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Florida Is Delivering The Drama To Election Junkies · Bloomberg Intelligence

• 0:05
  Speaker 1: Welcome to the Bloomberg p m L Podcast. I'm pim Fox.
• 0:08
  Speaker 1: Along with my co host Lisa Abramowitz. Each day we
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  Speaker 1: bring you the most important, noteworthy, and useful interviews for
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  Speaker 1: you and your money, whether you're at the grocery store
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  Speaker 1: or the trading floor. Find the Bloomberg p m L
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  Speaker 1: Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot com. I
• 0:27
  Speaker 1: want to introduce Al Hunt, Bloomberg opinion columnist and expert
• 0:32
  Speaker 1: in all Things Washington, to tell us a little bit
• 0:35
  Speaker 1: about what we should pay attention to on this election day.
• 0:39
  Speaker 1: Al Hunt, always a pleasure, Thanks for being with us.
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  Speaker 1: I want you to just tell us a little bit
• 0:44
  Speaker 1: about Katie Hill. Now, this is not a name that
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  Speaker 1: many people may be familiar with. She is running in
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  Speaker 1: California's twenty five and you've written about Katie Hill and
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  Speaker 1: why this is an election to watch. Tell us, Well,
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  Speaker 1: it's a it's basically a Republican leaning district gets represented
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  Speaker 1: by an incomment named Steve Knight, who was one of
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  Speaker 1: the stronger incomments running for reelection. It's a district, it's
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  Speaker 1: north of l A. It's Ventura Simi Valley, home of
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  Speaker 1: the Reagan Library and suddenly this thirty one year old
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  Speaker 1: woman who is the daughter of a cop and a nurse,
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  Speaker 1: ran a large homeless organization, didn't have a lot of
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  Speaker 1: connections or anything, has run this dazzling campaign and come
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  Speaker 1: from clearly behind to the point where she is at
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  Speaker 1: least an even bet. She raised in the last quarter
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  Speaker 1: three point eight million dollars. Let me repeat that, three
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  Speaker 1: point eight million dollars even in Bloomberg terms, that's pretty big.
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  Speaker 1: And she's got two thousand volunteers every last weekend at
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  Speaker 1: least fanning out. So it's really kind of exciting to
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  Speaker 1: see that kind of grassroots enthusiasms. So when you look
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  Speaker 1: at the race specific details right now and from what
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  Speaker 1: you're hearing with respect turnout, what are you expecting for
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  Speaker 1: today's results? A huge turnout to begin with, and huge
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  Speaker 1: turnout under conventional standards would be an advantage for Democrats,
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  Speaker 1: and think it still might be. But one doesn't know
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  Speaker 1: whether Trump rallied people with his what I consider racist
• 2:13
  Speaker 1: demogo agree on the caravan and other issues the last
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  Speaker 1: couple of days, so it's a little bit uncertain. I
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  Speaker 1: think the big turnout in suburban areas is clearly going
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  Speaker 1: to advantage Democrats. If there's a huge turnout in red
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  Speaker 1: rural areas, that may help Republicans. On balance, I think
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  Speaker 1: it's going to help democrats more. Al Hunt, are you
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  Speaker 1: looking to the Indiana Senate race as well? Big first
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  Speaker 1: six o'clock post closed in Kentucky and Indiana, And there
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  Speaker 1: are two really really huge races, one in the House
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  Speaker 1: and one of the Senate Senate that you just mentioned.
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  Speaker 1: Joe Donnally is probably one of the three or four
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  Speaker 1: most endangered Democratic income with This is a really bad
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  Speaker 1: map for Democrats this year, and if Joe Donally survives,
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  Speaker 1: that means that Democrats, you know, have a shot taking
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  Speaker 1: control of the Senate. It's a long shot, but it's
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  Speaker 1: one of Republicans think they have to win. It's a
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  Speaker 1: very Republican stage. Joe donny is a one term senator.
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  Speaker 1: Uh he voted against bred Cavanall and they have really
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  Speaker 1: I think I think Obama's excuse me, I think that
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  Speaker 1: Trump has been there four times. Kentucky. Amy McGrath, Marine
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  Speaker 1: combat pilot Amy McGrath is running against Republican income in
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  Speaker 1: Andy Barr in a district it's about plus ten GOP
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  Speaker 1: and I think she's got a real chance to win.
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  Speaker 1: It's a very exciting race, and that will be an
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  Speaker 1: indication of a of a wave of interesting candidates winning
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  Speaker 1: this year, a lot of them women and a disproportionate
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  Speaker 1: number of them veterans young. Do you think that Ted
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  Speaker 1: Cruz will no longer be part of the Senate? Come?
