1 00:00:02,640 --> 00:00:05,320 Speaker 1: Welcome to the Bloomberg Penel Podcast. I'm Paul swing you 2 00:00:05,360 --> 00:00:07,680 Speaker 1: along with my co host Lisa Brahma Waits. Each day 3 00:00:07,720 --> 00:00:10,240 Speaker 1: we bring you the most noteworthy and useful interviews for 4 00:00:10,280 --> 00:00:12,520 Speaker 1: you and your money. Whether at the grocery store or 5 00:00:12,560 --> 00:00:15,480 Speaker 1: the trading floor. Find a Bloomberg Penl podcast on Apple 6 00:00:15,520 --> 00:00:17,960 Speaker 1: podcast or wherever you listen to podcasts, as well as 7 00:00:17,960 --> 00:00:23,159 Speaker 1: at Bloomberg dot com. This is the scandal that is 8 00:00:23,239 --> 00:00:27,600 Speaker 1: rocking Wall Street and beyond. This is the admissions bribery 9 00:00:27,680 --> 00:00:32,239 Speaker 1: case that has wrapped up numerous US universities, states, as 10 00:00:32,280 --> 00:00:35,159 Speaker 1: well as Wall Street luminaries. Joining us here in our 11 00:00:35,200 --> 00:00:38,879 Speaker 1: Bloomberg Interactive Brokers studios as Janet Lauren Bloomberg Endowments and 12 00:00:39,000 --> 00:00:43,239 Speaker 1: Education Reporter. So Janet, let's just start with where are 13 00:00:43,320 --> 00:00:46,159 Speaker 1: we here? Do we have a sense of how quickly 14 00:00:46,200 --> 00:00:48,600 Speaker 1: these cases are are proceeding? I guess it's sort of 15 00:00:48,720 --> 00:00:51,560 Speaker 1: a class prosecution with all of the prosecutors from a 16 00:00:51,600 --> 00:00:54,440 Speaker 1: variety of different states going after a slew of people. 17 00:00:54,680 --> 00:00:56,640 Speaker 1: How long will it take and how many people are 18 00:00:56,680 --> 00:00:59,200 Speaker 1: expected to go to jail with this? So the next 19 00:00:59,280 --> 00:01:01,840 Speaker 1: step is a hearing. Uh later at the end of 20 00:01:01,920 --> 00:01:06,640 Speaker 1: March in Boston. UM. There were several people in court yesterday, 21 00:01:06,720 --> 00:01:10,720 Speaker 1: including the man behind this scheme, Mr Singer from California. 22 00:01:10,800 --> 00:01:14,560 Speaker 1: Could you describe the scheme? Okay? The scheme UM started 23 00:01:14,640 --> 00:01:18,000 Speaker 1: with testing. So you want to get your kid into 24 00:01:18,000 --> 00:01:20,679 Speaker 1: a top school, but your kid doesn't have the right tests. 25 00:01:21,200 --> 00:01:24,560 Speaker 1: So they would hire people either to take the test. 26 00:01:24,680 --> 00:01:28,080 Speaker 1: They had proctors and a couple of different site locations 27 00:01:28,080 --> 00:01:31,880 Speaker 1: in California and Texas who could UM change the answers, 28 00:01:31,959 --> 00:01:34,640 Speaker 1: and in some cases the kids did not know that 29 00:01:35,040 --> 00:01:38,280 Speaker 1: their parents had hired the service to change their answers 30 00:01:38,280 --> 00:01:41,720 Speaker 1: to inflate their score. UM. So that was one aspect 31 00:01:41,840 --> 00:01:44,920 Speaker 1: to get higher test scores. And then the more interesting 32 00:01:45,160 --> 00:01:50,280 Speaker 1: aspect was hiring UM coaches at various schools to UM 33 00:01:50,480 --> 00:01:53,680 Speaker 1: say they needed these kids as their athletic recruits, and 34 00:01:53,680 --> 00:01:57,760 Speaker 1: then to bribe the coaches and UH and these kids 35 00:01:57,800 --> 00:02:01,720 Speaker 1: got in because they said they were UH star athletes 36 00:02:01,800 --> 00:02:05,440 Speaker 1: on the water polo team or the tennis team or 37 00:02:05,480 --> 00:02:09,440 Speaker 1: the soccer team. Is there a school UH that is 38 00:02:09,520 --> 00:02:14,240 Speaker 1: sort of most prevalent. Definitely usc UM. There was somebody 39 00:02:14,320 --> 00:02:18,880 Speaker 1: in the University of Southern California. University of Southern California, um. 40 00:02:19,000 --> 00:02:22,280 Speaker 1: The I was reading through the indictment yesterday, and that 41 00:02:22,320 --> 00:02:24,800 Speaker 1: seemed to be the school that had the most um 42 00:02:24,960 --> 00:02:30,040 Speaker 1: connections of getting kids in fraudulently by bribing people um 43 00:02:30,080 --> 00:02:33,839 Speaker 1: within the within the school. So from from a money's perspective, 44 00:02:33,960 --> 00:02:36,760 Speaker 1: I'm wondering, this is sort of a paid a place scheme, right, 45 00:02:37,080 --> 00:02:40,000 Speaker 1: money right. So the money would go often to the 46 00:02:40,080 --> 00:02:43,680 Speaker 1: schools themselves, not to the schools themselves, they went to 47 00:02:44,400 --> 00:02:48,680 Speaker 1: Mr Singer's um foundation UM. And believe it or not, 48 00:02:48,760 --> 00:02:51,959 Speaker 1: these donors, these these people who were paying the bribe 49 00:02:52,080 --> 00:02:56,400 Speaker 1: even got a text donation for giving money to his foundation. 50 00:02:57,000 --> 00:03:00,480 Speaker 1: And he paid the bribes from that so ribes to 51 00:03:01,240 --> 00:03:04,320 Speaker 1: to the coaches, to the proctors, to all the people 52 00:03:04,360 --> 00:03:06,640 Speaker 1: in his network of fraud. So did any of it 53 00:03:06,680 --> 00:03:09,000 Speaker 1: go to the actual endowments, to the base of of 54 00:03:09,000 --> 00:03:11,160 Speaker 1: of money that we know of. No, they were being 55 00:03:11,240 --> 00:03:15,200 Speaker 1: they these people were being paid off, you know again personally, Yes, 56 00:03:15,400 --> 00:03:18,440 Speaker 1: they were being personally paid off. Of course, one reason 57 00:03:18,480 --> 00:03:20,600 Speaker 1: why this is getting so much attention is because there 58 00:03:20,600 --> 00:03:23,280 Speaker 1: just has been this fear h that if you're wealthy 59 00:03:23,280 --> 00:03:25,680 Speaker 1: and connected, you can get whatever you want and perpetuate 60 00:03:26,160 --> 00:03:28,360 Speaker 1: the success that you've had with your kids. Uh, and 61 00:03:28,400 --> 00:03:30,440 Speaker 1: this sort of confirms that, right. The other is that 62 00:03:30,480 --> 00:03:33,959 Speaker 1: there are a number of quite big names. Doug Hodges 63 00:03:34,120 --> 00:03:38,560 Speaker 1: of Pimco, Gordon Caplan of Wilkie Far William mcglosh in 64 00:03:38,800 --> 00:03:41,520 Speaker 1: this this to me blew me away of TPG Capital. 65 00:03:41,720 --> 00:03:44,720 Speaker 1: He was the head of a unit that invested in 66 00:03:45,000 --> 00:03:49,200 Speaker 1: socially conscious companies. Yea. I mean the irony is head spinning, 67 00:03:49,320 --> 00:03:51,680 Speaker 1: right that that he was caught up in cheating for 68 00:03:51,760 --> 00:03:53,520 Speaker 1: his son to get into college. But I think it 69 00:03:53,640 --> 00:03:57,320 Speaker 1: shows the extent and the desperation that these these types 70 00:03:57,360 --> 00:03:59,920 Speaker 1: of parents nothing but the best, and they'll do their 71 00:04:00,000 --> 00:04:02,600 Speaker 1: willing to break the law to do this. And that 72 00:04:02,920 --> 00:04:05,840 Speaker 1: is uh, you know that that's another step beyond you know, 73 00:04:05,880 --> 00:04:08,640 Speaker 1: helping your kid get a job in grease the wheels 74 00:04:08,640 --> 00:04:11,520 Speaker 1: in different ways, you know, they were bribing people. And 75 00:04:11,560 --> 00:04:14,480 Speaker 1: then if you read in the transcripts the wire taps, 76 00:04:14,480 --> 00:04:16,600 Speaker 1: they knew exactly what they were doing. Do you get 77 00:04:16,640 --> 00:04:20,159 Speaker 1: the sense that this is uh sort of understood to 78 00:04:20,240 --> 00:04:23,080 Speaker 1: be what people have to do to get into the 79 00:04:23,120 --> 00:04:24,520 Speaker 1: school of their choice. I mean, to me, it was 80 00:04:24,560 --> 00:04:27,839 Speaker 1: mind boggling. I had ever heard of this before. But 81 00:04:27,880 --> 00:04:30,440 Speaker 1: are there certain circles where it's just sort of yeah, 82 00:04:30,560 --> 00:04:33,360 Speaker 1: I guess this is twenty nineteen. You bribe your person 83 00:04:33,480 --> 00:04:36,039 Speaker 1: to get your kid into college. I I think at 84 00:04:36,080 --> 00:04:40,599 Speaker 1: this extreme level, it's not pervasive by any means. Um. 85 00:04:40,640 --> 00:04:42,800 Speaker 1: In the indictment, there was described you get in the 86 00:04:42,839 --> 00:04:45,440 Speaker 1: front door. You really have the academic chops. You know, 87 00:04:45,480 --> 00:04:48,359 Speaker 1: you really are the best of star debate or the 88 00:04:48,360 --> 00:04:50,839 Speaker 1: best of something that really elevates you to this level. 