WEBVTT - NAFTA Decision will be Market Moving, Haines Says 0:00:09.840 --> 0:00:13.800 Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane Jailey. 0:00:13.960 --> 0:00:17.560 We bring you insight from the best in economics, finance, investment, 0:00:18.000 --> 0:00:23.480 and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 0:00:23.600 --> 0:00:33.760 Bloomberg dot Com, and of course, on the Bloomberg Let's 0:00:33.760 --> 0:00:36.599 turn our attention now to the State of the Union message. 0:00:36.640 --> 0:00:38.440 I know that a lot of people are waiting for this, 0:00:38.520 --> 0:00:41.200 and Chris Rupki is among them. He is the chief 0:00:41.200 --> 0:00:45.879 financial economist for m u f G Union Bank and 0:00:46.159 --> 0:00:49.680 he joins us here in our studio. Chris Rupki, great 0:00:49.680 --> 0:00:52.559 to have you here. So what kind of economy? What 0:00:52.680 --> 0:00:56.080 kind of economy is? Is the president going to be? Uh? 0:00:56.120 --> 0:00:58.800 What kind of economy do we have? While the president 0:00:58.880 --> 0:01:02.560 speaks no, it was interesting. I remember during the campaign, 0:01:02.720 --> 0:01:07.360 five percent unemployment was phony. He wouldn't be getting people 0:01:07.640 --> 0:01:11.000 into the stadiums if unemployment was really five percent. But 0:01:11.080 --> 0:01:14.600 now the president's crowing about how well the economy is 0:01:14.600 --> 0:01:18.240 doing with unemployment rate at four point one and saying, 0:01:18.319 --> 0:01:21.000 but what do you say, it's good? Yeah, it's it's 0:01:21.040 --> 0:01:24.080 full employment. It's like, why did we do uh, tax 0:01:24.120 --> 0:01:26.920 cuts and Jobs Act? I mean, we've never seen another 0:01:26.959 --> 0:01:33.000 administration in history probably do fiscal stimulus tax cuts unless 0:01:33.000 --> 0:01:35.319 we're in a recession. Why are we getting tax cuts? 0:01:35.319 --> 0:01:39.200 By the way, I haven't seen my time. I think 0:01:39.200 --> 0:01:41.280 it's coming at the end of this week, so I'll 0:01:41.280 --> 0:01:43.240 take a look at it. You should be I'm excited, 0:01:43.720 --> 0:01:46.000 you'd be excited a little bit more in the envelope. Well, 0:01:46.040 --> 0:01:49.040 every time you hear about a company releasing its results, 0:01:49.120 --> 0:01:51.240 they say that there's a little bit more in the envelope. 0:01:51.680 --> 0:01:55.240 Is that not for someone at my level? That's exactly right? 0:01:55.960 --> 0:01:58.240 So can you can you sort of opine about that, 0:01:58.320 --> 0:02:00.600 because you know, you can spend all a talking about 0:02:00.600 --> 0:02:03.280 whether they're going to do a dividend increase or share 0:02:03.400 --> 0:02:06.600 buy back, or maybe they'll pay their workers a little Well, 0:02:06.800 --> 0:02:09.800 we've kind of seen this before, right, What did companies 0:02:09.880 --> 0:02:12.560 do when they get the money? They usually reward their 0:02:12.600 --> 0:02:16.919 shareholders dividends, share buy backs. But yeah, they've been doing 0:02:16.960 --> 0:02:21.239 some good. Pr been giving out some thousand dollar bonuses 0:02:21.320 --> 0:02:24.600 to thousands of their employees, if not the upper levels 0:02:24.639 --> 0:02:27.840 of management. So it's good. I mean, I can't say 0:02:27.840 --> 0:02:32.280 it's it's not good in terms of money wherever it 0:02:32.320 --> 0:02:35.600 comes from. If money circulates in the economy. We're going 0:02:35.680 --> 0:02:38.839 to get some kind of growth. We can't say no. 0:02:39.040 --> 0:02:43.360 It's just that usually Washington with a twenty trillion dollar 0:02:43.680 --> 0:02:47.280 national debt, they would be doing this sort of deficit spending. 0:02:47.320 --> 0:02:49.920 It is deficit spending, right, It's not as if we 0:02:49.919 --> 0:02:52.800 don't have the money. But we're going to print it, right, 0:02:53.080 --> 0:02:55.519 isn't that Well, they're going to issue bonds. That's sort 0:02:55.560 --> 0:02:59.799 of like printing. It's like, why, why now, why are 0:02:59.800 --> 0:03:03.880 we English? I just don't I don't quite get it. Alright, 0:03:03.919 --> 0:03:06.200 So alright, head time I want to jump into we 0:03:06.200 --> 0:03:09.320 get some breaking news. Here's the headline within the press release. 