Latest / Bloomberg Intelligence / Former CIA Acting Director Forecasts Global Risks (Correct)

Transcript

Former CIA Acting Director Forecasts Global Risks (Correct) · Bloomberg Intelligence

• 0:04
  Speaker 1: Welcome to the Bloomberg P and L Podcast. I'm Pim
• 0:07
  Speaker 1: Fox along with my co host Lisa Abramowitz. Each day
• 0:11
  Speaker 1: we bring you the most important, noteworthy, and useful interviews
• 0:14
  Speaker 1: for you and your money, whether you're at the grocery
• 0:16
  Speaker 1: store or the trading floor. Find the Bloomberg P L
• 0:19
  Speaker 1: Podcast on iTunes, SoundCloud and at Bloomberg dot com. We
• 0:28
  Speaker 1: have this nice Spring two thousand seventeen forecast from Jack Devine,
• 0:32
  Speaker 1: who's founding partner and president of the ark And Group.
• 0:34
  Speaker 1: It's a very uplifting forecast. I was reading it this
• 0:38
  Speaker 1: morning and learned about things like the fact that North
• 0:40
  Speaker 1: Korea has already over twenty nuclear weapons and its arsenal
• 0:44
  Speaker 1: and can fairly quickly may develop a ballistic missile capability
• 0:48
  Speaker 1: to deliver these weapons against our allies, including perhaps US
• 0:52
  Speaker 1: in the United States. Um. Jack Divine is here with
• 0:55
  Speaker 1: us to talk about this of lifting forecast, and you're
• 0:57
  Speaker 1: talking about the biggest risks ahead for the US economy.
• 1:02
  Speaker 1: Let's start with North Korea. How big of a threat
• 1:05
  Speaker 1: is this to the US? Well, I think you have
• 1:08
  Speaker 1: a rare mix here. You have a um arguably mentally
• 1:15
  Speaker 1: uh um disturbed president of a country or chairman of
• 1:21
  Speaker 1: the country, which which country? Talking North Korea, there's several,
• 1:25
  Speaker 1: there's several out there, but they have a nuclear weapon,
• 1:28
  Speaker 1: which I think puts them in a special category. You know,
• 1:31
  Speaker 1: we've been fairly successful in the West preventing the proliferation
• 1:36
  Speaker 1: of nuclear weapons. I remember Jack Kennedy thought we'd have
• 1:39
  Speaker 1: a hundred and sixty countries with nuclear weapons. The Brazilians,
• 1:44
  Speaker 1: the Argentinees, of South Africans all started nuclear programs and
• 1:48
  Speaker 1: then we were able to work it back with two exceptions,
• 1:51
  Speaker 1: Pakistan and Umu India. So new North Korea, unstable country
• 2:00
  Speaker 1: by anyone's definition and largely unpredictable, now has nuclear weapons
• 2:05
  Speaker 1: and has ballistic missiles. And the question is will they
• 2:10
  Speaker 1: be able to develop the range in the next few
• 2:12
  Speaker 1: years to reach certainly the western part of the United States,
• 2:15
  Speaker 1: And I think most experts would say certainly they'll be producing.
• 2:20
  Speaker 1: The latest estimate I saw it was something like eight
• 2:22
  Speaker 1: to ten nuclear weapons a year going forward. Um India,
• 2:28
  Speaker 1: and again these are rough estimates, they're not it's not intelligence,
• 2:33
  Speaker 1: but India probably is a hundred and sixty and Pakistan
• 2:36
  Speaker 1: has a hundred and sixty. But if you start adding
• 2:39
  Speaker 1: eight year to twenty, it doesn't take long to become
• 2:42
  Speaker 1: a significant nuclear power in the region. Well, and you
• 2:45
  Speaker 1: were talking about Iran also heading towards a similar path, Jack,
• 2:50
  Speaker 1: your former acting director of the c i A. And
• 2:53
  Speaker 1: so you have a long history in being presented with
• 2:58
  Speaker 1: severe and potentially catastrophic risks. Where we are right now
• 3:03
  Speaker 1: looking at the potential risks ahead. Do you feel more
• 3:06
  Speaker 1: worried than you have in the past or is this
• 3:09
  Speaker 1: on par with the normal risks that you saw as
• 3:12
  Speaker 1: the head of the CIA. I think when the Russians
• 3:15
  Speaker 1: developed nuclear weapons in the post war period, uh, there
• 3:19
  Speaker 1: was a great deal concerned about whether we were going
• 3:22
  Speaker 1: to go into a confrontation, but it settled down fairly quickly,
• 3:26
  Speaker 1: with the exception of um, the Cuban Missile crisis, where
• 3:31
  Speaker 1: we actually had nuclear weapons in Cuba, which we didn't
• 3:34
  Speaker 1: realize until the nineties that they had some nuclear capability
• 3:39
  Speaker 1: back then. The Russians did that close to us, but
• 3:42
  Speaker 1: in the larger scheme of things, we had mutual destruction,
• 3:46
  Speaker 1: and the Russians, whatever we may think of them, I think,
• 3:50
  Speaker 1: behaved in irrational and fairly predictably behavior as we did.
