and be healthy. get off the floor and get on the aerotrainer. go to aerotrainer.com, that's a-e-r-o-trainer.com. from bloomberg world headquarters in new york, i am caroline hyde. romaine: stockmarkets sidelined for yet another day as investors choose to play it safe with the u.s. election just a week away. week'se: i had of this big gdp report, we get economic data. one measure of home prices, should the housing market remains strong. under the hood, consumer

confidence unexpectedly pulled back in october. prospects for employment, income, and of course the economy. perhaps they should be. cities forcing to slow down reopening plans. thee do see further dips in economic recovery, then this would not be good news for state and city budgets already left strained by the pandemic. many states predicting billions of dollars of shortfalls in 2021. some states are getting innovative in how to make ends meet, including putting legal marijuana sales on the pallet for tax revenue. joe: this has been one area that we have hoped -- well, some hoped there have would be further aid to state and local governments with a stimulus deal. it has not happened. largest number of defaults since

2012. expectations are, at least for -- that ithat continues. romaine: anything that can be done to sort of bump that backup. a time that they are trying to get out from under. joe: let's bring in bloomberg intelligence senior municipal strategist. let's start with the big picture. a week away from the election. are muniegree investors, muni analysts like yourself, watching the election, specifically with the thoughts and mind about the makeup of government ndc and how willing officials will be to help out? is justnk the market

being cautious at this point. we have not had a lot of volatility over the past month, which is surprising how much is at play here. the stimulusing was coming any day now. the senate is adjourned. really, the door is shut until after the election. really what many are hoping for is that we have a biden administration come in. that would be the most positive when it comes to big stimulus packages helping out state and local governments going forward. caroline: does it matter that it is delayed by several months? how much darker could the picture get? great point. a you look back, covid's best shot, we had a little bit of an improvement as we get to the warmer months. you had a little bit of pandemic fatigue, people getting back out

the restrictions lifted. people spending money again and being mobile. into the winter months, i think that will coincide with the delayed stimulus future. it really could cause some concerns when it comes to state and local government budgets and revenues. i think it is unfair to paint one broadsector with brush. states, looking at the rainy day levels, and what they had tucked away in reserves for black swan events that come out of nowhere. romaine: i know this is not the ideal time for some of these mia's apologies to try to issue talking, but you are about a relatively favorable rate environment. you definitely are under the 2% range for some of the best credit risk out there.

i am curious as to whether investors are willing to embrace that kind of debt at the moment when there is so much uncertainty. eric: the answer is overwhelmingly gas. i think that really speaks the demand for these bonds will only increase if you have a change in administration where the rhetoric surrounding a higher tax regime being associated with that. caroline: we were talking marijuana after this. are there any other ways in which the focus has been put on ways in terms of diversification of how you get money in? the: two big things that drum beating has been around, austerity measures and taxes. the rating future is hinging upon being -- states are trying

to be creative in finding ways, raising revenues, coming up with revenues. what is sort of interesting to us, we are following this from a municipal sector, sort of the long game. the way we are sort of framing it, if you have a federal push to make it legal, that would open the doors for a lot of the states to securitize these revenues and bond them out. talking about the long game potentially for marijuana and the tax revenue. we are going to talk about that long game coming up next with our next guest, vivian a's are -- vivian azar. this is bloomberg. ♪

romaine: today, we are focused on u.s. cities and states trying to raise revenue to make up for lost money because of the pandemic lockdown. one way is through legalized marijuana, which is showing up on a lot of balance this election. years,viously, for momentum towards increased legalization, decriminalization, medical marijuana, recreational, there has been momentum. but now, states in a serious budget all, this is an obvious area. cannabis on the pallet in new , arizona, south

dakota, and mississippi. it is all these ways that they are getting more cannabis, also gaming as well, something we have seen potentially drive further revenue. joe: joining us with further insight is senior research analyst vivien azer. thank you for joining us. how much is this coming election, combined with this sort of tax revenue need so many cities and states around the country, primed to create a moment for acceleration of legal cannabis? vivien: we think there is a a lot of momentum 10 at the state level coming out of this election. as you rightly pointed out, five states with a total of six ballot initiatives. and two forlt use, medical. arizona and new jersey are quite likely to pass. on the medical side, mississippi

and south dakota. net, we think those states would drive incremental $3 billion in incremental revenue by 2025. we have also done work around the potential for state legislatures to make moves. york,w that new connecticut, rhode island, new jersey, their governors had already created a task force to ease cross-border movement, requiring some sort of coordination. governor cuomo and his administration have come out in the past two weeks, reiterating their intent to move forward with a use. we think that can have the potential for a domino effect and also drive rhode island and pennsylvania. those states could be another $6 billion. romaine: you get the sense that this will be accelerated to a certain extent on the legislative side, even the regulatory side, by some of the

potential budget shortfalls. vivien: new york is facing a two-year, $30 billion budget deficit. what we are careful to remind investors of is that if new york is going to use cannabis as a means of filling a budget deficit, the licensing framework will probably be different than what we have seen historically. it does take time for the tax revenues to start flowing in. you have to create the regulatory framework, go through the licensing process. it is quite possible that the cost to acquire a license in a state like new york could be substantially higher. caroline: from what you have seen -- the way in which you have spoken with leaders of some of the publicly traded cannabis companies. at the moment, they don't say competition is each other,

