WEBVTT - Premier CEO Expects Obamacare Replacement to Take Three Years 0:00:00.080 --> 0:00:02.040 P and L is brought to you by proper Cloth, 0:00:02.120 --> 0:00:05.120 a leader in men's custom shirts, with proprietary smart sized 0:00:05.120 --> 0:00:08.720 technology and top rated customer service. Ordering a custom shirt 0:00:08.760 --> 0:00:11.680 has never been easier. Visit proper cloth dot com to 0:00:11.760 --> 0:00:19.920 order your first custom shirt today. Welcome to the Bloomberg 0:00:20.000 --> 0:00:22.599 P and L Podcast. I'm pim Fox. Along with my 0:00:22.640 --> 0:00:25.759 co host Lisa Abramowitz. Each day we bring you the 0:00:25.800 --> 0:00:29.360 most important, noteworthy, and useful interviews for you and your money, 0:00:29.360 --> 0:00:32.360 whether at the grocery store or the trading floor. Find 0:00:32.400 --> 0:00:35.840 the Bloomberg P and L Podcast on iTunes, SoundCloud and 0:00:36.080 --> 0:00:44.680 at Bloomberg dot com. President Trump just now, in his comments, 0:00:44.720 --> 0:00:48.320 reiterated his statement that he has said many times before 0:00:48.640 --> 0:00:52.040 that the best thing politically for Republicans to do would 0:00:52.040 --> 0:00:54.520 be just to allow Obamacare to fail because it will 0:00:54.560 --> 0:00:57.120 be a disaster with us to get a little bit 0:00:57.160 --> 0:01:01.120 more insight into what potentially are the problems and what 0:01:01.160 --> 0:01:05.039 the disaster may have looked like. Is Susan divorce. She's 0:01:05.120 --> 0:01:09.560 CEO of Premiere, which advises healthcare systems across the country 0:01:09.600 --> 0:01:12.680 and has a really good vantage point to look across 0:01:12.720 --> 0:01:15.880 the US healthcare system Susan, We're so glad to have 0:01:15.959 --> 0:01:18.479 you today. So just to weigh in on that point, 0:01:19.000 --> 0:01:22.200 what are the main problems that President Trump is probably 0:01:22.240 --> 0:01:27.679 talking about when he calls Obamacare disaster that it would 0:01:27.720 --> 0:01:31.120 evolve into one should the Republicans not do anything to it. 0:01:31.720 --> 0:01:34.480 Thanks so much, Lisa. I think what he's talking about 0:01:34.760 --> 0:01:38.959 is that healthcare and Obamacare, the Affordable Care Act, it's 0:01:39.080 --> 0:01:43.280 very costly, it limits choice in some ways for patients, 0:01:43.440 --> 0:01:47.160 and it's very complicated. And I think that he um. 0:01:47.200 --> 0:01:51.480 I think he believes that uh, consumers being more engaged 0:01:51.520 --> 0:01:54.640 in their health care and having a more free market 0:01:54.640 --> 0:01:59.200 competitive system will be more effective for consumers. But that 0:01:59.200 --> 0:02:01.320 doesn't sound like it is aaster. Where's the disaster part, 0:02:02.000 --> 0:02:05.640 you know? I think the disaster part is really um 0:02:05.640 --> 0:02:10.000 probably embedded in just the overall total cost. The benefit 0:02:10.040 --> 0:02:14.040 plan design is pretty rich, the subsidies to Medicaid are 0:02:14.080 --> 0:02:16.919 pretty high, and so I think what he worries about 0:02:17.160 --> 0:02:21.480 is the impact to businesses, the impact to taxpayers for 0:02:21.520 --> 0:02:24.120 the cost of healthcare. Can we just step back for 0:02:24.240 --> 0:02:27.679 just a second, because I noted that Brad Wilson was introduced. 0:02:27.760 --> 0:02:30.040 He is the head of a Blue Cross Blue Shield 0:02:30.120 --> 0:02:33.720 in North Carolina. Which is where a premier is headquartered. 0:02:33.760 --> 0:02:36.000 So you've got an ally or at least a colleague 0:02:36.320 --> 0:02:40.840 speaking with the president. Is healthcare a national issue or 0:02:40.919 --> 0:02:46.200 is it a state issue? Healthcare is actually delivered locally. 