Latest / Bloomberg Intelligence / ADP Report, Economy, Markets, Cannabis

Transcript

ADP Report, Economy, Markets, Cannabis · Bloomberg Intelligence

• 0:02
  Speaker 1: Welcome to the Bloomberg Penel podcast. I'm Paul swing you
• 0:05
  Speaker 1: along with my co host Lisa Brahmas. Each day we
• 0:07
  Speaker 1: bring you the most noteworthy and useful interviews for you
• 0:10
  Speaker 1: and your money. Whether at the grocery store or the
• 0:12
  Speaker 1: trading floor. Find a Bloomberg Penl podcast on Apple podcast
• 0:16
  Speaker 1: or wherever you listen to podcasts, as well as at
• 0:18
  Speaker 1: Bloomberg dot com. We're sitting here in our Bloomberg ter
• 0:21
  Speaker 1: Active Broger Studios trying to peg what my co host
• 0:25
  Speaker 1: and colleague very correctly called the smoking gun or the
• 0:28
  Speaker 1: red flag with the smoking talking the smoking gun, smoking
• 0:32
  Speaker 1: flag for why markets are feeling so low today. A
• 0:36
  Speaker 1: lot of people pointing their fingers at the ADP report. Carracadana,
• 0:41
  Speaker 1: who is the chief US economist for Bloomberg Economics, sitting
• 0:44
  Speaker 1: here maybe agreeing right, I mean, is this is this
• 0:47
  Speaker 1: a surprise? The disappointing ADP reproach showing the payrolls at
• 0:52
  Speaker 1: US employers cooled in September. I don't think it is
• 0:54
  Speaker 1: a surprise. I mean it's a little bit weaker than
• 0:56
  Speaker 1: what the consensus was looking for, but not materially just
• 0:59
  Speaker 1: a five thou in or so, but we are slowing
• 1:01
  Speaker 1: down relative to what we saw earlier in the year.
• 1:04
  Speaker 1: That being said, this kind of negative sentiment in the market,
• 1:08
  Speaker 1: it was evident during Asia hours, intensified during europe trading hours,
• 1:14
  Speaker 1: and then now what spreads into the US, although not
• 1:17
  Speaker 1: quite to the same degree as what we saw in Europe.
• 1:19
  Speaker 1: So I don't know that there's a single smoking gun.
• 1:22
  Speaker 1: It's more of a confluence of events. So a DP
• 1:25
  Speaker 1: tells us to labor markets a little weaker. Boris Johnson,
• 1:28
  Speaker 1: continuing to try to wrangle hard break for today's everyone
• 1:36
  Speaker 1: sings a few bars in this song. Right, you have
• 1:40
  Speaker 1: W t O talking about trade sanctions with Europe over
• 1:44
  Speaker 1: you know, squabbling over airbus and bowing and whatnot. So
• 1:48
  Speaker 1: there's just a lot of little things adding up which
• 1:51
  Speaker 1: kind of build on what we saw in yesterday, which
• 1:53
  Speaker 1: was a big surprise in the manufacturing. I s m alright, Paul,
• 1:56
  Speaker 1: some blame Boris Johnson, Yes, exactly. I always like to
• 1:59
  Speaker 1: blame break another among others among others. So Carl, is
• 2:02
  Speaker 1: this change you good folks down in Bloomber economics. You're
• 2:05
  Speaker 1: crunching the numbers. You've seen the you know, the manufacturing
• 2:09
  Speaker 1: are you know, the I s M for the latest
• 2:11
  Speaker 1: month was weaker than expected. So we know that manufacturing
• 2:14
  Speaker 1: UH is weak and probably weakening, certainly in the US,
• 2:17
  Speaker 1: and we know what's happening internationally. Um. Sorry, you kind
• 2:20
  Speaker 1: of taken down your outlook or preparing to take down
• 2:23
  Speaker 1: your outlook is maybe the consumer isn't quite as strong
• 2:27
  Speaker 1: as we thought. Well, we took our outlook down on
• 2:30
  Speaker 1: August one when the next round of tariffs were announced
• 2:34
  Speaker 1: back after the July FED meeting. The very next day,
• 2:36
  Speaker 1: President Trump announced that the tariffs would go into effect
• 2:38
  Speaker 1: at the start of August, start of October, excuse me, uh,
• 2:41
  Speaker 1: and also again in in December, they moved that October
• 2:45
  Speaker 1: first deadline back to October. But it does look like
• 2:49
  Speaker 1: the tariffs will go up to in the middle of
• 2:52
  Speaker 1: this month, it doesn't. You know, there've been very little
• 2:54
  Speaker 1: indication that we're actually moving away from that at this
• 2:57
  Speaker 1: point in time, and you see the impact of those
• 2:59
  Speaker 1: trade for action showing up in things like the I
• 3:01
  Speaker 1: s M survey yesterday. Additionally, another roughly a hundred and
• 3:05
  Speaker 1: fifty billion of product subject to tariff in the middle
• 3:09
  Speaker 1: of December, so the price tag on tariffs is about
• 3:12
  Speaker 1: two and a half times larger in twenty nineteen compared
• 3:16
  Speaker 1: to eighteen and so that does move the needle on growth.
