Speaker 1: This is Bloomberg Business Week. I'm Carol Masser and I'm
Speaker 1: Jason Kelly. We're here every day bringing you the latest
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Speaker 1: also listen to our radio show weekdays at two pm
Speaker 1: Eastern only on Bloomberg Radio. Bloomberg Chief Washington Correspondent Kevin's
Speaker 1: Surreally host Bloomberg sound On has been traveling with Secretary
Speaker 1: of State Mike Pompeo. Kevin spoke to the Secretary an
Speaker 1: exclusive interview from Jamaica. Kevin started by asking the Secretary
Speaker 1: about her on backed Hezbollah finding a foothold in South America.
Speaker 1: When you see the scope and reach of what the
Speaker 1: Islamic Republic of Run regime has done, you can't forget.
Speaker 1: They tried to kill someone in the United States of America.
Speaker 1: They've conducted assassination campaigns in Europe. This is a global phenomenon.
Speaker 1: When we say that Iran is the leading destabilizing force
Speaker 1: in the Middle East and throughout the world, it's because
Speaker 1: of this terror activity that they have now spread as
Speaker 1: a cancer all across the globe. This past week, as
Speaker 1: you've traveled the world, we started in Germany and Berlin,
Speaker 1: where you met with world leaders, including German Chancellor Angela Merkel.
Speaker 1: You talked I'm sure you talked about Iran, but as
Speaker 1: you know, Europe has not always followed the same strategic
Speaker 1: route as the United States when it comes to iron.
Speaker 1: Did your meetings with European leaders moved the needle in
Speaker 1: that direction at all? Yes, their look there, we've been clear.
Speaker 1: We've had a different view on the right way to
Speaker 1: proceed to mature that Iran never gets a nuclear weapon,
Speaker 1: that their missile program is contained, and that this terror
Speaker 1: regime we were just talking about is pushback. They've never
Speaker 1: wavered from the shared objective. That just had a different
Speaker 1: view about about how to proceed. But if you've seen
Speaker 1: what Iran has done even in the past few weeks,
Speaker 1: but that's nuclear extortion. They're now threatening to leave the NPT.
Speaker 1: So I did we I talked with my European counterparts
Speaker 1: while I was or they have now uh taken a
Speaker 1: step under the j c p o A to invoke
Speaker 1: the dispute resolution mechanism. I think not only they, but
Speaker 1: the world can now see that this rogue regime has
Speaker 1: no intention of complying with the central tenants of what
Speaker 1: that agreement contained, and the world must unite to ensure
Speaker 1: that Iran never has a nuclear When I saw President
Speaker 1: McCrone say that yesterday, I know he means that now
Speaker 1: we need to work together to achieve When you say
Speaker 1: they have no intention, than than how do you get
Speaker 1: Tamron to go to the United Nations, to come to
Speaker 1: the United Nations to work with the international community aside
Speaker 1: from the sanctions and the various military response options. Ultimately,
Speaker 1: the people of Iran will get what they so richly deserve,
Speaker 1: a regime that behaves in ways that are consistent with
Speaker 1: the value sets of the Iranian people. In the end,
Speaker 1: the Iranian people will demand their government. You see see
Speaker 1: it in the protests. You see it when they walk
Speaker 1: around American flags that were put down by the Islamic
Speaker 1: Republic's leadership and in a them to so they can
Speaker 1: show pictures of Iranian people walking over American flags, and
Speaker 1: in fact, people go out of their way not to
Speaker 1: do that. Uh. This isn't about Iran versus the United States.
Speaker 1: This is about a regime that has treated its own
Speaker 1: people terribly. The world can see it. It's a regime
Speaker 1: that even now the i a e. Is trying to
Speaker 1: figure out how nuclear material got to places that the
Speaker 1: Iranian leadership said it would not be. Uh. And so
Speaker 1: this is a global risk. President Trump started his remarks
Speaker 1: at the night after an American response by saying, Iran
Speaker 1: will never have a nuclear weapons or primary purpose, but
Speaker 1: we have a broader set of objectives to We just
Speaker 1: want them to behave like a normal nation and re
Speaker 1: enter the society, the community of nations, and and traveling
Speaker 1: with you all week, I mean, I'm struck by just
Speaker 1: the range of hotspot issues around the world that are
Speaker 1: going on, and back home, the only thing that they're
Speaker 1: talking about his impeachment and the Senate impeachment trial. Did
Speaker 1: that come up at all in your conversations with world leaders?
Speaker 1: And has the Senate impeachment trial endangered US interests and
Speaker 1: reputation around the world? You know, Kevin, it hasn't come
Speaker 1: up today except where I received a question at a
Speaker 1: press conference about it. So, and you said you would
Speaker 1: testify it. Yeah. I've said consistently if the law required
Speaker 1: me to testify, I would do so. Uh. You know,
Speaker 1: it hasn't come up. It almost never comes up in
Speaker 1: meetings with my counterparts. There's too many important things going
Speaker 1: on in the world. America is too close a partner
Speaker 1: today have with countries in the Caribbean reaching here in Kingston. Uh.
