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If You Have Money in the Market, Stay with the Market (Podcast) · Bloomberg Intelligence

0:02
Speaker 1: Welcome to the Bloomberg Penel Podcast. I'm Paul swing you
0:05
Speaker 1: along with my co host Lisa Brahma Waits. Each day
0:07
Speaker 1: we bring you the most noteworthy and useful interviews for
0:10
Speaker 1: you and your money. Whether at the grocery store or
0:12
Speaker 1: the trading floor. Find a Bloomberg Penl podcast on Apple
0:15
Speaker 1: podcast or wherever you listen to podcasts, as well as
0:17
Speaker 1: at Bloomberg dot com. This is the scandal that is
0:23
Speaker 1: rocking Wall Street and beyond. This is the admissions bribery
0:27
Speaker 1: case that has wrapped up numerous US universities, states, as
0:32
Speaker 1: well as Wall Street luminaries. Joining us here in our
0:35
Speaker 1: Bloomberg Interactive Brokers studios as Janet Lauren Bloomberg Endowments and
0:39
Speaker 1: Education Reporter. So Janet, let's just start with where are
0:43
Speaker 1: we here? Do we have a sense of how quickly
0:46
Speaker 1: these cases are are proceeding? I guess it's sort of
0:48
Speaker 1: a class prosecution with all of the prosecutors from a
0:51
Speaker 1: variety of different states going after a slew of people.
0:54
Speaker 1: How long will it take and how many people are
0:56
Speaker 1: expected to go to jail with this? So the next
0:59
Speaker 1: step is a hearing. Uh later at the end of
1:01
Speaker 1: March in Boston. UM. There were several people in court yesterday,
1:06
Speaker 1: including the man behind this scheme, Mr Singer from California.
1:10
Speaker 1: Could you describe the scheme? Okay? The scheme UM started
1:14
Speaker 1: with testing. So you want to get your kid into
1:18
Speaker 1: a top school, but your kid doesn't have the right tests.
1:21
Speaker 1: So they would hire people either to take the test.
1:24
Speaker 1: They had proctors and a couple of different site locations
1:28
Speaker 1: in California and Texas who could UM change the answers,
1:31
Speaker 1: and in some cases the kids did not know that
1:35
Speaker 1: their parents had hired the service to change their answers
1:38
Speaker 1: to inflate their score. UM. So that was one aspect
1:41
Speaker 1: to get higher test scores. And then the more interesting
1:45
Speaker 1: aspect was hiring UM coaches at various schools to UM
1:50
Speaker 1: say they needed these kids as their athletic recruits, and
1:53
Speaker 1: then to bribe the coaches and UH and these kids
1:57
Speaker 1: got in because they said they were UH star athletes
2:01
Speaker 1: on the water polo team or the tennis team or
2:05
Speaker 1: the soccer team. Is there a school UH that is
2:09
Speaker 1: sort of most prevalent. Definitely usc UM. There was somebody
2:14
Speaker 1: in the University of Southern California. University of Southern California, um.
2:19
Speaker 1: The I was reading through the indictment yesterday, and that
2:22
Speaker 1: seemed to be the school that had the most um
2:24
Speaker 1: connections of getting kids in fraudulently by bribing people um
2:30
Speaker 1: within the within the school. So from from a money's perspective,
2:33
Speaker 1: I'm wondering, this is sort of a paid a place scheme, right,
2:37
Speaker 1: money right. So the money would go often to the
2:40
Speaker 1: schools themselves, not to the schools themselves, they went to
2:44
Speaker 1: Mr Singer's um foundation UM. And believe it or not,
2:48
Speaker 1: these donors, these these people who were paying the bribe
2:52
Speaker 1: even got a text donation for giving money to his foundation.
2:57
Speaker 1: And he paid the bribes from that so ribes to
3:01
Speaker 1: to the coaches, to the proctors, to all the people
3:04
Speaker 1: in his network of fraud. So did any of it
3:06
Speaker 1: go to the actual endowments, to the base of of
3:09
Speaker 1: of money that we know of. No, they were being
3:11
Speaker 1: they these people were being paid off, you know again personally, Yes,
3:15
Speaker 1: they were being personally paid off. Of course, one reason
3:18
Speaker 1: why this is getting so much attention is because there
3:20
Speaker 1: just has been this fear h that if you're wealthy
3:23
Speaker 1: and connected, you can get whatever you want and perpetuate
3:26
Speaker 1: the success that you've had with your kids. Uh, and
3:28
Speaker 1: this sort of confirms that, right. The other is that
3:30
Speaker 1: there are a number of quite big names. Doug Hodges
3:34
Speaker 1: of Pimco, Gordon Caplan of Wilkie Far William mcglosh in
3:38
Speaker 1: this this to me blew me away of TPG Capital.
