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tv   Bloomberg Markets Americas  Bloomberg  March 7, 2017 2:00pm-3:31pm EST

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it's incredibly important that we not by lee anybody -- that we not violate anybody's conscience. through community health centers, the bill would allow greater access for women to help in greater numbers of facilities across this land. they have proposed more money for women's health care then currently exists. they are working their best to address that issue. in terms of whether or not old plans that were available before might be available, absolutely. the opportunity to provide a choicesarket of robust for individuals across this land will be secured. that is one of the keys to bringing down the premium costs, bringing down the cost for health coverage. i look forward to that coming to pass. >> if the new plan calls for repealing the revenue-generating
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taxes and penalties and keep the entitlements, how is that sustainable? >> that is the work of the congressional budget office -- once they receive that score, they will be working for that to make certain it is fiscally responsible. theine a system where incentives within the system are andto drive down costs respond to the specific needs of patients and in so doing, you will get a much more efficient system for the provision and delivery of health care? it is a system we don't have right now because the previous administration felt the federal government ought to do all of this. we saw what came about when the federal government does all of that. i you have a card that says you have insurance but you walk in and can't afford the doctor that is trying to take care of you. this is not a system that is
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working for folks -- >> [indiscernible] thehave complained that portable character resulted in higher waits at emergency rooms. -- the portable care act resulted in longer waits at emergency rooms. >> the rules and regulations they put in place, from our perspective, we believe if individuals are able to purchase the kind of coverage they want, they will have access to the kind of doctors and other providers they desire and won't need to be seen in the emergency room. emergency rooms ought to be for emergencies, not for the standard care that individuals tend to receive right now. if you put in place the right will bemergency rooms
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able to have the opportunity to care for those individuals that appropriately present to their department. >> i'm interested in following up on your comment that it's important that no one vote on anything that violates their conscience. federal funding cannot be used for abortions. our using the administration has -- position on birth control is the administration looking to actively withhold funding from planned parenthood if they continue to provide abortions? >> we are working through all of those issues. many of those were through the rule promakingss and we are working through that. that is not peacof this legislation right here. ce of this legislation right here. >> [indiscernible] thee are working through rules and regulations to see where the previous demonstration was, how they did it and whether or not it needs to be addressed.
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ist we believe is important to define whether or not that rule or regulation helps patients and decreases costs or harms patients and increases costs. if it does the former, we ought to extend it. >> what was the issue of conscience? >> to make certain that individuals in the market are not forced to do things that violate their conscience. >> [indiscernible] >> this is the culmination of years of work. it is the culmination of years of concern and frustration by the american people. they knew at the time that the previous law passed that it wasn't going to help them. they knew that costs were going to go up. the time thatt
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costs were going to go up and that access would go down. this is the culmination of years ,f hard work by the electorate by the citizens of this country to say that we want a system that respects patients and families and doctors. >> thank you, mr. secretary. the president tweeted earlier today that he is working on a plan to have drug prices come down. can you tell us about what that plan is going to be? included a tax rate for certain executives. why is that tax break important? >> to the latter, i'm not aware. drug pricing is really important. so many individuals are having significant difficulty being able to afford the medications they've been prescribed. it is not able to be addressed
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oneifically in the phase because it is not a revenue or spending issue for the federal government. three, whichand may be concurrent along with phase one, we look forward to bringing solutions to solve the remarkable challenge that patients have across this land with the increasing price of drugs. i have to run. you have a guy right here will answer all the other questions. thank you, dr. price. david: dallas tom price, the secretary of health and human services speaking at the white house daily press briefing. saying this is just the start. the second phase will be regular three modifications. -- regulatory modifications. the goal here is to allow americans to select their own doctor.
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drug pricing is really important. that will be an important part of later legislation. for more reaction, we bring in jon selib. lanhee chen, a former policy director for mitt romney's presidential campaign. price's commentary centered on competition in the market place. the u.s. knowledge that that has not gone on -- do you acknowledge that that has not gone on as intended? jon: there are a lot of reasons why insurers decide to enter certain markets and not enter other markets. i'm not sure what this legislation does to encourage that. under the affordable care act, we had provisions to stabilize the insurance market.
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theuard against some of increases in premiums that some as aese exchanges had seen result of sick of people coming into the markets. togress withheld those funds prevent those bumps in premiums. that would do quite a bit. would make a big difference. secretaryheard the say this is about patients. it doesn't seem like republicans are that patient to wait for a cbo score. how fatal a mistake you think that will be? score: obviously, the cbo , the cbo determination will be important. ae philosophy here is to get piece of legislation out there so that we can have a discussion about actual pieces of reform. the challenge we had before the legislation came out, no one was
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sure what would compose the republican plan. now, there is a plan that can be discussed. strategically, that was an important thing to do. jon selib aboutdy cutle his reaction to the legislation itself. lanhee: i think there are a lot of elements here that make sense , certainly on the repeal side. they've done as much of repeal it as is practical. on the replace inside, they've done a number of things that are good. is it a perfect piece of legislation? no. you are seeing conservative disagreement about that. there are a lot of things that are to come as part of this negotiation. it is a pretty good start. david: something tom price brought up, this notion that you would be able to buy insurance across state lines.
