Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene with
Speaker 1: David Gura. Daily we bring you insight from the best
Speaker 1: of economics, finance, investment, and international relations. Find Bloomberg Surveillance
Speaker 1: on Apple Podcasts, SoundCloud, Bloomberg dot Com, and of course,
Speaker 1: on the Bloomberg Taking a few sensitive meetings is Kelster's
Speaker 1: chief investment officer, Mr Christopher Allman. Chris unmiffed on the
Speaker 1: changing of expenses for research on what guys like you
Speaker 1: are going to pay for research? Where are we going
Speaker 1: to be in one year. Yeah, it's gonna be an
Speaker 1: interesting question, Tom, because a lot of people are wondering
Speaker 1: what really is the value of that research. We already
Speaker 1: pay for some independent economic research services. We pay for
Speaker 1: geo political research services because we found that the Street
Speaker 1: doesn't do a good job on that. Um. But I'm
Speaker 1: really gonna be interested. We've been out of soft dollars,
Speaker 1: as it's called in the USA for over about six
Speaker 1: years now, UM and have really limited the use with
Speaker 1: our managers. So I'm not quite sure how the USA
Speaker 1: is going to navigate what happens in Europe. But you know,
Speaker 1: if it's really a value, then you should be willing
Speaker 1: to pay for it. This is incredibly important, folks, And
Speaker 1: if you're not part of global Wall Street, trust me.
Speaker 1: There's all this other stuff going on. The President just
Speaker 1: tweeting about the NFL. We'll get to that in a moment.
Speaker 1: Chris Ellman, you are way out front on where the
Speaker 1: regulators want to go. If the regulators get the wish
Speaker 1: if we see research diminished, does that drive people to
Speaker 1: passive investing? Well, Tom, I don't think that. You know,
Speaker 1: people that rely on Wall Street research are really just
Speaker 1: using it as a guidebook. What I think is going
Speaker 1: to happen in the future, you'll see a bifurcation. The
Speaker 1: real quality research analysts will go to independent services and
Speaker 1: they'll be and they'll be people will be willing to
Speaker 1: pay for that. So they're still gonna be active management
Speaker 1: because a lot of the active managers like to do
Speaker 1: their own work anyway. Um, will it drive more people
Speaker 1: to passive Frankly, I hope so, because the amount of
Speaker 1: four O one K money in the USA alone, it
Speaker 1: needs to be impassive because otherwise active management is not
Speaker 1: beating the cost it charges and therefore there's no value.
Speaker 1: Add Good morning from Milan Chris, do you worry about
Speaker 1: a lot of hedge funds taking big position on the
Speaker 1: markets and therefore the markets almost being distorted by all
Speaker 1: this you know, passive money, and if that changes it
Speaker 1: doesn't you know, is there a correction coming that could
Speaker 1: be quite ugly. Well, good morning for Milan, so good
Speaker 1: to see you again. I don't believe that that the
Speaker 1: passive money is actually distorting the market. I think that
Speaker 1: it's just it's actually creating some stabilization and the numbers
Speaker 1: that we've seen, there's more money following indexes than before.
Speaker 1: But what we're seeing is a market that's actually fairly
Speaker 1: quiet because there's not a lot of people swing trading
Speaker 1: in it. And the hedge funds that have been in
Speaker 1: out of the market. Um, it's really the leveraged etf
Speaker 1: that have an impact. I don't think it's going to
Speaker 1: cause a significant change in trading habits. If we have
Speaker 1: a bear market, it's really going to be signaled due
Speaker 1: to the economy, Um, due to some kind of a recession,
Speaker 1: some kind of a regulatory or a tax law change.
Speaker 1: We'll see if we get this same as tax law,
Speaker 1: they've been so successful so far, I guess I have
Speaker 1: to have hope for the tax change. But you know,
Speaker 1: I don't foresee that this market is really uh in
Speaker 1: the internal dynamics. So the market look okay, it's just
Speaker 1: price to perfection, and it could stay that way for
Speaker 1: considerable period of time. And I don't think hedge fund
Speaker 1: activity is going to trigger that recession. What would trigger
Speaker 1: actually a readjustment of the market is its central bank policy.
Speaker 1: And if yet, it's do we know how the markets
Speaker 1: would function without all of this free cash out there? Well, Francine,
Speaker 1: that's the million gazillion dollar question. I have been asking
Speaker 1: all of our economic services, what is that trigger point?
Speaker 1: Certainly it could be a federal reserve policy action. We've
Speaker 1: seen that before, like in four when the Fed moved
Speaker 1: too quickly too fast, surprises the market, triggers a trade off.
