Mean for your money and the future of where stocks go from here john najarian, this is a long way from the finish line but at least now we can begin the race. Yeah. There were winners and losers right away, based on peoples perception perhaps not full understanding, but perception one of those losers right away was Toll Brothers, tol people came scrambling in, they hit that stock more than the other Home Builders. All the Home Builders sagged a little on this about the deductibility of certain things but Toll Brothers because its luxury homes, thats where i focused. They were actively buying puts in big numbers today. Rich, youre number five on the latest list. So people are going to look to you now for advice on what you think all of this is going to mean for where the market goes from here. Lets get some of it here. This is a powerful reform bill for investors because right now we can identify companies that are going to specifically benefit from a lower tax rate and from repatriation. Repatriation could result in capexspendi spending. Now were looking at immediate deductibility of all that expensing. You have companies with money suspended overseas, could bring it back. Dob additive to dividends. So id be looking at small cap stocks Large Companies like apple with a lot of money overseas. Theres a tremendous opportunity from this. Were talking about a lot of the benefits that big business is going to get out of this. They have got a lot of selling to do on this plan a plan that our own larry kudlow called a very sloppy bill, doesnt do much for the individual its clear theyre focusing very heavy on corporations, with the Corporate Tax rate going to 20 along with some of the other st stimulative parts. The momentum to get something done is so high, including republicans who have got to get this done before elections happen to them, means were going to get something if these are the indications of where were going, i love small cap, midcap big time lets take a repatriation of a few billion dollars from apple theyll spread that around to all their manufacturers state side, they may invest more here. I predict next year the russell twejt 00 will outperform the s p 500. Do you really so s p, lets call it 15 weve gotten year to date and here we are with the final two months of the year russell 2000, 10 . Is that the way to play it sapperstein brings a view of the Larger Companies that are going to benefit small caps too i agree with rich and kevin on that. I think clearly when you look at the russell and you think about what this is going to do for the Small Business community, thats exactly where the benefit is going to be reached. So this is clearly to me a Corporate Tax bill i dont think you focus on the individual at all. It is the domestic oriented type of u. S. Small companies that are going to do well listen, for a company like tesla, the removal of that electric vehicle tax, thats a big problem for them and obviously thats reflected in the tape today but i think also too well get into not to mention the companys own earnings. Thats just kind of making it worse. But i also and well get into this further, but the appointment of the new fed chair, i think that plays into small caps as well and well talk about that in a second. Lastly, the effective tax rate in the Financial Sector is incredibly high, so thats an area that you look at. To joes point as well as yours, rich, about the deductibility or the repatriation, in this bill, judge, there is the nondeductibility over a certain level of corporate bond. So, in other words, i think its 30 or Something Like that so, in other words, many of the folks of course have been borrowing against holdings either domestic or overseas to finance buybacks and so forth. You need that repatriation to come in here and fill that gap, because otherwise theyre not going to be able to use a lot of the plays that they have done in the last few years when Interest Rates have been so low. So what do you think the temperature is of the market today . A somewhat muted reaction, as we said is there the possibility now that you get this sort of environment in the stock market until investors get a real opportunity to see whats real, whats not, the sausagemaking process and whats going to be left on the Kitchen Floor and doesnt actually make it into the final pot . This is added stimulus on top of a growing economy with an accommodative fed, a low inflation background and its an ideal environment to own stocks. Its been that way all year. Its not fully priced into the market. But youre assuming this has already been written into law. We just began what could be a very long race. Thats fine we dont see it actually occurring and having effect until 2018 approval lets say legislative approval q1, maybe even q2. But the optionality of the passage of tax reform requires all investors to maintain full equity positions here. So base case for you is that it passes. Yes. The only issue is the timing . And the effectiveness of these proposals. Is everybody on that same page listen, i think they missed an opportunity here, and this is lets not take this politically, but you could have really added a stimulative effect to make this retroactive. You would have seen the rebate checks coming in q2 at a time youre trying to accelerate the growth you would have seen Consumer Spending accelerate consistent with that so thats a missed opportunity. As youve seen from the internals of what we know at this point is the ability to pay for this whole thing. It is under reconciliation. Its something that the treasury secretary in the past has talked about possibly making it retroactive and again, in the near term, i think that would have been a clear stimulative. We may hear from the treasury secretary himself, whos out in los angeles giving a speech today. If we do in fact hear from him, well be certain to bring that to you live. Lets bring another guest into the conversation, michael farr joins us now from washington, d. C. , with farrmiller in