Speaker 1: This is Bloomberg Business Week. I'm Carol Masser and I'm
Speaker 1: Bloomberg Quick Takes Tim Stanebeck. We're here every day bringing
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Speaker 1: pm Eastern Time on Bloomberg Radio or watch us on
Speaker 1: YouTube search Bloomberg Global News. So I have to say, Tim,
Speaker 1: we were taking our weekend show this morning, and you know,
Speaker 1: it's a crazy week when virus news is overshadowed in
Speaker 1: our world by the phenomenon that is game stopped, which
Speaker 1: we are going to continue talking about over the next
Speaker 1: few hours. It's the story. It is the story. But
Speaker 1: let's not forget the other big story is the virus. Yeah,
Speaker 1: and look, um, it does feel like we are getting
Speaker 1: to a point where it's the sad reality is that
Speaker 1: thousands of people dying, our fellows citizens every day is
Speaker 1: not the headline anymore. No, and Um, and though the
Speaker 1: numbers are still troubling, even though some of them are
Speaker 1: coming down, let's talk about it because there's a lot
Speaker 1: of stuff going on, including we talked about the variant,
Speaker 1: the South African variant for the virus UH finding cases
Speaker 1: in South Carolina. Dan Pulsky is with us. He's professor
Speaker 1: of health policy and Management at Johns Hopkins Bloomberg School
Speaker 1: of Public Health. He has studied health economics and health
Speaker 1: care policy. The Bloomberg School of Public Health, supported by
Speaker 1: Michael R. Bloomberg, founder a Bloomberg ALP and Blomberg Philanthropies,
Speaker 1: stands with us on the phone from Philadelphia. Dan, good
Speaker 1: to have you here with Tim and myself. Um, there
Speaker 1: is a fair amount of headlines out and about there. Uh,
Speaker 1: what do you think is most important for our audience
Speaker 1: to kind of focus on right now when it comes
Speaker 1: to COVID and the vaccine rollout. Um. I guess patience
Speaker 1: that's patients with a C. Yes, exactly. UM. You know,
Speaker 1: I think there's a lot of optimism that everything's going
Speaker 1: to get back to normal, but it's going to take
Speaker 1: some time. Um. And you know, the vaccines are in shortage,
Speaker 1: so all of the issues that I think are um
Speaker 1: out there around you know, the anxiety about getting my dose.
Speaker 1: When am I going to get it? What's going wrong? Um?
Speaker 1: You know it comes back to that. They're just it's
Speaker 1: gonna take a little time to produce vaccines for for
Speaker 1: everyone around the world. Dan, I I gotta ask. Um.
Speaker 1: You know Carol mentioned the South African strain being found
Speaker 1: in South Carolina today. Uh. We we don't know, based
Speaker 1: on testing how effective the existing vaccines are against new
Speaker 1: strains that emerge. UM, but we do know that the
Speaker 1: drug manufacturers are already altering their formulas in order to
Speaker 1: address this. Should should people put off getting a vaccine
Speaker 1: that first shot to try to get one that actually
Speaker 1: uh protects against new strains? Uh? No, don't put it off.
Speaker 1: Get your vaccine when it's your turn to get your vaccine,
Speaker 1: for sure. UM. But you know in the new variants
Speaker 1: UM bring up, you know it's something similar to flu
Speaker 1: and that over the law, we're going to be living
Speaker 1: with this virus for a long time, UM, for years, UM,
Speaker 1: and it's gonna keep evolving, just like we need a
Speaker 1: flu shot every year. UM. I wouldn't be surprised if
Speaker 1: we end up needing ah, you know, to get the
Speaker 1: COVID whatever variants of the year into our um shot. Um,
Speaker 1: just as part of how we conduct our daily lives.
Speaker 1: You know. I groaned when I heard that, but then
Speaker 1: I thought to myself, Hey, that's not so bad. You know,
Speaker 1: getting the flu shot is not that big of a deal. Yeah,
Speaker 1: it's not the big of a deal. But also getting
Speaker 1: flu isn't that big of a deal. I mean, it's
Speaker 1: it's still you know, a serious can be serious for people,
Speaker 1: especially if they're vulnerable. UM. You know right now, COVID
Speaker 1: is certainly much more serious than the flu. So that's
Speaker 1: I think where the difference is. Getting a flu shot
Speaker 1: isn't a big deal, but you know, getting getting of
Speaker 1: it certainly is worse. And I think that's some of
Speaker 1: the fear on the new variants is just so much
Speaker 1: uncertainty and you think, Okay, well we've finally got this tackle,
Speaker 1: and then these variants come up, and it just brings
Speaker 1: up the fact that you know, this is something we're
Speaker 1: gonna have to live with one way or another for
Speaker 1: quite some time. When you say that we may have
Speaker 1: to get a vaccine for COVID on a regular basis,
Speaker 1: just like we do for a flu vaccine. Will it
Speaker 1: be a case that it's the same thing that if
Speaker 1: you don't know, you might get a little sick, or
Speaker 1: is it a case that if you don't get it,
Speaker 1: you're gonna get really sick and maybe create some problems
Speaker 1: in society? Um, you know, I think it's the same
Speaker 1: messaging as as flu that every person who gets the
Speaker 1: flu vaccine, you're not only protecting yourself, but you're protecting others,
Speaker 1: particularly those most vulnerable that actually can't get the flu vaccine.
Speaker 1: So that's certainly um going to be the case for
Speaker 1: for the coronavirus vaccine as well. Um. Uh, but you know,
Speaker 1: and and then I think on top of that, uh,
Speaker 1: you know, this is a kind of thing that you know,
Speaker 1: like up a expert in in like you know, Dr
Speaker 1: Fraud she can explain better than myself. But um, if
Speaker 1: if the vaccine doesn't have really great coverage, variants that
Speaker 1: can spin out when you know a lot there's a
Speaker 1: lot of people covered, but not enough people covered. Yeah
Speaker 1: that the viruses. People are fighting against the virus, and
Speaker 1: then the virus kind of fights back, and and the
Speaker 1: one who's fighting back the virus who who's fighting back
Speaker 1: is a little bit stronger than the one that before.