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how difficult is that and why is that something republicans care so much about? jon: i don't know why republicans care about it so much. some of the challenges with that policy are there are a whole host of reasons why insurance companies do want to provide coverage in a state and not provide coverage. there's a whole host of economic reasons. one of the other challenges there, in an unregulated insurance marketplace, which is what this legislation would move to, what you might have happen is the old insurance companies domicile in a state that has very few regulations. i looked at this piece of legislation and to the preservation of insurance benefits for those were young. difficult is it going to be
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to maintain parts of the affordable care act that people like and still do wholesale changes that have been proposed in this legislation? lanhee: that is the major challenge here. they're using a particular legislative process -- it is arcane, not that many people have spent time understanding it. that restricts the ability of republicans to effectuate wholesale repeal on issues like insurance regulations. the requirement that all plans cover the same set of what are known as essential health benefits. that is something that through this process you cannot repeal. the provision you mentioned earlier regarding people under 26 being able to remain on their plans, that is not repeal under this process. they will have to keep this in pieces. how much of the previous system will work with the new system they are trying to bring in behind it? they've done the best they can
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to date. the question is whether the votes are there in the house and senate to get this thing across the finish line. david: that is lanhee chen and jon selib joining us on set. joins bloomberg television live tomorrow at seven point 3 a.m. eastern time a.m. eastern time. you can find breaking news, chart and related functionality discussed on the program. this is bloomberg. ♪
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scarlet: this is "bloomberg markets." oliver: let's see where stocks are trading with julie hyman. julie: stocks have taken a bit of a leg lower. it is still a very small decline. the s&p off .5%. off .2%. the last time we had a back to back drop was the end of january. a little more than a month since we've had a two day pullback. that is what we are now potentially poised for. health care is the biggest declining group in the s&p 500. a lot of this has not to do directly with the health care bill, it has something to do with president trump's week from this morning, talking about competition in drug pricing. -- tweet from this morning.
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we have more volatile drugmakers down today. , hospitalealth care stocks declining relative to that health care bill on concerns that they will see more uninsured patients. express scripts is also pulling back. frontier communications was downgraded at bank of america merrill lynch. the clinic revenue for the company -- declining revenue for the company. scarlet: we will stay on the markets as investors search for the next catalyst -- joining us now is a former economist for the french ministry of finance. he is here in new york with us today. you have traveled around the u.s. and met with investors based here, they keep heckling you with questions about the politics. do you think they are getting carried away with the focus on politics and the focus should
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really be on the economic fundamentals? why is the reflation trade still intact? jerome: reflation is surprising for us. it is the sickness of the the reflation -- synchronicity of the reflation. investors are less concentrated on european politics, but we believe the fundamentals are offering up in the -- opportunities going forward. oliver: your inflation outcast -- tell us what you are seeing through the measurement you are using to gauge inflation and how it differs from what we might spread. 230
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we try to assess whether spending now in terms of the reflation dynamics -- rather than using one measure or what the market sees as belly, we look at the details of the data and say what is really happening. -- what the market sees as value. but we really intriguing look at the indicators that 80% are not thinking about reflation. they show an acceleration. that does not have been for quite a while. it is driven by commodity price. that shows inflation down the corner. reflation turning into inflation. -- wee long gross assets
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talked about the political risk. how beautiful that into your strategy -- how do you full that into your strategy? take a it's difficult to decision on that basis. finallypened last year, what we had a bad year for u.s. equities and u.k. equities and political risk. prepare ourried to portfolios to not be too affected by events. recently, we've been going into a position we are favoring german bonds versus french bonds. because weecently are interested in something more curve,al, the volatility the equivalent of the vix for
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europe is showing a shape that is fairly attractive in the sense that there's a lot of opportunities to forward that. there's some overreaction. we try to be flexible when it -- it isprotocol risk difficult to take long-term allocation decisions. april, you canee see where volatility in pricing -- the you want to short that longer-term volatility or do you want to look at the current spot levels and say -- jerome: to me, this curve is quite clear. around the progress french elections. it is very far away from the risk. there's big opportunity for investors to benefit from
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convergence of future contracts. --se are the ideas we scarlet: i want to bring your on theo eu bloomberg. there are a lot of things we were just talking about, including the odds of marine le pen winning. you can click through and see charts on inflation as well. how theo get a sense of protectionism we're hearing from the unite states, from the u.k., filters through to growth. , from the u.k., filters through to growth. does it lead to faster growth elsewhere or does it come at the expense of the economy? jerome: it will be bad news for growth in the world. that is pretty consistent. what we do believe regarding
