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Financially-Squeezed Trump Is A National Security Risk: O'Brien · Bloomberg Intelligence

0:01
Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, along
0:04
Speaker 1: with my co host of Bonnie Quinn. Every business day
0:06
Speaker 1: we bring you interviews from CEOs, market pros, and Bloomberg experts,
0:10
Speaker 1: along with essential market moving news. Kind the Bloomberg Market
0:13
Speaker 1: Podcast on Apple podcast or wherever you listen to podcasts,
0:17
Speaker 1: and on Bloomberg dot com. It is time now for
0:20
Speaker 1: Bloomberg Opinion. Last night, around six pm, The New York
0:23
Speaker 1: Times released a whole cornucopia of stories that detailed as
0:28
Speaker 1: much as we know now and even a little bit
0:30
Speaker 1: more about President Donald Tomp's tax returns. Tim O'Brien, senior
0:34
Speaker 1: columnist for Bloomberg Opinion, writes today that these taxes show
0:38
Speaker 1: he's a national security threat. I'm quoting. At best, he's
0:42
Speaker 1: a haphazard businessman, human billboard and serial bankruptcy artist who
0:46
Speaker 1: gorgees on debt he may have a hard time repaying.
0:49
Speaker 1: And I won't say what he is at worst. What
0:52
Speaker 1: is he at worst? Him? Well, it works funny, he's
0:55
Speaker 1: you know, he's he's a con artist and a grifter
0:58
Speaker 1: who I think is purple traded a number of public
1:01
Speaker 1: policy frauds on on both his voters in the American
1:06
Speaker 1: public during his tenure, because what the tax returns reveal
1:11
Speaker 1: is that the person who was a signature force behind
1:15
Speaker 1: a major tax overhaul that ben benefited the most affluent
1:19
Speaker 1: members of our society, um himself. He paid next to
1:24
Speaker 1: no taxes in just seven and fifty dollars and many
1:29
Speaker 1: years he paid no taxes at all. Um. I think
1:33
Speaker 1: the other thing that's that is substantiated in the Times
1:36
Speaker 1: report has been something that's been known about Trump for
1:38
Speaker 1: a long time is that, um, he has hundreds of
1:43
Speaker 1: millions of dollars in debt. I think he's gotten north
1:45
Speaker 1: of a billion, frankly, and uh he may have a
1:49
Speaker 1: hard time paying that debt down if his creditors come calling.
1:53
Speaker 1: He is his assets are certainly, you know, well in
1:57
Speaker 1: excess of his current debts. But the problem is his
2:00
Speaker 1: assets aren't liquid and uh so his biggest holdings are
2:04
Speaker 1: actually controlled by other people. So he's going to enter
2:08
Speaker 1: into a phase right now where he may be financially squeezed.
2:11
Speaker 1: It makes him a national security risk because if he
2:13
Speaker 1: can't sell his assets to pay back his loans, he's
2:17
Speaker 1: gonna go looking for a handout, and that makes him
2:19
Speaker 1: vulnerable to foreign influence. So, Tim, you know, when he
2:24
Speaker 1: talked about real estate investors and so on, the there's
2:27
Speaker 1: so much UM tax sheltering that those types of owners
2:32
Speaker 1: and investors can avail themselves to, whether it's depreciating the
2:36
Speaker 1: value of a building and accelerating that depreciation, so on
2:39
Speaker 1: and so forth, that oftentimes you do see these big
2:41
Speaker 1: earners with little to no tax burden. How unusual do
2:45
Speaker 1: you think President Trump is here with his returns versus
2:48
Speaker 1: some of his peers. That's a good question, paul I.
2:51
Speaker 1: You know, Um, over the last two decades, Trump has
2:56
Speaker 1: underpaid UH taxes by about four million dollars relative to
3:02
Speaker 1: his peers based on the Times data. UM. You know,
3:05
Speaker 1: the wealthiest taxpayers in the United States carry the biggest burden.
3:09
Speaker 1: They're the most affluent members of society, pay more in
3:13
Speaker 1: terms of total dollar amounts UH in taxes than anyone else. Um.
3:20
Speaker 1: But when you compare Donald Trump to his peers, he's
3:24
Speaker 1: well below them. When you compare Donald Trump to an
3:27
Speaker 1: average American family, say a family making about seventy five
3:31
Speaker 1: THO dollars a year, they're going to play somewhere in
3:34
Speaker 1: the neighborhood of fourteen thousand dollars in taxes in the
3:38
Speaker 1: year that Donald Trump paid seven hundred and fifty dollars.
3:41
Speaker 1: No one looking at that would say that that's equitable.
