Speaker 1: This is Bloomberg Business Week. I'm Carol Masser and I'm
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Speaker 1: Search Bloomberg Global News. Well the US Central Bank top
Speaker 1: of mind today next FOMC decision just nine days away.
Speaker 1: This story is among our most read on the Bloomberg terminal.
Speaker 1: It's about how with half point interest rate increases all
Speaker 1: but certain in June and July, Photo Reserve officials are
Speaker 1: shifting the focus away from a destination on hikes to
Speaker 1: something that's trickier to determine and explain, and that is
Speaker 1: the broader impact of their policies on the economy. So
Speaker 1: let's get to it with Bloomberg News, Foederal Reserve and
Speaker 1: US Economy reporter he is Craig Tours and he's on
Speaker 1: the phone from Washington, d C. Craig, I love this
Speaker 1: story top of mine. I feel like it. It just
Speaker 1: meshes so well after although the recession talk we heard
Speaker 1: from so many last week tell us about kind of
Speaker 1: the shift in the narrative from J. Powell and Company
Speaker 1: or J Powell specifically. Yeah, so, Carol, we really saw
Speaker 1: it in the last press conference where he called this
Speaker 1: concept of the neutral rate UM imprecise and then mentioned
Speaker 1: the word financial conditions more than a dozen times. And
Speaker 1: you know, the tricky thing about financial conditions is they
Speaker 1: don't happen tighten, or loosen all at once. Right now,
Speaker 1: UM mortgage rates have gone up quite a bit. They're
Speaker 1: above five percent last I looked. But heck, if you
Speaker 1: were financing inventory UM and selling cars, you'd probably be
Speaker 1: financing three two right now. And that's not very tight.
Speaker 1: So you know, what they're trying to do is strict
Speaker 1: even further. And if you look at financial conditions in disease,
Speaker 1: we have one Chicago Fed as one Goldman as one
Speaker 1: they look pretty loose. Still. You know, Craig, as a
Speaker 1: stock market guy, I think of that, and I think
Speaker 1: you know, the Fed obviously wants to continue tightening conditions.
Speaker 1: Is there any way they can do that without causing
Speaker 1: the stock market to go back down to its lows
Speaker 1: of the year? Do you think? No, That's what I thought. Um,
Speaker 1: you know, because as you're raising borrowing costs for companies
Speaker 1: um or on consumer credit cards, eventually, I think you're
Speaker 1: going to be hurting earnings sooner or later, or at
Speaker 1: least earnings outlooks. So I mean, it's what they want
Speaker 1: to do. And part of the stock market going down
Speaker 1: that affects financial conditions by reducing portfolio wealth, which might
Speaker 1: reduce consumption a little bit. So yeah, I think they're
Speaker 1: fully intent. Um, I'm tightening further. And Carol and Mike,
Speaker 1: you know, you gotta take little brainers now the face
Speaker 1: chair and uh we had this comment from her last week.
Speaker 1: So you remember Mr Bostick in Atlanta. Dr Bostick, he said, well,
Speaker 1: we might pause and then financial conditions eased, so that
Speaker 1: you don't want financial conditions easing. And then little brainer
Speaker 1: came back and said, nah, pause looks quote very hard.
Speaker 1: In September, this is like one of those things like kids, look, look,
Speaker 1: this is just a reminder, right, that each of these
Speaker 1: FED speakers can kind of do their own thing right there,
Speaker 1: or is there Like I always wonder if there's a
Speaker 1: memo behind the scenes, like Leo you come out and
Speaker 1: say this, and Bostick you say this. I always wonder. Yeah,
Speaker 1: it doesn't seem like they all got the same memo
Speaker 1: this time if if there is, But you know, look,
Speaker 1: I'll say this, it's good that we not all simple
Speaker 1: things or is decentralized as ours? Um, the unique history
Speaker 1: of the United States were small business, businessmen and farmers.
Speaker 1: I've read these documents, by the way, they're in the
Speaker 1: University of Virginia, and you know, we didn't want centralized money.
Speaker 1: We didn't want a group of seven to have all
Speaker 1: the power so reserved. Thanks should have diverse views. That's
Speaker 1: a good thing, a good craig. I wonder, you know,
Speaker 1: obviously the consensus thinking is that we'll get a half
Speaker 1: percentage point increase at the next two meetings. Um, that's
Speaker 1: your point. Uh. Mr Bostick sort of indicated he might
Speaker 1: like to see a pause then in September. But if
Speaker 1: not a pause, is it possible that maybe they'll go
Speaker 1: back go back to basis points? Have they sort of
Speaker 1: ruled that out anyone else in the discussions lately. I
Speaker 1: think that's an interesting um possibility. Nothing's off the table.
Speaker 1: And Mike, what what I think they don't really understand
Speaker 1: is balance sheet runoff that starts this month. How that
Speaker 1: adds to financial conditions. Some people say you may add
Speaker 1: nothing at all. I mean we you know, when the
Speaker 1: FED buys an asset, it creates a liability in the
Speaker 1: form of coush in the banking system, and right now
Speaker 1: we have all this excess reserves, so much so that
Speaker 1: banks are just reparking it at the FED at a
Speaker 1: low interest rate. So it shouldn't make that much difference,
Speaker 1: but it might. We don't understand this fully how this works.
Speaker 1: One thing I like is how you said in your
Speaker 1: story that it may j Powell walking back from the
Speaker 1: concept of neutral, cautioning that the discussion had a sort
Speaker 1: of false precision, but he said, you're going to be
Speaker 1: kind of enquiring how all of this is affecting the
Speaker 1: economy through financial conditions. To me, that says their data
Speaker 1: dependent on everything. I'm just got thirty seconds. Is that fair? Like?
