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Trumpcare Bill Doesn't Age Well, Nisen Says · Bloomberg Intelligence

• 0:05
  Speaker 1: Welcome to the Bloomberg P and L Podcast. I'm Pim
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• 0:32
  Speaker 1: So we were talking about that healthcare bill that was
• 0:34
  Speaker 1: just released, and we want to bring in Max Niece
• 0:36
  Speaker 1: and bloombergad Fly columnists covering all things healthcare and Max
• 0:41
  Speaker 1: as Greg was just saying, healthcare shares are surging, Can
• 0:45
  Speaker 1: you give us a sense of what in this bill
• 0:47
  Speaker 1: that was just released caused this rally? Why is this
• 0:51
  Speaker 1: being viewed as a positive for the healthcare industry? Um?
• 0:55
  Speaker 1: You know, so I'm just like everybody else, including a
• 0:58
  Speaker 1: large number of Republican senator I'm still making my way
• 1:01
  Speaker 1: through the bill yet, I I you know, i'd like
• 1:05
  Speaker 1: to say I have, but but not quite yet. I'm
• 1:07
  Speaker 1: kind of just jumping through looking for snippets. Um. So
• 1:10
  Speaker 1: what it looks like is that this isn't kind of
• 1:12
  Speaker 1: a dramatic departure from what the House passed. There are
• 1:16
  Speaker 1: some modest differences to the subsidies that low income people get,
• 1:20
  Speaker 1: and um, some of the Medicaid cuts are deeper in
• 1:23
  Speaker 1: the long run, but this doesn't diverge dramatically from what
• 1:27
  Speaker 1: people know already. And I guess resolving some of that
• 1:30
  Speaker 1: uncertainty might, um might be causing some of that jump
• 1:33
  Speaker 1: in stock rise based on what you know, how likely
• 1:36
  Speaker 1: is this to be reconciled with the House bill and
• 1:38
  Speaker 1: actually make it to the President's desk. Um, You know,
• 1:41
  Speaker 1: I I think that the issue isn't gonna be reconciling
• 1:45
  Speaker 1: it with the House bill in this case, it's whether
• 1:47
  Speaker 1: it can get through the Senate, because I mean, the
• 1:50
  Speaker 1: really kind of salient detail here is that the Republican
• 1:54
  Speaker 1: senators who have to vote for have not seen it yet,
• 1:57
  Speaker 1: most of them, so they're kind of grappling it in
• 1:59
  Speaker 1: the same way that um, we are as reporters and
• 2:02
  Speaker 1: and the country is right now, so there are there
• 2:04
  Speaker 1: are things that some you know, conservatives aren't gonna like
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  Speaker 1: parts of this bill, and moderates as well. It's the
• 2:09
  Speaker 1: same problem that's been there for the start politically, so
• 2:12
  Speaker 1: that's going to have to be worked throughing in a
• 2:13
  Speaker 1: pretty short time period. If they want to vote on
• 2:15
  Speaker 1: it next week. Well, and let's talk about the fact
• 2:17
  Speaker 1: that U. S. Senate Majority Leader Mitch McConnell has said
• 2:20
  Speaker 1: that he would like a vote to come next week.
