WEBVTT - Chipmakers Could Be Hit With Both U.S. And China Tariffs: Ovide 0:00:05.800 --> 0:00:08.360 Welcome to the Bloomberg P and L Podcast. I'm pim 0:00:08.400 --> 0:00:11.200 Fox along with my co host Lisa A. Brahmowitz. Each 0:00:11.240 --> 0:00:14.440 day we bring you the most important, noteworthy, and useful 0:00:14.480 --> 0:00:17.079 interviews for you and your money, whether you're at the 0:00:17.120 --> 0:00:20.360 grocery store or the trading floor. Find the Bloomberg P 0:00:20.520 --> 0:00:42.159 M L Podcast on Apple Podcasts, SoundCloud and Bloomberg dot Com. 0:00:42.159 --> 0:00:44.000 One of the issues having to do with trade and 0:00:44.200 --> 0:00:47.680 the United States and China is technology. For example, Micron 0:00:47.680 --> 0:00:50.239 Technology said a ban on the sale of some of 0:00:50.280 --> 0:00:55.680 its products in China is unfair but won't hurt its earnings. 0:00:56.040 --> 0:00:58.680 Here to tell us more about how chip makers are 0:00:58.760 --> 0:01:03.360 trapped in the US China crossfire is our own Shira Oviday, 0:01:03.440 --> 0:01:07.000 technology columnist for Bloomberg Opinion, and of course you can 0:01:07.040 --> 0:01:09.959 follow Shira on Twitter at Shira over Day. All right, 0:01:10.000 --> 0:01:14.360 Shara tell us about the chip companies and why this 0:01:14.400 --> 0:01:17.319 has been a back and forth because it has to 0:01:17.400 --> 0:01:19.959 do not just with tariffs, but then it has to 0:01:20.040 --> 0:01:24.560 do with the imposition of bands about what kinds of 0:01:24.600 --> 0:01:27.840 products can be sold between the two countries. Right, So 0:01:27.880 --> 0:01:31.720 there's two issues at play here that involve computer chip makers. 0:01:31.800 --> 0:01:36.360 US chip makers. So I think, much to the surprise 0:01:36.400 --> 0:01:40.319 and chagrin of US chip makers, on the list of 0:01:40.319 --> 0:01:45.320 the first wave of US tariffs of goods coming from 0:01:45.440 --> 0:01:52.880 China are some products that impact US chip makers. So again, 0:01:53.440 --> 0:01:56.400 they trade group for the chip company said, we're in 0:01:56.400 --> 0:01:59.720 this weird position where some of the products that are 0:01:59.720 --> 0:02:03.160 come from US chip companies that get sent to China 0:02:03.320 --> 0:02:07.040 force sort of testing or some minor assembly, and then 0:02:07.320 --> 0:02:09.840 sent back to the U S or other countries, they're 0:02:09.880 --> 0:02:13.000 being subject to this tariff. Right, So you have US 0:02:13.080 --> 0:02:16.400 tariffs that are trying to protect US companies that are 0:02:16.480 --> 0:02:20.280 then being forced to absorb tariffs in some of these cases. Um, 0:02:20.320 --> 0:02:23.960 which I think again was surprising to US chip companies. Now, 0:02:24.080 --> 0:02:27.080 let's just take maybe just one example, because I know 0:02:27.160 --> 0:02:32.360 that you know, not all chips are created equal, right, um, Micron, 0:02:32.600 --> 0:02:34.960 which has been the sort of the post child for 0:02:35.000 --> 0:02:37.600 this whole thing. It has to do that the issue 0:02:37.639 --> 0:02:42.560 with Micron has to do with a Taiwanese chip maker 0:02:43.120 --> 0:02:49.280 as well, United micro Electronics. They're based in Taiwan, correct, right, 0:02:49.320 --> 0:02:52.520 So the the issue that Micron has is somewhat separate 0:02:52.560 --> 0:02:55.960 from the tariff issues. So they have been sued Micron, 0:02:56.000 --> 0:02:58.840 which is based in Boidi, Boise, Idaho, that makes these 0:02:58.919 --> 0:03:01.840 kind of memory chips are essential and basically anything that 0:03:01.919 --> 0:03:04.880 has a computer brain, so that includes smartphones, that includes 0:03:05.120 --> 0:03:09.280 supercomputers and everything in between. So they've been sued for 0:03:09.400 --> 0:03:13.520 patent infringement in China by both a Chinese company and 0:03:13.560 --> 0:03:17.400 a Taiwanese company. And what Micron says is this lawsuit 0:03:17.639 --> 0:03:21.880 which is basically accusing them of stealing um, you know, 0:03:22.000 --> 0:03:26.680 proprietary technology from this Taiwanese and China for their graphics cards, 0:03:26.720 --> 