1 00:00:05,800 --> 00:00:08,719 Speaker 1: Welcome to the Bloomberg p m L Podcast. I'm pim Fox. 2 00:00:08,760 --> 00:00:11,520 Speaker 1: Along with my co host Lisa Bramowitz. Each day we 3 00:00:11,640 --> 00:00:15,120 Speaker 1: bring you the most important, noteworthy, and useful interviews for 4 00:00:15,200 --> 00:00:17,840 Speaker 1: you and your money, whether you're at the grocery store 5 00:00:17,960 --> 00:00:20,720 Speaker 1: or the trading floor. Find the Bloomberg p m L 6 00:00:20,840 --> 00:00:32,840 Speaker 1: Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot Com. Joining 7 00:00:32,920 --> 00:00:35,080 Speaker 1: us now is Tom Kennedy, head of fixed income strategy 8 00:00:35,080 --> 00:00:37,760 Speaker 1: at JP Morgan Private Bank, who did work for the 9 00:00:37,760 --> 00:00:40,920 Speaker 1: Fed for many years so has an inside look from 10 00:00:40,920 --> 00:00:43,800 Speaker 1: that perspective. Tom, can we just start with what happened 11 00:00:43,800 --> 00:00:47,360 Speaker 1: on Friday that this funds such a huge decline? Absolutely, 12 00:00:47,360 --> 00:00:50,239 Speaker 1: good morning. I think you're battling against a couple of 13 00:00:50,240 --> 00:00:53,559 Speaker 1: issues here. People coming around to the realization that recession 14 00:00:53,560 --> 00:00:58,080 Speaker 1: probabilities are rising, growth concerns are are emanating and finding 15 00:00:58,120 --> 00:01:02,000 Speaker 1: themselves in a credit credit risky product in the leverage 16 00:01:02,040 --> 00:01:04,959 Speaker 1: loan market. And then also you have over the life 17 00:01:04,959 --> 00:01:08,759 Speaker 1: of this expansion very very long expansion, tourists or people 18 00:01:08,800 --> 00:01:11,240 Speaker 1: that are not commonly used to the leverage loan market 19 00:01:11,480 --> 00:01:13,600 Speaker 1: finding themselves in a place where they may or may 20 00:01:13,640 --> 00:01:15,280 Speaker 1: not be so comfortable with the credit risk that they 21 00:01:15,280 --> 00:01:20,920 Speaker 1: are exposed to. Now. In the Federal Reserves Financial Stability Report, 22 00:01:21,400 --> 00:01:27,040 Speaker 1: the quote is business sector debt relative to gross domestic 23 00:01:27,120 --> 00:01:32,400 Speaker 1: product is historically high, and there are signs of deteriorating 24 00:01:32,560 --> 00:01:37,840 Speaker 1: credit standards. Leverage loans, junk bonds now in excess of 25 00:01:38,000 --> 00:01:42,319 Speaker 1: two trillion dollars. Is this as good as it gets? 26 00:01:42,760 --> 00:01:44,600 Speaker 1: I think the best of these markets, pimp to your point, 27 00:01:44,600 --> 00:01:47,000 Speaker 1: are behind us. I really do. If we try to 28 00:01:47,040 --> 00:01:48,480 Speaker 1: just drill in a little bit on what the FED 29 00:01:48,680 --> 00:01:50,840 Speaker 1: is looking at, what are they really trying to showcase 30 00:01:50,880 --> 00:01:53,440 Speaker 1: to us? The leverage loan market is now bigger than 31 00:01:53,440 --> 00:01:57,720 Speaker 1: the high yield market. That market historically has been left 32 00:01:57,760 --> 00:02:01,880 Speaker 1: for private credit. Now we're in place where the demand 33 00:02:01,920 --> 00:02:04,640 Speaker 1: for floating rate product over the last ten years has 34 00:02:04,720 --> 00:02:07,720 Speaker 1: driven people to this asset class. And I think a 35 00:02:07,760 --> 00:02:10,840 Speaker 1: good amount of education is necessary. What is a leverage loan. 36 00:02:11,240 --> 00:02:13,799 Speaker 1: It's a loan to a business that already either has 37 00:02:13,800 --> 00:02:17,040 Speaker 1: a lot of debt or of poor credit quality. That's 38 00:02:17,040 --> 00:02:20,079 Speaker 1: a default risk type of product. I'm not saying default 39 00:02:20,120 --> 00:02:23,520 Speaker 1: risks are high. I'm saying these are the credit quality 40 00:02:23,600 --> 00:02:27,680 Speaker 1: natures of these these companies. And then looking at the quality, 41 00:02:27,800 --> 00:02:29,440 Speaker 1: what do I think the FED is really looking at 42 00:02:29,520 --> 00:02:32,280 Speaker 1: underneath the hood of the leverage loan market. Covenant light 43 00:02:32,760 --> 00:02:36,120 Speaker 1: ubiquitous at this point eight percent of leverage loan debt. 44 00:02:36,680 --> 00:02:40,399 Speaker 1: Is just tell people what is covenant life really mean? Good? Good? 45 00:02:40,440 --> 00:02:44,080 Speaker 1: Point him? So uh. A covenant light issuer says, they 46 00:02:44,080 --> 00:02:47,720 Speaker 1: are leaving the parameters for the lending of this money 47 00:02:47,760 --> 00:02:50,720 Speaker 1: to a company strictly in the hands of the company. 48 00:02:50,800 --> 00:02:53,000 Speaker 1: The company can do what they like with with that debt. 49 00:02:53,120 --> 00:02:55,280 Speaker 1: There are no restrictions on what they can do with 50 00:02:55,320 --> 00:02:59,560 Speaker 1: the debt, so they can basically pay off private equity owners. 51 00:02:59,639 --> 00:03:02,480 Speaker 1: They and level up further. They can borrow more money, 52 00:03:02,520 --> 00:03:04,520 Speaker 1: and there isn't necessarily any kind of sign off that 53 00:03:04,600 --> 00:03:07,359 Speaker 1: the bar that the lenders have to do. You know, 54 00:03:07,400 --> 00:03:09,200 Speaker 1: I want to go back to something you are saying, 55 00:03:09,200 --> 00:03:11,560 Speaker 1: which is there are all these tourists who got in 56 00:03:11,760 --> 00:03:13,840 Speaker 1: through things like e t f s which are liquid 57 00:03:13,880 --> 00:03:17,560 Speaker 1: even though the underlying isn't as liquid by any means um. 58 00:03:17,720 --> 00:03:20,000 Speaker 1: Why are they being triggered now? Because the FET has 59 00:03:20,000 --> 00:03:22,400 Speaker 1: been issuing warnings in this area for a while. It's 60 00:03:22,400 --> 00:03:24,360 Speaker 1: hard to say that it's just this, but there hasn't 61 00:03:24,400 --> 00:03:27,560 Speaker 1: been a major credit quality issue, So why are they 62 00:03:27,600 --> 00:03:30,280 Speaker 1: fleeing right now? I think the main reason they're fleeing 63 00:03:30,280 --> 00:03:32,600 Speaker 1: now is that you are finally seeing cracks in the 64 00:03:32,600 --> 00:03:36,160 Speaker 1: credit market. The volatility we've been seeing in the equity 65 00:03:36,200 --> 00:03:39,920 Speaker 1: market over the year hasn't really corresponded to much concern 66 00:03:40,000 --> 00:03:43,320 Speaker 1: and credit markets. However, since the turn of this quarter, 67 00:03:43,360 --> 00:03:46,160 Speaker 1: the fourth quarter of we're starting to see credit spreads 68 00:03:46,160 --> 00:03:50,160 Speaker 1: widening now, and and when UH investors are opening up 69 00:03:50,160 --> 00:03:52,480 Speaker 1: their statements in the leverage loan space, they are seeing 70 