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How New Yorkers Can Prepay Their Property Taxes: Speiss · Bloomberg Intelligence

• 0:05
  Speaker 1: Welcome to the Bloomberg P and L Podcast. I'm Pim Fox.
• 0:08
  Speaker 1: Along with my co host Lisa A. Bramowitz. Each day
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• 0:32
  Speaker 1: Looking to prepay those property taxes as a result of
• 0:35
  Speaker 1: changes in the tax overhaul plan, Tim Space's partner in
• 0:39
  Speaker 1: charge of Eisner Emperor's Personal Wealth Advisors Group, he joins
• 0:43
  Speaker 1: us now, Tim, thanks very much for being with us.
• 0:44
  Speaker 1: I guess you've got a lot of people waiting on
• 0:46
  Speaker 1: hold calling you to ask how do you do this?
• 0:49
  Speaker 1: So go ahead tell everybody how do you do this? Well, um,
• 0:54
  Speaker 1: if we're in New York, which many of your listeners are,
• 0:58
  Speaker 1: many of the minis, totalities and counties have already been
• 1:02
  Speaker 1: posting warrants and that's really the magic the trick here.
• 1:06
  Speaker 1: Warrants need to be posted on websites for there to
• 1:10
  Speaker 1: be posted a liability, and that needs to happen in
• 1:14
  Speaker 1: order for taxpayers to first pay taxes this month, but
• 1:19
  Speaker 1: then have it recognized as a bona fide payment and
• 1:22
  Speaker 1: uh either a shortlist of county than where they are
• 1:25
  Speaker 1: with respect to this in New York, I mean Westchester
• 1:27
  Speaker 1: is an outlier. At the moment, west Chester is asserting
• 1:30
  Speaker 1: they don't have time to do it. But with the
• 1:32
  Speaker 1: executive order last week, that's exactly what the governor wants
• 1:35
  Speaker 1: them to do. The executive order state of Emergency was
• 1:38
  Speaker 1: intended to have those miss Cotton counties post those warrants. Now,
• 1:42
  Speaker 1: when you say post those warrants, are those warrants general
• 1:46
  Speaker 1: in nature or are they then somehow made specific to
• 1:50
  Speaker 1: the individual taxpayer? The ladder the ladder pen they made there,
• 1:55
  Speaker 1: they're the actual bill you know that you and I
• 1:58
  Speaker 1: would would use and receive. Now you know what the
• 2:02
  Speaker 1: discussions we're having now is call them in the musicality,
• 2:07
  Speaker 1: try to establish what your liability is. Call your mortgage holder.
• 2:12
  Speaker 1: They might have they might actually have notice of the
• 2:14
  Speaker 1: warrant sent to them. They might have in their possession already.
• 2:18
  Speaker 1: So those are things to to really be doing. I
• 2:21
  Speaker 1: would imagine, well, I shouldn't say that, but is it
• 2:24
  Speaker 1: possible that this is easier said than done? Because it
• 2:29
  Speaker 1: is also important where the money comes from in order
• 2:33
  Speaker 1: to prepay these taxes. Correct, correct, so as many of
• 2:38
  Speaker 1: us No, I mean as homeowners, we oftentimes make the
• 2:42
  Speaker 1: payment through the mortgage payment and that's that's held in
• 2:45
  Speaker 1: this crow directly by the mortgage company. Which is why
• 2:49
  Speaker 1: you know, I we are proposing that that's another route.
• 2:52
  Speaker 1: So um yeah, I mean you can contact the municipality
• 2:56
  Speaker 1: for the warrant. Remember that if the warrant exists, it
• 2:59
  Speaker 1: would have already been issued also to the mortgage holder.
• 3:02
  Speaker 1: So the issue the matter is trying to determine where
• 3:05
  Speaker 1: you send in the check, so it's your proper, proper payment, right,
• 3:10
  Speaker 1: And when I get getting out in terms of where
• 3:12
  Speaker 1: the money comes from, it has to do. For example,
• 3:14
  Speaker 1: if you are a joint filer, if the money does
• 3:18
  Speaker 1: not come from a joint account, that could be an issue. Um,
• 3:25
  Speaker 1: I personally don't think so. I mean, if you're talking
• 3:29
  Speaker 1: about a joint account holder, the most simple one, husband
• 3:32
  Speaker 1: and wife. If I make the payment, um sure it's
• 3:36
  Speaker 1: it's in my spouse's name as well, but that dema payment.
• 3:40
  Speaker 1: We're jointly liable. Um. You know the funds. The funds
• 3:43
  Speaker 1: are rather fungible in that regard, right, but I'm saying
• 3:46
  Speaker 1: if the funds exist in a single payer account, right, yes, yeah, okay,
• 3:53
  Speaker 1: yeah yeah. I mean if it's a single payer account
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  Speaker 1: and that single payer is the mortgage holders, that's I
• 4:00
  Speaker 1: believe it. Where you're going with this is where your
• 4:02
  Speaker 1: example is going to be is going to be critical. Right.
