US Jobless Rate Will Drop to 3.5% Next Year, Hyman Says

and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, Bloomberg dot Com, and of course on the Bloomberg with Us Edward S. Hyman, who is a rumored to actually watch every once in a while. He's with ever Corps. I s I and I want to get back to the economy into what you many would say invented, and that is the linkage of the economy into the equity markets. This is a chart you and I know from Yale Management.

I've put it in terms of the Dow and not the SMP on radio, folks, It's a gorgeous shot of the depression in nine percent change log chart and up we go and we just seem to prosper along the way. Do you still have a belief in American exceptionalism and in American capitalism way over my head. I'm I'm a practitioner,

and right now it looks like it's continuing to prosper. Uh. This is a very important chart in that, uh, we're learning more and more that the more the stock market goes up, the more it helps uh optimism and consumer spending, capital spending, and that's what's been going on. Also, house prices have been going up, and the two together lift

consumer net worth and that's been driving the economy. But that is an exceptional chart, and uh, well, I'd love to take credit for it, but I think Mr Ibbotson over at Yelle Management maybe would want to take credit for this iconic log chart pick really years ed Hyman. Within that, though, what's changed is the belief that there are John Edwards to America's can we prosper and can we all do better? Given the polarities that we see

in our society like in the healthcare debate today. So uh, I think that if the economy keeps growing, uh, those disparities will uh dissipate a little bit. But the main thing I'm focused on is for the bottom of the economy to get better. The top is doing fine. Uh. And the main thing that needs to happen to get that to work is for wages to accelerate. And I've

been disappointed in that. I thought wages by now would be over three and there's still about two and a half p uh at the unemployment rate today is four point three, as you know, and I think it will be three and a half a year from now. And uh, it's just you know, continue to press on that. And if that's true, Uh, then the odds are pretty good that wages will pick up and that will help the bottom of the economy. But how do you explain actually that there was almost no wage growth? Is it the

quality of jobs being created in the US? Or is it that CEO still don't feel very bright about the future, that the animal spirits that we were talking about just having really fully taken shape, fransty And I was, I was. I was scared you would ask about that, because I really I can't figure it out. When I travel around, I don't hear about wages going up. Unemployment, like you know,

is really low. Unemployment claims are really low. Uh. So my best guess is I just have to be patient and maybe in two thousand eighteen, wages will finally start to really pick up. But as your question alludes to, wages are not picking up in where they're not picking up in the UK and not picking up in Australia and Canada the other Anglo Saxon English speaking countries, all of which have low unemployment rates. But uh, I think

it will happen later on in this cycle. But do you think it's and I know this is the impossible question because actually we we've been asking so many people and no one has the answer, which it goes back also to the productivity puzzle. But do you think it's psychological if central banks, for example, suddenly started raising rates when that shocks CEOs into thinking that their world was becoming harder, but but that the picture was rosier? No, I think I think francying what will make wages go

up is that eventually you just won't have enough labor. Uh, And whether it's in the energy space or in educational space, people will start paying up or they'll start losing workers. I do think that technology has been playing a role were uh, technology has been replacing workers. And I think that you're still, as you've mentioned, an overhang where we they'll remember a little bit the O eight oh nine. Uh,

you know, big depression and uh. People are scared about that, both in terms of asking for a pay increase and for managers giving a big pay increase. Him and I think the comments on the jobs are so important that I want to go to this chart. We give Dean macke formerly Barclay's point seven to a lot of credit for a four percent view on unemployment. Here's the recent leg down to a better unemployment and had to recapitulate

this out a year or so. You see as a three and a half percent, which is better than we were in the glory times of two thousand. Do we get growth with that great unemployment rate? We get the same we've been having. You get something like two maybe three percent growth. But all during that big drop in on the unemployment rate from tan down to four point three, growth has been just about two. My view on unemployment