0:03:30.280 right computer graphics cards. So what Micron says is basically 0:03:30.320 --> 0:03:35.720 this lawsuit is a ruse um too to cover up 0:03:35.840 --> 0:03:41.520 for Chinese intellectual property theft of Micron's own technology. So 0:03:42.160 --> 0:03:44.600 and Micron believes that this is politically motivated, that this 0:03:44.640 --> 0:03:47.640 is part of China's kind of attempts to develop a 0:03:47.680 --> 0:03:51.600 homegrown computer chip industry, and that part of that effort, 0:03:51.680 --> 0:03:55.440 Micron says, is to kind of steal from American companies, 0:03:55.760 --> 0:03:58.600 and they feel like Micron feels like they're caught in 0:03:58.640 --> 0:04:03.360 this kind of US China battle over the future of technology. Okay, 0:04:03.360 --> 0:04:06.960 so that's Microns case. Now let's go to another patient. 0:04:07.400 --> 0:04:10.240 This has been to do with Qualcom. It wants to 0:04:10.320 --> 0:04:16.080 acquire an XP semiconductor, but like in any situation, you 0:04:16.160 --> 0:04:19.279 have to get government approval, right, Yeah, that's right. So 0:04:19.400 --> 0:04:21.800 Qualcom again, like Micron, feels like it's kind of caught 0:04:21.800 --> 0:04:24.880 in the crossfire between the U S and China trade 0:04:24.880 --> 0:04:27.840 war that they have been trying to buy this Dutch 0:04:28.200 --> 0:04:32.159 chip maker and XP for eighteen months I think, and 0:04:32.400 --> 0:04:36.599 the last regulatory approval is the Chinese antitrust body, and 0:04:36.680 --> 0:04:40.960 Qualcom has said with some justification that they believe that 0:04:41.080 --> 0:04:44.839 regulatory approval in China is being held up because of 0:04:44.960 --> 0:04:51.680 retaliation perhaps for the us UM essentially banning or imposing 0:04:51.720 --> 0:04:54.800 a death sentence on z T, which is this um 0:04:54.880 --> 0:05:01.480 Chinese telecom company that broke us UM us by selling 0:05:02.040 --> 0:05:04.760 goods to Iran and other band countries and then lying 0:05:04.800 --> 0:05:07.360 about it. It looks like z T s back in 0:05:07.400 --> 0:05:09.919 the U S government's good graces after you know, a 0:05:09.920 --> 0:05:12.640 big fine and some management changes. So we'll see if 0:05:12.680 --> 0:05:17.479 that impacts the speed of regulatory approval for the Qualcom 0:05:17.560 --> 0:05:20.240 n XP deal. Do you have a big whiteboard by 0:05:20.279 --> 0:05:23.719 your desk in order to sort of diagram all of 0:05:23.760 --> 0:05:27.440 the connections here because I'm gonna because I'm gonna go 0:05:27.520 --> 0:05:32.080 even deeper here, which is that the chips that Micron 0:05:32.240 --> 0:05:38.920 makes are very likely sold or shipped to China and 0:05:38.960 --> 0:05:45.680 then put into products maybe let's say smartphones, right, that 0:05:45.760 --> 0:05:51.560 are then sold to customers in the United States and Europe. Correct. Yeah, 0:05:51.600 --> 0:05:54.400 it is very complicated. And I was asking folks in 0:05:54.440 --> 0:05:57.320 the chip industry yesterday, is it possible that they could 0:05:57.360 --> 0:06:00.880 be hit by tariffs on both side of this trade war? 0:06:01.200 --> 0:06:05.720 Could they be subject to US tariffs on some products 0:06:05.760 --> 0:06:09.440 and Chinese tariffs on some products? And the answer that 0:06:09.480 --> 0:06:12.520 I got was, They're not really sure, but it's possible, 0:06:12.600 --> 0:06:16.320 which would be mind blowing. And the companies that we've 0:06:16.360 --> 0:06:20.400 just talked about, Micron, Qualcom, and XP, they're not the 0:06:20.440 --> 0:06:23.920 only ones. We've got broad Calm, Texas Instruments, A m 0:06:24.040 --> 0:06:29.560 D microchip technology, Intel, and video and analog devices. All 0:06:29.640 --> 0:06:35.680 of these companies produce a decent amount of revenue in China. Yeah. 0:06:35.720 --> 0:06:39.040 I mean, look, China is right now the world's biggest 0:06:39.440 --> 0:06:43.440 buyer of computer chips. Um that if you look at 0:06:43.600 --> 0:06:47.920 US exports by revenue, computer ships are number four, behind 0:06:48.000 --> 0:06:51.320 things like airplanes and cars and oil. So you know, 0:06:51.360 --> 0:06:53.760 this is a big U s export with a lot 0:06:53.760 --> 0:06:58.360 of powerful and big US companies and computer ships are 0:06:58.360 --> 0:07:03.839 also again the you know, the beating heart of China's 0:07:03.920 --> 0:07:09.040 made made in China initiative to develop more homegrown technology. 