Speaker 1: I feel like they're going to go into every meeting
Speaker 1: and just kind of look at the current set of
Speaker 1: data points. I think what we want to hear in
Speaker 1: the next pros conference, um uh is what is clear
Speaker 1: and convincing evidence means to him three months of falling inflation.
Speaker 1: That's the key question. All right, Well, you gave us
Speaker 1: something to think about on another countdown to another important
Speaker 1: FED meeting, which I think many of us would argue
Speaker 1: that they're all important, certainly because it's just going to
Speaker 1: determine so much as you say, FED isn't It's not
Speaker 1: part of their mission to watch the financial or not
Speaker 1: at least not watch the equity market, but they certainly
Speaker 1: keep a watch on it. Bloomberg News Federal Reserve in
Speaker 1: US Economy reporter Craig Tourist joining us on the phone
Speaker 1: in Washington, d C. You are listening to Bloomberg Business
Speaker 1: Week Carol Master along with Mike Reagan, and we are
Speaker 1: Bloomberg Radio. This is Bloomberg Business Week with Carol Masser
Speaker 1: and Bloomberg Quick Takes. Tim Stinovic on Bloomberg Radio shares
Speaker 1: a Twitter though under some pressure they were down as
Speaker 1: much as five point six percent, off that low, but
Speaker 1: still down just shy of two percent. Elon Musk as
Speaker 1: he said. Doug said believes Twitter is breaching their merger
Speaker 1: agreement but not meeting his demands for information, spam and
Speaker 1: fake accounts. There's the twists and turns of Ellen Musk
Speaker 1: in his pursuit of Twitter. It's just fascinating. Hey, let's
Speaker 1: get to it with our own. Kurt Wagner, he's technology
Speaker 1: reporter at Bloomberg News. He's with us on the phone
Speaker 1: from San Francisco. He's writing about this. So I just
Speaker 1: want to know, Kurt, do you just like stay glued
Speaker 1: to Twitter at Elon's account to find out what's next
Speaker 1: when it comes to Twitter? Yeah, I mean just constantly
Speaker 1: being online. It's it's reminiscent of the Donald Trump days
Speaker 1: right where you're just bombarded with news over Twitter at
Speaker 1: all hours of the day. I feel like that's kind
Speaker 1: of what we're at now, you know, Kurt. The gist
Speaker 1: of this seems to be that Twitter has stated in
Speaker 1: their filings uh with the SEC that they believe less
Speaker 1: than five percent of users are quote unquote bots, and
Speaker 1: that Ellen thinks the numbers something like or more. Is
Speaker 1: there any sort of independent third party that could you know,
Speaker 1: chime in here that you've heard and tell us who's right. Well,
Speaker 1: a few weeks we actually we wrote a story that
Speaker 1: UM kind of outline the fact that there are third
Speaker 1: parties that try to quantify this, but unfortunately they're they're
Speaker 1: just guesses, right. I mean, the only way to really
Speaker 1: know the answer to this is to have the data
Speaker 1: that that Twitter the company has, and uh, they're clearly
Speaker 1: not willing to hand over that raw data. Now. I'm
Speaker 1: told that they have shared their methodology for calculating this
Speaker 1: percentage with with Elon and his team. Um, they have,
Speaker 1: you know, to a certain extent, at at a very
Speaker 1: high level, even tweeted it publicly. Um, but they're not
Speaker 1: willing to hand over the actual raw data, which is
Speaker 1: I think the issue here. It's not so much that
Speaker 1: they're not willing to show their map, it's that Ellen
Speaker 1: doesn't think their approach or methodology makes much sense. I
Speaker 1: also wonder occurtis there's sort of a dispute over what
Speaker 1: the definition of a bot actually is. You know, if
Speaker 1: I'm if I'm running a social media campaign for a
Speaker 1: big company, and I have four or five different brands
Speaker 1: and all of a sudden, they're they're all tweeting the
Speaker 1: same thing. Is that am I a bot technically at
Speaker 1: that point? Yeah, I think there's a difference between a
Speaker 1: bot and a spam bot, right, because bots on their
Speaker 1: own are actually allowed on Twitter. It's not against the
Speaker 1: rules for there to be an automated account. So there
Speaker 1: are actually bots. I've I've written about them back when
Speaker 1: the vaccine first came out last year. There are actually
Speaker 1: some really helpful bots that would tell you when vaccine
Speaker 1: appointments were available and help people kind of get those
Speaker 1: and and at the time I was like, Hey, there
Speaker 1: are some Twitter bots that are actually pretty good and
Speaker 1: doing helpful things. Now the issue, of course is spam bots, right,
Speaker 1: those are different, different type, and those are the types
Speaker 1: of things I think Ellen means when he talks about
Speaker 1: bots broadly. Um, But again, I think really what this
Speaker 1: comes down to is like I don't actually think this
Speaker 1: is much of an issue about bots at all. I
Speaker 1: think this is probably Elon really looking for a reason
Speaker 1: to throw this deal into question. Um, you know, the
Speaker 1: price of Twitter is so much cheaper today than it
Speaker 1: was when he made the offer a few months ago.
Speaker 1: And if you're someone who's now in the hook to pay,
Speaker 1: you know, overpay for a company, what are you gonna do.
Speaker 1: You're gonna look to try and lower the price, and
Speaker 1: this fields like an effort to do that. Well, that's
Speaker 1: what I wanted to say, and I love what you said.