• 3:54
  Speaker 1: So the risks while they existed, UH, I don't think
• 3:59
  Speaker 1: most people lived and the fear that they did temporarily
• 4:01
  Speaker 1: and to say the early fifties. As far as a
• 4:03
  Speaker 1: nuclear confrontation, the unpredictability of the North Korea now has
• 4:09
  Speaker 1: a U is as a new a new situation for US.
• 4:14
  Speaker 1: And I think the possibility that they could use a
• 4:17
  Speaker 1: nuclear weapon. We can't count on the mutual destruction formula
• 4:21
  Speaker 1: to stop the North Koreans from using a nuclear weapon.
• 4:25
  Speaker 1: So how does trade fit into this? Right? Because it
• 4:28
  Speaker 1: does in the sense that US relationship with China and
• 4:33
  Speaker 1: with South Korean other UH countries in the region. I mean,
• 4:38
  Speaker 1: it wouldn't that play into how this threat is dealt with? Well,
• 4:43
  Speaker 1: I think sanctions haven't worked. I think in terms of
• 4:46
  Speaker 1: stopping them. I mean, clearly they're going forward. They've tried
• 4:50
  Speaker 1: to induce the North Koreans to be more positive at
• 4:54
  Speaker 1: the table. You know, we withdrew nuclear weapons unilatterly from
• 4:58
  Speaker 1: South Korea ninety one. The South Koreans, with our encouragement
• 5:02
  Speaker 1: or support, build a industrial city if you will in
• 5:07
  Speaker 1: North Korea. The Chinese, We've talked to them often. Countries
• 5:13
  Speaker 1: have sanctions in place. None of it seems to be
• 5:17
  Speaker 1: touring the the North, the North Koreans. I know a
• 5:21
  Speaker 1: lot of experts in Washington and government officials, and uh,
• 5:26
  Speaker 1: I've read enough about it that many people are counting
• 5:28
  Speaker 1: on the Chinese to fix the problem, that somehow they
• 5:32
  Speaker 1: have you know, real access and could could muscle the
• 5:36
  Speaker 1: North Koreans. I would encourage folks not to be overly
• 5:41
  Speaker 1: confident that that's going to happen. The Chinese have their
• 5:45
  Speaker 1: own reasons why North Korea, why Korea remains should remain
• 5:51
  Speaker 1: divided from their perspective, and uh, I think we're going
• 5:55
  Speaker 1: to expend a lot of energy jaw boning with the Chinese,
• 6:00
  Speaker 1: and it probably is not going to make much difference.
• 6:02
  Speaker 1: And we'll probably be back at the the radio station
• 6:05
  Speaker 1: talking next year about the North Koreans having greater missile
• 6:09
  Speaker 1: capability and having the thirty to forty nuclear weapons. So
• 6:14
  Speaker 1: I'm not optimistic about it. Well, one thing that that
• 6:18
  Speaker 1: you did sort of dismiss was this idea that Russia
• 6:23
  Speaker 1: was in some way conspiring with the current leadership and
• 6:25
  Speaker 1: could lead to something very substantial. Is this is this
• 6:30
  Speaker 1: something that is a clear and present risk in your opinion,
• 6:34
  Speaker 1: in any way to the United States. I'm sorry, we're
• 6:37
  Speaker 1: talking with Russia. Yeah, with Russia with respect to it's
• 6:40
  Speaker 1: sort of Yeah. What I said in the forecast, and
• 6:47
  Speaker 1: I'm standing by it, is that the allegation that Trump's
• 6:54
  Speaker 1: campaign or he was monitored for political reasons will turn
• 7:00
  Speaker 1: out to be a goose egge, as will the development
• 7:05
  Speaker 1: of information that shows conlusion between the campaign, not an individual,
• 7:09
  Speaker 1: but the Trump campaign and the Russians to defeat Hillary Clinton.