• 3:19
  Speaker 1: And we're in a slower moving economy already, so when
• 3:22
  Speaker 1: you have slower growth, the economy is more susceptible to
• 3:25
  Speaker 1: those types of shocks. That being said, I know there's
• 3:27
  Speaker 1: been talked this morning about one handle on GDP and whatnot.
• 3:31
  Speaker 1: We have been looking for about one point eight one
• 3:35
  Speaker 1: point seven percent to GDP growth in the back half
• 3:37
  Speaker 1: of the year, and we moved to that call back
• 3:39
  Speaker 1: on August first, when the tariffs went into effect. So, uh,
• 3:43
  Speaker 1: the tone we were seeing in the market was not
• 3:46
  Speaker 1: consistent with sub two percent GDP growth. Now we're starting
• 3:49
  Speaker 1: to see that reality set in as job creation, manufacturing
• 3:53
  Speaker 1: activity all looks more consistent with US sub two percent number.
• 3:56
  Speaker 1: But to answer your question, stall speed for the US economy,
• 4:00
  Speaker 1: it's about one point four one point five percent growth,
• 4:03
  Speaker 1: So we are closer to stall speed, but we're not
• 4:05
  Speaker 1: there yet. And that's why my team thinks that we
• 4:07
  Speaker 1: can actually muddle through this soft patch, thanks very much
• 4:11
  Speaker 1: to consumers remaining resilient. So that was my question, right,
• 4:15
  Speaker 1: at what point do you reach a tipping point. How
• 4:17
  Speaker 1: much pessimism should be baked in right now. Is it
• 4:19
  Speaker 1: a recession that we're facing, or is it simply uh,
• 4:23
  Speaker 1: lower inflation, lower growth, and just lower asset increases. Well,
• 4:29
  Speaker 1: it's not recession, uh, And it's not even growth recession.
• 4:32
  Speaker 1: And there's a distinction between recession and growth recession. Everyone
• 4:35
  Speaker 1: knows what recession is. Growth recession is a period where
• 4:38
  Speaker 1: growth slows down so much, not that we fall into contraction,
• 4:42
  Speaker 1: but actually that things start to unravel, like the unemployment
• 4:45
  Speaker 1: rate starts to drift higher. I don't think we'll even
• 4:48
  Speaker 1: get to a growth recession in the back half of
• 4:51
  Speaker 1: this year. So labor market continues to produce job gains
• 4:54
  Speaker 1: in excess of eighty five thousand per month, that will
• 4:58
  Speaker 1: keep the unemployment rate out relatively steady at the current levels.
• 5:02
  Speaker 1: So I think we're just accepting a reality of a
• 5:06
  Speaker 1: of a much more sluggish profile to the economy here
• 5:09
  Speaker 1: in the US, and then much weaker conditions abroad Germany
• 5:12
  Speaker 1: probably slipping into technical recession uh UK on the cusp
• 5:16
  Speaker 1: of recession once Brexit is executed. Boom Brick Economics have
• 5:21
  Speaker 1: a GDP forecast. GDP growth will be about two to
• 5:26
  Speaker 1: two and a quarter percent, So we're kind of refining
• 5:29
  Speaker 1: things as we look at that. Um. That being said,
• 5:31
  Speaker 1: one thing we should keep in mind here right everyone's
• 5:33
  Speaker 1: talking about the R word. Uh. The ground is very
• 5:36
  Speaker 1: fertile for a significant rebounded activity if these trade headwinds
• 5:41
  Speaker 1: are removed. So the Fed has policy rates set in
• 5:44
  Speaker 1: a very accommodative stance right there, giving the economy steroids,
• 5:49
  Speaker 1: so to speak. So rates are accommodative, Corporate profit growth
• 5:52
  Speaker 1: is positive, corporate balance sheets are in good condition. In
• 5:55
  Speaker 1: the unemployment rate is the lowest sense of Vietnam Draft
• 5:58
  Speaker 1: was in effect, So things are well posed. Issue that
• 6:00
  Speaker 1: if we don't just squandered this all with increase in
• 6:03
  Speaker 1: tariff after increase and tariff now the economy could rebound
• 6:06
  Speaker 1: quite nicely and beyond. Carraco Donna, Chief economists for a
• 6:11
  Speaker 1: Bloomberg Economics, thanks so much for joining us here on
• 6:13
  Speaker 1: our Bloomberg Interactive Brokers studio. Today we're joined by opinion
• 6:33
  Speaker 1: columnists Terres Rafael. She joins us from the London Bureau.
