WEBVTT - Elon Musk Takes a Gamble as Insurance Rates Skyrocket 0:00:01.400 --> 0:00:04.120 Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, along 0:00:04.120 --> 0:00:06.200 with my co host of Bonnie Quinn. Every business day 0:00:06.240 --> 0:00:10.360 we bring you interviews from CEOs, market pros, and Bloomberg experts, 0:00:10.400 --> 0:00:13.600 along with essential market moving news. Find the Bloomberg Markets 0:00:13.600 --> 0:00:17.000 Podcast on Apple podcast or wherever you listen to podcasts, 0:00:17.000 --> 0:00:21.680 and on Bloomberg dot com. So rates for what's being 0:00:21.720 --> 0:00:26.400 called Directors and Officers insurance they've skyrocketed because there's been 0:00:26.440 --> 0:00:29.360 a surge in lawsuits by plaintiffs seeking to sue as 0:00:29.360 --> 0:00:32.040 a group. Now the latest surgeon lawsuits coming as a 0:00:32.080 --> 0:00:35.479 response to the coronavirus outbreak and how companies may have 0:00:35.560 --> 0:00:39.520 bungled it in certain cases according to these plaintiffs. But interestingly, 0:00:39.640 --> 0:00:42.559 Elon Musk never want to shy away from making a gesture. 0:00:42.960 --> 0:00:45.560 Set in April, he was dropping the insurance policy that 0:00:45.640 --> 0:00:48.920 protects Tesla's board from shareholder lawsuits. It doesn't mean they 0:00:48.960 --> 0:00:51.360 wouldn't be insured. It meant that he would pay out 0:00:51.400 --> 0:00:53.560 of his own pocket. It's a fantastic story today, brought 0:00:53.560 --> 0:00:57.120 to us by Jeff Phey and Catherine Chilinsky of Bloomberg News, 0:00:57.280 --> 0:01:00.440 and let's bring them in now. Jeff, why that Elon 0:01:00.520 --> 0:01:02.600 Musk have put himself on the line, Like, it's not 0:01:02.680 --> 0:01:05.280 that he doesn't have enough money, but I mean these 0:01:05.319 --> 0:01:12.400 are potentially multimillion even more lawsuits. Elon is Elon is 0:01:12.480 --> 0:01:16.440 what I want to say to start off. Also, I mean, 0:01:16.680 --> 0:01:20.360 you're talking about an average increase over the last two 0:01:20.480 --> 0:01:23.360 years of this kind of insurance starting to get a 0:01:23.360 --> 0:01:26.039 bit out of hand, and the insurance company is insurance 0:01:26.080 --> 0:01:29.440 companies are citing a jump in the numbers of security 0:01:29.480 --> 0:01:32.399 suits and then of course the COVID thing, both of 0:01:32.400 --> 0:01:35.920 which are legitimate reasons. But I mean forty percent in 0:01:36.000 --> 0:01:39.399 a two year period, that's a that's a pretty big bump. 0:01:39.600 --> 0:01:43.320 And you know, I mean companies are looking to conserved 0:01:43.680 --> 0:01:49.160 resources given the economic body blows of the pandemic has caused. 0:01:49.200 --> 0:01:51.840 So Elon sees this as a way of saving money. 0:01:52.360 --> 0:01:53.720 So kind I want to bring you in here. You 0:01:53.800 --> 0:01:57.120 cover all things on the insurance side on this d 0:01:57.280 --> 0:02:00.640 n O or Directors and Officers insurance market. Here, what 0:02:00.760 --> 0:02:03.520 is it typically cover? What kind of protections is it 0:02:03.600 --> 0:02:07.680 typically give a board member? Yeah, so it gives them 0:02:07.720 --> 0:02:10.560 a lot of liability protection in case they're stuit um. 0:02:10.560 --> 0:02:12.960 It often you know, you see it occur when some 0:02:13.200 --> 0:02:16.000 shareholder files the suit that alleges, you know, they've been 0:02:16.080 --> 0:02:18.480 hurt because of a stock drop, which kind of makes 0:02:18.480 --> 0:02:21.280 this a really interesting time period for the market, um 0:02:21.320 --> 0:02:23.040 because you know, while we did see sort of the 0:02:23.040 --> 0:02:25.480 stock market crash and a bit of the first quarter, 0:02:25.560 --> 0:02:28.480 especially in March, it was a broad based decline. So 0:02:28.560 --> 0:02:30.079 I think it's going to make a lot of these 0:02:30.120 --> 0:02:33.520 claims a little more intriguing because whether you can prove 0:02:33.560 --> 0:02:37.320 the cause, whether you were hurt by um this broad market, 0:02:37.400 --> 0:02:39.000 or if it was just something that really affected a 0:02:39.040 --> 0:02:41.080 