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Speaker 1: Yeah, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene

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Speaker 1: Jay Leye. We bring you insight from the best in economics, finance, investment,

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Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud,

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Speaker 1: Bloomberg dot Com, and of course, on the Bloomberg. So

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Speaker 1: we begin April, closing out of quarter which saw a

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Speaker 1: resurgent volatility index. Dominant forces began to reassert themselves, though,

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Speaker 1: including a week of dollar and a FLATNY Yiel curve.

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Speaker 1: The difference between the yield on two year treasury notes

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Speaker 1: and ten year yields drop below fifty basis points, a

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Speaker 1: post crisis low. So what's the economic signal if there

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Speaker 1: is one at all? Let's bring in Mark Chandler Brown

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Speaker 1: Brothers Harriman, global head of Currency Strategists, joins us now

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Speaker 1: in New York. Mark Greater, catch up with you, sir,

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Speaker 1: Walk me through and is it different this time? Two

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Speaker 1: ten fifty? Well, I think that you know, we're not

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Speaker 1: going to get for sure until it gets inverted, but

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Speaker 1: I think you know that the Yel curve that two

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Speaker 1: to ten is still seen by many economists is one

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Speaker 1: of the most accurate guides to the US economy, So

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Speaker 1: it's flashing us some warning signs. So what on the

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Speaker 1: warning signs right now? Well, I think that the warning

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Speaker 1: sign is that the US economy has entered late stage

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Speaker 1: of its economic expansion that began in two thousand and nine.

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Speaker 1: So things like auto sales rolling over, non farm payroll

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Speaker 1: slowing that we're still at elevated levels. We'll see this

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Speaker 1: report on Friday, But the twelve month moving average peaked

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Speaker 1: over three years ago, and we got this default rador

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Speaker 1: delinquency rate at least on credit cards going up, all

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Speaker 1: signs of late cycle. I think that's confirming what the

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Speaker 1: yield curve is telling us, and that is that the

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Speaker 1: economy is on late stage, and simingly, the Federal Reserve

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Speaker 1: is not back in a way, and it's one of

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Speaker 1: the reasons why the two year yield has remained so

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Speaker 1: Anchor are you surprised by how many people in this

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Speaker 1: market haven't taken out right hikes for given the picture

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Speaker 1: that you've just painted, Because I think that that's why

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Speaker 1: I think the Federal Reserve is looking past this weakness

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Speaker 1: in Q one GDP, which is sort of like a

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Speaker 1: curse in the US, you know, since the crisis first quarter.

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Speaker 1: GDPs tend to be on the soft side. But I

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Speaker 1: think the reason that FED can look past the softness

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Speaker 1: in Q one is gonna do that a lot of

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Speaker 1: fiscal stimulus. We've got more fiscal stiamus in the pipeline

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Speaker 1: that was generated in two thousand and nine in the

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Speaker 1: midst of the crisis. Do you have a number then,

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Speaker 1: what that does the GDP because it had two tens

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Speaker 1: of percent three. I mean, if you've seen a good calculation,

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Speaker 1: I go with the Federal Reserve. I don't see any

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Speaker 1: reason to doubt the Federal Reserve. And they say it's

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Speaker 1: worth about point four maybe point five to g D.

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Speaker 1: That's a big number. It's a big but it's a

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Speaker 1: short term. That is to say that the effect of

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Speaker 1: the fiscal stimulus wears off we rather. I mean, I

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Speaker 1: look at the condundrum of April and maybe even I'll

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Speaker 1: be charitable and go out eight weeks into the end

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Speaker 1: of May, and just to me, it's an arch debate

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Speaker 1: right now. What this FED will do. The FEDS been

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Speaker 1: very quiet. I assume they're gonna be a lot louder

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Speaker 1: and communicating the message in April. Yeah, what I see

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Speaker 1: is so so startling to me is that the market

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Speaker 1: looks like I used a W I R P on

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Speaker 1: bloom We can check this out that you have fed

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Speaker 1: funds cowculation and looking at the Bloomberg's calculation, the market

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Speaker 1: is putting in about a one in four chance of

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Speaker 1: a May rate hike, and I think that's just over

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Speaker 1: the top. I think that Powell's first meeting is able

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Speaker 1: to raise interest rates show his hawkish credentials, but hike

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Speaker 1: in May seems to me to be over the top.

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Speaker 1: Where is the most exposed part of the foreign exchange

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Speaker 1: trade the speculators out there, not the headers, but the

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Speaker 1: people trying to make elphin for an exchange. Where's the

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Speaker 1: greatest belief right now? I think the greatest belief is

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Speaker 1: using the the yen, using the Swiss frink and the

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Speaker 1: dollar as funding currencies to buy other higher returning assets

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Speaker 1: like emerging markets. I say that the market has been

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Speaker 1: squeezed out of a lot of the short young positions

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Speaker 1: at the funding side. Uh they've shifted over the dollars

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Speaker 1: and the Swiss shrinks, and so I think the dollars

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Speaker 1: position is the most extreme as far as short dollar

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Speaker 1: position by speculator for anyone Following the FED spake, scheduled

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Speaker 1: speech from FED Sham and j Pound came on the agenda.