0:03:09.400 --> 0:03:13.119 I love this hungry tape. Hungry Tapeworm was such a 0:03:13.160 --> 0:03:16.280 good band. They'd play Grand Funk Railroad like no one. 0:03:16.600 --> 0:03:21.679 The ballooning costs of healthcare act as a hungry tapeworm 0:03:22.200 --> 0:03:27.679 on the American economy. There's the headline from Amazon, Berkshire, 0:03:27.720 --> 0:03:31.240 haths Away and J See we did that in stereo. 0:03:31.720 --> 0:03:34.640 We do that, Pim and I can do that anyways. 0:03:34.760 --> 0:03:38.040 It's it's a really interesting headline talking about rip up 0:03:38.040 --> 0:03:41.920 the script. Amazon, Berkshire, Hathaway, JP Morgan going to form 0:03:41.960 --> 0:03:45.320 a healthcare company to go after the hungry taper Chris Rupki, 0:03:45.480 --> 0:03:49.640 how much is healthcare is a percent of our jullion 0:03:49.680 --> 0:03:54.400 dollar economy? Is it six or is it actually more? Well, 0:03:54.440 --> 0:03:58.800 I mean more, and I don't have that at my fingertips, 0:03:58.920 --> 0:04:07.120 but it is interesting the FEDS PC inflation core PC inflation. 0:04:07.640 --> 0:04:13.160 A huge weight of that is healthcare. It's like, so 0:04:13.600 --> 0:04:17.360 you mean to tell me financially, yeah, not even psy 0:04:18.960 --> 0:04:23.520 of your budget, of the nation's budget ex. Food and energy. 0:04:23.600 --> 0:04:28.080 After that is healthcare, and then it's ginormous pim Fox 0:04:28.080 --> 0:04:31.960 A key paragraph here with Todd Coombs, Uh, Marvel Selivanberg 0:04:32.040 --> 0:04:36.920 Told and Beth Galletti of Amazon, the three major officers, 0:04:36.960 --> 0:04:42.320 a headquarters location and key operational details will be communicated 0:04:42.800 --> 0:04:47.080 to take on the hungry tapeworm. The hungry tapeworm, Well, 0:04:47.560 --> 0:04:49.800 they say that they're going to provide US employees and 0:04:49.800 --> 0:04:54.280 their families was simplified, high quality, transparent healthcare. The thing 0:04:54.320 --> 0:04:56.080 I would note, though, is that there is no healthcare 0:04:56.160 --> 0:05:00.480 company in this transpriate no no. And Richard Truman mentions 0:05:00.560 --> 0:05:04.080 the United Healthcare Trading Lower Office. To summarize, folks, because 0:05:04.080 --> 0:05:06.320 we went into it a little bit quickly. You're trying 0:05:06.360 --> 0:05:09.440 to get the news to Amazon. Berkshire Hathaway and JP 0:05:09.560 --> 0:05:16.400 Morgan Chase to partner on US employee healthcare. The sub 0:05:16.400 --> 0:05:22.280 beheading is goal is to improve US employee satisfaction while 0:05:22.320 --> 0:05:24.600 reducing costs. I mean, that's the spin. They want their 0:05:24.600 --> 0:05:28.080 employees to be happier with their coverage. But it's a 0:05:28.160 --> 0:05:30.200 it's are we talk about the president and a private 0:05:30.240 --> 0:05:32.880 initiative today? You wonder if you'll mention this in the 0:05:32.880 --> 0:05:37.360 State of the Onion. Very good, Chris Rupki. Uh, this 0:05:37.480 --> 0:05:42.400 kind of announcement, while interesting and perhaps will hurt, will 0:05:42.640 --> 0:05:45.800 help a lot of people. To the point about the 0:05:45.800 --> 0:05:50.400 current healthcare system, Uh, do you see any way to 0:05:50.560 --> 0:05:53.840 rein in the entitlement programs in any way that would 0:05:53.880 --> 0:05:57.039 be meaningful without cutting the quality of the care or 0:05:57.080 --> 0:06:00.520 the quality of the service delivered. It's going to be difficult, 0:06:00.640 --> 0:06:05.560 and I resent your use. Resent your use of the 0:06:05.600 --> 0:06:08.440 word entitlement. When I was a young man in my thirties, 0:06:08.560 --> 0:06:14.480 I could talk about those benefits being entitlements for some people. 