• 6:37
  Speaker 1: So Terres, it looks like bars. Johnson today outlined his
• 6:40
  Speaker 1: plan for new Brexit agreement and warned the European Union
• 6:43
  Speaker 1: to compromise or watch the UK walk away from the
• 6:46
  Speaker 1: talks and leave the block with added deal. How did
• 6:49
  Speaker 1: that go over? Well, we're still waiting to hear an
• 6:52
  Speaker 1: official EU response. UM the the EU said it wants
• 6:57
  Speaker 1: to examine the details of the proposal, but the kind
• 7:00
  Speaker 1: of early indications uh were that, uh, you know, we're
• 7:05
  Speaker 1: not that warm to the deal because it's proposing what
• 7:08
  Speaker 1: looks like a breach of the EU's read lines in
• 7:12
  Speaker 1: that there is no way to do the Johnson uh
• 7:15
  Speaker 1: deal without putting customs checks somewhere. Now he said they
• 7:19
  Speaker 1: wouldn't be and we're talking about Ireland in the border
• 7:21
  Speaker 1: between Northern Ireland the Republic of Ireland, which is the
• 7:24
  Speaker 1: key to sort of unlocking this whole Brexit problem and
• 7:29
  Speaker 1: getting a deal. And Johnson has said there will be
• 7:30
  Speaker 1: no checks at the border. Um, they will honor the
• 7:33
  Speaker 1: Good Friday peace agreement. However, he's also said they will
• 7:36
  Speaker 1: have to be checked somewhere, and so I think the
• 7:38
  Speaker 1: sticking point is how you actually do that. The other
• 7:42
  Speaker 1: sticking point is that Boris Johnson is quickly losing support
• 7:45
  Speaker 1: even from his own party. I mean, how much power
• 7:47
  Speaker 1: does he have in setting this this this proposal over
• 7:50
  Speaker 1: to EU. Well, he doesn't have power if you look
• 7:55
  Speaker 1: at the number of sort of MPs that he commands
• 7:58
  Speaker 1: in parliament. Um. However, the real, uh, you know, question
• 8:03
  Speaker 1: is whether he would have enough support to get his
• 8:05
  Speaker 1: deal through before October nineteenth, when parliamentary legislation requires him
• 8:10
  Speaker 1: to seek an extension. Now, if the Northern Ireland Land
• 8:14
  Speaker 1: Democratic Unionist Party go along with Johnson is say, has
• 8:18
  Speaker 1: indicated so far they're open to doing, and he can
• 8:21
  Speaker 1: reclaim Tory MPs that he expelled from the party, whip
• 8:26
  Speaker 1: from from the sort of the voting part of the party.
• 8:29
  Speaker 1: If he can get their support and a few Labor
• 8:31
  Speaker 1: MPs on side, then he gets a deal through and
• 8:34
  Speaker 1: then we're in very very different territory because he can
• 8:36
  Speaker 1: then call an election claiming he's delivered Brexit and uh,
• 8:41
  Speaker 1: you know, and then it's really game on for Johnson.
• 8:43
  Speaker 1: But whether you know, the Labor Party is going to
• 8:45
  Speaker 1: give him that you know, gift, whether the EU is
• 8:48
  Speaker 1: going to give him enough to allow him to recommend
• 8:51
  Speaker 1: the deal to Parliament, all those are unclear right now.
• 8:54
  Speaker 1: So tre's can you just update this on the timing.
