Advertisement
New Zealand markets closed
  • NZX 50

    12,105.29
    +94.63 (+0.79%)
     
  • NZD/USD

    0.5975
    -0.0000 (-0.01%)
     
  • NZD/EUR

    0.5537
    +0.0004 (+0.07%)
     
  • ALL ORDS

    8,153.70
    +80.10 (+0.99%)
     
  • ASX 200

    7,896.90
    +77.30 (+0.99%)
     
  • OIL

    83.11
    -0.06 (-0.07%)
     
  • GOLD

    2,254.80
    +16.40 (+0.73%)
     
  • NASDAQ

    18,254.69
    -26.15 (-0.14%)
     
  • FTSE

    7,952.62
    +20.64 (+0.26%)
     
  • Dow Jones

    39,807.37
    +47.29 (+0.12%)
     
  • DAX

    18,492.49
    +15.40 (+0.08%)
     
  • Hang Seng

    16,541.42
    +148.58 (+0.91%)
     
  • NIKKEI 225

    40,168.07
    0.00 (0.00%)
     
  • NZD/JPY

    90.4440
    +0.0510 (+0.06%)
     

Inflation Reduction Act: There are ‘clear winners in the clean energy space’

BTIG Director of Policy Research Isaac Boltanksy joins Yahoo Finance Live to discuss the Reduction Inflation Act, tax credits for clean energy, and the outlook for heath care regulation.

Video transcript

- Well, we're going to stay on this topic and bring in BTIG director of policy research Isaac Boltansky with more on the Inflation Reduction Act here. And, first and foremost, I want to get your reaction to this, and as we've been breaking it down, where some of the most significant movement could take place as a result of this and perhaps where you're still raising a few question marks.

ISAAC BOLTANSKY: I think, on balance, I agree with Rick's overview there, that this is not going to be a bill that ultimately changes the market's trajectory one way or the other. I think that we can point to some clear winners in the clean energy space in particular. But I've already been talking to some folks around those names who say, look, it's great to have these subsidies and this money flowing into the space.

ADVERTISEMENT

But there are some questions about getting that money to work, right? If we talk about electric vehicles, are we really going to be able to source all the materials that we need domestically in order to enjoy the full tax credit? For solar and wind, are we still going to fight some of those NIMBY dynamics, the not-in-my-backyard, that make actually applying these subsidies on scale more difficult.

So, to me, I think the big takeaway on the clean energy side in particular is it is very positive for the space to see this energy. I think it will be a tailwind for this space overall. But we're going to have to get into the details to see if all of these subsidies are really going to be put to good use.

- Isaac, a question about that new 1% tax on stock buybacks-- what is that going to change at affected companies? Are they just going to shift over and do a little less buying back of stocks and maybe increase dividends more? Is this just going to be shifting from one place to another?

ISAAC BOLTANSKY: I think that's exactly right. I think, by and large, all we're going to see is a move from heavy buybacks to perhaps more of a split with dividends. I'll be interested to see how it impacts banks. As you know, some of the largest banks have been focused on their capital distribution limitations, given the CCAR stress test process. So I think there's some questions there about how that will unfold strategically.

But, by and large, as you know, the tax code just incentivizes and disincentivizes, right? And so this is just going to incentivize a shift over to dividends, by and large.

- Let's talk about the climate portion of the bill for a second, Isaac. Hi, it's Julie. It seems we are seeing some movement in some of these stocks and have been seeing some movement in some of these stocks. I think about Plug Power. I think about some of the electric vehicle makers that have been running up in advance of this.

How much of a boon is this going to be for that industry, and also for climate activists, for that matter, who have been pushing for some of these changes?

ISAAC BOLTANSKY: Yeah, look, my caution is based solely on there's an immense amount of excitement here in DC and from Democrats, right? Because they've been able to take their rhetoric and put it into reality. And there's $370 billion coming to clean energy. That's huge. It's massive.

I think that my one cautionary point is simply that it's going to take some time to see if all of those 40-plus different tax credits that are in the legislation for clean energy are actually going to work, right? We're covering everything from automobiles to wind turbines to heat pumps. Some of those are going to fail, and they'll miss the mark.

I'm of the view, at least this morning, if we're talking about, you know, price action, it should be a tide that lifts all boats. But over the next few months, we're going to have to dig through and say, perhaps, some of the requirements regarding, let's say, electric vehicles, and having to get the materials for the batteries on shore to get the full value of the credit, might prove a little bit difficult over the next few years.

- Isaac, the pharmaceutical industry, Big Pharma, rarely loses a lobbying battle in Washington, DC. And now Medicare will be able to negotiate the price of some drugs in the program. What does that mean for pharmaceutical industry profits?

I mean, this is a very profitable industry. Some of the scary language about this is, oh, there's going to be massive loss of life because innovation for new drugs is going to stop. What is the real impact of that change going to be, do you think?

ISAAC BOLTANSKY: Look, as always, the truth is somewhere in between the opposing talking points, right? And I think that we can definitely make an argument that some of the concern around the drug pricing changes will impact asset allocation, R&D dollars, and perhaps impact the overall trajectory of some of these lifesaving medicines.

But on balance, my big takeaway is if we would have talked the morning after Georgia flipped, and I would have told you we wouldn't have a tax increase on the top rate for capital, for corporations, for individuals, and that we would only be introducing a new drug pricing regime for some drugs, and only capping prices for a certain segment of the market over time, you would have thrown me off your air and said, I think you're crazy. There's no way that's all that's going to get produced. But here we are the morning after, and that's all that happened.

- Yeah, it does seem like it is pretty extraordinarily limited when it comes to that effect. I mean, at the same time, we talked to one of your peers in another shop, who said, the pharma companies are just going to make up this cost anyway by having higher prices on stuff that's not negotiated and not regulated. Do you think that's going to be the outcome?

ISAAC BOLTANSKY: I think that when we talk about what's going to happen downstream, there's going to be a movement away from some of the drugs that are covered in terms of pricing power, right? And so, obviously, if you are capped on a certain subset of drugs and how much you can charge, you're going to move to drugs that aren't covered.

And we can have this debate again whenever Democrats have a trifecta. But as Rick outlined before, the pharma industry is pretty safe now. This is the worst that they're going to see for the next few years because at a minimum, the House is going to flip, and then we can talk about where we are in 2024. But in terms of how bad it could have been for the pharma industry the morning after we saw Democrats take Georgia, this is nothing to lose any sleep about.

- Yeah. I guess when we're talking inflation reduction, it's especially not true when we're talking about the pharmaceutical industry, unfortunately for many Americans out there. Isaac, thank you so much for being here. Isaac boltanski, BTIG director of policy research, and our Rick Newman as well, thanks a lot, guys.