WEBVTT - Intesa Sanpaolo Is a Solid and Undervalued Bank, Herro Says 0:00:09.720 --> 0:00:12.880 Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene with 0:00:13.560 --> 0:00:16.520 David Gura. Daily we bring you insight from the best 0:00:16.560 --> 0:00:22.239 of economics, finance, investment, and international relations. Find Bloomberg Surveillance 0:00:22.320 --> 0:00:27.000 on Apple Podcasts, SoundCloud, Bloomberg dot Com, and of course 0:00:27.320 --> 0:00:33.960 on the Bloomberg Christopher Grassanti joins us now. He's the 0:00:34.000 --> 0:00:36.360 owner and founder Grassanti Capital Management's great to have you 0:00:36.640 --> 0:00:39.000 with us here in Bloomberg and leven three oh students, 0:00:39.040 --> 0:00:41.000 Let's talk a bit about the Trump Trade. We had 0:00:41.000 --> 0:00:43.600 a lot of conversations yesterday in which guests said, whither 0:00:43.680 --> 0:00:47.360 the Trump Trade? It's over done and gone? Uh you 0:00:47.080 --> 0:00:51.200 you you indicated that decide what does the Trump trade? Men? 0:00:51.320 --> 0:00:53.199 Because some extent it still exist at the least to 0:00:53.320 --> 0:00:54.920 the last note you wrote back at April, what's your 0:00:54.920 --> 0:00:57.160 sense of worth things stand that the role that Washington's 0:00:57.200 --> 0:01:00.240 playing here in the markets, in the economy right now, well, David, 0:01:00.280 --> 0:01:01.639 if I had told you that he would be able 0:01:01.680 --> 0:01:04.839 to get no meaningful legislation passed, and he'd go through 0:01:05.040 --> 0:01:08.680 chiefs of staff and he'd go through communications directors, you'd say, wow, 0:01:08.720 --> 0:01:11.360 the market will have real trouble going up. But obviously 0:01:11.400 --> 0:01:13.679 that's not been the case. I think what's really gonna 0:01:13.720 --> 0:01:15.800 matter as we go into the fall is what happens 0:01:15.840 --> 0:01:18.400 with tax relief or tax reform, at least especially on 0:01:18.440 --> 0:01:21.080 the corporate side for the market. And so I think 0:01:21.080 --> 0:01:24.000 the market remains hopeful and Minuchin coming to the fore 0:01:24.120 --> 0:01:25.920 saying this is what's going to happen. We finally have 0:01:26.000 --> 0:01:27.800 a plan. I think that's part of the reason the 0:01:27.840 --> 0:01:31.319 futures are up this morning. So I'm optimistic that the 0:01:31.400 --> 0:01:34.840 rally has legs to continue. Steven Manuchan saying he has 0:01:34.880 --> 0:01:36.959 a plan. There was that a joint statement for members 0:01:36.959 --> 0:01:39.720 of the Congress and the White House, just over a 0:01:39.760 --> 0:01:42.400 page long. Do we have enough information here? You disappointed 0:01:42.400 --> 0:01:44.759 on what we've seen thus far? And as an investor, 0:01:45.040 --> 0:01:47.199 would you like to see more meat on the bone? Right? Well, 0:01:47.240 --> 0:01:48.920 it's kind of a double edged sword because the more 0:01:48.960 --> 0:01:53.160 information they give, the more they're gonna upset certain constituencies. 0:01:53.200 --> 0:01:56.120 So I think there's a purposeful vagueness to what they're 0:01:56.160 --> 0:01:58.000 putting out now, and of course the devil will be 0:01:58.000 --> 0:02:00.720 in the details as you get down to to September. 0:02:00.800 --> 0:02:03.720 So I suspect we're gonna start seeing headlines about corporate 0:02:03.760 --> 0:02:05.920 tax relief, and at least at the beginning, that will 0:02:05.960 --> 0:02:08.520 spur the market. The real question is will they be 0:02:08.600 --> 0:02:10.880 able to push things through committees in both the House 0:02:10.880 --> 0:02:13.400 in the Center. How do you see the interplay between 0:02:14.320 --> 0:02:15.920 the turmoil? I think we can call it that if 0:02:15.919 --> 0:02:17.960 you have you have the communications structories on the job 0:02:18.000 --> 0:02:19.839 for five or six days and at least uh and 0:02:19.960 --> 0:02:22.400 the markets are we seeing it reflect what's happening in 0:02:22.440 --> 0:02:24.480 Washington at all? Or do you get a sensor that 0:02:24.520 --> 0:02:27.320 the