Power Lunch - $4 Trillion Tax Fight, Musk’s Chip Caper 6/4/24

Episode Date: June 4, 2024

Trump-era tax cuts are set to expire next year, creating a $4 trillion dollar question with huge implications for the economy. We’ll discuss what it means for the 2024 presidential race.Plus, Elon Musk is responding to reports that Tesla bought AI chips from Nvidia, but he ordered them to be shipped to two of his other companies instead. We’ll get the latest details. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Welcome to Power Lunch, everybody. Alongside Kelly Evans. I'm Tyler Matheson. Coming up, Elon Musk, responding to reports that Tesla bought AI chips from Nvidia, but he ordered them shipped to two of his other companies instead. What's going on there? We'll have more details. And ahead of Friday's jobs report, we'll talk to former Labor Secretary Marty Walsh, asking him about his current job being head of the NHL Players Union. Let's get a check on the markets, though, before that, stocks have been mixed this whole trading session, really. Dow hanging on to an 86-quarter point. gain in the SPP lower by 7, the NASDAQ lower by 2 tenths of a percent today. Today we also have five states and Washington, D.C., holding primaries. And though the presidential nominations are all but guaranteed, one key issue on voters' minds is what happens to those tax cuts set to expire next year? It's a $4 trillion question with huge implications for the economy. Megan Kisela joins us now with more.

Megan? Kelly, former President Donald Trump and some Republican lawmakers are signaling they want to see a full extension of those 2017 tax cuts, but it will come at a price. So new research from the Joint Committee on Taxation says a full extension would cost $4 trillion over the next 10 years. And the Committee for a Responsible Federal Budget says those cost estimates are now 50% higher than initial estimates from 2018. Costs are rising for a couple of reasons.

Part of it is simply inflation and rising wages, so the base of income to tax is larger than it was. have also been able to see the tax law in action for several years now, so they have better data on which they're basing those estimates. But the bigger question is what all of this means for the size of the U.S. debt. So without corresponding pay-for's, this would add $4 trillion to the $20 or so trillion the U.S. has already projected to borrow over the next 10 years. And the economists I spoke with say this matters for debt sustainability. So if you take a look at our debt to GDP ratio, it has been holding fairly steady. An economist say debt growth is manageable as

as it increases more slowly than the broader economy. But extending the tax cuts could be the tipping point that changes that. Economists with Brookings estimate that without major cuts in spending, debt would soar to 211% of GDP within 30 years. That's up from the 120% level where it is now. So Kelly, this is highlighting one key economic issue at stake in November's election. Trump so far is talking about full extension while Biden is pushing to raise taxes on corporations and the wealthy. Kelly? That's super interesting, Megan, because it obviously seems unsustainable

if those tax cuts are extended, but it's hard to imagine that President Trump could really campaign on anything but keeping them in place. And yet, practically speaking, you have to wonder if under either administration taxes will end up going up. You do have to wonder that. You could chalk some of this up to campaign rhetoric. I think that's possible here. A lot of the folks I spoke with, both economists and And political analysts think that even Republicans in the next administration, if they had control of Congress, would find a way to pay for some of this, that there's likely an in-between for the corporate tax rate, right, between the 21% level where it is now and the 35% level where it was. Maybe they could land somewhere in between, but it is clear it's a good campaign talking point, right, to say that you're going to fully extend tax cuts. That's one way to get businesses on your side. All right, Megan, thank you very much.

Megan Cassello reporting from Washington. on the fate of the Trump tax cuts no matter who wins the election. Let's get to our panel. Kyle Palmerlo is a senior fellow of the American Enterprise Institute, and Brendan Duke, is Senior Director for Economic Policy at the Center for American Progress. Welcome to both of you. Kyle, let me begin with you. Thank you. Does anyone credibly believe any more that major tax cuts in any substantial way, quote, pay for themselves? Well, I hope not. I think if you're talking about $4 trillion reduction in revenue. You're going to maybe impact the economy some ways.

You're going to encourage some people to work. Maybe investment rises. That might raise a little bit of revenue to offset the cost, but you're still going to lose revenue overall. And I think the data is pretty clear from the Tax Cuts and Jobs Act from between 2018 to about 2019 that the federal government did lose revenue. Now, that's not to say that the TCGA didn't make improvements to the tax system, but I think it's a stretch to say that it paid for itself. How much of the, a part of that, if I'm recalling correctly, was creating a window through which U.S. corporations could bring foreign domiciled profits back into the U.S. at favorable tax rates. Kyle or Brendan, jump ball, whoever wants to take this. Did that happen in any big material way?

Or another way to put it is, are a lot of profits still? sitting overseas untaxed? So the part of the reforms to the international system included what they call a deemed repatriation provision. So whether the cash was brought back or not, the federal government deemed that money to be repatriated and taxed at a lower tax rate. This was an exchange for a new system going forward that would tax foreign profits at a low minimum tax rate and or if or for any profits taxed above that they would be

excused from tax now it's a I think it's a separate question whether that would have that has any impact on the US economy but I certainly think that the government collected revenue from that provision and now we're sort of digging through the numbers Brendan but my understanding in part was and correct me where I'm wrong that government revenues despite the the tax cuts have been you know, somewhat steady over the past. You know, COVID makes things a little bit weird. But that spending is kind of structurally three or four points higher than it was pre-pandemic. Do you think that spending is structurally higher because inflation remains in the system and will work its way out?