going to feint appercent was inspired by Dean Mackie. That's so, that's funny you bring him up three and a half unemployment by next year. Tom, this took me by surprise. I know it took you by surprise. I just want to hear a little bit more from from ed where where are the industries that will lose the most jobs? Frency. Let me explain how I get there. Earlier we looked at the unemployment claims if you remember that chart down so much, and the unemployment rate and unemployment claims stack

up pretty closely. And so the unemployment claims are the ticket to why I think unemployment is going to come down to three and a half percent. Uh. The places that jobs are being created, as I mentioned earlier, in the healthcare, higher education, the tech space, the new tech space, and then sports and entertainment. Those are the places where local economies are being driven. I mean, he claims Charter

her Francine is extraordinary. Again, this is claims adjusted for population growth in America, and and it really talks about one part of America you mentioned earlier, bringing the bottom up as well. Is that done by policy or within a locky in society? Is it done by the corporations and investment? Has that become organic? We're in a self feeding expansion. Uh, and that's the end for the end

of it. It It becomes pulling in. But right now these sectors that I mentioned are coming together, and you also have the millennials, and they're driving things. They're giving an energy to local economies like Denver is just sort of booming in the time we got left. I want to know your thoughts in the future of global Wall Street in New York, in London, and for that matter, in

our other geographies like Hong Kong and Dubai. It's pretty tough, you know, the whole financial services business on the by side, on the South side, it's a tough industry. I'm not sure it's gonna get any better within the by side. Are they still gonna buy ed Hyman research than I hope? So this is important, but at a at a lower scale, at a lower scale, Roger Altman in Bonus, Roger Edheim is with us and the Red Sox are in first play.

Fred Seed, Yeah, te him. I like that. We need to thank ed Edwards Great ed Hyman of eb CRIS. I sincerely hope you come back very soon. I don't want to start you with Mark Felli. He's the global Chief investment Officer at ubs A Wealth Management. Mark great to speak with you. As I mentioned, joining us from Zurich today, you look at the FT one and you look at it in dollar terms, it's back to where it was before that Brexit vote one year ago. Today. What does it tell us? What is what is this

crazy journey of the last year. Say to you about about the market? Well, of course the uh, you know, the foot seats done okay, but the the tound has been whacked against the dollar or something like. And I think you know what we've seen post the Great Financial Crisis is just how much these currencies are the shock absorber for some of the more political geopolitical move what's your your outlook for sterling? How much has that changed

here in recent months? As we had that speech that Theresa May gave before Parliament, as of course she had the snap elections. Are the results of that? Now she heads to Brussels for this EU as someone, how much has it changed? Yeah, So we think that a lot of the negative uh for the pound versus David dollar have been priced in as Terrason May had signaled she'd be willing to go for a hard Brexit. So we've got it at one spot thirty over the six months.

And I think that what I would say though, is we do sort of think that this Brexit will be a ticking time bomb where you know, much like these grease negotiations, they kind of go along and go along, but nothing really gets done until you get down to the wire. So it's it's going to be interesting to trade, to trade around the UK assets for the next two years.

What do you make of of what she had to say at this semit, ensuring the rights of those in the European Union who have been living in Britain for more than five years, providing a plan for those who have been there for less than five beginning to develop some of the strictures she'd like to see in place.

I believe with the hopes here of appeasing those in the European Union and those who are from the European Union living in the UK who are worried about their their status there, does that provide more certainty just getting those broad contours of a plan that she outlined over the over the last couple of days. Yeah, I don't think it does. I think that what is I think that the UK is trying to uh awfer or negotiate. But you know that if you listen to what Europe saying,

you know it's not a supermarket. You can't pick and choose. We're listening. They they have their own views, particularly around the free movement of people. Um and and I think they're going to end up dictating more of the terms than than the UK. Good morning, David Garra. Where were you a year ago? Watch all of the sunfold? I was actually at it. There was a British pub near murray Hill the early evening and why isn't a shocked girl was in a Brooklyn bar, probably having some overprice

