P&L: How Do We Replace Obamacare With Something That Works?

under President elect Donald Trump. There has been a lot talked about about possibly provisions of Obamacare that could be repealed. But but I want to dig into what we have learned so far. Susan Dvore, she's the CEO of Premiere. It is a company that advises on how to reduce healthcare costs and improve outcomes at hospital systems around the country. Here in the studio with us. Thank you so much

for being with us. Thank you. So what have we actually learned about the concrete proposals that are likely in a Trump administration that could change the outlook for hospitals. Well, we have heard over and over again repeal Obamacare, and while I think that's legislatively pretty easy to do, the question is how do we not go back to what

we had before Obamacare? And how do we actually take waste out of the system, Have consumers involved in their health care pay for healthcare based on the value it's delivering. And so how do we replace Obamacare with something that works? Yes, and before President Trump takes over, we still have a few weeks left of the current Congress and administration. Can we expect anything from this lame duck Congress or is

it just write it off? At this point? There is one really important thing that we Premiere think needs to happen in the lame duck Congress, which is how do you make these healthcare systems interoperable? How do you have your data as a patient, uh, get connected to all the other pieces of data about you? So right decisions are being made. You just talked about big data. Um. The question of interoperability is in a bill could pass, probably will pass, and could be done in the lame

duck Congress that would move us forward uh faster. So basically would force hospital systems to get on a specific grid to It would force vendors, It would force all of these technology vendors to make their systems talk to one another. It's like having an iPhone that that you can't put any apps on today because none of it can be connected. They need to be forced to connect. What's the counter argument? The counter argument that often they

will make is that patient privacy issue. So you have to make sure you can protect the patient information and the price privacy, but allow the patient to have connected information. And if you really want to solve big health care problems like the problem of stroke, the problem of diabetes, you need population based data, so you need to be able to connect the data at a population level as well.

So it's like for a lot of people out there, the big question is we've seen our health insurance premiums go up year after year pretty alarming rates, and you know, you blame whoever you want on that um. President Trump has sort of promised to stop that um. But the question is something has to give in the whole chain there. Where do you expect the pressure to be uh focused in a Trump administration as far as lowering prices? What what sector of healthcare or the insurance industry do you

expect to sort of come under the most scrutiny. Yes, So there's no simple answer here, right, this is like a game of Jenga where you have all these interrelated wooden pieces and if you pull one out at the wrong time, the whole thing collapses. Right. So the question is, well, the question is, how do you have all the participants in healthcare UH participate to to solve this problem. So from the perspective of hospitals and physicians and provider delivery systems,

they are building value based systems. They're saying, pay us based on the clinical and economic value we deliver to consumers. Insurance companies have to take all of this regulatory reporting and all of this administrative paperwork out. Um, the suppliers and device companies have to find a way to help us curb the cost of high pharmaceuticals and medical devices. Well, you know, I'm looking at Tenant Healthcare's stock, which just plunged in the wake of UH Donald Trump's election as

the next US president. I'm wondering what traders are looking at right now that's making them so barish on hospitals. I mean, what are they worried about in the in the new administration? You know, I think what they're missing is they're viewing hospitals as hospitals and they're not viewing hospitals as health care systems, so a lot of hospit battles.

Most of the hospitals across the country have employed physicians, affiliated physicians, nursing home surgery centers, and they're taking care of populations, and they can move patients around into the delivery system to optimize the value and to lower the cost. If you look at a more pure hospital company, people are worried about the external pressure on cost in the hospital setting. If you look at an integrated delivery system where they can optimize how the patient is taken care

of to lower the cost, that's a different thing. And I think that people are are pretty shortsighted in just the view of hospital in other words, just to sort of give some specifics, in other words, having urgy care centers and specific neighborhoods are sort of getting targeting high risk populations and getting them screenings earlier, and having these sort of other programs to to your point that committize costs. Right, So if you look at health care systems in communities,

they're taking care of all these patients. These patients are going to show up in their emergency rooms, show up in their urgent care center, show up at their doctor's offices, and so we have to move to a system where they're paid based on the value across the continuum of care, not go back to a view of the world that you pay in silos. You pay a hospital silo, you pay a nursing home silo, you pay a physician silo. And I think that's what the new replacement to Obamacare

will continue to do. One of the elements of Obamacare that created so much of the backlash was the notion that employers be mandated to provide coverage. Um, do you see that surviving Trump and and sort of what are how would you prioritize the changes we can expect under Trump? Yes, so there are no free lunches. So you can take

away the individual and the employer mandate. But if you take that away, you've got to have a way to incent consumers to have healthcare coverage and to have it continuously, because what you don't want is people staying out of the system and then jumping in when they need healthcare. It's a very high cost way to do it. So I think what the Republicans will do is they will incent consumers by what it cost you if you jump in versus what it costs you if you have continuous coverage.