Speaker 1: We've also seen it where there's a change in federal
Speaker 1: policy that causes the economy to stumble. We've also seen
Speaker 1: it where there are international geopolitical events that cause consumers
Speaker 1: to lose their confidence. So it could be any one
Speaker 1: of those, and I don't I can't tell you that
Speaker 1: there's a particular action to look for to gauge and
Speaker 1: the challenges this could go on for a week, but
Speaker 1: it can also go on for another two years. So
Speaker 1: you don't want to be out of this market. But
Speaker 1: I'm I'm very cautious enough not wanting to be overweight
Speaker 1: the market and bet too much. Chris Sellman, thank you
Speaker 1: so much, greatly appreciate your effort from Berlin today use
Speaker 1: Concler's investment officer. We're gonna have an adult conversation now
Speaker 1: about oil and along the way we'll explain the jargon
Speaker 1: as we go. I think it's been something missing in
Speaker 1: the discussion. You can do that when you've got someone
Speaker 1: as smart as Michael mcgloan joining it, with Bloomberg Intelligence,
Speaker 1: with decades of uh learning the humility of trying to
Speaker 1: game where oil is gonna go. I saw Opec Resolve
Speaker 1: open for def Leopard a few years ago. They were
Speaker 1: a great band, and you're talking about the way they
Speaker 1: got the name OPEC Resolve. There used to be Opec
Speaker 1: Resolve when a sterea came out, you know, thirties some
Speaker 1: years ago. Where's the OPEC Resolve today? Well, let's say
Speaker 1: good leading and I've definitely lost my hair trying to
Speaker 1: figure out the oil market. But um, I think the
Speaker 1: key thing from OPEC is the job bonning. They know
Speaker 1: what they have to say to get the market up,
Speaker 1: whether they're doing or not. Still have power to Yeah,
Speaker 1: well they do. I mean they're still producing over one
Speaker 1: third of the world's oil. I mean, not much of
Speaker 1: it's exported to US anymore, but they still that's one third.
Speaker 1: Now that's their power is definitely diminishing, but they still
Speaker 1: and the differences. They all need money, we know that,
Speaker 1: but open I mean Saudi Arabia is a key factor,
Speaker 1: and they know they have to cut back and it'll
Speaker 1: get the old price up, and so far it's working.
Speaker 1: When when you look at the sort of the spread
Speaker 1: here between Brent and w t I, what does that
Speaker 1: tell you at this point? How what happens when it's
Speaker 1: want as it is hurricane distorted typically right now it's
Speaker 1: um it's a bit of a bullish sign because it's distorted,
Speaker 1: distorted by a hurricane. I don't think we you know,
Speaker 1: we have to get US exports back online and they're
Speaker 1: coming fast. Add to that the declining dollar and it's
Speaker 1: just a pretty good bullish situation for US. W t
Speaker 1: I catching up to Brent at the moment. The key
Speaker 1: point is right now. I look at it as a
Speaker 1: percent about twelve percent that Brent's above w T I.
Speaker 1: The last time we were this wide was right at
Speaker 1: the bottom in the underlying market in February two thousand
Speaker 1: and sixteen. So it's it can it can mark peaks
Speaker 1: and trials in the market about here. I'm just thinking
Speaker 1: of looking at it as it's an indication to w
Speaker 1: it's getting a little too cheap. You've you've written a
Speaker 1: lot about this. The role of the dollar plays here.
Speaker 1: Commodities appeared to have been waiting for some dollar backfill.
Speaker 1: It may be commencing explained the role here of of
Speaker 1: the dollar week or strong in oil prices well right now.
Speaker 1: I think initially the quantities were a bit of a
Speaker 1: shock mode. I mean, the dollar is down eight percent
Speaker 1: in the year, and almost all industries you look at,
Speaker 1: which is one of the worst years in in forty
Speaker 1: and it's overdue for a bit of a back and field.
Speaker 1: We know that. But every day that goes by that
Speaker 1: it's just kind of backing up a little. But the
Speaker 1: market's getting it. The dollar has likely peaked. So if
Speaker 1: you look at it simply at the end of the year,
Speaker 1: if the dollars unchanged. It's down eight percent of the year,
Speaker 1: but the commandity market is still basically unchanged, so that's
Speaker 1: got to catch up. And crude oil and I think
Speaker 1: in all commanies are doing it. Goal definitely medals number one. Okay,
Speaker 1: And now we go, folks, to clear the jargon, which
Speaker 1: we take pride in its surveillance. Let's begin with backwardation.
Speaker 1: What is backwardation? One of my favorite terms that the
Speaker 1: key point to remember about backwardation is it's one that
Speaker 1: front futures contract is higher than the backs now November
Speaker 1: is higher than next June exactly. Or I like to
Speaker 1: look at it as one year base. It's a simplistic
Speaker 1: way to look at it is November now versus November
Speaker 1: a year from now. One year is the best way
Speaker 1: to measure cross all commodities because there's no c seasonally.
Speaker 1: So if you look at futures a year from now
Speaker 1: and all the petroleum products, they are four percent lower,
Speaker 1: the current prices are four percent higher. That's the most
Speaker 1: extreme backwardation since it isn't fortunately because of Harvey, well
Speaker 1: not part of it is Generally, backwardation means more demand
Speaker 1: versus supply. It means there's demand. It's a more macro,
Speaker 1: bigger martial in thing, exactly exactly, and it's also the
Speaker 1: key thing to remember. It's kind of a forward looking
Speaker 1: way of looking at the market. Now we get supplying
Speaker 1: demand data. Yeah, that's a backward measure. The curves forward looking.