3:41
Speaker 1: He was the head of a unit that invested in
3:45
Speaker 1: socially conscious companies. Yea. I mean the irony is head spinning,
3:49
Speaker 1: right that that he was caught up in cheating for
3:51
Speaker 1: his son to get into college. But I think it
3:53
Speaker 1: shows the extent and the desperation that these these types
3:57
Speaker 1: of parents nothing but the best, and they'll do their
4:00
Speaker 1: willing to break the law to do this. And that
4:02
Speaker 1: is uh, you know that that's another step beyond you know,
4:05
Speaker 1: helping your kid get a job in grease the wheels
4:08
Speaker 1: in different ways, you know, they were bribing people. And
4:11
Speaker 1: then if you read in the transcripts the wire taps,
4:14
Speaker 1: they knew exactly what they were doing. Do you get
4:16
Speaker 1: the sense that this is uh sort of understood to
4:20
Speaker 1: be what people have to do to get into the
4:23
Speaker 1: school of their choice. I mean, to me, it was
4:24
Speaker 1: mind boggling. I had ever heard of this before. But
4:27
Speaker 1: are there certain circles where it's just sort of yeah,
4:30
Speaker 1: I guess this is twenty nineteen. You bribe your person
4:33
Speaker 1: to get your kid into college. I I think at
4:36
Speaker 1: this extreme level, it's not pervasive by any means. Um.
4:40
Speaker 1: In the indictment, there was described you get in the
4:42
Speaker 1: front door. You really have the academic chops. You know,
4:45
Speaker 1: you really are the best of star debate or the
4:48
Speaker 1: best of something that really elevates you to this level.
4:51
Speaker 1: And there's the best traditional backdoor, which is giving millions
4:54
Speaker 1: of dollars. Maybe you went to that school um to
4:57
Speaker 1: try to make donations, you know, by a building, and
5:00
Speaker 1: sometimes at some places that works very effectively. Well, this
5:03
Speaker 1: guy created what he called a side door, meaning he
5:06
Speaker 1: knew that there was some entry point that was a
5:09
Speaker 1: little squishy, namely college athletics. The guy who founded this company,
5:13
Speaker 1: Mr Singer. And you know, if you are recruiting for
5:17
Speaker 1: a basketball team that is well known and you know
5:21
Speaker 1: your you can only recruit real kids who are going
5:23
Speaker 1: to play on these teams. They were pretending to recruit
5:27
Speaker 1: kids to play on lesser sports water polo, um, tennis.
5:32
Speaker 1: You know, they don't get as much attention and scrutiny.
5:34
Speaker 1: So perhaps it was a little bit easier to figure
5:36
Speaker 1: out how to work the system. And you look at
5:39
Speaker 1: the indictment and they used photoshop to take kids faces,
5:45
Speaker 1: these kids faces and putting them on the bodies of
5:47
Speaker 1: people who were playing sports. I mean it's it's sophisticated,
5:51
Speaker 1: yet it's very crude in a way. Yeah, and just
5:54
Speaker 1: so so blatant, so blatant. I just have to wander
5:58
Speaker 1: real quick jet twenty seconds. Do you think that any
6:00
Speaker 1: of these big colleges will lose money as a result
6:02
Speaker 1: of this? I don't. So you think that it's not
6:05
Speaker 1: going to really affect anything in the long term. Um.
6:07
Speaker 1: I think you saw with worst scandals of sexual abuse,
6:11
Speaker 1: they continue to raise money. Wow. Janet Lauren, thank you
6:15
Speaker 1: so much for being here. This story is is really
6:18
Speaker 1: one that will be rocking certainly the world of parents
6:22
Speaker 1: who have kids who are going to go to college
6:25
Speaker 1: and are wondering what are we competing with at this point.
6:28
Speaker 1: Janet Lauren, Bloomberg Endowments reporter, joining us here in our
6:31
Speaker 1: Bloomberg Interactive Broker's studios. Brexit all very much on the
6:49
Speaker 1: docket here. Theresa May did lose that crucial vote of
6:53
Speaker 1: support for her latest plan to exit the European Union.
6:58
Speaker 1: This is leading to some hope act really ironically that
7:01
Speaker 1: perhaps as fully to a second referendum or a delay
7:04
Speaker 1: to the Brexit process, and that is why perhaps the
7:07
Speaker 1: pound of strengthening versus the dollar today. The question is
7:11
Speaker 1: this really realistic? And joining us here as Ben Emmon's
7:13
Speaker 1: he is managing director focusing on global macro strategy at
7:17
Speaker 1: Medley Global Advisors. He's also a Bloomberg opinion columnist. Ben,
7:21
Speaker 1: thank you so much for being here in our Bloombergetter
7:22
Speaker 1: Active Broker Studios. Do you think that this optimism is misplaced?
7:27
Speaker 1: Actually there's not, Lisa, because reach what is going on here?
7:30
Speaker 1: And I think this is very confusing for a lot
7:31
Speaker 1: of people too. Yes, Brexit is confusing, very confusing. You know,
7:35
Speaker 1: you go through these motions and I think in the
7:37
Speaker 1: UK specific process, the voting Colney on amendments to trying
7:41
Speaker 1: to stee it his withdrawal agreement to ultimately a version
7:44
Speaker 1: that both sides can agree on. EU and the UK
7:46
Speaker 1: now you shut no, no, no, no, this is it.
7:49
Speaker 1: But there's much more rigor room here and I think
7:51
Speaker 1: the point that's one reason why the pound is bidding
7:53
Speaker 1: up right that's optimism that ultimately we do end up
7:57
Speaker 1: with an agreement that both of you can you and
8:00
Speaker 1: live with. In addition, I think this is also about
8:03
Speaker 1: the fact that you have to look more long term here.
