Latest / Bloomberg Intelligence / Corporate Payments To Cohen Are A Serious Legal Matter: Feldman

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Corporate Payments To Cohen Are A Serious Legal Matter: Feldman · 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 Brabowitz. Each day we
• 0:11
  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
• 0:20
  Speaker 1: Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot com. There's
• 0:33
  Speaker 1: been a lot of news about Michael Cohen, President Trump's
• 0:37
  Speaker 1: personal attorney. The latest is a report that A. T
• 0:42
  Speaker 1: and T was paying Cohen uh to get more insight
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  Speaker 1: into the Trump administration as far back as the beginning
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  Speaker 1: of twenty seventeen. To wait in on this, we want
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  Speaker 1: to bring in Noah Feldman and Felix Frankfurter, professor of
• 0:57
  Speaker 1: laud Harvard University, also a Blue Amberg View columnists joining
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  Speaker 1: us by phone. Noah, thank you so much for being here. Um,
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  Speaker 1: is there any way to interpret this payment that A.
• 1:09
  Speaker 1: T and T made, or a series of payments to
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  Speaker 1: Michael Cohen, other than simply trying to curry favor so
• 1:16
  Speaker 1: they can get their Time Warner deal through. It's hard
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  Speaker 1: to see what else could have been going on. I mean,
• 1:22
  Speaker 1: they're the a T and T explanation, namely that they
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  Speaker 1: just wanted to get some insight into Trump, doesn't seem
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  Speaker 1: all that credible since it was already nine months into
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  Speaker 1: the Trump administration when they suddenly made this payment to
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  Speaker 1: Cohen himself. It looks as though at a crucial juncture
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  Speaker 1: in their murder talks, they were seeing if there was
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  Speaker 1: some way they could get closer to Trump, and Cohen
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  Speaker 1: arguably presented himself to them as exactly such a such
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  Speaker 1: a mechanism. If so, it didn't work, since the Department
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  Speaker 1: of Justice blocked their merger. So one question that this
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  Speaker 1: raised in my mind is is there a line between
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  Speaker 1: pay to play types of performance and types of activities
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  Speaker 1: versus lobbying. Well, legally speaking, if you're paying somebody for
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  Speaker 1: the purpose of that person then going to the government
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  Speaker 1: a government official and trying to convince them of your position,
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  Speaker 1: that's lobbying. And lobbyists have to be registered, and Cohen
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  Speaker 1: was not registered as a lobbyist, And that's one reason
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  Speaker 1: that A. T and T immediately said as part of
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  Speaker 1: their public statement, we did not hire Cohen as a
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  Speaker 1: lawyer or as a lobbyist. They couldn't hire him a
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  Speaker 1: lobbist because he wasn't registered as a lobbyist. That said,
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  Speaker 1: there is of course implicit I think in the payment,
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  Speaker 1: the suggestion that they were trying to hire him to
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  Speaker 1: lobby and that means a serious that's a serious matter
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  Speaker 1: for a T and D, and they'll have to do
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  Speaker 1: an internal investigation to figure out exactly what they were
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  Speaker 1: up to. So the answer is that legally there should
• 2:43
  Speaker 1: be a line, but in practice they are all what
• 2:44
  Speaker 1: there isn't always uh Noah. As a lawyer, what would
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  Speaker 1: you want to know about not only this payment to
• 2:53
  Speaker 1: Michael Cohen and his law firm, but also other payments
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  Speaker 1: to his law firm, and well to two things? First
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  Speaker 1: of all, what services were rendered in exchange for these payments?
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  Speaker 1: Did Cohen actually do anything for Korea aerospace industries, for
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  Speaker 1: nov artists, um for a firm connected to a Russian oligarch.
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  Speaker 1: These are all entities that made payments. The second of all,
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  Speaker 1: where did the money go after Cohen got it? And
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  Speaker 1: it's worth noting the payments were not made to his
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  Speaker 1: law firm, although you think that would be true. They
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  Speaker 1: were made to a shell company called Essential Consultants that
• 3:27
  Speaker 1: Cohen set up, and that Cohen actually used to make
• 3:30
  Speaker 1: payments to Storey Daniels. So there's something particularly fishy about
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  Speaker 1: the idea that these were not payments made to Cohen's
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  Speaker 1: law firm, but rather to a special purpose empty shell
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  Speaker 1: that he created to disperse money in part on behalf
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  Speaker 1: of the president. Okay, this sounds like a legal question.