Speaker 1: It's basically a positive and then critical with backwardation. Is
Speaker 1: it a bet typically that the near term is a
Speaker 1: higher price, or is it a bet that the year
Speaker 1: out price is lower. It's it's asymmetric. It's got to
Speaker 1: be an overweight to one of those, right. It's more
Speaker 1: of an indication that demand is greater now versus supply,
Speaker 1: and it's that much it's taking that carry out of
Speaker 1: the market. So it's just an indication of greater demand now.
Speaker 1: And often sometimes it gets too much extreme it could
Speaker 1: lead the other way now getting I think we're getting
Speaker 1: close to that. Was that good enough to keep off
Speaker 1: from New Jersey happy? I think what he said is
Speaker 1: I want my oil and I want it now. Well,
Speaker 1: this is from the gentleman that drive Rummer to David,
Speaker 1: I insist you ask about contango. Oh my gosh, can
Speaker 1: we do a jargon on jargon alert? Jargon explanation of
Speaker 1: contango and what what it is. Well, contango is the
Speaker 1: opposite as we know. It's when the front price is
Speaker 1: lower for the out prices. That's just normally pricing in
Speaker 1: the carrol that's normal. That's normal. And you think of
Speaker 1: credile's expensive to store. That's kind of faced in the
Speaker 1: it's thing and you can't store it on your finger
Speaker 1: like you can't gold. I mean, it's faltil, it's it's dangerous.
Speaker 1: So it's got to be in the price. When you
Speaker 1: take that out in backgardation, that's the sign of demand.
Speaker 1: So you look at a year ago, it was six
Speaker 1: percent in contango all and that was a sign that
Speaker 1: we're pretty well supplied. Now it's the opposite. Demand is great.
Speaker 1: But the key idea here is contango is normal and
Speaker 1: the backwardation now is the odd thing. Final question, can
Speaker 1: nontangibles like treasury futures, etcetera. Can they do these two things.
Speaker 1: Treasuries in the futures curve are completely priced off the
Speaker 1: forward short term interest rates, so they do. But that's
Speaker 1: not an indication of supply demand. It's like gold, it's
Speaker 1: just the exact cost of that character. If we exhausted
Speaker 1: this Taylor Riggs is taking notes on this level three
Speaker 1: did we of it? I think we just killed that. Well,
Speaker 1: we could move on No. One worldwide. Yes, Michael mcgloane
Speaker 1: has done a better discussion about gartment is down in
Speaker 1: Virginia in tears over this right now. One of my
Speaker 1: big herosscartment is in tears over that discussion of backward backwards,
Speaker 1: backwardation and contango. David, good morning to Escarpment. And let
Speaker 1: me ask you about other commodities. We talked about the
Speaker 1: effect of the hurricane on on the oil market, What
Speaker 1: about other commodities and otherways concerned around Harvey around irma
Speaker 1: about cotton in particular in the South. Have we seen
Speaker 1: other commodities take a hit as a result of those storms. Well,
Speaker 1: the number one was cotton, lumber party in there and
Speaker 1: orange juice. The key thing of all those threet commodities,
Speaker 1: cotton is the only one that's worthy of being a
Speaker 1: bloomer commodity list because it's the only one has decent
Speaker 1: enough trading, enough trading voluments, so much significant. It's still
Speaker 1: one of our major exports in his country. But has
Speaker 1: come back. Cotton has just well still well supplied despite
Speaker 1: the fact and get distorted by the hurricanes. In the
Speaker 1: big picture, it's more um. This distortion in in creude
Speaker 1: oil I think helps spark this rally because it took it,
Speaker 1: flushed out some of those weak longs and then boom
Speaker 1: now goes right back to where it should be going.
Speaker 1: How much better are we at forecast? And we talked
Speaker 1: about weather in the role that it can have on
Speaker 1: commodities here in the US and around the world. Uh,
Speaker 1: do we see a more nimble commodities? Uh, commodities market
Speaker 1: than we have in the past. Well, the first thing
Speaker 1: I think of the weather is the grain market, the
Speaker 1: US grain market, and this global warming situation was supposed
Speaker 1: to hurt US grains of play, it's done the opposite.
Speaker 1: Climate change has added a massive amount of Yes, it's
Speaker 1: heated up the in temperature lit but it's added moisture
Speaker 1: to the grain belt. For instance, look at this year.
Speaker 1: August was one of the coolest August in a hundred years,
Speaker 1: but it wasn't And so it's just been added the
Speaker 1: volatility in moisture. So we've had five years of bumper crops.
Speaker 1: The questions at some point that's got to end and
Speaker 1: the grain market is an area I see very much brewing.
Speaker 1: It just needs a little bit of basically needs a
Speaker 1: dry August, and we had the opposite last this August.
Speaker 1: That's close here. By talking about gold, I know you're
Speaker 1: you're watching gold here as we approached the end of
Speaker 1: the month. What are you looking at in particularly what
Speaker 1: will the close of gold here at the end of
Speaker 1: September tell you about the about the commodity key pivots.