3:44
Speaker 1: So even if the taxes he pays comport with what
3:47
Speaker 1: real estate fallowers are allowed to do and has not
3:49
Speaker 1: run a file of the tax code, there's a lot
3:52
Speaker 1: of inequity built into this. Now, obviously we have to
3:54
Speaker 1: remember that this is his self portrayal. Right, these are
3:57
Speaker 1: his taxes that were presumibly VET advice accountants and so on.
4:01
Speaker 1: But tim, if you represent yourself as being able to
4:05
Speaker 1: pay a loan off and you're not able to pay
4:09
Speaker 1: that loan off, is that a climb? Well, if you
4:12
Speaker 1: misrepresent two investors or two banks the value of your
4:16
Speaker 1: assets um, and you knowingly are making false statements as
4:21
Speaker 1: a form of fraud, Uh, there's you know, it's on
4:24
Speaker 1: the banks and investors to do their own due diligence,
4:26
Speaker 1: But no one is allowed to go around and create
4:29
Speaker 1: valuations out of whole cloth. Uh and and and try
4:33
Speaker 1: to get funding based on that. Uh. Trump. Trump is
4:37
Speaker 1: being investigated currently for that very thing VANNI by the
4:41
Speaker 1: Manhattan District Attorney's Office. This issue that Michael Cohen raised
4:45
Speaker 1: during his his congressional testimony, things that I've raised decades
4:49
Speaker 1: ago about how he accounts for his his assets. UH.
4:54
Speaker 1: You know, Michael Cohen said that Trump routinely and knowingly
4:57
Speaker 1: inflated valuations in order to get loans and in esters,
5:00
Speaker 1: and that could be putting him in I think legal
5:05
Speaker 1: peril in the in the upcoming year. So Tim, it's
5:09
Speaker 1: just an update on what some of those external investigations
5:12
Speaker 1: are of the presidents as perhaps it relates to his finances.
5:15
Speaker 1: I guess the Southern District of New York. Yeah, the
5:18
Speaker 1: southern reside of New York has been looking at at Trump.
5:22
Speaker 1: The status of that is unknown. It's complex there because
5:24
Speaker 1: the Southern District, which is the U. S. Attorney's office
5:27
Speaker 1: there is federal UH. They are under the Attorney General's
5:31
Speaker 1: UH guidance from the Attorney generalist, someone who's routinely run
5:35
Speaker 1: interference for Trump. UM. The state Attorney general in New
5:39
Speaker 1: York is looking at UH has looked at Trump's foundations
5:42
Speaker 1: and his charitable activities. In the past, he and his
5:45
Speaker 1: children were tossed out of the philanthropic world for um
5:50
Speaker 1: defrauding their own charity. I think UM, the A G
5:55
Speaker 1: and New York is also looking at Trump's taxes, but
5:57
Speaker 1: I think the investigation in the District Attorney's office in
6:01
Speaker 1: New York that is looking at Trump's payment of hush
6:04
Speaker 1: money to UM women who have alleged to have sexual
6:08
Speaker 1: encounters with him, as well as possible accounting UH irregularities
6:15
Speaker 1: or and or fraud UM at the Trump organization is
6:19
Speaker 1: the one that's the most perilous for him. He's got
6:21
Speaker 1: no federal sway over that investigation. It's something that's going
6:25
Speaker 1: to be waiting for him if he doesn't get reelected
6:27
Speaker 1: in November. And I think it's something that's really animated
6:31
Speaker 1: a lot of his agitation around these issues because he
6:34
Speaker 1: knows he's gonna be facing that next year. Tim, This
6:37
Speaker 1: isn't a flip question, but I would like you to
6:40
Speaker 1: consider it. So about two hundred million came from the Apprentice,
6:45
Speaker 1: a big, big sum. He was getting something like the
6:48
Speaker 1: royalties or the the fees for that. Given that it's
6:52
Speaker 1: clear he's a money losing businessman. Could the Apprentice or
6:56
Speaker 1: Mark Burnett, or you know, somebody on behalf of Consumers
6:59
Speaker 1: or view where is sue him for falls advertising? Well,
7:04
Speaker 1: I don't you know. I think I think, um, probably
7:07
Speaker 1: Mark Burnett could have gotten Donald Trump more cheaply than
7:10
Speaker 1: he did. That's one of those things we've realized. And
7:12
Speaker 1: all the money he made from that show. Um, you know,
7:15
Speaker 1: I don't think, um, I don't see a false advertising
7:19
Speaker 1: shoe rising with The Apprentice. I think the usue around
7:21
Speaker 1: The Apprentice has always been that Donald Trump was sitting
7:23
Speaker 1: in a fake boardroom in these phony scenarios with aspiring entrepreneurs,
7:29
Speaker 1: doling out his wisdom as he tried and true dealmaker
7:33
Speaker 1: and and in fact, that persona is what helped lifted
7:36
Speaker 1: him into the White House. White House. And what we've
7:39
Speaker 1: seen time and again is that reality shows that he's
7:43
Speaker 1: never been a gifted dealmaker or businessman. That he's been
7:46
Speaker 1: uh a routine Um, he's had routine bankruptcies. Another problems
7:51
Speaker 1: the tax returns drives home even further. Hey, Tim, thanks
7:56
Speaker 1: so much for joining us. Who really appreciate me. You're
7:58
Speaker 1: busy today Tim O'Brien, senior columnist for Bloomberg Opinion, giving
8:02
Speaker 1: us his thoughts on this explosive story from The New
8:05
Speaker 1: York Times over the weekend. Of course, you know, Tim
8:09
Speaker 1: wrote in authorized biography of Trump years ago, was sued
8:12
Speaker 1: by Trump for that before he was president. Tim won
8:18
Speaker 1: that lawsuit, so he's had a lot of experience with
8:21
Speaker 1: then real estate investor Donald Trump. Let's bring back Bill Rhodes,
8:28
Speaker 1: advisor to the world really and banker to the world.