0:07:09.320 --> 0:07:11.960 So it's inevitable that these US chipmakers are getting kind 0:07:11.960 --> 0:07:15.200 of caught in this power play between the US and China, 0:07:15.240 --> 0:07:19.000 where China is both the their biggest customer in many 0:07:19.040 --> 0:07:23.120 cases and also this kind of source of tension between 0:07:23.120 --> 0:07:26.360 their home country, the United States, and their biggest market, China. 0:07:26.640 --> 0:07:30.680 Is it worth noting that nobody forced these companies to 0:07:30.840 --> 0:07:33.600 put their production Let's say, if they have production in 0:07:33.760 --> 0:07:38.400 China in China, they went there because the scale and 0:07:38.440 --> 0:07:41.840 the cost makes it possible to then buy a smartphone 0:07:42.680 --> 0:07:45.520 that costs whatever it is but allows everybody to make 0:07:45.520 --> 0:07:47.320 a decent profit on it. Yeah, and that's a that's 0:07:47.320 --> 0:07:50.120 a totally fair point. That Look, the supply chain for 0:07:50.120 --> 0:07:53.640 a lot of products, including computer chips, is very global. 0:07:54.080 --> 0:07:57.640 That you do have these huge factories in China that 0:07:57.720 --> 0:08:01.240 have developed expertise over the years in you know, certain 0:08:01.240 --> 0:08:05.160 discrete elements of the computer chip manufacturing process. And the 0:08:05.160 --> 0:08:08.240 same is true in Vietnam. And Malaysia and the United 0:08:08.240 --> 0:08:11.160 States and other countries. You know, they have developed these 0:08:11.320 --> 0:08:17.200 um specialties and certain aspects of smartphone manufacturing, testing and assembly. 0:08:17.680 --> 0:08:19.760 And right now, I think what you're seeing in the 0:08:19.800 --> 0:08:22.640 computer chip industry is some questioning about do we need 0:08:22.680 --> 0:08:26.040 to adjust the supply chain as it has developed over 0:08:26.080 --> 0:08:32.400 the last decades to kind of reflect this fear of 0:08:32.440 --> 0:08:35.920 globalization being crimped in various corners of the world. So 0:08:36.000 --> 0:08:38.160 it's it's really interesting right now, a little a little 0:08:38.160 --> 0:08:39.800 bit of an irony when you think of all of 0:08:39.840 --> 0:08:45.280 the sort of market driven decisions that are made and 0:08:45.600 --> 0:08:49.400 yet they end up being political in terms. Everything is political. 0:08:49.480 --> 0:08:52.839 Everything is political now. Thanks very much. Shira Oviday our 0:08:52.920 --> 0:08:55.839 technology columns for Bloomberg Opinion. Check out all her stuff 0:08:55.880 --> 0:08:59.199 on Bloomberg dot com, slash opinion, and follow her on 0:08:59.240 --> 0:09:27.280 Twitter at your over Day. The unemployment rate moved to 0:09:27.400 --> 0:09:31.480 hire in June from an eighteen year low. Steady hiring 0:09:31.640 --> 0:09:36.160 and an increased number of job seekers continue to support 0:09:36.240 --> 0:09:40.199 the labor market. US non farm payrolls rose a seasonally 0:09:40.240 --> 0:09:43.920 adjusted two d and thirteen thousand in June. Here to 0:09:43.960 --> 0:09:46.839 tell us more about the report and its implications is 0:09:46.920 --> 0:09:49.599 Chris leu. He is a senior fellow at the University 0:09:49.679 --> 0:09:53.319 of Virginia Miller Centers, a former Deputy Secretary of Labor 0:09:53.679 --> 0:09:56.840 under President Barack Obama. He can be followed on Twitter 0:09:56.960 --> 0:10:01.360 at Chris lout four All Chris lou forty four. I 0:10:01.360 --> 0:10:05.120 want to focus first on wages and the increase that 0:10:05.200 --> 0:10:08.160 we saw. I believe it was two point seven percent. 