market is becoming more near to what's happening. Well, 0:02:27.360 --> 0:02:29.080 maybe one of the good news is for the market 0:02:29.160 --> 0:02:31.480 for with the Scaramuci stuff, has it happened during earning 0:02:31.520 --> 0:02:34.880 seasons and their earnings have been relatively benign. We've we've 0:02:34.919 --> 0:02:39.079 started seeing either UH, solid makes or even some nice 0:02:39.120 --> 0:02:41.880 beats from tech companies like Facebook. So I think that's 0:02:41.880 --> 0:02:44.560 really what the markets focused on, rather than the relative 0:02:44.680 --> 0:02:48.160 short tenure of Scarls. Were this in a good time 0:02:48.200 --> 0:02:51.560 to speak to him? Futures again, Uh, just lost my 0:02:52.160 --> 0:02:55.680 here there they are futures dred three up hundred three. 0:02:55.720 --> 0:02:58.840 We didn't print twenty two thousand on the futures market 0:02:58.880 --> 0:03:00.760 this morning. Just check that, Chris, I want to talk 0:03:00.800 --> 0:03:04.839 about us of cash. The theory is, I mean, thank 0:03:04.880 --> 0:03:08.519 you Mr Winberg of Golden sax Fame Fame. Trees don't 0:03:08.560 --> 0:03:11.520 grow to the sky. But the basic idea is there's 0:03:11.520 --> 0:03:13.919 got to be a point where you don't buy back 0:03:14.160 --> 0:03:18.960 shares because they're just too rich. Are we there? I 0:03:19.000 --> 0:03:21.079 think we? I mean, obviously, Tom, it's a case by 0:03:21.120 --> 0:03:24.040 case basis, but but I think we are kind of 0:03:24.080 --> 0:03:27.760 there for the folks that are typically in growth companies 0:03:27.800 --> 0:03:31.560 that have been buying back stock. So uh, I would 0:03:31.639 --> 0:03:34.040 stop now. Having said that, it's the part of the 0:03:34.080 --> 0:03:36.760 ethos of certain companies that they buy back to three 0:03:37.440 --> 0:03:39.920 the shares each year, and I think that's a mistake. 0:03:39.920 --> 0:03:42.000 I think Warren Buffett put it pretty well. You'll you'll 0:03:42.000 --> 0:03:43.600 take a look, you'll do the numbers, and if your 0:03:43.600 --> 0:03:45.720 stock is a good investment, you'll buy it, and if 0:03:45.720 --> 0:03:47.600 it's not, you want so where's diving and growth? And 0:03:47.680 --> 0:03:49.720 I just looked at the stock. I'm not gonna mention folks. 0:03:49.760 --> 0:03:52.240 It's not a name. A lot of people know. It's 0:03:52.240 --> 0:03:56.120 a great American success story. They're up eighteen percent per 0:03:56.200 --> 0:03:59.800 year off the Lehman Low Bottoms of oh nine, they've 0:03:59.800 --> 0:04:03.640 got huge dividend growth. Do you just keep doing dividend growth? 0:04:03.880 --> 0:04:06.760 I mean, it's Mario Gabelly one on one. Yeah, I 0:04:06.760 --> 0:04:10.160 think you do. One of the probably v major question 0:04:10.200 --> 0:04:13.560 we ask we're analyzing companies is what is the company 0:04:13.560 --> 0:04:15.240 going to do with the cash that they produce? And 0:04:16.240 --> 0:04:18.400 it's not the same for each company. Is no right answer. 0:04:18.400 --> 0:04:21.320 If you're a growing company, have great markets that are growing, 0:04:21.480 --> 0:04:23.960 you reinvest in your own business. But if you're not 0:04:24.080 --> 0:04:26.320 a growing company, you give that back to shareholders and 0:04:26.360 --> 0:04:29.160 buy backs. And you know the noise of media, you 0:04:29.240 --> 0:04:31.600 have discovery scripts, which is you know, we're all trying 0:04:31.600 --> 0:04:34.039 to sort that out right now. I believe it's twenty 0:04:34.520 --> 0:04:39.160 of advertising revenue and cable TV something uh like that. 0:04:39.240 --> 0:04:44.039 Are you seeing constructive m and a creating value or 0:04:44.120 --> 0:04:46.560 is it the beginning of an exuberance. No, I think 0:04:46.560 --> 0:04:48.719 it's even what it's it's it's even later than the 0:04:48.720 --> 0:04:50.440 beginning of an exuberance. I think we're kind of in 0:04:50.440 --> 0:04:53.240 the middle innings of exuberance were in late cycle. So 0:04:53.320 --> 0:04:56.240 you're starting to see deals that make sense for the bankers, 