Audible Gasps in Chamber, Republicans Dazed After Obamacare Vote: Dennis

a vote on the skinny repeal of Obamacare. It failed with a dramatic thilmbs down from John McCain, who came back up from Arizona despite his new diagnosis of brain cancer to vote down and crush this bill. Here to discuss Zach trac Er, healthcare reporter for Bloomberg News in our Bloomberg eleven three oh studio, as well as Stephen Dennis Center order for Bloomberg News. Who is on Capitol Hill and who is at the proceedings last night or

I should I say today? Early this morning? I'm amazed you're still up and uh and conscious at this point, Steve, can you give us a sense of what it was like on the floor in the moments leading up to the momentous John McCain thumbs down, as well as just afterwards as everyone tried to digest what this failure meant. Yeah,

so it was a really insane night. Um talked to John McCain several times leading up to him walking into the chamber, and he had told us and other reporters about two hours earlier that he was prepared to vote no if he didn't get at these assurances from the House and he wasn't necessarily satisfied with Paul Ryan's answers, and he wanted to talk to his governor. And then I got him right before he went on the floor,

and he said, you know, I'll let you know. He told another reporter of the show was about to go on or something or watch the show, and so we sprinted upstairs into the chamber to see what he was gonna do. And the first thing he did is walked up to Chuck Schumer. Chuck Schumer something, had a big smile on his face and put his arm around McCain.

And then McCain goes over to John Coryn, the Republican whip, who suddenly is a very agitated, upset turns around because the thumbs down to another senator, and I spurnt it out of the chamber because it looked like this thing was going to go down and McCain was going to vote no. And over the course of the next hour there was an, you know, just a massive effort to try to get John McCain or Lisa mccowsky to change

their minds. And Mike Pence came over and talked to him for about half an hour, talked to him off the floor. It looks like there may have been a phone call with the president. Other senators one after another

came and tried to talk McCain out of it. In the meantime, Lisa mccowski and Susan Collins are sort of on each of his shoulders and sort of protecting him, and McCain ultimately stood fast and Lisa mccowski stood fast, and Collins voted no for first Denmarkowski and uh McCain's sort of for effect came in and was the third no vote um and there was audible guests inside the chamber, especially from the Democratic side, and you know, just a crazy scene that sort of a madhouse in the in

the Capital afterwards with a Republican the days mad uncertain what to do, and Democrats also because they certainly weren't expecting this. Zach Tracer, I wonder if you could come in and tell us what does this mean now for Americans who have been using insurance that is available through the Affordable Care Act, well, Obamacare, it survived another sort of near death experience. UM. It remains to be seen

what this means. You know, for the next few years, we're still going to be relying on, you know, a Trump administration that's declared this law dead. That's you know, Donald Trump tweeting let it fail, um, you know. So, so we're gonna be relying on those folks too, you know, run open enrollment starts in November to make sure this market works going into UM. So you know, it's still a lot of open questions about what the administration will do. UM. But for the time being, you know, this this is

the law of the land. Uh, Steve, I want to get your sense on what's next for the Republicans that already have been some calls for Senate Majority Leader McConnell to step down or give over the proceedings to somebody else. With respect to healthcare. But this is a huge blow politically because this is the one thing that they wanted to get done. Um, certainly in the first year. Uh, you know, initially, what's the next up there? Yeah, I think that there's really a choice now for the president.

You know a Zach was saying, you know, the president has to make a choice now. Does he want to maybe pivot? You know, there's all these talks. Maybe at some point Trump will pivot. Uh, he can do what he did last night and just talk about letting the law the law of al maybe trying to sabotage it and try to bring the Democrats to the table with threats. I don't think that's gonna work. Um, there are things

you can do with Democrats. Mr McConnell didn't sound particularly interested in and uh, you know, he said that he didn't think there was gonna be a lot of interests among Republicans and bailing out insurance companies, which is sort of might be code for just giving more money to the system for things like cost sharing subsidies. But Zach, I want to bring you in here. So if Congress

does nothing, what would happen to Obamacare and its current form. Well, the big question that we're watching UM, as Steve pointed out, is what happens with these cost sharing subsidies. These need to be paid each month. There's a big legal dispute going on over whether there whether it's legal for them to be paid UM. And essentially this legal dispute gives the Trump administration UM some ability to decide to stop paying them at any time. So there's this big, big

