Latest / Bloomberg Intelligence / UAW, EVs, Med Tech, and Microsoft

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UAW, EVs, Med Tech, and Microsoft · Bloomberg Intelligence

0:00
Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside
0:04
Speaker 1: my co host Matt Miller.
0:05
Speaker 2: Every business day we bring you interviews from CEOs, market pros,
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Speaker 2: and Bloomberg experts, along with essential market moven news.
0:14
Speaker 1: Find the Bloomberg Markets podcast called Apple Podcasts or wherever
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Speaker 1: you listen to podcasts, and at Bloomberg dot com Slash podcast.
0:21
Speaker 2: Let's get back to the strike because we're getting red
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Speaker 2: headlines across the Bloomberg terminal. Now from Sean Fain's Facebook
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Speaker 2: live presentation, he says, the United Autoworkers Union is going
0:33
Speaker 2: to expand its strike, but only against General Motors and Stilantis.
0:40
Speaker 2: They're not going to expand their strike against Ford. Now.
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Speaker 2: I'm not sure what's going to happen to Bronco Production.
0:48
Speaker 2: I'm sure a lot of people want to know about that,
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Speaker 2: so I'll find out and get back to you on it.
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Speaker 2: But they are going to expand their strike against GM.
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Speaker 2: At Silantis, we have Kevin Tyne and standing by on
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Speaker 2: the phone, Bloomberg Intelligence US autos analyst. Wait is he
1:03
Speaker 2: is he there?
1:04
Speaker 3: Yeah?
1:04
Speaker 2: Okay, good, he's on camera. He's not him on the phone.
1:07
Speaker 2: Did you hire him?
1:08
Speaker 1: Probably?
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Speaker 2: Congratulations, he's very good, Kevin, What do you think about this?
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Speaker 2: So it seems like they're getting along a little better
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Speaker 2: with Bill Ford now and historically they do get along
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Speaker 2: better with the Ford Motor Company because of the Ford
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Speaker 2: family and because of Bill. Really with GM and Stilantis,
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Speaker 2: they still have serious beef. How do you read it?
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Speaker 4: Yeah, I mean using it as leverage, right, saying by
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Speaker 4: expanding for Stilanthason GM and holding the line on Ford
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Speaker 4: probably motivates, you know, the competitors to get in there
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Speaker 4: and be a little bit more aggressive with with their
1:45
Speaker 4: negotiating in terms of what they're willing to give. But
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Speaker 4: but you know, it's it's not over yet. You know,
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Speaker 4: there's still probably a ways to go, and and you know,
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Speaker 4: things like this, you might mean the biggest issues or
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Speaker 4: the easiest issue, use the low hanging fruit is handled,
2:02
Speaker 4: but it's probably going to be in the details before
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Speaker 4: anything is really agreed to across the board.
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Speaker 1: Hey, Kevin, is there like you've probably done I'm sure
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Speaker 1: you've done analysis. When does his strike start there hurt
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Speaker 1: them financially? The big three?
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Speaker 4: It's weeks, not you know, not days obviously, And keep
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Speaker 4: in mind too, there's there was a build up of
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Speaker 4: inventory ahead, so there are units on the ground, and
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Speaker 4: you could think of it of a little bit of
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Speaker 4: a working capital shift from one quarter to the next
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Speaker 4: unless it gets you know, very long. The last one
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Speaker 4: was forty days and twenty nineteen against General Motors, and
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Speaker 4: that's significant, right, so, and historically, even though inventory is
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Speaker 4: above where it was a year ago, it's still very low. Historically.
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Speaker 4: I think I calculated it out to start September was
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Speaker 4: probably about forty three days of inventory for the end
3:00
Speaker 4: Street has a whole and typically fifty five to sixty
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Speaker 4: five days is considered manageable. So it's below what's considered
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Speaker 4: you know, a healthy level. And at the worst, these
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Speaker 4: the domestic automakers, they would have eighty ninety days supply
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Speaker 4: in some months, so significantly off that, but but not
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Speaker 4: as bad as it was prior to the to the pandemic.
3:26
Speaker 2: In terms of job security, I mean, we know that
3:29
Speaker 2: they're asking for pay rises. Obviously they also want to
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Speaker 2: be pension, which is seems less likely, although I'd love
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Speaker 2: to hear your take a four day work week, which
3:39
Speaker 2: is like nice, there's no way in hell, right, But
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Speaker 2: they want actual job security. So from GM there's a
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Speaker 2: ton of cars coming, you know, new production. Mary Barros
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Speaker 2: say is they won't need fewer workers for electric vehicles.
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Speaker 2: There's just a massive offering there from Stilantis, not so much.
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Speaker 2: I mean, they have a couple brands that seems like
4:00
Speaker 2: they're about to die out.
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Speaker 4: Yeah, look, and I think it's it's the line of
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Speaker 4: sight is pretty clear, right. So the automakers have made
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Speaker 4: a lot of money in the past couple of years,
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Speaker 4: not even just through the last contract, but probably over
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Speaker 4: the last decade, and it's very easy for the union
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Speaker 4: to point to that and say, we want our share
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Speaker 4: of that. You've been very profitable due to the concessions
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Speaker 4: we've given over the last couple of contracts, all the
4:24
Speaker 4: way through the bankruptcy period, and it's not going to
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Speaker 4: be easy for the manufacturers to hide that, right that
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Speaker 4: you can see that money every day in every filing.
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Speaker 4: But at the same time, the manufacturers can look at
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Speaker 4: the unions and say, but look at our production. Look
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Speaker 4: at our sales volume is way down from the twenty
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Speaker 4: seventeen peak in this country. US sales in twenty seventeen,
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Speaker 4: we're seventeen and a half million. We're running out of
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Speaker 4: fifteen to four. So I think it's going to be
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Speaker 4: the manufacturer's pointing to that and telling the union, we
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Speaker 4: can't give you a whole lot of job security. This
5:00
Speaker 4: market is smaller and it's going to continue to be smaller.
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Speaker 4: Transaction prices will be higher, margins will be better, the
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Speaker 4: money will be there, but we can't guarantee capacity and
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Speaker 4: headcount going forward. We need that flexibility. And then on
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Speaker 4: pensions and healthcare, you know, the manufacturers have a very
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Speaker 4: easy time of directing the eye of the union too.
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Speaker 4: That's what we were bankrupt, remember in twenty two, thousand
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Speaker 4: and nine and twenty ten, and that's the structure we had, right,
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Speaker 4: So two of those three things are a little bit
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Speaker 4: easier for the manufacturer to explain away.
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Speaker 3: The money is not. So I think when.
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Speaker 4: All is said and done, the likelihood is that the
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Speaker 4: manufacturers pay up, but they want that flexibility to adjust
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Speaker 4: the cost structure going forward. And I think, you know,
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Speaker 4: the pension and healthcare going back to the way it
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Speaker 4: was in prior to the bankruptcy period is just a
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Speaker 4: non starter. I don't even think that gets discussed in
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Speaker 4: any seriousness.
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Speaker 1: So I didn't believe you, Kevin A. Couple of years
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Speaker 1: ago when you said the industry was going to go
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Speaker 1: from a mode of seventeen seventeen and a half million
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Speaker 1: production down to you know, something materially less like fifteen
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Speaker 1: and a half or something like that. But once again
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Speaker 1: you were right, and that do you think the union
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Speaker 1: believes that?