0:06:15.040 --> 0:06:18.599 But now as I can see those entitlements or something 0:06:18.640 --> 0:06:22.240 that I will be entitled, so I would say these 0:06:22.279 --> 0:06:26.599 are very important expecture. No, but that goes to the 0:06:26.680 --> 0:06:29.880 absolute societal tension. The late oh they Reinhart at Princeton 0:06:30.320 --> 0:06:33.200 really address this. What's interesting about this Chris to the 0:06:33.240 --> 0:06:41.640 President's speech tonight on infrastructure. Here's private enterprise basically saying enough, yeah, 0:06:41.640 --> 0:06:46.560 but they gotta make money off it. Reducing overall costs 0:06:46.640 --> 0:06:51.000 is called making money to Mr Diamond, I'm not sure that. Yeah, 0:06:51.040 --> 0:06:53.880 it sounds a little suspect, doesn't it. I mean, it's 0:06:53.920 --> 0:06:57.560 a nice idea, but it's kind of like infrastructure spending 0:06:57.600 --> 0:07:00.760 you know that's going to be h have dependent on 0:07:00.880 --> 0:07:05.040 private money? Is It's like, well, what what sort of 0:07:05.320 --> 0:07:07.600 private money is going to come in to do infrastructure? 0:07:07.640 --> 0:07:09.880 How are you? How does the business get paid? How 0:07:09.880 --> 0:07:13.520 do investors get paid? Mr? It's not easy, Mr Bezos 0:07:13.760 --> 0:07:17.200 picking avocados for whole foods. Quote. The health care system 0:07:17.240 --> 0:07:21.480 is complex, and we enter into this challenge open eyed 0:07:21.840 --> 0:07:25.520 about the degree of difficulty. That's not the usual spin. 0:07:25.600 --> 0:07:28.680 Pim Uh, Well, I hope he's got both eyes open, 0:07:28.800 --> 0:07:32.200 because it is a complex system and one that many 0:07:32.240 --> 0:07:35.920 people depend on. Chris to that point, though, about the 0:07:36.000 --> 0:07:41.600 programs and the ability of this society to pay for them, Uh, taxes, 0:07:42.520 --> 0:07:45.800 we cut taxes. That means it's less money to spend 0:07:45.800 --> 0:07:49.160 on these kinds of things. I don't understand the How 0:07:49.200 --> 0:07:52.000 does that not offer a contradiction? Yeah, well there's a 0:07:52.160 --> 0:07:54.800 it is a contradiction. You know, how do how do 0:07:54.840 --> 0:07:57.320 you pay for these moneys? I mean, I mean, how 0:07:57.320 --> 0:08:00.400 do you pay for these programs? Uh? You know. I 0:08:00.440 --> 0:08:04.960 think the current leadership in Washington, you know, has felt 0:08:05.040 --> 0:08:10.280 that we need less Washington, we need less federal government services. 0:08:10.360 --> 0:08:14.080 But I don't know, the next crew that comes in 0:08:14.160 --> 0:08:16.040 might want to do something else. The reason I want 0:08:16.120 --> 0:08:19.160 to focus on healthcare is because of the demographic bulge 0:08:19.160 --> 0:08:22.520 of the baby boom generations could be very expiring and 0:08:22.600 --> 0:08:24.800 so the cost is going to go up. And then 0:08:25.280 --> 0:08:29.240 I recently was at a conference and heard one theory 0:08:29.320 --> 0:08:34.240 about why we have such sluggish growth and low unemployee 0:08:34.360 --> 0:08:38.640 low inflation. It's because as the baby boomers age, right, 0:08:38.760 --> 0:08:42.760 you have an economy is they're pulling out of there. Uh, 0:08:43.160 --> 0:08:46.000 They're they're exiting the job market. Can I can I 0:08:46.040 --> 0:08:49.240 make a surveillance correction? Go ahead? It's so important. I 0:08:49.559 --> 0:08:52.840 M know, Mr Bezos, Mr Diamond, and Mr Buffett go 0:08:52.920 --> 0:08:57.600 to the hungry tapeworm. That is our medical system. Daniel 0:08:57.679 --> 0:09:01.800 Anger to the rescue. It was late. Tape rooms don't 0:09:01.800 --> 0:09:05.680 make you hungry, that's the research. Not that I've ever 0:09:05.760 --> 0:09:08.000 had a tapewroom. You had a tapeworm? M not going 0:09:08.280 --> 0:09:12.240 I've not. I've not had a tapeworm. But they can 0:09:12.280 --> 0:09:16.040 cause a vitamin B twelve deficiency in some patients. But 0:09:16.120 --> 0:09:19.040 they just they don't make you hungry. You just are 0:09:19.040 --> 0:09:24.160 not interested in you know, maybe he would have saved that, Chris. 0:09:24.559 --> 0:09:27.199 You know, Chris ROPI, thank you so much, greatly appreciated 0:09:27.200 --> 0:09:41.959 this morning. Some terrific respective across television in radios. One, 0:09:45.200 --> 0:09:47.160 let's go to healthcare. Why don't you bring in our 0:09:47.200 --> 0:09:51.880 good guest here who's expert on hungry tapework, Max Neeson. 