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Speaker 1: Welcome to the Bloomberg pim L Podcast. I'm pim Fox.

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Speaker 1: Along with my co host Lisa Abramowitz. Each day we

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Speaker 1: bring you the most important, noteworthy, and useful interviews for

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Speaker 1: you and your money, whether at the grocery store or

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Speaker 1: the trading floor. Find the Bloomberg pi L podcast on iTunes,

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Speaker 1: SoundCloud and at Bloomberg dot com. Well Lisa Abramowitz. French

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Speaker 1: elections now British elections. UH conflict between Russia and the

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Speaker 1: United States, countries wanting to leave the European Union. Oil

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Speaker 1: in the Middle East, Russia and Syria and the United

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Speaker 1: States and Saudi Arabia. Let me give you the other list.

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Speaker 1: Let's go all the way to Asia. Now, other things

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Speaker 1: we can worry about. UH, problems on the Korean Peninsula,

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Speaker 1: North and South Korea and China, as well as Japan

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Speaker 1: and the Asian Trade Block. I can't make sense of it.

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Speaker 1: You know why that is? Okay, that's right because we've

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Speaker 1: got Bill Rhodes. He is the president and the chief

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Speaker 1: executive of William R. Rhodes Global Advisors, and a Bill

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Speaker 1: you know, just in giving you that list, that's like

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Speaker 1: a free for all. Um, Where where do you start?

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Speaker 1: Let's start with China and and the Korea, because you

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Speaker 1: know that that area of the world very well. It's

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Speaker 1: great to be with you guys here again. And I

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Speaker 1: think as far as China goes, the most recent news

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Speaker 1: of courses that their first quarter came at a six

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Speaker 1: point nine percent people that expect GDP g d p uh,

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Speaker 1: people that expected somewhere between six point seven and six

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Speaker 1: point eight. The problem is it's driven by tremendous increases

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Speaker 1: in debt. Their debt burden as we speak is somewhere

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Speaker 1: between two d and fifty and two percent of g

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Speaker 1: d p UH. The difference with those numbers is basically,

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Speaker 1: if you count the inner bank exposures of the banks,

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Speaker 1: it's too weighty, if you know, and it's to fifty.

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Speaker 1: But that's like double it was a few years ago.

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Speaker 1: And it continues to grow because the government is pushing

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Speaker 1: as much uh, you know, liquidity into the market and

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Speaker 1: allowing credit to grow significantly with the state owned banking

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Speaker 1: system because they want to make sure the economy is

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Speaker 1: red hot when they have the nineteenth Party Congress is

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Speaker 1: full because this only happens every five years, and they

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Speaker 1: want to make sure that President Shi Jin ping gets

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Speaker 1: all his favorites on the Standing Committee of the Politburo,

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Speaker 1: and Uh, this is all it counts at this point,

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Speaker 1: is to get that done, uh, which will ensure that

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Speaker 1: he's got at least another five years, and who knows,

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Speaker 1: he may decide the first one since Don Joe Pain

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Speaker 1: to extend it beyond that. Uh. And so that's all

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Speaker 1: it counts. But the problem here is shadow banking continues

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Speaker 1: to be basically regulated. It's growing very rapidly. That's helping

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Speaker 1: fund this tremendous credit boom. Uh. They haven't done much

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Speaker 1: to close the zombie companies and steal coal, shipbuilding and

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Speaker 1: other areas, which they need to do because eventually this

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Speaker 1: is going to catch up to them, probably next year.

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Speaker 1: So the real question is what happens after the Party

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Speaker 1: Congress is fall. Will they start squeezing the economy? Yeah,

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Speaker 1: you know, Bill, I want to pick up on what

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Speaker 1: you're saying that probably next year they're going to have

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Speaker 1: to start grappling with this. You are a an international

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Speaker 1: banker at City Group for five decades and you dealt

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Speaker 1: with a lot of workouts, don't Well, it's it's it's

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Speaker 1: important to have that kind of background because you helped

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Speaker 1: negotiate workouts in a host of different countries, from Argentina,

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Speaker 1: Brazils at Maco, Mexico. Uh, you know, South Korea, you

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Speaker 1: name it. What are you looking for? You just got

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Speaker 1: back from China. What are you looking for to understand

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Speaker 1: exactly where we are with respect to when China's credit

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Speaker 1: bubble will come crossing town? Well, I think they're gonna

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Speaker 1: have to start squeezing starting the end of this year.