Speaker 1: They care about so much that we do. They're such
Speaker 1: good friends and allies. They see the noise in Washington,
Speaker 1: but it is not something they would think in the
Speaker 1: time that we have between us, that they would raise.
Speaker 1: How Democrats are saying that Rudy Giuliani orchestrated a shadow
Speaker 1: foreign policy And can you assure diplomat serving overseas all
Speaker 1: around the world in dangerous places, that that's not the case. Yeah.
Speaker 1: The foreign policy we were executing then is the same
Speaker 1: foreign policy we're executing today. With respect to Ukraine. It's
Speaker 1: an important country. It sits at this cross roads. It's
Speaker 1: under enormous pressure from Rush. President Trump has taken actions
Speaker 1: to counter Russia the President Obama refused to take. We've
Speaker 1: provided defensive systems for the Ukrainian people so that they
Speaker 1: can defend themselves. We've supported this new leader, President Zelinsky,
Speaker 1: in his efforts to stamp out corruption and to build
Speaker 1: his democracy. Were continuing to do that. Our policy with
Speaker 1: respect to Ukraine has been set on the fundamental principles
Speaker 1: of reducing the footprint of corruption and helping the Ukrainian
Speaker 1: people build up a democracy while under threat from the
Speaker 1: Russians in the east and southeast. You said that you
Speaker 1: look forward to going there, that you have other issues
Speaker 1: that you want to discuss with them, or is that
Speaker 1: still the case. Yeah, I'm going to get there. I'm
Speaker 1: gonna get there before too long. I had a trip
Speaker 1: planned and then we had an issue arise in the
Speaker 1: Middle East that had to attend to. UH. While that
Speaker 1: issue is not behind us, there's still a lot of
Speaker 1: work to do there, and that is our chief Washington corresponded.
Speaker 1: Kevin Creali speaking with Secretary of State Mike Pompeo. Kevin
Speaker 1: has been traveling with the Secretary of State, as he noted,
Speaker 1: on this sort of WorldWind tour of the world. They
Speaker 1: spoke today in Jamaica. Obviously very much on the news,
Speaker 1: very much on the impeachment News. Ukraine obviously is right
Speaker 1: in the sphere of influence that the Secretary of State
Speaker 1: plays into, so him saying that he will make a
Speaker 1: trip there before too long, given its importance, and a
Speaker 1: reminder that there are some kind of big, major foreign
Speaker 1: policy issues that are still out there right and that
Speaker 1: have been kind of plaguing certainly this administration for some time.
Speaker 1: So we'll see where that goes. Brands Energy, we do
Speaker 1: want to talk a bit about energy. It's been an
Speaker 1: interesting market to watch and I think it's timely. I
Speaker 1: think about the launch of our Green not interesting if
Speaker 1: you're in it, if you're long, if you're short, you're great, um,
Speaker 1: But it's interesting in a week where Davas is all
Speaker 1: about climate change and we are seeing the energy space
Speaker 1: certainly be disrupted by alternative energy. It was the worst
Speaker 1: performing sector major industry sector in the S and P
Speaker 1: five last year and it's continuing to be at the
Speaker 1: bottom of the pack. In Ryan Kelly has to deal
Speaker 1: with all of this and find the opportunities. He's senior
Speaker 1: vice president portfolio manager at Hennessy Funds. He's back in
Speaker 1: our Bloomberg Interactive Broker studio studio. It's not easy right now, right,
Speaker 1: and sitting here thinking if I wanted to know all that,
Speaker 1: I just want to stated, thanks very much. Can I
Speaker 1: have my butt off to get a recitation of how
Speaker 1: bad the market? Here's my therapy session. No, but I
Speaker 1: mean running a gas um and utility, our guest utility
Speaker 1: fund not easy. UM, It's it's actually going okay, it's
Speaker 1: it's it's confusing. UM. Certainly, if you're talking just about
Speaker 1: the overall energy sector, about oil, about natural gas prices,
Speaker 1: those of all plummeted energy is pretty tough last year. Obviously,
Speaker 1: as you just alluded to, UM, the natural gas side
Speaker 1: has actually been doing pretty well in one regard because
Speaker 1: of these low prices. It's very good for the end customer.
Speaker 1: It's very good for the natural gas distribution companies, it's
Speaker 1: very good for the utilities. And our fund focuses on
Speaker 1: utilities in general and natural gas utilities specifically. So what
Speaker 1: we have is that because we've had so such affordability, abundance,
Speaker 1: accessibility of natural gas for many years. Here, Uh, it
Speaker 1: means actually that natural gas you do, the utilities are
Speaker 1: doing pretty well, and the fund is up about two
Speaker 1: point eight percent in the past month. So at the
Speaker 1: beginning of the year. Last year was up about two
Speaker 1: and a half percent. Performance though, do you feel like
Speaker 1: it's not where you'd like it to be? Yeah, performance
Speaker 1: could have been better overall for the whole year last year.
