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Speaker 1: Runch you by Bank of America Mary Lynch with virtual reality,

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Speaker 1: virtually everything will change. Discover opportunities in a transforming world

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Speaker 1: VI of a mL dot Com slash VR, Mary Lynch,

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Speaker 1: Pierced Fenner and Smith Incorporated. Welcome to the Bloomberg Surveillance Podcast.

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Speaker 1: I'm Tom Keene with David Gura. Daily we bring you

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Speaker 1: insight from the best of economics, finance, investment, and international relations.

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Speaker 1: Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, Bloomberg dot Com,

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Speaker 1: and of course on the Bloomberg. Anthony Casenzi with me,

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Speaker 1: who has written all sorts of brilliant books on short

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Speaker 1: term paper? Is it Stigams? I've always had trouble pronouncing

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Speaker 1: Sickens money market to the seventies that I rewrote, It's

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Speaker 1: twelve pages. I put in about five new pages myself. Yeah,

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Speaker 1: it's like the Bible of short term paper. When you

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Speaker 1: see volatility across all asset classes so dampened. Witnessed the

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Speaker 1: equity sp X VIX indicator going well under ten record

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Speaker 1: twenty four year lows. What does it say about the

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Speaker 1: machinery the engine of our finance connected to UH productivity

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Speaker 1: and inflation? And they are linked the productivity because of

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Speaker 1: a lack of investment by US government and low inflation,

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Speaker 1: because it means central banks, well, they can't move their

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Speaker 1: policy rates much because they know the fiscal authorities aren't

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Speaker 1: doing much to promote economic growth, which is languishing globally

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Speaker 1: in part because of giant social safety nets and promises

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Speaker 1: made to future generations. Generations ago, money is that today

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Speaker 1: can't be spent on, say, let's say education or infrastructure,

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Speaker 1: things that would power economical One quick example here in

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Speaker 1: New York, Penn Station of the busiest train station in

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Speaker 1: the country is under construction now until September one. It's

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Speaker 1: very difficult for people in New Jersey to get through

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Speaker 1: this one tunnel. It got clogged a month or so

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Speaker 1: ago because of a derailment. I was stuck in it

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Speaker 1: for five hours. Um, so I couldn't be product in

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Speaker 1: the power you could now want to, couldn't walk off

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Speaker 1: the train, and so for five hours it was unproductive.

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Speaker 1: What they wanted for decades is a second tunnel. And

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Speaker 1: this is only New York. And there are many many

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Speaker 1: cases like this, not maybe as perhaps not as large,

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Speaker 1: but ways to make people move around faster, to do

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Speaker 1: things better that we're not doing. I mean, everybody knows

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Speaker 1: with your accent, you gotta be from someplace self like

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Speaker 1: Staten Island and the idea of the Staten Island eighteen seventeen.

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Speaker 1: This I mean something as basic as the Staten Island Ferry,

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Speaker 1: you know for this. The ninth sixty four, the year

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Speaker 1: I entered the world, the Verizono Bridge was built connecting

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Speaker 1: Brooklyn to Staten Island. There was the biggest suspension bridge

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Speaker 1: in the world. That that well, here's here's what happened though,

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Speaker 1: in terms of how how government spending can help growth.

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Speaker 1: Staten Island became the fastest growing county in the country

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Speaker 1: at that I'm sorry, in New York for thirty years

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Speaker 1: straight because of that bridge, because it made it easier

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Speaker 1: for people since it is an island, to to get

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Speaker 1: to Staten Island to to uh build homes and of

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Speaker 1: course grow families and grow businesses. So the word you

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Speaker 1: used before, Tony Cosnzi, which is so important and it's

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Speaker 1: it's this is why we love having you on. It's

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Speaker 1: a behavior word languish. We languish. Are we raising rates

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Speaker 1: into a languishing economy or are we getting rates up?

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Speaker 1: Just to get back to normal while we languish. There's

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Speaker 1: a big difference there. We are raising rates into a

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Speaker 1: languishing economy. In the question has become of late is

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Speaker 1: the Federal Reserve overtightening it? Should it be tightening? And

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Speaker 1: perhaps given that this so called Phillips curve, the idea

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Speaker 1: that there's a relationship between low unemployment and higher inflation

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Speaker 1: may not exist, and so there has become a question

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Speaker 1: about whether the Fed's overdoing it. Where's this question in

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Speaker 1: tips the inflation protected securities that either and the markets

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Speaker 1: price for this consumer price indext to be at one

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Speaker 1: in three quarter percent over the next ten years, roughly

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Speaker 1: where it is now. In other words, the market saying

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Speaker 1: the Federal Reserve, despite all its efforts, won't be able

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Speaker 1: to promote Well, it's not just that, it's also the

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Speaker 1: US dollar has weakened and yields have fallen, which is,

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Speaker 1: they're all signals that perhaps if end I've left out

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Speaker 1: the biggest indicator, the yield curve, it's flattening, which is

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Speaker 1: to say, as the fest pushes short term interest rates up,

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Speaker 1: longer term interest rates relative to those have fallen. So

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Speaker 1: the difference in yield has sh punk, which is a

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Speaker 1: way of saying that long term investors think that ultimately

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Speaker 1: inflation may decline, or since long term rates are accumulative

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Speaker 1: bests and where short term rates will be in the future,

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Speaker 1: that perhaps they Fed will have to reverse its right high.

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Speaker 1: But is tony is anybody at the Fed the PhD

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Speaker 1: s if they read stigiums I mean, if they read

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Speaker 1: the twelve at page tone that you you wrote, yes,

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Speaker 1: and this is the problem as some would say. Um,

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Speaker 1: some could say and argue that those who are constructing

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Speaker 1: policy today and the FED staff is a two hundred

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Speaker 1: PhDs there, that the the religion they've got is to

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Speaker 1: bygone a bygone era. So the so called Phillips curve

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Speaker 1: developed in a late nineteen fifties. Uh, this idea of

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Speaker 1: relationship between unemployment inflation. Perhaps it was simply a product

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Speaker 1: of the fifties, sixties and seventies, eighties, and perhaps not

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Speaker 1: even the nineties. And we should ignore it and look

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Speaker 1: back to a period of eighteen fifty nineteen fifty when

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Speaker 1: that seemed to be no films. But when you say

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Speaker 1: this to Scott Mather, anybody else at him go, I

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Speaker 1: mean you go in there is the stud of short

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Speaker 1: term interest rates. I've never heard you talk more about

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Speaker 1: fiscal about fiscal dynamics as you are now. How does

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Speaker 1: PIMCO adjust their thinking? Do they go to a week

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Speaker 1: to talk about this or all the game of thrones?