So I think there are all are alternatives to the individual and employer mandate um that will drive continuous coverage. But we've got to we've got to have a system where people have coverage. Thank you so much. That was

really fascinating. This is definitely one of the most important things to watch going forward, as as the population in the US does get older and as people increasingly depend on the health care system going forward, Susan divorce CEO of Premier, a company that goes into hospitals around the country and hospital systems and all of the outlying businesses that are related in order to make sure that quality is consistent and that costs are minimumized and that it's

made more efficient. For some more direction, I want to bring a Mike Underhill, portfolio manager of the rich Worth Capital Innovations, Global Resources and Infrastructure Fund, to get some sense of this. Mike, is it time to invest in real assets or is it time? Is there going to be sort of a slow waning of that as people

cycle into stocks. Well, it's a great question. When I look at the world we're in today, we continue to see investors posing questions around four themes volatility, uncertainty, complexity, and ambiguity. And you look at volatility, complements and ets other types of structured products. You look at the uncertainty. We've we've just passed the U S election, but we've got other milestones of uncertainty. You've got an OPEC meeting

next week. You've got a bunch of different regulatory and policy shocks that potentially we're going to be experiencing over the next twelve months. The complexity and financial structures and the markets. And then the ambiguity. You've seen it in the bond market and you've seen it with the steepening of the yield. So what we're starting to see both in the equity markets and fixed income markets, you're seeing

a need for more real asset income. And so investors, institutional investors and also individual investors are really focusing on what's going on with the reflationary trade. As I said, we've we've gone past the US elections now where we've

removed some of that uncertainty. We look at some of the fiscal policy things like infrastructure investment, a potential investment package of upwards of one trillion dollars of infrastructure benefits Companies that are in the materials think base metals and steel, but you know gold and oil in particulars. Go back to your question. I look at gold, it's more of a it's a currency plan, and you look at the basement of the US dollar, and you look at the

volatility and uncertainty in the market. Goals a great investment. The other question you had about oil, it's the largest, most liquid commodity in the world, and you look at the least amount of spare capacity the OPEQUE meeting and the positioning going into the OPEC meeting, Oil is trending towards fifty five a barrow, possibly sixty by the end of the year. I'm like, I'm looking at some of

the giant moves we've seen. I'm looking at copper right now up uh rally started before the election, but towards mid October it's up that much. Uh SMP industrial stocks about nine this month. Has the optimism about this stimulus spending gotten a little ahead of itself. I think all that very valid points. I think what you're seeing is a few things. You're seeing a rotation out of defensive names. So thank utilities and reats and and telco type companies.

You know, those equity income place into more cyclicals and so names like you look at Southern Copper and you look at some of the other names like US Steel, beneficiaries of the industrial and manufacturing renaissance that's going to happen. Have they gotten ahead of themselves? I would say they have not. Actually, when you look at what's gone on, a lot of money has come off the sidelines. You've seen short covering and copper, You've seen short covering in steel.

You look at iron ore and things like that. Some of these names are up in the last month. They're going to take a breather. You're gonna see some trades and people do some short term profit taking. If you look at the longer term secular trends, there's a trend towards this not only infrastructure stimulus, but you're going to see more manufacturing and production. So I think the trend line is very bullish, particularly for copper and some of

the base metals. And when you look at what's going on in China, you know there's an industrial base there that's starting to recover, albeit slowly. Are there any sectors were commodities that have people have missed that they should have loaded into recently but but haven't taken off. Well, I look at timber. Timpers at a great example. If if you look at a company like wire house or it's a timber reat, you know you can you can

