178. Who’s Getting Rich Off Trump’s War?

0:07Hello and welcome to The Rest is Politics US. I'm Anthony Scaramucci joined today by my friend and a friend of the show, the very brilliant Stephanie Ruhle, who's the anchor of the 11th Hour on MS Now. She's also a senior business analyst there. And Stephanie, I don't like telling people how long I know you because I'm lying about my age. I mean, I'm only 29. So what? We met in high school? We've known each other for a long, long time. Stephanie, if we met in high school, you and I would have never gotten out of high school. So we're sort of fortunate for both of us that we didn't meet in high school.

0:42But today, we're going to be talking about the markets, which you are an expert about. We're going to be trying to understand why the market is ignoring the Strait of Hormuz. And while oil flows are under threat, and I'm here in London, and some of the European analysts are saying there's only six weeks left of jet fuel. Stocks are doing the exact opposite of what I would expect. Maybe you expect this, and if you do, you have to explain why. And then, of course, in the second half, we're going to talk about Donald Trump heading for a head-to-head collision with Fed Chair Jerome Powell. And can the president force him out?

1:18And what happens if Chairman Powell refuses to go? let's start with your view of the economic situation in the stock market why have they decoupled so thank you for having me we've always said that the market and the economy are two different things and we've said we have this k-shaped economy right now i feel like that is the case more than ever in the last 24 hours the president on the the great lawn was asked about high gas prices. And his response was, well, they're not really that high after all. And that right there shows that this president is focused on institutional investors, not the American people.

2:00And while you have members of the GOP basically begging the president to get on message and start talking about the economy, well, what has he done in the last week? He's attacking the Pope. He's sending unhinged tweets. And we've got this war with Iran. And what the president does, and it's, It blows my mind and it disappoints me in terms of the markets. We watch what he does. Bad news about the war comes out on a quiet news time Saturdays. By Sunday night, he's like, hey, there's going to be peace talks in the morning. And then the market goes up. He tells Fox Business the war is over. And then there's absolutely no facts to back that up.

2:38But we're watching investors who know better, right? Investors know better. They know that Trump isn't telling the truth, but there's an important thing that people don't realize. Traders, they don't even necessarily care what the end result is six months from now or even four months from now. It's all about volatility. In this first quarter, some of the biggest banks out there had the biggest quarter they've ever had in terms of equity trading because it's just about volume and volatility. And the difference between an investor and a real business, I'm going to give an example. If you think that Trump is full of it, if you think this war isn't ending for the foreseeable future and you're just an investor, no big deal.

3:23He says something positive. You know the market's going to go up. You can buy the market today. You can go long today. And tomorrow, you can sell everything. That's different from operating a real business, right? I just learned this morning, I'm in D.C. for the Semaphore Conference, and I learned that that a toilet manufacturer, you know, those Japanese toilets, Toto, they make the fancy toilets. They're going to stop manufacturing a few of their models because of what's happening in Iran, because they're going to be missing inputs that they need for manufacturing. So businesses that actually operate real businesses, not just investors who are trading the markets are struggling.

4:05You opened the conversation with, you've got airports in five different countries that are now potentially facing jet fuel shortages. You've got countries that are having kids go to school from home or have a four-day work week, not because of a global pandemic, because of what's happening in terms of oil prices. So investors are like, yeah, oil prices will be damned. We'll deal with the long-term impact down the road. But today, hey, as long as Trump is giving us news, which he gives us every day, let's just play the markets. And I think that's totally distressing because the president is focused on those markets and not the everyday Americans who are at the bottom of the K economy and they're struggling.

4:44What do you think? Well, I want to be the bull here for a second and look past the war and look at liquidity and rate expectations. I think that's one thing booing the market. you and I both know with the Fed at like, let's say four and a quarter, roughly between four and a quarter and 437 on the 10 year, that's the interest rate in the United States. The expectations are that if the war ends, they'll be able to cut rates and rates are coming lower. And so the market's pricing some of that in. The AI CapEx is part of a real earning cycle here. It's not just a narrative, in my opinion. And so you've got billions of dollars that's flowing into this, which is hurting us on energy prices.