00:03:53,040 --> 00:03:56,440 Speaker 1: not that steady increase in valuation, they're actually learning that 71 00:03:56,480 --> 00:03:58,720 Speaker 1: those products can go down in value. So I think 72 00:03:58,760 --> 00:04:01,560 Speaker 1: you're seeing an outflow US in response to a mark 73 00:04:01,640 --> 00:04:04,920 Speaker 1: to market type of of environment where credit spreads are are, 74 00:04:05,440 --> 00:04:07,840 Speaker 1: they're widening. We have to acknowledge that just to help 75 00:04:07,880 --> 00:04:10,360 Speaker 1: me understand something, because I was those under the impression 76 00:04:10,360 --> 00:04:13,080 Speaker 1: that junk bonds or leverage loans would be issued by 77 00:04:13,200 --> 00:04:16,760 Speaker 1: companies that were in dire straits that needed the money, 78 00:04:16,800 --> 00:04:21,680 Speaker 1: that couldn't access the triple A or you know, the 79 00:04:21,720 --> 00:04:26,160 Speaker 1: corporate credit worthiness space. But that's really not who's been 80 00:04:26,160 --> 00:04:28,880 Speaker 1: doing all the issuing, right, You're right, I think the 81 00:04:28,960 --> 00:04:32,119 Speaker 1: comparable market to leverage loans is the high yield market. 82 00:04:32,600 --> 00:04:34,840 Speaker 1: Let's assume you're a company and you have an option 83 00:04:35,080 --> 00:04:37,320 Speaker 1: you can go to the high yeld market. You might 84 00:04:37,760 --> 00:04:41,520 Speaker 1: see some covenants or restrictions on what you can do 85 00:04:41,560 --> 00:04:44,039 Speaker 1: with those funds, and your funding status might be higher 86 00:04:44,040 --> 00:04:46,080 Speaker 1: than what you see in the leverage loan market, and 87 00:04:46,160 --> 00:04:48,880 Speaker 1: so naturally a company is going to migrate to the 88 00:04:48,920 --> 00:04:53,200 Speaker 1: market where they get the most favorable UM lending or 89 00:04:53,240 --> 00:04:55,839 Speaker 1: borrowing terms that they see. And that's I really do 90 00:04:55,880 --> 00:04:57,440 Speaker 1: think what we've seen over the last five to ten 91 00:04:57,520 --> 00:05:00,839 Speaker 1: years a flocking of companies to this market. It's the 92 00:05:00,839 --> 00:05:03,400 Speaker 1: best terms of trade for them. So let's play this out. 93 00:05:03,760 --> 00:05:06,760 Speaker 1: How do you think the leveraged loan market performs over 94 00:05:06,800 --> 00:05:09,599 Speaker 1: the next six to twelve months. We've seen some UH 95 00:05:09,680 --> 00:05:14,240 Speaker 1: firms recommending loans over bonds because they've actually been underperforming UM. 96 00:05:14,279 --> 00:05:17,479 Speaker 1: But what you're saying sounds pretty dire. So I don't 97 00:05:17,520 --> 00:05:20,160 Speaker 1: mean to sound dire. I think what you just did 98 00:05:20,279 --> 00:05:22,479 Speaker 1: LEA says how you need to think about this asset class. 99 00:05:22,600 --> 00:05:27,000 Speaker 1: Do I prefer high yield fixed rate bonds or the 100 00:05:27,120 --> 00:05:29,400 Speaker 1: leverage loan market, which has a floating rate component to it. 101 00:05:29,880 --> 00:05:32,680 Speaker 1: That's the trade I don't think leverage loans are going 102 00:05:32,720 --> 00:05:35,960 Speaker 1: to outperform high yield over the next twelve months. Actually, 103 00:05:36,120 --> 00:05:38,680 Speaker 1: we this trade we're talking about dates back to US 104 00:05:38,720 --> 00:05:42,960 Speaker 1: to June. We removed leverage loan overweights relative to high 105 00:05:43,000 --> 00:05:45,080 Speaker 1: yield in June. So when do you when do you 106 00:05:45,240 --> 00:05:47,320 Speaker 1: put it back on? What are you looking for? I'm 107 00:05:47,360 --> 00:05:49,440 Speaker 1: I'm gonna I need to see the credit cycle actually 108 00:05:49,480 --> 00:05:52,080 Speaker 1: play through. I actually favored duration at this point. I 109 00:05:52,120 --> 00:05:54,960 Speaker 1: don't think when I'm when I'm an fixed income investor 110 00:05:55,000 --> 00:05:58,800 Speaker 1: deciding do I want to have interest rate exposure the 111 00:05:58,880 --> 00:06:00,920 Speaker 1: likelihood that rates will come down, I want to own 112 00:06:01,000 --> 00:06:04,000 Speaker 1: that option at this point. So the leverage loan for 113 00:06:04,040 --> 00:06:06,479 Speaker 1: me is all you're playing is that credit spreads will 114 00:06:06,520 --> 00:06:10,000 Speaker 1: remain very tight. My bias is credit spreads widen and 115 00:06:10,040 --> 00:06:12,039 Speaker 1: that risk free rates come down. In that world, I 116 00:06:12,080 --> 00:06:15,120 Speaker 1: prefer a longer duration investment. How bad if the loss 117 00:06:15,160 --> 00:06:18,560 Speaker 1: is going to get loans, the loan, the loan sell off, 118 00:06:18,640 --> 00:06:22,000 Speaker 1: and trying to identify what a bogey is for defaults, 119 00:06:22,080 --> 00:06:25,320 Speaker 1: I I don't even pretend to be the perfect expert 120 00:06:25,320 --> 00:06:27,560 Speaker 1: in doing that. I think when you're an investor, you 121 00:06:27,600 --> 00:06:30,200 Speaker 1: have to recognize the deterioration in quality is happening in 122 00:06:30,200 --> 00:06:32,880 Speaker 1: the leverage loan market. It's been happening for years. If 123 00:06:32,880 --> 00:06:34,760 Speaker 1: you don't think rates are going to rise very much, 124 00:06:34,839 --> 00:06:36,800 Speaker 1: this is not the asset class that you should expect 125 00:06:36,800 --> 00:06:40,560 Speaker 1: to outperform relative to high yield. Calling a default cycle, 126 00:06:40,560 --> 00:06:42,080 Speaker 1: which I know you're looking at me and you want 127 00:06:42,080 --> 00:06:45,640 Speaker 1: me to do, yes, please God, I really I can't. 128 00:06:45,680 --> 00:06:47,120 Speaker 1: I don't think anyone's gonna be able to do that 129 00:06:47,160 --> 00:06:49,760 Speaker 1: our time. That well, Lisa, thanks very much for being 130 00:06:49,760 --> 00:06:51,960 Speaker 1: with us. As always Tom Kennedy, he is the head 131 00:06:52,000 --> 00:07:07,800 Speaker 1: of fixed income strategy for JP Morgan Private Bank. And 132 00:07:07,800 --> 00:07:10,480 Speaker 1: I want to bring in Teresa Raphael Bloomberg opinion editor 133 00:07:10,520 --> 00:07:14,520 Speaker 1: covering European politics and economics for Bloomberg, and of course 134 00:07:14,640 --> 00:07:18,640 Speaker 1: still with us is John Author's senior Marcus correspondent, columnist 135 00:07:18,760 --> 00:07:22,080 Speaker 1: editor everything under the Sun here at Bloomberg Trace. I'd 136 00:07:22,120 --> 00:07:24,800 Speaker 1: love to start with you. What was your sense What 137 00:07:24,920 --> 00:07:28,200 Speaker 1: was the most sort of newsworthy thing that Prime Minister 138 00:07:28,440 --> 00:07:31,040 Speaker 1: May said? Well, I mean I think the first thing 139 00:07:31,080 --> 00:07:33,920 Speaker 1: to note was the atmospherics in the house today. We 140 00:07:34,240 --> 00:07:38,360 Speaker 1: made him get out two sentences before um there were 141 00:07:38,440 --> 00:07:41,800 Speaker 1: jeers and she was being laughed at and derided, and 142 00:07:41,880 --> 00:07:44,680 Speaker 1: that really speaks to, you know, a prime minister whose 143 00:07:44,720 --> 00:07:48,680 Speaker 1: power has just waned dramatically. Um the most newsworthy thing. 