get access to timber. And when you look at timber as a commodity, you've got deforestation and climate change, and you've got things like in British Columbia the Mountain pine beetles killed one of every three trees in BC, and so you've got decreasing supply of timber as a commodity. You've got increasing to man. You've seen most recently existing home sales five point six million. That's that's significantly over

the five point four four expected. And so the autumn revival of housing market is there for not only existing but you look at single family starts in October sixty nine thousand, So you know timber commodity price inflation, decreasing timber as a commodity, increasing demand. So that's the definition of commodity price inflation. Wirehouse is a great way to play it. You get some divided income while you wait as well as you get some good upside and leverage

to the US single and multifamily housing recovery. You know, Mike, I'm looking at a story right now about the priorities laid forth by President elect Donald Trump, and this Baron's reporter is noting that he really did not talk about infrastructure spending very much, and that currently in the markets there is sort of a reduction and expectations for what some of his infrastructure plans may be a let alone

what he might actually get across. I mean, hasn't one of the the main drivers of the UH take up in commodities, with the exception of gold, hasn't it been really driven by these infrastructure expectations And how much could there be a sort of decline in commodities should there

be some disappointment on this front. Well, again, good question there, and I would say it's it's not just the infrastructure the potential infrastructure spending, because I think whether if it was Trump or or Hillary Clinton, you're looking at infrastructure as being one of the last great ways you can stimulate the economy because you look at monetary policy and artificially low rates that experiment over the last decade, you know, we've run the course on on monetary policy, fiscal policies

and next logical progression. You've seen it in Australia, You've seen it in the UK over the last thirty years, what they've done with fiscal spending and investing in infrastructure. There's a multiplier effect, and so infrastructure plus some of these tax cuts financed via deficit. You know, infrastructure investment both economic infrastructure, energy, utilities, transportation, as well as social infrastructure,

so think about schools and hospitals. There's a multiplier effect that creates jobs as well as it it increases the overall GDP and economic output. Has the base metal commodity trade has it has its out outlasted the short term trade? I don't think so. I think what you're seeing is there's short term speculation as well as short covering by

some hedge funds in the material space. And admittedly, if you were to look at natural resources and medals in two thousand fifteen, a year ago, some of those asset classes, some of those companies were down, so the asset class was washed out. You've seen a reversion of the mean, and that's started in February, really February eleventh, two thousand and sixteen, when you saw oil and equity sort of hit their technical market bottom. We saw the dead cat bounce,

and then you've seen this. This fits and starts of volatility. So it really started. Natural resources and material started ramping up an energy in February sixteen, so this started quite some time ago. But I think again, you're gonna see volatility as well as significant upside, So it's not going to be a smooth ride, right. Mike Underhill, portfolio manager of the Ridgeworth Capital Innovations, Global Resources and Infrastructure Fund, on the outlook going forward for commodities of all type,

of all types. And Lisa brown Woods. Uh, Mike Reagan here with me today Bloomberg calumnist filling in for Pim Fox, who's on vacation. This is Bloomberg. I'm seeing people smile now, clients of mine where I didn't even know they had teeth. That is a quote in a story, truly phenomenal story on the Bloomberg by Max Abelson and Tacan Campbell. Uh. And Lisa brown Woods here with Mike Reagan filling in for Pim Fox. Max Abelson, really great read. What are

you hearing from these Wall Street types at this point. Lisia, First of all, thank we're saying that about the story. Second, well, I have to give full credit to Dacon Campbell and my colleague forgetting that awesome quote. I always I was proud of my ability to get good quotes, but that

one is like, that was pure Deacon. When he showed that to me, I was so excited because what we were interested in finding out was how these guys are viewing Trump after he spent like months just openly mocking them. Trump Trump called bankers, um at Wall Street people, hedge for managers, you know, basically the members of like a

criminalistic cabal. And you know, it took them. They told us like basically twenty minutes, you know, the twenty minutes after the election, they were sad that Hillary Clinton didn't win, you know, the Clinton supporters that is. And then they moved on because at least they think, you know, they're they're made in the shade that their industries is gonna be deregulated, their taxes are gonna go down, and uh it's gonna Trump is gonna help usher in this like

free willing new era. So Max, what are they basically anticipating just the complete destruction of Dodd Frank. I mean, is that is that a realistical I think that anyone on Wall Street or or or anywhere else who thinks they know what's gonna happen like under President Trump, is you know, really is going to have to be surprised.