• 8:57
  Speaker 1: I know we're kind of getting towards the thin at
• 9:00
  Speaker 1: the end of this process, and somehow the Halloween holiday
• 9:03
  Speaker 1: kind of is stuck in my mind. So okay, it's
• 9:07
  Speaker 1: incredibly confusing, But you know, let's start by saying the
• 9:10
  Speaker 1: next forty eight hours or key to find out how
• 9:13
  Speaker 1: the EU responds to uh to Johnson's proposals. If they
• 9:18
  Speaker 1: agree to negotiate, then we've got a sort of ten
• 9:20
  Speaker 1: day period before the EU summit, which is happening on
• 9:23
  Speaker 1: the seventeenth of October. Now, legislation passed in Parliament requires Johnson,
• 9:28
  Speaker 1: if he cannot get a deal, to ask the EU
• 9:31
  Speaker 1: for an extension by October nineteen. October thirty one, Halloween
• 9:35
  Speaker 1: is Brexit Day. If nothing else happens. If there's no extension,
• 9:40
  Speaker 1: the UK leaves the EU without a deal on October one.
• 9:43
  Speaker 1: The parliamentary legislation is designed to make that impossible. It's
• 9:48
  Speaker 1: triggered this request for an extension. Johnson is vowed that
• 9:51
  Speaker 1: he will not seek that extension. He said it would
• 9:53
  Speaker 1: signal the extinction of the Tory Party. So don't be
• 9:56
  Speaker 1: surprised if this ends up where else but in court. Again.
• 10:00
  Speaker 1: The other thing it could do, what about a second referendum, right.
• 10:03
  Speaker 1: I mean, are we still talking about that or does
• 10:06
  Speaker 1: that seem less likely more likely? Now I'll tell you
• 10:08
  Speaker 1: who's talking about it. The Labor Party is talking about it.
• 10:11
  Speaker 1: So at their conference which was a week ago, they
• 10:14
  Speaker 1: agreed that the official Labor policy would be to win
• 10:17
  Speaker 1: an election, uh, renegotiate a deal or renegotiate Theresa May's deal,
• 10:23
  Speaker 1: so they would would be a Labor deal and then
• 10:26
  Speaker 1: put it to the people in a referendum, with the
• 10:29
  Speaker 1: Labor Party not specifying which way it would urge people
• 10:33
  Speaker 1: to vote. So you could have a situation which they've
• 10:35
  Speaker 1: negotiated the deal but but you know, campaign against it.
• 10:39
  Speaker 1: So the Labor Party wants a referendum, that's very clear.
• 10:42
  Speaker 1: The other two sort of major parties, mainly the Conservatives,
• 10:46
  Speaker 1: they want to just get Brexit done is we've heard
• 10:48
  Speaker 1: in their party conference. And the Liberal Democrats, who have
• 10:51
  Speaker 1: been revived are campaigning to revoke Article fifty, that is
• 10:56
  Speaker 1: canceled Brexit all together. So just real quickly, I know
• 10:59
  Speaker 1: you said we're gonna were waiting on the EU, but
• 11:01
  Speaker 1: they haven't given any indication that they're going to budge. Right, Well,
• 11:04
  Speaker 1: I think the for the EU it's a very delicate
• 11:07
  Speaker 1: UH point in this process. They don't want to be
• 11:10
  Speaker 1: blamed for allowing a no deal Brexit to go ahead.
• 11:13
  Speaker 1: Of course, they will be blamed if it happens. Johnson
• 11:16
  Speaker 1: made very clear in his speech today and in his
• 11:18
  Speaker 1: letter to UH European Commissioned President Jean claud Yonker. He
• 11:22
  Speaker 1: says it would be a failure of state craft. So
• 11:24
  Speaker 1: the EU wants to avoid the blame, which means so
• 11:28
  Speaker 1: I think they're likely to engage to some extent um
• 11:31
  Speaker 1: in negotiations. But this is a very big ask for them,
• 11:35
  Speaker 1: because it's Johnson dismisses as a technicality what the EU
• 11:40
  Speaker 1: regards is very fundamental, and that is maintaining the piece
• 11:43
  Speaker 1: on UH in Northern Ireland by ensuring that there are
• 11:47
  Speaker 1: no physical infrastructure that could be attacked by by terrorists
• 11:50
  Speaker 1: or sectarian groups. Jos Raphael, thank you so much, as
• 11:53
  Speaker 1: always for that insight on the morass that is Brexit.
• 11:57
  Speaker 1: Teresa Hale is Bloomberg Opinion editor joining us from London.