• 7:15
  Speaker 1: I think at the end, you know, we're gonna have
• 7:17
  Speaker 1: a lot, a lot of smoke, little fire. Uh, there
• 7:22
  Speaker 1: will be no prosecutions, in my opinion, there will be
• 7:25
  Speaker 1: no actions taken against the Russians because of it. Um,
• 7:30
  Speaker 1: it will be very difficult to understand why we're going
• 7:33
  Speaker 1: to spend the next year doing this, and most Americans
• 7:35
  Speaker 1: are going to scratch their head. But I do want
• 7:38
  Speaker 1: to say the Russian hacking into the system is a
• 7:41
  Speaker 1: big issue, but it's not the one that everyone's getting
• 7:46
  Speaker 1: fixated about as it relates to the election itself. Uh.
• 7:50
  Speaker 1: You know, we used to have what they called Moscow rules,
• 7:52
  Speaker 1: where the we had the capability of doing lots of things,
• 7:56
  Speaker 1: uh nefarious things to them and vice versa. We could,
• 8:00
  Speaker 1: for example, counterfeit each other's money, and we didn't do that.
• 8:06
  Speaker 1: Jack Devine, thank you so much for joining us. It
• 8:08
  Speaker 1: was really a pleasure speaking with you. Jack Devine, former
• 8:10
  Speaker 1: acting Director of the CIA CIA and founding partner and
• 8:13
  Speaker 1: president of Security for the Arkin Group, talking about his
• 8:17
  Speaker 1: Spring two thousand seventeen forecast of risks. Is it time
• 8:33
  Speaker 1: to take risk or is it time to take chips
• 8:35
  Speaker 1: off the table? Carlistet has some perspective on this, as
• 8:39
  Speaker 1: senior portfolio manager at Western Asset Management, managing seventeen billion
• 8:43
  Speaker 1: dollars more than that in his Western Asset Core Plus
• 8:46
  Speaker 1: bond fund. He joins us in our Bloomberg eleven three
• 8:48
  Speaker 1: oh studio. Carl, thank you so much for being here.
• 8:51
  Speaker 1: I want to start with emerging markets because this has
• 8:53
  Speaker 1: been one area that has been surprisingly immune to any
• 8:57
  Speaker 1: weakness or hiccups in riskier assets. This year, UH so far,
• 9:01
  Speaker 1: dollarge denominated US UH dollargennominated marging markets debt has performed
• 9:06
  Speaker 1: twice as much as US junk bunds. Do you think
• 9:08
  Speaker 1: that this is a signed to sell or or something else. Well,
• 9:11
  Speaker 1: first of all, you have to remember that emerging markets
• 9:13
  Speaker 1: did horribly in two thousand, fifteen and sixteen. So some
• 9:16
  Speaker 1: of this is just frankly a catchup. I personally in
• 9:20
  Speaker 1: Western nasset things that emerging markets still has more room
• 9:22
  Speaker 1: to run. Uh. Certainly not priced at the huge discounts
• 9:25
  Speaker 1: they were a year ago. But if you do your
• 9:27
  Speaker 1: country selection correctly, we like Latin Brazil, Argentina, Indonesia, India.
• 9:33
  Speaker 1: We still think there's some outsized returns to come from
• 9:36
  Speaker 1: emerging market debt. Yesterday on Bloomberg Television, Ed Hyman of
• 9:40
  Speaker 1: ever Core Partners came on and said that China is
• 9:43
  Speaker 1: a mess and at some point it's going to blow up.
• 9:45
  Speaker 1: They have a ton of debt which is unsustainable. So
• 9:48
  Speaker 1: you know, China is one of the biggest developing markets
• 9:51
  Speaker 1: and if it were to blow up, it would be
• 9:53
  Speaker 1: potentially catastrophic for marging markets. How concerned are you about this? Well,
• 9:56
  Speaker 1: you you have to nail on the head if your
• 9:57
  Speaker 1: your view of emerging market must come m a view
• 10:00
  Speaker 1: on China. For example, Brazil, over half their exports go
• 10:03
  Speaker 1: to China, so you have to have a view on
• 10:05
  Speaker 1: China first before you make your view of emerging markets.
