WEBVTT - Math Doesn't Add Up on Trump's Infrastructure Plan, Sen Says 0:00:04.760 --> 0:00:08.080 Welcome to the Bloomberg P and L Podcast. I'm Pim Fox. 0:00:08.119 --> 0:00:11.159 Along with my co host Lisa Abramowitz. Each day we 0:00:11.280 --> 0:00:14.480 bring you the most important, noteworthy, and useful interviews for 0:00:14.520 --> 0:00:16.880 you and your money, whether at the grocery store or 0:00:16.920 --> 0:00:20.680 the trading floor. Find the Bloomberg pm L podcast on iTunes, 0:00:20.840 --> 0:00:30.440 SoundCloud and at Bloomberg dot com. President Trump has proposed 0:00:30.480 --> 0:00:34.880 a one trillion dollar infrastructure spending plan. Under this plan, 0:00:35.200 --> 0:00:38.240 the US would spend about a hundred billion dollars each year. 0:00:38.960 --> 0:00:43.520 Uh And Connor Sen, portfolio manager for New River Investments 0:00:43.560 --> 0:00:47.800 in Atlanta, and a Bloomberg View columnist, pointed out that 0:00:48.240 --> 0:00:51.960 such incredible spending would require five hundred and seventy thousand 0:00:52.280 --> 0:00:56.240 additional construction workers. I want to bring in Connor. Now, Connor, 0:00:56.280 --> 0:00:58.720 I thought your column was fascinating and it raised the 0:00:58.800 --> 0:01:03.080 question can we find five hundred and seventy thousand new 0:01:03.160 --> 0:01:07.760 construction workers in this currently tight labor market. Probably not 0:01:07.840 --> 0:01:10.240 five million thousand that you'd want to hire, so you 0:01:10.280 --> 0:01:12.360 can always find people off the five lines. I've never 0:01:12.600 --> 0:01:14.600 worked on construction before, but if you paid me enough, 0:01:14.640 --> 0:01:18.400 I suppose I could give it a shot. For preparing 0:01:18.440 --> 0:01:22.000 for a career in construction exactly So, it's it's not 0:01:22.080 --> 0:01:23.440 the kind of thing that you're likely to be able 0:01:23.440 --> 0:01:26.000 to ramp up in a you know, in the short 0:01:26.080 --> 0:01:27.880 term open long term, you could get there, but it's 0:01:27.880 --> 0:01:29.400 not the kind of thing that could happen you're one 0:01:29.480 --> 0:01:33.440 or two. So companies and investors that are looking to 0:01:33.480 --> 0:01:37.600 reap the rewards of this infrastructure spending plan should perhaps 0:01:37.800 --> 0:01:41.920 wait a while to celebrate, exactly So, if you're a company, 0:01:41.959 --> 0:01:44.160 if you're a construction firm, perhaps you could do a 0:01:44.200 --> 0:01:47.800 limited amount of production at a in In that way 0:01:47.840 --> 0:01:49.520 you can keep your costom line. But if you're really 0:01:49.560 --> 0:01:51.840 trying to ramp up to get the lion share of 0:01:52.000 --> 0:01:54.600 something like this, you probably have to pay way more 0:01:55.040 --> 0:01:58.080 than you get back from the government. So the reason 0:01:58.080 --> 0:02:00.840 why I found this column so intra staying was because 0:02:00.880 --> 0:02:03.240 a lot of people say, you know, they questioned the 0:02:03.280 --> 0:02:06.200 idea of this infrastructure plan based on budget issues that 0:02:06.280 --> 0:02:08.480 can the US pay for it? Is there the ability 0:02:08.520 --> 0:02:11.600 to do it without raising taxes or increasing the deficit substantially? 0:02:11.919 --> 0:02:15.880 You're saying from a fundamental perspective, it cannot be implemented, 0:02:15.919 --> 0:02:18.519 at least not in the near term, is this being 0:02:18.560 --> 0:02:22.440 priced in anywhere in markets that are currently bidding up 0:02:22.480 --> 0:02:26.440 the you know, infrastructure and the and the industrial stocks 0:02:26.440 --> 0:02:30.400 and bonds. Well, one of the questions that investors have 0:02:30.520 --> 0:02:33.480 right now is what exactly is being pricedman, because you 0:02:33.520 --> 0:02:36.840 have you do have underlying strong economic fundamental you seeing 0:02:37.360 --> 0:02:39.400 you know, about a year ago, that's when the industrial 0:02:39.480 --> 0:02:42.040 and energy cycle was botted me out, that started to recover, 0:02:42.600 --> 0:02:45.920 and then