Josh, tell me. How do you think the markets are going to react now, assuming this passes as early as next week, according to the president . Yeah, you know, its really something. Were now going to get a massive fiscal stimulus which we could have used seven years ago, but well get it now, and its squarely aimed at probably the one area of the economy that needs it the least, corporate profits, but, fine they are going to give it to us, and its going to be great for stocks and maybe some of that is already priced in, but were going to get that on top of still having very, very historically low interest rates. No rush in terms of the rate at which rates will rise. Somebody from the fed yesterday said they are not going to counteract fiscal stimulus with what they are doing to Monetary Policy so maybe there will be some space in between where that can actually take effect. Look, the most important thing you just said is whether you debate, and there are others weighing in, whether its Jeffrey Gundlach or others out in l. A. As to quote, unquote whether we need this tax plan. We do need it absolutely do need if. Who needs it, the people who own corporate stocks and bonds the people that want jobs in this country i mean, the president the prior president , judge, eight years ago, josh is spot on we needed this eight years ago, but he refused he dug in his heels and he would not move on the Corporate Tax rate, which is what were talking about. He would not move on that unless we moved up the individual tax rate that was ludicrous thats why we had stagnation for that period of time. Im not sure we had taxes rising in the 90s and stocks did very well. But were looking at the last eight years, not the 90s. This is not a political debate. Its not political. No, its not political. Im saying we needed it eight years ago and its great for the stock market and it will be great for people who need jobs, people who want Business Done in this country rather than outside of our borders. I think bottom line this will add 7 to 9 to s p earnings and global economies are inflicting more positively. This is square in line with certainly better outlook for u. S. Equities Going Forward. Weve seen a pretty significant rotation i think this year with people starting to look outside of the u. S. For investment. I think this is going to draw people to start looking back inside the u. S. Agreed. Looking for the value opportunities, looking at some of the sectors that are more domestically oriented that will start to outperform. So i read what youre saying, okay, more domestically focused, maybe small caps kevin olely, youve made the argument that small caps are the place to be, but theres been a considerable rollover in the russell, and maybe if there was a sell on the news of this plan, even though youre getting a nice snap back today, that the sell on the news was squarely on the small caps why is that going to change . Because right now the russell 2000 is wound like an elastic band to the news of tax reform it will be the major ben fishry, and as the news goes in and out on the cycle, whether rubio votes or not and the tensions go up with the volatility, so does the russell. I was this morning involved in a negotiation to take an investment in a california manufacturer that is currently, including the regulatory environment, paying 39 tax. If these reforms go through, his tax rate is going to 21. Do i want to invest in this . Hell yes his cash flow is going up 21 . What are we talking about here theres no question we have to do this. This company will be globally competitive in a matter of three weeks. Lets get moving lets get it going there will be tons of money investing in these companies. Okay. Kate moore, the rising tide, so to speak of the market is going to lift all boats. Cramer this morning, if thing is going to pass, the market is not done numbers are just too low talking about earnings expectations. I dont think its going to lift all boats i think its going to lead to greater differentiation within the market had a year where momentum has done exceptionally well in 2017. I would say, you know, many people didnt have to change their trades they could stick with their winners for most of this year. Didnt have the big regime shift like in 2016 i think people will have to be much more careful about which sectors and industries they invest in in 2018 as a result of a growing differentiation between profits potential. I think we have a chart on this actually, and would i love to show it which is the global earnings revision ratios right which are above 1 meaning analysts are upgrading their earnings expectations more than they are downgrading thats the first time weve really seen that in a concerted way since the financial crisis and while we see the u. S. Potentially leading another u. S. Up in, were seeing very strong global breadth and that leads me to remain extremely invested in equities. Youre looking at big blue chips. Youre skeptical on the small cap story. A little bit more skeptical than kevin on the small cap story. How so . Because the fundamentals this year arent great, so, yes, we could see upside to earnings, especially from the tax side, but we need to make sure that in a rising wage environment and where theres increased global competition, well see if some of that changes after fiscal policy changes, that, you know, these companies can be competitive on a sustained basis, and its not just a step change because of taxes. Right so, kevin, i mean, why not why not blue chips i mean, if you also get what gundlach told us is expectation of and maybe its counterintuitive that the dollar after rising in the very near term is going to take another leg down thats going to be great for Big Companies that do business around the world. Ill tell you why blue chip is not going to be the major beneficiary. Everybody knows the effect of tax right now with a Blue Chip Company with 47 any s p company doing business abroad, 47 of sales on average outside of the United States taxed at around 15 in aggregate bringing the total tax