WEBVTT - P&L: Former Acting Director of the CIA Discusses Russian Hack 0:00:04.760 --> 0:00:08.080 Welcome to the Bloomberg P and L Podcast. I'm Pim Fox. 0:00:08.119 --> 0:00:11.200 Along with my co host Lisa Abramowitz. Each day we 0:00:11.280 --> 0:00:14.480 bring you the most important, noteworthy, and useful interviews for 0:00:14.520 --> 0:00:16.880 you and your money, whether at the grocery store or 0:00:16.920 --> 0:00:20.680 the trading floor. Find the Bloomberg p L Podcast on iTunes, 0:00:20.840 --> 0:00:30.080 SoundCloud and at Bloomberg dot com. Let's turn our attention 0:00:30.160 --> 0:00:34.000 now to geopolitical events. Jack Divine joins us. He is 0:00:34.000 --> 0:00:36.400 a founding partner and president of the ark And Group, 0:00:36.440 --> 0:00:39.239 also a member the Council and Foreign Relations. Also the 0:00:39.280 --> 0:00:43.640 author of the book entitled Good Hunting, A Spy Master's Story, 0:00:43.840 --> 0:00:45.720 and he's a spy hunter. I was going to let 0:00:45.800 --> 0:00:50.559 him tell us my masters. Yes please, Mr Divine, thank 0:00:50.600 --> 0:00:53.760 you very much for being with us. I wanted to 0:00:53.840 --> 0:00:56.920 let you describe a little bit of your thirty two 0:00:57.000 --> 0:01:00.720 year career for the Central Intelligence Agency. No one's ever 0:01:00.760 --> 0:01:02.560 done that. Asked me to sum up my career in 0:01:02.560 --> 0:01:05.720 a minute, but I will. At the top of my career, 0:01:05.800 --> 0:01:09.200 was responsible for all the what we would call spies 0:01:09.200 --> 0:01:11.520 around the world. People in the business never referred them 0:01:11.560 --> 0:01:14.720 as spies or agents, but I was the chief spymaster 0:01:14.800 --> 0:01:17.319 at the highest point, I've served in seven foreign countries. 0:01:17.400 --> 0:01:21.200 I wasn't in charge of the program to drive the 0:01:21.280 --> 0:01:25.880 Russians out of Afghanistan with UH famous Congressman Charlie Wilson. 0:01:26.520 --> 0:01:30.040 On the downside, I was drawn into reluctantly into the 0:01:30.040 --> 0:01:32.639 Iran country affair. I was in Chilly when I Yendi 0:01:32.760 --> 0:01:35.800 was overthrown, and I was ahead to the counter narcotics 0:01:35.800 --> 0:01:39.120 program with escobar bit the dust. So I've spent a 0:01:39.160 --> 0:01:42.960 long time. I've written to it, and UH, I'm passionate 0:01:43.000 --> 0:01:47.240 about the intelligence business and the CIA. So you've got 0:01:47.280 --> 0:01:52.760 a strong stomach for risk and for for potential of problems. 0:01:53.240 --> 0:01:58.080 I'm wondering what you think about President elect Trump's recent 0:01:58.200 --> 0:02:01.919 stance on the c i A and on intelligence briefings. 0:02:02.400 --> 0:02:04.480 He was quoted as saying, you know, I'm like a 0:02:04.480 --> 0:02:06.440 smart person. I don't have to be told the same 0:02:06.480 --> 0:02:08.840 thing in the same words every single day for the 0:02:08.880 --> 0:02:12.400 next eight years. Do you think this poses a problem? 0:02:12.440 --> 0:02:15.440 I think it's important to understand the really the breath 0:02:15.560 --> 0:02:20.280 of CIA. It's not just producing analysis, it's it's collecting 0:02:20.400 --> 0:02:23.360 information around the world, and it's an instrument of the 0:02:23.400 --> 0:02:26.919 president when he wants to get things done, um below 0:02:26.960 --> 0:02:30.600 the radar, and every president has used the CIA in 0:02:30.600 --> 0:02:34.680 that capacity up Dwight Eisenhower had three hundred covert action 0:02:34.760 --> 0:02:38.880 operations and give you the sense of it. So I think, uh, 0:02:39.120 --> 0:02:42.880 I think it's a terrible mistake to disdain the CIA 0:02:42.960 --> 0:02:46.560 as an institution