89 00:04:51,279 --> 00:04:54,360 Speaker 1: And there's the best traditional backdoor, which is giving millions 90 00:04:54,360 --> 00:04:57,000 Speaker 1: of dollars. Maybe you went to that school um to 91 00:04:57,080 --> 00:05:00,120 Speaker 1: try to make donations, you know, by a building, and 92 00:05:00,160 --> 00:05:03,520 Speaker 1: sometimes at some places that works very effectively. Well, this 93 00:05:03,560 --> 00:05:06,880 Speaker 1: guy created what he called a side door, meaning he 94 00:05:06,960 --> 00:05:09,520 Speaker 1: knew that there was some entry point that was a 95 00:05:09,520 --> 00:05:13,560 Speaker 1: little squishy, namely college athletics. The guy who founded this company, 96 00:05:13,960 --> 00:05:17,560 Speaker 1: Mr Singer. And you know, if you are recruiting for 97 00:05:17,600 --> 00:05:21,000 Speaker 1: a basketball team that is well known and you know 98 00:05:21,040 --> 00:05:23,320 Speaker 1: your you can only recruit real kids who are going 99 00:05:23,320 --> 00:05:27,120 Speaker 1: to play on these teams. They were pretending to recruit 100 00:05:27,200 --> 00:05:32,080 Speaker 1: kids to play on lesser sports water polo, um, tennis. 101 00:05:32,120 --> 00:05:34,760 Speaker 1: You know, they don't get as much attention and scrutiny. 102 00:05:34,839 --> 00:05:36,880 Speaker 1: So perhaps it was a little bit easier to figure 103 00:05:36,920 --> 00:05:39,760 Speaker 1: out how to work the system. And you look at 104 00:05:39,760 --> 00:05:45,080 Speaker 1: the indictment and they used photoshop to take kids faces, 105 00:05:45,200 --> 00:05:47,520 Speaker 1: these kids faces and putting them on the bodies of 106 00:05:47,839 --> 00:05:51,720 Speaker 1: people who were playing sports. I mean it's it's sophisticated, 107 00:05:51,800 --> 00:05:54,240 Speaker 1: yet it's very crude in a way. Yeah, and just 108 00:05:54,279 --> 00:05:58,320 Speaker 1: so so blatant, so blatant. I just have to wander 109 00:05:58,400 --> 00:06:00,719 Speaker 1: real quick jet twenty seconds. Do you think that any 110 00:06:00,760 --> 00:06:02,799 Speaker 1: of these big colleges will lose money as a result 111 00:06:02,839 --> 00:06:05,080 Speaker 1: of this? I don't. So you think that it's not 112 00:06:05,120 --> 00:06:07,279 Speaker 1: going to really affect anything in the long term. Um. 113 00:06:07,320 --> 00:06:10,640 Speaker 1: I think you saw with worst scandals of sexual abuse, 114 00:06:11,120 --> 00:06:15,880 Speaker 1: they continue to raise money. Wow. Janet Lauren, thank you 115 00:06:15,960 --> 00:06:18,679 Speaker 1: so much for being here. This story is is really 116 00:06:18,920 --> 00:06:22,920 Speaker 1: one that will be rocking certainly the world of parents 117 00:06:22,960 --> 00:06:24,760 Speaker 1: who have kids who are going to go to college 118 00:06:25,040 --> 00:06:28,080 Speaker 1: and are wondering what are we competing with at this point. 119 00:06:28,160 --> 00:06:31,520 Speaker 1: Janet Lauren, Bloomberg Endowments reporter, joining us here in our 120 00:06:31,520 --> 00:06:49,560 Speaker 1: Bloomberg Interactive Broker's studios. Brexit all very much on the 121 00:06:49,800 --> 00:06:52,919 Speaker 1: docket here. Theresa May did lose that crucial vote of 122 00:06:53,000 --> 00:06:57,800 Speaker 1: support for her latest plan to exit the European Union. 123 00:06:58,240 --> 00:07:01,760 Speaker 1: This is leading to some hope act really ironically that 124 00:07:01,920 --> 00:07:04,760 Speaker 1: perhaps as fully to a second referendum or a delay 125 00:07:04,880 --> 00:07:07,960 Speaker 1: to the Brexit process, and that is why perhaps the 126 00:07:07,960 --> 00:07:11,400 Speaker 1: pound of strengthening versus the dollar today. The question is 127 00:07:11,480 --> 00:07:13,920 Speaker 1: this really realistic? And joining us here as Ben Emmon's 128 00:07:13,960 --> 00:07:17,160 Speaker 1: he is managing director focusing on global macro strategy at 129 00:07:17,280 --> 00:07:20,960 Speaker 1: Medley Global Advisors. He's also a Bloomberg opinion columnist. Ben, 130 00:07:21,040 --> 00:07:22,800 Speaker 1: thank you so much for being here in our Bloombergetter 131 00:07:22,800 --> 00:07:26,360 Speaker 1: Active Broker Studios. Do you think that this optimism is misplaced? 132 00:07:27,040 --> 00:07:30,120 Speaker 1: Actually there's not, Lisa, because reach what is going on here? 133 00:07:30,240 --> 00:07:31,800 Speaker 1: And I think this is very confusing for a lot 134 00:07:31,840 --> 00:07:35,200 Speaker 1: of people too. Yes, Brexit is confusing, very confusing. You know, 135 00:07:35,240 --> 00:07:37,360 Speaker 1: you go through these motions and I think in the 136 00:07:37,440 --> 00:07:41,400 Speaker 1: UK specific process, the voting Colney on amendments to trying 137 00:07:41,400 --> 00:07:44,200 Speaker 1: to stee it his withdrawal agreement to ultimately a version 138 00:07:44,280 --> 00:07:46,600 Speaker 1: that both sides can agree on. EU and the UK 139 00:07:46,760 --> 00:07:49,120 Speaker 1: now you shut no, no, no, no, this is it. 140 00:07:49,160 --> 00:07:51,040 Speaker 1: But there's much more rigor room here and I think 141 00:07:51,040 --> 00:07:53,840 Speaker 1: the point that's one reason why the pound is bidding 142 00:07:53,880 --> 00:07:57,080 Speaker 1: up right that's optimism that ultimately we do end up 143 00:07:57,080 --> 00:08:00,040 Speaker 1: with an agreement that both of you can you and 144 00:08:00,160 --> 00:08:02,800 Speaker 1: live with. In addition, I think this is also about 145 00:08:03,200 --> 00:08:05,120 Speaker 1: the fact that you have to look more long term here. 146 00:08:05,360 --> 00:08:07,600 Speaker 1: We're going to like to get an extensive Article fifty 147 00:08:07,640 --> 00:08:10,440 Speaker 1: that's being voted on tomorrow, and that's the EU has 148 00:08:10,480 --> 00:08:13,120 Speaker 1: already said if you have a question to us, then 149 00:08:13,200 --> 00:08:14,920 Speaker 1: we'll give it to you. That's been out there. So 150 00:08:15,240 --> 00:08:17,400 Speaker 1: UK likely to go to that direction as opposed to 151 00:08:17,440 --> 00:08:20,000 Speaker 1: the second referendum, and the reason is that in the 152 00:08:20,120 --> 00:08:22,400 Speaker 1: UK they don't really want to go to a second referenum. Okay, 153 00:08:22,440 --> 00:08:25,120 