Speaker 1: So that's kind of the scientific challenge why it's so
Speaker 1: important to get vaccinated. Dan, Um night, We we only
Speaker 1: have about thirty seconds left. But I know you've been
Speaker 1: looking very closely at the rollout of the vaccine. Um,
Speaker 1: we've heard a lot about speed bumps in your opinion.
Speaker 1: How are we doing so far, because this is a race. Well,
Speaker 1: we've been doing pretty poorly. Um, but you know we
Speaker 1: now have you know Biden's goal of a hundred million
Speaker 1: doses in a hundred days. Um, it's gonna be some
Speaker 1: a lot more bumps in the road to kind of
Speaker 1: get to the point where, um, things are rolling at
Speaker 1: a pace where I feel like that can be achieved. So, UM,
Speaker 1: I think it's a worthy goal and I'm optimistic. Let's
Speaker 1: get back to you. Dr Dan Pulsky, Professor of Health
Speaker 1: economics and Policy at the Johns Hopkins Bloomberg School of Health.
Speaker 1: He joins us on the phone from Philadelphia. The Johns
Speaker 1: Hopkins Bloomberg School of Public Health is supported by Michael R. Bloomberg,
Speaker 1: founder of Bloomberg LP and Bloomberg Philanthropies. Dan I wanted
Speaker 1: to get your thoughts on what we We just heard
Speaker 1: from Jason Farley at the Bloomberg who's the professor of
Speaker 1: nursing at talking all about how we need to ramp
Speaker 1: up production of vaccine to get those shots in arms.
Speaker 1: What is the right way to ramp up production and
Speaker 1: then also ramp up distribution in an administration of vaccine UM,
Speaker 1: I would say that the challenge of ramping up distribution
Speaker 1: is you know, were more challenging and that it's so distributed.
Speaker 1: So to ramp up production, you know, we can rely
Speaker 1: on industry UM that I think has that capacity. But
Speaker 1: to ramp up distribution, it's like inventing a new company. UM.
Speaker 1: You know, it's putting up places to distribute vaccine, that's
Speaker 1: training people how to do it. UM. The staffing challenges,
Speaker 1: the logistical challenges, the information system challenges are you know,
Speaker 1: there's just no infrastructure in place to really UM, you know,
Speaker 1: ramp up quickly and reliably. But I think one thing
Speaker 1: that's so frustrating to people is that it's not like
Speaker 1: we had no warning, right, Like, this is something that
Speaker 1: we knew since you know, some people since February, most
Speaker 1: people since March, that we would need to distribute an
Speaker 1: administer vaccine and manufacture tons and tons of vaccines. Well
Speaker 1: but the manufacturing. And we're not mad at you, We're
Speaker 1: just trying to understand how did it happen. I mean,
Speaker 1: I think it was, you know, a leadership, a vacuum
Speaker 1: in the prior administration. Uh. You know, I was part
Speaker 1: of this panel talking of you planning for one aspect,
Speaker 1: which is, you know, how to distribute vaccines equitably when
Speaker 1: it's in shortage, And we were talking back in the
Speaker 1: summer and making really detailed plans for that. But we
Speaker 1: we we just wanted information about what the administration was
Speaker 1: doing to plan for this period that we all knew
Speaker 1: was going to start, you know, six months in the future, right,
Speaker 1: and we never got any information. We were frustrated, like
Speaker 1: why why aren't they sharing any information? Only now do
Speaker 1: we realize there was no information to share. It's like
Speaker 1: planning for It's like planning for war, right, planning for war.
Speaker 1: You know it's coming, we know we have to manufacture
Speaker 1: a lot of tanks and being really basic here and
Speaker 1: then okay, we make the tanks, but wow, how do
Speaker 1: we get it to people in the field who need it?
Speaker 1: How do we get it to you know, the members
Speaker 1: of the military. I mean, I feel like that's what
Speaker 1: we did, and I just into it staggering. And I
Speaker 1: do know the body administration has been has been rather
Speaker 1: frank about saying that maybe the situation was a lot
Speaker 1: worse than we anticipated, and they're getting up to speed.
Speaker 1: But I guess I just don't understand why it is
Speaker 1: a nation all of the companies involved just say okay,
Speaker 1: let's go on, you know, into overdrive and just let's
Speaker 1: ramp up manufacturing of the vaccines and do everything and
Speaker 1: anything to get them out there. Yeah. Um, well, the
Speaker 1: the the issue with the manufacturing, it is actually it's
Speaker 1: quite a miracle, and that a typical way of vaccines
Speaker 1: developed is the manufacturing doesn't start to laughter, everything has
Speaker 1: been approved, but this was such an extraordinary circumstance that
Speaker 1: everything was being done in parallel. Um, so while the
Speaker 1: drug was being tested, manufacturing was being ramped up. And uh,
Speaker 1: it's actually been quite a feat compared to the past.
Speaker 1: It's a highly regulated industry. It's hard to do these things.
Speaker 1: A tremendous amount of um collaboration between industry partners, new
Speaker 1: partnerships being developed and working with government, so you know,
Speaker 1: while it's certainly not fast enough and there's a lot
Speaker 1: of challenges to get it at a rate that I
Speaker 1: think people would feel would be you know, even a
Speaker 1: bee will probably not to be here. UM. But you know,
Speaker 1: I think the larger perspective is that, um, it has
Speaker 1: been you know, historic feat of development and of manufacturing.