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  Speaker 1: It has to be the same person, has to be
• 4:07
  Speaker 1: the same person. In other words, if you are not
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  Speaker 1: the mortgage holder, if it's held in a third party
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  Speaker 1: name or in the name of a spouse, many people
• 4:14
  Speaker 1: for tax planning purposes, they might have already moved it
• 4:17
  Speaker 1: into someone else's name. Uh, the money has to come
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  Speaker 1: from that same named to count. Correct. Do you foresee
• 4:25
  Speaker 1: this being a bigger issue in from people who tried
• 4:31
  Speaker 1: to pay, thought they paid and aren't going to get
• 4:35
  Speaker 1: the full deduction because in many cases you're gonna get
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  Speaker 1: that warrant or that bill once again in that's that's correct.
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  Speaker 1: We could foresee that that kind of confusion. Now for
• 4:49
  Speaker 1: many many of our clients, we get involved in these matters,
• 4:52
  Speaker 1: you know, to our our family office practice or so forth.
• 4:55
  Speaker 1: So so matching up payments absolutely, um, having discussions about
• 5:01
  Speaker 1: payments that were made weren't credited properly. Absolutely, they'll they'll
• 5:06
  Speaker 1: be there'll be a number of discussions around this and
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  Speaker 1: and you're right, I mean the rest of the week
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  Speaker 1: it's going to be a state of flux in in
• 5:14
  Speaker 1: first knowing that there's the lives of those has been
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  Speaker 1: posted and getting it to the right recipient, whether that's
• 5:20
  Speaker 1: Nescrow account, the mortgage company, the actual innicipality. All of
• 5:23
  Speaker 1: that will be going on. And yes, many things will
• 5:25
  Speaker 1: be sorted out or have to be sorted out into
• 5:27
  Speaker 1: one of eighteen. Is it also the case that if
• 5:30
  Speaker 1: you are, let's say, in an apartment house or a
• 5:33
  Speaker 1: condominium coop or whatever, that because those taxes typically are
• 5:38
  Speaker 1: paid on a monthly basis, and they are paid from
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  Speaker 1: one corporation to another. In other words, the managing agent
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  Speaker 1: would pay the property tax. Uh, that it can be
• 5:51
  Speaker 1: a challenge to even find out how much is the
• 5:54
  Speaker 1: property tax. All that that's correct as well, we've been
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  Speaker 1: we've been receiving emails and responding to just those things
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  Speaker 1: with co op boards this week. From a practical perspective,
• 6:09
  Speaker 1: a co op board, if if if the seven team
• 6:13
  Speaker 1: monthly bills as you're pointing out, are going to be
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  Speaker 1: fairly the same as twenty eight team. It actually might
• 6:18
  Speaker 1: be more might be easier to send checks. In this case,
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  Speaker 1: you're talking about a co op board co op where
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  Speaker 1: we would have a treasurer homeowners, unit holders and could
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  Speaker 1: cut checks to that individual persons the treasurer. That actually
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  Speaker 1: might be the more easy scenario. But but paying twelve
• 6:36
  Speaker 1: months in advance could also be allowed because it's the
• 6:41
  Speaker 1: fix the terminal liability. It's under the agreement with the
• 6:44
  Speaker 1: co op and the resident. You know that's that's a
• 6:47
  Speaker 1: bona fide debt, that's an obligation. It is no now
• 6:51
  Speaker 1: you could pay that in December and have a taxi duction.
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  Speaker 1: I have a feeling you're going to be busy for
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  Speaker 1: the rest of the week, if not for the rest
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  Speaker 1: of If it was just a week, then it would
• 7:02
  Speaker 1: be fine. Indeed, it is always taxes. Thanks very much.
• 7:08
  Speaker 1: Tim Space's partner in charge of Personal Wealth Advisors Group
• 7:12
  Speaker 1: for Eisner Emperor, and of course you can follow them
• 7:15
  Speaker 1: on Twitter at eisener amper telling us about how to
• 7:19
  Speaker 1: attempt to prepay your property taxes for that deduction. The
• 7:41
  Speaker 1: US dollar has had the worst year in more than
• 7:44
  Speaker 1: a decade, so the question then becomes what's going to
• 7:47
  Speaker 1: happen next year. Here to help us answer this question
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  Speaker 1: is Land and New in our FX reporter for Bloomberg News.
• 7:54
  Speaker 1: She joins me here in our eleven three oh studio.