0:04:56.720 --> 0:05:01.120 for um, for the executives that are getting compensated on 0:05:01.520 --> 0:05:04.560 share appreciation things like that, but don't necessarily mean that 0:05:04.600 --> 0:05:07.440 you're going to see higher earnings as a result with 0:05:07.440 --> 0:05:10.279 the combined companies, and and and so they're betting on 0:05:10.320 --> 0:05:12.039 a lot of things going right in order for these 0:05:12.040 --> 0:05:14.560 deals to to really justify themselves. What does that deal, 0:05:14.600 --> 0:05:17.440 that Discovery Scripts deal tell you about that part of 0:05:17.480 --> 0:05:23.880 the market, the economy, and in particularly your vicom They 0:05:23.960 --> 0:05:27.560 didn't win that deal. Um, what it is I think 0:05:27.680 --> 0:05:30.760 is a desperation not to be left behind. Because clearly 0:05:30.800 --> 0:05:34.080 in the content side of things, there are winners and losers, 0:05:34.080 --> 0:05:36.800 and so far, at least Discovery has been, you know, 0:05:36.839 --> 0:05:39.039 on the losing side of the ledger. And you have 0:05:39.120 --> 0:05:42.040 companies like Time Warner with HBO, of course Disney with ESPN. 0:05:42.160 --> 0:05:44.919 Stuff stuff that delivers content that people who are really 0:05:45.320 --> 0:05:47.400 want and of course the test there are they willing 0:05:47.440 --> 0:05:49.719 to pay more for it? And for HBO and ESPN 0:05:49.760 --> 0:05:52.719 the answers yes, and for the Discovery Channel maybe not. 0:05:53.240 --> 0:05:55.440 So they're desperately trying to get big enough, and I 0:05:55.480 --> 0:05:57.680 think the endgame there is to get a critical mass 0:05:57.720 --> 0:06:00.440 of that then they can be acquired and they can 0:06:00.480 --> 0:06:04.279 be taken out without just Languishing and Viacoma were shareholders. 0:06:04.279 --> 0:06:06.920 They're simply because it's too cheap. They have some good content, 0:06:06.960 --> 0:06:09.400 we think it's worth considerably more. It sells for less 0:06:09.839 --> 0:06:12.240 than one tempt the market cap of Disney, for example, 0:06:12.279 --> 0:06:14.080 so we just think that's too low. How old are 0:06:14.120 --> 0:06:17.400 you about desperation as a motivating fact here in the 0:06:17.480 --> 0:06:20.919 TMT space in others? How problematic is that to be 0:06:21.000 --> 0:06:23.800 motivated by concern or worry that maybe you're going to 0:06:23.839 --> 0:06:26.400 be left? But you know, it's funny being a value guy. 0:06:26.440 --> 0:06:29.000 We have the luxury of really looking at industries that 0:06:29.040 --> 0:06:32.960 are our old fashioned industry. TMT is tough media right now. 0:06:33.200 --> 0:06:35.440 It's obviously it looks nothing like it looked even five 0:06:35.520 --> 0:06:38.160 years ago. So you have to be so dynamic there. 0:06:38.200 --> 0:06:41.000 You can't settle for the status quo like you could 0:06:41.040 --> 0:06:43.440 if you were an iron or company or something like that. 0:06:43.880 --> 0:06:46.600 So you know, if if you're not it's the shark. 0:06:46.640 --> 0:06:48.520 If you're not moving, you're dying in the media business. 0:06:48.560 --> 0:06:50.479 And so that's that's a tough way to go. I 0:06:50.520 --> 0:06:52.800 want to go back to what we talked about before. 0:06:52.839 --> 0:06:58.760 You said on television you're an eighteen. That's very sequis 0:06:59.640 --> 0:07:04.120 can you say that a focused portfolio. I remember the 0:07:04.279 --> 0:07:09.320 uproar over the Fidelity fifty fund years ago uh Mercenel 0:07:09.400 --> 0:07:12.360 and the crew up in Boston. Fifty was I was 0:07:12.440 --> 0:07:16.640 outrageous focusing concentration. So here are you running virtually a 0:07:16.680 --> 0:07:21.000 hedge fund with eighteen stocks? Have you what's the downside? 