bunch of companies at once. I think it's going to 0:02:41.160 --> 0:02:44.200 be kind of an interesting tension we'll see in these lawsuits, well, 0:02:44.240 --> 0:02:46.919 just on that particular. In christition as well. I mean, 0:02:47.080 --> 0:02:50.000 there are some companies for whom that's more of a 0:02:50.040 --> 0:02:52.080 problem than others, and Tesla might be one of them, 0:02:52.080 --> 0:02:54.560 considering we saw it's your price cool above a thousand 0:02:54.560 --> 0:02:58.480 dollars last week. And Ellen himself has run ins with 0:02:58.560 --> 0:03:02.480 regulators from time to time, given his his round things 0:03:02.520 --> 0:03:05.720 on Twitter sometimes and they can move stocks. So is 0:03:05.760 --> 0:03:08.600 he really putting himself on the line. I mean, what's 0:03:08.639 --> 0:03:11.400 the worst case scenario for Elon Musk in this in 0:03:11.440 --> 0:03:16.000 this in this scene, Catherine Well, I would say, I mean, 0:03:16.040 --> 0:03:19.480 obviously if there are lawfoods, then they do prove quite 0:03:19.720 --> 0:03:22.400 um successful against him. You know, he's got a lot 0:03:22.440 --> 0:03:25.080 on the line, and that's it becomes quite tricky in 0:03:25.120 --> 0:03:27.600 his case because there are some conflicts of interest that 0:03:27.639 --> 0:03:30.040 people have raised. You know, the board members need to 0:03:30.080 --> 0:03:32.480 sort of make sure his wealth is there in a 0:03:32.520 --> 0:03:35.480 way to protect them and um, and that's where do 0:03:35.520 --> 0:03:37.680 you know, insurance always gets kind of interesting. You know, 0:03:37.680 --> 0:03:39.360 That's why a lot of people turn to sort of 0:03:39.400 --> 0:03:43.040 the traditional insurers to buy it because they want, you know, 0:03:43.120 --> 0:03:45.560 someone who's very separate from the company and the board 0:03:45.760 --> 0:03:49.120 to ensure them so that there's no conflict of interest. 0:03:49.200 --> 0:03:51.240 And I think those were some of the concerns that 0:03:51.480 --> 0:03:54.480 you know, experts we talked to raised, is that Ellen 0:03:54.640 --> 0:03:56.800 is going to have to work over money if there 0:03:56.920 --> 0:03:59.640 is a loss, and you know, he has obviously got 0:03:59.640 --> 0:04:01.960 a lot of the Tesla and the board and they're 0:04:01.960 --> 0:04:03.600 gonna have to make sure that they can kind of 0:04:03.880 --> 0:04:06.800 keep things very independent. Yeah, Jeff, I kind of want 0:04:06.800 --> 0:04:08.160 to follow up on that. If I were a board 0:04:08.240 --> 0:04:11.600 member Tesla, I'm much sure. I'm sure, I'm I'm drinking 0:04:11.600 --> 0:04:15.800 the Elon Tesla uh Elon Musk kool aid, But I'm 0:04:15.800 --> 0:04:18.320 not sure i'd be comfortable not having that DNO insurance 0:04:18.320 --> 0:04:22.200 policy behind me. What's the sense of other companies out there? 0:04:22.200 --> 0:04:25.400 I mean, this is really unusual, isn't it? It is? 0:04:25.839 --> 0:04:29.599 And given what Elon Musk thinks the best most journalists, 0:04:29.640 --> 0:04:31.840 I would not sit by the phone waiting for that 0:04:31.920 --> 0:04:37.360 call for your board appointment. But um um, the reality 0:04:37.640 --> 0:04:40.440 is that nobody else that we were able to find 0:04:40.480 --> 0:04:42.880 has done this. You know, we we poked around. Ja 0:04:43.000 --> 0:04:45.160 and Jay may have had. They wouldn't comment on it. 0:04:45.480 --> 0:04:48.920 They have their own captives ensure. But here's the reality. 0:04:48.960 --> 0:04:53.240 We quote Stip McBride, who's a director at companies such 0:04:53.240 --> 0:04:56.360 as Bluebell ice Cream in Texas as an old DNO 0:04:56.520 --> 0:04:59.720 expert marketing from Mark Lane here now, and we quote 0:04:59.760 --> 0:05:03.360 him the saying he would not join the Tesla board 0:05:03.440 --> 0:05:07.880 without cutting his own separate deal with Elon Musk, That 0:05:08.120 --> 0:05:11.880 he would write that would leave him no wiggle room 0:05:12.040 --> 0:05:17.000 on covering litigation against Skip McBride. They may have done that. 0:05:17.000 --> 0:05:19.359 That may be the way that they have handled that. 0:05:19.480 --> 0:05:22.080 They did not disclose that, by the way, in their 0:05:22.160 --> 0:05:26.120 SEC filings, what they did disclose is that the Elon's 0:05:26.160 --> 0:05:29.760 board had basically chewed over the idea of whether this 0:05:29.880 --> 0:05:32.400 left them in a conflict position when they found that 0:05:32.440 --> 0:05:36.480 it did not. So, you know, this is all one 0:05:36.600 --> 0:05:39.760 big Google lots that you've got sort of swirling around 0:05:40.240 --> 0:05:44.160 involving COVID. You have the insurance industry saying that they 0:05:44.200 --> 0:05:47.800 faced potential losses of four hundred and eighty billion dollars. 0:05:47.880 --> 0:05:53.960 That's gonna be every month over insurance claims, business and 0:05:54.120 --> 0:05:58.560 eruption other insurance claims. D you know, for an eighty 0:05:58.640 --> 0:06:03.039 billion a month, it's really phenomenal. But I suppose, you know, 0:06:03.160 --> 0:06:05.640 I mean, if the price has gone off that much, 0:06:05.760 --> 0:06:08.200 then I guess you do get to that number pretty quickly. 0:06:08.600 --> 0:06:14.360 What's the outlook for these coronavirus cases, Jeff, I mean here, 0:06:14.400 --> 0:06:17.080 there's going to be so many of them. Yeah, here's 0:06:17.120 --> 0:06:19.960 the deal. And you guys mentioned Tesla as being somebody 0:06:19.960 --> 0:06:22.680 who's a particular risk. I don't see them at particular risk. 0:06:23.120 --> 0:06:25.440 You know, we note in the story used a particular 0:06:25.520 --> 0:06:28.760 risk as a Norwegian Cruise line and Princess Cruise Line, 0:06:28.920 --> 0:06:33.000 and those guys have got already got at least a 0:06:33.000 --> 0:06:36.640 half dozen security suits against them, saying not only did 0:06:36.640 --> 0:06:40.320 you bungle COVID, but in the in the example of Norwegian, 0:06:40.920 --> 0:06:44.440 you basically lied to people about you know, how bad 0:06:44.520 --> 0:06:47.080 COVID was trying to get them to keep their booking 0:06:47.160 --> 0:06:51.400 dates on the cruises that goes before a jury. And 0:06:51.680 --> 0:06:53.600 I don't even want to think of a number that 0:06:53.720 --> 0:06:57.680 gets attached in the verdict. Jeff Philly, thanks so much 0:06:57.720 --> 0:06:59.800 for joining us. Jeff Philly is a legal reporter for 0:07:00.440 --> 0:07:04.680 Bloomberg News uh and Cat Lynskey financial reporter covering all 0:07:04.720 --> 0:07:07.120 things insurance for Bloomberg News as well, with a fascinating 0:07:07.120 --> 0:07:10.760 story the two had out today, Elon Musk effectively self 0:07:10.880 --> 0:07:14.280 ensuring his board. I. I just can't think another example 0:07:14.320 --> 0:07:17.040 of that, Bonnie. I mean, if you were counting on 0:07:17.120 --> 0:07:22.920 your CEO to ensure you poll, would you argue with him? Uh? No, 0:07:23.080 --> 0:07:24.880 I don't think so. I mean, I just think the risk, 0:07:24.960 --> 0:07:27.880 particularly in this environment, or just too great. And I 0:07:27.920 --> 0:07:29.880 think it's, you know, it's really too much really to 0:07:29.960 --> 0:07:34.000 ask for board member. I think in this environment, yeah, exactly, 0:07:34.160 --> 0:07:38.040 I mean captive insurance trickier with dno because of conflicts 0:07:38.040 --> 0:07:40.240 of interest. As we say in the story, it's definitely 0:07:40.280 --> 0:07:43.680 well worth reading the whole story. Absolutely great stuff coming 0:07:43.680 --> 0:07:48.200 out of Bloomberg does. Yeah, that's what he does. It's 0:07:48.240 --> 0:07:55.520 Ellen being elon Hens one of the biggest public pension 0:07:55.560 --> 0:07:59.200 plans in the country, second to maybe only one other. 