March 3, 2023

Kingsview CIO Scott Martin on Fox Business Your World With Neil Cavuto 3.3.23

Click here to listen to the full interview.

Program:  Your World with Neil Cavuto

Date:  3/3/2023

Station:  Fox Business News

Time:  4:00PM

NEIL CAVUTO: And the debt is a combination of all those deficits. They added up to the point we’re on the brink. An issue that I did bring up with Senator Manchin yesterday and expressed his concerns about where this could be going. Take a look.

JOE MANCHIN: Just spending, sending checks out and spending money for the sake of spending. It has proven to be lethal to us right now.

CAVUTO: You know, the president indicated yesterday, Senator quoting here, I want to be clear. I’m going to raise some taxes. He didn’t outline what taxes he’s going to raise. You limited those he wanted to increase a couple of years ago. Where are you on that and what do you think he’s talking about?

MANCHIN: Well, I don’t know. I’ll probably hear something today, hopefully, of what direction they want to go. But I can assure you, you can’t basically just tax your way out of debt. You can’t borrow your way out of debt and you can’t cut your way out of debt. You can do a combination of all of those to a certain extent and manage your debt. We’re not managing debt. There’s not a person watching or listening right now that doesn’t manage their financial situation and be successful.

CAVUTO: And therein lies our conundrum what to do and what will the president propose? A lot of focus on coming up with ways to raise revenue, but not necessarily save on revenue or address spending either. Hitha Herzog Following all of that H squared research or retail watch extraordinaire, how this is going to fall out on folks like you and me? Scott Martin of Kingsview Asset Management as well on the market impact. Now, you know, if the markets are worried about this, Scott, of course they had a funny way of showing it today, maybe because they’re so used to this in general. But I am wondering about the fallout here. What do you see happening if we can’t get a handle on our nation’s finances?

SCOTT MARTIN: Not good things. You’re right. Unfortunately, Neil, the market is getting very used to this administration’s tough talk, let’s say, or scary talk to the consumer and the small business man and woman. And that’s really what scares me, Neil. I mean, if you look at the the generation of wealth here in this country and the hard workers and all those small mom and pop businesses that are frankly getting targeted by the Biden administration here and a lot of this latest talk, that’s the future of the stock market. That’s the future of the economy. Those are your spenders. Those are your job creators. And so the economy is going to suffer big time if this tough talk keeps going on. And Mr. Manchin is correct in the sense of you can’t tax your way out of this, and especially we should not considering that of all the pitfalls and missteps this administration has had in the last couple of years, Neil, economically speaking, we still have boys and girls record amounts of tax revenues coming into the Treasury Department. You don’t take those tax revenues and spend them. You use an about you use them to balance the budget and that’s something that DC needs to learn.

CAVUTO: Well, both parties could use that advice because they’ve both got us in this pickle. But what’s interesting, Hitha, I know you follow the consumer. We’re getting more reminders that, you know, this debt goes up when interest rates go up. So we’re paying more just in interest and related costs here. And combine that with just the inflationary environment, it’s no wonder you have stores like Macy’s and Best Buy, Nordstrom, Costco, Walmart, either stating out front or worried about the future that the consumers are retrenching a bit. What do you see happening?

HITHA HERZOG: Yeah, it seems pretty obvious, right? Increase in prices and a lack of demand and shopping will certainly have a major impact on the economy. I mean, when you’re thinking about when you’re looking at aggregate consumption, right, consumer spending is two thirds of the economy. So when you’re looking at aggregate consumption, if that decreases, that’s going to have a severe effect on GDP. So really, you know, having this pending tax increase is, you know, not boding well with the consumer. And of course, they’re going to start cutting back on those discretionary spends. And in addition, I mean, Scott made this point to the small business. Most small businesses are really funding their their small business with personal income. So if that personal income is taxed and gets higher, then there’s going to be a lack of spending for that small business. And we’re looking at this at my fellowship at the DCI Institute in in Washington. That’s this is an obvious, obvious situation.

CAVUTO: We’re going to explore this a little later in the show, guys. But, Scott, the one thing I do know, the president’s kicking around the idea of putting a tax on companies and their stock buybacks. It kicked in this year at 1%. But we all know that a number that starts low goes high and higher, and we’re hearing that it might go as high as 4%. And that doesn’t mean it ends there. The impact do you think that would have?

MARTIN: It’s not great. I think it hurts investor sentiment. It certainly hurts the ability, Neal, for companies to do what they need to do and the government to just stay out of the way is something that obviously is foreign right now. And here’s the problem I have with the whole buyback onslaught, let’s say, against these companies. Not all buybacks are created equal. Not all not every company does a buyback for the same reason. And so there’s a lot of other reasons and intricacies that companies have to do buybacks. So to say that every buybacks is bad and everybody’s got to pay more tax and yada yada yada is not the greatest thing. And if you look at the stock market and you look at the returns the stock market gives us over long periods of time. Buybacks are part of that, boys and girls. So those are things that need to happen as they do with economic activity and spending and all the things that Hitha mentioned that we’re all very concerned about.

CAVUTO: You know, we talk about the economic environment. The president’s been saying, you know, we still have job growth, we still have a very strong economy. Inflation could be a lot higher, but we still have and this is, you know, talking about anecdotal evidence, packed restaurants, packed theaters, packed Broadway shows. So if the economy is going to hell in a handbasket, it has a wacky way of showing it. How do you look at that?

HERZOG: I think what we’re seeing, Neil, is really the after effects of the lockdowns that we had for two years. I say this a lot whenever we can see consistent spending, but it’s the psychological effect of not being able to spend and be out. So despite the fact that maybe the consumer is feeling the pinch, there’s also that other aspect. If you think about, you know, two two little people on your shoulder, one is telling you to save, save, save. And the other one is saying, you know what, YOLO, let’s just go out and spend. So when you’re referring to those packed restaurants and people going shopping, they’re spending on debt. And that is something that we have to watch as well. And credit card debt is skyrocketing because consumers want to go out. I mean, this is a consumption based society. So that is what we’re seeing.

CAVUTO: All right, guys, I want to thank you both. We’ll see you again. The details of the president next week, how he hopes to address this and what Republicans will or will not go along with, including many in his own party.

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