Moneybeat: New economic era

JENNY ROUGH, HOST: Coming up next on The World and Everything in It: The Monday Moneybeat.

NICK EICHER, HOST: Time now to talk business, markets, and the economy with financial analyst and adviser David Bahnsen. David heads up the wealth management firm The Bahnsen Group. He is here now. Good morning to you, David.

DAVID BAHNSEN: Good morning, Nick, good to be with you.

EICHER: Alright, the economic policy side of the cabinet is filling in, David, and I’ve been looking forward to talking with you about it. The big job is Treasury and I’d like to begin with the controversy that broke into the open … a behind-the-scenes row, a tussle, first reported in The Wall Street Journal and then The New York Times between the head of the transition, Howard Lutnick, and a billionaire hedge-fund manager Scott Bessent … both of whom were vying for the Treasury post. Even Elon Musk weighed in on the side of Mr. Lutnick to become treasury secretary … and frankly, I thought that might’ve meant done deal. But Mr. Lutnick wound up at Commerce … and it looks like Mr. Bessent will become Treasury secretary. Do you see that as a good outcome?

BAHNSEN: Well, it did have a good outcome. And the tussling was not even as much directly between Mr. Lutnick and Mr. Bessant as it was between Lutnick and some of the people that wanted to see Bessant. And I think that ultimately, in the end, President-elect Donald Trump is going to make these decisions.

This one, of all the different appointments so far, was clearly the one that had the most back-and-forth and the most behind-the-scenes drama. And, you know, there’s a few things that I know I probably shouldn’t share, but what I will say is I think President-elect Trump went through a good process to get there, and that I would much rather have Scott Bessant as Treasury Secretary than some of the other possibilities.

So I’m happy with that outcome, and to the extent that some greater chaos and dysfunction behind the scenes was averted and dealt with, that’s a good thing. As we’re sitting here talking, we don’t yet know the National Economic Council director. That’s going to be an important pick, and from what I’m hearing—and literally, just moments ago, I got off the phone with some very, you know, connected advisers to the administration—I think it’s between two Kevins: Kevin Warsh, who was also a candidate for Treasury, and Kevin Hassett, my colleague at National Review.

Both of them, I think, would be absolutely fantastic. So there’s sort of an orbit, Nick, of economic people, the vast majority of which I really do like. There’s a couple out there that I hope don’t end up with a position. I think that you want people who get things done. You want people that support a free-market agenda, deregulation, pro-energy policies, and that believe excessive taxation is an impediment to economic growth, and that believe in a strong, stable dollar. You know, that’s the general worldview that you’re looking for here. It isn’t all that complicated. And I think Scott Bessant is a guy who knows financial markets.

My worry, if they had put someone who was more of a loyalist and more of almost kind of a Trump MAGA fan versus being a real economic and global thinker at Treasury, is that we would have had some problems. And Scott Bessant is going to do a good job there, and I’m happy.

EICHER: So, couple things … David … on Bessent. I’d like to know what you know about this … that Bessent as he was coming up in the world of finance that he was a protege of George Soros, that’s one. But No. 2, I found this so interesting, and I’d like to hear your view on it: This was something Bessent said on the eve of the 2024 election. I’ll quote a few sentences.

“We are going to decide whether we are going to grow our way out of this debt burden, and I think we can, through deregulation, energy independence & dominance in the U.S., and a growth mindset. I feel very strongly that this is the last chance to grow ourselves out of this.”

I’d love for you to dive into that, David, but first, the Soros matter … Scott Bessent isn’t for radical politics and soft-on-crime, leftist district attorneys, is he?

BAHNSEN: No, and this is something I wish more people understood. George Soros has a very large foundation, think tank, activist, political, lobbying endeavor, and Scott Bessant has never had anything to do with any of that. George Soros also had to make his money somewhere, and it was in the world of finance, and about 25% of Wall Street has touched George Soros’s hedge fund at one time or another, working there, working for a counterparty, doing business together, trades.