144 00:07:49,080 --> 00:07:53,040 Speaker 1: She's not promising that there will be any substantial renegotiation. 145 00:07:53,080 --> 00:07:55,320 Speaker 1: The European Union has been very clear that they're not 146 00:07:55,360 --> 00:07:58,280 Speaker 1: going to open the legally binding part of this agreement 147 00:07:58,280 --> 00:08:01,880 Speaker 1: around the Irish backstop. What she is sort of suggesting 148 00:08:02,080 --> 00:08:05,679 Speaker 1: as that there might be some additional reassurances that could 149 00:08:06,080 --> 00:08:09,360 Speaker 1: I'm now extrapolating that could sort of take the part 150 00:08:09,400 --> 00:08:13,360 Speaker 1: of UM additions to the political declaration. There may be 151 00:08:13,480 --> 00:08:17,240 Speaker 1: some sort of side assurances. She's also um said that 152 00:08:17,240 --> 00:08:20,760 Speaker 1: she would find ways to empower the Commons to increase 153 00:08:20,800 --> 00:08:24,160 Speaker 1: the democratic legitimacy and and allow the comments to place 154 00:08:24,240 --> 00:08:27,240 Speaker 1: obligations on government. All of that has to do with 155 00:08:27,680 --> 00:08:31,400 Speaker 1: Um reassuring skeptics that Britain will be able to find 156 00:08:31,400 --> 00:08:33,800 Speaker 1: a way out of this backstop. But you know, really 157 00:08:33,800 --> 00:08:36,559 Speaker 1: she's saying, this is the deal. Look at the alternatives. 158 00:08:36,679 --> 00:08:38,640 Speaker 1: You're not going to like any of them. Give it 159 00:08:38,679 --> 00:08:40,319 Speaker 1: a chance, But I know that I don't have the 160 00:08:40,400 --> 00:08:44,720 Speaker 1: votes to do this tomorrow, John, Just to reiterate the 161 00:08:44,800 --> 00:08:48,920 Speaker 1: Irish backstop that we've been learning about is basically an 162 00:08:48,960 --> 00:08:55,000 Speaker 1: insurance policy that the border between Northern Ireland and the 163 00:08:55,080 --> 00:09:01,920 Speaker 1: Irish Republic would remain open as open as its currently is. Yes, 164 00:09:01,960 --> 00:09:03,360 Speaker 1: that's what I mean. In other words, there will be 165 00:09:03,400 --> 00:09:07,040 Speaker 1: no change yes to the it's an it's an insurance 166 00:09:07,080 --> 00:09:09,600 Speaker 1: policy for the Republic of Ireland, for the South of 167 00:09:09,720 --> 00:09:13,560 Speaker 1: Ireland for those who passionately believe in the process that 168 00:09:13,679 --> 00:09:17,840 Speaker 1: was started under Senator Mitchell, Tony Blair and the various 169 00:09:17,880 --> 00:09:23,040 Speaker 1: Irish players twenty years ago, that the that the board 170 00:09:23,160 --> 00:09:26,360 Speaker 1: that the trade within the Island of Ireland will continue 171 00:09:26,360 --> 00:09:29,280 Speaker 1: as it currently is. I saw a very interesting comment 172 00:09:29,320 --> 00:09:33,920 Speaker 1: from Glafstadt saying a few minutes ago before I came 173 00:09:33,960 --> 00:09:37,200 Speaker 1: to the studio, saying that whatever happens, the EU will 174 00:09:37,240 --> 00:09:42,160 Speaker 1: not let Ireland down. And that is the am past 175 00:09:42,280 --> 00:09:46,000 Speaker 1: that we have that in the event that we don't 176 00:09:46,080 --> 00:09:50,840 Speaker 1: have some kind of wonderful new technology involving laser beams 177 00:09:50,960 --> 00:09:56,480 Speaker 1: and and chips in embedded in people's foreheads or whatever 178 00:09:56,920 --> 00:10:01,559 Speaker 1: to enable um A border to remain as soft as 179 00:10:01,600 --> 00:10:05,800 Speaker 1: it currently is while still having Britain outside the Customs Union, 180 00:10:05,840 --> 00:10:09,080 Speaker 1: you will have this this arrangement that will will carry 181 00:10:09,120 --> 00:10:13,720 Speaker 1: on given that most people assume that the the high 182 00:10:13,760 --> 00:10:18,080 Speaker 1: tech ability to to run a border where most people 183 00:10:18,120 --> 00:10:20,520 Speaker 1: can just drive straight through like an easy pass on 184 00:10:20,520 --> 00:10:23,880 Speaker 1: the George Washington Bridge. While most people assume that that's 185 00:10:23,920 --> 00:10:28,600 Speaker 1: not going to be possible, this backstop remains. And while 186 00:10:28,600 --> 00:10:32,640 Speaker 1: the backstop remains, Britain remains within the Customs Union without 187 00:10:32,720 --> 00:10:36,160 Speaker 1: having a vote over it, and that is unappealing to 188 00:10:36,280 --> 00:10:38,640 Speaker 1: democratic at a political level, I just want to give 189 00:10:38,679 --> 00:10:41,400 Speaker 1: some market response, because we are seeing a market reaction. 190 00:10:41,440 --> 00:10:45,840 Speaker 1: The pound continuing to decline versus the dollar session lows 191 00:10:46,040 --> 00:10:50,360 Speaker 1: and at the lowest levels since two thousand seventeen April 192 00:10:50,400 --> 00:10:53,439 Speaker 1: two seventeen, So you have to think people are taking 193 00:10:53,480 --> 00:10:56,640 Speaker 1: this as the likelihood of a no deal brexit, a 194 00:10:56,720 --> 00:10:59,440 Speaker 1: hard brexit that will have material impact on the economy 195 00:10:59,520 --> 00:11:03,600 Speaker 1: is increased. Saying you're also seeing your UK bond yields decline, 196 00:11:03,840 --> 00:11:07,920 Speaker 1: a sort of suggestion that growth expectations going forward are declining. 197 00:11:08,040 --> 00:11:11,040 Speaker 1: Ters come on in here. I mean, is today sort 198 00:11:11,080 --> 00:11:15,320 Speaker 1: of a landmark moment in terms of basically increasing the 199 00:11:15,400 --> 00:11:17,880 Speaker 1: chances of a no deal brexit and showing there really 200 00:11:17,960 --> 00:11:20,280 Speaker 1: isn't a political leader who can carry this through on 201 00:11:20,320 --> 00:11:22,720 Speaker 1: the UK side. I mean, there's no question we're at 202 00:11:22,720 --> 00:11:25,640 Speaker 1: a watershed moment. I think, you know, if if Donald 203 00:11:25,640 --> 00:11:28,640 Speaker 1: Trump's modus operandi has been you know, denied, denied, denied, 204 00:11:28,679 --> 00:11:31,200 Speaker 1: Theresa May has been delayed, delay, delay, and today she's 205 00:11:31,200 --> 00:11:34,840 Speaker 1: delayed further. But there's only you know, so much road 206 00:11:34,960 --> 00:11:40,040 Speaker 1: left for her um in terms of the um you know, economy. 