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Speaker 1: Just lost weight light in the weight funny when they

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Speaker 1: missed it. April six, eight six, said him will be

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Speaker 1: given a speech on the economic outlook during a visit

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Speaker 1: to Chicago. So put that one in the diary if

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Speaker 1: you can. I don't want to get to China Mark

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Speaker 1: as well as in the news again this morning. Retaliatory

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Speaker 1: tip for tariffs kicking in today. Something changed last quarter

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Speaker 1: where suddenly we woke up to the prospect of a

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Speaker 1: move of the trade situation. Can you put it into

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Speaker 1: perspective for us, and how worried we should be in

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Speaker 1: the coming quarter. Sure. I think a lot of people

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Speaker 1: and they hear protections and you know, we all think

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Speaker 1: back about Smooth Holey and we read in the history books.

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Speaker 1: This is nothing like that. You look at the amount

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Speaker 1: of trade that's being exposed to these tariffs, relatively small.

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Speaker 1: Here's what I think about China and the retaliation one.

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Speaker 1: It's not tip for tat US is saying steel and

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Speaker 1: aluminum tarrifts. That's what China is retaliating for now. And

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Speaker 1: they're putting on tariffs on about three billion dollars with

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Speaker 1: the US goods relatively small amount. I think china strategy

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Speaker 1: is really threefold. One take these retaliatory measures, small symbolic measures.

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Speaker 1: Secondly challenged the US to the w t O, and

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Speaker 1: thirdly adopt someone it changes. Some of these changes are

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Speaker 1: low hang food for the Chinese, like better protected for

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Speaker 1: intellectual property rights. As Chinese companies gained their own portfolio

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Speaker 1: of patents, China's interest is much more to defend uh

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Speaker 1: the intellectual property right. So I think China is gonna

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Speaker 1: make some reforms, fight the US at w t O,

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Speaker 1: and do some of these symbolic measures. Did you have

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Speaker 1: Clarency on what America's strategies? America strategy? In my mind,

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Speaker 1: the best way to think about what what the President

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Speaker 1: Trump is doing and people who surround himself by, is

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Speaker 1: really repeating the success the U s thinks it had

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Speaker 1: with Japan under Ronald Reagan with voluntary export restrictions like

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Speaker 1: we did with Korea or orderly market agreements which involves quotas.

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Speaker 1: Many people in the US thought it was successful against

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Speaker 1: Japan opening up the Japanese markets in the nineteen eighties

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Speaker 1: with Ronald Reagan. No one called this a trade war then,

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Speaker 1: and I think that a lot of people are surrounding himself,

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Speaker 1: the Trump administration doing the same thing, same products, same

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Speaker 1: same efforts. Watch what they do. What are flows doing

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Speaker 1: right now? I mean, whether it's sterling in the flow

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Speaker 1: of sterling and boarding with all the Brexit back and forth,

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Speaker 1: what are dollar flows right now? Well, you know we're

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Speaker 1: gonna get them tick dating again, But right now it

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Speaker 1: looks like foreign appetite for US securities has weakened. Partly,

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Speaker 1: we had a bearish market for barns. People think, even

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Speaker 1: though the bond deal, like you mentioned, is below the

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Speaker 1: two eight that held US up, and I think they

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Speaker 1: were seeing not so much demand for US equities. The

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Speaker 1: demand for equity seems to be going much more towards

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Speaker 1: Europe and emerging markets. So right now, I'd say the

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Speaker 1: US curd account deficit, which is sizeable, is being funded

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Speaker 1: by hot flows rather than these large flore we range bound, right, John,

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Speaker 1: I'm sorry you have for five days today's session very

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Speaker 1: much so in the FX market, really really muted price section.

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Speaker 1: We can have this sort of overly sophisticated conversation about

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Speaker 1: international trade. What is good, what is right? What we

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Speaker 1: should what we shouldn't do. I just want to understand

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Speaker 1: how markets How do you think markets should adjust to

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Speaker 1: the reality of this relationship between China and the United States.

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Speaker 1: How should markets adjusting and how are you adjusting? I

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Speaker 1: look past these, I would expect these sort of a

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Speaker 1: high level of chronic trade tech in the US, and

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Speaker 1: I just like there was a chronic tension between the

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Speaker 1: US and Japan for many years. But I don't think

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Speaker 1: it really affects the market on day to day basis.

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Speaker 1: I don't know if China even thinks about northern border

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Speaker 1: southern border. The president does, he tweeteth we go to

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Speaker 1: Mark Chandler for immediate tweet perspective, and this is your area,

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Speaker 1: Mr Chandler. Mexico as the absolute power not to let

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Speaker 1: these yards large quote caravans unquote of people enter their country.