0:02:46.639 --> 0:02:50.760 It's even smaller than state or national because these health 0:02:50.800 --> 0:02:54.720 care systems in communities are there forever serving those populations, 0:02:54.720 --> 0:02:59.200 whether there's any payment or exchanges or Medicaid subsidy um. 0:02:59.240 --> 0:03:02.000 But I would say that the Trump administration would like 0:03:02.200 --> 0:03:06.320 for it to be a more state based system. And 0:03:06.560 --> 0:03:09.880 part of the changes that we believe are coming are 0:03:09.919 --> 0:03:12.800 really around how do you empower the states to take 0:03:12.840 --> 0:03:15.520 more control of Medicaid? So talk a little bit about that, 0:03:15.560 --> 0:03:18.040 I mean, how would you? So? I think the plan 0:03:18.240 --> 0:03:23.000 is that if you could change the level of subsidy 0:03:23.120 --> 0:03:25.959 and in some ways have a fixed amount a cap 0:03:26.080 --> 0:03:28.040 or a block grant and give it to the states, 0:03:28.200 --> 0:03:31.200 you would then give the states the flexibility to decide 0:03:31.200 --> 0:03:33.800 how best to take care of their Medicaid populations. But 0:03:33.840 --> 0:03:37.360 how does that jibe with this idea of allowing UH 0:03:37.560 --> 0:03:41.440 people are participate in a government sponsored health plan to 0:03:41.480 --> 0:03:43.840 go across state lines? I mean, how does that? How 0:03:43.840 --> 0:03:47.280 does that play into that whole discussion makes it harder. 0:03:47.440 --> 0:03:50.720 I mean what I call it fifty shades a healthcare 0:03:51.040 --> 0:03:54.440 I mean you will have fifty different programs, fifty different 0:03:54.480 --> 0:03:57.080 measurement systems. If you're a provider, you're a doctor, or 0:03:57.080 --> 0:03:59.640 you're a health care system, and especially if you're a 0:03:59.680 --> 0:04:03.480 multi state health care system, you will have multiple different 0:04:03.480 --> 0:04:07.480 programs trying to essentially accomplish the same things. Well, let's 0:04:07.480 --> 0:04:10.640 just follow on with that topic, because it seems as 0:04:10.640 --> 0:04:15.800 though with the introduction of technology, greater information sharing and 0:04:16.000 --> 0:04:19.039 the ability of people to be mobile. Right, if you 0:04:19.279 --> 0:04:21.799 want an operation and you know that the best result 0:04:21.839 --> 0:04:24.240 can be garnered from a hospital in Texas, and you 0:04:24.279 --> 0:04:27.320 happen to live in Illinois, um that should be or 0:04:27.440 --> 0:04:31.080 that maybe an option for you? Is there a better 0:04:31.120 --> 0:04:34.920 way to deliver healthcare on this scale and take advantage 0:04:35.080 --> 0:04:39.400 of the the cost savings. If only that worked, it 0:04:39.400 --> 0:04:41.599 would be a much better way. The problem is we 0:04:41.640 --> 0:04:44.600 have to lift this iron curtain on data because there 0:04:44.640 --> 0:04:48.160 are so many limitations in the portability of data across 0:04:48.279 --> 0:04:52.159 multiple information information systems. It just doesn't work today. And 0:04:52.200 --> 0:04:54.000 that's not even a health care issue, not even a 0:04:54.000 --> 0:04:55.800 health care issue. So how would you do that? What 0:04:55.560 --> 0:04:57.080 what do you think if you would like to see 0:04:57.120 --> 0:05:01.520 new legislation introduced in Congress? We need legislation introduced. There's 0:05:01.520 --> 0:05:04.800 already been some legislation introduced along with the twenty one 0:05:04.800 --> 0:05:09.880 Cures Act Century Cures Act, which really requires standards for healthcare. 0:05:09.920 --> 0:05:14.479 I mean, every other industry has had standards for transmitting information, 0:05:14.800 --> 0:05:19.400 privacy standards, security standards, reporting standards. We don't have it yet. 0:05:19.600 --> 0:05:23.440 You know. Ultimately, this whole debate about Obamacare comes down 0:05:23.680 --> 0:05:26.480 to cost, right, I mean that's the that's the essential 0:05:26.520 --> 0:05:31.960 issue here. Is there a way to meaningfully reduce costs 0:05:32.040 --> 0:05:36.679 at a time when the US population is aging dramatically? Yeah? 0:05:36.720 --> 0:05:39.520 So at Premier we spend every day figuring out how 0:05:39.520 --> 0:05:41.760 do we improve quality and safety and lower the cost 0:05:41.760 --> 0:05:45.360 of healthcare. The demographics are are driving the cost up. 0:05:45.600 --> 0:05:48.960 The lack of coordination, coordination and the fragmentation of care 0:05:49.080 --> 0:05:52.680 is driving cost up. The inability