8:31
Speaker 1: We were talking a little bit about China in our
8:33
Speaker 1: last block, and now we want to move to Latin America.
8:36
Speaker 1: We'd just begun on that Bill. There is some very
8:40
Speaker 1: you know, specific cases in Latin America. Obviously Venezuela is
8:44
Speaker 1: one of them. But the countries that had been sort
8:47
Speaker 1: of skirting the worst of you know, of the fallout
8:51
Speaker 1: from the coronavirus now seemed to be right bang in
8:53
Speaker 1: the center of it. So Mexico, for example, and some
8:55
Speaker 1: of the other countries. How bad will it get over
8:58
Speaker 1: the next two to three order is for Latin America. Well,
9:01
Speaker 1: I think Latin America is facing the greatest challenge it
9:04
Speaker 1: has an over a century. Uh. First of all, you
9:08
Speaker 1: have the COVID UH nineteen situation, a pandemic which has
9:13
Speaker 1: really hit uh Latin America harder than anywhere else. Um.
9:19
Speaker 1: The latest figures that I've seen show that of the
9:24
Speaker 1: COVID deaths UH so far in the world, and these
9:27
Speaker 1: are figures as of June. I haven't seen anything since
9:30
Speaker 1: coming from Latin America with only eight percent of the population,
9:37
Speaker 1: So they are getting hit big time. And the latest
9:40
Speaker 1: predictions that you find from the various banks, Bank of
9:43
Speaker 1: America elsewhere is that this year there will be a
9:47
Speaker 1: decline of over eight percent eight point two percent, although
9:51
Speaker 1: the World Bank and the i m F in June
9:53
Speaker 1: had talked about possibility of ten percent. Allow it Alo,
9:57
Speaker 1: We'll just have to see. But it is hitting Latin
10:01
Speaker 1: America much worse in the Middle East, Africa or Emerging Asia. Uh.
10:05
Speaker 1: And as you pointed out, I think Mexico Brazil have
10:09
Speaker 1: been hit particularly hard. Mexico is on the way, according
10:14
Speaker 1: to the day's statistics put out by the Central Bank,
10:18
Speaker 1: the Bank of Mexico, to a drop of GDP of
10:21
Speaker 1: between eight and uh eight percent and twelve percent uh
10:27
Speaker 1: and it's only being helped keep the float by the
10:30
Speaker 1: flow of remittances from the United States. Um. That's number one,
10:35
Speaker 1: you know, is the COVID thing. Second of all, a
10:38
Speaker 1: lot of these countries, as you point out, had already
10:40
Speaker 1: been in trouble before. Argentina Ecuador, Venezuela had all been
10:46
Speaker 1: in recession, some of them pretty steep before COVID hit.
10:50
Speaker 1: And the third thing, which is most people forget but
10:53
Speaker 1: we've we've discussed it here on your program, is the
10:56
Speaker 1: greatest refugee problem America's ever faced in its history. Over
11:02
Speaker 1: five million venezue oilans circulating around Latin South America, and
11:09
Speaker 1: the country that's been hit the most with him is
11:11
Speaker 1: Columbia with a million and a half. But these are like,
11:16
Speaker 1: you know, uh, three horsemen. Of course, there were four
11:18
Speaker 1: horsemen of the apocalypse, but I would say if you
11:21
Speaker 1: had one less horse, it would be three horses of
11:23
Speaker 1: the apocalypse hitting Latin America all at one time. So, Bill,
11:29
Speaker 1: it just seems overwhelming the challenges in Latin America because
11:33
Speaker 1: so many of the issues that you highlighted are deep seated.