Or is spending structurally higher and will it stay that way? So I think a key thing is that the projected deficit over the next decade is actually lower than projected pre-COVID, which is really good news when you exclude interest, which is obviously, an important part of that, the primary deficit. So that's good news on the deficit front, but what we're talking about right now, we're talking about extending these tax cuts, which are not part of the CBO baseline, and would exacerbate that and would cause debt to continue to grow, interest rates to rise and make buying a home, by investing in a business, much less affordable than it is now.

So I think that really lays the stakes that we've actually made some good progress on the deficit over the last, you know, few years relative to pre-pandemic projections, obviously, again, when you exclude interest, but the, you know, passing these tax cuts without paying for them, just putting them on the credit card would exacerbate the situation. Well, I think part of the problem is what you said. So it would be one thing if we were arguing about, you know, the size of the deficit and we had no debt. But because the debt is already so high, anything that adds to it feels concerning.

So a lot of people who argue that the tax cut plan was bad, are actually more concerned about it what it did to the debt pile and how much it boosted us. So here we're starting at 120% of GDP. And you could make a case that the interest payment on that is now the most important factor going forward. So I don't know if we should really be asking about the plans around tax cuts or if we should simply be looking to the Federal Reserve and potential and economic slowdown to lower rates and maybe bail us out of the situation, Brendan. Look, I think the key thing is that both candidates actually have proposed pay force for extending the tax cuts in some sense.

Biden has proposed, you know, letting them expire for the top 2% of households, households making over $400,000 and paying for the extension of the tax cuts below that amount. Donald Trump actually does have some pay for us. He has proposed a 10% tariff on all imports into the United States and a 60% tariff on all imports from China. That is actually a huge revenue raiser. It raises about $3 trillion over 10 years. It helps pay for those tax cuts. But of course, it actually really hurts families.

You know, it actually wipes away all the tax cut they would get from extending those tax cuts. It's about a $1,700 tax increase for a typical family, which wipes out any tax cut that they would get from extending the Trump taxes. So let me turn back to you, Kyle, if I might. Are there people out there who seriously believe that you can get to anything approaching a balanced budget or debt reduction or deficit reduction without. strictly by cutting spending or you gave them truth serum, would they say, you know, to get there, we really are going to have to raise some revenues? I think lawmakers, policy analysts need to be realistic about what's politically possible. If you look back to when Republicans were in control last, they had the chance to reduce spending.

They really weren't able to reduce spending significantly. So a more politically realistic outcome is that taxes may need to go up somewhat, but spending may also need to come down at the same time. Now, whether you could get to a deal that eliminates the deficit or reduces the debt, I think that that would be highly aggressive, but at least things could become more or be made to be more sustainable in the long run. And that's important given the fact that interest rates are so high. So it's not just the level of debt, as was discussed, but it's also the interest rate on that debt. Let me just try one final question on both of you, if I might. Very quickly, Brendan, I'll start with you. What if all income, I mean all income, corporate capital gains, carried interest, all of it was taxed at the same rate? In some sense, President Biden has tried to move toward that.

He wants to equalize the tax rate between, you know, capital gains and workers' incomes for high-income households. He's actually, you know, proposed applying a minimum tax to unrealized capital gains for billionaires. So I think there's ways to move that direction. There's also other loopholes to deal with. So, I mean, I certainly think that has to be a part of the discussion. We have to leave it there. Thank you, gentlemen. Interesting stuff.

In fact, let's get over to the CNBC CEO Council where Amon Javers is sitting down with House Speaker Mike Johnson and listen in. I think that we do well to hold fast to those principles. I'm reminded of what Ronald Reagan said in his farewell address. He said, they call me the great communicator, but I really wasn't, I paraphrase him, but he said, I was basically communicating the same great things that have guided our nation since its founding it. It was about the message, not the messenger, he said. And those same great things we are now the stewards of, and I think we, we abandon them at our peril. So we're fusing these new ideas, the new emphasis,

into the tested and tried and true principles, and I think that will serve us well in the days ahead. You talk about the idea of free markets being so vital to your coalition, but I think Trump really shattered the norm on free markets, right, with his approach to tariffs on China in the first term. And as we look ahead to a potential Trump two term, the president is now campaigning on 10% across the board tariffs. That's not something traditional economic conservatives would have supported.

It is something the new populists are supporting. Is it something that you are supporting? I believe there's a role to play for that, and I think we'll have some very thoughtful discussion, a vigorous debate, about exactly when that can be applied and how it should be. You can't argue with President Trump's approach. I mean, look, I'll say this.