Speaker 1: It's just the demand is so an extraordinary Dan, we
Speaker 1: only have about fifteen seconds left. Your best estimation for
Speaker 1: when everybody who wants a vaccine will be able to
Speaker 1: get one here in the United States? Um, I would say,
Speaker 1: you know, through the year, end of the year. Wow,
Speaker 1: that's a lot different than what we heard from the
Speaker 1: President earlier this earlier this week, who said that it
Speaker 1: will be by this spring. Yeah. Well it's it's yeah, Dan,
Speaker 1: Thank you so much, UM, and really appreciate it. Dr
Speaker 1: Dan Pulsky, Professor of Health economics and Policy at Johns
Speaker 1: Hopkins Bloomberg schoo Public Health, on the phone from Philadelphia
Speaker 1: and of course the Bloomberg School of Public Health supported
Speaker 1: by Michael R. Bloomberg, founder of Bloomberg Elpy and Bloomberg Philanthropies. Listen,
Speaker 1: I know you and I kind of hammer. He was
Speaker 1: such a gem. But you know, I think we all
Speaker 1: kind of want to know, like when when do we
Speaker 1: start to get back to normal? When will we be vaccinated?
Speaker 1: I'm so sick of this pandemic. No I'm not the
Speaker 1: only one, alright, So great story. Pillow King. Mike Glendel,
Speaker 1: you know him from those late night commercials. You'll also
Speaker 1: know him because a couple of years ago Bloomberg business
Speaker 1: Week did a deep dive into him. He's an ally
Speaker 1: of former President Donald Trump, and his reporter Josh Dean
Speaker 1: is back writing about him again. Laugh at dam Shunn
Speaker 1: his business sue him. That my pelo ceo will not
Speaker 1: stop trying to prove Donald Trump got cheated. That's the headline,
Speaker 1: Josh joining us on the phone in New York along
Speaker 1: with Bloomberg business Week editor Joe Webber on the access
Speaker 1: line in Brooklyn. Tim and I could not get enough
Speaker 1: of this story. Chill uh boy? I I could, um,
Speaker 1: but that was mainly just because of what it is.
Speaker 1: But you know, backstory here. Four years ago, Aosh Dean
Speaker 1: wrote basically the definitive story on Mike Lindell and just
Speaker 1: the preposterous business success story. Um. That that is my
Speaker 1: pillow And this is a guy who went from basically
Speaker 1: being a crack addict UM to an unlikely entrepreneur with
Speaker 1: actually like a pretty successful business. UM. And Josh actually
Speaker 1: did that story four years ago for the magazine and
Speaker 1: it happened to coincide basically with the first couple of
Speaker 1: visits that Lindell had with Trump. And obviously, if you
Speaker 1: know anything about Mike Lindell, the past four years, UM
Speaker 1: have become much trumpier UM, let's say. And so when
Speaker 1: the administration was in its last days, we've kind of
Speaker 1: reached out to Josh and said, what do you what
Speaker 1: do you think about getting back in touch with Mike
Speaker 1: Lendel And so that led to a pretty memorable conversation
Speaker 1: that Josh had with him and this feature. UM, Josh,
Speaker 1: what was the what was the opening question? How did
Speaker 1: the converse stations start with with Mr Lindell? I don't
Speaker 1: even know if I needed to ask a question. I
Speaker 1: think I think I just said hello often running started
Speaker 1: just going I mean that man is UM. I think
Speaker 1: I said in the original story, you know, he's been
Speaker 1: off cocaine and crack now for a long time, but
Speaker 1: it's like his body is permanently stuck in up in
Speaker 1: up cocaine mania. Like, I don't think he's used drugs
Speaker 1: in a long time, but he talks like someone who's
Speaker 1: who maybe just did it for so long that he
Speaker 1: can't he can't control himself anymore. Well so listen, though
Speaker 1: he's definitely an ally of Donald Trump, we know that,
Speaker 1: and you laid out really well, why has he continued
Speaker 1: to be so adamant despite the court cases that have
Speaker 1: shown that there was no fraud in the election? Why
Speaker 1: has he and I know this is when he was
Speaker 1: often running and talking with you, why has he, though
Speaker 1: continued to say there was fraud. I mean, he's he's
Speaker 1: just one of those people who are so convinced of
Speaker 1: something that no amount of information or evidence would ever
Speaker 1: change his mind. I mean he would tell you, you know,
Speaker 1: for hours on end that he's convinced and that he
Speaker 1: has this you know, quote unquote forensic evidence of machine
Speaker 1: hacking and all this stuff, and talking about examples like
Speaker 1: this man and Italy who allegedly confessed and cord to hack. Well,
Speaker 1: I mean some of these stories you just have to
Speaker 1: do a little bit of begging to realize, like it's
Speaker 1: either been debunked or it's being spun in a slightly
Speaker 1: um disingenuous way so that the evidence isn't really evidence.
Speaker 1: But I mean, you know, unless he's completely doing this
Speaker 1: for show, and I don't think that he is. He
Speaker 1: truly believes that, you know, he's here to save Donald
Speaker 1: Trump's presidency and to save democracy. Well, Josh, I was
Speaker 1: so surprised to read that he's not concerned at all
Speaker 1: by this, uh what you call a big danger the
Speaker 1: dominion voting systems UM having threatened him with a defamation suit.
Speaker 1: Uh you write that a decision in Dominion's favor could
Speaker 1: destroy my pillow as a company. Uh, why is he
Speaker 1: not concerned about this? This is a big deal. Yeah,
Speaker 1: I mean, here's probably the most convincing evidence that he
Speaker 1: truly believes what he's saying, that it's not some kind
Speaker 1: of act, because yeah, I mean, this is a potentially
Speaker 1: an existential threat to my pillow, like a decisive judgment,
Speaker 1: and we're talking like, you know, I think dominions going
Speaker 1: after these these defense for hundreds of millions of dollars.