11:37
Speaker 1: We're there before the pandemic. Now they're just being exacerbated
11:40
Speaker 1: by the effects of the pandemic. What are some possible solutions,
11:44
Speaker 1: um for this part of the world. Well, going back
11:48
Speaker 1: to China, um there's an expression in Chinese Mandarin called
11:53
Speaker 1: wai ti, which means crisis opportunity, and um luis Alberto Moreno,
11:59
Speaker 1: who ran the Inter American Development Bank predicted ten years
12:02
Speaker 1: ago that this is going to be the decade for
12:05
Speaker 1: Latin America because they were going to institute UH reforms,
12:08
Speaker 1: which they didn't do. So this is an opportunity, I
12:12
Speaker 1: think for them to institute major reforms in the area
12:16
Speaker 1: of education, health care services, the rule of law, and
12:20
Speaker 1: also to build up their institutions so that they can
12:24
Speaker 1: come out of this with some sort of a base
12:27
Speaker 1: going forward. Also, there's an opportunity on the trade side
12:32
Speaker 1: because you have two major trading blocks in Latin America
12:36
Speaker 1: Mircos serp which is Brazil, Argentina, Paraguay, Uruguay, and then
12:41
Speaker 1: you have the Pacific Alliance, which are all those countries
12:44
Speaker 1: in South America from Chilean up through Mexico, which formed,
12:49
Speaker 1: as I said, to Pacific Alliance. And there's been talk
12:52
Speaker 1: about merging the two of those so that you would have,
12:56
Speaker 1: you know, one of the largest trading blocks in the world.
12:58
Speaker 1: And if that could ever tie itself up to the
13:02
Speaker 1: modern version of NAFTA, which was the idea that George
13:06
Speaker 1: Bush Sr. And Bill Clinton had of a trade zone
13:09
Speaker 1: of the Americas. So sometimes when you get in the
13:12
Speaker 1: depth of despair, Uh, you can build on it. And
13:17
Speaker 1: the question is, uh, is there the will on the
13:20
Speaker 1: part of governments to do so? And will there be
13:23
Speaker 1: the financial backing from international financial institutions and the private
13:27
Speaker 1: sector to do so? And that will depend on the
13:30
Speaker 1: governments in these individual countries uh taking the steps they
13:35
Speaker 1: need to reform the economies and to try and and
13:38
Speaker 1: uh get away from some of the corrupt practices that
13:41
Speaker 1: we've seen over the last few years. Well, it sounds
13:44
Speaker 1: like a big asks me and and and and a long, long, long,
13:48
Speaker 1: long process. Um. You know, how hopeful are you that
13:51
Speaker 1: we we see some kind of reform in the next
13:53
Speaker 1: ten years. Well, you know, I'm an optimist in the
13:58
Speaker 1: sense that I saw Latin America to come out of
14:01
Speaker 1: the decade, the so called outlook, the decade of the
14:04
Speaker 1: eighties and reformed itself, but they never continued on with it.
14:09
Speaker 1: And so I think this time they really have to
14:13
Speaker 1: move themselves, that they're going to fall away behind uh
14:17
Speaker 1: Emerging Asia, even Africa, uh, you know, which is taking
14:21
Speaker 1: steps on COVID. So my hope here is that the
14:25
Speaker 1: governments will respond. The I m F, the World Bank,
14:28
Speaker 1: inter American Development Bank will provide help but very important
14:32
Speaker 1: here and maybe we end on this point I don't
14:34
Speaker 1: know in timing, is the local private sectors have to
14:38
Speaker 1: be uh willing, uh and optimistic about investing in their
14:43
Speaker 1: own country because so often in Latin America the local
14:46
Speaker 1: private sector moves its money out, and you can't expect
14:51
Speaker 1: foreign investment to come in if they see the local
14:54
Speaker 1: private sector moving their money out. So I think there's
14:57
Speaker 1: there's work here for governments, the private sector, and the
15:01
Speaker 1: international financial institutions to try and take advantage of this
15:06
Speaker 1: terrible situation to put in reforms that they've been holding
15:10
Speaker 1: off on doing for some time. Bill, thanks once again
15:14
Speaker 1: for joining us. We we we appreciate it always. Bill Rhodes,
15:16
Speaker 1: president and CEO of the William R. Rhodes Global Advisor's
15:19
Speaker 1: former chairman at City Bank. A tour the Forced Vannie
15:22
Speaker 1: of all things global markets from China all the way
15:26
Speaker 1: to Latin American and his Bill points out why the
15:29
Speaker 1: challenges in front of that region of the world in
15:31
Speaker 1: Latin America just seems so so steep. I'm not sure
15:34
Speaker 1: who can lead them out of those challenges well, and
15:37
Speaker 1: particularly now during coronavirus which is ravaging this house as well.