• 10:07
  Speaker 1: Our views that it's not a black hole. Sure, there
• 10:10
  Speaker 1: are problems here and there, but it's still growing at
• 10:13
  Speaker 1: six six and a half percent. Uh, And put that
• 10:16
  Speaker 1: in perspective, China is twice as big as it was
• 10:18
  Speaker 1: ten years ago. So six percent today is twelve percent
• 10:21
  Speaker 1: ten years ago. China adds the g d P of
• 10:24
  Speaker 1: the Netherlands to the world every year, but it does
• 10:27
  Speaker 1: that with credit. And isn't that concerning that they're sort
• 10:30
  Speaker 1: of expanding their leverage by so much. I mean, that's
• 10:31
  Speaker 1: sort of I guess at Hyman's point, right, Well, well,
• 10:35
  Speaker 1: China is in a very enviable position unlike the rest
• 10:38
  Speaker 1: of the developed world. They have a rate structure above zero,
• 10:41
  Speaker 1: and they have a fiscal surplus. So as they have
• 10:43
  Speaker 1: fits and starts, they are changing their economy from a
• 10:46
  Speaker 1: more export related to more of a Western consumption economy.
• 10:50
  Speaker 1: That's not a straight line. You're gonna get hiccups along
• 10:53
  Speaker 1: the road. They have these two tools that we don't have. Alright,
• 10:57
  Speaker 1: So you think that developing markets still have room to go,
• 11:01
  Speaker 1: that China, you know, potentially might see some growing pains,
• 11:03
  Speaker 1: but in general is rather benign. No. I mean, I mean,
• 11:06
  Speaker 1: we're not without concern, but the red lights aren't flashing Okay,
• 11:11
  Speaker 1: So moving away from developing markets, just generally, do you
• 11:15
  Speaker 1: feel like we are in a sort of benign phase
• 11:18
  Speaker 1: in the credit cycle in the US and that US
• 11:21
  Speaker 1: HIG yield bonds can chug along, investment grade bonds can
• 11:23
  Speaker 1: kind of meander in some kind of range, or do
• 11:26
  Speaker 1: you think that we could be in for some hiccups. Well,
• 11:29
  Speaker 1: this is the big question. Everyone wants to know. Where
• 11:31
  Speaker 1: are we in the credit cycle? Where are we in
• 11:33
  Speaker 1: the business cycle. We western trying to take a step
• 11:36
  Speaker 1: back and look at each industry specifically and look at
• 11:38
  Speaker 1: where they fall in that circle. Take energy, for example,
• 11:42
  Speaker 1: they just had their recession, right, everything they do is
• 11:45
  Speaker 1: to improve the balance sheet, you know, become more credit worthy.
• 11:48
  Speaker 1: Banking banking, big banks aren't buying back their stocks, special dividends,
• 11:52
  Speaker 1: reckless m and A. They're just coming out of their recession.
• 11:55
  Speaker 1: But then you go around the circle and you get
• 11:57
  Speaker 1: industries like telecommunications, pharma, hospitals that are releveraging the balance sheet.
• 12:02
  Speaker 1: There are some scary signs. So we don't pigeonhole the
• 12:06
  Speaker 1: entire corporate market at one spot on this circle, but
• 12:08
  Speaker 1: really try to pick individual industries. So what is a
• 12:12
  Speaker 1: pigeon told as being a particularly bad area right now, Well,
• 12:15
  Speaker 1: I I do think that telecommunications is in a is
• 12:18
  Speaker 1: in a bad spot for the bondholder, releveraging the balance sheets,
• 12:21
  Speaker 1: some m and a activity that may or not be useful.
• 12:24
  Speaker 1: So you're talking like a T N T, even a
• 12:26
  Speaker 1: T and T verizing we're definitely short those names, all right,
• 12:29
  Speaker 1: and uh, what about in the real tail side? Are
• 12:31
  Speaker 1: you sorry to do? It may finally be the point
• 12:34
  Speaker 1: where you may want to think about it. Um Our,
• 12:36
  Speaker 1: our high yield analyist has a saying, uh, they are
• 12:39
  Speaker 1: burning the furniture to save the store. So you know,
• 12:42
  Speaker 1: you have a high yield company selling anything that has
• 12:44
  Speaker 1: any value whatsoever, and what's left not a lot. But
• 12:48
  Speaker 1: you have to remember that the market has figured this out.