Speaker 1: The fund is the SMP of course up. That's a
Speaker 1: big laggard. UM and Uh. I think that what's going
Speaker 1: on is that we also have some more some larger
Speaker 1: major pipeline companies that move natural gas around the country.
Speaker 1: They're related both to oil and natural gas, so there's
Speaker 1: issues there that's been holding a speck And forgive me,
Speaker 1: I think I said two and a half percent last year,
Speaker 1: and I did just mean year to date, right, year
Speaker 1: to day. Yes, but as you said, it was double
Speaker 1: digit games last year. Yes, yes, Um and uh. And
Speaker 1: interestingly though, when you just look at the fundamentals of
Speaker 1: the companies, UM. The utility space for the last three
Speaker 1: quarters has been has had the highest growth and earnings
Speaker 1: out of any of the sectors, which is pretty pretty crazy.
Speaker 1: This year, it's or this quarter on a year over
Speaker 1: your basis, it's expected to be up nine on an
Speaker 1: EPs point of view, which is not the sort of
Speaker 1: growth that we're seeing elsewhere in the market. To be sure. Well,
Speaker 1: let's talk about some of those names. One literally close
Speaker 1: to home Duke Energy. Uh tell us about that. Yes, Well,
Speaker 1: I think that a couple of ways that you can
Speaker 1: play this this spaces is to buy the bigger utilities.
Speaker 1: Utilities have a real opportunity now to switch from UM
Speaker 1: more traditional fossil fuel type sources to renewables. Duke Duke
Speaker 1: Energy d u K is in the process of doing that.
Speaker 1: They have very lofty goals of transforming themselves over the
Speaker 1: next thirty years, and I think there's gonna be a
Speaker 1: nice long runway for that company. It's also a nice
Speaker 1: large company, seventy billion in market cap, a pretty good
Speaker 1: pe compared to peers. So I think that there's some opportunities.
Speaker 1: I think people forget, Like how massive that the dividends.
Speaker 1: I think you're saying. I was looking at the dividend.
Speaker 1: It's almost four percent, So dividend eiels are a big
Speaker 1: part of the utility play UM and and you know,
Speaker 1: it's interesting. I do think about these big utilities and
Speaker 1: the transition from UM you know, traditional fuels if you will,
Speaker 1: or fossil fuels to alternatives. I mean, how twenty years
Speaker 1: is that it takes years, decades, decades because of the
Speaker 1: infrastructure build out, because of the infrastructure, And you know,
Speaker 1: one thing I'd maybe like to talk a little bit
Speaker 1: about is that this future energy complex that we're looking
Speaker 1: at is probably going to be predominantly renewables and natural gas.
Speaker 1: And that's some of the debate that's going on now,
Speaker 1: and I think some of the misinformation that's out there
Speaker 1: is that natural gas is very important part of all
Speaker 1: of this. We've gotten to uh lost two percent in
Speaker 1: greenhouse gas emissions last year because natural gas has been
Speaker 1: replacing coal in large scale power plants. So um, this
Speaker 1: is a decades long process to get to more renewables.
Speaker 1: About twelve percent or so of our overall energy is
Speaker 1: produced from renewables right now. It could get to twenties
Speaker 1: to even thirty over time, but it's going to take
Speaker 1: a lot to get there. You don't think there's an urgency.
Speaker 1: I've just got to push a little bit. With climate change,
Speaker 1: we only have about thirty seconds. But I do feel
Speaker 1: like that there's an urgency all of a sudden. Maybe
Speaker 1: it's the fires in Australia or California or what have you,
Speaker 1: But I mean, I feel like the clock is ticking.
Speaker 1: I think there is an urgency. I think that we're
Speaker 1: getting rid of coal. I think that we're producing a
Speaker 1: lot less energy out of oil. Those are two great things.
Speaker 1: But I think that, um, the amount of infrastructure you'd
Speaker 1: have to change or to go straight to renewables is phenomenal.
Speaker 1: In fact, we'll be hurting the environment until we got there,
Speaker 1: so we need to do it a little bit more
Speaker 1: at a measured pace. All Right, We're gonna leave it.
Speaker 1: They're great stuff. Get to catch up with you. Ryan Kelly,
Speaker 1: Senior Vice president portfolio manager for Hennessy Funds, looking after
Speaker 1: the Gas Utility Fund. I want to watch for sure.
Speaker 1: So Deep, No Body, So Wow, A bold call for
Speaker 1: the walk in music for this song. But it is
Speaker 1: all about the shorts. Just ask Elon Musk. He is
Speaker 1: the subject of this week's cover story. It's all about
Speaker 1: Tesla and those shorts for the moment being proven dramatically wrong.
Speaker 1: Dana hall pennd the story. She covers the company day
Speaker 1: to day, and this is just an amazing step back
Speaker 1: story about everything going on there. She joins us from
Speaker 1: our nine sixty studio in San Francisco. Joe Webber, the
Speaker 1: editor of the magazine. He's here in our Bloomberg Interactive
Speaker 1: Broker studio. Dana, First of all, congrats on this story.