Speaker 1: Bottom line with gold is it's a much better founded
Speaker 1: market than it was a year ago. It failed right
Speaker 1: after September meeting. It declined ten percent this year. It's
Speaker 1: the number one factor behind it declining dollar and if
Speaker 1: the do unless the dollar really reversus, gold has hasn't
Speaker 1: been to it. It was a September being Now gold
Speaker 1: failed at the February four meet. Well, look at golden
Speaker 1: this tightening cycle, gold is actually outperform the SMP five
Speaker 1: and people don't really get that yet. And during the
Speaker 1: entire tyking cycle it's about about spy. We make jokes
Speaker 1: about it, folks. But what you just heard there was
Speaker 1: the clearest exposition I've ever heard of degradation in Contango.
Speaker 1: That was people seriously people flunk exams on this stuff.
Speaker 1: What a public service. Michaelmgloan giving his perspective here from
Speaker 1: Bloomberg Intelligence on some of the pro talk and discussion
Speaker 1: that you hear in the commodity markets at Bloomberg that
Speaker 1: oftentime in the media gets thrown around like David, that
Speaker 1: was great. Absolutely, I'm not I go I can. I
Speaker 1: can fake it like anything. Mcloan is a real deal,
Speaker 1: So that really works. Terrific. Thank you very much, the
Speaker 1: commity strategistic to Bloomberg Intelligence here on Bloomberg eleven three
Speaker 1: studios in New York. For a long time, he represented
Speaker 1: Maryland's eighth Congressional district and moved on to the Senate
Speaker 1: when Barbara mcculsky retired. He's the junior Senator from Maryland.
Speaker 1: Chris van Holland joins us now on our phone lines,
Speaker 1: and there's a lot to talk about this morning, from
Speaker 1: healthcare to tax reform and the deficit. Let's start with healthcare,
Speaker 1: if we could. Senator. We heard from Senator Susan Collins
Speaker 1: yesterday she does not intend to support the bill known
Speaker 1: as the Graham Cassidy Bill, a a revision to uh
Speaker 1: the Affordable Care Act I wonder what kind of conversations
Speaker 1: you've had with Larry Hogan, the governor of your state
Speaker 1: of Maryland, about healthcare and about this bill in particular. Well,
Speaker 1: Larry hold and the governor of Maryland has come out
Speaker 1: against this bill. It would be very harmful to Maryland,
Speaker 1: as it would to most states around the country, and
Speaker 1: in fact, every state would be badly heard in the
Speaker 1: in the out years when medicaid would face an absolute
Speaker 1: cliff beyond a decade from now and between now and then,
Speaker 1: it does eliminate the guarantee for protections against things like
Speaker 1: pre existing conditions and eliminates the guarantee of essential benefits.
Speaker 1: So uh, that is why you've seen every patient protection
Speaker 1: group in the country come out against it, all the nurses, doctors, hospitals.
Speaker 1: So I'm I'm very much hoping that this is defeated
Speaker 1: once and for all and we can get back to
Speaker 1: the bipartisan discussions about how we can improve the Affordable
Speaker 1: Care Act in the healthcare system. Yes, I'm curious about
Speaker 1: the status of those bipartisan discussions. I know that Lamar
Speaker 1: Alexander has been working on a bipartisan bill with your
Speaker 1: colleague from from Washington state. Uh, And I'm curious just
Speaker 1: to what it looks like on Capitol Hill when a
Speaker 1: piece of legislation like Graham Cassidy is being worked on
Speaker 1: and worked through. Is the door open for Democrats to
Speaker 1: join the discussion or is this something that's really happening
Speaker 1: on a parallel track, a different track from everything else. Well,
Speaker 1: once the Graham Cassity initiative really started, as the Republicans
Speaker 1: in the Senate dropped the bipartisan negotiations, they essentially ended.
Speaker 1: At that point, you had a situation where the Trump
Speaker 1: administration and the Speaker of the House Paul Ryan and
Speaker 1: then Republican Leader Mitch McConnell decided to go back to
Speaker 1: the effort to blow up the Affordable Care Act, and
Speaker 1: at that time those bipartisan talks ended, Which was why
Speaker 1: I'm hopeful that if we're able to defeat Graham Cassidy,
Speaker 1: that we will resume those negotiations, which I understand from
Speaker 1: both sides were making progress, making progress. What are the
Speaker 1: the areas of commonality? In other words, if you get
Speaker 1: back to the negotiating table with Republicans, what are things
Speaker 1: that you think need to change where you think Democrats
Speaker 1: Republicans can can come together? Is there unanimity? Is their
Speaker 1: agreement here that parts of the Affordable Care Act need
Speaker 1: to be changed? Yes, I think everybody agrees that the
Speaker 1: Affordable Care Act needs changes. So the main things that
Speaker 1: were on the table were making permanent the cost sharing
Speaker 1: provisions so that there would be some certainty in the
Speaker 1: marketplace that they would be there. The lack of certainty
Speaker 1: has created some wild fluctuations with respect to premium offerings.