8:05
Speaker 1: We're going to like to get an extensive Article fifty
8:07
Speaker 1: that's being voted on tomorrow, and that's the EU has
8:10
Speaker 1: already said if you have a question to us, then
8:13
Speaker 1: we'll give it to you. That's been out there. So
8:15
Speaker 1: UK likely to go to that direction as opposed to
8:17
Speaker 1: the second referendum, and the reason is that in the
8:20
Speaker 1: UK they don't really want to go to a second referenum. Okay,
8:22
Speaker 1: so let's put this into market terms, right, I mean,
8:25
Speaker 1: if there is going to be an extension, Goldman Sachs says,
8:28
Speaker 1: the pound will likely rally to a three year high.
8:31
Speaker 1: How long does the extension have to be in your
8:34
Speaker 1: opinion to make that happen? And do you agree with
8:36
Speaker 1: Coleman Sacks. I do agree with Goldman section at points
8:40
Speaker 1: the extension could be three months, it could be longer
8:42
Speaker 1: even But I actually really think that over really facing
8:45
Speaker 1: year is that we're gonna have a transition period of
8:47
Speaker 1: at least a few years, which is technically the withdrawal agreement, right,
8:50
Speaker 1: but that's until twenty two I believe then in that
8:55
Speaker 1: time frame it gives them a lot of time to
8:57
Speaker 1: completely work out what they ultimately will be as a
9:00
Speaker 1: relationship to the EU. That's what they call it. It's
9:02
Speaker 1: a relationship and that's the trading relationship. And that's all
9:05
Speaker 1: about concepts like Norway plus or e A plus, that
9:09
Speaker 1: idea of like you function like the similar way that
9:12
Speaker 1: you did before, but in a in a not in
9:15
Speaker 1: the EU context of being part of the EU twenty seven. So, yes,
9:18
Speaker 1: the pounder is upside. The pound is actually being very
9:21
Speaker 1: depressed simply because it's uncertainty about how do you agree
9:24
Speaker 1: with the exactly what workus as it slowly has been
9:27
Speaker 1: worked out. I think that Golden Sex as a point,
9:30
Speaker 1: there's there's room to rise here. Making a round trip
9:33
Speaker 1: basically back to the numbers from last year in March
9:35
Speaker 1: when the Brexit and certaintyv started to increase, right when
9:38
Speaker 1: we were one forty one on the pounds. Really interesting.
9:41
Speaker 1: So Theresa May, is she out as Prime Minister? I
9:44
Speaker 1: don't think so. I don't think that she will really
9:46
Speaker 1: face any how many lives does this person have the
9:49
Speaker 1: political lives is really I think she's absolutely my hero
9:53
Speaker 1: because no matter how much people beat up on her,
9:55
Speaker 1: she is resilient. She's very resilient. She's also the only
9:59
Speaker 1: person that's willing to the job that's fair enough, so
10:05
Speaker 1: she is She's definitely she will stay in the saddle. Now. Obviously,
10:09
Speaker 1: if if, if the voting goes on and it leads
10:12
Speaker 1: to a real breakup of government, coalition or a government,
10:15
Speaker 1: and then yes you face a new election, but that's
10:18
Speaker 1: not really happening here. So I think that she's she'll
10:21
Speaker 1: stay on as Prime minister. Our view is that will
10:25
Speaker 1: ultimately lead to a long term agreement that she will
10:28
Speaker 1: will will be able to have engineered for you. Okay,
10:30
Speaker 1: all right, So let's say Brexit is delayed and there
10:33
Speaker 1: is some sense that we are going to come to
10:35
Speaker 1: a resolution, not easy, not clean, but at least a
10:39
Speaker 1: resolution here and one that might not be as painful
10:41
Speaker 1: as a full no deal brexit. Do you get the
10:43
Speaker 1: sense that people will have to raise their growth expectations
10:47
Speaker 1: for the euro region, which have been completely beaten up
10:50
Speaker 1: over the past few years, and do you think that
10:52
Speaker 1: that will lead to yields rising from the near lowest
10:56
Speaker 1: ever rates that we're seeing right now. Yeah, there's a
10:59
Speaker 1: fair point because what's driving the slowdown in Europe. One,
11:03
Speaker 1: it is driven by China and the demand for Chinese
11:06
Speaker 1: products and the trade war that had an impact there.
11:09
Speaker 1: That's been one fact. But the other fact is that, yes,
11:11
Speaker 1: the trade with UK is substantial. The Netherlands I'm from,
11:15
Speaker 1: for example, is very sensitive to that trade. Germany therefore two.
11:19
Speaker 1: So I do think that if the resolution happens in
11:21
Speaker 1: the activity picks up further, that yes, there's an opportunity
11:25
Speaker 1: for Europe to rebounds, and it has a lot more
11:27
Speaker 1: scope to rebound than say the US going through this
11:30
Speaker 1: motion of slowdown from the fiscal This is a big deal.
11:33
Speaker 1: You think that the euro Zone, the real European region,
11:36
Speaker 1: has more potential to rebound and grow than the US. Yeah,
11:42
Speaker 1: what period over this beerod devastating the next coming year
11:45
Speaker 1: or so, and this whole trade agreement with the UK
11:48
Speaker 1: is completely flashed out, there's that scope to actually see
11:51
Speaker 1: that rebound. And I think that therefore not only the
11:54
Speaker 1: pound but also the euro has opportunity to right to appreciate.
11:58
Speaker 1: But that probably been the ons are going to underperform. Yeah,
12:01
Speaker 1: you would think at some point, I do bun deals
12:03
Speaker 1: are you know, near zero That is a reflection one
12:06
Speaker 1: of really low inflation. And to your point earlier like
12:08
Speaker 1: why do you have negative yields? It's increasing, that's inflation expectations.