to exchange this information 0:05:52.760 --> 0:05:55.479 is driving cost up, and cost are growing at one 0:05:55.520 --> 0:05:58.720 to two percent faster rate than the GDP. That is 0:05:58.760 --> 0:06:00.880 not going to work, right, But is there a way 0:06:00.920 --> 0:06:03.840 to let's say, you did, uh, you know, streamline the 0:06:03.920 --> 0:06:07.159 data bullet I mean, like but I'm just trying to 0:06:07.200 --> 0:06:09.039 figure out. I mean, if we sort of follow a 0:06:09.040 --> 0:06:12.920 certain prescription with streamlining of the data, with you know, 0:06:13.040 --> 0:06:15.240 maybe I don't know if you would advocate for government 0:06:15.240 --> 0:06:18.760 negotiation for prices, you know, pharmaceutical prices or not. I mean, 0:06:18.800 --> 0:06:22.240 that's a very touchy subject um. But are there ways 0:06:22.360 --> 0:06:25.240 to bring it down or is this just an inevitable 0:06:25.360 --> 0:06:29.320 inevitability of an aging population. Lots of ways to bring 0:06:29.360 --> 0:06:32.760 it down. And at Premiere where we we we process 0:06:32.839 --> 0:06:36.200 fifty billion dollars of supply chain spend by creating competitive 0:06:36.240 --> 0:06:39.560 friction between suppliers to drive the cost down. We work 0:06:39.600 --> 0:06:44.400 with healthcare systems to you know, reduce infections, reduce readmissions, 0:06:44.440 --> 0:06:47.320 lower the length of stay in a hospital. We have 0:06:47.480 --> 0:06:50.240 just three and fifty hospitals that have been working together 0:06:50.320 --> 0:06:53.719 on this for several years. They alone have saved fifteen 0:06:53.760 --> 0:06:56.680 billion dollars. So there are lots of ways to do it. 0:06:56.720 --> 0:06:59.640 But you have to coordinate the care, you have to 0:06:59.640 --> 0:07:03.400 have anders for reporting, you have to enable providers to 0:07:03.520 --> 0:07:07.560 actually work together. Remove a bunch of the regulations and barriers, 0:07:07.560 --> 0:07:11.360 which I do think the Trump administration is intent on doing. Well. 0:07:11.400 --> 0:07:14.040 We see a system in which will actually be able 0:07:14.080 --> 0:07:16.680 to know how much the healthcare costs. And I don't 0:07:16.680 --> 0:07:19.320 mean on a larger level, you know, billions, but in 0:07:19.440 --> 0:07:23.680 terms of an individual, a patient actually being able to 0:07:24.240 --> 0:07:28.520 know at the very least how much a procedure costs. Yeah. 0:07:28.560 --> 0:07:31.440 I think that part of the push for the Trump 0:07:31.440 --> 0:07:35.080 administration and the Republicans is to get consumers engaged. So 0:07:35.120 --> 0:07:37.680 if you have health care savings accounts, you start to 0:07:37.720 --> 0:07:41.840 get transparency. Consumers start to demand transparency to the to 0:07:41.920 --> 0:07:44.400 the price of procedures and to the things that are 0:07:44.440 --> 0:07:47.920 being used and get involved in those decisions. So I 0:07:47.960 --> 0:07:49.800 think it's going to take a while, but I think 0:07:49.840 --> 0:07:52.560 that is definitely where the Republicans want to go. One 0:07:52.600 --> 0:07:55.800 thing that President Trump mentioned was Tom Price, Dr. Price, 0:07:56.280 --> 0:08:01.160 Head of Health and Human Services. What can doctors do 0:08:01.680 --> 0:08:05.400 in this context? And is that also a challenge because 0:08:06.040 --> 0:08:10.480 you have the American Medical Association still is a state 0:08:10.800 --> 0:08:15.080 based program, right and you know many have said that 0:08:15.720 --> 0:08:17.760 of the cost of health care comes from the doctor's pen, 0:08:17.920 --> 0:08:20.440 so they really are the place where a lot of 0:08:20.480 --> 0:08:25.360 decisions are being made. We actually think this whole repeal 0:08:25.440 --> 0:08:27.960 and replace will take two to three years. It will 0:08:28.000 --> 0:08:31.080 have three steps. The first is the repeal with reconciliation, 0:08:31.200 --> 0:08:34.520 The second is dr Price. He has a lot of 0:08:34.600 --> 0:08:39.199 regulatory flexibility, and the third will be several incremental bills 0:08:39.240 --> 0:08:41.520 to replace it over time. Have you been in touch 0:08:41.720 --> 0:08:45.880 with representatives who are drafting the new version of Obamacare? 