0:09:51.960 --> 0:09:53.880 Let's not go with tape rooms. It's too early in 0:09:53.880 --> 0:09:58.880 the morning everywhere, and some places it's too early for dinner. Um, 0:09:59.000 --> 0:10:02.360 JP Morgan, Berkshire, Hathaway and Amazon say they're going to 0:10:02.440 --> 0:10:05.520 get together and help their employees. They're going to provide better, 0:10:05.920 --> 0:10:10.959 less expensive healthcare. What's your reaction? So my initial reaction 0:10:11.040 --> 0:10:13.800 was this was not the Amazon for a into healthcare 0:10:13.880 --> 0:10:16.360 that that has been expected. You know for about a 0:10:16.440 --> 0:10:19.400 year now, which was something like a more aggressive for 0:10:19.559 --> 0:10:23.680 it into mail order pharmaceuticals from pseudo benefit managers. What 0:10:23.720 --> 0:10:27.160 they're doing is I think even more interesting. UM they're 0:10:27.200 --> 0:10:29.880 potentially going to run along with these two other companies, 0:10:30.360 --> 0:10:33.840 UM their own health plans entirely from plays and since 0:10:33.880 --> 0:10:37.000 they're not just doing this informally, they're creating a company 0:10:37.040 --> 0:10:38.760 that suggests if they figure out how to do this 0:10:38.800 --> 0:10:41.760 well and given the people involved that that's a decent bet, 0:10:42.280 --> 0:10:44.320 um they might try to bring it to other employers. 0:10:44.440 --> 0:10:49.400 Is it Kaiser Permante from forty years ago, where you 0:10:49.440 --> 0:10:53.080 know the heritage out West? They did it different out 0:10:53.120 --> 0:10:56.679 West with Kaiser. I think ultimately, you know, if if 0:10:56.720 --> 0:10:59.559 you they have grand ambitions, and I think if they're 0:10:59.600 --> 0:11:01.520 going to take this kind of step that they probably 0:11:01.520 --> 0:11:03.920 do that's something of the model that they're going to 0:11:04.040 --> 0:11:07.360 look to emulate. UM, you know, doing things starting from 0:11:07.360 --> 0:11:10.240 a different point of view, with a different set of priorities, 0:11:10.440 --> 0:11:13.040 not attempting to to make a profit. UM. As they 0:11:13.080 --> 0:11:15.920 kind of highlighted repeatedly in their press release, UM that 0:11:16.040 --> 0:11:19.720 being the great frustration that so much in American healthcare 0:11:19.800 --> 0:11:22.679 is not geared at bringing cost down, but for um, 0:11:22.840 --> 0:11:25.160 you know, eating out a profit margin for every single 0:11:25.200 --> 0:11:28.880 person along the way ensures PBMs providers. Any chance that 0:11:28.960 --> 0:11:31.600 this is going to present the conflict of interest with 0:11:31.640 --> 0:11:35.679 what their real businesses are, I don't think so, at 0:11:35.760 --> 0:11:38.040 least that at the start, considering that they're you know, 0:11:38.080 --> 0:11:42.600 initially focusing just on their own employees and on other employers. Um, 0:11:42.679 --> 0:11:44.320 you know, at the end of the day, they're they're 0:11:44.360 --> 0:11:47.120 just attempting to to keep costs down from the employees. 0:11:47.120 --> 0:11:48.560 It will be more interesting when they bring it to 0:11:48.600 --> 0:11:51.040 other companies or if they try to get into providers. 0:11:51.080 --> 0:11:53.320 And we know that everybody with Jeff Bezos is cut 0:11:53.320 --> 0:11:55.600 and chiseled. Maybe I can't say that a Mruture half 0:11:55.600 --> 0:12:00.120 away and JP Morgan. But is this the beginning of 0:12:00.440 --> 0:12:05.080 companies saying enough is enough. We're gonna essentially self insures. 0:12:05.120 --> 0:12:08.680 All we're talking about here, they're gonna self ensure where 0:12:08.679 --> 0:12:15.439 you begin to separate healthy employed America away from unhealthy, 0:12:15.679 --> 0:12:19.600 lesser or unemployed America. I mean that that's already a 0:12:19.640 --> 0:12:22.440 reality in our health care system. If you work at 0:12:22.440 --> 0:12:26.760 a large complayer, your your health care is subsidized to 0:12:27.400 --> 0:12:31.440 an extent that that nobody really realizes unless you later 0:12:31.559 --> 0:12:35.040 end up unemployer on the individual market, where um, the 0:12:35.080 --> 0:12:37.000 burden falls much more a question and you pay much 