5:29But it's really creating a tremendous amount of capital expenditure throughout the entire economy. And that's causing a lot of profits. We saw what's going on with the banks. You saw the print from Goldman Sachs. Bank of America, JP Morgan. Right, exactly. The Bank of America just printed an$8.6 billion quarter goal. It was a five plus trillion dollar quarter. And Moynihan said in the conference call that the consumer seems way more resilient and margins for these banks are at near record highs and they're all running big buyback programs. So I guess what I'm wondering is to your point about the K-shape, because I am also talking to Americans that are faced with a ratcheting affordability crisis.

6:15The president's saying to people that, like what you just said, that the gas prices are going lower, but they know they're not going lower. Rising consumer costs are sort of through the roof. You've got fertilizer are going to be super expensive, Stephanie, which is going to increase food prices and likely there could be some food shortages. And so I guess the question I have for you is how much more tolerance do Americans have for these cost of living increases? So I accept that the K part of the economy, even though there's a war going on, they think the war is going to end relatively quickly.

6:52The unwind is going to be beneficial to these companies. Defense spending is likely to go up. The defense stocks are doing quite well. But Americans are suffering. And the unemployment rate is moving. It went to 4.6%. You and I know that that's a garbage number because the labor participation rate, meaning people are exhausted from looking for work. And so they stop looking for work. And you know they fall off the unemployment scrolls once they go past the year. So the labor participation rate is terrible. and the IMF is saying that we're going to have a global recession if we keep the war up.

7:29So go ahead. What do you think happens? Yeah, I mean, Ken Griffin from Citadel said two days ago, if the Strait of Formos is closed for six months, 12 months, we are going to inevitably face a global recession. And the one thing that's interesting as everybody's sort of dogging on the U.S. and saying like in previous global economic crises, the United States has always been the reliable partner, the stable partner, and we're not that partner this time around. That's true, but it's not like other countries have stepped up to take our place to be the world leader. We're getting worse, but nobody else is stepping in.

8:07But to your political question, it's interesting because people were fed up with the cost of living during the Biden administration. When Janet Yellen and others talked about inflation and kept saying It's transitory. It's short term. We're going to, you know, we're still better than the rest of the world. Nobody wanted to hear it. They were angry when the Biden administration said that to them. And I think that's one of the main drivers, what elected Donald Trump. Now, here we are months away from the election, the midterms. And the president, the GOP has been asking the president to get on message about the economy for months and months.

8:47And the reason I just think, I mean, he's not doing it because he's distracted with, as I said, fighting with the Pope and the war and everything else. But one of the biggest challenges about like, why can't he just get on message about the economy? He can't get on message because he's currently responsible for the economic woes that the bottom half of the K are facing, right? So the trade wars have made life more expensive. That was the president's choice. So the war in Iran that's making gas prices more expensive has been the president's choice. And our extremely harsh immigration policies and war on science and education, the president's choice.

9:32So you could say that there have been presidents that have presided over an economy when the housing crisis, the financial crisis hit. And we could judge or vote for or against them based on how they handled that crisis. But the woes that we face now economically, that bottom half of the K, Donald Trump can't talk around them because his signature is on the bottom of them. What do you think? Disagree with me. I think he loses. No, well, I don't necessarily want to disagree because I think a lot of what you're saying is true. But I just think that he's not going to get out of this intact for the midterms.

10:08He may even lose the Senate at this point. I don't think he loses the Senate to the point where he gets impeached and removed from office. But I do think he's going to have a lot of pressure on him if things don't turn around quickly. And we have a lot of viewers and listeners from outside the United States. So I just want to explain to people, when the U.S. says it has a 4.6 % unemployment rate, it's a garbage number. The right number to look at is the U6 number. And so what does that mean? And Stephanie knows this. You include everybody that's been looking for a job in addition to the people that are looking for a job past one year.