Speaker 1: Even as we had into this fall uh, there was effort.
Speaker 1: There was an effort at reinsurance provisions so that there
Speaker 1: would be some relief for the very high cost patients
Speaker 1: that really drive many of the costs that are face.
Speaker 1: And then there was a discussion about more flexibility in
Speaker 1: the Medicaid waiver provisions. States already have a lot of flexibility,
Speaker 1: but there had been complaints about the amount of time
Speaker 1: that they get, how amount of time it takes for
Speaker 1: them to have their proposals reviewed and implemented. So that
Speaker 1: was a package coming together Senate out whether or not
Speaker 1: that would pass in the House is a whole different question. Senator,
Speaker 1: you have leapt into the leadership of the Democratic Party
Speaker 1: in the Senate. It's a hugely dynamic time. And if
Speaker 1: we could turn over to the mundane politics of the
Speaker 1: moment you're managing for the two thousand and eighteen election
Speaker 1: with the d s CC trying to get it done
Speaker 1: against some difficult math. Are you impatient that you need
Speaker 1: to see a new Democratic party now or can it
Speaker 1: wait till left the midterm elections. Well, I'm not sure
Speaker 1: quite what you mean by a new Democratic Party. I mean,
Speaker 1: in this cycle, even a few months ago, the Democrats
Speaker 1: put forward a lot of ideas with respect to jobs
Speaker 1: in the ecount. To me, it's understandable that that hasn't
Speaker 1: gotten a whole lot of attention because the focus has
Speaker 1: been on what's going on in the Congress right now,
Speaker 1: which is controlled, of course by Republicans in both houses,
Speaker 1: and so I think for the mid terms you're gonna
Speaker 1: see primarily a referendum on the Trump administration and the
Speaker 1: conduct of the majority in the House and Senate. That's
Speaker 1: been the traditional pattern of mid terms. But at the
Speaker 1: same time, we will have our senators are incumbent senators
Speaker 1: in every one of their race is talking about what's
Speaker 1: best for their state, and of course our challenges will
Speaker 1: be doing the same thing. You are in the crosshairs
Speaker 1: of this debate. You're not sitting on the couch in
Speaker 1: the Oval office, but you're in the cross hears of
Speaker 1: this debate. Do you desire in terms of a new
Speaker 1: Democratic Party the same old, same old, and let's call
Speaker 1: it a progressive party of the two coasts, or does
Speaker 1: it have to be a Democratic party that that pays
Speaker 1: homage to Michigan, to Wisconsin, into other areas rural less,
Speaker 1: sanctuary city areas well. However you define the Democratic Party,
Speaker 1: we absolutely have to do a better job of connecting
Speaker 1: with voters in every part of the country. It's very
Speaker 1: clear from the last presidential election that many voters who
Speaker 1: had supported Democrats in the past, who had voted for
Speaker 1: Barack Obama, decided to vote for Donald Trump because uh,
Speaker 1: he somehow persuaded them that he had their best economic
Speaker 1: interests in mind. And so, uh, the Democrats have been
Speaker 1: very clear since the end of the election that we
Speaker 1: need to refocus our efforts on what the Democratic Party
Speaker 1: has always stood for, which is the chance for everybody
Speaker 1: uh to have a good, pain decent job, in a
Speaker 1: in a good future. So to answer your question, yes,
Speaker 1: we need to do a better job of connecting with voters,
Speaker 1: and a lot of the Senate races that we've got
Speaker 1: up this time are in the is you've talked about.
Speaker 1: And we have incoming senators who have been very successful
Speaker 1: at making it clear that they're looking out for the
Speaker 1: best interests of their states. A few weeks back, I
Speaker 1: imagine a copy of the Washington Post landed with the
Speaker 1: thud outside your office and the Heart State Office Building
Speaker 1: and many others on Capitol Hill. John McCain, your colleague
Speaker 1: from Arizona, writing about comedy on Capitol Hill, about by partisanship,
Speaker 1: about regular order, And I wonder how you processed what
Speaker 1: he wrote in that op ed piece, and how you
Speaker 1: process what he said in his statement about why he
Speaker 1: doesn't intend to to to vote for Graham. Casting. Yes,
Speaker 1: it has to do with some aspects of the bill,
Speaker 1: but it also has to do with the way things
Speaker 1: are proceeding on Capitol Hill right now. There's there's his
Speaker 1: encouragement to get back to regular order. What's it gonna
Speaker 1: take to get there? What's it gonna take to get
Speaker 1: back to by partisanship and the traditions of the U. S. Senate. Well,
Speaker 1: I applaud Senator McCain for calling out the Senate to
Speaker 1: get back to the regular order. You mentioned that I've
Speaker 1: been in the House and now I'm in the Senate
Speaker 1: my first term, and you know, one of the one
Speaker 1: of the whole lawks of the Senate in the past
Speaker 1: has been the idea that people can work together to
Speaker 1: get things done across party lines. In fact, the rules
Speaker 1: are structured to encourage that kind of compromise. So I
Speaker 1: really hope we're able to do it. Uh. The healthcare
Speaker 1: debate has been very polarizing, as we've seen, which is
Speaker 1: why I'm hopeful that if we can defeat this Graham
Speaker 1: Cassidy proposal, that we can get back to those Alexander H.