• 7:56
  Speaker 1: Thanks very much for being here. Let's start off with
• 7:59
  Speaker 1: the Let's start off in Japan. What is the outlook
• 8:02
  Speaker 1: for the Japanese yenn? We're trading around what a hundred
• 8:04
  Speaker 1: and thirteen to the dollar right now, Yeah, that's right.
• 8:07
  Speaker 1: And it seems like opinions are a little bit more
• 8:09
  Speaker 1: divided on the yen. Some people think that the b
• 8:11
  Speaker 1: o J might start hinting towards a change in policy
• 8:14
  Speaker 1: by the end of next year. Others are saying no,
• 8:16
  Speaker 1: they're nowhere near doing that. So opinions are a little
• 8:19
  Speaker 1: bit more mixed on the end. I would say we've
• 8:21
  Speaker 1: got about not quite half and half bullish bearish. But
• 8:24
  Speaker 1: these two. Anybody who talks about the end that they
• 8:27
  Speaker 1: still regarded as the risk off trade, that when things
• 8:31
  Speaker 1: go badly, you go to the end. Yes, people are
• 8:35
  Speaker 1: still talking about the end as a risk off trade,
• 8:37
  Speaker 1: but they're more keen to look at whether the bo
• 8:40
  Speaker 1: J is going to be changing monetary policy anytime soon.
• 8:43
  Speaker 1: And it doesn't look like they're going to change next year,
• 8:45
  Speaker 1: but maybe watching for some signals or some cues from
• 8:49
  Speaker 1: the boj that that might happen. Well, you provide the
• 8:51
  Speaker 1: perfect segue, because signals from the European Central Bank they
• 8:55
  Speaker 1: seem to be ahead of the Bank of Japan. There
• 8:58
  Speaker 1: is signaling that perhaps this old experiment with quantitative using
• 9:01
  Speaker 1: in the purchases of bonds maybe coming to an end
• 9:04
  Speaker 1: of the economy is stronger. What's the outlook for the
• 9:06
  Speaker 1: euro exactly? And that is what is propping up the
• 9:09
  Speaker 1: outlook for the euro. We see the analysts see that
• 9:12
  Speaker 1: the euro might rise about one point seven percent next year.
• 9:15
  Speaker 1: That's based on a median forecast. And so it seems
• 9:18
  Speaker 1: like everyone is really bullish euro and very barished dollar
• 9:21
  Speaker 1: next year. So that's kind of been the reversal of
• 9:23
  Speaker 1: what we saw in sentiment at the beginning of this year. Right,
• 9:26
  Speaker 1: But the dollar did have a terrible year apparently, right
• 9:29
  Speaker 1: it did. It got crushed. Um. Dollar bulls are really
• 9:31
  Speaker 1: crushed this year. It's down almost eight percent UM and
• 9:34
  Speaker 1: all those hopes for a tax reform and infrastructure and
• 9:36
  Speaker 1: stimulus in the US kind of been dashed, you know,
• 9:39
  Speaker 1: they they the tax reform plan or the tax cuts
• 9:42
  Speaker 1: haven't really had that shot in the arm for the
• 9:45
  Speaker 1: U s economy that people are expecting. The FED is slowly,
• 9:48
  Speaker 1: slowly and gradual, and everything is pretty goldilocks. So there
• 9:51
  Speaker 1: isn't that kind of sense of the raging bull in
• 9:53
  Speaker 1: the US market anymore. Does anybody find that that's an
• 9:55
  Speaker 1: irony when you can get more by investing in a
• 9:59
  Speaker 1: US treasure, Ay, then you can investing in just about
• 10:03
  Speaker 1: anything else, any other government paper, particularly in Europe, and
• 10:08
  Speaker 1: that we haven't seen this big flood of money going
• 10:11
  Speaker 1: into the dollar to grab the equity returns that are
• 10:15
  Speaker 1: already you know, for the sp sure. I think in
• 10:19
  Speaker 1: the foreign exchange market that's kind of a tired story.
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  Speaker 1: People price that in two years ago or you know,
• 10:25
  Speaker 1: last year, and so, uh, those gains that are to
• 10:28
  Speaker 1: be had by buying the US dollar have kind of
• 10:31
  Speaker 1: dissipated because everyone says, Okay, we know what the FED
• 10:33
  Speaker 1: is doing, we know that the US economy is strong,
• 10:35
  Speaker 1: but not gonna you know, go through the roof. So
• 10:37
  Speaker 1: what's next? I guess long term in the FX market
• 10:40
  Speaker 1: is by lunchtime something like that. Alright, a few seconds, well,
• 10:46
  Speaker 1: let's you know, this is an outlier, I guess, but
• 10:48
  Speaker 1: the Canadian can't even pronounce it today. Scandinavian currency Swedish
• 10:54
  Speaker 1: crona Norwegian corona of course, the Norwegian corona linked to
• 10:57
  Speaker 1: their oil and uh well they're petro rich economy. What's
• 11:04
  Speaker 1: the outlook for Scandinavian currencies. Well, again, these are looking
• 11:08
  Speaker 1: pretty good. If you're looking for winners in the G
• 11:10
  Speaker 1: ten currencies, the candies are looking pretty nice just because
• 11:14
  Speaker 1: their emergency monetary policy settings are no longer needed. We
• 11:18
  Speaker 1: got this synchronized global growth. Economies are doing better around
• 11:22
  Speaker 1: the world, and so as central banks catch up to
• 11:25
  Speaker 1: the US as a central banks start to change policy,
• 11:28
  Speaker 1: decide to tighten. People think that these currencies are gonna strengthen.
