Kevin Horner: Thank you, Lou. I appreciate it. Michael thanks for being with us today of course. This is kind of fun. Nice to have you on the opposite side of the chair now. So can you offer a little insight for our attendees, our watchers here today about exactly what the team in Washington DC is really looking at on a consistent basis.
Mike Townsend: Sure. Well, at Schwab we have a team of four in Washington. So there’s four of us who watch every day what’s happening in the halls of congress, at the White House, at the cabinet agencies, at the regulatory agencies like the SEC and the fed. And it’s really our job to try to figure out what it all means, cut through all the noise and the nonsense and believe me, we know there’s a lot of noise and nonsense coming out of Washington. And try to figure out what should investors be paying attention to, what actually matters coming out of all of this. So that’s what we spend every day trying to focus on.
Kevin Horner: Ok. I like that because to me what that says is that we’re looking at the various ways that the inner workings of the market, right? We talk so much broadly about the market returns, about the directionality. This really would help someone paying closer attention maybe to understand the maneuvers between various sectors and industries of the market. Is that fair to suggest as well?
Mike Townsend: Yeah. I think that’s true but it’s also kind of in the big picture. Does what happens in Washington matter to the markets? I think we saw after the election last fall some real influence maybe coming out of Washington on the markets, anticipation of good climate for the business world, regulation taxes, that sort of thing. But right now, I think we’re seeing a big separation between what’s going on in Washington and what’s happening in the market. The market is kind of not too worried about all of the noise and the nonsense that I mentioned. So we try also to keep both the little picture but also the big picture coming out of Washington.
Kevin Horner: Ok. Very good, very good. Ok. Now my addiction to coffee has been well documented on this and other shows of course. Now my curiosity is how does your day begin if not with coffee.
Mike Townsend: Absolutely right. No coffee for me. Never liked the stuff. But I’ll tell you how my day literally begins. Every single day my first task is to get up. I get up a little before 6:00 AM and my goal is to get two very surly teenagers out of bed and ready for the bus. So that’s the first goal. Before I do that every day I look at my Twitter feed and I see what the President of the United States has Tweeted overnight. And if you step back and think about how amazing that is, that this is the primary communication vehicle of the President of the United States. This is how he reaches people. Every single day, that’s the first thing that I do. And two years ago, a year ago, not at all. So that’s a big, big change.
Kevin Horner: That shocks me but it makes perfect sense given what we’ve seen of course. If this is his methodology or his mechanism for communicating with the world, we really don’t have an alternative but to start there, even in scenarios right now where we see that the market doesn’t necessarily give much of a concern to the details, the ins and outs that he might be speaking to. It still drives a lot of directionality one way or another.
Mike Townsend: And certainly, in Washington. It literally drives the day. And that is, right now in this atmosphere that we’re in in Washington, every 24-hour period is like its own little circus. And that’s what starts the day is sort of seeing what’s on the president’s mind, seeing how members of congress are going to have to react to what the president said. And the perfect example is what’s been happening over the last two weeks.
After seven, eight months of nothing happening in congress, the president holds a meeting in the White House. He has the republican and the democratic leaders of both the house and senate come and within minutes he’s struck a deal with the democratic leaders. And he walks out and within 48 hours – and I cannot tell you how amazing this is how this unfolded. Within 48 hours the president had signed into law a bill that provides $15 billion in hurricane funding, a bill that delays the potential government shut down at the end of this month to December 8th and a bill that pushes the debt ceiling fight which is perhaps the most market moving event that comes out of Washington off until sometime in 2018. 48 hours from conversation to signing the bill into law. That’s the environment in which we live right now.
So as much as the details of the news is how it happened. And it happened in a way that goes completely outside what is normal in the Washington political world. And we’re seeing it again now with another possible agreement over the Dreamers. And so, this is what all of us in Washington – I’ve been in Washington almost 25 years. All of us are trying to get our arms around this kind of new ways of doing business.
Kevin Horner: It’s really, really interesting. It sped things up. It created this air of uncertainty. And yet even still, our market continues to like we largely said ignore, move through noise, move through nonsense and look at things on a broader scale. Is there – subsequent to your Twitter feed and the first thing in the morning, I imagine that Twitter feed is then going to influence maybe a couple of calls that you make or take perhaps. You give a few interviews on a day to day basis as well.
Mike Townsend: Yeah. I try. On any given day, a big part of my job is just trying to absorb all of the information that’s coming constantly in Washington and whether that’s from the Twitter feed or the president. But there are all sort of publications in DC that follow incredible weeds of policy making, the committees that are meeting and holding hearings and the people who are commenting. So I’m trying to get a perspective from both sides of the aisle, republicans, democrats. I read lots of right leaning publications. I read lots of left leaning publications. And try to sort out what the political perspective of both sides is on any given day. And then try to figure out does any of it mean anything? Is anything going to actually turn into legislation?
Kevin Horner: Sure.
Mike Townsend: So I have to try to absorb all of that information and come up with something to tell investors you can hear all of this noise, but right now we don’t know how this is going to affect you. So it’s a fascinating time.
Kevin Horner: Would you say that in the last year maybe have you shifted to a more broad range of review of the information that’s out there? Because it used to be that you could read multiple sources and your sources would be very much alike. However, these days it seems as though our comments from multiple locations are fairly different.
Mike Townsend: Yeah. And I think that’s one of the big challenges I have right now is kind of just the two parties are so far apart on so many issues. And we’re seeing it reflected in the populace in general. And just trying to cut through all of that and figure out what’s being said for purely political reasons, what’s being said for negotiation reasons, what’s being said that might actually turn into something that matters to investors. And like I said tax reform is a good example of that. We’re too early yet to be able to know how that’s going to affect investors but it sure will at some point.
Kevin Horner: It will have an impact, no doubt about it. All right. I think that pretty much wraps our opportunity for Day in the Life. I appreciate you being here of course. Look forward to seeing you a little later as well. Lou, my man, back to you.