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Speaker 1: Welcome to the Bloomberg pm 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 you're at the grocery store

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Speaker 1: or the trading floor. Find the Bloomberg p L podcast

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Speaker 1: on iTunes, SoundCloud and at Bloomberg dot com. Right now,

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Speaker 1: I want to bring in Dr Steve Miller, chief medical

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Speaker 1: officer and senior vice president at express script. It is

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Speaker 1: one of the largest companies in the country. It is

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Speaker 1: an American Fortune Fortune one hundred company, h the twentieth

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Speaker 1: largest in the US, and it is the largest pharmacy

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Speaker 1: benefit management organization in the United States. Dr Miller, I

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Speaker 1: want to start with drug pricing. We hear a lot

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Speaker 1: about you know that the price is too high? Uh

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Speaker 1: do you think do you agree? Do you think that

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Speaker 1: the cost of drugs in the US is too high?

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Speaker 1: Let's start there at least I definitely think they are.

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Speaker 1: Americans are actually should during their burdens for the rest

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Speaker 1: of the world. So we're four point six percent of

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Speaker 1: the world's population, We're thirty three of world drug spend.

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Speaker 1: We're somewhere between fifty and seventy percent of drug profits.

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Speaker 1: So we truly are funding all innovation for the rest

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Speaker 1: of the world, and they're actually freeloading on America. So

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Speaker 1: what could be done to actually bring prices down? So

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Speaker 1: you know, we've worked very hard, and there's certain things

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Speaker 1: that we can do every day, uh that, and that

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Speaker 1: patients can actually do every day. So, for instance, if

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Speaker 1: there's a generic available for a branded product, you should

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Speaker 1: be taking the generics. The FDA approves them under the

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Speaker 1: same process. They've been proven time and time again to

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Speaker 1: be equally effective. But there's also things we got to

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Speaker 1: do dramatically if we're going to continue that, and that

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Speaker 1: is we've got to make biosimilars available in this country.

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Speaker 1: So biosimilars are generic versions of the complex drugs for cancer,

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Speaker 1: rheumatoid arthritis, other diseases. American companies have been making these

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Speaker 1: drugs for Europeans. They've been taking advantage of them for

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Speaker 1: the last eight years. The discounts are somewhere between sixty

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Speaker 1: and sev yet they're unavailable in the United States and

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Speaker 1: that makes no sense. Dr Miller, You've been described as

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Speaker 1: a cost fighting ninja. You must there must be a

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Speaker 1: target on you from all of the pharmaceutical companies because

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Speaker 1: I want you to tell us about formularies and how

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Speaker 1: you arrive at the how do you go through the

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Speaker 1: process of determining which drugs are covered and how much

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Speaker 1: is paid, Because this is something that you're dealing with

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Speaker 1: by looking at your own data, not relying on the

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Speaker 1: data from let's say the drug companies or even from

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Speaker 1: healthcare providers. Yeah, so formularies are listed drugs, and that

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Speaker 1: list has to have any a drug to treat any

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Speaker 1: patient with any disease. It walks into a doctor and

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Speaker 1: so there's about twenty five thousand different products in the

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Speaker 1: United States, but it turns out that doctors need about

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Speaker 1: dred of them, and so it allows us to put

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Speaker 1: drug company against drug company to get better deals. So

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Speaker 1: the simplest example is there are six different statins like lipatore, zoe,

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Speaker 1: core crust or other things. What you do is you

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Speaker 1: say to the pharmaceutical manufacturers, I need a statun for

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Speaker 1: my patients. But the data shows that you're all equivalent

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Speaker 1: who will give us the best price, and so by

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Speaker 1: pitting them together, we can actually drive market share and

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Speaker 1: get lower prices. And so we have a process in

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Speaker 1: which our formularies are designed by external experts to express scripts,

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Speaker 1: no employees of express Scripts. The only thing they can

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Speaker 1: consider is clinical. They're not allowed to consider price. This way,

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Speaker 1: we can guarantee to our plans and our patients that

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Speaker 1: we've always put clinical first, that we always have the

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Speaker 1: right drugs available for them. But then we once we

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Speaker 1: have their parameters, can drive to the lowest net cost. So,

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Speaker 1: Dr Miller, how do you respond to, let's say a

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Speaker 1: pharmaceutical company that would say to you, by you're doing this,

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Speaker 1: you are reducing our R and D budget and you're

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Speaker 1: sort of inhibiting the production of new drugs. Yeah, so

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Speaker 1: I will tell you that the typical responses is that

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Speaker 1: you know what is we uh, there's nothing in the pipeline.

