Latest / Bloomberg Intelligence / Pruitt Is Rolling Back Standards Agreed to by Car Companies, Browner Says

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Pruitt Is Rolling Back Standards Agreed to by Car Companies, Browner Says · 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
• 0:11
  Speaker 1: bring you the most important, noteworthy, and useful interviews for
• 0:15
  Speaker 1: you and your money, whether you're at the grocery store
• 0:17
  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. President
• 0:32
  Speaker 1: Trump has made no secret of his desire to unrule
• 0:36
  Speaker 1: UH some of the policies of former President Barack Obama,
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  Speaker 1: and among those are clean car standards that are enforced
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  Speaker 1: by the Environments Protection Agency. And here to talk about
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  Speaker 1: that is Carol Browner, chair of the board UH for
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  Speaker 1: and for the League of Conservative of Conservation Voters as
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  Speaker 1: well as a former e p A administrator from to
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  Speaker 1: two thousand and one, the longest serving administrator on record. Carol,
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  Speaker 1: thank you so much for joining us. I just want
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  Speaker 1: to get a sense first of all of what currently
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  Speaker 1: UH Scott Prue at the current ep A head is
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  Speaker 1: looking to do with respect to clean car standards and
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  Speaker 1: how quickly it could really move well. Well, thank you
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  Speaker 1: and thank you for having me. UM. What Mr Prude
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  Speaker 1: is up to is basically trying to looking at rolling
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  Speaker 1: back standards that were agreed to with the car companies.
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  Speaker 1: I had the opportunity to work with President Obama at
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  Speaker 1: the beginning of his term, and we sat down with
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  Speaker 1: the car manufacturers. E p A has authority to make
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  Speaker 1: cars cleaner department transportation to make them more efficient, and
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  Speaker 1: so we all worked together to craft a program that
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  Speaker 1: would give car company sort of what they needed, rather
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  Speaker 1: than two different agencies regulating them one set of sort
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  Speaker 1: of requirements. And they actually stood with President Obama and
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  Speaker 1: the Rose Garden announced this framework agreement and then it's
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  Speaker 1: been you know, implemented over the years, and now suddenly
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  Speaker 1: the new head of the e p A, Mr. Pruitt,
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  Speaker 1: is talking about, you know, rolling it back, and it's
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  Speaker 1: just it's it's it's mind boggling, right because last week
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  Speaker 1: alone you had Ford in GM announcing they're going to
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  Speaker 1: make more electric cars. Uh, you know, you have a
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  Speaker 1: resurgence in the car industry. They're selling more cars last
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  Speaker 1: year than they sold I think in any year. So
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  Speaker 1: it's hard to understand, you know, why they're doing this.
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  Speaker 1: The consumer wants a cleaner car. They want a car
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  Speaker 1: that pollutes less. They want a car that goes further
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  Speaker 1: on a tank I gas. They want to save money
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  Speaker 1: at the pump. They want their kids to drink a
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  Speaker 1: breeze clean air. Excuse me, Carol, I don't know. Let
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  Speaker 1: me just focus on a slightly different area involving Scott
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  Speaker 1: Prude in the e p A. I don't know whether
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  Speaker 1: you're familiar with Michael Dorson. He is a professor at
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  Speaker 1: the University of Cincinnati, and he is under consideration under
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  Speaker 1: potential nomination and vote in the Senate for a position
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  Speaker 1: in the e p A. And while the Democrats have
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  Speaker 1: blocked his appointment, Scott Prude has appointed him as an advisor.
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  Speaker 1: And it turns out that Mr Dowson, who operated a
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  Speaker 1: nonprofit research foundation, was called a Toxicology Excellence for risk assessment.
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  Speaker 1: Contributors to that organization include DuPont, Monsanto, American Chemistry Council.
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  Speaker 1: Is this part and parcel of the way the agency
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  Speaker 1: works on a regular basis? Or is this something unusual? Um?
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  Speaker 1: It strikes me based on you know what you're telling
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  Speaker 1: me as unusual. Look, you know Congress created the agency
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  Speaker 1: Congress past law saying certain people who run parts of
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  Speaker 1: the agency, Mr Prude and people who run other parts
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  Speaker 1: should be subject to a review by the Senate, should
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  Speaker 1: be you know, called up to testify on why they
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  Speaker 1: are qualified, and then should be voted on by the Senate.