15:41
Speaker 1: You sort of get the impression that everyone would just
15:43
Speaker 1: listen to Bill everything would be okay. He has so
15:46
Speaker 1: much experience in all of this, but unfortunately and sometimes
15:49
Speaker 1: governments have their own opinions on things. Yeah, but hopefully
15:51
Speaker 1: this can be a catalyst for these countries to come together.
15:57
Speaker 1: Despite the volatility and financial markets stemming large part from
16:00
Speaker 1: the pandemic, one area of the financial markets has seen
16:04
Speaker 1: extraordinary robust new issuance, and that is corporate credit investment
16:08
Speaker 1: great credit. Just record months we've seen as companies take
16:11
Speaker 1: advantage of historically low interest rates. Together some more color
16:14
Speaker 1: on that, we welcome Steve Kellner. He's head of Corporates
16:17
Speaker 1: for p JIM Fixed Income. They have over eight hundred
16:20
Speaker 1: billion firm wide and fixed income assets, so they know
16:24
Speaker 1: what they're talking about. Steve, Thanks so much for joining
16:25
Speaker 1: us here. We've seen so much new issuance in the
16:29
Speaker 1: corporate credit market. My question is is this company has
16:32
Speaker 1: taken on additional debt to fuel growth or is it
16:36
Speaker 1: simply refinancing their existing debt and is trying to take
16:38
Speaker 1: advantage here of these historically low rates. First off, thanks
16:43
Speaker 1: for having me. This morning's pleasure to be here. I'd
16:45
Speaker 1: say it's probably UM. It's probably both that companies in
16:49
Speaker 1: the short term are increasing their leverage through the increase
16:54
Speaker 1: in in gross debt UM. But at the same time,
16:57
Speaker 1: companies have been refinancing a lot about standing debt and
17:00
Speaker 1: a lot of this has been built around increasing liquidity.
17:04
Speaker 1: And we think as we move into two thousand and
17:06
Speaker 1: twenty one, a lot of those companies are going to
17:08
Speaker 1: start buying back their debt or paying off maturing debt,
17:12
Speaker 1: especially in the triple bespect So what kinds of decisions
17:16
Speaker 1: do you have to make on a daily basis, UM,
17:20
Speaker 1: I think we want to actually look at say macro
17:22
Speaker 1: type of indicators. Um, you know, which way is the
17:25
Speaker 1: economy going, certainly which ways interest rates and the FED
17:29
Speaker 1: going to go in here, and then from there it's
17:31
Speaker 1: a lot of bottoms up analysis and working at different
17:34
Speaker 1: industries and different companies, ripping apart their balance sheets and
17:38
Speaker 1: income statements, and then actually seeing what their use of
17:41
Speaker 1: their free cash flow as they start to generate it
17:44
Speaker 1: is going to be, and which companies out there will
17:46
Speaker 1: be improving their credit profile going forward. So I'd say
17:49
Speaker 1: it's it's a combination of a top down um macro
17:54
Speaker 1: view of the economy and with different industries that are
17:56
Speaker 1: affected and are going to be affected in the future,
17:58
Speaker 1: coupled with a lot of in depth analysis of the
18:01
Speaker 1: companies in the industries themselves. Hey, sty what are you
18:04
Speaker 1: and your team seeing in terms of credit quality? Out
18:08
Speaker 1: there were six seven months into this pandemic. There's really
18:11
Speaker 1: some concern here that the economic damage is going to
18:14
Speaker 1: be widespread, continued to be widespread, and perhaps last for longer.
18:19
Speaker 1: What are you seeing in terms of credit quality? Yeah,
18:22
Speaker 1: it's probably more of a k type of environment where
18:25
Speaker 1: you've got the companies that are actually in the sweet
18:28
Speaker 1: spot and benefiting from the work at home and other
18:31
Speaker 1: technology oriented or consumer oriented um effects, and then you've
18:37
Speaker 1: got the companies that got caught in the headminds of
18:39
Speaker 1: covid um, and those companies themselves is probably where the
18:43
Speaker 1: opportunity is as you look forward, in the sense that
18:46
Speaker 1: those managements now are really really focusing on cutting expenses.
18:51
Speaker 1: They've actually stopped their share buybacks in most cases, have
18:54
Speaker 1: stopped their dividends. They're focusing on improving their cash flow
19:00
Speaker 1: and using that cash flow to shore up their balance sheets.