Speaker 1: so let's put this into market terms, right, I mean, 154 00:08:25,160 --> 00:08:28,120 Speaker 1: if there is going to be an extension, Goldman Sachs says, 155 00:08:28,160 --> 00:08:31,360 Speaker 1: the pound will likely rally to a three year high. 156 00:08:31,800 --> 00:08:34,120 Speaker 1: How long does the extension have to be in your 157 00:08:34,160 --> 00:08:36,719 Speaker 1: opinion to make that happen? And do you agree with 158 00:08:36,760 --> 00:08:39,720 Speaker 1: Coleman Sacks. I do agree with Goldman section at points 159 00:08:40,160 --> 00:08:42,640 Speaker 1: the extension could be three months, it could be longer 160 00:08:42,720 --> 00:08:45,280 Speaker 1: even But I actually really think that over really facing 161 00:08:45,360 --> 00:08:47,480 Speaker 1: year is that we're gonna have a transition period of 162 00:08:47,480 --> 00:08:50,880 Speaker 1: at least a few years, which is technically the withdrawal agreement, right, 163 00:08:50,920 --> 00:08:54,839 Speaker 1: but that's until twenty two I believe then in that 164 00:08:55,040 --> 00:08:57,560 Speaker 1: time frame it gives them a lot of time to 165 00:08:57,679 --> 00:09:00,360 Speaker 1: completely work out what they ultimately will be as a 166 00:09:00,400 --> 00:09:02,360 Speaker 1: relationship to the EU. That's what they call it. It's 167 00:09:02,400 --> 00:09:05,640 Speaker 1: a relationship and that's the trading relationship. And that's all 168 00:09:05,640 --> 00:09:09,400 Speaker 1: about concepts like Norway plus or e A plus, that 169 00:09:09,559 --> 00:09:12,360 Speaker 1: idea of like you function like the similar way that 170 00:09:12,400 --> 00:09:15,040 Speaker 1: you did before, but in a in a not in 171 00:09:15,080 --> 00:09:18,480 Speaker 1: the EU context of being part of the EU twenty seven. So, yes, 172 00:09:18,520 --> 00:09:21,719 Speaker 1: the pounder is upside. The pound is actually being very 173 00:09:21,720 --> 00:09:24,880 Speaker 1: depressed simply because it's uncertainty about how do you agree 174 00:09:24,880 --> 00:09:27,880 Speaker 1: with the exactly what workus as it slowly has been 175 00:09:27,880 --> 00:09:29,960 Speaker 1: worked out. I think that Golden Sex as a point, 176 00:09:30,040 --> 00:09:33,000 Speaker 1: there's there's room to rise here. Making a round trip 177 00:09:33,040 --> 00:09:35,760 Speaker 1: basically back to the numbers from last year in March 178 00:09:35,800 --> 00:09:38,959 Speaker 1: when the Brexit and certaintyv started to increase, right when 179 00:09:38,960 --> 00:09:41,480 Speaker 1: we were one forty one on the pounds. Really interesting. 180 00:09:41,559 --> 00:09:44,280 Speaker 1: So Theresa May, is she out as Prime Minister? I 181 00:09:44,320 --> 00:09:46,640 Speaker 1: don't think so. I don't think that she will really 182 00:09:46,840 --> 00:09:49,559 Speaker 1: face any how many lives does this person have the 183 00:09:49,640 --> 00:09:53,280 Speaker 1: political lives is really I think she's absolutely my hero 184 00:09:53,400 --> 00:09:55,559 Speaker 1: because no matter how much people beat up on her, 185 00:09:55,840 --> 00:09:59,000 Speaker 1: she is resilient. She's very resilient. She's also the only 186 00:09:59,040 --> 00:10:05,200 Speaker 1: person that's willing to the job that's fair enough, so 187 00:10:05,240 --> 00:10:09,360 Speaker 1: she is She's definitely she will stay in the saddle. Now. Obviously, 188 00:10:09,400 --> 00:10:12,120 Speaker 1: if if, if the voting goes on and it leads 189 00:10:12,160 --> 00:10:15,240 Speaker 1: to a real breakup of government, coalition or a government, 190 00:10:15,280 --> 00:10:18,400 Speaker 1: and then yes you face a new election, but that's 191 00:10:18,400 --> 00:10:21,800 Speaker 1: not really happening here. So I think that she's she'll 192 00:10:21,920 --> 00:10:25,600 Speaker 1: stay on as Prime minister. Our view is that will 193 00:10:25,679 --> 00:10:27,960 Speaker 1: ultimately lead to a long term agreement that she will 194 00:10:28,000 --> 00:10:30,880 Speaker 1: will will be able to have engineered for you. Okay, 195 00:10:30,880 --> 00:10:33,400 Speaker 1: all right, So let's say Brexit is delayed and there 196 00:10:33,520 --> 00:10:35,320 Speaker 1: is some sense that we are going to come to 197 00:10:35,360 --> 00:10:39,000 Speaker 1: a resolution, not easy, not clean, but at least a 198 00:10:39,040 --> 00:10:41,320 Speaker 1: resolution here and one that might not be as painful 199 00:10:41,360 --> 00:10:43,960 Speaker 1: as a full no deal brexit. Do you get the 200 00:10:43,960 --> 00:10:47,440 Speaker 1: sense that people will have to raise their growth expectations 201 00:10:47,480 --> 00:10:50,280 Speaker 1: for the euro region, which have been completely beaten up 202 00:10:50,360 --> 00:10:52,680 Speaker 1: over the past few years, and do you think that 203 00:10:52,679 --> 00:10:56,600 Speaker 1: that will lead to yields rising from the near lowest 204 00:10:56,600 --> 00:10:59,320 Speaker 1: ever rates that we're seeing right now. Yeah, there's a 205 00:10:59,360 --> 00:11:03,360 Speaker 1: fair point because what's driving the slowdown in Europe. One, 206 00:11:03,440 --> 00:11:06,840 Speaker 1: it is driven by China and the demand for Chinese 207 00:11:06,840 --> 00:11:08,959 Speaker 1: products and the trade war that had an impact there. 208 00:11:09,040 --> 00:11:11,160 Speaker 1: That's been one fact. But the other fact is that, yes, 209 00:11:11,200 --> 00:11:15,439 Speaker 1: the trade with UK is substantial. The Netherlands I'm from, 210 00:11:15,480 --> 00:11:18,680 Speaker 1: for example, is very sensitive to that trade. Germany therefore two. 211 00:11:19,000 --> 00:11:21,160 Speaker 1: So I do think that if the resolution happens in 212 00:11:21,160 --> 00:11:25,079 Speaker 1: the activity picks up further, that yes, there's an opportunity 213 00:11:25,120 --> 00:11:27,280 Speaker 1: for Europe to rebounds, and it has a lot more 214 00:11:27,360 --> 00:11:30,440 Speaker 1: scope to rebound than say the US going through this 215 00:11:30,559 --> 00:11:33,040 Speaker 1: motion of slowdown from the fiscal This is a big deal. 216 00:11:33,160 --> 00:11:36,240 Speaker 1: You think that the euro Zone, the real European region, 217 00:11:36,679 --> 00:11:42,080 Speaker 1: has more potential to rebound and grow than the US. Yeah, 218 00:11:42,640 --> 00:11:45,880 Speaker 1: what period over this beerod devastating the next coming year 219 00:11:45,960 --> 00:11:48,240 Speaker 1: or so, and this whole trade agreement with the UK 220 00:11:48,400 --> 00:11:51,480 Speaker 1: is completely flashed out, there's that scope to actually see 221 00:11:51,520 --> 00:11:54,320 Speaker 1: that rebound. And I think that therefore not only the 222 00:11:54,360 --> 00:11:58,720 Speaker 1: pound but also the euro has opportunity to right to appreciate. 223 00:11:58,840 --> 00:12:01,600 Speaker 1: But that probably been the ons are going to underperform. Yeah, 224 00:12:01,679 --> 00:12:03,400 Speaker 1: you would think at some point, I do bun deals 225 00:12:03,440 --> 00:12:06,160 Speaker 1: are you know, near zero That is a reflection one 226 00:12:06,200 --> 00:12:08,760 Speaker 1: of really low inflation. And to your point earlier like 227 00:12:08,760 --> 00:12:12,200 Speaker 1: why do you have negative yields? It's increasing, that's inflation expectations. 