12:12
Speaker 1: That's definitely part of that story. But the gross story
12:15
Speaker 1: that would pick up again, Yes, would normalize bound hields,
12:18
Speaker 1: would normalize even Italian and friendship bond deals. I'm not
12:22
Speaker 1: so much in the camp of that. The Eurozone is
12:24
Speaker 1: facing a real recession risk for that matter, So it's
12:27
Speaker 1: it's more maybe Italy itself as a contraction phase currently,
12:30
Speaker 1: but not probably. Ben Emmons, thank you so much for
12:33
Speaker 1: being with me today. This is really interesting Europe with
12:35
Speaker 1: more potential to grow than the US. Ben Emmons is
12:39
Speaker 1: Managing director of Global macro Strategy at Medley Global Advisor
12:43
Speaker 1: and a Bloomber Opinion calumnist. There is a paradox in
13:01
Speaker 1: markets today. You have US equities that are rallying, that
13:05
Speaker 1: are continuing to push forward despite concerns about high valuations,
13:10
Speaker 1: and yet you also have bonds that are pushing forward.
13:12
Speaker 1: And this is the mind boggling statistic to me. There
13:16
Speaker 1: is currently nine point two trillion dollars of negative yielding
13:20
Speaker 1: debt outs there That is the highest level since late
13:24
Speaker 1: two thousand and seventeen. Usually the higher this level goes,
13:28
Speaker 1: the more bearish you would think you ought to be
13:31
Speaker 1: on the global economy. Joining us now to try to
13:33
Speaker 1: put this together and make sense of it is David Katz, President,
13:36
Speaker 1: chief investment Officer of Matrix Matrix Asset Advisors. David, thank
13:41
Speaker 1: you so much for being with us. I want to
13:42
Speaker 1: start there. Do you think that there is sort of
13:45
Speaker 1: a contradiction baked into markets given how low bond yields
13:49
Speaker 1: are today? Also, while you have US equities continuing to
13:53
Speaker 1: rally well, we think the fact that the bond yields
13:57
Speaker 1: are so exceptionally low make style that much more attractive,
14:01
Speaker 1: which means it really does make sense that the stocks
14:03
Speaker 1: have been rallying. At some point the economy is going
14:07
Speaker 1: to get it right in terms of or the market
14:10
Speaker 1: is going to get it right, that the economy is
14:11
Speaker 1: actually doing better than the bond market thinks, and then
14:14
Speaker 1: we think that rates are going to start to drift higher.
14:16
Speaker 1: But in the meantime, it does mean the stocks are
14:18
Speaker 1: an attractive place to be for two thousand and nineteen,
14:22
Speaker 1: So we've certainly had a fantastic start to the year
14:25
Speaker 1: for equity investors, or the SMP up over eleven percent
14:28
Speaker 1: year to date. David, So is are we still chasing
14:31
Speaker 1: it here? Are we waiting for pullbacks? Or do we
14:33
Speaker 1: just kind of trade around our favorite names here? What
14:35
Speaker 1: are you recommending? So we went into the year very
14:39
Speaker 1: upbeat about the market, thought it would be a well
14:41
Speaker 1: above average year. The fact that you've gotten eleven percent
14:44
Speaker 1: in ten weeks means that at some point it's going
14:46
Speaker 1: to slow down. So if you've been sitting on the
14:48
Speaker 1: sidelines and you're finally looking at the market saying, boy,
14:51
Speaker 1: it's doing great, maybe I should start to jump in
14:53
Speaker 1: right here. That we would advise against um. We think
14:57
Speaker 1: that if you have money in the market, stay with
14:59
Speaker 1: the market. We would use a week like last week
15:02
Speaker 1: where the market was down to to three to four
15:04
Speaker 1: percent is a place to be adding to stocks, but
15:06
Speaker 1: wouldn't be chasing the big updates like you had earlier
15:09
Speaker 1: in the week and then today. All right, but David,
15:11
Speaker 1: I want to go back to the whole bond stock disconnect,
15:14
Speaker 1: or maybe it's an absolute direct connection. Here's what I
15:17
Speaker 1: don't understand. If bonds and stocks can rally in tantem,
15:21
Speaker 1: then do bonds still provide sort of the haven and
15:26
Speaker 1: the buffer uh kind of bet or the buffer kind
15:29
Speaker 1: of uh proposition versus stocks? In other words, there usually
15:33
Speaker 1: is an inverse relationship. So the sixty kind of breakdown
15:36
Speaker 1: of your portfolio makes sense. The bond offering sort of
15:39
Speaker 1: buffer against selloffs and stocks does that not count anymore?
15:43
Speaker 1: Du Bonds just always rally no matter what. Oh, absolutely not.
15:47
Speaker 1: So when we look at the bond market right now,
15:49
Speaker 1: we think yields are at the lower end of their range.