0:08:46.040 --> 0:08:49.440 We have. We have a big Washington based UM office 0:08:49.480 --> 0:08:52.040 and we routinely meet with a lot of the Republicans 0:08:52.040 --> 0:08:54.120 and a lot of them. Do you get a sense 0:08:54.280 --> 0:08:59.360 of how cohesive the Republicans are when it comes to 0:08:59.600 --> 0:09:02.760 a new proposal. There's a lot of discussion and debate, 0:09:02.840 --> 0:09:05.199 and it's what makes us at Premier think this is 0:09:05.240 --> 0:09:07.439 going to take time and it's going to be an 0:09:07.440 --> 0:09:10.440 incremental bills that they can build support for. What's the 0:09:10.480 --> 0:09:15.439 most controversial aspect. The most controversial aspect I think at 0:09:15.480 --> 0:09:18.880 this point is that you have Medicaid expansion for ten 0:09:18.920 --> 0:09:22.880 million people and the benefit plan design is rich and 0:09:22.920 --> 0:09:26.760 the subsidy is rich, and how how do you pull 0:09:26.800 --> 0:09:29.400 that back? How do you change that and how do 0:09:29.480 --> 0:09:33.520 you get um some cost containment into that system? I 0:09:33.559 --> 0:09:35.520 think is a big challenge and the people who have 0:09:35.640 --> 0:09:39.040 expanded Medicaid have a hard time, you know, reducing it 0:09:39.120 --> 0:09:42.559 or taking it away the people who haven't expanded Medicaid 0:09:43.280 --> 0:09:45.960 can't maybe afford to expand Medicaid. So I think that's 0:09:46.040 --> 0:09:49.040 probably the toughest part of this. Well, it's interesting because 0:09:49.080 --> 0:09:51.240 that it ties back to Lisa's first question having to 0:09:51.280 --> 0:09:54.240 do with block grants and money flowing to the states. 0:09:54.280 --> 0:09:58.800 What's the implication for Medicaid in that context. So, Brad Wilson, 0:09:58.840 --> 0:10:01.360 you mentioned from North Carolina NA. In North Carolina, they're 0:10:01.400 --> 0:10:04.320 taking two approaches. One is a managed care insurance approach. 0:10:04.440 --> 0:10:08.160 The other is a provider led healthcare system lead approach. 0:10:08.679 --> 0:10:12.280 If you give states a flat rate, a capt amount, 0:10:12.360 --> 0:10:15.640 a block grant, there's all kinds of flexibility for those 0:10:15.640 --> 0:10:18.440 states to figure out how to coordinate that care. And 0:10:18.520 --> 0:10:21.080 so I think that is that that is the method 0:10:21.120 --> 0:10:23.080 that they will use to try to contain costs and 0:10:23.120 --> 0:10:26.440 get predictability to that line item. At the same time, 0:10:26.480 --> 0:10:27.760 some of this stuff has to be done at the 0:10:27.760 --> 0:10:31.240 federal level. Well, this is the problem with fifty different 0:10:31.280 --> 0:10:34.480 programs for Medicaid. If you had fifty different programs from Medicare, 0:10:34.480 --> 0:10:36.839 I mean actually managing that if you're a doctor, or 0:10:36.880 --> 0:10:39.160 you're a hospital, or you're a health system, it's it's 0:10:39.200 --> 0:10:42.640 it's totally unmanageable. So I do think we need federal standards, 0:10:43.120 --> 0:10:47.319 federal framework. We need to make sure that patients are protected, 0:10:47.360 --> 0:10:51.240 transparency is their costs are predictable and managed, and so 0:10:51.320 --> 0:10:54.600 I think it is a combination of federal and state programs. Well, 0:10:54.640 --> 0:10:56.520 thank you very much for coming in and spending time 0:10:56.520 --> 0:10:59.439 with us and educating us all. Susan Davore is the 0:10:59.520 --> 0:11:03.760 chief exam ecorative of Premier the symbol p i NC 0:11:04.040 --> 0:11:07.480 based in Charlotte, North Carolina. Thank you very much. I 0:11:07.520 --> 0:11:09.000 know this is going to be a topic that we're 0:11:09.000 --> 0:11:24.240 going to keep calling on your expertise in the future. Well, 0:11:24.320 --> 0:11:27.080 let's get more on what Warren Buffett said in his 0:11:27.120 --> 0:11:31.560 annual letter to shareholders on Saturday with Noah Bloyer. He 0:11:31.640 --> 0:11:35.040 is a Bloomberg reporter covering Berkshire Hathaway covering this letter 0:11:35.120 --> 0:11:39.680 and subsequent commentary from Warren Buffett. Noah, what was your 0:11:39.720 --> 0:11:43.760 biggest takeaway from this letter? I think the biggest thing 0:11:44.200 --> 0:11:48.160 that that Buffett commented on here was just a tremendous 0:11:48.200 --> 0:11:51.400 amount of money that has been wasted on active management. 