Prof G Markets: Winners and Losers Under Trump’s Second Term

25:14So their supply chains are not as global as some of these larger corporations. They're not multinational in the same way that a company like Amazon is. They do the majority of their business in the US. And the expectation is that with Trump and his more isolationist policies. In addition to these global tariffs that we've talked about, we're going to see more investment in companies who do their business in America and America alone. So that, generally speaking, should benefit small caps. Scott, your reaction to the increase in small cap stocks? It's a really interesting point. I understood that, okay, lower tax is good for these companies.

25:53Tax cut puts more money in people's pockets. So stimulus, or at least short-term stimulus. I hadn't seen what you just saw, and it's absolutely correct. And that is small cap companies tend to probably get the disproportionate, if not all of the revenue domestically. They're less hurt by tariffs. Because what happens in a tariff is we put 60 % tax on consumer goods coming in from China, they respond. And if I'm selling a lot into China, I get really hurt. But if I'm just a domestic producer, I'm not insulated from tariffs, but I'm not as badly hurt by a multinational in terms of a trade war. Yeah.

26:30And just to be clear on my opinion here, this is an outcome that I actually like. Like, I think this is generally speaking a good thing. The amount of concentration of capital and power to the top few companies, as reflected in their market cap, I don't think has been a good thing. Let's just do one more winner here. It's probably worth mentioning, which is cryptocurrencies. So Bitcoin just hit a record high. The expectation is that Trump is going to have a lot looser and more lenient or kinder regulation to cryptocurrencies. Scott, your reaction to that final winner, particularly Bitcoin? I wouldn't have been surprised if the following conversation took place.

27:08He said to the crypto brothers and Andreessen Horowitz, like, you guys figure out a way to raise me a billion dollars. I'm going to fire Gensler and I'm going to announce not only would be less regulation, but on the demand side, I'm going to announce a trillion dollar or, I don't know, hundred billion dollar fund that invests in, you know, I'm going to do something that puts not only limits regulation, but creates more demand for this, for cryptocurrencies. currencies. So I can just see him saying, guys, you raised me a billion dollars, I'll take Bitcoin to a million, and this is how I'm going to do it.

27:43I'm going to fire that pain in the ass, Debbie Downer, Gensler. And wouldn't you like it if all of a sudden Bitcoin became one of the default currencies, or we tried to give it some sort of dollar backing, or I don't know, something that makes it. I'm sure the crypto community has thought of all kinds of things that would be great to legitimize this market. So what are you going to see? I think You're going to see Bitcoin go up substantially. You're going to see venture capital firms start deploying capital against blockchain and crypto companies. And unfortunately, the downside will be a lot of tiers in an unregulated market that attracts a lot of maverick cowboys, which has a fair share of grifters in it.

28:25And the grift is going to be grifting with a lack of oversight from the SEC. You know, there will be some innovation here. There is a lot that can be done. And a lot of intelligent people said it was overregulated and we needed to kind of let these horses run a little bit more. I think that's a valuable argument or a legitimate argument. But you're just going to see with a total absence of regulation, which is what I think you're going to see here, you're just going to see the Miami coin again or the Ed Elson coin. There's just going to be all kinds of shit. That's a good idea, actually. You like that?

28:54I'll work on that. As you know, I'm an investor in Ledger, which is a cold storage hardware wallet. 12 % of all crypto is stored on these things. You can also trade on it. I would imagine the value of that company went up 30 % in the last two days, even though it's a private company. So this is a big win for that community. Gary Gensler, do you think he's around in 12 months? He's absolutely gone. He's on the green mile. The more interesting question is whether Lena Kahn survives because she actually has fans on both sides of the aisle. And my prediction is she actually survives. Yeah, I think J.D.

29:24Vance quite likes her, right? So does Matt decades. Now, she is an antitrust. She's a trust buster. But I think this issue is so complex that I think Trump's going to get bored of it and just say, oh, fuck, leave her in place. And also having, I just don't think he has the patience to deal with this. And everybody who advised Trump or everybody who was close to him, when someone would come in and talk to Trump, they would say the following, fewer words, more pictures. You were literally told on some of the most complex issues. He likes pictures and very few words that the guy literally doesn't read with supposedly his reputation.

29:59And I imagine talking about the complexities of an antitrust case or the monopoly maintenance case of Google and what would, if they didn't do it, what would it mean? He's also himself, President-elect Trump, does not like these companies. He has been very aggressive and very upset with Meta and Alphabet. So if he can soften his image and keep the young woman in that position who's going after them. I think she survives, and she's one of the few people that has something resembling bipartisan support. So I think it's going to be Chairperson Khan for a while. We'll be right back. And if you're enjoying the show so far, hit follow and leave us a review on Prof G Markets.