15:52
Speaker 1: We think on the tenure you probably get up to
15:55
Speaker 1: about three or more before year end, which means if
15:59
Speaker 1: you're a bond in vestor look to bonds to give
16:02
Speaker 1: you a little bit of income, some stability if the
16:04
Speaker 1: market sells off meaningfully, but do not look for bonds
16:07
Speaker 1: to be a meaningful place to make money. The flip
16:09
Speaker 1: side is stocks will do better over time. Valuations are
16:13
Speaker 1: at about sixteen and a half time's earnings, which is
16:15
Speaker 1: pretty reasonable in terms of the overall market in a
16:18
Speaker 1: good economy with low interest rates, so we think that
16:21
Speaker 1: will make money. If we're wrong. If there were problems
16:24
Speaker 1: with the China trade deal, we think the stock market
16:28
Speaker 1: would sell off and bonds would rally on that because
16:31
Speaker 1: that would hurt the global economy. The other wild card
16:33
Speaker 1: that's out there is one of the reasons our rates
16:36
Speaker 1: are so low is because we live in a global
16:39
Speaker 1: economy and European rates are low and in fact going
16:42
Speaker 1: to be going lower. So, David, you mentioned China. To
16:45
Speaker 1: what extent we get this question a lot. To what
16:47
Speaker 1: extent do you think a potential China trade deal? Uh,
16:51
Speaker 1: successful China trade deal is already priced into the equity markets.
16:55
Speaker 1: We think that the equity markets are not pricing in
16:58
Speaker 1: a failure anymore in the fourth or they were pricing
17:00
Speaker 1: in a failure. So we think we're right now in
17:03
Speaker 1: the in the middle ground. If there was not a deal,
17:05
Speaker 1: if we double the tariffs again, we think the market
17:08
Speaker 1: would sell off. If there is a deal, we don't
17:11
Speaker 1: think it necessarily means the market is going to rally
17:13
Speaker 1: five or ten percent in the following weeks. But what
17:16
Speaker 1: we do think it does is it really frees up
17:18
Speaker 1: the global economy to do better. And if the global
17:21
Speaker 1: economy is doing better, then we think stocks can do better.
17:24
Speaker 1: So we think a deal is absolutely critical for the
17:28
Speaker 1: US economy and for the U S stock markets. We
17:31
Speaker 1: think that the Trump administration, or at least President Trump,
17:35
Speaker 1: finally understands that when he talks about a deal happening,
17:38
Speaker 1: the market goes up. When he talks about being Mr Tariff,
17:41
Speaker 1: the market goes down. If he understands that, and if
17:44
Speaker 1: they've made as much progress as the body language of
17:47
Speaker 1: the last few weeks suggest, there would be a deal
17:49
Speaker 1: and that would free up our market to do better
17:52
Speaker 1: as the year progresses. If there's not a deal, where
17:54
Speaker 1: a lot more cautious. So, David, I want to go
17:57
Speaker 1: back to what you were talking about with respect to
17:59
Speaker 1: you would be adding at times like last week when
18:02
Speaker 1: there was about a three or four percent pullback at
18:03
Speaker 1: one point. Uh, you focus on specific stocks that you like, right,
18:07
Speaker 1: You're not talking about broad index type of strategy. Correct.
18:12
Speaker 1: That's absolutely correct. And even with the market up at
18:14
Speaker 1: these higher levels right now, we do think there are
18:16
Speaker 1: a lot of stocks that are selling it very attractive valuations.
18:20
Speaker 1: You know, we're able to buy companies that have good
18:23
Speaker 1: long term growth prospects, paying good yields, that are selling
18:26
Speaker 1: at nine, ten eleven times earnings, and generally, when you're
18:28
Speaker 1: able to do that you do pretty well. Yes, So
18:31
Speaker 1: what are you talking about in particular? So companies that
18:34
Speaker 1: we like in the biotech area. Gilead Science has been
18:38
Speaker 1: a miserable performer over the last year. Itsels under ten
18:41
Speaker 1: times earnings, has a three point nine percent yields. They
18:44
Speaker 1: brought in the new CEO who's very well regarded. We
18:47
Speaker 1: think the surprises there are on the upside. PNC Financial
18:51
Speaker 1: Services is a bank that is very strong bank great
18:55
Speaker 1: financial are great capital ratios, but has really lagged the
18:58
Speaker 1: group over the last year. Uh it sells it about
19:01
Speaker 1: eleven times earnings and pays a three percent yield. Royal
19:04
Speaker 1: Dutch Oil Company pays a six percent yield. Zimmer biomet
19:09
Speaker 1: which makes medical devices knee and hip replacements, UH sells
19:13
Speaker 1: it about fourteen or fifteen times earnings. Has been a
19:16
Speaker 1: lot of insider buying of late. So all of those
19:18
Speaker 1: companies we think are pretty low risk with very good
19:21
Speaker 1: reward potentials. How about the UH real cook about thirty seconds, David,
19:25
Speaker 1: the Fang stocks. They have been such a leader, both
19:27
Speaker 1: on the upside last year and the downside in December.
19:30
Speaker 1: Are you guys playing in that space at all? So
19:33
Speaker 1: we do think there are a few that are actually
19:35
Speaker 1: pretty attractive here. So we've been buying Facebook, uh, and
19:39
Speaker 1: although we brought it lower, we do think the stock
19:41
Speaker 1: goes up from here. Google, again, we we bought lower,
19:44
Speaker 1: but we still do like that stock. Here. Netflix we're
19:47
Speaker 1: very wary of. We think that it is richly priced.
19:51
Speaker 1: You're starting to see the cps and the Comcast and
19:53
Speaker 1: the Disneys of the world taking back a lot of content, uh,
19:57
Speaker 1: developing their own O T t U product. So we
20:00
Speaker 1: think Netflix probably not as strong as it's been. Amazon
20:05
Speaker 1: is a great company, but by the product and probably
20:08
Speaker 1: we try away from the stock, we think they're better
20:10
Speaker 1: places to make money. David Cats, thank you so much.