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Speaker 1: And they have a first rate central bank, to People's

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Speaker 1: Bank of China, uh, and some of the best economists

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Speaker 1: in Asia there. The head of it, UH, Joe shah Shuan,

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Speaker 1: has been kept over three years, which is a very

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Speaker 1: smart move of Shi Jinping. He should have retired three

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Speaker 1: years ago because he is trying to keep this thing moving.

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Speaker 1: UH and UH. Also when we talk about China, the

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Speaker 1: People's Bank of China, we have to talk about the

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Speaker 1: n m B because, as you know, our president, the

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Speaker 1: Chinese currency exactly. Our president had had talked again and

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Speaker 1: again about manipulation by the Chinese of their currency and

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Speaker 1: the first thing he was going to do was take

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Speaker 1: action to declare them manipulator. And the truth is that

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Speaker 1: the Chinese, through the People's Bank of China has spent

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Speaker 1: a trillion dollars over the last year to maintain the

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Speaker 1: stability of the ren MB, so they're not pushing it down,

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Speaker 1: they're actually keeping it stable or pushing it up. Well,

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Speaker 1: I just I want to just press you on the

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Speaker 1: credit issue before we go on, because it's this is

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Speaker 1: the big question that a lot of people have, which

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Speaker 1: is if China's credit system blows up, that will disrupt

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Speaker 1: the entire financial system of the world. Are we close

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Speaker 1: to that point? Well, my own feeling is that the

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Speaker 1: Chinese will be pragmatic enough that when they get through

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Speaker 1: this nineteen Party Congress, they'll start basically uh squeezing the

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Speaker 1: banking system, start controlling the shadow banking system, UH, working

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Speaker 1: more to uh to to basically control the bubble in

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Speaker 1: real estate municipalities UH, and start moving more rapidly and

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Speaker 1: closing down some of these zombie companies. So I think

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Speaker 1: you're going to see a major surge starting at the

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Speaker 1: end of this year through next year in this area

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Speaker 1: because the Chinese no they have a problem them UH

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Speaker 1: and UH. I think they will work at it. The

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Speaker 1: question is do they start early enough and what will

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Speaker 1: be the impact if their growth rate goes from near

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Speaker 1: seven percent where it is today and drops down to five. Uh,

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Speaker 1: you know the effect in the world. As a world

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Speaker 1: second largest economy, the largest importer of commodities in the world,

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Speaker 1: so they have the largest banking system in the in

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Speaker 1: the world. Now they passed Europe. So you've got to

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Speaker 1: take a look at all of these and watch very carefully.

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Speaker 1: Once you have that party Congress what they do with

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Speaker 1: the economy. Can you do Brexit and the new the

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Speaker 1: snap election that's just been called, can you do that

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Speaker 1: in fifteen seconds. I'm not surprised that Prime Minister May

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Speaker 1: has done it because she needs the strongest hand she

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Speaker 1: can get in this negotiation, because this negotiation is going

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Speaker 1: to be tough, and uh, you know she was counting

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Speaker 1: on some good feelings from Chancellor Merkel and others. But

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Speaker 1: remember Chancellor Merkel has to go into an election. God

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Speaker 1: only knows what's going to happen in France because everyone

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Speaker 1: thought two weeks ago or three weeks ago there was

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Speaker 1: going to be a runoff in the second round between

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Speaker 1: Makron and the le Pen, But now you have the

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Speaker 1: Left surging and it's really not clear what's gonna happen

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Speaker 1: in the first round, so I think that all bets

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Speaker 1: are off. With regards to the French election, I think

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Speaker 1: with Merkele she will win, but it may be a

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Speaker 1: tougher election than people think. Exactly. Well, I will keep

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Speaker 1: will keep getting in touch with you because you have

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Speaker 1: a lot of fantastic insights. Bill Rhodes is the author

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Speaker 1: of Banker to the World, and he has been for

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Speaker 1: decades as a former banker at City Group. Bill Rhodes

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Speaker 1: is the president, chief executive officer of William R. Rhodes

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Speaker 1: Global Advisors. My grandfather used to say to me, just

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Speaker 1: because your paranoid doesn't mean they're not out to get you.

