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P&L: How Do We Replace Obamacare With Something That Works? · Bloomberg Intelligence

• 0:04
  Speaker 1: Welcome to the Bloomberg P and L Podcast. I'm Pim Fox.
• 0:08
  Speaker 1: Along with my co host Lisa Abramowitz. Each day we
• 0:11
  Speaker 1: bring you the most important, noteworthy, and useful interviews for
• 0:14
  Speaker 1: you and your money, whether at the grocery store or
• 0:16
  Speaker 1: the trading floor. Find the Bloomberg pm L podcast on iTunes,
• 0:20
  Speaker 1: SoundCloud and at Bloomberg dot com. I would like to
• 0:28
  Speaker 1: learn more about what we have actually learned about healthcare
• 0:33
  Speaker 1: under President elect Donald Trump. There has been a lot
• 0:36
  Speaker 1: talked about about possibly provisions of Obamacare that could be repealed.
• 0:40
  Speaker 1: But but I want to dig into what we have
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  Speaker 1: learned so far. Susan Dvore, she's the CEO of Premiere.
• 0:45
  Speaker 1: It is a company that advises on how to reduce
• 0:49
  Speaker 1: healthcare costs and improve outcomes at hospital systems around the country.
• 0:53
  Speaker 1: Here in the studio with us. Thank you so much
• 0:54
  Speaker 1: for being with us. Thank you. So what have we
• 0:57
  Speaker 1: actually learned about the concrete proposals that are likely in
• 1:00
  Speaker 1: a Trump administration that could change the outlook for hospitals. Well,
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  Speaker 1: we have heard over and over again repeal Obamacare, and
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  Speaker 1: while I think that's legislatively pretty easy to do, the
• 1:10
  Speaker 1: question is how do we not go back to what
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  Speaker 1: we had before Obamacare? And how do we actually take
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  Speaker 1: waste out of the system, Have consumers involved in their
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  Speaker 1: health care pay for healthcare based on the value it's delivering.
• 1:24
  Speaker 1: And so how do we replace Obamacare with something that works? Yes,
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  Speaker 1: and before President Trump takes over, we still have a
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  Speaker 1: few weeks left of the current Congress and administration. Can
• 1:35
  Speaker 1: we expect anything from this lame duck Congress or is
• 1:39
  Speaker 1: it just write it off? At this point? There is
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  Speaker 1: one really important thing that we Premiere think needs to
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  Speaker 1: happen in the lame duck Congress, which is how do
• 1:48
  Speaker 1: you make these healthcare systems interoperable? How do you have
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  Speaker 1: your data as a patient, uh, get connected to all
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  Speaker 1: the other pieces of data about you? So right decisions
• 2:00
  Speaker 1: are being made. You just talked about big data. Um.
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  Speaker 1: The question of interoperability is in a bill could pass,
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  Speaker 1: probably will pass, and could be done in the lame
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  Speaker 1: duck Congress that would move us forward uh faster. So
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  Speaker 1: basically would force hospital systems to get on a specific
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  Speaker 1: grid to It would force vendors, It would force all
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  Speaker 1: of these technology vendors to make their systems talk to
• 2:23
  Speaker 1: one another. It's like having an iPhone that that you
• 2:26
  Speaker 1: can't put any apps on today because none of it
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  Speaker 1: can be connected. They need to be forced to connect.
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  Speaker 1: What's the counter argument? The counter argument that often they
• 2:35
  Speaker 1: will make is that patient privacy issue. So you have
• 2:39
  Speaker 1: to make sure you can protect the patient information and
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  Speaker 1: the price privacy, but allow the patient to have connected information.
• 2:46
  Speaker 1: And if you really want to solve big health care
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  Speaker 1: problems like the problem of stroke, the problem of diabetes,
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  Speaker 1: you need population based data, so you need to be
• 2:56
  Speaker 1: able to connect the data at a population level as well.
• 2:59
  Speaker 1: So it's like for a lot of people out there,
• 3:02
  Speaker 1: the big question is we've seen our health insurance premiums
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  Speaker 1: go up year after year pretty alarming rates, and you know,
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  Speaker 1: you blame whoever you want on that um. President Trump
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  Speaker 1: has sort of promised to stop that um. But the
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  Speaker 1: question is something has to give in the whole chain there.
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  Speaker 1: Where do you expect the pressure to be uh focused
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  Speaker 1: in a Trump administration as far as lowering prices? What
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  Speaker 1: what sector of healthcare or the insurance industry do you
• 3:32
  Speaker 1: expect to sort of come under the most scrutiny. Yes,
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  Speaker 1: So there's no simple answer here, right, this is like
• 3:37
  Speaker 1: a game of Jenga where you have all these interrelated
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  Speaker 1: wooden pieces and if you pull one out at the
• 3:43
  Speaker 1: wrong time, the whole thing collapses. Right. So the question is, well,
• 3:48
  Speaker 1: the question is, how do you have all the participants
• 3:51
  Speaker 1: in healthcare UH participate to to solve this problem. So
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  Speaker 1: from the perspective of hospitals and physicians and provider delivery systems,
• 4:02
  Speaker 1: they are building value based systems. They're saying, pay us
• 4:06
  Speaker 1: based on the clinical and economic value we deliver to consumers.