Speaker 1: If they choose to sue him, um, and he loses,
Speaker 1: then he could lose the company. But he thinks that
Speaker 1: he's right, So he believes as he as he tells it,
Speaker 1: I'm going to go to court and I'll present my
Speaker 1: evidence and i will prevail. I mean it's from the
Speaker 1: outside objectively, it seems crazy and self destructive, but he
Speaker 1: doesn't see it. Tell uh, what do you have to
Speaker 1: say about how his business has been doing? Because there
Speaker 1: was this photograph taking taking of him, uh leaving the
Speaker 1: White House with what appeared to be um some papers
Speaker 1: that referenced martial law. Uh, and and I'm curious, like, hey,
Speaker 1: what do you say about that? And then be how
Speaker 1: is how his business been doing well? The martial law
Speaker 1: of thing he said that was we're not his notes.
Speaker 1: So basically he was going to see Trump to present
Speaker 1: his you know, quote unquote evidence of of like election fraud.
Speaker 1: And then a lawyer friend of his, if he wouldn't name,
Speaker 1: gave him a second set of notes that included um,
Speaker 1: that martial law reference. So he's like, I don't even
Speaker 1: know what marshal is. That wasn't me um. As for
Speaker 1: the business, he's you know again, he thinks that this
Speaker 1: is good for his business, and it may be. I mean,
Speaker 1: in the short term, he says, sales are up, he's
Speaker 1: hiring more people. He's actually added floor space because you know,
Speaker 1: I think there's probably everything is political today, right, so
Speaker 1: people maybe buying pillows as a reaction to what they
Speaker 1: see as like left wing blowback. Yeah, it's interesting. Really
Speaker 1: a buddy of Donald Trump's. No, I mean I asked
Speaker 1: you talked to the president. He said, no, Like I
Speaker 1: don't have his faw number. We've only met a handful
Speaker 1: of times. But I mean he loves he thinks it's
Speaker 1: Trump is amazing. I mean they've had some meetings. He
Speaker 1: appeared at that that famous or infamous I guess some
Speaker 1: coronavirus briefing. He's been on, you know, in in tons
Speaker 1: of rallies. But he said they're not friends. They've just
Speaker 1: met a fanful of times. And what about you guys
Speaker 1: talk about Yeah, go ahead, go ahead, Joel. What else
Speaker 1: do you guys talk about? Josh, we talked about the pandemic,
Speaker 1: the pandemic and um coronavirus. Mike does not believe that
Speaker 1: it's the threat that we all believe it to be.
Speaker 1: And he takes a supplement that he also sells that
Speaker 1: he thinks keeps him safe. He will not be getting
Speaker 1: the vaccine. Wow, that's shocking to hear. I mean, I
Speaker 1: guess there is some vaccine skepticism. Um. What about his
Speaker 1: political ambitions, Well, for for a lot of the past year,
Speaker 1: there's been pretty rampant speculation in Minnesota the who runs
Speaker 1: for governor? And he has not discouraged that. Um, I
Speaker 1: think the Minnesota Republican Party has has essentially propped him
Speaker 1: up as a likely candidate. He's now saying he's not
Speaker 1: so sure. I mean, this is how far in the
Speaker 1: rabbit hole he is that he believes, like this fraud
Speaker 1: was so bad and so um widespread that no election
Speaker 1: going forward can ever be trusted if there are machines us.
Speaker 1: I mean, this is basically his position now. So he's like,
Speaker 1: why would I run for governor? Couple just deal up
Speaker 1: for me. I just want to know, Jan Krokowski, they're
Speaker 1: not dating. Can we just set the record straight. Definitely
Speaker 1: not dating that one. That story? Yeah, well, Josh, real quick,
Speaker 1: what are the pillows? Like? Very briefly you got him off.
Speaker 1: Jane Krokowski, I don't know love these pillows, right, you know,
Speaker 1: I'm one of those people who I like a memory
Speaker 1: film pillows. I don't I have to say my husband
Speaker 1: one night if because we both were not sleeping, we
Speaker 1: bought some. Uh, I'm not going to say we have
Speaker 1: a lot of different kinds of pillows on our bed.
Speaker 1: Josh Dean is a great read. We're going to feature
Speaker 1: it in the weekend story as well. Uh, and Jill
Speaker 1: Webber thank you as well, really appreciate it. You're listening
Speaker 1: to Bloomberg Business Week with Carol Messer and Bloomberg Quick
Speaker 1: Takes Tim Stenovy on Bloomberg Radio. So, yeah, a top
Speaker 1: story this hour, this day, this week, and I already
Speaker 1: know that in December when we look back, it's going
Speaker 1: to be a top story this year. It's game Stop
Speaker 1: and the like other names that we don't usually talk about,
Speaker 1: but all of a sudden, they've been really dominating the
Speaker 1: trade in terms of big moves. Yeah. Look it's it's
Speaker 1: not just game Stop, right, it's other stocks as well.
Speaker 1: And and look we're just learning moments ago the Senate panel,
Speaker 1: a Senate panel is planning to hold a hearing on
Speaker 1: the current state of the stock market. And this prompted
Speaker 1: by the activity that we've seen this week. Totally alright,
Speaker 1: So let's get into it, and let's get you up
Speaker 1: to speed on some of the day's headlines because they
Speaker 1: are happening as we speak. Let's bring in Bloomberg News
Speaker 1: cross At reporter Katie greifeld Uh and talk about kind
Speaker 1: of where we are. We're also going to get to
Speaker 1: Jennifer Schelp. She's director Financial Regulation Studies over at the
Speaker 1: Cato Institute, and we'll bring her in just a moment. Katie, though,
Speaker 1: set the scene. Um, where are we when it comes
Speaker 1: to what's going on with game Stop and other stocks
Speaker 1: that have had some big moves and the playing the
Speaker 1: trading platforms that they trade on, Well, it's very much
Speaker 1: a fluid situation. Obviously. The big story today is that
Speaker 1: you have apps like robin Hood and other brokerages limiting
Speaker 1: trading on some of those popular names such as game Stop,
Speaker 1: UM and some of the other we've been calling the
Speaker 1: meme stocks that have just taken off this week. And
Speaker 1: so interestingly, I mean, as you mentioned, game Stop is
Speaker 1: thinking today, as is a n C Holdings, and you
Speaker 1: have seen the benchmark indexes bounced back like the SMP
Speaker 1: for example, it's having a best game game in two months,
Speaker 1: whereas yesterday it was the worst fault since October. So
Speaker 1: clearly a total flip in in who's leading and what's leading.