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Speaker 1: They must stop them at their northern border, which they

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Speaker 1: can do because their border laws work, not allow them

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Speaker 1: to pass through into our country, which has no effective

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Speaker 1: border laws. And I wonder there if the presidents conflating

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Speaker 1: the northern border with Chiapas and the hugely fractious Mexican

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Speaker 1: southern border, which you know I'm not informed on Mark,

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Speaker 1: but borders on um civil war or you know, some

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Speaker 1: real violence there. But this is the flow of Central

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Speaker 1: America North. I mean that politics is still there. It's

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Speaker 1: still there, but I think they find that uh one,

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Speaker 1: I'd say that Trump's tweets need to be confusing north

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Speaker 1: south borders, just like he confused where they puts a

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Speaker 1: billion dollars had a Chinese trade of who by a

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Speaker 1: billion or undred billion. I think it's an awkward way

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Speaker 1: to have diplomacy. But I do think that these issues

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Speaker 1: are real. That isn't say there's problems in South America.

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Speaker 1: Mexico is the gateway into the US. But I think

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Speaker 1: that some of this anti immigration, some of this comes

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Speaker 1: from the far right shock media that Trump just picks

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Speaker 1: up and then we tweets, we see it's seven minutes

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Speaker 1: ago on Twitter. Will a much more on that somehow.

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Speaker 1: I think there'll be John Farrell a few more tweets,

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Speaker 1: a few more tweets this morning as well. Mark Chandler

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Speaker 1: is always thank you Brown brothers. Ariman. Let's get a

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Speaker 1: viewpoint now where we are for April and into the

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Speaker 1: second quarter on international relations and now they fold into

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Speaker 1: the markets. Kim Wallas is with the Bremers Eraiser group.

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Speaker 1: He has a terrific perspective on Washington and how policy

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Speaker 1: folds into our economic Kim, is there a Trump policy

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Speaker 1: in foreign affairs? Good question, Tom, Not yet. You know,

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Speaker 1: most presidents develop a doctrine, or you can detect the

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Speaker 1: doctrine two or three years into it. I don't think

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Speaker 1: it's going to be much different here. But we do

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Speaker 1: have a sense of how the president regards international relations,

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Speaker 1: and that is like any other negotiation. Everything to him

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Speaker 1: seems to be transactional. The trouble here with trade is

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Speaker 1: that over the forty years, Ricardo has been proven right.

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Speaker 1: When you build a global trading system, it's really difficult

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Speaker 1: for one actor to break it apart without there being

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Speaker 1: severe damage on all sides. And we're running into those

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Speaker 1: risks now. One of the hallmarked things. This came up

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Speaker 1: a couple of times this weekend in conversation with folks,

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Speaker 1: is Kim Wallis the president really hasn't been tested yet

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Speaker 1: with an international crisis. Is that right? It's right? You

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Speaker 1: can just stretch it out time to say he hasn't

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Speaker 1: been tested by a crisis at all, except that those

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Speaker 1: of his of his own making. So we're heading into

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Speaker 1: waters that are very different and unknown for this president

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Speaker 1: and how he reacts. I think that owes a lot

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Speaker 1: to the softness in the dollar and other UH assets

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Speaker 1: that the markets are just a little bit nervous right now. Kim.

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Speaker 1: For a while, the market had ignored a lot of this,

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Speaker 1: and then we woke up in and all of a

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Speaker 1: sudden reaction function of some investors has changed drastically, more

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Speaker 1: specifically to the issues around trade. Why do you think

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Speaker 1: that is, Kim? The first piece I think is because

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Speaker 1: tax cuts were passed in December. Whatever work they have

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Speaker 1: to do to clean that up and this year or

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Speaker 1: next year is beyond the point. But from an agenda standpoint,

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Speaker 1: tax cuts were passed last year. Now we move into

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Speaker 1: a mid term election year. People have been focused on politics.

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Speaker 1: Now they have to focus on policy and economic realities

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Speaker 1: of protectionist trade policies from the US. It's different than

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Speaker 1: what they expected. Well, Kim, let me try and get

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Speaker 1: my hands around the policy. This administration, rightly or wrongly,

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Speaker 1: has blurred some of the lines between foreign policy and

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Speaker 1: economic policy. And we're doing it again with Mexico this

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Speaker 1: morning as we look at immigration policy. But fought that

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Speaker 1: into a debate on after as well. How difficult is

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Speaker 1: it to get any clarity on the direction of travel

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Speaker 1: for economic policy when the lines are blurred into the

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Speaker 1: immigration debate into foreign policy. For foreign policies, say China

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Speaker 1: and North Korea. For the immigration debate, it's Mexico. But

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Speaker 1: both of those issues fold into broader economic trade stories

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Speaker 1: as well. How difficult is it to understand where this

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Speaker 1: is going. It's incredibly difficult, and that's why I think

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Speaker 1: you have politicians on Capitol Hill, both parties, but especially

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Speaker 1: Republicans going into the mid terms, and trading partners around

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Speaker 1: the world very confused. Right now. The President talks about uh,

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Speaker 1: good trade policy and when he sticks to issues like

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Speaker 1: national security, when he looks at intellectual property protections, tech transfer,

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Speaker 1: things that clearly over the last two decades China has

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Speaker 1: taken advantage of the US through the w t OH,

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Speaker 1: he's unsound when he bears into other things unrelated really