0:07:21.000 --> 0:07:24.360 What's the ugliness? We push back? I mean when I 0:07:24.400 --> 0:07:26.880 think hedge fund, I think faster money, and and in 0:07:26.880 --> 0:07:29.160 our holding periods are really three or four years, so 0:07:29.560 --> 0:07:32.800 we go narrow and deep. Tom. So we're buying Apple 0:07:32.840 --> 0:07:36.240 at eleven times because nobody was buying the iPhone six 0:07:36.280 --> 0:07:40.160 and a half or seven complete failure, right, and so 0:07:40.240 --> 0:07:41.920 we know over the three years there's gonna be a 0:07:41.960 --> 0:07:44.760 good product cycle and things like that. We're we're buying 0:07:44.800 --> 0:07:49.080 Wells Fargo during the credit card debacle because they have 0:07:49.320 --> 0:07:51.960 a deep management team. They have a biggest mortgage franchise 0:07:51.960 --> 0:07:53.720 in the United States, and that will come back again 0:07:53.880 --> 0:07:56.720 over three years in a quarter or two who knows so, 0:07:57.160 --> 0:07:59.480 And we feel that's better than taking a ride in 0:07:59.560 --> 0:08:02.920 a mark It. That's certainly uh more expensive than very 0:08:02.960 --> 0:08:05.600 quickly you're all pull I had from steel from Christopher Whalen, 0:08:05.640 --> 0:08:08.400 which is always a constructive thing. Is there something about 0:08:08.400 --> 0:08:10.680 preferreds here? Do you want to go to convertibles or 0:08:10.720 --> 0:08:13.920 preferred and pick up a bigger dividend? You know you don't. 0:08:14.160 --> 0:08:15.800 I don't think some time, I I think you can 0:08:15.800 --> 0:08:20.080 do things like buying We've been buying Verizon lately because 0:08:20.160 --> 0:08:22.000 everybody is so down on them because they've done the 0:08:22.080 --> 0:08:24.760 unlimited data. So the stock is dropping the mid fifties 0:08:24.800 --> 0:08:27.160 to the low forties a week or two ago, and 0:08:27.160 --> 0:08:30.360 then point eight percent yield at four point and and 0:08:30.400 --> 0:08:31.920 two weeks ago, when it was in the low forties, 0:08:31.920 --> 0:08:34.360 the yield was in the mid five So I'd rather 0:08:34.520 --> 0:08:37.240 own that with the prospect of if things were turned 0:08:37.280 --> 0:08:39.360 to normal, they don't have to be gangbusters. You'll get 0:08:39.360 --> 0:08:42.319 ten percent appreciation on the stock and the five percent 0:08:42.520 --> 0:08:45.200 we'll come back and do some investment theory here with 0:08:45.280 --> 0:08:49.640 Christopher Gersanti. Always important to do that, uh as as 0:08:49.760 --> 0:08:52.480 well Chris Krossani with us. And that's a well timed thing. 0:08:52.520 --> 0:08:55.360 I'm assuming you don't own under armor. You do not 0:08:57.400 --> 0:09:00.440 on no retail at all. Actually, well, within that, what 0:09:00.480 --> 0:09:02.120 do you do when you screw up? What do you do? 0:09:02.559 --> 0:09:04.480 You know? You've got a four year plan on the stock. 0:09:04.520 --> 0:09:06.720 How do you figure out you made a mistake and 0:09:06.800 --> 0:09:08.720 what do you do? How do you that's a great question. 0:09:08.720 --> 0:09:11.520 That's actually the hardest thing that we do is when 0:09:11.520 --> 0:09:13.240 do we give up because we don't have an automatic 0:09:13.280 --> 0:09:16.360 it's down five percent or tempercent kick it out. In fact, 0:09:16.480 --> 0:09:18.400 often when it's down five or temper cent, that's our 0:09:18.400 --> 0:09:21.240 opportunity to really load up on a on a position. 0:09:21.360 --> 0:09:24.080 So so the tough thing is we have a thesis 0:09:24.160 --> 0:09:27.000 going in and whether it's an analyst that works for 0:09:27.040 --> 0:09:30.280 me or it's me, we write it down and that's 0:09:30.280 --> 0:09:32.080 the thesis we have to stick with. So if they 0:09:32.120 --> 0:09:35.800 reports something different, um, there's a tendency for folks to 0:09:35.800 --> 0:09:37.640 come in and say, well, it's still gonna work even 0:09:37.679 --> 0:09:40.199 though our original thesis didn't work out. And that's when 0:09:40.400 --> 0:09:42.319 the yellow lights go off and we sell the stock. 0:09:42.480 --> 0:09:46.600 David grow Yes, I'm going to pounce on that and 0:09:46.600 --> 0:09:51.959 give some wisdom. Write it down. There's no substitute. This 0:09:52.080 --> 0:09:56.200 goes back to Gene Perroni, who was a wonderful technician. 