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  Speaker 1: You can't actually give someone one of these jobs without
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  Speaker 1: going through their process. It's just the way the system
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  Speaker 1: works is a part of the accountability. And you know, it's, uh,
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  Speaker 1: I think deeply troubling if this is an effort to
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  Speaker 1: simply get around that kind of transparency and that kind
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  Speaker 1: of accountability. But you know, I will tell you, as
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  Speaker 1: a former administrator watching Mr Pruett, in some ways, I'm
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  Speaker 1: just no longer surprised. I mean, this is a man
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  Speaker 1: who sued the agency fourteen times. He doesn't apparently believe
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  Speaker 1: in science, He doesn't appear to be committed to sort
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  Speaker 1: of the transparency and accountability that are really important to how,
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  Speaker 1: you know, the government does its work on behalf of
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  Speaker 1: the American people. And just to present sort of why
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  Speaker 1: President Trump and EPA administrators Scott Pruett are trying to
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  Speaker 1: roll back some of these clean car standards. President Trump
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  Speaker 1: during his campaign was talking about giving all sources of
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  Speaker 1: energy a fair shake, in other words, trying to cater
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  Speaker 1: to particularly to the coal miners saying that they should
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  Speaker 1: be able to continue with their production without getting penalized
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  Speaker 1: by these caps. Carol, I have to wonder, as somebody
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  Speaker 1: who has vast experience as the head of the e
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  Speaker 1: p A, how much power does this agency you really
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  Speaker 1: have to unilaterally enforce or roll back regulations. In other words,
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  Speaker 1: could they another roll back the entire clean car standards
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  Speaker 1: without sign off by a majority of Congress. Um. Yes,
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  Speaker 1: they can roll things back without the the the approval
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  Speaker 1: of Congress. Because what happens if Congress passes a law
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  Speaker 1: tells e p A, go do the detail work. You know,
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  Speaker 1: we've given you broad guidance. We want cars more fuel efficient,
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  Speaker 1: we want it over a certain period of time. And
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  Speaker 1: in this case, there's also a Supreme Court decision that's
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  Speaker 1: as e p A, you should be regulating dangerous carbon
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  Speaker 1: pollution from cars and so um. The e p A
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  Speaker 1: then sort of goes through a process, and it's an
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  Speaker 1: important process. They tell the public, here's what we're thinking.
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  Speaker 1: They write it all down. Here's why we're thinking it,
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  Speaker 1: here's the law, here's the science. Tell us what you think.
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  Speaker 1: Car companies tell us what you think. Unions tell us
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  Speaker 1: what you think, et cetera. Then the agency takes all
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  Speaker 1: those comments, makes a decision based on those comments, and
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  Speaker 1: issues a final regulation or rule, which then becomes enforceable.
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  Speaker 1: This is how it has been done since e p
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  Speaker 1: A was created. And there's a reason it's done this way.
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  Speaker 1: It's fair, it's transparent, it engages the you know, all
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  Speaker 1: of the parties that have an interest. If Mr Food
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  Speaker 1: wants to undo a rule that's gone through that process,
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  Speaker 1: he will have to go through the process himself. Um. Now,
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  Speaker 1: Congress can always step in and just vacate the law
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  Speaker 1: to say, but we're changing that law. Uh, no more
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  Speaker 1: more law. But Mr Food is not free to do
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  Speaker 1: whatever he wants. He must follow the laws, and he
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  Speaker 1: must follow the science. And in this case, you even
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  Speaker 1: have a Supreme Court decision saying e p A should
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  Speaker 1: regulate carbon pollution. You have a fuel efficiency law fined
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  Speaker 1: by bush To saying e p A Department Transportation put
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  Speaker 1: together the rules to make cars more efficient. So he's
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  Speaker 1: not free to do just anything. But what's very concerning
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  Speaker 1: here is, as you guys know, industry needs predictability and surgery.
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  Speaker 1: They need to know what's expected of them or a
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  Speaker 1: period of time so they can make investments, so they
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  Speaker 1: can find the sort of common sense, cost effective solutions.
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  Speaker 1: And so when you pull the rug out midstream, you're
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  Speaker 1: getting rid of all that predictability and uncertainty. It is
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  Speaker 1: unfair to everyone, Carol, I just want to get your
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  Speaker 1: thoughts onthing specific having to do with biofuels UM possible
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  Speaker 1: reduction in bio diesel requirements and a proposal to allow
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  Speaker 1: exported renewable fuel to count towards that domestic quota that
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  Speaker 1: affects the biofuel industry and also affects politics in Iowa.
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  Speaker 1: What are your thoughts on this? Well, I mean, this
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  Speaker 1: is another good example of where they just appear to
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  Speaker 1: be all over the map and you know, again, uh,
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  Speaker 1: not giving industry the kind of certainty and predictability, right
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  Speaker 1: you have Apparently, you know, the the Mr Pruett said
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  Speaker 1: one thing, and the White House is saying another, saying, uh,
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  Speaker 1: you know, these guys, you know, they should at least
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  Speaker 1: get on the same page. They won't be free to
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  Speaker 1: just do either of these things. They have to you know, again,
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  Speaker 1: follow the process, follows um the law. Um. You know,
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  Speaker 1: bio fuels have played a role in lessening air pollution. Uh.
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  Speaker 1: You know, the good news is today we do a
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  Speaker 1: lot of other things that helped to lessen pollution. But
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  Speaker 1: you know, they got to stop just thinking out loud.