and its people. It's very dangerous. Most 0:02:47.000 --> 0:02:52.440 most presidents, at least UM find a way, uh not 0:02:52.560 --> 0:02:55.440 to go head to head with the agency's people. We're 0:02:55.480 --> 0:02:58.440 not talking about the elites, the senior people. We're talking 0:02:58.440 --> 0:03:01.040 about people that grew up in institution. You have to 0:03:01.040 --> 0:03:05.799 be very careful. They're very professional, they're dedicated, and disdain 0:03:06.000 --> 0:03:08.680 is about the worst thing that they tolerate. You have 0:03:08.720 --> 0:03:10.920 to watch the people don't head for the doors. They 0:03:10.960 --> 0:03:14.200 do in business the best ones. So I think it's 0:03:14.240 --> 0:03:19.720 ill timed. I understand why, um, the President elect Trump 0:03:19.840 --> 0:03:23.600 may be dissatisfied with the intelligence he's getting. UM, there's 0:03:23.639 --> 0:03:27.560 ways to fix that, make clear your your own your 0:03:27.600 --> 0:03:30.200 own interests and priorities. But I think to walk away 0:03:30.240 --> 0:03:35.000 from it or to disdain it, and this is really extraordinary, 0:03:35.080 --> 0:03:37.600 and I think it will turn out to be a 0:03:37.680 --> 0:03:41.440 huge mistake, hopefully will be reset quickly. I mean, um, 0:03:41.480 --> 0:03:44.440 there are a lot of professional people that I'm sure 0:03:44.480 --> 0:03:47.720 we'll will try to make some sense of this, but 0:03:47.840 --> 0:03:52.160 this was, um, from my perspective, the biggest mistake on 0:03:52.200 --> 0:03:56.080 the national security arena, which doesn't bode well I think 0:03:56.200 --> 0:03:59.320 for the the next couple of years this needs to 0:03:59.360 --> 0:04:03.080 be straightened and quickly. Can you make sense or give 0:04:03.160 --> 0:04:05.320 us some sense of your thoughts having to do with 0:04:05.400 --> 0:04:08.480 Russia and cyber attacks in the U S election and 0:04:08.480 --> 0:04:11.960 so on. I mean, I think the first, I think 0:04:13.760 --> 0:04:16.080 I think the verse. First of all, we should say 0:04:16.080 --> 0:04:18.960 that Putin is a product of the intelligence system, and 0:04:19.120 --> 0:04:21.760 he was a KGB officer for over fifteen years. He 0:04:22.800 --> 0:04:25.560 worked in the Eastern Germany when the great spy masters 0:04:25.600 --> 0:04:30.880 the East German Marcus Wolfe, he headed up the their 0:04:31.000 --> 0:04:34.040 version of the FBI. He has a mindset that understands 0:04:34.080 --> 0:04:38.359 intelligence and may understand some of the darker side, because 0:04:39.320 --> 0:04:43.200 the experience with Marcus wolf is really pretty black. So 0:04:43.600 --> 0:04:48.000 the fact that Russians would be hacking in to our 0:04:48.240 --> 0:04:54.000 areas of policy and uh and of foreign and domestic 0:04:54.600 --> 0:04:57.120 interest should be of no surprise. I mean, this is 0:04:57.160 --> 0:05:01.120 what not only big powers do around the world, medium 0:05:01.120 --> 0:05:04.320 and now small and even individuals do this. So the 0:05:04.360 --> 0:05:07.560 fact that hacking is not the issue, and I I'm 0:05:07.600 --> 0:05:10.680 surprised that we spend so much time on that question. 0:05:11.080 --> 0:05:16.000 It's really whether you take that information and use it domestically. 0:05:16.120 --> 0:05:19.760 Now that is a shocker. Uh in the business. For 0:05:19.839 --> 0:05:22.440 all the years I was in it, there were unwritten rules. 