threat hanging over the Affordable Care Act. And if these were pulled UM, insurers have said either that they would pull out of markets, UM, they would raise premium something like. I mean this is you know, sort of the nuclear option that they do have going forward. Stephen, maybe you could shed a little light on this. This seems to be this desire for in fighting, right there's in fighting with the Republicans in Congress, there's infighting inside the White House,

there's infighting when it comes to this healthcare initiative. What is cause is that you've been covering this? Do you have a sense of what is deeply responsible for this? Well, there's a lot of different reasons, right, UM for when you lose a bill like this. It's not just one reason. There's there's many different reasons said to have the sort of this kind of catastrophe. I think one of them

has to be the Trump White Houses incomplete chaos. I mean, the there's been basically this complete utter meltdown in the last few days with Scaramucci in his profanity lace tirade to the New Yorker about Ryan's previous This is not what you This is not the sign of a well functioning White House trying to pass its number one legislative priority on the Senate floor. But hang on, but Stephen,

but is it? But is it the characteristic of, let's say, an administration that wants to do away with the old levers of power and to create the very kind of conditions that you're describing because they don't trust the old way of doing business. I guess though, But I mean, you know, there's a math problem here. The math problem is that they have fifty two Republican senators. They don't have sixty, they don't have seventy, they don't have fifty five. They have fifty two, and two of them are Lisa

Murkowski and Susan Collins, who owe nothing to Donald Trump. Uh. Lisa Murkowski gets elected with independence and Democrats in Alaska. She you know, she is based. She doesn't face a reelection until two and John McCain has brain Cancer's John McCain. He can do what wants the you know, the one punishment was rand Paul preventing him from doing his defense

bill today. But you know, I think John McCain ultimately is the one person who could probably uh safely kill this bill and not really have to worry about some some massive repercussions. And if they were to try to do threats against these senators. There was a clumsy threat against Murkowski. I don't see how that does anything but backfire when you only have a margin of two makes sense, you know how to do the math for us. Thanks

very much, Bloomberg. Stephen Dennis, our congressional reporter. Our thanks also to Zach Tracer, our healthcare reporter. We've got much more coming up. This is Bloomberg. We have been talking about the FDS surprise decision and to cut the amount of nicotine and cigarettes to non addictive levels, or that the least is the plan. I want to bring an Anna Edney. She's our healthcare reporter here at Bloomberg News.

And Anna, before we get into the details of this and talk a little bit about the response with shares of Philip Morris and Ultria plummeting. I want to just ask, do you have any idea what precipitated this announcement by the f D A. Well, it's something they have been talking about, um even before the new FDA Commissioner, Scott

Gottlieb got there. Um Mitzadella, who's ahead of the tobacco center there, He's made references um in the past to wanting to focus more on nicotine, to sort of taking a more nicotine centric approach um to how they deal with tobacco products. And so it seems like, you know, with with Gottlieb coming in that then maybe that was something that was able to be um hastened and that um, you know, possibly some of some of his ideas um kind of made this a bigger deal than it would

have been before. And isn't it also a direct sort of an effort on the part of the FDA to encourage what they describe as safer alternatives to cigarettes, such as e cigarettes and vapor products. Definitely, the FDA has been looking into whether there are you know, safer products, so they they have authority through a two thousand nine law to kind of look at UM these reduced risk products is what they call them, and try to maybe

get those UM FDA clearance. And so you know, they haven't quite stood behind anything yet and said hey, this is better for you UM than a cigarette might be. And they haven't really pushed back quite as a policy, but it looks like that could be the way that

they're moving with this decision. They also talked about targeted relief I believe on the timeline for the f d AH looking at the regular regular regulations and the application submissions, right, yeah, that's right, the you know, to to be able to get in their UM these reduced rest products to turn in kind of the information they need to UM to

be able to get on the market. They pushed that back so that UM and tried to ease some of the regulations so that you know, they could support the alternative is basically to smoking, the what they call combustible cigarettes. So anna, if they've been if the FDI, f d A has been talking about this for a while, why was there such a dramatic response in the shares of Philip Morris and Altria I think it was, you know, something that they have hinted up, but no one really