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Speaker 1: to trade. When you start attacking our number one and

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Speaker 1: a number two trading partners, Canada and Mexico. That's what

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Speaker 1: makes the Union Pacific, for example, nervous. That's what makes

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Speaker 1: a d M for example nervous. Is that there's a

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Speaker 1: chance here that you're gonna have real damage done to

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Speaker 1: trade flows that show up on their bottom line. You can, Wiles,

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Speaker 1: Let's be clear that the President has a huge part

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Speaker 1: of America that's with him in different shades on immigration

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Speaker 1: and on any kind of border issues. Particularly let's be

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Speaker 1: blunt with our southern border. The imagery that I've seen

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Speaker 1: of this quote unquote caravan, which I'm going to editorialize,

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Speaker 1: is the thousand kinds of people coming out of Central America.

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Speaker 1: It's a tradition they walk across Mexico. Is one part

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Speaker 1: PR stunt in one part reality. How will that play

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Speaker 1: in Washington if the caravan gets bigger, or is the

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Speaker 1: caravan moves towards America's southern border, it's part of the problem.

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Speaker 1: And knowing where this is going to head the near term, Tom, obviously,

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Speaker 1: we don't know, and it's unknowable. Frankly, the caravans have

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Speaker 1: been going on for decades now, and how much that

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Speaker 1: adds to overall migration. No one has real figures. But

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Speaker 1: as you said, there's a reality, and there's the PR

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Speaker 1: part of this. The PR part of this is again

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Speaker 1: national security, Protect your borders, sound footing good, easily understood policy.

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Speaker 1: But when it veers into other aspects of our relationships

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Speaker 1: with Mexico, that's when trouble comes up. That's when the

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Speaker 1: Mexicans pushed back against us. That's when US suppliers of

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Speaker 1: goods and services to Mexico don't have a sense of

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Speaker 1: where this is headed. There's a there's a path here

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Speaker 1: for the president to speak both to his base and

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Speaker 1: to achieve trade policy that arguably hasn't been updated in

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Speaker 1: two decades. The question is whether or not he can

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Speaker 1: stay on the script of the reality and stay away

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Speaker 1: from the pr and John Ferrell, this speaks to the

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Speaker 1: care of that of Europe with people whether on rafts

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Speaker 1: or boats or whatever, coming across the Marna, and it's

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Speaker 1: been a big issue in Europe as well, and you've

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Speaker 1: seen it come up in various elections too, and that

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Speaker 1: drives us towards the midterms Kim later on this year.

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Speaker 1: If this is campaign politics, I imagine it plays well

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Speaker 1: with the base, and therefore I guess we can conclude

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Speaker 1: we're going to hear more of it. Kim. I think

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Speaker 1: we'll hear more of it and it plays very well

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Speaker 1: with the base. It doesn't but those those thoughts and

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Speaker 1: that scare tactic doesn't really do much on the economic side.

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Speaker 1: And that's the conundrum here is how do you figure

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Speaker 1: out what do you do to promote your base showing

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Speaker 1: up to the polls in midterm elections and this is

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Speaker 1: a good issue, and then what do you do to

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Speaker 1: avoid hurting your party by hurting its supporters economically? So out,

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Speaker 1: the Republicans have got a pretty strong message at the moment, Kim.

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Speaker 1: They've passed a tax bill. They can look to the U. S.

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Speaker 1: Economy and be hopeful about a decent year of growth. Um,

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Speaker 1: the president can get on the campaign trail and talk

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Speaker 1: about tightening up the border with Mexico. What is the

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Speaker 1: message the campaign trail message from the democ Party right now?

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Speaker 1: Uh yet to be developed. I think it is that

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Speaker 1: a lot of the policies that the president is pursuing

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Speaker 1: are not in the long term interests of the country.

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Speaker 1: For example, his flavor of immigration policy doesn't take into

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Speaker 1: account many of the nuances, be they uh, national security, economic,

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Speaker 1: criminal justice, there's a list of issues inside of immigration.

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Speaker 1: Democrats don't believe that the president's policies are comprehensive enough

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Speaker 1: and that he's taking an easy approach to a really

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Speaker 1: complicated policy. Your question is good because I don't think

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Speaker 1: that's a message that they're going to take to the polls.

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Speaker 1: I think the message Democrats want to take to the

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Speaker 1: polls basically, if that we can do better. Boss. Thank

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Speaker 1: you so much, really smart, Thank you so much for

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Speaker 1: your Asia group. Uh this morning, Neil Data joining us

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Speaker 1: now in New York, of course, joining us from Renmack Economics,

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Speaker 1: renms head of US Economics, to get a set up

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Speaker 1: for the U s States softer relative to expectations through Q.

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Speaker 1: Want you to any different, I think you'll probably see

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Speaker 1: a bounce in Q one. I mean, um, I mean

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Speaker 1: Q two. Rather, you know, we've we've seen this scenario before.