Speaker 1: One of my favorite things in your story today is
Speaker 1: about how it's just so similar to former President Donald
Speaker 1: Trump and could use social media to kind of get
Speaker 1: what he wanted or at least get a narrative going
Speaker 1: out there. And I do feel like Elon Musk is
Speaker 1: incredibly savvy about posting things, and is he just trying
Speaker 1: to get a cheaper price for this deal? And and
Speaker 1: we're a regulator saying you cannot do this. And where
Speaker 1: was he, you know, early on when he was doing
Speaker 1: his due diligence um and saying, hey, I got some
Speaker 1: problems with the bot stuff, let's figure that out before
Speaker 1: I actually put in an offer, Like, well, where where
Speaker 1: was he with the due diligence? Is that he didn't
Speaker 1: do due diligence, right, And that was part of the
Speaker 1: that was part of the deal, was that he didn't
Speaker 1: want to or need to supposedly look behind the curtain
Speaker 1: that Twitter's you know, non public information, right, And so
Speaker 1: now that's obviously um apparently becoming an issue for him.
Speaker 1: But again, is it really I'm not entirely sure that
Speaker 1: this is this is the body issue. It's it's instead,
Speaker 1: to your point, kind of lowering the price. And what
Speaker 1: does this mean for regulators? Now? I don't know about
Speaker 1: the regulation front, but I can say on Twitter side,
Speaker 1: they've said we intend to enforce this merger agreement, right,
Speaker 1: so Twitter can in theory, as long as they get
Speaker 1: shareholder approval and and other a couple other stipulations, they
Speaker 1: could go to Ellen and try to sue him to
Speaker 1: force him to complete his part of the agreement here. Now,
Speaker 1: that's obviously a ways down the road, and that could
Speaker 1: be very messy, and maybe something comes up to stop that.
Speaker 1: But there is a scenario here where Twitter actually sues
Speaker 1: Elon to try and make him buy this company that
Speaker 1: he agreed to buy a few months ago, like a
Speaker 1: really well, it's so messy, and as as Ellen has tweeted,
Speaker 1: he's gathering an army of street fighting at Arney's. I guess, uh,
Speaker 1: I guess with that in mind, but Kert quickly I wonder, um,
Speaker 1: I'm trying to think who would take the job of
Speaker 1: CEO if Elon does this takeover? Have there been any
Speaker 1: rumblings about that and whether or not he's he might
Speaker 1: have a difficulty finding a CEO given his sort of
Speaker 1: unpredictable and and uh contentious personality. And Kurt just got
Speaker 1: about twenty seconds. Yeah, well, he said that he's going
Speaker 1: to temporarily be CEO. The only name of someone that
Speaker 1: seems to keep coming up is Jack Dorsey, although he
Speaker 1: said he'd never be CEO again. You just have to
Speaker 1: remember there are a lot of people out there who
Speaker 1: really do still love and admire Elon Musk. So I
Speaker 1: think finding one person who's willing to take this job
Speaker 1: and work for him won't be that hard. It just
Speaker 1: depends on who that person is going to be. Well,
Speaker 1: it just continues to give and give and give. This story. Um, Kurt,
Speaker 1: thank you so much. Really appreciated, Kurt Wagner. He's technology
Speaker 1: port U Bloomberg News on the phone in San Francisco.
Speaker 1: Shares of Twitter, as I mentioned, they were down five
Speaker 1: point six percent at it's lows, still down about one
Speaker 1: point seven per cent. You're listening to Bloomberg Business Week
Speaker 1: with Carol Messer and Bloomberg Quick Takes Tim Stinovic on
Speaker 1: Bloomberg Radio. Alright, everybody. In the upcoming issue of Bloomberg
Speaker 1: business Week. Actually it's the back page. It's out later
Speaker 1: this week. It's a story on the industrial stalwart that
Speaker 1: is going all in on specialty software. So let's get
Speaker 1: to it. Bloomberg Opinion Deals and industrialist columnist brook Sutherland.
Speaker 1: Her columns on the industrial space always a must read,
Speaker 1: and she judge us on the phone in New York
Speaker 1: City along with Bloomberg Business Week nitor Joel Webber on
Speaker 1: the access line in Brooklyn. I love these kind of stories.
Speaker 1: It's like a kind of a tell, if you will,
Speaker 1: to our audience, Um, about a company maybe we don't
Speaker 1: talk about all the time, but maybe it's got to
Speaker 1: be on our radar. Yes, so yeah, I had to
Speaker 1: tell you. Oh wait, hang on, Brook, Well, let's bring Joel.
Speaker 1: So yeah. I'm always pleasantly surprised with what brook brings
Speaker 1: our way. And you totally uh, you described it perfectly,
Speaker 1: like Roper Industrial is not a name that I was
Speaker 1: familiar with until Brooke enlightened me. And what's interesting about
Speaker 1: this company is sort of, uh, it's leaving uh, sort
Speaker 1: of the domain of brook Sutherland and coming something else. Brooke,
Speaker 1: what what jumped out to you, and why did you
Speaker 1: choose to write about Roper? Sure, so it's the company
Speaker 1: I've been writing about for a couple of years now.
Speaker 1: But you're completely right that it is not a household
Speaker 1: name that most people typically think of. But what always
Speaker 1: took me as interesting about it is they really were
Speaker 1: ahead of the curve when it came to investing in software. UM.
Speaker 1: You know, it was a couple of years ago now,
Speaker 1: but back in ten we had this sort of mini
Speaker 1: wave where all of these industrial companies were talking about digital,
Speaker 1: some more instantively than others perhaps, UM. But Roper at
Speaker 1: that point was really, you know, already sort of far
Speaker 1: along down the past of really becoming a software company UM.