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protectionism come anything related to populist votes -- ere is a legislati framework. there's international agreemts, domestic agreements. whatever the politician surmised, it is hard to implement. whatever happens in terms of the there's a lotink of progress towards having more international trade everywhere. it is difficult to reverse the framework. bad --re will not be a good news of protectionism increasing. when i look at the eu function when you can see what is happening with credit default swaps. oliver: you look country by country and you can see these credit default swaps are selling people are away from their
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average. are these the types of instruments that you want to basically be selling? to lookit is difficult at specific countries' reactions. suffery, the french did relative to germany. a lot of this is already priced now. you have to look at countries that might be affected by a snowball effect, like italy, maybe. that is not necessarily what we are looking at the moment. be opportunities in that are attractive ones that is over. scarlet: jerome teiletche, thank you so much for coming. oliver: still ahead, jeff curry
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explains the factors behind his bullish view on oil. holding thepicer daily briefing. we just heard from tom price about health care. watch it now on the bloomberg at tv . this is bloomberg. ♪
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scarlet: we are still looking at th declines. would not be surprised to tell you that is faring the best. -- technology is faring the best . this is bloomberg. ♪ live-stream your favorite sport
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at the airport. binge dvr'd shows while painting your toes. on demand laughs during long bubble baths. tv everywhere is awesome. the all-new xfinity stream app. xfinity. the future of awesome. scarlet: from bloomberg world headquarters, this is "bloomberg markets." commodity markets are closing in new york.
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we start with metals. copper falling to a one-month low today, off by 1.3%. there has been a surge in copper supply. metal production will increase this year. gold futures losing steam throughout the day. the near certainty that the federal interest rate will increase send gold on a six-day losing streak. there are signs that the late winter cold snap polls soon give way to warmer temperatures this month. this will soon give way to warmer temperatures this month. natural gas spiking just before 10:00 a.m. saudi arabia's energy minister admitting that oil inventories are not draining as quickly as expected. reiterateddman sachs -- crude will rise to $50 a before declining to $45 a
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barrel for the rest of the year. demandrry talked about problems and supply response. >> we have seen two things. an upward revision to 2016 and very positive macro data that suggests there is upside risk in growth to demand in 2017. also on the positive ledger, you've had core opec compliance much better than what we thought. ledger,egative particularly in the u.s., the supply response seems to beginning momentum much faster than we thought. one is productivity gains and also access to capital. we did not change our forecast because the positive things offset the negative things and we end up in the same place and we are confident you will see the inventory draws come to deal.
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the curve does this. jeff: absolutely. while we see a modest appreciation, the real core of our view is that transition into a backward curve -- last year, we saw brent flirting with it. the underlying fundamentals are much more supportive. if we thinkes returns, it is that positive youy at has generated -- buy out on the forward curve and role of the curve. curve. up the 2013, back to 2012 and the oil price start of the year -- you still generated and 11% annualized return over that time period. we think we are going into a similar environment.
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jon: what is the biggest pushback, what is the big headwind to this actually happening? jeff: there is a view that the supply response will likely overwhelm any type of demand increase and you end up with weaker prices. i want to go to a broader point here. we look at this market and i did a survey of our clients -- where did you see long-term oil prices? 90% of the people between $55 and six to five dollars a barrel. best $65 a barrel. we are getting a consensus on long-term oil prices. there's no more uncertainty about where the supply is going to come from. do is get need to above the cost level of that certain supply source to stimulate the investment. so, why are we bullish? this is the set up in the
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1980's and 1990's. seafront and prices rise above that cost structure to bring on investment. why can we remain bullish? demand continues to grow in that second half of the business cycle. continuing to play catch-. when these markets go into a deficit, they stay in a deficit for several years. supply gets above demand or -- it is a difficult challenge for the market to shift back to a surplus or deficit. jon: you don't believe the story that rigs will come back on aggressively if we get this bullish oil scenario? >> we believe it. we did a piece just now, we upgraded our outlook on u.s. production. we expect is he 850,000 barrels per day -- that is a big number.
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updated our demand levels at the same time. really why you see an outperformance of commodities in the second half of a business levelss because activity are high enough that they push demand above supply and put a lot of stress on the system that creates that backwardation. we think we are going into an environment like that. currie onat was jeff bloomberg daybreak americas. scarlet: it can be felt sharply in u.s. shall country, including places like the permian basin. services company's are having problems filling jobs and production costs are rising fast as well. for more, we want to bring in david marino. when we talk about the jobs waiting to be filled, these are jobs that pay $80,000 a year.