After the first two years of the first Trump administration, I came to Washington the same time he did for the first time, January 2017. And everyone in this room knows we had achieved the greatest economy in the history of the world, not just the United States. I mean, we had every demographic was doing better, the economy was roaring, and we did that because we applied those tried and true ideas

under Trump's leadership. The Tax Cuts and Jobs Act, we reduce taxes, we reduce regulations dramatically, and that unleashed the free market, it unleashed the free enterprise system. We effectively tried, and I think achieved, getting the government off the backs of job creators, entrepreneurs, risk takers,

so that they could do what they do best, and everybody was doing better. This new team in charge reflexively did almost exactly the opposite, and I think it's not a mystery of how we get back to prosperity. We implement those same plans and principles again. What you just said, though, does not sound like a ringing endorsement of 10% across the board tariffs. I mean the idea that we'll talk about it, we'll have a discussion. That doesn't mean, yes, sir, I'm going to salute in March and execute that on Capitol Hill.

Well, look, I don't know that we know all the details of all the ideas yet, but I'm open to those discussions, but as the speaking, of the House and the leader of my party and the Congress, I'm going to be very careful about what I commit to on the front end. But listen, it is a thoughtful debate. We're in interesting times. We're in unprecedented times in many ways, and I think we need to adapt to that. One of the things voters seem to be saying screaming out loud is that inflation is an enormous problem for them. The economy is by almost every measure, an incredible economy. Inflation has been the sticking point. That's the thing that voters seem to be screaming about

the most. One of the criticisms of the Trump economic agenda is that it is inflationary. You do the 10% across the board tariffs, particularly on immigration. If you deport millions of people who are currently employed, that's going to be inflationary. How do you deal with inflationary pressures and a populist economic agenda at the same time if there is a Trump 2 in 25, and you're the guy executing on Capitol Hill? Well, we make those plans methodically, and we carefully implement them, and I think you've got to be careful. I've spoken with President Trump about the deportation necessity. I mean, I think that's right. By our estimates, maybe as many as 16 million illegals have come across that open border since Joe Biden took office. But the reality is

deporting them all is not a simple thing. I'm not even sure you could locate many of them. I mean, that's part of the problem. How do you practically do that? The size of the police force that you'd have to have to do that would be enormous. The cost of that be enormous. The logistics of that would be enormous. The legal fight around it would be epic. It would. And the point is, so the theory in this is probably different than the actual application of it, and that's what we'll have to sift through. Look, I think this is doing untold damage to the country. It's catastrophic what the open border has done to us, and I don't need to recount all the parade of horribles with this group because you know it. But we're going to be dealing

with this for decades to come, and it is a nation-changing nation-shifting, shifting. kind of problem and we'll have to deal with it and develop responses as we go. The other thing we've seen with the rise of economic populism on the right is this idea that, you know, you talked about Republicans years ago, and the idea was we're with the job creators, we're with the CEOs, we're with the big companies, we want to help them thrive and grow. Now you see a movement on the right economically, which says, hey, wait a second, these CEOs in terms of the culture wars are not with us, the Republican base necessarily. They're jamming maybe cultural values down our throats that we don't like.

CEOs are not our natural ally. In many cases, there are enemy, and you've seen Target, Disney, Anheiser-Busch, you know, all the companies that you can list, targeted by the conservative movement. That's something very new for CEOs like we have in the room here, to hear from the Republican Party.

Do you feel like you need to build a bridge to those CEOs of those targeted companies? Do you feel like the Republican Party has gone too far into targeting individual companies, individual CEOs? Well, I think in many ways it was a righteous response. I think what happened is a lot of the corporations sort of went too far. The pendulum swung too far, and I think some tough lessons were learned by some of the biggest

companies in America, and that is that to be a good corporate citizen, you don't have to wade into the culture war issues. It doesn't seem to be a smart business proposition. What we need to do is go back to the fundamentals, I think, and take care of customers' needs and desires and kind of stay in your lane. I just think it's good business practice. I think that's advisable going forward. Look, it depends on how you define populism.

If you look it up in the dictionary, by one definition, it is appealing to the needs and desires of ordinary people. That's not a bad thing. That's what we're for. And we're for hardworking people, hardworking families who are having a very difficult time right now. And there's a lot of unrest. There's a lot of angst in the country.

People are angry about a lot of things. I mean, if I was a corporate CEO, I would be looking for less things to anger them about, you know, but far be it for us to give advice, I just think that the market probably drives a lot of that, and we've learned some tough lessons, right? Another target of economic populace is often the Federal Reserve. As a leader in Washington, where do you stand on just the concept of the Federal Reserve? Back to the First Principles, the independence of the Federal Reserve, do you think it should be politically independent,

or do you think a re-elected President Trump should feel free to fire J-PAL and install somebody who will lower interest rates or do what the President wants? I've always had concerns about the Fed as an institution itself. You know, it is manipulation in the markets at some level and understand why it was created and what the idea behind it is. But, I mean, they've been wrong on many occasions and wrong in recent years. I mean, I had Chairman Powell come and address probably late 2019 or maybe early 2020. Before COVID, I was the chair of the Republican Study Committee, the largest caucus in Congress, largest caucus of conservatives. And we had all the fiscal hawks in the room, and I had Chairman Powell there, and he gave a quick.