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Speaker 1: It turns out that because of American ingenuity, we have

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Speaker 1: over seven thousand products in clinical testing in the United

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Speaker 1: States right now, and that's the data according to the

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Speaker 1: pharmaceutical manufacturers. When you look at FDA approvals, two thousand

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Speaker 1: and fifteen was almost a record. You have to go

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Speaker 1: back twenty years to have that many drugs approved. So

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Speaker 1: we actually have a very vigorous drug pipeline. That's funded

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Speaker 1: by the ni H, it's funded by the pharmaceutical manufacturers,

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Speaker 1: it's funded by others. And so I'm not worried that

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Speaker 1: US trying to drive to the lowest cost. This is

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Speaker 1: still a four hundred billion dollar industry. There's plenty of

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Speaker 1: profitability there for the drug companies to do R and D.

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Speaker 1: The President has publicly come out against high drug prices.

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Speaker 1: He's singled out various pharmaceutical companies. What can the president

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Speaker 1: do without Congress? Can he do anything in order to

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Speaker 1: change drug pricing? Yeah? So we there are things that

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Speaker 1: require legislation, obviously, but there's a lot that can be

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Speaker 1: done by regulations. So the f d A, cms all

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Speaker 1: have really a lot of influence over drug pricing. So

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Speaker 1: I'll give you a couple examples. Right now, we have

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Speaker 1: a backlog of generic approvals that the f d A.

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Speaker 1: The FDA could obviously do things to accelerate those approvals.

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Speaker 1: Getting those generics out into the marketplace lowers drug prices.

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Speaker 1: We have these situations where we have only one generic

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Speaker 1: in the marketplace, they've been jacking up the price. You've

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Speaker 1: seen this with situations like Derra prim The FDA could

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Speaker 1: actually prioritize a competitor to uh DERA prim So don't

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Speaker 1: just accept the applications as they come in in but

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Speaker 1: when there's a shortage in the marketplace, put that at

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Speaker 1: the top priority list and get a competitor and faster.

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Speaker 1: So there are plenty of regulatory things that can be

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Speaker 1: done to bring down drugs. Thank you very much for

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Speaker 1: being with us. Dr Steve Miller is the Chief Medical

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Speaker 1: Officer Senior Vice president Express Scripts. Joining us here at

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Speaker 1: the National Medicare Advantage Summit taking place in Arlington, Virginia.

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Speaker 1: It is hosted by a Better Medicare Alliance. We are

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Speaker 1: broadcasting for the National Medicare Advantage Summit taking place in Arlington, Virginia,

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Speaker 1: right across the River Potomac from Washington, d C. And

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Speaker 1: here to tell us more about the healthcare system in

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Speaker 1: the United States is Tom Scully. He's a general partner

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Speaker 1: with Welsh, Carson, Anderson and Stow. He has also senior

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Speaker 1: counsel at Austin and Bird. But perhaps more importantly for

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Speaker 1: our conversation, he was the administrator of the Centers for

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Speaker 1: Medicare and Medicaid Services under President George W. Bush. And yes,

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Speaker 1: both both bushes, one push, one end push too. Um,

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Speaker 1: and you also really played a very important role in

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Speaker 1: helping to design Medicare Part D Medicare Advantage both. Right, um, so,

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Speaker 1: where do where do you? Where do you start when

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Speaker 1: you try to explain to people the current state, because

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Speaker 1: there's so many pieces to this, whether it's Medicare advantage,

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Speaker 1: whether it's supplemental, whether it's Medicare Medicaid. You say you're

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Speaker 1: on the board of a Medicaid insurance program here in

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Speaker 1: d C. How do you tease all this out so

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Speaker 1: that we can understand at least where we are and

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Speaker 1: what are some of the options to move forward to

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Speaker 1: make it better. Who would ever know healthcare was so complicated?

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Speaker 1: Well maybe maybe the best way the reason you were

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Speaker 1: you were the admit you would the administrator for the

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Speaker 1: Centers for Medicare and Medicaid Services. What does the c

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Speaker 1: m S. C MS is a giant agency in Baltimore,

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Speaker 1: which most people in Washington you know. It's in Baltimore,

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Speaker 1: and it runs Medicare and Medicaid and it also runs

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Speaker 1: the exchanges, the Obamacare exchanges, UH and a number of

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Speaker 1: other things. But it's um so you probably have seventy

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Speaker 1: seven million people. One of the four Americans roughly in

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Speaker 1: the Medicaid program, which is lower income you know, lower

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Speaker 1: income healthcare for women and kids, covers seventy the nursing

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Speaker 1: homes in the country, covers most the disabled mentally retarded

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Speaker 1: people in the country as far as mentally disabled UM

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Speaker 1: and Medicare is forty four million seniors and chronically disabled people.

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Speaker 1: So their giant programs. The combined budget for CMS with

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Speaker 1: between all of Medicare, Medicaid and the problems about one

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Speaker 1: point four trillion dollars a year, So it basically runs

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Speaker 1: about half the health care economy, and uh a lot

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Speaker 1: of it is on autopilot. So I would say n

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Speaker 1: of the you know, the these seven right people have

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Speaker 1: the job in less twenty years. Democrats Republicans were all friends,

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Speaker 1: and most of the job is running giant insurance plans

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Speaker 1: and making sure all these beneficiaries getting take care of.