Speaker 1: It's such a great read, you know, Carol, and I
Speaker 1: got to read it ahead of it over the weekend
Speaker 1: as it sort of in process, and it's just such
Speaker 1: a tale in many ways that captures the spirit of
Speaker 1: where this company is. Tell us what you set out
Speaker 1: to do. Sure, well, I've been covering Tesla for quite
Speaker 1: quite a long time at this point, and unfortunately for
Speaker 1: my mental health, spend a lot of time on Twitter,
Speaker 1: which is really where the Tesla conversation takes place. I mean,
Speaker 1: it is the water cooler for this company. Elon tweets,
Speaker 1: the fans tweet, the shorts tweet, and you know, over
Speaker 1: the past couple of years, I started seeing this tesla
Speaker 1: q hashtag more and more. It really kind of accelerated
Speaker 1: after the Solar City buy out and uh and then
Speaker 1: kind of erupted in with a whole go private debacle
Speaker 1: and I just sort of tried to figure out, well, Okay,
Speaker 1: who is Tesla Q? Who are these guys, and like,
Speaker 1: there's so many different characters. Um. But when Tesla filed
Speaker 1: a restraining order against Skabushka. I sort of found my
Speaker 1: character and just tried to spend as much time as
Speaker 1: possible understanding really what his motivation was. And I think
Speaker 1: what's what's really fascinating is that, you know, a lot
Speaker 1: of these people are not actual short sellers. Some of
Speaker 1: them are just skeptics, and they really don't buy the
Speaker 1: kind of mythology around musk that has been created. Scaboush,
Speaker 1: What who is that? Dane so Scabushka. His real name
Speaker 1: is Randy Pothy. He is a graduate student in ann Arbor.
Speaker 1: He's a fascinating guy. He speaks five languages. He's getting
Speaker 1: a doctoral dissertation in Asian Languages and Culture. But he
Speaker 1: grew up in Fremont, which is where Tesla has its factory.
Speaker 1: And in eighteen when a lot of people were questioning
Speaker 1: the ability of Tesla to manufacturer it's Model three, he
Speaker 1: was in this rare position to actually check things out
Speaker 1: because you know, his parents still live in Fremont. So
Speaker 1: he started tweeting out these pictures of production that people
Speaker 1: took very seriously. I mean you would see on the
Speaker 1: Tesla fanboy forums, you know, all these messages like Scabushka
Speaker 1: production numbers and they were remarkably accurate. And uh so
Speaker 1: he just sort of became this intriguing figure. Well in
Speaker 1: triguing And didn't you actually talk to us about the
Speaker 1: first time you reached out to him data, because I
Speaker 1: think this is interesting too. I mean, he had information,
Speaker 1: right he was tracking this company that to some extent
Speaker 1: could be helpful. Oh sure, Well, I mean, so you
Speaker 1: know a lot of short sellers do a lot of research,
Speaker 1: but a lot of them are based in New York
Speaker 1: and they're and they're you know, fantastic and in terms
Speaker 1: of like digging into financials and filings and you know,
Speaker 1: they look at things on the on the balance sheets.
Speaker 1: Scabush was actually someone who was clearly like going to
Speaker 1: the factory every day or had a beat on what
Speaker 1: was happening at the factory. And I live in the
Speaker 1: Bay Area, and so there was this whole thing where,
Speaker 1: you know, it was clear that Tesla was building some
Speaker 1: kind of new tent to house its production line. I
Speaker 1: kept hearing from employees, you know, Ellen's building a tent
Speaker 1: out back. So um. And at the same time, Scabushka
Speaker 1: was sort of posting these photographs. So I was actually
Speaker 1: at the Fremont bart station looking at this tent, and
Speaker 1: I wasn't positive if I was looking at like the
Speaker 1: new tent or an old tent, And so I sent
Speaker 1: him a picture and I was like, am I looking
Speaker 1: at the right thing? And he confirmed it? And I really,
Speaker 1: I mean I was, you know, legitimately trying to kind
Speaker 1: of cultivate him as a source. I asked him if
Speaker 1: he wanted to meet, but he always declined and I
Speaker 1: didn't meet him until much later. So talk to us
Speaker 1: more about tesla Q, because that is like they're on Twitter.