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Speaker 1: And somebody who might ascribe to that theory of the

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Speaker 1: world is Michael sal Loov. He's head of products, particularly

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Speaker 1: with mobile security focus for Checkpoints Software Technologies. He's former

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Speaker 1: CEO and co founder of Lacoon Mobile Security, which was

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Speaker 1: acquired by Checkpoints Software. The company is based in San Carlos, California,

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Speaker 1: as well as Tel Aviv. Michael sat, thank you so

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Speaker 1: much for joining us. I want to start with talking

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Speaker 1: about what companies that you work with are doing to

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Speaker 1: make sure that their mobile devices and all of those

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Speaker 1: used by the employees are secure and our company is

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Speaker 1: doing enough. Good morning, Lisa Um. So indeed, you know,

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Speaker 1: we've seen quite am impressive adoption of mobile devices in

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Speaker 1: the in the corporate environment. I think all of us

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Speaker 1: are using those the smartphones, Android ius um as our

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Speaker 1: primary sort of computing platform for for doing mobile and

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Speaker 1: most of the companies today basically they actually invested heavily

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Speaker 1: in the manage those devices, but very few of them

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Speaker 1: have adopted solutions to to secure the device itself from

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Speaker 1: from hackers. Well, tell us a little bit about some

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Speaker 1: of the things that could happen if you don't spend

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Speaker 1: time and money securing your network. Right, So, you know,

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Speaker 1: cybercriminals and they recognize the trend and they see the

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Speaker 1: mobile devices probably the weakest link in all of the

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Speaker 1: i T infrastructure, mainly because I T professionals or security professionals,

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Speaker 1: they don't have good visibility into what's going on on

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Speaker 1: those devices. And you can add to that the fact

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Speaker 1: that most of those devices are actually they have dual use, right,

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Speaker 1: they are used by the the owners both for corporate

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Speaker 1: communication but also for personal use. So you know, once

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Speaker 1: cyber criminals hack into that device, they can actually do

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Speaker 1: almost everything, starting from like is dropping on all of

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Speaker 1: your about communication passwords that you would type, you know,

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Speaker 1: get access to your calendar, contact lists, and probably some

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Speaker 1: of the scarier things is the fact that they can

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Speaker 1: use the Microsoft the microphone and the and the camera

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Speaker 1: to drop on you even you know, when when the

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Speaker 1: follows in your pocket, when the screen is closed. Wait wait, wait,

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Speaker 1: back up, back up. Okay. So we've heard a lot

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Speaker 1: about these sort of worst case scenarios, you know, the

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Speaker 1: dolls that are spying on your children and telling them

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Speaker 1: what to do with microphones and stuff like that. She

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Speaker 1: never believes me that. Well, no, no, I believe. I believe.

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Speaker 1: I'm trying to figure out how common is this. I mean,

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Speaker 1: is this just you know, a one in a you

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Speaker 1: know billion chance that somebody's going to do this, or

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Speaker 1: are there growing teams of people actively trying to hack

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Speaker 1: in activate the microphone and steal everything that you have

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Speaker 1: in your bank. So I think that the microphone scenario

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Speaker 1: is actually very targeted scenario. But the truth to be told.