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Speaker 4: Well, here's the thing, right is that is that you
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Speaker 4: have to look at at least one other input. Right,
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Speaker 4: everybody wants to talk about volume and the headline of
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Speaker 4: seventeen and a half versus fifteen four, but revenue per
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Speaker 4: unit matters, right, So while production and sales are down,
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Speaker 4: average transaction price is at a record, right, We're heading
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Speaker 4: to fifty thousand dollars, So when you multiply out just
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Speaker 4: back of the envelope, the revenue pool is actually larger.
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Speaker 4: So you know, you have to understand that not every
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Speaker 4: unit is the same as every other unit. You know,
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Speaker 4: a twenty thousand dollars Toyota Corolla is not a sixty
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Speaker 4: five thousand dollars f one point fifty. And this industry
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Speaker 4: is moving towards the latter to say, we just want
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Speaker 4: to sell as many sixty five thousand dollars things as
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Speaker 4: we can. We're willing to give up the bottom.
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Speaker 3: Of that market.
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Speaker 4: It means our volume goes away, but really the revenue
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Speaker 4: pool and the revenue contribution and the profit contribution and
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Speaker 4: your margins are just way better. And I think that's
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Speaker 4: what this industry becomes going forward.
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Speaker 2: By the way, on that note, I wanted originally I
7:24
Speaker 2: was planning on talking with you about the Jeep Grand
7:27
Speaker 2: Wagoneer Obsidian Series three that I'm driving right now, you know,
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Speaker 2: before this hard news crash the party. But that is
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Speaker 2: an extremely expensive vehicle. It's the biggest vehicle Jeep has
7:39
Speaker 2: ever made. The one I'm driving is one hundred and
7:41
Speaker 2: fourteen hundred and fifteen thousand dollars in this trim. And
7:44
Speaker 2: though I love the new Hurricane five to ten, the
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Speaker 2: Inline six, it's amazing, five hundred and ten horse power,
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Speaker 2: five hundred pound feet of torque. For the same price,
7:54
Speaker 2: you can get a Range Rover or a BMW X
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Speaker 2: seven the M sixty version, or a Cadillac Escalade the
8:02
Speaker 2: Ultra super Luxury Platinum version. Like why are they selling
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Speaker 2: these one hundred and thirteen hundred and fourteen thousand dollars Jeeps?
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Speaker 4: Yeah, I mean, then look the average on Grand Wagoneer.
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Speaker 4: I just looked it up. Is one hundred and five
8:14
Speaker 4: thousand is the average, you know, sales weighted, you know,
8:18
Speaker 4: but that's right there with Expedition, it's there with Suburban.
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Speaker 4: That's what you know. Those have become the profit centers
8:26
Speaker 4: because you're sharing platform and components with pickup trucks and
8:31
Speaker 4: now you're just adding content that's pure profits. So you know,
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Speaker 4: that's kind of my point is that, look, if you
8:37
Speaker 4: sell one of those how many you know, dodged darts
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Speaker 4: did you have to sell to get.
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Speaker 2: Anywhere near that?
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Speaker 4: And you probably lost money on every Dodge Dart, which
8:47
Speaker 4: is why it doesn't exist anymore.
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Speaker 3: You know.
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Speaker 2: So the old world the hornet coming out.
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Speaker 4: Yeah, well the old world would be like, run production
8:56
Speaker 4: on hornet all day long and then figure out how
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Speaker 4: to sell it. And it's like the new model is
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Speaker 4: going to be, Hey, if we can sell one or
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Speaker 4: two Grand Wagoneers, we can cut production of hornet. Which
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Speaker 4: is why I say in this contract negotiation, you know,
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Speaker 4: the manufacturers need to protect that flexibility going forward, saying
9:13
Speaker 4: this is going to be a smaller market because we're
9:15
Speaker 4: selling more expensive things.
9:17
Speaker 1: Man's if I were an investor, I'd be like, I
9:20
Speaker 1: like this auto industry better than the old auto industry.
9:22
Speaker 2: Yeah, for sure.
9:23
Speaker 1: This industry's more, more problem and that's w Kevin has
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Speaker 1: been telling us for years. That's where it's going.
9:27
Speaker 2: But if you're a UAW were feel that way.
9:30
Speaker 1: No, absolute opposite, Kevin Tinny, thanks so much for joining us.
9:33
Speaker 1: Kevin is our lead auto analyst for Bloomberg Intelligence.
9:37
Speaker 5: You're listening to the team Ken's are Live program Bloomberg
9:41
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9:52
Speaker 2: Now. Yesterday, Paul and I were talking with a gentleman
9:56
Speaker 2: who said, you know, one of the big problems in
9:58
Speaker 2: terms of battery production is that a lot of the
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Speaker 2: stuff is mined elsewhere, and then most of it is
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Speaker 2: processed in China. Yep, China, China. So our next guest
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Speaker 2: is hoping to change that a little bit. Nevade Alum
10:16
Speaker 2: joins us. He's president CEO of Evolution and they are
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Speaker 2: working on a I guess cobalt processing plant in Yuma, Arizona,
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Speaker 2: which should supply when it's up to speed about a
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Speaker 2: million batteries? What a year, Nevade? Is that an annual
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Speaker 2: figure that you want to be a cobalt for a
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Speaker 2: million batteries a year?
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Speaker 6: Yes, that's correct, Matt, one million a year. You know,
10:44
Speaker 6: right now.
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Speaker 7: There's thirty cobalt processing facilities in China and zero in
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Speaker 7: North America, so you know we need to catch up here.
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Speaker 7: That's and you know, luckily we started this process a
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Speaker 7: few years ago before the IRA and the other laws,
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Speaker 7: and now we're catching a nice ailwind.
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Speaker 6: So it's going really well.
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Speaker 2: Well, do you get any financing benefits from that? Tax
11:04
Speaker 2: breaks from that legislation? I mean, are there subsidies that
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Speaker 2: you can take advantage of here?
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Speaker 6: Yeah?
11:11
Speaker 7: Absolutely, though I will say we were going to do
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Speaker 7: this plant without those.
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Speaker 6: Subsidies, but it's a great help for us for sure.
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Speaker 2: So how much are you going to spend to build
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Speaker 2: this plant? I know that Uma because I read in
11:25
Speaker 2: a local newspaper expects to have a ton of revenue
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Speaker 2: sort of as a job as a knock on effect
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Speaker 2: jobs and everything. But how much youre going to spend
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Speaker 2: to build it? And when are you gonna be done
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Speaker 2: making it all?
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Speaker 1: A park?
11:37
Speaker 7: Around three hundred million dollars and it'll be done in
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Speaker 7: twenty twenty six.
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Speaker 6: We think, all.
11:43
Speaker 1: Right, so what actually happens at a cobalt processing facility
11:48
Speaker 1: and how does that how's that part of the whole
11:51
Speaker 1: battery situation.
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Speaker 7: So cobolt is a really important metal, uh for EV batteries,
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Speaker 7: for normal regulation and for energy density and for you know,
12:04
Speaker 7: giving you long range and good cold weather performance. It's
12:07
Speaker 7: also extremely important in aerospace and defense. It's used in
12:11
Speaker 7: hypersonic missiles and stealth bombers. So it's a really critical
12:16
Speaker 7: material for the United States to have self sufficiency in.