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Speaker 1: And in certain periods of time, like with Obamacare or

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Speaker 1: in my case with the Party and Medicare advantage, they

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Speaker 1: get very legislative legislator in tense times, you spend time

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Speaker 1: changing the problem. So when I came in with Pushing

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Speaker 1: two thousand one, it was like called heck, I changed

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Speaker 1: the name. The CMS been a week after I got there.

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Speaker 1: You didn't want to work for HECA? No, you know

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Speaker 1: what a long story. I used to run the for

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Speaker 1: profit Hospital Association for eight c A and ten and

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Speaker 1: those guys back in the nineties, and I had a

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Speaker 1: lot of friends at HeLa. But there's a perception, fair unfair,

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Speaker 1: that there's a big slumbo and bureaucracy. So I told

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Speaker 1: my boss at the time, Tommy Toomp, said hey, let's

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Speaker 1: change the name. And there's nothing in the statute. So

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Speaker 1: we just sat around made up in her name. Well,

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Speaker 1: so you were talking about at one point for a

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Speaker 1: trillion dollar budget for all of these agencies, and you're

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Speaker 1: saying so on a pilot. Meanwhile, we're looking at budget

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Speaker 1: projections that are saying that the cost is going to

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Speaker 1: balloon as the population does age. Are there conversations that

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Speaker 1: are being had that you're involved with with the current

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Speaker 1: legislators for making feasible changes that would reduce costs over time?

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Speaker 1: And what the House bill? This is the biggest debate

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Speaker 1: in the country list you know three months is the

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Speaker 1: Paul Ryan House Bill didn't pass. So if you take Obamacare,

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Speaker 1: I'm not trying to criticize President Obama. I think he

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Speaker 1: was worthy effort to try to cover and of universal coverage.

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Speaker 1: But what happened under President Obama's healthcare plan is if

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Speaker 1: you look at before I kicked in two thousand twelve,

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Speaker 1: you had fifty five million people on the medicaid. Problem.

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Speaker 1: Between then and today, it's going from fifty five million

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Speaker 1: to seventy seven million, So two million people on Medicaid.

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Speaker 1: If you kept it going for the next ten years,

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Speaker 1: you go to ninety seven million. Current spending on Medicaid

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Speaker 1: now six hundred billion dollars a year, six hundred billion

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Speaker 1: dollars here, it's a big number already, a drums round.

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Speaker 1: It will be from six to nine hundred and fifty

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Speaker 1: billion over the next ten years. But isn't that more

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Speaker 1: of a commentary on sort of the fact that there

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Speaker 1: are people who are falling into poverty or falling into

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Speaker 1: a lower income bracket and help. No, you're President Obama did,

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Speaker 1: I'm not trying to be good pro con that bill

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Speaker 1: expanded the poverty coverage of Medicaid and mandated there was

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Speaker 1: gonna go to a hundred and thirty eight percent of

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Speaker 1: poverty in every state. The Supreme Court came out said

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Speaker 1: you can't force the states to do that. So thirty

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Speaker 1: one northern, largely democratic states took the hundred percent from

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Speaker 1: the money and expanded their problems massively, and nineteen largely southern,

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Speaker 1: more conservative states said we're not going to do it.

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Speaker 1: We don't want to have these giant new in talent problems,

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Speaker 1: and until nineteen of them skipped it. Okay. So the

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Speaker 1: real issue is what the Republicans have done. These are

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Speaker 1: big policy changes that effect have an enormous impact in

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Speaker 1: every American the economy. Republicans largely said we're gonna freeze

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Speaker 1: it where it is, So spending a Medicaid under what

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Speaker 1: Paul Ryan wanted to do would go from six hundred

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Speaker 1: billion this year to about seven d fifty billion, and

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Speaker 1: ten years if you left it on the cruise control

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Speaker 1: from Obamacare, we go from sillion to nine hundred billion.

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Speaker 1: The Republicans would freeze it where it is at about

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Speaker 1: seventies seven million people. Those are big policy issues. Do

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Speaker 1: you want to cover all those new people in those

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Speaker 1: other states? Do you want to you know, those are

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Speaker 1: you're talking about another twenty million people in the medicaid

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Speaker 1: problems that good or bad those are big, fundamental, gigantic

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Speaker 1: economic issues. So I have been to love to medicaid problem.

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Speaker 1: But every person, let's every person is paying taxes out

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Speaker 1: there listening to this, pays four thousand dollars per year.

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Speaker 1: You're not a Medicaid that is your tax contribution to

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Speaker 1: pay for Medicaid every year is four thousand dollars per taxpayer.