Speaker 1: And they did that through a takeover based strategy where
Speaker 1: they were to acquire these niche providers of software UM
Speaker 1: where there wasn't very much competition in the market. They
Speaker 1: could command high margins UM and good free cash low
Speaker 1: and then they would turn around and spend that free
Speaker 1: cash flow on yet more deals. Rachel, I did not know.
Speaker 1: I did not know that there was software that still
Speaker 1: had white space. What kind of software are we talking
Speaker 1: about here, Brookes? Uh, it is interesting and it's really
Speaker 1: niche and so we're talking about in you know, business
Speaker 1: management software for law firms. Uh, they bought a company
Speaker 1: that makes software that used to make visual effects for movies. Um.
Speaker 1: They have software that connects you know, different parts of
Speaker 1: the construction and building product industries, from building product manufacturers
Speaker 1: to architects. Um. It's in. All of these businesses don't
Speaker 1: necessarily have a lot to do with each other. Um.
Speaker 1: What they have in common is they tend to be
Speaker 1: software based. And then again they tend to generate very
Speaker 1: high margins and throw off a lot of free cash flow.
Speaker 1: So there are a bit more like a private equity
Speaker 1: firm in that respect, and that they're not necessarily hunting
Speaker 1: for strategic adjacencies. They're looking for businesses that have really
Speaker 1: good financial characteristics. Draw your right. You know, whenever I
Speaker 1: read a Brook column, I know it's about an industrial company,
Speaker 1: so I love it. I felt this was almost like
Speaker 1: an obituary of an industrial company. It's kind of sad,
Speaker 1: kind of sad. Read a little bit, But Brook, I
Speaker 1: want to get back to that notion of these companies
Speaker 1: they decided to acquire. I'm reading your story here and
Speaker 1: it sounds like the core company it makes pumps, compressors,
Speaker 1: and controls. Okay, classic industrial Uh, then business management software
Speaker 1: for law firms, and software used to create visual effects
Speaker 1: for the movie industry. So what's there a rhymer reason
Speaker 1: for these sort of bolt on acquisitions? Or was it
Speaker 1: was just a very acquisition focused management that when they
Speaker 1: saw a good deal they couldn't resist. Um? How do
Speaker 1: you end up with this sort of conglomerate of businesses
Speaker 1: all under one roof? Sure, so it definitely was an
Speaker 1: acquisition focused company. UM. They you know, have really sort
Speaker 1: of built their strategy around takeovers in the past couple
Speaker 1: of years. And I think, you know, if you take
Speaker 1: a step back, I think what the former CEO of
Speaker 1: the company, Brian Jellison, realizes that, you know, the growth
Speaker 1: opportunities are in software. Um, it's getting very difficult to
Speaker 1: grow in industrials. We keep talking about all of these
Speaker 1: reasons to be optimistic for industrial growth, and yet here
Speaker 1: we are again talking about potentially get another recession for
Speaker 1: this industry. UM. And I think you know, when you
Speaker 1: look at software, it's a lot less vulnerable to economic
Speaker 1: slings UM. And you know, it really preserves that free
Speaker 1: cash flow profile. But then makes this acquisition machine work UM.
Speaker 1: And what made me want to take another look at
Speaker 1: this company is they actually are doing a transaction to
Speaker 1: finally get out of their industrial businesses. They struck a
Speaker 1: deal with private equity firm Quate, Doublia and Rice to
Speaker 1: sell a majority interest in the remaining industrial assets UM
Speaker 1: and then they intend to sell down the rest of
Speaker 1: that stake over time. So they are formally transitioning away
Speaker 1: from the industrial manufacturing sector, which is really interesting because
Speaker 1: it's the capstone of really a multi decade strategy to
Speaker 1: transform this company here UM. And you know, one thing
Speaker 1: that's interesting is Brian Jellison had already sort of resisted
Speaker 1: getting out of these industrial businesses in part because they're
Speaker 1: not bad businesses. I mean, Rocher is a good company.
Speaker 1: They managed these assets well. These businesses, even in the
Speaker 1: oil and gas types, are tended to generate pretty good returns,
Speaker 1: even in times of uh, you know, economic cycles, and
Speaker 1: you know, they weren't bad assets to keep around. But
Speaker 1: to your point, they really didn't ask that much to
Speaker 1: do with software. And I think his successor, Neil Hunt,
Speaker 1: has been a lot more aggressive in getting rid of
Speaker 1: some of these more traditional assets and completing the company's transformation.
Speaker 1: So you trade one sector for another, that's a pretty
Speaker 1: incredible transformation. Uh. And what do you what do you
Speaker 1: look like now that you're in a new world. What
Speaker 1: does Roper? How does stack up with its new competitive set?
Speaker 1: I think that's what's going to be really interesting because
Speaker 1: the end their benefit of holding on to these industrial
Speaker 1: assets was that you've got to continue to be followed
Speaker 1: by industrial people like myself, but also you know Wall
Speaker 1: Street analysts and investors who have different attitudes towards business.
Speaker 1: I mean, because Roper had so much software, they didn't
Speaker 1: really look like an industrial company, and they had you know,
Speaker 1: off the chart margins, off the chart, return on invested
Speaker 1: capital um, and you know, you would talk to the
Speaker 1: industrial analysts and they really would get sort of stars
Speaker 1: in their eyes talking about this company because it really
Speaker 1: was such a standout in the industrial wells. Now they're
Speaker 1: going to be part of the S and P five
Speaker 1: under and Information Technology sector index. That's a little bit
Speaker 1: of a different ballgame. It's people who have different standards
Speaker 1: for what they expect from software companies. So, like I said,
Speaker 1: Roper has always been very well run. They have this
Speaker 1: fine tuned acquisition machine, This is a very good company
Speaker 1: that they are entering a different arena with different expectations.