• 11:32
  Speaker 1: But doesn't Sweden have negative interest rates? Sure, and so
• 11:36
  Speaker 1: then if negative interest rates are no longer needed, if
• 11:39
  Speaker 1: Sweden's economy is doing better. M Dara Mayor from HSBC says, look,
• 11:44
  Speaker 1: this emergency setting is not needed anymore, so why are
• 11:47
  Speaker 1: they doing it. They've got to change, all right, so
• 11:48
  Speaker 1: they in other words, it's all about whether they are
• 11:51
  Speaker 1: going to change their policy based on the performance of
• 11:55
  Speaker 1: the economy, and that would then speak to a stronger
• 11:58
  Speaker 1: Swedish chronup. All right, let's talk about something closer to home,
• 12:02
  Speaker 1: and the Canadian dollar, uh really connected to what's going
• 12:07
  Speaker 1: on in energy markets. Yes, as you mentioned before with Norway,
• 12:10
  Speaker 1: Canada is also a beneficiary of those stronger energy prices.
• 12:13
  Speaker 1: So if the energy prices stay around sixty bucks where
• 12:17
  Speaker 1: they are right now, Canada does better. Again, the Bank
• 12:20
  Speaker 1: of Canada doesn't need to you know, keep rates as
• 12:23
  Speaker 1: low as as they are, so it's going to think
• 12:25
  Speaker 1: about tightening and the but the estimate was that they
• 12:27
  Speaker 1: were going to raise maybe twice next year compared to
• 12:30
  Speaker 1: the Federal Reserve, which would be a three time or
• 12:33
  Speaker 1: maybe even a four time event. Sure and um, but
• 12:37
  Speaker 1: relative to other central banks elsewhere, that's still on the
• 12:40
  Speaker 1: active side. That's still on the kind of more firm,
• 12:42
  Speaker 1: solid side, So that would be bullish for the currency.
• 12:45
  Speaker 1: Medium forecasts are for it to rise about two point
• 12:48
  Speaker 1: seven percent, so that's pretty strong. Alright, So things getting
• 12:51
  Speaker 1: a little better for the looney. What about the Australian,
• 12:54
  Speaker 1: the Aussie dollar and the New Zealand dollar. Again we're
• 12:57
  Speaker 1: talking about commodity currencies here, so Australia again is going
• 13:00
  Speaker 1: to do better as the commodity complex sort of picks
• 13:03
  Speaker 1: up that central bank story again. You know, if the
• 13:07
  Speaker 1: r b A doesn't feel those emergency settings are necessary anymore,
• 13:11
  Speaker 1: it's going to catch up with the rest of the
• 13:13
  Speaker 1: central banks around the world and start to you know,
• 13:16
  Speaker 1: lean towards a more tightening posture just so quickly. What's
• 13:19
  Speaker 1: the most challenging aspect of covering the FX markets is
• 13:22
  Speaker 1: that it changes so quickly. I think it is that
• 13:25
  Speaker 1: it changes very quickly. We saw, you know, these kind
• 13:27
  Speaker 1: of flash moves in the euro over the Christmas period.
