Speaker 1: This is Bloomberg Business Week. I'm Carol Masser and I'm
Speaker 1: Bloomberg Quick Takes Tim Stanovik. We're here every day bringing
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Speaker 1: Business Week Carol Masser along with Tim Stanovik and our
Speaker 1: interactive broker's studio. Watching shares of the eight r s
Speaker 1: at trade here in the US of Tema Pharmaceutical it's
Speaker 1: down about three percent, and as we speak, shares of
Speaker 1: the Israeli based generic's companies we mentioned under a little
Speaker 1: bit of pressure following the company's latest quarterly update, the
Speaker 1: company missing on both the top and bottom lines for
Speaker 1: the third quarter, and Tim also launching a sustainability linked
Speaker 1: bond today, planning to raise four billion tied to e
Speaker 1: s G efforts to increase access to medicines in low
Speaker 1: and middle income countries. It's something we just talked about.
Speaker 1: It is Core Schultz as president and CEO of Tapa
Speaker 1: Pharmaceutical joining us now from Partsippany, New Jersey. Court. It's
Speaker 1: great to have you on the show. How are you.
Speaker 1: I'm very fine, Tim, And Carol, its great to be
Speaker 1: with you. I'm very fine. Thanks. Well, let's start with
Speaker 1: the quarter. Carol went through some of the numbers. Why
Speaker 1: the misses. Basically, you could say that the expectations that
Speaker 1: we saw in the marketplace and also the the expectations
Speaker 1: we had at the beginning of the year was that
Speaker 1: the COVID nineteen effects would sort of start to slow
Speaker 1: down in the second quarter and then in the third
Speaker 1: and the fourth quarter we will basically be back to normal.
Speaker 1: But what we've seen is that we have seen in
Speaker 1: Europe a lower volume in the total market in both
Speaker 1: the first and the second quarter, and then a return
Speaker 1: taught normality here in the third quarter, but not quite
Speaker 1: getting there. So we see an improvement in Europe, but
Speaker 1: it's not quite back to where we thought it would
Speaker 1: be based on a full normalization and that's basically because
Speaker 1: there's still a bad luck of people not getting to
Speaker 1: the doctor, not getting to the specialist, and therefore not
Speaker 1: going for those prescriptions that we would be expecting they
Speaker 1: would be going for. It is normalizing, it is getting better.
Speaker 1: We are optimistic about the fourth quarter that we will
Speaker 1: see a further sort of increasing volumes in Europe. So
Speaker 1: so that's really the story on Europe. The story on
Speaker 1: the US it is a little different, but basically the same.
Speaker 1: That we did not see the specialist opening up in
Speaker 1: the second quarter the way we were hoping for. So
Speaker 1: we are very dependent on headache specialists for JOVI and
Speaker 1: on psychiatrists for Osteto, and we saw that they were
Speaker 1: opening up their clinics slower. We are now at the
Speaker 1: end of the third quarter here we're getting very close
Speaker 1: to psychiatrist officers being sort of back to where they
Speaker 1: would have been at the end of two thous But
Speaker 1: that natural growth you see of a couple of on
Speaker 1: on patient population and doctor visits, we haven't seen. So
Speaker 1: we've had a setback in the sense that the growing brands,
Speaker 1: we have a joey for prevention of migraine or stead
Speaker 1: of for charter dis Skenesia and Korea in huntress disease.
Speaker 1: They are growing nicely, but the growth slowed down in
Speaker 1: the first and the second quarter. So even though they're
Speaker 1: growing nicely now in the third quarter, the numbers are
Speaker 1: still below what we hope for at the beginning of
Speaker 1: the year. So basically we're optimistic about the growth patterns,
Speaker 1: but the absolute numbers are probably a hundred million below
Speaker 1: what we were hoping for. So core is it by
Speaker 1: the end of this year, the first quarter of next
Speaker 1: year that you anticipate in terms of the numbers at
Speaker 1: their back to pre pandemic levels. When does it happen?
Speaker 1: We anticipate that here in the fourth quarter. The numbers
Speaker 1: in terms of script volumes and the numbers in terms
Speaker 1: so they're normalized numbers, you would say, will be bad
Speaker 1: to pre pandemic levels here in the fourth quarter of
Speaker 1: all right, And we know and that that's for both
Speaker 1: of Europe and North America are one of them. Is
Speaker 1: that for every every region, we know the North American
Speaker 1: market is your biggest market based on revenues, both Europe
Speaker 1: and North America and it and it plays a big
Speaker 1: role for us. So we're really not talking about US
Speaker 1: not having the right you know, market shares. We're gaining
Speaker 1: market shares with Jovi in Europe, we're gaining markets here
Speaker 1: with Osteedo, so we're performing nicely, but the total volume
Speaker 1: in the market is just lower than what we were
Speaker 1: moving for Core Are you a CORE are you? Are
Speaker 1: you confident that people returned to the physical doctor's office,
Speaker 1: the physical psychiatrist office to the same degree that they
Speaker 1: did before the pandemic. Does it ever fully recover with
Speaker 1: the rise of telemedicine. I think the number of consultations
Speaker 1: will fully recover. Some of them will be telemedicine consultations,
Speaker 1: and that is in principle is fine. I mean, the
Speaker 1: main thing is that people have an in depth discussion
Speaker 1: with their psychiatrist, all with their headache specialists, because you
Speaker 1: could say the problem about launching new drugs is that
Speaker 1: you need to communicate with the specialist. So our sales
Speaker 1: reps needs to communicate with the specialist and you need
Speaker 1: the specialist to communicate with the patients in order to
Speaker 1: get the conversions to linu and better products. Hey what oh,
Speaker 1: go ahead, please finish And that can happen of course
Speaker 1: on video, and it can happen physically on average, I
Speaker 1: would say the conversion rate or whatever you want to
Speaker 1: call it, the pull through is higher if you have
Speaker 1: face to face conversations between the doctors and the salesforce,
Speaker 1: and if you have face to face conversations between the
Speaker 1: doctor and the patient. Hey, just got about forty seconds,
Speaker 1: and we'll come back and talk some more. Um in
Speaker 1: terms of growth engines once we get kind of back
Speaker 1: to more normal, is it. Do you see catalyst coming
Speaker 1: for you? Guys? Got about forty seconds and will come
Speaker 1: back and talk some more. In terms of new drugs
Speaker 1: that you can put out to the market, Yeah, it's
Speaker 1: really more of a stato, more of a jovi. And
Speaker 1: then in a long edging we spirit on l Ai
Speaker 1: that we hope to get approved next year. All right,
Speaker 1: And is there a COVID play for you guys? Not
Speaker 1: really not a part of the fact that we are
Speaker 1: distributing COVID vaccines for instance in Israel, and we have
Speaker 1: a lot of Parma suitables that have been used when
Speaker 1: you treat these sort of effects of COVID in intensive
Speaker 1: care units and so on, But we don't have a
Speaker 1: play specifically targeted towards COVID nineteen Hey, core. A few
Speaker 1: things we want to bounce around off of you and
Speaker 1: just get to that. I feel like are out out
Speaker 1: outlying issues, if you will, uh, and curious about your view.