0:09:56.240 --> 0:09:59.839 Off of his father's historic work. Eugene Peruni said the same, 0:10:01.000 --> 0:10:02.920 you gotta write it you gotta plot the chart with 0:10:02.960 --> 0:10:07.240 a pencil. There's just something about writing it down which 0:10:07.280 --> 0:10:10.679 clarifies thoughts right right. And on our analysts meeting, everybody's 0:10:10.720 --> 0:10:12.800 required to have a memo, even though with the electronic 0:10:12.840 --> 0:10:15.440 communications it's so easy to send emails and but we 0:10:15.480 --> 0:10:17.120 have to have something in writing, and it's got to 0:10:17.160 --> 0:10:19.640 have numbers in it, and it can't be conceptual. It's 0:10:19.679 --> 0:10:23.280 got to be data driven. Um. And so that's something 0:10:23.320 --> 0:10:26.760 we can return to when things are going going awry, 0:10:26.840 --> 0:10:29.240 as they always do in a three or four years 0:10:29.280 --> 0:10:31.880 suggesting the digital world, David, write it down as it 0:10:31.960 --> 0:10:36.720 lost as a cursive but they don't have to write 0:10:37.880 --> 0:10:40.640 all day. Could go all day on a lack of 0:10:40.720 --> 0:10:43.400 cursive in schools. Chris, a few minutes ago you mentioned, 0:10:43.440 --> 0:10:44.760 well as far ago you said you bought a lot 0:10:44.800 --> 0:10:46.960 during that first scandal. We had another one this week 0:10:47.000 --> 0:10:50.880 and involving these sort of fake insurance schemes. How do 0:10:50.880 --> 0:10:52.319 you how do you react to that? Is that another 0:10:52.320 --> 0:10:55.319 opportunity to to buy How confident in the leadership to 0:10:55.360 --> 0:10:59.880 push back a little? I don't think this this one 0:11:00.160 --> 0:11:02.680 that they really were buying insurance for folks at car Loans, 0:11:02.720 --> 0:11:05.280 which they're allowed to do. They just I think they 0:11:05.360 --> 0:11:08.560 just screwed up, and and I don't think anyone's more 0:11:08.600 --> 0:11:10.840 embarrassed about it than they are. And they're gonna spend 0:11:10.840 --> 0:11:13.079 a bunch of money, but it'll be behind them, I think, 0:11:13.200 --> 0:11:15.840 relatively quickly, because I don't think there was kind of fraud. 0:11:15.880 --> 0:11:18.200 I think it was just a bad systems management issue. 0:11:19.320 --> 0:11:20.920 Are you worried about a recession? At this point of 0:11:21.000 --> 0:11:23.200 stepping back and looking at the economy broadly, there any 0:11:23.200 --> 0:11:27.080 indications to you that things are about to turn No. 0:11:27.160 --> 0:11:30.640 I'm always scared to say no, no, But I have 0:11:30.679 --> 0:11:32.880 to say the indicators that we look at, you know, 0:11:33.080 --> 0:11:35.079 a weekly job claims, which is kind of the most 0:11:35.080 --> 0:11:39.880 coincident indicator um our average hourly earning and things like that. 0:11:40.280 --> 0:11:44.719 There's no yellow lights flashing terribly brightly um And so 0:11:44.800 --> 0:11:47.360 the other thing I would say is, obviously it would 0:11:47.360 --> 0:11:49.600 be too late when they're all flashing brightly. And I 0:11:49.640 --> 0:11:53.600 do think we're obviously this this recovery is long in 0:11:53.640 --> 0:11:56.040 the tooth. But we went down so far in oh 0:11:56.040 --> 0:11:57.760 eight oh nine. So I'm one of the guys who 0:11:57.760 --> 0:12:00.360 thinks it should take longer to come back, because because 0:12:00.360 --> 0:12:02.120 we went down so far, so I'm not troubled by 0:12:02.120 --> 0:12:04.760 the length of the of the recovery. What's the biggest 0:12:04.760 --> 0:12:08.120 misunderstanding about value investing when you talk to people about it? 0:12:08.880 --> 0:12:12.120 You know, I think the big mistakes value investors make, 0:12:12.240 --> 0:12:15.000 even good ones, are to be too dogmatic. I mean, 0:12:15.000 --> 0:12:16.720 there's an old saying by Oscar Wild which I love, 0:12:16.760 --> 0:12:19.200 which is I'm I'm not young enough to know everything. 0:12:19.679 --> 0:12:21.640 And and the longer you go in this business you 0:12:21.679 --> 0:12:24.440 realize that you have to be adaptable to make money. 