update on the economy and spoke for 10 or 15 minutes and never mentioned the federal debt by way of example. And all the hands went up for the Q&A and I said, well, Mr. Chairman, I can anticipate what they're about to ask you. You didn't mention the debt. And I don't remember his exact quote, but Chairman Powell said something to the effect of, well, I think too much emphasis is placed on the federal debt. Wrong room to say that in. This was the, you know, all the fiscal hawks. And I could see the steam coming out of their ears of my colleagues. And, you know, they told us inflation was going to be transitory and all these things. And I think some mistakes have been made. I have some concerns about it. Should it

be a completely independent body and immune from politics? Probably. But, you know, I think that I think a lot of attention has to be paid with their activities and the jurisdiction they have and the broad influence they have on the markets. So would you advise a re-elected President Trump to fire J-PAL? I don't want to call for anybody's job today. But I would say that I'm sure that that will be in the decision matrix. I'm sure the leadership of the Fed will be top of mind and the president will get a lot of advice from a lot of people who are on that subject probably a lot more intelligent than I am. Do you have anybody that you like better? Is there a short list? I don't want to break news here today. You and I are on opposite sides of that tension

here. I'm trying to get you, I'm trying to get you to say something. Yeah, yeah, I know you are. No, I got enough controversy as it is. I don't need new ones. Fair enough. You talk about the debt. Obviously, your caucus has a lot of fiscal hawks, but your critics will say that when Trump was power, we ran up the national debt, right? And there was a lot of spending and there was tax cutting and that was bad for the debt. How do you answer those critics who say, everyone is concerned about the debt when they're out of power. But when they get in power, what they really want to do is spend money and appeal to voters? Well, I mean, that's probably accurate over the history of the country and in recent decades for certain. But we have kicked the can down the road

now and run out of road. I mean, we're almost 35 trillion in debt, of course, and it's not a sustainable trajectory and everyone here knows it. The mandatory spending is 72% of the federal budget. We spent a lot of time arguing over discretionary spending and how to limit that and how to limit the size and scope of the government overall. But now it has gotten very

serious. Now we're spending our grandchildren's finances and they're not going to enjoy the same liberty and opportunity and security that we have known because it simply will not be affordable. So we have to do big things and we have to do it in a bipartisan fashion. It's not lost on us that

we're probably beyond the days of having 35 and 40 seat majorities in Congress anymore because the redistricting and gerrymandering, we're probably going to have small majorities on one side of the other for this foreseeable future. So you'll need very thoughtful, very responsible members of Congress to sit around a room and arm wrestle over this to figure out what the real answers are. We have some ideas and we'll have groups working on that. I believe we have to start in the beginning of the new Congress to address it seriously or will be derelict in our duty. Speaking of bipartisanship, I mean, your speakership was in many ways saved by Democratic votes on the floor of the House of Representatives coming to back you and saying, no, we need to keep this current speaker in place and avoid some of the tumult that we've seen in previous months. Did that experience of getting Democratic votes to back you up as a leader change your perspective on the partisan warfare we have in Washington in any way?

I mean, did you reconsider any of those members once you saw them voting for you? No, look, I'm somebody who has built a career on relationships, and I think it's really important. We mentioned Ronald Reagan earlier. I really like the way he did the job. He was a happy warrior. He and Speaker Tip O'Neill, Democrat at the time, everybody remembers, had a famously friendly relationship. They didn't agree on policy, almost any of it, but they didn't hate one another. And when I was a freshman in Congress and the 115 Congress of 2017, I authored a document called the Commitment to Civility,

And it's just a one-page, simple statement, a summary statement, basically restating the golden rule that we would treat one another with dignity and respect. And even though I'm, you know, by some estimates, a hardcore conservative, I'm not mad at anybody who's not, right? And so we got every member of my freshman class to sign the commitment to disability. Well, 52 out of 53 members, I think, signed on. A few months later, Steve Glees was, there was assassination attempt on the baseball field. We all remember the tragedy. And after that, Speaker Ryan came to me and he said, hey, that freshman class project about You ought to make that Congress wide.

So we did, and we went to leaders and luminaries on both sides and people from, you know, John Lewis to Kevin McCarthy and everybody signed on and 170 or so, I think members ultimately signed on. We were advancing the idea, the very simple idea that we're not going to agree with one another all the time, but we still have to regard one another as colleagues and not enemies. And so I've just been trying to implement that and, you know, within my own team and in my own camp, but also across the aisle. we're not going to agree on a lot of policy, increasingly so. But we can respect one another.

And I just think it's a really important part of the job. I want to ask you a little bit about some of the news of the day. We saw this historic conviction of former President Trump last week in New York. You called that a Banana Republic trial. And I wonder if, as we watched the Hunter Biden trial unfold this week, is that also a banana republic trial? I haven't been able to watch any of that yet. We'll see. I hope not. Look, I think what happened in Manhattan was a travesty, and I say that as a former litigator. or somebody who was in federal courts for 20 years, litigating, you know, high-profile cases.