0:12:37.000 --> 0:12:39.280 more out of pocket, You pay higher prices because you 0:12:39.320 --> 0:12:43.240 don't have the benefit of that enormous employer tax exclusion 0:12:43.559 --> 0:12:46.120 for healthcare benefits and the power you know, all of 0:12:46.120 --> 0:12:48.800 that negotiating power aggregated in the form and not just 0:12:48.880 --> 0:12:51.319 your employer, but you know everyone who they participate in 0:12:51.360 --> 0:12:55.200 the PBM or or bigger insure with. What the what 0:12:55.280 --> 0:12:59.080 are some of the competitive challenges to putting together something 0:12:59.120 --> 0:13:02.200 like this, um, I mean, they're gonna have to basically 0:13:02.280 --> 0:13:05.680 learn how to operate, you know, however much they're gonna do. 0:13:05.800 --> 0:13:08.920 You know, they might still contract with an insure man 0:13:09.040 --> 0:13:12.199 for parts of of the business, like self insured companies 0:13:12.240 --> 0:13:14.439 currently do. But every piece that they're going to pick 0:13:14.520 --> 0:13:16.120 up on their own and run on their own, they're 0:13:16.160 --> 0:13:17.800 gonna have to learn how to do from the start, 0:13:17.880 --> 0:13:19.880 and you know, they put the challenge on themselves to 0:13:19.920 --> 0:13:22.559 figure out how to do it better with more technology. 0:13:22.840 --> 0:13:25.960 Max I'm begging Max needs of course, folks. With Bloomberg 0:13:25.960 --> 0:13:29.640 gut Fly, he writes these terrific chart paragraph charts stories. 0:13:29.640 --> 0:13:31.760 Are you go to write about this today? I'm I've 0:13:31.800 --> 0:13:34.960 already started really really looking forward to this already brought 0:13:35.120 --> 0:13:38.280 also brought in his his medicine kit to help you 0:13:38.320 --> 0:13:41.360 get over the plague. So he cares it's a plague. 0:13:41.360 --> 0:13:44.880 It's like a thirteenth century Thix. Seriously. Fortunately you're in 0:13:44.920 --> 0:13:48.760 the surveillance cone of silence, so you're hermetically sealed away 0:13:48.800 --> 0:13:51.400 from me. Is that why I'm hermetically so you see 0:13:51.440 --> 0:13:54.319 the car. I thought Max and I were together. No, 0:13:54.520 --> 0:14:00.320 Max is gonna get the play. But an interesting concept, right, 0:14:00.679 --> 0:14:04.320 It's it's absolutely fascinating up particularly the notion and this 0:14:04.400 --> 0:14:06.560 is probably the thing I'm gonna focus on um that 0:14:06.679 --> 0:14:09.280 this is kind of a pilot among themselves to figure 0:14:09.280 --> 0:14:11.920 out can we make a company out of this for 0:14:11.960 --> 0:14:25.600 other people? Max, Thank you so much. Terry Haynes is 0:14:25.680 --> 0:14:29.040 ever Cores I s E. Senior political strategist. He's the 0:14:29.040 --> 0:14:32.240 head of political analysis and a managing director. He is 0:14:32.280 --> 0:14:36.000 also experienced in the ways of Washington, d C. Former 0:14:36.280 --> 0:14:38.880 Chief Council Staff director of the U. S. House Committee 0:14:38.880 --> 0:14:42.440 on Financial Services and Senior Council on US House Energy 0:14:42.480 --> 0:14:46.280 and Commerce Committee, and a variety of other government positions. Terry, 0:14:46.320 --> 0:14:48.360 good to have you with us here on Bloomberg. What 0:14:48.400 --> 0:14:50.840 are you going to be listening for from the President 0:14:50.880 --> 0:14:54.440 Donald Trump's State of the Union message? Good to be here, Pim, 0:14:54.440 --> 0:14:57.640 and thank you the well I'm going to be you know, 0:14:57.720 --> 0:15:00.400 the President essentially is going to divide this each into 0:15:00.520 --> 0:15:03.360 three parts. Uh, and I think everybody knows what the 0:15:03.600 --> 0:15:05.640 what those three parts will be, so I won't spend 0:15:05.680 --> 0:15:08.040 long on them. First will be the I think the 0:15:08.080 --> 0:15:12.040 first year achievements. You know they uh, we all dip 0:15:12.040 --> 0:15:14.680 into the Trump Show on a daily basis, but this 0:15:14.720 --> 0:15:17.440 is an opportunity to to provide the best of a 0:15:17.480 --> 0:15:20.520 framing device for the president in his first year in office. 