Speaker 1: Murray talks that you reference. I hope we can do
Speaker 1: it in other areas. I always thought modernizing our infrastructure
Speaker 1: would be an area where people could come together. You know,
Speaker 1: that shouldn't be a democratic or a publican or any
Speaker 1: other issue. Uh, And so that would be in a
Speaker 1: fruitful area. I think for discussion. Tax reform is an
Speaker 1: area where it's possible to have bipartisan cooperation because I
Speaker 1: think there's general agreement that you know, we've got a
Speaker 1: lot of junk in the tax code and it can
Speaker 1: be simplified. How you do that, of course, is a
Speaker 1: whole another debate, and I guess that's when we're going
Speaker 1: to have, so I hope we can have it here.
Speaker 1: Thank you very much for joining us this morning. Don't
Speaker 1: be a stranger. Would love to have you back against.
Speaker 1: We talked a bit about tax reform, if you're so inclinent.
Speaker 1: Senator Chris van Holland, the junior Senator from Maryland, joining us.
Speaker 1: David right here with the Tom Keene Limberg eleven three
Speaker 1: studios in the yourk Librick surveillance on Limberg Radio, continuing
Speaker 1: to talk about a number of big stories days. We
Speaker 1: look at the Janet Yellen speech at twelve forty five
Speaker 1: Wall Street Time speak at the NAB conference in Cleveland.
Speaker 1: Be carrying that for you live here on Bloomberg Radio.
Speaker 1: Presidential press conference this afternoon as well, and focusing also
Speaker 1: on what's happening legislatively on Capitol Hill. Conversation about healthcare
Speaker 1: reform continues, so does the conversation about a tax reforum
Speaker 1: as well. And in just about we're gonna be joined
Speaker 1: by Kathleen Sebelia. She's the former U S Secretary of
Speaker 1: Health and Human Services, She'll be on our phone line
Speaker 1: forgiving in our studio on Bloomberg nine one one studio
Speaker 1: in Washington, d C. Secretaries to beilias. Let me ask you,
Speaker 1: first of all here just where we go from here?
Speaker 1: Indications seemed to be that the Republicans do not have
Speaker 1: the support they need to get this particular piece of legislation,
Speaker 1: Graham Cassidy through. Where do we go from here? There's
Speaker 1: talk of bipartisanship. We heard it from Senator at Van
Speaker 1: Hollen a few moments ago here on the show. What
Speaker 1: is what is a bipartisan approach to healthcare going forward?
Speaker 1: Look like, well, I think if the Graham Cassidy bill
Speaker 1: is either pulled from the floor or fails to get
Speaker 1: the majority in the Senate, it's really important to act
Speaker 1: quickly on some kind of bipartisan solution. Because eight we're
Speaker 1: about six weeks away from open enrollment under the existing law,
Speaker 1: which means that insurers have to know that the law
Speaker 1: will be followed, that actually the administration intends to enforce
Speaker 1: the I R S penalty, that they will indeed pay
Speaker 1: the um cost sharing subsidies to insurance companies as the
Speaker 1: law outlines so insurance companies can participate in the marketplace,
Speaker 1: and then the administration hopefully will change course and actually
Speaker 1: inform people that open enrollment is approaching, have people available
Speaker 1: to help on the ground um instead of the really
Speaker 1: continuous sabotage that's underway. I think Chairman Alexander and Senator
Speaker 1: Murray are working hard. They've had hearings where governors have
Speaker 1: come in, insurance commissioners have come in, others to talk
Speaker 1: about three or four steps that need to be done
Speaker 1: very quickly to stabilize the existing market and make sure
Speaker 1: that the people who buy marketplace coverage in the individual
Speaker 1: market have choices going forward. Sectariy belies. I look at
Speaker 1: the commentary surrounding this particular piece of legislation. There are
Speaker 1: a lot of people saying Republicans talked a lot about
Speaker 1: repealing the Affordable Care Act, but never had a solution
Speaker 1: to to put in place. As you look back on
Speaker 1: these last few years, a few months, few years, has
Speaker 1: there been anything proposed by the Republicans you had a
Speaker 1: chance of making it through here? And when we look
Speaker 1: ahead to buy partisan solutions, what are the things they've
Speaker 1: proposed that you think have legs that need to happen
Speaker 1: that when it comes to healthcare in this country, well,
Speaker 1: both the original House and Senate bills had some kind
Speaker 1: of stabilization fund that would be applied at the state level,
Speaker 1: particularly in states where um there is not enough coverage
Speaker 1: and participation by companies. I think that's a very good idea.
