WEBVTT - P&L: Hologic's 3D Technology Finds Early Stage Cancer, CEO Says 0:00:04.760 --> 0:00:08.080 Welcome to the Bloomberg pm L podcast. I'm Pim Fox. 0:00:08.119 --> 0:00:11.200 Along with my co host Lisa Abramowitz. Each day we 0:00:11.280 --> 0:00:14.480 bring you the most important, noteworthy, and useful interviews for 0:00:14.520 --> 0:00:16.560 you and your money, whether you're at the grocery store 0:00:16.800 --> 0:00:19.960 or the trading floor. Find the Bloomberg p L podcast 0:00:20.000 --> 0:00:31.280 on iTunes, SoundCloud and at Bloomberg dot com. Logic shares 0:00:31.400 --> 0:00:34.559 right now are up more than eight percent. They reported 0:00:34.600 --> 0:00:39.279 earnings after the bell yesterday that beat analysts estimate and 0:00:39.440 --> 0:00:43.280 uh we have a special guest with us, Steve McMillan, chairman, 0:00:43.320 --> 0:00:47.040 president and CEO of Logic to explain a little bit 0:00:47.040 --> 0:00:50.120 more about what happened in the past quarter and why 0:00:50.159 --> 0:00:52.479 it was so successful. Thank you so much for joining us. 0:00:52.560 --> 0:00:55.040 Thank you, Lisa, thanks for having us so um So, 0:00:55.160 --> 0:00:58.440 what happened? What sort of drove the better than expected earnings? Really? 0:00:58.480 --> 0:01:00.640 I think it was broad based growth. We have three 0:01:00.720 --> 0:01:03.440 key businesses in the company. We have the mommography business, 0:01:03.440 --> 0:01:06.080 where we've become the world leader, especially behind our genius 0:01:06.280 --> 0:01:09.840 three D technology. We also a very strong molecular diagnostics 0:01:09.880 --> 0:01:12.920 business that has been the world leader in both cervical 0:01:13.160 --> 0:01:16.600 cancer testing as well as reproductive health, so all kinds 0:01:16.600 --> 0:01:20.440 of sexually transmitted infections. That business is performing very very well. 0:01:20.720 --> 0:01:23.320 And then we have a guy in surgical division, which 0:01:23.400 --> 0:01:27.360 is really for endometrioliblation as well as fibroid removal through 0:01:27.360 --> 0:01:31.800 the uterus, and that business is also performing way above expectations. 0:01:31.800 --> 0:01:34.360 It had a seventh straight quarter of double digit growth, 0:01:34.440 --> 0:01:37.600 So it's really broad based growth. And as you know, 0:01:37.680 --> 0:01:41.080 in a very skittish healthcare and investor environment right now, 0:01:41.360 --> 0:01:42.880 we always kind of want to be a safe port 0:01:42.880 --> 0:01:45.040 in the storm, and and we showed we came through 0:01:45.240 --> 0:01:47.880 so very proud of our team. Well, I do want 0:01:47.880 --> 0:01:49.920 to raise one thing. I mean, I would imagine that 0:01:50.080 --> 0:01:54.080 Logic is sort of at the forefront of the controversy 0:01:54.120 --> 0:01:56.920 over mammograms and how effective they are. And you know, 0:01:57.000 --> 0:02:00.160 there's some talk about removing the recommendation that the men 0:02:00.200 --> 0:02:02.800 get mamograms, which I'm sure is leading into insurance and 0:02:02.800 --> 0:02:06.360 whether or not they'll cover it. How much is that 0:02:06.400 --> 0:02:10.119 affecting Logic and the business going forward. We we really 0:02:10.120 --> 0:02:12.520 see it as a great opportunity in that so many 0:02:12.560 --> 0:02:17.480 of the shortfalls and shortcomings of traditional mamography or mammograms 0:02:18.000 --> 0:02:21.400 has really been the old technology, and because we've brought 0:02:21.400 --> 0:02:24.000 our three D technology to the marketplace just in the 0:02:24.080 --> 0:02:28.160 last few years, it's really addressing all of the key 0:02:28.200 --> 0:02:30.360 issues historically. So if you think about it, what are 0:02:30.360 --> 0:02:34.040 the key issues historically? One is, you know, false positives. 0:02:34.800 --> 0:02:38.280 Our three D technology dramatically reduces the amount of false positives. 