knew exactly how they would implement it. Um as far as the the nicotine um levels goes as reducing those, and we still don't exactly know how they'll implement it. They thinking like this sounds pretty I don't know, sketchy, not sketchy as he likes. I don't know, you know, if this is kosher, but as as far as like, you know, sort of a sketch of a plan. They're planning to look at this and maybe address this. So it's sort of the reason why I sort of have

doubts about the response in the market to this. I think you're right that it is a sketchypho plan. And that's something that that Commissioner Gottlieb has been doing in many different areas. He's saying, here's where I'm going. He's not waiting until everything is fully ready to go. He's kind of giving people direction on different things, whether it's drugs or medical devices, UM, and here on tobacco. As you know, this is where this is where he's looking.

This is what he would like to do. UM what comes out me and you know, that's a that's a totally different question. UM. You know, I think right now we're probably there probably lobbyists, UM, tobacco lobbyists all across Washington gearing up to do a lot of work in the next you know, a few months or year, however long this might take to come up with UM and

talking to lawmakers. You know, there's a there's a good chance that there are some maybe particularly Republicans, who who don't want to interfere with cigarette products and might seek to block this. Well, maybe you could just also talk about the initiatives. I know that Philip Morris, for example, Uh, they're the maker of Marlborough. They have their own smokeless cigarette, right the what is it I i q O S Yeah, yeah, the you can't say it as nicely as Marlborough ken

you right now? Um. They So, you know the notes I've seen this morning coming in from some of the analysts on Wall Street who cover tobacco companies directly saying that that could be a benefit, um, for for Philip Morrison, that they might be able to kind of take the lead in this in this market, given the shift that

FDA is kind of starting to put in place. UM, these the non combustible cigarettes, they are considered more like products that would heat up instead of burn, so they kind of heat slowly at at a much lower rate um. And so you know, those kind of products could be where they're headed, and it looks like they kind of

have the jump on that. I want to thank you very much for being with us a very important topic on EDNY explaining what is going on with the Food and Drug Administration working to cut the amount of nicotine in cigarettes to non addictive levels, the goal preventing thousands of tobacco related deaths a year. It was a surprise move and the shares are certainly reacting to it. Looking at the shares of Altria Group, they are down nine and a half percent. British American tobacco down more than

six and a half percent. Uh, this is a story obviously we will continue to follow. Thank you very much. Don't you think it is I think it's fascinating, But I also don't totally understand the response because everyone, if everyone knows the FDA has been working on something, and then they put out something saying we're working on something, and everyone freaks out. I don't totally get it. Well, now it's on paper and they can all freak out

and they're selling this thought. David Garrity is our just our guest now. He is the chief executive of g v A Research, and he is also a columnist at Investopedia.

And David, you're gonna tell us a little bit about Amazon earnings or lack thereof, right, certainly, Well, no, with regards Amazon, mean, we're looking at a company here that historically, you know, over the twenty years that has been public and obviously the years before then when it was private, has typically focused very very much on gaining market share and has not been shy about spending money in order

to do that. And now while we're in a situation here where revenues are continuing to outpace analyst expectations, the company hasn't necessarily fully made its turn towards a commitment to consistent profit that people were hoping for, in which I think has been instrumental in helping to drive the stock price higher over the last twelve the twenty four months. You know, Shara O. V Day, a Bloomberg Gadfly columnist here, had made a really good point, I thought, which is

why our shareholders surprised by this. Amazon has said, we are going to spend money on new initiatives, we are not going to try to generate even bigger profits. This shouldn't have come as a surprise, so why did it?

I think on the margin, what you have to consider is that as Amazon has grown and gone into more verticals and has essentially captured the market capitalization associated with those prospective competitors, that the pool, if you will, of institutional investors investing in Amazon are no longer strictly speaking, the technology oriented investors that it was in the past. That now people have begun to look upon Amazon as being a proxy or an eligible substitute for investing in

the retail sector or investing in the consumer sector. And I would argue that the expectations associated with those investors and they're investing parameters have obviously favored profits more over time.