in that sector inventories which have been drawn 0:02:45.960 --> 0:02:48.320 down or then being built up to have this kind 0:02:48.320 --> 0:02:52.760 of lagged demand from just how much industrial demand has fallen, 0:02:52.840 --> 0:02:56.040 and so that is being pricedon's markets. And then on 0:02:56.080 --> 0:02:58.080 the policy side, we just don't know yet because it's 0:02:58.120 --> 0:03:00.680 only been a few months what exactly of people pising 0:03:00.720 --> 0:03:02.960 in Is it you know, the views on policy, or 0:03:03.000 --> 0:03:06.560 is it just this underlying economic situation. Connor, you mentioned 0:03:06.760 --> 0:03:10.079 that there is an economic cycle that we all try 0:03:10.120 --> 0:03:13.640 to pay attention to, and the last one that we 0:03:13.720 --> 0:03:20.200 saw big growth for construction employment was between You also 0:03:20.200 --> 0:03:23.160 write that we are later in this economic cycle. What 0:03:23.320 --> 0:03:28.160 takes place later typically what happens sort of in the 0:03:28.200 --> 0:03:31.680 cycles that early on after a session you have reduced 0:03:31.760 --> 0:03:35.240 production and there's a lot of slack resources in the economy, 0:03:35.240 --> 0:03:37.360 they can be put back to work. And so after 0:03:37.400 --> 0:03:40.520 the set cut interest rates and there's potentially ciscal stimulus, 0:03:40.680 --> 0:03:43.560 you have conditions that are right for strong early cycle growth. 0:03:44.000 --> 0:03:45.680 And so we didn't see that in housing coming out 0:03:45.680 --> 0:03:47.880 of the huge housing bubble, but we did see that 0:03:47.960 --> 0:03:50.280 in the end of the sector and just sort of 0:03:50.280 --> 0:03:53.040 a dead cat bounce and manufacturing, and so we saw 0:03:53.080 --> 0:03:55.120 that growth early on and then sort of in the 0:03:55.120 --> 0:03:57.280 middle of the cycle, like you said two thousand thirteen, 0:03:57.280 --> 0:04:00.320 two fifteen, you had apartment growth, you did have some 0:04:00.440 --> 0:04:03.160 energy growth, and at that point, I said, was still 0:04:03.360 --> 0:04:06.160 very easy on the monetary side. What tends to happen 0:04:06.240 --> 0:04:11.040 later in the cycle is as resource flat diminishes, cost 0:04:11.080 --> 0:04:14.080 go up, the stead starts becoming more aggressive on hiking 0:04:14.120 --> 0:04:16.200 interest rates, and that's when you tend to get into 0:04:16.279 --> 0:04:20.760 problems with overproduction and tighter money. So Connor, at this 0:04:20.839 --> 0:04:25.200 point in the cycle, can we get a sort of 0:04:25.279 --> 0:04:28.240 ramp up in construction workers, especially at a time when 0:04:28.320 --> 0:04:32.040 immigration is being constrained, Yeah, exactly. So the only way 0:04:32.040 --> 0:04:34.039 to really make this work over the near term would 0:04:34.040 --> 0:04:36.839 be a big change for more immigration. And it seems 0:04:36.880 --> 0:04:39.039 like at least on below end for immigration or going 0:04:39.040 --> 0:04:42.440 the other direction. And so the question is just I 0:04:42.480 --> 0:04:45.200 think our two choices are either more production at much 0:04:45.240 --> 0:04:49.080 higher prices or kind of constrained production at lower prices, 0:04:49.120 --> 0:04:53.280 and either situation is really great. So Connor, given your 0:04:53.400 --> 0:04:56.680 role as a portfolio manager at New River Investments, have 0:04:56.839 --> 0:05:01.680 you started to back away from certain securities that have 0:05:01.720 --> 0:05:05.200 gotten bit up in anticipation of this infrastructure spending. But 0:05:05.279 --> 0:05:07.520 I mean, going back to your original point where people 0:05:07.520 --> 0:05:11.479 are trying to understand what actually is being priced into 0:05:11.480 --> 0:05:13.360 the market. Do you think that the market has gone 0:05:13.360 --> 0:05:16.400 too far with pricing in too much? That seems implausible 0:05:16.400 --> 0:05:19.680 at this point, and specifically, where are you looking? I do, 0:05:19.839 --> 0:05:23.040 because our viue is that if we do get more production, 