I don't, I, I, I, what happened there was unprecedented. They, they, the charges were legitimate in my view. They targeted a political opponent. They used the judicial system to do it. The entire case is based upon the, the testimony of a known perjurer. I mean, the whole thing. And it, regardless of how I feel about it or any of us, I'm telling you, the American people are upset about it.

As of Saturday, I've traveled and done political events in 118 cities and 29 states in the last six months. And everywhere I go, East Coast, West Coast, upstate New York, deep south, it doesn't matter. The sentiment is the same. People are losing their faith in our institutions because they see this. They see the politicization or the weaponization

of the judicial system itself. And as a constitutional law attorney in somebody who believes in our institutions and is trying to conserve the greatest nation in the history of the world, I am really concerned about that perception. If you don't have equal justice under the law or if the people don't believe that you do, you lose a very important element of what is necessary to maintain a system of government like ours,

a constitutional republic. Are you saying it's a perception or is it a reality? Well, I think it's both. On the one hand, you know, is the system biased in favor of President Biden when it comes to the Donald Trump trial, but somehow not biased in favor of him when it comes to the trial of his own son? Well, I don't know. We'll see how the trial of his son plays out. but, you know, you can make an argument there that, has he had a fair jury that's been selected?

I don't know. We'll see. I haven't had a time to dial in on that. But I can tell you that I think it's reality and perception as it pertains to the case in Manhattan that it should never have been brought. And I think every legal analyst, everyone that I've talked to and most that have been on television, right and left have acknowledged if it was not Donald Trump, those charges would not have been brought and this would not have been pursued.

And that's the problem at the end of the day. You went to the Trump trial to show your support for the former president. Obviously, you think that was an appropriate thing to do. Would it also be appropriate for President Biden to go to the Hunter Biden trial and show his support for Hunter Biden? Well, Dr. Jill Biden sitting on the front row. And, you know, with the motorcade and the Secret Service and the whole thing. Sure.

But an elected official like yourself going to show support for somebody who's on trial. Do you think that would be appropriate for the President of the United States? It's his son. I wouldn't complain about that. I didn't go as Speaker of the House. I happened to be in Manhattan raising money the night before, and it was actually on a whim. I called to, it occurred to me who was going to be back in court the next morning,

and so I just made a call, and we arranged it last minute. It was spontaneous. It was my idea. It wasn't his. And I just wanted to go and say, not as Speaker of the House, but as an individual and an officer of the court, by the way, that this is offensive to us, and this is not who we are as Americans, and we've got to protect and preserve our system of justice.

That's interesting that it was your idea. to go because there's been a lot of reporting that suggests that Trump and the people around him were trying to rally support to get political figures to show up for him. Are you saying that nobody from the Trump team asked you guys to or you personally have? No, I mean, that quite literally was about 10-15 at night the night before. I called one of his assistants who was with him and I said, the president's back in court tomorrow, right? I've been a little busy. I hadn't been following him. The president's back in court tomorrow, right? Well, I'm a few blocks away. It just occurs to me. Maybe I'll show up. Well, come to Trump Tower. That's how it happened. It was

spontaneous. I guess I'm breaking that news. I don't know. know. And that was my idea. Yeah. The former speaker, Kevin McCarthy, said that every American should accept the election results in the fall. Do you agree with that? Well, I hope so. That's the intention. I agree with the sentiment. I mean, we absolutely have to make sure that it will be a free and fair election, and I trust and hope and believe there will be. So yes. If it is a fair election and Biden wins, will you vote to certify the Biden victory? Of course. It's a fair election. Yes, of course. I mean, that's our responsibility. That's our system works. And as I said, I believe in the institutions and we have to preserve it. So yeah.

So you think Republicans generally will vote to certify Biden win? Because there's been some question about whether there are any circumstances in which Republicans would vote that way, given that it is a near certainty that former President Trump, if defeated, will say again that there was some kind of fraud in this election. Listen, we hope that it's a just and fair and free election. There's a lot of work being done across the country in the various states to ensure that that's true. We hope there's not fraud. We hope there's not illegals voting and all the rest. And we're doing everything we can to make sure that happens. Look, we're the rule of law team. I mean, we believe in the rule of law.

It's one of the seven core principles that I articulated earlier. I believe that the system that we have is the greatest in the world. It's not perfect. But we're the last best hope of man on the earth, as Reagan also used to remind us, and we have to preserve it. And the peaceful transfer for a power is a fundamental precept of our nation. And so, yeah, We'll defend it at every turn and hope and pray that we have an election that can be trusted, and I hope that's true. Give us a sense of how the election is playing out in the House of Representatives. Are you going to be Speaker of the House again in 2025? All right. That was Amon Javers, along with House Speaker Mike Johnson, covering everything from the level of debt to the independence of the Federal Reserve,

to the recent trial of former President Trump, and whether he himself would support an election result if, Joe Biden were to be re-elected. We're going to take a break, monitor this from our CEO summit down in Washington. If there's more news to share, we will do it. Meantime, Power Lunch will be back in just two minutes. Welcome back to Power Lunch, everybody. The major average is turning positive across the board. But our next guest sees a lot of continued risks out there.