20:13
Speaker 1: David katz As, a chief investment officer for Matrix Asset Advisors,
20:17
Speaker 1: are joining us on the phone. We appreciate that well.
20:34
Speaker 1: Listeners to the show know that Lisa and I like
20:36
Speaker 1: to talk technology. We ausually talk about some of the
20:39
Speaker 1: fun stocks like Facebook and Amazon and Google. Today, we
20:42
Speaker 1: want to talk about an interesting story. We want to
20:44
Speaker 1: really talk about inside a quantum technology. What does quantum
20:48
Speaker 1: technology and what does it mean for the marketplace. We
20:51
Speaker 1: are fortunate to have Lawrence Gassman join us. Lawrence is
20:54
Speaker 1: a founder and president of Inside Quantum Technology, based in Lynchburg, Lynchburg, Virginia. Lawrence,
21:00
Speaker 1: thank you so much for joining us. First um, What
21:03
Speaker 1: is quantum technology and what does it do that makes
21:07
Speaker 1: it so important? We're in Charlottesville, Virginia, by the way.
21:11
Speaker 1: But quantum technology, okay, who's from the thank you? Is
21:16
Speaker 1: a technology that was derived from something called quantum information theory,
21:21
Speaker 1: which was theoretical development in the ninety nineties, and with
21:27
Speaker 1: the growth in power of chips, it's actually become reality.
21:33
Speaker 1: And it's really three things. One is quantum computers, which
21:38
Speaker 1: outpace any computer that's ever been built and is able
21:41
Speaker 1: to solve certain problems that classical computers can't do. Um
21:46
Speaker 1: quantum encryption, which is the most which has different variants,
21:50
Speaker 1: but it's the most secure encryption ever developed, and therefore
21:57
Speaker 1: of interest in the military. Actually the military is all
22:00
Speaker 1: over the world, and that's the two main things. The
22:03
Speaker 1: third thing is quantum senses, which are senses that are
22:08
Speaker 1: more potentially more sensitive than anything that has been built before.
22:13
Speaker 1: So together they have a common core and history um
22:18
Speaker 1: but they're producing new markets just beginning to get going
22:21
Speaker 1: in some ways. So one reason why Lawrence. We're talking
22:25
Speaker 1: about this now is because we're almost upon the Inside
22:29
Speaker 1: Quantum Technology conference that's going to be held in Boston
22:32
Speaker 1: starting March, and I'm just wondering, do you have a
22:35
Speaker 1: sense of attendance for this conference? And the reason why
22:39
Speaker 1: I think this is really important is because when I
22:41
Speaker 1: hear quantum computing, my brain kind of starts to go fuzzy,
22:45
Speaker 1: and I think, you know, please, I hope I can
22:47
Speaker 1: understand this and and and understand the practical applications. But
22:51
Speaker 1: in reality, this is going to be the ce change
22:54
Speaker 1: that determines which of the IBM, Microsoft, Intel A villas
22:57
Speaker 1: are going to be the winners in the coming technology cycle. Well,
23:02
Speaker 1: the conference will be next week, and we have a
23:05
Speaker 1: mix between some of the big big companies that we
23:08
Speaker 1: have IBM, Microsoft, d Wave which is a specialist company
23:12
Speaker 1: but a rather substantial one. And one thing you'll see
23:18
Speaker 1: is that there's a huge mix and an impressive mix
23:21
Speaker 1: between the companies and the everyday names. On the encryption side,
23:25
Speaker 1: for instance, you have just about every major telephone company involved.
23:29
Speaker 1: But there is also a stunning number of um startups
23:35
Speaker 1: being funded by vcs that are really begin to take off.
23:42
Speaker 1: I'm for going to ask me how many. I don't know,
23:45
Speaker 1: but I seem to discover one new one every morning.
23:48
Speaker 1: We again, we're going to have a lot of the
23:50
Speaker 1: more prominent of the firms in that space. I think
23:55
Speaker 1: there's a sense that this is a really new area
23:58
Speaker 1: and a lot of money will be made over the
24:01
Speaker 1: next few years and even more in the next ten
24:04
Speaker 1: years UM and a lot of talented people are responding
24:08
Speaker 1: to that. So Lawrence, give us, if you can, some
24:10
Speaker 1: practical applications that our listeners might get a sense of
24:14
Speaker 1: how quantum technologies quantum computing will impact their their daily lives. So,
24:20
Speaker 1: I mean, as far as I'm concerned, there isn't going
24:23
Speaker 1: to be a desktop quantum computer in the foreseeable future.
24:28
Speaker 1: But because people have said things like that about computers
24:30
Speaker 1: for a long time and they've turned out to be wrong.