Speaker 1: I gotta say that book. I do wonder with IoT
Speaker 1: and you know, the Internet of Big Things, whether or
Speaker 1: not we like, does the concept to industrial change a
Speaker 1: little bit, you know, in a new era? And just
Speaker 1: got about thirty seconds left. Sure, I mean it definitely
Speaker 1: is changing. Like I said, you had sort of that
Speaker 1: rush of industrial companies getting into digital and that is
Speaker 1: only continued. I will say these strategies have gotten a
Speaker 1: little bit more fine honed over the years. So I
Speaker 1: think it is sort of table stakes that industrials will
Speaker 1: have a digital strategy. But it fits um, you know,
Speaker 1: handed glove with their manufacturing, whereas ropers really going all
Speaker 1: in on software like we talked about, you know, business
Speaker 1: management software for law firms, where for the movie industry.
Speaker 1: It's not really industrial anymore. Transformation is happening all around us,
Speaker 1: all right. Brook Sutherland deals in industrials columnist Bloomberg Opinion
Speaker 1: on the phone in New York City. As we mentioned,
Speaker 1: this story we feature in the upcoming issue of Business
Speaker 1: Week magazine. You can read it now on the Bloomberg
Speaker 1: and a Bloomberg dot com slash business Week, and our
Speaker 1: thanks always to Tell Webber, he's the editor of Bloomberg
Speaker 1: Business Week magazine. Joining us from Brooklyn. You're listening to
Speaker 1: Bloomberg Radio. This is Bloomberg. This is Bloomberg Business Week
Speaker 1: with Carol Master and Bloomberg Quick Takes Tim Stenovic on
Speaker 1: Bloomberg Radio. We have seen so many Americans die from
Speaker 1: drug overdoses. Between nineteen yearly half a million Americans dying
Speaker 1: as part of the opioid epidemic. Opioid drugs probably contributed
Speaker 1: to an unprecedented decline in US life expectancy from seventeen.
Speaker 1: They've also hit the labor markets. We've seen a lot
Speaker 1: of estimates about the cost in so many different levels
Speaker 1: when it comes to opioids. Well, here with the latest
Speaker 1: on the settlements and more, we welcome William Tongue. He's
Speaker 1: Attorney General of the State of Connecticut with us in
Speaker 1: our Interactive Broker studio. General Tongue, it's so nice to
Speaker 1: have you here with us. I do feel like there's
Speaker 1: two big issues right now affecting the safety and well
Speaker 1: being of our citizens, and I think about guns and opioids,
Speaker 1: and if I may, let's talk about guns. First, Um,
Speaker 1: you were key and helpful in passing gun control measures
Speaker 1: after the Sandy Hooks massacre. I think we all thought
Speaker 1: after that, oh, things are going to change dramatically. I'm
Speaker 1: not even sure what the smart conversation is about gun
Speaker 1: control in this country when we see tragedy after tragedy,
Speaker 1: just in the last month alone, what is the smart conversation?
Speaker 1: Recognize that this is a public health emergency and an epidemic,
Speaker 1: and nobody knows it better than Texas right now, and
Speaker 1: nobody knows it better than Connecticut. You know, it's been
Speaker 1: barely ten years that we suffer the same tragedy that
Speaker 1: people and you bold you are experiencing now. And Um,
Speaker 1: we're grateful for our own home state Senator Chris Murphy,
Speaker 1: who's leading the charge in Washington. We do hope that
Speaker 1: those discussions will bear fruit, but hopeful, but are in
Speaker 1: the reality. I mean, we're realistic. Why has it become
Speaker 1: so much a right about bearing arms versus protecting the
Speaker 1: broader society? No, I don't know. I have a sixteen
Speaker 1: year old and a thirteen year and a ten year old,
Speaker 1: and I think all of us are asking how many
Speaker 1: more children have to die? I mean, what's what's hard
Speaker 1: about doing what we have to do to keep our
Speaker 1: children safe? What's polarizing? What's political all about that? Nothing? Nothing?
Speaker 1: You know, all of us put our kids on our
Speaker 1: buses or drop them off at school every single day,
Speaker 1: and we hope we get them back safe. And and
Speaker 1: that that hope is is now not a given, but
Speaker 1: in question is terrifying for all of us who have
Speaker 1: children in this country. And so after Newtown, we took
Speaker 1: strong action, effective action. We have some of the strongest
Speaker 1: gun laws in the nation, some of the lowest rates
Speaker 1: of gun violence in the nation. After Sandy Hook. It
Speaker 1: still happens in Connecticut, as it happens everywhere. But we're
Speaker 1: blessed to have a ban on large capacity magazines UM
Speaker 1: on the A R fifteen. We have UM a ban
Speaker 1: on ghost guns in Connecticut. I wrote UM the domestic
Speaker 1: violence gun law, which a lot of people referred to
Speaker 1: as a red flag law. I did that before, and
Speaker 1: I became attorney general when sense so common sense. UM
Speaker 1: hard to understand what the objections are. But still, William,
Speaker 1: I wonder you know, if you pass these measures in Connecticut, UM,
Speaker 1: you still run the risk of some state next door
Speaker 1: two states over having looser laws and someone you know,
Speaker 1: buying a gun there smuggling it in. So it must
Speaker 1: be frustrating in a way. I mean ultimately from where
Speaker 1: you sit, is this really a job that DC has
Speaker 1: to undertake? So we we we don't run that risk.