• 2:24
  Speaker 1: And given the fact that it's just being released now,
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  Speaker 1: even to some Republican the Republicans own members in the Senate, UM,
• 2:33
  Speaker 1: why do they want to rush this? Um? I think
• 2:36
  Speaker 1: the kind of thing we've learned over the course of
• 2:39
  Speaker 1: the process with the House polls that this bill doesn't
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  Speaker 1: or this particular effort, policy effort does not age well,
• 2:46
  Speaker 1: does not hold up to UM. Scrutineer right Eric, particularly well,
• 2:50
  Speaker 1: it does some things that are are going to be
• 2:53
  Speaker 1: very unpopular, including weakening protections for those with pre existing
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  Speaker 1: conditions in a different way than the House will, but
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  Speaker 1: but a heres to still do so, and cutting Medicaid
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  Speaker 1: really substantially, and that's not popular at all. Medicaid do
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  Speaker 1: doesn't just cover low income people, it also covers kids
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  Speaker 1: and a majority of people that are in nursing homes
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  Speaker 1: in the United States. So, um, you know, they the
• 3:15
  Speaker 1: point of kind of rushing the process is potentially getting
• 3:19
  Speaker 1: less political backlash actually getting it done. For people. Senators
• 3:22
  Speaker 1: go back to their districts and get uh and get
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  Speaker 1: another earful about the bill. Well that's the thing, right,
• 3:28
  Speaker 1: because of the congressional recess. Yeah, exactly. So Congress is
• 3:32
  Speaker 1: out after next week for a for a pretty long one,
• 3:34
  Speaker 1: and then again in August. So they really want to
• 3:37
  Speaker 1: get this done as quickly as they can. Just to
• 3:39
  Speaker 1: play devil's advocate. A lot of Republican Senate leaders have
• 3:42
  Speaker 1: come out and said, look, uh, more money does not
• 3:45
  Speaker 1: necessarily mean better healthcare, and they're trying to allocate cash
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  Speaker 1: and and and create the right incentives to create a
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  Speaker 1: better health care system. What's your response to that, Um,
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  Speaker 1: I think that's just kind of typical uh rhetoric that
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  Speaker 1: you hear. I mean, of course, government is not always
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  Speaker 1: the most efficient way of allocating money. That I don't
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  Speaker 1: I don't think anyone would argue that. But when you
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  Speaker 1: cut in this case, Medicaid by more than eight hundred
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  Speaker 1: billion dollars, people lose a lot of healthcare. That that's
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  Speaker 1: just that's not an equation you can really contest or
• 4:19
  Speaker 1: argue with. And the same goes for subsidies for health insurance.
• 4:23
  Speaker 1: Let's get a little more detail from Max and Neeson
• 4:25
  Speaker 1: are a Bloomberg Gadfly columnist. Listening to both a Senator
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  Speaker 1: Schumer and Senator McConnell, I wanted to begin by asking you.
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  Speaker 1: Senator Schumer talked about affordable insurance, and I'm wondering he
• 4:39
  Speaker 1: made certain claims about this will do away with affordable
• 4:42
  Speaker 1: insurance for people. Is that accurate? I think it will
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  Speaker 1: definitely be accurate for for certain subsets of the population.
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  Speaker 1: And the ones that come to mind are people that
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  Speaker 1: get subsidies under the A C A that will get
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  Speaker 1: less generous subsidies under under they change the acronym. I
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  Speaker 1: think it's the B C R A now UM. And
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  Speaker 1: the other thing one that comes to mind is people
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  Speaker 1: that lose coverage under the Medicaid Expansion or Medicaid in general,
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  Speaker 1: and also people that have certain conditions. While the Senate
• 5:12
  Speaker 1: bill appears to maintain a prohibition against charging people with
• 5:16
  Speaker 1: pre existing conditions more which was states could wave that
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  Speaker 1: under the House version, it does maintain um, the ability
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  Speaker 1: for states to get rid of the requirement that states
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  Speaker 1: cut that ensures cover a certain essential health benefits like
• 5:31
  Speaker 1: mental health care, for example, So you can't charge someone
• 5:34
  Speaker 1: with mental health care issues more. But you can offer
• 5:38
  Speaker 1: a plan that doesn't have mental health care in it
• 5:41
  Speaker 1: and make it much less expensive, and the plan with
• 5:43
  Speaker 1: that kind of care much more expensive, so effectively with people,
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  Speaker 1: it's those sort of long term expensive issues. Health health
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  Speaker 1: care will become unaffordable potentially in some states. Maxim struck
• 5:54
  Speaker 1: by the GOP's UH sent a proposal to include an
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  Speaker 1: additional fifty billion dollars over four years to stay abilize
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  Speaker 1: insurance exchanges. This was exactly the provision the Republicans have
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  Speaker 1: criticized in the past, is a way to keep insurers
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  Speaker 1: in the marketplace. Why did they reverse course and include this?
