Moneybeat – Is any relief in sight?


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

NICK EICHER, HOST: Time now to talk with David Bahnsen, financial analyst and advisor. David, good morning.

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

EICHER: Let’s begin with Congress, the virus relief package. The White House apparently has put $1.8 trillion on the table. The House, as we know, passed $2.2 trillion, so $400 billion separates them. Close, by Washington standards. And then I want to throw into the mix Fed Chairman Jay Powell’s statement that there’s a greater risk Congress will do too little than that Congress will do too much. What do you hear?

BAHNSEN: Well, I think that Speaker Pelosi has ended up with this thing exactly where she wants it because if, indeed, there’s a blue wave in the election and you have a President Biden and Democrat control of the Senate, there’s nothing stopping them from doing another bill later, adding to this bill. They could easily add a trillion dollars on top of this later. But, of course, if they don’t win the election, they’ll at least get something near $2 trillion now. It kind of hedges their bet a little bit. 

The issue in the Senate, Nick, I can only tell you it’s not really going to be about the Senate. It’s going to be about the president. If the president’s going to go say he supports it, then a bunch of the Republican senators that are skeptical are going to have to get behind it and they don’t need that many. If they have Democrat support, they only need a certain number of Republicans to get behind it and they’re going to have that many. 

So, this thing is entirely in the president’s hand and in Speaker Pelosi’s hand, and it has been the whole time. And I think they’re closer to getting a deal done than they’ve been. I don’t think most people are going to like the deal, but I believe that right now you’ve got to put it over 50 percent that we’re going to get an announcement next week.

EICHER: But I would like to hear your thoughts on the Fed statement about the greater risk of doing too little than doing too much. I mean, we got to the end of fiscal 2020 with an annual deficit year-over-year three times greater than 2019—biggest deficit relative to GDP since 1945. How can Chairman Powell say that?

BAHNSEN: Well, first of all, I don’t think any of those numbers are remotely surprising. It was all over six months ago, and you’re running over trillion dollar deficits entering COVID. And then you take on a $2.2 trillion CARES Act and also have all the revenue decline that comes with a recession.

But what Powell was saying was the exact party line that has to be said if you’re a central banker, is you have to keep pressuring Congress to do something with fiscal stimulus because you don’t want all the pressure on you and doing something with monetary stimulus. 

And, option C, that there need not be anymore intervention fiscally or monetarily is not on the table. There’s nobody advocating that. So, all we’re debating is whether or not someone should do something and that someone is Congress or the Fed. But there’s no one saying don’t just do something, stand there. They’re all saying don’t just stand there, do something.

EICHER: Well, let’s talk about jobs. Maybe that’s a good transition. Continuing claims—ongoing claims for unemployment benefits—fell by more than one million to 11 million now. I guess we were as high as, what, 25 million at one point? So the continuing claims seems like the good story but the new claims, it’s just like it’s stuck at that mark of 800-thousand new claims per week. What’s your analysis?

BAHNSEN: Well, yeah, they are measuring two different things and I think you’re right that the continuing claims dropping is a good story. It’s certainly the one I’m following the most. You’ve got to remember that that $600/week supplement from the Feds ended and then there were various state options and so it’s different state-by-state as to what additional incentive existed to not go re-find work. But each week you’re finding people who maybe their benefits have gone away, they’re now incentivized to go out and find new jobs and then there’s also more layoffs as you have restaurants or other types of businesses—it is primarily in the hospitality industry—that were staying open and keeping payroll going from PPP. Now, those resources have run out. They decided they can’t stay profitable at 25 percent capacity or whatever the case may be, so then you get new rounds of layoffs. So, you have a push and a pull and it really is what it appears to be to you: The bad news of still having 800,000 a week of new people filing for unemployment and the good news of people who had been on unemployment before coming off of it. Both of those things are happening at once for the reasons that I’ve said.

EICHER: OK, on Wall Street: I’m curious, what is Wall Street saying about the election? Traders seem pretty good predictors of politics.

BAHNSEN: Here’s my take: I don’t really think there’s much of an alternative theory to this, but I’m open to one. There’s no way that the market is pricing in a Trump victory when his polling is worsening, not getting better. 

But then I will point out: I think it’s increasingly possible the Republicans could keep the Senate. There’s nothing the market would like more than that, a decisive victory in the presidency but the Republicans holding the Senate. So, I don’t know that that’s going to happen, but I think the market is well aware it’s at least a good possibility right now.

EICHER: Alright, let’s leave it there. David Bahnsen, financial analyst and advisor. Always good of you to carve out some time for us each week here to talk about this unprecedented economic crisis. David, thank you.

BAHNSEN: My pleasure, Nick. Good to be with you.


(AP Photo/Mark Lennihan) A mask is placed on the Fearless Girl statue in front of the New York Stock Exchange, Wednesday, Oct. 7, 2020. 

WORLD Radio transcripts are created on a rush deadline. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of WORLD Radio programming is the audio record.

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