Speaker 1: First of all, earlier this month, you guys had recalled
Speaker 1: more than two and a half million vials of drugs
Speaker 1: that the company that you guys had said may not
Speaker 1: be sterile um and there were used inspectors that discovered
Speaker 1: this at a Tever production plant in California. I think
Speaker 1: there were medicine used to help to cancer. They may
Speaker 1: have contained mold contamination. What's the update on that. Yeah, So,
Speaker 1: first of all, just two correct a few facts. We
Speaker 1: actually ourselves discovered some environmental issues related to mold. It
Speaker 1: was not the case that the products were not sterile,
Speaker 1: and we did recalls in the first quarter and the
Speaker 1: second quarter, and that's something we did based on our
Speaker 1: own internal investigations. And then following that, we had an
Speaker 1: FDA inspection which resulted in a three. And we are
Speaker 1: now addressing all the points raised in the three, working
Speaker 1: together with FDA to secure that we get all the
Speaker 1: remediation done and the factory is still in operation. From
Speaker 1: the point of you, we're still packaging and shipping products,
Speaker 1: but in the sterile area in order to make sure
Speaker 1: that the environment is in completing perfect compliance. We have
Speaker 1: stopped manufacturing for a shorter period where we're doing remediation,
Speaker 1: and we expect to be back manufacturing here at the
Speaker 1: end of the quarter. And this is all done in
Speaker 1: close collaboration with FDA. How far along are you in
Speaker 1: working out all of those issues? How long do you
Speaker 1: think you will be collaborating with the FDA. So some
Speaker 1: of these issues takes, you know, a shorter period to correct.
Speaker 1: Other issues take a longer period. So typically when you
Speaker 1: have a situation like this, before you reach a complete remediation,
Speaker 1: it can be one to two years. But that doesn't
Speaker 1: mean that you can't be manufacturing and supplying your patients
Speaker 1: in the meantime. What's the cost of the company because
Speaker 1: of this the downtime as well as the fixes. So
Speaker 1: it's relatively insignificant. It's not a major manufacturing site, it's
Speaker 1: not a major part of our revenues, so the consequences
Speaker 1: are basically included in our accounting for the third quarter. Hey,
Speaker 1: and also one of the things that we've been watching
Speaker 1: and I want to get you the way in on
Speaker 1: as A Nerve Artists considering selling or spinning off its
Speaker 1: Sanders generic drug business. How do you view that? Is
Speaker 1: that a good thing? Is it something that you're interested
Speaker 1: in purchasing? So I viewed as something and of course
Speaker 1: you have to ask them why they're doing it. I
Speaker 1: wouldn't know that, but if I, if I just took
Speaker 1: it from the outside, it reminds me of what fights
Speaker 1: A did with their up joint unit. They basically we
Speaker 1: had some generic and old products that they spun out
Speaker 1: and put together with my Land into Viatress, And I
Speaker 1: think it looks like Navartists doing the same. And one
Speaker 1: of the you could say arguments you've heard is that,
Speaker 1: of course you get better ray sios, you get better growth.
Speaker 1: RAY shows if you have an old business that you
Speaker 1: spin off and you keep your innovative specialty business, and
Speaker 1: your numbers from that point of view, will look better,
Speaker 1: And that might be the motivation. In terms of us
Speaker 1: thinking about Sanders, we're not really looking into it. We
Speaker 1: don't have any appetite for any major acquisition, simply due
Speaker 1: to the fact that we're focusing on reducing our debt,
Speaker 1: so it's not something we would be interested in. May course,
Speaker 1: I want to get your thoughts on why you're planning
Speaker 1: the four billion dollars in E s G bonds tied
Speaker 1: to medicine access. Why go to E s G route
Speaker 1: with these bonds. Well, basically because we believe in doing
Speaker 1: good for the environment and doing good for patients. That's
Speaker 1: really the foundation of the company. We are the world's
Speaker 1: largest manufacture of medicine. We sell more medicine per day
Speaker 1: than anybody else in the world, and we believe in
Speaker 1: doing good in while doing that. So what we've decided
Speaker 1: to do is to issue these four billion dollars in bonds.