0:15:20.520 --> 0:15:22.480 So I think they'll do that. They'll run through a 0:15:22.480 --> 0:15:25.760 bunch of priorities. Infrastructure, of course, is going to get 0:15:25.760 --> 0:15:28.200 hammered in quite a bit. I expect him to talk 0:15:28.280 --> 0:15:32.000 about trade, housing, finance, a bunch of other things, and 0:15:32.040 --> 0:15:35.520 finally a national security focus. The two things I'm going 0:15:35.560 --> 0:15:40.600 to listen to with particularly closely, one I think will 0:15:40.640 --> 0:15:44.640 be housing finance. Uh. I expect Secretary Manution to testify 0:15:44.680 --> 0:15:47.480 this morning on the Hill that he remains interested now 0:15:47.560 --> 0:15:49.800 in finance it's not a secret that he is. But 0:15:50.240 --> 0:15:53.080 at the same time, renewed commitment to trying to get 0:15:53.120 --> 0:15:58.480 something done UH from the administration UH will will be 0:15:58.520 --> 0:16:01.640 important for markets, and I can leave whatever signals on 0:16:01.760 --> 0:16:04.600 trade the President wants to send. I've always said the 0:16:04.600 --> 0:16:07.560 trades one of the three big unknowns UH this year, 0:16:08.640 --> 0:16:12.240 certainly trade policy as the top that. And the question 0:16:12.280 --> 0:16:14.360 really is UH. You know, we got a positive read 0:16:14.360 --> 0:16:16.360 out of NAFTA yesterday out of the end of the 0:16:16.360 --> 0:16:19.680 Montreal round from from U. S. T. R. Lightheiser. UH. 0:16:19.720 --> 0:16:23.320 The question is does the President continue that kind of 0:16:23.440 --> 0:16:28.320 pro pro business, pro market approach that he first talked 0:16:28.320 --> 0:16:31.280 about in Davos last week and was underscored by Lightheiser, 0:16:31.960 --> 0:16:34.680 or does he go back to a more saber rattling 0:16:34.960 --> 0:16:37.440 If I don't like it, I'll get rid of its 0:16:37.440 --> 0:16:40.040 sort of approach where it comes to NAFTA, and that 0:16:40.080 --> 0:16:43.320 will be market moving as well. Terry, based on your 0:16:43.400 --> 0:16:46.560 experience to whom is the President really going to be 0:16:46.640 --> 0:16:51.480 speaking tonight, Well, but my experience is that the President 0:16:52.080 --> 0:16:54.800 uses this speech to speak directly to the American people. 0:16:54.840 --> 0:16:57.920 It's it's the largest audience that the president will have 0:16:58.000 --> 0:17:01.760 all year. Uh, non la, there's some disaster of course 0:17:01.800 --> 0:17:05.919 that that requires. But UH, presidents always look at this 0:17:05.960 --> 0:17:09.560 opportunity as one where they get to actually talk to 0:17:09.600 --> 0:17:14.639 the American people. They get to characterize their own presidency directly, UH, 0:17:14.800 --> 0:17:18.600 and they get to lay out their priorities directly, so 0:17:18.640 --> 0:17:21.440 that they can you know, not only frame you know, 0:17:21.720 --> 0:17:24.720 what it is, how it is uh that they want 0:17:24.760 --> 0:17:28.680 to move forward, but also you know, frankly in political terms, uh, 0:17:28.760 --> 0:17:31.000 put the opposition on the back foot too. Well, That's 0:17:31.000 --> 0:17:32.879 where I was going with this, because of course, this 0:17:33.000 --> 0:17:37.199 the first president that really uses the social media world 0:17:37.400 --> 0:17:41.200 of Twitter and a variety of other mechanisms to speak 0:17:41.240 --> 0:17:45.320 directly to his constituents and indeed to the country in 0:17:45.320 --> 0:17:48.760 the world. Sure, and he gets to use but he 0:17:49.160 --> 0:17:53.639 gets to use the the cameras in the more conventional 0:17:53.680 --> 0:17:57.720 media here to uh to to do something other than 0:17:58.240 --> 0:18:01.919 uh other then kind of you know, the message at 0:18:01.960 --> 0:18:05.280 the moment, and actually gets to frame his own presidency 0:18:05.440 --> 0:18:08.680 and uh and have people to try to understand exactly 0:18:08.720 --> 0:18:11.800 what he's up to as president beyond beyond the Twitter 0:18:11.880 --> 0:18:14.240 of the day and uh. And that's I think that's 0:18:14.280 --> 0:18:16.880 particularly important for this president Frankly, all right, what would 0:18:16.880 --> 0:18:22.160 you like to hear about regarding