Speaker 1: They are sort of amazing and sort of this hive
Speaker 1: mind ability to kind of look at Tesla and Ellen
Speaker 1: from all these different angles, and they've actually impacted the
Speaker 1: stock over the time. But yet life has gotten very
Speaker 1: expensive for short sellers of late as Tesla's stock has
Speaker 1: sort of started to soar. What uh, what do you
Speaker 1: make of where we're tesla Q stands now and what
Speaker 1: are they saying about what could happen in the year
Speaker 1: to come, especially on a day right as you know, Dana, right,
Speaker 1: we saw a Tesla market cap a hundred billions, surpassing VWI. Yeah,
Speaker 1: that's real psychological logical milestone. Sure, well, I guess I
Speaker 1: would say that, you know, once you sort of I
Speaker 1: mean a lot of folks within Tesla Q, I mean
Speaker 1: they they view Musk through the lens of fraud or
Speaker 1: fabrication or a cult of personality, And once you see
Speaker 1: him through that lens, it's very difficult to kind of
Speaker 1: be moved from that. Just like you know, the fans
Speaker 1: who see him as like, you know, our great hope
Speaker 1: for for solving climate change, I mean, they will not
Speaker 1: be moved either. So it's very it's a very bifurcated community.
Speaker 1: But I think, you know, short sellers would probably say
Speaker 1: or yes, the stock is on a terror but but
Speaker 1: it's completely divorced from fundamentals. And you know, just because
Speaker 1: the stock is high doesn't mean that the company is
Speaker 1: ever going to be sustainably profitable. Clearly, Tesla reported a
Speaker 1: profit in the third quarter. They're going to report earnings
Speaker 1: next week. But you know, will will the company ever
Speaker 1: have a profitable year like that? That remains to be seen.
Speaker 1: And why ultimately is this stock, this company so binary?
Speaker 1: You know, we and I know we have ski this
Speaker 1: all the time, but I keep coming back to this
Speaker 1: idea that there's essentially no one who's like yeah, right, yeah,
Speaker 1: like it just doesn't happen, So why is it. I
Speaker 1: think it's like a two for one, right, So you
Speaker 1: can short Apple, you can short Netflix, you can short Amazon.
Speaker 1: But people who aren't really like shorting Tim Cook or
Speaker 1: Bezos or you know, like they're they're really I mean,
Speaker 1: this is really about Elon, and Elon himself trolls the
Speaker 1: short sellers all the time, and so it's become this
Speaker 1: long running war that is very personal between both sides,
Speaker 1: and it's people are people are shorting the company because
Speaker 1: they fundamentally do not believe you know, Elon and the
Speaker 1: hype that he has created around himself, and so they
Speaker 1: fundamentally have have issues with him as the chief executive
Speaker 1: and with the company. The go private thing was just
Speaker 1: kind of like the icing on the cake. I mean,
Speaker 1: once that happened, like tesla Q just doubled down and
Speaker 1: they will not be moved. You know, they will not
Speaker 1: be moved. Now to be clear, some of that, I mean,
Speaker 1: people everyone has a very different trading thing. Some some
Speaker 1: people are swing traders, they trade every day, some or
Speaker 1: puts some options. I mean some some people like they
Speaker 1: might consider themselves a short but they might not have
Speaker 1: an act of short position at this moment. I mean,
Speaker 1: you know, that gets into like everyone has a fundamentally
Speaker 1: different strategy when it comes to how they trade. Okay, so, Dan,
Speaker 1: I'm closing question for you. You cover elon tesla so closely.
Speaker 1: This was a kind of a longer, longer term story
Speaker 1: that uh that you know is your first cover for
Speaker 1: the magazine. What did you learn? That's a really good question.
Speaker 1: I mean, I guess what I learned was just how
Speaker 1: kind of diverse this community of tesla Q is. I mean,
Speaker 1: to be honest, when I first saw Scobushka's tweets, I
Speaker 1: thought that this guy was either a supplier or a contractor,
Speaker 1: or an employee or a former employee. Like I never
Speaker 1: would have guessed in a million years that he was
Speaker 1: a graduate student. You know, I thought, for sure, this
Speaker 1: guy must have some kind of in with the company.
Speaker 1: But his research was so profoundly good. And then when
Speaker 1: I met him, I was like, wait, you're a graduate
Speaker 1: student writing a doctoral listener. You're like, you're just like
Speaker 1: a guy, just like a guy exactly. It's a great story,
Speaker 1: a must read. The cover story in this week's magazine,
Speaker 1: Joel Webber, Thanks to you, Editor Bloomberg Business Week at
Speaker 1: Dana Hall, she wrote the story. Tech reporter for Bloomberg
Speaker 1: joining us from San Francisco. Need it out right now
Speaker 1: as we speak. This is Bloomberg Business Week with Carol
Speaker 1: Messer and Jason Kelly on Bloomberg Radio. Certainly, one of
Speaker 1: the big stories that continues to be on everyone's radar
Speaker 1: is about the respiratory virus over in China. China ramping
Speaker 1: up its efforts to contain it. Uh the virus so
Speaker 1: far killing at least seventeen people, infecting hundreds as the
Speaker 1: outbreak has spread beyond Asia. China State broadcaster CCTV her
Speaker 1: Charlie talking about this earlier, reporting that the death toll
Speaker 1: has nearly doubled from a previous total as I mentioned,
Speaker 1: of nine. And there were two preliminary positive reports of
Speaker 1: this virus in Hong Kong, another diagnosis in the US,
Speaker 1: patients under examination in Mexico and Russia. So well, it
Speaker 1: feels on what contained we are hearing more and more
Speaker 1: about the spread. Let's get the latest on this. Bloomberg
Speaker 1: News Health Science and Medical Technology reporter Michelle Cortez joining
Speaker 1: us on the phone from Minneapolis, So, Michelle, how should
Speaker 1: we as investors view this? And I don't mean to
Speaker 1: be so clinical about it, but we have seen it
Speaker 1: impact the market. So is it contained? Are we getting
Speaker 1: a better control of it? What are you hearing? It
Speaker 1: is very much a situation that influx. We really don't know,
Speaker 1: especially in the beginning. People are reporting out what's happening,
Speaker 1: and the numbers are increasing dramatically every time we talk
Speaker 1: to anybody in China or public health officials speak out.