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david: we are truck drivers who worked on rigs, people who have experience -- they are not engineers, necessarily, but efinityas the pe of production picks up the there's more need for people to move sand into the permian basin to help frack the wells, to help on the drilling rigs. there's all the jobs that go around the industry getting tighter. oliver: we basically now have how come you're not having a shortage of jobs and $55? david: you have some people who left the industry. 2.5 years of a pretty deep downturn. people needed to move on to other areas.
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in the short-term, it looks like there's a tightness in the market for labor. as salaries go up, that labor force will come back. scarlet: how high can u.s. productions rise? they have reduced costs a lot. should opec be looking? david: the government came out with its latest short term forecast. they look for u.s. production to move up to 10 million barrels a day by the end of 2018. it still has room to run. a lot of the games we've seen so far happen from offshore projects that were started five years ago. the boom in shale drilling is now about to really be felt in terms of production. we have a ways to go. oliver: in 2013, 2014, some of these guys looking at this would
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say, how are we going to make this work? you had shell who said the cost to drill has gone down by more than half t. they've had a lot of these cost reductions they feel are structural. the cost for sand is increasing. the costs may have bottomed and will creep back up. the question is how fast it will come back up and where is the price. a lot of companies have hedged production and are confident they can produce at that level. towe see prices go back down $30, $40, clearly production would not rise as fast. scarlet: are these companies operating with the mindset that oil will stay at $50? david: i don't think anyone is expecting $100 anytime soon predict the saudi oil minister
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cautions that a lot of the investors are in short cycle. there's a lack of long cycle investment, deepwater and offshore. that could be a risk for production going forward. scarlet: they're interesting stuff. oliver: very interesting stuff. thanks to david marino. scarlet: let's get a check of the headlines. mark: health and human services tom price dr. tim told reporters that the goal of legislation is to allow americans to select their own doctors. in a briefing seen here on bloomberg television, secretary price said the federal government has to get out of the way. is happening right now is the american people are having to sacrifice in order to purchase coverage. many individuals cannot afford
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the kind of coverage they have right now. they have that insurance card but don't have care. down thee is to drive health care costs for everybody. you increased choices for folks and increase competition and return the regulation of health care where it ought to be. commentsretary price's came a day after house republicans released their long-awaited plan for unraveling president obama's health care law. british prime minister theresa ing blowered a crush to her plan after lawmakers demanded the power to reject the final deal she reaches with european union. in house of lords voted favor of changing the prime minister's draft brexit law to give parliament the ability to send her back to the negotiating legislators decide the
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terms are not good enough. -- to discuss the elements in syria and iraq. -- developments in syria and iraq. u.s. and turkey also discussing plans to recapture islamic state's self-declared capital. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. i'm mark upton. this is bloomberg. -- i'm mark crumpton. scarlet: democratic senators are reacting to the gop's plans to repeal and replace the affordable care act. leader says they will fight trumpcare tooth and nail. from new york, this is bloomberg. ♪
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oliver: this is "bloomberg markets." scarlet: time for the bloomberg business flash. mercedes-benz' parent sees no signs of growth slowdown in china. >> 20% growth in the two first months over a very strong your doesn't give us any signal of a reduction in momentum of our brand. scarlet: confirms the company is headed in the right direction. japan might be in on expect it ally in president trump's push to lower drug prices.
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japanese officials went to review prices annually for all therapies. the move to keep big pharma profits in check comes as president trump tweeted out this morning that he is working on a new system where there will be competition in the drug industry. meeting thedering justice department in court over that long running mortgage backed securities case. the government has accused ubs of deceiving investors and ubs may go to trial if the federal figure exceeds what the swiss bank thinks is reasonable. let's get a check on markets. special focus on health care. julie: the topic du jour for sure. the health care etf is down .5% today. some of the individual
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components are not much changed considering we got this big news today with this introduction of the health care bill. let's take a look at the components here. we have the largest insurers which are little changed today. one reason why is that this bill is seen as a starting point. the end the end details are not entirely clear. also, there were no big surprises. companies do have exposure to medicaid but not as much as -- second individual mover some of the companies that have higher exposure to medicaid, some of them are doing worse. tent's not a consis eaction in today's session among these companies. look at hospital stocks, there's a bit more uniform -- hospitals down across the board today, being led by community health.