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32:23We're back with ProfG Markets. Let's move on to the losers. So our first loser on the list here is clean energy stocks. So solar stocks plummeted, wind energy stocks plummeted. basically all the renewable stocks tanked after this result. Why? Pretty expected. Trump wants to put these renewable energy projects on hold. He wants to leave the Paris Climate Agreement. He wants to repeal the Inflation Reduction Act. He wants to scrap our offshore wind projects. That obviously harms the revenues of clean energy companies. It helps fossil fuel companies. So we've seen stocks like ExxonMobil up. Natural gas companies like EQT and Antero, they also rose pretty sharply.

33:05I think most people understand this, so let's not dwell on it. But perhaps you have a brief thought on the fact that clean energy is getting a little bit taken to the woodshed right now. I woke up on November the 5th and I thought, let me get this, two really qualified women have been beaten by a man who is a convicted felon, inspired an insurrection, and has been found guilty of rape. I feel like there's just no getting around it. The misogynist tendencies, and I don't use that word lightly, in the U.S. still runs pretty deep. And strangely enough, I think it's affected here. And that is anything associated with estrogen, anything that's seen as feminine in its energy quality, wind, solar, oh, you pussy-ass bitch.

33:55I'm not interested in wind and solar. However, I actually think in a strange way, this is going to be really good for nuclear. Because nuclear, for whatever reason, is seen as badass. Wait, didn't that fry a bunch of Russians in that whole Chernobyl? For some reason, nuclear has a macho feel to it. And that's, I realize how ridiculous, this election was won on a very manosphere impression of masculinity. When I look at the results, who showed up, who didn't, no one gave a shit about bodily autonomy. And I know that's hard to say, but they didn't believe President Trump was that pro-life. Five of the seven referendums on bodily autonomy passed, so people think the states are handling it.

34:41They just didn't care. Fewer women voted for Harris than voted for Biden. Bodily autonomy played no role. What showed up was young men, fears about how young people are doing. and an embrace of the manosphere, that you Democrats are too fucking sensitive. Stop lecturing us. Stop acting so high and mighty. Stop being such snowflakes and so offended at everything for us. Stop being so feminine. It's like this giant fear and upset that our society is becoming feminized. I think that's a really good point, especially when it comes to certain companies and people. The thing that Elon Musk cracked was that he figured out a way to make electric vehicles feel macho and masculine.

35:25And as soon as he did that, suddenly the people like Trump were on board. I think that's definitely true of nuclear. I'd love to somehow create like a rubric of which companies and which products are more feminine versus masculine. And I bet we could figure out a perfect line between Democrat and Republican support for those initiatives, right? I like that. Yeah. My next podcast is just going to be called Gorilla Semen. that'll win them over suddenly we'll stop being beta snowflakes as soon as we call it that the new government contract podcast gorilla semen i really like that take let's move on to our second loser which is companies that are exposed to this new tariff policy so these are companies whose businesses are reliant on importing goods into the u.s so that's a very broad category, there are many types of companies who fall into that category.

36:23So in retail, you've got companies like Williams-Sonoma, you've got Best Buy, Nike. These are companies that have highly international supply chains. And so when the tariffs come about, or if the tariffs come about, it'll just make everything they do more expensive. Also, people said we were going to see it in tech. So there was some concern that these tech companies that import their chips from abroad would be affected. That was a big concern. We actually haven't really seen that yet. Some tech companies dropped a little bit on the election result, but broadly speaking, they're bouncing back.

37:00So the jury is still out on whether this administration and the tariff policies will benefit or harm tech. What is clear, though, is that if you are an American company and you rely heavily on an international supply chain, you are very nervous right now. You are trying to bring all of your supply chain, you're trying to bring everything back to the U.S. So, Scott, your reaction to tariff-exposed companies being a loser in the Trump administration? Republicans are supposed to be the more fiscally-minded or better on business, right? And I can see at least a handful of Republican senators and or representatives saying, you know, 88 % of our gifts under the Christmas tree, the good consumers work all year to be able to afford come from China and we don't need to raise costs.

37:50I think there will be tariffs. The ones in place will either stay or get increased. I don't think it's going to be anything near what he's proposing because anyone who can do math is going to be able to find five or seven Republicans to say, this is a really bad idea. And the way for you to look really smart is to say this would hurt the good people of Alabama and raise their costs or, you know, their costs for whatever tires or tractors by 22 percent. And the farmers in Iowa would raise the cost of whatever it is, feed imported from, you know, name it Ecuador by 15. I mean, as soon as people actually do the math and see what's going to happen in terms of impact at a ground level, you're going to see all sorts of constituents pop up and say basically, what the fuck?