competition is the illegal trade of the moment. how quickly does that get overwhelmed by regulation and how quickly do we see all means in buying cannabis become a regulated means of buying it? vivien: for the u.s., it is a little different. in canada, it went nationally legal overnight. in the u.s., we will continue to have a patchwork state-by-state framework until there is really meaningful change at the federal level. that is not anything we anticipate happening. that would require a member one come a blue wave and 2020 which we think will bring a modified version of the state fact. that is the decriminalization that harris talked about in our debate against vice president pence. versiond be a modified because -- given the current climate. step two would be a national

framework. joe: talk more about what needs to happen at the federal level. we get all the states increasingly legalizing momentum. in terms of banking, other things like that, what do we need to see at the federal level? vivien: a blue wave, which is what the research group is calling for. we defined that as a biden win in the white house, the democrats maintaining control in the house and picking up 52 or more seats in the senate. with that, we get what i just referenced, a modified version. caroline: wow. of all thep abreast news. you have really run some amazing numbers for us. vivien azer, we thank you. joe, interesting news crossing the wire that we are seeing,

that early voting in the united states, just talking about the impact of the election, early voting, which is 50.2% of the 2016.u.s. ballots cast in romaine: in my neighborhood, the lines were several blocks long. there are certain states where they have basically almost matched. texas, including your home state. joe: i like to claim it is my home state. i vote in new york. i will vote election day morning. planning on sort of in and out. -- are youe you but voting for the marijuana ballot initiative? joe: there is not one here. coming up, stocks versus the economy. we will discuss what some people say is a glaring disconnect between the devastating effects

of covid-19 on the economy and the buoyant mood of the stock market. this is bloomberg. ♪

caroline: over the past few weeks, we have dug into the apparent disconnect between the economy and stock market. this week, the latest gdp report. will it actually alleviate some of it? >> we know it will be a massive number as we know that q2 was massively negative. i think the bigger picture is a lot of the data continues to come in better than expected. data this morning was generally pretty solid. durable goods orders much better than expectations. -- we also got richmond fed, which was strong. by and large, i think gdp

numbers continue to surprise economists to the upside. romaine: markets continue to rally. obviously, maybe not a direct correlation but there are certainly people to look at the economic recovery and say, it will be fine going forward. by neil k'sjoined are, founder of asset management. about the so-called disconnect between the economy and stocks. of topliner sort recovery? are perplexed, concerned with the disconnect of the stock market. i wrote a piece looking at the historical numbers. i just ran a correlation between the two and i found that it

rarely ever converts. thes the rule, not exception. got of the comments that i was that using inflation in the 500ulation or using the s&p -- we ran the numbers using some of these suggestions and i found very little improvement in the numbers. my conclusion is that the vast majority of the time is that there is no connection between the market and economy. it, wherejust accept would the fun be in that? more aggressive than usual? >> part of it is that it has been getting worse since the financial crisis.

what you will see is that the economy, economic growth has diminished. the stock market has just taken off. that difference, magnified before covid-19, then covid-19 comes along, throws the economy for a loop. the market quickly recovers. bigger,g, it has been certainly noticeable. going back to your number -- we willoment ago see where covid takes us. romaine: when you talk about the correlations between the market and the economy, of course we talk about the main indexes. at the same time, there are progress,f economic

where you can draw a direct link to the markets. wrong just looking at the metrics? >> that is a good question because we can never say we have looked under every rock. but i am trying. to the extent where we can quantify them, for example the s&p 500 index equal weight, or as one commenter asked, using , everyte sales suggestion that we have gotten that is quantifiable, i have run the numbers. i am happy to look and report back. joe: let me ask you another question that is kind of related to this but slightly different. when you buy a stock, or when

you buy an index or basket of stocks, you care about their earnings power. i guess the question is, is -- setting aside nominal share price, is the relationship between economic growth and the earnings power of the s&p 500 index overall? because that is what really matters to fundamentals. or is it that the biggest companies in the s&p 500 index have the ability to grow earnings almost any economic conditions? >> although that is a relatively recent phenomenon, i think we will need more time before we can say with conviction that is something that is structural of the economy. there is a connection between earnings and the broader economy. the economy is a lot of things. the corporate results are just

one input into that. the economy is measuring something a lot broader than the market is. i think there is greater importance in making that clear, having people not conflate the two things. i think often people, and politicians in particular, use the market as a proxy for the broader economy. everything is doing great. in reality, the market hides a lot of what is happening in the background. i think we do ourselves a disservice by looking at the market and saying, there is nothing else to see. caroline: is it the same worldwide? >> that is a really good question. i don't know the answer to that. i will run the numbers. the one thing i will say, the reason my analysis often starts with the u.s., we happen to have the longest data series in the

u.s. only two or three decades long. we have a deep data series in the u.s. that is a great question and one worth looking into. in fact, i will. joe: that will be the next segment. caroline: got to go global. sadly, that is all from "what'd you miss?" sometimes, good things come to those who wait. romaine: i just watch it all the time. caroline: we have not debated kim kardashian's k-shaped economy. joe: that is the upper end of the k. romaine: where is kanye? out campaigning?

have a great evening. this is bloomberg. ♪ [ sigh ] not gonna happen.

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