12:22
Speaker 7: So what we do is we take cobalt hydroxide, so
12:27
Speaker 7: already processed cobalt that is processed in Africa, and then
12:32
Speaker 7: it'll come here to the United States instead of going
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Speaker 7: to China. And you know what the Chinese do is
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Speaker 7: they just process it there and then send it back
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Speaker 7: to the United States for the cars here such as
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Speaker 7: Tesla and other electric automakers. But we want to skip
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Speaker 7: the China step, just bring it straight here to America,
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Speaker 7: process it into cobalt sulfate, which is the salt that
12:55
Speaker 7: goes into the cathode portion of the EV battery. And
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Speaker 7: sell it to the new plants that have been announced
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Speaker 7: in the United States by General Motors, LG, Samsung Ford.
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Speaker 7: You know, they're spending billions of dollars building these what
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Speaker 7: they call battery precursor plants. They're going to use nickel sulfate,
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Speaker 7: cobalt sulfate, manganese sulfate and put it all together and
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Speaker 7: make a battery pack.
13:24
Speaker 2: Now I've seen I guess a rendering of the plant
13:28
Speaker 2: in Yuma, and one of the things you immediately notice, Paul,
13:33
Speaker 2: check this out. Yeah, giant colar facility, even bigger than
13:38
Speaker 2: the actual processing plant. So I know, you guys want
13:41
Speaker 2: to be carbon neutral. This is all going to be
13:45
Speaker 2: powered by the sun.
13:47
Speaker 7: Yes, Indeed, Yuma County is the sunniest county in the
13:50
Speaker 7: United States, so it's it's pretty easy, we think, to
13:54
Speaker 7: do the full on solar power one hundred percent solar,
13:58
Speaker 7: no greenhouse gas, is, no propane, no diesel.
14:03
Speaker 6: So we also are.
14:05
Speaker 7: Going to be benefiting the local farmers by selling them
14:08
Speaker 7: back some of our excess solar production at cost. They're
14:12
Speaker 7: losing a lot of hydro power from.
14:14
Speaker 6: The lower levels on the Colorado.
14:16
Speaker 7: River, so they're very excited about our coming in and
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Speaker 7: building this facility there.
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Speaker 2: Well, I heard that you know you like Yuma, not
14:25
Speaker 2: only because I guess apparently your wife is from Yuma
14:27
Speaker 2: for one thing.
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Speaker 6: That's right.
14:29
Speaker 2: It's also very sunny, low cost of living, low regulatory
14:34
Speaker 2: kind of hassle there, but it's close to like all
14:40
Speaker 2: the used batteries coming back out of California is what
14:43
Speaker 2: I read. So are you recycling cobalt there?
14:47
Speaker 6: We will. We intend to recycle as well.
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Speaker 7: So you know, our first phase is to build a
14:53
Speaker 7: sulfate facility, which is sort of I think the easy,
14:58
Speaker 7: easier thing. It's a very established to tchnology around the world.
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Speaker 7: As I said, there's thirty of these plants in China.
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Speaker 7: And then as more and more batteries are spent and
15:09
Speaker 7: used up, we want to recycle some of those into
15:12
Speaker 7: turning them around and getting the cobalt back out of them.
15:15
Speaker 7: And then lastly we want to add a cobalt metal
15:20
Speaker 7: facility for aerospace and defense.
15:22
Speaker 6: So that's part of the strategic.
15:24
Speaker 7: Reserve announced by the President under the Defense Production Act.
15:29
Speaker 1: How do you think you will be able to compete
15:32
Speaker 1: against the Chinese? They actually have much greater scale, presumably
15:36
Speaker 1: government support to some level. How do you think about
15:39
Speaker 1: the competitive environment.
15:41
Speaker 7: Well, you know, there is no cobalt mined in China either.
15:45
Speaker 7: They all take it out of Africa, so we're competing
15:48
Speaker 7: with them in Africa. We're going to bring it here
15:50
Speaker 7: instead of taking to China, and so logistically we save money.
15:53
Speaker 7: The other great thing about Yuma County and where we
15:55
Speaker 7: are is right on the border of California and Mexico.
15:59
Speaker 7: So we need to come through the port of Long
16:01
Speaker 7: Beach or the port of Ensenada with our inputs. So
16:04
Speaker 7: and it's only three hours by truck from Ensenada or
16:07
Speaker 7: Long Beach. So I think logistically it's the great spot
16:10
Speaker 7: we're on in State eight. We're on the up railroad,
16:14
Speaker 7: so we we picked it. Also because logistics are important
16:17
Speaker 7: in these in these kinds of deals.
16:20
Speaker 1: What is it I mean from a competitive perspective? Again,
16:24
Speaker 1: can you will you be competing on price to your
16:27
Speaker 1: customers here? Can you because of the lower presumably the
16:31
Speaker 1: lower logistics costs of nothing else away from China?
16:36
Speaker 7: Yeah, Well, look, it's it's a combination of price, and
16:38
Speaker 7: we would have been competing on price initially, but more
16:42
Speaker 7: now there's tariffs on Chinese sul faith, there's the IRA
16:46
Speaker 7: regulations about Chinese inputs that come in to the EV
16:52
Speaker 7: battery supply chain. You know, there's a lot of new
16:55
Speaker 7: laws that are sort of helping us compete on price,
16:59
Speaker 7: so we may be able to charge us higher price
17:03
Speaker 7: than we might have ordinarily, you know if there were
17:06
Speaker 7: none of these laws.
17:08
Speaker 2: All right, it's I think a fascinating story, and we're
17:10
Speaker 2: finally starting to see movement, maybe because it's.
17:13
Speaker 1: Climate Week and we saw a bunch of these folks
17:15
Speaker 1: this week.
17:15
Speaker 2: No, I mean, I mean in terms of bringing processing
17:19
Speaker 2: here because Nevade, I don't know how much you talk
17:23
Speaker 2: with other people in the kind of battery supply chain,
17:26
Speaker 2: but I imagine we must be trying to bring a
17:29
Speaker 2: lot more processing of cobalt, lithium and rare earths to
17:33
Speaker 2: the US at some point.
17:34
Speaker 6: Right, Yes, it's all happening.
17:37
Speaker 7: It's it's hundreds of billions of dollars of investment, real
17:41
Speaker 7: you know, team effort, Lots of big corporations, as I mentioned, LG,
17:45
Speaker 7: General Motors, Samsung. They've announced billion dollar plants in Georgia,
17:50
Speaker 7: South Carolina, Tennessee, even Arizona. LG is building in a
17:53
Speaker 7: five and a half billion dollar plant just up the road.
17:57
Speaker 6: In Phoenix, just south of Phoenix.
17:59
Speaker 7: So that you know, is going to help us sell
18:03
Speaker 7: our product into the United States.
18:05
Speaker 2: Yeah, so it's moving. Yeah, the infrastructure, the supply chain
18:08
Speaker 2: is moving here.
18:09
Speaker 1: That's right, all right, Neved, thanks so much for joining us.
18:11
Speaker 1: Nevade Alam he is a president and CEO of Evolution
18:15
Speaker 1: there in getting into the battery business and the processing
18:17
Speaker 1: of all the cobolt and all that kind of stuff.