• 12:50
  Speaker 1: So if you look at the high yield index, it
• 12:52
  Speaker 1: yields about five and three quarters the energy subcomponent, which
• 12:56
  Speaker 1: gets most of the publicity for being you know, higher yielding,
• 12:59
  Speaker 1: six and three quarter. The high yield retail index yields
• 13:03
  Speaker 1: almost nine. So at some point we're gonna have some
• 13:06
  Speaker 1: value here. So we're actually starting to look at high
• 13:09
  Speaker 1: yield retail, all right. So you're you're confident that perhaps
• 13:13
  Speaker 1: burning the furniture will be the right way to go
• 13:15
  Speaker 1: to create value. What about cast allocations? Have you been
• 13:18
  Speaker 1: decreasing them and trying to deploy cash given the somewhat
• 13:21
  Speaker 1: benign at least economic backdround. Well, what we are what
• 13:25
  Speaker 1: I refer to as a value manager, So you have
• 13:27
  Speaker 1: to have a fundamental view on the company or their
• 13:30
  Speaker 1: interest rate structure, but you also have to be cognizant
• 13:32
  Speaker 1: of where the markets pricing that. Security retail is a
• 13:35
  Speaker 1: good example of that. I mean, the markets figured out
• 13:37
  Speaker 1: that it's it's risking today. Uh, corporate bonds have had
• 13:40
  Speaker 1: an amazing run. Both hig yield investment grade spreads are
• 13:42
  Speaker 1: much tighter than they were six months twelve months ago.
• 13:45
  Speaker 1: Our view of the world is relatively benign. But being
• 13:48
  Speaker 1: a value manager, we can't like corporate bonds as much
• 13:51
  Speaker 1: today as we like them six months and twelve months ago.
• 13:54
  Speaker 1: So our client portfolios have been gradually de risking into
• 13:57
  Speaker 1: this bowl marketing credit. So real quick, how much as
• 14:00
  Speaker 1: cash increased as a as a percentage of you, Well,
• 14:02
  Speaker 1: we don't keep cash that's been redeployed in other areas.
• 14:05
  Speaker 1: Structured product being one of our favorites. All right, Carl
• 14:08
  Speaker 1: set thank you so much for joining us. Really terrific
• 14:10
  Speaker 1: to speak with you. Carl Etet his senior portfolio management
• 14:13
  Speaker 1: manager at Western Asset Management. He manages the more than
• 14:17
  Speaker 1: seventeen billion dollar Western Asset Core Plus Bond Fund, and
• 14:21
  Speaker 1: he is with us here in our Bloomberg eleven three
• 14:23
  Speaker 1: oh studio. But right now, let's check in with former
• 14:40
  Speaker 1: US Congressman Rick Lazio. He's senior vice president at Alliance Group,
• 14:45
  Speaker 1: and uh, former Congressman Lazio has had a great deal
• 14:49
  Speaker 1: of experience with congressional note negotiations, including those over taxes.
• 14:54
  Speaker 1: So Mr Lazio, I'd love to get your opinion just
• 14:57
  Speaker 1: from the outset of what the biggest challenge will be
• 15:00
  Speaker 1: for President Trump to push through any tax deal. Well,
• 15:05
  Speaker 1: thank you, Lisa. I made. The first thing, of course,
• 15:08
  Speaker 1: is that comprehensive tax reform at its most basic level
• 15:13
  Speaker 1: is extremely difficult. That's why it only happens once in
• 15:16
  Speaker 1: a generation. The last major comprehensive tax reform was signed
• 15:20
  Speaker 1: into law by President Reagan in six or thirty odd
• 15:23
  Speaker 1: years ago. And and why is that? It's because comprehensive
• 15:27
  Speaker 1: tax reform has winners and losers, and the losers tend
• 15:31
  Speaker 1: to fight harder for the things that they already have
• 15:35
  Speaker 1: that they risk losing than the people that have the
• 15:39
  Speaker 1: potential to win. I wasn't I'm trying to wrap my
• 15:44
  Speaker 1: head around what some of those ideas could be. So,
• 15:46
  Speaker 1: can you give us an example of something that uh,
• 15:48
  Speaker 1: certain constituents wouldn't want to lose, that would be up
• 15:51
  Speaker 1: for grabs, that would be something that they would fight
• 15:53
  Speaker 1: hard for sure, The mortgage interest deduction, for example, where
• 15:57
  Speaker 1: the realtors and home builders and where they have got
• 16:00
  Speaker 1: sort of institutional support in every congressional district in the nation.