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  Speaker 1: But is this normal? No, I will answer that in
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  Speaker 1: a real world sex it is not normal. Um, ordinary
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  Speaker 1: law firms do not own or ordinary lawyers do not
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  Speaker 1: own shell corporations through which they independent payments and then
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  Speaker 1: disperse money to to others. That's not ordinary behavior. It's
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  Speaker 1: certainly not what you do for any legal services, because
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  Speaker 1: those would ordinarily go through your your law practice. And
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  Speaker 1: so it's a it's a particularly unusual phenomena. Now, individual
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  Speaker 1: attorneys who do other kinds of things, lecturing or consulting
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  Speaker 1: might have an LC for those purposes. I even have
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  Speaker 1: one for those purposes, but it doesn't make hundred dollar
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  Speaker 1: expenditures on behalf of clients. No, what's the potential liability
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  Speaker 1: for a T and T as it does an internal
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  Speaker 1: review and as it faces quite a bit of blowback
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  Speaker 1: as to these five hundred thousand dollars of payments that
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  Speaker 1: it made. Michael Cohen, I should say first of all
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  Speaker 1: that I'm not certain what the number was that A
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  Speaker 1: T and T s payments, and I suppose that remains
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  Speaker 1: to be to be determined into tail. But the answer
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  Speaker 1: is that if you are a corporation and you hired
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  Speaker 1: someone to lobby, knowing that that person was not registered
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  Speaker 1: as a lobbyist, you could be implicated to ten really
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  Speaker 1: in his criminal lobbying. Furthermore, if they were trying to
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  Speaker 1: influence an ongoing government proceeding, like the Department of Justice
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  Speaker 1: proceeding that was considering the possibility of their their merger
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  Speaker 1: with Time Warner, that could be construed as seeking to
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  Speaker 1: pervert the course of government practice, potentially even bribery. Now,
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  Speaker 1: for bribery, there would have to be not just a quid,
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  Speaker 1: not just a gift to someone connected to the government,
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  Speaker 1: but but a quote some expectation of a response. But
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  Speaker 1: that's something that they should be worried about it and
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  Speaker 1: they should have lawyers working on this right now. That's
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  Speaker 1: a serious matter for a corporation. Noah, wouldn't this be
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  Speaker 1: relatively easy to figure out based on how a T
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  Speaker 1: and T accounted for the payment. I mean, because if
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  Speaker 1: you're paying it for business services, you deduct it. That
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  Speaker 1: that's this good place to start. And I'm sure that
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  Speaker 1: investigators both internally at A T and T and also
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  Speaker 1: in the government will will look at that, um. But
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  Speaker 1: I don't that's necessarily enough. A further investigation has to
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  Speaker 1: be done with an A T and T to figure
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  Speaker 1: out who authorized this payment, how did they account for
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  Speaker 1: it internally? Um, you know, what was its actual purpose?
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  Speaker 1: What did they think that they were buying. But this
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  Speaker 1: shouldn't be like a very difficult thing to do, right,
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  Speaker 1: I mean, if you're a major corporation, you have a
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  Speaker 1: system and a process in place in order to you know,
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  Speaker 1: there's a purchase order or there's a requisition for him,
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  Speaker 1: I mean full disclosure. My husband's a lawyer. There's a
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  Speaker 1: lot to do about the culture and who signed off
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  Speaker 1: on it, and a lot more I imagine as well. No, noah, yeah,
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  Speaker 1: I think that I think that's right. Of course, that