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Speaker 1: And you and all make a decision do you want

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Speaker 1: to cover all those people and have universal coverage. I

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Speaker 1: think it's the right thing to do. The Medicaid problems

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Speaker 1: of a mass I could you could spend hours explaining

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Speaker 1: to you how screwed up it is structurally, but it's

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Speaker 1: a wonderful problem. I happen to be a fan of

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Speaker 1: usual coverage. But how much do you want to spend where?

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Speaker 1: These are the single biggest issues in the government. Medicare

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Speaker 1: and Medicaid are the biggest problems in the governments security,

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Speaker 1: and they drive all your taxpayer spending. And these policy

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Speaker 1: issues about who you want to cover where and whose

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Speaker 1: air subsidies and who should get subsidies are massive and

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Speaker 1: they're important to people. And I know they're incredibly complicated.

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Speaker 1: Who health is so complicated, but they are the budget

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Speaker 1: and they are the governments that this is the future

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Speaker 1: of government policy. Is there a model or is there

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Speaker 1: another country that is doing something that we can learn from.

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Speaker 1: If you were given a clean I mean you're not

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Speaker 1: going to ever get a clean slate, there is no

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Speaker 1: clean slate. But if you were to be given, you know,

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Speaker 1: half a clean slate, what would you do? What would

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Speaker 1: you say? You can't? And I've been doing this forever,

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Speaker 1: and I think things changing incrementally, and I look at

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Speaker 1: I was not a big fan of Obamacare structurally, I

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Speaker 1: think he's trying to do the right thing. If you

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Speaker 1: look at President Obama's package, and I've said this publicly

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Speaker 1: a lot, it looks a hell of a lot like

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Speaker 1: that George H. W. Bush Plan that I helped design

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Speaker 1: nineteen ninety with a lot more money. So what they

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Speaker 1: were trying to do, the unerfual covers was worthy in

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Speaker 1: a in a rational goal. I think they ever did

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Speaker 1: it went too far and and and and put too

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Speaker 1: much on the structure. But they were trying to do

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Speaker 1: the right thing. And I think when you look at

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Speaker 1: the Republicans are trying to do, they're actually trying to

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Speaker 1: scale back what President Obama did. So whatever happens, the

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Speaker 1: problems are going to get bigger. It's a matter of

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Speaker 1: how much bigger. And even on the Republican bills, Medicare

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Speaker 1: and Medicator and grow dramatically. The issue is are they

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Speaker 1: gonna grow really fair star less fast so you can't

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Speaker 1: really change it. Did the Dutch have a pretty good system? Yes,

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Speaker 1: the Germans I think a pretty good system. They have

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Speaker 1: kind of neighborhood based systems. But you have to go

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Speaker 1: back to and blow the whole thing up and start

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Speaker 1: from the scratch. We have an incredibly complicated web of

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Speaker 1: multiple problems the cover people, and you really have no

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Speaker 1: choice but to build on it. Tom Scully, thank you

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Speaker 1: so much for joining us. Truly a fascinating to hear

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Speaker 1: your thoughts. Tom Scully was the head of CMS under

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Speaker 1: both President George one. Okay, you were in the White House,

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Speaker 1: but you've been making healthcare policy and you did a

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Speaker 1: Medicare party and you also did Medicare advantage, and we

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Speaker 1: really appreciate you being with He looks incredibly healthy. Like

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Speaker 1: about nine seven, Tom Scully general partner at Wells, Carson

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Speaker 1: Anderson and still also Senior council at Austin and bird

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Speaker 1: l LP. We are here broadcasting live at the National

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Speaker 1: Medicare Advantage Summit in Arlington, Virginia. It is hosted by

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Speaker 1: the Better Medicare Alliance. This is Bloomberg. We are live

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Speaker 1: at the National Medicare Advantage Summit in Arlington, Virginia, and

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Speaker 1: we are so lucky to have Dr Kvita Patel here

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Speaker 1: with us. She is a nonresident Senior Fellow at Brookings

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Speaker 1: Institute and a former advisor to the Obama White House.

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Speaker 1: She worked on the Affordable Care Act. Uh So, Dr Ptel,

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Speaker 1: you really have a clear insight into what's going on

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Speaker 1: right now? What should we pay attention to. What's the

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Speaker 1: most realistic change that could happen in short order to

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Speaker 1: the a c A Affordable Care Act. So I still

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Speaker 1: think the most realistic change is going to be no

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Speaker 1: change that we're not going to see a repeal or

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Speaker 1: something that kind of completely rips out the Affordable Care Act.

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Speaker 1: There's still a lot of discussions going on, but the

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Speaker 1: bottom line is the votes are not there right now.