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  Speaker 1: I think it was an effort to kind of build
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  Speaker 1: a broader consensus around the bill. Um, you know, some
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  Speaker 1: more near term stability and and more cynically, Um, it
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  Speaker 1: just means that going into the next couple of electoral
• 6:23
  Speaker 1: cycles you have a more stable market. A lot of
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  Speaker 1: the impact of this bill the kind of big shift
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  Speaker 1: from the households that it's pushed out further, so the
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  Speaker 1: big Medicaid cuts, the ending of the Medicaid expansion, it's
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  Speaker 1: pushed out a little bit further. The big changes to
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  Speaker 1: the A c A as well. UM, and that's kind
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  Speaker 1: of evidence by these these funds. So that might create
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  Speaker 1: a problem with the conservative wing of the party. They
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  Speaker 1: they especially hated these payments when they were part of
• 6:47
  Speaker 1: the A C. A. They won't like it. That something
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  Speaker 1: that could be described, I imagine as something of a
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  Speaker 1: bailout by by that wing of the party. It's now
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  Speaker 1: in this bill, so that might be a problem. Thank
• 6:58
  Speaker 1: you so much for joining us Maxnis and Blueberg Gadfly columnists.
• 7:00
  Speaker 1: UH you can follow his work at Bloomberg dot com
• 7:03
  Speaker 1: slash gad fly, and I'm sure Max you will be
• 7:06
  Speaker 1: opining on this proposal. Center Republic Industry Itierate did release
• 7:10
  Speaker 1: their healthcare proposals to replace Obamacare, providing an additional fifty
• 7:14
  Speaker 1: billion dollars over four years to stabilize insurance exchanges. This
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  Speaker 1: is the plan that has been long awaited that Senate
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  Speaker 1: Majority Leader Mitch McConnell would like to have a vote
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  Speaker 1: on as soon as next week, and it will affect
• 7:25
  Speaker 1: a broad swath of the US economy. Right now, we
• 7:40
  Speaker 1: are looking at oil prices that are finding some stability
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  Speaker 1: after a pretty significant swoon, after falling to the lowest
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  Speaker 1: levels UH in ten months. It is rising just a
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  Speaker 1: bit with the value of crude going to forty three
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  Speaker 1: a little over forty three dollars a barrel. To get
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  Speaker 1: a better sense of the direction of these prices, I
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  Speaker 1: want to bring in John killed Off. He has founding
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  Speaker 1: partner of again at Capital in New York. John, have
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  Speaker 1: we seen the lows this year? Four crew? It's hard
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  Speaker 1: to tell at this moment not to uh cop out
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  Speaker 1: or avoid your question. Yesterday's sell off to two oh
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  Speaker 1: five a barrel with significant it matches up with the
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  Speaker 1: low from November. So there's a potential for technical traders
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  Speaker 1: to see that as a double bottom, and I'm having
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  Speaker 1: to abide that at the moment. But really I think
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  Speaker 1: the path of least resistance is still lower down into
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  Speaker 1: the upper thirties, upper thirties. How long would it stay there,
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  Speaker 1: that's a good question, PIM. I think it would stay
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  Speaker 1: there um for a good amount of time. What the
• 8:40
  Speaker 1: market is right now in the process of doing is
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  Speaker 1: is calling and taking OPEC to task for not doing enough,
• 8:47
  Speaker 1: so they're challenging. The market gets into these modes where
• 8:49
  Speaker 1: they challenge the producing community, sometimes on the upside. Right
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  Speaker 1: now it's on the downside to react and the statis
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  Speaker 1: apparently are scrambling right now to to find the way
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  Speaker 1: to react to this and to get the prices back up. John,
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  Speaker 1: when I talk with bulls oil bulls, they say, look
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  Speaker 1: Saudio Saudi Arabia in particular has great incentive to prop
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  Speaker 1: up and give a floor to oil prices based on
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  Speaker 1: the fact that they're planning to do an initial public