Speaker 1: And just to explain that, we issue four billion dollar
Speaker 1: in bonds five seven, eight years out and we use
Speaker 1: all that money to repay debt, which is you know,
Speaker 1: one to three four years out, so it's really a
Speaker 1: question of moving some of the debt. And the reason
Speaker 1: why we do it is because our debt repayments in
Speaker 1: some of the coming years, for instance in twenty three
Speaker 1: is more than the two billion plus cash flow we
Speaker 1: make every year. So that's just to explain why we
Speaker 1: are making a bond offering. We basically sell bonds in
Speaker 1: order to buy some MOLA bonds, so that we change
Speaker 1: the timing of the debt. The reason why we do
Speaker 1: sustainability link bonds is basically because we can do it
Speaker 1: and because it's good for society to What we do
Speaker 1: on the exers side is really we commit to ensuring
Speaker 1: access to essential medicines in loan middle income countries. Now
Speaker 1: essential medicines, that's a list of medicines that w U
Speaker 1: h O has to find that essential to healthcare. Hey,
Speaker 1: court just got about twenty seconds here. What are the
Speaker 1: metrics though and transparency that you will use to make
Speaker 1: sure that that is E s G and working to
Speaker 1: meet your intended goals? Just quickly. Yeah, So it's already
Speaker 1: certified by external bodies that you know, independent and they
Speaker 1: do this, the Independent Access to Medicine Foundation, the I
Speaker 1: S S s G people, So they look at and say,
Speaker 1: this makes sense. This is bona fide. This is something
Speaker 1: that will be measured and reported and that will help
Speaker 1: societies around the world and the actual kid guys get
Speaker 1: more essential medicines registered in more of these lone middle
Speaker 1: income countries. Okay, we gotta run unfortunately, core Um. Hopefully
Speaker 1: you'll come back and let us know how that's going.
Speaker 1: Course Salties President CEO T have a Pharmaceuticals on the
Speaker 1: phone in New Jersey. It is the Blueberg Big Take Today.
Speaker 1: It's also the upcoming cover story domestic cover story Bloomber
Speaker 1: business Week Magazines, out tomorrow online at business Week dot
Speaker 1: com on the Bloomberg terminal and Tim It's about the
Speaker 1: impact the pandemic has really had on the American worker,
Speaker 1: for better or worse, and for better perhaps in terms
Speaker 1: of some of the lasting leverage we could see when
Speaker 1: it comes to unemployment reform. Josh Idolsen wrote the story's
Speaker 1: labor reporter for Bloomberg News. He joins us from the
Speaker 1: Bloomberg nine sixties studio in San Francisco. Josh, congratulations on
Speaker 1: a great story. Along with the great resignation and strike toober,
Speaker 1: jobless Americans are fighting for unemployment reform that could translate
Speaker 1: into lasting leverage, but it hasn't yet begun to translate.
Speaker 1: Take us into it. Thanks for having me. We are
Speaker 1: at this rare, turbulent moment in the workplace in the US.
Speaker 1: You have workers who labored through the pandemic, who shouldered
Speaker 1: great risk to themselves and to their families, and didn't
Speaker 1: get the compensation or the safety protections that they felt
Speaker 1: they deserved. You have workers who were benched involuntarily and
Speaker 1: saw an unemployment system that they thought should be available
Speaker 1: and should be reliable fing them. You have lots of workers,
Speaker 1: historic numbers choosing to quit their jobs. So this is
Speaker 1: a moment of both exit and voice. Some people are
Speaker 1: leaving their jobs, some people are trying to ban together,
Speaker 1: and in the places where workers have a union in
Speaker 1: the United States, we're seeing large numbers of workers authorized strikes,
Speaker 1: making October Striketober, as some put it. So this is
Speaker 1: all playing out at a moment when we have perhaps
Speaker 1: the last big bill of the Democrats, last stretch for
Speaker 1: a while of being able to legislate unilaterally being wrangled over.
Speaker 1: And it's one that could make permanent changes in ways
Speaker 1: that would change workers leverage, including the unemployment system. That
Speaker 1: there's a relatively unusual effort a foot right now to
Speaker 1: organize jobless workers to transform So uh, norm and norma
Speaker 1: Ray moment. Everybody go back and google that movie. But
Speaker 1: I mean, is this a big move forward then, because
Speaker 1: we've seen unions right declining in power and in uh
Speaker 1: in membership. But is this potentially a critical change when
Speaker 1: it comes to the power of the worker. It's a
Speaker 1: moment of possibility, and in some ways it has the
Speaker 1: flavor of the way one historian put it to me
Speaker 1: is when you have a national mobilization like a world
Speaker 1: war or a pandemic, you have all of these workers
Speaker 1: who get the country through it and bottle up some
Speaker 1: frustrations along the way, and then afterwards expect a debt
Speaker 1: to be paid back. We're in a different political moment
Speaker 1: when where there's attention to essential workers, into inequality, into
Speaker 1: labor that hasn't been there at times, and we're in
Speaker 1: a moment where many workers, like people that I talked
Speaker 1: to in the film and TV industry over the past week,
Speaker 1: have higher expectations than they used to, have a different
Speaker 1: consciousness both from the work they did during the endemic,
Speaker 1: but also from their time out of work during the
Speaker 1: shutdowns about the importance of their own time, and feel
Speaker 1: unwilling to accept some of the things they did in
Speaker 1: the past in terms of how work dominates their schedules
Speaker 1: and encroaches on their personal lives. Josh, for the story,
Speaker 1: you spoke to people in several different parts of the country.
Speaker 1: I'm wondering though the Washington d C. Connection. The lawmakers
Speaker 1: who are really on the side of labor right now,
Speaker 1: Senator Ron Wyden, Alexandroocazio Cortez, representative from New York. What
Speaker 1: are they doing so? Widen, the chairman of the Senate
Speaker 1: Finance Committee, told workers that he will fight like heck
Speaker 1: to get something that is at least a down payment
Speaker 1: on fundamental change to the unemployment system into the Reconciliation bill.