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  Speaker 1: I guess well, no, I'm I I'm not saying I'm
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  Speaker 1: not weighing in a one way or another. Better artist
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  Speaker 1: certainly know you're being there, I'm not, but but better
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  Speaker 1: rockers certainly run a competitive campaign, and it seems like
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  Speaker 1: there is some uncertainty there though the leaning towards Ted Cruz, right,
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  Speaker 1: he's a rock star two thousand and eighteen. Uh, not
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  Speaker 1: not Ted Cruise, but better ur it's a it's a
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  Speaker 1: really tough state. It's a really really tough state to
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  Speaker 1: Wednesday wide. If you're a Democrat, it's probably moving that way,
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  Speaker 1: but slowly. I think the only the only reason Democrats
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  Speaker 1: think they may be an upset is because there is
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  Speaker 1: a massive surge of early voting there. And the question
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  Speaker 1: is do the polls and them and the modeling are
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  Speaker 1: they able to reflect that? Because they all show Cruise
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  Speaker 1: winning by about three or four. I don't know the
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  Speaker 1: answer that question, but it will be exciting to watch
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  Speaker 1: poles closed in Texas at eight, So stay tuned for
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  Speaker 1: then next door, you said that Better Rourke is the
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  Speaker 1: rock star of this election cycle. So you know, one
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  Speaker 1: sort of speculation is if he wins, he'll be considered
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  Speaker 1: a candidate for the presidency at some point, perhaps even
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  Speaker 1: as soon as Do you think that that's feasible? And
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  Speaker 1: do you think it's feasible even if he doesn't win? Well,
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  Speaker 1: I think all the standards change when Donald Trump one.
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  Speaker 1: Uh So therefore, you know, experience and gravitas and all
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  Speaker 1: that kind of stuff that used to count for something
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  Speaker 1: doesn't count much anymore. But I think that would be early.
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  Speaker 1: Uh Barack Obama they said was early, but Barack Obama
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  Speaker 1: has spent you know what, eight years in the state legislature,
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  Speaker 1: four years in the Senate. I think more of a
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  Speaker 1: you know, more ready say than Better would be in
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  Speaker 1: twenty But I'll tell you there's an awful lot of
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  Speaker 1: of of really movement Democrats who would put their hand
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  Speaker 1: to fire for better or work. Al Hunt tell us
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  Speaker 1: about the races in Florida, And I don't just mean
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  Speaker 1: the Senate race between Bill Nelson and it's it's it's
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  Speaker 1: really you know, if you if you're looking for a
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  Speaker 1: operations central tonight, it's Florida because it's the one state
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  Speaker 1: that has everything. Huge Senate race, which you just mentioned,
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  Speaker 1: Bill Nelson running against an incumbent Governor Rick Scott, I mean,
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  Speaker 1: and and the amount of money spent is has been colossal.
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  Speaker 1: Same time, you have a fantastic governor's race with a
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  Speaker 1: Trump supporting right wing Republican Congresman Rohn de Stantus running
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  Speaker 1: against uh. The African American mayor of Tallahassee, Andrew Gillham,
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  Speaker 1: has really been a It's been a very tough race.
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  Speaker 1: I was down there a couple of weeks ago, and
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  Speaker 1: I think, to the surprise of some Democrats in Washington least,
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  Speaker 1: Gillham is just one heck of a candidate, and I
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  Speaker 1: think the odds now favor him, and that would be
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  Speaker 1: huge because it would be the first time the Democrats
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  Speaker 1: control the state House in eight years. It affects redistricting
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  Speaker 1: after the two thousand and twenty cents and those two
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  Speaker 1: races at the top of Democrats win those by three
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  Speaker 1: or four or five points. And some think they will.
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  Speaker 1: That's that's going to affect the number of House seats
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  Speaker 1: two I think there right now Democrats think they're going
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  Speaker 1: to pick up two House seats in Florida. They have
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  Speaker 1: a chance to pick up as many as four or
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  Speaker 1: five if they have any kind of a blue wave night.
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  Speaker 1: So we're talking a lot about a potential blue waver
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  Speaker 1: of Democrats picking up seats. But there is the alternative here,
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  Speaker 1: which is that Republicans pick up both they win, they
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  Speaker 1: keep control over both houses, both the House for Presentatives
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  Speaker 1: as well as the Senate. And what's the likelihood of
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  Speaker 1: that and what would that do for President Trump? Well,
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  Speaker 1: the likelihood of that I think is probably you know,
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  Speaker 1: in the fifteen, you know, seventeen percent range. I think,
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  Speaker 1: you know, far greater than they'll keep controlling the Senate.