Speaker 1: The original law had risk sharing pools, had an ability
Speaker 1: to balance risk a state by state UM that was
Speaker 1: not funded intentionally by Congress. So a stabilization fund uh
Speaker 1: administered at the state level by insurance commissioners would I
Speaker 1: think make the market not only more secure, but also
Speaker 1: hopefully prompt competition. I'm a I'm a market believer that
Speaker 1: more competition actually is the best rate UM risk ricter,
Speaker 1: and what we need to do is make sure that
Speaker 1: people have choices of a couple of different companies. So
Speaker 1: that's a that is a very good idea. I think
Speaker 1: just telling the insurance companies what the rules are. This again,
Speaker 1: is a private sector plan run by insurance companies in
Speaker 1: each state. The products licensed or not only selling marketplace
Speaker 1: products for those who qualify for Obamacare subsidies, but they
Speaker 1: also sell insurance products to farm families and mom and
Speaker 1: pop businesses and um families who are buying their own coverage.
Speaker 1: It's really important that that market doesn't blow up, and
Speaker 1: that's really at risk right now. So what are the
Speaker 1: rules insurance companies will then sell products in those states?
Speaker 1: And the short time we got left with you, and
Speaker 1: we'd love to have you come on and spend more
Speaker 1: time with us. We learn in civics that Kansas is
Speaker 1: worth studying. You lived Kansas, your father in law, I believe,
Speaker 1: was first district Congress. There's all that crazy cibilious Robert's
Speaker 1: relationship over the years. What's the state of Kansas right now?
Speaker 1: To borrow from an acclaimed book, I mean, after all
Speaker 1: the tax work, in the turmoil of all Republicans Kansas
Speaker 1: your Democrat, what's what's the state of your Kansas? Governor? Well,
Speaker 1: I think it's important that people actually take a really
Speaker 1: hard look at Kansas. So Senator brown Back came back,
Speaker 1: ran for governor, was successfully elected, and then put in
Speaker 1: place a tax plan that I think will look eerily
Speaker 1: like what's being proposed at the federal level. It it
Speaker 1: sounds like all the harmarks of what the Trump tax
Speaker 1: plan may include. It has been a total economic disaster
Speaker 1: can you print money in Lawrenceville? I mean you have
Speaker 1: a printing press there. We do not have a printing press.
Speaker 1: We have to work on a balanced budget, and the
Speaker 1: tax framework has been such a disaster that a Republican
Speaker 1: legislature finally got rid of the plan and overrode the
Speaker 1: governor's veto because the state is in economic turmoil. So
Speaker 1: we need to pay attention to that. We need to
Speaker 1: pay attention to you know what what happens when a
Speaker 1: Democrat gets elected in a Republican state and actually can
Speaker 1: get some things done. So we do have a good
Speaker 1: bye pers in history. Here's our governor. Please promise if
Speaker 1: you'll come back to a Washington studios, Mr Gura will
Speaker 1: spend an hour review or more. There's that much to
Speaker 1: talk about about Kansas as well, Kathleen sibilious of course
Speaker 1: on our politics. Stay with this coast to coast and
Speaker 1: in Kansas. This is Bloomberg plecture to bring in now
Speaker 1: somebody who knows the history of principles of American philanthy
Speaker 1: better than anybody else. That's Joe Fleischman, Professor of Law
Speaker 1: and Public Policy a Duke University, the author of a
Speaker 1: new book putting wealth to work philanthropy for today, we're
Speaker 1: investing for tomorrow. It's great to have you with us
Speaker 1: here in New York. I could wander a few blocks
Speaker 1: south of here at forty two Street and look at
Speaker 1: that Kevin Roach building, the Ford Foundation constructed uh full
Speaker 1: of people working hard on any number of issues, but
Speaker 1: also a monument to a certain kind of foundation. And
Speaker 1: central to your book, Joel, is attention in philanthropy today.
Speaker 1: Do you build a monument like that, an institution like that,
Speaker 1: or do you in your lifetime decide to spend off
Speaker 1: the fortune that that you've made. How do we get
Speaker 1: to the point where we're at this turning point where
Speaker 1: where where those who have been blessed with a lot
Speaker 1: of money have to make that decision. I think we're
Speaker 1: at that port largely because a lot of people have
Speaker 1: made a lot of money when they were young, and
Speaker 1: therefore they would like to translate into a public impact
Speaker 1: the same kind of impact they had in building their companies.
Speaker 1: I think that's the reason where we're where we are
Speaker 1: at this point. You use the word impact, and there
Speaker 1: is a trend that I can pick up in philanthropy
Speaker 1: to day to measure impact you look at a foundation
Speaker 1: like the Gates Foundation, very data dependent foundations want to
Speaker 1: see that the money that they're putting towards something is
Speaker 1: being used as best as it can be used. Is
Speaker 1: that necessarily a good thing? Can we measure everything with metrics?
Speaker 1: The answer is you can't measure everything with metrics, and
Speaker 1: most of the good foundation people know that. On the
Speaker 1: other hand, you should measure what you can measure. Uh,
Speaker 1: And those things which lend themselves to metric metrical measurement
Speaker 1: to do it. Qualitative measurements are also very good. So
Speaker 1: the answer is it's it's it's fine to do both. Uh.