bill down to about 21 , 22 . Its already there, so they are not going to be the major ben fishery. I would much rather invest in a company thats going to have a 20 increase in free cash flow, and they are all over america. I mean, i dont know why we have to keep thinking about large cap only this is a chance, and i believe in this plan, is going to free and unshackle not only on a reduced tax rate but on a deregulated environment you saw the president chopping up ribbons yesterday. Thats affecting my company in california in a big way. 20 increase in cash flow. Where are you going to get that . You wont find that in the s p company. The russell has been ripping and then its been rolling over, as if a lot of that is already in the trade and its like bye, bye, take some profits. Argue the same thing for the s p. If you think the russ sell too expensive at a 20plus pe think again because if you add a 20 cash flow its trading at a 15 or 16 pe im betting gig on it. Increased my allegation to 30 of my domestic holdings. Im a believer in this once in a lifetime opportunity lets sign this bill and move on create jobs in america and give me my cash flow. 20 more cash flow never had that opportunity in your life. Its josh small caps are not exactly cheap, would be the first its not as though they are trading at some discount because people dont recognize how great this will be for their cash flows, and in many pockets of the russell you see premiums to the s p. Thats first the second is this is not a oneway street or a Silver Bullet you are going to have inflation maybe exacerbated by this this fiscal stimulus, and what ends up happening is you could see margin deterioration by the second half of next year employees will need to be paid more the price of goods that corporations need will undoubtedly go up if you are right, and so its not necessarily a one plus one equals two scenario. What are your thoughts on some of the potential pitfalls of Something Like this . Reporter josh, what are you a Debbie Downer today . I like inflation and Pricing Power. Just pointing it out. I like the ability for wages to go up in america because theres more Consumer Spending me, too. Reporter i dont see any downside i dont see anywhere where reducing taxes is a bad idea for a small cap or midcap company in america in addition to that, the philosophical reason here. A third of every dollar goes into the federal government is completely wasted. I love the idea that were giving them less its a much better idea. Im very, very bullish on next year in midcap. I really sglam there are plenty of people on wall street whether the tax plan will even amount to the kind of growth that jon and people who are bullish for it say it will. Reporter okay. Lets go the other way lets increase taxes if you like tax so much and you think it actually brings a growth metric, why dont we tax ourselves at 66 and give all the money to the government. Its not liking taxes. Youve got to be kidding me. Its not liking taxes, its being realistic and pointing out we are going to be adding north of 1. 4 trillion to the deficit and if you dont care, thats fine, too, but it seems to me that the biggest proponents of doing this tax reform right this minute right now just two or three years ago were looking to hold the government for ransom unless we cut the deficit, so, again, i dont ask that you be on the side of deficits shrinking or rising, just pointing out its not like a free lunch there are some potential negatives that come along with this. Reporter josh, how about this idea for a change how about we cut spending. How about that idea. Okay, where. Reporter how about we cant afford to spend the way were spending where do you want to cut, cut the military or Social Security . Thats fine with me but where. Reporter i think you have to go through every single program. Very easy to stand up on a soapbox as a politician, not you, but any politician and say we spend too much money. Okay great. Which programs what do you want to be on the hook for cutting its not that easy, and were not going to do it this time. Reporter well, i dont agree. I actually think that at the state and federal level we waste a third of every dollar we collect. I actually believe, that and i dont believe well have a 1. 4 trillion i think well grow at 3. 5 if we implement the plan im bullish on the plan. Ive seep what happens with overregulated, overtaxed environment. We saw that through the obama years. Enough of that lets move on. Lets try this well, more details are trickling in about what the final tax bill may look like ylan mui is following the money as always for us live on capitol hill with the very latest. What can you tell us. Reporter republicans have made key changes to the bill to get senator marco rubio on board. They are increasing refundable portion of the Child Tax Credit from 1,100 to 1,400. Thats a big change in terms of numbers, but no official word yet from marco rubios office on whether it is actually enough to win his support. Also, weve been getting more details on whats in that final version of the legislation, including that 37 top rate for households it will apply to individuals making 500,000 or more and couples making 600 now or more. Also, the estate tax will remain in the final version of the bill, but the exemption before it takes effect, that will be doubled, and those individual tax cuts, they will stay in place through 2025 there had been some question earlier over whether they might expire sooner. It does look like they will be in place through 2025. Now, weve been watching lawmakers stream in and out of representative kevin bradys office as they put their signatures on that final version of the legislation the window for them for the members of the tax bills Conference Committee, for them to sign this bill has now closed it ended at noon and now the bill must be presented before congress there is some question still over which chamber is going to vote for us on this. Is it going to be the house or the senate because theres some uncertainty over the health