Because I feel like we was very diplomatic. I was about, yeah, you know, look, people have had the wrong idea about this guy for a really long time, going back to when he basically was nearly ruined in the early nineties and managed to bounce back is a sort of like new reality figure, and then of course during the primaries, of course during the presidential run. But I think that to answer your question, there's an expectation because he's said so that a lot of Dodd Frank is going to disappear,

is going to be rolled back. Now. The thing that we also have to talk about that's kind of complicates all this is that he's also said totally contradictory things. He suggested that, for example, like glass Stagel will come back, or at least that is literally in the Republican platform for for this year. So what's giving bankers confidence that

Donald Trump had been station will be positive for Wall Street. Well, came up during my interviews UM and and interviews that Dacan Campbell, My colleague ran, is this you had as the closing ad for Trump's campaign that remember that image of Lloyd Blank fine uh and Donald Trump's voiceover was like, you know, a a criminal group is trying to steal

your money. Um. By the Friday after the election, the team that was in charge of Trump's transition, that is in charge of Trump transition included Golden sax Alum, Steve Bannon, Goldman sax Alum, Steve Manuchin, Goldman sax along Lam, Anthony Scaramucci. So he is surrounding himself with these people and I

think that's incredibly comforting. And then you know, even beyond who's going to be Treasury Secretary, Zach Mider and I wrote that long profile about Steve Manuch and it's kind of it's kind of feeling like it's going to be him Treasury secretary. Side my colleagues UM, Jesse Hamilton and Robert Schmidt had a great story today that folks should read as well. That's basically about Wall Street licking their

lips to UM expecting that Tarulah. Of course that at the FED is going to sort of be out of the unofficial role that he's kind of been in over the last couple of years, and that they'll have a Federal Reserve Vice chairman overseeing Wall Street who's like incredibly sympathetic to bankers. That that's that's what Schmith's story is. You know, how much of a surprise really is this?

I mean, isn't this always what people suspect that presidential candidates will sort of talk a hard line on Wall Street, then they'll get into office and they'll forget everything. And isn't that the sort of classic cliche, you know the differences. I think that Reagan and Bush one and Bush two came in with, um, you know, nothing but but mostly nice things to say about the financial services industry. Um,

this is the old guy over here. We would remember if George W. Bush was insulting Wall Street, had to go there with the old guy. Listen. I'm I think it's fair to say that even um, you know, even Obama, even Obama when he took over at the height of financial crisis, didn't have nearly the same kind of populous tone that that that Donald Trump had. So on the one hand, you always expect Republicans and frankly even Democrats to be much softer on Wall Street because of the

financial power of Wall Street. But and and and then of course people are disappointed. But but then on the other um, you know, Donald Trump is is just so inconsistent. It's just so hard to hard to know what's gonna come. Max. Let me ask you, from all the reporting you've done on Wall Street and Trump, and it's been excellent reporting for for sort of a junior rookie reporter like yourself, young a young man like yourself. Have you talked to

many bankers who have actually done business with Trump? And is there a difference in perspective from those that have actually done deals with them and those that are just you know, watching along like the rest of us. You know, I think that um one real pity is that the City Group banker who was really in charge in the early nineties passed away. I think she was actually hit riding a bicycle just just before Trump's run really took off.

So well, we don't know, um. I would love to know what she has to say about I think it was sort of partially her decision to keep Trump alive, to keep Trump above water um that they really could have brought him down, that he had skinning him, so he basically could have had to go personally break right

rather rather than the company's going back roup. But but I have whenever you speak to people who have done business with them, they speak with it with incredible anchor and sadness about about the betrayals that that they've had to go through. There are people who love him, but there are a lot of people who feel betrayed after spending time working with Donald Trump. Donald Trum. We got

some home sales data this morning at ten am. Existing home sales came in higher than expected, just sort of showing that there might just be momentum behind the housing market. But is that momentum about to stall out? I want to bring in Logan Mota Shoppi, a senior loan officer at AMC Lending Group, to give us a little bit of color. I'm forward leading indicators. Logan. When we look at existing home sales, that's a backward looking indicator. Correct, yes,