Speaker 1: There are things that could be done that would address
Speaker 1: some of the issues that workers have been raising over
Speaker 1: the years, and that some experts have been raising for
Speaker 1: years without a lot of attention in Washington areas, like
Speaker 1: the exclusion of many workers from the unemployment system and
Speaker 1: the race amongst states to cut off benefits more quickly. Well,
Speaker 1: and I always think it's important when we do a
Speaker 1: story like this and you do it is and you
Speaker 1: go there, Josh, in terms of what the u S
Speaker 1: system is may be compared to what we see in
Speaker 1: other countries, and and it's meager, right, in terms of
Speaker 1: the benefits compared to what other countries do for workers,
Speaker 1: that's right. The maximum months that people can get benefits
Speaker 1: here are lower than you see elsewhere. In peer O E. C.
Speaker 1: D countries. It's a pretty stingy system in the US,
Speaker 1: and unemployment insurance, as stingy and unreliable as it is,
Speaker 1: is still controversial in part because it does give people
Speaker 1: a little more leverage to hold out a little longer
Speaker 1: against a mediocre offer they don't want. Well, that's what
Speaker 1: we see happening in the labor force right now, right
Speaker 1: this imbalance between supply and demand. Companies telling us each
Speaker 1: and every day they're having trouble finding workers, yet workers
Speaker 1: aren't ready to get off the sidelines and go take
Speaker 1: those jobs. Well, keep in mind, many workers don't qualify
Speaker 1: for unemployment benefits, and many circumstances where you leave your
Speaker 1: job don't qualify you to get the benefits, and many
Speaker 1: people who are receiving benefits now are no longer eligible,
Speaker 1: either because of the federal cut off or because of
Speaker 1: state cutoffs that happened before that. But that said, there
Speaker 1: is research that where there are more unemployment benefits, workers
Speaker 1: in some cases are able to hold out and choose
Speaker 1: to hold out for jobs that pay a little better.
Speaker 1: And that, depending who you ask, is one of the
Speaker 1: best or worst things about having this system. So the
Speaker 1: fight about unemployment is in part a fight about leverage
Speaker 1: in the labor market. And we did this cover story
Speaker 1: in part because right now there's a fight over workers
Speaker 1: leverage that's happening on picket lines, and there's a fight
Speaker 1: over workers leverage that's happening in Congress at the same time. Well,
Speaker 1: and probably last question, Josh, but I am wondering about
Speaker 1: the political will, right, I mean, politicians are always thinking
Speaker 1: about their next ballot and also the support to keep
Speaker 1: their election or re election race is going. Um, what
Speaker 1: is the political will to pick up on something like this,
Speaker 1: because are these people who are fighting for some of
Speaker 1: these benefits? Are these the people who really go out
Speaker 1: and vote? That is part of why this organization Unemployed
Speaker 1: Action has come into existence is that the jobless are
Speaker 1: not usually seen as a prominent political constituency that people
Speaker 1: have to cater to, and being unemployed is often not
Speaker 1: how someone wants to self identify, and it's generally not
Speaker 1: something they want to continue to be true of them.
Speaker 1: And so this group has been struggling against the tide
Speaker 1: in many ways to create a forceful political constituency and
Speaker 1: one that people continue to be active with even after
Speaker 1: they've personally found another job. Josh just in the last
Speaker 1: thirty seconds that we have with you, at what point
Speaker 1: will you know? At what point will we know if
Speaker 1: this is a moment like post World War two in
Speaker 1: terms of power for the labor movement, And just got
Speaker 1: about twenty seconds. We're going to have to see what
Speaker 1: happens in Congress as well as on the picket lines
Speaker 1: over the next months. But labor has been in a
Speaker 1: real catch twenty two of needing more members and needing
Speaker 1: legal change, and people are desperate for a way to
Speaker 1: break out of that. All right, it's the domestic cover
Speaker 1: story of Bloomberg Business Week. It's written by Bloomberg News
Speaker 1: labor reporter Josh Idolsin, so be sure to check it out.
Speaker 1: It's also on the Bloomberg terminal and you can find
Speaker 1: it at Bloomberg dot com and business week dot com.
Speaker 1: Good story, Josh, and congratulations on the big take. But
Speaker 1: just as another reminder of the pandemic impact in our world.
Speaker 1: All Right, you're listening to Bloomberg Radio. This is Bloomberg
Speaker 1: Business Week with Carol Masser and Bloomberg Quick Takes Tim
Speaker 1: Stinovik on Bloomberg Radio. Well, we've brought her in to
Speaker 1: talk about Robin and but we've really been talking about
Speaker 1: taxes and tax billionaires behind the scenes around our table
Speaker 1: here in our studio. Tax policy expert too. She knows
Speaker 1: Robin Hood. She knows tax policy. She is our investing
Speaker 1: reporter at Bloomberg News here in her interactive broker studio.
Speaker 1: Let's talk though, a little bit about Robin Hood. It's
Speaker 1: down about ten point six percent in today's trade. Reported
Speaker 1: earnings after the close. I think it's below right easily.
Speaker 1: It's I p O price. So there you have it.
Speaker 1: Revenue fell short of Wall Street estimates, cryptocurrency transactions plunging
Speaker 1: from the preceding period. What do we need to know? Annie,
Speaker 1: So robin Hood's earnings yesterday did disappoint, and you're seeing
Speaker 1: the effect on the share price today. Like you mentioned,
Speaker 1: the stocks down ten percent. The real story was around
Speaker 1: crypto transaction revenue, which was seventy eight percent lower versus
Speaker 1: the previous quarters, like it disappeared overnight. Yeah. And the
Speaker 1: reason we saw that, of course, is we there was
Speaker 1: this gigantic run up in doge coin in Q two
Speaker 1: and that kind of abated. So now the big question
Speaker 1: is that users have is will Robin Hood add more cryptocurrencies.