• 9:16
  Speaker 1: offering for Saudi Aramco in the near future. What do
• 9:20
  Speaker 1: you say to those traders who still have faith that
• 9:25
  Speaker 1: there will be a floor because of those political incentives. Well,
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  Speaker 1: I think that the sadis you know, bristle at having
• 9:32
  Speaker 1: to go with a loan. They've they've been carrying most
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  Speaker 1: of the load since the beginning, and now they're having
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  Speaker 1: to deal with potentially covering as the as the oil
• 9:44
  Speaker 1: Minister put it, Libya and Nigeria, whose production in a
• 9:48
  Speaker 1: surprise I think to the market and certainly to OPEC
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  Speaker 1: and the non OPEC participants have come rowing back. They're
• 9:53
  Speaker 1: back to really full output from being near zero for
• 9:57
  Speaker 1: the better part of the year or two oh in
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  Speaker 1: the Historically, the Staudies reach a point where they won't
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  Speaker 1: do it, and they instead turned press the market by
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  Speaker 1: over supplying it. Now, this Stadio ramfil thing is a
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  Speaker 1: new wrinkle. And with the new Crown Prince and the
• 10:15
  Speaker 1: new oil Minister, UH, they seem more committed to engineering
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  Speaker 1: a higher price, potentially through more cutbacks. But boy, it's
• 10:23
  Speaker 1: a bitter pill for them to swallow, and historically in
• 10:26
  Speaker 1: my experience with them, they don't swallow it. Well, John,
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  Speaker 1: to bring into the equation the swing producer, the United
• 10:34
  Speaker 1: States and its role in uh not only domestic energy markets,
• 10:38
  Speaker 1: but now international energy markets as an exporter, well that
• 10:43
  Speaker 1: and that is the big monkey wrench that has also
• 10:45
  Speaker 1: been thrown into this OPAC non OPEC agreement UM. And
• 10:48
  Speaker 1: also to keep pointing out to everyone that while the
• 10:52
  Speaker 1: shale players get all the glory and the headlines, you know,
• 10:55
  Speaker 1: like a big wide receiver on a football team, we've
• 10:58
  Speaker 1: had a lot of production increases from the Gulf of
• 11:00
  Speaker 1: Mexico this year from projects that have been on in
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  Speaker 1: the works for years, and they're that production is not
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  Speaker 1: going away no matter how low prices go. And a
• 11:07
  Speaker 1: lot of the shale plates have hedged a lot of
• 11:09
  Speaker 1: their production when prices got back up into the that
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  Speaker 1: production is going to be a lot more stickier this
• 11:16
  Speaker 1: time around. And as you said, pim Uh China in
• 11:18
  Speaker 1: particular has sought out the U S shale producer oil
• 11:21
  Speaker 1: and we've been exporting increased the masts to China again
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  Speaker 1: in a battle from market share with the Saudis that
• 11:29
  Speaker 1: they bristle at historically, that they don't accept and that
• 11:32
  Speaker 1: they end up fighting back on. So that's that's the
• 11:34
  Speaker 1: issue I had with all of this, and I really
• 11:36
  Speaker 1: think there's a potential, uh for the production war to breakout,
• 11:40
  Speaker 1: not a price war. You know, John, just wanted to
• 11:44
  Speaker 1: get your thoughts on some of these leveraged shale producers
• 11:48
  Speaker 1: in the US, UH. You know, they they are thought
• 11:51
  Speaker 1: as the swing producer and having the upper hand frankly,
• 11:54
  Speaker 1: but if you look at the debt markets, particularly energy
• 11:57
  Speaker 1: junk bonds, they have dropped more than three and a
• 11:59
  Speaker 1: half percent so far this month, and there's a lot
• 12:01
  Speaker 1: of concern that we're going to see another wave of carnage.
• 12:03
  Speaker 1: What's your what's your feeling in that space? We start
• 12:06
  Speaker 1: seeing largely the washout of the weakest players. No, I
• 12:10
  Speaker 1: think if we get down into the upper thirties, they'll
• 12:13
  Speaker 1: be more of that to come. Enough of their production.
• 12:17
  Speaker 1: Any of these folks to get them through. I think
• 12:20
  Speaker 1: another episode like that. Um, and all right, we're gonna John,
• 12:25
  Speaker 1: we gotta break in, John Kildeff. I want to thank
• 12:27
  Speaker 1: you breaking in. John Killoff is the founding partner of
• 12:30
  Speaker 1: Again Capital. Let's get a little bit more detail about
• 12:45
  Speaker 1: this potential deal. I want to bring in Dina Camel
• 12:48
  Speaker 1: Middle East aviation reporter joining us from Dubai and Michael
• 12:53
  Speaker 1: Sasso airline reporter from Bloomberg News joining us from Atlanta. Dina,
• 12:57
  Speaker 1: maybe you could speak a little bit about what Squtar
• 13:00
  Speaker 1: bring to any kind of shareholding and what is the
• 13:04
  Speaker 1: connection between Cutar Airways and global air travel. Yes, high there, Um, Actually,
• 13:11
  Speaker 1: this is not the first time that we're seeing Cutar
• 13:14
  Speaker 1: Airways go into this type of venture, and already in
• 13:18
  Speaker 1: in April, we saw the Cutar Airways CEO of Rebecca
• 13:22
  Speaker 1: say that he was thinking of adding one more acquisition
• 13:26
  Speaker 1: to his portfolio of you know, many many airlines and
• 13:31
  Speaker 1: many previous purchases. Um. So today's announcement is actually one
• 13:35
  Speaker 1: in a series of acquisitions that the airline has already done. Um.