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  Speaker 1: But but our reach and the half. But if they do, uh,
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  Speaker 1: it's uh, you know, it's a free license for Donald Trump.
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  Speaker 1: Donald Trump can do anything he wants to. It will
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  Speaker 1: be the end of the Affordable Healthcare Act. He can
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  Speaker 1: really get done almost anything he wants. He dominates his party,
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  Speaker 1: and his party will dominate Washington. Al Hunt, thank you
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  Speaker 1: so much for being with us. All Hunt is a
• 7:44
  Speaker 1: columnist with Bloomberg Opinion talking about the midterm elections. There
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  Speaker 1: certainly has been a lot of hype around financial technology
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  Speaker 1: fintech firms. A number of startups have version to the surface,
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  Speaker 1: so over the number of years, there is a question though,
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  Speaker 1: how much more room is there for startups at a
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  Speaker 1: time when the big banks are all trying to plow
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  Speaker 1: into financial technology fintech Joining us now to talk about
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  Speaker 1: that it should work such a volo. He is a
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  Speaker 1: general partner at Trinity Ventures in San Francisco. Shu Work,
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  Speaker 1: thank you so much for being with us. So let's
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  Speaker 1: just start there. I mean, do you see a lot
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  Speaker 1: of good potential opportunities out there with respect to fintech
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  Speaker 1: firms that you are interested investing in? Absolutely. I think
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  Speaker 1: fintech's uh is a pretty broad category. There's a lot
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  Speaker 1: of different kinds of opportunities up and down the financial
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  Speaker 1: services spectrum. Um. I do think the the levels of
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  Speaker 1: innovation in fact are just getting started. You had mentioned
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  Speaker 1: the big banks flowing in more. If anything, I think
• 8:50
  Speaker 1: that actually creates a whole bunch of new opportunity because
• 8:53
  Speaker 1: as these big banks effectively try to create new products
• 8:56
  Speaker 1: and services there's a whole bunch of new technology platforms
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  Speaker 1: and so of us is that will be necessary in
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  Speaker 1: order to deliver them. A lot of opportunity there, and
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  Speaker 1: part of the reason why a lot of the large
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  Speaker 1: national institutions are getting more aggressive is because there's a
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  Speaker 1: whole bunch of new upstarts are effectively pushing the boundary
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  Speaker 1: and kind of forcing a lot more innovation faster. So
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  Speaker 1: all in all, I think there's still a lot of
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  Speaker 1: opportunity across the spectrum for fintech innovation. Now, you yourself
• 9:24
  Speaker 1: are a serial entrepreneur in the world of fintech. You've
• 9:28
  Speaker 1: created companies that have then been acquired by master Card,
• 9:32
  Speaker 1: for example. How is it possible that on the consumer level,
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  Speaker 1: you're able to take an uber or to transact business
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  Speaker 1: completely on your phone instantly, without any friction, you can
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  Speaker 1: pay for things. But when it comes to the world
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  Speaker 1: of wholesale banking banks moving large amounts of money, why
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  Speaker 1: is that still a challenge and why is it still expensive?
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  Speaker 1: It's an excellent quite chin, and I think the simple
• 10:01
  Speaker 1: answer is that the stakes are higher and and the
• 10:04
  Speaker 1: infrastructure that is necessary to be built up in order
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  Speaker 1: to plane those spaces is higher simply because the regulatory
• 10:12
  Speaker 1: um requirements that are required to play those spaces are
• 10:17
  Speaker 1: substantially more um stringent, So you have a larger number
• 10:22
  Speaker 1: of regulations that control, you know, things like k y
• 10:26
  Speaker 1: C and m L that all are multiple three letter
• 10:30
  Speaker 1: words that effectively are things that need to be done.
• 10:34
  Speaker 1: To make sure that the consumer and all the participating
• 10:38
  Speaker 1: parties in a transaction are protected and to make sure
• 10:41
  Speaker 1: that all of those things are done is a much
• 10:43
  Speaker 1: higher bar and a lot of cases actually quite boring stuff.
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  Speaker 1: So when you think about financial innovation, UH innovation first
• 10:50
  Speaker 1: starts with the easier things, things that are easier to
• 10:53
  Speaker 1: get done. But we've recently invested in a company that's
• 10:57
  Speaker 1: actually making that a lot easier do um, a company
• 11:01
  Speaker 1: called Synapse i f I that's actually creating a p
• 11:05
  Speaker 1: I S to almost make access to wholesale banking almost
• 11:08
  Speaker 1: as easy as Stripe has made payment services to be
• 11:13
  Speaker 1: integrated into an over order left for example. And just
• 11:15
  Speaker 1: to do the acronym definition, k y C means know
• 11:20
  Speaker 1: your Customer and a m L for those in the
• 11:23
  Speaker 1: financial world, no, it means anti money laundering rules. Sorry, no, no,
• 11:29
  Speaker 1: no worries. It's good to point that out, because these
• 11:31
  Speaker 1: acronyms do have purposes for for the regulators and for
• 11:34
  Speaker 1: the banks. But Schwork, I'm wondering you mentioned payments and
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  Speaker 1: that was an area that you have expertise in yourself.