• 12:19
  Speaker 1: I remember after I had my first child, there was
• 12:21
  Speaker 1: a game changing moment. Moment. It was when he was
• 12:25
  Speaker 1: big enough to fit into an Ergo carrier. It was
• 12:29
  Speaker 1: a carrier where I could carry him around, not have
• 12:31
  Speaker 1: a stroller, get on the subway, go up and downstairs,
• 12:34
  Speaker 1: and it was fine. And here we have a Lia
• 12:37
  Speaker 1: Sabo who just joined us in our offices here, chief
• 12:39
  Speaker 1: executive officer of Compass Diversified Holdings, and one of his
• 12:43
  Speaker 1: portfolio companies is the Ergo company. So I I had
• 12:47
  Speaker 1: to I had to sort of reminisce a little bit.
• 12:49
  Speaker 1: But I want to just ask you about a company
• 12:52
  Speaker 1: like that, which has expanded tremendously since the time when
• 12:54
  Speaker 1: I had my first child. I'm wondering, how do you
• 12:57
  Speaker 1: expand it when it's got such a specific focus, well,
• 13:01
  Speaker 1: remaining true to the brand, but also getting big enough scale.
• 13:05
  Speaker 1: And this is sort of a really key question right
• 13:07
  Speaker 1: now as we look at say we Work, and some
• 13:09
  Speaker 1: of these other companies that are struggling to do just that. Yeah, So, Lisa,
• 13:13
  Speaker 1: it's one of the challenges that any consumer company has.
• 13:17
  Speaker 1: And you know, in our business we invest in industrial
• 13:20
  Speaker 1: and branded consumer companies. You know, a company like Ergo.
• 13:23
  Speaker 1: When we acquired the business, it was from the founder
• 13:26
  Speaker 1: car and Frost and Karen was looking for us to
• 13:29
  Speaker 1: help build the business distribution wise globally, and so the
• 13:34
  Speaker 1: first part of the playbook was to establish distribution in
• 13:38
  Speaker 1: Europe and Asia, China being one of the faster growing
• 13:42
  Speaker 1: markets that we have right now. And then, as with
• 13:45
  Speaker 1: every consumer product business that we own, the lifeblood of
• 13:49
  Speaker 1: it is innovation, So figuring out what are the pain
• 13:52
  Speaker 1: points that consumers have with that product, how can we
• 13:56
  Speaker 1: innovate to create, you know, a better product that better
• 13:59
  Speaker 1: addresses the consumers needs. And then to understand what freedom
• 14:04
  Speaker 1: the customer is going to give us to be able
• 14:07
  Speaker 1: to extend, expend into adjacent markets without deluding down the
• 14:12
  Speaker 1: you know, the core market that we're addressing. So last,
• 14:15
  Speaker 1: your your company, Compass Diversifi Holdings is essentially a holding
• 14:19
  Speaker 1: company and you you mentioned you have some brand new
• 14:21
  Speaker 1: consumer uh companies that you own. So what we're seeing
• 14:26
  Speaker 1: in the markets stay is concerned about the consumer, uh
• 14:28
  Speaker 1: you know, and I think so from your perspective, what
• 14:32
  Speaker 1: is your sense of how the consumer is right now? Yes,
• 14:35
  Speaker 1: So the consumer has been strong, and the consumer has
• 14:38
  Speaker 1: been strong over the course of twenty nineteen, and it's
• 14:41
  Speaker 1: really been a carryover for a number of years. And
• 14:44
  Speaker 1: what we're seeing is, you know, in today's market, the
• 14:47
  Speaker 1: consumer has a lot of choices, so you have to
• 14:49
  Speaker 1: give them reasons to want to buy. And how you
• 14:52
  Speaker 1: connect to your consumer is changing dramatically. Clearly, the rise
• 14:57
  Speaker 1: of digital media and social media is change changing the
• 15:00
  Speaker 1: connectivity and how you interact. But generally the consumer feels strong.
• 15:06
  Speaker 1: Labor markets continue to be very tight, wage gains continue
• 15:09
  Speaker 1: to be strong, and that continues to fuel spending. And
• 15:13
  Speaker 1: you know, at the same time, we have very easy
• 15:15
  Speaker 1: financial conditions. So I think if you look at balance
• 15:17
  Speaker 1: sheets of consumers today, they are incredibly strong. And so
• 15:21
  Speaker 1: that would I would say, you know, from our standpoint,
• 15:24
  Speaker 1: is the real pillar of strength in the economy. Luckily
• 15:27
  Speaker 1: that represents the economy. So the economy is still you know, growing,
• 15:31
  Speaker 1: but uh, you know, it's remained strong throughout the year.