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Speaker 1: First of all, in a survey that we've conducted a

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Speaker 1: few few weeks ago, together with dimensional data, they they

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Speaker 1: have dimensional research I'm sorry, they've actually the company is

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Speaker 1: actually recognized about of the company is recognized that they

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Speaker 1: already had a breach from a mobile device, and twenty

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Speaker 1: five said that they actually have no clue, right that

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Speaker 1: they don't have visibility from our own research, basically from

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Speaker 1: customers that are using our our mobile threat prevention product,

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Speaker 1: and we have more than eight hundred customers those days

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Speaker 1: that are using the product. Every every company that they

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Speaker 1: have more than five hundred employees, they had a mobile breach.

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Speaker 1: So that's definitely quite common. Is that? Is that? Okay,

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Speaker 1: we're just sinking in with that any company that has

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Speaker 1: more than five people, it's not okay, Well that the

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Speaker 1: truth is out right, Okay, so we got so this

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Speaker 1: is now you're trying to combat this. So you're trying

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Speaker 1: to offer up some solutions, right for for companies to

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Speaker 1: prevent this from becoming a total mess. Yeah that's not

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Speaker 1: true it yeah, yeah, okay, So give us some idea,

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Speaker 1: like how much would something like that cost? I mean,

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Speaker 1: is is that is that expensive? Is that on a

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Speaker 1: perform basis? How does that work? So it's actually it's

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Speaker 1: not that expensive, you know, for you know, from if

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Speaker 1: we're talking about list price. It's basically it's basically four

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Speaker 1: dollars per month per per device. Now, you know tech,

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Speaker 1: you know, an average company with with let's say, like

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Speaker 1: you know, five thousand or three thousand employees, it's not

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Speaker 1: that expensive. And also of course you know those things,

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Speaker 1: those type of software, they have discounts, you know, based

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Speaker 1: on volumes. Yeah, Michael, how do you have a sense

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Speaker 1: of where a lot of these hackers come from? Um,

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Speaker 1: you know, it's it's usually sort of like you know,

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Speaker 1: the the usual suspects. So a lot of those groups

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Speaker 1: are emerging from China, you know, for example, last that's

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Speaker 1: the same last November, we've uncovered a group which preached

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Speaker 1: about one point three million devices. They were Chinese. Some

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Speaker 1: of those groups are actually emerging from from Russia, so

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Speaker 1: we've seen traces that the same guys that hacked DNC

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Speaker 1: they also have capabilities in the in the mobile in

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Speaker 1: the smartphone space. No, it's it's pretty much equivalent to

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Speaker 1: what we're seeing, you know, everywhere else in in the cyberspace.

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Speaker 1: Thank you very much for joining us. Michael shall Love

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Speaker 1: is the head of Products Mobile Security for a checkpoint

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Speaker 1: software and I guess that you know offers a little

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Speaker 1: bit of a window into what you should at least

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Speaker 1: be aware could happen to your phone. Just because your

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Speaker 1: paranoid doesn't mean they're not advocate. Just that's all I'm

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Speaker 1: gonna say. Okay, Well, the rental car companies Hurts Global

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Speaker 1: Holdings and Avis Budget Group, they have bonds which trade,

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Speaker 1: and boy, they are not trading like hotcakes. They are

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Speaker 1: sort of like lemons, at least according to Molly Smith,

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Speaker 1: our Bloomberg corporate finance reporter who joins US now and

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Speaker 1: you can follow Molly on Twitter at Molly Smith News.

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Speaker 1: Molly Smith tell us the tale of Hurts Global and

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Speaker 1: Avis Budget and I just want to note that you

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Speaker 1: are in the enviable position of actually being charged more

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Speaker 1: if you were ever to rent a car from either

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Speaker 1: of these organizations because they have that twenty five year

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Speaker 1: old and below penalty. That's true. I am charged with

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Speaker 1: that penalty being I think or something like that security

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Speaker 1: deposit charge for us under the age of UM. But

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Speaker 1: that's true. Yeah, the bonds are really getting hit lately. Um.

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Speaker 1: You could see it starting from a bit earlier this month,

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Speaker 1: and it's really coming in line with the decline in

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Speaker 1: used car prices, which is really the assets essentially that

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Speaker 1: back these bonds and loans that are issued by these companies.