We're taking a 10% market correction from the recent highs. Here for a Power Lunch exclusive is Ron Grischewski, Groshevsky, Chairman and CEO. Got you mixed up with the coach there. Chair and CEO of Steeful Financial. He joins us from the Steeful Cross Sector Insight Conference in Boston. I'm going to call you Ron from here on out just to be safe. Ron, welcome.

Good to have you with us. Why do you think the market is a little bit vulnerable to a 10% pullback? What are the factors that could cause that to happen? Well, first of all, you know, we and I have been saying all year that, we didn't believe that the Fed would be decreasing rate significantly. And as the market comes to grips with that, coupled with the rally we've had, we believe that there's more short-term downside risk to the market. We think a 10% correction investor should be prepared for. And frankly, Tyler, you know, to be a bear from May, October isn't necessarily always hard. It's harder

to be a bull during this time. So, but that's our belief. I believe, I believe, really that the Fed's not going to decrease rates this year for a multitude of reasons. We just had a rather interesting conversation. I don't know whether you heard any of it with Amin Javers and the House Speaker Mike Johnson. And it ranged over everything from the level of debt and deficit and tax policy to the recent trial in New York of former President Trump. Do you think the market has discounted the election result in any meaningful way, whatever that means. And I ask it in part because remember that the stock market set records

under President Trump, and it has set records under President Biden. So I guess I'm kind of asking, does the market care? You know, that's a great question, Tyler. Look, the market's done well under all forms of administrations. And I don't really think that the market cares. I think what the market would care is if they thought they'd be unified government. Then that might, you know, one party controlling, whether it's the Republicans or the Democrats, I think the market generally would not like the pendulum effects of policy that could come from unified government. So maybe that's an indictment against government as a whole.

Ron, I just want to, I want to sort of ask you a question about the banks, which maybe you have a strong opinion about it, maybe not. But it's been conventional wisdom for the past year that the big banks will benefit post-Silicon Valley and the small banks will really struggle. Do you think, I mean, why is Jamie Diamond selling stock and then talking down, you know, his own company's prospects at the investor day? You know, do you think that we have taken these conclusions for granted and perhaps the opposite kind of trade should be warranted? What, you know, the small banks, are they actually doing better than than we anticipated? Look, I think the new deposit regime where deposits are more dear, rates are higher, is a tougher environment for banks without scale. And so, you know, I do think it's been a tougher environment.

But look, I think, Kelly, and I've talked about this, and I'm going to go on a tangent for a second, I think the real issue in the next crisis in the banking industry will be a run on small banks when investors are not confident that deposits are insured. And I think the two-tier system where the big SIPPs have implicit government guarantees and small banks do not is a problem that Congress needs to take up and regulators need to take up now before the next crisis comes and everyone just wants to pull their money out of all the mid-size and regional banks. But I'm concerned about that. I think you're exactly right. And we hope that they will do something or a lot of people think there's just an implicit guarantee of everybody's money.

But in the meantime, and I, speaking of a friend who might have moved money out of Chase recently because it doesn't pay anything, is that actually that large trend going on where people have realized, no, the smaller banks are often, you know, places where you can get better yield right now versus the big money center ones? Well, I think that's the basis of our phenomenal financial system is that we have, you know, more than 4,000 banks. We may be, we don't need 4,000, but we don't need 4,000. but we don't need five.

And the best banking is done by local bankers who know the local communities and the local businesses. I don't think Jamie would disagree with that. I think he sees the strength of the community banking system. I just want to see that the community banks have the same level playing field that the big banks have. And again, I think my big bank brethren would agree with that. All right, Ron. Ron Krushchevsky, thank you very much.

We appreciate your time today. Hope to see you again soon. Thank you for having me. Coach R, we'll call him something like that. After the break, ice rinks and a hot economy. We'll speak to the head of the NHL's Players Union, Marty Walsh, get some insights on the labor market and the sports industry. Power Lodge will be back after this. Well, the Stanley Cup final matchup is set.

Connor McDavid and the Edmonton Oilers will take on Matthew Kachuk and the Florida Panthers, with game one taking place this weekend. The Panthers will be fighting for their first ever victory in the Stanley Cup finals. Edmonton looking to end a 14-year drought. And for all things hockey and beyond, let's bring in Marty Walsh. He's the executive director of the NHL Players Association. And President Biden's former Labor Secretary joins us live from the 2024-C-C-C-Eau Council Summit in D.C. Mr. Walsh, welcome as a former mayor of Boston.

I know you must have been disappointed that the Bruins got knocked out as we in New York were disappointed to see the Rangers go. Well, hey, listen, you have a Florida team that's very hot. they're playing the second straight Stanley Cup final. And I'm looking forward to this Stanley Cup starting this weekend. It's going to be exciting. Best hockey player in the world, Connor McDavid, an incredible team in Florida Panthers with Matthew Kachuk and his team.

It's just going to be a great series for hockey. Very good defense on that Florida team. Let's broaden out a little bit and take you back to your days as Labor Secretary and get your broad comments on what seems to be. uptick in union growth, membership, activity, whether it's the UAW or unions at Starbucks or unions on college campuses or votes to unionize in the automobile industry, one of which was successful at Volkswagen, the other of which was not successful last week in Alabama. Where do you think the union movement stands today?