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Speaker 1: I mean, you've had a very robust jobs growth in

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Speaker 1: the first quarter, but if you look at the expenditure

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Speaker 1: side tracking estimates of GDP, they've come in a little

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Speaker 1: bit weaker. Um perils tend to be a much more

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Speaker 1: stable measure of activity along with survey measures like the

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Speaker 1: I S M, which is released later today. UM. I

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Speaker 1: think you go with those numbers, and you know that

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Speaker 1: tells me that the second quartership should be substantially better

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Speaker 1: than what we've seen in the first UM, you know,

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Speaker 1: and a lot of the weakness in Q one is

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Speaker 1: is just a function I think of weaker consumer spending.

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Speaker 1: We've seen a bit of an uptick in the in

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Speaker 1: the saving rate, UM, you know, some weakness in in

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Speaker 1: consumer spending UM. But with confidence high in the employment

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Speaker 1: situation remaining fairly fairly solid, it's unlikely that these weak

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Speaker 1: readings on consumer spending are gonna last. How did you

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Speaker 1: get a rate on the labor market in the United States?

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Speaker 1: Because we've had two jobs report for the years so far,

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Speaker 1: the January jobs report and the in the February payrolls reports,

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Speaker 1: and they couldn't have been more different. The January jobs

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Speaker 1: report got everyone scared about inflation, wage growth being the

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Speaker 1: standout there than the February jobs report was just this

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Speaker 1: monster payrolls growth k and the idea that maybe we

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Speaker 1: can carry on generating these kind of numbers without the

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Speaker 1: wage growth. So where does the truth's life for ren

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Speaker 1: mac what are you looking at general February and extrapolated forward?

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Speaker 1: For me, well, you shouldn't take any everyone knows that

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Speaker 1: you shouldn't take I mean, it's it's interesting to see

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Speaker 1: these sort of you know, significant narratives developed in the

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Speaker 1: in the capital markets based off off the off the

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Speaker 1: US jobs data that as it may um, you know,

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Speaker 1: you know, I think the general story is one um

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Speaker 1: to your ladder point, which is basically, this is a

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Speaker 1: labor market that is not yet at full employment. I

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Speaker 1: mean you have to me, the big story is the

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Speaker 1: turn in primate labor force participation that started sometime early

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Speaker 1: in continues to this day. Um. That's you know, we

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Speaker 1: are not people talk about late cycle. I hear that

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Speaker 1: all the time in our client meetings. If you look

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Speaker 1: at the labor market, it doesn't look late cycle to me.

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Speaker 1: I mean this temporary help employment accelerate late cycle. Do

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Speaker 1: we generate this sort of robust jobs growth late cycle? Um?

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Speaker 1: Well with wage growth less than three percent late cycle?

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Speaker 1: So to me, this whole story that we're you know,

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Speaker 1: using the labor market data and low unemployment as a

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Speaker 1: son that the economy is late cycle, I think is uh,

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Speaker 1: you know, real data, but you know fake news. Be careful.

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Speaker 1: Now give us the vector, fake news guy, give us

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Speaker 1: the vector on the unemployment rate, and is it a

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Speaker 1: constructive vector to drive under four percent? You know, I

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Speaker 1: think it probably will go a little four percent at

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Speaker 1: some point over the next year. But Tom, I think

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Speaker 1: the story that no one's talked about is that has

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Speaker 1: been stuck at four point one for the last five

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Speaker 1: That's that's that's the that's the main story. So if

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Speaker 1: the and and of course, I mean if you look

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Speaker 1: at things like the U six rate, for example, it's

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Speaker 1: not so much of the U six rates down, But

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Speaker 1: the question is, li isn't it lower given how much

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Speaker 1: the U three rate has gone down. So I think

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Speaker 1: that there's still some residual slack in the labor market.

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Speaker 1: Neil Donna, thank you so much, ringing back than greatly appreciated,

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Speaker 1: particularly wisdom in the five o'clock hour this morning, as

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Speaker 1: we got this second quarter going, we're talking about Walmart

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Speaker 1: gonna become one one big company, perhaps maybe even offering healthcare.

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Speaker 1: Humanist stock up about seven percent, Walmart now down about

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Speaker 1: two and a half percent. Here to tell us all

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Speaker 1: about the possible combination of a humanity and Walmart is

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Speaker 1: Jonathan Palmer, Bloomberg intelligence expert when it comes to all

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Speaker 1: things healthcare related. Always a pleasure. Thanks for coming in, Jonathan.

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Speaker 1: So what do you make of this possibility of a deal.

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Speaker 1: Why would Walmart want to buy Humanity? Thanks for having

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Speaker 1: me on pen. You know, the story came out last

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Speaker 1: week on Friday, interesting timing, and the Wall Street Journal

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Speaker 1: came out that they were in talks, early talks human

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Speaker 1: in Walmart. And they've been pretty good on the healthcare

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Speaker 1: front of kind of scoping out or smoking out potential deals.

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Speaker 1: But my view is that I don't see Humanity being

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Speaker 1: bought by Walmart. It just doesn't make sense for Walmart

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Speaker 1: to own and masure. These guys have a partnership that

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Speaker 1: goes back about seven years to two thousand and ten

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Speaker 1: where they offer a Medicare Part D plan that's co

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Speaker 1: branded together. It's been very, very successful in the market.