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  Speaker 1: Insurance companies have to take all of this regulatory reporting
• 4:17
  Speaker 1: and all of this administrative paperwork out. Um, the suppliers
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  Speaker 1: and device companies have to find a way to help
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  Speaker 1: us curb the cost of high pharmaceuticals and medical devices. Well,
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  Speaker 1: you know, I'm looking at Tenant Healthcare's stock, which just
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  Speaker 1: plunged in the wake of UH Donald Trump's election as
• 4:37
  Speaker 1: the next US president. I'm wondering what traders are looking
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  Speaker 1: at right now that's making them so barish on hospitals.
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  Speaker 1: I mean, what are they worried about in the in
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  Speaker 1: the new administration? You know, I think what they're missing
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  Speaker 1: is they're viewing hospitals as hospitals and they're not viewing
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  Speaker 1: hospitals as health care systems, so a lot of hospit battles.
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  Speaker 1: Most of the hospitals across the country have employed physicians,
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  Speaker 1: affiliated physicians, nursing home surgery centers, and they're taking care
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  Speaker 1: of populations, and they can move patients around into the
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  Speaker 1: delivery system to optimize the value and to lower the cost.
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  Speaker 1: If you look at a more pure hospital company, people
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  Speaker 1: are worried about the external pressure on cost in the
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  Speaker 1: hospital setting. If you look at an integrated delivery system
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  Speaker 1: where they can optimize how the patient is taken care
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  Speaker 1: of to lower the cost, that's a different thing. And
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  Speaker 1: I think that people are are pretty shortsighted in just
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  Speaker 1: the view of hospital in other words, just to sort
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  Speaker 1: of give some specifics, in other words, having urgy care
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  Speaker 1: centers and specific neighborhoods are sort of getting targeting high
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  Speaker 1: risk populations and getting them screenings earlier, and having these
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  Speaker 1: sort of other programs to to your point that committize costs. Right,
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  Speaker 1: So if you look at health care systems in communities,
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  Speaker 1: they're taking care of all these patients. These patients are
• 5:58
  Speaker 1: going to show up in their emergency rooms, show up
• 6:00
  Speaker 1: in their urgent care center, show up at their doctor's offices,
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  Speaker 1: and so we have to move to a system where
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  Speaker 1: they're paid based on the value across the continuum of care,
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  Speaker 1: not go back to a view of the world that
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  Speaker 1: you pay in silos. You pay a hospital silo, you
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  Speaker 1: pay a nursing home silo, you pay a physician silo.
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  Speaker 1: And I think that's what the new replacement to Obamacare
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  Speaker 1: will continue to do. One of the elements of Obamacare
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  Speaker 1: that created so much of the backlash was the notion
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  Speaker 1: that employers be mandated to provide coverage. Um, do you
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  Speaker 1: see that surviving Trump and and sort of what are
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  Speaker 1: how would you prioritize the changes we can expect under Trump? Yes,
• 6:41
  Speaker 1: so there are no free lunches. So you can take
• 6:43
  Speaker 1: away the individual and the employer mandate. But if you
• 6:46
  Speaker 1: take that away, you've got to have a way to
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  Speaker 1: incent consumers to have healthcare coverage and to have it continuously,
• 6:54
  Speaker 1: because what you don't want is people staying out of
• 6:56
  Speaker 1: the system and then jumping in when they need healthcare.
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  Speaker 1: It's a very high cost way to do it. So
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  Speaker 1: I think what the Republicans will do is they will
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  Speaker 1: incent consumers by what it cost you if you jump
• 7:09
  Speaker 1: in versus what it costs you if you have continuous coverage.
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  Speaker 1: So I think there are all are alternatives to the
• 7:15
  Speaker 1: individual and employer mandate um that will drive continuous coverage.
• 7:19
  Speaker 1: But we've got to we've got to have a system
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  Speaker 1: where people have coverage. Thank you so much. That was
• 7:24
  Speaker 1: really fascinating. This is definitely one of the most important
• 7:26
  Speaker 1: things to watch going forward, as as the population in
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  Speaker 1: the US does get older and as people increasingly depend
• 7:33
  Speaker 1: on the health care system going forward, Susan divorce CEO
• 7:36
  Speaker 1: of Premier, a company that goes into hospitals around the
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  Speaker 1: country and hospital systems and all of the outlying businesses
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  Speaker 1: that are related in order to make sure that quality
• 7:47
  Speaker 1: is consistent and that costs are minimumized and that it's
• 7:51
  Speaker 1: made more efficient. For some more direction, I want to
• 8:06
  Speaker 1: bring a Mike Underhill, portfolio manager of the rich Worth
• 8:09
  Speaker 1: Capital Innovations, Global Resources and Infrastructure Fund, to get some
• 8:13
  Speaker 1: sense of this. Mike, is it time to invest in
• 8:16
  Speaker 1: real assets or is it time? Is there going to
• 8:18
  Speaker 1: be sort of a slow waning of that as people
• 8:20
  Speaker 1: cycle into stocks. Well, it's a great question. When I
• 8:23
  Speaker 1: look at the world we're in today, we continue to
• 8:26
  Speaker 1: see investors posing questions around four themes volatility, uncertainty, complexity,
• 8:32
  Speaker 1: and ambiguity. And you look at volatility, complements and ets
• 8:36
  Speaker 1: other types of structured products. You look at the uncertainty.