0:02:38.280 --> 0:02:40.520 So what does that mean in real terms? You know, 0:02:40.639 --> 0:02:44.640 fiftcent fewer false positives means women are not having to 0:02:44.680 --> 0:02:48.120 go back and have biopsies that aren't needed, so you 0:02:48.160 --> 0:02:50.600 can see things so much better. The other part is 0:02:50.720 --> 0:02:56.560 that we're detecting early stage cancers about fifteen months earlier 0:02:57.320 --> 0:02:59.440 and or depending on how look at the data, we're 0:02:59.440 --> 0:03:05.480 getting about more positives in terms of effectively diagnosing the 0:03:05.480 --> 0:03:08.000 breast cancer. So what's happening is a lot of the 0:03:08.080 --> 0:03:12.720 research and the guidelines are based on old mammograms. Everything 0:03:12.760 --> 0:03:16.560 that we've brought with three D is effectively addressing those shortcomings. 0:03:16.560 --> 0:03:18.920 But have fewer women been getting mamograms? And is that 0:03:18.960 --> 0:03:21.920 affecting your business? Not really, we're seeing you know, actually, 0:03:22.160 --> 0:03:24.399 part of the strength of our business over the last 0:03:24.480 --> 0:03:27.240 couple of years has been the adoption of our three 0:03:27.320 --> 0:03:30.480 D technology. So even though there's pressures on healthcare costs. 0:03:30.840 --> 0:03:35.000 There are some controversies. You know, the USPSTF, which is 0:03:35.040 --> 0:03:39.720 the US Prevented Services Task Force Society, had come out 0:03:39.840 --> 0:03:43.080 a year ago suggesting that women should wait until they're 0:03:43.120 --> 0:03:46.400 fifty for their first mammogram. I think everybody on this 0:03:46.480 --> 0:03:51.000 planet has either a friend or someone in their family who, 0:03:51.040 --> 0:03:54.040 if they waited until fifty, would be dead. Quite frankly, 0:03:54.280 --> 0:03:57.840 my own mother was diagnosed almost twenty years ago, so 0:03:57.960 --> 0:04:02.040 to wait until you're fifty is just completely nonsensical. And 0:04:02.120 --> 0:04:04.200 so I think what we've actually seen is despite the 0:04:04.280 --> 0:04:09.320 USPSTF guidelines, the American College of Radiology and the radiologist 0:04:09.320 --> 0:04:12.400 who were close to this are absolutely going against that, 0:04:12.720 --> 0:04:15.200 and they know that really starting at forty and frankly, 0:04:15.240 --> 0:04:17.839 if you've had a history of breast cancer, you should 0:04:17.839 --> 0:04:19.520 start sooner. You know, we all know, you know, there 0:04:19.520 --> 0:04:22.680 are women in their twenties and thirties diagnosed. So the 0:04:22.800 --> 0:04:27.520 whole key in breast cancer it's it's an eminently deal. 0:04:27.680 --> 0:04:29.600 You know, it's a disease you can totally deal with 0:04:29.680 --> 0:04:32.320 if you catch it early, and that's what three DM 0:04:32.360 --> 0:04:35.200 ammograms are helping to do. So we actually feel we're 0:04:35.200 --> 0:04:37.880 on the right side of it, and we're reducing costs, 0:04:37.920 --> 0:04:41.279 we're improving the patient outcomes, and it's good for everybody 0:04:41.360 --> 0:04:44.880 in the system, the patient, the payer, the radiologist, and 0:04:45.240 --> 0:04:47.880 frankly our company. You mentioned. If you're reducing the cost, 0:04:48.160 --> 0:04:52.800 what specifically, well, the big cost in breast cancer is 0:04:53.040 --> 0:04:54.720 when you start to deal with it later. If you 0:04:54.760 --> 0:04:57.760 get somebody who stage three or stage four, you're dealing 0:04:57.839 --> 0:05:00.240 with full blown you know, let's face it mustaqu to me, 0:05:00.440 --> 0:05:05.120 is radiation, chemo, all of that. When you can catch 0:05:05.200 --> 0:05:08.400 breast cancer in its very early stages, you can have 0:05:08.720 --> 0:05:12.640 much more les. You know, basically a less intervention is needed. 0:05:13.160 --> 0:05:15.080 And so if you can get it early, when it's 0:05:15.120 --> 0:05:18.560 small and it hasn't started to fantasticize, you deal with it. 0:05:18.640 --> 0:05:21.039 And that's where the big win is both in terms 0:05:21.080 --> 0:05:24.800 of survival rates, but it's also dramatically less in cost. 0:05:24.960 --> 0:05:28.000 So that's why a win win. Something like SIGNA just 0:05:28.120 --> 0:05:30.160 in the last couple of months is now covering three 0:05:30.240 --> 0:05:33.480 D mammograms and we think that's clearly the trend that's 0:05:33.520 --> 0:05:36.440 occurring because they're realizing it's better for the patients. It's 0:05:36.440 --> 0:05:38.920 also frankly better for their caution, seconds got to be quick. 