NYC’s Second Home Tax Picks Up Steam & Is LIV Golf About to Collapse?

0:00Toby Maloney:Get informed no matter where you are or what you're doing. Subscribe to Bloomberg News Now and get news when you want it on your schedule. Big tech dominating our headlines. Another win for Donald Trump. A key inflation report. These are short audio reports, five minutes or less, that bring you the latest headlines with context 24 hours a day. Stay on top of the latest news from around the world. Get it on your smartphone. Subscribe to Bloomberg News Now on Apple Podcasts, Spotify or anywhere else you listen. Good morning, Brew Daily Show. I'm Neil Freiman. And I'm Toby Howell. Today, Yale blames itself for the university trust crisis.

0:39Neal Freyman:Then New York wants to tax rich people's backup homes. It's Friday, April 17th. Let's ride.

0:50Toby Maloney:Good morning and happy Friday. Toby is remote today, so I'm holding down the Fort Solodolo in the studio. But Toby, I'd love your thoughts on this viral post on X about the changing nightlife scene in New York. Andrew Young wrote, nightlife in NYC is shifting from alcohol-induced socializing to activities that combine connection with intellectual interest. Out, clubbing, drinking games, bars without themes. In, lectures at bars, philosophy clubs, board game nights, reading meetups. Are people actually going to lectures at bars? And how is that different than just drinking with me in the first place?

1:25Neal Freyman:OK, this makes Gen Z and young people sound so lame. But at the same time, when the Hangout has an activity, boy, do I get excited. I mean, we are fully Mahjong-pilled at this point. I would much rather play some sort of game than stand around with a drink in my hand and talk. But also, I would rather be a hermit than pay to lose to you and Mahjong, Neil. I can do that absolutely for free. So directionally, I think it's correct, but maybe the payment aspect of it is not going to be, you know, the new trend. It's just going to be something that's happening in hangouts, not in bars.

2:02Toby Maloney:This episode is brought to you by On Investing, an original podcast from Charles Schwab. Each week, host Lizanne Saunders, Schwab's chief investment strategist, and Colin Martin, head of fixed income research and strategy for the Schwab Center for Financial Research, bring you fresh insight into what's happening in the markets and why and what the implications might be for your portfolio.

2:21Neal Freyman:Join Colin and Lizanne as they explore questions like, how do you evaluate corporate bonds that look interesting and what sectors are on the move right now? You can download the latest episode and subscribe at schwab.com slash on investing or wherever you get your podcasts. New York is cooking up a new tax, but unless you're deciding between a Patek Philippe and a Richard Mill to wear to dinner, it's probably not going to affect you. New York Governor Kathy Hochul unveiled a pee-to-tear tax this week, which will go after second homes in New York City. Specifically, it would target homes valued at over$5 million, whose owner's primary residence is outside of the city.

3:02Neal Freyman:The proposal comes from the governor's office, but it has New York City Mayor Zoran Mamdani's fingerprints all over it. Mamdani has been pushing to advance his tax-to-rich agenda he pledged to execute during his campaign, but has repeatedly run into opposition from Hochul, who doesn't want to use tax hikes to close the city's estimated$5 billion budget shortfall. But Hochul's idea to target wealthy out-of-towners, raising an estimated$500 million in additional revenue in the process, was quickly endorsed by Mom Donny, who jointly unveiled the plan. B 'et-a-teir is French for foot on the ground, but just think of it as a secondary residence you only live in for part of the year.

3:39Neal Freyman:There's around 13 ,000 or so units in the city, which are over$5 million but aren't lived in full time. Mom Donnie singled out Ken Griffin, the billionaire hedge fund owner of Citadel, whose primary residence is Miami, but also owns a$240 million penthouse in Manhattan. Neil, this policy is still just a proposal for now and has not yet been approved by the state legislature, but it's got its foot in the door and on the ground.

4:05Toby Maloney:New York City is actually not a trend center here. Other cities have a similar tax on the books. British Columbia has a vacancy tax. France has a real estate wealth tax. Oakland, California approved a vacant property tax in 2018 that charges up to$6 ,000 annually on properties that are used less than 50 days a year. New York City tried to get this across the finish line several times before in 2014 and 2019, but that was stymied pretty aggressively by the real estate industry. It didn't really go anywhere. It was DOA. It looks like the political winds have shifted, though, and there's a lot of support behind this one besides just a small progressive faction that supported the last ones.

4:44Toby Maloney:I mean, just look at the video that Zoran posted. He about this particular tax. He filmed himself in front of Ken Griffin's$238 million apartment on Central Park South. That video, Zoran's had a lot of videos go viral. This one, according to his comms director, was the biggest one ever. It was retweeted 34 ,000 times.

5:04Neal Freyman:And this time it does seem like the real estate industry is a little bit left out to dry. The rest of the broader business community isn't rallying around the real estate industry because they're essentially just happy that the attention is directed away from them and directed on a specific industry like real estate. The real estate industry's argument against this, though, is the same ones that they've used in the past, like you mentioned, in 2014 and 2019. They think that it's going to artificially warp the market. All you're going to do is see a lot of units come online that are priced just below$5 million, trying to undercut that new effort, that new tax.