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  Speaker 1: I'm looking at squares shares, for example, and they're up
• 11:42
  Speaker 1: more than a hundred and twenty percent so far year
• 11:44
  Speaker 1: to date. Is the payment sector still ground zero when
• 11:49
  Speaker 1: it comes to innovation in financial technology? What is the
• 11:52
  Speaker 1: frontier for the next wave of innovation? Absolutely, I think
• 11:57
  Speaker 1: it's definitely the early days square and of course is
• 12:01
  Speaker 1: then innovating almost in and around the payment sectors, so
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  Speaker 1: they're actually kind of getting into things like lending and
• 12:08
  Speaker 1: marketing and all the other kinds of services from payroll
• 12:11
  Speaker 1: and so and so forth. So they the number of
• 12:13
  Speaker 1: services they can offer their existing customer base um is
• 12:16
  Speaker 1: still you know, they're still sketching the surface. I think
• 12:19
  Speaker 1: there's a lot more upside there. And but if you
• 12:21
  Speaker 1: look at broadly more fintech, I do think the the
• 12:24
  Speaker 1: amount of innovation is almost poised to accelerate because one
• 12:28
  Speaker 1: of the things that almost limits innovation and financial services
• 12:32
  Speaker 1: is in fact regulatory um strength. If you may so,
• 12:36
  Speaker 1: if the the regulators are are being very very cautious,
• 12:41
  Speaker 1: then it almost limits innovation because people are scared to
• 12:45
  Speaker 1: kind of push the boundary a little bit to kind
• 12:47
  Speaker 1: of make sure figure out what it is that actually
• 12:49
  Speaker 1: can be done. Um. But when the regulators tend to
• 12:52
  Speaker 1: be a little bit more lax, then it tends to
• 12:55
  Speaker 1: become a little bit more um encouraging of innovation. So lending,
• 13:00
  Speaker 1: for example, has been innovated on many, many times over
• 13:04
  Speaker 1: the last ten years because regulators were a little bit
• 13:08
  Speaker 1: more friendly towards innovation in the lending space. So as
• 13:12
  Speaker 1: regulators look favorably upon innovation in different areas, those actually
• 13:17
  Speaker 1: tend to count alive with a lot more innovation. So
• 13:21
  Speaker 1: I think lately, I think that regulators have been a
• 13:24
  Speaker 1: little bit more encouraging our innovation. The occ is, for example,
• 13:28
  Speaker 1: creating things like the Fintech Charter, so they're they're starting
• 13:30
  Speaker 1: to think about innovation as part of the realm of
• 13:34
  Speaker 1: the things that they want to encourage and push. And
• 13:38
  Speaker 1: so as the regulators start to kind of look at
• 13:40
  Speaker 1: this a little bit more favorably, I think innovation is
• 13:42
  Speaker 1: only going to accelerate. Can you just tell us quickly
• 13:45
  Speaker 1: about branch because we talked about the developed world, and
• 13:49
  Speaker 1: Branch is a company that you've invested in that works
• 13:52
  Speaker 1: in emerging markets. That's exactly right. I think if you
• 13:57
  Speaker 1: really think about financial services, we tend it kind of
• 14:00
  Speaker 1: almost always on fin techs especially, we tend to think
• 14:03
  Speaker 1: about that as a very US phenomenon. But if you
• 14:06
  Speaker 1: really look at the fintech innovation, it's actually happening across
• 14:09
  Speaker 1: the world. In fact, because again regulation is a little
• 14:14
  Speaker 1: bit more friendly innovation. In Europe, you actually find and
• 14:17
  Speaker 1: DiNovo banks that have actually been created from scratch actually
• 14:20
  Speaker 1: thriving in Europe, which is not quite played out almost
• 14:23
  Speaker 1: the same way in the US yet. UM. But if
• 14:26
  Speaker 1: you really think about consumers and consumer demand, UM, financial
• 14:31
  Speaker 1: services in the US is almost one of the most
• 14:33
  Speaker 1: well developed sectors. But across the rest of the world,
• 14:36
  Speaker 1: financial services has very very low penetration, so very few
• 14:41
  Speaker 1: consumers actually even have access to financial services as a