0:10:08.720 --> 0:10:12.320 Do you believe that at that level we could get 0:10:12.360 --> 0:10:18.000 to a four percent annual g d P rate? I don't, uh, 0:10:18.040 --> 0:10:21.440 And I think that is really the concerning part of 0:10:21.520 --> 0:10:24.600 an otherwise strong jobs numbers we have been in this 0:10:25.000 --> 0:10:26.920 kind of two point five. I think we were up 0:10:26.920 --> 0:10:31.320 to two point eight percent increased last month. Two point 0:10:31.360 --> 0:10:34.240 seven is just not enough, and particularly when you consider 0:10:34.400 --> 0:10:37.440 that inflation right now is running two point eight percent, 0:10:37.520 --> 0:10:40.880 that effectively means that most workers aren't seeing any more 0:10:40.920 --> 0:10:43.760 money than they did a year ago. And so we 0:10:43.920 --> 0:10:46.200 we are in a very difficult situation right now where 0:10:46.200 --> 0:10:49.360 the said um hasn't quite decided where they want to 0:10:49.400 --> 0:10:51.439 go on rates, which will have an effect on wages. 0:10:51.760 --> 0:10:55.560 We're starting to wonder whether this jobs market is different 0:10:55.559 --> 0:10:58.160 than what we have always thought, which is if you're 0:10:58.160 --> 0:11:00.920 down in this level of unemployment, you would expect ways 0:11:00.960 --> 0:11:03.760 to be going up much much faster. So um, you know, 0:11:03.800 --> 0:11:05.560 I think it's concerning, and I think many of us 0:11:05.559 --> 0:11:08.520 are starting to wonder what this economy is fundamentally different 0:11:08.559 --> 0:11:10.880 than what it used to be. Well, take that a 0:11:10.880 --> 0:11:13.160 little bit further and tell us if you had to 0:11:13.200 --> 0:11:16.320 explore that idea of a fundamentally different economy, what do 0:11:16.360 --> 0:11:19.040 you mean by that. Well, Look, you would think when 0:11:19.040 --> 0:11:21.160 you have normally a tightening labor market, a couple of 0:11:21.200 --> 0:11:23.480 things happen. People come off the sidelines, which is what 0:11:23.520 --> 0:11:25.680 happened this month, and it's one of the reasons why 0:11:25.720 --> 0:11:28.320 the unemployment rates picked up from three point eight to 0:11:28.360 --> 0:11:30.560 four percent. And that's a good thing. But you would 0:11:30.600 --> 0:11:33.800 also think that in this tightening job market, employers would 0:11:33.800 --> 0:11:36.920 have to pay more uh to entice workers to come there, 0:11:37.000 --> 0:11:39.520 and it just doesn't happen. And you know, we know 0:11:39.600 --> 0:11:43.400 that there are some solutions to this. Obviously, job training 0:11:43.440 --> 0:11:46.840 is important in helping people advance the more skilled jobs. 0:11:47.600 --> 0:11:51.080 High paying jobs like manufacturing and construction are another good answers, 0:11:51.120 --> 0:11:54.080 and it's one of the reasons why infrastructure is always 0:11:54.120 --> 0:11:58.360 a bipartisan policy idea raising the federal minimum wage and 0:11:58.400 --> 0:12:01.280 state minimum wages would have an effec as well. But 0:12:01.480 --> 0:12:04.360 we also may be trapped in a situation where we 0:12:04.480 --> 0:12:07.840 now have a perpetual class of people who are doing 0:12:07.920 --> 0:12:12.280 relatively unskilled labor at basically minimum wages who just can't 0:12:12.280 --> 0:12:14.840 get out of that trap right now. And that's concerning 0:12:15.360 --> 0:12:18.480 well to your point. In June, the share of American 0:12:18.520 --> 0:12:22.600 adults working or looking for a job rose by two 0:12:22.640 --> 0:12:26.160 tenths of a percentage point. That number now is sixty 0:12:26.200 --> 0:12:29.120 two point nine percent, and it is up from that 0:12:29.280 --> 0:12:33.360 low of sixty two point three that wasn't in But 0:12:33.960 --> 0:12:37.120 it's like it's like the smallest share of adults participating 0:12:37.200 --> 0:12:40.400 since the late nineteen seventies. This is not something that 0:12:40.559 --> 0:12:42.960 is brand new, is it. No, that's exactly right. I mean, 0:12:43.040 --> 0:12:46.120 throughout most of the Obama administration and now the Trump administration, 0:12:46.280 --> 0:12:50.400 the figure you're sighting, the labor force participation has basically 0:12:50.440 --> 0:12:53.600 been between about sixty two percent and sixty three percent, 0:12:53.960 --> 0:12:57.880 and that's declined steadily since the mid nineteen seventies. Now, 0:12:57.920 --> 0:13:00.240 in part it's because of changes in the Democrat six 0:13:00.320 --> 0:13:03.280 of the workforce. We have a lot of people retiring earlier, 0:13:03.480 --> 0:13:05.839 we have more people in school, so and that's a 0:13:05.880 --> 0:13:08.200 good thing. We you know, we're looking at labor force 0:13:08.200 --> 0:13:11.080 participation which goes all the way down to people aged sixteen, 0:13:11.160 --> 0:13:13.760 so we don't necessarily want all of them in the workforce. 