10:48And when you do that, that number is closer to 7.9%. And just to take people back 40 plus years, when we were at 10 % unemployment, Stephanie, we were in a full-on recession in 1982. And so for me, I think we end up now in a recession. I think the CapEx spending will be fine. The market will probably be somewhat buoyed. But as recessionary forces kick in in the United States, it's very deconsumptive for the bottom half of the country. You know, Stephanie, I just give this these numbers. People need to think about this, about America and about the general unfairness that's going on in America. The realtor.com says that the average price of a home is$383 ,000.

11:32If you reverse engineer a salary that you need to pay a mortgage on that home, you got to make at least$170 ,000 to afford that home and not be house poor. The median income in the United States is$83 ,000. So that means people are missing dental appointments. They're skipping prescription drugs. They get into a fender bender. They're not taking the car to the collision shop because they can't afford even the insurance deductible and they don't want their rates to go higher. So I guess what I'm saying, because you came from an environment similar to me. We both grew up in middle class, working class families.

12:11And so when I go back home and talk to my cousins that are still in that environment, they are really suffering. A lot of them, frankly, voted for Donald Trump and they are super mad now. And so I guess my question is more, it's economic but also political. So what happens? Because the Democrats have not provided any solutions for those people either. You know, Mayor Mondani is like, hey, you got a$5 million second home in New York. We're going to tax the daylights out of you, which means those people are going to sell those homes and buy those homes in Florida. So, I mean, that's all that's going to happen.

12:47It's just, you know, it's a stupid tax and it's never worked. When you tax the rich like that, it's frankly never worked. I think that people are very angry, but the onus is on Democrats to not just say he's not doing the right thing. They have to offer a solution. OK, think about this. Farmers were crushed by Trump's first term and the tariffs he imposed. And yes, he put together a farm aid bill last time to soften the blow. But farmers still know what happened and they weren't happy about it. And then they turned around and voted for him again. Not because they're ignorant. Like, farmers deeply understand how trade works.

13:26They deeply understand how climate works. But Democrats were unable to go there and message and to provide them with a solution. And what Donald Trump did the first time around, back when you knew him very well, he accurately and directly expressed and identified Americans' pain. What's different this time, Anthony, is I don't think he cares. And I'm not saying he definitely cared last time, but let me just draw the comparison. In Trump 1.0, you went to many of them. He did rallies all the time, right? Trump's original Make America Great Again, America First platform is what thrust him into office.

14:05He did rallies all the time. He's barely done two this term, and he spends all of his time between the White House and Mar-a-Lago. So he's basically in a gilded cage. And in this gilded cage, he is surrounded by people who have made a phenomenal, mind-blowing amount of money, whether it's their businesses that are Trump adjacent, whether they're in the crypto space, whether they're investors who seemingly know exactly what the market's going to do before anyone else. So he's surrounded by people or, you know, he's suddenly around many, many tech leaders who've grown close to him, because now the AI universe is going to face almost no regulation in Trump 2.0.

14:48So those frustrated, angry Americans, many of whom voted for him or didn't vote for him or didn't vote at all because they're so frustrated that the government doesn't work for them despite the fact that they pay taxes. I don't think he's seeing or hearing those people right now. However, unlike Trump 1.0, where he was very frustrated by people in his own administration who weren't doing what he liked, I think he's very happy now. Even if he's leading policies that aren't wildly popular, he has a 100 % accommodative administration who executes whatever he fancies. And he's only surrounding himself by Americans who are winning big time economically.

15:31And he himself and his family and the family of Howard Lutnick and Howard Lutnick's children and so on and so forth have become so phenomenally wealthy, good times are here again for them, right? We've talked about this before. Think about Trump's World Liberty Financial, right? Trump's meme coin. It's down 82%, but Trump and his family have extracted billions of dollars. So while I think the American people are frustrated and angry, I don't think that he is. I saw the president three weeks ago. I went to lunch at the White House on the day of the State of the Union, which to me, he was facing a very frustrated, angry America.