207 00:11:40,120 --> 00:11:43,560 Speaker 1: She said very clearly in her comments address today. Look, 208 00:11:43,600 --> 00:11:45,920 Speaker 1: those of you that are advocating leaving without a deal, 209 00:11:46,160 --> 00:11:49,000 Speaker 1: be upfront with people. That is going to have costs. 210 00:11:49,000 --> 00:11:52,400 Speaker 1: And she's quite right that the you know, hard line 211 00:11:52,400 --> 00:11:55,120 Speaker 1: brexitters who say, look we we can trade on World 212 00:11:55,160 --> 00:11:58,680 Speaker 1: Trade Organization terms will be fine. And uh, you know, 213 00:11:58,720 --> 00:12:02,120 Speaker 1: the question is fine and what time period? Because every 214 00:12:02,160 --> 00:12:05,240 Speaker 1: you know, economic study on this and including the Bank 215 00:12:05,240 --> 00:12:08,120 Speaker 1: of England and the government and the various economic thing 216 00:12:08,200 --> 00:12:09,720 Speaker 1: takes have come and said that is going to be 217 00:12:09,840 --> 00:12:13,480 Speaker 1: painful in the short term, ten fifteen years. Well, it's 218 00:12:13,520 --> 00:12:15,600 Speaker 1: also a report and John you can come in on 219 00:12:15,640 --> 00:12:17,520 Speaker 1: this as well, and Terres maybe you can give us 220 00:12:17,520 --> 00:12:19,559 Speaker 1: a sort of bird's eye view of what it's like 221 00:12:19,760 --> 00:12:23,680 Speaker 1: in the UK because the government, the UK government has 222 00:12:23,760 --> 00:12:30,199 Speaker 1: already told supermarkets such as Asda, Tesco, Sainsbury Morrison. They've 223 00:12:30,240 --> 00:12:35,680 Speaker 1: actually spoken to those supermarket groups asking them to stock 224 00:12:35,880 --> 00:12:40,360 Speaker 1: as much as possible in their warehouses in case the 225 00:12:40,520 --> 00:12:45,480 Speaker 1: UK crashes out of the European Union without a deal. Well, 226 00:12:45,559 --> 00:12:51,760 Speaker 1: this go ahead, John, John, I used to it for 227 00:12:51,760 --> 00:12:56,840 Speaker 1: the Financial Times. She's famously manically pro Remain. I voted 228 00:12:56,920 --> 00:13:04,320 Speaker 1: Remain myself. That kind of story bothers me as a 229 00:13:04,440 --> 00:13:07,240 Speaker 1: very strong pro Remainer in it it has It has 230 00:13:07,280 --> 00:13:10,240 Speaker 1: a whiff of the pro pre y two k argument. 231 00:13:10,280 --> 00:13:12,960 Speaker 1: It also has a whiff of what the Leaf campaign 232 00:13:13,679 --> 00:13:17,200 Speaker 1: accused the Remain campaign of doing during the campaign, which 233 00:13:17,240 --> 00:13:21,840 Speaker 1: is project fear. I'm prepared to believe that a no 234 00:13:21,960 --> 00:13:24,559 Speaker 1: deal Well, I do believe that a no deal Brexit 235 00:13:24,640 --> 00:13:27,200 Speaker 1: would be a very very bad idea for the UK, 236 00:13:28,080 --> 00:13:30,560 Speaker 1: and to the extent that the UK matters to everybody else, 237 00:13:30,840 --> 00:13:34,320 Speaker 1: it would be a bad deal for everybody else. Um, 238 00:13:34,640 --> 00:13:37,920 Speaker 1: it doesn't play well. I suspect in the provinces. In 239 00:13:37,960 --> 00:13:42,679 Speaker 1: the smacks of the elite trying to get everybody scared, 240 00:13:42,800 --> 00:13:45,920 Speaker 1: of trying to play two fears that may not be 241 00:13:46,000 --> 00:13:50,000 Speaker 1: totally justified. Yeah, I think John just put his finger, 242 00:13:50,000 --> 00:13:53,080 Speaker 1: And there's there's the optics of those kinds of messages, 243 00:13:53,120 --> 00:13:55,880 Speaker 1: and then there's a reality, you know, should we really 244 00:13:55,960 --> 00:13:58,520 Speaker 1: be stalking up? Should supermarkets be stalking up? And the 245 00:13:58,520 --> 00:14:00,680 Speaker 1: reality is that a lot of it is in the 246 00:14:00,720 --> 00:14:05,079 Speaker 1: gift of the EU. Europe could actually um impose, you know, 247 00:14:05,800 --> 00:14:08,600 Speaker 1: impose the letter of the law such that there are 248 00:14:08,679 --> 00:14:11,400 Speaker 1: such backups of Lori's that you know, there may be 249 00:14:11,600 --> 00:14:16,360 Speaker 1: certain supplies that would be UM short, you know, in 250 00:14:16,400 --> 00:14:19,240 Speaker 1: short supply for a while while new supply chains are 251 00:14:19,280 --> 00:14:22,160 Speaker 1: being sourced and things are being worked out. The reality 252 00:14:22,240 --> 00:14:25,360 Speaker 1: is probably that there will be some last minute UM 253 00:14:25,400 --> 00:14:29,200 Speaker 1: agreements to ensure that the worst of the emergencies and 254 00:14:29,200 --> 00:14:32,360 Speaker 1: we're talking sort of medicines more than um kit cat 255 00:14:32,400 --> 00:14:35,840 Speaker 1: bars uh is averted. But you know, somebody did a 256 00:14:35,840 --> 00:14:38,280 Speaker 1: study is that a two minute delay at the Dover 257 00:14:38,360 --> 00:14:41,600 Speaker 1: Calais border would lead to sort of seventeen miles of 258 00:14:41,680 --> 00:14:44,840 Speaker 1: backed up Lorrie. So there is some truth to all 259 00:14:44,880 --> 00:14:47,520 Speaker 1: of this. Just to let you know, just to let 260 00:14:47,520 --> 00:14:50,280 Speaker 1: everyone know that the pound has broken one and now 261 00:14:50,320 --> 00:14:54,440 Speaker 1: trades one five eight nine. When I first came to 262 00:14:54,480 --> 00:14:58,120 Speaker 1: the States as an exchange students, it was one one 263 00:14:58,120 --> 00:15:03,560 Speaker 1: oh five yes, So back to you, but I want 264 00:15:03,560 --> 00:15:05,400 Speaker 1: to I want to go back to something you're talking about. 265 00:15:05,440 --> 00:15:07,640 Speaker 1: When you're saying that you know more than more than 266 00:15:07,720 --> 00:15:11,280 Speaker 1: kickcap bars, we're talking about medicine. How bad could this get? 267 00:15:11,360 --> 00:15:13,440 Speaker 1: I mean, when when were we here, uh Prime Minister 268 00:15:13,560 --> 00:15:16,400 Speaker 1: May talking about making provisions for a no deal brexit? 269 00:15:16,640 --> 00:15:20,120 Speaker 1: Are we talking about stockpiling medicine and having you know, 270 00:15:20,320 --> 00:15:23,560 Speaker 1: enough corn to just sort of uh feed out to people, 271 00:15:24,000 --> 00:15:26,360 Speaker 1: you know, in a sort of warlike situation. Is that 272 00:15:26,360 --> 00:15:28,880 Speaker 1: what we're talking about? Well, I think medicine, yes, to 273 00:15:28,960 --> 00:15:32,480 Speaker 1: some extent, because some medicines have to be refrigerated. Refrigerated 274 00:15:32,760 --> 00:15:36,280 Speaker 1: trucks can you know, only have a certain amount of 275 00:15:36,320 --> 00:15:39,920 Speaker 1: time they can um, you know, they can keep things refrigerated. 