it's a backward indicating look indicator. But what what I would uh emphasize today on the existing home sales report is that existing home sales are at psycho highs, as mortgage demand is at psycho highs, and the housing community, economists, analysts and everybody has been telling people that low inventory

is holding housing back. It's exactly the opposite. All the data showing demand is at psycho highs and home sales are at psycho highs, and existing home sales UH what we've seen as cash buyers have been falling, but mortgage demand has been rising. But yet mortgage demand is basically

back to levels. And there's your issue with the home sales in this cycle is that we don't have that kind of strong demand curve, So we shouldn't be using excuses as low inventory or tight lending that are holding sales back based on certain economists as metrics look, then I'm wondering how elastic can we expect that demand to be given the recent jump in UH interest rates. Mortgage rate have been higher in and twenty fifteen than where

we are today. So when we look back at what happened in was that mortgage rates were working from four and a half percent levels, Existing home sales went negative year over year, New home sales had the biggest miss I've ever seen in twenty years, and an up cycle. So even though we could see sales be impacted, in reality we only lost two hundred thousand homes at A five point three million when rates were higher in t UH sales still grew, but the rate of growth was impacted.

So I don't think it's going to be as big as people think because demand is low already, so we're not working from an elevated level to where UH low rates were boosting home sales. This has been the worst demand curve we've ever seen world War two. Well, let's talk about that. Why has demand for mortgages been so low. Because the fundamental core backdrop you need for a housing market.

For strong housing markets, you need good demographics. We we have terrible demographics for housing in this cycle, ages seventeen to twenty nine or massive, ages forty nine to sixty five or massive. This is a renting profile. Second, you have no more exotic loans in the system, so that facilitates demand that's gone. Everybody has to have the ability to own the debt right now, That takes some demand off. Wait until years four when you have a higher ages

thirty one to thirty four in the systems. Either millennials are buying but the millennials that are ages thirty in the thirty four are buying ages of the biggest in America right now, they're still too young to have a strong housing market. Now. Are the homebuilders going to adjust to the needs of millennials? Um? Is that part of what's keeping things in check to some degree that there there there's not as many starter houses being built as

perhaps there should be. The builders have been building bigger and bigger homes since nineteen seventy five. Back in nineteen seventy five, medium square foot was about fifteen hundred. Today it's over. They're not building because they can't really make money off of them. So if you want new home sales to go over eight nine hundred thousand, you're gonna need to build smaller homes. This year was the first year that we saw median home sales price fall for

builders for the new home sales market. That is actually a very bullish data line because that means they're building more of the smaller homes and that's what you would need to get more first time home buyers in that market. Local Where do you think that we are in the housing market? Site on the year, Well, it's this has not been a very strong cycle, so I wouldn't look

at economic cycles to work with housing. UH two thousand eight to two thousand nineteen we're going to be soft, but in the next decade you're going to have a massive, massive UH demographic homeownership age bracket, but also you're going to have your first time homeowners would be a lot better. We've had over seven million loans delinquent because we had people with exotic debt. The home buyers now in this cycle are the best I've ever seen in my life.

So the move up buyer is it's just been a much more solid UH position to move up years down the line. But now it's just been a very soft cycle. Don't expect anything to really change until and is the sort of maybe not the death but the definitely reduction in adjustable rate mortgages. UM. That's something different in this cycle, right that we won't have to sort of worry about we have we We do not have any exotic recasting

debt in scale. There's some home equity lines that are going to recast, but we don't have this massive debt leverage bubble as we did in two thousand seven. But one of the main points is that people forget. In two thousand and seven, primate labor force growth peaked and then it declined. We had we didn't have that in the nineteen eighties or the nineteen nineties. That is a very big metric for housing. We're not going to have

that problem anymore. Primate labor forces is starting to grow again, so we have no more adjustable rate risk in terms of in big scale, There's always going to be a few out there, but our demographics are starting to get stronger. So the future of housing look actually looks a lot stronger than it did from two thousand eight to two

thousand sixteen. Logan Mota Shami, thank you so much for joining us senior loan officer at a MC lending group talking about perhaps we shouldn't call it the housing cycle, maybe just the housing plateau. Thanks for listening to the Bloomberg pien 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

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