Speaker 1: And part of the theory is that all of the
Speaker 1: hedge funds who are just getting crushed yesterday on their
Speaker 1: short bets, now that that speculation is curbed, at least temporarily,
Speaker 1: they're basically regrossing and re leveraging on their position. So, Katie,
Speaker 1: when you say restricting trades on platforms like robin Hood,
Speaker 1: what what exactly do you mean? Does that mean that
Speaker 1: if somebody holds robin Hood and they want to sell it,
Speaker 1: they mean, excuse me, holds game Stop and they want
Speaker 1: to sell it, they can't necessarily do that, that's the question.
Speaker 1: So it's it's a bit different across apps. So robin Hood,
Speaker 1: for example, I mean, there are restrictions placed on shares
Speaker 1: and options, and the fact that options trading is restricted
Speaker 1: is a really interesting nuance here because that's theorized the
Speaker 1: fact that you fall just such rampant call buying in
Speaker 1: some of these names. People were saying that's fueling this
Speaker 1: bullish feedback loop. So obviously, with these restrictions and the
Speaker 1: fact that you can't trade options, it's clearly having an
Speaker 1: impact on the stocks, whether because you know the fact
Speaker 1: that people aren't really able to trade the retail traders
Speaker 1: at least hedge funds can still trade those names. Or
Speaker 1: I mean perhaps it's just a turn and sentiment that
Speaker 1: you know, this idea that there could be further regulation coming. Yeah,
Speaker 1: we're certainly looking into all of that. Katie, Thank you
Speaker 1: so much. Our own Katie Greifeld, cross ass at reporter
Speaker 1: at Bloomberg News. Let's get to our next guest. We
Speaker 1: want to bring in, Jennifer Schulp. She is Director of
Speaker 1: Financial Regulation Studies at the Cato Institute's Center for Monetary
Speaker 1: and Financial Alternatives. She focuses on the regulation of securities
Speaker 1: and capital market. She's also a former director UH in
Speaker 1: the Department of Enforcement at FINRAD. She joins us on
Speaker 1: the phone in Washington, d C. Jennifer, forgive me if
Speaker 1: I shaalp it is right, okay, so right, okay. I
Speaker 1: want to make sure UM really appreciate you being here,
Speaker 1: as you know, our top story here. What do you
Speaker 1: make of what we're seeing in terms of the trades.
Speaker 1: Initially that all of a sudden got a lot of
Speaker 1: these trading platforms attention for them to all of a
Speaker 1: sudden start restricting them. Well, I think it's a powerful
Speaker 1: message about the power of retail trading that Heretofore Wall
Speaker 1: Street has been able to generally ignore the retail trader,
Speaker 1: and we're we're really seeing that that's no longer the case.
Speaker 1: And with the rise of low cost trading apps and
Speaker 1: this kind of increased activity on the chat boards, we're
Speaker 1: really seeing actions here that they are going to make
Speaker 1: Wall Street stand up and take notice about retail trading. UM,
Speaker 1: maybe not call them dumb money anymore. Um, that might
Speaker 1: be a harder habit to break than just this one time. Well,
Speaker 1: I'm wondering what it means for potential regulation. I mean,
Speaker 1: we're hearing lawmakers way in a Senate panel is going
Speaker 1: to hold a hearing on the current state of the
Speaker 1: stock market. This reached the White House briefing room yesterday.
Speaker 1: Two of the three people yesterday the first three people
Speaker 1: to ask questions to fed chair your own pole at
Speaker 1: the press conference, ask questions about games game stop specifically, UM,
Speaker 1: what is potential regulation that you know that that we
Speaker 1: could see out as a result of this. I think
Speaker 1: there's going to be a difficult road to walk and
Speaker 1: trying to find any sort of regulatry path here UM,
Speaker 1: and I think that Congress is going to find that
Speaker 1: as they start digging in. This is obviously an unusual situation. UM.
Speaker 1: Although rallies and bubbles are not UM, nor is short selling.
Speaker 1: This is just a different twist with different players taking
Speaker 1: different positions than where they've been before. UM. We might
Speaker 1: see some additional regulation in looking at how short selling
Speaker 1: operates UM, just the mechanics. UM so that some of
Speaker 1: these feedback feedback loops that we're seeing here, UM, that
Speaker 1: might be a place to take a look to see
Speaker 1: if there's a better way to do things to prevent
Speaker 1: the feedback. Do you think Robin Hood's wrong? Interacting brokers
Speaker 1: is wrong? Do you think they should not have restricted trading?
Speaker 1: I think that's a tough question. UM. I think as
Speaker 1: a matter of principle, UM, the traders should be able
Speaker 1: to trade. But there's also UM risks to the brokerage
Speaker 1: houses at issue here as well, UM clearing risks that
Speaker 1: I'm not sure that Robin Hood or some of these
Speaker 1: other brokerage houses would be able to continue to operate
Speaker 1: through the clearing firms and through the clearing process given
Speaker 1: how fast the stock was rising. So I think it's
Speaker 1: a you know a matter of principle, yes, um, individual
Speaker 1: traders should be allowed to keep trading. So it sounds
Speaker 1: like a technological limitation more logistical, right, and logistical and
Speaker 1: just capital um in order for the firms to be
Speaker 1: able to put up money um to clear through the
Speaker 1: settlement process. I just don't know that there's not capital
Speaker 1: limitations on what robin Hood can do to support this
Speaker 1: trading at this point. Do you think they think that's
Speaker 1: something we're going to find out if we move through
Speaker 1: these lawsuits. Yeah, listen, we're gonna we're gonna come back
Speaker 1: and talk some mohorrew but we've got about forty seconds here.