228 00:12:12,240 --> 00:12:15,560 Speaker 1: That's definitely part of that story. But the gross story 229 00:12:15,640 --> 00:12:18,600 Speaker 1: that would pick up again, Yes, would normalize bound hields, 230 00:12:18,640 --> 00:12:22,480 Speaker 1: would normalize even Italian and friendship bond deals. I'm not 231 00:12:22,640 --> 00:12:24,680 Speaker 1: so much in the camp of that. The Eurozone is 232 00:12:24,679 --> 00:12:27,360 Speaker 1: facing a real recession risk for that matter, So it's 233 00:12:27,400 --> 00:12:30,880 Speaker 1: it's more maybe Italy itself as a contraction phase currently, 234 00:12:30,960 --> 00:12:33,400 Speaker 1: but not probably. Ben Emmons, thank you so much for 235 00:12:33,400 --> 00:12:35,920 Speaker 1: being with me today. This is really interesting Europe with 236 00:12:35,960 --> 00:12:39,719 Speaker 1: more potential to grow than the US. Ben Emmons is 237 00:12:39,760 --> 00:12:43,199 Speaker 1: Managing director of Global macro Strategy at Medley Global Advisor 238 00:12:43,280 --> 00:13:01,480 Speaker 1: and a Bloomber Opinion calumnist. There is a paradox in 239 00:13:01,800 --> 00:13:05,199 Speaker 1: markets today. You have US equities that are rallying, that 240 00:13:05,280 --> 00:13:09,840 Speaker 1: are continuing to push forward despite concerns about high valuations, 241 00:13:10,120 --> 00:13:12,680 Speaker 1: and yet you also have bonds that are pushing forward. 242 00:13:12,720 --> 00:13:16,160 Speaker 1: And this is the mind boggling statistic to me. There 243 00:13:16,320 --> 00:13:20,720 Speaker 1: is currently nine point two trillion dollars of negative yielding 244 00:13:20,840 --> 00:13:24,920 Speaker 1: debt outs there That is the highest level since late 245 00:13:24,960 --> 00:13:28,520 Speaker 1: two thousand and seventeen. Usually the higher this level goes, 246 00:13:28,760 --> 00:13:31,400 Speaker 1: the more bearish you would think you ought to be 247 00:13:31,520 --> 00:13:33,840 Speaker 1: on the global economy. Joining us now to try to 248 00:13:33,840 --> 00:13:36,520 Speaker 1: put this together and make sense of it is David Katz, President, 249 00:13:36,640 --> 00:13:41,040 Speaker 1: chief investment Officer of Matrix Matrix Asset Advisors. David, thank 250 00:13:41,040 --> 00:13:42,880 Speaker 1: you so much for being with us. I want to 251 00:13:42,920 --> 00:13:45,679 Speaker 1: start there. Do you think that there is sort of 252 00:13:45,720 --> 00:13:49,360 Speaker 1: a contradiction baked into markets given how low bond yields 253 00:13:49,360 --> 00:13:53,319 Speaker 1: are today? Also, while you have US equities continuing to 254 00:13:53,400 --> 00:13:57,560 Speaker 1: rally well, we think the fact that the bond yields 255 00:13:57,640 --> 00:14:01,560 Speaker 1: are so exceptionally low make style that much more attractive, 256 00:14:01,600 --> 00:14:03,880 Speaker 1: which means it really does make sense that the stocks 257 00:14:03,920 --> 00:14:07,840 Speaker 1: have been rallying. At some point the economy is going 258 00:14:07,920 --> 00:14:10,240 Speaker 1: to get it right in terms of or the market 259 00:14:10,280 --> 00:14:11,800 Speaker 1: is going to get it right, that the economy is 260 00:14:11,840 --> 00:14:14,240 Speaker 1: actually doing better than the bond market thinks, and then 261 00:14:14,280 --> 00:14:16,480 Speaker 1: we think that rates are going to start to drift higher. 262 00:14:16,760 --> 00:14:18,920 Speaker 1: But in the meantime, it does mean the stocks are 263 00:14:18,960 --> 00:14:22,000 Speaker 1: an attractive place to be for two thousand and nineteen, 264 00:14:22,600 --> 00:14:25,160 Speaker 1: So we've certainly had a fantastic start to the year 265 00:14:25,200 --> 00:14:28,040 Speaker 1: for equity investors, or the SMP up over eleven percent 266 00:14:28,160 --> 00:14:31,600 Speaker 1: year to date. David, So is are we still chasing 267 00:14:31,640 --> 00:14:33,440 Speaker 1: it here? Are we waiting for pullbacks? Or do we 268 00:14:33,480 --> 00:14:35,280 Speaker 1: just kind of trade around our favorite names here? What 269 00:14:35,280 --> 00:14:39,280 Speaker 1: are you recommending? So we went into the year very 270 00:14:39,360 --> 00:14:41,240 Speaker 1: upbeat about the market, thought it would be a well 271 00:14:41,280 --> 00:14:43,960 Speaker 1: above average year. The fact that you've gotten eleven percent 272 00:14:44,040 --> 00:14:46,160 Speaker 1: in ten weeks means that at some point it's going 273 00:14:46,200 --> 00:14:48,560 Speaker 1: to slow down. So if you've been sitting on the 274 00:14:48,600 --> 00:14:51,080 Speaker 1: sidelines and you're finally looking at the market saying, boy, 275 00:14:51,120 --> 00:14:53,640 Speaker 1: it's doing great, maybe I should start to jump in 276 00:14:53,720 --> 00:14:57,400 Speaker 1: right here. That we would advise against um. We think 277 00:14:57,400 --> 00:14:59,200 Speaker 1: that if you have money in the market, stay with 278 00:14:59,240 --> 00:15:01,960 Speaker 1: the market. We would use a week like last week 279 00:15:02,000 --> 00:15:03,920 Speaker 1: where the market was down to to three to four 280 00:15:04,000 --> 00:15:06,400 Speaker 1: percent is a place to be adding to stocks, but 281 00:15:06,480 --> 00:15:09,800 Speaker 1: wouldn't be chasing the big updates like you had earlier 282 00:15:09,800 --> 00:15:11,720 Speaker 1: in the week and then today. All right, but David, 283 00:15:11,720 --> 00:15:14,000 Speaker 1: I want to go back to the whole bond stock disconnect, 284 00:15:14,080 --> 00:15:17,600 Speaker 1: or maybe it's an absolute direct connection. Here's what I 285 00:15:17,600 --> 00:15:21,760 Speaker 1: don't understand. If bonds and stocks can rally in tantem, 286 00:15:21,840 --> 00:15:25,840 Speaker 1: then do bonds still provide sort of the haven and 287 00:15:26,120 --> 00:15:29,840 Speaker 1: the buffer uh kind of bet or the buffer kind 288 00:15:29,840 --> 00:15:33,320 Speaker 1: of uh proposition versus stocks? In other words, there usually 289 00:15:33,360 --> 00:15:36,400 Speaker 1: is an inverse relationship. So the sixty kind of breakdown 290 00:15:36,440 --> 00:15:39,760 Speaker 1: of your portfolio makes sense. The bond offering sort of 291 00:15:39,800 --> 00:15:43,040 Speaker 1: buffer against selloffs and stocks does that not count anymore? 292 00:15:43,120 --> 00:15:46,760 Speaker 1: Du Bonds just always rally no matter what. Oh, absolutely not. 293 00:15:47,600 --> 00:15:49,600 Speaker 1: So when we look at the bond market right now, 294 00:15:49,640 --> 00:15:52,880 Speaker 1: we think yields are at the lower end of their range. 