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Speaker 1: So when those prices are coming down on the cars,

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Speaker 1: you know, so are these um securitizations from the companies,

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Speaker 1: And you're seeing that now reflected in the bond prices.

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Speaker 1: Previously was an equity issue, you know, you saw a

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Speaker 1: bit more of the stock sell off earlier, but the

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Speaker 1: creditors now starting to get weary as well well. And

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Speaker 1: just to be clear, this isn't just the investors in

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Speaker 1: the securitized bonds, but also in the straight corporate debt

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Speaker 1: that Hurts and Avis have issued. Which is interesting because

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Speaker 1: these companies have levered up on several fronts. Right they've

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Speaker 1: sold off the residuals, there are the income that they

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Speaker 1: get from rentals to go to the securitized bond holders,

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Speaker 1: as well as sold corporate debt to raise money for

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Speaker 1: their operations. Have these companies addressed the ongoing and growing

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Speaker 1: concern that the resale market for autos is falling out

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Speaker 1: of bed and it's going to profoundly challenge their whole

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Speaker 1: business model. Well, I think that's exactly the challenge that

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Speaker 1: they're facing now and possibly having to re evaluate their

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Speaker 1: residual value assumptions and what they had previously made. Both

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Speaker 1: Hurts and Avis were forecasting no more than a two

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Speaker 1: to three percent decline and used car prices. You're now

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Speaker 1: already seeing um GMS forecasting those prices to fall seven

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Speaker 1: percent this year. Ally Financial UM, which is an auto

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Speaker 1: financing lender UM their prices already fell seven percent in

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Speaker 1: the first quarter, So um the decline is definitely steeper

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Speaker 1: and faster than these companies had anticipated. Not just looking

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Speaker 1: four point eight billion dollars worth of debt. Let's just

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Speaker 1: take Hurts Global for h for a moment, But this

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Speaker 1: INCURDS includes I beg your pardon, um, revolving revolvers that

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Speaker 1: are available, term loans that out that our outstanding, as

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Speaker 1: well as a bond principle. So well, although you should

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Speaker 1: note that it's up right, I mean it was that

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Speaker 1: that if you look at just for example of Hurts,

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Speaker 1: they're short and long term debt has increased from eleven

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Speaker 1: point three billion dollars in two thousand and eleven to

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Speaker 1: thirteen point five billion dollars, so they've been actually increasing

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Speaker 1: their debts, so it actually matters quite a bit anyway,

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Speaker 1: carry on, okay, Okay. I anyway, I was looking at

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Speaker 1: four point eight billion right on the Bloomberg and is

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Speaker 1: that considered a lot for for these kinds of companies.

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Speaker 1: I mean, these are assets and you may you may,

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Speaker 1: you may find that people are going to buy them,

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Speaker 1: and it may be good paper. You don't know, right well,

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Speaker 1: I mean, I think really what's more concerning to the

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Speaker 1: creditors right now and the analysts that look at it's

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Speaker 1: not so much the absolute amount of debt, but when

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Speaker 1: you're looking at it on a net leverage ratio basis.

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Speaker 1: So Hurts is really trying to keep that within a

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Speaker 1: two and a half to three and a half times range,

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Speaker 1: and they're as of year end it was at five

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Speaker 1: points six times. They're um net debt to adjusted earnings.

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Speaker 1: So really, like then they've acknowledged that, you know, their

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Speaker 1: CFO on conference cause they know that they are really

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Speaker 1: at elevated leverage levels and something that they are working

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Speaker 1: to reduce. But so far that clearly has not happened. Well.