0:11:51.960 --> 0:11:57.360 Uh he he estimated conservatively that money managers, have you 0:11:57.520 --> 0:12:01.960 enough a hundred billion dollars over the last ten years 0:12:02.800 --> 0:12:05.959 on on fees that really didn't deliver returns um to 0:12:06.240 --> 0:12:08.840 beat the market. So that was that was far and 0:12:08.880 --> 0:12:11.280 away his his his big takeaway from this one. So 0:12:11.400 --> 0:12:14.720 it doesn't warm Buffet have a one million dollar bet 0:12:15.240 --> 0:12:17.880 he will give one million dollars to charity if he 0:12:18.000 --> 0:12:20.720 can beat hedge fund managers by investing in a passive 0:12:20.800 --> 0:12:25.240 SMP five hundred index this year. Yeah, it's it's it's 0:12:25.240 --> 0:12:27.200 a ten year bet and it's coming to an end. 0:12:27.280 --> 0:12:30.160 He bet that. Uh, like you said, an m P 0:12:30.400 --> 0:12:36.160 five tracker from Vanguard could could beat um a basket 0:12:36.200 --> 0:12:40.280 of hedge funds, it was actually several funds of funds um, 0:12:40.360 --> 0:12:43.440 and nine years into that bet, he's way ahead. It 0:12:43.559 --> 0:12:46.640 ends on December thirty one, and he basically declared in 0:12:46.720 --> 0:12:53.240 early victory. Now explain what warm Buffets position is on 0:12:53.440 --> 0:12:57.200 people who can actually outpace the market when it comes 0:12:57.240 --> 0:13:00.720 to returns. So, yeah, that's a great question. He did. 0:13:00.800 --> 0:13:02.880 He did throw that crowded bone. He said it's not 0:13:02.960 --> 0:13:06.520 impossible to do that. Obviously, Buffett himself as an example, 0:13:06.640 --> 0:13:09.200 and and he thinks that he can keep doing that. 0:13:09.280 --> 0:13:13.720 At Berkshire he's not buying index funds for Berkshire. What um. 0:13:14.640 --> 0:13:17.680 What he did say though, is that it's incredibly difficult 0:13:17.720 --> 0:13:20.880 to identify people who can outperform over the long haul 0:13:21.280 --> 0:13:23.440 early on in their careers, because if you don't do 0:13:23.480 --> 0:13:25.880 it early in their careers, it's you're you're often going 0:13:25.920 --> 0:13:28.560 to miss out on that incredible performance that that those 0:13:28.559 --> 0:13:31.520 managers are going to have. You know, I found it compelling, 0:13:31.559 --> 0:13:35.679 aside from the passive and active debate that is quite 0:13:35.720 --> 0:13:38.440 heated and topical. At the moment, I thought that Warren 0:13:38.440 --> 0:13:43.560 Buffett's optimism was somewhat surprising because Warren Buffett was a 0:13:43.640 --> 0:13:48.160 longtime supporter of Hillary Clinton, and he made no mention 0:13:48.320 --> 0:13:51.960 of President Trump. And he said that children born in 0:13:52.000 --> 0:13:56.440 America today have the brightest future ever and considered continued 0:13:56.520 --> 0:13:59.040 to reiterate his faith in the economy that even if 0:13:59.080 --> 0:14:01.840 there are hiccups, that it will keep chugging along. What 0:14:01.880 --> 0:14:04.440 did you make of this? Well, actually, I thought that 0:14:04.559 --> 0:14:08.400 those passages were quite consistent with what he's what he said, um, 0:14:08.600 --> 0:14:12.280 and you know, he's he has expressed optimism about the 0:14:12.320 --> 0:14:15.120 prospects or business in America for a long long time. 0:14:15.559 --> 0:14:18.240 And you can go back to his letters, He's he's 0:14:18.240 --> 0:14:21.280 obviously been an incredible beneficiary of it um but but 0:14:21.280 --> 0:14:23.400 but so have lots of other people. And I think 0:14:23.800 --> 0:14:28.720 his point there really was to tell people that business 0:14:28.720 --> 0:14:31.200 will do fine in America. We have a good economic 0:14:31.280 --> 0:14:35.480 system and it doesn't matter who's in the OPA office. 