• 13:40
  Speaker 1: The first one was, you know, gradually building up a
• 13:45
  Speaker 1: stake in British Airways. Parents I g UH. They've also
• 13:49
  Speaker 1: recently tooken up, taken up ten percent of latam um.
• 13:53
  Speaker 1: So they've been pursuing an organic growth. And this latest
• 13:58
  Speaker 1: interest in in American sort of completes the triangle of
• 14:02
  Speaker 1: of trying to capture traffic from across the Atlantic. I
• 14:06
  Speaker 1: want to bring in Michael here. So cut Our Airways
• 14:09
  Speaker 1: has been criticized by American airlines for unfair competition. What
• 14:14
  Speaker 1: does this potential investment in American airlines do with respect
• 14:18
  Speaker 1: to the rivalry here? Well, I think that's the big question. Um,
• 14:24
  Speaker 1: there's some you know, I've heard some analysis that maybe
• 14:28
  Speaker 1: Cutter is trying to get a foothold in this controversy
• 14:32
  Speaker 1: in the United States. You may be aware that all
• 14:35
  Speaker 1: three of the US major US airlines, including American Delta,
• 14:40
  Speaker 1: UH and UH and United Airways United Airlines all have
• 14:43
  Speaker 1: trying to bring a trade case against Cutter and Emirates
• 14:48
  Speaker 1: and ATA Airways, suggesting that they're unfairly flooding the US
• 14:53
  Speaker 1: market with with cheap flights, that they're being subsidized by
• 14:57
  Speaker 1: their home governments. I mean, there's a there's a thought
• 15:01
  Speaker 1: out there that maybe this could be some attempt to
• 15:04
  Speaker 1: influence that process. Uh. Some could they have some influence
• 15:08
  Speaker 1: in with the Trump administration or some influence with American maybe, Uh,
• 15:13
  Speaker 1: but that's just kind of spot analysis. Well, and we're
• 15:16
  Speaker 1: not exactly sure yet. Well, and you talk about the
• 15:19
  Speaker 1: conflict between Cutter Air and some of the US airlines,
• 15:23
  Speaker 1: but the conflict with Cutter goes much beyond that. I mean,
• 15:26
  Speaker 1: recently we've seen a lot of news coming out of
• 15:29
  Speaker 1: the Middle East with respect to Saudi Arabia and it's
• 15:33
  Speaker 1: worsening relationship with Cutter as well as with the U
• 15:36
  Speaker 1: s Dina. Can you speak a little bit about how
• 15:38
  Speaker 1: this type of investment complicates that or is uh perhaps
• 15:43
  Speaker 1: despite that or as a result of that. I mean,
• 15:45
  Speaker 1: just to remind people, cut Our Air is state owned. Yes,
• 15:50
  Speaker 1: that's that's correct. It might be a little bit too
• 15:52
  Speaker 1: early to stay at at this point. Um, how this
• 15:55
  Speaker 1: plays into the geopolitical tensions that that cuts are is
• 16:00
  Speaker 1: facing at the moment um. As you correctly pointed out,
• 16:04
  Speaker 1: cut Our the nation is being isolated by four other
• 16:08
  Speaker 1: neighboring Arab countries Saudi Arabia, Egypt, UM, Bahain and the
• 16:13
  Speaker 1: United Arab Emirates UM for who accused Cutter, UM for
• 16:18
  Speaker 1: supporting UM Islamic terrorism and financing extremists UM, which are
• 16:23
  Speaker 1: allegations that that cut our denies UM and and and
• 16:27
  Speaker 1: in the meantime, they've also closed down UM their airspace
• 16:31
  Speaker 1: to all Cutari flights. So let's just put cutter airways.
• 16:35
  Speaker 1: UH in a very difficult situation. UH, it's it's had
• 16:38
  Speaker 1: to face longer reroutes, very expensive reroutes around that airspace. UM.