Speaker 1: Do you think this could potentially be the end of
Speaker 1: robin Hood though? Uh, I don't think so, But I
Speaker 1: think they could have done some reputational damage that they're
Speaker 1: going to have to come back from. All right, listen,
Speaker 1: sit tighten, Jen, We're gonna do a little bit of
Speaker 1: news and then we'll come back with Jennifer Schalp. She's
Speaker 1: Director of Financial Regulation Studies over at the Cato Institute,
Speaker 1: and she's a former director at FINRA, specifically at their
Speaker 1: Department of Enforcement. I mean a lot of questions coming
Speaker 1: out and you want markets to move and operate smoothly efficiency.
Speaker 1: It's why we had trading stops put in right after
Speaker 1: some of the big stops we saw from from the eighties.
Speaker 1: We did different measures after the financial crisis. Um, but
Speaker 1: you have to make sure it's still free markets and
Speaker 1: you know, free for everybody. Yeah, you do, and especially
Speaker 1: with with a platform like robin Hood. I think a
Speaker 1: fascinating story following this will be what is the reputational
Speaker 1: damage if any, to robin Hood and to what extent
Speaker 1: can it hold on to its customers. So earlier this week,
Speaker 1: NASAC CEO Dina Freedman participated in the Bloomberg the Year
Speaker 1: head Virtual event UH and she was asked about the
Speaker 1: trading that we've seen this week. She talked about specifically
Speaker 1: how the NASDAC handles potential market disruptions from social media.
Speaker 1: Check it out. We basically have some tools that track
Speaker 1: changes in chatter on social media. We think that there's
Speaker 1: something unusual or you know, even worse nefarious going on,
Speaker 1: we can halt the stock and then we will contact
Speaker 1: the company make sure there's no news all right, And
Speaker 1: that was again nasac CEO at Dina Freeman. So what
Speaker 1: they do when there's you know, social media chatter, which
Speaker 1: we know Tim has been a big part of the
Speaker 1: run ups that we've seen in game Stop. There have
Speaker 1: been conversations going on for weeks. Yeah, yeah, they have.
Speaker 1: I mean it makes sense given that this is you
Speaker 1: know it. I guess what. What's what's kind of surprising
Speaker 1: about this whole story, Carol, is this stuff was happening
Speaker 1: back in the nineteen nineties on message boards, right. The
Speaker 1: differences I think the apps and the commission free trading
Speaker 1: and that that you're allowed to do now. But I
Speaker 1: mean people have been been talking talking their book for
Speaker 1: since books existed, exactly. It happens all the time. So
Speaker 1: let's get back to Jennifer Schullp. She's Director of Financial
Speaker 1: Regulation Studies over at the Cato Institute's Center for Monetary
Speaker 1: and Financial Alternatives. She's also former director in the Department
Speaker 1: Enforcement at FINNERA. Still with us on the phone from Washington,
Speaker 1: d C. What do you make of what you just
Speaker 1: heard from nastac CEO aDNA Freedman about how they deal
Speaker 1: with talk about social media and Tim's right, I mean,
Speaker 1: go back to you know, the dot com bubble. I mean,
Speaker 1: people were talking about things. UM, what's different, what's new?
Speaker 1: What do we need to do? You know, I agree
Speaker 1: with him, this is this is not new, so to speak. UM.
Speaker 1: And I don't fault Nasdack at all for keeping an
Speaker 1: eye on social media, particularly where there might be misinformation
Speaker 1: or in fighter information that's been leaked. That's that's great
Speaker 1: things for the UM, for the exchanges to be keeping
Speaker 1: an eye on to see if there is a need
Speaker 1: to pause trading. UM. Where I where I walk away
Speaker 1: a little bit. Is nazdac statement yesterday that they would
Speaker 1: have stopped trading here for extended period of time? UM,
Speaker 1: kind of at least implicitly supporting some of the thirty
Speaker 1: day type of suspensions of trading that it's Secretary of
Speaker 1: State of Massachusetts Bill Galvin was supporting. UM. I think
Speaker 1: that gets in the way of actual markets from san
Speaker 1: and this type of discussions trading talking your book, this
Speaker 1: is normal, even if the outcome here might not look
Speaker 1: look normal at the moment. Well, that's what that was exactly.
Speaker 1: My next question to you, Jennifer, I mean, our our
Speaker 1: markets functioning normally here? Is this what's supposed to be happening.
Speaker 1: I think the answer is yes. UM. I think that
Speaker 1: there's concerned because there's a bubble um. But but bubbles
Speaker 1: are part of our markets, have been a part of
Speaker 1: markets since their inception. Um. We don't need to talk
Speaker 1: about tulips to know that, right. Um. And the overall market,
Speaker 1: if you look at it, I mean today it's you know,
Speaker 1: it's not like it's bringing down the overall market. And
Speaker 1: I do wonder if if we are ignoring that, and
Speaker 1: we shouldn't be that the fact that the market rose
Speaker 1: today when it was pulling down a little bit as
Speaker 1: a sign that that's something. Well, I'm saying that something
Speaker 1: isn't that you're seeing, you know, a pretty signific get
Speaker 1: correction in game stopped today, and yet the rest of
Speaker 1: the market is doing okay, it's actually valid. I don't
Speaker 1: think there's any indication here that we have sort of
Speaker 1: a contagious event um and that there's any sort of
Speaker 1: larger market instability problem. I think we're functioning correctly. It's
Speaker 1: just kind of crazy. So how does the story end?