0:05:23.200 --> 0:05:25.559 it's going to be at sort of prices and profit 0:05:25.600 --> 0:05:27.920 margins that are not very compelling for companies. And so 0:05:28.360 --> 0:05:30.920 our view is that there isn't that much resource black 0:05:30.960 --> 0:05:34.040 left in economy, especially with immigration policy being where it is, 0:05:34.120 --> 0:05:36.599 so it's just not going to be a great environment 0:05:36.680 --> 0:05:38.760 for companies and profit margins. It might be a great 0:05:38.839 --> 0:05:41.880 environment for workers and wages. Thence the question is what's 0:05:41.880 --> 0:05:44.279 the best way to take advantage of that. So for 0:05:44.360 --> 0:05:46.960 that making, the answer is more real estate or kind 0:05:46.960 --> 0:05:51.000 of just to discussion our consumer spending, but not kind 0:05:51.000 --> 0:05:54.880 of business fixed investment and and things that are potentially 0:05:54.960 --> 0:05:57.440 will suffer on the profit Martin side as as interest 0:05:57.520 --> 0:06:00.200 rates go up and labor gets more expensive. So which 0:06:00.200 --> 0:06:02.919 companies do you think are overbid at this point? I 0:06:02.960 --> 0:06:06.440 think anything related to infrastructure in general. Um, you know, 0:06:06.480 --> 0:06:08.320 you sort of see what's happened to prices over the 0:06:08.360 --> 0:06:11.400 past year. A company like United Rentals, which is very 0:06:11.440 --> 0:06:14.320 highly lettered and sort of at the bottom of the 0:06:14.360 --> 0:06:16.480 industrial cycle. Early last year the stock went down to 0:06:16.480 --> 0:06:18.600 I think forty five dollars to share. Today it's more 0:06:18.600 --> 0:06:21.960 like a hundred hundred thirty d and thirty five. I 0:06:22.000 --> 0:06:23.840 think it's just one of these things where it's a 0:06:23.880 --> 0:06:27.159 combination of more optimism on policy and then sort of 0:06:27.160 --> 0:06:29.240 more momentum traders who would just look at charts and 0:06:29.279 --> 0:06:31.080 prices see how much it's gone up, and they're trying 0:06:31.080 --> 0:06:33.560 to ride that trend. But it's just tough to see 0:06:33.560 --> 0:06:35.320 how this is going to work out profitably for companies 0:06:35.320 --> 0:06:37.360 with the next two or three years. Would it make 0:06:37.400 --> 0:06:41.239 more sense to build more homes rather than spend time 0:06:41.400 --> 0:06:45.760 arguing over roads, buildings, tunnels and repairing the highways, because 0:06:45.800 --> 0:06:48.359 that's not something you just may wave a magic wand 0:06:48.400 --> 0:06:51.120 and it happens. Yeah, I think you want to try 0:06:51.160 --> 0:06:53.280 to do both. The issue is just it's a lot 0:06:53.320 --> 0:06:55.800 easier to sort of get the house and stuff done 0:06:55.920 --> 0:07:00.360 in a reasonable way. Infrastructure is notoriously slow, with memory 0:07:00.400 --> 0:07:04.599 review and policymakers and architects and planners and just there's 0:07:04.600 --> 0:07:07.440 so many different touch points and potential pain points as 0:07:07.480 --> 0:07:09.520 resources get tight, and so there's just no way to 0:07:09.560 --> 0:07:11.600 throw a lot of money at it and get good, 0:07:11.680 --> 0:07:15.680 good value in the short term, no value in the 0:07:15.720 --> 0:07:19.200 short term. Well, in that case, I guess maybe people 0:07:19.200 --> 0:07:22.840 will take some profits on on those positions. Just finally, 0:07:22.880 --> 0:07:25.880 to to connor, you know, we keep hearing that infrastructure 0:07:25.880 --> 0:07:30.360 spending will then lead to higher and more sustained economic growth. 