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Speaker 1: Dr Ptel, maybe you could just disc ride to people

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Speaker 1: how Medicare advantage works in the health care system and

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Speaker 1: how this partnership between the public system, which is of

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Speaker 1: course Medicare UH and private insurance. How does that come

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Speaker 1: together and how does they How did that present a

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Speaker 1: challenge because most people look at this situation they go, boy,

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Speaker 1: it can't get any more complicated, right, right, So the

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Speaker 1: Medicare Advantage Program really started as a way to expand

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Speaker 1: kind of what we would call private sector choices in

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Speaker 1: insurance for Medicare beneficiaries. And that was actually done during

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Speaker 1: a Republican administration previously, the actual George H. W. Bush administration,

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Speaker 1: and that failed a little bit in its first attempt,

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Speaker 1: and then there was a little bit of a reboot

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Speaker 1: in the in the George W. Bush administration, where we

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Speaker 1: then got what we have today, which is the Medicare

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Speaker 1: Advantage Program. And basically of people in Medicare are in

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Speaker 1: private plans, which are Medicare Advance Plans, which are basically

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Speaker 1: confusing because and what if you have a family member

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Speaker 1: like I do they just get a bunch of brochures

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Speaker 1: like around October and they have all these choices, And

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Speaker 1: that's what you're referencing. But where we've gotten now is actually,

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Speaker 1: in about five years, more than half of the Medicare

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Speaker 1: beneficiaries are going to be in these Medicare advantage or

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Speaker 1: private commercial insurance plans in Medicare, then the traditional fee

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Speaker 1: for service a million people currently in Medicare correct about

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Speaker 1: fifty five to sixty million in the Medicare program. That

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Speaker 1: number is going to grow in the next five years.

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Speaker 1: But then half of the people in this program in

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Speaker 1: Medicare will be in the Medicare advantage program. How does

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Speaker 1: Medicare advantage and partnering private health insurance companies with public

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Speaker 1: ones reduce costs? So the way it reduces cost is

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Speaker 1: basically by what what the government does is it actually

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Speaker 1: pays the private insurance plan kind of a lump some

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Speaker 1: amount to take care of basically everything. Right now, at

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Speaker 1: traditional Medicare, there's hospital costs, physician costs, drug costs, and

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Speaker 1: it's all pays out of separate pockets and pieces of

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Speaker 1: the government. Pie Medicare advantage, the government pays one lump

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Speaker 1: sum to the private plan and says you take care

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Speaker 1: of everything, no matter how much it costs. And if

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Speaker 1: someone doesn't necessarily need all that money, then the plan

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Speaker 1: keeps that extra money. And what the plans will do

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Speaker 1: in a way to save money. Is they will do

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Speaker 1: really aggressive things like send a nurse out to a

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Speaker 1: patient's home to do an in home assessment and not

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Speaker 1: ever have to even see the doctor to establish kind

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Speaker 1: of what that patient needs, all in an attempt to

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Speaker 1: create a more efficient system. Okay, so talking about private

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Speaker 1: health insurers brings me back to A C A and

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Speaker 1: the path forward. The latest plan that was unveiled today

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Speaker 1: by an Alabama Republican congressman shows that there is an

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Speaker 1: attempt to try to pull out high risk pools or

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Speaker 1: sort of group people by how risky they are they

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Speaker 1: are and their pre existing conditions. Can you speak to

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Speaker 1: that and how effective that could be? Yeah? So you

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Speaker 1: remember the criticism of the American Health Care Act is

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Speaker 1: that potentially the older or sicker you are, you're gonna

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Speaker 1: have to pay potentially a thousand percent more than you

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Speaker 1: would today under the Affordable Care Act. So what's being

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Speaker 1: introduced now is ways to actually deal with sicker patients

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Speaker 1: who are older and to try to acknowledge that they

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Speaker 1: need something different than just regular old Medicare insurance. So

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Speaker 1: what you're seeing proposed um not just for Medicare but

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Speaker 1: for actually any age are these high risk pools that

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Speaker 1: take people out based on the numbers of kind of

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Speaker 1: you know, numbers of diseases that they have, or how

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Speaker 1: sick they are, based on how much money they're using

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Speaker 1: in the system, or potentially pre existing conditions, and then

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Speaker 1: charge them more. And then well if one charges them more,

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Speaker 1: but then it also puts them in a different cool

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Speaker 1: almost like medicare advantage, where it's a private insurance system

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Speaker 1: that then has to take care of them for a

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Speaker 1: dedicated amount of money. But I don't understand this works

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Speaker 1: why any insurance company would agree to take them on.

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Speaker 1: So it's yes, that's a good question. Will anyone actually

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Speaker 1: take on the sickest people in a population? If you

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Speaker 1: pay enough money, somebody will. But who's gonna put that?