• 14:44
  Speaker 1: fraction of the entire population. And what Brand is trying
• 14:48
  Speaker 1: to do is kind of taking the device that is
• 14:52
  Speaker 1: that actually does have very high penetration, which is a
• 14:55
  Speaker 1: smartphone UM, which is rapidly increasing in its penetration rates
• 14:59
  Speaker 1: across and developing world and using the the access and
• 15:03
  Speaker 1: information that a smartphone provides in order to be able
• 15:06
  Speaker 1: to create underwriting decisions, in order to give access to
• 15:10
  Speaker 1: both loans and going forward even savings products to consumers
• 15:15
  Speaker 1: um directly off of their phone. So a branchless banking,
• 15:18
  Speaker 1: if you may, delivered by a smartphone into the very
• 15:23
  Speaker 1: um deepest parts of Africa, India and Mexico and a
• 15:29
  Speaker 1: bunch of other countries as as they go along. Thank
• 15:32
  Speaker 1: you very much for spending time with us and talking
• 15:34
  Speaker 1: about financial technology and the challenges and the opportunities. Schwark
• 15:39
  Speaker 1: Sayavolo is the general partner for Trinity Ventors. Joining us
• 15:43
  Speaker 1: from San Francisco. The energy and pharmaceutical industries stand to
• 15:51
  Speaker 1: potentially be disrupted depending on the outcome of today's midterm
• 15:55
  Speaker 1: elections in the United States. Joining us now, Brian Rice
• 15:58
  Speaker 1: in your healthcare policy analyst four Brick Intelligence coming to
• 16:01
  Speaker 1: us from our nig n WIN studios in Washington, d C. Brian,
• 16:04
  Speaker 1: thank you so much for joining us. Let's start with
• 16:07
  Speaker 1: the pharmaceutical industry. What is the sort of range of
• 16:11
  Speaker 1: outcomes from today's election that could potentially affect this industry? Sure,
• 16:15
  Speaker 1: and I think the one that pharmaceutical industry would be
• 16:18
  Speaker 1: most concerned with is if you have the true blue
• 16:21
  Speaker 1: wave where Democrats control not only the House but also
• 16:25
  Speaker 1: the Senate, and in that instance, they would have the
• 16:27
  Speaker 1: ability to not only hold a lot of hearings that
• 16:29
  Speaker 1: would create a lot of noise and headlines, but then
• 16:31
  Speaker 1: also potentially send some legislation to President Trump's desk. And
• 16:35
  Speaker 1: I think the concern for the industry is that if
• 16:37
  Speaker 1: you've listened to President Trump over the past couple of years,
• 16:40
  Speaker 1: you know his personal leanings from time to time appear
• 16:43
  Speaker 1: to be more aligned with the Democrats on things like
• 16:45
  Speaker 1: giving the federal government more direct influence over the prices
• 16:49
  Speaker 1: of prescription drugs in the part deep program for example. Now,
• 16:53
  Speaker 1: if it's just a split where our gridlock situation where
• 16:56
  Speaker 1: Democrats maybe win control of the House, but Republicans retain
• 16:59
  Speaker 1: control of the Senate, and I think those more draconian
• 17:01
  Speaker 1: things are are taken off the table. But again, the
• 17:04
  Speaker 1: Democrat controlled House would have the ability to dictate a
• 17:07
  Speaker 1: number more hearings and things that would put pharmaceutical companies
• 17:11
  Speaker 1: UM in more of a spotlight than they are are already.
• 17:14
  Speaker 1: Brian Ryan, I just want to let you know that
• 17:16
  Speaker 1: we have a group of future voters of America joining
• 17:20
  Speaker 1: us here in our Bloomberg Interactive Broker studios. We have
• 17:23
  Speaker 1: all the members of a Girl Scout a troop nineteen
• 17:27
  Speaker 1: fifty six from Edgemont in Scarsdale. So they're all listening
• 17:32
  Speaker 1: to you because they want to understand how the midterm
• 17:35
  Speaker 1: elections figure into not just this election cycle, but the cycle.
• 17:41
  Speaker 1: Are these the same issues you believe are going to
• 17:43
  Speaker 1: dominate the next election or is this something that is
• 17:47
  Speaker 1: specific to this mid term because typically you think, oh,
• 17:51
  Speaker 1: however the economy goes, that's how the vote goes. Well.