0:05:22.480 --> 0:05:25.640 If yes, someone will give you different, different variations of 0:05:25.680 --> 0:05:29.920 it's called the Moscow rules, in which we basically operated 0:05:29.960 --> 0:05:32.160 where we would not beat up their officers and they 0:05:32.160 --> 0:05:34.839 wouldn't beat up hours I put it in those youth, 0:05:34.960 --> 0:05:37.600 and we wouldn't counterfeit money, they wouldn't count there. There 0:05:37.600 --> 0:05:40.479 were rules of the game, and one of the rules 0:05:40.480 --> 0:05:43.760 of the game was not to interfere in the internal 0:05:43.800 --> 0:05:47.200 politics of either country. And again you're not going to 0:05:47.279 --> 0:05:51.800 find a treaty, no lawyers are attached to it um 0:05:51.839 --> 0:05:53.760 and I think this is a violation to that. If 0:05:53.839 --> 0:05:57.760 in fact it turns out that the Russians not only hacked, 0:05:58.240 --> 0:06:01.200 but more importantly use that inform trying to influence this 0:06:01.240 --> 0:06:03.640 is a change in the game and we need to 0:06:04.520 --> 0:06:08.120 We need to, I think, sit down privately in public 0:06:08.160 --> 0:06:10.320 with the Russians and decide whether we're going to have 0:06:10.400 --> 0:06:14.240 this new arrangement where we go after and try to 0:06:14.279 --> 0:06:20.040 influence internal affairs, big story, huge story, seismic shift and intelligence. 0:06:20.080 --> 0:06:23.960 If indeed this has been done. The way that you're 0:06:23.960 --> 0:06:27.719 talking makes me think that the CIA and the KGB 0:06:28.680 --> 0:06:32.920 have direct contact and discussions about the manners with which 0:06:32.960 --> 0:06:35.200 they go about their business. Is that is that really 0:06:35.200 --> 0:06:39.240 the case? I think it evolves over over years. You 0:06:39.320 --> 0:06:43.640 don't sit down and demarcate the the issues. But in 0:06:43.680 --> 0:06:47.200 my own case, I not only random or the drive 0:06:47.320 --> 0:06:51.880 the Russians out of Afghanistan. Years later, I was the 0:06:51.920 --> 0:06:56.440 guest of the KGB in Moscow in June of ninety one. 0:06:56.480 --> 0:06:59.840 The government fell in August of ninety one. That had 0:07:00.160 --> 0:07:02.640 to do with my presence there. But the point that 0:07:02.680 --> 0:07:05.800 I would make is, of course we've have relations to 0:07:05.839 --> 0:07:09.000 deal with them. It's part of you know, how do 0:07:09.080 --> 0:07:13.880 you have a a safety net so that you can 0:07:13.920 --> 0:07:17.400 pick up the phone and call each other and uh 0:07:17.560 --> 0:07:21.560 and back off of something that mayby misinterpreted. So I 0:07:21.560 --> 0:07:25.440 think that if there aren't communications today, they better reset 0:07:26.160 --> 0:07:28.800 just real quick. Are you optimistic about the year ahead? 0:07:30.480 --> 0:07:32.280 Well you have to wait. I'm going to put out 0:07:32.320 --> 0:07:38.720 my forecast and I would say I'm bullish on all right. 0:07:38.880 --> 0:07:42.880 Jack Divine, founding partner and president of the Arkin Group, 0:07:43.040 --> 0:07:48.000 also UH the author of Good Hunting, a Spymasters Story. 0:07:48.600 --> 0:07:51.000 Jack is a thirty two year veteran of the Central 0:07:51.040 --> 0:07:54.760 Intelligence Agency, used to be the head of all the Spies. 0:08:09.120 --> 0:08:11.160 I want to bring in Hugh Johnson, chairman and c 0:08:11.400 --> 0:08:14.200 i O of Hugh Johnson Advisors, who oversees more than 0:08:14.240 --> 0:08:17.880 a billions of dollars. I want to get your view, Hugh, 0:08:18.280 --> 0:08:23.800 on how exactly you're pricing in so many uncertainties that 0:08:23.920 --> 0:08:29.120 are supposed to come together with some clarity perhaps next year. Uh. 0:08:29.160 --> 0:08:32.439 Most people are expecting it to be bigger growth expectations. 