• 15:34
  Speaker 1: Well as how many of your portfolio companies sort of
• 15:36
  Speaker 1: sit within this retail consumer facing category? Yeah, so we
• 15:40
  Speaker 1: have four companies in the consumer facing and then we
• 15:44
  Speaker 1: have four in the true industrial side. Okay, so of
• 15:47
  Speaker 1: those four, how many do you think that the tariffs
• 15:51
  Speaker 1: will be a serious concern if they do go into effect,
• 15:54
  Speaker 1: the more serious or significant tariffs that have been proposed
• 15:59
  Speaker 1: by President Trump in China. Yeah, so we're fortunate and
• 16:02
  Speaker 1: that we have very little exposure to tariffs. We move
• 16:06
  Speaker 1: production out of China years ago, so Ergo Baby would
• 16:10
  Speaker 1: be a classic example. We moved into Vietnam many years
• 16:13
  Speaker 1: ago for reasons that were totally different. There was a
• 16:16
  Speaker 1: lot of IP theft. As we hear about a lot
• 16:18
  Speaker 1: in these trade talks, we experienced at firsthand, and so
• 16:22
  Speaker 1: as a result of that, we redomiciled where a production
• 16:26
  Speaker 1: base was gonna be for Ergo and for all of
• 16:28
  Speaker 1: our companies out of China. Now we've had some minor
• 16:32
  Speaker 1: exposure where products are still produced in China, and on
• 16:36
  Speaker 1: those instances, what we have found is with tariffs going
• 16:39
  Speaker 1: into effect, the dollar is strengthened. Our vendors find that
• 16:44
  Speaker 1: they have significant capacity in China. So the vast majority
• 16:48
  Speaker 1: of the tariff has been pushed back on the vendor
• 16:51
  Speaker 1: and dollar strength is enabling that some of the cost
• 16:54
  Speaker 1: pressure that you do get. We've found receptivity with our
• 16:58
  Speaker 1: retail partners and pushing through, but the vast majority, you know,
• 17:01
  Speaker 1: has been pushed back to our our trade partners. So
• 17:05
  Speaker 1: alias again about the four companies in the industrial space,
• 17:08
  Speaker 1: four companies in the consumer space, Where is Compass diversified
• 17:12
  Speaker 1: holdings looking now to deploy capital. Yeah, well, now is
• 17:16
  Speaker 1: an interesting time and I would say we were looking
• 17:20
  Speaker 1: out and as our strategic direction this year was we
• 17:23
  Speaker 1: were looking to be more net divestors than investors. And
• 17:27
  Speaker 1: the reason for that is we looked at risk that
• 17:30
  Speaker 1: seemed elevated from the economy. Um, we have a trade
• 17:34
  Speaker 1: war that's ongoing, we have a presidential election, we have brexit,
• 17:38
  Speaker 1: you have seventeen trillion dollars of global negative rates, which
• 17:42
  Speaker 1: probably tells you everything you need to know about the
• 17:43
  Speaker 1: global economy and the health of it. And so we
• 17:46
  Speaker 1: felt that the environment to be putting capital to work
• 17:50
  Speaker 1: today was not conducive because at the same time, prices
• 17:54
  Speaker 1: are extraordinarily high, and so that felt like a you know,
• 17:58
  Speaker 1: upside down risk reward balance for us. Now that being said,
• 18:02
  Speaker 1: we're constantly out there looking for new opportunities. I would
• 18:05
  Speaker 1: say we principally are looking to invest through the eight
• 18:09
  Speaker 1: different platform companies that we have to do add on acquisitions,
• 18:13
  Speaker 1: and we still remain open to divestitures just as a
• 18:16
  Speaker 1: broad strategy mandate. So, given your experience, what do you
• 18:20
  Speaker 1: think the next downturn will look like? And this is
• 18:22
  Speaker 1: The reason why I ask is because that's what's on
• 18:24
  Speaker 1: everyone's mind today. Yeah, well, so, I guess this could
• 18:27
  Speaker 1: be a bit of a you know, I don't know
• 18:29
  Speaker 1: if it's contrarian or it maybe a little bit of
• 18:32
  Speaker 1: an outlier. But you know, our view is the policies
• 18:36
  Speaker 1: of the Federal Reserve have really pushed a lot more
• 18:40
  Speaker 1: in terms of the you know, the money, the quantitative easing,
• 18:43
  Speaker 1: the lowering of interest rates. We believe that it has
• 18:46
  Speaker 1: pushed the cycles to be both stronger on the up
• 18:49
  Speaker 1: cycle and longer in duration, but probably more violent on
• 18:52
  Speaker 1: the downside. And I think you know, what we saw
• 18:54
  Speaker 1: in two thousand and the first correction was a pretty
• 18:58
  Speaker 1: significant you know, draw down in economic contraction. But then
• 19:03
  Speaker 1: the policies that created the two thousand and two to
• 19:07
  Speaker 1: two thousand and eight expansion, driven by you know, quantitative
• 19:11
  Speaker 1: easing type policies, caused a much bigger draw down. I
• 19:15
  Speaker 1: think today we fear that those could it could be
• 19:18
  Speaker 1: an even bigger draw down. That would be our fear. Well, interesting,
• 19:24
  Speaker 1: Elias say, well, thank you so much for joining us.