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Speaker 1: Inflation is coming well. We developed what we call first

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Speaker 1: we have this new new normal concept, the idea that

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Speaker 1: economic growth would be slower than historical averages than three

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Speaker 1: years ago. We developed a new neutral concept, the idea

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Speaker 1: that the neutral policy rate where the Feds neither pressing

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Speaker 1: on the gas or the break has lower than historical averages.

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Speaker 1: And so we've been looking at them. Each year we

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Speaker 1: tested at our secular forms and this year we talked

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Speaker 1: with in in Newport Beach, Larry Summers for example in

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Speaker 1: New English. So we look at fiscal matters and also

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Speaker 1: Gene Sperling form ahead of the National Economic Council, numerous

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Speaker 1: others that can help us to discern the outlook on

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Speaker 1: fiscal policy. And even had a conversation recently with John

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Speaker 1: Bayn in the former House Speaker. We wanted to share

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Speaker 1: all that because of what we see in Greg Villa

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Speaker 1: and Kevin'serlian this morning. Do you shift everything? We can't

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Speaker 1: even get healthcare going. We do follow it eachtraordinarily closely

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Speaker 1: because we knew this year in seen the markets were

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Speaker 1: thinking about the possibility of a of a sea change

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Speaker 1: in fiscal policy. It might be more fiscal span didn't happen.

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Speaker 1: We don't expect much to happen next year either. It'll happen,

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Speaker 1: most likely tax some form of tax cuts, but it

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Speaker 1: won't be long. I wanted to transformation. I want to

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Speaker 1: distill this with Tony because I think it's so important.

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Speaker 1: How you know the rate increased parlor game, which folks

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Speaker 1: is you all know I try to avoid like crazy.

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Speaker 1: I'm going to do it right now with the best

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Speaker 1: guy in the block. One rate increase, three rate increases

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Speaker 1: go up to this year as probable, probably December. But

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Speaker 1: if there's an inflation optics, which we wouldn't expect, be September.

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Speaker 1: The next year three two to three. But think about this, though,

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Speaker 1: we'd be squabbling if I'm wrong, if we're wrong and

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Speaker 1: it's two and it's not three. Uh. With the tiny amounts.

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Speaker 1: Of course, the FED in the past would move rates

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Speaker 1: by significant amounts. And what we expect, and the more

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Speaker 1: important idea is that the new neutral concept means that

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Speaker 1: the the terminal rate where the FIT ends its policy

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Speaker 1: regime will probably be somewhere in the twos. Now, the

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Speaker 1: tenure of the past two cycles didn't trade much in

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Speaker 1: yield above where that terminal rate was. In other words,

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Speaker 1: if the FITS policy rate is going to go no

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Speaker 1: higher than two and a half, then the tenure yields

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Speaker 1: shouldn't be much higher than that. Maybe it's towards three

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Speaker 1: things to talk about with Tony Krisenzi. We'll come back,

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Speaker 1: I think on the terminal yield. You know, we kid

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Speaker 1: about inflation is coming. And for those of you that

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Speaker 1: don't follow Game of Thrones, it's a playoff this idea

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Speaker 1: of winter is coming, which is sort of the theme,

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Speaker 1: if you will, of the mythology of the Game of Thrones.

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Speaker 1: We're gonna come back on the mythology of cherry yelling.

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Speaker 1: Will that mythology change next year when we may still

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Speaker 1: be waiting to see if inflation is coming. Not to

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Speaker 1: spoil anything, but Jamie Lanister just walked in David Gura

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Speaker 1: with this threat of the difference. David, as I stood

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Speaker 1: up and watched all the Game of Throw, you stayed

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Speaker 1: up and watched the new addition a Game of Thrones

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Speaker 1: and then you watched all the season six. Lets morning, right,

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Speaker 1: it's gonna blame it on the wagon train back from Ida.

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Speaker 1: But yes, there you go. We're good. Mr Ger and

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Speaker 1: I are in good behavior this morning. We're not spoiling

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Speaker 1: Game of Thrones, particularly London. It's good morning London Radio

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Speaker 1: as well. Where you got it at two am? So

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Speaker 1: many of you, boy did we You should have seen

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Speaker 1: the emails and put Mr Keene in his place, David,

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Speaker 1: do not give away. And what I will say is

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Speaker 1: it's beautifully shot there, beautiful, beautiful watched. Yes, oh no,

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Speaker 1: a huge fan. I just think it's it's like X

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Speaker 1: Files and then I waited ten years or something else.

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Speaker 1: Dantres Finally there it is. He was in X File

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Speaker 1: season three. Tony Cosenzi with us uh Pimco, let's grape

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Speaker 1: up the script. Tony h for for Denando Giugliano with

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Speaker 1: Bloomberg View has a spectacular opet today on Milton Friedman

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Speaker 1: in on Olivia Blanchard was a huge friend of the program,

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Speaker 1: making a very thoughtful analysis of modern Freedman theory like

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Speaker 1: Nehruin and all that, and the basic idea is they

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Speaker 1: thought all this stuff up years ago, Ned Phelps, John Taylor,

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Speaker 1: and others. And the answer is it doesn't seem to

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Speaker 1: work when things get bad. Does Nehru's theory work when

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Speaker 1: things get bad and rates go down? This is something

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Speaker 1: we don't know and the Federals is experimenting with and

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Speaker 1: this is why it's making the case for moving gradually

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Speaker 1: because it doesn't know whether this relationship between the unemployment

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Speaker 1: rate and inflation exists. And last week that's how Cherry

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Speaker 1: yell and moved the market. But Milton Freedman I was

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Speaker 1: looking back at something called the Great Debate from the

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Speaker 1: late nineties sixties between Milton Friedman, Tobewin, Samuelson, and others.