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  Speaker 1: procedure absolutely should be in place. But you can in
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  Speaker 1: a big corporation, you can sometimes sign off on something
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  Speaker 1: without knowing exactly what it's for. Further down the line,
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  Speaker 1: and the question here is who made the approval, What
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  Speaker 1: did they think the approval was for? Whatever the line
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  Speaker 1: item is said is important to know, but it's not
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  Speaker 1: the whole story. We also need to know who was
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  Speaker 1: the person who authorized this rather unusual expenditure. Thank you
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  Speaker 1: very much for being with us. Noah Feldman, Harvard University
• 7:00
  Speaker 1: Professor of Law. You can follow him on Twitter at
• 7:02
  Speaker 1: Noah are Feldman. His latest book is The Three Lives
• 7:06
  Speaker 1: of James Madison, Genius Partisan President, and of course uh
• 7:12
  Speaker 1: Noah is a Bloomberg Opinion columnist. Well, with oil moving
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  Speaker 1: past seventy barrel, we want to talk to an expert
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  Speaker 1: to find out, well, what's next. John killed off as
• 7:35
  Speaker 1: an expert. He's a founding partner of Again Capital and
• 7:38
  Speaker 1: he joins us. Now, John, what's your take on what's
• 7:42
  Speaker 1: happening with oil prizes? Is it all related to the
• 7:45
  Speaker 1: US pulling out of the Iron nuclear deal that's primarily
• 7:49
  Speaker 1: at him, But um, there's really a witches brew of
• 7:53
  Speaker 1: of uh strong fundamentals in this market. Literally moments ago,
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  Speaker 1: and I'm just calling to the data as I speak
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  Speaker 1: to you. We got the weekly inventory report from the
• 8:02
  Speaker 1: Department of Energy, and there's draw downs in everything across
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  Speaker 1: the board, crude oil, diesel fuels, gasoline, um, and this
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  Speaker 1: is emblematic of what's happening. Diesel fuels in particular have
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  Speaker 1: just plunged. They're really tight right now here in the US,
• 8:18
  Speaker 1: and because demand has been strong and exports of these
• 8:21
  Speaker 1: items have been strong. And I'm just checking here, crude
• 8:24
  Speaker 1: oil exports once again for the third week in about
• 8:27
  Speaker 1: or almost two million barrels a day. So the US
• 8:29
  Speaker 1: continues to be a major exporter of crude oil. So
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  Speaker 1: there's a strong fundamental story outside of the Uran situation.
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  Speaker 1: But of course the Uran situation is certainly now a
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  Speaker 1: big part of the overall outlook for crude oil and
• 8:43
  Speaker 1: higher prices ahead. John, I want to give you kudos
• 8:46
  Speaker 1: because you've really gotten the direction of the price of
• 8:49
  Speaker 1: oil correct and you've been really accurate. So, given the
• 8:54
  Speaker 1: fact that you have access to the oil crystal ball,
• 8:56
  Speaker 1: we're looking at crude that just passes seventy one dollars
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  Speaker 1: a barrel mark. Where are we headed right now in
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  Speaker 1: the near term? Well, unfortunately, again, so we have these
• 9:07
  Speaker 1: geopolitical worries with the RAN. You know, you have to
• 9:09
  Speaker 1: worry about potential for military conflict so that pumps up
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  Speaker 1: the security premium then as well as productions in free fall.
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  Speaker 1: And our friends the Saudis are not going to move
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  Speaker 1: with alacrity to put more oil on the market. The
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  Speaker 1: way I see it, I think they're gonna tell us
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  Speaker 1: that we should check back with them in about fifteen
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  Speaker 1: dollars or so, and maybe then they'll help to stabilize
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  Speaker 1: the price. So I think we're going considerably higher for
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  Speaker 1: w t I upwards of five dollars a barrel of barrow.
• 9:40
  Speaker 1: What does that do to gasoline at the pump? How
• 9:42
  Speaker 1: much are we expecting to pay? Well, that's fifteen dollars.
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  Speaker 1: You get two and a half cents for just on
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  Speaker 1: the barrel pim um, So you're talking at least about
• 9:52
  Speaker 1: about forty five to fifty cents higher from here. We're
• 9:55
  Speaker 1: already at nearly three dollars, so you're talking around three
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  Speaker 1: fifty a gallon national average higher in some spots California'll
• 10:03
  Speaker 1: be paying, you know, through the nose and another other
• 10:05
  Speaker 1: higher traditionally higher price zones like the Upper Midwest. Wow,
• 10:09
  Speaker 1: we're gonna be speaking more about the impact that that
• 10:11
  Speaker 1: could potentially have on the economy later in the program.