0:07:59.280 --> 0:08:02.520 Let's bring in Chris Ellman, chief investment officer at callister 0:08:02.720 --> 0:08:07.880 Is the California State Teachers Retirement System. Chris, welcome back. Well, Fannie, 0:08:07.920 --> 0:08:09.920 it's good to be back. We're number two in assets, 0:08:10.000 --> 0:08:12.800 but we're number one in everyone's heart. That's what I 0:08:12.880 --> 0:08:15.760 was hinting out there. Chris, Well, let's get straight to it. Then. 0:08:15.880 --> 0:08:19.720 Have you had to revise what you're assuming you're going 0:08:19.760 --> 0:08:23.840 to make in returns over the next several years. Well, 0:08:23.880 --> 0:08:26.320 we haven't changed our long term assumption because it's a 0:08:26.360 --> 0:08:29.360 thirty year average, Fannie. But what we have done is 0:08:29.520 --> 0:08:32.720 reassessed and the keyword was when the Fed said interest 0:08:32.760 --> 0:08:36.480 rates we're going to stay at zero through that's a 0:08:36.480 --> 0:08:40.960 powerful statement, and so the next five years will probably 0:08:41.000 --> 0:08:45.000 be lower returns, although the last time the Fed did that, 0:08:45.080 --> 0:08:48.120 we had double digit returns for those five years. So 0:08:48.640 --> 0:08:53.160 risk assets maybe profitable during this time period we have 0:08:53.200 --> 0:08:56.240 to get through the health crisis. But I think that 0:08:56.280 --> 0:08:58.400 we're going to see very low returns. Obviously had a 0:08:58.440 --> 0:09:03.880 fixed income corporate credit uh anything was variable rates that reset, 0:09:04.440 --> 0:09:07.719 but that means that equity investments and growth investments may 0:09:07.720 --> 0:09:10.439 have a chance to use that free money that financing. 0:09:11.760 --> 0:09:14.959 So Chris your your kind of parts. At Cowper's UH, 0:09:14.960 --> 0:09:18.520 they were talking about needing to maybe I more private 0:09:18.520 --> 0:09:22.240 equity uh to leverage and maybe even more leverage to 0:09:22.320 --> 0:09:26.120 boost returns. I making the portfolio a little bit more 0:09:26.320 --> 0:09:29.480 riskier in order to generate the returns that they need. 0:09:29.600 --> 0:09:33.319 How do you view that? Yeah, Ben Ming's uh new 0:09:33.400 --> 0:09:36.559 c I oh there, who's really taking a comprehensive look 0:09:36.600 --> 0:09:41.280 at the portfolio? And we're all seeing a trend that 0:09:41.320 --> 0:09:44.640 the Canadians have used some of the Dutch pension plans 0:09:44.920 --> 0:09:48.400 UH and Danish pension plans have used, which is too 0:09:48.520 --> 0:09:51.440 You know, when when interest rates are zero, uh, you 0:09:51.559 --> 0:09:55.640 borrow money and leverage and you and go into growth assets. 0:09:55.640 --> 0:09:58.240 But I think there's a natural for a public pension. 0:09:58.320 --> 0:10:00.600 There's got to be a limit to that. And that's 0:10:00.600 --> 0:10:03.560 what everybody wants to explore. You want to use that 0:10:03.640 --> 0:10:07.560 lower cost money as an opportunity to buy into things 0:10:07.600 --> 0:10:12.520 like real estate. Private equity should take advantage of it, obviously, um, 0:10:12.559 --> 0:10:16.480 but also just across the portfolio. But there are natural limits, 0:10:16.520 --> 0:10:19.120 no one has defined that. But but probably not more 0:10:19.120 --> 0:10:24.160 than leverage. Um. We have a leverage policy. We actually 0:10:24.200 --> 0:10:28.000 monitor that very closely. You take leverage in real estate. 0:10:28.040 --> 0:10:33.080 Everybody buys their home with what down maybe down, so 0:10:33.160 --> 0:10:36.600 they're leveraging over half. A public pension plan would be 0:10:36.640 --> 0:10:41.000 doing just the opposite, barely leveraging the portfolio, Paul Um. 0:10:41.040 --> 0:10:43.480 But it's it's simply because the fact that the Fed 0:10:43.600 --> 0:10:46.600 has signaled rates are going to be so low for 0:10:46.640 --> 0:10:51.280 so long. Um, that's very inexpensive money that allows you 0:10:51.320 --> 0:10:54.920 to invest in other places. But not until the health 0:10:54.920 --> 0:10:58.440 crisis is resolved. And can I point out, Chris and 0:10:58.480 --> 0:11:01.360 correct me if I'm wrong, But you guys would actually 0:11:01.400 --> 0:11:03.240 have been doing a little bit more of this than 0:11:03.280 --> 0:11:07.720 other retirement systems for a long time. You've always been 0:11:07.760 --> 0:11:10.640 a little more into real estate, a little riskier when 0:11:10.640 --> 0:11:13.640 it comes to venture and growth and even fund of 0:11:13.640 --> 0:11:18.360 funds and alternatives generally. Right, Well, Bonnie, uh spot on. 0:11:18.480 --> 0:11:21.679 You've known me for almost two decades. I think, UM, 0:11:21.840 --> 0:11:24.720 we we do tilt a little heavier toward real estate 0:11:25.360 --> 0:11:31.040 UM than most public pensions UH, State of Washington, ourselves, Oregon. 