38:43And it's going to stiffen the backbone of some Republicans to say, I am not down. And the margins, even if they get control of all three branches, the margins here are going to be so narrow that on a topic like this, I think that Democrats will be able to find a few defectors to kind of cross their arms and hold firm on tariffs. I don't think tariffs are going to be nearly at the scale that he's threatening. Some companies that are being hit a little harder related to this tariff issue, foreign stocks, emerging market stocks, so companies in Europe, in Mexico, in China, they're down. Many of these companies rely on selling stuff to Americans.

39:25So let's just focus on Germany as an example. BMW is down, Porsche is down, Mercedes is down, Volkswagen is down. 13 % of Germany's cars are exported to the US. So this is not great news for foreign car makers. If we look at Europe as a whole, the US accounts for one-fifth of their exports. They shipped half a trillion euros worth of goods to America last year. That number should come down under Trump. So you just sort of think of every foreign staple that we enjoy in America, whether it's beer from Mexico or computers and smartphones from Japan or even GLP-1 drugs from Denmark. If you're in that business and you need to ship it over to America, you are hurting at least a little bit right now based on the market's reaction.

40:15Scott, your reaction to what's happening to foreign stocks right now? Well, I think you have to discern the difference between kind of foreign supplies, if you are foreign suppliers, and then foreign competitors. And that is, I think there will be a political win in showing up to Michigan and Detroit and saying, we're going to increase demand for Ford because the trade relationship with Germany is asymmetric, so I'm announcing a 15 % tax on all cars coming from Germany. Whereas if he were to announce new tariffs on metal coming in from Canada that's just going to increase the costs for Ford, I think that will be more politically unpalatable, despite the fact they both kind of end up in the same place, and that is an increased cost on U.S.

41:02consumers. But, again, I don't know if it would be much easier for him to put a tariff on a product where there is an American substitute, at least in the short run. Not recognizing over time all that that means is that American companies have less competition, take advantage of that, and increase their prices, thereby raising prices and creating inflation on American consumers. But I think in the short run, it's just much easier to tax a competitive product than it is feed coming in from Ecuador that raises the price, raises the costs of goods for farmers. It's sort of a question. It feels very similar.

41:40It is very similar to what happened with Brexit, where the UK was like, we can do this all on our own. So let's just cut off ties and we're going to be fine. And the question here is that it's like, OK, I'm down with the idea of bringing everything to America. And the question that we're asking right now is, can we do everything truly on our own? Can we just sort of put a giant tax on everything that comes from abroad? or do we actually need these countries and do we rely on them to sustain our society? And I think it's a more, it certainly was not a valid question to be asking in the UK. The UK was completely dependent on the rest of Europe and that's why it's struggling so much right now.

42:22And I think it is a more valid question when it comes to the US, but that is certainly the direction we're moving in here. We're basically saying we don't need all you guys. We can do it on our own. I think what we're about to find out is whether that is indeed true. Our final loser that I've got here, this is the most interesting in my opinion, the housing market generally, and specifically so real estate stock. So you've got real estate brokers like Redfin, like Zillow, Compass, they're all in the red right now. They all reacted quite badly to the election result. You've got real estate services, companies like CBRE and Cushman and Wakefield, they all fell.

43:04You've got home building stocks. So companies like D.R. Horton, which constructs houses, the largest American house construction company, and companies like Lena, all of the home builders are down right now. And this is the most interesting to me because basically what the market is saying, the expectation, despite Trump's promise to bring down housing costs, is that buying a house is about to get even more expensive. So we've seen yields rise in expectation of higher inflation as a result of the tariffs that we've just discussed. And when yields rise, that means that rates rise. And when rates rise, that means you're paying a a larger mortgage payment.

43:46So that's sort of an accepted principle in the markets right now. We're going to see higher mortgage rates. So to counteract that, Trump needs to figure out a way to significantly reduce housing prices. He's laid out some plans. You know, he wants to make it easier to build, which I think we both agree with is a good thing. However, the tariffs are expected to increase the cost of goods needed to build houses. That's one problem. And the deportation and immigration crackdowns are expected to make the construction labor market even tighter, which means it'll be even more expensive to build a home.