• 8:39
  Speaker 1: We've we've just passed the U S election, but we've
• 8:41
  Speaker 1: got other milestones of uncertainty. You've got an OPEC meeting
• 8:44
  Speaker 1: next week. You've got a bunch of different regulatory and
• 8:47
  Speaker 1: policy shocks that potentially we're going to be experiencing over
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  Speaker 1: the next twelve months. The complexity and financial structures and
• 8:54
  Speaker 1: the markets. And then the ambiguity. You've seen it in
• 8:56
  Speaker 1: the bond market and you've seen it with the steepening
• 8:59
  Speaker 1: of the yield. So what we're starting to see both
• 9:03
  Speaker 1: in the equity markets and fixed income markets, you're seeing
• 9:05
  Speaker 1: a need for more real asset income. And so investors,
• 9:08
  Speaker 1: institutional investors and also individual investors are really focusing on
• 9:12
  Speaker 1: what's going on with the reflationary trade. As I said,
• 9:15
  Speaker 1: we've we've gone past the US elections now where we've
• 9:17
  Speaker 1: removed some of that uncertainty. We look at some of
• 9:19
  Speaker 1: the fiscal policy things like infrastructure investment, a potential investment
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  Speaker 1: package of upwards of one trillion dollars of infrastructure benefits
• 9:27
  Speaker 1: Companies that are in the materials think base metals and steel,
• 9:31
  Speaker 1: but you know gold and oil in particulars. Go back
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  Speaker 1: to your question. I look at gold, it's more of
• 9:35
  Speaker 1: a it's a currency plan, and you look at the
• 9:37
  Speaker 1: basement of the US dollar, and you look at the
• 9:39
  Speaker 1: volatility and uncertainty in the market. Goals a great investment.
• 9:42
  Speaker 1: The other question you had about oil, it's the largest,
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  Speaker 1: most liquid commodity in the world, and you look at
• 9:47
  Speaker 1: the least amount of spare capacity the OPEQUE meeting and
• 9:50
  Speaker 1: the positioning going into the OPEC meeting, Oil is trending
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  Speaker 1: towards fifty five a barrow, possibly sixty by the end
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  Speaker 1: of the year. I'm like, I'm looking at some of
• 9:58
  Speaker 1: the giant moves we've seen. I'm looking at copper right
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  Speaker 1: now up uh rally started before the election, but towards
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  Speaker 1: mid October it's up that much. Uh SMP industrial stocks
• 10:13
  Speaker 1: about nine this month. Has the optimism about this stimulus
• 10:19
  Speaker 1: spending gotten a little ahead of itself. I think all
• 10:24
  Speaker 1: that very valid points. I think what you're seeing is
• 10:27
  Speaker 1: a few things. You're seeing a rotation out of defensive names.
• 10:31
  Speaker 1: So thank utilities and reats and and telco type companies.
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  Speaker 1: You know, those equity income place into more cyclicals and
• 10:39
  Speaker 1: so names like you look at Southern Copper and you
• 10:41
  Speaker 1: look at some of the other names like US Steel,
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  Speaker 1: beneficiaries of the industrial and manufacturing renaissance that's going to happen.
• 10:48
  Speaker 1: Have they gotten ahead of themselves? I would say they
• 10:51
  Speaker 1: have not. Actually, when you look at what's gone on,
• 10:53
  Speaker 1: a lot of money has come off the sidelines. You've
• 10:55
  Speaker 1: seen short covering and copper, You've seen short covering in steel.