• 16:05
  Speaker 1: One of the reasons why Paul Ryan and other Republicans
• 16:10
  Speaker 1: want to have a bill to the President before the
• 16:13
  Speaker 1: August congressional recesses. They don't want members to go home
• 16:17
  Speaker 1: and get their brains brains beaten out politically at town
• 16:22
  Speaker 1: hall meetings m because of these Washington groups that have
• 16:26
  Speaker 1: organized well and are pushing back. They'd rather have the
• 16:29
  Speaker 1: vote have taken place, that it's in the past, and
• 16:33
  Speaker 1: that they may be some grumbling afterwards, but it doesn't
• 16:35
  Speaker 1: create nervousness or weak knees on the part of members
• 16:39
  Speaker 1: that they're going to count on for the vote. So, um,
• 16:42
  Speaker 1: that's an example of a potential loser in this, meaning
• 16:49
  Speaker 1: that that fewer people may be able to take advantage
• 16:53
  Speaker 1: of the mortgage interest deduction if it is capped then
• 16:58
  Speaker 1: then exists right now. Okay, So that's that's That's clearly
• 17:02
  Speaker 1: one reason. The second reason, of course, is that that, uh,
• 17:05
  Speaker 1: that Donald Trump has a different and small smaller political
• 17:10
  Speaker 1: base than most past presidents. And then you know, most recently,
• 17:15
  Speaker 1: of course, the defeat of the Republican healthcare bill, um
• 17:21
  Speaker 1: creates even more risk now for tax reform. So expand
• 17:25
  Speaker 1: on that, I mean, how much of a how much
• 17:27
  Speaker 1: damage was done by the failure for the GOP to
• 17:30
  Speaker 1: get a healthcare bill brought to the floor for a vote?
• 17:34
  Speaker 1: Is this going to be potentially as damaging as some
• 17:37
  Speaker 1: are making it out to be. Yeah, there's a fair
• 17:39
  Speaker 1: amount of damage across the board here. Uh, there's there's
• 17:42
  Speaker 1: damage in terms of the president's credibility as somebody who
• 17:46
  Speaker 1: has positioned himself as somebody that would take on Washington
• 17:50
  Speaker 1: get things done that can do president and and change
• 17:54
  Speaker 1: his status quot Number one, that's in question. So he
• 17:57
  Speaker 1: has lost some political capital very le on in his term.
• 18:01
  Speaker 1: Number two, the Republicans in general, both on Capitol Hill
• 18:05
  Speaker 1: and with respect to the President, have lost momentum. This
• 18:09
  Speaker 1: soda sense that you build on things, UH, you build
• 18:12
  Speaker 1: on wins, and that people members that you count on
• 18:16
  Speaker 1: lock in UH more tightly when when you have had
• 18:20
  Speaker 1: a past win and they expect you to win again
• 18:22
  Speaker 1: and you want to be part of that. And number three,
• 18:25
  Speaker 1: on the technical part of this, UH, the fact is
• 18:28
  Speaker 1: that the that the Republican healthcare bill would have reduced
• 18:33
  Speaker 1: the budget baseline for tax reform by about a trillion
• 18:37
  Speaker 1: dollars over ten years, which means that now Republicans have
• 18:41
  Speaker 1: to find a trillion dollars more in offsets, meaning to
• 18:46
  Speaker 1: close loopholes, reduced deductions, credits, and other preferences, um if
• 18:52
  Speaker 1: they want to want their reduction and tax rates to
• 18:55
  Speaker 1: be budget neutral. So that puts all kinds of of
• 19:00
  Speaker 1: things in play. And compounding this, of course, is that
• 19:03
  Speaker 1: there is some question, particularly over on the seventh side
• 19:06
  Speaker 1: about UH the border adjustment tax concept, which is another
• 19:12
  Speaker 1: trillion dollars over ten years, that if that falls out,
• 19:15
  Speaker 1: so all that together it creates a lot more headwind
• 19:19
  Speaker 1: for tax reform. There are some people and I think
• 19:22
  Speaker 1: this is a fair comment that that the failure of
• 19:25
  Speaker 1: the repeal of Obamacare puts more pressure on Republicans, including
• 19:30
  Speaker 1: very conservative Republicans, to come through for tax reform. Um,
• 19:35
  Speaker 1: but I'm not sure that all sets the negativity that
• 19:38
  Speaker 1: I just described. Yeah, it's interesting the idea that because
• 19:41
  Speaker 1: there wasn't a replacement for Obamacare, they're gonna have to
• 19:43
  Speaker 1: basically budget for it or account for it in their
• 19:45
  Speaker 1: tax plan. Um. Is there any issue with tax reform
• 19:49
  Speaker 1: that is that has bipartisan support that they could start with. Yeah,
• 19:54
  Speaker 1: it's if if they, If they, you know, you definitely
• 19:57