• 10:15
  Speaker 1: But I want to just get your thoughts further on
• 10:17
  Speaker 1: the implications of the US withdrawing from the Iran nuclear deal. Um,
• 10:23
  Speaker 1: what are your thoughts about what could transpire as a
• 10:26
  Speaker 1: result of this and were you surprised by anything that
• 10:29
  Speaker 1: President Trump said yesterday? Well, there were three scenarios in
• 10:33
  Speaker 1: my view, A he stayed in be he had a
• 10:35
  Speaker 1: hard exit, if you will, and or see that he
• 10:38
  Speaker 1: would sort of pull out in name only. And I
• 10:41
  Speaker 1: was really thinking that, just from a political angle, the
• 10:44
  Speaker 1: way the President seems to operate in these waters, that
• 10:46
  Speaker 1: c would be the choice. And it wasn't. Um, he
• 10:49
  Speaker 1: chose the hard path. He chose to re implement the sanctions. Uh,
• 10:54
  Speaker 1: part of them kicking in ninety days, the rest of
• 10:56
  Speaker 1: them kicking in a hundred and eighty days. And from
• 10:58
  Speaker 1: my math then, from what will be required of our
• 11:01
  Speaker 1: counterparties are allies, about five thousand barrels of Iranian CRUDEO
• 11:07
  Speaker 1: will be coming off the market at the very least,
• 11:10
  Speaker 1: And as a result of that, this is a market
• 11:13
  Speaker 1: that can't afford any lost barrels, particularly if the Saudi's
• 11:16
  Speaker 1: are going to be stingy with their production and exports,
• 11:20
  Speaker 1: which they are intimating as even as of this morning,
• 11:23
  Speaker 1: that that's their posture for now. So the other big
• 11:26
  Speaker 1: fear though here and I don't even like to really
• 11:28
  Speaker 1: speculate about this, but you saw how quickly the Israelis
• 11:32
  Speaker 1: and Staudis came out in support of President Trump's decision.
• 11:36
  Speaker 1: So the alliance, as I've been calling it, has been
• 11:38
  Speaker 1: laid bare. You have the US Shaddy in Israel aligned
• 11:42
  Speaker 1: against Iran UH and maybe to a degree Iraq. So UM,
• 11:47
  Speaker 1: the potential or a war premium in prices is something
• 11:50
  Speaker 1: you have to consider now as well, John, what's the
• 11:53
  Speaker 1: best way for investors to participate if they don't want
• 11:56
  Speaker 1: to go and play the oil futures market. Well, I
• 12:01
  Speaker 1: still see many of the pure play oil companies as
• 12:04
  Speaker 1: UM not reflective of the price environment that we're in
• 12:08
  Speaker 1: and that we're gonna look like we're gonna stay in.
• 12:10
  Speaker 1: I think part of the equity discount you're seeing and
• 12:13
  Speaker 1: most of the major oil companies is because of the
• 12:15
  Speaker 1: struct the term structure of the curve. The futures curve
• 12:18
  Speaker 1: prices out in December are operative ten dollars cheaper than
• 12:21
  Speaker 1: where we are trading in the front of the month,
• 12:23
  Speaker 1: but to the extent this persists month after month after month,
• 12:27
  Speaker 1: the earnings picture for these companies is going to be Uh.
• 12:30
  Speaker 1: I think big upside surprises. So I think that is
• 12:33
  Speaker 1: probably the safest way to play it. UH. Pure play
• 12:36
  Speaker 1: producers certainly are the Chesapeake Oil should be the beneficiaries
• 12:41
  Speaker 1: companies like that um, particularly since the global market has
• 12:45
  Speaker 1: now been thrown wide open to them as of last
• 12:47
  Speaker 1: year and the numbers are just growing them. John killed Off,
• 12:50
  Speaker 1: thank you so much for being with us and for
• 12:52
  Speaker 1: sharing your thoughts. Definitely oil on the top of the
• 12:55
  Speaker 1: minds of many, many traders, investors, and others today as
• 13:00
  Speaker 1: oil prices climbed to their highest system of ever of fourteen.
• 13:17
  Speaker 1: As oil prices climb, so to have expectations for inflation.
• 13:23
  Speaker 1: This in part is what is driving a ten year
• 13:26
  Speaker 1: treasury yields above three percent, just as the US government
• 13:30
  Speaker 1: plans to auction off twenty five billion dollars of the
• 13:34
  Speaker 1: debt later today. Joining us now to talk about what
• 13:37
  Speaker 1: to expect with all this is David Kotalk. He's chairman
• 13:39
  Speaker 1: and chief investment officer of Cumberland Advisors and comes to
• 13:42
  Speaker 1: us from the lovely Sara Sootta, Florida. David, thank you
• 13:45
  Speaker 1: so much for being with us. Um I want to
• 13:48
  Speaker 1: talk about inflation. There's been a conundrum of how much
• 13:51
  Speaker 1: it could potentially accelerate. How much do you view the
• 13:56
  Speaker 1: increase in oil prices as a huge draw or an
• 14:00
  Speaker 1: increasing inflation expectations and uh and sort of as a
• 14:04
  Speaker 1: corollary leading to substantially higher U S yields. Well, thank you, Lisa.