16:11He almost seemed joyous. And I think it's because who he is surrounded by. And I think the American people are certainly not. The same sentiment that elected him, elected Mamdani in New York, who were saying, this doesn't work for me. I can't afford my life. So when I tell people that really only he cares about is making money for himself, you're providing evidence of that, Stephanie, by saying he looks joyous, even though most people are suffering. That was my take when I saw him. And listen, talk to anybody. Any given weekend, it's a fundraiser at Mar-a-Lago that's$1 to$5 million ahead, right?

16:49That Saturday night when the first strike in Iran, they still had a fundraiser at Mar-a-Lago. Saturday night when Whitcoff and Jared and J.D. Vance were in Pakistan for what was supposed to be the start of these peace talks, he's a UFC fight. You're not looking at a president who's presiding over a country who's thinking about parents whose son and daughters are out defending our country in the Gulf. He's finally, as wealthy, wealthier than he had purported himself to be all these years, as are his kids. And the grift that we talked about in Trump 1.0, it's sort of on full display. It's not sort of, it is.

17:32I just think that the Democrats are not offering policy solutions. I don't hear anything other than anti-Trump bashing rhetoric. They could put out a doubling of the earned income tax credit for both childless and people with families. You could pick up several hundred, if not several thousand dollars from that, that can go back into the economy. No jobs training. You know, there's a huge Medicaid gap now because of the big, beautiful spending bill. You're taking 17 million people off of that. They haven't provided a solution to bring those people back, a result of which those people are going to end up hurting the economy by rushing to the emergency room when they have a problem and waiting too long.

18:16And Anthony, you tell me, who's the group in the government that's working on AI dislocation? I don't want to come across or I don't want to make you think I'm anti-AI in any way, But assuming we accept the idea that AI is going to change every element of the way that we live, work, and play, I'd like to know who's the group inside of our government who's saying, how do we solve for the mass numbers of job displacement in our country? Right? There are many, many jobs that I'm not even going to get to this next point. I'm going to go off the rails. But all I hear is AI all the way. We've got to win this AI war.

18:55It's between us and China. And okay, I accept that principle. Who is focusing on the aftermath? Because you and I have talked about this before. The government is not supposed to run like a business. Yes, it should run more efficiently. But what the government needs to be is a framework to make sure that people can be financially secure, physically safe, and socially free. AI is going to cause a massive disruption in our lives. Who's the working group focused on that? I don't know the answer. Well, there's no working group. But I mean, the number one thing, I mean, if it were me, I would say, number one, stop pretending it's not going to happen.

19:32Because you have all these old school democratic solutions are not going to work if 20 % of the labor force is going to get knocked out of the game by AI. And by the way, you start knocking out white collar jobs and upsetting all the soccer moms in suburbia, you're going to have a very big problem, right? So number one, stop pretending it's not going to happen. Number two, real skilled policymakers are talking about wage insurance. And so let me give you the example. I'm making$70 ,000 a year and I lose the job now. And because of AI, I can only make 40. We've got to have a wage insurance pool.

20:12If you're going to be using the AI, you have to pay into a pool so that when you fire the worker, okay, the worker can have supplemental income for a period of time until they can get retrained or find another job. No one's talking about that. You got to have portable benefits because you know what happens. The person gets fired. Our healthcare benefits, I would imagine, like me, my healthcare benefits are tied to Skybridge. I'm sure yours are tied to MS now. Yes. And so we got to think about that. And then like it or not, we have to come up with a robot tax. No one's talking about it, but we would need a robot tax so that when you're replacing a worker with the software, you have something in there that helps equalize things.

20:56Because if you don't have that, you're not going to be able to have a layer of cushioning for the economy. It's going to be very, very destructive. And Anthony, instead, what we've created is this open road for the AI tech entrepreneurs, whether it's Sam Altman or others, who it's been wildly reported, right? These guys might be geniuses and visionaries, but they're going to get on their rocket ships and leave rubble behind and we're going to be in the rubble, who's the government body that's actually going to focus on the impact? Because it's not those business leaders for sure. Well, because you have fossils, Stephanie, in these positions.