  Speaker 1: want to regain momentum by by building some wind taxes. Uh,
• 20:01
  Speaker 1: this is a tough area to to build momentum within
• 20:04
  Speaker 1: because you want to use this reconciliation process. Democrats now
• 20:09
  Speaker 1: feel emboldened and are less likely, I think, to come
• 20:12
  Speaker 1: across right now and help Republicans bail them out of
• 20:15
  Speaker 1: the whole that they've dug themselves into. There are some
• 20:18
  Speaker 1: things like the medical device tax, for example, on healthcare,
• 20:21
  Speaker 1: whether there was there was democratic support, there is going
• 20:25
  Speaker 1: to be democratic support for lowering rates. Uh. My guests
• 20:29
  Speaker 1: would be for lowering rates for uh, middle income and
• 20:33
  Speaker 1: lower income Americans. Um, there will be some support, my
• 20:38
  Speaker 1: guests would be for some adjustment in terms of the
• 20:44
  Speaker 1: the extra territorial taxes, the trapping capital overseas. I mean,
• 20:49
  Speaker 1: even the Senate democratically to Chuck Schumer with Republicans Senter
• 20:53
  Speaker 1: a Portman have been have been talking last year and
• 20:57
  Speaker 1: uh and are probably in basic policy agreement about where,
• 21:02
  Speaker 1: you know, how we address that issue. So there are
• 21:04
  Speaker 1: component pieces, both on the individual side and corporate side. Unfortunately,
• 21:10
  Speaker 1: I hate to do this, we have to, we have
• 21:11
  Speaker 1: to leave it there. Former US Congressman Rick Lazio, senior
• 21:14
  Speaker 1: vice president at Alliance Group, talking about tax reform in Congress.
• 21:30
  Speaker 1: Katherine Greenfield is here with us. She's healthcare reporter for
• 21:33
  Speaker 1: Bloomberg and Katherine, you wrote a story that I thought
• 21:35
  Speaker 1: was fascinating about the challenges that go way beyond what
• 21:40
  Speaker 1: the government's healthcare plan will be for these hospitals. Can
• 21:44
  Speaker 1: you give us just a sense of what some of
• 21:46
  Speaker 1: these issues are that are plaguing these, uh, these hospitals. Sure,
• 21:50
  Speaker 1: so thanks for having me, um so, yeah, definitely. The
• 21:54
  Speaker 1: general sense after the GOP bill was pulled on Friday
• 21:58
  Speaker 1: was that hospital stodge to bullet but um, you know,
• 22:02
  Speaker 1: issues with Obamacare are still out there for hospitals, UM,
• 22:06
  Speaker 1: and maybe investors are realizing that. So, for example, you know,
• 22:11
  Speaker 1: you still have the nineteen states that didn't expand Medicaid
• 22:14
  Speaker 1: under the a C A UM who are really struggling
• 22:17
  Speaker 1: with their uncompensated care costs. UM. You know, you still
• 22:21
  Speaker 1: have millions of people uninsured. And uh, most hospital chains
• 22:27
  Speaker 1: are projecting flatt admissions growth for this year, which definitely
• 22:32
  Speaker 1: won't help. Yeah, well, I mean zooming back. Healthcare is
• 22:35
  Speaker 1: a fascinating area because people say, we don't want to
• 22:38
  Speaker 1: lose our hospitals, and yet hospital beds are less and
• 22:40
  Speaker 1: less occupied as people get more transactions done at doctor's
• 22:43
  Speaker 1: offices and outpatient centers. You had some amazing statistics here
• 22:48
  Speaker 1: in your story, but more than two U S county
• 22:51
  Speaker 1: still have uninsured rates at or above That is even
• 22:54
  Speaker 1: with Obamacare. National bed occupancy rates that's how full the
• 22:58
  Speaker 1: hospitals are on average any given day are about so
• 23:02
  Speaker 1: less than half of their beds are filled on any
• 23:05
  Speaker 1: given day. That's kind of amazing. UM. And we're gonna
• 23:07
  Speaker 1: be speaking later in the program with a Bloomberg intelligence
• 23:10
  Speaker 1: analyst talking about how people think that real estate that
• 23:13
  Speaker 1: that retail real estate is the biggest hit this year,
• 23:17
  Speaker 1: it's actually hospital related real estate because these hospitals are
• 23:20
  Speaker 1: at risk of going out of business, Dave. Within the
• 23:23
  Speaker 1: hospital sector, has there been a big laggard or is
• 23:26
  Speaker 1: there someone who people watch to get a sense of
• 23:29
  Speaker 1: how this entire industry is going well? I mean, clearly,
• 23:32
  Speaker 1: if you're talking about the hospital stocks, h c A
• 23:35
  Speaker 1: being the biggest company in the industry represents your your
• 23:38
  Speaker 1: bell weather, and yesterday was one of the best performers
• 23:42
  Speaker 1: in the s the best. Today it's the second worst.