• 10:59
  Speaker 1: You look at iron ore and things like that. Some
• 11:01
  Speaker 1: of these names are up in the last month. They're
• 11:04
  Speaker 1: going to take a breather. You're gonna see some trades
• 11:06
  Speaker 1: and people do some short term profit taking. If you
• 11:08
  Speaker 1: look at the longer term secular trends, there's a trend
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  Speaker 1: towards this not only infrastructure stimulus, but you're going to
• 11:15
  Speaker 1: see more manufacturing and production. So I think the trend
• 11:18
  Speaker 1: line is very bullish, particularly for copper and some of
• 11:21
  Speaker 1: the base metals. And when you look at what's going
• 11:22
  Speaker 1: on in China, you know there's an industrial base there
• 11:25
  Speaker 1: that's starting to recover, albeit slowly. Are there any sectors
• 11:29
  Speaker 1: were commodities that have people have missed that they should
• 11:33
  Speaker 1: have loaded into recently but but haven't taken off. Well,
• 11:37
  Speaker 1: I look at timber. Timpers at a great example. If
• 11:39
  Speaker 1: if you look at a company like wire house or
• 11:41
  Speaker 1: it's a timber reat, you know you can you can
• 11:44
  Speaker 1: get access to timber. And when you look at timber
• 11:47
  Speaker 1: as a commodity, you've got deforestation and climate change, and
• 11:50
  Speaker 1: you've got things like in British Columbia the Mountain pine
• 11:53
  Speaker 1: beetles killed one of every three trees in BC, and
• 11:56
  Speaker 1: so you've got decreasing supply of timber as a commodity.
• 11:58
  Speaker 1: You've got increasing to man. You've seen most recently existing
• 12:02
  Speaker 1: home sales five point six million. That's that's significantly over
• 12:06
  Speaker 1: the five point four four expected. And so the autumn
• 12:08
  Speaker 1: revival of housing market is there for not only existing
• 12:11
  Speaker 1: but you look at single family starts in October sixty
• 12:14
  Speaker 1: nine thousand, So you know timber commodity price inflation, decreasing
• 12:18
  Speaker 1: timber as a commodity, increasing demand. So that's the definition
• 12:22
  Speaker 1: of commodity price inflation. Wirehouse is a great way to
• 12:24
  Speaker 1: play it. You get some divided income while you wait
• 12:27
  Speaker 1: as well as you get some good upside and leverage
• 12:28
  Speaker 1: to the US single and multifamily housing recovery. You know, Mike,
• 12:32
  Speaker 1: I'm looking at a story right now about the priorities
• 12:37
  Speaker 1: laid forth by President elect Donald Trump, and this Baron's
• 12:41
  Speaker 1: reporter is noting that he really did not talk about
• 12:44
  Speaker 1: infrastructure spending very much, and that currently in the markets
• 12:49
  Speaker 1: there is sort of a reduction and expectations for what
• 12:53
  Speaker 1: some of his infrastructure plans may be a let alone
• 12:56
  Speaker 1: what he might actually get across. I mean, hasn't one
• 12:59
  Speaker 1: of the the main drivers of the UH take up
• 13:03
  Speaker 1: in commodities, with the exception of gold, hasn't it been
• 13:07
  Speaker 1: really driven by these infrastructure expectations And how much could
• 13:10
  Speaker 1: there be a sort of decline in commodities should there
• 13:13
  Speaker 1: be some disappointment on this front. Well, again, good question there,
• 13:17
  Speaker 1: and I would say it's it's not just the infrastructure
• 13:21
  Speaker 1: the potential infrastructure spending, because I think whether if it
• 13:24
  Speaker 1: was Trump or or Hillary Clinton, you're looking at infrastructure
• 13:29
  Speaker 1: as being one of the last great ways you can
• 13:31
  Speaker 1: stimulate the economy because you look at monetary policy and
• 13:35
  Speaker 1: artificially low rates that experiment over the last decade, you know,
• 13:38
  Speaker 1: we've run the course on on monetary policy, fiscal policies
• 13:42
  Speaker 1: and next logical progression. You've seen it in Australia, You've
• 13:46
  Speaker 1: seen it in the UK over the last thirty years,
• 13:48
  Speaker 1: what they've done with fiscal spending and investing in infrastructure.
• 13:51
  Speaker 1: There's a multiplier effect, and so infrastructure plus some of
• 13:54
  Speaker 1: these tax cuts financed via deficit. You know, infrastructure investment
• 13:58
  Speaker 1: both economic infrastructure, energy, utilities, transportation, as well as social infrastructure,
• 14:05
  Speaker 1: so think about schools and hospitals. There's a multiplier effect
• 14:08
  Speaker 1: that creates jobs as well as it it increases the
• 14:10
  Speaker 1: overall GDP and economic output. Has the base metal commodity
• 14:15
  Speaker 1: trade has it has its out outlasted the short term trade?
• 14:19
  Speaker 1: I don't think so. I think what you're seeing is
• 14:22
  Speaker 1: there's short term speculation as well as short covering by
• 14:25
  Speaker 1: some hedge funds in the material space. And admittedly, if
• 14:28
  Speaker 1: you were to look at natural resources and medals in
• 14:31
  Speaker 1: two thousand fifteen, a year ago, some of those asset classes,
• 14:34
  Speaker 1: some of those companies were down, so the asset class
• 14:38
  Speaker 1: was washed out. You've seen a reversion of the mean,
• 14:40
  Speaker 1: and that's started in February, really February eleventh, two thousand
• 14:43
  Speaker 1: and sixteen, when you saw oil and equity sort of
• 14:47
  Speaker 1: hit their technical market bottom. We saw the dead cat bounce,
• 14:50
  Speaker 1: and then you've seen this. This fits and starts of volatility.