0:05:38.960 --> 0:05:41.600 Does the election outcome impact you guys, not really? I 0:05:41.680 --> 0:05:44.080 think you know again, we've even Donald Trump says he 0:05:44.160 --> 0:05:46.599 wants to change in terms of Obamacare. At the end 0:05:46.640 --> 0:05:49.360 of the day, we are reducing healthcare costs and we're 0:05:49.400 --> 0:05:51.400 improving patient outcomes. We think it puts us in a 0:05:51.480 --> 0:05:55.400 good place. Steve mcmilany's chairman Presidency of Logic, Morble mass 0:05:55.520 --> 0:05:57.440 Is where they're based in our New York studio on 0:05:57.520 --> 0:06:09.680 this Thursday, this is Bloemberg. Well, we want to talk 0:06:09.680 --> 0:06:11.760 a bit about Wells Fargo today because it's back in 0:06:11.800 --> 0:06:15.160 the news, the SEC investigating sales practices at the company 0:06:15.560 --> 0:06:18.520 and our Bloomberg exclusive how the stars at the company 0:06:19.279 --> 0:06:22.840 climbed as abuses flourished beneath them. Let's talk about it 0:06:22.880 --> 0:06:25.640 all with us. As Laura Keller, financial reporter at Bloomberg News, 0:06:25.720 --> 0:06:29.960 she's here with Elliot Stein's senior litigation analyst at Bloomberg Intelligence. 0:06:30.200 --> 0:06:32.640 First off, Lord, let me start with you. Um, talk 0:06:32.680 --> 0:06:35.200 to me about what was going on at the company. 0:06:35.240 --> 0:06:38.240 We know about these fake accounts, these fraudulent accounts. A 0:06:38.320 --> 0:06:40.120 lot of people lost their jobs as a result. But 0:06:40.440 --> 0:06:42.680 what some of the senior people. They did just fine, 0:06:43.360 --> 0:06:45.960 right exactly, And this is the story. UM, we hope 0:06:46.000 --> 0:06:48.440 and I think it accomplished this UM you know that 0:06:48.560 --> 0:06:51.080 was looking at accountability, so it really did focus more 0:06:51.120 --> 0:06:54.360 on these senior managers and senior levels of people rather 0:06:54.440 --> 0:06:56.760 than what we already know the company has you know, 0:06:56.880 --> 0:07:00.760 fired these very low level workers. UM. So what we 0:07:00.920 --> 0:07:05.720 essentially chronicled here was really just this generation of executives UM, 0:07:05.800 --> 0:07:09.040 who rose through the ranks even while all of these 0:07:09.160 --> 0:07:12.920 practices were going on. UM. These were very very ambitious people. 0:07:13.200 --> 0:07:15.280 A lot of them came out of California, some of 0:07:15.320 --> 0:07:18.440 them specifically out of southern California, UM, where we already 0:07:18.520 --> 0:07:22.840 know from the Fortums former CEO excuse me, John Stump UM, 0:07:22.920 --> 0:07:25.000 where a lot of these problems were happening. UM, and 0:07:25.080 --> 0:07:28.960 then sort of chronicled the story of these UM Southern 0:07:29.000 --> 0:07:32.920 California and California stars fanning out across the country and 0:07:33.080 --> 0:07:36.320 therefore sort of bringing these sales practices that they had 0:07:36.560 --> 0:07:40.440 you know, come to know and and used um throughout 0:07:40.600 --> 0:07:42.760 their career, you know, to these other places like Florida 0:07:42.880 --> 0:07:45.360 or like Texas. Well, hold on a second, and these 0:07:45.800 --> 0:07:48.400 star managers are they immune at this point. I mean, 0:07:48.480 --> 0:07:50.640 the story seems to suggest that some of them could 0:07:51.400 --> 0:07:54.080 get fired. Still, yes, I mean, I want to be clear. 0:07:54.160 --> 0:07:58.600 In the story, we do name many particular managers. We did, 0:07:58.840 --> 0:08:01.720 um speak to some one who, um we note in 0:08:01.760 --> 0:08:04.280 the story who told us that indeed there are some 0:08:04.440 --> 0:08:09.160 managers that the company executives have already identified to be fired. Um, 0:08:09.400 --> 0:08:11.680 but we don't We're not able to say at this 0:08:11.800 --> 0:08:14.480 point whether those are the same people. So there's gonna 0:08:14.480 --> 0:08:16.040 be clear on that. Well, I'm curious to how this 0:08:16.160 --> 0:08:18.280 all folds. And Elliott, let's bring you