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Speaker 1: He tried to say, um, what police. He tried to

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Speaker 1: make the case as to what Monty policy can and

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Speaker 1: can't do. The two cans in the three cans are

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Speaker 1: The cans are that it can prevent money. I'm sorry,

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Speaker 1: what can do the three cans is it can prevent

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Speaker 1: money itself from being a major source of disruption. Think

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Speaker 1: about the dropping money supply from thirty three as a

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Speaker 1: referenced felt a third he said, that's why there was

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Speaker 1: the Great Depression Secondly, it can keep keep offsets, can

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Speaker 1: offset disturbances, and it can provide a background for the economy,

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Speaker 1: keep it well. Oil. It can't do is peg interest

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Speaker 1: rates and peg unemployment. Why peg interest rates? He said.

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Speaker 1: He referred to nineteen the nineteen fifties and the Treasury

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Speaker 1: Chord nineteen fifty one, where after a period where the

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Speaker 1: Fed did peg interest rates, it said it couldn't. And he's,

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Speaker 1: as he says, central bank at the Central Bank globally

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Speaker 1: realized I couldn't do that because inflation ultimately picks up.

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Speaker 1: But you and I have had a fabulous day talking

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Speaker 1: about the fifties in Eisenhower. Our parents used to drive

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Speaker 1: across the country when it was one third of an interstate,

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Speaker 1: and all that mean Gurage just takes it for granted

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Speaker 1: that there's a full interstate out there. You know, he

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Speaker 1: thought the Verizon Bridge was there when Sano came into

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Speaker 1: the harbor. But but Tony, the idea here is those

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Speaker 1: old theories don't work in a new global economy. The

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Speaker 1: slew rates are too quick, the financial system is too integrated.

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Speaker 1: That's what Olivier Blanchard's dealing right. We met with Mr

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Speaker 1: blanche at pimco's office in Newport Beach Art for a

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Speaker 1: year ago, and we were talking about productivity in this

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Speaker 1: context and he was somewhat optimistic could pick up, but

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Speaker 1: not significantly. And this is the problem with the country.

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Speaker 1: The nation's resources are allocated toward areas that aren't um

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Speaker 1: positive for the long term growth of the economy. I

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Speaker 1: just want to point out, David Girl that John Snow

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Speaker 1: met with PIMCO. He was at the SEC, he was

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Speaker 1: at the second reporter. They got everybody at PIMCO. John

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Speaker 1: Snow showed up on every resource we can Tony for

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Speaker 1: a while. We heard that you'll talk about histories. Is

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Speaker 1: to what extended she extend? Our other central bankers concerned

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Speaker 1: about it right now? Well, you're seeing in Japan that

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Speaker 1: certainly worried about it. And we know that Prime Minister

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Speaker 1: Abe and us there worry about the decline in the population.

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Speaker 1: It's at a hundred twenty six million persons. It's following

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Speaker 1: a half million people just the last few years or so,

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Speaker 1: and he's expected potentially to go to under one hundred

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Speaker 1: million by the year face with a decline in population growth,

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Speaker 1: how then can Japan grow rapidly? It can't the fact

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Speaker 1: that it has any growth at all is impressive. Europe

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Speaker 1: faces as similar, but not as bad a problem. On

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Speaker 1: the demographic front. The United States better but not great,

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Speaker 1: the population growing slowly and the labor force more importantly,

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Speaker 1: growing at only a half percent per year, historically growing

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Speaker 1: at one So in terms of hysteresis, factors that can

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Speaker 1: cause it can include the demographic issue, can also include

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Speaker 1: credit growth, which is slow globally in part because of

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Speaker 1: efforts by regulators to slow down. But productivity, in the

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Speaker 1: end is at the heart of it, and that requires

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Speaker 1: governments to pivot away from monetary policy toward fiscal policy

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Speaker 1: and to do more on the investment front. Tony, thank

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Speaker 1: you so much. Greatly appropriate is with our history lesson

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Speaker 1: earlier on this Debton Island Ferry and such we have

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Speaker 1: now on our phone lines when Gregg Valier of Horizon Investment,

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Speaker 1: somebody on whom we werely for regular updates on what's

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Speaker 1: going on in Washington, d C. And Greg, great to

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Speaker 1: have you with us this morning. It's it seems prudent

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Speaker 1: for us to start with the state of play on healthcare.

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Speaker 1: We wish Senator McCain the best. He's by all accounts

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Speaker 1: reportedly recovering from some surgery on blood clot above his

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Speaker 1: left eye in Arizona, and that's caused to delay in

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Speaker 1: this whole process. While we pass along our our good

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Speaker 1: wishes to the senator, what does that mean for the

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Speaker 1: process going forward? Greg, Well, nothing good, David, good morning. Uh.

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Speaker 1: First of all, I have thought for a while that

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Speaker 1: John McCain is a giant among pigmies in the Senate,

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Speaker 1: and he will be missed for the next few weeks. Uh.

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Speaker 1: There's a story in this morning's New York Times quoting

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Speaker 1: brain surgeons who worried this could be more ominous. What

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Speaker 1: caused this? How long will it take for him to recover?

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Speaker 1: So to go to your question, I think that the

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Speaker 1: health care process, which already was looking pretty doubtful, has

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Speaker 1: suffered perhaps a fatal blow. Santa. McCain is eighty years old,

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Speaker 1: I'll point out, and it is indeed a good piece

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Speaker 1: that you point to on the New York Times. I'll

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Speaker 1: flunk that and put it out on Twitter. What are

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Speaker 1: we waiting for at this point? A CBO score that

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Speaker 1: was by some accounts expected to come out today that's

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Speaker 1: been delayed. I gather what what's leader McConnell doing at

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Speaker 1: this point now in terms of trying to get his

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Speaker 1: colleagues on the Republican side to come on board with him.

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Speaker 1: I think he's got the fear, David, that the score

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Speaker 1: will not be good. It'll show, you know, millions of

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Speaker 1: people perhaps losing Medicaid coverage. So I think McCain has

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Speaker 1: to realize he does not have the votes. This may

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Speaker 1: drag into the fall, and the agenda in the fall

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Speaker 1: is so incredibly crowded it's going to be pretty tough

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Speaker 1: to get a healthcare bill done. Greg. Adults are entering

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Speaker 1: the room, Ty Cobb, not the baseball player of the

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Speaker 1: attorney with Hogan levels is one of them. Is there

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Speaker 1: any indication within your reporting in your study that the

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Speaker 1: president will listen to adults or is there going to

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Speaker 1: be a real tension point literally within the next twenty

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Speaker 1: four hours when he goes no to their good requests. Well,

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Speaker 1: he seems to have problems with his attorneys. They don't

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Speaker 1: last very long. So well, we'll see with the current team.