British Mark Mark Hafway with us with ubus Mark. Where were you a year ago? I remember it very well. I was on the shores of Lake Como meeting with fun managers, all watching the tape and and I remember we all went to bed very late, feeling rather sanguine, and we all started texting each other at four am. What you know? What is going on exactly? And that

you know? First of all, let me commented, girls in a bar in Afway's in Lake Como and I'm stuck in I'm stuck at his studio in London with John Farrow. I don't know what that's about. Um. It was really remarkable to see that late night, David. And really there was a whisper at ten pm London time, and then the whole next day was just real. I remember folks having dinner exhausted after literally no sleep for thirty hours in Brown's Hotel over on the edge of Mayfair, and

the quiet on the streets. David Gerrow, I will never forget the rest of my life. It was absolutely surreal. Mark. Let me ask you about what we learned about the euro Area today, recording its fastest expansion in six years in the second and second quarter. How optimistic are you about Europe right now? Where do you see opportunity in the Eurozone? Yeah, so we do like Europe. We are overweight the Euro versus the dollar, and we're overweight European

equities versus UK equities. Uh and and and when you when you look more glad. We're gonna talk about emerging markets here in just a little while on the show. But where do you see opportunity in the emerging markets? Are you? Are you of the camp here saying that amid all of the concern over the central banking and the prospects of fiscal reform, tax reform here in the

US developed markets, are emerging markets are more attractive. We're not saying that emerging markets are more attracts it currently as a group, I think for the emerging markets to do well, uh, we think they'll they'll do Okay, you need that base. We believe of the certainly the United States doing well, and I think, um, you know, we prefer to stay in developed markets, but certainly within within the emerging markets, uh, places like China should continue to

do well. What do people do that aren't in the market. They look at the valuations. They keep it simple in their analysis. They look at price to earnings. How do you rationalize the acquisition of shares right now? Mark? Yeah, I think that the key sense the financial crisis has remained central bank policy as a driver. That's what's taken

so much volatility out of this system. And to me, I don't want to over the over reductivist here, but with that inflation low, the central banks continue to have room to maintain this oversized stimulus and that has been supportive for markets and supportive of very low interest rates. So I think what's new that people have to somewhat new is people need to weigh that against when they

want to call the end of this cycle. How do you counsel clients to to navigate the low volatility that we have seen and continue to see, how how do you deal with that particular challenge. Well, it uh. It has created an opportunity for investors who are concerned about draw downs to add some relatively cheap protection uh for you know, for equity industry. So that's a popular way of dealing with it um. And then you know the

the other one. I think what we found is we actually just surveyed our clients and over them think that this is the most uncertain period in history. And and it's very interesting when you compare that what the markets are telling us new highs uh and very low volatility.

And I think it I think it gets to this dynamic of forces that are extraordinary today, such as central bank polity, which we we know eventually will end, and our look out on a future which is much more uncertain, where governments are in play, national debt is high, and population changes are are moving demographics all over the world. And I think part of what we have the Council Investors on is to take those two separate buckets and separate them a little bit. Cubs at with a new

white paper. Millennials, the global guardians of capital mark let me ask you, first of all, how millennials regard wealth, wealth creation, accruing wealth, and what they intend to do with them. It's a great question. What I think we found is so interesting is that there are a lot of stereotypes about millennials, this generation born between two and that they're very selfish and me centered, and actually we've

found kind of the opposite. Uh. The majority of them are willing to forego, for example, some upshuntder turn in their investments if those investments are more sustainable or have a better impact on society. So that that is one of the trends that I think is very important for us to look at. And of course, millennials are increasingly inheriting from the baby boomer generation and soon are going to have twenty four trillion in wealth in their command.