• 17:54
  Speaker 1: First of all, I'm honored to be speaking in front
• 17:57
  Speaker 1: of such a distinguished group. Welcome girls, and uh. Secondly,
• 18:01
  Speaker 1: I think the healthcare UH situation is one that will
• 18:04
  Speaker 1: continue to be of particular interest to voters, not only
• 18:08
  Speaker 1: drug pricing, but then also starting tomorrow probably will cycle
• 18:12
  Speaker 1: very quickly into the presidential campaign, in particular the intra
• 18:16
  Speaker 1: Democratic party fight about how far left do you want
• 18:19
  Speaker 1: to go? Are we going to nominate someone who believes
• 18:22
  Speaker 1: in the Bernie Sanders Medicare for All perspective? Or is
• 18:26
  Speaker 1: it maybe not quite that far down that stretch. So
• 18:29
  Speaker 1: you know, I think twenty nineteen is going to be
• 18:30
  Speaker 1: a very interesting year from a healthcare perspective, and that
• 18:33
  Speaker 1: obviously sets up the battle versus President Trump in twenty
• 18:37
  Speaker 1: depending on the outcome of these UH midterm elections tomorrow
• 18:41
  Speaker 1: and what policies emanate from there, that will obviously drive
• 18:44
  Speaker 1: a lot of the conversation UM UH in heading into
• 18:48
  Speaker 1: and certainly, you know, healthcare, so one that I think
• 18:50
  Speaker 1: both parties will be forced to talk about, even if
• 18:53
  Speaker 1: they don't want to. Brian, one thing that I'm struck
• 18:56
  Speaker 1: by is that no matter who wins, we're going to
• 18:58
  Speaker 1: probably deepen US deficit right with spending, possibly either with
• 19:02
  Speaker 1: infrastructure spending or a more permanent tax cut. Would you
• 19:07
  Speaker 1: say that that's an accurate statement? And what are the
• 19:09
  Speaker 1: most likely spending scenarios should we see a blue wave
• 19:13
  Speaker 1: or a red wave? Yeah, I think in certainly history
• 19:16
  Speaker 1: suggests that's a pretty safe bet no matter what the
• 19:18
  Speaker 1: what the outcome of an election is, UM, certainly you
• 19:21
  Speaker 1: have either a blue wave or a split Congress. UM.
• 19:25
  Speaker 1: I think infrastructure is an area where the President has
• 19:27
  Speaker 1: expressed a lot of interest and Democrats UM also would
• 19:31
  Speaker 1: want to to maybe uh, provide more stimulus In that standpoint,
• 19:35
  Speaker 1: I think the political question that the Democrats would then
• 19:38
  Speaker 1: have to ask though, is do they want to hand
• 19:40
  Speaker 1: the president a win? Do they want to be seen
• 19:43
  Speaker 1: on stage at a bill stigning ceremony for example, where
• 19:46
  Speaker 1: the president is getting something that he wants. And then
• 19:48
  Speaker 1: for the president, would he be willing to to cave
• 19:51
  Speaker 1: in on some Democratic demands? How much would he ask
• 19:54
  Speaker 1: for in return, whether it's the wall or other infrastructure
• 19:57
  Speaker 1: priorities that perhaps the Democrats, um, you know, aren't aligned with,
• 20:01
  Speaker 1: but that I think is an area that investors are
• 20:03
  Speaker 1: going to want to focus on. But that's certainly that's
• 20:06
  Speaker 1: certainly not a deficit cutting program that we're going to see, Brian,
• 20:09
  Speaker 1: there are a lot of ballot initiatives that voters are
• 20:12
  Speaker 1: going to have to decide on. Tell us the ones
• 20:15
  Speaker 1: that you believe are the most relevant. Well, a couple
• 20:20
  Speaker 1: uh that that I think are in our various analysts
• 20:22
  Speaker 1: are focused on here at Bloomberg Intelligence out in California.