0:11:31.160 --> 0:11:34.000 There's a lot of funds that have a fairly large 0:11:34.400 --> 0:11:38.320 allocation to private equity. UH. At our fund it's it's 0:11:38.360 --> 0:11:41.840 currently about ten percent going to which is a big 0:11:41.960 --> 0:11:45.920 dollar amount UM. And you know, the returns from private 0:11:45.920 --> 0:11:48.319 equity are going to come down, but they're going to 0:11:48.400 --> 0:11:51.240 be helped by this lower money. And the reason you're 0:11:51.240 --> 0:11:53.400 going to come down is simply competition. There's just too 0:11:53.480 --> 0:11:56.960 much money chasing too few deals. And and before the 0:11:56.960 --> 0:12:00.800 health crisis, private equity companies were paying top dollar for 0:12:00.880 --> 0:12:04.240 any kind of an investment, and that usually means lower 0:12:04.320 --> 0:12:07.880 returns going forward. So we're still going to stay in 0:12:07.880 --> 0:12:10.800 the space, but it's going to be less of a 0:12:10.880 --> 0:12:12.840 return than you used to see. And the stay the 0:12:12.920 --> 0:12:16.240 nineties of the two thousands. We think a broadly diverse 0:12:16.280 --> 0:12:20.520 side portfolio is gonna help you through this. Growth investments 0:12:20.600 --> 0:12:24.280 once we get out of the health crisis, growth investments 0:12:24.280 --> 0:12:27.960 will be attractive to people, and that could be even 0:12:28.120 --> 0:12:31.080 in US and non US stocks. You know the world 0:12:31.080 --> 0:12:34.920 has had so many geopolitical challenges. Um, if you could 0:12:34.960 --> 0:12:38.400 get its act together, Japan could finally start growing again. 0:12:38.520 --> 0:12:42.120 You've got some investment opportunities, big if at the start 0:12:42.160 --> 0:12:45.040 of those. Well again, I have to keep cavigating. We've 0:12:45.040 --> 0:12:47.760 got to get through this health crisis. Yeah. Absolutely, that's 0:12:47.800 --> 0:12:51.120 paramount for everybody. I think you know, it goes without saying, 0:12:51.480 --> 0:12:54.320 but Chris, talk to me about your real estate holdings 0:12:54.360 --> 0:12:56.280 and what you're you on real estate is right now, 0:12:56.320 --> 0:12:59.720 because I think that sort of has split people in two, 0:13:00.040 --> 0:13:02.839 does to what they are anticipating in terms of inflation 0:13:03.120 --> 0:13:06.160 as to what they're anticipating in terms of how you 0:13:06.200 --> 0:13:11.720 know structurally, light will change after this. Good good point, Bunny. 0:13:11.800 --> 0:13:14.360 You know, right now real estate is fairly frozen. There 0:13:14.360 --> 0:13:17.600 are no transactions, so there's no price information to figure 0:13:17.600 --> 0:13:21.080 out where things are going into This real estate was 0:13:21.120 --> 0:13:24.680 pretty much priced of perfection. The real estate our team 0:13:24.720 --> 0:13:28.440 was doing was more build two core as we describe it, 0:13:28.520 --> 0:13:32.160 so so speculative building, but leasing up the property and 0:13:32.200 --> 0:13:34.920 making it a core holding. Most of the return in 0:13:34.960 --> 0:13:38.199 real estate comes out of your lease income. It does 0:13:38.280 --> 0:13:40.760 not come out of capital appreciation. As much as people 0:13:41.080 --> 0:13:43.280 focus on that, I think that will be true and 0:13:43.320 --> 0:13:46.680 you're right, the dynamics of the typical downtown office building 0:13:47.360 --> 0:13:49.520 are going to change. Um, this is the first time 0:13:49.520 --> 0:13:51.600 in my forty year career I've been able to work 0:13:51.640 --> 0:13:54.760 from home. But I like it. I know my staff 0:13:56.080 --> 0:13:58.840 of my staff liked it. So I think we're still 0:13:58.840 --> 0:14:03.439 gonna have to come back to the office interact. Yeah, 0:14:03.800 --> 0:14:06.920 it is amazing, you know there, but there's less interaction, 0:14:07.000 --> 0:14:10.240 there's less dropping in in people's office and sharing ideas. 