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Speaker 1: And investment and as you said in stockholders, investors in

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Speaker 1: the company, owners of the investor have already kind of

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Speaker 1: voted with their money and the stock is down so

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Speaker 1: far this year, right and Avis also down more than

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Speaker 1: this year as well. You have to wonder why Hurts

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Speaker 1: and Avis still buy new cars, hold them for a

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Speaker 1: year during their highest appreciation period of time, and then

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Speaker 1: try to resell them. Is there any talk about changing

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Speaker 1: that model. Well, the idea right now, as they're starting

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Speaker 1: to buy more new cars versus used in the fleet,

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Speaker 1: is really to take advantage of the heavy discounting going

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Speaker 1: on at the new car level. And while I mean

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Speaker 1: they are trying to drive their acquisition costs down in

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Speaker 1: other ways by some of them are switching more to

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Speaker 1: what's called the risk versus a program vehicle, a risk

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Speaker 1: vehicle in which case the companies like Hurts an Avis

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Speaker 1: own the vehicle outright, they're making the assumptions about the

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Speaker 1: residual um price when you know, when it comes time

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Speaker 1: to sell the car. Versus a program car, the companies

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Speaker 1: get on a buyback agreement from the manufacturers, so they

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Speaker 1: don't have to assume any of that price risk. So

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Speaker 1: the program cars in that sense do cost a bit more.

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Speaker 1: Hence why the rental car companies are somewhat shifting, shifting

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Speaker 1: a little bit more towards the risk vehicles to drive

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Speaker 1: down the acquisition costs a little bit more. Is that

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Speaker 1: is that going to affect you know, how the business

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Speaker 1: actually run, the kind of car you get when you,

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Speaker 1: you know, you show up at a at a rental

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Speaker 1: car company. Well, at least for Hurts right now, the

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Speaker 1: fleet is like a bit lopsided. And we talked about

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Speaker 1: this little bit in the story that you know, they

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Speaker 1: were trying to you know, reduce the size and age

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Speaker 1: of their fleet previously by buying smaller, cheaper cars, but

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Speaker 1: they didn't turn out to be so popular. Americans tent

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Speaker 1: prefer bigger cars, especially when they're renting, when they're on

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Speaker 1: the road, you know, they have more things to carry.

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Speaker 1: So I think right now that's really what they're in

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Speaker 1: the middle of doing, of correcting their fleet, and that's

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Speaker 1: something that analysts are looking for coming up. Thank you

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Speaker 1: so much. This is a really important story to sort

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Speaker 1: of highlights some of the growing distress that we've been

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Speaker 1: hearing about and seeing in the auto sector. Molly Smith,

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Speaker 1: we really appreciate you joining us. Molly Smith is a

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Speaker 1: corporate finance reporter for Bloomberg. Talking about Avis and Hurts

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Speaker 1: and their bonds tumbling to new lows as we see

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Speaker 1: resale values of vehicles decline. Medical bills have been straining

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Speaker 1: employers for a long time. But the question really is

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Speaker 1: how much does Obamacare change that? How much does the

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Speaker 1: failure of the GOP's proposal UH to repeal and replace

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Speaker 1: Obamacare affect all of this. I want to bring in

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Speaker 1: Joe Jackson, who's chairman and executive officer of wage Works,

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Speaker 1: which is based in San Mateo, California. And if everyone

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Speaker 1: has ever deducted or put aside money for medical expenses,

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Speaker 1: they've dealt with wage Works and filling out those forms,

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Speaker 1: I know that I have, Joe, Thank you so much

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Speaker 1: for joining us right now. How much are you keeping

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Speaker 1: track of what happens on the national healthcare level? How

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Speaker 1: much does that affect your revenues and your business? Well,

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Speaker 1: thank you for having me, Lisa. I think we spend

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Speaker 1: quite a bit of time kind of tracking and um

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Speaker 1: UH keeping close to the the puts and takes that

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Speaker 1: were put into the recent healthcare bill. UM. We continue

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Speaker 1: to have folks in Washington UM monitor the meetings that

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Speaker 1: are taking place UM. But I think overall, what we

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Speaker 1: tell folks at wage Works is that the whether or

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Speaker 1: not the bill were to pass UM are products that

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Speaker 1: we provide. Working families across the countries are thriving today

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Speaker 1: and will continue to thrive no matter whether there's a

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Speaker 1: new healthcare bill, which I believe that there will be

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Speaker 1: at some point in time, or um if if there's not.