0:14:36.320 --> 0:14:37.920 You are right to point out that he was a 0:14:37.960 --> 0:14:41.560 big bactor of Hillary Clinton and policy wise lined up 0:14:41.600 --> 0:14:44.440 with her a lot more. But I think what Buffett 0:14:44.480 --> 0:14:46.440 was trying to do in this letter is remind people 0:14:46.680 --> 0:14:51.800 that over the history of America, business has done just fine. 0:14:51.800 --> 0:14:56.520 Our capitalist system has worked very, very well, and and 0:14:56.520 --> 0:14:59.280 and he was reminding people that they shouldn't get too 0:14:59.280 --> 0:15:02.280 wrapped up maybe the doom and gloom of the moment. 0:15:02.840 --> 0:15:08.040 He also spoke, uh, sort of eloquently about his his 0:15:08.120 --> 0:15:10.480 vision for his position in the future, right, I mean, 0:15:10.520 --> 0:15:12.680 he said that, you know, he's ready to go. He 0:15:12.760 --> 0:15:17.160 doesn't foresee retirement anytime soon, although he did say something 0:15:17.240 --> 0:15:19.160 that's you know, it's difficult to identify the things that 0:15:19.200 --> 0:15:21.680 he's going to be interested in, but he's always ready 0:15:21.680 --> 0:15:25.360 to take advantage of opportunities, right right, right, Yeah, I 0:15:25.360 --> 0:15:27.960 mean it's it's kind of incredible at eighty six. He just, 0:15:28.960 --> 0:15:32.040 I mean just this morning, said he increased his Apple steak. 0:15:32.120 --> 0:15:34.400 It's now north of eighteen billion dollars. I mean, this 0:15:34.440 --> 0:15:36.240 is the guy whose clipped that he still uses the 0:15:36.240 --> 0:15:41.360 flip phone. Um so, uh yeah. I mean, there was 0:15:41.400 --> 0:15:44.080 nothing in the letter that suggested he's ready to hang 0:15:44.160 --> 0:15:47.760 up his police and you know, quite to the contrary, 0:15:47.800 --> 0:15:51.240 he Berkshire keeps evolving and he keeps thinking about ways 0:15:51.280 --> 0:15:53.960 to expand and grow the business over time. Let's talk 0:15:54.000 --> 0:15:57.440 about Apple. This morning, Warren Buffett said that he continued 0:15:57.480 --> 0:16:02.400 to buy Apple shares at at a rapid clip, and 0:16:02.440 --> 0:16:04.880 that it is now I believe, his second biggest holding. 0:16:05.280 --> 0:16:09.640 What do you make it? I mean, what I make 0:16:09.720 --> 0:16:11.720 of that is I think what we wrote last year 0:16:11.760 --> 0:16:15.440 when when the stake was first disclosed, is that Apple. 0:16:15.880 --> 0:16:18.600 You know, Buffett has long had this aversion to tech companies, 0:16:18.640 --> 0:16:20.920 but they're not looking at Apple as a tech company. 0:16:20.960 --> 0:16:23.800 They're looking at it more as a consumer products company. 0:16:23.880 --> 0:16:26.920 And if you think about Apple from the advantage, it 0:16:27.000 --> 0:16:29.480 really does start to check some of the boxes that 0:16:29.480 --> 0:16:33.280 that Buffett cares about. The iPhone, you know, he said 0:16:33.280 --> 0:16:37.280 this morning is just this incredibly sticky product. And when 0:16:37.320 --> 0:16:41.040 you have an ecosystem of apps and all the stuff 0:16:41.040 --> 0:16:45.840 that Apple is is providing in terms of the cloud, Um, 0:16:45.920 --> 0:16:50.040 people are just reluctant to change devices or switched to 0:16:50.080 --> 0:16:54.400 a different ecosystem. So, um, I think I think that 0:16:54.560 --> 0:16:59.880 played in more than uh, his you know, past reservation 0:17:00.240 --> 0:17:03.360 about being able to guess where technology is going. No, 0:17:03.560 --> 0:17:05.800 he also spoke about furniture. Maybe you want to sit 0:17:05.840 --> 0:17:09.320 on something while you're using your Apple product, and that 0:17:09.480 --> 0:17:13.480 is a good connection to taxes. He spoke a little 0:17:13.520 --> 0:17:16.680 bit about that as well. Yeah, I mean I think 0:17:16.720 --> 0:17:19.920 I think he was cautioning people. Um, you know, there's 0:17:19.920 --> 0:17:23.159 been a lot of talk about the border adjustment and 0:17:23.200 --> 0:17:25.960 what's going to happen with respect to tax reform, and 0:17:26.400 --> 0:17:29.359 I think he threw some cold water on the idea 0:17:29.440 --> 0:17:31.640 that we were going to have this major, major overhaul. 