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Speaker 1: You know, you can make a case that he had

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Speaker 1: a good meeting to Paris. I thought that went quite well.

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Speaker 1: There haven't been any huge blow ups in the last

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Speaker 1: few days. Maybe he could have a fairly good stretch.

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Speaker 1: But we wake up every morning wondering what's going to

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Speaker 1: be in the Washington Post or the New York Times.

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Speaker 1: Are there more revelations to come? Greg? After a weekend

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Speaker 1: in Bedminster at his resort there, Donald Trump tweeting heading

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Speaker 1: back to Washington, d C. Much will be accomplished this

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Speaker 1: week on trade, the military, and security. Should I read

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Speaker 1: anything into that? The fact that health care is not

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Speaker 1: among those things mentioned. I think he's got to know,

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Speaker 1: David that it's dolled it probably several weeks. So there

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Speaker 1: are other issues he's going to talk today about by America,

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Speaker 1: somewhat ironic since many of his products are not made

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Speaker 1: in this country. But if he can stay on message,

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Speaker 1: I do think there are some issues where he can

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Speaker 1: get traction. Well wait a minute, is he stayed on message?

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Speaker 1: I mean, I'm gonna say he did, and worsaw he

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Speaker 1: had a pretty good job, and worsaw and then G twenty.

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Speaker 1: Depending on who you talked to, their view is different.

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Speaker 1: But Greg, I don't understand where who he's listening to,

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Speaker 1: in the family or within the White House. Who's this

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Speaker 1: guy listening to is going to be with all presidents

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Speaker 1: m there's an adoring echo chamber that they listened to,

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Speaker 1: and they perhaps don't realize that some issues need a

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Speaker 1: serious attention right away. So I think that's a problem

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Speaker 1: for him. He probably listens to a very narrow circle,

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Speaker 1: as children are loyal advisers, but I don't think he

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Speaker 1: listens to enough people, certainly not enough people from Capitol Hill.

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Speaker 1: That's the way. Well, let's come back with Greg David Girl,

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Speaker 1: that's the way, bloombergs. Let's we live you and I

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Speaker 1: live in a neco an adoring necho literally ten feet

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Speaker 1: by ten feet. Rachel was was was adoring and echo

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Speaker 1: Jay Marin this morning, very good when Greg Valier of

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Speaker 1: Horizon Investments joining us from Washington, d C. As he

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Speaker 1: often does, Greg, let me ask you here about where

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Speaker 1: things stand when it comes to tax reformer were able

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Speaker 1: to have a conversation about it or politicians able to

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Speaker 1: have a conversation about it until we surmount this health

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Speaker 1: care hurdle. Well, there's been some progress, Dave in behind

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Speaker 1: the scenes. Minuchin has met with Paul Ryan and Kevin

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Speaker 1: Brady and a lot of the other big players. I

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Speaker 1: think they're getting closer to a consensus on what they want.

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Speaker 1: Is it just reform, is it just tax cuts? So

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Speaker 1: they're making some progress. Hopefully in the fall, the Houseways

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Speaker 1: and Means Committee will start marking up a bill. But

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Speaker 1: all of these other impediments healthcare, getting a budget done

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Speaker 1: make it really unlikely that we can get a tax

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Speaker 1: bill done this year. Let me ask you about the

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Speaker 1: trips that the president has taken abroad recently. I don't

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Speaker 1: think you and I have spoken since the gent summit

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Speaker 1: in Hamburg. Of course, the president was in Paris last

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Speaker 1: week at the invitation of the new French president. What

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Speaker 1: does that tell us about the way that he's approaching

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Speaker 1: foreign policy his two recent trips to Europe. Well, I'd

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Speaker 1: give him credit for evolving. Uh. He said a lot

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Speaker 1: of harsh things about the city of Paris during the campaign.

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Speaker 1: But he's changed. And I think, you know, there's a

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Speaker 1: there's candidates and then there are presidents. And I think

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Speaker 1: Trump is, you know, maybe not smoothly morphing, but he

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Speaker 1: is morphing towards being a president rather than a strident candidate.

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Speaker 1: Is his is his outlook changing? Is his willingness to

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Speaker 1: engage with foreign leaders? Changing? Is his policy changing at

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Speaker 1: low these seven months here into to see. That's a

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Speaker 1: good question. Let's see this week. I think there's probably

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Speaker 1: going to be a lot of talk about NAFTA. Is

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Speaker 1: he willing to take on Canada? In Mexico, There'll be

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Speaker 1: a lot of talk coming up about immigration policy, So

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Speaker 1: we'll see. I think his rhetoric with someone like Makrone

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Speaker 1: is encouraging, but I think you've got to look at

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Speaker 1: the policies. I'll go with that the rhetorics there, but

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Speaker 1: then he has spokespeople, spokesperson, spokeswomen's staff members, et cetera. Greg,

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Speaker 1: you and I talked about this earlier this morning. When

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Speaker 1: does he start knocking people's heads together and get adults

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Speaker 1: in there, like the announcement of Mr Cobb but the attorney, Well,

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Speaker 1: hopefully that will come. Hopefully he realizes he needs a

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Speaker 1: lot more talent around him. Um, I think he needs

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Speaker 1: to listen to more people. We talked about that earlier today.

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Speaker 1: I think he's got to wideness circle of advisors. Um, well,

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Speaker 1: I'll agree. I'll take your point that this is less

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Speaker 1: about the people involved and that he doesn't have a

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Speaker 1: pool to pick from, because do you observe Greg Valier

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Speaker 1: that he to and perfect loyalty. Loyalty is the only

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Speaker 1: litmus test for this executive and it's not reciprocated. That's

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Speaker 1: a key point, tom So. I think that a lot

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Speaker 1: of people who might be toying with the idea of

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Speaker 1: joining this administration realized he's not easy to work for.

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Speaker 1: Uh and I think that's an impediment for him. Go ahead,

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Speaker 1: go ahead, Greg valuate with us. Let me set this up,

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Speaker 1: David grew. If I could Greg valuate with us with

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Speaker 1: a Vicks nine green on the screen, futures up to down,

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Speaker 1: futures up. David, I interrupted you because of that rattlesnake

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Speaker 1: boast bow tie. Greggy brought me back a rattles steak skin.