18:19
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18:39
Speaker 1: It is United Nations General Assembly Week here in New York.
18:42
Speaker 1: And then we've got lots of unga, lots of stuff happened,
18:45
Speaker 1: lots of terrible traffic. But one of the key areas
18:47
Speaker 1: is Russia and various sanctions on Russia as it relates
18:51
Speaker 1: to the Ukraine War. One area that is going to
18:54
Speaker 1: come up for discussion very soon is going to be
18:57
Speaker 1: banned on Russian diamonds, so we went to get to
19:00
Speaker 1: the bottom of that. We could do that with our
19:02
Speaker 1: next guest on Core Daga, CEO of Ongara and Encore,
19:07
Speaker 1: thanks so much for joining us again here talk to
19:11
Speaker 1: us about just remind us what you do at Angara.
19:15
Speaker 5: Sure.
19:16
Speaker 8: So, at Angara we are vertically integrated online jewelers. So
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Speaker 8: we do everything from cutting and polishing gemstones, to designing jewelry,
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Speaker 8: to manufacturing jewelry to retailing over the web in over
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Speaker 8: thirty countries.
19:28
Speaker 6: All right.
19:29
Speaker 2: So I all right, So I had a question on
19:31
Speaker 2: a slightly dip before we get into that business, on
19:33
Speaker 2: a slightly different thing. I always kind of wonder, isn't
19:38
Speaker 2: Wharton the grad school? And I see some people who
19:41
Speaker 2: do the undergraduate thing at Wharton, But isn't that Penn.
19:45
Speaker 8: Yes, so Wharton is one of the schools in Penn.
19:48
Speaker 8: But it is undergrad and grad school.
19:50
Speaker 6: All right.
19:50
Speaker 2: So you go to Wharton, you study finance there in entrepreneurship,
19:55
Speaker 2: then you go get your MBA from Harvard. I've heard
19:57
Speaker 2: of it trade school. You decide I'm going to become
20:01
Speaker 2: a jeweler.
20:03
Speaker 3: Yeah.
20:03
Speaker 8: So interestingly, I grew up in the jewelry business, so
20:05
Speaker 8: I've kind of played with gemstones a say, age of five.
20:09
Speaker 8: I always thought I would never come into the industry
20:11
Speaker 8: because it is pretty antiquated and old fashioned, as you
20:14
Speaker 8: can imagine. But after work and I went to McKenzie.
20:18
Speaker 8: My largest project was turning around a major jewelry retailer,
20:21
Speaker 8: and that's when I fell in love with the trade again.
20:23
Speaker 8: I saw a lot of opportunities, especially online.
20:26
Speaker 1: So here we are.
20:27
Speaker 2: So you could have just gone straight to the jewelry business.
20:31
Speaker 2: You didn't need to stop. You didn't need to stop
20:34
Speaker 2: at McKenzie, You didn't need to stop at Harvard, right,
20:37
Speaker 2: But what did you learn at those places that gave
20:42
Speaker 2: you an edge now in this business?
20:45
Speaker 8: So, I think the industry is one of the most
20:47
Speaker 8: fragmented industries out there. So when you compare it to
20:51
Speaker 8: any other part of retail. So for example, Signet, which
20:55
Speaker 8: is the number one jeweler in the US, only has
20:57
Speaker 8: less than ten percent market share you compared to something
20:59
Speaker 8: like a best By, which has a much more dominant position.
21:02
Speaker 8: So the idea was, how do we structure the industry
21:05
Speaker 8: in a way that allows us to get to that
21:07
Speaker 8: scale where we can really dominate the industry?
21:10
Speaker 1: All Right, so one of the news items you and
21:12
Speaker 1: I were talking about it before is Russia. Russia supplies
21:15
Speaker 1: a lot of diamonds. Then they're going to I guess
21:17
Speaker 1: the G seven is gonna put some sanctions on it
21:19
Speaker 1: or something like that. What's what's happening there.
21:21
Speaker 8: Yeah, So in a couple of weeks there's likely to
21:23
Speaker 8: be a ban announced, and the ban would be for
21:25
Speaker 8: all Russian diamonds. So just as a precursor to this,
21:28
Speaker 8: April twenty twenty two, the Biden administration is issued in
21:32
Speaker 8: executive order to ban Russian diamonds. So this has already
21:35
Speaker 8: been done by the US and UK. The key difference
21:39
Speaker 8: here is twofold. One is instead of two countries, it's
21:41
Speaker 8: seven countries. And second, and I think far more importantly,
21:45
Speaker 8: is the previous band was only on rough. Now the
21:48
Speaker 8: thing is for rough diamonds, those get exported typically from
21:52
Speaker 8: Russia to India, China or Antwerp, and in this case,
21:57
Speaker 8: the cutting and polishing happens in those centers and those
22:00
Speaker 8: are then substantially transformed goods, so they are no longer
22:03
Speaker 8: considered Russian diamonds. So that previous band really had no teeth.
22:08
Speaker 8: This is very different because they're thinking about prohibiting cutting
22:12
Speaker 8: and polished Russian diamonds from entering any of the G seven,
22:16
Speaker 8: which is really sixty five percent of the total market demand.
22:21
Speaker 2: This is what we do with Russian goods that we
22:24
Speaker 2: want to put sanctions on them, so you know we're serious.
22:28
Speaker 2: But they can send the goods to India or China
22:31
Speaker 2: to get finished and then we'll buy them. Yeah, you
22:33
Speaker 2: know exactly.
22:36
Speaker 1: Russian terms of how big is Russian terms of being
22:39
Speaker 1: a supplier.
22:39
Speaker 8: So Russian diamond market is roughly four billion. There was
22:42
Speaker 8: four billion in exports back in twenty twenty one before
22:45
Speaker 8: the war. Just you know, just to compare that to
22:48
Speaker 8: the overall GDP. Overall Russian GDP in twenty twenty one
22:52
Speaker 8: was one point seven trillion, So you're really talking about
22:55
Speaker 8: point two percent of the market. To the previous point,
22:58
Speaker 8: it is more optics than reality because point two percent
23:02
Speaker 8: is a pretty small part of the overall market to change.
23:06
Speaker 1: All right, So where where do you typically get your diamonds?
23:10
Speaker 8: So we typically buy from siteholders, which are the customers
23:14
Speaker 8: of Dibber's. So typically Botswan and Sort is our number
23:18
Speaker 8: one source. So we started avoiding Russian diamonds back in
23:21
Speaker 8: twenty twenty two when the ban in the US was
23:23
Speaker 8: announced preemptively. So for US it doesn't really affect us
23:27
Speaker 8: because we don't source Russian diamonds in any case.
23:30
Speaker 2: How fungible are these stones? I mean, how would you
23:36
Speaker 2: know if a diamond came, you know, cut, polished, finished,
23:40
Speaker 2: out of Russia. It doesn't have any kind of like
23:42
Speaker 2: microchip inside it.
23:44
Speaker 8: There's no tag, right, It's hard, and that's why this
23:47
Speaker 8: ban is going to be especially difficult to enforce. But
23:51
Speaker 8: the idea behind it is really implementing blockchain technology and
23:55
Speaker 8: ledger systems throughout the supply chain to be able to
23:59
Speaker 8: figure out what's going from Russia versus elsewhere. And honestly,
24:02
Speaker 8: I think it's actually kind of great because all of
24:04
Speaker 8: a sudden traceability becomes enforced in the diamond industry, which
24:08
Speaker 8: is great soul. We can make sure we don't get
24:11
Speaker 8: any conflict diamonds, blood diamonds and the like.