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  Speaker 1: We've got to leave it there, but I thank you
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  Speaker 1: very much. Carol Browner is a former e p A
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  Speaker 1: administrator joining us to tell us more about the e
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  Speaker 1: p A how it works, and Uh is from the
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  Speaker 1: League of Conservation Voters based in Washington, d C. All right,
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  Speaker 1: let's turn our attention now to fees and also talk
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  Speaker 1: a little bit about value of funds. David Winters is
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  Speaker 1: the chief executive of Winter Green Advisors, helping to manage
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  Speaker 1: more than half a billion dollars. They're based in Mountain Lakes,
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  Speaker 1: New Jersey, and David joins us in our eleven three
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  Speaker 1: oh studios. David, always a pleasure. Thank you for being here.
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  Speaker 1: Very interesting comments and analysis that you've done. I wonder
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  Speaker 1: if you could just take us through this having to
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  Speaker 1: do with what you describe as being kind of the
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  Speaker 1: gloss on a lot of these index products is that
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  Speaker 1: they are low fee products, and you've come out with
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  Speaker 1: slightly different uh, well, a different review. Well, PIM, we've
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  Speaker 1: done a lot of fundamental research because you've had this
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  Speaker 1: boom in passive investing and it's attracted huge amounts of capital.
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  Speaker 1: And what's attracted people is this idea that it's a
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  Speaker 1: low fee and that you know, therefore it's also diversified
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  Speaker 1: in low risk. And what we've done is is delved
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  Speaker 1: in beyond the fee to look at the fact that
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  Speaker 1: there's a lot of delution behind uh these index funds
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  Speaker 1: because they vote of the time in favor of corporate
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  Speaker 1: compensation plans, and that's about two point six percent a year.
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  Speaker 1: And then if you take the buy backs, which actually
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  Speaker 1: fifty four percent of the time offset the delution, that's
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  Speaker 1: another one point seven So the actual cost of an
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  Speaker 1: index fund is about four point three Wait just just
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  Speaker 1: back up for a second. So you're basically saying that
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  Speaker 1: because a lot of these index funds just vote along
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  Speaker 1: with whatever the corporate leadership wants to do, there are
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  Speaker 1: sort of costs inherent to that. The essentially the index funds,
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  Speaker 1: which started as a good idea, Lisa, have become enablers
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  Speaker 1: for higher costs because the delution is a hidden fee
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  Speaker 1: that people don't see and it actually comes out of
• 10:32
  Speaker 1: investors pockets. So index investing has become expensive and a
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  Speaker 1: lot of the returns have come from fang in France. Okay, so,
• 10:41
  Speaker 1: but but just backing up and taking a bigger picture view. Uh.
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  Speaker 1: You know, David, you have to wonder how much previous
• 10:48
  Speaker 1: mutual fund investors or four one K fund managers really
• 10:51
  Speaker 1: took an active approach prior to the UH surge in
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  Speaker 1: e t F involvement, or they really such governors of costs.
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  Speaker 1: Were they so much more active in the past, or
• 11:04
  Speaker 1: were they basically uh, sort of passive investors in hiding. Well,
• 11:08
  Speaker 1: in fact, if you do the numbers and they're on Bloomberg,
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  Speaker 1: they are squared of a lot of mutual funds. Is
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  Speaker 1: very close to an index fund, and there is a
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  Speaker 1: lot of of voting in favor. But active investors like
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  Speaker 1: ourselves have the choice not to go for big delution.
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  Speaker 1: So you know, one of our big positions has a
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  Speaker 1: thirty basis point level of delutions. So therefore, when you
• 11:32
  Speaker 1: look at it on a like for like basis, it's
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  Speaker 1: much less expensive what we're doing at winter Green because
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  Speaker 1: there's not as much delution in the companies in which
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  Speaker 1: we invest in. Delution over time is a mugging of
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  Speaker 1: the shareholders. I gotta understand dilution and maybe you can
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  Speaker 1: just give me the quick definition for because I understand.
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  Speaker 1: You know, you can dilute someone's value by issuing more
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  Speaker 1: shares for example, is that what you're talking about exactly?
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  Speaker 1: Pim In other words, every year the boss wants to
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  Speaker 1: raise and we're all for management getting paid well if
• 12:01
  Speaker 1: they do a good job. But essentially it comes if
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  Speaker 1: it's two point six percent, and over time it's grown
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  Speaker 1: and the buy backs are also used to offset this delustion.
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  Speaker 1: It comes out of investors pockets and it's it's a
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  Speaker 1: lot of money. It's if you add it all up,
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  Speaker 1: it's almost nine billion dollars in two thousand sixteen that
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  Speaker 1: investors aren't getting basically going into the pockets of of
• 12:25
  Speaker 1: the corporate executives who are granted these stock options or
• 12:28
  Speaker 1: compensated right, And there's ways of doing it, you know,
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  Speaker 1: where you wouldn't have such delution, and still executives can
• 12:34
  Speaker 1: make money. But it means that in a in an
• 12:36
  Speaker 1: expensive market, these uh, these companies you know, the uh,
• 12:40
  Speaker 1: the passive have become amentum monsters and then you know
• 12:43
  Speaker 1: the market weight you buy more of what goes up
• 12:46
  Speaker 1: and unlike value investing, where we think the real where
• 12:49
  Speaker 1: people should be focused today, UM, where there's a lot
• 12:52
  Speaker 1: for what you pay for, the index investors are essentially
• 12:56
  Speaker 1: buying what's expensive, what's risky, and essentially enable higher higher costs.