0:14:10.720 --> 0:14:14.040 We need that interaction, that that creativity and the culture. 0:14:14.120 --> 0:14:16.880 There's no culture when you're working from a zoom screen. 0:14:17.440 --> 0:14:19.680 So but I think we're going to see a new 0:14:19.720 --> 0:14:21.800 dynamic where, yes, a lot of people at least a 0:14:21.840 --> 0:14:23.920 few days a week, maybe a week a month, work 0:14:24.000 --> 0:14:28.080 from home. Um. Certainly the young families love it because 0:14:28.120 --> 0:14:30.800 then they can be with their kids. But I can 0:14:30.880 --> 0:14:33.680 tell you that people with teenagers are happy to get 0:14:33.680 --> 0:14:35.880 back to the office. They want to get out of out. 0:14:36.000 --> 0:14:39.400 So it's a it's a split. But you know the 0:14:39.400 --> 0:14:44.000 other part of real estate apartments industrial Um, all of 0:14:44.040 --> 0:14:49.280 those wonderful Amazon fulfillment centers, those are still very profitable. 0:14:49.320 --> 0:14:52.480 There are sub segments in real estates such as UH 0:14:52.520 --> 0:14:55.360 the server centers where the internet has to be kind 0:14:55.360 --> 0:14:59.640 of housed or hubbed. Uh, those are profitable. So you know, 0:14:59.760 --> 0:15:03.400 I've think I've always liked industrial because it's just big 0:15:03.440 --> 0:15:06.080 and bold and and not a lot of landscapes, so 0:15:06.120 --> 0:15:07.520 you don't have to water it. As long as the 0:15:07.560 --> 0:15:11.760 trucks pull up, you're making money. Um. Retail is going 0:15:11.800 --> 0:15:13.880 to be challenged, obviously, but people do want to go 0:15:13.920 --> 0:15:16.680 back to the mall. But we've been we've in retail, 0:15:16.720 --> 0:15:19.640 we've been underweight, and we have been a grocery anchored 0:15:19.720 --> 0:15:23.200 kind of local chains and centers for a long time. 0:15:23.960 --> 0:15:25.520 And Chris, thanks so much for joining us. We always 0:15:25.520 --> 0:15:30.080 appreciate hearing your broad perspective. Chris Ailment, chief investment officer 0:15:30.200 --> 0:15:33.800 for the California State Teachers Retirement System. They've got a 0:15:33.800 --> 0:15:37.120 couple of dollars under management, about two thirty nine billion 0:15:37.160 --> 0:15:40.000 based in Sacramento, putting that money to work for all 0:15:40.000 --> 0:15:46.880 the good teachers from the state of California. Supreme Court 0:15:47.000 --> 0:15:50.040 has been a busy here. Today, a divided US Supreme 0:15:50.120 --> 0:15:54.000 Court ruled that federal law protects gay and transgender workers 0:15:54.000 --> 0:15:56.720 from job discrimination, in a decision that gives millions of 0:15:56.840 --> 0:16:00.240 LGBT people new civil rights. To get the latest on this, 0:16:00.320 --> 0:16:02.840 we welcome Gregg's store. He covers all things on the 0:16:02.880 --> 0:16:05.080 Supreme Court for us. Greg, So give us a sense 0:16:05.080 --> 0:16:08.680 of how important this decision is. Greg, Was it expected? 0:16:08.840 --> 0:16:13.520 What's your take? It's hugely important. Uh, more than half 0:16:13.520 --> 0:16:17.400 the U. S States don't cover sexual orientation and gender 0:16:17.480 --> 0:16:20.600 identity through their own antidiscrimination laws. And what that meant 0:16:20.680 --> 0:16:23.640 was and most of the country it was perfectly legal 0:16:23.680 --> 0:16:27.360 for an employer to fire somebody because of his or 0:16:27.360 --> 0:16:31.360 her gender identity or sexual orientation. Now that can no 0:16:31.440 --> 0:16:33.640 longer happen. And it's a ruling that came out of 0:16:33.680 --> 0:16:38.800 a pretty conservative Supreme Court. Yeah, isn't it phenomenal? Greg? 0:16:38.840 --> 0:16:42.680 Because it's it's quite ironic that even though we had 0:16:42.680 --> 0:16:45.520 that massive decision a few years ago in two thousand 0:16:45.600 --> 0:16:50.640 and fifteen legalizing same sex mariginationwide, that still people who 0:16:50.640 --> 0:16:53.160 could have been fired from their jobs for the very 0:16:53.200 --> 0:16:56.200 same thing, for being gay. Yeah, ironic is exactly the 0:16:56.280 --> 0:16:58.960 right word for it. And it's something that a lot 0:16:59.000 --> 