Speaker 1: The good news is it doesn't look like it's going
Speaker 1: to be as severe as stars or maybe even mirrors,
Speaker 1: or maybe even the seasonal flu. On the other hand,
Speaker 1: it's so early and the case rates are increasing so quickly.
Speaker 1: There's no guarantee. And Michelle, you know, one of the
Speaker 1: things that some of our guests were saying earlier on
Speaker 1: in the show is that there was a sense, as
Speaker 1: we've talked to investors that people are sort of on it.
Speaker 1: You know, that this wasn't allowed to spread literally your figuratively,
Speaker 1: even the sort of the hysteria is probably not the
Speaker 1: right word, but you know, this notion of you know,
Speaker 1: maybe the institutions are sort of doing the things they're
Speaker 1: supposed to do you know this better than we do.
Speaker 1: What's your sense of the response and the response time here? Well,
Speaker 1: you're absolutely correct. China has been so forthright, especially in
Speaker 1: comparison with the Stars outbreak from two thousand and two
Speaker 1: and two thousand and three. The important thing for investors
Speaker 1: to keep in mind is, of course, is not the
Speaker 1: actual severity of the outbreak itself. It's it's the response
Speaker 1: that everyone takes in order to contain it. So we're
Speaker 1: seeing like just breaking news right now. Uhan has shut
Speaker 1: everything down. They're not letting people in and out of
Speaker 1: the city, they're not letting people on buses, you can't
Speaker 1: fly out, they've shut it all down. So if they
Speaker 1: can do that, and that's you know, let a million people,
Speaker 1: it's not small, but that's going to affect certain commerce there.
Speaker 1: If that spreads within China, then that's where you're starting
Speaker 1: to get your economic hit coming from. On the flip side,
Speaker 1: there are no signs from the public health piece that
Speaker 1: things are happening. We're not seeing human to human transition
Speaker 1: in the second and third and fourth situations, right, So
Speaker 1: it's not like we're seeing someone who's sick who then
Speaker 1: gets their healthcare worker sick and then their healthcare worker
Speaker 1: get someone sick. It's very much more contained than that
Speaker 1: currently and the virus needs to be not mutating an
Speaker 1: awful lot, so that's also good. But again from the
Speaker 1: business perspective, they're just now starting to shut things down
Speaker 1: and we don't know how far that's going to go. Well,
Speaker 1: and I think we all, you know, can remember Stars,
Speaker 1: right and what was it? I think killed people in
Speaker 1: a in a short period of time, just a few months,
Speaker 1: So I think that's our reference point. Um safe to
Speaker 1: say one would hope that the world has learned something
Speaker 1: by that at in it and that we are quickly,
Speaker 1: you know, running to contain this. I mean there is
Speaker 1: a difference, right, well, there's a significant difference. I mean
Speaker 1: the situation with Stars is we didn't people didn't know
Speaker 1: what to do. Not only do you know what to
Speaker 1: do when they're taking that action quickly. I mean there
Speaker 1: was a study in the New England Journal Medicine that
Speaker 1: just one person on an airplane with Stars infected nineteen
Speaker 1: other people around them, just in one flight. Now they're
Speaker 1: not letting people get on a plane if you have
Speaker 1: the fever, so you know, so so yes, we're definitely
Speaker 1: much better than we were just quickly. There's a story
Speaker 1: on the Bloomberg to that talks about a potential vaccine
Speaker 1: to prevent the spreading of the virus. Uh maybe moving
Speaker 1: into early stage human testing the next three months. This
Speaker 1: is from the NIH. Uh they're infectious disease chief. Um,
Speaker 1: you know, we're not quite there. It takes some time,
Speaker 1: but at some point we might have a way of
Speaker 1: controlling this. Absolutely true. Another thing that's very interesting, people
Speaker 1: are moving aggressively into that. Maderna is the company that's
Speaker 1: working on and I h with that, but there's other
Speaker 1: companies as well, So that is a you know, a
Speaker 1: positive negative thing. We you know, when these bad things
Speaker 1: happen in our world, we do get an infusion of
Speaker 1: interest and effort and money into some of these public
Speaker 1: health efforts like ramping up vaccine. Than we are starting
Speaker 1: to see that the early gave that first studies in
Speaker 1: Man in three months. It will take years before it
Speaker 1: actually is widely available. Great context. Thank you so much.