• 23:45
  Speaker 1: So you know, it goes to show you things do
• 23:48
  Speaker 1: have a way of kind of swinging back and forth.
• 23:50
  Speaker 1: I mean, especially after a big day like what we
• 23:53
  Speaker 1: saw yesterday. You know, beyond that, I mean, it really
• 23:56
  Speaker 1: does become an issue of do you see the concerns
• 24:01
  Speaker 1: that are facing the companies that actually are involved in
• 24:04
  Speaker 1: this business play out in terms of the real estate
• 24:07
  Speaker 1: investment trust that are involved as well. I mean, we've
• 24:10
  Speaker 1: certainly seen that happening retailing, with the issues of department
• 24:13
  Speaker 1: store chains and so on having a carry over to
• 24:16
  Speaker 1: the retail roads. So you know, it's a matter of
• 24:19
  Speaker 1: whether that's sort of daisy chain, you might say, gets
• 24:22
  Speaker 1: linked up again. Katherine, some of these anecdotes in your story,
• 24:26
  Speaker 1: did you actually travel to Big Bend in Texas to
• 24:29
  Speaker 1: to look around and see what was going on? Or
• 24:31
  Speaker 1: did you did you take a tour of some of
• 24:32
  Speaker 1: these hospitals. Yes, so my colleague John Lauerman who shared
• 24:38
  Speaker 1: a byline with me, he was reporting on Big Bend. Um.
• 24:41
  Speaker 1: I talked to Cure, a Health based in Tennessee, which
• 24:45
  Speaker 1: owns three hospitals in Alabama. None of what I'm in
• 24:49
  Speaker 1: Alabama didn't expend Medicaid, so none of those hospitals or
• 24:53
  Speaker 1: you know, getting those benefits. Um. And that was done
• 24:57
  Speaker 1: over the phone. Although I did get invited Alabama and
• 25:00
  Speaker 1: I would love to go, so so maybe maybe I'll
• 25:03
  Speaker 1: be reporting with us from Alabama. Katherine Grayfield, thank you
• 25:06
  Speaker 1: so much for joining us healthcare reporter for Bloomberg News,
• 25:09
  Speaker 1: and she's joining us at our Bloomberg eleven three ohs studio.
• 25:11
  Speaker 1: And Dave Wilson as always, thank you so much for
• 25:13
  Speaker 1: joining us Bloomberg Stox columnist and blogger on M Live Go.
• 25:18
  Speaker 1: And clearly this just serves to remind everyone, I mean,
• 25:21
  Speaker 1: including myself, that we all talk so much about the
• 25:24
  Speaker 1: GOP's plan for healthcare and Obamacare, but the problems are
• 25:28
  Speaker 1: vast and go far beyond a specific legislative plan and
• 25:32
  Speaker 1: go to a structural problem within healthcare. Thanks for listening
• 25:41
  Speaker 1: to the Bloomberg P and L podcast. You can subscribe
• 25:44
  Speaker 1: and listen to interviews at iTunes, SoundCloud, or whatever podcast
• 25:49
  Speaker 1: platform you prefer. I'm pim Fox. I'm out there on
• 25:52
  Speaker 1: Twitter at pim Fox. I'm out there on Twitter at
• 25:55
  Speaker 1: Lisa Abramo. It's one before the podcast. You can always
• 25:58
  Speaker 1: catch us World War I on Bloomberg Radio m HM