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  Speaker 1: So I'm trying to figure out if this is just
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  Speaker 1: a symptom of a lot of money going into markets
• 13:09
  Speaker 1: and what would normally happen with inflows versus e t
• 13:13
  Speaker 1: f s and passive investments, because I think that there's
• 13:15
  Speaker 1: a conflation often of the two. And I think that
• 13:17
  Speaker 1: you could argue that with a lot of money slashing
• 13:19
  Speaker 1: about and that enables the company is not necessarily the
• 13:23
  Speaker 1: trend into passive How would you how would you negate that? Well?
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  Speaker 1: I think that you know, investors really ultimately um should
• 13:31
  Speaker 1: you know, get a lot for what they pay for.
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  Speaker 1: And the the e t f s which have been
• 13:35
  Speaker 1: the you know, the big movement of late and the
• 13:38
  Speaker 1: index funds again, they vote of the time UM for
• 13:42
  Speaker 1: these plans, and I think there are other The key
• 13:46
  Speaker 1: thing is that active managers can use the vote, which
• 13:50
  Speaker 1: is what Arissa you know says you're supposed to do
• 13:53
  Speaker 1: for the benefit of shareholders. And you've had these two
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  Speaker 1: things happen, which is over time hurting in susters. This
• 14:01
  Speaker 1: is fascinating to me because it also highlights how we're
• 14:03
  Speaker 1: probably going to see an increasing amount of activism among
• 14:06
  Speaker 1: the investors who truly are active, who want to uh
• 14:10
  Speaker 1: clamp down on this, especially as valuations get so high
• 14:13
  Speaker 1: that people start wondering whether we actually have that much
• 14:17
  Speaker 1: more room to run. David Winters, thank you so much
• 14:19
  Speaker 1: for joining us. A pleasure to speak with you. David
• 14:21
  Speaker 1: Winters is chief executive officer of Winter Green Advisors, which
• 14:24
  Speaker 1: is based in Mountain Lakes, New Jersey. Definitely, the active
• 14:28
  Speaker 1: versus passive debate will not go away, but I do
• 14:30
  Speaker 1: like to just sort of get a question of is
• 14:33
  Speaker 1: this really passive we're talking about or just mob think
• 14:36
  Speaker 1: which has been prevalent over the past few years. We
• 14:50
  Speaker 1: hear a lot about the opioid epidemic in more rural
• 14:54
  Speaker 1: areas among working class people. We've been hearing about the
• 14:57
  Speaker 1: thousands and thousands of people uh that are dying of
• 15:00
  Speaker 1: drug overdoses. UH. But there is also an opioid epidemic
• 15:05
  Speaker 1: on Wall Street, and here to talk about that is
• 15:08
  Speaker 1: Max Abelson, a finance reporter for Bloomberg News who wrote
• 15:11
  Speaker 1: a phenomenal story really ought to read it. Opioids hit
• 15:14
  Speaker 1: Wall Street, begging pain and opportunity to profit. Max, thanks
• 15:18
  Speaker 1: so much for joining us. Can you just give us
• 15:20
  Speaker 1: a sense of how pervasive the opioid crisis on Wall
• 15:24
  Speaker 1: Street is? Lisa, thank you for those wonderful words. Well,
• 15:27
  Speaker 1: you know, Gina smile like my co writer and I, um,
• 15:31
  Speaker 1: you know, there's there's bad news and good news when
• 15:32
  Speaker 1: it comes to figure out how pervasive this is. The
• 15:34
  Speaker 1: bad news is when people die of opiate overdoses. There
• 15:40
  Speaker 1: there isn't data on what their professions were, so that's
• 15:42
  Speaker 1: a bad news. We can't tell you. You know, there
• 15:44
  Speaker 1: were there were x overdoses on Wall Street because of
• 15:47
  Speaker 1: opioids and and why this year. The good news when
• 15:51
  Speaker 1: it comes to understanding what's going on here, is that
• 15:53
  Speaker 1: Gina and I set out to find find out if
• 15:56
  Speaker 1: you know, the if the opioid epidemic that's absolutely you know,
• 16:00
  Speaker 1: spreading like a virus through rural communities, working class and
• 16:03
  Speaker 1: poor communities as as your listeners know, you know, to
• 16:07
  Speaker 1: find out if it was touching Wall Street, and and
• 16:09
  Speaker 1: you know, all we did is the normal stuff. We
• 16:11
  Speaker 1: just got on the phone. We got on the phone
• 16:12
  Speaker 1: with people in New Canaan and Darien and New York City,
• 16:16
  Speaker 1: and what we found out is we spoke more than
• 16:18
  Speaker 1: half a dozen current and former traders, bankers, private equity people,
• 16:23
  Speaker 1: and they told us these like agonizing stories of what
• 16:26
  Speaker 1: happens when you become addicted to oxyconton and other opioids,
• 16:29
  Speaker 1: and these people's lives you know, hit near ruin um
• 16:33
  Speaker 1: and it and it's not out of the ordinary experience.