Scott Bessant was a global currency trader with Soros. Stan Druckenmiller and Jim Rogers are very well-known billionaire hedge funders who also worked with Soros that are considered very libertarian or right-wing minded. So Soros as a financier and Soros as an ideologue are two different eras of Soros, and Bessant deserves to not be associated with the radical Soros.

Now, by the way, like Trump, and like a lot of other people, including Ronald Reagan, he used to be a Democrat. But he’s been an incredibly thoughtful Republican who can articulate why he became a Republican, why he’s an economic conservative, and why he believes in an American freedom message. He can articulate it very well, and so I don’t have any worries whatsoever about Scott’s bona fides, and I’ve spent time with him discussing these things at great length, and that’s not something I would say about every candidate.

The issue you bring up about what he said the day before the election is fascinating. I agree that there are a lot of components to what are going to be necessary to address the U.S. debt fiasco. I don’t believe that we’re only going to be able to grow our way out of it. And I don’t think Scott really believes it, either.

But I do think that’s an important political messaging, because you need growth to lead so that you can inspire the people for the necessary adjustments, cuts, austerity, and entitlement reform that are going to be necessary. Right now, no one has any incentive to do anything because there’s no step in the right direction. There’s no momentum. So it feels hopeless and helpless, and people just think kicking the can down the road is the best way to go.

If you start moving the needle with growth, then there’s an ability politically to alter the conversation. But nobody has been willing to talk about growth. At the end of the day, I actually think our opportunity to only grow our way out of it was about 10 to 12 years ago, and I think we missed that boat. There will end up being pain to deal with this debt fiasco. But I think Bessant’s right that the message you have to have—especially, by the way, the day before an election—is growth-oriented. That’s what has to lead. And no one’s been willing to start there.

EICHER: Running through my cabinet flash cards here, just a flurry of people named … as we’ve said Bessent at Treasury, Lutnick at Commerce. A new Labor Secretary nomination announced Lori Chavez-DeRemer … moderate Republican who lost a congressional seat in Oregon …. We mentioned the Energy Secretary nominee Chris Wright. Linda McMahon as Education Secretary, Scott Turner at HUD, the Housing secretary. Russell Vought as budget director, running OMB, the office of management and budget. The economic team’s pretty much in place … what do you think overall?

BAHNSEN: Well, you don’t, in the sense that I sure hope to the heavens that they block this Labor Secretary. And I don’t think they will, because I think you’re going to have as many Democrats vote for her as Republicans. But Laurie Chavez-DeRemer out of Oregon was just nominated over the weekend as Labor Secretary, with the support of the teachers’ unions, the labor unions, and again, President Trump ran on a pro-worker policy.

She supported California A.B. 5, which is one of the most radical pieces of legislation that I’ve ever seen pass, trying to reclassify independent contractors as employees. She has the support of Randi Weingarten, who was the head of the teachers’ union and became rather infamous during COVID for wanting to keep schools closed for years upon years.

This appointment is by far the one that’s most concerning to me, ideologically, philosophically, and in terms of the movement. She’s opposed to Right-to-Work states, and so I don’t know what’s going to happen there. National Economic Council still has to be named. Your point: Education, Commerce, Treasury, State, Defense—they’ve all been named. The Defense Secretary is going to have a tough time getting through the hearings.

So we don’t really know where all of these are going to go. CDC got named over the weekend with a very, very strong pro-lifer. So, you know, you’re right, a lot more of these have been appointed or nominated than normally has been before Thanksgiving. But there’s still a few that are up in the air about confirmation, and a few that are to be determined. So we’re moving the ball, but there’s more work to be done.

EICHER: David Bahnsen, founder, managing partner, and chief investment officer of The Bahnsen Group. If you’re not subscribing to David’s regular market writing, you can find out more at dividendcafe.com. It’s free, and of course, as I say, you will receive it in your inbox. David, thank you. I hope you have a great week and Happy Thanksgiving.

BAHNSEN: Thanks so much, Nick, and Happy Thanksgiving.

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