• 14:09
  Speaker 1: It's always a pleasure, and it's lovely in Sarasota where
• 14:13
  Speaker 1: the price of gasoline is rising like everywhere else. And
• 14:19
  Speaker 1: so the real question, I guess is how persistent will
• 14:24
  Speaker 1: we see the oil price above seventy dollars and will
• 14:28
  Speaker 1: it stick and pass through? And that remains to be
• 14:33
  Speaker 1: seen in our shop. We're not so sure it sticks.
• 14:38
  Speaker 1: And the reason is the ability of American producers to
• 14:42
  Speaker 1: turn on product production in a hurry to respond to
• 14:47
  Speaker 1: the higher price. So the higher price in essence cures
• 14:51
  Speaker 1: itself with more supply over time. It takes a little
• 14:55
  Speaker 1: time to come on stream. David Kotok, you spend time
• 15:01
  Speaker 1: at Lean's Lodge this summer in Maine. Do you believe
• 15:06
  Speaker 1: that inflation or the government's debt will be the greater
• 15:11
  Speaker 1: of the two conversations. Um at Lean's Lodge will have
• 15:16
  Speaker 1: conversation to which, by the way, you are always both
• 15:19
  Speaker 1: of you invited each and every time, and I'd love
• 15:23
  Speaker 1: to give you the fishing lesson too. I think inflation
• 15:27
  Speaker 1: will have some conversation because by the time we get there,
• 15:31
  Speaker 1: we'll see little signs of higher But I think the
• 15:34
  Speaker 1: debt issue is bigger, and the Federal Reserve bigger, and
• 15:40
  Speaker 1: the collision of rising debt issue and Silicia just talked
• 15:43
  Speaker 1: about the treasury auction size is growing at the same
• 15:48
  Speaker 1: time the Fed is shrinking its balance sheet is a
• 15:52
  Speaker 1: double whammy, and that's going to be a subject of
• 15:55
  Speaker 1: a lot of conversation by the end of this summer
• 15:58
  Speaker 1: when we're there. So talking about how much debt the
• 16:01
  Speaker 1: US is selling. So they are planning to sell billion
• 16:04
  Speaker 1: dollars of ten year treasuries today at one pm New
• 16:07
  Speaker 1: York time. I'm trying to understand the dynamic behind this
• 16:12
  Speaker 1: as people wonder whether whether we're actually going to see
• 16:15
  Speaker 1: a three percent coupon on these treasuries for the first
• 16:19
  Speaker 1: time in seven years. Do you think we're going to
• 16:21
  Speaker 1: get there? Yes, absolutely, which is quick before the whole
• 16:27
  Speaker 1: sequence is over but yes. So this is what's surprising
• 16:30
  Speaker 1: to me because you have so many investors who have
• 16:32
  Speaker 1: come out and said, you know, I would love to
• 16:35
  Speaker 1: own treasuries and earn a three percent yield. We haven't
• 16:38
  Speaker 1: earned that for seven years. This is real income at
• 16:41
  Speaker 1: a time when there's a lot of volatility. What happened
• 16:43
  Speaker 1: all them well, and they're going to have their opportunity,
• 16:47
  Speaker 1: and the question then becomes what do they do next?
• 16:50
  Speaker 1: I mean, the range of forecasts on the ten year
• 16:54
  Speaker 1: treasury yield, say one year forward run from the recession
• 17:00
  Speaker 1: coming slowed down. This coming policy is going to hurt us.
• 17:03
  Speaker 1: Trade war is going to hurt us, and that's going
• 17:06
  Speaker 1: to take the tenure yield back closer to two or
• 17:10
  Speaker 1: to an infraction. I think Barry Banister was out with
• 17:13
  Speaker 1: that just recently. And you can get to the other
• 17:16
  Speaker 1: side of the coin and you can get forecasts Jamie Diamond,
• 17:19
  Speaker 1: we're gonna have a four percent ten year treasury. Well
• 17:22
  Speaker 1: maybe they're both right, and the timing is the question.