295 00:15:52,920 --> 00:15:55,760 Speaker 1: We think on the tenure you probably get up to 296 00:15:55,800 --> 00:15:59,240 Speaker 1: about three or more before year end, which means if 297 00:15:59,280 --> 00:16:02,200 Speaker 1: you're a bond in vestor look to bonds to give 298 00:16:02,240 --> 00:16:04,320 Speaker 1: you a little bit of income, some stability if the 299 00:16:04,320 --> 00:16:07,160 Speaker 1: market sells off meaningfully, but do not look for bonds 300 00:16:07,200 --> 00:16:09,880 Speaker 1: to be a meaningful place to make money. The flip 301 00:16:09,920 --> 00:16:13,000 Speaker 1: side is stocks will do better over time. Valuations are 302 00:16:13,000 --> 00:16:15,480 Speaker 1: at about sixteen and a half time's earnings, which is 303 00:16:15,480 --> 00:16:18,440 Speaker 1: pretty reasonable in terms of the overall market in a 304 00:16:18,480 --> 00:16:21,120 Speaker 1: good economy with low interest rates, so we think that 305 00:16:21,160 --> 00:16:24,600 Speaker 1: will make money. If we're wrong. If there were problems 306 00:16:24,960 --> 00:16:28,560 Speaker 1: with the China trade deal, we think the stock market 307 00:16:28,600 --> 00:16:30,960 Speaker 1: would sell off and bonds would rally on that because 308 00:16:31,040 --> 00:16:33,800 Speaker 1: that would hurt the global economy. The other wild card 309 00:16:33,840 --> 00:16:36,280 Speaker 1: that's out there is one of the reasons our rates 310 00:16:36,280 --> 00:16:39,200 Speaker 1: are so low is because we live in a global 311 00:16:39,240 --> 00:16:42,240 Speaker 1: economy and European rates are low and in fact going 312 00:16:42,280 --> 00:16:45,840 Speaker 1: to be going lower. So, David, you mentioned China. To 313 00:16:45,880 --> 00:16:47,640 Speaker 1: what extent we get this question a lot. To what 314 00:16:47,720 --> 00:16:51,000 Speaker 1: extent do you think a potential China trade deal? Uh, 315 00:16:51,080 --> 00:16:54,040 Speaker 1: successful China trade deal is already priced into the equity markets. 316 00:16:55,400 --> 00:16:58,080 Speaker 1: We think that the equity markets are not pricing in 317 00:16:58,160 --> 00:17:00,800 Speaker 1: a failure anymore in the fourth or they were pricing 318 00:17:00,800 --> 00:17:03,200 Speaker 1: in a failure. So we think we're right now in 319 00:17:03,240 --> 00:17:05,680 Speaker 1: the in the middle ground. If there was not a deal, 320 00:17:05,760 --> 00:17:08,119 Speaker 1: if we double the tariffs again, we think the market 321 00:17:08,119 --> 00:17:11,120 Speaker 1: would sell off. If there is a deal, we don't 322 00:17:11,119 --> 00:17:13,399 Speaker 1: think it necessarily means the market is going to rally 323 00:17:13,480 --> 00:17:16,040 Speaker 1: five or ten percent in the following weeks. But what 324 00:17:16,160 --> 00:17:18,720 Speaker 1: we do think it does is it really frees up 325 00:17:18,720 --> 00:17:21,160 Speaker 1: the global economy to do better. And if the global 326 00:17:21,160 --> 00:17:24,119 Speaker 1: economy is doing better, then we think stocks can do better. 327 00:17:24,160 --> 00:17:28,320 Speaker 1: So we think a deal is absolutely critical for the 328 00:17:28,440 --> 00:17:31,720 Speaker 1: US economy and for the U S stock markets. We 329 00:17:31,840 --> 00:17:35,480 Speaker 1: think that the Trump administration, or at least President Trump, 330 00:17:35,480 --> 00:17:38,880 Speaker 1: finally understands that when he talks about a deal happening, 331 00:17:38,960 --> 00:17:41,440 Speaker 1: the market goes up. When he talks about being Mr Tariff, 332 00:17:41,720 --> 00:17:44,560 Speaker 1: the market goes down. If he understands that, and if 333 00:17:44,560 --> 00:17:47,040 Speaker 1: they've made as much progress as the body language of 334 00:17:47,080 --> 00:17:49,920 Speaker 1: the last few weeks suggest, there would be a deal 335 00:17:49,960 --> 00:17:52,200 Speaker 1: and that would free up our market to do better 336 00:17:52,240 --> 00:17:54,640 Speaker 1: as the year progresses. If there's not a deal, where 337 00:17:54,640 --> 00:17:56,960 Speaker 1: a lot more cautious. So, David, I want to go 338 00:17:57,040 --> 00:17:58,919 Speaker 1: back to what you were talking about with respect to 339 00:17:59,480 --> 00:18:01,959 Speaker 1: you would be adding at times like last week when 340 00:18:02,000 --> 00:18:03,879 Speaker 1: there was about a three or four percent pullback at 341 00:18:03,880 --> 00:18:07,879 Speaker 1: one point. Uh, you focus on specific stocks that you like, right, 342 00:18:07,920 --> 00:18:11,600 Speaker 1: You're not talking about broad index type of strategy. Correct. 343 00:18:12,520 --> 00:18:14,879 Speaker 1: That's absolutely correct. And even with the market up at 344 00:18:14,920 --> 00:18:16,960 Speaker 1: these higher levels right now, we do think there are 345 00:18:16,960 --> 00:18:20,360 Speaker 1: a lot of stocks that are selling it very attractive valuations. 346 00:18:20,440 --> 00:18:23,040 Speaker 1: You know, we're able to buy companies that have good 347 00:18:23,080 --> 00:18:26,280 Speaker 1: long term growth prospects, paying good yields, that are selling 348 00:18:26,280 --> 00:18:28,960 Speaker 1: at nine, ten eleven times earnings, and generally, when you're 349 00:18:28,960 --> 00:18:31,080 Speaker 1: able to do that you do pretty well. Yes, So 350 00:18:31,080 --> 00:18:34,199 Speaker 1: what are you talking about in particular? So companies that 351 00:18:34,240 --> 00:18:38,120 Speaker 1: we like in the biotech area. Gilead Science has been 352 00:18:38,160 --> 00:18:41,360 Speaker 1: a miserable performer over the last year. Itsels under ten 353 00:18:41,440 --> 00:18:44,359 Speaker 1: times earnings, has a three point nine percent yields. They 354 00:18:44,400 --> 00:18:47,399 Speaker 1: brought in the new CEO who's very well regarded. We 355 00:18:47,440 --> 00:18:51,160 Speaker 1: think the surprises there are on the upside. PNC Financial 356 00:18:51,200 --> 00:18:55,200 Speaker 1: Services is a bank that is very strong bank great 357 00:18:55,240 --> 00:18:58,560 Speaker 1: financial are great capital ratios, but has really lagged the 358 00:18:58,600 --> 00:19:01,399 Speaker 1: group over the last year. Uh it sells it about 359 00:19:01,400 --> 00:19:04,840 Speaker 1: eleven times earnings and pays a three percent yield. Royal 360 00:19:04,920 --> 00:19:08,960 Speaker 1: Dutch Oil Company pays a six percent yield. Zimmer biomet 361 00:19:09,040 --> 00:19:13,399 Speaker 1: which makes medical devices knee and hip replacements, UH sells 362 00:19:13,440 --> 00:19:16,320 Speaker 1: it about fourteen or fifteen times earnings. Has been a 363 00:19:16,320 --> 00:19:18,800 Speaker 1: lot of insider buying of late. So all of those 364 00:19:18,800 --> 00:19:21,080 Speaker 1: companies we think are pretty low risk with very good 365 00:19:21,080 --> 00:19:25,720 Speaker 1: reward potentials. How about the UH real cook about thirty seconds, David, 366 00:19:25,720 --> 00:19:27,640 Speaker 1: the Fang stocks. They have been such a leader, both 367 00:19:27,680 --> 00:19:30,000 Speaker 1: on the upside last year and the downside in December. 368 00:19:30,440 --> 00:19:33,120 Speaker 1: Are you guys playing in that space at all? So 369 00:19:33,240 --> 00:19:35,680 Speaker 1: we do think there are a few that are actually 370 00:19:35,760 --> 00:19:39,040 Speaker 1: pretty attractive here. So we've been buying Facebook, uh, and 371 00:19:39,119 --> 00:19:41,040 Speaker 1: although we brought it lower, we do think the stock 372 00:19:41,080 --> 00:19:44,359 Speaker 1: goes up from here. Google, again, we we bought lower, 373 00:19:44,400 --> 00:19:47,600 Speaker 1: but we still do like that stock. Here. Netflix we're 374 00:19:47,800 --> 00:19:51,119 Speaker 1: very wary of. We think that it is richly priced. 