• 13:30
  Speaker 1: We can see things move very very fast, and so
• 13:32
  Speaker 1: that is pretty challenging, especially around you know, non liquid
• 13:36
  Speaker 1: periods like we're talking end of year. You know, a
• 13:39
  Speaker 1: little move um can then be exacerbated by a low
• 13:43
  Speaker 1: liquid conditions. Thank you very much for coming in, spending
• 13:46
  Speaker 1: time with us, and looking forward to much more because
• 13:48
  Speaker 1: we didn't even get to the Mexican pace. I would
• 13:51
  Speaker 1: like to talk to you about the political story. Yes, indeed,
• 13:53
  Speaker 1: Land and New in our FX reporter for Bloomberg News
• 13:57
  Speaker 1: much appreciate it. Tobacco sales well, that includes cigarettes but
• 14:17
  Speaker 1: also smokeless tobacco and here to help us understand the
• 14:19
  Speaker 1: dynamic at work in the industry. Is Ken Say, our
• 14:22
  Speaker 1: senior analyst Global Food, Beverages and Tobacco for Bloomberg Intelligence. Ken,
• 14:27
  Speaker 1: thanks for being with us. Let's start off by just
• 14:30
  Speaker 1: describing the global cigarette market. We'll get the smokeless products
• 14:34
  Speaker 1: in a moment. How big is the market, who are
• 14:37
  Speaker 1: the leaders and what are the challenges? Yeah, him, I'm
• 14:41
  Speaker 1: happy holidays. Thanks for having me aboard here. Okay, We've
• 14:44
  Speaker 1: been looking at the global tobacco industry for years, and
• 14:47
  Speaker 1: the report we put out the other day is that
• 14:49
  Speaker 1: we're getting concerned that this industry is showing a decline
• 14:53
  Speaker 1: in cigarette sales after many, many years of increases. It's
• 14:56
  Speaker 1: now it could be a reflection point. It's a large
• 14:59
  Speaker 1: industry globally, it's about a six eight billion dollars in
• 15:03
  Speaker 1: US dollar business. The challenge for these companies, though, it's
• 15:08
  Speaker 1: tobacco products sales and it's on the decline. So if
• 15:11
  Speaker 1: it's on the decline, what are the tobacco companies doing
• 15:14
  Speaker 1: in order to make up for that shortfall? So what
• 15:17
  Speaker 1: they've been doing in recent years is investing heavily what
• 15:19
  Speaker 1: they what they call next generation products, of which are
• 15:22
  Speaker 1: basically noncombustible devices might see noncombustible. Health advocates have for
• 15:29
  Speaker 1: a while now stated that it's not the nicotine that
• 15:32
  Speaker 1: causes harm, but it's actually the the combustion and the
• 15:36
  Speaker 1: smoke that consumers inhale. So the idea is, with the
• 15:40
  Speaker 1: FDA and health officials prodding to some degree, Uh, these
• 15:44
  Speaker 1: companies are moving to versions where that they have nicotine
• 15:48
  Speaker 1: but there don't cause smoke, so they deliver some of
• 15:52
  Speaker 1: the satisfaction smokers crave. Uh, these products like e cigarettes,
• 15:56
  Speaker 1: and now you're seeing these things called heat not burns,
• 15:59
  Speaker 1: which are basically a similar thing except has tobacco and
• 16:02
  Speaker 1: instead of nicotine flavored oils. So they're turned into those
• 16:07
  Speaker 1: kind of products as well as snuff, which has been
• 16:09
  Speaker 1: around a long time, uh smoking tobacco and pipes. Um.
• 16:14
  Speaker 1: But collectively they only comprise you know, about ten percent
• 16:18
  Speaker 1: of sales. So the idea here is, well, the full
• 16:21
  Speaker 1: in cigarette consumption uh outweigh uh the rise in these
• 16:26
  Speaker 1: other products which are still small in total. Is the
• 16:30
  Speaker 1: market in China really the defining market? It is from
• 16:36
  Speaker 1: a total you know, global perspective, I mean China consumed
• 16:40
  Speaker 1: over of world cigarettes and so what you're seeing there
• 16:45
  Speaker 1: is um a more restrictive policy there in China about
• 16:49
  Speaker 1: where smokers can light up. Um, they are you know,
• 16:54
  Speaker 1: keeping them have public places, at workplaces and so on,
• 16:59
  Speaker 1: because they wreck even I think down the road that
• 17:01
  Speaker 1: the health care costs of treating you know, the smoker
• 17:04
  Speaker 1: and related harm, there's a real problem on their society.