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Speaker 1: I think we see something along the lines of a

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Speaker 1: more in depth partnership that maybe brings more people, more

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Speaker 1: of Humanist customers into the stores. What would that how

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Speaker 1: would that take shape, what would that look like. So

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Speaker 1: there's a trend in the marketplace to consumerization of healthcare

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Speaker 1: and moving healthcare out of what we think of traditional

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Speaker 1: sites of care, so hospitals, doctor's offices. One of the

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Speaker 1: big promises of the CVS Etna deal is that CBS

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Speaker 1: will begin to start offering healthcare in their their pharmacies

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Speaker 1: for ETNA members and thereby well ering costs and maybe

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Speaker 1: getting ahead of some of the things that might be

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Speaker 1: causing problems for their patients. The same thing might be

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Speaker 1: said for this deal. Maybe we get more people into

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Speaker 1: Walmart to get healthcare checkups or or wellness checkups that

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Speaker 1: sort of. So maybe expanding the pharmacy that exists inside

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Speaker 1: of a Walmart to include a clinic. That's right. So

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Speaker 1: Walmart does have some clinics in some of its stores,

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Speaker 1: and and Humanity has been pushing down that that route

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Speaker 1: as well. They have about two hundred owned clinics in

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Speaker 1: the country. It's it's a far cry from the minute

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Speaker 1: clinics that you see at cvs, which are well over

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Speaker 1: a thousand. But you know that we might see something

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Speaker 1: along those lines. It's CBS. Are there m d s

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Speaker 1: or fancy nurses in those clinics or not? It's a

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Speaker 1: mix depending on where it makes You don't know. And

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Speaker 1: it Walmart Humanity, would they have m d s or

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Speaker 1: fancy nurses in those clinics? That's a great question. Does

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Speaker 1: anybody want to go to these things? Come on? Well,

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Speaker 1: you know, for some run of the middle things. I

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Speaker 1: think you could go to a local clinic instead of

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Speaker 1: going to your doctor. And maybe the middle sun takes

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Speaker 1: a curveball off his left elbow in a little league game,

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Speaker 1: and I'm going to go some place without a doctor

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Speaker 1: or a fancy nurse. I agree with you there, you

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Speaker 1: break something, you want to go to a hospital. But

431
00:22:06,640 --> 00:22:09,000
Speaker 1: if you have a sniffle in your your g P

432
00:22:09,200 --> 00:22:11,200
Speaker 1: says I can't see you for another three days, you

433
00:22:11,280 --> 00:22:13,200
Speaker 1: might say, okay, I'll go wait for half an hour

434
00:22:13,240 --> 00:22:15,199
Speaker 1: at the local CVS or Walmot. Now what we do

435
00:22:15,240 --> 00:22:17,399
Speaker 1: here at surveillance as we can see Dr al and

436
00:22:17,400 --> 00:22:19,399
Speaker 1: he says, get to work. I mean that's how it works, right,

437
00:22:19,400 --> 00:22:21,359
Speaker 1: But let me let me just push back on this. Okay,

438
00:22:21,440 --> 00:22:25,359
Speaker 1: So you have some an accident, what is typically going

439
00:22:25,440 --> 00:22:27,320
Speaker 1: to happen. You're gonna end up in a hospital. They're

440
00:22:27,320 --> 00:22:28,919
Speaker 1: gonna well, but I mean, what are they gonna do.

441
00:22:29,040 --> 00:22:30,840
Speaker 1: They're gonna take an X ray or you're gonna end

442
00:22:30,920 --> 00:22:32,640
Speaker 1: up having an m r I or a CAT scan,

443
00:22:32,760 --> 00:22:35,520
Speaker 1: depending upon the severity of situation. If you can get

444
00:22:35,560 --> 00:22:38,520
Speaker 1: those kinds of things into a non hospital setting, why

445
00:22:38,600 --> 00:22:41,640
Speaker 1: do they need to be in a hospital. Great point.

446
00:22:41,800 --> 00:22:44,840
Speaker 1: I don't think we'll see that level of acuity or complications,

447
00:22:45,000 --> 00:22:47,680
Speaker 1: you know, move out of the traditional hospital setting. I

448
00:22:47,720 --> 00:22:50,160
Speaker 1: think these are more the run of the mill, preventative

449
00:22:50,560 --> 00:22:53,760
Speaker 1: types of visits. But why though, is it because the cost?

450
00:22:53,880 --> 00:22:56,280
Speaker 1: Is it because the cost machine and that m r

451
00:22:56,320 --> 00:22:58,439
Speaker 1: A machine just costs so much money that you know

452
00:22:58,480 --> 00:23:00,280
Speaker 1: you got to keep it in the hospital. Well, when

453
00:23:00,280 --> 00:23:02,399
Speaker 1: it comes to insurance companies and healthcare companies in general,

454
00:23:02,440 --> 00:23:04,760
Speaker 1: it's always about cost and how can you ower costs?

455
00:23:05,920 --> 00:23:09,199
Speaker 1: Is there a proof that they can make money on

456
00:23:09,240 --> 00:23:14,200
Speaker 1: the revenue down the income statement by clinical clinic sizing.