Do they have a different inclination of what they'd like to invest in? Uh? When it comes to the types of companies, the types of sectors they're interested in the social responsibility of those those companies in particular, how do

you how do you adjust to deal with that? Well, it has forced us to adjust in in some ways, but I think in very positive ways of kind of helped us to be emboldened to make a commitment of investing five billion dollars over the next five years in impact investing too, to open that up investments that not just have a financial return but also help help society, and that I think for us is one of the

key differences. But actually on some of these things like digital uptake and like sustainability, millennials may lead the way, but it's something that we see as a water shift for our entire investing. Really to me, folks, just so you know, the twenty four trillion dollar wealth transfer that's happening at the keen household, that's most of that most John Tucker, that's most of the transferrees are many many were their all their middle names or tuition um mark.

When you when you look at the millennials, and I'm not sure the age bracket, to me, the distinctive feature, seriously is their lack of economic growth. We have so many kids in their twenties even in their thirties who have never known what we call normal g d P. Are they ever going to see the normal economic growth we all enjoyed? Well, you know, I think that this this view of what is normal, you know, three three percent growth plus in in the United States. We're all

we're all waiting for the comeback of that. I think I think it's still possible if some of what the millennials are doing around connectivity uh starts to trickle out of our Look look just looking at social media and into things like more productivity in the health care sector for example, that that would be one of my one of my hopes, or more productivity and connected transportation systems and more automation there So that I do believe the still hope to get some of those millennials out of

their parents basement, right, Mark Cafley, thank you so much, out of their parents based maybe with them paying their own phone bill. Well, Mark Cathley's with u BIS brought you by Bank of America. Mary Lynch with virtual reality virtually everything will change, Discover opportunities in a transforming world. B of a, mL dot Com, slash VR, Mary Lynch, Pierced Fenner and Smith Incorporated. We had a great conversation this morning with Edward Hyman of evercreps I S I

Two things. First of all, he said he really cares about p M I S, Like when Bloomberg has a p M I S Hyman lean sorre. He really I was surprised. He really emphasized the value he gets out of p m I, purchasing managers, Indexes, and of course the other thing which I think will make global headlines this weekend. He believes in a three and a half percent unemployment. Right, we're not at full full full employment. Listen,

very good, very good, closing the right now, closing. We wanted to get Craig Moffett in with Moffatt Nathanson, Uh, just just to talk about the chaos of the Michael Nathanson Craig Moffatt world. Craig, sort of an open discussion this morning, wonderful day. Have you with us? What part of your world is most chaotic? Now? Um? Well, I I can speak from my distribution side better than than Michael's, right, but we want both both, but both are pretty chaotic.

Um And in some ways I think you know the real action is going on right at the intersection between the two, in that the launch of all of these new virtual um M v p d s as they're called, or or virtual cable operators, the the YouTube TVs and

you lose and what have you. UM is a fascinating thing to watch, and there's you know, one of the simplest observations out of all of this is you've got all of these people that are in ring the business for seemingly some other reason besides that pedestrian objective of

actually making money. Um. You know, you've got Google and YouTube that seemed to be entering it because they want to eventually leverage it for advertising revenue, so they don't care whether they make any money on the product itself. And you've got Hulu that's trying to do it, um to support distribution of the network, so they aren't interested in actually making any money on the distribution business. Um. You've got direct TV that's using it as a way

now to help sell wireless subscriptions. And so you're getting products that used to be sold at a hundred dollars in the market for thirty five dollars and nobody's makes any money and it's driving down. Okay, this is exactly who I wanted to go. And and the dovetail of this, folks is I really look, I look like everybody else.