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Speaker 1: I'd a whole boat. It smells. It's so disgusting there, see,

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Speaker 1: if I could convinci Greg, let me ask you about

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Speaker 1: the obsession with pallace intrigue here. This has been a

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Speaker 1: white house that has been closely watched. Last week there

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Speaker 1: was speculation that Gary Cone might be in the running

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Speaker 1: to be the next FED chair. There's a lot of

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Speaker 1: reporting here that Sarah Huckabee Sanders is not going to

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Speaker 1: take over the responsibilities that Sean Spicer has had. Is

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Speaker 1: that a problem for this White House? The constant drum

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Speaker 1: roll of a drumbeat rather of speculation about who might

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Speaker 1: be doing what. Yeah, it's a problem. It's sort of

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Speaker 1: like Game of Thrones. You gotta wonder who's up, who's down.

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Speaker 1: There's lots of intrigue. But I would point out one

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Speaker 1: very important factor for investors, and that is the fundamental

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Speaker 1: still look great. And whether it's the unemployment rate, or

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Speaker 1: low inflation or pretty steady interest rates, good corporate earnings.

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Speaker 1: I mean, it's very tempting for all of us to

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Speaker 1: look at these distractions, which which are significant, but you

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Speaker 1: can't miss the forest. And the forest still looks damn good.

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Speaker 1: The forest from western coast looks like winter is coming. Greg,

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Speaker 1: I mean, help me here. The moderates in the Republican

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Speaker 1: in the House, their winter is here. That's all there

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Speaker 1: is to it. How do they respond to a decade

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Speaker 1: long shift to a conservative Republican party. Well, I think

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Speaker 1: they've got to respond by not reacting to every tweet.

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Speaker 1: They've got to respond by getting their act together and

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Speaker 1: passing things. They've got to work on a budget that

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Speaker 1: both houses going to agree on. Paul Ryan do that?

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Speaker 1: Or is Paul Ryan the new John Bayner and John

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Speaker 1: Bayner's above the wall with a walking dead. No. I

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Speaker 1: think Ryan can get a budget done. I think Ryan

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Speaker 1: can get tax reform done. And I think that's what

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Speaker 1: a lot of these Republicans have to do. Look the

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Speaker 1: other way with the tweets and get to work on

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Speaker 1: all of these key issues. David gurl I'm trying to

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Speaker 1: get my head around around the death walkers whatever they're called.

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Speaker 1: Above the wall with John Bayner and Orange. It just

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Speaker 1: doesn't work. I can't get there. Greg, what did what

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Speaker 1: did Speaker Ryan? What did Leader McConnell? What did their

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Speaker 1: their colleagues learn over that Fourth of July recess? They

426
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Speaker 1: went back, they heard from constituents about healthcare and and more.

427
00:23:52,400 --> 00:23:54,680
Speaker 1: What's your sense of the way that the political landscape

428
00:23:54,720 --> 00:23:58,480
Speaker 1: shifted after that recess. Well, look, I think that healthcare

429
00:23:58,600 --> 00:24:02,520
Speaker 1: is an albatross for whatever party is in power. Nobody's happy,

430
00:24:02,560 --> 00:24:06,280
Speaker 1: everyone's disappointed about health care, so they know that. I

431
00:24:06,320 --> 00:24:08,960
Speaker 1: think the surprise in the last two or three weeks

432
00:24:09,040 --> 00:24:12,639
Speaker 1: is that public attitudes about the economy had picked up

433
00:24:12,640 --> 00:24:15,680
Speaker 1: a bit. That's an important thing that a lot of Republicans,

434
00:24:15,720 --> 00:24:18,959
Speaker 1: I think are pleased to see. Do you think that

435
00:24:18,960 --> 00:24:20,760
Speaker 1: that's going to continue? What what what do you think is

436
00:24:20,760 --> 00:24:22,600
Speaker 1: is driving that? Is it driving it? Because it seems

437
00:24:22,600 --> 00:24:25,040
Speaker 1: like some some source of stability here amidst a lot

438
00:24:25,080 --> 00:24:28,879
Speaker 1: of chaos. Yeah. And I think real disposable income looks great.

439
00:24:29,160 --> 00:24:31,359
Speaker 1: I mean, you've got low inflation, You've got way to

440
00:24:31,440 --> 00:24:33,439
Speaker 1: starting to pick up. People have got a little bit

441
00:24:33,520 --> 00:24:36,560
Speaker 1: extra money in their pockets. Gasoline prices are low, So

442
00:24:36,600 --> 00:24:40,440
Speaker 1: it's inevitable that consumer confidence will do better despite all

443
00:24:40,480 --> 00:24:43,439
Speaker 1: the tweets in Russia. And before we let you go

444
00:24:44,000 --> 00:24:48,240
Speaker 1: critically that good news about the economy, will that allow

445
00:24:48,800 --> 00:24:53,240
Speaker 1: the non core Trump supporters to maintain support for the president.

446
00:24:53,600 --> 00:24:57,560
Speaker 1: Is that enough for them to rationalize continued support? We

447
00:24:57,640 --> 00:25:00,520
Speaker 1: don't see that in the big poll over the weekend. Uh. Yeah,

448
00:25:00,520 --> 00:25:02,119
Speaker 1: I mean the problem for Trump is that he's at

449
00:25:02,160 --> 00:25:07,520
Speaker 1: thirty eight. Maybe approval left generous, you know, it's it's

450
00:25:07,560 --> 00:25:10,639
Speaker 1: it's enough, but it's a problem for him and if

451
00:25:10,680 --> 00:25:13,640
Speaker 1: he loses another few points, he's gonna lose a lot

452
00:25:13,680 --> 00:25:16,840
Speaker 1: of political capital. Greg, thank you so much, a terrific

453
00:25:16,880 --> 00:25:20,199
Speaker 1: brief and again, thank you again for your clarity on

454
00:25:20,240 --> 00:25:23,640
Speaker 1: the life and career of Senator McCain. He's a grievous

455
00:25:23,680 --> 00:25:27,320
Speaker 1: surgery in Arizona, reported by The New York Times this morning,

456
00:25:27,359 --> 00:25:30,920
Speaker 1: and our thoughts go out to all of Arizona. Senator again,

457
00:25:30,920 --> 00:25:35,160
Speaker 1: Greg Villi with Horizon Investors surveillance correction. If I say