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Speaker 1: The key thing is that out of pocket healthcare expenses

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Speaker 1: continue to go up each year, and working families across

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Speaker 1: the country the only defense mechanism that they have UM

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Speaker 1: to offset those increases and out of pocket expenses is

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Speaker 1: to use health savings account put pre tax dollars into

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Speaker 1: a flexible spending account UM that allows them to pay

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Speaker 1: for those expenses using pre tax dollars, which is really

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Speaker 1: a benefit for working families Joe Jackson. Then how come

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Speaker 1: the government seems to make it so difficult and so

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Speaker 1: complicated for everybody to share the same kinds of benefits

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Speaker 1: that you are describing. Because you've got the flexible spending

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Speaker 1: accounts the f s as, then you have the health

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Speaker 1: savings accounts, the h s A S oh and yes,

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Speaker 1: Health Reimbursement Arrangements the h r a S and then

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Speaker 1: you've got transit programs. Why can't they just simplify this

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Speaker 1: and expand these programs you you say they work, Why

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Speaker 1: just not expand something that is already doing pretty well well?

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Speaker 1: I think there is expansion across the board. I think

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Speaker 1: in health savings accounts a lot of what was proposed

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Speaker 1: in the recent healthcare bill would go a long way

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Speaker 1: to expand the amount of dollars that can be contributed

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Speaker 1: to a health savings account. Uh. There were some other

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Speaker 1: what if they pulled off the caps for example? I

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Speaker 1: mean they keep talking about tearing up the script and

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Speaker 1: you know, making the government. What would you like if

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Speaker 1: you could write your own bill, Let's say, what would

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Speaker 1: it contain? Well? I think from from our industry standpoint,

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Speaker 1: I think you make a good point. I think working

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Speaker 1: Americans should be allowed to contribute whatever the amount that suits.

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Speaker 1: Their family would be required to cover their out of

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Speaker 1: pocket expenses, so eliminating the caps um making the product

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Speaker 1: more efficient, products more efficient to be utilized is uh.

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Speaker 1: You also have sections of the US and in different populations.

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Speaker 1: Some are spenders where a flexible spending account where the

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Speaker 1: dollars are available to be spent in total on January one,

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Speaker 1: at the beginning of each plan year. They find that

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Speaker 1: a lot more attractive to cover their requirements UM savings

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Speaker 1: accounts are becoming more and more popular from a health

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Speaker 1: saving standpoint. If you think about um UH individuals that

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Speaker 1: are are retiring, that the amount of money that is

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Speaker 1: going to for example of sixty five year old couple

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Speaker 1: today that retire UH, their healthcare costs are going to

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Speaker 1: average through their lifetime about three hundred and seventy seven

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Speaker 1: thousand dollars. That's expected to be about five hundred and

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Speaker 1: seventy thousand dollars in the near future. So from our perspective,

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Speaker 1: we believe and and I say this many times too

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Speaker 1: folks that we speak with, that I think in three

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Speaker 1: to five years people are going to have a four

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Speaker 1: oh one K account for retirement. They're going to have

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Speaker 1: a healthcare account, whether it's a savings or a spending

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Speaker 1: account for retirement. And I think the recent health care

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Speaker 1: bill has a lot of UH pluses that are going

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Speaker 1: to impact both flexible savings accounts and health savings accounts.

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Speaker 1: And I think that you know more of that as

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Speaker 1: you described as whether it's UH expanding the cap, expanding

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Speaker 1: the use of an eligibility for these accounts. I think

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Speaker 1: all of that is going to play well for our

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Speaker 1: industry and our business going forward. So talking about your business,

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Speaker 1: Joe wage Works manages some of these flexible spending accounts

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Speaker 1: health savings accounts for companies. How do you make money?

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Speaker 1: Is it the companies pay you to manage this this

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Speaker 1: arrangement or are there other sources of revenue for you? Well, no,

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Speaker 1: primarily it's the employers. We have a little over a

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Speaker 1: hundred thousand employers that we work with today. Primarily they

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Speaker 1: would pay us a per participant, per month fee for

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Speaker 1: the plan. Year are big time of re enrollment season,

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Speaker 1: which is in open enrollment. We spend a lot of

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Speaker 1: time and effort educating, providing awareness programs to people so

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Speaker 1: they're aware that of the value these products provide them.