0:12:24.520 --> 0:12:26.400 So when folks say, oh, well tech is too expensive, 0:12:26.400 --> 0:12:29.280 there's going to be a huge crash, maybe, but maybe 0:12:29.320 --> 0:12:31.960 that crash doesn't come for two or three years. And meanwhile, 0:12:32.080 --> 0:12:35.160 buying companies that look expensive, leg Oracle, which is at 0:12:35.160 --> 0:12:37.240 the higher end of its range, which is but still 0:12:37.280 --> 0:12:40.360 only eighteen times next year's number. So stuff like that. 0:12:40.400 --> 0:12:42.319 There are compromises I think you make in this kind 0:12:42.320 --> 0:12:45.439 of environment that I don't apologize for. Chris, Thank you, 0:12:45.600 --> 0:12:49.080 very valuable. Christomers scienty always valuable, but particularly here. The 0:12:49.200 --> 0:12:57.679 future is a four closing in on SMP. Wow, the 0:12:57.760 --> 0:13:00.200 vix ten point three zero, that's a good time to 0:13:00.240 --> 0:13:16.920 speak to Chris Chrissante His research is definitive in its 0:13:17.120 --> 0:13:21.080 detail on where we're going. What's great about Chuck Gabriel 0:13:21.679 --> 0:13:25.319 is he doesn't hide away from the sausage making of 0:13:25.320 --> 0:13:29.000 what cometh in Washington. Of course, David Grew, you know 0:13:29.080 --> 0:13:34.200 it's busy, Charles Gabriel, Capital Partners joining US Center Phone Linel, David, 0:13:34.200 --> 0:13:36.800 why don't you bring in handsome Chuck Gabriel. He knows 0:13:37.240 --> 0:13:41.599 everything there's to know about the path from budget reform 0:13:41.640 --> 0:13:48.480 and budget passing to tax reform and tax reform passing. Chuck, Chuck, 0:13:48.559 --> 0:13:51.040 let me start by asking you what members of the 0:13:51.040 --> 0:13:53.000 House have left behind here. There was a vote on 0:13:53.600 --> 0:13:55.920 a budget before they before they left town. Where do 0:13:55.960 --> 0:13:57.640 things stand when it comes to the budget in particularly, 0:13:57.640 --> 0:13:58.920 what are they gonna face when they get back? I 0:13:58.920 --> 0:14:01.520 guess on September the fifth. I mean, they've got a 0:14:01.559 --> 0:14:06.000 healthy vacation here. Yeah, it's the ambient air quality improves 0:14:06.080 --> 0:14:09.800 mightily down in Washington around now. The Senate will be 0:14:09.800 --> 0:14:13.240 here at least another week, but they that is the 0:14:13.400 --> 0:14:15.760 must do business. Even though they didn't pass the budget 0:14:15.800 --> 0:14:18.720 for in most of two thousand seventeen, so they do 0:14:18.840 --> 0:14:21.800 have to pass the budget for the fiscal years the 0:14:21.800 --> 0:14:26.520 twelve months. It begins October one, and they've passed a 0:14:26.520 --> 0:14:30.880 budget resolution in the House Budget Committee, but it has 0:14:30.920 --> 0:14:33.360 not yet gone to the floor, and there's evidence that 0:14:33.440 --> 0:14:36.720 it's uh, it faces a very high hurdles on the 0:14:36.760 --> 0:14:38.800 House floor, so it might not pass on the House floor, 0:14:38.840 --> 0:14:41.840 and the House budget would be indigestible in the Senate. So, 0:14:42.520 --> 0:14:45.200 you know, just not to belabor it day. We're starting 0:14:45.240 --> 0:14:49.360 a messy process that's going to all be pushed to 0:14:49.480 --> 0:14:51.240 the end of the month, at which point we might 0:14:51.280 --> 0:14:53.800 have a little bit of a of a little skirmish 0:14:53.840 --> 0:14:57.920 or government a little suspense about a government shutdown this 0:14:57.960 --> 0:15:01.320 time with the dead ceiling attached and all you know, 0:15:01.320 --> 0:15:04.880 with Wall Street really mostly focused on the tax cuts. UH, 0:15:05.200 --> 0:15:08.880 this whole story really has to play through before they 0:15:08.880 --> 0:15:11.240 can pass a budget resolution that both the House and 0:15:11.240 --> 0:15:14.640 the Senate can accept. Probably a shell budget resolution will 0:15:14.640 --> 0:15:17.280 allow them to move a tax bill through the Senate, 0:15:17.320 --> 0:15:20.440 and that probably won't come through October November. So, you know, 0:15:21.240 --> 0:15:23.440 not backing this all into what you'll be talking