And so it's these new marginal investors or investors coming in on the margin who arguably are the ones that Amazon needs to be concerned with, and the ones who are concerned about Amazon's expense growth well, and Amazon plays in so many different fields just as you described, and I keep thinking of the Amazon effort when it comes to your living room, whether it is the Alexa uh speaker that is connected to their vast inventory of stuff

that you might not need, plus also their entertainment offerings with Amazon Prime Video that competes directly with Apple in

many ways. And if you could talk about Apple, because they're going to be releasing their results on Tuesday, certainly well, I mean Amazon waiting in very, very effectively, but you and an Apple arguably seems to have been late in terms of the battle for the living room, if we will, But I would say that you know, in the case of looking at Apple, we do have something to look forward to in the fall, which is the introduction of

the tenure anniversary iPhone um price points. They are seen to be moving north of a thousand dollars, So there may be some questions about affordability from a consumer standpoint, but nevertheless, from an investor's perspective, owning Apple ahead of a product introduction has typically been a good time to

own the stock. And if we wanted to look at sort of evaluation of Apple relative it's to its growth rate, say is compared with Amazon, Apple is trading it far less of a demanding multiple relative to its expected growth rate based upon earnings estimates held by put out by the Street versus those of Amazon, and so as a result of investors wanted to have exposure to tech. You know, from a tactical standpoint, probably not a bad idea to be looking at Apple over Amazon in here, David, I

love the war for the living room. It's sort of could connote a lot of things, but this is perhaps not the one that people think of with you know, marital discord, but even you know, I want to talk a little bit about a point that Liam Dunning of Bloomberg made earlier in the show where he was talking about Exxon and that the issue with the shares falling after the release of their their second quarter earnings really came because their prices were already so elevated their share

price um that anything but perfection was going to be such a disappointment. I mean, as Amazon basically in the same boat, and that going forward, unless they're able to deliver the sky in the moon, you're going to see a continued weakness in their shares. Now, I would say that, you know, given the midpoint guidance for operating UH income for Amazon in the third quarter, that number being you know,

a negative I think one million dollars. So the company arguably saying that they might be in a position just to lose money in the third quarter. UM. Investors typically had looked for Amazon for a big finish to the year, a big fourth quarter, and so I would say that probably Amazon trades flat to down, but find some support, you know, going into maybe the end of August, beginning of September, when investors start setting themselves up for a

run into the year end. And the fact is that Amazon is going to be very well positioned with the recent Amazon Prime Day. Uh, they've sold more Echo Slash Alexa powered devices, UM, you know from that standpoint, and they're moving into more categories. So clearly the share of wallet they'll be gaining, arguably is going to be growing.

And bottom line, we are looking at an economy that probably remains relatively stable going into the second half of the year, both domestically, and we're seeing some strength coming in major markets such as Europe overseas. David, just quickly, do you believe that people will be speaking into their Alexa devices ordering groceries from whole foot Um. We'll have to see if the Trump administration allows that transaction to move forward, but I would certainly expect that, yes, this

is something likely to happen. Well done, all right, Yeah, I mean honestly, I think that this is uh, this is really key. I was reading on the Market's Live blog on Bloomberg how the IT sell off and Amazon's shares has really driven and sell off across emerging markets equities, and how this has had huge ripple effects in a variety of markets. So clearly what happens here has a very very big ramification on many other markets. David Garretty,

thank you so much for joining us. David Garretty as chief executive officer of g v A Research and a columnist and invest Opedia, and he always provides good insight into the world of fang and technology. Coming up, Politics, Policy and Power with Amy Morris and Roz Krasney. Amy, I hear that there's some I don't know stuff going down in Washington these days. We have ten shows in one. We're gonna take twenty pounds of news and put it

in a five pounds show. The Russia sanctions bill could face a presidential veto Russia's reacting to it as well. We're gonna follow all of that. The Affordable Care Act repeal has collapsed. You may have heard Senate Republicans blocked that bill. We're gonna find out where they go from here. Also, we got the second quarter GDP numbers, and it is also Trump's first full economic quarter, so we'll find out a little bit more about how he is doing as well. Well.