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the company announcing a bond sale. community health down by 8%. universal health services also lower. if the number of insurers goes down in the united states, that will put a heavier burden potentially on some of these hospitals there is upsetting things in the bill as well. -- offsetting things in the bill as well. here, we have the s&p 500 health care index in white. the price-to-earnings ratio versus that of the s&p 500. the spread between the two, health care shares have tended to be more expensive than the broader market. lateer, that has changed last year and going into this year where health care shares now trade at a discount. because of the uncertainty over the new administration and
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congress'policies right now. scarlet: we will stick with that topic and get the view from one health care provider as republicans introduced the revised bill. kim davis tells us about the risks on making changes to medicaid. that is up next. this is bloomberg. ♪
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oliver: this is "bloomberg markets." scarlet: we want to turn out to the republicans' proposato repeal and replace the affordable care act. next guest says the leaders need to exercise caution. joining us now by phone from mount sinai health system is dr. ken davis. thank you for joining us this afternoon. talk about how the republicans in the house want to move
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medicaid from a police shared federal state program with matching federal payments to one where washington provides block grants to the states. how they implement the provision of these block grants is critical, isn't it? dr. davis: absolutely critical. we know the goal is to decrease the amount of money states are getting. affects those states that have had the most expansion of their medicaid programs. how will they be able to sustain the level of coverage they currently have when they ultimately receive less dollars? re will have to be changes in who's eligible and what will be the co-pays associated with that. binn ministration is a first iteration of more discussions to go. -- the administration says this is a first iteration of more
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discussions to go. dr. davis: there are a number of issues. the first is the comorbidity associated with disability -- a lot of people have disability and those disabilities are diseases like addictions, alcoholism, opiate addiction -- we have the opioid epidemic now. and psychosis and obsessive-compulsive disorders and dementias. six of the leading 10 disabilities in the world are brainconditions like addictions and dementias. how will those people be able to be responsible, sustain their coverage, not allow their coverage to lapse? what happens when they come back onto the exchanges? will they find it 30% increase in their premiums because they were so depressed and suicidal they did not remember to do what they were supposed to do?
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we have to have precautions that protect the mentally ill and people who have addictions and dementias. going to be able to guarantee continued coverage for those with existing conditions? we know that risk pools across 35 states in our country have largely failed. risk pools are inadequately funded. the premiums skyrocket. when they skyrocket and the and theskyrocket delectable skyrocket, they become no insurance at all. they are either too extensive or the policies that work. we have to guarantee those people with existing conditions affordable insurance. if they don't, they still come to the hospital and come at the end stage of their disease. when they are very expensive to the health care system and they are often not able to be helped. scarlet: that being the case, if
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no changes are made and if the plan to replace obamacare takes as long as some people think it might come is the health care system sustainable the way it is right now? dr. davis: the larger question you are raising is, how can the country continue to afford its health care expenditures when we are the highest in the western world as a percentage of gdp? what are we going to do to bend that cost rve? these changes do not address the things that are necessary to bend the cost curve like encouraging hospitals and physicians to move out of for service medicine to population management and taking some risk. that was critical to be able to start to bend this cost curve. otherwise, it will always be unaffordable and we will continue to have these equations that don't quite. equate.don't
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how this will affect hospital margins, it likely will be helpful in an industry that is quite stressed already. if there is a wind down of the or this peransion capita caps on medicaid, how will that affect how hospitals do business? this is a real problem for hospitals, particularly those hospitals that have a jug of three such that they have a substantial proportion of medicaid patients. such.graphy which peopleance will increasingly come with large co-pays which we say is no pays them a large that doubles -- large deductibles or no insurance at all, the hospital still has to take care of them.
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mount.pital losses they had been mitigated by disproportionate share of payments. that disproportionate share of endents are scheduled to october 2017. hospital systems lose both ways. the medicaid system becomes more problematic and we lose our disproportionate share of payments. that will take the hospitals and put them under command is pressure. -- under tremendous pressure. scarlet: dr. ken davis with thank you for your thoughts. -- thank you for your thoughts. oliver: some big predictions. this is bloomberg. ♪
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. . .
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oliver: it is 3:00 p.m. in new york, 8:00 p.m. in london. i am oliver renick. scarlet: i am scarlet fu. welcome to "bloomberg markets."
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♪ fromr: we aren't lightbank bloomberg world headquarters in new york for the next hour, plus bloombergrel ive from world headquarters in new york for the next hour, plus we are covering stores in los angeles and washington. day, 1straight down street that long in a month, as telecom energy shares are losing steam. the vice chair of multi-asset investment is going to be joining us in a moment. will climb to 4% -- we will figure out how confident he feels about the call. fight theabout to republican plan to repeal and replace the affordable care act. meanwhile, opposition from the conservative wing of the republican base. what are the chances of passage? let's get a check on the markets. they aren't doing too much come with julie hyman.