375 00:19:51,119 --> 00:19:53,800 Speaker 1: You're starting to see the cps and the Comcast and 376 00:19:53,840 --> 00:19:57,080 Speaker 1: the Disneys of the world taking back a lot of content, uh, 377 00:19:57,440 --> 00:20:00,520 Speaker 1: developing their own O T t U product. So we 378 00:20:00,560 --> 00:20:05,240 Speaker 1: think Netflix probably not as strong as it's been. Amazon 379 00:20:05,520 --> 00:20:08,640 Speaker 1: is a great company, but by the product and probably 380 00:20:08,960 --> 00:20:10,880 Speaker 1: we try away from the stock, we think they're better 381 00:20:10,880 --> 00:20:13,520 Speaker 1: places to make money. David Cats, thank you so much. 382 00:20:13,600 --> 00:20:17,320 Speaker 1: David katz As, a chief investment officer for Matrix Asset Advisors, 383 00:20:17,359 --> 00:20:34,600 Speaker 1: are joining us on the phone. We appreciate that well. 384 00:20:34,640 --> 00:20:36,560 Speaker 1: Listeners to the show know that Lisa and I like 385 00:20:36,720 --> 00:20:39,119 Speaker 1: to talk technology. We ausually talk about some of the 386 00:20:39,119 --> 00:20:42,399 Speaker 1: fun stocks like Facebook and Amazon and Google. Today, we 387 00:20:42,400 --> 00:20:44,879 Speaker 1: want to talk about an interesting story. We want to 388 00:20:44,920 --> 00:20:48,679 Speaker 1: really talk about inside a quantum technology. What does quantum 389 00:20:48,720 --> 00:20:51,800 Speaker 1: technology and what does it mean for the marketplace. We 390 00:20:51,880 --> 00:20:54,600 Speaker 1: are fortunate to have Lawrence Gassman join us. Lawrence is 391 00:20:54,600 --> 00:20:59,960 Speaker 1: a founder and president of Inside Quantum Technology, based in Lynchburg, Lynchburg, Virginia. Lawrence, 392 00:21:00,359 --> 00:21:03,359 Speaker 1: thank you so much for joining us. First um, What 393 00:21:03,600 --> 00:21:07,520 Speaker 1: is quantum technology and what does it do that makes 394 00:21:07,520 --> 00:21:11,000 Speaker 1: it so important? We're in Charlottesville, Virginia, by the way. 395 00:21:11,040 --> 00:21:16,800 Speaker 1: But quantum technology, okay, who's from the thank you? Is 396 00:21:16,840 --> 00:21:21,000 Speaker 1: a technology that was derived from something called quantum information theory, 397 00:21:21,160 --> 00:21:26,840 Speaker 1: which was theoretical development in the ninety nineties, and with 398 00:21:27,000 --> 00:21:32,919 Speaker 1: the growth in power of chips, it's actually become reality. 399 00:21:33,000 --> 00:21:37,399 Speaker 1: And it's really three things. One is quantum computers, which 400 00:21:38,000 --> 00:21:41,680 Speaker 1: outpace any computer that's ever been built and is able 401 00:21:41,760 --> 00:21:46,399 Speaker 1: to solve certain problems that classical computers can't do. Um 402 00:21:46,680 --> 00:21:50,680 Speaker 1: quantum encryption, which is the most which has different variants, 403 00:21:50,720 --> 00:21:57,120 Speaker 1: but it's the most secure encryption ever developed, and therefore 404 00:21:57,160 --> 00:22:00,000 Speaker 1: of interest in the military. Actually the military is all 405 00:22:00,119 --> 00:22:03,119 Speaker 1: over the world, and that's the two main things. The 406 00:22:03,160 --> 00:22:07,960 Speaker 1: third thing is quantum senses, which are senses that are 407 00:22:08,160 --> 00:22:13,159 Speaker 1: more potentially more sensitive than anything that has been built before. 408 00:22:13,600 --> 00:22:18,040 Speaker 1: So together they have a common core and history um 409 00:22:18,400 --> 00:22:21,560 Speaker 1: but they're producing new markets just beginning to get going 410 00:22:21,600 --> 00:22:25,920 Speaker 1: in some ways. So one reason why Lawrence. We're talking 411 00:22:25,920 --> 00:22:29,359 Speaker 1: about this now is because we're almost upon the Inside 412 00:22:29,440 --> 00:22:32,640 Speaker 1: Quantum Technology conference that's going to be held in Boston 413 00:22:32,760 --> 00:22:35,720 Speaker 1: starting March, and I'm just wondering, do you have a 414 00:22:35,760 --> 00:22:39,200 Speaker 1: sense of attendance for this conference? And the reason why 415 00:22:39,240 --> 00:22:41,600 Speaker 1: I think this is really important is because when I 416 00:22:41,680 --> 00:22:45,399 Speaker 1: hear quantum computing, my brain kind of starts to go fuzzy, 417 00:22:45,440 --> 00:22:47,480 Speaker 1: and I think, you know, please, I hope I can 418 00:22:47,920 --> 00:22:51,080 Speaker 1: understand this and and and understand the practical applications. But 419 00:22:51,119 --> 00:22:54,280 Speaker 1: in reality, this is going to be the ce change 420 00:22:54,320 --> 00:22:57,840 Speaker 1: that determines which of the IBM, Microsoft, Intel A villas 421 00:22:57,960 --> 00:23:02,320 Speaker 1: are going to be the winners in the coming technology cycle. Well, 422 00:23:02,640 --> 00:23:04,919 Speaker 1: the conference will be next week, and we have a 423 00:23:05,040 --> 00:23:08,480 Speaker 1: mix between some of the big big companies that we 424 00:23:08,560 --> 00:23:12,399 Speaker 1: have IBM, Microsoft, d Wave which is a specialist company 425 00:23:12,480 --> 00:23:18,320 Speaker 1: but a rather substantial one. And one thing you'll see 426 00:23:18,440 --> 00:23:21,480 Speaker 1: is that there's a huge mix and an impressive mix 427 00:23:21,560 --> 00:23:25,720 Speaker 1: between the companies and the everyday names. On the encryption side, 428 00:23:25,720 --> 00:23:29,160 Speaker 1: for instance, you have just about every major telephone company involved. 429 00:23:29,920 --> 00:23:35,679 Speaker 1: But there is also a stunning number of um startups 430 00:23:35,720 --> 00:23:42,280 Speaker 1: being funded by vcs that are really begin to take off. 431 00:23:42,440 --> 00:23:45,159 Speaker 1: I'm for going to ask me how many. I don't know, 432 00:23:45,240 --> 00:23:48,199 Speaker 1: but I seem to discover one new one every morning. 433 00:23:48,400 --> 00:23:50,080 Speaker 1: We again, we're going to have a lot of the 434 00:23:50,160 --> 00:23:55,359 Speaker 1: more prominent of the firms in that space. I think 435 00:23:55,560 --> 00:23:58,119 Speaker 1: there's a sense that this is a really new area 436 00:23:58,440 --> 00:24:01,840 Speaker 1: and a lot of money will be made over the 437 00:24:01,920 --> 00:24:04,520 Speaker 1: next few years and even more in the next ten 438 00:24:04,600 --> 00:24:08,360 Speaker 1: years UM and a lot of talented people are responding 439 00:24:08,400 --> 00:24:10,560 Speaker 1: to that. So Lawrence, give us, if you can, some 440 00:24:10,720 --> 00:24:14,320 Speaker 1: practical applications that our listeners might get a sense of 441 00:24:14,359 --> 00:24:20,000 Speaker 1: how quantum technologies quantum computing will impact their their daily lives. So, 442 00:24:20,760 --> 00:24:23,840 Speaker 1: I mean, as far as I'm concerned, there isn't going 443 00:24:23,880 --> 00:24:28,439 Speaker 1: to be a desktop quantum computer in the foreseeable future. 444 00:24:28,480 --> 00:24:30,920 Speaker 1: But because people have said things like that about computers 445 00:24:30,920 --> 00:24:32,760 Speaker 1: for a long time and they've turned out to be wrong. 