washington hes the ceo welcome back. Thank you very much, scott. So give us your reaction now to what we just got from the gop, this tax plan, what you think its ultimately going to mean for the market if it passes right well, you know, i think the discussion has been absolutely right on i think that the small caps and the domestic make so much sense, but i think this is good news and bad news if you harken back just one year when mr. Trump was elected, we saw markets start to surge on anticipation of this stimulative agenda arguably fundamentals have caught up to support that, but now i think its on the one hand great that some of the agenda is actually getting accomplished on capitol hill but it worries me a little bit because i would fully expect to see kind of a further surge in some of these stock prices in anticipation of more stimulus. So its going to create a tougher job probably for the federal reserve, but were adding stimulus at a time when perhaps we dont need a lot of it. Can fundamentals then continue the heavy lift if in fact this is we hope so. If this is drawn out longer than we think . You know, at a certain pace, right . They can keep moving at a certain pace i suppose we have to exclude google and some others there because they have been on such an enormous tear but in general theres a certain steady pace and markets seem to be exceeding that pace and certainly may on this tax cut news. I dont hear anybody even the wee bit concerned about the market at all. And im wondering if thats concerning in and of itself, michael, that now youve got almost everybody jumping into the pool absolutely it is. When you have everybody, i mean the bullish percentage i think is as high as its been since the last crash, 2007 or even 1987 so pretty much everybody is getting to be bullish now. And yet theres still as many people out there saying i wonder when its going to go down, i wonder when this thing is going to crack but there are very few naysayers, very few bears. Doug class calling for the market to go down and a few others, but there are not very many voices saying this thing is about to come down. The other big story were waiting for is this afternoon jay powell expected to be named the next fed chair you know him quite well both professionally and socially. What kind of fed chief do you think hes going to be you know, jay is a wonderful guy and ive known him for years. Jay is a very balanced guy hes a very thoughtful guy i love the idea that hes not a ph. D. Economist, that hes not an academician, that he does have practical experience. I think to understand jay, you have to understand that he was jesuit trained he got to georgetown prep. He got his law degree from georgetown university. Theres the old joke with the franciscan and the dominican and the jesuit who were all locked in a dungeon the franciscan prays for lights to come on and nothing happens the dominican gives an hour lecture and praise and nothing happens. The jesuit goes and changes the fuse and the lights come on. Its a telling joke because it goes to the pragmatism and thoughtfulness of the jesuits. What powell did in 2011 was come up with a daybyday breakdown of costs for keeping the u. S. Government open that then secretary geithner would have to actually meet in order to pay the governments bills so whenthings start flurrying, and at that point remember the debt rating was downgraded to a aa when thing when the fur starts flying, powell goes to the numbers. Hes a pragmatist, hes thoughtful, he really doesnt have an ax to grind. I think he could be an excellent, outstanding i think the powell fed could be one of the most important and best weve seen in decades. And reason to be continued bullish. Anybody see it differently this is somebody whos widely seen as continuing chair yellens heres whats different about this guy if you want to sell deregulation, you have to have very good communication skills this guy, if you havent listened to him, go online and listen to some of his speeches he has an innate ability to communicate numbers to a pragmatic place. I think hes going to sell deregulation for trump in a beautiful way that trump himself cant do this is a win for every investor and i hope he is the guy. You see the markets, what theyre doing today. Dow picking up a little bit, its up 29 points. We did mention that some wellknown speakers are out today talking about taxes from the administration mnuchin, the treasury secretary, one of them out on the west coast. Also gary cohn today is at the National Economic club in washington, d. C. He of course the head of the Economic Council john harwood listening into that john scott, gary cohn is just the first Major Administration person to speak after the rollout of the tax bill and he said this bill does meet the president s requirements for cutting business taxes, also delivering tax breaks to middle class families the president would sign it, though he acknowledges that theres going to be a negotiation with the senate. They are going on a separate track through regular order. Gary cohn also said he does not and the administration does not believe that the plan would increase the deficit as much as the budget passed by both the house and the senate calls for, which is 1. 