24:33
Speaker 1: But what it really does is UM. Well, two of
24:36
Speaker 1: the areas that are really beginning to take off now
24:40
Speaker 1: are problems that could not be solved with classical computers,
24:44
Speaker 1: in building new materials or building new drugs. Quantum computers
24:49
Speaker 1: seem to be able to tackle that kind of problem,
24:52
Speaker 1: or transportation and planning UM. So you get people like
24:56
Speaker 1: Volkswagen and UM and and US and some other firms
25:01
Speaker 1: that are beginning to use quantum computing to solve those
25:05
Speaker 1: kind of problems. On the encryption side, quantum computing actually
25:10
Speaker 1: raises an issue because if we could ever build a
25:12
Speaker 1: quantum computer big enough, and we're not sure when that
25:16
Speaker 1: will happen, but not too distant future, we'll be able
25:18
Speaker 1: to break all the common um UH encryption schemes, including
25:24
Speaker 1: the ones that you know every use every day on
25:26
Speaker 1: your um and your computer. So that opens a new
25:30
Speaker 1: opportunity for new kinds of encryption schemes, including some that
25:33
Speaker 1: actually involved quantum technology itself. UM. So that's a problem
25:38
Speaker 1: on the solution, but it's one the quantum computers create.
25:42
Speaker 1: But it's a lot of optimization problems, and and that's
25:46
Speaker 1: really where it's focused at the moment. Lawrence, just real
25:49
Speaker 1: quickly here when we talk about quantum computing and it
25:52
Speaker 1: just means the amount of speed and the amount of
25:54
Speaker 1: data that can be involved. Is that basically the underlying
25:58
Speaker 1: unifying things here and the tying um thing conceptually um
26:04
Speaker 1: it involves. So I mean, everybody knows whether bit it
26:07
Speaker 1: bit is a one or zero in quantum computing, and
26:11
Speaker 1: quantum technology. You have things called cubits which are actually
26:14
Speaker 1: their physical manifestation is actually a quantum state. That's something
26:19
Speaker 1: that involves I think we have time for me to
26:22
Speaker 1: go into quantum a theory, but we don't. We have
26:25
Speaker 1: done seconds. But the important thing is when you've got
26:29
Speaker 1: a bit and you never add another bit, you've doubled
26:31
Speaker 1: the capacity. With um quantum computing, it goes up geometrically.
26:38
Speaker 1: So uh, if you had a five bit computer that's
26:43
Speaker 1: not that large, but the five hundred cubic computer would
26:46
Speaker 1: be able to do amazing things. Lawrence Gasman, thank you
26:49
Speaker 1: so much for being with us, Founder and president of
26:51
Speaker 1: inside at Quantum Technology, based in Charlottesville. Well, the cannabis
27:09
Speaker 1: business is certainly getting a lot of love recently. First
27:12
Speaker 1: we had Martha Stewart throwing her hat in a ring,
27:14
Speaker 1: and now we have billionaire investor Nelson Peltz joining Aurora
27:18
Speaker 1: Cannabis as a strategic advisor and as receiving stock options
27:22
Speaker 1: that could make him the pot firm's second largest shareholders.
27:25
Speaker 1: To kind of dig into all things cannabis, we have
27:28
Speaker 1: Christine A. M. She has a Bloomberg columnist on Canadian cannabis.
27:32
Speaker 1: She's from Bloomberg Opinion. She joins us from the Toronto Bureau. Christine,
27:36
Speaker 1: thanks for joining us. How important is it that a
27:39
Speaker 1: significant investor with name recognition, Uh put some capital behind
27:44
Speaker 1: this business. Thanks for having me. Yeah, Well, as you say,
27:47
Speaker 1: He's certainly not the first big name to join a
27:50
Speaker 1: cannabis company, um Martha Stewart being another very prominent example.
27:54
Speaker 1: UM Gene Simmons is also working with the cannabis company.
27:57
Speaker 1: There are lots of that's not exactly surprising, but going well,
28:00
Speaker 1: that's true. But Nelson Pelts is arguably the biggest name
28:04
Speaker 1: investor to work with the cannabis company. So it's quite
28:07
Speaker 1: significant for Aurora. You can see that in the way
28:09
Speaker 1: the share price is reacting today, currently up about eleven
28:13
Speaker 1: in Toronto trading. Um and and Pelts is basically coming
28:18
Speaker 1: on board to help advise the Aurora on strategic partnerships. Now,
28:21
Speaker 1: Aurora is one of the biggest companies in this space,
28:23
Speaker 1: but has not yet been able to secure a strategic
28:26
Speaker 1: partnership along the lines of Canopies deal with Constellation Brands
28:30
Speaker 1: or Chronoses deal with Altria Group. Um And, so they
28:33
Speaker 1: they've been hunting for that, and they're looking for partners
28:37
Speaker 1: across a wide range of verticals in the industry. And
28:40
Speaker 1: the hope here is that Pelts, with all his wide
28:43
Speaker 1: ranging contacts, particularly in the consumer products space, can help
28:46
Speaker 1: them form those partnerships. Christine, That's exactly where I wanted
28:49
Speaker 1: to go to this concept. That and Nelson Pelts. His
28:51
Speaker 1: relationships have included the likes of Wendy's as well as Proctoring, Gamble, Pepsi, Mandeleys,
28:58
Speaker 1: Family Dollar Stores. These are more of consumer facing companies
29:03
Speaker 1: that are well known in households across North America. One
29:06
Speaker 1: question that I have is the marijuana companies to date
29:09
Speaker 1: that have been most successful have really rooted their business
29:12
Speaker 1: in medical marijuana. I'm just wondering how does this sort
29:16
Speaker 1: of position Aurora Cannabis in a consumer way potentional That's