• 14:53
  Speaker 1: So it really started. Natural resources and material started ramping
• 14:56
  Speaker 1: up an energy in February sixteen, so this started quite
• 14:59
  Speaker 1: some time ago. But I think again, you're gonna see
• 15:01
  Speaker 1: volatility as well as significant upside, So it's not going
• 15:04
  Speaker 1: to be a smooth ride, right. Mike Underhill, portfolio manager
• 15:07
  Speaker 1: of the Ridgeworth Capital Innovations, Global Resources and Infrastructure Fund,
• 15:11
  Speaker 1: on the outlook going forward for commodities of all type,
• 15:15
  Speaker 1: of all types. And Lisa brown Woods. Uh, Mike Reagan
• 15:18
  Speaker 1: here with me today Bloomberg calumnist filling in for Pim Fox,
• 15:20
  Speaker 1: who's on vacation. This is Bloomberg. I'm seeing people smile now,
• 15:36
  Speaker 1: clients of mine where I didn't even know they had teeth.
• 15:41
  Speaker 1: That is a quote in a story, truly phenomenal story
• 15:45
  Speaker 1: on the Bloomberg by Max Abelson and Tacan Campbell. Uh.
• 15:49
  Speaker 1: And Lisa brown Woods here with Mike Reagan filling in
• 15:51
  Speaker 1: for Pim Fox. Max Abelson, really great read. What are
• 15:56
  Speaker 1: you hearing from these Wall Street types at this point. Lisia,
• 15:59
  Speaker 1: First of all, thank we're saying that about the story. Second, well,
• 16:01
  Speaker 1: I have to give full credit to Dacon Campbell and
• 16:03
  Speaker 1: my colleague forgetting that awesome quote. I always I was
• 16:07
  Speaker 1: proud of my ability to get good quotes, but that
• 16:08
  Speaker 1: one is like, that was pure Deacon. When he showed
• 16:11
  Speaker 1: that to me, I was so excited because what we
• 16:14
  Speaker 1: were interested in finding out was how these guys are
• 16:18
  Speaker 1: viewing Trump after he spent like months just openly mocking them.
• 16:22
  Speaker 1: Trump Trump called bankers, um at Wall Street people, hedge
• 16:26
  Speaker 1: for managers, you know, basically the members of like a
• 16:29
  Speaker 1: criminalistic cabal. And you know, it took them. They told
• 16:34
  Speaker 1: us like basically twenty minutes, you know, the twenty minutes
• 16:36
  Speaker 1: after the election, they were sad that Hillary Clinton didn't win,
• 16:40
  Speaker 1: you know, the Clinton supporters that is. And then they
• 16:42
  Speaker 1: moved on because at least they think, you know, they're
• 16:45
  Speaker 1: they're made in the shade that their industries is gonna
• 16:47
  Speaker 1: be deregulated, their taxes are gonna go down, and uh
• 16:51
  Speaker 1: it's gonna Trump is gonna help usher in this like
• 16:53
  Speaker 1: free willing new era. So Max, what are they basically
• 16:56
  Speaker 1: anticipating just the complete destruction of Dodd Frank. I mean,
• 17:00
  Speaker 1: is that is that a realistical I think that anyone
• 17:04
  Speaker 1: on Wall Street or or or anywhere else who thinks
• 17:06
  Speaker 1: they know what's gonna happen like under President Trump, is
• 17:09
  Speaker 1: you know, really is going to have to be surprised.
• 17:12
  Speaker 1: Because I feel like we was very diplomatic. I was about, yeah,
• 17:17
  Speaker 1: you know, look, people have had the wrong idea about
• 17:20
  Speaker 1: this guy for a really long time, going back to
• 17:22
  Speaker 1: when he basically was nearly ruined in the early nineties
• 17:25
  Speaker 1: and managed to bounce back is a sort of like
• 17:27
  Speaker 1: new reality figure, and then of course during the primaries,
• 17:30
  Speaker 1: of course during the presidential run. But I think that
• 17:32
  Speaker 1: to answer your question, there's an expectation because he's said
• 17:36
  Speaker 1: so that a lot of Dodd Frank is going to disappear,
• 17:39
  Speaker 1: is going to be rolled back. Now. The thing that
• 17:42
  Speaker 1: we also have to talk about that's kind of complicates
• 17:43
  Speaker 1: all this is that he's also said totally contradictory things.