24:13
Speaker 1: Talk to us about the diamond market today, how's it
24:15
Speaker 1: been over the last year or two or is it?
24:17
Speaker 1: Are diamonds more expensive less expensive?
24:20
Speaker 8: So natural diamonds have been getting crushed so since their
24:24
Speaker 8: peak in mid twenty twenty two, they are down roughly
24:30
Speaker 8: thirty five to fifty percent.
24:31
Speaker 1: In wise of value. A few reasons.
24:34
Speaker 8: One is that there is a natural lack of demand
24:37
Speaker 8: in China as well as the US, which are the
24:40
Speaker 8: two major consumers of diamonds, and people are going out
24:44
Speaker 8: a lot more. They're eating out, traveling, and a lot
24:47
Speaker 8: of that consumption power is going there. But I think
24:49
Speaker 8: the bigger issue is lab grown diamonds.
24:51
Speaker 1: And you guys do lab grown diamonds, right.
24:53
Speaker 8: We have launched lab grown and so a few interesting
24:56
Speaker 8: statistics on lab grown Back in twenty eighteen, it was
24:59
Speaker 8: like two percent the market. This last year, thirty six
25:03
Speaker 8: percent of engagement rings sold were labrown engagement rings. Over
25:06
Speaker 8: half of current diamond distribution in the US is lab grown,
25:11
Speaker 8: So really they've taken off it's a perfect substitute chemically, physically, optically,
25:15
Speaker 8: the same discounts ranging anywhere from seventy five to ninety
25:18
Speaker 8: percent of their name.
25:19
Speaker 6: Wow.
25:20
Speaker 2: So basically I get my wife a lab grown diamond, Yeah,
25:26
Speaker 2: if I give her a two carrot honker on a
25:28
Speaker 2: platinum ring, she will be just as pleased as if
25:32
Speaker 2: I gave her like a real blood.
25:34
Speaker 8: Diamond, well, not a blood diamond. Per se, but a
25:38
Speaker 8: natural diamonds call it yes, yeah, so absolutely, and she.
25:41
Speaker 2: Takes it down to Wilson Jewelers and Scarsdale. They're not
25:44
Speaker 2: going to know the difference.
25:44
Speaker 8: They will not. The only way you can know the
25:46
Speaker 8: difference is if you send it to the GIA or
25:48
Speaker 8: IGI or another certification lab and there's small traces of
25:52
Speaker 8: nitrogen in natural diamonds that do not exist in lab room.
25:56
Speaker 8: That's really the only way you'll be able to tell
25:58
Speaker 8: the difference.
25:59
Speaker 2: But it's visually. I'm never buying a real diamond a game.
26:01
Speaker 1: Yeah, I mean, boy, if I had known that back
26:03
Speaker 1: in the day, they didn't have them that guy, I know,
26:05
Speaker 1: I know, I know, I know. Trust me. Ancor Daga,
26:08
Speaker 1: thanks so much for joining us. Acre Daga, CEO of ANGAA.
26:13
Speaker 5: You're listening to the team. Ken's are Live program Bloomberg
26:16
Speaker 5: Markets weekdays at ten am Eastern on Bloomberg dot com,
26:20
Speaker 5: the iHeartRadio app and the Bloomberg Business App, or listen
26:23
Speaker 5: on demand wherever you get your podcasts.
26:27
Speaker 1: Let's talk med tech Boston Scientific. I have no idea
26:31
Speaker 1: what they do, but it's a big company. It's like
26:33
Speaker 1: eighty billion dollars in market cap stocks up sixteen percent.
26:36
Speaker 2: Do they make medical hardware?
26:38
Speaker 1: Medical devices?
26:39
Speaker 9: Right?
26:39
Speaker 1: Stuff StuffYeah stuff that you know, so it's medical devices.
26:41
Speaker 1: Matt Hendrickson, he knows what they do. He's a senior
26:44
Speaker 1: equity analyst covering the med tech business with Bloomberg Intelligence
26:48
Speaker 1: Boston Scientific. Just give me the thirty seconds. What did
26:51
Speaker 1: they do and why do we care?
26:53
Speaker 3: Yeah?
26:54
Speaker 10: They make stuff okay, like stints, right, So they make stints.
26:57
Speaker 3: It started off with stints and then it turned into
26:59
Speaker 3: heart vale.
27:00
Speaker 10: This turns into and what some of the products we'll
27:02
Speaker 10: probably talk about is the Watchmen device, which goes into
27:04
Speaker 10: the heart. They create catheters and then they go into endoscopy,
27:08
Speaker 10: so singles use scopes to help with you know, various
27:13
Speaker 10: endoscopic procedures.
27:15
Speaker 1: All right, So like splunk splunk, except what the people
27:18
Speaker 1: splunk for people? Okay, now that makes sense, I get
27:20
Speaker 1: it now. During the pandemic, hospitals were overloaded with just
27:24
Speaker 1: dealing with COVID patients, so people weren't doing surgeries and
27:27
Speaker 1: procedures and things like that. And that's not good for
27:30
Speaker 1: a company like uh Post and Scientific or Metronic or
27:33
Speaker 1: something like that.
27:33
Speaker 10: No, they need procedural volume, especially in the cardiology side
27:37
Speaker 10: to get their organic revenue growth, which is kind of
27:40
Speaker 10: the key driver for their valuation all those aspects.
27:44
Speaker 3: Once the hospital beds are filled with COVID patients.
27:47
Speaker 10: They couldn't do heart procedures. That that's mostly in the
27:51
Speaker 10: back mirror.
27:53
Speaker 1: So now are we back to more normalized.
27:55
Speaker 10: If anything, we're kind of going still through kind of
27:58
Speaker 10: this backlogs. We're kind of getting an extra tailwind in enitionship.
28:01
Speaker 2: Operations maybe as opposed to revenge travel, although surely that
28:07
Speaker 2: is happening. I mean it must be happening.
28:09
Speaker 10: Well someone I mean for Boston, I mean someone who
28:13
Speaker 10: can probably wait a year or two for a procedure.
28:16
Speaker 10: Now they're going back to their doctor like hey, I'm
28:18
Speaker 10: ready now, and you know, the doctor's like, great, we.
28:21
Speaker 3: Need the volume. We need to make our money, so
28:22
Speaker 3: come on.
28:23
Speaker 6: In, all right.
28:23
Speaker 1: So Boston Scientific had an investor day. What was kind
28:27
Speaker 1: of the message they wanted to get across.
28:28
Speaker 10: Well, the big thing was so we talked about organic
28:31
Speaker 10: growth being kind of the driver for valuation. They were
28:34
Speaker 10: traditionally in the high single digit so they were in
28:37
Speaker 10: six to eight percent. Was kind of their long term
28:39
Speaker 10: project or long term outlook. Or goal, and so this
28:45
Speaker 10: this meeting this week, they bumped it up to eight
28:48
Speaker 10: to ten percent. Okay, so it's and this is a
28:50
Speaker 10: company that's making fourteen expected to make fourteen.
28:53
Speaker 3: Billion dollars in sales this year.