19:02
Speaker 1: So this is one of the rare times in the
19:05
Speaker 1: economic cycle that the manager's behavior are closely aligned with
19:10
Speaker 1: bond holders. And again that's probably more in the industries
19:13
Speaker 1: that have been caught UM in the down draft of COVID,
19:16
Speaker 1: and again most of those would be in the trip
19:18
Speaker 1: will be ratings category. What would your advice be for
19:23
Speaker 1: non sophisticated investors, because obviously, you know there are different
19:27
Speaker 1: levels of investors, and there are certain of those who
19:30
Speaker 1: don't want to be in the stock market right now.
19:32
Speaker 1: Is there any way they could play in your market
19:36
Speaker 1: the our market themselves. Since we tend to deal in
19:40
Speaker 1: corporate bonds and it's taxable, it really lends itself much
19:44
Speaker 1: more to institutional investing and pension plans where the where
19:48
Speaker 1: they're non taxable or the taxes are deferred UM. But
19:52
Speaker 1: the way to actually do would be through mutual funds
19:55
Speaker 1: and some of the more perhaps UM core plus or
19:59
Speaker 1: broad market strategy funds which look to take advantage of
20:02
Speaker 1: corporates but also selective high yield and selective emerging markets,
20:07
Speaker 1: and those are typically referred to as total return bond funds,
20:11
Speaker 1: and that's probably the best vehicle that way an investor
20:14
Speaker 1: can get active management as well as diversification. Steve, how
20:20
Speaker 1: are you guys from the corporate credit perspective, handicapping the
20:23
Speaker 1: upcoming elections, both the presidential election as well as Senate. Yeah,
20:28
Speaker 1: I think this is a pretty gamy time right now. Um.
20:32
Speaker 1: And and you know, it's it's not as much probably
20:36
Speaker 1: about who wins the presidency as much as it is
20:40
Speaker 1: about how how long it takes to determine who the
20:43
Speaker 1: who that winner is um in here. But we do
20:46
Speaker 1: think that, you know, we are an environment where the
20:49
Speaker 1: markets are going to stay very volatile until we actually
20:51
Speaker 1: get to the election. And it looks like as though
20:54
Speaker 1: we've actually been able to figure out who that winner
20:56
Speaker 1: is going to be if you look forward to next here, um.
21:00
Speaker 1: Obviously the Democrats are talking about raising taxes. Um. Those
21:04
Speaker 1: tax increases for corporate America, if they occur, should be
21:08
Speaker 1: pretty modest, perhaps one to something like maybe on the
21:12
Speaker 1: tax rate. But remember, even if the Democrats get in,
21:16
Speaker 1: their primary focus next year is probably going to be
21:19
Speaker 1: to continue to fix the economy. Um. And that's going
21:22
Speaker 1: to be difficult to do if you start increasing taxes
21:25
Speaker 1: on corporations. Just briefly, how much in fallen angels are
21:30
Speaker 1: you expecting in the next you know, six twelve months. Yeah,
21:34
Speaker 1: the we've had, we've had a drop off in the
21:38
Speaker 1: rate of fallen angels recently. There's only been a few
21:41
Speaker 1: in the last few months. UM. The rating agencies, while
21:45
Speaker 1: they have a lot of these companies negative outlook, they're
21:48
Speaker 1: giving them time, um to get the benefit of the
21:51
Speaker 1: turn in the economy when when the economy fully reopens,
21:56
Speaker 1: um and I think that we think that the fallen
21:58
Speaker 1: angels are going to be relatively modished over the next
22:03
Speaker 1: twelve months. We've had we had about a hundred and
22:06
Speaker 1: sixty billion so far this year, and we would expect
22:09
Speaker 1: to be well under that over the next twelve month. Steve,
22:12
Speaker 1: thank you so much for all the details. Steve Kellner
22:14
Speaker 1: is head of Corporates at p JIM Fixed Income and
22:18
Speaker 1: what an interesting job it must be these days with
22:20
Speaker 1: practically every corporate and the market at the moment, it's
22:23
Speaker 1: really just such a fascinating market. It is time now
22:28