0:13:14.120 --> 0:13:16.600 But it does suggest that we have far too many 0:13:16.640 --> 0:13:19.840 people on the sidelines right now, either because they couldn't 0:13:19.880 --> 0:13:21.960 find jobs, which was the case a couple of years ago, 0:13:22.480 --> 0:13:25.040 or because the jobs weren't there, or because they're not 0:13:25.080 --> 0:13:28.120 trained for the jobs. And that second part, if that's true, 0:13:28.280 --> 0:13:31.000 is something that we really need to address as a country. Okay, 0:13:31.040 --> 0:13:35.120 So would it be possible to address that more efficiently 0:13:35.320 --> 0:13:39.200 if the Department of Labor and the Department of Education 0:13:39.280 --> 0:13:42.640 work combined. Well, look, that's actually one of the theories 0:13:42.720 --> 0:13:46.000 of the president's reorganization proposal that he came out with 0:13:46.040 --> 0:13:49.640 a couple weeks ago. Um. Look, there there is certainly 0:13:49.640 --> 0:13:54.040 a synergy between education and training UH in the in 0:13:54.440 --> 0:13:56.640 the federal government, but there are also about nine different 0:13:56.640 --> 0:13:59.600 federal agencies that deal with training UH, and the overlap 0:13:59.640 --> 0:14:03.000 between the as agencies is actually relatively small. And having 0:14:03.040 --> 0:14:05.760 been at one end of UM looking at that, we 0:14:05.960 --> 0:14:09.120 function very Well, the bigger problem is we're not actually 0:14:09.160 --> 0:14:12.000 investing enough money. The share of money that we put 0:14:12.000 --> 0:14:14.920 in as the settled government into job training pales in 0:14:15.000 --> 0:14:17.800 comparison to what Germany and other countries put in. We 0:14:17.920 --> 0:14:20.920 don't really have a national job training strategy. It really 0:14:20.920 --> 0:14:24.760 has done state by state, and we haven't invested sufficiently 0:14:24.840 --> 0:14:30.160 improven job training methods like apprenticeships, which are wildly popular 0:14:30.200 --> 0:14:34.200 and successful in Europe. Why haven't we been successful at that? 0:14:34.320 --> 0:14:37.120 Is it just money? Well, it is money, but it's 0:14:37.120 --> 0:14:41.520 also the way that employers operate. Employers tend to um 0:14:42.080 --> 0:14:45.200 train their own workers, UH, and there's less incentive, frankly 0:14:45.320 --> 0:14:49.360 to create a broader pipeline of workers. So what companies 0:14:49.400 --> 0:14:51.280 will do in an industry is that they will fight 0:14:51.360 --> 0:14:54.840 over a share of the pie instead of working collaboratively 0:14:54.920 --> 0:14:58.040 to increase the pie, which is what UH companies do 0:14:58.120 --> 0:15:01.040 in other countries. They invest in job training programs that 0:15:01.160 --> 0:15:04.880 let's say, create more plumbers than the Chinas, understanding that 0:15:04.960 --> 0:15:06.800 they may not be able to hire those people, but 0:15:06.880 --> 0:15:09.560 that's good for the overall industry. So companies need to 0:15:09.560 --> 0:15:12.880 start thinking about job training in a more collaborative way. 0:15:13.000 --> 0:15:16.520 Do you believe that that may also be a result 0:15:16.720 --> 0:15:21.280 of states, individual states competing with each other in order 0:15:21.360 --> 0:15:25.080 to grab businesses because they think of it just as 0:15:25.120 --> 0:15:30.040 a state's issue rather than of national issue. Well, that's 0:15:30.040 --> 0:15:32.840 exactly that's a fantastic point. Far too often when states 0:15:32.840 --> 0:15:36.160 are trying to lure companies there um, they just dropped 0:15:36.160 --> 0:15:38.680 their tax rates. They provide tax and sentence to companies, 