I look at the ratings in the industry, and Craig I would suggest Mr Trump has been good for cable TV news like you know, good morning at MSNBC to Laurence O'Donnell, who's just killing it behind Rachel Maddow with his work. I mean, Larry's just killing it in TV. Can you subscribe, Craig to the idea that cable TV is done? Well, No, cable tv is not done. But remember when you say cable tv, cable tv is not a single business. It's really a whole value chain. It's

a whole bunch of businesses, right. Um. When some people mean cable TV, they mean the video distribution coming from people like Comcast and Charter and Direct TV. Other people. When they say k the cable tv, they mean the networks themselves, Um, whether it's CNN or or UM or the smaller ones Bravo or the integrated ones like Turner in USA. Other people. When they say cable tv they mean the production of the shows, so HBO or what have you. Those are all part of a big ecosystem,

and there's some strengths in there, some weaknesses in that ecosystem. Think, generally speaking, the production of content, so the studio side is actually quite healthy these days. There's a lot of good content being produced and they're still finding lots of places to sell it and make money. The the aggregation function of content, that is the concept of a cable

network is less healthy. Um. The concept of taking a bunch of different shows and creating a schedule out of them that runs twenty four hours a day, is starting to be a pretty anachronistic concept, right, So, so the value of the of the network piece is not that hot. The value of the distribution sides falling apart. The physical layer of distributions great broadband and and if you're a

physical infrastructure provider like a cable operator, that's fine. But if you're aggregating those networks and selling them to consumers like direct TV or addition network um, and you don't have a broadband business, well, that's not a good place to be. Where are we in terms of experimentation? In other words, you have a lot of these these cable networks and providers trying any number of ways to distribute content. Are we still just trying to figure out what works,

throwing something at the wall to see what sticks? Or is there a company? Are there companies who have figured this out? We're now seeing others emulate them. It's a

great question. I think I would say we're in sort of iteration one dotto, which is to say, we're still in the phase where the old media companies UM, that is, the media companies that we think of today as the big media companies, the Disneys and the Viacoms and the Foxes and what have you, are trying all of these new combinations of the old content UM to try to make the perfect skinny bundle, so to speak of is it that customers want Discovery but they don't want t

N T Or is it that they want UM ESPN but they don't want Fox Regional Sports or whatever it is. And people are trying all these different combinations. But that's what I mean by one dotto. UM. In some ways, that's sort of a it's it's sort of a training wheels type ified to say that what we're really looking

for is just a reaggregation of the old content. What's much more revolutionary is going on in the background UM with probably a lot less attention, but but ultimately they may be more important that whole types of consumption are are crowding out the concept of traditional Well, let's let's come back, Craig. We're gonna have to come back on

this right now. This is really important conversation Craig Moffett on how we consume all this media and can anybody make any money out of down the road will continue with Craig Moffatt of Moffatt Nathanson. Craig, you know spectrum enterprises all these phone lines out there. What I see are two major players, Verizon as an example, with a too good to be true five dividend. What thinketh you

a Verizon's dividend? Is it a legit utility dividend? Well, you know, it's a great question, and the I think, yeah, Look then in the short term is Verizon's dividend is fined? Um? But but the there is a fair um point you raise. And when you mentioned Spectrum Business Services your sponsor, um, that's a big segment for Verizon and A T and T. And where Spectrum Business Services getting its customers from from

Verizon and A T and t. Um. We just published a note earlier this week that points out the end of last week that points out so the let's take A T and T for a second, their commercial wire line services business, something that nobody spends any time talking about. You hardly ever get a question about if people all want to talk about wireless, postpaid net ads and r poos and things like that. The wire line business services at a T and T is larger than the entire

company of Time Warner that they're buying. It's bigger than the studio, the cable networks, HBO, um Warner Brothers, the whole thing combined, and it's shrinking now at seven percent a year because of the rate that cable is taking market share UM in the enterprise segment and the business services segment UM. It makes it incredibly hard for A T and T UM and Verizon um to actually grow as companies because there's so many places where they face

competition um. That and and as the so called incumbents in those businesses, they have nowhere to go but down. Let me ask you about the so called triple bundle, the triple play. Now, looking at a quad play, are we likely to have that four things coming together as one you you'll be able to get I mean, help me help me with what just the fourth thing would be?