0:08:33.520 --> 0:08:36.080 Are you convinced are you all in on this narrative 0:08:36.120 --> 0:08:39.360 that growth will just be on gangbusters run in the 0:08:39.480 --> 0:08:42.760 US and that it's up from here for stocks and 0:08:42.880 --> 0:08:45.800 down from here for government bonds? Can you can you 0:08:45.840 --> 0:08:48.440 just tell that that Lisa covers the bond market very well? 0:08:49.000 --> 0:08:52.840 She does, she does, And no, I think gangbusters is 0:08:52.880 --> 0:08:55.680 the word, that's the strong word, and that's a little 0:08:55.720 --> 0:08:58.160 bit too strong. And when you take a look at 0:08:58.200 --> 0:09:01.559 the forecast for the economy, forecast for earnings, yeah, sure, 0:09:01.600 --> 0:09:04.520 we might get something from the Trump bump. You're right, 0:09:04.559 --> 0:09:08.200 there's a lot of uncertainty. There's uncertainty is to the magnitude. 0:09:08.240 --> 0:09:11.920 There's uncertainty is to the timing. That makes it very 0:09:11.960 --> 0:09:15.000 difficult to put together a sensible forecast for what's going 0:09:15.040 --> 0:09:18.240 to happen in stock prices. But nevertheless, we're going to 0:09:18.360 --> 0:09:20.480 get something in the order of a Trump bump, and 0:09:20.520 --> 0:09:23.000 you don't see that in a lot of forecasts right now. 0:09:23.040 --> 0:09:27.679 That consensus is something like two point three percent growth 0:09:27.720 --> 0:09:31.000 in the US economy two thousand and seventeen with a 0:09:31.040 --> 0:09:34.120 Trump bump or something I think is a reasonable expectation 0:09:34.200 --> 0:09:36.280 of what's going to happen next year in the form 0:09:36.360 --> 0:09:40.080 of obviously tax cuts and spending increases. And again the 0:09:40.120 --> 0:09:43.000 timing is important, but what I think it's going to 0:09:43.160 --> 0:09:46.920 maybe move us up towards the at best two point seven. 0:09:47.480 --> 0:09:50.400 You might get as high as two point nine. That's 0:09:50.440 --> 0:09:52.720 going to make a difference for what earnings do in 0:09:52.760 --> 0:09:54.679 two thousand and seventeen. They might be a little bit 0:09:54.720 --> 0:09:57.480 higher than You put it all together, and you say, 0:09:58.040 --> 0:10:00.480 what's the case for stocks in the end, there is 0:10:01.240 --> 0:10:03.520 you can make the case for stocks being where they 0:10:03.559 --> 0:10:06.640 are and maybe being a little bit higher, but it's 0:10:06.800 --> 0:10:10.720 very hard to do. Valuation is really an issue, even 0:10:10.840 --> 0:10:15.200 if you include some forecast or some expectation of the 0:10:15.240 --> 0:10:17.240 Trump bump. We hold on a second, h Am, I 0:10:17.240 --> 0:10:20.559 hearing you correctly that you're basically bearished on stocks right now. No, 0:10:20.840 --> 0:10:23.840 that's that's not correct, because that what I'm saying is 0:10:23.880 --> 0:10:27.960 that it's all within the context of an ongoing bull market. 0:10:28.000 --> 0:10:31.400 If you ask yourself, as the current stock market, economic 0:10:31.480 --> 0:10:34.720 interest rate cycle alive and well, the answer is yes. 0:10:35.520 --> 0:10:39.000 Trump has essentially postponed the end of it, is given 0:10:39.000 --> 0:10:41.920 a little bit new life to the economy. I think 0:10:41.920 --> 0:10:43.959 that we still have a ball market. It's going to 0:10:44.080 --> 0:10:46.720 go through two thousand seventeen. The case through two thousand 0:10:46.840 --> 0:10:50.640 eighteen becomes a little more difficult, but nevertheless positive bull 0:10:50.720 --> 0:10:55.880 market environment. But within the context of that ball market environment, 0:10:56.200 --> 0:10:58.440 I'm saying we've gotten a little ahead of ourselves. I 0:10:58.440 --> 0:11:01.080 guess is the way to say it a little bit pricey. 