• 16:36
  Speaker 1: This is something that's that's coming to Wall Street. So Max,
• 16:39
  Speaker 1: I wondering if you could offer up some of the
• 16:42
  Speaker 1: examples in this story, and they really are quite moving,
• 16:45
  Speaker 1: and then maybe tie that into the profit that drives
• 16:50
  Speaker 1: a lot of the opioid manufacturing industry. And what a
• 16:54
  Speaker 1: good question. Well, the one that hits me really hard,
• 16:58
  Speaker 1: like hit me on the gut when I heard it,
• 17:00
  Speaker 1: to answer both of your questions at once, was this guy.
• 17:04
  Speaker 1: He was like in his thirties, He's working for one
• 17:06
  Speaker 1: of the biggest banks at the time. At the time,
• 17:09
  Speaker 1: he was working for one of the biggest banks in
• 17:10
  Speaker 1: the world on a trading floor and he was put
• 17:13
  Speaker 1: on a deal for it was like a pharma deal
• 17:16
  Speaker 1: connected to opioid dependency. And he smiled to himself. And
• 17:20
  Speaker 1: the reason he smiled is that he was at the
• 17:23
  Speaker 1: height of his addiction to viking in and he was
• 17:25
  Speaker 1: also using percocet and and these are these are really
• 17:28
  Speaker 1: strong painkillers. He started using them because he wanted to
• 17:32
  Speaker 1: take that edge off of hangovers when he was at work,
• 17:35
  Speaker 1: and he got dependent on um. You know, he would
• 17:38
  Speaker 1: use dozens of pills a day. And you know, he
• 17:41
  Speaker 1: he so on the one hand, he was like working
• 17:43
  Speaker 1: on this deal, and which goes to show that Wall
• 17:45
  Speaker 1: Street is profiting from both the um sales of of pharmaceuticals,
• 17:51
  Speaker 1: but also profiting from that from the industry. That's that's
• 17:55
  Speaker 1: being brought about in order to deal with it. Um,
• 17:58
  Speaker 1: you know, and and and this guy was working on
• 18:00
  Speaker 1: the training floor on that deal at the same time
• 18:02
  Speaker 1: that he was at the peak of his addiction. He's
• 18:04
  Speaker 1: now clean. You've got a lot of big time investors
• 18:06
  Speaker 1: in this too, don't you. Oh yeah, I mean look
• 18:08
  Speaker 1: just this month, I mean this month alone, were a
• 18:11
  Speaker 1: couple of weeks in October. Um, you know, let's see, Um,
• 18:16
  Speaker 1: there was a UM Instant Therapeutics. Okay, Instant Therapeutics sells.
• 18:23
  Speaker 1: You guys, listeners know about fentanyl. It's a pill, It's
• 18:26
  Speaker 1: a fentanyl based pill. It's called subsiss. New Jersey Attorney
• 18:30
  Speaker 1: General accused Incests of selling this fentinyl drug to more
• 18:34
  Speaker 1: people than it should have been selling it to and
• 18:36
  Speaker 1: it much higher doses. And you look at Incesses investors.
• 18:39
  Speaker 1: You know, Orbamed, a really big private equity firm, Folder Hill,
• 18:44
  Speaker 1: a hedge fund that your listeners probably know about. Um.
• 18:47
  Speaker 1: You know, these are things that are going on now. Incidentally,
• 18:50
  Speaker 1: just a couple of months ago, Endo International, which John Paulson,
• 18:54
  Speaker 1: Steve Cohen, Goldman Sachs TPG their investors. They sell opioids
• 18:59
  Speaker 1: open e er and the the f d A had
• 19:01
  Speaker 1: to ask him to stop doing it. Um because I think,
• 19:04
  Speaker 1: if I remember him correctly, because of viruses that we're
• 19:06
  Speaker 1: breaking out among intravenous drug users. Although I'm not positive
• 19:09
  Speaker 1: about that that I think that's the reason they had
• 19:11
  Speaker 1: to stop selling it. Max. You know, I'm struck. There
• 19:14
  Speaker 1: have been stories. Certainly in the nineteen eighties, you think
• 19:16
  Speaker 1: of Wall Street, think of cocaine and and and lots
• 19:19
  Speaker 1: of hard drug use and hard partying. Uh, that's calmed
• 19:24
  Speaker 1: down a bit. No, I mean, where does where does
• 19:26
  Speaker 1: where does oxycodone? And and and some of these prescription
• 19:30
  Speaker 1: jugs fall into that whole story question. Well, for one thing, cocaine,
• 19:34
  Speaker 1: it's not disappeared from from Wall Street. You know. Here,
• 19:37
  Speaker 1: here's here's a good way of of dealing with that.