That would be mobile services as well. Yes, yeah, the quad play has historically meant uh meant adding mobile to the mix, although you do have to wonder how much longer UM the one of the other legs of the stool, the wired voice business, UM is really all that relevant business UM. And now, as we were talking about in the last segment, there are there are questions about the linear delivery of video. Is video really a separate business anymore?

Or is video just a different stream of ones and zeros delivered over the broadband pipe that somebody else, whether it's Hulu or Amazon or Google, is ultimately selling UM and so the cloud play may collapse back down. That said, there's there is clearly a convergence coming between wired infrastructure and wireless infrastructure. Those two infrastructures are starting to look

more and more like each other. If you take wireless networks and you make them denser and denser and denser to support more and more and more users and more and more data, well those networks start to look more and more like wired networks. They start to look like a wired network with lots of small wireless endpoints on the end. And in some ways that's what a wired network is today. To right, you're you don't connect to your cable system via either net cable anymore. You connect

to your cable via wireless, hidpoint case WiFi. We've we've seen Apple sort of dip its toe into the creation of content recently. Here. Do you think that we're going to see here in the near term of the medium term a Silicon Valley company getting into production in a in a bigger way. Well, already Amazon is doing that. Um and Uh, there are a lot of people who would say that Netflix is a Silicon Valley company. Um and so yeah, I think that's that's clear. Whether we'll

see Apple do that, I don't know. I wouldn't. I wouldn't pretend to have any particular insight into what Apple strategic plans are with respect to content creation. Um. You'll certainly see um more and more activity around bidding for rights, and in some ways those two things are quite analogous. You know, there's always talk about will the NFL, um well, will alternative distribution player bit for the NFL, And eventually the answer is probably yes. Kraig Moffatt where this will

be with them in a second here Moffatt Nathanson. This morning, there's a really interesting headline out of Europe. Mr McCraw of France and Chancellor Miracle of Germany are holding a joint news conference after the EU summit. Friends in Aqua made clear to me this morning this is a big deal that they will hold. Basically the briefing is a joint summit. Will have much more on that. Mr Macrosse. As Europe needs France Germany working together. I guess no

surprise they're separately in Brussels. Mr Tusk of the European Union says Prime Minister Mayz citizens offer is below our expectations. That as a prelude to maybe hearing from Prime Minister may Mr Younger speaking right now as well, David Gura, Yeah, you know, I I wonder where you see Craig likely combinations in the future. What's going to drive consolidation for their consolidation in the distribution space. UM. My guess is UM that you'll see less of it than than people think.

UM the one that everybody talks about, and for good reason, because it's the one that is truly likely. It's eventually sprint in t mobile. UM will will make a real effort to come together. How quickly that will happen, I don't know, because there's lots of complicated questions about valuation and complicated questions about regulatory and that sort of thing.

But I think they both come to the conclusion that all these other alternatives for each of them weren't really all that real to begin with, and so they're going to end up end up with each other. Outside of that, it's harder to say. And all Teeth is talking about they'd love to own Cox. There was an article earlier this week UM that so would Charter. But I don't think Cox is for email um and so I don't

see a lot of more consolidation coming in cable. I don't see Cable buying a wireless operator, even though people like to talk about that all the time. UM. And and so most of the this stuff is really just arm waving at this point. I think the big deals are probably going to be fewer and further between the people things very quickly. When you and Michael Nathanson are in speaking terms and you're talking about where the value is in the market, where is the value within the