28:55
Speaker 10: So we're not talking about some small company making additional
28:58
Speaker 10: like two million dollars to get to that growth. You're
29:00
Speaker 10: talking about very incremental growth to kind of drive that
29:04
Speaker 10: eight to time pent organic growth.
29:06
Speaker 1: So what did the market. Had the market respond to that?
29:09
Speaker 3: They were They were up two percent, and so so
29:10
Speaker 3: far this week they're still up.
29:12
Speaker 1: Well, so what's driving is it? What's driving this growth here?
29:16
Speaker 2: I mean, is they also make I mean they do
29:18
Speaker 2: M and A right, and they just do a deal yep.
29:20
Speaker 10: So yeah, they just acquired a company called Relievant, which
29:23
Speaker 10: is the procedure in your vertebrate to ablate the nerves
29:27
Speaker 10: to help.
29:27
Speaker 3: With that lower back pain essentially.
29:29
Speaker 9: Wow.
29:30
Speaker 2: Yeah, that sounds like a good thing, but it hurts
29:32
Speaker 2: to even think about that procedure.
29:34
Speaker 1: People say back is the worst.
29:36
Speaker 2: Yeah, can't get it all.
29:37
Speaker 1: Right, So what's so what's your call on Boston Scientific?
29:40
Speaker 9: Well?
29:40
Speaker 3: I think I mean right now it's trading at about you.
29:44
Speaker 1: Can't read those numbers. The font on his page of
29:48
Speaker 1: his compage, give me, give me this. It is the
29:51
Speaker 1: smallest font. Yeah, it's like, forget about it. You can't
29:54
Speaker 1: read that.
29:54
Speaker 3: It's my little chie cheek. Yeah, okay exactly, but it's
29:57
Speaker 3: training twenty four times.
29:58
Speaker 10: Pe got that eight percent growth, the call should be
30:03
Speaker 10: that investor or the analyst, the consensus should be upping
30:07
Speaker 10: their estimates and that should be getting you know, normally,
30:10
Speaker 10: when you say eight to ten percent, you know the
30:12
Speaker 10: street goes at nine percent.
30:13
Speaker 3: Yeah, r down in the middle.
30:15
Speaker 10: If you get that nine percent growth, you should be
30:17
Speaker 10: able to see that multiple go up to something that's
30:19
Speaker 10: more like like the twenty eight times range. And so
30:21
Speaker 10: that's kind of the big call, as they kind of
30:23
Speaker 10: you know, during the meeting, they kept saying the next level,
30:26
Speaker 10: the next level, the next level. Right, Well, if they're
30:28
Speaker 10: able to be able to achieve that growth and get
30:31
Speaker 10: too closer to ten percent versus the eight percent, they'll
30:33
Speaker 10: get to that next level in the multiple.
30:35
Speaker 2: By the wait, I mean, who else is there? If
30:38
Speaker 2: I want a stent, I'm probably going to get it
30:39
Speaker 2: from Boston Scientific, right, Well.
30:41
Speaker 10: I mean, yeah, a stent is a stent is you're
30:44
Speaker 10: gonna get is either a bit Metronic or Boston, but
30:46
Speaker 10: those are kind of the slower growing side. This is
30:49
Speaker 10: some of their key growth drivers beside the M and
30:51
Speaker 10: A is going to be the Watchman device. Now that's
30:53
Speaker 10: a product that's going from like a two billion dollar
30:56
Speaker 10: market to.
30:57
Speaker 1: What's the Watchmen device.
30:58
Speaker 3: Watchmen is for.
30:59
Speaker 10: Its device that closes the left atrial appendage in the heart,
31:03
Speaker 10: and essentially what it does is that appendage for people
31:06
Speaker 10: with atrial fibrillation, holds blood in that little appendage, it
31:10
Speaker 10: clots and then it turns into a stroke risk. They
31:13
Speaker 10: close that appendage with this device and then therefore essentially
31:17
Speaker 10: removing the risk of blood clotting in that appendage and then.
31:20
Speaker 3: Going up to the brain for a stroke.
31:22
Speaker 2: But did we not need that appendage to begin with?
31:24
Speaker 3: I mean, you know, that's what they found out over time,
31:26
Speaker 3: is that no, they didn't.
31:27
Speaker 10: It's kind of the same thing as your appendix, you
31:29
Speaker 10: kind of it's kind of just sticking out there and
31:30
Speaker 10: you don't need it, and you can.
31:31
Speaker 3: Cut it off. They were cutting it off.
31:34
Speaker 10: Now this is a non surgical procedure for being able
31:37
Speaker 10: to do the same thing.
31:38
Speaker 1: Yeah, all right, So talk to us just more broadly
31:41
Speaker 1: about the medical device business.
31:42
Speaker 2: What's thea you mentioned a couple Abbot, Medtronic. I know
31:46
Speaker 2: Striker because I love the name and they make you know,
31:49
Speaker 2: hips and stuff.
31:51
Speaker 3: Edward's Life Sciences, Yep, they're they're doing heart valves yep.
31:54
Speaker 3: So that's you know, everything.
31:56
Speaker 10: Everything is trying to minimize kind of the openness of surgery.
32:00
Speaker 10: So it's all minimally invasive procedure. So you know, you're
32:04
Speaker 10: just the last one was Edwards. They have taken an
32:07
Speaker 10: open heart procedure and have created a technology that you
32:11
Speaker 10: take a catheter and.
32:12
Speaker 3: You don't have to open the heart. You can just
32:14
Speaker 3: go straight up through the or earth.
32:16
Speaker 10: It's like it looks like a little like spy like
32:18
Speaker 10: in the spy movies, those little like cameras, like those
32:21
Speaker 10: snakes around.
32:21
Speaker 3: Yeah, it's kind of just.
32:22
Speaker 10: Like that, and it delivers the valve and there it's done.
32:25
Speaker 10: There it's been but the medtech sector has been hit
32:29
Speaker 10: hard because of kind of the g LP trend that's
32:32
Speaker 10: going on. What's the goop trin the GOLP drugs that
32:36
Speaker 10: are coming out for obesity.
32:40
Speaker 2: Yes, true, gov we go v and I would sell
32:44
Speaker 2: a medical device company because I think there's gonna be
32:47
Speaker 2: less prestigures, because gonna be you're not gonna you're not
32:49
Speaker 2: gonna be nearly as at risk of a heart attack
32:54
Speaker 2: or stroke if you don't weigh three hundred pounds. So
32:57
Speaker 2: if you used to weigh three hundred pounds and you
32:59
Speaker 2: go it an ozepic shot once a week or I
33:02
Speaker 2: don't know, once a month, however it.
33:03
Speaker 3: Works sometime it's daily or yeah.
33:07
Speaker 2: Pill forms as well. So if you can take these
33:10
Speaker 2: drugs and get into better shape, you're not gonna need
33:13
Speaker 2: a stint.
33:15
Speaker 3: That's that's the that's the thesis going on right now.
33:17
Speaker 9: Wow.
33:17
Speaker 3: But I mean there's there's a lot of caveats too.
33:20
Speaker 10: There's zimmer Bioment, for example, it's another orthopedic company like Striker.
33:25
Speaker 10: Their CEO came out and said, hey, some of these
33:28
Speaker 10: patients who were too obese for surgery, if they take
33:31
Speaker 10: these weight loss drugs, then they'll be healthy enough to
33:34
Speaker 10: get their knee replacement or to get their hip replacement.