458
00:25:35,200 --> 00:25:40,000
Speaker 1: anything wrong David Gura about Game of Thrones, hundreds of emails,

459
00:25:40,240 --> 00:25:43,880
Speaker 1: I said, the Walking Dead, that's another show, Death Walkers,

460
00:25:43,960 --> 00:25:47,640
Speaker 1: the White Walkers, White Walkers of the bed show where

461
00:25:47,640 --> 00:25:49,280
Speaker 1: I am. Yes, and I'm not going to give away

462
00:25:49,320 --> 00:25:53,440
Speaker 1: any White Walkers from last night, but thank you for

463
00:25:53,480 --> 00:25:56,959
Speaker 1: all of you, particularly in England listening on Game of Thrones,

464
00:25:56,960 --> 00:26:01,840
Speaker 1: were dazzled. Yeah, your knowledge of my lack. They're watching

465
00:26:01,880 --> 00:26:05,600
Speaker 1: it on mute with surveillance turned out that's what they're doing. Yeah, no, no,

466
00:26:05,920 --> 00:26:17,000
Speaker 1: you don't want you Immune runt you by Bank of America.

467
00:26:17,080 --> 00:26:22,000
Speaker 1: Mary Lynch with virtual reality virtually everything will change. Discover

468
00:26:22,119 --> 00:26:26,800
Speaker 1: opportunities in a transforming world via a mL dot Com

469
00:26:27,000 --> 00:26:37,320
Speaker 1: slash VR, Mary Lynch, Pierced Fenner and Smith Incorporated. We

470
00:26:37,400 --> 00:26:39,840
Speaker 1: have a Steam guest this morning, and let me get

471
00:26:39,880 --> 00:26:42,959
Speaker 1: everybody to focus. He has a book out. It's like

472
00:26:43,119 --> 00:26:46,840
Speaker 1: mause book. It's a little Red Book prescription for the future,

473
00:26:46,920 --> 00:26:50,440
Speaker 1: except he's actually talking about something we can actually get done,

474
00:26:50,520 --> 00:26:54,440
Speaker 1: unlike the former grade of China in A guy named Levitt,

475
00:26:54,760 --> 00:26:59,959
Speaker 1: secretary of h h S Vintage GOP says, shut up

476
00:27:00,040 --> 00:27:02,560
Speaker 1: and read this book, David, that's all you need to know.

477
00:27:02,880 --> 00:27:06,119
Speaker 1: Levit of the other party says, just shut up and

478
00:27:06,160 --> 00:27:10,000
Speaker 1: read a Manuel tom paraphrase, Secretary Levitt, if I've never

479
00:27:10,080 --> 00:27:12,360
Speaker 1: heard out of the words shut up zec Commanuel, thank

480
00:27:12,359 --> 00:27:14,919
Speaker 1: you very much for joining us here on Bloomberg Surveillance.

481
00:27:14,920 --> 00:27:16,760
Speaker 1: I don't think I've ever had an introduction like that

482
00:27:16,880 --> 00:27:20,320
Speaker 1: my life. I'm in an order. It's great. You know, Zeke,

483
00:27:20,600 --> 00:27:23,399
Speaker 1: you look like one of the guys on the wall

484
00:27:23,560 --> 00:27:26,760
Speaker 1: for Game of Thrones. I mean, you look that grizzled

485
00:27:26,800 --> 00:27:29,840
Speaker 1: after what you've been through. Go ahead, David, and it

486
00:27:29,920 --> 00:27:32,159
Speaker 1: continues that Zeke. I just got back from this this

487
00:27:32,240 --> 00:27:34,320
Speaker 1: Alan Company conference in Sun Valley, and I talked to

488
00:27:34,440 --> 00:27:36,919
Speaker 1: Dr Toby const Growth there of the of the Cleveland Clinic,

489
00:27:36,920 --> 00:27:39,360
Speaker 1: and he said something that's still ringing through my head.

490
00:27:39,440 --> 00:27:41,320
Speaker 1: He said, in order for there to be real progress

491
00:27:41,359 --> 00:27:44,560
Speaker 1: on health policy reform in this country, this particular bill

492
00:27:44,600 --> 00:27:47,600
Speaker 1: before the Senate has to die. Stark terms. They are

493
00:27:47,600 --> 00:27:49,840
Speaker 1: a stark reading of what's going on legislatively. Do you

494
00:27:49,840 --> 00:27:51,800
Speaker 1: agree with him or are we being held up by

495
00:27:51,800 --> 00:27:54,760
Speaker 1: the politics here as usual? Toby and I are on

496
00:27:54,800 --> 00:27:57,639
Speaker 1: the same page about this. Uh. This bill does nothing

497
00:27:57,960 --> 00:28:01,439
Speaker 1: to advance healthcare on any dimension, the access dimension, not

498
00:28:01,600 --> 00:28:04,879
Speaker 1: the cost control dimension, and not the quality dimension. And

499
00:28:04,920 --> 00:28:07,280
Speaker 1: I agree it needs to be defeated. And I would

500
00:28:07,280 --> 00:28:10,560
Speaker 1: say for your listeners, especially with the Cruise amendment in it,

501
00:28:10,560 --> 00:28:16,399
Speaker 1: which totally undermines UH insurance markets. Uh. So it has to,

502
00:28:16,920 --> 00:28:19,640
Speaker 1: you know, be defeated. And then we need to move

503
00:28:19,680 --> 00:28:22,520
Speaker 1: on to well, how do we shore up the exchanges?

504
00:28:22,960 --> 00:28:25,840
Speaker 1: How do we actually get healthcare costs under control so

505
00:28:25,880 --> 00:28:29,040
Speaker 1: that we can keep health premiums and and the deductibles

506
00:28:29,440 --> 00:28:33,160
Speaker 1: more under control? How beholden to insurance the insurance system

507
00:28:33,200 --> 00:28:37,120
Speaker 1: to insurance companies? Is progress on health policy? In other words?

508
00:28:37,160 --> 00:28:39,560
Speaker 1: Can can you advance health policy? Can you make changes

509
00:28:39,600 --> 00:28:42,080
Speaker 1: to the way health care is administered in this country

510
00:28:42,120 --> 00:28:44,840
Speaker 1: with without having to deal with the insurance companies? No?