5 trillion he said that they believe the growth produced by the plan will be higher than that. Thats going to be a key point of argument. In fact jeff flake, the republican senator from arizona who criticized the president last week just came out and said we cant cut cut cut, weve got to Pay Attention to our 20 trillion debt. So there are already some signs of difficulty for this plan even as gary cohn said the white house is embracing it. As well as you know the hill, the marketing of this plan is really the next big step is how to sell it when clearly you have a heavy focus on the Corporate Tax cut. Larry kudlow, as i mentioned at the top of our show, saying it does little for the individual Washington Post on the mortgage interest idea says that hurts the middle class the New York Times today talking about the plan tilting towards business so how does all of that factor in the ability of the gop to sell this . Well, theres some real trouble signs, scott the National Federation of independent business, the Small Business lobby, has just come out against this bill saying that it doesnt do enough to help Small Business. Youve got criticism from the Home Builders of course who dont like the limitation on the mortgage Interest Deduction as well as the way that the interaction with the standard deduction might cause fewer people to take that deduction. Youve also had criticism from marco rubio in the senate whos leading a group of republican conservatives who want more relief for families through a larger Child Tax Credit. I was talking a few moments ago to a republican tax analyst who said to pass this bill, the corporate rate and the passthrough rate are going to have to come up in order to finance a larger Child Tax Credit to get some of those conservatives like marco rubio on so theres a lot of juggling thats going to have to take place, first of all, to get it through the house where youve got members from new york, new jersey, illinois, california, who want to take care of the state and local deduction or reduce the impact, and then youve also got these questions in the senate where of course they can only lose two members. John, thanks so much. John harwood at our bureau in d. C. Michael farr, thanks to you as well thank you for joining us today. Thank you very much. I know well see you soon. Lets turn our attention to some of the stocks that are moving today and lets hit facebook absolutely blue earnings out of the water. Yep. But also said theyre going to spend a boatload on security moving forward and thats probably what has the stock down by a couple of percentage points, even though it was a great earnings report. There have been many comments in the past about facebook not concerned so much about wall street and concerned about the social element of the Business Model itself i think hes speaking to that and basically saying we had an issue surrounding this election and were going to go out and were going to spend and it could impact revenues by as much as 45 to 60 . The only thing that i question about that is why not go out and buy the security exposure. Theres many Security Companies out there that could help facebook right now they certainly have a tremendous amount of cash to me, that would be the best way to go. Either way, zuckerberg himself said that all of the spending will, quote, significantly impact our profitability. Sandbagging hes sandbagging its brilliant its absolutely brilliant. You dont think theres any reason for investors to rethink where this company is valued relative to what its profitability could be moving forward when he says its going to be impacted its the best sandbagging ive ever seep of a tech company. Its brilliant blame it on the government for making you do this talk about hiring tens of thousands of people you dont actually have to hire because you can do most of the stuff with a. I. Now and talk about how youre being socially conscious, youre getting your head squeezed right now in washington so this is a great comeback, and get everybody thinking you cant hit your numbers in the next quarter and then blow them away again. Thats exactly whats going to happen i think this guy is way better than even i thought he was. So shareholders dont be deterred at all. 178, were okay. This idea of hiring people to actually edit content thats coming at you by the billions of words a day is ridiculous. Most of this content is about your dog, your cat, your kid, whatever once in a while just break out the russian sales. So us what the russians are actually buying online and youll see that its practically nothing, nothing this whole russia thing is so bleep. Thats what i think. Judge, i was in facebook into the earnings report. As you know from the disclosures and so forth i talked about it october 17th, they bought a ton, 20,000 of the 180 calls. Stock popped all the way to 188. I didnt sell it there but i sold stock against my calls so im flat i still own the calls, it might be on my disclosure, but i sold stock against it on that pop now its 178 i would probably look to reload right around 170, 172, Something Like that. But i still like it. I agree with kevin, i think this is one you hold for the long term. Any metric that they reported and i dont have all of them in front of me, but ad revenue alone up 49 is eyepopping enough and gives you an idea of what the other significant metrics were. The only other places you get that are really google as far as they got the same issue are they going to hire 10,000 people to look at all that stuff . I dont think so. The other one thats interesting today, again, weve called it the best performing Technology Stock or internet stock that hardly anybody talks about. Now of course they talk about it more and its somewhat facetious, but alibaba. That stock up 26 in three months is this one of the ones that you really need to be in now i think the price action is a little a little concerning today. I think theres some disappointment somewhere in terms of maybe people came in very bullishi isishly positioned the stock is falling back below 185. I dont think you run for cover on this one because the earnings were fantastic i dont know, theres other places maybe i might want to be if were going to see a little correction in these big tech names. Other views accounting issues theres 20 that wont touch the stock. Did you bring this into your portfolios no, we dont. There are plenty of other investors who do. If you want to own this space, you own amazon with american accounting. You dont have a chinese story, income statement, you have basic real accounting. Heres a real fiduciary saying he wouldnt touch it with a stick. To the point about where else do you get 50 right here, like joe said, you get it right here at baba. They were look