Speaker 1: I mean, is this something that we're going to continue
Speaker 1: to see because Wall Street bets on Reddit is a
Speaker 1: thing and there's so much interest around it, or are
Speaker 1: is this going to be a flash in the pan.
Speaker 1: That's an interesting question, and I think some of that's
Speaker 1: going to play out in how badly some of these
Speaker 1: individual investors get hurt when the stock comes down UM,
Speaker 1: and I think the stock is going to come down.
Speaker 1: I don't think that's a controversial position, and I think
Speaker 1: that UM individuals are going to lose money here UM
Speaker 1: is not a controversial position to the extent that people
Speaker 1: really get burned. I think we might see less excitement
Speaker 1: for jumping into another bubble in the future UM. But
Speaker 1: at the same time, I think people are having fun
Speaker 1: here UM, either fun just for fun's sake or fun
Speaker 1: to stick it to Wall Street. And I wouldn't be
Speaker 1: surprised if we see more of this, at least in
Speaker 1: the short term. It's interesting because I do feel like
Speaker 1: that there's a lot of big trading houses and firms
Speaker 1: and investment firms who often talk about, you know, what
Speaker 1: we need to, you know, figure out ways for alternative
Speaker 1: investments for it to be much more accessible to kind
Speaker 1: of the little guy and retail investors. So there is
Speaker 1: that argument in one hand. But as soon as kind
Speaker 1: of retail investors figure out how to I guess game
Speaker 1: the market Um, but it doesn't look like they're breaking
Speaker 1: the law. You know, everybody kind of gets upset, and
Speaker 1: I would point out that hypocrisy. Um, I'm I'm pretty
Speaker 1: solidly in favor of giving retail investors the opportunity both
Speaker 1: in the alternative investments front and here. Um, we need
Speaker 1: to make sure people are educated and understand the risks
Speaker 1: of the markets that they're playing in, and those risks
Speaker 1: are real, but giving them the opportunity to try, I
Speaker 1: think we should be permitting that on all fronts. Yeah,
Speaker 1: I gotta say, Um, I'm just looking at the amount
Speaker 1: of the questions and things that are coming in on
Speaker 1: my Twitter feed because this is really resonating with a
Speaker 1: lot of people. Tim, Yeah, it is. And and and look,
Speaker 1: I think there's a big part of this story is
Speaker 1: about the little guy versus you know, the big guys
Speaker 1: and them like sticking it to the man and sticking
Speaker 1: it to those hedge funds. Well, somebody tweets me, you know,
Speaker 1: so should we have a lot of bands people from
Speaker 1: going to Vegas so we can protect them from losing money?
Speaker 1: Like it's just there's I know you're looking at No.
Speaker 1: I mean, I don't know the answer this is like
Speaker 1: uncharted territory in some ways. Yeah, exactly. Um, Jennifer, thank
Speaker 1: you so much. Really really enjoyed that. Jennifer shelp. She's
Speaker 1: director of Financial Regulations. Studies are at the Cato Institute
Speaker 1: Center for Monetary and Financial Alternatives. She as a director
Speaker 1: at the Deportment director former director in the Department of
Speaker 1: Enforcement at Finneret. Listen, there's gonna be lots of conversations
Speaker 1: about this to come, so stay tuned. Everybody. Buckle in
Speaker 1: because there's a lot more to come. You're listening to
Speaker 1: Bloomberg Business Week and this is Bloomberg Radio. So we
Speaker 1: want to get to the big story of the day
Speaker 1: and really the week, and it's already going to be,
Speaker 1: as we said earlier, a story of the year. Let's
Speaker 1: get right to Interactors Brokers chairman and founder Thomas Peturfhee.
Speaker 1: He is on the phone in Connecticut. Interactive Brokers among
Speaker 1: the platforms that did start restricting trading of stocks that
Speaker 1: have run up rapidly, including game Stop. They did that
Speaker 1: earlier today. Thomas, good to have you here with Tim
Speaker 1: and myself. First of all, why did you stop the trades?
Speaker 1: What was the nail and the coffin that made you
Speaker 1: ultimately decide to do it. And I'm curious if you
Speaker 1: were getting calls from either clients, investors, or even your
Speaker 1: board that you had to do something. Uh So, first
Speaker 1: of all, I'm in Sunny Bomb Beach Okay, sorry, which
Speaker 1: I was told Connecticut. I wish I was there too.
Speaker 1: Thank you for inviting me onto the show. Yes are
Speaker 1: The answer is yes? So this stuff today games the
Speaker 1: game game gm E, it was at one point as
Speaker 1: low as two as one and twelve dollars and one
Speaker 1: point as high as for under an eighty three dollars.
Speaker 1: Currently it is reading at two londerd and thread four
Speaker 1: dollars um. So why did we resort to these measures.
Speaker 1: We did because we are extremely concerned about the continuing
Speaker 1: viability of intermediaries, the clearinghouses and the brokers. Now why
Speaker 1: is that Because every option contract there is a buyer
Speaker 1: and sellers to a number of For each number, each
Speaker 1: each option contract that that exists in the world, there
Speaker 1: is a loser and a winner. The broker stands between
Speaker 1: the broker and the clearinghouse spends between the winners and
Speaker 1: the losers. The broker has to collect from the losers,
Speaker 1: give it to the clearing cause. The clearing cause gives
Speaker 1: it to the winners broker and gives it to broke
Speaker 1: winners broker gives it to the winning The problem arises
Speaker 1: when the loser loses more money than is in his
Speaker 1: or accounts. Right now, there are currently um three billion
Speaker 1: options contracts are standing on game. The average option contract I,
Speaker 1: since the stuff has moved around so much, I estimate
Speaker 1: the average option contract is worth about ten thousand dollars.