in, senior litigation 0:08:18.280 --> 0:08:20.920 analyst at Bloomberg Intelligence, and we're also talking with Laura Keller, 0:08:20.960 --> 0:08:23.760 financial reporter at Bloomberg News. So I saw the headline 0:08:23.800 --> 0:08:27.680 this morning about the SEC investigating the sales practice at 0:08:27.720 --> 0:08:30.680 well before I thought, oh okay, another chapter. What does 0:08:30.760 --> 0:08:32.360 this mean? How does it kind of maybe playing too 0:08:32.400 --> 0:08:34.280 some of what Laura was talking about? Right, Well, it 0:08:34.480 --> 0:08:37.680 just it shows that this continues to be in evolving 0:08:37.840 --> 0:08:40.160 and growing story that the bank is really trying to 0:08:40.840 --> 0:08:43.560 you know, rapids hands and head around and they haven't 0:08:43.600 --> 0:08:45.719 quite yet. It feels like right right, Um, you know, 0:08:45.800 --> 0:08:48.800 I think they've been criticized. Well, it's interesting because the 0:08:48.880 --> 0:08:52.040 SEC investigation. First of all, it's not not really a surprise. 0:08:52.440 --> 0:08:55.240 I mean, how could they not that and not only that, right, 0:08:55.280 --> 0:08:57.439 how could they not after the Department of Justice is 0:08:57.480 --> 0:09:00.480 investigating them? UH, states are invest to gain in them, 0:09:00.480 --> 0:09:03.520 including California. But three U. S. Senators sent the SEC 0:09:03.640 --> 0:09:06.920 a letter saying you should investigate Wells far ago UM. 0:09:07.040 --> 0:09:09.720 And you know, the focus will probably be on whether 0:09:10.800 --> 0:09:14.080 the bank should have disclosed in their filings that they 0:09:14.120 --> 0:09:16.559 were being investigated for these things about the CFPV and 0:09:16.600 --> 0:09:20.480 the o c C. Nothing really was disclosed until the fine, 0:09:20.600 --> 0:09:24.000 the hive million dollar fine in September, even though these 0:09:24.040 --> 0:09:27.880 things have been going on for year years, including lawsuits 0:09:28.360 --> 0:09:31.199 UM and investigations by the City of Los Angeles. I 0:09:31.280 --> 0:09:33.719 want to talk about that. As far as the expense 0:09:33.840 --> 0:09:37.120 of the litigation, you noted that they increase their litigation 0:09:37.240 --> 0:09:41.120 reserves by about seven hundred million dollars UH since the 0:09:41.360 --> 0:09:47.120 first quarter. UM. Is this is this enough? UM? All right? So, 0:09:47.120 --> 0:09:50.840 so today in their filing they disclosed that they're reasonably 0:09:50.920 --> 0:09:54.480 possible litigation costs beyond reserves or one point seven billion 0:09:54.520 --> 0:09:58.319 dollars as of September UM the same number at the 0:09:58.440 --> 0:10:01.599 end of June three. For June thirty was one billion. So, 0:10:01.760 --> 0:10:05.560 like you said, they increased by seven hundred million dollars UM. 0:10:07.120 --> 0:10:09.439 It's unclear whether it will be enough. What's interesting is 0:10:10.080 --> 0:10:13.920 um that it's potentially not the fake account scandal may 0:10:13.960 --> 0:10:17.800 not be even the biggest um litigation cost if they'd 0:10:17.800 --> 0:10:20.520 already we knew they'd already reserved the billion dollars. They're 0:10:20.520 --> 0:10:24.200 still being investigated by the Justice Department's RMBS task Force, 0:10:24.720 --> 0:10:27.559 which has been in the news because of the anticipated 0:10:27.600 --> 0:10:31.120 Deutsche Bank settlement and settlements with other European banks. Wells 0:10:31.160 --> 0:10:32.920 Fargo is one of one of one of the few 0:10:33.240 --> 0:10:35.719 U S banks that still has to settle with that 0:10:35.920 --> 0:10:38.360 task force. Well, go ahead, No, I was wondering the 0:10:38.480 --> 0:10:39.959 lore like in your story, So you think, you know 0:10:40.120 --> 0:10:44.280 you profile, you know, you talk about one individual Kim Young, Um, 0:10:44.600 --> 0:10:47.200 you know who? You know who? Who was I guess 0:10:47.240 --> 0:10:50.880 not senior senior or was she senior? Um? Pretty senior? Yeah. 0:10:50.880 --> 0:10:52.160 I mean most of the people that we talked to 0:10:52.280 --> 0:10:55.599 what they call regional presidents or even beyond that, I 0:10:55.679 --> 