5:44Neal Freyman:They also say it's just going to dampen demand in general from wealthy buyers. Why would you buy in New York City when you can go buy in Florida that doesn't have these taxes? And if that weakened demand comes to pass, then builders might start pulling back on construction a little bit. Maybe that reduces the housing supply, leading to a shortage, and it has almost the reverse effect of what you intended. So those are some of the reasons why maybe people aren't a fan of the pita-terre tax.

6:12Toby Maloney:Will this actually raise the money that's required? So New York has this$5.4 billion budget shortfall, and it's looking for ways to close that gap. The revenue projections from the Hochul administration is that the pita-terre tax will deliver at at least$500 million in revenue to the city. However, a separate independent budget office analysis estimated that it would bring in a lot less than that, just$232 million in revenue. So we're all looking to the state legislator to see whether they're going to pass this. And one factor that may give this a little bit of a boost is that it is not a standalone bill like it has been in the past.

6:52Toby Maloney:So you can just have a particular vote on this specific bill. It's going to be wrapped up into the broader budget. So if you like the budget overall, then this is just one provision in that. And that's why the real estate industry was a little blindsided by this. And that's why they're going to fight tooth and nail to have it not pass, along with billionaires like Bill Ackman, who also came out against this. But it seems like there's a lot of momentum, not just from a small group of folks who wanted this in the past, but from a broader coalition. Moving on, Yale says the problem with colleges today is Yale.

7:22Toby Maloney:On Wednesday, a 10-person committee from Yale University released a highly anticipated report on the declining trust in American education, and it acknowledged that itself and its Ivy League peers were largely to blame. The report, which was commissioned by Yale's president last year, identified three main reasons that universities are suffering a plunge in public opinion. One, skyrocketing costs. Two, an opaque, unfair admission system that rewards the wealthy and elite at the expense of the middle class. And three, a culture that stifles free expression. The committee proposed dozens of solutions to address those problems and restore universities as institutions Americans see as a worthwhile investment.

7:58Toby Maloney:Because right now, colleges are not considered trustworthy. In a 2024 survey, a record low 36 % of Americans said they had a great deal or quite a lot of confidence in higher ed compared to 57 % a decade ago. 7 in 10 Americans say higher education is heading in the wrong direction, and 35 % of Americans thought college was very important, which is half the number from 2013. Overall, the committee said that they believed in the purpose of higher education, and it's in a tough spot. Colleges are, quote, expected to be all things to all people, selective but inclusive, affordable but luxurious, meritocratic but equitable.

8:33Toby Maloney:However, they concluded, without a clear mission and purpose, it becomes difficult to judge whether colleges and universities are living up to their fundamental commitments.

8:40Neal Freyman:Yeah, I think the word that stood out to me in your intro, Neil, was opaque, not just when it comes to admissions transparency, but also when it comes to the affordability piece. No one even knows how much they're paying to go to college these days because even though the sticker price is ticked up above$100 ,000 annually at some places, obviously that comes with a lot of caveats. Usually you're not getting charged full tuition. You're getting some sort of financial aid. So even though that's a good thing on the service, making it more affordable to go to college, the fact that you just don't know how much to pay going in is an issue.

9:17Neal Freyman:And it's why people are not trusting college or the institution of higher education like they have in the past. You can point to someone like Yale, though, who has been doing better with this. They released this blanket statement in the fall of this year that families earning up to$200 ,000 per year will be able to attend at Yale tuition free. So anyone who is making less than$200 ,000 a year, welcome to Yale for free. That kind of transparency goes a long way towards restoring some of the trust that it's lost over the years.

9:49Toby Maloney:And then on the admissions front, the committee blasted Yale and other colleges as skewing toward the wealthy and the elite. The report said that applicants from the top 1 % of the income distribution are substantially more likely to gain admission than equally credentialed middle-class peers. And they propose just when you apply to college, it should be about how you're doing academically and maybe nothing else matters. So they proposed a minimum standard of academic achievement, whether that's a minimum standardized test score or maybe a Yale or college specific entrance exam that would ensure that no student is admitted without the requisite academic preparation and ability.

10:27Toby Maloney:So that would be nice for all of us who thought they had to do a ton of clubs just to get into these colleges. And then we got rejected anyway.

10:34Neal Freyman:What about this proposal, Neil? I want to hear your thoughts on this. A device-free policy in the classroom, which would do away with phones, with laptops, with tablets. Do you think that's a good way to learn while you're in college?

10:47Toby Maloney:I think it depends on the class because I was thinking about some of my smaller seminars and no one had laptops in there because that would just be weird. It was part of a discussion. I don't know what I would do with myself if I'm in an 800 person psych 101 or econ 101 class and I didn't have my laptop to maybe watch some European soccer games in the afternoon. So it might be tough for me.