0:11:01.440 --> 0:11:04.680 So on a short intermediate term basis, you've got to 0:11:04.720 --> 0:11:09.600 be really careful, careful because of valuation, and you've got 0:11:09.640 --> 0:11:12.599 to be really quite frankly tough on prices that you 0:11:12.720 --> 0:11:16.280 pay to buy stocks. You're picking of entry points has 0:11:16.280 --> 0:11:19.600 got to be extraordinarily good. At this point in the 0:11:19.640 --> 0:11:21.679 second we've had a big move on the upside, we're 0:11:21.679 --> 0:11:23.880 a little bit pricey. You've got to be good at 0:11:23.920 --> 0:11:26.200 picking entry points, and you have to be patient in 0:11:26.320 --> 0:11:30.800 order to be good at entry points. Hugh Johnson SMP 0:11:31.720 --> 0:11:35.040 is up nearly eleven so far during the year. Dal 0:11:35.160 --> 0:11:39.200 Jones Industrial Average up more than fourteen percent. Tell us 0:11:39.200 --> 0:11:42.440 about financial stocks, do you think that is an area 0:11:42.480 --> 0:11:45.240 that's going to do well in Yeah? You know him. 0:11:45.640 --> 0:11:47.400 When you take a look at all of this, it 0:11:47.440 --> 0:11:49.760 really looks really good. This has been one heck of 0:11:49.800 --> 0:11:53.160 a year, surprisingly good, much better than any of us, 0:11:53.280 --> 0:11:56.800 most of us anyway, had expected. So I think, you know, 0:11:57.400 --> 0:11:59.760 you're probably not going to get that big a year 0:11:59.800 --> 0:12:02.840 and two thousand and seventeen it might be positive, but 0:12:02.960 --> 0:12:05.520 it's not going to be in the order of ten 0:12:05.600 --> 0:12:08.240 to twelve percent that we're seeing this year. We're not 0:12:08.240 --> 0:12:10.440 going to see anything like that. And again, I think 0:12:10.480 --> 0:12:14.080 the reason I'm saying that, are concluding that is valuation. 0:12:14.240 --> 0:12:19.120 I can't put together enough earnings growth, uh in order 0:12:19.160 --> 0:12:21.320 to make the case for a real big move up 0:12:21.360 --> 0:12:24.439 in stock prices from current levels. Another way of getting 0:12:24.440 --> 0:12:27.040 at that same thing and saying it is that you've 0:12:27.080 --> 0:12:29.319 got to be a really good stock picker, and you've 0:12:29.360 --> 0:12:32.160 got to pick good entry points when you pick, if 0:12:32.200 --> 0:12:34.840 you pick the right stock. So be a good stock picker, 0:12:35.240 --> 0:12:38.480 be a good uh, be a good spector picker. Financials 0:12:38.480 --> 0:12:40.199 are going to do well, but you and I both 0:12:40.240 --> 0:12:42.480 know they've had a big move to the upside. So 0:12:42.520 --> 0:12:44.880 you've got to be a lot more careful now than 0:12:44.920 --> 0:12:48.320 you had to be, say, around election time. You know, 0:12:49.040 --> 0:12:51.480 one thing that I'm innterested in is industrials. Industrials have 0:12:51.520 --> 0:12:54.199 done really well since Trump's election, and um in your 0:12:54.240 --> 0:12:56.480 notes you said that that's one area that you're actually 0:12:56.520 --> 0:13:00.600 bullish on going forward. What's the risk, especially at trade 0:13:00.640 --> 0:13:04.960 negotiations hit a heat up with China among other nations. 0:13:05.080 --> 0:13:09.440 What's the risk that perhaps the industrial rally has gotten 0:13:09.440 --> 0:13:14.000 a little bit ahead of itself, especially with companies like Caterpillar, 0:13:14.040 --> 0:13:16.920 for example, which export quite a bit of goods to 0:13:17.080 --> 0:13:20.880 China and could potentially suffer from trade a trade board there. Yeah, 0:13:20.880 --> 0:13:23.640 it's a it's a big risk. So if there's a 0:13:23.640 --> 0:13:26.840 big risk that we're not it's very difficult to quantify 0:13:27.080 --> 0:13:30.080 that that faces us in two thousand seventeen, and I 0:13:30.160 --> 0:13:33.280 might add two thousand eighteen, is is a whole risk 