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Speaker 1: This gonna put the government is so at the end

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Speaker 1: of the day, you have mentioned I obviously am a

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Speaker 1: fan of the Affordable Care Act, even with its warts

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Speaker 1: and flaws. At the end of the day, somebody has

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Speaker 1: to foot the bill. We can't skirt or get around

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Speaker 1: the fact that as a society we have to pay

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Speaker 1: for healthcare as a society, including people who are really

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Speaker 1: sick and including people who are super healthy. And that's

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Speaker 1: the bottom line. I want your thoughts on prescription drug

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Speaker 1: prices and the insurance plans around those, because the president

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Speaker 1: has the President Donald Trump has come out via tweets,

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Speaker 1: via verbal uh rhetoric, he's saying drug prices are too high. Correct.

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Speaker 1: So the emphasis on drug pricing is very interesting for

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Speaker 1: a Republican administration, and it's largely, as you mentioned, because

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Speaker 1: of President Trump's quotes. Translating that into something that will

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Speaker 1: change the way all of us receive our prescription drugs

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Speaker 1: is very hard to do. However, that's something if you

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Speaker 1: listen to all the people who work under President Trump,

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Speaker 1: they've said that this is one of the top priorities

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Speaker 1: for the White House. The way prescription drug plans work

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Speaker 1: right now, most of us in America don't even realize it.

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Speaker 1: It's a third party that deals with the way your

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Speaker 1: drugs are paid for, and those are called prescription benefit plans.

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Speaker 1: And so there's a whole different entity and industry outside

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Speaker 1: of your insurance card that actually deals with all of this.

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Speaker 1: And that's why it's complicated and I am not likely

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Speaker 1: to see a change happen soon. Well, I want to

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Speaker 1: thank you for helping us understand that at least a

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Speaker 1: little bit. Dr Kvita Patel, Nonresident Senior Fellow, Brookings Institution.

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Speaker 1: We are broadcasting at the National Medicare Advantage Summit taking

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Speaker 1: place in Arlington, Virginia, is hosted by Better Medicare Alliance.

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Speaker 1: And to turn our attention now to politics and America's

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Speaker 1: relationship with China, I want to bring in Brendan A. Hearn.

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Speaker 1: He is the chief investment officer of Crane Shares and

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Speaker 1: Brendan of course, we're all wondering about the Chinese President

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Speaker 1: Jijing Ping's visit to UH President Donald Trump's mar Alago

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Speaker 1: Club in Florida. What do you think the most pressing

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Speaker 1: topic their meeting will be. It's going to be North

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Speaker 1: Korea him. It's an area of mutual interest in an

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Speaker 1: area where there's potential a lot of potential collaboration and

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Speaker 1: coming up with a solution that is certainly a factor

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Speaker 1: for both countries. Well, so North Korea is definitely even

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Speaker 1: more on people's minds just because of the recent missile tests.

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Speaker 1: But don't both sides have a reason to not say anything.

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Speaker 1: I mean, it's the best case scenario that neither of

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Speaker 1: them say anything and they make nice and then they

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Speaker 1: have a nice photo up with each other. I agree

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Speaker 1: at Lisa. I think ultimately you want to get the

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Speaker 1: dialogue going between you know, the first and second largest

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Speaker 1: world economies leaders talking with one another, and hopefully that

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Speaker 1: sets a path for more communication um in the years

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Speaker 1: to come. You know, Brendan, one of the issues has

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Speaker 1: been Chinese acquisitions of what are considered to be essential assets.

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Speaker 1: For example, Chinese companies attempts to purchase oil companies in

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Speaker 1: the United States that was thwarted. Do you think that

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Speaker 1: there is going to be talk about the Westinghouse Toshiba

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Speaker 1: unit that is up for sale that is facing financial problems.

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Speaker 1: Good question. I believe the this is an opportunity for

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Speaker 1: President g to show Trump and and really the United

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Speaker 1: States in general about how much business China is doing

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Speaker 1: here in the US. Last year, three million tourists, three

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00:24:04,240 --> 00:24:08,480
Speaker 1: hundred thousand Chinese students studying. China is the second larger

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Speaker 1: buyer of agricultural products, and there's US companies doing well

435
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Speaker 1: in China. I think this gives China opportunities to show

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00:24:14,960 --> 00:24:17,919
Speaker 1: how they can be a good business partner. And yes,

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Speaker 1: there are sensitive sectors, you know, technology being one of them,

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Speaker 1: nuclear energy. Well, what we're talking about with Westinghouse nuclear

439
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Speaker 1: energy well, and China has a pollution issue. UM nuclear

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Speaker 1: is going to be is currently one of those solutions,

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Speaker 1: along with hydro wind and solar bringing Westinghouse technology to China.