Speaker 1: So un some three million contracts, half of them are
Speaker 1: worthless half of the worth on the average of ten
Speaker 1: thousand dollars. That's uh, that's fifteen billion dollars of the
Speaker 1: winners and losers, right. So now the brokers have to
Speaker 1: collect from the losers and pay to the winners. If
Speaker 1: they can't, they have to put up their own money,
Speaker 1: right right. So uh, Luckily enough, we have a very
Speaker 1: large uh capital base of nine billion dollars and they
Speaker 1: have automated liquidation systems. But many of other brokers do
Speaker 1: not have them. But but can I, if Thomas, if
Speaker 1: I can break in, and we should put out that
Speaker 1: Interactor Brokers is a sponsor Bloomberg Radio and Bloomberg TV.
Speaker 1: So it's not the case that traders were doing anything
Speaker 1: wrong or illegal. It's just a case of logistically there
Speaker 1: were going to be problems right in terms of clearing houses.
Speaker 1: So that's more an operational problem versus a market problem
Speaker 1: or traders doing something wrong. Correct. No, no, no, not correct.
Speaker 1: So so short squeezes are illegal. Na, when when you
Speaker 1: buy a stock for three hundred dollars that months ago
Speaker 1: was the failing company right there, you know, basically a
Speaker 1: second and store for for video games, right, Uh so
Speaker 1: it wasn't really worth and it's much money and it's
Speaker 1: not reading that two hundred and thirty dollars, right, So
Speaker 1: your only motivation to buy that stuff with you know
Speaker 1: full well eventually we'll go down to seventeen dollars is dead.
Speaker 1: I'm sorry, there is. I don't know what that's okay,
Speaker 1: We're all getting a lot of Skype calls at home
Speaker 1: when working from home these days, right, So we go ahead,
Speaker 1: go ahead, I want you to finish that time, if
Speaker 1: I may, if I may continue, please, So your only
Speaker 1: motivation to buy this start or two hundred and thirty
Speaker 1: dollars could be to join the short screech, because why
Speaker 1: would this stuck go up. Why is the first two
Speaker 1: hundred and thirty dollars, It's first hundred dollars right right?
Speaker 1: Are you are you guys closing out account? Are you
Speaker 1: closing closing out positions? We learned just minutes ago that
Speaker 1: robin Hood has told users that it may close some
Speaker 1: at risk positions previous legislation they introduced in Thomas, I
Speaker 1: don't think. I don't know if you can hear us. Yeah, yeah,
Speaker 1: I can hear you now. I just didn't hear you
Speaker 1: before that at least positions. What did you mean? Yeah?
Speaker 1: Are you are you closing out any accounts? We did
Speaker 1: know that robin Hood says that it told users that
Speaker 1: it may close some at risk positions. We have we
Speaker 1: have closed thousands of positions. We have we have twenties
Speaker 1: as of yesterday morning, we have twenty seven thousand customers
Speaker 1: who are involved in in GM stock, either via the
Speaker 1: stock or via options them. Of course many many of them,
Speaker 1: especially since we have tend to have professional customers that
Speaker 1: tended to be at the short side. So yes, we
Speaker 1: close out many of those positions. And was a lot
Speaker 1: of the the positions that you closed out of me?
Speaker 1: I'm curious about in terms of your business. How much
Speaker 1: is retail investors individual investors versus bigger institutional clients. So well,
Speaker 1: it's hard to spell our Our average client account is uh,
Speaker 1: just under three d dollars, so they are not your
Speaker 1: regular Moments clients. But of course many of them are
Speaker 1: solder are many of them are much bigger, but it's
Speaker 1: just the average. Ye have one point one eight million customers.
Speaker 1: So yeah, hey, you know, Thomas, you know it's hard,
Speaker 1: and I think we're trying to get our head about
Speaker 1: I have lots of conversations with you know, big name
Speaker 1: shops too, and and investors who say, you know, we're
Speaker 1: increasingly trying to open up alternative investments to individual investors,
Speaker 1: give them access to the types of investments that the
Speaker 1: bigger institutional clients typically have. And yet I feel like
Speaker 1: when a smaller retail investor to some extent acts like
Speaker 1: one of the big guys, all of a sudden, their
Speaker 1: hands gets slapped. I So I don't think that's true.
Speaker 1: So short squeezes are not legal. Maybe many of the
Speaker 1: long heres do not know that they are participating in
Speaker 1: a short squreet, but uh that that that's the only
Speaker 1: issue I see that they inadvertently doing something that they
Speaker 1: shouldn't be doing. But it's it's really stupid to look
Speaker 1: at the stock and buy the three hundred dollars and
Speaker 1: you know that it's a it's a little business, right,
Speaker 1: it's a it's a corner store. Thomas. We only have
Speaker 1: fifteen seconds for this. But are you worried that there's
Speaker 1: going to be a pr impact from this and retailer
Speaker 1: traders will go to other trading platforms. I don't think so,
Speaker 1: because our professional customer understands that we have to protect
Speaker 1: the marketplace for their's sake and their money. We have
Speaker 1: to protect. Do you think regulators just quickly twenty seconds?
Speaker 1: I have to get involved from Congress and others. I
Speaker 1: think unless regulators come out and say that training should
Speaker 1: be in these stocks for liquidation only, and this is
Speaker 1: going to continue indefinitely and that's not good. Thomas. I
Speaker 1: know it's been a busy day, uh, And we really
Speaker 1: appreciate you finding some time for us. Interactor Broker's chairman
Speaker 1: and founder Thomas Petter feed joining us on the phone.
Speaker 1: Interactor Broker's a sponsor of Bloomberg Radio and Bloomberg TV.
Speaker 1: Thanks for listening to Bloomberg Business Week. Download the podcast
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