0:07:30.560 --> 0:07:34.000 Is there any evidence to support that. There's there's sort 0:07:34.040 --> 0:07:37.360 of hazy long term fundamental growth. It just it's sort 0:07:37.360 --> 0:07:39.880 of like whether you have just better policy or or 0:07:39.960 --> 0:07:45.480 more younger hard to measure, given how the economic cycles 0:07:45.520 --> 0:07:48.360 more bobble than that sort of production increase. One more 0:07:48.360 --> 0:07:50.280 thing I wanted to point out is something that other 0:07:50.320 --> 0:07:52.440 people aren't talking about, is that, let's say we found 0:07:52.480 --> 0:07:55.040 these five thousand construction workers and maybe a million more 0:07:55.080 --> 0:07:58.040 support staff, what happens after ten years, because then you 0:07:58.120 --> 0:08:00.000 have a million and a half workers that immediately get 0:08:00.080 --> 0:08:03.760 run out of work and create this technical assessment right away. 0:08:04.000 --> 0:08:06.920 The back end of this is also problematic. Thanks very much. 0:08:07.000 --> 0:08:10.280 Connor Sen is a Bloomberg View columnist and portfolio manager 0:08:10.600 --> 0:08:27.120 for New River Investments. They're based in Atlanta, and to 0:08:27.200 --> 0:08:30.160 learn more about what he is doing with other people's 0:08:30.200 --> 0:08:32.640 money and his own, I want to bring in David Coudla. 0:08:32.679 --> 0:08:35.200 He is the founder and the chief executive of and 0:08:35.200 --> 0:08:37.440 he's also the chief investment strategist. I beg your pardon 0:08:37.520 --> 0:08:41.480 of mainstay Capital Management helps to manage more than two 0:08:41.520 --> 0:08:44.520 billion dollars of customer assets. David, thank you very much 0:08:44.559 --> 0:08:47.280 for being with us. Good morning, him, Good morning. You've 0:08:47.280 --> 0:08:49.440 got a lot of hats to where they're I'm curious 0:08:49.480 --> 0:08:52.360 if you can tell me whether you're selling anything into 0:08:52.400 --> 0:08:57.120 this rally. Well, what we have been selling going back 0:08:57.120 --> 0:09:00.880 into the fourth quarter is our interest rate sensitive bond positions. 0:09:01.400 --> 0:09:04.400 We've been largely void of interest rate sensitive bond That's 0:09:04.400 --> 0:09:07.040 probably the most important warning I can give to investors, 0:09:07.160 --> 0:09:09.800 although once I can interest rate sensitive bonds in other words, 0:09:09.800 --> 0:09:13.840 bonds invests the vast majority. Well, is it is it 0:09:13.920 --> 0:09:16.600 just treasuries? Is it an investment grade bonds? Are you 0:09:16.640 --> 0:09:21.320 also including in that high old bonds emerging markets? Good? 0:09:21.400 --> 0:09:25.000 Good question and an important distinction. We we've still been 0:09:25.040 --> 0:09:28.120 in high old bonds emerging market debt, and as Pimp said, 0:09:28.120 --> 0:09:30.440 floating rate income we think is a is a great 0:09:30.480 --> 0:09:35.840 opportunity in a rising interest rate environment. Our concern is 0:09:35.920 --> 0:09:40.600 with yes, specifically treasuries and high grade corporates, those very 0:09:40.640 --> 0:09:43.640 safe investments for credit risk and default risk, but our 0:09:43.720 --> 0:09:48.760 interest rate sensitive and actually uh, you know, face negative 0:09:48.760 --> 0:09:51.079 returns looking at the time of horizon since last year 0:09:51.120 --> 0:09:54.120 you might be considering over several months and going forward. 0:09:54.160 --> 0:09:57.360 We just we've we've had uh caution there and continue 0:09:57.400 --> 0:10:01.000 to have that caution with fiscal policy, tax policy, and 0:10:01.040 --> 0:10:05.080 monetary policy all pointing towards even higher rates. So, David, 0:10:05.160 --> 0:10:07.440 people have been talking about a bond market sell off 0:10:07.520 --> 0:10:10.440 for years, and people have been expecting inflation to pick up. 0:10:10.760 --> 0:10:14.720 Now the FED is expected, I believe now the chance 0:10:14.880 --> 0:10:17.880 of a March FED rate hike is nine or something 0:10:18.400 --> 0:10:22.240 looking at FED funds future, but the yield curve is flattening. 