Speaker 1: They want Sheba, a new coin which is completely different
Speaker 1: from doj coin, and they've struck a more cautious approach,
Speaker 1: completely different, but still a joke, exactly, a different joke
Speaker 1: about Sheba. You news it's a mean coin. Yeah, yeah, exactly,
Speaker 1: like wrapped up in a crypto. I was particularly struck
Speaker 1: by the decline in crypto because bitcoins price had gone up.
Speaker 1: Do any of us own it? No? No, no, no,
Speaker 1: you know, I don't know. No, shea over here. But
Speaker 1: I was particularly struck by this when these earnings crossed
Speaker 1: yesterday because the price of bitcoin had gone up by
Speaker 1: something along the lines of since the company last reported earnings,
Speaker 1: And my thought was, Okay, well, doesn't that get more
Speaker 1: people off the sidelines and more people trading crypto and
Speaker 1: more crypto revenue for the company. But no, So across
Speaker 1: the board's crypto volumes were down by around a little
Speaker 1: over thirty percent in this quarter, um, just across the
Speaker 1: boards in the industry, but robin Hood felt it particularly
Speaker 1: because they had even said in the second quarter that
Speaker 1: doge coin made up more than sixty of their crypto
Speaker 1: transaction revenue, so it wasn't just crypto trading generally, um,
Speaker 1: it was specifically the surgeon dozed doge coin that was
Speaker 1: juicing their transaction revenue in the second quarter, and now
Speaker 1: you've seen that abate. And then the other thing that's
Speaker 1: kind of spooking investors is the guidance that they gave.
Speaker 1: They gave some guidance in Q two that like, hey,
Speaker 1: Q three will probably look a little bit quieter on
Speaker 1: the trading front, and they've given similar guidance for Q
Speaker 1: four unless we have another crazy meme stock or meme crypto.
Speaker 1: Is because everybody's got back to work, because I'm hearing
Speaker 1: everybody hasn't come back to work, so helped me out here.
Speaker 1: Like you know, I had a note and I was
Speaker 1: gonna say, has the company peaked already? I mean, they
Speaker 1: definitely went public at just the right time. I mean
Speaker 1: they were going public when they were absolutely on fire
Speaker 1: coming off of Q one with stocks and options going
Speaker 1: insane over a game stop and all the meme stock trading.
Speaker 1: And then Q two you had this huge run up
Speaker 1: in dojcoin, which they were ready to catch because they
Speaker 1: already offered doj cooin coin based didn't until June. So
Speaker 1: now now that they're being a little bit more cautious
Speaker 1: than their approach on cryptos, and that now that there
Speaker 1: wasn't just one singular event that was quite like that
Speaker 1: in the third quarter, you're seeing a little bit of wildbliness.
Speaker 1: It's that caution you write in your most recent story, Annie,
Speaker 1: that is playing out in terms of attention between the
Speaker 1: safety that robin Hood is going for. It's in the
Speaker 1: crosshairs of regulators right now, and it doesn't really want
Speaker 1: to necessarily add every meme stock or every meme coin
Speaker 1: excuse me, uh, the ability to trade there. So, so
Speaker 1: how is that playing out for investors if robin Hood
Speaker 1: doesn't embrace the SEBA news of the world. That's a
Speaker 1: really good question. Robin Hood has gone through this evolution
Speaker 1: where they're trying to show now and and have made
Speaker 1: really big strides towards being a more established, regulatory compliant brokerage.
Speaker 1: So they've done things like they've added added customer service
Speaker 1: twenty customer service calls seven, they've added some protections and
Speaker 1: bulked up in that area. And now they've got this
Speaker 1: problem of like they allow retail investors to ask questions
Speaker 1: on their earnings calls in the top one was when
Speaker 1: will you add more cryptos and when will you add
Speaker 1: new coin. So there they have this tension of trying
Speaker 1: to walk to the line maybe a bit more on
Speaker 1: the regulatory front, will also trying to placate these customers
Speaker 1: who really want at least some of them really want
Speaker 1: some meme tokens. Well, and you did point out in
Speaker 1: your story the brokerage brought on more, brought on about
Speaker 1: more employees in the period compared with the second quarter.
Speaker 1: So engineer's customer support and compliance. Who are we supposed
Speaker 1: to compare them against? Because the CEO or the CFO
Speaker 1: kind of warned that we don't expect our growth to
Speaker 1: be linear. We do think it's going to ebb and
Speaker 1: it's going to flow. It's going to be highly dependent
Speaker 1: on things like market conditions and volatility. So can we
Speaker 1: compare them with I don't know, the trading floor of
Speaker 1: a big bank or one of the you know, traditional
Speaker 1: brokerage with it's a Schwab or something. Who do we
Speaker 1: compare them against. It's a bit of a tricky comparison
Speaker 1: because Schwab or Interactive Brokers are of course both retail
Speaker 1: trading platforms, but they have these other services, particularly Schwab
Speaker 1: has a bank function. They earned tons of money from
Speaker 1: net interest income, so they have these other streams of revenue,
Speaker 1: whereas robin Hood is still mostly dependent just on transactions
Speaker 1: in cryptocurrency stocks and options to earn its revenue. Um.
Speaker 1: So it sounds like it leaves them a little bit vulnerable, right,
Speaker 1: which it does to things like volatility too. When when
Speaker 1: fortunes shift as far as how much people are trading,
Speaker 1: that impacts robin Hood a lot more than it would
Speaker 1: a company that is kind of cushioned by having other
Speaker 1: business lines. What about those other business lines that robin
Speaker 1: hood is interested in adding crypto walllet's I think it's
Speaker 1: Bloomberg Intelligence. Is Julie Sherriel that has written about the
Speaker 1: idea of this becoming potentially a super app. Yeah, robin
Speaker 1: Hood is really into this idea of becoming a financial
Speaker 1: super app, so offering more, like you said, crypto Wall.