Speaker 1: What you don't want to do is to say we're
Speaker 1: not going to do anything because it can't be measured,
Speaker 1: because some of the most interesting things have in fact
Speaker 1: been done that can't be measured. A small time foundation
Speaker 1: charity player, when d Rubinstein of Carlisle Group says, shut
Speaker 1: up and read this book. What I love about your effort, Professor,
Speaker 1: putting Wealth to work is it's hugely accessible. We have
Speaker 1: foundation itis today and you beautifully write about the reality
Speaker 1: of trusty fatigue. What is trusty fatigue, which is a
Speaker 1: clear and present danger? Yes, what is trusting fatigue is
Speaker 1: that foundations and and many many smaller foundations have the
Speaker 1: problem of their trustees basically have gotten tired of what
Speaker 1: they're doing, basically because either there's not enough money to
Speaker 1: justify what they're doing, or or it is simply a
Speaker 1: fact that they've got they've they've gotten bored, or they
Speaker 1: maybe family. Okay, so John Tucker here has a twenty
Speaker 1: three million dollar foundation, small potatoes. He sets it up,
Speaker 1: and his grandchildren are going to get fatigue over it. Yes,
Speaker 1: where's the money go? The money has to go to
Speaker 1: a charity, simple as that. As simple as that. Either
Speaker 1: under the terms of an internal Revenue Act, once you
Speaker 1: set up the foundation, anything that happens that money has
Speaker 1: to be charitably certified. Basically, we've seen another trench here
Speaker 1: that is record I'm not bored. A lot of these
Speaker 1: set up is five O, one C three's. We're seeing
Speaker 1: a movement into other configurations. Has the notion of a
Speaker 1: philanthropy what it is under the tax laws and just
Speaker 1: in general change here we're seeing lcs. For instance, when
Speaker 1: it comes to to philanthropic enterprises, right, the answer is yes,
Speaker 1: and know I mean the major major events in the
Speaker 1: in the sector, such as the donor advised funds is
Speaker 1: a very good example. The assets held by all the
Speaker 1: private foundations is somewhere around seven hundred million dollar billion dollars. UH.
Speaker 1: The the the amount of money in the donor advised
Speaker 1: funds accumulatively at the last time the figures were reported
Speaker 1: was seventy billion dollars. So you've got ten percent of
Speaker 1: what the foundations hold in donor advised funds. That's all
Speaker 1: happened since UH And the consequence is many people use,
Speaker 1: even foundations used donor advised funds they in order to
Speaker 1: facilitate if they can't get the money out of the
Speaker 1: door as quickly as they'd like to, they've got the
Speaker 1: donor advised funds where they can simply write a check.
Speaker 1: I started off by asking you about the Ford Foundation
Speaker 1: mentioning the building down street, and let me use it
Speaker 1: here lastly, just to ask you about the moment that
Speaker 1: we're at right now. Under Darren Walker's leadership, we've seen
Speaker 1: a rethinking of what that foundation in particular does. Are
Speaker 1: we seeing that more broadly? UH introspection in the philanthropic
Speaker 1: sector about what philanthropies can do and how best they
Speaker 1: can do it absolutely. The many foundations are doing it.
Speaker 1: They're not moving with great alacrity, I should tell you. Uh.
Speaker 1: For example, impact investing foundations have not done anywhere near
Speaker 1: They have not moved as rapidly, for example, as the
Speaker 1: for profit businesses. JP Morgan has moved a lot faster
Speaker 1: in impact investment than any of the foundations have. But
Speaker 1: some of them are coming along. The Ford Foundations said
Speaker 1: now it is aiming towards spending putting ten percent of
Speaker 1: its assets, and that the Krasky Foundations decided to put
Speaker 1: ten percent of its assets and the impact investiting. But
Speaker 1: but it's it's a very slow process. I like how
Speaker 1: you quote the attorney and professor Leo Tolstoy. All happy
Speaker 1: families are alike. Each unhappy family is unhappy in its
Speaker 1: own way. And you discussed that and solve that in
Speaker 1: this book, right, And I try to in any event,
Speaker 1: there's not very The one thing I can say I
Speaker 1: do say in the book is that the donors who
Speaker 1: want to solve their families uh interpersonal problems by putting
Speaker 1: their getting their kids involved in philanthropy barking up on
Speaker 1: the wrong trail. It has never happened. Joe Flashman, Thank
Speaker 1: you very much. Joel Fleishman is gonna join me on
Speaker 1: television as well. Joel Flashman, Professor of Public Policy and
Speaker 1: Law at Duke University and the author of the new
Speaker 1: book Putting Wealth to Work Philanthropy. For today, We're investing
Speaker 1: for tomorrow. This is Bloomberg Surveillance on Bloomberg Radio David
Speaker 1: Gura and Tom Keene in New York. Thanks for listening
Speaker 1: to the Bloomberg Surveillance podcast. Subscribe and listen to interviews
Speaker 1: on Apple Podcasts, SoundCloud, or whichever podcast platform you prefer.
Speaker 1: I'm on Twitter at Tom Keene David Gura. Is that
Speaker 1: David Gura before the podcast? You can always catch us worldwide.
Speaker 1: I'm Bloomberg Radio.