0:10:22.400 --> 0:10:24.920 In other words, people are expecting growth too slow. What 0:10:25.000 --> 0:10:27.199 gives you confidence that growth and inflation are going to 0:10:27.240 --> 0:10:31.040 pick up enough to justify a really truly significant bond 0:10:31.080 --> 0:10:34.880 sell off this time around? Great question, And there have 0:10:34.920 --> 0:10:38.520 been so many people that have been forecasting the rising rates, 0:10:38.840 --> 0:10:42.320 have been shorting bonds going back five years. The difference 0:10:42.400 --> 0:10:46.400 now is the feed is finally raising rates, and you know, 0:10:46.440 --> 0:10:48.960 we we ended Keewey started raising rates a little over 0:10:48.960 --> 0:10:51.320 a year ago, raised in December. We think we'll get 0:10:51.360 --> 0:10:53.480 at least two rate hikes this year, so we know 0:10:53.559 --> 0:10:55.760 the short end of the curve is going up. We 0:10:55.880 --> 0:11:00.360 couple that with President Trump being elected and as I 0:11:00.440 --> 0:11:04.520 spoke of the reflationary those three things, reflationary policies for 0:11:04.520 --> 0:11:07.840 the economy, and we're seeing better economic data, so you know, 0:11:07.920 --> 0:11:11.599 we've we've got a recently, I want to use the 0:11:11.640 --> 0:11:14.400 word strong economy. Economy that's doing okay, and we think 0:11:14.440 --> 0:11:16.679 it's going to continue to do well. It's still expanding, 0:11:17.160 --> 0:11:21.760 and monetary both monetary and fiscal policy pointing towards higher rates. 0:11:22.000 --> 0:11:25.200 That is a change, you know, largely from what we 0:11:25.280 --> 0:11:28.440 had over the past let's say four years until until 0:11:28.960 --> 0:11:32.120 six or seven months ago. So you're not taking any 0:11:32.160 --> 0:11:36.040 of these signals about how wonderful everything is compared to 0:11:36.200 --> 0:11:39.840 let's say July of two thousand one, or compare it 0:11:39.920 --> 0:11:44.120 to two thousand seven. You don't buy that there's a 0:11:44.160 --> 0:11:47.800 little bit of irrational exuberance out there. I think there's 0:11:47.800 --> 0:11:51.600 certainly a little bit when we see the DAL rise. 0:11:51.679 --> 0:11:54.679 For I tell you the sp up six and a 0:11:54.720 --> 0:11:57.120 half percent. So if you're telling me that we are 0:11:57.160 --> 0:11:59.040 in March and it's up six and a half more 0:11:59.040 --> 0:12:01.240 than six and a half per sent what kind of 0:12:01.320 --> 0:12:03.440 risk are you taking on if you want an extra 0:12:03.480 --> 0:12:05.920 four for the rest of the year. That's right there. 0:12:05.960 --> 0:12:08.320 There is there, there's some exuberants. I mean, I think 0:12:08.320 --> 0:12:10.880 it's I think it's even fair to say that maybe 0:12:10.920 --> 0:12:13.680 we're starting to approach that u fork stage in the 0:12:13.720 --> 0:12:17.440 stock market cycle. But we don't see what we don't see. 0:12:17.480 --> 0:12:20.120 We don't see a recession on the horizon. Remember a 0:12:20.200 --> 0:12:23.760 year ago, all the analysts, all the market pundits calling 0:12:24.200 --> 0:12:28.280 talking about recession here or around the globe, talking about 0:12:28.320 --> 0:12:31.800 inflation here around the globe. That's that's gone. We're now 0:12:31.840 --> 0:12:35.320 looking at inflation on the rise. We're looking at uh 0:12:35.600 --> 0:12:37.960 still you know, growth and emic growth, but still growth 0:12:38.000 --> 0:12:41.440 that we expect to improve at least some and so 0:12:41.640 --> 0:12:44.000 that's good for stocks. You know, we're positive on stocks 0:12:44.000 --> 0:12:47.520 and that environment. But look him and Lesta, a correction 0:12:47.559 --> 0:12:50.480 of of ten or even we can get that at 0:12:50.480 --> 0:12:53.840 any time. David, what have the call has been like 0:12:53.960 --> 0:12:58.560 from your clients? What are the biggest concerns at this point? Uh. 0:12:58.800 --> 0:13:02.720 The the interesting thing is is, you know, we have 0:13:03.360 --> 0:13:05.640 always in an environment like this, we have those clients 0:13:05.679 --> 0:13:09.040 that are excited, I want to get more aggressive. We 0:13:09.160 --> 0:13:12.200 have clients who are concerned with how far the markets 0:13:12.240 --> 0:13:17.200 come and want to get more conservative. What's interesting is is, uh, 0:13:17.280 --> 0:13:19.240 and we were talking about this just this week, is 0:13:19.440 --> 0:13:22.360 how that tends to fall down party lines. Those people 0:13:22.920 --> 0:13:26.520 that may have voted for Trump believe in Trump, what 0:13:26.600 --> 0:13:29.680 he's going to do for the economy, believe this continues 0:13:29.720 --> 0:13:33.520 and gets even better. Uh. Those that have been cautious 0:13:33.920 --> 0:13:37.800 and have concerns about Trump have only become more cautious. 