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00:24:38,800 --> 00:24:40,960
Speaker 1: They're gonna build you know, it's upwards of two dozen

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Speaker 1: nuclear plants in the years to come. And why wouldn't

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00:24:44,640 --> 00:24:46,879
Speaker 1: that be a good thing for Westinghouse to have a

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00:24:47,040 --> 00:24:51,000
Speaker 1: Chinese ownership, either partial or full Brennan. I imagine that

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Speaker 1: one thing that will be brought up is the trade

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00:24:53,200 --> 00:24:56,280
Speaker 1: deficit that the US has with China. President Trump has

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00:24:56,320 --> 00:24:59,480
Speaker 1: talked extensively about it. He has lamented how big it is,

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Speaker 1: even though it has contracted over the years. What do

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00:25:02,200 --> 00:25:04,399
Speaker 1: you expect to come out of this particular meeting with

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00:25:04,480 --> 00:25:07,560
Speaker 1: respect to the trade deficit. I think it sets a

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Speaker 1: this dialogue and communication going forward. I believe that you

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00:25:12,240 --> 00:25:16,280
Speaker 1: have a little bit of a team of rivalries within

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Speaker 1: the Trump administration where you've got say, Jared Kushner, Gary Cohen, Manuchin,

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Speaker 1: and Male Pass on one side, uh more of say

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00:25:24,200 --> 00:25:27,359
Speaker 1: the globalist trade proponents, and on the other side you

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00:25:27,440 --> 00:25:31,080
Speaker 1: have a Steve Banion, Wilbert Ross, Peter Navarro, and so

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Speaker 1: I believe you have a little bit of, uh, the

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00:25:34,160 --> 00:25:37,080
Speaker 1: administration finding its way between these two camps that have

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Speaker 1: divergent views. Well, hold on a second. It's really interesting

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Speaker 1: that you mentioned that because Steve Bannon, as you know,

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00:25:43,280 --> 00:25:47,000
Speaker 1: was just removed from the National Security Council. Do you

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00:25:47,080 --> 00:25:50,520
Speaker 1: think that that's going to affect this conversation that President

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00:25:50,560 --> 00:25:54,399
Speaker 1: Trump has with President Jejim ping and possibly ease the

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00:25:54,480 --> 00:25:57,639
Speaker 1: negotiations over some kind of trade contract. I think behind

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00:25:57,720 --> 00:26:01,280
Speaker 1: the scenes that the hand, the visible hand of Henry

467
00:26:01,560 --> 00:26:05,880
Speaker 1: Kissinger is at play. Uh. He visited China in December

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Speaker 1: to help arrange this meeting. He's been meeting with the

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00:26:09,040 --> 00:26:12,680
Speaker 1: administration to help them prep for this meeting. And and

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00:26:12,800 --> 00:26:14,720
Speaker 1: so certainly I think you're going to see a more

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00:26:14,880 --> 00:26:18,360
Speaker 1: balanced view potentially. I mean, time is gonna tell um

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00:26:18,960 --> 00:26:23,119
Speaker 1: in in this course of dialogue. Now, Brendan Crane Shares

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00:26:23,680 --> 00:26:27,159
Speaker 1: has a variety of exchange traded funds designed for a

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Speaker 1: Chinese investments. Is the Chinese you want? Is it currently

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00:26:32,040 --> 00:26:35,359
Speaker 1: in your mind overvalued or undervalued versus the US dollar?

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00:26:36,560 --> 00:26:38,800
Speaker 1: That's a good question, PIM. I mean, I think ultimately

477
00:26:39,119 --> 00:26:44,600
Speaker 1: interest rate differentials helped drive currencies China has slowly slightly

478
00:26:44,920 --> 00:26:47,520
Speaker 1: started the titan not the official interest rates. So so

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Speaker 1: I don't think China meets the Treasury departments uh definition

480
00:26:52,080 --> 00:26:54,840
Speaker 1: of a currency manipulator. Um. But I think if we

481
00:26:54,920 --> 00:26:59,360
Speaker 1: were in euro, yen or pound, you might say it's undervalued. Yeah,

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00:26:59,400 --> 00:27:01,840
Speaker 1: this is going to be something that that could come

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00:27:01,920 --> 00:27:05,400
Speaker 1: up because President Trump has said that, uh, that China

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00:27:05,560 --> 00:27:07,680
Speaker 1: is manipulating its currency. And yet you know, you do

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00:27:07,880 --> 00:27:10,119
Speaker 1: wonder if there was some kind of removal of some

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00:27:10,240 --> 00:27:13,800
Speaker 1: kind of state control, the direction probably would be down

487
00:27:14,200 --> 00:27:17,720
Speaker 1: not up right. It probably would de appreciate. Beginning in

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00:27:19,560 --> 00:27:23,000
Speaker 1: China cut the official interest rates, the FED moves to

489
00:27:23,040 --> 00:27:27,680
Speaker 1: a tightening bias the the yuan depreciates versus the dollar.