• 19:25
  Speaker 1: Elias's chief executive officer accomplished diversified holdings, joining us here
• 19:29
  Speaker 1: in a Bloomberg Interactive Brooker Studio. There has been a
• 19:48
  Speaker 1: big question hovering over the cannabis and the tobacco industries
• 19:53
  Speaker 1: over the past few months, and that is what will
• 19:55
  Speaker 1: the vaping outbreak the deaths that are mounting in the
• 19:59
  Speaker 1: United States tied to vaping due to their industries joining
• 20:03
  Speaker 1: US now, Mark Zuglan, he is CEO of Canopy Growth
• 20:06
  Speaker 1: joining us from Ontario. Mark, I want to start there
• 20:10
  Speaker 1: because it's something that I'm sure all of your investors
• 20:13
  Speaker 1: are asking, what do you do with the fact that
• 20:15
  Speaker 1: the FDA has raised serious concerns about vaping devices and
• 20:19
  Speaker 1: that fifteen people at least have been uh, have died
• 20:22
  Speaker 1: in what has been linked to the cigarettes at a
• 20:25
  Speaker 1: time when that is sort of the preferred vehicle for
• 20:28
  Speaker 1: using cannabis right now. Yeah, I think you know, the
• 20:33
  Speaker 1: stories that we're hearing, certainly out of the out of
• 20:34
  Speaker 1: the US are are tragic, and I think you know,
• 20:37
  Speaker 1: compounding um that tragedy is that um, there's still a
• 20:42
  Speaker 1: lot of unknown people are still this many months later, UM,
• 20:45
  Speaker 1: trying to gather the information and understand um, you know
• 20:49
  Speaker 1: the role of of of the illicit market, whether it's
• 20:52
  Speaker 1: people are tampering with products, whether it's you know, vitamin
• 20:55
  Speaker 1: E is being added. You know, a lot of a
• 20:56
  Speaker 1: lot of questions on on what's happening and so UM,
• 20:59
  Speaker 1: it's very hard for me to speak to that particular
• 21:01
  Speaker 1: set of details. But what I can do is speak
• 21:03
  Speaker 1: to can Be growth and what's happening in Canada because
• 21:06
  Speaker 1: as as you point out, in the next several months, um,
• 21:09
  Speaker 1: you know, we will be launching bait products in Canada,
• 21:12
  Speaker 1: and I think it's important to talk about what that
• 21:15
  Speaker 1: structure looks like. Right in Canada, we have a fully
• 21:19
  Speaker 1: regulated market, so the way we make our products, what
• 21:22
  Speaker 1: goes into the products, where those products are sold, UM,
• 21:25
  Speaker 1: all have rules that surround them and rules that we
• 21:28
  Speaker 1: need to operate in. And you know, I think that
• 21:30
  Speaker 1: the second thing if you look at you know, players
• 21:32
  Speaker 1: like Canopy, you know we we did not go out
• 21:35
  Speaker 1: to China and just source the first product we could
• 21:37
  Speaker 1: find and ask somebody else to fill it and put
• 21:39
  Speaker 1: our brand on it. Um. We've been building these products
• 21:41
  Speaker 1: for two years and even you know, many many months ago.