276 00:15:39,920 --> 00:15:42,720 Speaker 1: So there in the NHS, the National Health Service, estate 277 00:15:42,840 --> 00:15:47,920 Speaker 1: run health service here has been told to keep certain 278 00:15:47,960 --> 00:15:51,080 Speaker 1: supplies uh in reserve. So I think yes that I 279 00:15:51,080 --> 00:15:53,880 Speaker 1: mean terms of corn and people sort of starving, I 280 00:15:53,880 --> 00:15:57,200 Speaker 1: mean that would seem wildly overblown. Um And as I said, 281 00:15:57,200 --> 00:16:00,720 Speaker 1: I would imagine that the EU would say, psibly put 282 00:16:00,760 --> 00:16:05,880 Speaker 1: in to play certain emergency measures, certain temporary uh kind 283 00:16:05,880 --> 00:16:10,160 Speaker 1: of equivalency recognition of EU of UK rules and regulations 284 00:16:10,160 --> 00:16:11,400 Speaker 1: so that we're not going to see a sort of 285 00:16:11,480 --> 00:16:16,920 Speaker 1: cataclysmic scenario. But you know, that's not to say that 286 00:16:17,040 --> 00:16:19,640 Speaker 1: a no deal exit isn't a very scary place to be. 287 00:16:20,040 --> 00:16:22,960 Speaker 1: And there's only a sort of small minority in the 288 00:16:23,000 --> 00:16:25,320 Speaker 1: House of Commons, but they're very vocal, and they're within 289 00:16:25,360 --> 00:16:28,840 Speaker 1: Theresa May's own party that are advocating that. Trying to 290 00:16:29,080 --> 00:16:31,600 Speaker 1: just come in on the sort of pick up on 291 00:16:31,640 --> 00:16:36,280 Speaker 1: what Terrez was talking about and the domestic political change. 292 00:16:36,320 --> 00:16:38,320 Speaker 1: Do you think that that we should be ready for 293 00:16:38,320 --> 00:16:40,640 Speaker 1: a new prime minister in the United Kingdom. Well, that's 294 00:16:40,800 --> 00:16:47,120 Speaker 1: a further problem, and this is actually perversely Theresa's strongest 295 00:16:47,440 --> 00:16:54,040 Speaker 1: cards at this moment um. You've heard various people within 296 00:16:54,080 --> 00:16:59,480 Speaker 1: the Conservative ranks are trying to position for a leadership campaign. 297 00:16:59,520 --> 00:17:03,320 Speaker 1: But it's not as though um either the party in 298 00:17:03,360 --> 00:17:07,400 Speaker 1: the country or certainly the Parliamentary Party would be wild 299 00:17:07,480 --> 00:17:12,920 Speaker 1: about coalescing behind Boris Johnson. Dominic rob who recently stood 300 00:17:12,960 --> 00:17:15,640 Speaker 1: down as Brexit Minister, as I gather, is also interested 301 00:17:15,680 --> 00:17:19,440 Speaker 1: in a leadership bid. He made this disastrous sounds bite 302 00:17:19,440 --> 00:17:22,120 Speaker 1: where he admitted that he hadn't realized until the last 303 00:17:22,200 --> 00:17:26,720 Speaker 1: few weeks how important the Dover Calais link was the 304 00:17:26,800 --> 00:17:31,800 Speaker 1: British trade, bringing sarcastic comments that he's only just realized 305 00:17:31,800 --> 00:17:38,040 Speaker 1: we're an island. Yes, thank you. The geography lessons continue. 306 00:17:38,680 --> 00:17:42,040 Speaker 1: John Author's thank you, senior editor for Bloomberg Market saws 307 00:17:42,160 --> 00:17:56,960 Speaker 1: our thanks to Terres Raphael Bloomberg opinion columnist, and I 308 00:17:57,000 --> 00:18:00,520 Speaker 1: want to turn our attention to bitcoin and crypto currencies, 309 00:18:00,560 --> 00:18:04,560 Speaker 1: which have basically been demolished. Basically a tractor has run 310 00:18:04,600 --> 00:18:06,880 Speaker 1: over them, and then a giant has come and stomped 311 00:18:06,920 --> 00:18:09,160 Speaker 1: on them, and then everybody turned and looked and said 312 00:18:09,200 --> 00:18:11,679 Speaker 1: we told you so because they lost more than their 313 00:18:11,760 --> 00:18:14,520 Speaker 1: value or more. Joining us now is somebody who actually 314 00:18:14,920 --> 00:18:20,199 Speaker 1: uh supportive of the technology behind bitcoin and the others, 315 00:18:20,560 --> 00:18:22,879 Speaker 1: and that is a blockchain Ron Quaranta, as founder and 316 00:18:22,960 --> 00:18:25,679 Speaker 1: chairman of the Wall Street Blockchain Alliance, joining us here 317 00:18:25,720 --> 00:18:27,600 Speaker 1: in our eleven three our studios. So run, what do 318 00:18:27,640 --> 00:18:31,280 Speaker 1: you make of the recent cryptocurrency route? Good morning? So 319 00:18:31,400 --> 00:18:32,840 Speaker 1: thanks for having me. Yeah, there are a couple of 320 00:18:32,840 --> 00:18:34,800 Speaker 1: things going on that we talked about on a regular basis. 321 00:18:34,880 --> 00:18:37,320 Speaker 1: I think we're clearly seeing some of the sell off 322 00:18:37,320 --> 00:18:41,560 Speaker 1: that's pulling some of the froth out of an overvalued marketplace, 323 00:18:41,600 --> 00:18:44,440 Speaker 1: and I think part of that is institutional money that's 324 00:18:44,640 --> 00:18:46,440 Speaker 1: kind of been taking a bit off the table. It's 325 00:18:46,440 --> 00:18:48,679 Speaker 1: important to realize that a lot of o TC trading 326 00:18:48,720 --> 00:18:50,919 Speaker 1: that isn't reported directly, so I think a lot of 327 00:18:50,960 --> 00:18:54,399 Speaker 1: that is precipitating some of that price decline, and in 328 00:18:54,440 --> 00:18:57,840 Speaker 1: particular the past month and change, given some regulatory action 329 00:18:57,880 --> 00:19:03,760 Speaker 1: the sec UH sanctioning a unregistered exchange to specific token 330 00:19:03,800 --> 00:19:06,560 Speaker 1: offerings for example, that had settled with the SEC because 331 00:19:06,560 --> 00:19:10,119 Speaker 1: they sold unregistered securities, that kind of regulatory overhang has 332 00:19:10,200 --> 00:19:13,360 Speaker 1: kind of clouded the marketplace. People have kind of fled 333 00:19:13,440 --> 00:19:17,280 Speaker 1: for the doors. Eight A bitcoin downs something like others 334 00:19:17,320 --> 00:19:20,800 Speaker 1: down well over ninety percent um. That doesn't diminish the 335 00:19:20,880 --> 00:19:24,159 Speaker 1: overarching value proposition that we believe for the technology and 336 00:19:24,240 --> 00:19:26,680 Speaker 1: quite honestly crypto assets. In our mind, this is part 337 00:19:26,680 --> 00:19:29,320 Speaker 1: of that evolution that needs to happen to be part 338 00:19:29,359 --> 00:19:32,560 Speaker 1: of the world that we know. Ron just explain to 339 00:19:32,600 --> 00:19:37,400 Speaker 1: people what is the Wall Street block chain alliance and 340 00:19:37,480 --> 00:19:41,359 Speaker 1: given example, if you can of a project or something 341 00:19:41,440 --> 00:19:44,920 Speaker 1: specific that is being worked on to take advantage of 342 00:19:44,920 --> 00:19:48,040 Speaker 1: this technology. Sure, so the worst street blockchain alliance is 343 00:19:48,080 --> 00:19:50,399 Speaker 1: a nonprofit trade association based here in New York with 344 00:19:50,440 --> 00:19:53,560 