• 20:26
  Speaker 1: Prop eight I think has a lot of a lot
• 20:28
  Speaker 1: of interest within the healthcare community, in particular dialysis providers,
• 20:32
  Speaker 1: you know, Uh, Divita in particular has been very keen
• 20:34
  Speaker 1: on on that one. UH, several ballot initiatives could could
• 20:39
  Speaker 1: I guess further the trend towards cannabis legalization. I think
• 20:42
  Speaker 1: Michigan is a state in particular that that our analysts
• 20:45
  Speaker 1: are focused on, given the UH the potential market in
• 20:49
  Speaker 1: that state. So those are a couple that across the
• 20:51
  Speaker 1: country a number of ballot initiatives. This is much more
• 20:53
  Speaker 1: than just the battle for control of Congress. Thank you
• 20:56
  Speaker 1: so much for being with us, Brian, Ryan. I'm sure
• 20:58
  Speaker 1: you've got a long night ahead of you, and we
• 21:00
  Speaker 1: may not even know the results right come tomorrow morning,
• 21:02
  Speaker 1: and there might be some pretty hairy races there. That's right,
• 21:05
  Speaker 1: you know, ballot I guess the post closed around eleven
• 21:08
  Speaker 1: o'clock tonight Eastern time in California. A number of those
• 21:11
  Speaker 1: races could ultimately decide which way the no the Congress
• 21:15
  Speaker 1: goes next year. Well, Brian, right, I have a wonderful
• 21:18
  Speaker 1: time drinking coffee from now until tomorrow this time, Brian
• 21:21
  Speaker 1: Ryce and your healthcare policy analyst for Bloomberg Intelligence coming
• 21:24
  Speaker 1: to us from the Capital of the United States, Washington,
• 21:28
  Speaker 1: d C. The creditors of Seers are asking the court
• 21:34
  Speaker 1: to probe transactions that involve the bankrupt retailer's biggest shareholder,
• 21:40
  Speaker 1: Eddie Lampert. And here to tell us about it is
• 21:43
  Speaker 1: Noel Hebert, director of credit research for Bloomberg Intelligence. No
• 21:48
  Speaker 1: just set out for us exactly what kinds of transactions
• 21:53
  Speaker 1: do they want to investigate? It? Well, pretty much all
• 21:56
  Speaker 1: of them. Uh. So mean, over the last several years
• 22:00
  Speaker 1: is in order to keep Sears afloat at these done
• 22:03
  Speaker 1: a number of things to basically inject capital into the business.
• 22:07
  Speaker 1: The biggest one being the transaction where they spun out
• 22:10
  Speaker 1: a bunch of real estate into what's called Siritage, which
• 22:13
  Speaker 1: is a real estate investment trust that took on a
• 22:16
  Speaker 1: bunch of the stores owned by Sears. But then more
• 22:18
  Speaker 1: recently there's been a number of deals which were more
• 22:22
  Speaker 1: direct lending, whereas Eddie Lampert through his E s L
• 22:25
  Speaker 1: investment font would basically lend dollars secured by new real
• 22:30
  Speaker 1: estate or intellectual property or some of the other assets
• 22:33
  Speaker 1: of the company. So what's its stake here? I mean,
• 22:36
  Speaker 1: could Eddie Lampert have to pay the credit or something
• 22:39
  Speaker 1: or would you just stand or recover less? Uh it's
• 22:42
  Speaker 1: a great question. Hi, I wish I knew the answer. Uh,
• 22:45
  Speaker 1: you know, I think realistically it's a tactic by creditors
• 22:51
  Speaker 1: to try and extract more from Eddie Lamper to kind
• 22:53
  Speaker 1: of move the process along, because if it doesn't happen quickly,
• 22:57
  Speaker 1: the problem is, as we saw with Toys r Us,
• 23:00
  Speaker 1: that you end up in a situation where you risk
• 23:02
  Speaker 1: moving from a chapter eleven into a Chapter seven. Um
• 23:05
  Speaker 1: that he doesn't want that because of his Sriitage ownership
• 23:08
  Speaker 1: Steak and because Seritage still collects a lot of rent
• 23:10
  Speaker 1: from scares. So to be clear, chapter seven means that
• 23:13
  Speaker 1: the whole place to stands liquidates and is done, whereas
• 23:15
  Speaker 1: Chapter eleven is more restructuring. Who are the creditors? I
• 23:18
  Speaker 1: mean these are these mostly hedge funds. It's going to
• 23:21
  Speaker 1: be predominantly hedge funds because you gotta remember, you know,
• 23:25
  Speaker 1: esl controlled, you know, of the equity. He also controlled
• 23:30
  Speaker 1: of you know, the lending part of the portfolio. So
• 23:33
  Speaker 1: between him and fair Home before they had equity exited
• 23:37
  Speaker 1: much of their equity stak. I mean those two collectively
• 23:41
  Speaker 1: owned you know, three quarters of the capital structure. Almost
• 23:44
  Speaker 1: no al How far back will this are they looking
• 23:48
  Speaker 1: for this investigation to go? So they're they're trying to
• 23:52
  Speaker 1: roll up everything going back until which is when you
• 23:56
  Speaker 1: saw Siries Home Town spun out, as well as some
• 23:59
  Speaker 1: of the deals with Sears Canada. Uh those I mean
• 24:02
  Speaker 1: because a lot of those deals, including Land's End as well,
• 24:06
  Speaker 1: which was a lot of those deals were just done
• 24:08
  Speaker 1: as distributions spun out pro rata or everybody, all the
• 24:12
  Speaker 1: shareholders had equal right to participate. So those look like
• 24:15
  Speaker 1: a tough lift, I would think from the creditor standpoint.