457
00:23:14,280 --> 00:23:18,040
Speaker 1: I'm inventing a new word like cliniquing or whatever. Walmart's

458
00:23:18,680 --> 00:23:21,320
Speaker 1: I just don't this reminds me of you know, banks,

459
00:23:21,320 --> 00:23:24,400
Speaker 1: it's a grocery stores that's been the rage like three

460
00:23:24,440 --> 00:23:30,800
Speaker 1: times phim It's it's definitely h an unproven model. Nobody

461
00:23:30,840 --> 00:23:34,560
Speaker 1: has proven this out. Nobody's even CBS with their clinics.

462
00:23:34,640 --> 00:23:36,239
Speaker 1: It's a it's a hope and a dream that that

463
00:23:36,320 --> 00:23:39,200
Speaker 1: happens over the next five or six years. So if

464
00:23:39,200 --> 00:23:44,040
Speaker 1: this combination is about expanded use of the Walmart real

465
00:23:44,160 --> 00:23:49,879
Speaker 1: estate to offer healthcare services, Humana will be looking what

466
00:23:50,160 --> 00:23:54,119
Speaker 1: at the cost benefit analysis to determine whether that is

467
00:23:54,160 --> 00:23:57,960
Speaker 1: a less expensive delivery system than what they currently offer

468
00:23:57,960 --> 00:24:01,520
Speaker 1: in hospitals. Absolutely, there are. They're focused on the cost

469
00:24:01,560 --> 00:24:04,520
Speaker 1: and traditionally, if you can manage people earlier in the process,

470
00:24:04,520 --> 00:24:07,240
Speaker 1: so getting them to see doctors earlier, making sure that

471
00:24:07,280 --> 00:24:09,680
Speaker 1: they follow through on on checkups, or that their blood

472
00:24:09,720 --> 00:24:13,280
Speaker 1: pressure medications working, those sorts of things, that saves you

473
00:24:13,359 --> 00:24:16,320
Speaker 1: money down the line from something that's maybe far worse

474
00:24:16,359 --> 00:24:18,800
Speaker 1: that requires a long hospital. Okay, then let me just

475
00:24:18,840 --> 00:24:20,840
Speaker 1: push back to what you originally said, which is the

476
00:24:21,119 --> 00:24:24,160
Speaker 1: perhaps no deal because it didn't make sense. So why

477
00:24:24,200 --> 00:24:27,320
Speaker 1: not have Walmart just buy an insurance company and self insure?

478
00:24:28,960 --> 00:24:30,600
Speaker 1: But what's the difference? I mean, if you're gonna pay

479
00:24:30,600 --> 00:24:32,440
Speaker 1: the premium to someone, why pay it to a third

480
00:24:32,480 --> 00:24:36,800
Speaker 1: party that ostensibly is a being counter but doesn't necessarily

481
00:24:36,840 --> 00:24:39,679
Speaker 1: add value to the service that is ultimately being delivered.

482
00:24:39,720 --> 00:24:42,320
Speaker 1: It's not like Humanita has its own doctors, its own

483
00:24:42,400 --> 00:24:45,760
Speaker 1: nurse practitioners and so on. Well, you know, the healthcare

484
00:24:45,800 --> 00:24:48,399
Speaker 1: markets own animal and I think you know, Walmart is

485
00:24:48,440 --> 00:24:52,040
Speaker 1: really good at retail and and human is pretty good

486
00:24:52,040 --> 00:24:54,720
Speaker 1: on the insurance side, and They're already running clinics and

487
00:24:54,760 --> 00:24:57,679
Speaker 1: doing this themselves, so they probably have more expertise in

488
00:24:57,720 --> 00:24:59,679
Speaker 1: that area than than Walmart, So it makes sense for

489
00:24:59,720 --> 00:25:03,080
Speaker 1: them partner as opposed to do an outright purchase. How

490
00:25:03,119 --> 00:25:07,720
Speaker 1: will the hospitals and the doctor's respond to the hopes

491
00:25:07,760 --> 00:25:10,920
Speaker 1: and dreams of these providers and they're merging in into

492
00:25:10,960 --> 00:25:17,159
Speaker 1: a medical alegopoly. Well, hospital administrators and doctors are not

493
00:25:17,280 --> 00:25:21,080
Speaker 1: big fans of systems in general. They don't like hospital systems,

494
00:25:21,080 --> 00:25:23,520
Speaker 1: they don't like insurers, they don't like p A PBM,

495
00:25:23,640 --> 00:25:26,960
Speaker 1: So I think you'll see a certain amount of skepticism

496
00:25:27,000 --> 00:25:30,160
Speaker 1: from those groups on on this promise. The reality, though,

497
00:25:30,160 --> 00:25:33,119
Speaker 1: is I think if you told a doctor that said, oh,

498
00:25:33,119 --> 00:25:35,560
Speaker 1: you know, Ms. Smith comes in and waste my time

499
00:25:35,600 --> 00:25:38,080
Speaker 1: over every little sniffle, she can go to a local