Speaker 1: a mission to god and promote comprehensive adoption of blockchain 345 00:19:53,600 --> 00:19:56,400 Speaker 1: technology across our member base. And our members are banks 346 00:19:56,400 --> 00:19:59,880 Speaker 1: and brokers and hedge funds and institutional investors, law firm 347 00:20:00,080 --> 00:20:03,000 Speaker 1: accounting practices, really trying to understand the ecosystem of both 348 00:20:03,000 --> 00:20:06,760 Speaker 1: blockchain and and crypto assets. One of the biggest models 349 00:20:06,760 --> 00:20:09,800 Speaker 1: that we've seen that's really going into production leveraging blockchain 350 00:20:09,800 --> 00:20:12,919 Speaker 1: technology is supply chain. When you look at shipping companies 351 00:20:13,000 --> 00:20:16,160 Speaker 1: like Marriage working with IBM, when you look at banking 352 00:20:16,200 --> 00:20:20,159 Speaker 1: and trade finance institutions, leveraging blockchain to audit and manage 353 00:20:20,200 --> 00:20:23,520 Speaker 1: the shipment of goods overseas and the cost effective, more 354 00:20:23,520 --> 00:20:27,080 Speaker 1: efficient way that's fundamentally evolving how supply chain and trade 355 00:20:27,119 --> 00:20:30,119 Speaker 1: management works. Okay, well, I gotta I gotta just be 356 00:20:30,200 --> 00:20:33,679 Speaker 1: really honest here. When you start talking about cryptocurrencies and 357 00:20:33,720 --> 00:20:36,399 Speaker 1: taking the currency away from a nation, that's pretty sexy. 358 00:20:36,440 --> 00:20:39,880 Speaker 1: That's like, you know, vote rogue kind of actors kind 359 00:20:39,880 --> 00:20:43,040 Speaker 1: of creating their whole own ecosystem in the web, and 360 00:20:43,400 --> 00:20:46,280 Speaker 1: you know, and when you talk about supply chain management, 361 00:20:46,359 --> 00:20:50,280 Speaker 1: it's not And uh, I have to wonder whether blockchain 362 00:20:50,359 --> 00:20:54,520 Speaker 1: has moved from a catchphrase that got everybody's attention and 363 00:20:54,600 --> 00:20:57,440 Speaker 1: people just threw money at it to something that's more 364 00:20:57,440 --> 00:20:59,760 Speaker 1: of a show me, show me the money proposition, and 365 00:20:59,760 --> 00:21:02,800 Speaker 1: there's actually less interest in just throwing money at the 366 00:21:02,840 --> 00:21:05,920 Speaker 1: development of new applications here. Yeah, I mean we've seen 367 00:21:05,920 --> 00:21:07,200 Speaker 1: out over the past two or three years, we have 368 00:21:07,200 --> 00:21:10,239 Speaker 1: had lots of money thrown at radical new solutions that 369 00:21:10,320 --> 00:21:12,480 Speaker 1: were leveraging blockchain technology. If you and I put together 370 00:21:12,480 --> 00:21:14,120 Speaker 1: at power Point, we probably would have gotten ten million 371 00:21:14,119 --> 00:21:16,639 Speaker 1: dollars to create a new startup. But why didn't you 372 00:21:16,680 --> 00:21:21,600 Speaker 1: call me? But it's become show us why it makes sense. 373 00:21:21,720 --> 00:21:24,760 Speaker 1: It's become show us why this should go to market. 374 00:21:25,080 --> 00:21:26,720 Speaker 1: And I think the interesting part of this is the 375 00:21:26,760 --> 00:21:28,399 Speaker 1: stuff that you don't hear about in the news. We 376 00:21:28,440 --> 00:21:31,359 Speaker 1: all hear the mania about bitcoin and price declines. The 377 00:21:31,400 --> 00:21:33,800 Speaker 1: work that's happening behind the scenes. Our members are part 378 00:21:33,800 --> 00:21:37,560 Speaker 1: of some of that. Some of the largest technology providers IBM, Microsoft, 379 00:21:37,640 --> 00:21:42,000 Speaker 1: Amazon Web Services leveraging blockchain technology to bring to slowly 380 00:21:42,040 --> 00:21:44,679 Speaker 1: bring solutions that make how we do what we do 381 00:21:44,720 --> 00:21:49,719 Speaker 1: more efficient, more effective, more um more cost effective. Broadly 382 00:21:49,760 --> 00:21:53,879 Speaker 1: across the entirety of the ecosystem. Our banks interested in 383 00:21:53,960 --> 00:21:58,160 Speaker 1: blockchain technology because they see it as the next version 384 00:21:58,400 --> 00:22:02,679 Speaker 1: of Swift, which is the national payment system that is 385 00:22:02,720 --> 00:22:05,359 Speaker 1: currently being used. Yeah, we don't. I don't know a 386 00:22:05,400 --> 00:22:08,080 Speaker 1: bank that's not a large bank that's not looking at 387 00:22:08,080 --> 00:22:10,439 Speaker 1: blockchain technology in some way, shape or for him for 388 00:22:10,520 --> 00:22:13,560 Speaker 1: a couple of reasons. One is the function of banks 389 00:22:13,600 --> 00:22:16,000 Speaker 1: needs to evolve. It's a very friction filled world. You 390 00:22:16,040 --> 00:22:18,040 Speaker 1: and I were discussing that a bit earlier, from everything 391 00:22:18,040 --> 00:22:21,480 Speaker 1: from payments to clearing and settlement is really expensive. Really, 392 00:22:21,760 --> 00:22:23,879 Speaker 1: you know, friction filled is what we call it. So 393 00:22:23,960 --> 00:22:26,960 Speaker 1: most major banks are looking at leveraging blockchain technology to 394 00:22:27,080 --> 00:22:29,840 Speaker 1: evolve how they do what they do, how they transfer funds, 395 00:22:29,840 --> 00:22:32,359 Speaker 1: how they manage client accounts. Even things like k y 396 00:22:32,440 --> 00:22:34,600 Speaker 1: C a m L. They're going to be leveraging blockchain 397 00:22:34,600 --> 00:22:38,720 Speaker 1: technology to manage identity for their clients. And when you 398 00:22:38,760 --> 00:22:41,359 Speaker 1: look at the costs of ky C a m L, 399 00:22:41,760 --> 00:22:45,000 Speaker 1: that makes sense to to leverage a cost efficient technology 400 00:22:45,000 --> 00:22:48,800 Speaker 1: and cost effective technology to make that better. Have the 401 00:22:49,000 --> 00:22:53,760 Speaker 1: applications in the financial sector been overstated with respect to blockchain, 402 00:22:54,760 --> 00:22:57,600 Speaker 1: I wouldn't say they've been overstated. I think we all 403 00:22:57,680 --> 00:22:59,639 Speaker 1: waited with bated breath and then realize some of the 404 00:22:59,680 --> 00:23:01,920 Speaker 1: stuff not coming to market quickly enough. And the old 405 00:23:02,000 --> 00:23:03,800 Speaker 1: joke is in steen it was all going to be 406 00:23:03,840 --> 00:23:06,160 Speaker 1: in production. And I've been in the blockchain space for 407 00:23:06,160 --> 00:23:08,280 Speaker 1: for several years now and we're still waiting for that 408 00:23:08,359 --> 00:23:10,840 Speaker 1: big production already moment. I don't think it's been overstated. 