Speaker 1: We live there right there, there's the iron pipeline, um,
Speaker 1: that comes up from the South to Connecticut and literally
Speaker 1: people with guns in the back of their trunks and
Speaker 1: they go in often into urban areas and in Connecticut,
Speaker 1: pop the trunk and say what are you looking for?
Speaker 1: It's terrible and and it's terrible, UM, on some very
Speaker 1: real level, it's totally nuts that we have a system
Speaker 1: like this. And um, as so many of us have
Speaker 1: said over and over again, I bet you have in
Speaker 1: the past couple of weeks. This happens nowhere else in
Speaker 1: the world but here. And um that we're unable to
Speaker 1: stop stop it, not that we're powerless to stop it. Right.
Speaker 1: Remember what, Remember what Justice Scalia and Justice Alito said
Speaker 1: in Heller and McDonald, the two big um gun control
Speaker 1: for lack of a better description cases before the Supreme Court.
Speaker 1: They said states have a role in the name of
Speaker 1: public safety to regulate gun ownership and gun use UM
Speaker 1: to keep people safe. And this is Justice Alito and
Speaker 1: Justice Scalia saying this. And so if it's obvious that
Speaker 1: we have a role, then let's take UM, let's take
Speaker 1: on our responsibility to keep people safe. I do want
Speaker 1: to point out Michael Bloomberg, the founder majority owner of
Speaker 1: Bloomberg LP, the parn of Bloomberg Radio, and of course
Speaker 1: Bloomberg Philanthropy is a donor to groups that's up our
Speaker 1: gun control, including every Town for Gun Safety. UM. We're
Speaker 1: talking with William Tong, Attorney General the State of Connecticut. UM,
Speaker 1: we might do wonder if we see more Americans I
Speaker 1: think about what's going on with abortion, where individuals can
Speaker 1: kind of go after you know, kind of almost become
Speaker 1: like public sheriffs if you will, in going after things
Speaker 1: or vigilant. If Americans can start and aggressively so start
Speaker 1: suing more gunmakers, might that bring about a change, and
Speaker 1: should they be allowed to it might? And And there's
Speaker 1: the case against Remington's in Connecticut that broke new ground
Speaker 1: UM in the law. And basically what the Supreme Court
Speaker 1: of Connecticut said is that UM people can bring consumer
Speaker 1: protection lawsuits against the gun manufacturers UM. Notwithstanding UM the
Speaker 1: federal law known as Placa, which UM is a huge
Speaker 1: liability shield for the gun industry, and and so that's encouraging. UM.
Speaker 1: We you know, we're prepared UM for the Supreme Court
Speaker 1: to issue a decision in the Brewing case that's coming.
Speaker 1: So all the focuses on abortion right now in Dobbs,
Speaker 1: but Bruin is coming to and it affects New York
Speaker 1: States gun laws, and so that will that may be bad,
Speaker 1: and that may have a direct impact on connecticuts laws.
Speaker 1: Just kind of segues into opioids because I do feel
Speaker 1: about like liability. Why is it that you have companies
Speaker 1: that create products that put so many Americans at risk?
Speaker 1: And I think about opioids. UM, you held that with
Speaker 1: the state settlement in Connecticut UM for Connecticut Base Perdue Pharma,
Speaker 1: UH and the Sackler family, and I think doubled or
Speaker 1: more so the amount in terms of their responsibility. But
Speaker 1: why is it though that when it comes down to it,
Speaker 1: they're not really held liable as individuals or you know
Speaker 1: what I mean, Like we have these settlements and companies, well,
Speaker 1: we did no wrong, we didn't. They're extraordinarily powerful these
Speaker 1: companies because of lobbying that they're extraordinarily well connected. Um
Speaker 1: they have great lawyers and I'm a lawyer too, and um,
Speaker 1: um they behind a system, a bankruptcy system that is broken.
Speaker 1: And and that's why that's part of the reason why
Speaker 1: Connecticut continued to fight and held out. As you say, um,
Speaker 1: when we said the first settlement offer a three billion
Speaker 1: and then four and a half billion wasn't enough, because um,
Speaker 1: it wasn't enough. And it's not just about the money, right,
Speaker 1: it's about doing justice. It's about not creating the wrong
Speaker 1: incentives that if you're a gazillionaire and you do something
Speaker 1: horrible and you kill people, you're in Connecticut Still that
Speaker 1: number is going up. And more than ten billion dollars
Speaker 1: in damage every year to one state of three million people.
Speaker 1: How much money did they make. Yeah, they took out
Speaker 1: conservatively eleven twelve billion dollars out of the company. You
Speaker 1: know it's much more than that. And by the way,
Speaker 1: you also know they're getting richer right now by the minute,
Speaker 1: I'm looking at the ticker tape here right on the screen.
Speaker 1: Every day they're in the market, they're making more money
Speaker 1: and and and should the individuals the family be held responsive. Yes, yes,
Speaker 1: and and we have encouraged criminal authorities in the Department
Speaker 1: of Justice to do the same. Um. I don't have
Speaker 1: that authority as the state attorney general in Connecticut, and
Speaker 1: so I did everything I could to push a deal
Speaker 1: um that was at four and a half billion, to
Speaker 1: increase it to six billion as at increase to make
Speaker 1: them the Sacklers face the victims and have victims and
Speaker 1: survivors speak directly to members of the Sacklo family. That
Speaker 1: was a specific ask by Connecticut that that happened. That
Speaker 1: was a big deal. You know, William, I'm trying to
Speaker 1: put myself in your shoes as the state attorney general
Speaker 1: in Connecticut. And and don't worry, I'm not a lawyer,
Speaker 1: so no competition. You don't have to worry about me.