Speaker 1: Michelle Cortes, l science and medical technology reporter for Bloomberg,
Speaker 1: joining us on the phone from Minneapolis. Brom a journal Now,
Speaker 1: but you let me drive, Oh no, no, no, no,
Speaker 1: who's going home? Honey? Please, I'll do the right gravel.
Speaker 1: Excuse me, I want to drive, Just drive, baby. It's
Speaker 1: the questions trying. This is the drive to the globe.
Speaker 1: Give me thanks, world dry un. On Bloomberg Radio, it
Speaker 1: is time for the drive to the close. Aliber Porscha
Speaker 1: is back with US, chief market strategist at Rutimann Asset Management.
Speaker 1: Over one point six billion in assets under management, based
Speaker 1: in Connecticut. Right well, midtown, New York. Actually I live
Speaker 1: in Connecticut, connecticution, big word on Bloomberg RADI in our
Speaker 1: Bloomberg Interactive Broker's studio in New York. We kind of
Speaker 1: like those big words occasionally. Well what all right? I'm
Speaker 1: going to ask you? Since you live in Connecticut, can
Speaker 1: I get real estate? We've been talking about the stories.
Speaker 1: It's been having a tough time. Gave me this evil look.
Speaker 1: Oh my lord. So well, I bought my house in
Speaker 1: two thousand and four, and it's worth less today than
Speaker 1: it wasn't two thousand four, by significant margin. And it's
Speaker 1: not because I bought stupidly. Um. Look, I think it's
Speaker 1: it's going to be ebb and flow. Right now, you're
Speaker 1: still going through the shock of ge having moved out,
Speaker 1: in particular in Fairfield, which is where I live. You've
Speaker 1: got the tax situation, you get the fiscal state of
Speaker 1: the state that's not particularly great, although it has improved
Speaker 1: significantly in the last couple of years in terms of
Speaker 1: reserves and everything else. Um. Look, you know, real estate
Speaker 1: has always been a long term proposition. I know we've
Speaker 1: gone through cycles of flipping homes and we know where
Speaker 1: that ended in two thousand seven, two thousand eight, So
Speaker 1: I'm not overly concerned about on a long term basis.
Speaker 1: At the end of the day, it's going to come
Speaker 1: down to Canada State, like any state, get businesses to
Speaker 1: come in, get investment going, and get people to want
Speaker 1: to live there. I think they've got plenty of people
Speaker 1: who want to live there. It's a question of affordability
Speaker 1: and jobs exactly. Does come down to that, right, that's
Speaker 1: the mix. Um, thank you for doing that. I was
Speaker 1: just curious since we've been talking a lot about it. Hey,
Speaker 1: let's also, um, talk about the market. You walked in
Speaker 1: and we're like, you were like, we're after a strong start, um,
Speaker 1: and I'm like, wait a minute, you know, kind of
Speaker 1: do you buy it? I mean, do you think the
Speaker 1: fundamentals are there over I think they're generally there, yes,
Speaker 1: And I say that for a couple of reasons. Number One,
Speaker 1: while everybody likes to talk at how well the market
Speaker 1: stocks did in two thousand and nineteen, if you go
Speaker 1: back to October one, SMP is only about ten percent higher,
Speaker 1: So you have to take into account that sharp dip
Speaker 1: that we saw in the fourth quarter of two thousand eighteen. Also,
Speaker 1: a lot of the headwinds that we faced going into
Speaker 1: two thousand nineteen are now gone or about to be gone.
Speaker 1: Trade is looking pretty stable with regards to u c
Speaker 1: M H u C M c A having been done,
Speaker 1: as well as the Phase one trade deal with China.
Speaker 1: It's unlikely that you're going to see a lot of
Speaker 1: more trade, hard trade talk out of the administration, or
Speaker 1: certainly not action against Europe during the election year because
Speaker 1: they just don't want to rattle that cage. The FED
Speaker 1: has effectively told us, hey, we're standing pat We're not
Speaker 1: planning on doing anything this year, which incidentally also falls
Speaker 1: in line with what they like to do during election years.
Speaker 1: They don't like to be particularly active in election years, right,
Speaker 1: And you've got an economy that's kind of pottering along.
Speaker 1: So you could take all of the those things along
Speaker 1: with what's presumed to be probably somewhere around five six
Speaker 1: seven percent earnings growth for the year, because comparables are
Speaker 1: going to get so much easier this year than they
Speaker 1: were last year. I mean, there's reason for optimism. What
Speaker 1: was earnings growth by the end of last year? What
Speaker 1: do we see last year? What were all in We
Speaker 1: saw a drop of about two percent year over year,
Speaker 1: and yet the market rallied again forward expectations, right, and
Speaker 1: so the expectation and what you saw really is a
Speaker 1: strong rebound in the first quarter of two thousand nineteen,
Speaker 1: nothing in a second and third quarter, and then another
Speaker 1: ten percent rally in the fourth quarter as trade, brexit
Speaker 1: and interest rates became fairly clear and towards this year.