0:15:38.920 --> 0:15:41.560 and far too often when you talk to companies, they'll say, look, 0:15:41.920 --> 0:15:44.480 tax low, tax rates are fantastic, but it doesn't help 0:15:44.480 --> 0:15:47.000 when we get there and we can't find the train 0:15:47.080 --> 0:15:49.840 workers we need to fill our factories. And so far 0:15:49.920 --> 0:15:52.880 more now come states are starting to understand if we 0:15:52.960 --> 0:15:56.240 really want to attract companies, we need to have a 0:15:56.760 --> 0:15:59.280 uh integrated job training program, and it's one of the 0:15:59.280 --> 0:16:02.120 reasons why you continue to see more companies going to 0:16:02.200 --> 0:16:05.120 more urban areas where they can find the train workers 0:16:05.200 --> 0:16:07.480 for the work they need. Thank you very much. Chris 0:16:07.560 --> 0:16:11.520 lou Senior Fellow, University of Virginia Miller Center. He's the 0:16:11.560 --> 0:16:15.200 former Deputy Secretary of Labor under President Barack Obama. You 0:16:15.200 --> 0:16:43.680 can follow him on Twitter at Chris lou Well. Turning 0:16:43.720 --> 0:16:45.960 out of the shares of biogen they are up more 0:16:46.000 --> 0:16:49.280 than fourteen and a half percent, as comes after Bargin 0:16:49.400 --> 0:16:53.360 and its Japanese partner revealed results of a study of 0:16:53.400 --> 0:16:56.680 a drug that is designed to raise hopes for the 0:16:56.720 --> 0:17:00.920 treatment of Alzheimer's to battle this disease. Here to tell 0:17:00.960 --> 0:17:03.760 us more about it is Drew Armstrong, or healthcare reporter 0:17:03.800 --> 0:17:06.840 for a Bloomberg News and you can follow Drew on 0:17:07.080 --> 0:17:12.560 Twitter at Armstrong Drew Okay Armstrong, Drew, what is the 0:17:12.640 --> 0:17:15.959 breakthrough that we're seeing and learning about? Well, I wouldn't 0:17:15.960 --> 0:17:19.400 describe what we saw today or I guess late last 0:17:19.480 --> 0:17:22.840 night technically so much as a breakthrough, but a glimmer 0:17:22.880 --> 0:17:26.560 of hope for a medical research field that has seen 0:17:27.320 --> 0:17:30.560 a lot of glimmers of hope before followed by what 0:17:30.800 --> 0:17:35.920 ultimately turned out to be disappointing failures. So late last 0:17:36.000 --> 0:17:39.040 night we saw this data from biogen um n as 0:17:39.119 --> 0:17:42.679 I basically saying, hey, we looked at this drug. It's 0:17:42.720 --> 0:17:46.919 an experimental drug in mid stage testing, and it looks 0:17:46.920 --> 0:17:50.040 like it helped people. There are a lot of caveats. 0:17:50.480 --> 0:17:53.439 UM they're using a different measure of whether or not 0:17:53.480 --> 0:17:57.040 it helped people than than other drug makers have before. 0:17:57.800 --> 0:18:01.919 UM that the systems that appeared to give patients in 0:18:02.040 --> 0:18:04.800 slowing the progression of Alzheimer's didn't show up when they 0:18:04.880 --> 0:18:07.800 when they looked at this in at the twelve months 0:18:08.160 --> 0:18:10.600 twelve months along in the study. This is just an 0:18:10.640 --> 0:18:12.920 eighteen months, so they took a little bit longer than expected. 0:18:13.119 --> 0:18:15.199 And they haven't announced yet. This is really important. One 0:18:15.200 --> 0:18:18.280 of the things they're not saying so far that's really important. 0:18:18.359 --> 0:18:21.280 They haven't announced that, Hey, this is great and we're 0:18:21.280 --> 0:18:23.399 going to take this to the next stage. A lot 0:18:23.440 --> 0:18:25.120 of times when you're a drug maker and you have 0:18:25.440 --> 0:18:29.399 blockbuster good news, you say, great, phase two trial worked, 0:18:29.520 --> 0:18:32.159 onto phase three, Let's get this in a bigger population 0:18:32.240 --> 0:18:34.040 that we can use to get this drug approved by 0:18:34.040 --> 0:18:37.240 the FDA. That is not in the statements that they 0:18:37.240 --> 0:18:39.399 have given. And I think that should probably sound a 0:18:39.480 --> 0:18:43.240 note of caution for people here. Okay, well put and 0:18:43.240 --> 0:18:49.359 and really useful information through the target of this specific drug. 0:18:49.920 --> 0:18:55.000 They're going after what are what is called beta amyloid. 