• 19:39
  Speaker 1: So the main character in the story is a really
• 19:41
  Speaker 1: um interesting, likable guy named Chay Layard Connecticut. Fancy Um,
• 19:48
  Speaker 1: you know, joke to me that he was wearing head
• 19:50
  Speaker 1: to dove vineyard vines when he went to rehab. And honestly,
• 19:53
  Speaker 1: you know, at least I do not think he was kidding.
• 19:55
  Speaker 1: I think he really was wearing all vineyard vines. He's
• 19:57
  Speaker 1: just that kind of guy. But look, um, you know
• 20:00
  Speaker 1: Trey was using cocaine. Um, you know, he was also
• 20:03
  Speaker 1: drinking alone at the height of his addiction. But you know,
• 20:06
  Speaker 1: the cocaine, which is sort of socially acceptable, was sort
• 20:09
  Speaker 1: of known, um, you know, entertaining clients that kind of thing.
• 20:12
  Speaker 1: I think, Um, you know, that's sort of just a
• 20:14
  Speaker 1: reality that um has stayed with wallsheet. But you know,
• 20:19
  Speaker 1: he was using so much oxycon that it was a
• 20:21
  Speaker 1: hundred and sixty milligrams every day and you're supposed to
• 20:24
  Speaker 1: start with ten for every twelve hours. Um. And you
• 20:27
  Speaker 1: know it took over his life and he was really
• 20:29
  Speaker 1: brutally honest with me. Um. You know, you want to
• 20:33
  Speaker 1: rehab in New Canaan. And Trey is now one of
• 20:36
  Speaker 1: the proprietors of the Lighthouse, and we wrote about the Lighthouse.
• 20:40
  Speaker 1: You know it will cost you if you want to
• 20:41
  Speaker 1: room by yourself in New Canan, fifteen thousand dollars for
• 20:44
  Speaker 1: the month. Hundred dollars actually. And look, I mean we
• 20:49
  Speaker 1: visited and there are bankers there and executives and these
• 20:52
  Speaker 1: are people who are you know, some of them are alcoholics,
• 20:54
  Speaker 1: but some of them are addicted to pain pills. And Trey,
• 20:57
  Speaker 1: what Trey said to us is that, look, you know
• 20:59
  Speaker 1: this is this is coming. You know this is going
• 21:01
  Speaker 1: to invade every single industry. And you know he might
• 21:04
  Speaker 1: be right. It's a very sobering story and one that
• 21:08
  Speaker 1: I encourage everyone. I know, we all encourage everyone to
• 21:10
  Speaker 1: read it. Opioids hit Wall Street, Bringing pain and the
• 21:13
  Speaker 1: opportunity to profit. Thanks very much, Max Abelson and also
• 21:18
  Speaker 1: Jinna smile welcome. I gotta say, you know, we see
• 21:21
  Speaker 1: these images all the time of people who overdosed some
• 21:24
  Speaker 1: cars throughout the country and their children in the back seats,
• 21:27
  Speaker 1: and uh, you know, it's just it's it's very difficult,
• 21:31
  Speaker 1: but it's something that needs to be addressed, that's for sure. Yeah. Well,
• 21:33
  Speaker 1: I'm glad you were able to bring some of this
• 21:35
  Speaker 1: to light for us. Thanks very much. Max Abelson, Finance
• 21:38
  Speaker 1: reporter for a Bloomberg News time to check on what's
• 21:53
  Speaker 1: going on in markets and also just to sort of
• 21:55
  Speaker 1: focus a little bit first on on Apple, and I
• 21:57
  Speaker 1: want to bring in John Butler. John is our senior
• 21:59
  Speaker 1: tell Calm Services and Equipment analyst for Bloomberg Intelligence. Also
• 22:03
  Speaker 1: joining us, of course Dave Wilson, Bloomberg Stocks Commist and
• 22:06
  Speaker 1: Bloggert m Live go on the Bloomberg Go ahead, send
• 22:09
  Speaker 1: Dave an email at d Wilson at Bloomberg dot net.
• 22:12
  Speaker 1: And John Butler, let's begin with you and an Apple.
• 22:14
  Speaker 1: Are we supposed to read through any of the remarks
• 22:18
  Speaker 1: or details or speculation about the suppliers to Apple about
• 22:21
  Speaker 1: the popularity and the sell through of the iPhone eight.