Speaker 1: So there are fundamental justifications, alright. So let's talk about
Speaker 1: some names that you like in this current environment. Adobe
Speaker 1: is an interesting one to me, especially because the cloud
Speaker 1: they're sort of playing in there. We talked about the
Speaker 1: clouds so much, but usually in the context of the
Speaker 1: big names, the Amazons to Googles, and more recently yesterday
Speaker 1: and today IBM with with Redhead talk about Adobe in
Speaker 1: that content. Well, Adobe to us has really been successful
Speaker 1: at moving to a subscription model, which carries a higher
Speaker 1: multiple and profitability on a long term basis. They've become
Speaker 1: a one stop shop for marketing. Right. You can pretty
Speaker 1: much do everything with the uh the Adobe suite of applications.
Speaker 1: And so when we look at that, we think that
Speaker 1: there's a tremendous amount of potential. And in particular, while
Speaker 1: they've underperformed and has been challenging, their enterprise software has
Speaker 1: got a lot of upside potential. So we like the
Speaker 1: stock and we think it's a category winner. This stock
Speaker 1: is up over a thousand percent um since the end
Speaker 1: of even a thousand percent just year after year after
Speaker 1: year after games. And we prefer buying strong companies that
Speaker 1: are up sharply than companies that we think are undervalued
Speaker 1: because something went wrong. Wait it again, we'd prefer to
Speaker 1: buy in an up market like we've seen over the
Speaker 1: last decade. We would much rather pay and own a
Speaker 1: strong company that's performed very very well then a company
Speaker 1: that we think might be undervalued because something's gone wrong.
Speaker 1: So forward looking pe if thirty six doesn't are you
Speaker 1: it does not because as long as the growth is delivered,
Speaker 1: then we're in good shape. Yeah, this is just as
Speaker 1: as you say, just smartly back to uh even at
Speaker 1: the beginning of tween nineteen, just a nice little steady
Speaker 1: rise up. Talk to us about Bristol Myers Squib. Obviously
Speaker 1: a dealmaker in some ways. Is that what makes this
Speaker 1: a more attractive stack? Yes, in many ways it does
Speaker 1: so a couple of things. If you think about healthcare
Speaker 1: companies as a whole, they have a huge problem as
Speaker 1: a sector, which is effectively declining revenues and profits because
Speaker 1: so much stuff is coming off patent. That holds true
Speaker 1: for the industry. Some of them are executing better than others.
Speaker 1: In the case of Bristol Myers Squib, they bought cell
Speaker 1: Gene and so they've effectively emande their way out of
Speaker 1: their declining earnings and revenues. And we think that it's
Speaker 1: a strong management team. We like the balance sheet, we
Speaker 1: like the outlook. We think they're gonna do more strategic
Speaker 1: acquisitions and as a result, we see a pretty strong
Speaker 1: path in the industree right, and then you've got to
Speaker 1: dividend almost two point seven percent on top of it.
Speaker 1: All um intuitive Surgical ticker I s r G For
Speaker 1: those who might have forgotten, we're talking about robotic surgery.
Speaker 1: Robotic surgery, which is the wave of the future. Every
Speaker 1: year when you look at that industry, more and more
Speaker 1: hospitals and and and now even already an enormous amount,
Speaker 1: but it's still just scratching the surface. And they intuitive
Speaker 1: is ten years ahead of their nearest competitor in terms
Speaker 1: of their technology. So again, if you believe that that's
Speaker 1: going to continue to grow, which we certainly do, and
Speaker 1: be part of the landscape, then you want to own
Speaker 1: the category killer. And that's intuitive right now, Revenues up
Speaker 1: year over year, earnings growth of about five point six
Speaker 1: percent year over year. Alright, big biggest worry about this
Speaker 1: market right now, you don't sound worried. Well, the biggest
Speaker 1: worry is that economic data continues to deteriorate, and so
Speaker 1: that we get into kind of April May with very
Speaker 1: weak data and the two two to three GDP growth
Speaker 1: that is our base assumption doesn't come true and gets
Speaker 1: a one handle. That will be problematic for investors. Would
Speaker 1: the FED maybe move then I doubt it. Yeah, I
Speaker 1: think you'd have to see low ones or below one
Speaker 1: for the FED to move, especially in an election year,
Speaker 1: it feels like all right. Oliver Proporcha is Chief market
Speaker 1: Strategies for Bruderman Asset Management up there in Connecticut, gave
Speaker 1: us some good context on that. He's here in our
Speaker 1: Bloomberg Interactor Broker Studio today, some really interesting ideas as
Speaker 1: we move deeply into Thanks for listening to Bloomberg Business Week.
Speaker 1: You can subscribe to the podcast on iTunes, SoundCloud, or
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