409 00:23:10,880 --> 00:23:14,919 Speaker 1: I think the expectations were a bit inflated. Um And 410 00:23:14,960 --> 00:23:17,520 Speaker 1: what we're beginning to see now is real solutions that 411 00:23:17,560 --> 00:23:20,120 Speaker 1: don't get the news. They're boring stuff that we don't 412 00:23:20,160 --> 00:23:23,440 Speaker 1: talk about in the sexy news cycle of cryptomassets, for example, 413 00:23:23,640 --> 00:23:27,320 Speaker 1: But the solutions are are coming to market behind the scenes. Now. 414 00:23:27,359 --> 00:23:30,240 Speaker 1: You mentioned just to do the acronym explanation when you 415 00:23:30,280 --> 00:23:34,520 Speaker 1: said K y C A m L. This is things 416 00:23:34,560 --> 00:23:40,200 Speaker 1: like anonymity and confidentiality. Yeah, when you engage financial relationships, 417 00:23:40,240 --> 00:23:43,600 Speaker 1: most financial organizations are required by law across your customer, no, 418 00:23:43,720 --> 00:23:46,280 Speaker 1: your customer and anti money laundering requirements at each of 419 00:23:46,320 --> 00:23:50,199 Speaker 1: those instances that each financial institution is it's expensive to 420 00:23:50,400 --> 00:23:53,639 Speaker 1: go through the process of confirming that I have I 421 00:23:53,680 --> 00:23:56,280 Speaker 1: can do certain transactions with the financial institution. Imagine a 422 00:23:56,359 --> 00:24:00,000 Speaker 1: blockchain solution that allows that to happen more quickly, more fish, 423 00:24:00,040 --> 00:24:03,679 Speaker 1: and they perhaps shared across an ecosystem of parties, and 424 00:24:03,720 --> 00:24:07,560 Speaker 1: you begin to understand the possibilities of security an identity 425 00:24:07,640 --> 00:24:11,919 Speaker 1: leveraging blockchain technology. So can you give us an example 426 00:24:12,320 --> 00:24:19,120 Speaker 1: of a space where blockchain has revolutionized something? So I 427 00:24:19,119 --> 00:24:21,760 Speaker 1: think the supply chain thing. I come back to that 428 00:24:21,840 --> 00:24:23,920 Speaker 1: simply because when you look at the stuff that's quote 429 00:24:23,960 --> 00:24:28,240 Speaker 1: unquote in production. UM shipping companies right now leveraging UM 430 00:24:28,400 --> 00:24:32,040 Speaker 1: supply chain, leveraging blockchain to manage supply chain for tracking 431 00:24:32,200 --> 00:24:34,720 Speaker 1: organic goods. So you might have seen the lettuce that 432 00:24:34,760 --> 00:24:38,600 Speaker 1: had been UM the remain the remain lettuce scare and 433 00:24:38,680 --> 00:24:41,480 Speaker 1: challenges their shipping companies are beginning to use blockchain. I 434 00:24:41,480 --> 00:24:44,880 Speaker 1: think Walmart, for example, now leverages blockchain to track provenance 435 00:24:44,920 --> 00:24:47,560 Speaker 1: of their food for example UM, and that stuff is 436 00:24:47,560 --> 00:24:50,919 Speaker 1: happening right now. UM. I think healthcare interestingly, there's some 437 00:24:50,960 --> 00:24:53,520 Speaker 1: look at healthcare around how do you manage digital health records. 438 00:24:53,520 --> 00:24:55,439 Speaker 1: I think we're a bit early in that space, but 439 00:24:55,520 --> 00:24:59,000 Speaker 1: if you think about the mess that healthcare records are globally, 440 00:24:59,720 --> 00:25:02,720 Speaker 1: b chain solutions really are being aimed at, how do 441 00:25:02,760 --> 00:25:06,200 Speaker 1: we make that better for the patient. Thanks very much 442 00:25:06,240 --> 00:25:08,840 Speaker 1: for being with us. Always the pleasure. Ron Coranta. He 443 00:25:08,960 --> 00:25:11,520 Speaker 1: is the founder and the chairman of the Wall Street 444 00:25:11,720 --> 00:25:17,840 Speaker 1: Blockchain Alliance, talking about new technology to perhaps streamline the 445 00:25:17,880 --> 00:25:21,680 Speaker 1: movement of money around the world, and also or lettuce 446 00:25:21,800 --> 00:25:35,600 Speaker 1: in nothing wrong with that, all right. Let's turn our 447 00:25:35,600 --> 00:25:38,280 Speaker 1: attention now to the world of healthcare with Scott Flanders. 448 00:25:38,320 --> 00:25:40,600 Speaker 1: He is the chief executive and board member of the 449 00:25:40,960 --> 00:25:43,760 Speaker 1: Health and he's here to tell us about consolidation in 450 00:25:43,800 --> 00:25:48,080 Speaker 1: the healthcare industry, plus an update on enrollments in the 451 00:25:48,119 --> 00:25:50,960 Speaker 1: Affordable Care Act. Scott Flanders, thank you very much for 452 00:25:51,040 --> 00:25:54,720 Speaker 1: being with us. Is the A c A enrollment levels 453 00:25:54,720 --> 00:25:58,760 Speaker 1: are they? Are they still climbing or have people decided 454 00:25:58,800 --> 00:26:00,840 Speaker 1: to take a rest And how to figure out what 455 00:26:01,240 --> 00:26:05,160 Speaker 1: premiums they can afford the pay before signing up. Well, 456 00:26:05,160 --> 00:26:08,600 Speaker 1: that's definitely the challenge, and I appreciate you bringing a 457 00:26:08,840 --> 00:26:12,880 Speaker 1: focus to it, because the premiums are up much less 458 00:26:12,920 --> 00:26:15,159 Speaker 1: than they have been the last few years, and so 459 00:26:15,200 --> 00:26:19,600 Speaker 1: there has been stabilization in the individual market as particularly 460 00:26:19,640 --> 00:26:24,840 Speaker 1: if consumers receive subsidies, it's very affordable. More insurance companies 461 00:26:24,880 --> 00:26:28,320 Speaker 1: are offering plans this year than last year. But even 462 00:26:28,320 --> 00:26:31,160 Speaker 1: with all of that good news, the reality is fewer 463 00:26:31,200 --> 00:26:34,160 Speaker 1: consumers are signing up for the two thousand and nineteen 464 00:26:34,200 --> 00:26:36,760 Speaker 1: coverage year than they have in past years. You know, 465 00:26:36,840 --> 00:26:40,000 Speaker 1: I'm interested in the fact that Barack Obama, former president, 466 00:26:40,240 --> 00:26:43,720 Speaker 1: who came up with a c A, just tweeted a 467 00:26:43,800 --> 00:26:46,399 Speaker 1: less than an hour ago. No jump shots, no ferns, 468 00:26:46,440 --> 00:26:48,159 Speaker 1: no memes. Not this time. I'm going to give it 469 00:26:48,200 --> 00:26:50,720 Speaker 1: to you straight. If you need health insurance for twenty nineteen, 470 00:26:50,760 --> 00:26:55,000 Speaker 1: the deadline to get covered is December. Pitching this, why 471 00:26:55,040 --> 00:26:56,600 Speaker 1: do you think? What do you think it would take 472 00:26:56,600 --> 00:27:00,560 Speaker 1: to re ignite this program in a meaningful way? And 473 00:27:00,680 --> 00:27:03,560 Speaker 1: on the flip side, I mean, is this sort of 474 00:27:03,600 --> 00:27:07,639 Speaker 1: the last gasps of it before it gets demolished? I mean, 475 00:27:07,680 --> 00:27:11,480 Speaker 1: where are we with this? Well? Look, it's down double 476 00:27:11,560 --> 00:27:15,760 Speaker 1: digit Enrollments are down uh ten twelve percent from prior year, 477 00:27:15,960 --> 00:27:19,720 Speaker 1: so it's not collapsing, it is shrinking. There are more 478 00:27:19,720 --> 00:27:24,320 Speaker 1: more alternatives this year, so the extension of short term 479 00:27:24,440 --> 00:27:28,199 Speaker 1: duration from ninety days to a full year in some 480 00:27:28,240 --> 00:27:32,879 Speaker 1: cases multiple years, has been a nice alternative, very attractive 481 00:27:32,920 --> 00:27:37,080 Speaker 1: to many of our consumers who can't afford the rising 482 00:27:37,160 --> 00:27:41,359 Speaker 1: premiums and the very high deductibles of Obamacare. You know, 483 00:27:41,440 --> 00:27:44,120 Speaker 1: we we do surveys all the time of our consumers 484 00:27:44,200 --> 00:27:48,000 Speaker 1: and don't even know that the open enrollment period ends 485 00:27:48,000 --> 00:27:55,800 Speaker 1: on December fift So I appreciate President Obama tweeting that deadline. Now, Scott, 486 00:27:56,200 --> 00:28:00,240 Speaker 1: previously you have served in a variety of positions only 487 00:28:00,280 --> 00:28:03,879 Speaker 1: in the media industry. Now that you're in the healthcare 488 00:28:04,080 --> 00:28:06,200 Speaker 1: of business, just tell us a little bit about the 489 00:28:06,400 --> 00:28:08,800 Speaker 1: health because you're more of a you're a marketplace, so 490 00:28:09,040 --> 00:28:13,320 Speaker 1: you get a different view of what is going on now, 491 00:28:13,359 --> 00:28:17,320 Speaker 1: that's right. Uh, we're completely neutral for the consumer. So 492 00:28:17,359 --> 00:28:22,480 Speaker 1: we're like Expedia is in travel, the health is the 493 00:28:22,600 --> 00:28:25,600 Speaker 1: same for health insurance. We have over a thousand people 494 00:28:25,800 --> 00:28:27,960 Speaker 1: and every day our mission is to try to get 495 00:28:28,000 --> 00:28:32,520 Speaker 1: every American with affordable health insurance. That's a simple mission, 496 00:28:32,600 --> 00:28:36,040 Speaker 1: but it's very hard to execute because it's complex. It's 497 00:28:36,080 --> 00:28:38,840 Speaker 1: a shopping experience and consumers only do once a year. 498 00:28:39,160 --> 00:28:41,720 Speaker 1: It's not their favorite, fun, most fun thing to do, 499 00:28:42,640 --> 00:28:45,440 Speaker 1: but yet it's important and has consequences if they get 500 00:28:45,440 --> 00:28:49,000 Speaker 1: it wrong, and so we're there to be a comparison site. 501 00:28:49,600 --> 00:28:52,000 Speaker 1: We also have call centers to help consumers that need 502 00:28:52,040 --> 00:28:54,560 Speaker 1: to speak to someone, but most of our consumers interface 503 00:28:54,640 --> 00:28:59,280 Speaker 1: with us on our website e health dot com. Scott, 504 00:28:59,320 --> 00:29:00,960 Speaker 1: you know, we've talked a lot of people about how 505 00:29:00,960 --> 00:29:04,280 Speaker 1: to make healthcare cheaper in the United States, and a 506 00:29:04,320 --> 00:29:08,160 Speaker 1: lot of people say that Ultimately, given what's going on 507 00:29:08,200 --> 00:29:10,760 Speaker 1: in government, and given the fact that Medicaid Medicare can't 508 00:29:10,760 --> 00:29:13,840 Speaker 1: negotiate for drug prices and things like that, Uh, it's 509 00:29:14,040 --> 00:29:16,080 Speaker 1: very difficult to see the government take the lead on this. 510 00:29:16,160 --> 00:29:19,440 Speaker 1: It will have to come from corporations like JP Morgan 511 00:29:19,560 --> 00:29:21,920 Speaker 1: and Berkshire Hathaway that have sort of made moves about 512 00:29:21,960 --> 00:29:25,200 Speaker 1: having their own healthcare system. It has to sort of 513 00:29:25,800 --> 00:29:29,240 Speaker 1: lie with them to create the competitive pressure. So are 514 00:29:29,280 --> 00:29:32,960 Speaker 1: you seeing any sort of corporation supporting what you do 515 00:29:33,240 --> 00:29:36,800 Speaker 1: and making moves that can materially lower healthcare costs in 516 00:29:36,840 --> 00:29:43,000 Speaker 1: the United States? Well, that's that's a three plus trillion 517 00:29:43,000 --> 00:29:46,520 Speaker 1: dollar question. Seventeen or eighteen percent of our entire economy 518 00:29:46,760 --> 00:29:50,040 Speaker 1: is spent on healthcare, so and it's it's growing faster 519 00:29:50,080 --> 00:29:52,600 Speaker 1: than GDP. So you know, it's a it's a major 520 00:29:52,720 --> 00:29:57,240 Speaker 1: fiscal issue today and it's growing and getting more challenging. 521 00:29:57,400 --> 00:30:00,400 Speaker 1: So you're right to focus on it, and there aren't 522 00:30:00,400 --> 00:30:05,560 Speaker 1: easy answers, but I do see the CBS merger as 523 00:30:05,600 --> 00:30:09,360 Speaker 1: a progressive, constructive step that I think will improve access. 524 00:30:10,040 --> 00:30:14,080 Speaker 1: You know, for many conditions, going into a hospital is 525 00:30:14,120 --> 00:30:18,040 Speaker 1: just so punishingly expensive, and if you have a high deductible, 526 00:30:18,080 --> 00:30:20,840 Speaker 1: which many Americans have, and there's still twenty seven million 527 00:30:20,880 --> 00:30:24,920 Speaker 1: Americans that have no insurance, and so they're going into 528 00:30:24,960 --> 00:30:30,840 Speaker 1: emergency rooms for treatments that could more easily be handled 529 00:30:31,160 --> 00:30:35,640 Speaker 1: and met checks or perhaps even at a pharmacy, and 530 00:30:35,720 --> 00:30:39,760 Speaker 1: that could be where we see that at CBS merger evolved. 531 00:30:40,120 --> 00:30:45,200 Speaker 1: So we think providing more access UH will make healthcare 532 00:30:45,360 --> 00:30:50,200 Speaker 1: more accessible to more Americans, and ultimately that will on 533 00:30:50,240 --> 00:30:55,080 Speaker 1: the margin, bring down cost. Scott Flanders, thank you so 534 00:30:55,160 --> 00:30:57,440 Speaker 1: much for being with a Scott Flanders, chief executive officer 535 00:30:57,480 --> 00:31:01,120 Speaker 1: at e Health, coming to us from Mountain v You, California, 536 00:31:01,880 --> 00:31:05,760 Speaker 1: talking about what the Obamacare enrollment has been like way 537 00:31:05,800 --> 00:31:09,880 Speaker 1: down UH and just in general with how to provide 538 00:31:09,880 --> 00:31:14,200 Speaker 1: a tool for people to better shop for insurance programs. 539 00:31:15,720 --> 00:31:18,280 Speaker 1: Thanks for listening to the Bloomberg p m L podcast. 540 00:31:18,600 --> 00:31:21,880 Speaker 1: You can subscribe and listen to interviews at Apple Podcasts. 541 00:31:21,920 --> 00:31:25,800 Speaker 1: SoundCloud or whatever podcast platform you prefer. I'm pim Fox. 542 00:31:25,920 --> 00:31:29,240 Speaker 1: I'm on Twitter at pim Fox. I'm on Twitter at 543 00:31:29,360 --> 00:31:32,680 Speaker 1: Lisa Abramowits one before the podcast. You can always catch 544 00:31:32,760 --> 00:31:34,480 Speaker 1: us worldwide on Bloomberg Radio