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julie: we are in stall mode. much of as oliver pointed out, if we get back to back for the s&p 500, it will be the first in more than a month. we have not had much of a stall like this in quite some time. i want to talk about what is going on outside of stocks today as well, with the inactivity overall in a major averages. if you look on over in the treasury market, we are continuing to see yields climbed here. for the yields higher seventh straight session. quite a run upward in yields as we have investors reset expectations for a federal reserve rate increase on march 15. if you look at the bloomberg, we had a three-your option today. that was a $24 billion option. bid to cover is in yellow here, 2.74%, lower than the average of the past 10 options.
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if you look at the number of indirect and direct bidders, that is also an indication with indirect demand lower than it has been recently that this was a relatively weak auction. supporting the idea potentially of weakening demand within the treasury market. what about what is going on with the u.s. dollar today? variousook at it vs. trading partners, it is doing ok. the dollar is higher vs. the japanese yen. euro is down versus the dollar. the pound in particular, after we economic data. if you look at the broader badge of currencies, we're not seeing much of a move. we getting new modeling from the likes of goldman sachs as well as ubs. they are looking at what is called the current fair value of the dollar. they calculate that at around $1.24. this is the euro is just an example. fall belown the euro
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the level and a 25% rally in the u.s. dollar versus the euro over the past couple of years. this would suggest by this model that indeed the dollar is overvalued at this point in time . this is just something to keep an eye on especially as the consensus forecast for the wide on the year. this is contrary and to that view, scarlet. ofrlet: let's get a check the headlines with "first word" news. mark crumpton has more. mark: senate majority leader chuck schumer says his colleagues should consider it a moral duty to protect what is potentially being called trump care of it the democratic leader spoke today. willor schumer: trumpcare cost more and you'll get less white increasing the availability of tax credits, the cost of average americans will increase by at least $1000 annually. said senator schumer also
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the gop plan for replacing the affordable care law is a boon for the wealthy and would send the u.s. back to what he calls the dark ages. wikileaks today published thousands of documents that it says come from the cia's center for cyber intelligence. the documents appear to give an inside look at the intimate details of the agency'ws cyber espionage efforts. the release could not immediately be authenticated by the associated press. wikileaks, which has been dropping cryptic hints about the release for months, said in a lengthy statement that the cia " recently lost control of a massive arsenal of cia hacking tools as well as associated documentation." china is warning of a new arms race after the u.s. began deploying a new missile system in south korea. the first elements of the system arrived a day after north korea testfir 4 missiles into wars
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off the japanese coast. both of u.s. and south korea say the missile system is defensive and not meant to be a threat to china. president trump surprised a group of visitors this morning on the first day of the white house open for tourists since he took office. the president welcomed a small crowd of tourists on the lower floor of the east ring, waving from behind a velvet rope and come in a political irony, standing near a portrait of a former first lady hillary clinton. the president motion for a 10-year-old boy from alabama to join him and said to the crowd, "work hard, everyone. work hard." global news 24 hours a day powered by more than 2600 journalists and analysts in over 120 countries. i am mark crumpton. this is bloomberg. scarlet? scarlet: thanks so much, mark. released hisry, he annual list of surprises and was strongly bullish on u.s. stocks.
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since then, the s&p 500 is up by almost 6%. that's get an update from betty liu. with: i am standing by byron mean of blackstone. good to see you again. byron: we were just together. betty: just a few weeks ago we have spoken at a real estate conference -- for you had spoken and you talked about your 2017 surprises. how much of them are you still confident about? the s&p 500, right, hitting 2500. the 10-year yield going up to 4%. seeing what you have seen from the white house, how confident you about those projections? , i would say the first part of the year certainly started out strong, but then i think there has been a turn after the state of the union address. i think that was the high point. recusal by jeff sessions i ppedk was athe accusation that a
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the phones of trump tower was a setback. in the market was very full of itself up to that point. my feeling is that the 2500 estimate was based on trump getting his progrowth agenda implemented. and the problem is he is firstng so much time on, he had to replace his national security adviser. now he has the sessions recusal. now he has to deal with this accusation that came out of midair. he should be working on legislation. betty: so bottom line, then -- byron: bottom line is i'm getting a little nervous about 2500 but i'm not backing away from it. 2500 sticks. the 4% -- i'm thinking we may not get there. there is too much liquidity
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sloshing around the world. u.s. interest rates are already a lot higher than europe or japan. i think the rates will maybe get to 3.5 and not 4. betty: what was 4% based on? byron: 4% was based on economic growth getting to 3%, the economy being stronger, creating more inflation, and inflation is a result of wages and house prices. i thought wages are already creeping up. i thought would go up a little. i thought it would be enough inflation and enough demand for capital that rates would go to 4. but i think they won't continue to rise. it will get above 3 but not get to 4. betty: we're barely into the third month of 2017, byron. is this the first time you have actually had to change your views? byron: no, no, no, i never
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change the views. surprises stay there until year-end, no matter how humiliating -- betty: but you have some doubts. byron: you are programming, where do i have conviction and where don't i. i am being honest with you. where my heart is fluttering a little bit, i'm revealing it to you. betty: byron, i noticed when i looked through -- it is not just about the s&p are treasuries, but about a few other things you put into this surprise index, or your surprises of 2017, that show me that he seemed -- you seemed at least pretty bullish. byron: absolutely. i didn't vote for trump, i didn't support him, but i thought his progrowth agenda would be good for the economy and that would be good for the markets. betty: do you think he will we apologize policy initiatives through? that he will be able to get his policy initiatives through? byron: i definitely do, but right now he has got to start focusing on legislation.