0:18:55.680 --> 0:18:59.840 And I know that there's another disease, there's hereditary amoloid 0:19:00.000 --> 0:19:02.359 assists and so on, but this has to do with 0:19:02.400 --> 0:19:05.080 the build up of a protein. Is that correct? Yeah, 0:19:05.160 --> 0:19:07.439 that's exactly right, and and if I can kind of 0:19:07.480 --> 0:19:10.560 explain the science here. One of the things that research 0:19:10.560 --> 0:19:12.840 of notice researchers have noticed for a long time is 0:19:12.840 --> 0:19:15.840 that if you take an image of an Alzheimer's patient's brain, 0:19:16.040 --> 0:19:18.080 or if after they die you dissect it, you see 0:19:18.119 --> 0:19:21.439 these little tangles of protein, essentially like plaque build up 0:19:21.440 --> 0:19:23.760 in the brain that for a long time. It's it's 0:19:23.800 --> 0:19:26.080 definitely known as a hallmark of the disease. You look 0:19:26.119 --> 0:19:29.000 at people who have this disease and their brains all 0:19:29.040 --> 0:19:31.520 have this. I think what hasn't been understood is is 0:19:31.560 --> 0:19:35.399 it also the cause? You know, is this a is 0:19:35.440 --> 0:19:37.920 this something that is causing the disease or just something 0:19:37.960 --> 0:19:40.920 that happens to go along with it. And when if 0:19:41.000 --> 0:19:44.280 it is, if this is what's damaging people's brains, when 0:19:44.280 --> 0:19:47.440 does it start. Does it start building up silently when 0:19:47.440 --> 0:19:50.280 we're forty or fifty years old, only kind of rearing 0:19:50.320 --> 0:19:54.280 its head in actual Alzheimer's a decade or two decades later, 0:19:54.600 --> 0:19:57.640 or is it something that you know, you are at 0:19:57.640 --> 0:19:59.560 an elder age and you begin to show science and 0:19:59.600 --> 0:20:02.000 that's when the damage begins. But the theory has been 0:20:02.080 --> 0:20:05.040 that if you can do something to eliminate these plaques 0:20:05.480 --> 0:20:07.520 or to even stop them from building up, that you 0:20:07.600 --> 0:20:13.439 might somehow be able to slow Alzheimer's disease. That is 0:20:13.480 --> 0:20:15.840 exactly so. And so if you can do that, you 0:20:16.119 --> 0:20:20.040 this might be potentially a a drug that could you know, 0:20:20.080 --> 0:20:22.760 actually alter the course of the disease. But so far, 0:20:23.400 --> 0:20:25.479 even though a lot of drugs have shown success in 0:20:25.520 --> 0:20:28.800 reducing the amount of plaque, you haven't actually seen the 0:20:28.840 --> 0:20:32.600 kind of corresponding you know, decreases in the rate of 0:20:32.680 --> 0:20:36.360 dementia or incognitive decline, those things that actually matter. I mean, 0:20:36.400 --> 0:20:38.280 it's all, it's all well and good to treat a 0:20:38.400 --> 0:20:41.480 biological thing, but if it doesn't help the patient, it 0:20:41.520 --> 0:20:44.360 doesn't mean anything for these folks. So the question has 0:20:44.359 --> 0:20:47.639 always been does this drug work on this thing, this plaque, 0:20:47.720 --> 0:20:50.720 and does that also translate into a benefit. And so 0:20:50.880 --> 0:20:53.240 there have been some signs in the studies that maybe 0:20:53.359 --> 0:20:55.879 that's the case, But I think the big question is 0:20:55.880 --> 0:20:58.639 going to be does it bear out in a wider study, 0:20:58.880 --> 0:21:01.760 Does it really true, really alter the course of this disease, 0:21:01.880 --> 0:21:03.760 or is there somewhere else the drug makers need to 0:21:03.800 --> 0:21:06.800 be looking. Just quickly, a couple of the companies still 0:21:07.000 --> 0:21:11.280 looking for drugs to combat Alzheimer's. Right. Yes, Roche is 0:21:11.320 --> 0:21:14.520 in this space, um Eli, Lily and a number of 0:21:14.520 --> 0:21:17.159 other folks have looked at some different approaches. You know, 0:21:17.320 --> 0:21:20.720 drug makers look at this as probably the last great, 0:21:21.080 --> 0:21:24.359 massive untreated disease in in the world. I mean, this 0:21:24.400 --> 0:21:28.360 affects millions of people. It costs billions and billions of dollars. 