about 0:15:23.440 --> 0:15:25.520 all day to day. You know, we've got a new 0:15:25.600 --> 0:15:29.880 chief of staff, uh, and the Legislative Director is pivoting 0:15:30.000 --> 0:15:32.240 right off the excitement that you're having a reboot of 0:15:32.280 --> 0:15:35.720 the White House is already sort of exhorting the Congress 0:15:35.760 --> 0:15:40.120 to begin marking up tax reform in September October. And 0:15:40.160 --> 0:15:44.040 that's just a laughable idea. So that's that's where we 0:15:44.080 --> 0:15:46.760 are down here. We had a Senator Jeff Flake here, 0:15:46.800 --> 0:15:49.200 the junior senator from Arizona, on the show yesterday, and 0:15:49.520 --> 0:15:52.360 he said that if he's going to be a realist, 0:15:52.360 --> 0:15:54.880 healthcare is now solidly behind the Senate. They've got to 0:15:54.920 --> 0:15:56.720 move on to two other things. That seems to run 0:15:56.800 --> 0:15:59.520 counter that opinion. Seems to run counter to what we're 0:15:59.520 --> 0:16:02.320 hearing from from the White House, both through official and 0:16:02.320 --> 0:16:06.560 nonofficial channels. Three statements and tweets. Uh, do you think 0:16:06.600 --> 0:16:10.000 that it's dead for the time being, Yeah, you know, 0:16:10.720 --> 0:16:14.080 you know, Channel Princess Bride. It's mostly dead, you know. 0:16:14.320 --> 0:16:17.400 And there there's the problem is that you still have 0:16:17.560 --> 0:16:23.240 an imploding set of private insurance exchanges that are going 0:16:23.280 --> 0:16:25.880 to have to make some very key decisions also in September. 0:16:25.880 --> 0:16:29.400 I mean basically, you keep drawing lines towards you know, 0:16:29.480 --> 0:16:32.680 a sort of concentric circles that point to you know, 0:16:32.800 --> 0:16:36.680 Ghostbusters type clouds over the Ansonia Building, you know in Washington, 0:16:36.800 --> 0:16:41.720 you know, in September, UM and UM. So they can't 0:16:41.840 --> 0:16:44.360 just walk away from it. They can walk away from 0:16:44.400 --> 0:16:48.720 making it, you know, their their their sole pursuit. Uh. 0:16:48.760 --> 0:16:50.520 And they can try to move on to a fiscal 0:16:50.600 --> 0:16:53.600 eighteen budge of resolution to move tax reform, but you 0:16:53.600 --> 0:16:55.520 know they're going to have to deal with things like 0:16:55.600 --> 0:17:00.160 the contribution sharing reimbursements, you know, to bail out the insurers. 0:17:00.200 --> 0:17:02.200 They'll probably have to do that in an appropriations bill 0:17:02.320 --> 0:17:04.680 later this year. And if they do move to tax 0:17:04.680 --> 0:17:08.840 reform in a fiscal eighteen budget resolution, they can keep 0:17:08.880 --> 0:17:12.880 a place keeper in there to allow for you know, 0:17:13.119 --> 0:17:17.440 for health reform to be attached to you know that 0:17:17.440 --> 0:17:21.119 that bus whenever. So they aren't yet really fully done, 0:17:21.160 --> 0:17:24.200 but for the most part, you can drive a stake 0:17:24.200 --> 0:17:26.320 in the idea of skinny repeal. Wanted to drag it 0:17:26.359 --> 0:17:29.080 back A chuck to your expertise, which is the sequence 0:17:29.080 --> 0:17:33.560 of all this our our budget discussions and tax reform 0:17:33.800 --> 0:17:37.560 in tandem, or is the horse before the cart with 0:17:37.640 --> 0:17:43.679 the budget reform. They we've had discussions and you know, 0:17:43.720 --> 0:17:47.920 initial hearings and uh. Now a mark up and passage 0:17:47.920 --> 0:17:49.960 of a House Budget resolution in the in the House 0:17:50.000 --> 0:17:53.240 Budget Committee, Tom. But you know, meanwhile, you know, at 0:17:53.240 --> 0:17:56.680 the same time, of course, they have had the rollout 0:17:56.800 --> 0:18:02.160 of the Early Better Way Ryan tax Bill, and now 0:18:02.400 --> 0:18:05.199 you know sort of principles from the tax of the 0:18:05.240 --> 0:18:08.040 Big Six, so to speak. So you know, they're they're 0:18:08.080 --> 0:18:12.680 they're on separate big tops. They're running simultaneous. But again, 0:18:12.760 --> 0:18:15.600 the one thing that is as a given every year, 0:18:15.720 --> 0:18:19.159 like death and taxes, is September thirty and having to 0:18:19.200 --> 0:18:22.240 fund the government after after at the beginning of the 0:18:22.240 --> 0:18:24.119 fiscal year that's coming, and this time we have a 0:18:24.160 --> 0:18:27.800 debt ceiling extension to attach to it, and we have 0:18:27.880 --> 0:18:31.240 to get through that before we can lock in a 0:18:31.280 --> 0:18:34.480 new budget resolution and just called eighteen budget resolution that 0:18:34.520 --> 0:18:37.040 will allow them to move tax reform through the Senate. 