• 16:44
  Speaker 1: So the idea that it's now trying to UM solidify
• 16:48
  Speaker 1: its partnerships, you know, with one World members UM and
• 16:52
  Speaker 1: and basically trying to diversify its streams of of of
• 16:56
  Speaker 1: revenue so that it's not reliant on any one part
• 17:00
  Speaker 1: of the world too heavily UM for where it's earnings
• 17:03
  Speaker 1: come from. UM AND. I think that move ties in
• 17:06
  Speaker 1: with the political pressure that it's that it's facing here
• 17:09
  Speaker 1: in the region. Already, it's been denied access to eighteen
• 17:14
  Speaker 1: destinations in those four countries that are imposing the ban,
• 17:18
  Speaker 1: so there's a sense that it wants to diversify and
• 17:21
  Speaker 1: and and spread itself across regions. Well, I want to
• 17:25
  Speaker 1: thank you very much both of you for really giving
• 17:28
  Speaker 1: us some detail about what is going on. Dina kamel
• 17:30
  Speaker 1: is our Middle Eastern aviation reporter. She joins us from Dubai.
• 17:34
  Speaker 1: Michael Sassau, our airline reporter, coming to us from Atlanta.
• 17:50
  Speaker 1: Let's turn our attention now to the big topic of
• 17:52
  Speaker 1: asset price inflation. Brentan Brown is the chief economist and
• 17:55
  Speaker 1: head of economic research for Mitsubishi u f J Securities.
• 18:00
  Speaker 1: He is also the author of a Global Monetary Plague,
• 18:04
  Speaker 1: Asset Price Inflation, and Federal Reserve Quantitative Easing. Good to
• 18:09
  Speaker 1: have you with us here in our studio. Thanks for
• 18:11
  Speaker 1: being here. Maybe you just can begin by talking about
• 18:14
  Speaker 1: this idea of bubbles and asset price inflation. How is
• 18:18
  Speaker 1: it defined and how should we be applying those concepts
• 18:21
  Speaker 1: to what we see in the stock and bond in
• 18:23
  Speaker 1: commodity markets currently. So, asset price inflation is the unleashing
• 18:28
  Speaker 1: of irrational forces in markets by monetary distortions. And what
• 18:34
  Speaker 1: I mean by that is interest rates being pressed way
• 18:37
  Speaker 1: below natural neutral level and to expand. And why that's happening,
• 18:43
  Speaker 1: I would say over the last twenty years and especially
• 18:46
  Speaker 1: the last ten years, pressure of globalization China coming into
• 18:49
  Speaker 1: world markets pushes prices down, which in general most people
• 18:54
  Speaker 1: gain from In terms of our real living standards. The
• 18:57
  Speaker 1: FED and other central banks have been trying trying to
• 19:00
  Speaker 1: get to this two percent inflation standard. Goodness knows where
• 19:03
  Speaker 1: it came from, and certain not in a Federal Reserve Act.
• 19:05
  Speaker 1: Nobody's ever mandated two percent inflation. But the Fed, somehow,
• 19:08
  Speaker 1: out of its own wisdom, decided two percent inflation. But
• 19:11
  Speaker 1: if you aim for two percent inflation when the natural
• 19:13
  Speaker 1: rhythm of prices is actually downwards, you can only do
• 19:16
  Speaker 1: that by by pushing rates way low, very low, and
• 19:20
  Speaker 1: keeping them very low. And that's that creates a desperation
• 19:24
  Speaker 1: for yield. And that desperation for yield shows up in
• 19:28
  Speaker 1: all these areas of of of irrational forces gaining the
• 19:32
  Speaker 1: upper upper force. So Brendan, it's been about five years
• 19:36
  Speaker 1: of people warning about as at price bubbles and the
• 19:38
  Speaker 1: potential demise of the financial system when they collapse. And
• 19:42
  Speaker 1: here we are twenty seventeen. The feed is starting to
• 19:45
  Speaker 1: high rates, and you do see stock prices climbing higher.
• 19:48
  Speaker 1: While there are some jitters in the high O bond market,
• 19:50
  Speaker 1: for example, because of oil prices, we have not seen
• 19:53
  Speaker 1: an implosion. Does that mean that it's not going to happen?