0:13:33.320 --> 0:13:37.000 of trade. And anytime you're talking about a large multinational company, 0:13:37.320 --> 0:13:40.200 you're really talking about trade. You ask yourself the question, 0:13:40.200 --> 0:13:43.440 will geez you? Small and mid sized stock stocks that 0:13:43.480 --> 0:13:47.560 are not big multinationals have done really well performance wise 0:13:47.640 --> 0:13:50.800 since the election. Large cap stocks is to some extent 0:13:50.920 --> 0:13:53.440 lagged a little bit. A lot of that is because 0:13:53.440 --> 0:13:56.160 of the concern about what the direction that trade is 0:13:56.200 --> 0:13:58.839 gonna go. So you've really got to be careful based 0:13:58.840 --> 0:14:00.760 on a couple of things. A big move up that 0:14:00.800 --> 0:14:03.280 we've seen since the election, So we've got a couple 0:14:03.320 --> 0:14:06.280 of valuation problems, some rhetoric coming out of a Trump 0:14:06.320 --> 0:14:09.360 campaign saying that to look at the costs are too 0:14:09.440 --> 0:14:12.520 high by a lot of defense companies, for example, and 0:14:12.600 --> 0:14:15.079 so that that's a little bit of a problem, that's 0:14:15.120 --> 0:14:18.320 a policy problem, and then the trade issue is is 0:14:18.320 --> 0:14:20.360 could be a problem to all of this. When you're 0:14:20.400 --> 0:14:22.920 looking at financials, when you're looking at healthcare, when you're 0:14:22.920 --> 0:14:27.720 looking at technology, when you're looking at industrials, especially industrial infrastructure, 0:14:27.760 --> 0:14:30.840 play be a little bit careful because we've had a 0:14:30.840 --> 0:14:34.520 big move on the upside and we've got valuation problems 0:14:34.600 --> 0:14:37.360 in my mind right now, and unless we see a 0:14:37.400 --> 0:14:41.040 big outbreak in speculation, and that could that could occur. 0:14:41.720 --> 0:14:43.480 Uh in my judgment, you've got to be a little 0:14:43.480 --> 0:14:45.120 bit if you're gonna be sensible, you've got to be 0:14:45.120 --> 0:14:47.280 a little bit careful here and again be a good 0:14:47.280 --> 0:14:50.440 stock picker and a good entry point picker. Well, I 0:14:50.440 --> 0:14:52.760 guess if everyone could do that, everyone would have your job. 0:14:52.880 --> 0:14:56.280 You Wouldn't that be great? I'd be great if I 0:14:56.280 --> 0:14:58.800 could do it that. Well, Well, I think trying to 0:14:58.840 --> 0:15:03.080 match a ten eleven present per and a challenge for anyone. 0:15:03.160 --> 0:15:05.720 Thanks very much. Hugh Johnson. He is the chairman and 0:15:05.760 --> 0:15:09.480 the chief investment officer of Hugh Johnson Advisers. They're based 0:15:09.480 --> 0:15:12.760 in Albany, New York, and he helps to manage over 0:15:12.840 --> 0:15:30.360 one point two billion dollars of customer assets. We've heard 0:15:30.360 --> 0:15:32.760 a lot about some big businesses that are having some 0:15:32.840 --> 0:15:35.960 direct contact President elect Donald Trump, But what about the 0:15:36.000 --> 0:15:38.920 smaller companies out there? To get a sense of what 0:15:39.000 --> 0:15:42.960 the landscape is for smaller businesses under a Trump presidency, 0:15:43.000 --> 0:15:45.160 I want to bring in Karen Mills, Senior Fellow at 0:15:45.200 --> 0:15:50.720 Harvard Business School and former Small Business Administrator Administration Administrator. 0:15:51.280 --> 0:15:54.760 Karen Mills, thank you for joining us. So what is 0:15:54.840 --> 0:16:01.000 your base case outlook for small businesses under a Trump president? Well, 0:16:01.440 --> 0:16:03.840 President elect Trump really has to step up his game 0:16:03.960 --> 0:16:06.480 on small businesses because, as you said, there's been a 0:16:06.480 --> 0:16:10.720 lot of big business personalities coming in and out of 0:16:10.880 --> 0:16:15.320 his um realm right now, and he is appointing a 0:16:15.320 --> 0:16:19.000 lot of folks that really have the big business sensibility. 