33:37
Speaker 3: Uh.
33:37
Speaker 10: And then the other thing too is you know there's
33:39
Speaker 10: data coming out. I mean, the diabetes companies have been
33:41
Speaker 10: trying to fight back hard on this, but they're showing
33:44
Speaker 10: data that these patients who are taking these glps, these
33:47
Speaker 10: weight loss drugs, they're they're not taking them after a year,
33:50
Speaker 10: they're not taking them after two years.
33:51
Speaker 3: So it's you know, and it's something.
33:53
Speaker 2: Where but they keep the weight off.
33:54
Speaker 3: No, So these they try.
33:56
Speaker 2: These, they don't keep the weight off.
33:57
Speaker 3: And half of these patients are like just dropping out
34:00
Speaker 3: after a year even more.
34:01
Speaker 2: But so they lose weight, They lose a year and
34:04
Speaker 2: then they're like I liked being fat.
34:06
Speaker 10: I see it as like, do you want to keep
34:10
Speaker 10: you know, injecting yourself with this every single day or
34:12
Speaker 10: even once a week.
34:13
Speaker 3: It's you know, it's a it's it's a lot.
34:15
Speaker 2: And yeah, but so as being obese, Yeah, so I
34:18
Speaker 2: would probably rather object inject myself.
34:21
Speaker 10: Probably, But I also at the same time, if you
34:23
Speaker 10: keep injecting yourself and then you know there is bariatric
34:25
Speaker 10: surgery as kind of that you know, safe safety net there.
34:28
Speaker 2: Then you go like this would be interesting to hear.
34:30
Speaker 2: I I mean, I wonder if beriatric surgery is better
34:35
Speaker 2: or worse the band in terms of in terms of
34:40
Speaker 2: losing the weight and keeping it off. I wonder which
34:41
Speaker 2: one's better longer term.
34:43
Speaker 3: We hear more about that kind of in this third
34:45
Speaker 3: quarter call.
34:46
Speaker 10: And so that's could be intuitive surgical, and that's gonna
34:48
Speaker 10: be metronic.
34:48
Speaker 3: And yeah, it's a it's a stay tuned type of dude.
34:51
Speaker 2: What a fascinating industry to.
34:53
Speaker 3: Cover it is?
34:54
Speaker 1: It is, it's good stuff. I mean, the whole healthcare
34:56
Speaker 1: space is just you got it. It's just it's never
34:58
Speaker 1: going away. It's always a growth industry. You're always going
35:02
Speaker 1: to have a job if you're in the helpcare well.
35:03
Speaker 2: And lately I've been looking at like pictures of FDR
35:06
Speaker 2: or pictures of ideas, say it looked like one hundred
35:08
Speaker 2: years old and they died when they were sixty.
35:10
Speaker 1: Matt Hundredston's senior ecodanalysts covering all the medtech space for
35:12
Speaker 1: Bloomberg Intelligence, joining us live here in our Bloomberg Interactive
35:15
Speaker 1: broker studio. This is Bloomberg.
35:17
Speaker 5: You're listening to the tape Cat's are live program Bloomberg
35:21
Speaker 5: Markets weekdays at ten am Eastern on Bloomberg Radio, the
35:24
Speaker 5: tune in app, Bloomberg dot Com, and the Bloomberg Business App.
35:27
Speaker 5: You can also listen live on Amazon Alexa from our
35:30
Speaker 5: flagship New York station. Just say Alexa play Bloomberg eleven thirty.
35:37
Speaker 1: Let's look at the M and A front here. We've
35:38
Speaker 1: got a big M and A trade looks like it
35:40
Speaker 1: actually might close. Microsoft Activision sixty nine billion dollars. We
35:46
Speaker 1: got some approval I think from the UK's regulatory body.
35:50
Speaker 1: That was kind of the last one to fall. Jennifer
35:52
Speaker 1: rejoins us. She's a senior litigation analyst. She focuses on antitrust.
35:56
Speaker 1: It is right down her alley. She does that off
35:58
Speaker 1: for Bloomberg Intelligence. So, Jen, what did the UK authority's
36:03
Speaker 1: rule here on this Microsoft Activision deal?
36:07
Speaker 9: Well, Paul, at long last, it finally looks like this
36:10
Speaker 9: deal is going to close. What they have said is
36:12
Speaker 9: that a new remedy that Microsoft proposed about a month
36:16
Speaker 9: ago or so is probably sufficient to cure the concerns
36:20
Speaker 9: they had about the deal. That it looks likely that
36:23
Speaker 9: it's sufficient. This is a provisional decision, and so what
36:26
Speaker 9: they will do now is listen to comments by interested
36:29
Speaker 9: public other entities to participate in the market, and then
36:33
Speaker 9: at some point after October sixth, issue of final ruling.
36:36
Speaker 9: But really, Paul, this is called provisional, but this is it.
36:39
Speaker 9: I mean, they're going to ultimately clear this deal, there's
36:41
Speaker 9: no doubt in my mind.
36:43
Speaker 2: The weird thing to me was, if you're going to
36:45
Speaker 2: do a big M and a transaction, I get that
36:47
Speaker 2: you need to have the US regulators approve it, right
36:52
Speaker 2: and I get because it's a massive market, I get
36:54
Speaker 2: that you're going to have to have Europe approve it.
36:57
Speaker 2: But England do they really matter that much anymore?
37:01
Speaker 9: Well, I guess they do now they've made a big
37:04
Speaker 9: splash in the antitrust world. You know, the UK used
37:08
Speaker 9: to be part of the European Union before Brexit, so
37:12
Speaker 9: it didn't really issue its own opinions with respect to
37:15
Speaker 9: these big global mergers that were big enough to trigger
37:18
Speaker 9: European Commission review. You know, there might have been other
37:21
Speaker 9: deals that actually did trigger just only UK review in
37:24
Speaker 9: which the UK was still involved, but for the most part,
37:27
Speaker 9: when you had these big acquisitions like Microsoft activisions, you
37:31
Speaker 9: didn't have the UK independently involved. And now they are,
37:35
Speaker 9: and I think they really want to flex their muscles.
37:37
Speaker 9: They want to show that they are a real antidrus regulator.
37:40
Speaker 2: I mean, obviously that would common as tongue in cheek.
37:43
Speaker 2: So if you're British and you're offended. Please don't email
37:47
Speaker 2: my boss. They do have sixty seven million people, but
37:49
Speaker 2: again it's only sixty seven million people in the UK.
37:53
Speaker 2: What other regulators do I have to worry about?
37:57
Speaker 6: Am I am?
37:57
Speaker 2: I going to the Indonesian regulator. They have a lot
37:59
Speaker 2: of people, Well what about India? Do they look at
38:02
Speaker 2: the M and a deal?
38:03
Speaker 9: You know, you know what people don't notice. But I'll
38:07
Speaker 9: tell you what. When these deals get filed, sometimes they're
38:10
Speaker 9: filed with over one hundred jurisdictions. There are they could
38:14
Speaker 9: be fire out filed in Azerbijan. There are so many
38:17
Speaker 9: jurisdictions with competition authorities, so you know there's a whole
38:21
Speaker 9: group within these law firms. We have to assess every
38:23
Speaker 9: single jurisdiction globally where a deal has to get filed,
38:26
Speaker 9: where it might trigger the thresholds for that country or
38:29
Speaker 9: that jurisdiction. But in reality, the jurisdictions that really have
38:34
Speaker 9: the law behind them and I think the will to
38:36
Speaker 9: actually block a deal are primarily the US, EU, China
38:41
Speaker 9: and now UK.