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Speaker 1: I mean, if you're an employee today and you don't

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Speaker 1: take advantage of a health savings account or a flexible

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Speaker 1: spending account in essence, you're really leaving money on the table.

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Speaker 1: Are more people using these um more and more every year?

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Speaker 1: H s A s are fastest growing product. Our hs

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Speaker 1: A business grew last year a little over fifty uh

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Speaker 1: Flexible spending accounts continue to grow especially uh IN was

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Speaker 1: really a catalyst when the government basically eliminated the antiquated

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Speaker 1: user or lose it policy for flexible spending accounts, and

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Speaker 1: now you're able to carry over up to five d

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Speaker 1: dollars in your account each year. So that's really spurred

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Speaker 1: the growth of flexible spending accounts. But with c h

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Speaker 1: right there, I mean right there, right, I mean, why

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Speaker 1: it's five? I mean, come on, let's I mean, I understand,

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Speaker 1: you know that the country and the geography of the world,

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Speaker 1: and and you know we're coast to coast and worldwide.

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Speaker 1: We know that there are these vast differences. But I mean,

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Speaker 1: come on, and and I'm not saying that it's your role,

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Speaker 1: so you know, please, don't, you know, take it that way.

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Speaker 1: But it's like, come on, five hundred bucks. I mean,

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Speaker 1: you know, if you're gonna end up with some kind

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Speaker 1: of serious medical issue, what is it a thousand a

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Speaker 1: day in a hospital? And none of this really goes

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Speaker 1: to I mean, why not would you support a single

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Speaker 1: payer system for example? Um? No, I don't think that

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Speaker 1: that's really the uh you know again, I wouldn't speak

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Speaker 1: towards whether a single payer or the process we have

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Speaker 1: in place worked. I would tell you I'm shoulder to

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Speaker 1: shoulder with you in your comments with regard to the

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Speaker 1: five dollars. If you have a chronic condition today, the

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Speaker 1: average out of pocket expenses that you're going to incur

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Speaker 1: each year is about four thousand dollars, So you know,

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Speaker 1: the five dollar carryover doesn't seem like a lot. But

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Speaker 1: we worked for about eighteen months with Treasury in the

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Speaker 1: I R. S UH to help get that provision path.

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Speaker 1: I I guess I was just trying to get from

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Speaker 1: you the understanding of what is the other side, whoever

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Speaker 1: the other side is, what are they thinking when you

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Speaker 1: have these conversations with them? Well, I think it always

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Speaker 1: involves a tax code which is obviously very complicated and

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Speaker 1: very time consuming, and trying to make changes done. I

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Speaker 1: would tell you we continue. In fact, I have my

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Speaker 1: chief compliance officer in Washington today who's having uh, you know,

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Speaker 1: daily meeting. Oh wow, I wouldn't. I gotta say, I

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Speaker 1: do not envy him at all, but I'm so glad

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Speaker 1: you were able to spend time with us. Joe Jackson

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Speaker 1: is the chairman and the chief executive of wage Works,

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Speaker 1: giving us some detailed information and some updates on some

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Speaker 1: aspects of the bill to replace Obamacare might actually help consumers.

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Speaker 1: Maybe expand some of those health savings accounts. Thanks for

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Speaker 1: listening to the Bloomberg P and L podcast. You can

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Speaker 1: subscribe and listen to interviews at iTunes, SoundCloud, or whatever

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00:29:05,520 --> 00:29:09,040
Speaker 1: podcast platform you prefer. I'm Pim Fox. I'm out there

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Speaker 1: on Twitter at pim Fox. I'm out there on Twitter

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00:29:12,240 --> 00:29:15,160
Speaker 1: at Lisa Abramo. It's one before the podcast. You can

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Speaker 1: always catch us worldwide on Bloomberg Radio