• 21:44
  Speaker 1: You know, the focus has been on consumer features and
• 21:47
  Speaker 1: consumer safety. So our products, our tamper resistant, our products
• 21:50
  Speaker 1: will be UL certified, meaning the heating elements are controlled
• 21:54
  Speaker 1: and the battery is controlled. You will have you know, serialization,
• 21:57
  Speaker 1: so God forbides something does happen, you're able to trace
• 22:00
  Speaker 1: it back and immediately know what's happened. And again we
• 22:03
  Speaker 1: control the full process. We control what goes in, so
• 22:06
  Speaker 1: we can ensure it is only cannabis and it is
• 22:08
  Speaker 1: only turpins, which which you know do naturally occur in cannabis.
• 22:12
  Speaker 1: So there's a number of things so I think focused
• 22:16
  Speaker 1: on and it comes down to threefold. One being transparent.
• 22:20
  Speaker 1: There are unknowns and there are risks associate with vaping,
• 22:22
  Speaker 1: and we need to be transparent about that. And we
• 22:25
  Speaker 1: need to do research to understand more. To a regulated
• 22:28
  Speaker 1: environment to control the products going out is essential. And
• 22:32
  Speaker 1: three have companies that are investing long term to build
• 22:36
  Speaker 1: products and brands. So Mark, just give us a sense
• 22:39
  Speaker 1: of kind of in your experience and based upon your knowledge,
• 22:42
  Speaker 1: how are consumers using vaping products with cannabis and is
• 22:48
  Speaker 1: that a problem in and of itself. So you know,
• 22:54
  Speaker 1: in in Canada today there are no actual legal venues
• 22:58
  Speaker 1: to sell th HC or CBD bait pen so you know,
• 23:02
  Speaker 1: anything being sold in Canada today is essentially through an unregulated,
• 23:06
  Speaker 1: uncontrolled market in the United States. UM, there is you know,
• 23:10
  Speaker 1: of course state level rules governing some products, but you
• 23:13
  Speaker 1: know other products you know, are are our listens? I
• 23:15
  Speaker 1: think you know the the Again I fall back to,
• 23:18
  Speaker 1: you know, this need for regulation. You know where one
• 23:20
  Speaker 1: of these these few companies who who go on there
• 23:22
  Speaker 1: and ask for more regulation, ask for more UM controls
• 23:25
  Speaker 1: because I think it's it's good for our sector, it's
• 23:27
  Speaker 1: good for UM the consumer. So what lesson should the
• 23:32
  Speaker 1: United States take from Canada? If you're saying that you
• 23:34
  Speaker 1: do have the regulatory regime, is there a lesson that
• 23:37
  Speaker 1: can be derived as the US tries to understand the
• 23:40
  Speaker 1: underpinnings of this vaping epidemic. So, you know, without even
• 23:46
  Speaker 1: speaking specifically to to Bates, you know, be, this is
• 23:50
  Speaker 1: a message we're carrying with respect to CBD and frankly
• 23:52
  Speaker 1: with respect to UM. You know, a state's right system,
• 23:55
  Speaker 1: you know for UM, for th HC products, which is UM.
• 23:59
  Speaker 1: You know, a clear federal set of rules, a clear
• 24:04
  Speaker 1: set of regulatory processes UM UH, you know testing that
• 24:08
  Speaker 1: a consumer can rely on UM. You know, understanding a
• 24:11
  Speaker 1: brand and how it relates back to the producer. You
• 24:13
  Speaker 1: know all of these things. You know these are these
• 24:15
  Speaker 1: are good things for for the sector, for the businesses
• 24:18
  Speaker 1: in the sector, and the consumers who buy the products.
• 24:21
  Speaker 1: Mark so cool and thanks so much for joining us.
• 24:23
  Speaker 1: Mark is the CEO of Cannopy Growth Corporation, calling us
• 24:27
  Speaker 1: a vafone from Smith Falls, Ontario. Thanks for listening to
• 24:30
  Speaker 1: the Bloomberg P and L podcast. You can subscribe and
• 24:33
  Speaker 1: listen to interviews at Apple Podcasts or whatever podcast platform
• 24:36
  Speaker 1: you prefer. M Paul Sweeney, I'm on Twitter at pt
• 24:39
  Speaker 1: Sweeney and Lisa bram Woyds I'm on Twitter at Lisa
• 24:41
  Speaker 1: bramwo wits one Before the podcast, you can always catch
• 24:44
  Speaker 1: us worldwide. I'm Bloomberg Radio.