Speaker 1: It is an election here. But but you know, I'm
Speaker 1: thinking of both of these problems. You're big, big, huge problems.
Speaker 1: You're trying to solve opioids and guns. And in Connecticut,
Speaker 1: you know that ensure in industry is so crucial to
Speaker 1: the state of Connecticut. And I'm wondering is there any
Speaker 1: role for insurance companies in both of these issues. And
Speaker 1: the reason I asked is, you know, when I got
Speaker 1: a trampoline at my house, I got notified by my
Speaker 1: insurance company that they were dropping my homeowners because of
Speaker 1: the trampoline. Is there a case to be made that
Speaker 1: if someone has an A R fifteen in their house
Speaker 1: that the insurance company should be alerted. Uh, Or if
Speaker 1: a doctor is prescribing too much opioids that they're in
Speaker 1: malpractice insurance company. You know, given your position in Connecticut
Speaker 1: with a lot of insurance companies, I wonder if these
Speaker 1: issues ever come up, and they do. They do. There's
Speaker 1: a lot of creative thinking around that, around ways in
Speaker 1: which insurance can step in and require coverage. UM. Then
Speaker 1: there are counter arguments UM that that that somehow infringes
Speaker 1: on the right UM and and there are some arguments
Speaker 1: when you put pressure on the insurance companies that that's
Speaker 1: somehow bad for business and bad for the economy. What's interesting, though,
Speaker 1: is not only does Connecticut have a long standing and traditional,
Speaker 1: deep relationship with the insurance industry insurance industry, we also
Speaker 1: have a deep and long standing relationship with the gun
Speaker 1: manufacturing industries. Right and on top of that produce farm
Speaker 1: of the Sacklers pharmaceutical companies also based in Connecticut. So
Speaker 1: a lot of interested parties for better or worse. Well, right,
Speaker 1: because there's the upside to the economy, right jobs like
Speaker 1: like you bring in these companies, but you do wonder,
Speaker 1: you know at the end of the day, like where's
Speaker 1: the ultimate responsibility. We've learned this with cigarettes, with climate change,
Speaker 1: the oil industry, like right, like things that we know
Speaker 1: do harm. And people ask me when I first got
Speaker 1: elected and I started to get really aggressive on opioids
Speaker 1: and on the the Sacklers in Purdue Pharma, and they said, William,
Speaker 1: you know, what does it mean to you that they're
Speaker 1: from Connecticut or based in Connecticut. And I think they
Speaker 1: expected me to be like a homer, right that, oh, well,
Speaker 1: there are law jobs at stake, and you know, good
Speaker 1: Connecticut company. I said that what it means to me
Speaker 1: is that Connecticut and the state attorney General has a
Speaker 1: special obligation to be aggressive. It's on me, it's on us. Well,
Speaker 1: great to get your perspective, and we certainly will follow
Speaker 1: your efforts. Thank you so much. William Tong, He's Attorney
Speaker 1: General of the state of Connecticut. Joining us here in
Speaker 1: our Interactive Broker Studio. I'm room a journal now, but
Speaker 1: you let me drive. Oh no, no, no no, no, honey, please,
Speaker 1: I'll do the ride revels. I want to drive. It's
Speaker 1: a good question. Drive. This is good Drive to the
Speaker 1: Globe on blue Bird Radio. Just about ten minutes left
Speaker 1: in today's trading session on this Monday, June six, Let's
Speaker 1: get to it to drive to the close with Jason Greenblack,
Speaker 1: Senior portfolio manager American Century Investments. They've got some two
Speaker 1: hundred sixteen billion in assets under management. He joins us
Speaker 1: on the phone from New York City. He's also involved
Speaker 1: in the management of several funds. Hey, Jason, is so
Speaker 1: great to have you here on Bloomberg Business Week with
Speaker 1: myself and Mike Regan. How are you? And tell me
Speaker 1: why investors should care about fixed income at this juncture? Hi, Carol,
Speaker 1: Hi Mike. It's nice to speak with you today. So
Speaker 1: that's a question that we often get is why why
Speaker 1: fixed income? Why now down double digits in most asset
Speaker 1: classes within UH fixed income? Why should I care? And
Speaker 1: our response to that is is, um, We've we've repriced
Speaker 1: a lot. It certainly depends on your time horizon. If
Speaker 1: you're trying to to make short term asset allocation plays.
Speaker 1: You probably lost in the last week and a half.
Speaker 1: If you look back a week and a half ago,
Speaker 1: the tenure treasury was at two and three quarters were
Speaker 1: now up thirty basis points, and you would have lost
Speaker 1: two and a half percent UM. If you think about
Speaker 1: it longer term, though, in our minds, we think now
Speaker 1: is actually an interesting time to to start dipping in. UH.
Speaker 1: Spreads have certainly repriced in a lot of spread sectors,
Speaker 1: and treasury yields have really doubled this year, So we
Speaker 1: think on a longer term basis it makes sense, UM.
Speaker 1: But we also think it makes sense to have dry powder. UM.
Speaker 1: You know, we know that that we don't have a
Speaker 1: crystal ball. You know that volatility is high. We want
Speaker 1: to take advantage of opportunities, UM, on an active basis here.
Speaker 1: You know, Jason, I've noticed you say you're underweight mortgage
Speaker 1: backed securities and underweight both investment grade and high yield credit.
Speaker 1: I'm curious, um, sort of what the rationale is for that.