21:35Correct. Okay. You've got a hundred year old people that won't leave the government in these positions. Trump's 80 years old. Should he be the president right now? I mean, come on. you know, Chuck Grassley. Nancy Pelosi, finally, I mean, I guess, you know, she did a seance with George Washington, who she was related to, you know, 200 years ago or something. I guess she's finally leaving. I find it amazing, Anthony. And when I try to bring this up, I get annihilated for being ageist. But if in the business community, if you've watched businesses say, we're going to have a cutoff for how old people, you know, once people reach a certain age, They can't sit on our board anymore.

22:13Or this is where people are at peak, you know, optimizing their performance. Why? When it comes to government, right? The people who set our laws, who set policy that will impact decades to come, we're saying, sure, you know, we don't want to hurt your feelings. No limit when it comes to age. And I think when it comes to those lawmakers, so many of them are so addicted to the power, they're going to hang on for dear life as long as they can. Think about your business, right? Think about when we went or my old business, we worked in banking. You're hard pressed to even find somebody on a trading floor over the age of 50.

22:52No, they get blown out. Correct. They get blown out because they've got to make way for the new blood. But I'm just saying to you, Stephanie, if they don't find politicians that can address this issue, the 20th century middle class is built on two things, a good factory job and an employer-provided benefit. The AI breaks both of those in most cases. So particularly with the robotics coming on combined with the AI. So all I'm saying is we're going to end up with a two-tier society that looks like Charles Dickens with a smartphone. And if we don't have competent politicians that come up with a policy initiative for this, yeah, they'll be the Mag-7.

23:33They'll make a lot of money and all that other stuff. But I just think it's very dangerous. The reason I'm scared of what you're saying is who in this administration is even acknowledging that? Because the president is going from the White House to Mar-a-Lago. And all of the people in both of those places are on the right side of the economic trade. And so I don't even think the economic reality that you're talking about is being acknowledged. Well, yeah, but okay, forget about those people though. What about the opposition? Okay, I accept that those people, forget it, we've lost those people.

24:08But what about the opposition? Where is the position paper from Gavin Newsom, Pete Buttigieg? Where's the position paper from the Democrats to say, here's the annihilation problem coming. Here are the solutions or potential solutions for the problem. But listen, the stock market, unless the war goes longer than it thinks, stock market is holding and profits are holding. Yes. We'll just have to see if we can clear the straighter her moves before we run out of energy. Profits of big business. Remember, Anthony, we had an extraordinary amount of small businesses in this country go out of business last year.

24:49I'm with you. Trust me, it pains me. All right, when we come back, we're going to talk about Trump versus Jerome Powell. Okay, Luke Skywalker versus Darth Vader when we come back.

25:06Welcome back to The Rest is Politics US with me, Anthony Scaramucci. I'm joined by my dear friend, Stephanie Ruhl. Before we talk about Jerome Powell, what is going on with those bedposts behind you, Stephanie Ruhl? and for those of you that are listening as opposed to watching is that a trump hotel that you're living in god tell me tell me the truth you didn't think this was i'm here in this like generic corporate london hotel you didn't think this was my bedroom at home yes this is my bedroom home my husband sleeps in one royal bed and i sleep in the other no i'm staying at a hotel in washington because i'm here for a conference i should have realized it when i entered the room This used to be the location of the Trump International Hotel, where you have probably had many nights having cocktails with international dignitaries.

25:53It's nice to see that Liberace got to the bedrooms in the hotel as well. He didn't just do the Oval Office. I was going to say, it looks like the Oval Office here. All right, good. So, I mean, we're talking to Stephanie Ruhle from a gold-leafed hotel room in Washington. But we've got a big Washington drama going on between Jerome Powell and Donald Trump. And May 15th is just around the corner. So viewers and listeners, Jerome Powell's term ends May 15th. But guess what? Tom Tillis and a group of the Senate Banking Committee Republicans, really led by Tillis because he doesn't care anymore. He's not running for re-election.