• 17:26
  Speaker 1: But when you have a band that wide, it's impossible
• 17:30
  Speaker 1: to know what tenure treasure is going to yield a
• 17:33
  Speaker 1: year from now. All right, So if you're if it's
• 17:36
  Speaker 1: impossible to to know what the future brings. And gee,
• 17:39
  Speaker 1: that seems like an obvious statement, David, So congratulations for
• 17:43
  Speaker 1: being one of a few people to say it. Um,
• 17:45
  Speaker 1: what are you What are you telling people who are
• 17:47
  Speaker 1: looking to put money to work. Well, we have a
• 17:50
  Speaker 1: few billion that we manage in the bond market, and
• 17:53
  Speaker 1: we use a barbell, and we are increasing the size
• 17:58
  Speaker 1: of the safety side of the bar bell, which is
• 18:00
  Speaker 1: the shorter intermediate piece, especially as shorter intermediate rates have
• 18:07
  Speaker 1: now come up from away away from the zero bound
• 18:10
  Speaker 1: two more reflective of where they ought to be. At
• 18:16
  Speaker 1: least that's what we think. And so you protect your
• 18:19
  Speaker 1: capital with a barbell. You have some long end to
• 18:21
  Speaker 1: get yield and you have some shorter intermediate end to
• 18:24
  Speaker 1: protect capital, and you balance the two. And we are
• 18:29
  Speaker 1: increasing the safety side, all right, By increasing the safety side,
• 18:33
  Speaker 1: What does that technically mean you're doing? Is that money
• 18:36
  Speaker 1: market funds? Is that municipal debt? What does that mean? Well,
• 18:40
  Speaker 1: today we bought a block of the treasury two year floater.
• 18:46
  Speaker 1: That's an instrument in which the interest rate floats. Of course,
• 18:49
  Speaker 1: in rising interest rate environments, it floats up, and it's
• 18:52
  Speaker 1: a Treasury security. It's a substitute for cash. Money market
• 18:58
  Speaker 1: funds are an interesting question these is because there are
• 19:00
  Speaker 1: sweep vehicles in some brokerage firms where the brokerage firm
• 19:04
  Speaker 1: is trying to maintain the old twenty thirty basis point
• 19:08
  Speaker 1: yield and getting more and more pressure from clients and
• 19:12
  Speaker 1: forcing the client to have to go through a sequence
• 19:15
  Speaker 1: of orders to get to a money market vehicle instead
• 19:19
  Speaker 1: of a sweep vehicle. When the money market vehicles paying
• 19:22
  Speaker 1: one and a half or something like that. In time,
• 19:26
  Speaker 1: that will change because the customers will force the brokerage
• 19:28
  Speaker 1: firms to step up and pay what they should be
• 19:32
  Speaker 1: paying in this market environment. As far as stocks go,
• 19:38
  Speaker 1: um stocks are dependent on what these earnings are going
• 19:43
  Speaker 1: to be. Now that we've made an adjustment for the
• 19:46
  Speaker 1: tax code. Our own view is earnings and the trend
• 19:51
  Speaker 1: of earnings continues. We have a hundred and seventy on
• 19:54
  Speaker 1: the S and P as a guideline for that's got
• 19:58
  Speaker 1: a range of say one sixty five to one dollars
• 20:05
  Speaker 1: earnings for the companies in the sp Yeah, and if
• 20:10
  Speaker 1: you take that kind of a number, stock market at
• 20:13
  Speaker 1: the present level is reasonably priced and it has upside potential.
• 20:19
  Speaker 1: What price of oil makes you raise your eyebrows at
• 20:21
  Speaker 1: the pump ah if if if we trend up towards
• 20:26
  Speaker 1: eighty and it's sustained, that would become worrisome to us.
• 20:32
  Speaker 1: And our view is that the seventies something level is
• 20:37
  Speaker 1: near the peak. We have cut back on our energy
• 20:41
  Speaker 1: stock et F exposures. We were overweight. We took those
• 20:45
  Speaker 1: profits very recently and we actually now are going to
• 20:50
  Speaker 1: underwake the industry group because we think most of the
• 20:55
  Speaker 1: profit is already in the stocks. Thanks very much, David Kotaki.
• 20:59
  Speaker 1: Is that rman and the chief executive of Cumberland Advisors.