446 00:24:33,200 --> 00:24:36,760 Speaker 1: But what it really does is UM. Well, two of 447 00:24:36,800 --> 00:24:39,800 Speaker 1: the areas that are really beginning to take off now 448 00:24:40,400 --> 00:24:44,919 Speaker 1: are problems that could not be solved with classical computers, 449 00:24:44,960 --> 00:24:49,400 Speaker 1: in building new materials or building new drugs. Quantum computers 450 00:24:49,440 --> 00:24:51,960 Speaker 1: seem to be able to tackle that kind of problem, 451 00:24:52,119 --> 00:24:56,320 Speaker 1: or transportation and planning UM. So you get people like 452 00:24:56,440 --> 00:25:01,480 Speaker 1: Volkswagen and UM and and US and some other firms 453 00:25:01,520 --> 00:25:05,360 Speaker 1: that are beginning to use quantum computing to solve those 454 00:25:05,480 --> 00:25:10,119 Speaker 1: kind of problems. On the encryption side, quantum computing actually 455 00:25:10,200 --> 00:25:12,639 Speaker 1: raises an issue because if we could ever build a 456 00:25:12,720 --> 00:25:16,000 Speaker 1: quantum computer big enough, and we're not sure when that 457 00:25:16,080 --> 00:25:18,760 Speaker 1: will happen, but not too distant future, we'll be able 458 00:25:18,800 --> 00:25:24,400 Speaker 1: to break all the common um UH encryption schemes, including 459 00:25:24,440 --> 00:25:26,840 Speaker 1: the ones that you know every use every day on 460 00:25:26,960 --> 00:25:30,439 Speaker 1: your um and your computer. So that opens a new 461 00:25:30,480 --> 00:25:33,359 Speaker 1: opportunity for new kinds of encryption schemes, including some that 462 00:25:33,400 --> 00:25:38,880 Speaker 1: actually involved quantum technology itself. UM. So that's a problem 463 00:25:38,960 --> 00:25:42,320 Speaker 1: on the solution, but it's one the quantum computers create. 464 00:25:42,680 --> 00:25:46,280 Speaker 1: But it's a lot of optimization problems, and and that's 465 00:25:46,359 --> 00:25:48,960 Speaker 1: really where it's focused at the moment. Lawrence, just real 466 00:25:49,040 --> 00:25:52,359 Speaker 1: quickly here when we talk about quantum computing and it 467 00:25:52,440 --> 00:25:54,720 Speaker 1: just means the amount of speed and the amount of 468 00:25:54,760 --> 00:25:57,760 Speaker 1: data that can be involved. Is that basically the underlying 469 00:25:58,359 --> 00:26:04,520 Speaker 1: unifying things here and the tying um thing conceptually um 470 00:26:04,560 --> 00:26:07,840 Speaker 1: it involves. So I mean, everybody knows whether bit it 471 00:26:07,960 --> 00:26:11,000 Speaker 1: bit is a one or zero in quantum computing, and 472 00:26:11,080 --> 00:26:14,360 Speaker 1: quantum technology. You have things called cubits which are actually 473 00:26:14,840 --> 00:26:19,399 Speaker 1: their physical manifestation is actually a quantum state. That's something 474 00:26:19,480 --> 00:26:22,399 Speaker 1: that involves I think we have time for me to 475 00:26:22,440 --> 00:26:25,560 Speaker 1: go into quantum a theory, but we don't. We have 476 00:26:25,560 --> 00:26:29,240 Speaker 1: done seconds. But the important thing is when you've got 477 00:26:29,240 --> 00:26:31,840 Speaker 1: a bit and you never add another bit, you've doubled 478 00:26:31,880 --> 00:26:37,960 Speaker 1: the capacity. With um quantum computing, it goes up geometrically. 479 00:26:38,200 --> 00:26:42,920 Speaker 1: So uh, if you had a five bit computer that's 480 00:26:43,000 --> 00:26:46,000 Speaker 1: not that large, but the five hundred cubic computer would 481 00:26:46,000 --> 00:26:49,240 Speaker 1: be able to do amazing things. Lawrence Gasman, thank you 482 00:26:49,240 --> 00:26:51,600 Speaker 1: so much for being with us, Founder and president of 483 00:26:51,680 --> 00:27:09,280 Speaker 1: inside at Quantum Technology, based in Charlottesville. Well, the cannabis 484 00:27:09,359 --> 00:27:12,080 Speaker 1: business is certainly getting a lot of love recently. First 485 00:27:12,080 --> 00:27:14,160 Speaker 1: we had Martha Stewart throwing her hat in a ring, 486 00:27:14,400 --> 00:27:18,320 Speaker 1: and now we have billionaire investor Nelson Peltz joining Aurora 487 00:27:18,359 --> 00:27:21,800 Speaker 1: Cannabis as a strategic advisor and as receiving stock options 488 00:27:22,119 --> 00:27:25,440 Speaker 1: that could make him the pot firm's second largest shareholders. 489 00:27:25,640 --> 00:27:28,080 Speaker 1: To kind of dig into all things cannabis, we have 490 00:27:28,160 --> 00:27:31,840 Speaker 1: Christine A. M. She has a Bloomberg columnist on Canadian cannabis. 491 00:27:32,280 --> 00:27:36,200 Speaker 1: She's from Bloomberg Opinion. She joins us from the Toronto Bureau. Christine, 492 00:27:36,200 --> 00:27:39,719 Speaker 1: thanks for joining us. How important is it that a 493 00:27:39,800 --> 00:27:44,399 Speaker 1: significant investor with name recognition, Uh put some capital behind 494 00:27:44,400 --> 00:27:47,600 Speaker 1: this business. Thanks for having me. Yeah, Well, as you say, 495 00:27:47,640 --> 00:27:50,200 Speaker 1: He's certainly not the first big name to join a 496 00:27:50,280 --> 00:27:54,320 Speaker 1: cannabis company, um Martha Stewart being another very prominent example. 497 00:27:54,600 --> 00:27:57,480 Speaker 1: UM Gene Simmons is also working with the cannabis company. 498 00:27:57,520 --> 00:27:59,960 Speaker 1: There are lots of that's not exactly surprising, but going well, 499 00:28:00,520 --> 00:28:03,960 Speaker 1: that's true. But Nelson Pelts is arguably the biggest name 500 00:28:04,000 --> 00:28:07,040 Speaker 1: investor to work with the cannabis company. So it's quite 501 00:28:07,080 --> 00:28:09,320 Speaker 1: significant for Aurora. You can see that in the way 502 00:28:09,359 --> 00:28:12,800 Speaker 1: the share price is reacting today, currently up about eleven 503 00:28:13,480 --> 00:28:18,040 Speaker 1: in Toronto trading. Um and and Pelts is basically coming 504 00:28:18,080 --> 00:28:21,040 Speaker 1: on board to help advise the Aurora on strategic partnerships. Now, 505 00:28:21,280 --> 00:28:23,720 Speaker 1: Aurora is one of the biggest companies in this space, 506 00:28:23,760 --> 00:28:26,120 Speaker 1: but has not yet been able to secure a strategic 507 00:28:26,160 --> 00:28:30,160 Speaker 1: partnership along the lines of Canopies deal with Constellation Brands 508 00:28:30,359 --> 00:28:33,960 Speaker 1: or Chronoses deal with Altria Group. Um And, so they 509 00:28:33,960 --> 00:28:37,600 Speaker 1: they've been hunting for that, and they're looking for partners 510 00:28:37,640 --> 00:28:40,600 Speaker 1: across a wide range of verticals in the industry. And 511 00:28:40,640 --> 00:28:43,080 Speaker 1: the hope here is that Pelts, with all his wide 512 00:28:43,160 --> 00:28:46,800 Speaker 1: ranging contacts, particularly in the consumer products space, can help 513 00:28:46,840 --> 00:28:49,480 Speaker 1: them form those partnerships. Christine, That's exactly where I wanted 514 00:28:49,520 --> 00:28:51,600 Speaker 1: to go to this concept. That and Nelson Pelts. His 515 00:28:51,680 --> 00:28:57,640 Speaker 1: relationships have included the likes of Wendy's as well as Proctoring, Gamble, Pepsi, Mandeleys, 516 00:28:58,080 --> 00:29:02,960 Speaker 1: Family Dollar Stores. These are more of consumer facing companies 517 00:29:03,120 --> 00:29:06,880 Speaker 1: that are well known in households across North America. One 518 00:29:06,960 --> 00:29:09,400 Speaker 1: question that I have is the marijuana companies to date 519 00:29:09,480 --> 00:29:12,200 Speaker 1: that have been most successful have really rooted their business 520 00:29:12,360 --> 00:29:16,080 Speaker 1: in medical marijuana. I'm just wondering how does this sort 521 00:29:16,120 --> 00:29:21,160 Speaker 1: of position Aurora Cannabis in a consumer way potentional That's 522 00:29:21,160 --> 00:29:23,440 Speaker 1: a great question because Aurora has made it very clear 523 00:29:23,720 --> 00:29:26,920 Speaker 1: that it is first and foremost a medical cannabis company, 524 00:29:27,000 --> 00:29:30,880 Speaker 1: that that both in Canada and internationally is it's primary focus, 525 