• 17:08
  Speaker 1: So in addition also raising prices, um, you know, the
• 17:12
  Speaker 1: condundrum is that the cigarette industry over there, it's it's
• 17:15
  Speaker 1: a monopoly. It contributes about ten of tax revenues. So
• 17:20
  Speaker 1: they're mindful of that as well. They want to reduce
• 17:22
  Speaker 1: smoking in the country, but at the same time, I
• 17:25
  Speaker 1: think a manageable reduction is probably ideal for them. Is
• 17:29
  Speaker 1: the case similar in Japan where Japan tobacco pays high
• 17:35
  Speaker 1: taxes and therefore it becomes, as you say, a kind
• 17:37
  Speaker 1: of catch twenty two. You don't want to put them
• 17:39
  Speaker 1: out of business because they pay the taxes, yet the
• 17:42
  Speaker 1: products that they sell are known to cause cancer. Yeah,
• 17:46
  Speaker 1: that's exactly right, and it's actually a big issue right
• 17:49
  Speaker 1: now because in Japan. Actually in Japan, sales for cigarettes
• 17:53
  Speaker 1: are going to be probably down close a ten percent
• 17:55
  Speaker 1: this year and a lot of it is, uh, because
• 17:59
  Speaker 1: consumers are moving to what I mentioned before, the heat
• 18:02
  Speaker 1: not burn products, so basically non combustible version of cigarettes,
• 18:07
  Speaker 1: which Philip Morris International is leading the charge on in
• 18:10
  Speaker 1: Japan for that matter. And so what you're seeing is
• 18:13
  Speaker 1: a lot of the consumers are moving from conventional cigarettes
• 18:16
  Speaker 1: to these devices, and so it's leaving the governments to
• 18:21
  Speaker 1: try to figure out what is the appropriate level of
• 18:23
  Speaker 1: taxation to put on these noncombustible devices. They want to
• 18:27
  Speaker 1: be mindful of, you know, improving societal health, but at
• 18:31
  Speaker 1: the same time, they don't want to give up a
• 18:33
  Speaker 1: lot of tax revenue. So it's a it's a real
• 18:35
  Speaker 1: important issue right now. Is there any evidence that suggests
• 18:39
  Speaker 1: that these heat not burn or the vapor products do
• 18:43
  Speaker 1: not cause the same kinds of health problems that we
• 18:46
  Speaker 1: know come from smoking tobacco. Well, I there's no definitive proof,
• 18:51
  Speaker 1: but I think there's a growing body of scientists, um,
• 18:57
  Speaker 1: you know, endorsement that these products can certainly improve upon
• 19:02
  Speaker 1: conventional cigarettes. Another important issue, you know, is the whole
• 19:05
  Speaker 1: notion with the industry experts or industry followers called the
• 19:09
  Speaker 1: continuum of risk. Basically, in plain English, that means each
• 19:12
  Speaker 1: product has a relative risk associated with it. You know,
• 19:16
  Speaker 1: on one end, think of the highest harm, which is
• 19:18
  Speaker 1: conventional cigarettes. On the far right, you could think of
• 19:22
  Speaker 1: non combustible cigarettes or smoke with tobacco, because there's no combustion.
• 19:27
  Speaker 1: And while those latter products are not perfectly safe. Um,
• 19:31
  Speaker 1: the idea is that because they could help societal health
• 19:37
  Speaker 1: in general, if, if, if consumers gravitate towards them, isn't
• 19:40
  Speaker 1: that a good thing? And so some some nations are
• 19:44
  Speaker 1: grappling with that issue faster than others. And I would
• 19:47
  Speaker 1: get a guess that the combination the the consolidation rather
• 19:50
  Speaker 1: than the tobacco industry makes pricing something that they can control. Yeah,
• 19:54
  Speaker 1: that's right. You know, you have a market that's controlled
• 19:57
  Speaker 1: by essentially three four depending on market you're in producers
• 20:01
  Speaker 1: as opposed to you think like a consumer good like
• 20:04
  Speaker 1: a breakfast cereals or bakery product or something like that.
• 20:08
  Speaker 1: You know, you have more control and support over pricing activity,
• 20:13
  Speaker 1: particularly in the US. You know, the top three producers
• 20:16
  Speaker 1: control plus market share. They tend to move in tandem,
• 20:22
  Speaker 1: not always, but you know, pricing tends to be on
• 20:25
  Speaker 1: the rise. You don't see tobacco, cigarette prices falling much. Indeed,
• 20:29
  Speaker 1: thanks very much. Ken Shay, Senior analyst for Global Food,
• 20:32
  Speaker 1: Beverages and Tobacco for Bloomberg Intelligence. It all began in
• 20:51
  Speaker 1: two thousand and three and in two thousand and seven
• 20:54
  Speaker 1: the effort next Gen, it's supposed to create the next
• 20:58
  Speaker 1: generation air traffic control system for the U. S. Here
• 21:02
  Speaker 1: to help us understand this issue and what's next for
• 21:04
  Speaker 1: it is Poncho Kinney, former director of Strategy at the
• 21:08
  Speaker 1: White House Drug Policy Office and a former policy director
• 21:11
  Speaker 1: at the White House Office of Homeland Security. Mr Kenny,
• 21:14
  Speaker 1: thanks very much for being with us. Currently, you're at
• 21:17
  Speaker 1: the g S i S, the Global Security and Innovative
• 21:21
  Speaker 1: Strategies consulting business. What would they say if they were
• 21:26
  Speaker 1: presented if if your company, the consulting company, was presented
• 21:29
  Speaker 1: with this plan in a kind of clean slate approach,
• 21:34
  Speaker 1: would it have really focused on this multi billion dollar
• 21:39
  Speaker 1: and more than a decade long project. Well, we would
• 21:43
  Speaker 1: say that it's not in the interest of most Americans
• 21:46
  Speaker 1: to have a de facto privatization of the air traffic
• 21:51
  Speaker 1: control system in the United States. Why is that because
• 21:55
  Speaker 1: what would happen is when you have the airlines directing
• 21:59
  Speaker 1: investments and air traffic control system. They are going to
• 22:03
  Speaker 1: direct the investments where they're going to get the largest
• 22:05
  Speaker 1: return under investment, and those are on the larger airports.