• 17:47
  Speaker 1: He suggested that, for example, like glass Stagel will come back,
• 17:51
  Speaker 1: or at least that is literally in the Republican platform
• 17:54
  Speaker 1: for for this year. So what's giving bankers confidence that
• 17:59
  Speaker 1: Donald Trump had been station will be positive for Wall Street. Well,
• 18:02
  Speaker 1: came up during my interviews UM and and interviews that
• 18:05
  Speaker 1: Dacan Campbell, My colleague ran, is this you had as
• 18:09
  Speaker 1: the closing ad for Trump's campaign that remember that image
• 18:13
  Speaker 1: of Lloyd Blank fine uh and Donald Trump's voiceover was like,
• 18:16
  Speaker 1: you know, a a criminal group is trying to steal
• 18:19
  Speaker 1: your money. Um. By the Friday after the election, the
• 18:23
  Speaker 1: team that was in charge of Trump's transition, that is
• 18:26
  Speaker 1: in charge of Trump transition included Golden sax Alum, Steve Bannon,
• 18:30
  Speaker 1: Goldman sax Alum, Steve Manuchin, Goldman sax along Lam, Anthony Scaramucci.
• 18:35
  Speaker 1: So he is surrounding himself with these people and I
• 18:37
  Speaker 1: think that's incredibly comforting. And then you know, even beyond
• 18:40
  Speaker 1: who's going to be Treasury Secretary, Zach Mider and I
• 18:43
  Speaker 1: wrote that long profile about Steve Manuch and it's kind
• 18:44
  Speaker 1: of it's kind of feeling like it's going to be
• 18:46
  Speaker 1: him Treasury secretary. Side my colleagues UM, Jesse Hamilton and
• 18:50
  Speaker 1: Robert Schmidt had a great story today that folks should
• 18:53
  Speaker 1: read as well. That's basically about Wall Street licking their
• 18:56
  Speaker 1: lips to UM expecting that Tarulah. Of course that at
• 19:01
  Speaker 1: the FED is going to sort of be out of
• 19:04
  Speaker 1: the unofficial role that he's kind of been in over
• 19:07
  Speaker 1: the last couple of years, and that they'll have a
• 19:08
  Speaker 1: Federal Reserve Vice chairman overseeing Wall Street who's like incredibly
• 19:12
  Speaker 1: sympathetic to bankers. That that's that's what Schmith's story is.
• 19:14
  Speaker 1: You know, how much of a surprise really is this?
• 19:16
  Speaker 1: I mean, isn't this always what people suspect that presidential
• 19:20
  Speaker 1: candidates will sort of talk a hard line on Wall Street,
• 19:23
  Speaker 1: then they'll get into office and they'll forget everything. And
• 19:25
  Speaker 1: isn't that the sort of classic cliche, you know the differences.
• 19:29
  Speaker 1: I think that Reagan and Bush one and Bush two
• 19:34
  Speaker 1: came in with, um, you know, nothing but but mostly
• 19:38
  Speaker 1: nice things to say about the financial services industry. Um,
• 19:42
  Speaker 1: this is the old guy over here. We would remember
• 19:44
  Speaker 1: if George W. Bush was insulting Wall Street, had to
• 19:49
  Speaker 1: go there with the old guy. Listen. I'm I think
• 19:57
  Speaker 1: it's fair to say that even um, you know, even Obama,
• 20:02
  Speaker 1: even Obama when he took over at the height of
• 20:04
  Speaker 1: financial crisis, didn't have nearly the same kind of populous
• 20:08
  Speaker 1: tone that that that Donald Trump had. So on the
• 20:11
  Speaker 1: one hand, you always expect Republicans and frankly even Democrats
• 20:17
  Speaker 1: to be much softer on Wall Street because of the
• 20:19
  Speaker 1: financial power of Wall Street. But and and and then
• 20:22
  Speaker 1: of course people are disappointed. But but then on the
• 20:24
  Speaker 1: other um, you know, Donald Trump is is just so inconsistent.
• 20:28
  Speaker 1: It's just so hard to hard to know what's gonna come. Max.
• 20:29
  Speaker 1: Let me ask you, from all the reporting you've done
• 20:31
  Speaker 1: on Wall Street and Trump, and it's been excellent reporting
• 20:34
  Speaker 1: for for sort of a junior rookie reporter like yourself,
• 20:37
  Speaker 1: young a young man like yourself. Have you talked to
• 20:40
  Speaker 1: many bankers who have actually done business with Trump? And
• 20:43
  Speaker 1: is there a difference in perspective from those that have
• 20:46
  Speaker 1: actually done deals with them and those that are just
• 20:48
  Speaker 1: you know, watching along like the rest of us. You know,
• 20:51
  Speaker 1: I think that um one real pity is that the
• 20:55
  Speaker 1: City Group banker who was really in charge in the
• 20:58
  Speaker 1: early nineties passed away. I think she was actually hit
• 21:01
  Speaker 1: riding a bicycle just just before Trump's run really took off.