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00:27:28,160 --> 00:27:31,040
Speaker 1: China is slowly starting to tighten up a little bit

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Speaker 1: in advance of a big political turnover at the end

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00:27:34,520 --> 00:27:36,760
Speaker 1: of this year. This is the year of stability for

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00:27:36,880 --> 00:27:42,280
Speaker 1: China economically, in advance of the political and leadership changes coming. Brendon,

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Speaker 1: before we, you know, sort of look at China as

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00:27:44,320 --> 00:27:48,080
Speaker 1: a monolithic entity. Is it worth noting that they have

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Speaker 1: their own problems such as bad loans, and is it

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Speaker 1: possible that we are underestimating the issues that face the

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00:27:57,280 --> 00:28:00,320
Speaker 1: Chinese leadership. It's not just all about the United States. Oh,

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Speaker 1: I agree, there's a domestic agenda that's been set, you know.

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Speaker 1: You know, if you one looks at the thirteen five

501
00:28:06,480 --> 00:28:10,560
Speaker 1: year Plan, the um Chinese government is very explicit and

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00:28:10,760 --> 00:28:13,240
Speaker 1: where they want to drive not only their economy but

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00:28:13,320 --> 00:28:16,760
Speaker 1: the society. And there there are liabilities on the balance sheet.

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00:28:16,840 --> 00:28:19,520
Speaker 1: At the same time there's assets. And I think you

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00:28:19,600 --> 00:28:21,760
Speaker 1: bring up a great point. China is a big country,

506
00:28:21,840 --> 00:28:24,480
Speaker 1: just not geographically, but the economy and parts of China

507
00:28:24,560 --> 00:28:27,840
Speaker 1: is doing very well right now. Domestic consumption parts of

508
00:28:27,960 --> 00:28:33,639
Speaker 1: China geared to more traditional um steal aluminum coal, you know,

509
00:28:33,840 --> 00:28:35,640
Speaker 1: a little bit of of of a tougher roach. You've

510
00:28:35,640 --> 00:28:39,360
Speaker 1: got this barbelled economy right now. So for President Jijmping,

511
00:28:39,600 --> 00:28:42,640
Speaker 1: it's an election gear. He wants to send a message

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00:28:42,680 --> 00:28:45,840
Speaker 1: to his constituents back home. What's the best case scenario

513
00:28:46,240 --> 00:28:49,480
Speaker 1: that could emerge from this meeting for that purpose. I

514
00:28:49,560 --> 00:28:52,960
Speaker 1: think ultimately this is a sign of respect of face

515
00:28:53,480 --> 00:28:56,440
Speaker 1: and that that Trump is willing to meet with g

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00:28:56,640 --> 00:29:00,280
Speaker 1: at this stage of his new presidency. Is a tree

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00:29:00,360 --> 00:29:02,920
Speaker 1: in in and of itself. So I think it's a.

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Speaker 1: It's a good sign and shows something that's so important

519
00:29:05,920 --> 00:29:08,880
Speaker 1: to China, which is respect. Yeah, and so what about

520
00:29:08,920 --> 00:29:12,480
Speaker 1: for President Trump? I think ultimately Trump, you know, Trump

521
00:29:12,640 --> 00:29:16,520
Speaker 1: is going to one. He was elected with a set

522
00:29:17,000 --> 00:29:19,840
Speaker 1: agenda from the people who voted for him, and he

523
00:29:19,960 --> 00:29:22,760
Speaker 1: wants to satisfy those voters. At the same time, the

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00:29:22,920 --> 00:29:28,160
Speaker 1: US is a global leader economically, and I think upsetting

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00:29:28,800 --> 00:29:33,040
Speaker 1: what what will be an increasingly better mutually beneficial relationship economically,

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00:29:33,560 --> 00:29:37,040
Speaker 1: um it especially around an area like North Korea where

527
00:29:37,160 --> 00:29:39,800
Speaker 1: China can help. Right, Brendan to Hearn, thank you so

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00:29:39,960 --> 00:29:42,320
Speaker 1: much for joining us. This will be something that we

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00:29:42,400 --> 00:29:44,160
Speaker 1: I am sure we'll talk to you again about soon.

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00:29:44,200 --> 00:29:47,520
Speaker 1: Brendan to Hern is chief investment officer at Crane Shares

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00:29:47,600 --> 00:29:50,480
Speaker 1: in New York City, talking about President Trump's meeting with

532
00:29:50,520 --> 00:29:59,200
Speaker 1: President Jejan Ping of China. Thanks for listening to the

533
00:29:59,240 --> 00:30:02,600
Speaker 1: Bloomberg p Now podcast. You can subscribe and listen to

534
00:30:02,680 --> 00:30:07,880
Speaker 1: interviews at iTunes, SoundCloud, or whatever podcast platform you prefer.

535
00:30:08,200 --> 00:30:11,440
Speaker 1: I'm Pim Fox. I'm out there on Twitter at Pim Fox.

536
00:30:11,800 --> 00:30:14,440
Speaker 1: I'm out there on Twitter at Lisa Abramo. It's one

537
00:30:14,760 --> 00:30:17,480
Speaker 1: before the podcast. You can always catch us worldwide on

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00:30:17,520 --> 00:30:18,320
Speaker 1: Bloomberg Radio