500
00:25:38,119 --> 00:25:41,040
Speaker 1: CBS or or Walmart and get that taken care of

501
00:25:41,119 --> 00:25:43,920
Speaker 1: and I can focus my time on patients who who

502
00:25:43,960 --> 00:25:46,440
Speaker 1: have bigger problems, they would probably agree with that notion

503
00:25:46,520 --> 00:25:48,880
Speaker 1: that that might work. Stop, I'm going to give away

504
00:25:48,920 --> 00:25:52,719
Speaker 1: my microbiology background on one in eight D forty two

505
00:25:52,760 --> 00:25:55,960
Speaker 1: of those patients that wander into a Walmart and somewhere

506
00:25:55,960 --> 00:25:58,960
Speaker 1: between aisle six and aisle ten going because they have

507
00:25:58,960 --> 00:26:01,320
Speaker 1: a stiffle is going to be some form of steph

508
00:26:01,440 --> 00:26:05,320
Speaker 1: lecoccus advanced infection that that guy or that advanced nurse

509
00:26:05,680 --> 00:26:07,720
Speaker 1: is getting paid a lot of money to figure out.

510
00:26:08,320 --> 00:26:11,560
Speaker 1: I mean, I just I don't understand how the quality

511
00:26:11,760 --> 00:26:17,080
Speaker 1: is maintained given emergent, rare conditions. It's a very good point.

512
00:26:17,320 --> 00:26:19,000
Speaker 1: I think you have to really think of take a

513
00:26:19,000 --> 00:26:20,639
Speaker 1: step back and say, we're really not going to be

514
00:26:20,640 --> 00:26:22,960
Speaker 1: focusing on on these sorts of things. It's the run

515
00:26:23,000 --> 00:26:26,560
Speaker 1: of the mill healthcare delivery that's going to happen there,

516
00:26:26,560 --> 00:26:28,840
Speaker 1: and it's not something that you want to go if

517
00:26:28,880 --> 00:26:31,919
Speaker 1: you have some rare disease or some rare condition. Is

518
00:26:31,920 --> 00:26:34,760
Speaker 1: this also a situation in which we're focused on on

519
00:26:34,960 --> 00:26:38,080
Speaker 1: what is a diminimous cost in the system, which is

520
00:26:38,119 --> 00:26:40,679
Speaker 1: that most of the cost in the health care system

521
00:26:40,720 --> 00:26:43,520
Speaker 1: occurs at late stages of life and has to do

522
00:26:43,600 --> 00:26:47,920
Speaker 1: with either catastrophic or uh illnesses related to terminal care.

523
00:26:48,160 --> 00:26:51,080
Speaker 1: That's right. If you're you know, the majority of health

524
00:26:51,119 --> 00:26:54,080
Speaker 1: care dollars are spent by people over sixty five on

525
00:26:54,080 --> 00:26:56,440
Speaker 1: on a lot of the end of life sort of treatments.

526
00:26:56,440 --> 00:27:01,000
Speaker 1: If you have cancer, debilitating heart does ease you know,

527
00:27:01,040 --> 00:27:04,000
Speaker 1: if you have diabetes. These are all, you know, really

528
00:27:04,080 --> 00:27:07,080
Speaker 1: high cost to the health care system. So if you

529
00:27:07,080 --> 00:27:09,480
Speaker 1: can do some stuff to prevent some of these from

530
00:27:09,520 --> 00:27:13,040
Speaker 1: happening earlier, that's what would it make more sense for,

531
00:27:13,119 --> 00:27:19,159
Speaker 1: let's say Walmart to buy or expand uh diabetes uh

532
00:27:19,720 --> 00:27:24,359
Speaker 1: renal care sentence. That's an interesting concept. Listen to you,

533
00:27:24,359 --> 00:27:28,880
Speaker 1: you know the terminology. Should Walmart buy New York Presbyterian,

534
00:27:31,280 --> 00:27:32,720
Speaker 1: But I mean if they got the if they got

535
00:27:32,720 --> 00:27:37,760
Speaker 1: the real estate, why not go there for your dialysis? Well,

536
00:27:37,880 --> 00:27:41,520
Speaker 1: dialysis extremely complicated. Those patients are very sick. I don't

537
00:27:41,520 --> 00:27:44,359
Speaker 1: think anybody wants to go get dialysis who's getting it

538
00:27:44,400 --> 00:27:47,360
Speaker 1: at their local Walmart. Jonathan Palmer, thank you so much.

539
00:27:47,960 --> 00:27:52,160
Speaker 1: Thanks for listening to the Bloomberg Surveillance podcast. Subscribe and

540
00:27:52,240 --> 00:27:57,520
Speaker 1: listen to interviews on Apple Podcasts, SoundCloud, or whichever podcast

541
00:27:57,600 --> 00:28:01,840
Speaker 1: platform you prefer. I'm on Twitter at Tom Keane before

542
00:28:01,880 --> 00:28:05,720
Speaker 1: the podcast. You can always catch us worldwide. I'm Bloomberg

543
00:28:05,800 --> 00:28:06,080
Speaker 1: Radio