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he has got to deal effectively with replacing the affordable care act if you want to repeal it. he has got to deal effectively with the three components of his progrowth agenda -- cutting taxes, dismantling regulation, and spending money on infrastructure. theas got to replace supreme court justice. he has got to get these things -- betty: these things through. byron: right. and he has got to stop worrying about whether obama bugged trump tower. and he has got to get a cabinet in place that stays in place. betty: what about the fed? i know you predicted before that ye. fed would go 3 times this doeshat still hold? byron: absolutely. well, now they've got --you know, trump is lucky. the economy is doing pretty well. almost every parameter you look at -- initial on a claimant claims, leading indicators.
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i can give you 10 of them. the economy is heading towards 3% growth. all he has to do is give it a little push. but he has to get to work on it. he campaigned on promising to make america great again. he has got to pass legislation to complete that promise. if he doesn't get to work on it, he's in -- it isn't going to happen. betty: you also mentioned over in europe that you believe, or one of the prizes is that by the end of the year their merit the active discussions about ending the european union -- byron: more discussion than there is now. i don't think it will happen. what theied about french and german elections -- betty: do you think we will see a frexit? byron: ha ha. no, i don't think we will. wins, that would
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create more danger. she may win in the first round. i don't think she will win in the second. i'm a more worried about angela merkel. i hope she wins, because she is the putative leader of europe. betty: you see a real chance she could lose reelection? byron: i absolutely do. populism point donald trump in office. populism is sweeping europe as well. that endangers angela merkel. betty: speaking of populism, big populist topic is targeting china. i know you mentioned you believe that the administration and trump himself might moderate his views on china. doe anything that you have heard so far or seen make you believe this? ison: yeah, i mean, trump going to -- in a way all of us are lucky that the travel ban becauseevere as it was, he had to back down on it. betty: ok. byron: and that taught him --
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betty: there are some limits here? byron: he has to pay attention to the checks and balances that exist. you know come all of those over 70 -- and i am over 70 -- we wake up in the middle of the night, we go to the bathroom, and we go back to bed. not donald trump. he goes to the bathroom and he goes to his twitter. betty: and wreaks havoc. byron: exactly. he has got to stop doing that. betty: all right, byron, and then maybe we will see s&p 500 at 2500, who knows. thanks so much for joining us. byron: thanks for having me. betty: byron wien of blackstone. oliver: coming up, songwriters for beyoncé and other the stars are singing the blues, the streaming blues, fighting higher rates from services like spotify. we will break it down for you. this is bloomberg. ♪
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oliver: this is "bloomberg markets." i am oliver renick. scarlet: i am scarlet fu. tomorrow in washington, songwriters r arlike beyoncé and growtic the -- convd the copyright board to accept rates for streaming. whenever rate they take will last for five years so they have to make their case carefully. >> yeah, when you think about the relationship between the visit industry best music sndustry and the weight -- way you listen to me, you think of the artists themselves -- beyoncés, garth brooks.