0:10:59.280 mean within the retail bank, they're very senior people, um 0:10:59.440 --> 0:11:01.520 just not senior you would think, you know, sea level 0:11:01.600 --> 0:11:03.800 sweet for the whole company. Like, I wonder how much 0:11:03.840 --> 0:11:06.760 of this investigation, whether the SEC and others will eventually 0:11:06.840 --> 0:11:08.880 come back to some of those senior people who were 0:11:09.000 --> 0:11:11.199 rising in the ranks as all of this was going on. 0:11:11.360 --> 0:11:14.400 We know John Stump certainly is gone and has taken 0:11:14.440 --> 0:11:16.960 a fault because of this, but you wonder how much 0:11:17.000 --> 0:11:19.360 we'll trickle down. Coming off the financial crisis, it felt 0:11:19.400 --> 0:11:23.120 like so many financial executives we're not prosecuted at all. 0:11:23.360 --> 0:11:25.120 So I'm just curious if it'll if it will play 0:11:25.160 --> 0:11:27.040 out here. Well, yeah, and I think that's a really 0:11:27.120 --> 0:11:28.880 interesting question. I don't think we know the answer to 0:11:28.960 --> 0:11:31.839 that yet and what authorities themselves will focus on. But 0:11:31.920 --> 0:11:33.679 I think it's very interesting in the story that you know, 0:11:33.800 --> 0:11:36.520 we note that the you know, when you go back 0:11:36.559 --> 0:11:39.480 to these exacts, um, the that have identified people already 0:11:39.520 --> 0:11:42.120 for firings, we we you know, in our story talk 0:11:42.200 --> 0:11:44.080 about how well, actually they don't want to fire them 0:11:44.120 --> 0:11:47.679 yet they're delaying this because they actually want to use 0:11:47.800 --> 0:11:49.959 those people to an aid the investigation. They like that 0:11:50.080 --> 0:11:53.120 inquiry to keep going. So you know, whether that means 0:11:53.200 --> 0:11:56.040 they you know, eventually take the full brunt of us. 0:11:56.200 --> 0:11:57.319 You know, I don't know, We'll have to see what 0:11:57.360 --> 0:12:00.319 the investigation finds. You know, I'm looking at well Frago 0:12:00.400 --> 0:12:04.560 shares right now. Year to date, they're down about thirteen percent. Uh. 0:12:04.800 --> 0:12:07.319 You just have to wonder, given all of this uncertainty, 0:12:07.440 --> 0:12:11.240 given potential turnover in the upper ranks of management that 0:12:11.320 --> 0:12:14.080 are below the sea level suite Laura, like you're talking about, 0:12:14.120 --> 0:12:16.640 you have to wonder, you know, what, what are going 0:12:16.720 --> 0:12:18.760 to be the implications. I mean when you talk to investors, 0:12:18.840 --> 0:12:21.400 what are they say? Yeah, I mean investors. It's funny. 0:12:21.480 --> 0:12:23.839 Originally didn't really worry about this very much because it 0:12:23.880 --> 0:12:26.600 was only million. But if I kind of pick up 0:12:26.600 --> 0:12:29.360 on where you're going, Lisa, if this was so systemic 0:12:29.480 --> 0:12:31.640 to the point, I mean, you know, our story chronicles 0:12:31.760 --> 0:12:34.120 a lot of things here. You know, let's just say 0:12:34.200 --> 0:12:36.480 we we found you know, the bank has around two 0:12:37.000 --> 0:12:40.240 very senior managers. Let's just say, you know, wild guess, 0:12:40.280 --> 0:12:42.520 and this is really based on just you know, hypotheticals. 0:12:42.760 --> 0:12:45.959 What if of those people really had some hand in this? 0:12:46.280 --> 0:12:49.080 Do you fire every single person? How do you actually 0:12:50.640 --> 0:12:52.560 but hold on a second, Elliott, I want just real 0:12:52.679 --> 0:12:54.959 quick and twenty seconds. I mean, what is sort of 0:12:55.080 --> 0:12:59.880 the level of scrutiny that rises to legal accountability here? Well, 0:13:00.440 --> 0:13:03.080 so you're just going back to the share, the share 0:13:03.160 --> 0:13:06.600 losses um that actually goes to the SEC investigation, because 0:13:06.880 --> 0:13:09.160 the issue there is whether it was material to the company. 