I think it's strong, it's growing still. I mean, I think in 2020, when the early days of the pandemic, it turned out world upside down, obviously. And I took over as Labor Secretary in March of 2021. And there was 12.5 million people out of work then. And there was a lot of buzzwords, quiet quits and not going back to work and all this. And I think it gave the unions an opportunity to kind of think about a purpose to start organizing again. And you had large groups of employees that hadn't looked favorably upon the labor movement in generations, all of a sudden saying, wait a second, let's take a look.

We have an opportunity for collective power here by organizing. And I think the labor movement has taken advantage of that in some cases. I think there's more to go and more to do there. And I think also employees, we've seen it over the last three years now, employees have been put in better positions in their jobs, be able to get raises, work for higher pay, better benefits, things like that. I think the pandemic has certainly, I don't think, I know the pandemic certainly has changed our workforce. Not forever, but it has for the, for right now. It's a little unusual, it seems to me, that there is as much union organizing on college campuses as there is.

Not only employees of the colleges, whether they are student employees or full-time employees, but also potentially the organization of athletes, which will bring us back sort of more closely to the N.H. questions. What do you think of that and is it a good thing? Well, right now I know in Dartmouth College that they're trying to get a contract. They organized down in

Dartmouth. You're hearing other places of organizing drives going on. I'm not sure what the end result will be. I've had conversation with Liz Schuller at the AFLCAO to ask her talking about coming up with a temper. When you organize a college sports team, what does that mean

moving forward? I think everyone is working through that to figure out what it means, what the long-term impact could be for college sports. I think when money entered the picture in college sports, as far as paying athletes, it changes dynamics. Certainly my old governor, Charlie Baker, who's at the NCAA right now. We've had some conversations about this,

and I think a lot of people kind of see where it's going to go in the future. We're not sure. Where is all of this going in the future for those of us who are still wondering whether it was, you know, a great thing to change college sports into something much more kind of boring and professional. Yeah, I don't know if college sports are really boring. I think for me anyway, I mean, it was, depending on the sport you liked. I mean, college football certainly was a boring basketball, the tournament, hockey, baseball, softball, and all the other sports. But I think that colleges right now in the whole NCAA and the football leagues over there are, I try.

trying to figure out what the future of college sports is. I think what I hope it doesn't happen, I hope it doesn't destroy college sports because that's an opportunity for a lot of younger people to get in through the public, become athletes, become professional athletes, they go to college. You look at what's happening now with the WMBA and the excitement that they've had

and the viewership they've had and see the excitement there. So I'm not sure what the end of the road is. I don't have enough information on what they're talking about inside colleges right now, but I know for a long time colleges kind of ignored, the calls by players and the money that we're making. And now they have to sit at the table with these athletes and talk about what the future looks like. These colleges made a lot of money moving forward here.

And I don't begrudge anyone making money, but, you know, they made on the back of these college players. And now these college players are saying, wait a second, hold on. If you're going to make all this money on my back and on my blood, sweat and tears, I want some of that. Yeah. No, I guess it just makes me think, well, the whole point in the past was to get that degree and maybe implicit in there is sort of this idea that maybe the degree is not that valuable.

I don't know. Anyway, it's for society to debate. No, no, you're right there. I'm a little concerned about that as well. We have a lot of hockey players, NHL players that, you know, they leave college after one or two years, one or two seasons,

and we set up a program inside the Players Association called Unlimit, and we want to make sure we're helping our players move forward. I mean, that college degree does mean stuff. And again, you know, we could have a long debate on it. I'm of the mindset. When you go to college, try and get your degree, through an athlete, you know, play your sport.

If you get drafted, you get drafted. I just think that there's opportunities here. But colleges made a ton of money on this stuff. So I think that, you know, and they never had this conversation. And now it's, I wouldn't say it's too late, but now they're trying to put the genie back on the bottom figure, how do we move forward here? Exactly.

So I think, I hope everyone gets on the same page and does it because I wouldn't want to see the, you'll never see the elimination of college sports, but you don't want to see college sports be diminished in anyway. Indeed. Marty Walsh, thanks for joining us today. It's good to check in with you. Appreciate your time. Thank you.

Still ahead. Something here doesn't quite compute. Elon Musk accused of ordering Nvidia to ship thousands of AI chips supposedly reserved for Tesla to other businesses such as X. But Musk claims there was just simply nowhere for Tesla to store them. We'll dig into all of that when Power Lunch returns. Welcome back amid constant criticism and debate over his leadership. Elon Musk stands by the claim that he can turn Tesla into an AI leader. But new documents reveal he asked Nvidia.

to prioritize chip ship ship ship shipments to X, not Tesla. Musk confirming CNBC's reports, explaining the chips would have been backlog in the Tesla factory. CNBC.com's Laura Kalladne is here to discuss what she's learned. Laura, thanks for joining us. So just take us back to the start here. What exactly happened? What did Musk do? So in December, 2003, Elon Musk ordered NVIDIA to ship 12,000 of these very coveted AI chips,

H-100 GPUs from NVIDIA, to X. instead of to Tesla when they had been reserved for Tesla. And then in exchange, Tesla would get, you know, the next shipments of chips in January and June. So he effectively delayed Tesla's being able to continue building out data center and AI infrastructure by five, six months. So who paid for the chips, Tesla or X and XAI? There's still a lot to be reported out here. Ostensibly Tesla would have paid for Tesla's chips and X would have paid for X's chips. but maybe Elon Musk can answer that for us.