0:16:19.120 --> 0:16:21.960 So what we want to make sure is that there's 0:16:22.000 --> 0:16:25.200 somebody at the table to represent small business. And he 0:16:25.280 --> 0:16:28.360 has appointed a new s b A Administrator, but the 0:16:28.440 --> 0:16:31.280 real trick is going to be to make sure that 0:16:31.280 --> 0:16:34.360 that person has a voice in all the White House 0:16:34.400 --> 0:16:38.760 economic discussions. Well, you're talking about Linda McMahon, right, and 0:16:38.840 --> 0:16:42.600 Lynda McMahon, co founder former chief executive of the professional 0:16:42.800 --> 0:16:47.040 wrestling franchise w w E. I mean she doesn't seem 0:16:47.080 --> 0:16:51.840 like a lightweight. Uh is that? Well done to second? 0:16:51.880 --> 0:16:53.800 But but the s b A, right, I mean, it 0:16:54.160 --> 0:16:57.040 has an office in just about like every state. I 0:16:57.080 --> 0:17:00.920 think it's at least in more than one. UM. Do 0:17:00.960 --> 0:17:04.680 you think that Linda McMahon and her business background will 0:17:04.680 --> 0:17:07.200 be an asset to the people that depend on the 0:17:07.320 --> 0:17:10.679 s b A. Well. The good news is that the 0:17:10.760 --> 0:17:15.160 President elect kept the s b A in the cabinet 0:17:15.560 --> 0:17:18.440 and having a seat at the table is a really 0:17:18.520 --> 0:17:25.600 important um role for the Small Business Administration. Every single 0:17:25.880 --> 0:17:28.639 new piece of legislation that's going to come up in 0:17:28.680 --> 0:17:33.480 this administration has an impact on small business. Whether it's 0:17:33.560 --> 0:17:39.120 taxes or healthcare, or infrastructure or anything to do with trade. 0:17:39.880 --> 0:17:42.480 Those things are really part of the life blood of 0:17:42.520 --> 0:17:46.280 small business. And financial reform, you have to make sure 0:17:46.359 --> 0:17:50.320 that they still have access to loans. Karen, what's the difference? 0:17:50.359 --> 0:17:53.120 I mean, this is a very basic question, but can 0:17:53.160 --> 0:17:57.200 you give us a specific example of one area where 0:17:57.720 --> 0:18:00.680 a policy for small business would be different than a 0:18:00.720 --> 0:18:04.159 policy that would benefit big business. Well, it's actually true 0:18:04.359 --> 0:18:08.640 all the way across the board. So let's start with healthcare. 0:18:09.280 --> 0:18:11.399 In fact, there are a bunch of things in the 0:18:11.480 --> 0:18:15.399 healthcare law that small businesses want. They actually want to 0:18:15.480 --> 0:18:19.439 provide healthcare for their employees, but the problem was that 0:18:19.520 --> 0:18:22.040 they can't really even get a quote. If you have 0:18:22.160 --> 0:18:25.560 five people and somebody gets sick, that's a big risk 0:18:25.680 --> 0:18:29.560 for an insurance company. So they put new exchanges. You 0:18:29.560 --> 0:18:33.040 can actually go to a shop exchange and get a 0:18:33.160 --> 0:18:38.000 quote where your risk is pooled with everybody else's small business. 0:18:38.080 --> 0:18:42.600 So it's not five people, it's many thousands, millions of people, 0:18:42.880 --> 0:18:45.639 and that should give you a cheaper price. We don't 0:18:45.640 --> 0:18:49.159 want to throw that out in healthcare reform. In fact, 0:18:49.280 --> 0:18:52.560 that was put in by I think Olympius Snow was 0:18:52.600 --> 0:18:55.480 put in by the Republicans. So we want to make 0:18:55.520 --> 0:18:58.919 sure that somebody's got that I on what small businesses 0:18:59.000 --> 0:19:02.439 need as things get done in this next congressional session. 