of senator john mccain and senator that had cochran guys, we did talk to one republican member of the Conference Committee who said that he does expect both mccain and cochran to be voting next week back over to you guys. Thanks so much. Well see you as needed. Ylan mui on capitol hill for us. I dont even hear anybody talking about what Lee Cooperman was talking about us the other day, the dangers of what this plan may do to inflation. Josh said it. I dont hear you talking about that, kevin, and the fact that the the fed could be forced to be more engaged than it wants to be, and then thats going to have a negative impact on investors and stocks. Reporter you know, i think people fear inflation in a very unusual way these days because we havent had it for so long. The fact is if we had inflation, you would give corporations in america Pricing Power for the first time they could increase their prices they would pay more. There would be Wage Inflation which is what most people fear and i dont fear Wage Inflation. I love the fact that you pay more for employees who turn around and spend it on the economy. The whole thing works, and as long as you can get 3. 5 gdp growth and some people even talking 4, im not, thats extremely obvious mystic but 3. 5 with a little inflation you stay long equities and you trim down your duration on fixed income, and you ride the wave. Youve got to be optimistic on this i cant imagine anybody thinking what were doing here is a bad idea look, theres a lot of things about the plan i dont like. Wanted to get away for the estate tax for my Small Companies, ive got 44 of them so do farmers, with 1,800 of them yesterday in omaha. They were complaining about estate tax we didnt get rid of it, but all in all reducing the Corporate Tax rate to be competitive and putting more cash in the pockets of employees, i dont see any downside here, im sorry im excited aboutthis. Lets sign it, and im going to go longer american companies, longer. I hear you. I mean, isnt that the way to think about this there may be unintended consequences in various areas down the road, but this can only be bullish for stocks certainly in the near term is that correct . This is definitely going to drive inflation. I dont see stocks going down. It will drive asset price inflation. In terms of real wages and real wage growth, i i think how youre going see the Corporate Tax plan, you know, brought to the to the street is going to be three dividends and bye backs and cap x and m a. I dont think youre going to see massive Wage Inflation on back of this because theres nothing thats forcing the companies to spend it and to deploy it back to the consumers. Its even Jeffrey Gundlach not exactly always the most vocal bull of stocks on wall street or beyond out in l. A. Its an improved scenario for stocks youre going to get the the economy is going to continue to improve. The fed told you that it wont be more engaged, three hikes next year is the plan, not four. Wheres the negative lets be clear. We actually think and thats somewhat rhetorical. We think they will move up close to the fed target and our expectation is that the fed will move the three times that they say they will, but frankly the upside, and the greater risk to our scenario, and i think to the feds scenario, is that they actually move four times because there is a little bit of a growth push as well as a slightly higher inflationary environment than currently forecast what will i will say about the wages it will really hit companies differently and going back to the theme that i mentioned at the start of the show is differentiation. Some companies have a much better capability to deal with higher wages they have Pricing Power a little bit already, and then there are others that are getting disrupted that are not going to have the ability to really maintain their margins or protect their earnings frankly in a higher wage environment, so this is going to be i think i think were going to see less correlation in the market and well see greater opportunity for individual some picking. Individual stock picking, sector picking i have a note from jpmorgan who lays out the sectors you should be investing in and the ones you should be less exposed to. Financials overweight and industrials overweight, energy and materials all overweight the most interesting part on the negative side is technology. Strong fundamentals but rich valuation, crowded position and tax reform rotation a significant potential headwind. Sounds like a rotation story there. I mean, i dont disagree with the the analysis here, judge. By the way, weve said technology will get the least benefit. Except that they have the most repatriated earnings that they can bring back onshore if they choose to they could use for m a and smaller cap acquisitions and dividends, similar to what we saw. Whats the latest repatriation rate they are talking about . 14 . Is that materially low enough that they would move all of the money back i dont know. Absolutely not going to move all the money back and wont move it all back at once. Or spend it. Hang on, hang on. We want to go down to d. C. Where representative kevin brady is taking questions. Did you have to get lastminute tweaks to get rubio on board over there . Weve really worked to make sure weve got collective priorities and got it done on time and worked up through that process. Why do you think the wealthiest need another tax cut . Well, thats exactly wrong. This delivers and prioritizes middle class tax relief. And for many families in america, working blue collar families will see a tax reduction of between 1,200 and 2,000 thats real money for, woulding class families to the rate has been lowered to help families in our high tax states who asked for help because the state and local income Tax Deductions will be capped at 10,000. So middle class americans are afraid their taxes will go up in. They will see their taxes cut. Middle class americans are going to see tax relief, and they will be better off with higher paychecks because now american caps are going to be