0:17:32.119 --> 0:17:37.000 Um in part because um uh there's uh, there's some 0:17:37.000 --> 0:17:41.160 political realities and um, well economic realities too, right, because 0:17:41.160 --> 0:17:44.240 he's got furniture stores. He says, it's seventy of what 0:17:44.280 --> 0:17:46.399 you see is important, and then if you have to 0:17:46.400 --> 0:17:48.080 pay an import tax on it, they're just going to 0:17:48.160 --> 0:17:51.880 pass it along to two consumers. Yeah, that's that's that's 0:17:51.920 --> 0:17:54.920 exactly what he said. And um, uh, we're gonna have 0:17:54.960 --> 0:17:57.600 to see over the course of this year if he's right. Um, 0:17:57.640 --> 0:18:00.000 I want to ask about bonds. He was pretty naked 0:18:00.080 --> 0:18:04.400 have about treasuries and he did reduce proportion of government 0:18:04.440 --> 0:18:08.320 bond holdings in his portfolio. How how well has he 0:18:08.440 --> 0:18:13.440 timed the bond market? You know, I think I think 0:18:13.480 --> 0:18:17.399 the more important thing to look at there is just 0:18:17.720 --> 0:18:22.640 the Buffett has had this ban um towards stocks, towards 0:18:22.680 --> 0:18:27.200 wayne to own productive assets for a long time. And uh, 0:18:27.240 --> 0:18:30.880 it's even though the bond portfolio has been shrinking, He's 0:18:30.920 --> 0:18:33.119 got a lot of other investments that are bond Like. 0:18:33.560 --> 0:18:35.679 If you look at the amount of money that Berkshire 0:18:35.720 --> 0:18:38.840 has poured into the utility industry, for example, I mean 0:18:38.880 --> 0:18:43.240 the balance sheet of these electric uh power companies that 0:18:43.320 --> 0:18:46.960 they own. These are regulated utilities that kick off pretty 0:18:47.160 --> 0:18:51.720 dependable returns um and in certain ways they serve as 0:18:51.760 --> 0:18:54.359 a bond block investment on Berkshire's balance sheets. So I 0:18:54.520 --> 0:18:57.320 don't think the discussion is really about whether Buffet time 0:18:57.359 --> 0:18:59.680 the market right or wrong. He just he just has 0:18:59.720 --> 0:19:03.520 a fullosophy about investing in productive assets and wanting to 0:19:03.600 --> 0:19:06.040 be an owner of companies, and I think that's reflected 0:19:06.080 --> 0:19:11.840 in Berkshire portfolio. Burlington Northern Santa Fe spoke in the 0:19:11.960 --> 0:19:15.720 letter about the industrials and the infrastructure in the United States. 0:19:15.720 --> 0:19:19.159 To give us your take, Yeah, b NSF had a 0:19:19.280 --> 0:19:22.320 had a tougher year last year, and I think Buffett 0:19:22.359 --> 0:19:25.119 laid that out pretty clearly. A big challenge with the 0:19:25.280 --> 0:19:29.679 NSF is that, uh, it's a major one of the 0:19:29.720 --> 0:19:32.320 major things that hauls this coal and we've seen a 0:19:32.400 --> 0:19:35.159 shift in the US away from power plants using as 0:19:35.520 --> 0:19:39.040 much coal. We have more natural gas electric generation now, 0:19:39.119 --> 0:19:42.560 so that's hurt the railroad. UM. Also some of the 0:19:42.600 --> 0:19:46.800 business they were getting from, you know, providing uh materials 0:19:46.840 --> 0:19:50.159 and hauling oil away from from our onshore production in 0:19:50.200 --> 0:19:54.160 the US, that that business has declined. UM. But overall, 0:19:54.600 --> 0:19:57.760 you know, Buffett reiterated that he's committed to spending lots 0:19:57.760 --> 0:20:01.760 of capital to make sure the railroad, uh you know, 0:20:01.800 --> 0:20:05.280 they upgrade their tracks and have um you are spending 0:20:05.280 --> 0:20:07.359 the kind of capital that that that they need to 0:20:07.359 --> 0:20:11.120 make that a world class uh company. He also said 0:20:11.119 --> 0:20:14.240 he did I'm saying a parton go ahead. Well, I 0:20:14.400 --> 0:20:17.919 thought that He also talked about spending money. He doesn't 0:20:17.920 --> 0:20:20.960 mind spending big money for fees if he gets a 0:20:20.960 --> 0:20:25.439 good deal. Yeah, yeah, you know that was that was 0:20:25.920 --> 0:20:29.560 Buffett sort of typical advertisement that he