0:13:09.480 --> 0:13:13.319 You know, two million accounts sounds material um, but a 0:13:13.400 --> 0:13:15.440 hundred and eight five million dollars may not have sounded 0:13:15.480 --> 0:13:17.760 material to Wells Fargo. So that's sort of going to 0:13:17.800 --> 0:13:21.800 be the issue that plays out there, which is exactly well, 0:13:21.880 --> 0:13:24.679 Thank you so much, great conversation Laura Keller with a 0:13:24.720 --> 0:13:28.760 fantastic story on the Bloomberg as well as Elliott Stein, 0:13:28.920 --> 0:13:31.360 senior litigation analyst for Bloomberg Intelligence. Thank you so much 0:13:31.480 --> 0:13:33.480 for being with us. This will be something that probably 0:13:33.720 --> 0:13:36.679 will keep our attention for quite a few months to come, 0:13:36.760 --> 0:13:39.240 so we'll keep an eye on it. Wells Fargo shares 0:13:39.559 --> 0:13:42.600 slightly up, but overall this year they've been they've been 0:13:42.600 --> 0:13:53.000 down quite a bit. This is Bloomberg right now, though, 0:13:53.000 --> 0:13:54.640 we want to go back to some news we got 0:13:54.679 --> 0:13:57.319 out of the UK this morning. A panel of London 0:13:57.400 --> 0:14:00.560 judges deciding that the UK must hold a vote Parliament 0:14:00.880 --> 0:14:03.880 before starting the two year countdown to Brexit. Let's talk 0:14:03.920 --> 0:14:07.240 about what the implications of that decision, that legal decision, 0:14:07.760 --> 0:14:11.360 what it all means. Kit Hillela's legal reporter at Bloomberg News, 0:14:11.760 --> 0:14:14.320 was at the UK Supreme Court in London earlier today 0:14:14.320 --> 0:14:17.440 and joins us from London at this hour. A Kit, 0:14:17.559 --> 0:14:20.000 nice to have you here with Lisa and myself. So 0:14:20.240 --> 0:14:25.520 what does this mean, Hi, Carol? What does it mean? Well, 0:14:25.680 --> 0:14:27.880 the most important thing to remember is that this was 0:14:28.040 --> 0:14:32.680 round one of a legal fight. Um. The government has 0:14:32.880 --> 0:14:36.680 lost today, but it will be very quickly appealed to 0:14:36.720 --> 0:14:40.160 the Supreme Court, who will ultimately have the final say 0:14:40.280 --> 0:14:44.760 on this case. Okay, so um, But the markets are responding. 0:14:44.840 --> 0:14:46.480 So it seems to indicate I mean there is some 0:14:46.600 --> 0:14:48.960 significance here in that it's not going to be an 0:14:49.040 --> 0:14:54.040 easy resolution, right, I mean even the Supreme Court how 0:14:54.080 --> 0:14:56.960 long that will take a while? Right. Well, what they've 0:14:56.960 --> 0:14:59.680 done is because because it's such an important question, they 0:15:00.040 --> 0:15:03.520 us tracted. So the Supreme Court will hear the case quickly, um, 0:15:04.120 --> 0:15:06.640 maybe as soon as December, and will probably make a 0:15:06.720 --> 0:15:10.840 decision by January. UM. I guess the significance is that 0:15:11.040 --> 0:15:14.280 if the Supreme Court agrees with the decision today and 0:15:14.360 --> 0:15:16.760 there has to be a vote in parliament. That makes 0:15:16.800 --> 0:15:20.640 it difficult for Thereason May to do a fast, hard Brexit, 0:15:20.760 --> 0:15:22.760 which is what she wanted to do. It means they'll 0:15:22.760 --> 0:15:25.160 have to consult Parliament, They'll have to be a vote. 0:15:25.160 --> 0:15:27.200 It's going to take some time, it's going to be difficult, 0:15:27.480 --> 0:15:29.960 and it's certainly going to going to affect the timetable. Okay, 0:15:30.000 --> 0:15:31.360 And that's what I wanted to know. What were the 0:15:31.440 --> 0:15:34.400 implications of having now the Parliament If it stays that 0:15:34.520 --> 0:15:37.320 they have to vote you mentioned speed, that it's going 0:15:37.360 --> 0:15:39.880 to slow down the process. If Thereason May was trying 0:15:39.920 --> 0:15:42.160 to go much more quickly with this, and that they've 0:15:42.160 --> 0:15:45.360 got a potentially consult parliament, what does that mean though? Then, 0:15:45.400 --> 0:15:48.320 in terms of what a Brexit might ultimately look like. 0:15:49.480 --> 0:15:52.720 I think most people accept that Parliament isn't going to 0:15:52.840 --> 0:15:55.680 block Article fifty being triggered. It's not going to block 0:15:55.760 --> 0:15:58.880 a Brexit, but Parliament wants to have a say in 0:15:59.000 --> 0:16:01.600 how any deal will look and that makes it difficult 0:16:01.600 --> 0:16:04.600 for the reason May. She has to go