Moffatt Nathanson space. Um. It's hard to sound creative and surprising about this, but right now, the businesses that are gaining the most share and have the most value are probably still the Googles and facebooks and the ones that continue to gain UM the advertising dollars at the fastest pace. UM. So Michael likes those stocks. UM. There are some value plays, some rebounds. I like, for example, Verizon. I think Verizon is is oversold and is is a better business than

most people give it credit for. But it's not a structurally great business. UM. Cable is a structurally great business. But the valuations are right reflected. So there's fewer there's fewer real opportunities on my side of the coverage, the distribution side, probably than there are in Michael's in the internet and content. We gotta cut you off. Craig Moffatt, Thank you so much generous of you to join us on a Friday away from your clients. Mr Moffatt works

with Michael Nathanson. Moffatt Nathanson. We protect their copyright. I'm not going to send you out. They're gorgeous. Hulu charts about Hulus. I don't even know what Hulu is, David, Hula hl It's like you get TV, you get t I'm too old for this. I want to zee us with rabbit ears, David girl. Why don't you have the privilege of bringing in the gentleman from Bose. Yes, that would be Max boch is, former US Ambassador to China, former US Senator from Montana. Of course, he was the

chairman of the Senate Committee on Financing. In that capacity had a big role in getting the Affordable Care Act through the Senate through Congress. I wonder, first of all, what you would counsel your Democratic colleagues at this point. It seems like there were plenty of Republicans who were upset with how this process unfolded, the secret secrecy surrounded

the drafting of this piece of legislation. What should Democrats do now allow all of this to play out, Allow Republicans to hash out what this bill looks like, what the what's gonna turn what what the draft is going to turn into? Or should they take a more active role here? Well, hope springs eternal um and if I were in the Senate Council, let's try that's sit down with Mr for coonell Um. Let's see if they can work something out here that's um or both parties are

talking to each other. I think that's a bit difficult to achieve. That's probably a bridge too far. Alternatively, I would just explain what's in the bill. I would expose what's in the bill. It is an outrage. Frankly, it is a huge transfer of wealth from lower income people to upper income people. That is cutting healthcare benefits for the lower income people in the Medicaid and transfer that to a big tax cut for the most wealthy. You know, that's just it's just a mean spirited bill. And it's

more that's exposed. The more that's known, the more I think buying a good service to American people. Next question is do you stand up and Philiposter and tried to stop. I don't know the Republicans will be able to use procedural tactics to get the bill up and vote on it. After all, there are other majorities so they control the rules. Um. So I would explain more why this is a bad idea.

Help us understand the way the majority leader works. I know that you've worked along aside him for for many years. Uh is he is he going to resist taking a bill to the floor if he doesn't have the votes? Give us give us a sense of sort of his his his ability to get get a bill from draft to the to the center floor. He's gonna sales take to the or even though he doesn't have the votes.

But I think that's a bit of a bluff. Um. He's trying to bluff conservatives, mostly because if he says he takes the bill of the floor, and then the Conservatives have to, oh, gosh, maybe have to go along with this thing after all, even though a lot of the Conservatives don't like it. Um. In the end, I don't know. Mitch is a very smart man. He's he's he's probably one of the best politicians in the political sense. Knows how to count votes better than anybody else I've

ever met. My doubts he'll take it to the floor unless he has the votes. But having said that, having said that, he will probably find a way that you have to vote. The magic number here is fifty. Squeeze the arms, the Conservatives, squeeze arms are some moderates until he gets fifty. Let me ask you lastly, hear what the Democrats message should be. We heard from the former president saying this was a mean bill. You're you're echoing some of the comments that that he made. What should

the Democratic Party's message be here? As you do have Americans across this country who were wondering about the future, about the integrity of the Affordable Care Act. Well, that's a very deep question. When we worked on Affordable Care Act back in two thousand and ten, we addressed a very basic question, that is, should healthcare be determined by the marketplace, you know, free for all, or should healthcare be rights that all Americans should enjoy. And there are

two provisions in the bill that get at that. One is the individual mandate, the other's employer mandate. Now we put those in because we felt at the time that we're all in this together. All Americans are in this together when it comes to healthcare, and other countries have solved that question. All other countries have individual mandates or employer mandates. They have a system where they've decided that they are one country and the healthcare is not something

that's determined by the market. We have to decide that question, all right, Mr Ambassador, Thank you ver much. As always, that's Max Bochus, the former US Ambassador to China, former U S Senator from Montana. Of course, long it's any chairman of the Senate Committee on Finance joining us from Montana on our phone lines. Earlier this morning, the acclaimed economist Justin Wolfers of Michigan tweeted out a brutal tweet which basically said, this is what I think about healthcare.