• 22:09
  Speaker 1: And there's thirty some large hubs in the United States,
• 22:13
  Speaker 1: ranging from the busiest Atlanta with fifty million employments, down
• 22:16
  Speaker 1: to Portland or PDX, which has approximately nine million employments.
• 22:21
  Speaker 1: They're going to direct investment in air traffic control systems
• 22:26
  Speaker 1: in those airfields where they fly the greatest number of passengers.
• 22:29
  Speaker 1: So this would potentially result in the degrading of the
• 22:32
  Speaker 1: air traffic control system at the lesser served airports, smaller
• 22:37
  Speaker 1: ones across the United States. All right, well, let's just
• 22:40
  Speaker 1: go through some of the portions of this plant next
• 22:43
  Speaker 1: generation project. For example, integrated flight planning right allows immediate
• 22:49
  Speaker 1: access to weather information through one data source. I mean,
• 22:53
  Speaker 1: is that something that don't we already have that? Well,
• 22:57
  Speaker 1: I think the next Generation is absolutely ra solid proposal. Uh.
• 23:01
  Speaker 1: The point that I wanted to focus on today was
• 23:04
  Speaker 1: the proposed privatization of air traffic control system and place
• 23:09
  Speaker 1: in and under a private board that's dominated by commercial airlines.
• 23:13
  Speaker 1: In fact, what that would do is it would probably
• 23:16
  Speaker 1: result in delays of implementation the next gen, which is
• 23:19
  Speaker 1: absolutely a good policy. Well, I was just going to
• 23:22
  Speaker 1: go through the list only because this is something that
• 23:25
  Speaker 1: has been paid for by the taxpayer, whether it's the
• 23:29
  Speaker 1: integrated flight planning or departure management, cruise management, the rival management,
• 23:35
  Speaker 1: and so on, uh, surface traffic at airports. This is
• 23:39
  Speaker 1: all something that was put together by the administration, by
• 23:44
  Speaker 1: the Federal Aviation Administration. Why would it Why would you
• 23:48
  Speaker 1: want to give private control over something that the public
• 23:51
  Speaker 1: has paid for. Well, that's exactly the point. You wouldn't
• 23:54
  Speaker 1: want to do that. It just as counterintuitive to do that.
• 23:58
  Speaker 1: So this is what an effort on the part of
• 24:00
  Speaker 1: the airline industry in order to mold the air traffic
• 24:04
  Speaker 1: control system to their liking. I would think that's a
• 24:08
  Speaker 1: good way of phasing it. Yes, sir, okay, what's the
• 24:12
  Speaker 1: alternative that you foresee, Because let's say that they are
• 24:15
  Speaker 1: going to move ahead with this privatization because of current
• 24:19
  Speaker 1: political issues. Is there a way to save what's good
• 24:23
  Speaker 1: about the old system as well as introducing the new system. Yes,
• 24:28
  Speaker 1: there is, and and that is to reauthorize the Federal
• 24:31
  Speaker 1: Aviation Administration and enabling it to maintain its role as
• 24:36
  Speaker 1: the controller of the national air traffic control system. Explain
• 24:41
  Speaker 1: to people why that has not this this, this secure
• 24:44
  Speaker 1: and steady and reliable funding source hasn't been granted to
• 24:48
  Speaker 1: the f a A and also access for capital to
• 24:53
  Speaker 1: do infrastructure projects. What is the current limitation? Well, the limitation,
• 24:58
  Speaker 1: first of all, is that the airline have been pushing
• 25:00
  Speaker 1: relentlessly to privatize air traffic control. I know that there's
• 25:05
  Speaker 1: some that that refer to Washington as a swamp um.
• 25:09
  Speaker 1: I won't necessarily agree to that terminology, but I think
• 25:12
  Speaker 1: that it is true that there are lobbyists and there
• 25:15
  Speaker 1: are individuals and organizations that by access and gain influence
• 25:21
  Speaker 1: so that their concerns and their interests are reflected in legislation.