sticks in the 0:20:29.600 --> 0:20:33.560 annual letter. He wants to wants to buy businesses he's 0:20:33.600 --> 0:20:36.879 he has said that Berkshire is a sprawling conglomerate that 0:20:36.960 --> 0:20:41.720 wants to sprawl ever further. So that was that to me, 0:20:41.920 --> 0:20:45.480 was an advertisement telling, you know, investment bankers who have 0:20:45.640 --> 0:20:48.520 ideas about businesses Berkshire might want to buy a you know, 0:20:48.640 --> 0:20:51.960 coming off on his door. Thanks very much, Noah bou Hire. 0:21:02.119 --> 0:21:04.080 P and L is brought to you by proper Cloth, 0:21:04.200 --> 0:21:07.280 a leader in men's custom shirts. At proper cloth dot com, 0:21:07.440 --> 0:21:10.720 ordering custom shirts has never been easier. Create your custom 0:21:10.800 --> 0:21:14.160 shirt size by answering ten easy questions, select from over 0:21:14.240 --> 0:21:18.000 five fabrics to suit your personal taste. Shirts start from 0:21:18.000 --> 0:21:20.600 eighty five dollars and are delivered in just two weeks 0:21:20.840 --> 0:21:24.840 with proper Cloths perfect fit guarantee. Remakes are completely free 0:21:24.920 --> 0:21:28.760 and expert staff are standing by to help. For premium quality, 0:21:28.840 --> 0:21:32.840 perfect fitting shirts, visit proper cloth dot com Custom shirts 0:21:32.880 --> 0:21:43.640 made Smarter. I want to bring in Brendan Brown, chief 0:21:43.640 --> 0:21:47.120 economist and head of economic research at Mitsubishi u f 0:21:47.240 --> 0:21:52.000 J Securities. UH Brennan, you wrote about how the US 0:21:52.080 --> 0:21:54.439 can win currency wars, and I want to get to that, 0:21:54.480 --> 0:21:55.920 but I want to start with something else that we're 0:21:55.920 --> 0:21:58.680 talking about earlier in the program, about how the bond 0:21:58.680 --> 0:22:02.119 market right now is is sending a veto to the 0:22:02.160 --> 0:22:05.919 FED as far as hiking rates in March, and I 0:22:05.960 --> 0:22:09.639 wanted to ask you, do you agree that the FED 0:22:09.800 --> 0:22:14.320 would accept the bond markets guidance as absolute It would 0:22:14.359 --> 0:22:16.879 only would only high rates if the bond market was 0:22:16.880 --> 0:22:19.040 absolutely pricing it. Do you agree with that? I don't 0:22:19.040 --> 0:22:21.200 agree with that at all. I think the bond market 0:22:21.240 --> 0:22:25.119 at the moment is entranced by the FED, as are 0:22:25.160 --> 0:22:28.399 many other markets. Um. If you look at for general 0:22:28.400 --> 0:22:31.840 way markets behaving been behaving in recent week, stock market up, 0:22:31.840 --> 0:22:34.800 gold market up, credit credit spreads down, you've got a 0:22:34.880 --> 0:22:40.120 general vibrant asset price inflation going here. And that's dominated 0:22:40.160 --> 0:22:42.680 I think by a perception of FED is being pretty easy. 0:22:42.720 --> 0:22:45.400 If not the easing policy, you have to go back 0:22:45.400 --> 0:22:47.480 to an observation of Milton Friedman. But you can't you 0:22:47.520 --> 0:22:51.040 can't measure the stance of monetary policy by looking at 0:22:51.080 --> 0:22:53.920 interest rates at a time when growth is accelerating everywhere 0:22:53.920 --> 0:22:56.439 around the world. If rates in the US only go 0:22:56.520 --> 0:22:59.240 up twenty five basis points once a year, the US 0:22:59.359 --> 0:23:03.240 is actually expanding monetary policy at a at a more 0:23:03.359 --> 0:23:06.400 rapid rate than ever before. Well, does that bode well 0:23:06.560 --> 0:23:10.280 for our future economic performance and the future asset prices? No, 0:23:10.520 --> 0:23:12.320 because I think what we're seeing in the US is 0:23:12.359 --> 0:23:16.120 classic to many other asset price inflation cycles we've seen 0:23:16.119 --> 0:23:18.800 in the US. But you get to a fairly late stage, 0:23:18.880 --> 0:23:21.480 like in early two thousand and sixteen, where the asset 0:23:21.520 --> 0:23:24.760 markets look very shaky. The FED comes in and does 0:23:24.800 --> 0:23:27.080 the greenspan poot or a strong pood or a yell 0:23:27.160 --> 0:23:29.720 and put whatever you want to call it um six 0:23:29.760 --> 0:23:31.919