44:25So what the market is telling us right now is that mortgage rates are going to go up and housing prices are going to go up, which is just a total nightmare for someone like me who, one, wants to buy a house, and two, who believes that the cost of housing is basically one of the biggest issues, at least in the country right now. So, Scott, your thoughts on what this new administration could do to the housing market? Well, just as we said, this is the perfect storm of good things for bank stocks. It's the perfect storm of bad things for housing because his fiscal policy, what we know about it is it could be inflationary.

45:02The credit markets have already predicted that interest rates are going to go up. The 10 years are already going up. So one of the things that has made housing increasingly unaffordable is a massive increase in interest rates, right, and mortgage rates. And then if you – I remember during COVID I was building a house and the guy said, we can't get garage doors. He said – and he looked at the pulley on the automatic. You know, when you press it and there's an engine and a chain, the pulley between the chain and the door, he goes, that thing's made in Czechoslovakia and it's all closed because of COVID.

45:36If that thing, I mean, your washing machine, so many parts, even the lumber, so many things in your house come from foreign entities that the idea that he's going to do anything resembling this level of tariffs. So let me get this. My mortgage, my interest rate on my mortgage is going to go up and the cost to build is going to go up. Something's got to give here because this is one place you're going to see a pretty significant gag reflex from the U.S. population. If all of a sudden it becomes obvious that an already vastly unaffordable housing market, where just in the last five years it's gone from two-thirds of Americans can afford a home to just one-third, if that goes down any further because of Trump's tariff policy or because inflation starts to send mortgage rates up, I think he's going to get a very swift message back from the American people that, look, boss, housing is a crisis.

46:29We need all hands on deck, more permits, more housing. And again, in addition to supply, the cost of building and the mortgage rate are really important. So this is the perfect storm of bad things for housing. I don't believe a lot of this. If you look at the markets, the markets have sort of said it's going to be a divided government, that he's not going to be able to push through other than maybe extending the tax cuts. That's how I read it. They will continue to favor rich people and corporations. But a lot of this stuff is not going to happen at nearly the scale that he's threatened. That's all I've got for the winners and losers here.

47:08I also just do want to point out that what we have said about this has been based on the market's reaction. So what we're explaining right now, like your take on the idea that mortgage rates and housing prices are going to go up, that's not like our hot take. That's what the market is telling us right now. We don't know what's going to happen. Like, I hope and I would be really happy if Trump figures out a way to get the cost of housing down. And I'm so for it. Like, I'm 100 % in support of that happening. I'm in support of him bringing inflation down. I mean, I want things to work out. Do you have any final thoughts or takeaways from this winners and losers session?

47:52You know, what I would say across a lot of this stuff is I think it'll modulate. Nothing's ever as good or as bad as it seems. I think the market tends to, you know, the pendulum is never kind of the bottom. I think it's probably overreacting one way or the other. So I think the stocks that have been hammered the most are probably buying opportunities. And I think the stocks that are up the most, you know, I don't know, I'd be careful going into them. I think we're going to find that the intransigence, the multiple branches of government, the slow grinding gears of our, I don't even call it our democracy, but our capitalist system, and the fact that you're going to have a president that I'm not sure is going to have the attention span to enact a lot of this.

48:35I mean, to a certain extent, what's strange is, kind of a month in, he's a lame duck president. So I don't think the winners are going to win as much here, and I don't think the losers are going to lose as much as we think. All right, let's take a look at the week ahead. We'll see the consumer price and producer price indices for October, and we'll also see earnings from Disney, Alibaba, and Home Depot. Scott, do you have any predictions for us? My prediction is that Intel will either be acquired or go private in the next, I don't know, six months. I think this is such a storied firm. There are few firms that have fallen further faster than Intel.

49:12And this sector has added a ton of market capitalization, except the leader, the market leader, the dominant player, the one that was held up as the icon of great management, has consistently thrown up on itself for the last 20-odd years. And I think the stock's gotten to the point where there's so much IP, so many supplier relationships, so few companies that can produce this type of very complex capital-intensive product, heavy design product, and it's trading at, I think, 1 30th the value of NVIDIA, that if this thing shows any pulse, it will triple, except I think the changes in investments it needs to make would be more easily done outside of the purview of the public markets.

49:53So if it's not acquired, I think that somebody shows up and takes it private. This episode was produced by Claire Miller and engineered by Benjamin Spencer. Our associate producer is Alison Weiss. Mia Silverio is our research lead. Jessica Lange is our research associate. Drew Burrows is our technical director. And Catherine Dillon is our executive producer. Thank you for listening to Prof G Markets from the Vox Media Podcast Network. Join us on Thursday for our conversation with Josh Brown. He's back only on Prof G Markets.

50:25Lifetimes

50:30You help me In kind reunion As the world turns And the dark flies

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