0:21:28.520 --> 0:21:31.360 It is a personal and tragedy for families when it's 0:21:31.359 --> 0:21:33.520 struck by them. So this is a huge opportunity for 0:21:33.560 --> 0:21:35.159 someone to try and do something about that has had 0:21:35.200 --> 0:21:38.520 so many failures. Thank you very much. Drew Armstrong, healthcare 0:21:38.560 --> 0:21:42.440 reporter from Bloomberg News. Follow him on Twitter at Armstrong 0:21:42.680 --> 0:21:47.000 Drew for his continued insights and analysis and reporting about 0:21:47.000 --> 0:22:03.320 the health care industry. Very interesting. My co host and 0:22:03.359 --> 0:22:08.240 colleague Lisa Abramwitz on a well deserved holiday vacation. He's 0:22:08.240 --> 0:22:11.000 not on vacation. He's Scott Wren. He's a senior global 0:22:11.040 --> 0:22:16.040 equity strategist for Wells Fargo Investment Institute Assets Center Management 0:22:16.119 --> 0:22:20.159 one point nine trillion dollars based in St. Louis. Scott 0:22:20.160 --> 0:22:23.720 Rent always a pleasure, you know, looking at the performance 0:22:23.720 --> 0:22:27.240 of the SMP five hundred. It's up three and three 0:22:27.240 --> 0:22:29.919 and a quarter percent so far this year. Compare that 0:22:30.000 --> 0:22:35.320 to the NASDAC up over eleven percent, the Dow basically unchanged. 0:22:35.960 --> 0:22:39.120 What kind of market does this remind you of? Well, 0:22:39.200 --> 0:22:43.199 you know, I tell you, Tim we Um, we have 0:22:43.240 --> 0:22:47.919 been positive on the market, technology has done. We backed 0:22:47.920 --> 0:22:52.160 off our overweight and technology last year, so we left 0:22:52.160 --> 0:22:54.200 a little money on the table, no doubt about that. 0:22:54.800 --> 0:22:57.800 UM small caps are doing a little bit better than 0:22:57.840 --> 0:23:00.240 what we thought they would this year, and I think 0:23:00.240 --> 0:23:05.680 that's almost solely due to the fears over a trade war. 0:23:06.240 --> 0:23:09.840 But you know, really this this this market reminds me 0:23:10.359 --> 0:23:17.160 of periods when it's it's fairly narrow and you're you're 0:23:17.440 --> 0:23:21.399 toward the back end of certain cycles. But saying that 0:23:21.440 --> 0:23:26.879 there are there are numerous other characteristics. One is overwhelming enthusiasm, 0:23:27.359 --> 0:23:31.240 uh and chasing the market that I think are not um, 0:23:31.359 --> 0:23:33.760 you know, they're not present right now, so it it 0:23:33.920 --> 0:23:37.280 largely in narrowness, so to speak. It reminds me of 0:23:37.480 --> 0:23:40.520 later stages of cycles. Well, when you talk about the 0:23:40.600 --> 0:23:43.280 lack of enthusiasm, does that mean that you just can't 0:23:43.280 --> 0:23:46.720 get people interested in stocks? Could that be a real 0:23:47.440 --> 0:23:51.560 secular change because of the way that investments are made 0:23:51.680 --> 0:23:55.919 using exchange traded funds. I think that that could be 0:23:56.080 --> 0:23:58.119 part of it. But really, to be honest with you, 0:23:58.160 --> 0:24:00.520 and if you look at at our science, and I 0:24:00.520 --> 0:24:04.800 mean we cater to retail investors, um, most of them, 0:24:04.880 --> 0:24:08.320 let's say you're north of sixty, Um, most of them, 0:24:08.359 --> 0:24:11.600 at least on paper, they were burned in the tech bubble, 0:24:11.760 --> 0:24:15.320 and then they were burned on when in the financial crisis. 0:24:15.359 --> 0:24:18.520 And now they are older and they and they think 0:24:18.560 --> 0:24:21.040 in terms of g I don't have the time to 0:24:21.200 --> 0:24:26.879 make this money back there. They are concerned about, you know, 0:24:27.000 --> 0:24:31.560 being down on their portfolio. They are concerned about outliving 0:24:31.600 --> 0:24:35.840 their money. And so I think I think the secular change, really, 0:24:35.840 --> 0:24:37.959 to be honest with you, is that with all this 0:24:38.040 --> 0:24:41.520 money on the sidelines in past cycles, and I'm talking 0:24:42.119 --> 0:24:45.080 you know, you look back over the last forty years, Um, 0:24:45.160 --> 0:24:47.639 you know, if the market had moved this far over 0:24:47.680 --> 0:24:51.080 this time by this time, there'd be a lot of chasing, 0:24:51.160 --> 0:24:55.040