• 19:56
  Speaker 1: I would make two points here. I think, first of all,
• 19:59
  Speaker 1: the monetary force or the monetary monetary distortions this equilibrium,
• 20:04
  Speaker 1: I would say, have actually been growing UM in the
• 20:07
  Speaker 1: last eighteen months. First, we had for yelling FED last
• 20:10
  Speaker 1: year walking back from rate rises because of a China shock.
• 20:13
  Speaker 1: This year we've had the surprise for for Trump administration
• 20:17
  Speaker 1: did nothing to change matters in the FED, whereas there
• 20:20
  Speaker 1: were expectations that they may, and we've had the ECB
• 20:23
  Speaker 1: and the b o J merrily going on with their
• 20:27
  Speaker 1: QUI expansions and negative rates or though that had been
• 20:30
  Speaker 1: some expectations that would all slow down. So if anything,
• 20:32
  Speaker 1: we've had an increase in this monetary stimulus. As we
• 20:35
  Speaker 1: listen to some of these policies in these House and
• 20:38
  Speaker 1: the Senate hearings, how much do you pay attention as
• 20:41
  Speaker 1: an economist? How much does this way on your growth
• 20:45
  Speaker 1: outlook and the way you assess you as economy well,
• 20:49
  Speaker 1: the whether the fiscal plans and the tax cut move
• 20:52
  Speaker 1: ahead is one of the factors go into the economic outlook.
• 20:56
  Speaker 1: But I do tend to think that the importance of
• 21:00
  Speaker 1: UM shouldn't be exaggerated. UM. At best, it looks as
• 21:04
  Speaker 1: if what we're getting here is going to be some
• 21:07
  Speaker 1: sort of temporary tax cut rather than permanent. But haven't
• 21:13
  Speaker 1: you've written that they've that the Trump administration as well
• 21:16
  Speaker 1: as the Republicans in Congress, they've squandered an opportunity in
• 21:21
  Speaker 1: another area. But maybe this is all conflated in some way. Yeah,
• 21:25
  Speaker 1: I mean, if one looks at the trio of what's
• 21:28
  Speaker 1: making up for Trump administration program now um of infrastructure,
• 21:33
  Speaker 1: tax reform, health, the big gap in all of this is,
• 21:36
  Speaker 1: of course, anything on the monetary side. We have a
• 21:39
  Speaker 1: tremendous as we were discussing earlier, monetary distortion going on
• 21:44
  Speaker 1: at the FED, aiming for two percent inflation target, long
• 21:48
  Speaker 1: term interest rate controls, and nothing is on foreseeable legender
• 21:53
  Speaker 1: to change any of this. And that's you know, you
• 21:55
  Speaker 1: only have to read Milton Freeland's Capitalism Freedom to to
• 21:58
  Speaker 1: realize that any agenda of economic reform and unleashing forces
• 22:04
  Speaker 1: in a capitalist economy has to start with monetary reform.
• 22:07
  Speaker 1: You know, I'm struck by what JP Morgats Bob Michael
• 22:09
  Speaker 1: said earlier today on Bloomberg Television, which is, at some
• 22:13
  Speaker 1: point some of some of President Trump's policies will get
• 22:16
  Speaker 1: past and there will be an upside surprise with healthcare.
• 22:19
  Speaker 1: For example, healthcare is almost eighteen per cent of the
• 22:22
  Speaker 1: U S economy, and we do see healthcare share surging
• 22:25
  Speaker 1: on the prospect that there will be some solidification of
• 22:28
  Speaker 1: what the outlook is for healthcare in the US. But
• 22:31
  Speaker 1: you're saying any step they take will probably be incremental
• 22:34
  Speaker 1: and won't necessarily have uh that material of it of
• 22:37
  Speaker 1: an impact on the on the growth outlook in terms
• 22:40
  Speaker 1: of overall growth outlook. Yes, I mean, I think the
• 22:43
  Speaker 1: main growth positive aspect of the Trump fiscal agenda is
• 22:48
  Speaker 1: the cut in corporation tax, which will bring some economic
• 22:54
  Speaker 1: activity back from low tax jurisdictions abroad, whether it's Canada
• 22:58
  Speaker 1: or other places in and that in the longer term
• 23:01
  Speaker 1: will boost economic activity in the United States. By the way,
• 23:04
  Speaker 1: that will put some pressure upwards on wages. I mean,
• 23:07
  Speaker 1: these these measures to boost production in the United States
• 23:11
  Speaker 1: basically come to increased demand for US labor. It's not
• 23:14
  Speaker 1: necessarily going to be as positive as maybe Wall Street
• 23:18
  Speaker 1: imagines for earnings and equities. You know, I've heard so
• 23:21
  Speaker 1: many people talk about what will or won't boost inflation,
• 23:24
  Speaker 1: and so many people have gotten this so wrong. Do
• 23:26
  Speaker 1: you find yourself questioning what will actually lead to higher
• 23:30
  Speaker 1: wages is given the frustration and lack of understanding of
• 23:33
  Speaker 1: why they e remained so stagnant. I I don't know.