• 21:05
  Speaker 1: So well, we don't know, um. I would love to
• 21:08
  Speaker 1: know what she has to say about I think it
• 21:11
  Speaker 1: was sort of partially her decision to keep Trump alive,
• 21:14
  Speaker 1: to keep Trump above water um that they really could
• 21:16
  Speaker 1: have brought him down, that he had skinning him, so
• 21:18
  Speaker 1: he basically could have had to go personally break right
• 21:21
  Speaker 1: rather rather than the company's going back roup. But but
• 21:23
  Speaker 1: I have whenever you speak to people who have done
• 21:25
  Speaker 1: business with them, they speak with it with incredible anchor
• 21:28
  Speaker 1: and sadness about about the betrayals that that they've had
• 21:31
  Speaker 1: to go through. There are people who love him, but
• 21:33
  Speaker 1: there are a lot of people who feel betrayed after
• 21:35
  Speaker 1: spending time working with Donald Trump. Donald Trum. We got
• 21:50
  Speaker 1: some home sales data this morning at ten am. Existing
• 21:54
  Speaker 1: home sales came in higher than expected, just sort of
• 21:58
  Speaker 1: showing that there might just be momentum behind the housing market.
• 22:03
  Speaker 1: But is that momentum about to stall out? I want
• 22:06
  Speaker 1: to bring in Logan Mota Shoppi, a senior loan officer
• 22:10
  Speaker 1: at AMC Lending Group, to give us a little bit
• 22:12
  Speaker 1: of color. I'm forward leading indicators. Logan. When we look
• 22:17
  Speaker 1: at existing home sales, that's a backward looking indicator. Correct, yes,
• 22:22
  Speaker 1: it's a backward indicating look indicator. But what what I
• 22:25
  Speaker 1: would uh emphasize today on the existing home sales report
• 22:29
  Speaker 1: is that existing home sales are at psycho highs, as
• 22:33
  Speaker 1: mortgage demand is at psycho highs, and the housing community, economists,
• 22:37
  Speaker 1: analysts and everybody has been telling people that low inventory
• 22:42
  Speaker 1: is holding housing back. It's exactly the opposite. All the
• 22:46
  Speaker 1: data showing demand is at psycho highs and home sales
• 22:50
  Speaker 1: are at psycho highs, and existing home sales UH what
• 22:54
  Speaker 1: we've seen as cash buyers have been falling, but mortgage
• 22:57
  Speaker 1: demand has been rising. But yet mortgage demand is basically
• 23:01
  Speaker 1: back to levels. And there's your issue with the home
• 23:05
  Speaker 1: sales in this cycle is that we don't have that
• 23:07
  Speaker 1: kind of strong demand curve, So we shouldn't be using
• 23:11
  Speaker 1: excuses as low inventory or tight lending that are holding
• 23:15
  Speaker 1: sales back based on certain economists as metrics look, then
• 23:19
  Speaker 1: I'm wondering how elastic can we expect that demand to
• 23:22
  Speaker 1: be given the recent jump in UH interest rates. Mortgage
• 23:28
  Speaker 1: rate have been higher in and twenty fifteen than where
• 23:34
  Speaker 1: we are today. So when we look back at what
• 23:36
  Speaker 1: happened in was that mortgage rates were working from four
• 23:40
  Speaker 1: and a half percent levels, Existing home sales went negative
• 23:43
  Speaker 1: year over year, New home sales had the biggest miss
• 23:45
  Speaker 1: I've ever seen in twenty years, and an up cycle.
• 23:48
  Speaker 1: So even though we could see sales be impacted, in
• 23:52
  Speaker 1: reality we only lost two hundred thousand homes at A
• 23:55
  Speaker 1: five point three million when rates were higher in t
• 24:00
  Speaker 1: UH sales still grew, but the rate of growth was impacted.
• 24:04
  Speaker 1: So I don't think it's going to be as big
• 24:06
  Speaker 1: as people think because demand is low already, so we're
• 24:10
  Speaker 1: not working from an elevated level to where UH low
• 24:13
  Speaker 1: rates were boosting home sales. This has been the worst
• 24:16
  Speaker 1: demand curve we've ever seen world War two. Well, let's
• 24:19
  Speaker 1: talk about that. Why has demand for mortgages been so low.
• 24:22
  Speaker 1: Because the fundamental core backdrop you need for a housing market.
• 24:26
  Speaker 1: For strong housing markets, you need good demographics. We we
• 24:29
  Speaker 1: have terrible demographics for housing in this cycle, ages seventeen
• 24:32
  Speaker 1: to twenty nine or massive, ages forty nine to sixty
• 24:35
  Speaker 1: five or massive. This is a renting profile. Second, you
• 24:38
  Speaker 1: have no more exotic loans in the system, so that
• 24:41
  Speaker 1: facilitates demand that's gone. Everybody has to have the ability
• 24:45
  Speaker 1: to own the debt right now, That takes some demand off.