• 21:17
  Speaker 1: The business of veterinary science. It can be summed up
• 21:20
  Speaker 1: in an approval that was gained on Monday for Kindred
• 21:23
  Speaker 1: Biosciences for the first US approval for the treatment for
• 21:27
  Speaker 1: unintended weight loss in cats. The drug is mertazapine. And
• 21:32
  Speaker 1: here to tell us more about the business and the
• 21:35
  Speaker 1: drug is the chief executive of Kindred Biosciences are based
• 21:38
  Speaker 1: in Burlingame, California, and it is Dr Richard Chin. Dr Chin,
• 21:43
  Speaker 1: thank you very much for being with us. Tell us
• 21:45
  Speaker 1: about this drug and also about Kindred Biosciences. Well, thanks
• 21:51
  Speaker 1: Tim and Lisa. First, I want to thank you for
• 21:54
  Speaker 1: the opportunity to tell you about Kindred biosciencests. Meritaz was
• 22:00
  Speaker 1: approved just on Monday. Is a drug that helps cats
• 22:04
  Speaker 1: that have started losing too much weight. Um. Sometimes people
• 22:08
  Speaker 1: think this is a drug for cats that are too fat,
• 22:11
  Speaker 1: but it turns out people actually like fat cats. This
• 22:14
  Speaker 1: is for cats that are too thin, which is a
• 22:18
  Speaker 1: very serious condition because when cats get too thin, they
• 22:22
  Speaker 1: can go into liver failure, which can be fatal. Dr Yes,
• 22:28
  Speaker 1: go ahead. Well, I just you know, it's it's really
• 22:31
  Speaker 1: interesting to sort of view this product in light of
• 22:34
  Speaker 1: what we've been hearing about pet ownership and just how
• 22:38
  Speaker 1: many more people are adopting pets than they are even
• 22:41
  Speaker 1: having children at this point. How big is the market
• 22:45
  Speaker 1: for this type of drug, so he said, the Americans
• 22:50
  Speaker 1: spend sixty nine point four billion dollars a year on pets,
• 22:55
  Speaker 1: and of that, about seven million is on Valentine's Presence
• 23:01
  Speaker 1: for pets, and one point five billion is for knee
• 23:05
  Speaker 1: surgeries in pets. So pets have really become fast. I'm sorry,
• 23:09
  Speaker 1: I can't get beyond the Valentine's Presence Valentine. Okay, fine,
• 23:14
  Speaker 1: carry on. So you know pets have become family members.
• 23:19
  Speaker 1: It says, uh, this is not something, um, that was
• 23:22
  Speaker 1: a case thirty years ago. So people are really willing
• 23:24
  Speaker 1: to spend money when their pets get sick. It's not
• 23:27
  Speaker 1: a lot of money. Five thousand dollars is what it
• 23:29
  Speaker 1: costs the chemotherapy and their four hundred oncologists just for
• 23:33
  Speaker 1: dogs and cats in the United States. And as I said, um,
• 23:38
  Speaker 1: knee surgeries. Knee surgeries cost five thousand dollars per knee.
• 23:42
  Speaker 1: Usually they need both kneeds. So yeah, it's it's it's
• 23:44
  Speaker 1: a big market. Dr Chin. Can you explain kindred biosciences
• 23:49
  Speaker 1: in the context of working with molecules or potential treatments
• 23:55
  Speaker 1: that may have originally been developed for humans and using those,
• 24:00
  Speaker 1: maybe in a modified way, to treat a variety of
• 24:04
  Speaker 1: ailments in animals such as fever and horses. I know
• 24:07
  Speaker 1: you've got zametta and also equaline gastric ulcers and so on,
• 24:10
  Speaker 1: anemia and cats, among other things. Sure you know, our
• 24:15
  Speaker 1: strategy business strategy is to leverage the billions and billions
• 24:20
  Speaker 1: of dollars in research that's been invested on the human side,
• 24:24
  Speaker 1: and then we take drugs that have been shown to
• 24:28
  Speaker 1: work really well on the human side and we bring
• 24:30
  Speaker 1: it over to the veterinary side. So um meriteth, which
• 24:35
  Speaker 1: is the first molecule, is originally approved for people for
• 24:39
  Speaker 1: a slightly um different indication, and the same thing with zametta.
• 24:43
  Speaker 1: This is available for humans in many countries. So what
• 24:49
  Speaker 1: we do is we reduce the risk, you know most
• 24:52
  Speaker 1: one of the biggest issues on the human pharmaceutical industry,
• 24:56
  Speaker 1: and the red part of the reason why it's so
• 24:57
  Speaker 1: expensive is that there's only five to time percent success rate.