Speaker 1: to talk healthcare. Huge, huge policy and market driver these
22:32
Speaker 1: next few weeks. Let's bring in Brian Rye, senior healthcare
22:35
Speaker 1: policy analyst for Bloomberg Intelligence. Brian, obviously we have the
22:39
Speaker 1: Scotus nominee and the potential outcome there. We have Democrats
22:44
Speaker 1: saying that, you know, if Amy Coney Barrett is confirmed,
22:49
Speaker 1: that there's the great potential of us strikedown of the
22:51
Speaker 1: A C A in its entirety, and there are many
22:54
Speaker 1: other things to discuss as well. Let's start there, though,
22:58
Speaker 1: if Amy Coney Barrett, as we assume does get is
23:02
Speaker 1: nominated now and does get confirmed, is that automatically a
23:06
Speaker 1: strikedown of the C A. Well, Hi, Vanni, thanks for
23:09
Speaker 1: having me, And I would start by saying that, no,
23:11
Speaker 1: I don't think it's a certainty that the A C
23:13
Speaker 1: A and its entirety um would be rendered on constitutionally
23:17
Speaker 1: struck down. I think what's probably more likely to happen
23:20
Speaker 1: is that you would see the so called individual mandate
23:24
Speaker 1: probably struck down. That's not a huge deal because, frankly,
23:28
Speaker 1: because the tax law that Republicans passed zero and out
23:32
Speaker 1: the penalty for that, so in all effects, the mandates
23:35
Speaker 1: already been rendered um noll and void. I think what
23:39
Speaker 1: could happen is some uncertainty about, okay, if you strike
23:42
Speaker 1: down the mandate, are there other previsions of the A
23:45
Speaker 1: C A, such as community rating guaranteed issue the so
23:48
Speaker 1: called pre existing conditions concerned them you've we've heard a
23:51
Speaker 1: lot of a lot of talk about maybe that could
23:54
Speaker 1: be struck down as well. Um, certainly could create some
23:57
Speaker 1: chaos for the new Congress in one as to Okay, well,
24:01
Speaker 1: and then how do you fix that at that point?
24:03
Speaker 1: But I think in terms of the entire law being
24:05
Speaker 1: struck down, I'm not sure we'd go that far just yet. So, Brian,
24:09
Speaker 1: we also have a little bit of an election coming
24:12
Speaker 1: up here. Uh, there is a speculation that perhaps the
24:16
Speaker 1: Democrats can retake control of the Senate. If that were
24:20
Speaker 1: to occur, what do you think some of the fallout
24:22
Speaker 1: would be for the healthcare space? You know, that's a
24:25
Speaker 1: great question, Paul, And you're right, I know this is
24:27
Speaker 1: a meaningful election for a lot of different groups. I
24:29
Speaker 1: would argue that pharma probably has more at stakes than
24:32
Speaker 1: anyone else, you know, because you're right. If Democrats are
24:35
Speaker 1: able to not only win the presidency but retake control
24:38
Speaker 1: of the Senate, then a lot of the things that
24:40
Speaker 1: they've liked that they would like to do are something
24:42
Speaker 1: back on the table. I think the holy grail for them,
24:45
Speaker 1: the most meaningful reform they'd like to pass is to
24:48
Speaker 1: give the government the ability to negotiate Medicare drug prices
24:52
Speaker 1: directly with manufacturers right now, that's that's prevented, that's prohibited
24:56
Speaker 1: by federal law. Right now, those price negotiations are between
24:59
Speaker 1: drug makers and the insurers or PBMs who participate in
25:02
Speaker 1: the Medicare Part D program. Nancy Pelosi and the House
25:05
Speaker 1: Democrats have passed Build a couple of different times in
25:08
Speaker 1: the past nine months that would give the government that
25:11
Speaker 1: ability that would repeal that's so called non interference clause. Um.
25:15
Speaker 1: Those those bills have, you know, unsurprisingly died in the Senate,
25:19
Speaker 1: and so that Republican Senate has been a firewall for
25:22
Speaker 1: the industry. And as long as that remains in place,
25:25
Speaker 1: I think you would see the status quo continue. But
25:27
Speaker 1: you know, if Democrats were able to win a majority there,
25:31
Speaker 1: then a lot of those things get back on the table.