0:17:02.520 of people did not know. But that decision involving gay 0:17:02.560 --> 0:17:04.919 marriage was a constitutional decision. This was a matter of 0:17:04.920 --> 0:17:08.880 interpreting uh, the nineteen sixty four Civil Rights Act. UH. 0:17:09.000 --> 0:17:12.280 That law says that you can't discriminate against somebody on 0:17:12.320 --> 0:17:15.199 the basis of sex. And the core question for the 0:17:15.320 --> 0:17:19.119 Court in this case was a somewhat technical question, which 0:17:19.200 --> 0:17:23.280 is whether that phrase words sex covers sexual orientation and 0:17:23.320 --> 0:17:27.080 gender identity. And the Supreme Court today said yes, it does. 0:17:28.119 --> 0:17:31.160 So it's interesting, Greg, I saw the conservative Justice Neil 0:17:31.320 --> 0:17:35.159 Gorsuch and Chief Justice John Roberts joined the courts for 0:17:35.600 --> 0:17:39.800 liberals in the six three majority vote. How surprising was 0:17:39.840 --> 0:17:42.960 that to see those two conservative judges vote this way. 0:17:43.840 --> 0:17:46.439 The Chief Justice was probably more surprising. A lot of 0:17:46.520 --> 0:17:49.360 us had watched Justice Gorsers during the arguments, which were 0:17:49.640 --> 0:17:52.919 way back in October UM, and he suggested that he 0:17:53.000 --> 0:17:55.240 might actually read the statute this way, So there was 0:17:55.280 --> 0:17:59.040 at least the possibility after the argument that he would 0:17:59.080 --> 0:18:02.159 join the liberals in the Jordy UH. Chief Justice Roberts 0:18:02.160 --> 0:18:04.760 did not suggest any such thing, And he had actually 0:18:04.800 --> 0:18:08.160 been in dissent and all the courts be gay rights 0:18:08.200 --> 0:18:12.000 decisions UH leading up to this moment, so I'm not 0:18:12.040 --> 0:18:13.800 sure I would have guessed that he would have been there. 0:18:14.040 --> 0:18:16.200 This was something that was certainly in the mix. But again, 0:18:16.600 --> 0:18:19.080 given the overall direction of the court, it's a court 0:18:19.080 --> 0:18:21.760 that has become more conservative since Donald Trump got to 0:18:21.760 --> 0:18:25.040 appoint to justices, including gorst. Uh. You know, you have 0:18:25.160 --> 0:18:28.280 to say, wow, it's it's it's quite a surprise to 0:18:28.280 --> 0:18:30.880 see this court issue this really well. And in fact, 0:18:30.920 --> 0:18:33.320 it was actually a trio of cases they were considering, 0:18:33.359 --> 0:18:36.160 So the two gay rights cases, but also a very 0:18:36.240 --> 0:18:40.679 interesting case transgender rights case a concerned a Michigan funeral 0:18:40.680 --> 0:18:43.960 home chain that fired Amy Stevens. She was preparing to 0:18:43.960 --> 0:18:48.119 start living openly as a woman. Tragically, though she she's 0:18:48.160 --> 0:18:50.639 died now and the Supreme Court has come out with 0:18:50.680 --> 0:18:54.000 the decision just more than a month after she died. Yes, 0:18:55.000 --> 0:18:57.760 she did. She had had a health problems for for 0:18:57.800 --> 0:19:01.439 a while. Um, you know, she she did get to 0:19:01.480 --> 0:19:03.919 see a federal appeals court rule in her favor, but 0:19:03.960 --> 0:19:07.040 of course when the Supreme Court got involved, that victory 0:19:07.080 --> 0:19:10.159 for her was was in jeopardy. Um. You know, her 0:19:10.200 --> 0:19:13.639 name will certainly be remembered as uh, someone who pushed 0:19:13.680 --> 0:19:17.960 this issue, who insisted that she should be treated equally, 0:19:18.640 --> 0:19:20.800 that she should not be discriminated against because she had 0:19:20.840 --> 0:19:26.160 decided to begin living openly as a woman. But yes, 0:19:26.880 --> 0:19:29.720 tragic for her that she didn't live to see this day. 0:19:29.920 --> 0:19:33.679 It's interesting, Greg Tim Cook, the CEO of Apple, just 0:19:33.760 --> 0:19:36.919 came out applauding the Supreme Court decision. Here. What's the 0:19:36.960 --> 0:19:41.000 general feeling of corporate America as it relates to these 0:19:41.040 --> 0:19:42.760 types of rights and what do you think the response 0:19:42.800 --> 0:19:44.760 will be to this ruling. I think there'll be a 0:19:44.760 --> 0:19:46.760 lot more of of what you just heard from from 0:19:46.760 --> 0:19:50.480 Tim Cook. Uh, corporate America was was generally on the 0:19:50.560 --> 0:19:55.320 side of expanding LGBT rights. Uh. In part just a 0:19:55.359 --> 0:19:58.439 calculated business decision that they want to see clear rules 0:19:58.480 --> 0:20:00.640 and now they know what the rules are, Uh, they 0:20:00.720 --> 0:20:04.360 cannot discriminate. Uh. You know, and it's a nationwide rule. 0:20:04.400 --> 0:20:08.200 They don't have to worry about a patchwork across the country. 