• 24:48
  Speaker 1: Wait until years four when you have a higher ages
• 24:53
  Speaker 1: thirty one to thirty four in the systems. Either millennials
• 24:57
  Speaker 1: are buying but the millennials that are ages thirty in
• 25:00
  Speaker 1: the thirty four are buying ages of the biggest in
• 25:04
  Speaker 1: America right now, they're still too young to have a
• 25:07
  Speaker 1: strong housing market. Now. Are the homebuilders going to adjust
• 25:11
  Speaker 1: to the needs of millennials? Um? Is that part of
• 25:14
  Speaker 1: what's keeping things in check to some degree that there
• 25:17
  Speaker 1: there there's not as many starter houses being built as
• 25:20
  Speaker 1: perhaps there should be. The builders have been building bigger
• 25:23
  Speaker 1: and bigger homes since nineteen seventy five. Back in nineteen
• 25:25
  Speaker 1: seventy five, medium square foot was about fifteen hundred. Today
• 25:28
  Speaker 1: it's over. They're not building because they can't really make
• 25:31
  Speaker 1: money off of them. So if you want new home
• 25:33
  Speaker 1: sales to go over eight nine hundred thousand, you're gonna
• 25:38
  Speaker 1: need to build smaller homes. This year was the first
• 25:40
  Speaker 1: year that we saw median home sales price fall for
• 25:44
  Speaker 1: builders for the new home sales market. That is actually
• 25:46
  Speaker 1: a very bullish data line because that means they're building
• 25:49
  Speaker 1: more of the smaller homes and that's what you would
• 25:51
  Speaker 1: need to get more first time home buyers in that market.
• 25:56
  Speaker 1: Local Where do you think that we are in the
• 25:58
  Speaker 1: housing market? Site on the year, Well, it's this has
• 26:01
  Speaker 1: not been a very strong cycle, so I wouldn't look
• 26:04
  Speaker 1: at economic cycles to work with housing. UH two thousand
• 26:08
  Speaker 1: eight to two thousand nineteen we're going to be soft,
• 26:11
  Speaker 1: but in the next decade you're going to have a massive,
• 26:13
  Speaker 1: massive UH demographic homeownership age bracket, but also you're going
• 26:19
  Speaker 1: to have your first time homeowners would be a lot better.
• 26:21
  Speaker 1: We've had over seven million loans delinquent because we had
• 26:25
  Speaker 1: people with exotic debt. The home buyers now in this
• 26:28
  Speaker 1: cycle are the best I've ever seen in my life.
• 26:31
  Speaker 1: So the move up buyer is it's just been a
• 26:33
  Speaker 1: much more solid UH position to move up years down
• 26:37
  Speaker 1: the line. But now it's just been a very soft cycle.
• 26:41
  Speaker 1: Don't expect anything to really change until and is the
• 26:45
  Speaker 1: sort of maybe not the death but the definitely reduction
• 26:49
  Speaker 1: in adjustable rate mortgages. UM. That's something different in this cycle,
• 26:56
  Speaker 1: right that we won't have to sort of worry about
• 26:58
  Speaker 1: we have we We do not have any exotic recasting
• 27:02
  Speaker 1: debt in scale. There's some home equity lines that are
• 27:05
  Speaker 1: going to recast, but we don't have this massive debt
• 27:09
  Speaker 1: leverage bubble as we did in two thousand seven. But
• 27:12
  Speaker 1: one of the main points is that people forget. In
• 27:14
  Speaker 1: two thousand and seven, primate labor force growth peaked and
• 27:18
  Speaker 1: then it declined. We had we didn't have that in
• 27:20
  Speaker 1: the nineteen eighties or the nineteen nineties. That is a
• 27:23
  Speaker 1: very big metric for housing. We're not going to have
• 27:27
  Speaker 1: that problem anymore. Primate labor forces is starting to grow again,
• 27:31
  Speaker 1: so we have no more adjustable rate risk in terms
• 27:34
  Speaker 1: of in big scale, There's always going to be a
• 27:36
  Speaker 1: few out there, but our demographics are starting to get stronger.
• 27:39
  Speaker 1: So the future of housing look actually looks a lot
• 27:41
  Speaker 1: stronger than it did from two thousand eight to two
• 27:43
  Speaker 1: thousand sixteen. Logan Mota Shami, thank you so much for
• 27:47
  Speaker 1: joining us senior loan officer at a MC lending group
• 27:50
  Speaker 1: talking about perhaps we shouldn't call it the housing cycle,
• 27:53
  Speaker 1: maybe just the housing plateau. Thanks for listening to the
• 28:01
  Speaker 1: Bloomberg pien L podcast. You can subscribe and listen to
• 28:04
  Speaker 1: interviews at iTunes, SoundCloud, or whatever podcast platform you prefer.
• 28:10
  Speaker 1: I'm Pim Fox. I'm out there on Twitter at pim Fox.
• 28:13
  Speaker 1: I'm out there on Twitter at Lisa Abramo. It's one
• 28:16
  Speaker 1: before the podcast. You can always catch us worldwide on
• 28:19
  Speaker 1: Bloomberg Radio,