• 24:18
  Speaker 1: Same with Siritage because I got a fairness opinion and
• 24:21
  Speaker 1: Eddie Lamport in the ESL paid an extra forty million
• 24:23
  Speaker 1: a couple of years after that deal was done to
• 24:25
  Speaker 1: settle shareholder litigation at that point, so you know, it's
• 24:30
  Speaker 1: a good reach for them. I think the more recent
• 24:33
  Speaker 1: deals where you know they lent directly against specific assets
• 24:36
  Speaker 1: of the last call it two years, are probably more
• 24:39
  Speaker 1: doable for for the hedge funds and the people on
• 24:42
  Speaker 1: the other side of the ledger here um. But but
• 24:45
  Speaker 1: they're going after everything. I'm just wondering there have been
• 24:49
  Speaker 1: some kinks some people who are looking to lend a
• 24:52
  Speaker 1: Sears while they're in bankruptcy adator and possessions loan have
• 24:56
  Speaker 1: sort of balked at the idea of Eddie Lambert being
• 24:59
  Speaker 1: orally in alved where is that and sort of how
• 25:02
  Speaker 1: much are they going to be able to actually borrow
• 25:03
  Speaker 1: to keep themselves afloat during this whole process. Well, it
• 25:06
  Speaker 1: sounds like at least the latest iteration is that the
• 25:10
  Speaker 1: other creditors are willing to put up another three hundred million,
• 25:12
  Speaker 1: which is what Eddie and E. S l Are trying
• 25:15
  Speaker 1: to do as a second leaned that are in possession
• 25:17
  Speaker 1: financing loan um. So it looks like they're willing to
• 25:20
  Speaker 1: take on that liability, which is okay from the standpoint
• 25:24
  Speaker 1: of you still have plenty of coverage from your working capital,
• 25:28
  Speaker 1: so your inventory, etcetera. Um. And basically they're trying to
• 25:31
  Speaker 1: keep Eddie from getting more engaged because if he had
• 25:34
  Speaker 1: gotten into the debtor possession role that he would leap
• 25:36
  Speaker 1: frog right the other term loan lenders and some of
• 25:39
  Speaker 1: the other first leans which are still out there as creditors.
• 25:43
  Speaker 1: So I think the banks and a lot of people
• 25:44
  Speaker 1: who've sort of bought into this process over time and
• 25:49
  Speaker 1: kept you know, kind of maybe seeing the silver lining
• 25:52
  Speaker 1: on the gray cloud that kept building, or maybe now
• 25:55
  Speaker 1: feeling a little more disenchanted with the whole thing and
• 25:58
  Speaker 1: less inclined to the sort of let Eddie have a
• 26:01
  Speaker 1: bigger say and just quickly no time. You mentioned time.
• 26:05
  Speaker 1: Do they have time to let this happen while the
• 26:07
  Speaker 1: company still operates? No, would be my my gut answer here, right.
• 26:16
  Speaker 1: I mean, the reality is, if you don't have something
• 26:18
  Speaker 1: in place, in a real firm plan by the very
• 26:20
  Speaker 1: early part of next year, call it mid February early March,
• 26:24
  Speaker 1: it'll be very hard to keep this thing from spiraling
• 26:27
  Speaker 1: into liquidation because the company consumes so much cash um,
• 26:31
  Speaker 1: so you need to be able to wipe away all
• 26:33
  Speaker 1: the incremental costs, whether you're talking just the cost of
• 26:36
  Speaker 1: learning the bankruptcy, the cost of the incremental stores, etcetera.
• 26:39
  Speaker 1: So it's going to be an interesting an interesting road,
• 26:42
  Speaker 1: as it has for the number of years that this
• 26:44
  Speaker 1: has been ongoing. Noal Hebert, thank you so much for
• 26:46
  Speaker 1: being with us. Noal Hebert, Director of Credit Research for
• 26:48
  Speaker 1: Bloomberg Intelligence. Thanks for listening to the Bloomberg P and
• 26:53
  Speaker 1: L podcast. You can subscribe and listen to interviews at
• 26:56
  Speaker 1: Apple Podcasts, SoundCloud, or whatever podcast platform you prefer. I'm
• 27:00
  Speaker 1: pim Fox. I'm on Twitter at pim Fox. I'm on
• 27:04
  Speaker 1: Twitter at Lisa Abramowitz. One before the podcast, you can
• 27:07
  Speaker 1: always catch us worldwide on Bloomberg Radio