Speaker 1: They reaffirmed last night UM in their earnings that they're
Speaker 1: looking to add retirement type accounts, even though they didn't
Speaker 1: give a timeline for it. So they are trying to
Speaker 1: move forward on offering more and more products. But you
Speaker 1: know they're moving along on that. We haven't seen these launch,
Speaker 1: but we have the promise of those additional um ideas. Mauricio,
Speaker 1: who's a listener, says, dog is a meme coin. She
Speaker 1: is a meme of a meme ak scam coin. We
Speaker 1: don't know, right, We really don't know how all this
Speaker 1: stuff is going to play out. Yeah, I mean it
Speaker 1: is like a meme squared. Yes, it's a meme inception situation.
Speaker 1: Oh my god, my brain hurts. Annie Massa, thank you
Speaker 1: so much. You always set stuff straight when it comes
Speaker 1: to this world. So thank you. Annie Massa. She's an
Speaker 1: investing reporter here at Bloomberg News in her Interactive Broker
Speaker 1: studio and among our most read stories on the Bloomberg
Speaker 1: another one having to do with Hurts and Tesla's. This
Speaker 1: time we're adding an Uber and Caravanna. Let's get an
Speaker 1: update on this ongoing story from our own Eric Shatzker.
Speaker 1: He's editor at Large at Bloomberg News. He's with us
Speaker 1: any Bloomberg Interactive Broker Studios. That big news earlier this
Speaker 1: week was, of course, Hurts buying one hundred thousand Teslas
Speaker 1: over the next fourteen months. Now it's partnering with Uber
Speaker 1: to provide Tesla's to Uber drivers. How's it going to
Speaker 1: work out? Eric? Quite simply. Uber drivers are going to
Speaker 1: rent Tesla's from Hurts, not quite the same way you
Speaker 1: and I rent Tesla's, or will rent Tesla's perhaps from Hurts,
Speaker 1: but pretty close. Instead of it being a day by
Speaker 1: day rate, there's going to be a weekly rate. It
Speaker 1: starts at three dollars, it's going down to two. And
Speaker 1: the sales pitch to the Uber driver goes something like this.
Speaker 1: Right now, you've got to bring your own car, and
Speaker 1: if you want to drive an e V, you have
Speaker 1: to bring your own e V. That means, generally speaking,
Speaker 1: you have to go to Tesla. Perhaps you could go
Speaker 1: to GM, perhaps you could go to a few other companies,
Speaker 1: but you're probably going to lease it or you're gonna
Speaker 1: buy it and finance it with a bank. You're gonna
Speaker 1: have to make payments, you're gonna have to maintain it,
Speaker 1: you're gonna have to get insurance, gonna have to do
Speaker 1: all the things that those of us who own cars do.
Speaker 1: And in addition to sitting behind the wheel for twelve
Speaker 1: twelve hours a day, that's not so much fun and
Speaker 1: it's a hassle. And the idea being if you pay
Speaker 1: this weekly rate, you get rid of all that stuff.
Speaker 1: Hurts takes care of that for you. All you have
Speaker 1: to do is show up to the Hurts location, take
Speaker 1: the car, go out, do you you know, pick up
Speaker 1: your rider's, complete your trips and drop the car back
Speaker 1: off and the eye and furthermore, I should add that
Speaker 1: that Uber because it wants to go green. Daracaus Rashahi,
Speaker 1: the CEO, has some very big ambitions when it comes
Speaker 1: to fighting climate change. Is paying Uber drivers a dollar
Speaker 1: per ride up to a maximum of four thousand dollars
Speaker 1: per year. And if you the Uber customer, chooses to
Speaker 1: go green, the driver gets an extra fifty cents. So
Speaker 1: in many cases it could actually work out to the
Speaker 1: driver's financial benefit to do this as opposed to buying
Speaker 1: or leasing. Wait wait, it sounds like certainly for the
Speaker 1: Uber drivers. Yes, yes, you know, at the very very
Speaker 1: very least, even if it's a wash financially, think of
Speaker 1: all the hassle you give up. You know, I have
Speaker 1: to say this story. I am fascinated by the Tesla component, Eric,
Speaker 1: but I am so fascinated by what's going on at
Speaker 1: Hurst and how they are redesigning that company. Just a
Speaker 1: few months out of bankruptcy and thinking about what they
Speaker 1: want to be going forward. It's not like your father's
Speaker 1: rental car count. No, these guys are not old hands
Speaker 1: at the car rental business, their hedge fund people, their
Speaker 1: private equity people. They look at this with a fresh
Speaker 1: set of eyes and question every single aspect of the
Speaker 1: business model, as opposed to getting up every morning and thinking, oh,
Speaker 1: I'll just do what I did yesterday. Well, but how
Speaker 1: much of it is Mark Fields too, who is kind
Speaker 1: of your old car guy, right, I know he now
Speaker 1: works for TPG, But what's how much of what's going
Speaker 1: on is Mark's vision as well? Well, he's the interim CEO,
Speaker 1: and it's not clear how long he's going to last.
Speaker 1: It hurts he is clearly well, he is most definitely
Speaker 1: a part of the execution. He's responsible for making this happen.
Speaker 1: But the ideas actually came from the financial guy eyes.
Speaker 1: They concocted these ideas and nurtured them as they were
Speaker 1: contemplating whether to make a bid during the Hurts bankruptcy auction.
Speaker 1: They put in a six billion dollar bid. It was
Speaker 1: very competitive. Many people thought perhaps they were overpaying, And
Speaker 1: now it looks like an awfully good deal. I keep
Speaker 1: thinking of Jim Coulter, who we talked to at UM
Speaker 1: when we were at Stanford, and you know the Rise Fund.