25:33
Speaker 1: The one word of caution though, for for those who
25:35
Speaker 1: may think, well, that would be an automatic. As much
25:37
Speaker 1: as we saw with Republican promises to repeal and replace
25:41
Speaker 1: the A C A Obamacare heading into the election, we
25:44
Speaker 1: saw that they tried and failed to do that in
25:47
Speaker 1: seventeen Sometimes those votes that are easy to take, you know,
25:50
Speaker 1: they're not going to be enacted into law become a
25:52
Speaker 1: bit more difficult when the votes actually matter. So I
25:55
Speaker 1: think we could see something similar. If it's a slim
25:57
Speaker 1: majority for the Democrats in the Senate, it's an hold
26:01
Speaker 1: onto the Senate, but the White House changes hands. Does
26:04
Speaker 1: that mean anything? You know? It means probably more on
26:07
Speaker 1: the administrative side. You know, I don't think it means
26:10
Speaker 1: as much because frankly, President Trump, when he speaks off
26:13
Speaker 1: the cups his own interests don't healthcare Someone aligned more
26:16
Speaker 1: with Democrats sometimes then with with Republicans, such as his
26:20
Speaker 1: international Pricing index and drug importation and other things that
26:23
Speaker 1: most congressional Republicans opposed UM but that he personally sort
26:27
Speaker 1: of is is in favor of. So I would think
26:30
Speaker 1: you would see obviously new heads of the f D,
26:32
Speaker 1: a new head CMS, new head of HHS, and so
26:36
Speaker 1: from an administrative standpoint, they will probably be more likely
26:40
Speaker 1: to roll back some of the changes to the A
26:42
Speaker 1: C A UM. You know, a lot of the things
26:45
Speaker 1: that the Trump administration has done have been to roll
26:47
Speaker 1: back some of those protections. UM like make it easier
26:50
Speaker 1: for short term plans to gain a hold in some
26:53
Speaker 1: of the states, gives states a lot more flexibly, uh,
26:56
Speaker 1: for those who don't want to comply with a lot
26:58
Speaker 1: of the a c A mandates to do so, I
27:00
Speaker 1: think you would see that kind of roll back UM
27:02
Speaker 1: as well as have maybe the CMS folks try and
27:05
Speaker 1: restore the the funding to the health insurers who participate
27:08
Speaker 1: as well. So Brian or investors just kind of staying
27:11
Speaker 1: away from the whole healthcare space until we had better
27:14
Speaker 1: view what's going to happen come November. Well, you know,
27:17
Speaker 1: it's one of many factors. Obviously, there's a lot of
27:19
Speaker 1: things going on in the industry right now, a lot
27:20
Speaker 1: of certainly a lot of interest in development of a
27:22
Speaker 1: vaccine for the COVID nineteen pandemic and other things. And
27:26
Speaker 1: in a strange sort of way, this interest in innovation
27:29
Speaker 1: and speed UM is perhaps giving the industry somewhat of
27:32
Speaker 1: a decent argument against uh what they would turn price
27:35
Speaker 1: controls and other things that they would claim would stifle
27:38
Speaker 1: such innovation. And so a lot of moving parts are
27:41
Speaker 1: for the industry right now. You know, for better for worse, Paul,
27:44
Speaker 1: people always get sick. And so no matter who's um,
27:46
Speaker 1: you know, who who's gonna win the election, I think
27:48
Speaker 1: there will always be a need and an interest in
27:50
Speaker 1: what the health care sector is doing. But yeah, I
27:53
Speaker 1: think the as you alluded to earlier, it's not just
27:56
Speaker 1: the White House, but that control of the Senate, given
27:59
Speaker 1: how much the republic looking controlled Senate has been a
28:01
Speaker 1: firewall for the industry, particularly pharma. You know, if that
28:05
Speaker 1: changes hands, then the calculus changes as well. Okay, Brian,
28:09
Speaker 1: thanks so much for joining us. We will always appreciate
28:11
Speaker 1: you helping us get through these healthcare issues which the
28:15
Speaker 1: policy usues, which are just so dense for the average consumer.
28:19
Speaker 1: Brian Rye, senior healthcare policy analysts for Bloomberg Intelligence. Again,
28:23
Speaker 1: so Bavani's you point out we have, you know, a
28:26
Speaker 1: increasingly conservative uh Supreme Court, We've got the elections coming up,
28:31
Speaker 1: a lot of change from a regulatory perspective for a
28:33
Speaker 1: lot of industries, none perhaps more so than healthcare. And
28:36
Speaker 1: you know, another question is will coronavirus eventually be considered
28:40
Speaker 1: a pre existing condition, you know, if you suffer from
28:42
Speaker 1: longer term consequences. So what does it mean for all
28:44
Speaker 1: those people getting sick right now too? Yeah, absolutely that
28:48
Speaker 1: it's going to be something to pay attention to the
28:49
Speaker 1: markets up significantly, the doubt of five hundred points. Thanks
28:55
Speaker 1: for listening to Bloomberg Markets podcast. You can subscribe and
28:58
Speaker 1: listen to interviews at Apple, Old Podcasts, or whatever a
29:01
Speaker 1: podcast platform you prefer. I'm Bonnie Quinn, I'm on Twitter
29:05
Speaker 1: at Bonnie Quinn, and I'm Paul Sweeney. I'm on Twitter
29:07
Speaker 1: at pt Sweeney. Before the podcast, you can always catch
29:10
Speaker 1: us worldwide at Bloomberg Radio