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the problem for songwriters is that because of really old legislation, their rates are still set on the government -- by the government. to havetheir one chance a rate that they feel will work for them and give them enough money because streaming services have already taken off the past few years and you can imagine that the next five years it will go from being not just the primary way they make money but the dominant way. streaming services may be 30, 35% of the market in the u.s. when expect that will hit 50% in the next few years. oliver: i also mention it will not be an easy fight for the ,ongwriters because pandora they don't even make money right now, and they obviously have an arrangement. give us the background in terms of why the arrangement is such that it is now, because obviously they had to come to some sort of agreement, and now they are saying it is not enough. does that hurt their case when they have already agreed to do something and say they are going to go back on it? >> five years ago, the last time
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they had to set these rates, some of the streaming services you have on the screen there did not exist yet, the ones that did were pretty small. they tried to come up with a formula for how to compensate people based on the projections for what these would be. it is pretty complicated, but it is the greater of three possibilities from all of which are based on the amount of renue generated by the different music services. what the songwriters are saying , somed on a second, one of these services are bundled with other services so what goes to the music part is unclear and we will not get enough of that. they think of something like amazon or what a mobile carrier would offer in the future. they also look at some thing like spotify, and spotify is the one that is really in jeopardy here. and more than half of spotify users listen for free. spotify doesn't make that much money from for users from which means there's not a lot of money that flows to songwriters. songwriters are asking
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to get paid from any time someone streams and not from the revenue sharing basis. scarlet: what kind of leverage to the songwriters have? they are not exact retailers with, who can say i will not release my album on spotify -- not exactly taylor swift, who can say i will not release my on spotify. >> if one of them were to such -- threaten to take off 20% of music in the world, that would be big before spotify or pandora did they make deals everywhere else in the world so they will try to put pressure on some of these companies in france or brazil or japan if they don't get what they want. as you point out, the music industry has been fighting the tech industry for 10 years now and the tech industry usually wins. the songwriters see an opportunity to get a formula they are happy with and they are confident that this rate will get adopted. scarlet: lucas shaw, thank you
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so much. oliver: time for the biggest business stories in the news right now. valeant is in talks with investors to sell $2.5 billion of secure bonds. the second round of refinancing intended to ease the burden of its $30 billion debt load. that is according to people familiar with the discussion who say the drugmaker's bankers ha discussed selling bonds in 2 parts. the sale is part of a valiant's most ambitious effort yet to rein in the debt it took on the acquisition period. sellinggricole is according to people familiar with the matter, who also said the deal could potentially produce $2.4 billion for france's third-largest bank. credit agricole is said to be speaking to advisors about buyers. it may attract international and regional lenders seeking an entry into the kingdom. "businesss your
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flash" update. scarlet: still ahead, a car company teaming up with ibm to form a new artificial intelligence partnership. this is bloomberg. ♪
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oliver: this is "bloomberg markets." i am oliver renick. scarlet: i am a scarlet fu. time for "options insight" with julie hyman. julie: joining me is kevin kelly. you pointed out something i did not realize -- namely, we have seen small-cap volatility versus large cap volatility pick up a little bit more. i made a chart to illustrate your point. hopefully we can pull that up for viewers to see. thiss 10-d volatility of the russell 2000 as the ratio over 10-day volatility on the s&p
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500, and we have the moving average in yellow just to show the rising trend we are seeing here, that the gap is widening. kevin: yeah, this is pretty interesting, since could be foreshadowing turbulence, a market downturn coming up? vix shows 30 days coming up and seeing this wide out is concerning the event that a rate hike is baked in for march. it should be good for small-caps. they have tailwinds possibly tax legislation coming in to really help them out and they would benefit more from that. why are people hedging and why is volatility spreading into small caps when they are supposed to benefit from increasing economy, stronger dollar, also better tax policies? he doesn't make a lot of sense -- it doesn't make a lot of sense. that should be disconcerting, because we have seen global growth has been mixed. it has gotten better, but you figure that spx would catch up with the small-caps. julie: hasn't happened yet.
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i want to talk about one stock in particular that has been getting attention. snap has been declining for two days after rising for two days. the options are coming. you are excited to get your hands on some. kevin: one of the important things to follow in the ipo will options be allowed? that is what you are seeing play into the downfall over the last couple days, the banks know that options are going to trade this friday so they are able to lend out at high rates. isget a borrow on snap expensive but in anticipation of options coming, they can hedge their position at 20, 40%. some brokerages are charging 120%. julie: quite a fee. kevin: disappearing pictures and stuff -- the stock may disappear, too. julie: we are talking about salesforce from which just announced a new partnership with ibm for watson, getting some of
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its new products powered by that. wedon't have much time so just walk me through it quickly. kevin: options are cheap relative to the historical for salesforce.this is a great way to play off of cheap volatility for market moves. it it will make 52 new week other you will get earnings, or it will fall down just like it was in december. stops here at $83. great way to capitalize on the volatility to get either to the upside or downside. btv chart on vix, russell 2000. julie: got to leave it there. scarlet: thank you so much. this is bloomberg. ♪
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mark: i am mark crumpton. let's get to "first word" news. health and human services secretary tom price told white house reporters that the gold to
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affordable care act is to a level americans to select their own doctors, but there needs to be more competition. ofretary price: one third the counties in the united states have only one insurer offering coverage on the exchange it five states only have one insurer offering coverage on the exchange. one insurer is not a choice. mark: several conservatives said the plan would create "a republican welfare entitlement," and in an interview on bloomberg television, kentucky senator rand paul called -- proposal by fellow republicans obamacare lite. some workers are turning down backpay from the labor department because of fears of deportation triggered by the presidents immigration crackdown, according to sources with direct knowledge of the situation who tell bloomberg workers across the country are clearly about either collecting unpaid wages and overtime or refused to confirm their address so checks can be mailed by the de


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