29:21
Speaker 1: a great question because Aurora has made it very clear
29:23
Speaker 1: that it is first and foremost a medical cannabis company,
29:27
Speaker 1: that that both in Canada and internationally is it's primary focus,
29:31
Speaker 1: not the recreational market. But that said, I talked to
29:34
Speaker 1: their chairman, Michael Singer this morning and he said, well,
29:36
Speaker 1: they're looking for is multiple partners not just in the
29:39
Speaker 1: pharmaceutical space, but also in package goods, beverages, cosmetics, wellness,
29:44
Speaker 1: and so this indicates that well, you know, medical still
29:47
Speaker 1: remains their primary focus. They are looking increasingly at that
29:50
Speaker 1: recreational and consumer side of things, and the hope is
29:54
Speaker 1: that helps with all of his connections. As you mentioned,
29:56
Speaker 1: he's chairman at Wendy's, he's on the border Proctor and
29:58
Speaker 1: Gamble might be will to help form those partnerships, and
30:02
Speaker 1: they're Aurora's chairman. Michael Singer said, it's not just about
30:05
Speaker 1: Peltz's Rolodeques, although that's very much part of the appeal,
30:08
Speaker 1: of course, but it's also you know, his advice to
30:11
Speaker 1: his experience um and and the fact that he they're
30:14
Speaker 1: going to need some help is they're they're going to
30:16
Speaker 1: be looking to form all of these different partnerships. Also,
30:19
Speaker 1: I should note that unlike Canopy and Chronos, which have
30:22
Speaker 1: created one big deal, one big partnership, Aurora doesn't want
30:26
Speaker 1: to do that. They want to maintain control of the
30:28
Speaker 1: company and have several different smaller partnerships across a variety
30:31
Speaker 1: of verticals. Christine, give us a sense of the Canadian
30:34
Speaker 1: cannabis market itself, how big is it? And how fasts
30:37
Speaker 1: are growing, great question. Yeah, the Canadian cannabis market is
30:41
Speaker 1: still relatively small. UM. We legalized in October and so
30:45
Speaker 1: it's only been a few months. And part of the
30:47
Speaker 1: reason the market has remained small to day is because
30:49
Speaker 1: there have actually been some pretty severe supply shortages and
30:53
Speaker 1: so sales haven't been as high as many companies have hoped.
30:57
Speaker 1: And that's why many companies, Aurora included, are looking to
31:00
Speaker 1: expand internationally. UM that you know, Canada is a great
31:04
Speaker 1: starting point. It's been away for them to find their feet,
31:07
Speaker 1: but it's really going to be an international presence, particularly
31:11
Speaker 1: in the international medical market, which is much bigger than
31:13
Speaker 1: the international recreational market. That's going to make these companies
31:16
Speaker 1: global players. So are they Is Aurora still primarily Canada
31:21
Speaker 1: right now? Uh? It is. It would get the majority
31:24
Speaker 1: of its revenue from Canada, but it has operations in
31:27
Speaker 1: many different countries. In fact, they just shipped their first
31:31
Speaker 1: UM cannabis oil to German pharmacies earlier this week. UM.
31:35
Speaker 1: And they have presence in Australia, several other European countries UM.
31:39
Speaker 1: And they're working on Latin American partnerships as well. So
31:42
Speaker 1: they are one of the more global companies in this
31:45
Speaker 1: space to date, although many of those uh international initiatives
31:49
Speaker 1: are still pretty early stage. Just real quick here, Christina,
31:51
Speaker 1: I'm wondering if we can get a sense that these
31:53
Speaker 1: big names, these big name investors. We're not talking about
31:57
Speaker 1: Gene Simmons, who, of course was the lead singer of
31:59
Speaker 1: Kiss and perhaps my thank you, thank you, paul I,
32:02
Speaker 1: I do have some pop culture culture knowledge, Christine. Is
32:06
Speaker 1: there a sense that recreational use of marijuana will gain
32:11
Speaker 1: greater legalization? Is that sort of the feeling here and acceptance? Yeah,
32:15
Speaker 1: that is the feeling. Although you know, this is it's
32:17
Speaker 1: interesting seeing Pelts come in because for the most part,
32:20
Speaker 1: large American investors have been pretty reluctant to touch the space.
32:23
Speaker 1: And that's because you know, as you know, there are
32:26
Speaker 1: many states that have legalized recreational marijuana, but it's still
32:29
Speaker 1: illegal at the federal level, and so that's made things
32:31
Speaker 1: tricky for investors, for banks, for stock exchanges to really
32:35
Speaker 1: get closely involved. UM that is starting to change, though.
32:38
Speaker 1: We've seen several bills put forward both at the state
32:41
Speaker 1: and federal level in the US and in other countries
32:44
Speaker 1: as well. UM that could push legalization pretty quickly, and
32:47
Speaker 1: so we could see things change quite quite fast over
32:50
Speaker 1: the next two or three years. I'd say, Christine or Um,
32:53
Speaker 1: thank you so much for being with us Bloomberg reporter
32:56
Speaker 1: covering Canadian cannabis, UH covering coming to us from Toronto.
33:01
Speaker 1: Thanks for listening to the Bloomberg pen L podcast. You
33:03
Speaker 1: can subscribe and listen to interviews at Apple Podcasts or
33:06
Speaker 1: whatever podcast platform you prefer. I'm Paul Sweeney. I'm on
33:09
Speaker 1: Twitter at pt Sweeney. I'm Lisa abram Woyit's I'm on
33:12
Speaker 1: Twitter at Lisa abram woits one before the podcast. You
33:14
Speaker 1: can always catch us worldwide. I'm Bloomberg Radio.