• 22:25
  Speaker 1: So let's start with there's reports at a China from
• 22:29
  Speaker 1: the Economic Daily News that suppliers have seen up to
• 22:33
  Speaker 1: fifty UH cuts in UH supply cuts. You know, there's
• 22:40
  Speaker 1: ordering parts orders, thank you for the iPhone eight. One
• 22:45
  Speaker 1: little tidbit I picked up this morning that I thought
• 22:48
  Speaker 1: was really interesting is Rogers, which is Canada's largest wireless operator,
• 22:53
  Speaker 1: characterized demand for the iPhone eight as anemic and said
• 22:57
  Speaker 1: everyone is waiting for the iPhone ten, which is sort
• 23:01
  Speaker 1: of consistent with I think what everyone was feeling going
• 23:05
  Speaker 1: into the announcement in September. It really is the first
• 23:08
  Speaker 1: I mean experts, people who are like watch Apple day
• 23:10
  Speaker 1: and night, they thought that was going to happen, right,
• 23:13
  Speaker 1: because it's really the first time that Apple has launched
• 23:16
  Speaker 1: two separate devices with different launch dates. But they're only
• 23:21
  Speaker 1: six weeks apart. Right. But here's my question, Okay, if if,
• 23:24
  Speaker 1: if Apple has such demand for the iPhone ten, how
• 23:29
  Speaker 1: are they going to manufacture enough to meet demand? And
• 23:32
  Speaker 1: then won't people be pushed into the iPhone eight anyway,
• 23:35
  Speaker 1: Well that's in the mix, right. That's one of the
• 23:37
  Speaker 1: big questions is are they going to have enough supply
• 23:41
  Speaker 1: to meet demand for the iPhone ten, which, judging from
• 23:45
  Speaker 1: the order flow and audo activity for iPhone eight parts,
• 23:49
  Speaker 1: might suggest that it's stronger than they expected for the holidays.
• 23:53
  Speaker 1: So the question is, or the answer is, we don't
• 23:57
  Speaker 1: really know yet whether they're going to meet holiday demand
• 24:01
  Speaker 1: or not. Over time. I think that ultimately supply catches
• 24:05
  Speaker 1: up with demand. It stalks down two and a half
• 24:08
  Speaker 1: percent right now. I was just gonna say it's it's
• 24:09
  Speaker 1: down exactly two point six percent. It's the biggest drop
• 24:13
  Speaker 1: since August ten. And Dave Wilson, how much is this
• 24:16
  Speaker 1: really driving the declines across broader US equity indexes, which
• 24:21
  Speaker 1: are also having their worst morning since August. It's one
• 24:24
  Speaker 1: piece of a bigger puzzle, no question. I mean, when
• 24:28
  Speaker 1: you consider Apple has been up as much as forty
• 24:31
  Speaker 1: this year, you can sort of understand why you would
• 24:33
  Speaker 1: get a pullback. But beyond that, you really have to
• 24:36
  Speaker 1: look at the response to the third quarter earnings reports
• 24:39
  Speaker 1: as they come in. I just put together a post
• 24:41
  Speaker 1: for the Markets Live blog. You have fifteen companies in
• 24:45
  Speaker 1: the S and P five hundred that reported today before
• 24:48
  Speaker 1: the opening bell. Ten of them have fallen in early
• 24:52
  Speaker 1: trading in response to those results. And that doesn't count
• 24:56
  Speaker 1: the legs of eBay and American Express, which had numbers
• 24:59
  Speaker 1: out late yesterday and they're down as well. And think
• 25:03
  Speaker 1: about it. One of the arguments that's been made for
• 25:06
  Speaker 1: stock valuations where they are is that companies are increasing
• 25:11
  Speaker 1: their sales and they're earning, so that's going to justify
• 25:16
  Speaker 1: the higher prices that investors have been paying. And then
• 25:19
  Speaker 1: you get the results on a day like today, and
• 25:21
  Speaker 1: you wonder whether that thesis at least has some holes
• 25:25
  Speaker 1: poked in the argument. Well, I want to get a
• 25:29
  Speaker 1: sense John from you, because if there is such incredible
• 25:33
  Speaker 1: demand for these higher priced phones, right because the iPhone
• 25:36
  Speaker 1: ten is supposed to be a higher price point than
• 25:38
  Speaker 1: iPhone eight, doesn't that suggest that the economy is actually
• 25:41
  Speaker 1: doing wonderfully. I'm not sure what it says about the
• 25:46
  Speaker 1: economy per se, because the iPhone is high priced and
• 25:50
  Speaker 1: it plays in that premium category. So I think a
• 25:53
  Speaker 1: lot of the people that are buying the iPhone are
• 25:56
  Speaker 1: somewhat immune to economic trends. That would be my guess.
• 26:00
  Speaker 1: Can I just throwing things like natural disasters here? I mean,
• 26:02
  Speaker 1: because you know this is we've been talking about a
• 26:04
  Speaker 1: lot of the larger economic news and how they have
• 26:06
  Speaker 1: been affected by hurricanes and now of course wildfires in
• 26:10
  Speaker 1: northern California, and that's got to put some kind of
• 26:13
  Speaker 1: damper on you know, retail sales. You're not gonna worry
• 26:16
  Speaker 1: about getting your new phone when you know you see
• 26:18
  Speaker 1: your house floating down the streets. So I mean it
• 26:20
  Speaker 1: just I don't know whether this is necessarily something you
• 26:23
  Speaker 1: have to read large into and you know, maybe that
• 26:25
  Speaker 1: we're just getting a little bit of profit taking. I mean,
• 26:27
  Speaker 1: you've got companies in addition to set Apple up what
• 26:30
  Speaker 1: forty something percent? Okay, yeah, but if you take a
• 26:33
  Speaker 1: look at you know, companies like Boeing, which I don't
• 26:36
  Speaker 1: think anyone calls, you know, a big fast growth stock
• 26:38
  Speaker 1: stocks up sixty this year, so I mean that beats
• 26:42
  Speaker 1: Apple by a handy margin. So you know, you've got
• 26:45
  Speaker 1: to kind of take it all with a grain of salt.