38:43
Speaker 1: Yeah, it's interesting. So I mean I saw some reporting
38:45
Speaker 1: jen which kind of goes to what you said to
38:48
Speaker 1: that the what you're talking about about the UK, and
38:49
Speaker 1: the UK says, hey, you know, we're going to kind
38:53
Speaker 1: of prove this one here, but you better be careful
38:56
Speaker 1: what you bring to us because we're going to be
38:58
Speaker 1: We're not going to be a pushover here. So I
39:00
Speaker 1: guess that if you're an anti trust m and a lawyer,
39:03
Speaker 1: you got to keep that into account.
39:04
Speaker 9: These days, you know, absolutely, I think it's getting harder
39:08
Speaker 9: and harder. I mean, just the fact that the FTC
39:11
Speaker 9: and DJ are changing a lot of rules, making it
39:14
Speaker 9: more onerous actually to notify the deal to the regulators,
39:17
Speaker 9: more expensive as well, and have these extended review timelines
39:22
Speaker 9: and have become very unpredictable. Now you have to deal
39:25
Speaker 9: also with this unpredictable CMA in the UK, and I
39:28
Speaker 9: think that it just adds to the uncertainty of deals
39:32
Speaker 9: that makes it harder and harder for the merger arbe
39:34
Speaker 9: treasures to actually do what they do. And I think,
39:38
Speaker 9: you know what I'm thinking about right now is the
39:39
Speaker 9: Adobe Sigma deal because I wonder what the UK is
39:42
Speaker 9: going to do on that one. It's moved into a
39:44
Speaker 9: phase two on it, and I could see the UK
39:46
Speaker 9: actually being one of those regulators that tries to block
39:49
Speaker 9: that deal.
39:50
Speaker 1: Hey, Jen. I mean on the banking side, we usually
39:53
Speaker 1: charged a percentage of the deal size as our fee,
39:57
Speaker 1: and that got negotiated up front, that percentage. How does
39:59
Speaker 1: it work on the legal side? Is it still all
40:02
Speaker 1: about hours? Billable hours? So I mean a case like
40:05
Speaker 1: this with all the anti trust must have been just
40:08
Speaker 1: a juicy yeah, juicy deal for the lawyers.
40:11
Speaker 9: Yeah, oh yeah, it's all about hours. And I'll tell
40:14
Speaker 9: you the attorney's logs and serious hours. When these jurisdictions
40:18
Speaker 9: go into those in depth investigations, they are rigorous. They
40:21
Speaker 9: take a lot of work. I mean, that's what I
40:23
Speaker 9: spent most of my legal practice doing was responding to
40:26
Speaker 9: these second requests from the Federal Trade Commission in the
40:29
Speaker 9: Department of Justice, and they ask for a lot of data,
40:32
Speaker 9: a lot of information, a lot of responses to questions.
40:35
Speaker 9: There are depositions, there are interviews of company executives. It
40:40
Speaker 9: takes a lot of time, and when it's so protracted
40:42
Speaker 9: like Microsoft activision, with appeals and going in to court,
40:46
Speaker 9: it is expensive. Those lawyers did very well, by the way.
40:50
Speaker 2: On that note, and kind of an aside, but do
40:53
Speaker 2: you round up to the nearest hour? I mean, if
40:56
Speaker 2: you're if you're driving home to Westchester and you a
41:00
Speaker 2: lawyer for one of these cases and somebody calls you
41:02
Speaker 2: from the company to talk about it, and it's like
41:05
Speaker 2: a five minute conversation. Is that one billable hour?
41:09
Speaker 6: No?
41:10
Speaker 9: No, Now, I will say that every law firm has
41:13
Speaker 9: different rules about what becomes a billable hour and what
41:16
Speaker 9: doesn't become a billable hour. I can only vouch for
41:18
Speaker 9: the firm I work for, which was very careful about
41:21
Speaker 9: these things, and a five minute call would not have
41:23
Speaker 9: been a billable hour. But if those five minute calls
41:26
Speaker 9: start to add up, you know, maybe you have a
41:28
Speaker 9: billable hour there.
41:30
Speaker 6: And it also.
41:30
Speaker 9: Sometimes depends on how much do the legal counsel within
41:34
Speaker 9: the company push back on those bills, because they do
41:36
Speaker 9: and they can, and you.
41:38
Speaker 1: Know see in my experience, it's been, well, quarter hours
41:41
Speaker 1: you get built for like a five minute phone call,
41:43
Speaker 1: you'd get built a quarter hour.
41:44
Speaker 2: Right, Well, that makes more sense.
41:47
Speaker 1: Yeah, and Jen, how about the senior partner just devolved
41:50
Speaker 1: away from Michigan, I mean, no Microsoft, Microsoft, to just
41:53
Speaker 1: kind of how they make money. So the senior partners
41:56
Speaker 1: at these white che New York law firms, do they
41:59
Speaker 1: still have the bill hours or they just take a salary.
42:03
Speaker 9: Oh no, they bill hours, everybody built. Yeah, no, they
42:06
Speaker 9: bill hours and it goes to the client. I mean, look,
42:09
Speaker 9: I haven't done practicing on now for about eight years,
42:12
Speaker 9: but as far as I know, things haven't changed. And
42:14
Speaker 9: the senior partners have to keep the calendar just the
42:16
Speaker 9: same way the associates do and log all their time,
42:19
Speaker 9: bill their hours.
42:20
Speaker 1: That is just no way to live a life, right, Yeah.
42:23
Speaker 2: I feel like the bankers may have it figured out,
42:24
Speaker 2: but maybe I'm wrong.
42:25
Speaker 1: Yeah, I don't know. The lawyers do just fine as
42:27
Speaker 1: far as I can tell you. All right, Jen, thanks
42:29
Speaker 1: so much for joining us giving us a little primer
42:31
Speaker 1: on how to how you earn your money in the
42:34
Speaker 1: law firm. So your bill hours, I guess. Jennifer Ree,
42:37
Speaker 1: senior litigation analyst covering the anti hour costs.
42:40
Speaker 2: At one of the top white shoe law firms.
42:43
Speaker 1: Boy, I don't know. Five hundred hour, thousand dollars an hour,
42:45
Speaker 1: definitely over a thousand, over a thousand bank all right.
42:49
Speaker 1: I mean I don't know if I would break down
42:52
Speaker 1: my deal feed into hours, and I don't know how
42:54
Speaker 1: that would be looking.
42:54
Speaker 2: Thanks for listening to the Bloomberg Markets podcast. You can
42:58
Speaker 2: subscribe and listen to interviews at Apple Podcasts or whatever
43:01
Speaker 2: podcast platform you prefer. I'm Matt Miller. I'm on Twitter
43:05
Speaker 2: at Matt Miller nineteen seventy three.
43:08
Speaker 1: And I'm Paul Sweeney. I'm on Twitter at pt Sweeney.
43:10
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43:13
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