A lot to listen to ten shows in one Politics, Policy and Power with Amy Morris and Roz Krasny. They will jam it all in to that hour, and it is an important hour to listen to. I'm Lisa bram Woit's along with pim Fox. This is Bloomberg. I'm looking at the x On mobile, which missed estimates for earnings

basically because cuts failed to offset output declines. To give us a little bit more perspective, I want to bring in Liam Denning Bloomberg Gadfly columnists who focuses on all things energy and Liam, what was the big takeaway for

you from these earnings? Well, I think with with x On specifically, the big problem is that although they still generate a lot of money, Okay, they missed earnings estimates, but they're still you know, made three point four billion dollars, and they are still um for the third quarter in a row, covering their UM, their capex, and their dividends from cash flow from operations. The problem is they're just

they're just trading it too big of a premium. As far as I can hold on, I say, this is actually really important because what do they have as far as cash flow? Three point four billion dollars that was earning earnings, So that that that they're earnings with three point four billion dollars, I mean, this is a tremendous amount. So you're saying that basically all of the valuations right now are so elevated that anything but perfection and exceeding

expectations will be a downer. Yes, and and particularly an xn's case, because Xxon historically has always traded at a premium compared to the likes of Shell, Chevron, VP, whatever, because they do have this reputation for for excellence and a great track record on on delivering projects and that

sort of thing. But I just think that these days, UM, that maybe just a little too backward looking, because this company is challenged on several fronts, and if you look at its free cash flow versus a Shell, which delivered great results yesterday, that the disparity in valuation is quite stark. Well,

the disparity also in the dividends is also dramatic. Well, the disparity in dividends is is actually not too dramatic if you consider that Shell at the moment is having to fund um some of its dividends with script is issuing new shares. But I think the biggest problem is Shell clearly delivered a lot more free cash flow this past quarter, and on a four quarter basis, it's it's

really quite a lot. And if you look out ahead, analysts of forecasting Shell to deliver, you know, perhaps almost double the amount of free cash flow that Xon is set to deliver over the next three years, and your x ON trades at much bigger multiples and a much lower dividend yield than Shell. I guess I was also, you know, I was trying to have you read my mind. I apologize. I apologize because I also lumped in with Shell.

I was thinking of Chevron, which also released results, and I was looking at their dividend and that is significantly greater than than Exxon. And the stocks moving higher today, do you think they're gonna have to sell even more acreage of like in the Permium Basin, in the in the A shale gas region. In terms of what Exon well, yeah, I mean that they're going to look at what Chevron is doing and go, well, maybe that that Xto acquisition,

maybe we need to sell some of the acreage. I don't think so, you see, excellents, problem is really that it made a big bet on Russia. You may remember they signed this this very far reaching agreement. Yeah, the sacle And Islands. This is what Rex Tillers and Secretary of State got a metal well circling is actually running fine. It's more the agreement that they that they signed with Rosneft to to develop Russian shale and Russian Arctic offshore. And this was going to be the growth driver for

Xon into the twenties. The problem is sanctions have largely closed off some of that and and so Excellent is actually pivoting closer into the Permian shale, where it's made a number of acquisitions. The difficulty it has is that the shale business is quite different from Exxon's bread and butter, which is which is big kind of mega projects. Shale is very capital intensive. It's much it's much more about repeating your success on a on a lot of smaller

projects over and over again. Now there's no there's no doubt that Exon can bring some operational excellence to that sort of business, But whether it can achieve the sort of returns on capitol the shareholders have become used to over the past couple of decades, that's that really remains to the same. Thank you very much for being with us. Liam Denning is our Bloomberg gad Fly columnists. He covers energy, oil and all things related to fossil fuel. Just to

be clear, m is not joining us. He is working from home where he can put his feet up and stay in his pajamas. So thank you for getting on the phone with us. But can you tell my resentment it's a Friday, clearly Okay, Well, and enjoy enjoy the lounge. Uh Liam, I'll just tell you that the ex On mobile shares they are right now, they are down to and a quarter percent. Thanks for listening to the Bloomberg pan l podcast. You can subscribe and listen to interviews

at iTunes, SoundCloud, or whatever podcast platform you prefer. I'm Pim Fox. I'm out there on Twitter at pim Fox. I'm out there on Twitter at Lisa Abramo. It's one before the podcast. You can always catch us worldwide on Bloomberg Radio