housing finance? What I'd 0:18:22.160 --> 0:18:23.760 like to I don't have the luxury I'll tell you 0:18:23.800 --> 0:18:25.680 what I'd like to hear. What I think is, uh, 0:18:26.280 --> 0:18:28.919 what I'll be interested in is whether or not that 0:18:29.000 --> 0:18:32.200 makes the speech Frankly, Uh that it has been a 0:18:32.200 --> 0:18:35.040 as I say, by priority of Secretary minutions for some time. 0:18:35.600 --> 0:18:38.399 He first talked about his desire to want to do 0:18:38.480 --> 0:18:41.920 something on housing finance before he was even Treasury secretary, 0:18:41.960 --> 0:18:45.639 after he was nominated. But the end of and every 0:18:45.680 --> 0:18:49.639 time he talks about this, the markets blip in a 0:18:49.680 --> 0:18:56.280 positive way, housing stocks a rise. And I'd like to see, frankly, 0:18:56.359 --> 0:18:58.600 is whether there's a commitment from the President himself to 0:18:58.600 --> 0:19:00.920 invest political capital in this, because if that's the case, 0:19:00.960 --> 0:19:03.920 then you might get something. What what what's your read 0:19:03.960 --> 0:19:07.960 on Fannie Mae and Freddie mac My My read generally 0:19:08.160 --> 0:19:10.880 is that you know, we've got a situation where, uh 0:19:10.920 --> 0:19:15.280 the enterprises have been in conservatorship for a decade. Uh, 0:19:15.600 --> 0:19:17.840 it's uh, it's time to take a serious look at 0:19:17.880 --> 0:19:19.520 whether to get them out or not to the previous 0:19:19.560 --> 0:19:23.480 administration's policy was that we'll get them out one Congress 0:19:23.480 --> 0:19:25.320 tells us to get them out, but not before then. 0:19:25.880 --> 0:19:29.840 And uh. And what needs to happen fundamentally is, UH 0:19:30.560 --> 0:19:33.120 is there needs to be an understanding and some kind 0:19:33.119 --> 0:19:35.439 of coming together in Congress and you know, with the 0:19:35.440 --> 0:19:38.719 President and Secretary Munition as well, UH, to talk about 0:19:39.280 --> 0:19:41.320 what housing finance is going to look like going forward. 0:19:41.359 --> 0:19:43.600 I mean, are we gonna get are we gonna if 0:19:43.600 --> 0:19:47.400 we're gonna get greater participation from financial institutions? What does 0:19:47.440 --> 0:19:50.760 that look like? Uh? There is some policy difference between 0:19:51.240 --> 0:19:54.399 Democrats and Republicans and whether there should be whether the 0:19:55.160 --> 0:19:59.040 g SC structure should still be maintained. Uh, that's compromisable 0:19:59.119 --> 0:20:03.280 in my view. But what you're you know, the fundamental 0:20:03.320 --> 0:20:04.800 issue is going to be whether or not we're going 0:20:04.840 --> 0:20:07.000 to get more capital into the housing market or not. 0:20:07.280 --> 0:20:09.240 And uh, and whether we're gonna get a greater focus 0:20:09.240 --> 0:20:11.520 on housing finance because our view has always been here 0:20:12.000 --> 0:20:14.960 has always been that the current state of affairs has 0:20:14.960 --> 0:20:17.359 been a negative for the housing market and a negative 0:20:17.400 --> 0:20:20.920 for the markets generally. Based on your understanding of Secretary 0:20:21.000 --> 0:20:24.040 Minutions background, what does he bring that special to the 0:20:24.119 --> 0:20:28.600 conversation and debate about housing finance. I think two things. One, 0:20:28.680 --> 0:20:31.920 he's actually he's actually been in the markets. He actually 0:20:32.000 --> 0:20:34.840 understands the markets on the first firsthand the basis, and 0:20:34.880 --> 0:20:39.360 I think that's important. We have not had, Uh, it's 0:20:39.359 --> 0:20:42.200 been a while since we've had a Treasury secretary that 0:20:41.840 --> 0:20:44.760 that that that had that kind of direct knowledge. I mean, 0:20:45.119 --> 0:20:48.600 certainly i'd give I'd give Secretary Geithner and Secretary Paulson 0:20:49.000 --> 0:20:52.080 both both marks for that, but it's been a little while. 0:20:52.119 --> 0:20:55.520 Secretary Louse certainly didn't have that that sort of fundamental background. 0:20:55.600 --> 0:20:59.040 Number one. Number two, he brings a he brings a 0:20:59.080 --> 0:21:03.200 commitment to it and what you need fundamentally on this issue. 