Look at the Cato Institute even they want Obamacare. He joined us yesterday. Thank you so much for your huge response to Michael Cannon's appearance, both pro and con. Michael Cannon joining us briefly here this morning. Michael, you wrote a scathing note this morning, late last night, and within it you say, uh, it would be better if they did nothing. Why do you say that? I'm shocked at the Cato Institute is going against any flavor of Republican

inciding with President Obama. You know, Max Baca said a lot about how other nations have solved healthcare, about how he took lots of money from some people to give it to other people. And you know, if that improved healthcare, I might be for that sort of thing. But it just does it whether you look at this country or other countries. And uh, what Obamacare has done is increased the cost of health insurance, reduced the quality of health insurance,

cause markets to collapse. Why he wants to build on that failure? I don't know why Republicans. Why Republicans are trying to preserve that. Well, I guess we can figure out why. But it's not what they promised to do. It's not what um, it's not what voters elected them to do, and it's not going to improve healthcare. Do you presume there will be a vote that will test the medal of moderates and conservative Republicans well as Max Bauchus said, Mr McConnell will not bring this bill to

the floor unless he has the votes. So if so, it all depends on whether he can get those four conservatives who said they cannot support the bill in its current form. Uh to to to get on board and uh and right now, as as I said in that piece that you mentioned, we posted a kid to at Liberty the Cato blogged, Uh, this bill is not a step in the right direction, and it would take something substantial to make this a step in the right direction.

They would have to expand health savings accounts dramatically compared to what they do in in this bill. They would have to repeal community rating, which is the heart of Obamacare and is causing all the higher premiums, low quality coverage, and instability. You you gave us your five questions yesterday what you're gonna be looking for when that bill came out at hundred forty plus pages, imagine you're you're waiting through with trying to see what's in it. Libertarians read

the footnotes, they read the go to the books. Uh, Michael, what stood out to you? What you what are you most concerned about in this? In this legislation, the Straft legislation, what's most concerning is that it actually expands Obamacare in significant respects. You know, Max Bauchus and his colleagues when they passed to Obamacare, they authorized something called cost sharing reduction payments. This is a bailout to insurance companies who

participate in Obamacare's exchanges. They authorize that spending, but they never actually funded those subsidies. And Republicans are proposing to do that. So they're proposing to expand expand Obamacare beyond

what Democrats created. They are also proposing to expand the another subsidiy available through the exchanges, the Premium Assistance tax credits to people below the poverty level in states that did not expand Medicaid, which is just not only expands the exchange subsidies, so it expands one Obamacare entitlement, but

it's in effect a medicaid expansion by another means. So Republican Republicans and Congress are saying to Republicans in the nineteen states that did not implement Obamacare's medicaid expansion, We're going to override your decision. Michael Cannon, thank you on short notice for joining us. We greatly appreciate your commitment to the show here and yesterday as well. Mr Cannon is with a Cato Institute, a libertarian think tank in Washington.

I think his opinions are very well known, and we do think all of our listeners, those pro Obamacare, those pro Trump Care, those pro trying to get the kids camp physical in because everybody is books solid and every doctor, any of you, We greatly appreciate it. Thanks for listening to the Bloomberg Surveillance Podcast. Subscribe and listen to interviews on Apple Podcasts, SoundCloud, or whichever podcast platform you prefer. I'm on Twitter at Tom Keene. David Gura is at

David Gura. Before the podcast, you can always catch us worldwide. I'm Bloomberg Radio. Brunt you by Bank of America Mary Lynch. With virtual reality, virtually everything will change, discover opportunities in a transforming world, be of a mL dot com, slash vr, Mary Lynch, Pierced Fenner and Smith Incorporated,