• 25:25
  Speaker 1: And that is one of the problems that we face,
• 25:27
  Speaker 1: is that the airlines have been relentlessly supporting the privatization
• 25:32
  Speaker 1: of air traffic control system. And the House re authorization
• 25:36
  Speaker 1: built for the Federal Aviation Administration UH there was championed
• 25:40
  Speaker 1: by Representative Schuster, did include the privatization or a traffic
• 25:44
  Speaker 1: control system. The Senate bill did not. So what is
• 25:49
  Speaker 1: your alternative? What are you gonna do? Well? The alternative
• 25:53
  Speaker 1: I think is for communities that stand to lose in
• 25:57
  Speaker 1: the privatization, and those would be the communities that that
• 26:02
  Speaker 1: have commercial airports, that have small hubs and and non hubs,
• 26:06
  Speaker 1: to go to their representatives under senators and say this
• 26:10
  Speaker 1: is not in the interests of our communities to have
• 26:13
  Speaker 1: this privatization occur. But having said that, I believe that
• 26:16
  Speaker 1: the Next Gen Advisory Committee, which was actually formed at
• 26:21
  Speaker 1: the request of the f A a UH, it's been
• 26:25
  Speaker 1: chaired by an airline CEO since it was created, Well,
• 26:30
  Speaker 1: I think that that probably is not a bad thing
• 26:32
  Speaker 1: because what it does the results in common sense solutions
• 26:36
  Speaker 1: that will enable aircraft control and airspace management to be
• 26:40
  Speaker 1: more effective. But when you have a board, a private
• 26:44
  Speaker 1: board that's dominated by the commercial airlines, directing investment in
• 26:48
  Speaker 1: the aircraft control system as opposed to providing advice on
• 26:52
  Speaker 1: modernization and next gen types of solutions, then I think
• 26:56
  Speaker 1: you've got another problem right, and that makes it just
• 26:59
  Speaker 1: more difficult to implement this because the spending seems to
• 27:02
  Speaker 1: be controlled at a very micro level. Isn't that true? Well,
• 27:07
  Speaker 1: it could be, and I think that what you'll find.
• 27:10
  Speaker 1: What you may find is that the spending will be
• 27:12
  Speaker 1: directed towards the larger airports, and so there will be
• 27:17
  Speaker 1: winners at the larger level, at the macro level, and
• 27:20
  Speaker 1: at the micro level, those hundreds of commercial airliners that
• 27:24
  Speaker 1: are vital, whether it's in Fayetteville, North Carolina, or Dothan, Alabama,
• 27:29
  Speaker 1: they will stand a possibility of having less investment, lesser,
• 27:35
  Speaker 1: lesser modernization or traft control systems and the possibility of
• 27:39
  Speaker 1: increased usurphies. And and just to make it clear, you're
• 27:42
  Speaker 1: not against any of the technological improvements that are being
• 27:47
  Speaker 1: offered as part of next gen. What you're focused on
• 27:50
  Speaker 1: is who will actually control this next gen system? Yes,
• 27:55
  Speaker 1: it's who how will the investments be decided? That's the
• 28:01
  Speaker 1: main concern. I think it's not it's not the technology.
• 28:03
  Speaker 1: It's not the modernization, which is required and a good
• 28:06
  Speaker 1: thing uh and reflects new technologies that that are that
• 28:09
  Speaker 1: are available. But it's the decisions on where those investments
• 28:13
  Speaker 1: are going to be made and what do you have
• 28:16
  Speaker 1: a percentage whether you think that this is going to
• 28:19
  Speaker 1: change the sort of political zeitguys to make this happen,
• 28:23
  Speaker 1: or are you kind of at the last innings. I
• 28:28
  Speaker 1: think that there's still an opportunity we're probably you know,
• 28:31
  Speaker 1: like in the seventh inning, so to speak, because the
• 28:33
  Speaker 1: fact that the f a a S Authorization expires in March,
• 28:39
  Speaker 1: which means that there's still time for members of Congress
• 28:43
  Speaker 1: and Senators to to get engaged and to protect the
• 28:47
  Speaker 1: you know, the core interests of their communities. UM. But
• 28:51
  Speaker 1: as as may often happen, things make it, you know,
• 28:54
  Speaker 1: they can may get kicked down the road over here
• 28:55
  Speaker 1: and um, and there could be some interim measure that
• 28:59
  Speaker 1: just phones well, such as Washington. Thank you very much.
• 29:02
  Speaker 1: Poncho Kenny, Director of Operations g S I S. Thanks
• 29:13
  Speaker 1: for listening to the Bloomberg P and L podcast. You
• 29:16
  Speaker 1: can subscribe and listen to interviews at Apple Podcasts, SoundCloud,
• 29:20
  Speaker 1: or whatever podcast platform you prefer. I'm Pim Fox. I'm
• 29:23
  Speaker 1: on Twitter at pim Fox. I'm on Twitter at Lisa Abramo.
• 29:27
  Speaker 1: It's one before the podcast. You can always catch us
• 29:30
  Speaker 1: worldwide on Bloomberg Radio.