Speaker 1: Like he right, he's thinking about climate, He's thinking about
Speaker 1: disruption certainly and the impact on our environment. And I
Speaker 1: just feel like you can see that over this. Mark
Speaker 1: Field said it to me this morning. He said, we
Speaker 1: are trying to disrupt ourselves and hopefully then disrupting the industry. Eric,
Speaker 1: where does Carvonna come into this? Caravanna comes at the
Speaker 1: back end. If you think about the car rental business
Speaker 1: being three principal components, buying cars, renting cars, and then
Speaker 1: selling cars. Caravanna comes in on the selling part. Up
Speaker 1: until now, Hurts has been disposing or exiting vehicles, as
Speaker 1: they like to say, either by selling them off at
Speaker 1: Hurts locations, which is not a bad business, but also
Speaker 1: getting rid of them through wholesalers or through auctions. And
Speaker 1: those are bad businesses because those cars tend not to
Speaker 1: sell at high prices. They give up a lot to
Speaker 1: the middlemen, and the recovery is low, and of course
Speaker 1: if you have low recovery on the back end, your
Speaker 1: profit margins overall deteriorate. The idea by partnering with carbona
Speaker 1: home of the car vending machine, is that you'll get
Speaker 1: a much higher resale price after carbon, even after carbon
Speaker 1: is commissioned, by going direct to consumer. So the same
Speaker 1: DTC concept that is animating a company like Nike is
Speaker 1: now actually helping to improve margins at Hurts. Did you
Speaker 1: use the word our our phrase asset utilization yet we
Speaker 1: haven't used asset utilization. Well, because one of the missions
Speaker 1: when you're renting cars is to keep them on the
Speaker 1: road as much as possible. Goes without saying, however, if
Speaker 1: many of your customers only want a car on the
Speaker 1: weekend or infrequently, you've got to find something to do
Speaker 1: with that car during the week. So think about it
Speaker 1: this way. A leisure customer like myself perhaps might go
Speaker 1: and rent a Model three for the weekend, and then
Speaker 1: the Uber driver takes over and uses that car from
Speaker 1: Monday to Friday. Thus the car is busy seven days
Speaker 1: a week, and Hurts comes out on top. That's goodilization, right, yes,
Speaker 1: maximal asset utilization. Does it lead to more sales of
Speaker 1: test the vehicles beyond the one thousand that you recorded
Speaker 1: on Monday? Well, there's clearly an implication that it might
Speaker 1: because in the you know, as part of the Uber agreement,
Speaker 1: there's fifty tho cars set aside for Uber drivers, as
Speaker 1: many as fifty thousand between now and the end of
Speaker 1: two thousand twenty three, but there's the potential to extend
Speaker 1: it to a hundred and fifty thousand. These are all Tesla's.
Speaker 1: It's an exclusive deal with Uber to rent Tesla's two drivers.
Speaker 1: So yes, potentially many more Teslas down the road. Yes?
Speaker 1: Or now? Should we be watching Avis? Next move? Avis
Speaker 1: is watching Avis, that's for sure. Eric shatzk are great stuff.
Speaker 1: This is Bloomberg. Yeah, but you let me drive? Oh no, no, no, no,
Speaker 1: this is not a toy. All right, please Gravels, I
Speaker 1: want to drive. It's a good question. Drive. This is
Speaker 1: the drive to the clothes well up on Bloomberg Radio.
Speaker 1: All right. Definitely a different market picture that we've seen
Speaker 1: in the last hour or so because we were bouncing
Speaker 1: around a little bit, but we have fallen off our highs,
Speaker 1: really taking a leg down and taking another leg down
Speaker 1: as we get closer to that closing bell. Charlie of course,
Speaker 1: breaking down the numbers. The Nazak just barely holding on
Speaker 1: to a two tenths of a percent gain after the
Speaker 1: NAZAC one hundred. We did see hit a record earlier
Speaker 1: in the session, an all time high propelled by some
Speaker 1: of those big tech names, Microsoft and Google among them,
Speaker 1: which has really provided a lot of momentum. Let's get
Speaker 1: to the drive to the close. Barry James is the president, CEO,
Speaker 1: and portfolio manager at James Investment Research. He joins us
Speaker 1: on the phone from Alpha, Ohio. Barry, it's great to
Speaker 1: have you. I want to get your overall thoughts on
Speaker 1: the market before we get to your stock picks. How
Speaker 1: do you trade a market like this? I think we're
Speaker 1: in a rotation period. I say, a confluence like the
Speaker 1: Mississippi and Missouri rivers where they meet, You've got a
Speaker 1: green river and a brown river, and then it becomes
Speaker 1: a straight brown river after that. And that's kind of
Speaker 1: where we are. You know, the COVID is looking like
Speaker 1: it's it's coming back down. Inflations of problem bottlenecks are
Speaker 1: a problem rates even though they're down today. You know,
Speaker 1: I've been hitting higher and the economy is a little
Speaker 1: more normal. So I think we have this transition from
Speaker 1: the tech area from the growth area from the large
Speaker 1: cap into the cyclical value in smaller types of stocks.
Speaker 1: And that's where I would I would be focusing today.
Speaker 1: And yet you say that about rotation from tech, and
Speaker 1: yet every he's been all in on Google and Microsoft today.
Speaker 1: You're right, and it's kind of like these big storms
Speaker 1: on East and West coast. You know, something can come
Speaker 1: up that totally changes everything for the moment, and that
Speaker 1: big thing is interest rates. If you just follow the
Speaker 1: bouncing ball, as the rates go down, Tech goes up,
Speaker 1: Rates go up, Tech goes down. So uh, you know
Speaker 1: it's it's it's maybe a one off. I don't know
Speaker 1: what right, Well, what is though the smart correlation? Because
Speaker 1: also higher interest rates can mean and improving economy, and
Speaker 1: those companies stand to benefit as much as anything else
Speaker 1: of a reopening of the economy, obviously supply chains and
Speaker 1: inflation fears aside. I mean, we saw companies like McDonald's
Speaker 1: and Coca Cola being able to push higher prices through.