511
00:28:45,240 --> 00:28:52,480
Speaker 1: Because they control about of the market in various ways. Um,

512
00:28:52,760 --> 00:28:55,560
Speaker 1: and you want them on board? Uh? One of the

513
00:28:55,560 --> 00:28:57,880
Speaker 1: things insurance companies can do is they can experiment a

514
00:28:57,880 --> 00:29:00,720
Speaker 1: little easier than the federal government in some case is UH,

515
00:29:00,760 --> 00:29:04,120
Speaker 1: they can push out to commercial payers and employers to

516
00:29:04,200 --> 00:29:08,280
Speaker 1: get them to do things UH, with big dollars behind it. UM.

517
00:29:08,400 --> 00:29:10,440
Speaker 1: And I'd say that the most important thing we want

518
00:29:10,440 --> 00:29:13,520
Speaker 1: the private insurers to do besides get into markets and

519
00:29:13,600 --> 00:29:16,720
Speaker 1: stay in markets through the exchange, is we want them

520
00:29:16,720 --> 00:29:20,040
Speaker 1: to pay doctors and hospitals differently so that they UH

521
00:29:20,240 --> 00:29:22,520
Speaker 1: move off the fee for service system. UH. If you

522
00:29:22,560 --> 00:29:26,120
Speaker 1: ask me what's one key catalytic level we can use

523
00:29:26,200 --> 00:29:30,040
Speaker 1: to actually get ourselves to a more high performing health

524
00:29:30,040 --> 00:29:34,320
Speaker 1: care system. It's paid differently, and we have to incentivize

525
00:29:34,400 --> 00:29:37,600
Speaker 1: doing the right thing, getting rid of unnecessary care, making

526
00:29:37,640 --> 00:29:41,239
Speaker 1: care more efficient. And unfortunately, at the moment, that's not

527
00:29:41,280 --> 00:29:44,720
Speaker 1: where the incentives drive. We have had over the last

528
00:29:44,720 --> 00:29:47,680
Speaker 1: seven years since passage of the Affordable Care Act, movement

529
00:29:47,760 --> 00:29:52,480
Speaker 1: towards paying differently, paying capitation, paying financial incentives for keeping

530
00:29:52,480 --> 00:29:56,840
Speaker 1: costs down, paying bundled payments. I keep saying that's got

531
00:29:56,840 --> 00:29:59,160
Speaker 1: to be turbo charged. If you really want to get

532
00:29:59,240 --> 00:30:02,280
Speaker 1: us into a sistain aimable economic path for the healthcare system,

533
00:30:02,320 --> 00:30:05,000
Speaker 1: we have to turbo charge that payment change. Every time

534
00:30:05,040 --> 00:30:07,280
Speaker 1: I sit down with an insurance executive, if that's Mark

535
00:30:07,320 --> 00:30:10,960
Speaker 1: Bertolini or Michael Nidworth, and talk about the future of healthcare,

536
00:30:10,960 --> 00:30:12,960
Speaker 1: they've got a lot of great plans for how policy

537
00:30:13,040 --> 00:30:15,680
Speaker 1: could change. When we talk about uncertainty, is that affecting

538
00:30:15,680 --> 00:30:20,360
Speaker 1: the way insurance companies are implementing new changes to healthcare? Absolutely?

539
00:30:20,640 --> 00:30:25,000
Speaker 1: You know, insurance companies are by definition risk averse. Uh

540
00:30:25,040 --> 00:30:29,120
Speaker 1: and Uh. Anytime there's uncertainty, it means that there's more risk,

541
00:30:29,520 --> 00:30:34,560
Speaker 1: and they therefore raise their premiums. They stopped doing innovative plans.

542
00:30:35,080 --> 00:30:37,240
Speaker 1: I think one of the reasons we saw a burst

543
00:30:37,280 --> 00:30:41,680
Speaker 1: of a lot of experimentation by them and movement into

544
00:30:41,720 --> 00:30:45,720
Speaker 1: new products was the Affordable Care Act. Suddenly they could see, wow,

545
00:30:45,760 --> 00:30:48,560
Speaker 1: we might get fifteen million more people, will have an

546
00:30:48,680 --> 00:30:52,720
Speaker 1: organized marketplace where we can compete knowing the rules. Um.

547
00:30:53,000 --> 00:30:54,840
Speaker 1: And that's all. You know. One of the reasons we

548
00:30:54,920 --> 00:30:58,680
Speaker 1: have a big jump in premiums. Uh this last couple

549
00:30:58,680 --> 00:31:01,760
Speaker 1: of years has been uncertain to in that marketplace. Uh.

550
00:31:01,800 --> 00:31:05,200
Speaker 1: If you gave them certainty, and by that certainty I

551
00:31:05,240 --> 00:31:08,000
Speaker 1: mean some reinsurance or risk cord or so that if

552
00:31:08,000 --> 00:31:10,400
Speaker 1: they got a disproportionate number of sick people. They would

553
00:31:10,400 --> 00:31:14,040
Speaker 1: be protected if you guaranteed them the cause sharing subsidies,

554
00:31:14,040 --> 00:31:18,240
Speaker 1: so pay families under seventy dollars or so actually would

555
00:31:18,280 --> 00:31:21,920
Speaker 1: have help paying the deductibles and go pays. That kind

556
00:31:21,960 --> 00:31:28,040
Speaker 1: of certainty actually brings premiums down amazingly enough and uh

557
00:31:28,240 --> 00:31:31,040
Speaker 1: allows them to do things that they wouldn't have tried before.

558
00:31:31,240 --> 00:31:33,560
Speaker 1: Dr Manuel, I want to take this back to what

559
00:31:33,640 --> 00:31:36,760
Speaker 1: I witnessed right now across both aisles, and that is

560
00:31:36,800 --> 00:31:41,720
Speaker 1: an immense nostalgia for what we knew. I was beyond unfortunate.

561
00:31:42,040 --> 00:31:46,120
Speaker 1: Richard Meltzer is my pediatrician who was legendary and strong

562
00:31:46,240 --> 00:31:49,800
Speaker 1: Rochester and then with Project Hope with his wife Amy Meltzer,

563
00:31:50,360 --> 00:31:53,760
Speaker 1: and and you know, I grew up in the nirvana

564
00:31:53,840 --> 00:31:57,000
Speaker 1: of pediatrics. That's what everybody wants to get back to.