11:07Neal Freyman:You would focus, Neil. That's what you do. You'd lock in on the content and lock in. But yeah, I feel like I love that idea. You know, it almost goes back to the very first thing we talked about in the show. People are moving away from, you know, phone environments. They want to be more in person. So this went from a discussion about higher ed to a discussion about our relationship with technology. But it's all interconnected.

11:29Toby Maloney:I'll tie it back to one final piece is they they want to they want colleges to address grade inflation by establishing some sort of quota system or some sort of standardized GPA because grade inflation has gone insane. And Harvard right now is grappling with this. They're weighing a proposal to just cap the amount of A's per course because this is crazy. In the 2024-2025 school year, 60 % of grades that were given out at Harvard's were A's. And somehow, I don't think I would even get one of those. Welcome to Stock of the Week, Dog of the Week, the Friday segment where Toby and I pick one stock that's defying the laws of gravity and another that's under pressure.

12:08Toby Maloney:Yes, I have been listening to Queen. I won the pre-show bicycle race, so I get to go first. And my Stock of the Week is stocks, the entire stock market, because you can't pick favorites when so many companies are on a heater. It's scarcely believable given the upheaval this spring, but the stock market has now recovered all of its losses since the Iran war began and then some. The tech-focused Nasdaq 100 hit a new all-time high yesterday after posting a 12th consecutive day in the green, its longest winning streak since 2009. The broader S &P 500 also reached a new record for the first time since January, closing above 7 ,000 points for the first time ever.

12:44Toby Maloney:And it hasn't just been any bull run. This stock run-up has gout-gout level acceleration. Deutsche Bank notes that the S &P has ripped 10.7 % higher over the 11 sessions through Wednesday, which is a bigger bounce back than the one post-Liberation Day last April. Not to mention the S &P has only gained more than 10 % in 11 sessions, 15 times this century. So it only happens once every few years. Don't get used to it. Indeed, April is on pace to be the S &P's best month since November 2023. Wall Street appears to be a split-screen image with everything that's happening not on Wall Street. The Strait of Hormuz is still closed, causing the biggest oil shock the world has ever seen.

13:21Toby Maloney:Meanwhile, American consumer sentiment just fell to its lowest level on record as inflation and a glacial job market weigh on families. So, Toby, help me make sense of this.

13:30Neal Freyman:I will do that, Neil. I do think that part of the reason the market has had this run up is optimism about the Iran war. Even though the Strait of Hormuz is still closed, Trump has floated that a deal was very close over. The ceasefire has held, albeit delicately, for about a week now. So investors have expected that pace of the war to de-escalate rather than escalate. That seems to be the trajectory that they are betting on. So that's number one. Number two, strong corporate earnings. I mean, we floated it at the beginning of the week. But JPMorgan, Goldman, Citibank of America, all the big banks absolutely crushed it.

14:07Neal Freyman:They reported not only strong earnings and profits for their own businesses, but also reported that the consumer was still busting out the plastic. They're still swiping their credit cards, spending at a robust rate. And finally, the third thing, AI optimism. I mean, the market goes as AI goes still up until this point. TSMC reported blowout earnings. They are the biggest chip maker in the world. Tesla's been teasing a new chip. It seems like the software trade, trade that has been powering much of the stock market came roaring back these past couple of days. So that three headed monster is why we're seeing markets just rallying to the moon.

14:46Toby Maloney:I said I wasn't going to hand out any favorites, but I do want to pass out some game balls to some specific companies that are doing well. And you should probably look at your portfolio if you have any of these companies. Tesla is up 12 % this week after Elon Musk teased a new chip. Oracle is up over 30 % over the past five days. Intel is having its best stretch on record. It's up nearly 60 % in the past couple of weeks. And then quantum stocks went absolutely ballistic this week. A bunch of them, Rigetti Computing, Quantum Computing, D-Wave Quantum, are up over 30 % this week. And that came after NVIDIA said it was rolling out a new chip to help boost quantum.

15:24Toby Maloney:So wherever you look, especially in tech, stocks are going way up. And then let's look not in tech. American Eagle is up after announcing a new ad campaign with who else? Sidney Sweeney, hims and hers, Rose on RFK saying he was going to ease restriction on peptides. And then Uber is up as well. It is reportedly committing more than$10 billion to RoboTaxi. So all across the board, stocks are going up and to the right.

15:49Neal Freyman:Not to rain on your parade with a little bit of a nuance, Neil, but two thirds of the S &P 500 companies are actually still lower than they were before the war began. And so we are maybe seeing some of that concentration, some of that top heaviness, you know, the stalwarts of the market, NVIDIA, American Eagle. I'm joking about that last one. But we're maybe seeing more concentration in the top part of the market, again, while two-thirds of companies are still kind of lagging behind.

16:15Toby Maloney:You always have to bring nuance, Toby.

16:17Neal Freyman:That's what they call me, Toby Nuance Howell. All right, we're going to take a quick break and come back with our Dog the Week right after this. marketing your brand these days probably feels harder than finding perfectly ripe strawberries

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