to negotiate 0:16:04.720 --> 0:16:07.640 with other European nations about the terms of Britain's exit. 0:16:08.040 --> 0:16:09.840 Now she has to go and do that with a 0:16:09.880 --> 0:16:12.680 bunch of conditions from British lawmakers. That makes her job 0:16:12.720 --> 0:16:15.680 a bit harder. Well, you know, I've got to I'm 0:16:15.680 --> 0:16:18.440 a little confused. Can you help me out here? The 0:16:18.480 --> 0:16:21.440 British on a lot of levels, but you know one 0:16:21.440 --> 0:16:24.400 in particular, the British pound. You know, it gained on 0:16:25.000 --> 0:16:29.400 the news, it gained quite a bit relative to recent history. Um. 0:16:30.280 --> 0:16:33.960 I'm wondering whether this is a realistic kind of collective 0:16:34.320 --> 0:16:38.760 effects cheering, or whether people are kind of uh getting 0:16:38.760 --> 0:16:41.400 a little bit lost in the weeds here, because realistically 0:16:41.520 --> 0:16:44.480 this just sort of creates more uncertainty, which could potentially 0:16:44.520 --> 0:16:49.400 be negative for the economy. Right, Am I missing something here? No, 0:16:49.920 --> 0:16:53.120 it's a fair point. It is. It is confusing, I think. 0:16:53.160 --> 0:16:55.760 I think a lot of people are confused, especially even 0:16:55.800 --> 0:16:59.960 legal reporters are confused by it. Um. I think traders 0:17:00.080 --> 0:17:02.760 looking for any any sort of move that is going 0:17:02.800 --> 0:17:05.280 to affect the Brexit timetable, and they're looking to trade 0:17:05.320 --> 0:17:08.159 off any information. So in the middle of the trial, 0:17:08.560 --> 0:17:10.720 the government's lawyers made a what I thought was quite 0:17:10.720 --> 0:17:12.960 an obvious statement that they would have to be a 0:17:13.040 --> 0:17:16.240 vote in Parliament eventually on whatever deal was reached. And 0:17:16.520 --> 0:17:19.160 you know that news sent a pound up half a percent. 0:17:19.359 --> 0:17:21.680 That's ridiculous. Of course they would have to vote on it. 0:17:22.600 --> 0:17:24.640 So so so people are looking for any sort of news, 0:17:24.640 --> 0:17:26.520 any indication of how long this is going to take. 0:17:27.040 --> 0:17:29.320 And it is worth remembering that this legal. You know 0:17:29.440 --> 0:17:33.600 that a potential, although very unlikely, outcome of this process 0:17:34.119 --> 0:17:37.040 is that it makes Brexit impossible or too difficult, or 0:17:37.119 --> 0:17:38.960 delays it for such a long period of time that 0:17:39.119 --> 0:17:41.840 things change and maybe people are sort of trading on 0:17:41.920 --> 0:17:44.639 that remote possibility. All right, so what's the next step. 0:17:46.119 --> 0:17:47.800 The next step is that the government has said it's 0:17:47.800 --> 0:17:49.920 going to appeal to the Supreme Court in the UK, 0:17:50.080 --> 0:17:53.200 which is the highest court. That will happen very quickly 0:17:53.320 --> 0:17:55.320 and we'll have a rerun of all the arguments from 0:17:55.400 --> 0:17:58.520 both sides. The Supreme Court has a roughly fifty fifty 0:17:58.680 --> 0:18:03.240 track record of allowing appeals or dismissing them, so you know, 0:18:03.359 --> 0:18:04.920 you could make an argument that the government has a 0:18:05.000 --> 0:18:07.200 has a fighting chance of winning at the highest courts, 0:18:07.720 --> 0:18:10.400 and then the Supreme Court will make their decision in January. Okay, 0:18:10.440 --> 0:18:14.080 So I'm looking up with the average hourly fee is 0:18:14.440 --> 0:18:18.560 for lawyers in Britain, and it sounds like on average 0:18:18.600 --> 0:18:20.640 it's about a hundred pounds an hour, which I guess 0:18:21.720 --> 0:18:24.399 can be less than here, um, based on where the 0:18:24.440 --> 0:18:26.840 pound is versus the dollar. But I mean, who's incurring 0:18:26.880 --> 0:18:30.399 all of these legal fees? Um? Yeah, I think the 0:18:30.480 --> 0:18:32.040 lawyers in this case are earning more than a hundred 0:18:32.080 --> 0:18:35.760 pounds an hour. I would, I would think so. But 0:18:35.880 --> 0:18:39.120 this is this isn't going to be inexpensive yet. Yes, 0:18:39.680 --> 0:18:43.400 it is expensive to run these these cases in this country. 