0:21:03.200 --> 0:21:05.640 And I think this was proved in the last time 0:21:05.680 --> 0:21:08.320 anybody tried to do something like this. Um, you need 0:21:08.359 --> 0:21:10.600 commitment from the highest levels of the government and the 0:21:10.680 --> 0:21:13.920 executive branch, particularly to try to uh trying to knock 0:21:14.000 --> 0:21:16.480 heads together in the Congress and get something done here, 0:21:16.920 --> 0:21:20.520 and that hasn't existed for a while. And Secretary Munition 0:21:20.840 --> 0:21:23.800 would like to do this. He's been clear about it. Uh. 0:21:23.840 --> 0:21:27.560 And now that now that he's used some political capital 0:21:27.600 --> 0:21:30.720 on tax reform, uh, he appears to be interested in 0:21:30.760 --> 0:21:33.000 doing it again. So we'll see where he goes, and 0:21:33.040 --> 0:21:34.840 we'll see if the President agrees and wants to say 0:21:34.880 --> 0:21:37.320 something about it in the speech. We'll be listening and 0:21:37.440 --> 0:21:39.960 we'll also be looking for your reaction to it as well. 0:21:40.000 --> 0:21:44.159 Thank you very much. Terry Haynes is Evercore i SES 0:21:44.320 --> 0:21:47.679 senior political strategist. He's the head of political analysis and 0:21:47.880 --> 0:22:04.560 a managing director. Our guest is Emily Rowland, head of 0:22:04.600 --> 0:22:08.560 Capital markets research at John Hancock Investments. Joining us from Boston, 0:22:08.800 --> 0:22:11.639 home to Bloomberg one oh six one Boston, Newburyport and 0:22:11.760 --> 0:22:14.760 thirteen thirty in Metro West and the South Shore. Emily, 0:22:14.800 --> 0:22:18.800 thank you very much for being with us. Complacency and volatility. 0:22:18.840 --> 0:22:21.240 I'm wondering if you could describe your thinking about both 0:22:21.240 --> 0:22:23.639 of those as they affect investors. You know, when I 0:22:23.640 --> 0:22:26.639 think about our outlook heading into I would say it 0:22:26.720 --> 0:22:29.720 was probably a bit more optimistic than consensus. We really 0:22:29.760 --> 0:22:33.560 felt that Pact reform and earnings growth were likely under 0:22:33.600 --> 0:22:37.679 appreciated catalysts that would drive markets higher, and really looking 0:22:37.680 --> 0:22:40.880 at the extraordinary returns that we've seen so far this year, 0:22:40.960 --> 0:22:43.720 markets are up seven percent in one of the best 0:22:43.760 --> 0:22:46.160 starts to a year in recent history, and in our view, 0:22:46.160 --> 0:22:49.240 would be pretty difficult to keep up this pace. We 0:22:49.320 --> 0:22:52.000 really think it's it's highly likely that we'll see some 0:22:52.119 --> 0:22:55.920 sort of pull back in the cards, some increased volatility 0:22:55.960 --> 0:23:00.000 as we continue into and we think investors really probably 0:23:00.080 --> 0:23:04.200 aren't prepared for this. Just looking back last year, the 0:23:04.280 --> 0:23:07.240 maximum draw down we saw in the SMP five hundred 0:23:07.720 --> 0:23:10.840 was three percent. That means that even if you chose 0:23:10.880 --> 0:23:14.720 the worst day to invest in, the mostly losses three percent. 0:23:14.800 --> 0:23:19.000 Now that hadn't happened since and the average is about four. 0:23:20.440 --> 0:23:22.400 So we think we're going to get back to those 0:23:22.440 --> 0:23:25.520 averages and investors might be caught off guard when volatility 0:23:25.560 --> 0:23:27.960 really does start to pick up. Here. Well, what should 0:23:28.000 --> 0:23:30.600 investors do in order to heads or prepare for this 0:23:30.680 --> 0:23:33.520 increased volatility that you say we're going to get. Well, 0:23:33.560 --> 0:23:36.479 we think it's important for investors to simply revisit their 0:23:36.600 --> 0:23:40.320 risk tolerances make sure that they're investing in a way 0:23:40.359 --> 0:23:42.960 that aligns with their longer term goals, because if you 0:23:43.000 --> 0:23:46.200 think about it, you know, the investors psychology is sort 0:23:46.240 --> 0:23:49.120 of pointing to this environment where we're kind of moving 0:23:49.200 --> 0:23:53.520 into and maybe not quite yet excessive optimism, but we're 0:23:53.520 --> 0:23:55.679