Moneybeat: The trade show

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LINDSAY MAST, HOST: Coming up next on The World and Everything in It: The Monday Moneybeat. From Istanbul, here’s Nick Eicher.

NICK EICHER, HOST: It’s time now to talk business, markets and the economy with financial analyst and advisor David Bahnsen. David heads up the wealth management firm the Bahnsen Group, and he is here now. Good morning to you.

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

EICHER: Well, let’s begin north of the border. Canadian trade talks with the United States were thrown off course a bit last week after the premier of Ontario, Doug Ford, put on the air over the weekend during the World Series an anti-tariff ad quoting Ronald Reagan.

This angered President Trump. He called off negotiations over the weekend. Ford backed off a bit—he said he would pause the campaign, but not until today.

David, what’s your read on this unusual flare-up over tariffs? Is this mostly political theater, do you think, or does it point to something else?

BAHNSEN: Yeah, I thought actually the most interesting thing was that President Trump responded by announcing he was pulling all talks and back to 100 percent tariffs with Canada. And then the market responded by going up 500 points on Friday.

We are so far past the point of markets taking any of this seriously—it’s really staggering. It was about 3:45 in the morning Eastern Friday that I heard this announcement of what had flared up, and you would expect six, eight, ten months ago that it was going to lead to some sort of market response.

I think markets are doing what appears to me the counterparties are doing as well, which is just shrugging off all those types of threats and so forth.

What’s really interesting is that the President was upset, and even the Reagan Foundation chimed in that they thought the quotes were altered or edited in a way that was a little deceiving—and there was no reason for Canada to do that, because if they want quotes from President Reagan speaking against tariffs, there are plenty of them, I assure you.

EICHER: They kind of picked the wrong one, didn’t they?

BAHNSEN: Well, I think they picked one and then they misused it, is what the President feels. And of course, what really upset them was just their attempt to poke the bear. Doug Ford is not a fan of the President, and so it just again was taken to be a hostile situation that President Reagan did not agree with protectionism is indisputable. But the fact that this is all just going to blow over and there’s going to end up being some sort of discussion with the U.S. and Canada and where it all goes, you know, that also is beyond debate. I mean, it’s going to happen—and that’s why markets shrugged it off.

EICHER:All right, David, back here in the U.S.—well, I shouldn’t say it that way … I’m in Turkey at the moment, assuming I actually get back home sometime soon.

But back home … inflation went up slightly in the month of September—three percent year over year, just a bit above August’s pace. I still see that the Fed is on track for two more rate cuts. It looks like it’s in the high 90s that it’s going to continue to cut rates, even though it’s 3 percent and not 2, which is the target—bringing me to the Wall Street Journal editorial board raising the question: “Is three the new two?”

What do you think?

BAHNSEN: Well, as long as President Trump is there, it could be three, it could be four, it could be two—nobody cares. They’re cutting rates because they have been asked to do that, and the pressure is on.

I believe they’re right to do it, because they recognize that the thing putting upward pricing pressure is not monetary. The Fed has to respond to upward pricing pressure that is monetarily driven by raising rates, but this is not the case.

What is most interesting by far is that as the inflation rate ticked up a little, the Wall Street Journal is right—anyone else who’s pointing this out is right—everyone is right now just sort of ignoring the fact that the inflation rate is higher than it was the last several months of Biden’s presidency.

And we’re all talking about how we’ve beaten inflation, and the reality is, it’s just certain prices that are a bit higher because of tariffs. That’s what’s going on.

So I don’t think the Fed should be responding, because there isn’t anything the Fed can do about that.

But what I think is most interesting is that this was one of the first readings where the contribution to the inflation rate from this really lagged and antiquated housing measure was actually way down, and the owner’s-equivalent rent did show a much lower number than it has, and yet the inflation number stayed higher.

So the impact of certain prices with tariffs is definitely more pronounced than anyone is wanting to talk about. But I still don’t believe that gets to a level of the Fed saying, “Well, we’re going to use interest rates to try to adjust that.” There’s nothing they can do.

Why they want to be cutting rates, Nick, is because they’re worried about the labor market. They’re worried about a softening economy.

And so yes, the Fed will cut in October and they will cut in December.

EICHER: All right—so, the government shutdown now. A lot of news this past week. It’s going into its fourth week. The pressure is starting to show a little bit, I guess.

I mean, lawmakers in both parties are somewhat starting to break ranks. Some Republicans are pushing standalone bills; a few Democrats are kind of hinting they might support some narrow fixes.

But still, the leaders are kind of dug in, and the White House hasn’t said what kind of deal it would accept.

Where do you think things stand right now? And I guess I’m curious why we’re even talking about what the House has passed, because it was such a short-term CR.

We’re almost at that point—they’re going to have to do some other kind of deal, just because time is going to run out, aren’t they?

BAHNSEN: Yeah, they will at some point. The reason they haven’t yet is because absolutely nobody cares right now other than the government employees directly affected by it.

It is absolutely stunning how little attention any of it’s getting this week. I would guess—I’m not being hyperbolic—to say that in the week that just concluded, you had 100 times more press coverage of a sports-betting arrest around prop bets and NBA basketball games than you did the government shutdown.

There’s no pressure for either side to have to capitulate yet—and there will be—but at this point there just isn’t any heavy political pressure. Both sides are letting the clock run out.

But you’re very astute, Nick, to say that by the time they do come to a deal, they’ll be far enough down the line that it’s going to have to be something different. So any kind of really short-term CR becomes somewhat ineffectual at this point.

EICHER: I did also, David, want to get your take on this pardon for the crypto executive Chang Peng Zhao, the founder of the crypto exchange Binance—less than two years after he pleaded guilty to money laundering.

Since then, he has become a business partner in a Trump-linked digital-currency venture, and even some Trump allies are critical of the move.

Now, as soon as I brought that up, you sighed. I take it this pardon is really bothersome to you?

BAHNSNEN: Yes, it is—and it’s always hard for me, Nick, because I recognize that a lot of people are so appreciative of certain things the President has done in the policy realm that I don’t think people like it when I’m critical.

I cannot even imagine somebody defending this pardon. It would be incomprehensible to me. He pled guilty. He is guilty. It was a crime. He wasn’t over-sentenced, and he is in direct, very lucrative business with the President and his family.

And then to now go get this pardon … I guess the only thing people can say is, “Well, what about the pardon the Bidens did?” And I thought that was wrong too. So I’m not going to do the what-about-ism—it all bothers me.

I recognize that at this time the presidential pardon right is something embodied in the Constitution. I’m not one who believes it is being executed these days as our founders envisioned.

But there’s not much else that can be said here. I really would have a very hard time seeing anyone defend this pardon.

EICHER: David Bahnsen, founder, managing partner and Chief Investment Officer at The Bahnsen Group. He writes regularly for WORLD Opinions, and at dividend-cafe.com. David, thanks so much. We’ll talk to you next time.

BAHNSEN: Thanks so much, Nick. Good to be with you.

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