0:18:43.760 --> 0:18:46.680 If you win your case, Um, the other side pays 0:18:46.760 --> 0:18:49.760 your legal costs. So as of right now, the claimants 0:18:49.800 --> 0:18:52.600 of one and the government will have to pay for everything. Um. 0:18:52.880 --> 0:18:56.200 But is it is that the government versus the government here? No, 0:18:56.400 --> 0:18:58.760 The claimants are a range of different people who have 0:18:58.840 --> 0:19:03.040 an interest into laying or stopping Brexit. One of them 0:19:03.080 --> 0:19:06.159 is Gina Miller. She's a she's an investment worker who 0:19:06.280 --> 0:19:08.919 was sort of voted to remain in the EU. There 0:19:08.960 --> 0:19:13.080 are various expat Brits living abroad. They're a diverse bunch 0:19:13.119 --> 0:19:15.720 of people. Um. A few of the lawyers are acting 0:19:15.760 --> 0:19:18.240 pro bono that they're doing it for free and you 0:19:18.280 --> 0:19:21.000 know they've also raised funds using crowdfunding to pay for 0:19:21.080 --> 0:19:23.960 this because there's obviously there's a there's popular support in 0:19:24.000 --> 0:19:26.040 the UK for the idea of there being a vote 0:19:26.080 --> 0:19:30.440 in Parliament about Brexit. That's amazing crowdfunded legal costs web business. 0:19:30.480 --> 0:19:33.240 We did a story though about like the one, you know, 0:19:33.320 --> 0:19:35.520 kind of jobs that will actually benefit because of Brexit. 0:19:35.560 --> 0:19:38.080 They talked to think about the legal community in particular, 0:19:38.760 --> 0:19:42.439 certainly in the short run. Kitchell, thank you so much 0:19:42.440 --> 0:19:46.600 for joining us. It's really fascinating legal proceeding. Kitchell, legal 0:19:46.640 --> 0:19:50.560 reporter for Bloomberg in London, talking about what's going on 0:19:50.840 --> 0:19:53.600 with the Brexit vote and whether or not it can 0:19:53.640 --> 0:19:57.320 be a fast, quick, easy clean Brexit sounds like not 0:19:57.520 --> 0:20:08.919 so much. We'll stick with that though. This is berk Um. 0:20:09.000 --> 0:20:11.560 I want to bring in, uh, somebody who can talk 0:20:11.600 --> 0:20:14.600 to us a little bit about, uh, what's going on 0:20:14.880 --> 0:20:18.000 with these smaller companies that perhaps people are looking over 0:20:18.520 --> 0:20:22.880 as they rush to uh the stock markets. I want 0:20:22.920 --> 0:20:25.600 to thank you very much for coming in. John Campbell, 0:20:25.680 --> 0:20:29.960 chief investment officer of Cornerstone Investment Partners. Uh, so what 0:20:30.200 --> 0:20:33.680 are you looking at? I mean, you focus on the smaller, less, 0:20:34.400 --> 0:20:37.040 less less popular stocks. Which ones do you think are 0:20:37.040 --> 0:20:39.920 the best best right now? Well, our approaches to look 0:20:39.960 --> 0:20:42.359 at the overall market and try and find companies that 0:20:42.440 --> 0:20:45.400 have improving fundamentals, and we try to take the risk 0:20:45.440 --> 0:20:47.879 out of buying small cap stocks by buying companies that 0:20:48.000 --> 0:20:50.840 have free cash flow so they can cover their debts 0:20:50.880 --> 0:20:52.680 in the near term to cover their capex in the 0:20:52.760 --> 0:20:57.080 near time, have tangible assets. These small small cap asset 0:20:57.160 --> 0:21:00.600 classes an excellent class. If you look back nine the years, 0:21:01.119 --> 0:21:04.840 the returns on small cap have greatly outperformed other classes. 0:21:05.040 --> 0:21:08.760 For example, you can versus large cap stocks. Small cap 0:21:08.840 --> 0:21:11.399 stocks have done about twelve on average over that period, 0:21:11.440 --> 0:21:13.920 in large cap stocks have done closer to ten percent. 0:21:14.040 --> 0:21:16.960 So a two percent advantage over ninety years is a 0:21:17.040 --> 0:21:20.960 dramatic difference. The problem is you have a strong stomach 0:21:20.960 --> 0:21:22.879 that for small caps it can be really volatile. You 0:21:22.960 --> 0:21:24.880 could you have to have a strong stomach, and they're 0:21:24.960 --> 0:21:27.680 much more volatile than large cap stocks. That's exactly right. 0:21:27.840 --> 0:21:30.200 So if you want to get exposure of this class, 0:21:30.200 --> 0:21:31.440