0:19:02.640 --> 0:19:05.639 Right the Olympius know the Republican senator from from the 0:19:05.680 --> 0:19:10.479 state of Maine. It's s b A also a big lender. Right, 0:19:10.600 --> 0:19:13.520 You've got the general small business loans, Uh, you've got 0:19:13.560 --> 0:19:17.240 disaster loans, the micro loan project, and you've also got 0:19:17.280 --> 0:19:21.320 real estate and equipment loans. You've got a big package. 0:19:21.359 --> 0:19:25.159 There is that something that the administrator directly oversees or 0:19:25.200 --> 0:19:27.760 what role would they have in some kind of program 0:19:27.800 --> 0:19:31.399 that oversees the loan program. The sp A has a 0:19:31.520 --> 0:19:36.120 portfolio of over a hundred billion dollars of loan guarantees. 0:19:36.440 --> 0:19:39.040 They're not loans. The banks make the loans. It's actually 0:19:39.160 --> 0:19:42.800 kind of the perfect public private partnership Fannie Man Freddy 0:19:42.880 --> 0:19:46.480 Mac a little bit a little bit, and the guarantees 0:19:46.560 --> 0:19:48.480 are made by the s b A in a case 0:19:48.560 --> 0:19:51.800 where the bank can't quite make that loan. So this 0:19:51.880 --> 0:19:55.480 means lots of people have access to credit who wouldn't 0:19:55.520 --> 0:19:58.920 otherwise in the banking system. Well, this is absolutely critical 0:19:58.960 --> 0:20:02.560 for small businesses. And the gap and access to credit 0:20:02.680 --> 0:20:06.399 right now is in the smaller dollar loans under a 0:20:06.480 --> 0:20:10.080 hundred thousand. So when they go and look at Dodd Frank, 0:20:10.600 --> 0:20:13.680 let's make sure to also keep the small business hat 0:20:13.760 --> 0:20:18.000 on and make sure that whatever is done benefits those 0:20:18.080 --> 0:20:20.920 who are going to make loans to the people who 0:20:20.960 --> 0:20:24.240 need something under a hundred thousand dollars, because that's where 0:20:24.240 --> 0:20:26.600 the credit squeeze is real quick. Do you think that 0:20:26.640 --> 0:20:29.639 the rate hike that we're expecting tomorrow is going to 0:20:29.800 --> 0:20:33.919 have any specific effect on small businesses? Well, it's going 0:20:33.960 --> 0:20:37.080 to be more expensive tomorrow, and that's always a cost 0:20:37.160 --> 0:20:40.280 for small businesses. Um. I know they're all looking for 0:20:40.400 --> 0:20:44.600 now tax reductions coming what which might offset it? And 0:20:44.880 --> 0:20:47.480 the real important thing for small businesses is that the 0:20:47.520 --> 0:20:51.760 economy keep going. So if they're spending an infrastructure, that's 0:20:51.800 --> 0:20:55.760 good for small business and construction. But if the economy 0:20:56.200 --> 0:20:59.480 UH doesn't do well in this next administration, that people 0:20:59.480 --> 0:21:02.359 who get or the small business owners. Thank you for 0:21:02.400 --> 0:21:04.760 being with us and coming in. Karen Mills is the 0:21:04.840 --> 0:21:08.160 former administrator of the SPA of the Small Business Administration 0:21:08.480 --> 0:21:11.639 and also a senior fellow at the Harvard Business School. 0:21:11.680 --> 0:21:19.680 Thank you very much for giving us your time. Thanks 0:21:19.720 --> 0:21:22.280 for listening to the Bloomberg P and L podcast. You 0:21:22.320 --> 0:21:26.440 can subscribe and listen to interviews at iTunes, SoundCloud, or 0:21:26.520 --> 0:21:30.560 whatever podcast platform you prefer. I'm pim Fox. I'm out 0:21:30.600 --> 0:21:33.439 there on Twitter at pim Fox. I'm out there on 0:21:33.480 --> 0:21:36.760 Twitter at Lisa Abramo. It's one before the podcast. You 0:21:36.760 --> 0:21:39.399 can always catch us worldwide on Bloomberg Radio.