00:29:31,000 --> 00:29:34,040 Speaker 1: not the recreational market. But that said, I talked to 526 00:29:34,200 --> 00:29:36,880 Speaker 1: their chairman, Michael Singer this morning and he said, well, 527 00:29:36,880 --> 00:29:39,240 Speaker 1: they're looking for is multiple partners not just in the 528 00:29:39,240 --> 00:29:43,960 Speaker 1: pharmaceutical space, but also in package goods, beverages, cosmetics, wellness, 529 00:29:44,360 --> 00:29:47,040 Speaker 1: and so this indicates that well, you know, medical still 530 00:29:47,080 --> 00:29:50,800 Speaker 1: remains their primary focus. They are looking increasingly at that 531 00:29:50,880 --> 00:29:54,320 Speaker 1: recreational and consumer side of things, and the hope is 532 00:29:54,360 --> 00:29:56,160 Speaker 1: that helps with all of his connections. As you mentioned, 533 00:29:56,200 --> 00:29:58,680 Speaker 1: he's chairman at Wendy's, he's on the border Proctor and 534 00:29:58,720 --> 00:30:01,840 Speaker 1: Gamble might be will to help form those partnerships, and 535 00:30:02,000 --> 00:30:04,960 Speaker 1: they're Aurora's chairman. Michael Singer said, it's not just about 536 00:30:05,000 --> 00:30:08,360 Speaker 1: Peltz's Rolodeques, although that's very much part of the appeal, 537 00:30:08,400 --> 00:30:11,360 Speaker 1: of course, but it's also you know, his advice to 538 00:30:11,400 --> 00:30:14,880 Speaker 1: his experience um and and the fact that he they're 539 00:30:14,920 --> 00:30:16,640 Speaker 1: going to need some help is they're they're going to 540 00:30:16,680 --> 00:30:19,640 Speaker 1: be looking to form all of these different partnerships. Also, 541 00:30:19,680 --> 00:30:22,080 Speaker 1: I should note that unlike Canopy and Chronos, which have 542 00:30:22,320 --> 00:30:26,640 Speaker 1: created one big deal, one big partnership, Aurora doesn't want 543 00:30:26,640 --> 00:30:28,400 Speaker 1: to do that. They want to maintain control of the 544 00:30:28,440 --> 00:30:31,840 Speaker 1: company and have several different smaller partnerships across a variety 545 00:30:31,880 --> 00:30:34,760 Speaker 1: of verticals. Christine, give us a sense of the Canadian 546 00:30:34,840 --> 00:30:37,560 Speaker 1: cannabis market itself, how big is it? And how fasts 547 00:30:37,560 --> 00:30:41,080 Speaker 1: are growing, great question. Yeah, the Canadian cannabis market is 548 00:30:41,320 --> 00:30:45,640 Speaker 1: still relatively small. UM. We legalized in October and so 549 00:30:45,680 --> 00:30:47,400 Speaker 1: it's only been a few months. And part of the 550 00:30:47,440 --> 00:30:49,720 Speaker 1: reason the market has remained small to day is because 551 00:30:49,720 --> 00:30:53,120 Speaker 1: there have actually been some pretty severe supply shortages and 552 00:30:53,200 --> 00:30:56,960 Speaker 1: so sales haven't been as high as many companies have hoped. 553 00:30:57,000 --> 00:31:00,720 Speaker 1: And that's why many companies, Aurora included, are looking to 554 00:31:00,840 --> 00:31:04,800 Speaker 1: expand internationally. UM that you know, Canada is a great 555 00:31:04,800 --> 00:31:07,240 Speaker 1: starting point. It's been away for them to find their feet, 556 00:31:07,400 --> 00:31:10,920 Speaker 1: but it's really going to be an international presence, particularly 557 00:31:11,000 --> 00:31:13,520 Speaker 1: in the international medical market, which is much bigger than 558 00:31:13,560 --> 00:31:16,520 Speaker 1: the international recreational market. That's going to make these companies 559 00:31:16,720 --> 00:31:21,280 Speaker 1: global players. So are they Is Aurora still primarily Canada 560 00:31:21,480 --> 00:31:24,840 Speaker 1: right now? Uh? It is. It would get the majority 561 00:31:24,880 --> 00:31:27,680 Speaker 1: of its revenue from Canada, but it has operations in 562 00:31:27,920 --> 00:31:30,800 Speaker 1: many different countries. In fact, they just shipped their first 563 00:31:31,280 --> 00:31:35,040 Speaker 1: UM cannabis oil to German pharmacies earlier this week. UM. 564 00:31:35,080 --> 00:31:39,480 Speaker 1: And they have presence in Australia, several other European countries UM. 565 00:31:39,640 --> 00:31:42,640 Speaker 1: And they're working on Latin American partnerships as well. So 566 00:31:42,960 --> 00:31:45,760 Speaker 1: they are one of the more global companies in this 567 00:31:45,800 --> 00:31:49,120 Speaker 1: space to date, although many of those uh international initiatives 568 00:31:49,120 --> 00:31:51,600 Speaker 1: are still pretty early stage. Just real quick here, Christina, 569 00:31:51,600 --> 00:31:53,360 Speaker 1: I'm wondering if we can get a sense that these 570 00:31:53,360 --> 00:31:56,240 Speaker 1: big names, these big name investors. We're not talking about 571 00:31:57,160 --> 00:31:59,560 Speaker 1: Gene Simmons, who, of course was the lead singer of 572 00:31:59,640 --> 00:32:03,080 Speaker 1: Kiss and perhaps my thank you, thank you, paul I, 573 00:32:02,880 --> 00:32:06,640 Speaker 1: I do have some pop culture culture knowledge, Christine. Is 574 00:32:06,680 --> 00:32:10,920 Speaker 1: there a sense that recreational use of marijuana will gain 575 00:32:11,280 --> 00:32:15,080 Speaker 1: greater legalization? Is that sort of the feeling here and acceptance? Yeah, 576 00:32:15,120 --> 00:32:17,320 Speaker 1: that is the feeling. Although you know, this is it's 577 00:32:17,320 --> 00:32:20,360 Speaker 1: interesting seeing Pelts come in because for the most part, 578 00:32:20,480 --> 00:32:23,800 Speaker 1: large American investors have been pretty reluctant to touch the space. 579 00:32:23,800 --> 00:32:26,080 Speaker 1: And that's because you know, as you know, there are 580 00:32:26,120 --> 00:32:29,040 Speaker 1: many states that have legalized recreational marijuana, but it's still 581 00:32:29,040 --> 00:32:31,680 Speaker 1: illegal at the federal level, and so that's made things 582 00:32:31,720 --> 00:32:35,200 Speaker 1: tricky for investors, for banks, for stock exchanges to really 583 00:32:35,400 --> 00:32:38,440 Speaker 1: get closely involved. UM that is starting to change, though. 584 00:32:38,480 --> 00:32:41,440 Speaker 1: We've seen several bills put forward both at the state 585 00:32:41,480 --> 00:32:44,440 Speaker 1: and federal level in the US and in other countries 586 00:32:44,480 --> 00:32:47,760 Speaker 1: as well. UM that could push legalization pretty quickly, and 587 00:32:47,800 --> 00:32:50,760 Speaker 1: so we could see things change quite quite fast over 588 00:32:50,800 --> 00:32:53,280 Speaker 1: the next two or three years. I'd say, Christine or Um, 589 00:32:53,280 --> 00:32:56,000 Speaker 1: thank you so much for being with us Bloomberg reporter 590 00:32:56,160 --> 00:33:00,320 Speaker 1: covering Canadian cannabis, UH covering coming to us from Toronto. 591 00:33:01,120 --> 00:33:03,600 Speaker 1: Thanks for listening to the Bloomberg pen L podcast. You 592 00:33:03,600 --> 00:33:06,280 Speaker 1: can subscribe and listen to interviews at Apple Podcasts or 593 00:33:06,320 --> 00:33:09,320 Speaker 1: whatever podcast platform you prefer. I'm Paul Sweeney. I'm on 594 00:33:09,360 --> 00:33:12,000 Speaker 1: Twitter at pt Sweeney. I'm Lisa abram Woyit's I'm on 595 00:33:12,040 --> 00:33:14,920 Speaker 1: Twitter at Lisa abram woits one before the podcast. You 596 00:33:14,920 --> 00:33:17,440 Speaker 1: can always catch us worldwide. I'm Bloomberg Radio.