Speaker 1: Is it strictly a matter of rates are gonna keep
Speaker 1: going up? Or are you worried about any sort of
Speaker 1: credit risks starting to percolate in the economy as we
Speaker 1: as we cool down a little bit from the growth
Speaker 1: spurt we had and see these interest rate rise Are
Speaker 1: we looking at some deteriorating credit quality? Do you think
Speaker 1: we think it's the latter. We think that, Um, we
Speaker 1: are starting to see some cracks. We heard last week
Speaker 1: from from Jamie Diamond at JP Morgan Elon Musk making
Speaker 1: some comments. But the quote that I think is is
Speaker 1: really um you know most relevant today is is from
Speaker 1: Restoration Hardware CEO. UM. He made a comment saying that,
Speaker 1: you know, we have a long way to go and
Speaker 1: in rising rates to fight inflation, and none of us
Speaker 1: have a crystal ball, and we have to be prepared
Speaker 1: for anything right now. And we agree. We think that
Speaker 1: if the FED is still pushing forward with rates, inflation
Speaker 1: is still a problem. That we've heard on numerous occasions
Speaker 1: from many CEOs and management teams on first quarter earnings
Speaker 1: calls that we do think that that credit does have
Speaker 1: some some room to crack here. Um, it's not going
Speaker 1: to be at the upper tier of of the market.
Speaker 1: We think it's probably more so and those that are
Speaker 1: more highly levered, those companies that have a higher rate
Speaker 1: of ating rate um interest expense, and at some point
Speaker 1: we think that, you know, companies are going to be
Speaker 1: having difficult times passing along these price increases to consumers
Speaker 1: and it's not We think we're seeing evidence of that today.
Speaker 1: And we think that, you know, credit does have a
Speaker 1: propensity to widen from here, and at some point we
Speaker 1: want to use that built up liquidity to to buy
Speaker 1: when valuation is cheap en up. You know, it's funny
Speaker 1: that you say that about r H because our Romaine
Speaker 1: Bostick last week, you know, I think listened a lot
Speaker 1: to the earnings call and just said it was like
Speaker 1: listening to a FED call, Like it was just fascinating
Speaker 1: the amount he was talking about. You wouldn't have thought
Speaker 1: it was this high end, you know, furniture company because
Speaker 1: they were talking so much about interest rates in the
Speaker 1: economic outlook. But is it is interesting to see how
Speaker 1: the the tone has changed. Um, are you setting up
Speaker 1: your investors for some kind of you know, deep recession
Speaker 1: or recession at all? Recession? Certainly a question that we
Speaker 1: keep asking ourselves internally. At this point, that is not
Speaker 1: our central case scenario. We we think that stagflation is
Speaker 1: more likely the outcome here where growth is slowing um
Speaker 1: and flation will remain stubbornly high. However, I do think
Speaker 1: that is fixed income investors. We we typically model our
Speaker 1: cash flows and our assumptions to say, well, how will
Speaker 1: company why or Z perform in a recession and a
Speaker 1: risk off environment. And when you come to valuations and
Speaker 1: you look at corporate O A, S and I G
Speaker 1: at one thirty and about four hundred for high yield,
Speaker 1: we just don't think we're being compensated for that stagflation
Speaker 1: or even the recessionary risk that that could be looming
Speaker 1: um in the next twelve to eighteen months. You know, Jason,
Speaker 1: Obviously everyone is talking about how the FED wants to
Speaker 1: see financial conditions tighten a little bit further before they're
Speaker 1: comfortable that they're they're getting the job done on the
Speaker 1: inflation side. What kind of credit market turmoil do you
Speaker 1: think it would take to cause the FED the sort
Speaker 1: of back off of their tightening campaign. Um, I think
Speaker 1: we need to look at the very front end of
Speaker 1: the curve. The liquidity markets and funding in particular had
Speaker 1: had tightened back in March. That to us was an
Speaker 1: indication that maybe the FED the expectations coming off the
Speaker 1: beginning of the war in the Ukraine was starting to
Speaker 1: perhaps um influence the FED a bit. Um. However, I
Speaker 1: think just listening to the FED governors and even the
Speaker 1: chair over the last couple of weeks, they want to
Speaker 1: continue to push harder and and push forward with their
Speaker 1: rate hikes. So I think the liquidity that we're feeling
Speaker 1: at the moment, and and it is a less liquid
Speaker 1: market than we were in six months ago, it's just
Speaker 1: not enough. And I think conditions need to tighten up
Speaker 1: quite a bit more for them too, to perhaps put
Speaker 1: that um great hike on pause. Jason, really quickly thirty seconds. Um.
Speaker 1: In terms of green money and E s G. It
Speaker 1: does feel like a reckoning. You guys don't have a
Speaker 1: dedicated kind of green money space necessarily, but this is
Speaker 1: part of your process. Is this an opportunity for investors,
Speaker 1: especially as we look at what's going on to you
Speaker 1: politically with energy markets just so much kind of being
Speaker 1: disrupted and again just quickly sure, UM, I do think
Speaker 1: that there are opportunities. We see them every day in
Speaker 1: new issuance as far as certain sectors go. Um. You know,
Speaker 1: I think that where the cash flows go is where
Speaker 1: we should be looking, Um, we want to make sure
Speaker 1: that we're getting paid for taking those risks. And you know,
Speaker 1: as E. S. G goes, it's it's embedded in our
Speaker 1: process and I think that that's you know, key to
Speaker 1: to the analysis. Well, good to have you on come back,
Speaker 1: because we'd love to continue this conversation. Jason Green black
Speaker 1: Over at American Century Investments. Thanks for listening to Bloomberg
Speaker 1: Business Week. Download the podcast on iTunes, SoundCloud, or Bloomberg
Speaker 1: dot com, and you can also listen to our radio
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