0:20:08.720 --> 0:20:11.240 But there's also you know, when you talk to a 0:20:11.280 --> 0:20:13.679 lot of corporate leaders, they talk about how important it 0:20:13.720 --> 0:20:19.080 is for them to maintain a diverse and welcoming workforce. Uh, 0:20:19.119 --> 0:20:21.600 And this is something that in their minds will certainly 0:20:22.000 --> 0:20:26.160 push us in that direction. Yeah, it's amazing. Just more 0:20:26.200 --> 0:20:28.120 broadly on the docket, and what's left for the rest 0:20:28.160 --> 0:20:30.200 of the year, and who will write the decisions. Greg, 0:20:30.240 --> 0:20:33.600 I know you've been keeping ride. Well. I wouldn't have 0:20:33.640 --> 0:20:35.640 guessed that Justice Courses was going to write this decision, 0:20:35.640 --> 0:20:38.480 So I don't know who's going to write what going forward. 0:20:38.880 --> 0:20:41.240 One big one we're waiting for, we should get pretty soon, 0:20:41.359 --> 0:20:46.280 is whether President Trump can abolish the DOCTA deferred deportation program. Uh. 0:20:46.640 --> 0:20:49.200 That's obviously gonna be very contentious. We're gonna have rulings 0:20:49.200 --> 0:20:52.560 on abortion, religious rights, and then probably near the very 0:20:52.640 --> 0:20:55.760 end of the term, rulings on those subpoenas by the 0:20:55.880 --> 0:20:59.080 House and a New York Grand jury for President Trump's 0:20:59.160 --> 0:21:01.960 financial and formation. That will no doubt be one of 0:21:01.960 --> 0:21:05.600 the most politically divisive rulings of the term, and just 0:21:05.760 --> 0:21:09.000 on which justices are left to right decisions at least, well, 0:21:09.240 --> 0:21:11.560 it could be the way it works out. I would 0:21:11.560 --> 0:21:14.040 expect Chief Justice Roberts to write some of the big ones. Uh. 0:21:14.800 --> 0:21:19.480 The whole dynamic of who writes what the opinion is 0:21:19.600 --> 0:21:23.919 dependent on the sitting in which the Court uh issues 0:21:23.960 --> 0:21:26.720 it's ruling. So at this point it's a little hard 0:21:26.760 --> 0:21:30.159 to guess. Um. I do think Chief Justice Roberts a 0:21:30.240 --> 0:21:31.960 very good chance he will be the one writing the 0:21:32.040 --> 0:21:35.080 doctor decision. Beyond that, it's a little hard to speculate. 0:21:36.840 --> 0:21:39.359 All right, well, it is fascinating. Well, can keep an 0:21:39.359 --> 0:21:42.080 eye on all of your stories, particularly that seminal decision 0:21:42.080 --> 0:21:45.200 today from the Supreme Courts. It's amazing millions of LGBT 0:21:45.320 --> 0:21:48.720 people use civil rights. Yeah, it's really it's extraordinary. I 0:21:48.720 --> 0:21:51.040 wasn't aware that that many states did not have that 0:21:51.080 --> 0:21:55.200 protections at the state level. So obviously this is a compelling, 0:21:55.720 --> 0:21:58.480 uh and exceptionally important ruling here by the Supreme Court. 0:21:58.640 --> 0:22:01.320 And it's always the incremental decision that makes change right 0:22:01.680 --> 0:22:05.040 our Thanks to Greg's store, Supreme Court reporter for Bloomberg, 0:22:07.760 --> 0:22:12.720 it is time for a Bloomberg Opinion segment. Max Neeson, biotech, 0:22:12.760 --> 0:22:16.240 farm and healthcare calumnists for Bloomberg Opinion, joins us. Max, 0:22:16.280 --> 0:22:19.000 You've got a great column out and I love that 0:22:19.080 --> 0:22:22.639 the title here the headline to fight COVID nineteen this fall, 0:22:23.200 --> 0:22:26.000 get a flu shot. We'll talk to us about the 0:22:26.000 --> 0:22:29.399 flu shot. The people actually get this thing that doesn't work, 0:22:29.440 --> 0:22:31.760