• 25:02
  Speaker 1: We are batting about six success rate and higher, so
• 25:06
  Speaker 1: the success rate is about ten times higher. So I
• 25:10
  Speaker 1: want to talk a little bit more about this treatment
• 25:13
  Speaker 1: UM for cats. It's administered by rubbing the gel onto
• 25:17
  Speaker 1: a cat's ears. Is that correct? Yes, So this is
• 25:23
  Speaker 1: a drug that UM is put on the inside of
• 25:28
  Speaker 1: the year. It's annointment and the advantage of this is
• 25:30
  Speaker 1: a following when you have to till a cat. It's
• 25:35
  Speaker 1: a major undertaking because cats UM do not like having
• 25:40
  Speaker 1: things stuff down their throat and it's very hard to
• 25:42
  Speaker 1: trick them into eating UM pills. Dogs are much more
• 25:46
  Speaker 1: UM easy to pill because you can hide it in
• 25:50
  Speaker 1: peanut butter. So you have to catch the cat. You
• 25:52
  Speaker 1: have to stuff the tail down the cat's throat told
• 25:55
  Speaker 1: the mouth closed until the cat swallows the pill. And
• 25:58
  Speaker 1: then you take out your back of the band aids
• 26:01
  Speaker 1: and you band aid up all the scratches. And then
• 26:03
  Speaker 1: the next day you try to do the same thing
• 26:05
  Speaker 1: and the cats running away from you. So instead of
• 26:09
  Speaker 1: doing that, you can just put this drug on the
• 26:11
  Speaker 1: inside of the year of the cat. And you know
• 26:13
  Speaker 1: this is a very common condition. By the way, there
• 26:15
  Speaker 1: are nine million cats that have this problem every year.
• 26:21
  Speaker 1: In appetence, Dr Chin, you're also working on some molecular
• 26:26
  Speaker 1: some biologic molecular candidates. I wonder if you could just
• 26:29
  Speaker 1: tell us about the pipeline some antibodies for US indications
• 26:34
  Speaker 1: such as dermatitis in dogs and canine. Absolutely, so we
• 26:40
  Speaker 1: have a broad pipeline of monoclonal antibodies, and monoclonal antibodies
• 26:46
  Speaker 1: are cutting edge medicine on the human side as well.
• 26:49
  Speaker 1: In fact, seven to eight out of the top ten
• 26:51
  Speaker 1: selling drugs on the human side are monocolon antibody scentive
• 26:54
  Speaker 1: transformed human medicine. What we try to do is we
• 26:57
  Speaker 1: try to bring not the sort of uh, mediocre drugs,
• 27:04
  Speaker 1: a throwaway drugs from the human side over to the
• 27:06
  Speaker 1: bedner side. We're trying to bring the best of the
• 27:08
  Speaker 1: best technology. So we have a broad pipeline of antibodies,
• 27:12
  Speaker 1: including antibodies for the topic dermatitis, which is exema in
• 27:17
  Speaker 1: allergic skin conditioning dogs. That's very common right now. It's
• 27:21
  Speaker 1: over a five million dollar a year market and growing
• 27:24
  Speaker 1: very rapidly. It only costs US about five to eight
• 27:27
  Speaker 1: million dollars to develop each one of our drugs, so
• 27:32
  Speaker 1: we'd like to compare it to the human side. On
• 27:34
  Speaker 1: the human side, it might cost the billion dollars a
• 27:37
  Speaker 1: drug to develop the drug, and a blockbuster might be
• 27:41
  Speaker 1: a billion dollars. We're going to have to leave it there.
• 27:44
  Speaker 1: Thank you so much for being with us. Dr Riggin,
• 27:46
  Speaker 1: President and chief executive officer of Kindred Biosciences in San Francisco.
• 27:54
  Speaker 1: Thanks for listening to the Bloomberg P and L podcast.
• 27:57
  Speaker 1: You can subscribe and listen to interviews that Apple Podcasts, SoundCloud,
• 28:01
  Speaker 1: or whatever podcast platform you prefer. I'm pim Fox. I'm
• 28:05
  Speaker 1: on Twitter at pim Fox. I'm on Twitter at Lisa
• 28:08
  Speaker 1: abramowits one before the podcast. You can always catch us
• 28:12
  Speaker 1: worldwide on Bluebirg Radio