• 26:47
  Speaker 1: On r there, there's definitely a lot at play here, Pim.
• 26:50
  Speaker 1: And the one thing I'd say is, you know, I
• 26:53
  Speaker 1: think even if Apple has had launches before where they
• 26:57
  Speaker 1: can't meet demand out of the blocks and yet they
• 27:00
  Speaker 1: don't lose users. I mean, these are people that are
• 27:03
  Speaker 1: really committed to buying the phone. So if you look
• 27:06
  Speaker 1: at street estimates, really it's interesting from a revenue growth
• 27:10
  Speaker 1: perspective in this cycle. I think we're going to see
• 27:13
  Speaker 1: the strongest growth in the March quarter, so it's post holiday,
• 27:18
  Speaker 1: and I think expectations are already there in terms of
• 27:22
  Speaker 1: when the supply is really going to be able to
• 27:24
  Speaker 1: meet strong demand. Dave, I want to broaden out because
• 27:27
  Speaker 1: we were talking about the broader market and the jitters
• 27:30
  Speaker 1: that are kind of spreading throughout the SMP five hundred
• 27:33
  Speaker 1: and other broad indexes, and I'm just wondering, I mean,
• 27:37
  Speaker 1: isn't this a buying opportunity because nothing really is creating
• 27:41
  Speaker 1: the fundamental insecurity that would prompt me longer, longer sell off. Well,
• 27:48
  Speaker 1: at least you can understand why investors would think of
• 27:50
  Speaker 1: that possibility there. There are two bits of detail that
• 27:54
  Speaker 1: come into play here. One is that we've just gone
• 27:57
  Speaker 1: through half a dozen trading days where the SMP five
• 28:00
  Speaker 1: hundred had a range of less than three tents of
• 28:03
  Speaker 1: a percentage point from high too low on the day,
• 28:06
  Speaker 1: and that's a record according to the folks at LPL Financial.
• 28:09
  Speaker 1: So therefore no volatility. We've gone to some volatility today.
• 28:13
  Speaker 1: Beyond that, you know, we're still looking at the potential
• 28:16
  Speaker 1: for a record in terms of the amount of time
• 28:20
  Speaker 1: that the SMP five hundred has gone without pulling back
• 28:23
  Speaker 1: three from a high. We haven't seen that happen since
• 28:26
  Speaker 1: early November, just before the presidential election. So you know
• 28:30
  Speaker 1: the question is whether that by the dip approach that
• 28:33
  Speaker 1: has been working in markets for the last several months
• 28:36
  Speaker 1: rears its head as today's trading goes on. Well, no
• 28:39
  Speaker 1: dip today in the shares of Verizon, And a lot
• 28:42
  Speaker 1: of that has to do with the new data plan,
• 28:44
  Speaker 1: the unlimited data plan that they have put forth, which
• 28:47
  Speaker 1: I believe similar to the T Mobile plan, although there
• 28:50
  Speaker 1: are some differences. I don't think you get Netflix or
• 28:52
  Speaker 1: so on. But you know, forty four lines unlimited data stocks,
• 28:57
  Speaker 1: you know, the stocks moving higher, the stocks up more
• 28:58
  Speaker 1: than three, that's a big move for Verizon. That is
• 29:02
  Speaker 1: a big move for them. They had a decent quarter.
• 29:04
  Speaker 1: I was really sort of braced for the potential for
• 29:08
  Speaker 1: weakness here and instead, really you measure the health of
• 29:12
  Speaker 1: a business on wireless net editions, and they had very
• 29:16
  Speaker 1: good net editions. So I think, uh, you know, people
• 29:19
  Speaker 1: are responding to that. It really was so kind of
• 29:22
  Speaker 1: a relief, certainly for me. John Butler, thank you so much.
• 29:25
  Speaker 1: For joining us. Gun Boler is Senior Telecom Services and
• 29:28
  Speaker 1: Equipment Analyst for Bloomberg Intelligence and of course, our thanks
• 29:32
  Speaker 1: to Dave Wilson, Bloomberg Sox editor, columnist and blogger at
• 29:35
  Speaker 1: M Live go on the Bloomberg. Thanks for listening to
• 29:42
  Speaker 1: the Bloomberg P and L podcast. You can subscribe and
• 29:45
  Speaker 1: listen to interviews at Apple Podcasts, SoundCloud, or whatever podcast
• 29:49
  Speaker 1: platform you prefer. I'm pim Fox, I'm on Twitter at
• 29:52
  Speaker 1: pim Fox. I'm on Twitter at Lisa Abramo wits one.
• 29:56
  Speaker 1: Before the podcast, you can always catch us worldwide on
• 29:59
  Speaker 1: Bloomberg Radio it TA