0:18:37.040 --> 0:18:41.600 With that's what's ahead of Let me ask you, Scoop Jackson, question, 0:18:41.640 --> 0:18:45.200 I guess is the definitive fiscal conservative who's going to 0:18:45.280 --> 0:18:50.160 pay for all this? Well, it'll be interesting if they 0:18:50.560 --> 0:18:53.080 you know, I think there are many who would love 0:18:53.119 --> 0:18:56.200 to just do tax relief, but there are a lot 0:18:56.200 --> 0:18:59.679 of barriers to that based on you know, this ongoing 0:19:00.200 --> 0:19:04.560 sort of dialectic we've had in Washington about deficits and budgets, 0:19:04.560 --> 0:19:07.800 and Republicans made such a big deal obviously, and it 0:19:07.880 --> 0:19:10.160 helped them to retake the House in in two thousand 0:19:10.240 --> 0:19:13.040 ten and the cent in you know, with the Tea 0:19:13.080 --> 0:19:15.600 Party movement. So you know, there was a lot of 0:19:15.600 --> 0:19:19.879 pressure on President Obama to put uh, you know, um 0:19:20.960 --> 0:19:24.800 sort of provisions in place to guard against deficits, and 0:19:24.840 --> 0:19:27.640 so he signed a bill in two thousand and ten 0:19:28.320 --> 0:19:32.080 that really guards against what we call statutory pago. It 0:19:32.359 --> 0:19:36.320 actually will force a sequester on things like Medicare if 0:19:36.359 --> 0:19:39.240 you add to deficits within a five or a ten 0:19:39.320 --> 0:19:43.480 year window. It's something that's really geeky, almost totally forgotten 0:19:43.480 --> 0:19:46.159 in Washington. But there as a result of this, the 0:19:46.200 --> 0:19:50.160 reality is, well, you know, all the most analysts talk 0:19:50.240 --> 0:19:54.000 about is adding to deafits outside of a ten year window. 0:19:54.720 --> 0:19:57.840 There is this really sort of unseen, sort of nasty 0:19:57.920 --> 0:20:01.919 embedded problem there that really does take the notion of 0:20:02.000 --> 0:20:05.439 tax relief largely off the table. And if you're not 0:20:05.480 --> 0:20:08.080 talking tax relief, you're talking about having to broaden the 0:20:08.119 --> 0:20:11.639 base and you know, deal with things like eliminating or 0:20:11.720 --> 0:20:15.520 haircutting the state and local tax deduction, making people take 0:20:15.560 --> 0:20:19.040 their I ra A uh four own K contributions on 0:20:19.080 --> 0:20:21.639 an after tax roth the basis, you know, instead of 0:20:21.640 --> 0:20:25.280 a pre tax basis. We call that for authentication. A 0:20:25.320 --> 0:20:27.760 lot of these ideas to raise revenues in order to 0:20:27.800 --> 0:20:31.919 broaden the base and lower rates really are quite roiling 0:20:32.000 --> 0:20:34.560 for a number of major constituencies like the you know, 0:20:34.600 --> 0:20:37.880 the mortgage interest deduction might not be directly at risk, 0:20:38.359 --> 0:20:41.120 but if they double the standard deduction, that could hurt 0:20:41.160 --> 0:20:43.520 the realtors and the builders as well. So we're gonna 0:20:43.680 --> 0:20:45.320 you know, we're gonna go through a really kind of 0:20:45.880 --> 0:20:49.000 very worrisome September October. When we find do get to 0:20:49.040 --> 0:20:51.239 tax reform. It's not going to be all, you know, 0:20:51.320 --> 0:20:57.280 all joys you are. I'm completely depressed. Yeah, maybe, Tom, 0:20:57.359 --> 0:20:59.680 maybe the good news would be, you know, if we 0:20:59.760 --> 0:21:04.600 if really are provoked by Kim Jong un and the Koreans, 0:21:04.640 --> 0:21:06.440 that would unite us and then we'd see the real 0:21:06.480 --> 0:21:10.000