565
00:31:57,640 --> 00:32:02,280
Speaker 1: We can't go back there, can we. I'm not actually

566
00:32:02,280 --> 00:32:04,320
Speaker 1: sure I agree with you. A lot of what I'm

567
00:32:04,320 --> 00:32:06,840
Speaker 1: seeing is what I'd like to call back to the future.

568
00:32:07,280 --> 00:32:11,200
Speaker 1: Uh back you know what, what has really worked, because

569
00:32:12,040 --> 00:32:14,480
Speaker 1: a lot of the expenses are concentrated in ten percent

570
00:32:14,520 --> 00:32:18,280
Speaker 1: of the population, is actually more high touch, more you

571
00:32:18,280 --> 00:32:21,480
Speaker 1: know Marcus Welby tripe care for those patients. A lot

572
00:32:21,520 --> 00:32:24,560
Speaker 1: of the UH innovations that I portray in the book

573
00:32:24,920 --> 00:32:28,760
Speaker 1: are precisely about how do you personalize care? How does

574
00:32:28,800 --> 00:32:30,920
Speaker 1: the doctor not just wait for the patient to show up,

575
00:32:30,920 --> 00:32:32,720
Speaker 1: but reach out to the doctor and say, you know

576
00:32:33,200 --> 00:32:38,080
Speaker 1: what's going on? Are you taking those medications and maintaining contact,

577
00:32:38,480 --> 00:32:42,160
Speaker 1: educating them, working with them on behavior. Where does the

578
00:32:42,240 --> 00:32:46,160
Speaker 1: money come from to give us? Doctor will bey? Okay,

579
00:32:46,200 --> 00:32:50,640
Speaker 1: so here's the secret, uh tom uh. Look, if we

580
00:32:50,760 --> 00:32:54,640
Speaker 1: actually get these people with chronic illness and keep them healthier,

581
00:32:54,840 --> 00:32:57,400
Speaker 1: keep them out of the hospital, you spend money up

582
00:32:57,440 --> 00:33:02,040
Speaker 1: front and then reduced emergency room, you reduce hospitalization, reduced

583
00:33:02,120 --> 00:33:05,920
Speaker 1: need to go to nursing facilities. That's the tradeoff you're

584
00:33:05,920 --> 00:33:10,880
Speaker 1: gonna see. So money flows from lowering the hospitalization rate

585
00:33:11,000 --> 00:33:16,360
Speaker 1: and increasing the uh UH services that doctors, home health

586
00:33:16,360 --> 00:33:21,240
Speaker 1: care agencies, UH care coordinators provide. And that's the tradeoff.

587
00:33:21,560 --> 00:33:24,720
Speaker 1: And places that, as I documented my book, places that

588
00:33:24,800 --> 00:33:26,400
Speaker 1: have really hit it out of the park on this

589
00:33:26,840 --> 00:33:32,040
Speaker 1: care more in UH California as a good example. You know,

590
00:33:32,120 --> 00:33:37,320
Speaker 1: they can reduce their hospitalization rate below the comparable people

591
00:33:37,360 --> 00:33:42,400
Speaker 1: in their marketplace. That's a lot of dollars to save UM. Now,

592
00:33:42,440 --> 00:33:45,480
Speaker 1: obviously hospitals are going to be resistant to that UM,

593
00:33:45,600 --> 00:33:47,760
Speaker 1: but I think that's the kind of trade off. The

594
00:33:47,800 --> 00:33:52,080
Speaker 1: whole system needs UM and we don't need hospitals running

595
00:33:52,080 --> 00:33:55,840
Speaker 1: at fift occupancy UM having to do a lot of

596
00:33:55,880 --> 00:34:00,479
Speaker 1: things to make money and stay afloat for quickly, here,

597
00:34:00,480 --> 00:34:02,120
Speaker 1: what are you gonna be looking for in that CBO report?

598
00:34:02,160 --> 00:34:05,160
Speaker 1: We got about thirty seconds. Anything in there that that

599
00:34:05,240 --> 00:34:07,240
Speaker 1: can change your sense of it? I think there are

600
00:34:07,240 --> 00:34:11,080
Speaker 1: two important things. How many uninsured are you going to get?

601
00:34:11,120 --> 00:34:13,799
Speaker 1: We know that the bottom is fifteen million people. That's

602
00:34:13,800 --> 00:34:16,080
Speaker 1: the number of people that get thrown off of Medicaid,

603
00:34:16,320 --> 00:34:19,200
Speaker 1: So it's anywhere between fifteen million and twenty four million,

604
00:34:19,280 --> 00:34:21,960
Speaker 1: and that is a big question. And then what do

605
00:34:22,040 --> 00:34:25,400
Speaker 1: they anticipate the Cruise Amendment will do in terms of

606
00:34:25,440 --> 00:34:29,279
Speaker 1: the market insurance market on stable UM? And I think

607
00:34:29,280 --> 00:34:30,840
Speaker 1: those are the two big things to look at. We

608
00:34:30,920 --> 00:34:33,080
Speaker 1: gonna leave it there, Z Commanuel, thank you so much

609
00:34:33,160 --> 00:34:37,879
Speaker 1: the book Prescription for the Future with bipartisan shout out

610
00:34:38,239 --> 00:34:51,800
Speaker 1: to read Prescription for the Future from Dr Emmanuel. Thanks

611
00:34:51,840 --> 00:34:56,000
Speaker 1: for listening to the Bloomberg Surveillance podcast. Subscribe and listen

612
00:34:56,040 --> 00:35:01,680
Speaker 1: to interviews on Apple Podcasts, SoundCloud, or whichever podcast platform

613
00:35:01,719 --> 00:35:05,279
Speaker 1: you prefer. I'm on Twitter at Tom Keene. David Gura

614
00:35:05,600 --> 00:35:09,280
Speaker 1: is at David Gura. Before the podcast, you can always

615
00:35:09,320 --> 00:35:24,080
Speaker 1: catch us worldwide. I'm Bloomberg Radio Brunch You by Bank

616
00:35:24,120 --> 00:35:28,800
Speaker 1: of America Mary Lynch. With virtual reality, virtually everything will change.

617
00:35:29,280 --> 00:35:33,879
Speaker 1: Discover opportunities in a transforming world. VI of a mL

618
00:35:33,960 --> 00:35:38,360
Speaker 1: dot Com slash VR, Mary Lynch, Pierced Fenner and Smith

619
00:35:38,719 --> 00:35:39,560
Speaker 1: Incorporated