Speaker 1: That's that's exactly right, and that's exactly what we're looking for.
Speaker 1: And like our our fund, the Golden Rainbow Fund UM,
Speaker 1: we're trying to find companies that have pricing power and Uh,
Speaker 1: if they don't. And the easy way to do that
Speaker 1: is to look at the operating margins and can they
Speaker 1: really give them a boost? That kind of the behind
Speaker 1: the scenes type of numbers to look at. But without that,
Speaker 1: the companies are going to really be hurting, that's for sure.
Speaker 1: Why specifically are you concerned about stagflation? What are the
Speaker 1: signs that you're seeing that are telling you that we
Speaker 1: could be in a stagflation in your period? It's it's
Speaker 1: very interesting. I got a job offer at McDonald yesterday,
Speaker 1: you know, in my my bag to come work for us,
Speaker 1: and then the ladies no, that just actually, I mean
Speaker 1: they had it there. They're they're giving everybody that goes
Speaker 1: through their their drive because they're looking for workers. And
Speaker 1: the college student told the professor around here, he says,
Speaker 1: they asked one question at the interview, what's your size?
Speaker 1: But anyway, that is an indication that you know, we're
Speaker 1: gonna have higher wages. You see it all over the place,
Speaker 1: and so that's that's one side of it. Um stagflation
Speaker 1: is maybe a little bit of a strong term, I
Speaker 1: would say, just because you've got you know, consumers with
Speaker 1: a D and forty trillion dollars that they they have
Speaker 1: that they can spend, and you have all these companies
Speaker 1: are needing to expand, so those should continue to keep
Speaker 1: the economy going, but it will be more expensive. In
Speaker 1: the lady that works up you know, at the front
Speaker 1: up here at my office, she said, she went to
Speaker 1: get a roast. It was like thirty dollars for a
Speaker 1: small roast. She says, Well, I guess we won't be
Speaker 1: having roast for dinner. No, people are talking about Thanksgiving.
Speaker 1: Get ready to pay up. You know. We often see
Speaker 1: some maybe a price tick because of the demand or
Speaker 1: just because people know we gotta buy turkeys and all
Speaker 1: that good stuff, but because of some of the concerns
Speaker 1: about the supply chains, that we are going to see
Speaker 1: higher prices. Hey, economic news, You've got a FED meeting
Speaker 1: just around the corner. We get a read on GDP tomorrow.
Speaker 1: How might that impact investor sentiment? I think, Um, everybody
Speaker 1: knows the Fed is gonna you know, taper, but maybe
Speaker 1: they'll believe them this time. I'm not sure. But as
Speaker 1: we've seen before, the last you know taper back in
Speaker 1: the thirteen or so, um it it had a very
Speaker 1: short term impact and then rebounded, So I don't think
Speaker 1: it's going to have that much of a of a
Speaker 1: of a call on things, to be honest. Maybe a
Speaker 1: short term and maybe that's what today is all about,
Speaker 1: you know, an anticipation of that, but probably not all
Speaker 1: long term thing. Well, I promise we get to some
Speaker 1: of your stock picks, and I want to start with
Speaker 1: an Ohio company where you're joining us from Fifth Third Bank? Uh,
Speaker 1: the fifth Third Bank Corps. Why I pick for you? Well,
Speaker 1: it's a it's it's a really well run company. I
Speaker 1: don't have any inside information, but they they have a
Speaker 1: history of beating you know, their estimates, both the top
Speaker 1: and bottom line. Uh. Looks like loan growth is picking
Speaker 1: up again. Uh. And um, you know, if we do
Speaker 1: have this fed tapering, pushing rates up is always a
Speaker 1: good play for the banks, not obviously today, but this
Speaker 1: has maybe a better chance to do some buying. So uh,
Speaker 1: those are those are the areas and intends to focus
Speaker 1: Midwest Southeast, which are very very strong areas. So it
Speaker 1: has it has the pieces of the puzzle land. It's
Speaker 1: more of the cyclical type of stock that we're looking
Speaker 1: for right now. Got another name for us? Yeah, Well
Speaker 1: you were you were talking about the shipping were like
Speaker 1: Old Dominion, maybe it's not you know, the the guys
Speaker 1: right at the at the port, but they do more
Speaker 1: into regional and multi regional type of off halls. But
Speaker 1: they've done real heavy investing in their employees and equipment,
Speaker 1: and they're really keeping the people that they have, which
Speaker 1: a lot of trucking companies are having having difficulty doing
Speaker 1: um And we really see that they have you know,
Speaker 1: gas search charges and whatever, so they have great pricing power.
Speaker 1: So we believe that you know, they're hime operating margins
Speaker 1: and the free cash flow margins and those sorts of
Speaker 1: things are good for the future. Old Dominion tear this year,
Speaker 1: it's up almost six as we speak. Hey, we gotta run, Barry,
Speaker 1: Thank you so much. Barry James getting an offer to
Speaker 1: go work at McDonald's. UH president and CEO and portfolio
Speaker 1: manager over a James Investment Research joining us on the
Speaker 1: phone from Alpha. But that is our world that we
Speaker 1: live in. That really speaks the way that companies are
Speaker 1: looking for workers. Right now, he's going through the drive through,
Speaker 1: he's getting an offer for a job. Right They're desperate.
Speaker 1: We we see it big time, and we see it
Speaker 1: certainly at some of those um entry levels you would
Speaker 1: say are lower positions. We definitely heard it from some
Speaker 1: of the CEOs that we've talked to. Thanks for listening
Speaker 1: to Bloomberg Business Week. Download the podcast on iTunes, SoundCloud,
Speaker 1: or Bloomberg dot com, and you can also listen to
Speaker 1: our radio show at two pm Eastern on Bloomberg Radio
Speaker 1: or watch us on YouTube. Search to Bloomberg Global News