So we don't know whether Tesla paid for chips that ultimately went to another entity. We don't know that yet. But Musk just stepped in, big-footed the process and said, hey, Tesla's not ready to use these chips, not able to put them to work, but X and X-A-I are. So send the chips there instead. Is that the nub of it? He's saying now that Tesla wasn't ready for them. This begs a question as to why X-Corp had the resources to get to work,

standing up a brand new data center, but Tesla, who's been talking about, you know, developing robotaxies, very sophisticated computer vision and AI, wouldn't prioritize that and wasn't ready. You know, these delays weren't previously discussed in detail with shareholders. All right, Laura, thank you very much. Interesting story. I'm sure you'll be following it for us. Laura Kaladne. More power lunch next.

Time now for some technical support. Three charts in three minutes plus. Our chart is today, Jessica Inskip, Director of Product at Options Play. First up, Jessica, we've got Apple. This is one you're watching in preparation for the worldwide developers conference that kicks off this Friday. Big Apple event. What do the squiggly lines tell us? Absolutely.

So first we have a 13-weekly moving average. This is the line of defense converges with the 50 daily moving average you here. commented on quite a bit. This represents one quarter worth of prices. Once this overcomes that price, that's my indication that trend is shifting. Look at the slope of the line. But more importantly, Apple's been stuck in this trading range. Right now, I'm looking at this level here, which is about 194 to this 199.

I expect it to find this as an area of resistance unless there is a catalyst. That catalyst being WWDC. Could be that convention. That's right. But that is a key area around that 200. It's really 199 and some change. That is where a lot of supply exists. The question is, is demand is going to come in and overtake?

It depends on what happens. And it could be the news headline that does it. That it does. And this is important because it's a huge component of the S&P 500. And we need to see that. And it's in a lot of people's portfolios, whether they know it or not. All right, let's go to Salesforce. This is one of the dogs of the Dow is one you're watching in line to the recent sell-off.

You think it is also showing a buying opportunity. Tell me why. That it is. So 13 weeks is going to be one quarter worth of prices. Normally, we look at the 26 and 40 for a 2 and 3. The 200 weekly is what I like to call the longer-term trend. The quarterly gives us our training cycle. If this is breached, it is considered very bad.

And it's breached. That's what we're seeing when that little blue line goes down below it. But this is a wick. A what? A wick. A wick. Yes. So we have a candle.

It represents the open and closed for the day. And then the wicks are the high and low. It did not close below. It touched below, but it closed about here. So actually over where you are, there is something called a bullish engulfing candle around 234 to 250, it's where the day, a good day,

overtakes the previous. And this is weekly. So a huge week overtook it. That is now the area of support, and that's good. So as long as that 230, 250 area is maintained, and this is maintained, it's absolutely a bullish opportunity.

But now those old milestones, because remember a downtrend is a series of lower lows and lower highs. We want to see higher highs and higher lows. now it has to overcome those like it did here. So if we keep seeing what we're seeing here, that's a bullish opportunity. That is a bullish opportunity. This cannot be breached, as you can see as it is there.

As it is here, as it was here. And this would have been support. Now it becomes resistance. Once you breach support, old resistance, new support doesn't go through. Bullish opportunity. All right. And finally, it wouldn't be a day without a little game stop. A lot of talk about options activity on this one.

Walk us through it. So I've layered on the 40 weekly moving average. So we look at the 13 because that represents one quarter, 26-2-43. So this is the last one. We look at the slope of the line in addition to where the security is above or below. Sloping down, downwards trend, we see flattening when the trend starts to shift. That's also part of the Dow theory. We saw that here.

So now this is acting as support. But what happens then is we have to overcome those series of lower lows and lower highs. Lower lows, lower highs. Absolutely. We're going to have you drawing on here, Tyler. Lower high. Perfect. Lower high.

But those become train stops. What? Trading stops. Train stops. If you think about a train, they end up back at their destination, right? Which can happen with things that are squeezed without any fundamental valuation behind it. So what I see is a risk of a gamma squeeze happening with this. Oh, that sounds bad.

It does. Well, speculative excess, almost like bubble mentality. So a lot of activity, really spurring by. that create artificial demand, because we're looking at supply versus demand. What I need to see here, it's really the train stops are 21, 28, 40, and 48. And then once that demand comes in, I need to watch to see if those are maintained. But again, fundamental reasoning, careful to watch. We've got to leave it there.

Watch out for your gamma rays or whatever it is. Jessica, thank you. Thanks for watching, Power Lunch, everybody. Closing bell starts now.