• 23:35
  Speaker 1: I don't believe that wages are a key element to
• 23:39
  Speaker 1: look for in an inflationary process. I think the inflationary
• 23:42
  Speaker 1: process is in this cycle is asset prices. And I
• 23:46
  Speaker 1: think also we have an inflationary dimension in goods and
• 23:51
  Speaker 1: services markets, but it's not immediately apparent. And what I
• 23:53
  Speaker 1: mean by that is that if you measured inflation today
• 23:58
  Speaker 1: in the United States, and say way as it was
• 24:00
  Speaker 1: measured in the fifties and sixties or any time before that,
• 24:02
  Speaker 1: without all this hedonic price adjustment, today's inflation rate would
• 24:06
  Speaker 1: be three and a half to four percent UM. So
• 24:10
  Speaker 1: so there is an inflation there. If you have asset
• 24:12
  Speaker 1: price inflation was always going to be good inflation alongside,
• 24:15
  Speaker 1: because it's part of the same phenomenon, but it's it's
• 24:17
  Speaker 1: not necessarily immediately apparent. Last question, Now we are awaiting
• 24:20
  Speaker 1: comments from President Trump, who is meeting with a big
• 24:24
  Speaker 1: technology company leaders in Washington. I just wanted to get
• 24:27
  Speaker 1: your sense, Brennan, going forward, do you agree with guests
• 24:31
  Speaker 1: on previously in this program that we have five more
• 24:34
  Speaker 1: years in this credit cycle. I I would never say
• 24:38
  Speaker 1: anything like that. I think we're we I hate to
• 24:40
  Speaker 1: say we're in a new, new era or new experiment.
• 24:44
  Speaker 1: But the enormity of this particular monetary distortion, with every
• 24:49
  Speaker 1: major central bank pursuing or having huge balance sheets and
• 24:55
  Speaker 1: interest rates so low low, is something we haven't encountered before.
• 24:59
  Speaker 1: We have encountered asset price inflation before, but for example,
• 25:01
  Speaker 1: size of asset price inflations is small. It's probably eight
• 25:04
  Speaker 1: in the last hundred years. And to find one with
• 25:08
  Speaker 1: this degree of a normality of of distortions, I can't
• 25:11
  Speaker 1: find um. Moreover, this is happening in an era when
• 25:15
  Speaker 1: there isn't much good economic news. You know, previous asset
• 25:17
  Speaker 1: price inflations have mostly been accompanied by fantastic economic good news,
• 25:21
  Speaker 1: whether it was the late nineteen nineties or with late
• 25:23
  Speaker 1: nineteen twenties. First time there isn't good news. So so
• 25:26
  Speaker 1: with a lot of differences, but if you asked me
• 25:28
  Speaker 1: for the bottom line, I think the new mare is
• 25:30
  Speaker 1: going to be more within the next two years rather
• 25:32
  Speaker 1: than five years. Thank you very much for joining us. A.
• 25:35
  Speaker 1: Brendan Brown as chief economist and head of Economic Research
• 25:38
  Speaker 1: for Mitsubishi u f J Securities. Thanks for listening to
• 25:44
  Speaker 1: the Bloomberg P and L podcast. You can subscribe and
• 25:47
  Speaker 1: listen to interviews at Apple Podcasts, SoundCloud, or whatever podcast
• 25:51
  Speaker 1: platform you prefer. I'm pim Fox. I'm on Twitter at
• 25:55
  Speaker 1: pim Fox. I'm on Twitter at Lisa Abramo. It's one
• 25:58
  Speaker 1: before the podcast. You can now plays Catch us worldwide
• 26:01
  Speaker 1: on Bloomberg Radio