0:13:37.880 --> 0:13:40.439 Is the market has gone higher. So it's very interesting 0:13:40.559 --> 0:13:45.960 how politics and political persuasion has entered into Investor Sentiment 0:13:46.200 --> 0:13:48.959 Individual Investor Sentiment. David Coola, thank you so much for 0:13:49.080 --> 0:13:52.360 joining us. Always a pleasure. David coula chief executive officer 0:13:52.440 --> 0:13:56.800 and chief investment strategist of Mainstay Capital Management with about 0:13:56.800 --> 0:14:11.880 two billion dollars under management. All right, we want to 0:14:11.880 --> 0:14:14.680 get smarter about one particular company right now, which is 0:14:14.880 --> 0:14:17.880 Roche Holdings. Uh, the a d R as the American 0:14:17.920 --> 0:14:20.920 Depository receipts are trading higher by more than six and 0:14:20.960 --> 0:14:23.920 a half percent right now here to tell us? Why? 0:14:24.080 --> 0:14:28.400 Is Max Neeson here is our Gadfly columnist. He covers biotech, pharmaceuticals, 0:14:28.720 --> 0:14:31.720 and healthcare. He can be followed on Twitter at Max 0:14:32.040 --> 0:14:35.280 Neeson Max Neeson. So tell us what is up with 0:14:35.360 --> 0:14:39.440 this new breast cancer drug and Roche Holdings. So this 0:14:39.520 --> 0:14:42.200 was a really closely watched trial for the company. The 0:14:42.240 --> 0:14:45.800 drugs called Projetta, and the company was sessing whether this 0:14:45.880 --> 0:14:49.520 drug added on to its existing drug hercepting helped more 0:14:49.560 --> 0:14:52.200 women survive or made it less likely that their breast 0:14:52.200 --> 0:14:54.800 cancer would come back. Um, so this was a really 0:14:54.840 --> 0:14:58.080 difficult trial for them to have success in because hercepting 0:14:58.160 --> 0:15:01.360 works really really well already, and you kind of see 0:15:01.360 --> 0:15:03.680 that reflected in the share price boost. This is a 0:15:03.680 --> 0:15:06.440 really big company to move six percent or seven percent 0:15:06.960 --> 0:15:09.880 market cap move like fourteen billion, so really good news 0:15:09.920 --> 0:15:11.960 for the company. Well, so could you walk us through 0:15:12.280 --> 0:15:15.320 first of all, what this drug, how much it helps 0:15:15.520 --> 0:15:18.760 extend people's lives or you know, just whether it improves 0:15:18.760 --> 0:15:21.640 their quality of life, extends their life. Uh, and also 0:15:21.680 --> 0:15:24.280 how much more it would cost for the patient I'm 0:15:24.280 --> 0:15:27.720 talking about, so that that's always the question with cancer drugs. 0:15:27.800 --> 0:15:31.200 Often you see where even really expensive cancer drugs cannot 0:15:31.240 --> 0:15:33.680 only a couple of months. But the really good news 0:15:33.760 --> 0:15:36.640 here is when combined with surgery and and her sept 0:15:36.720 --> 0:15:39.160 in um, women actually have a really good chance of 0:15:39.400 --> 0:15:42.160 surviving in the long run. We don't know the precise 0:15:42.240 --> 0:15:46.000 benefit that this adds on top of her sceptin but um, 0:15:46.080 --> 0:15:49.080 the fact that the trial succeeded suggests that it's really significant. 0:15:49.320 --> 0:15:52.080 So it's something like already, um, you know, four out 0:15:52.080 --> 0:15:54.120 of five women see a really good result and this 0:15:54.160 --> 0:15:56.000 could even add on top of that. And is this 0:15:56.160 --> 0:16:00.000 late stage breast cancer or is this throughout the differ 0:16:00.000 --> 0:16:03.000 front stages. This is early stage when you when you 0:16:03.040 --> 0:16:05.680 catch it pretty early, you kind of have really good results, 0:16:05.880 --> 0:16:08.080 but I believe the drug is being tested in later 0:16:08.120 --> 0:16:11.000 stages as well. What kind of market are we talking about, 0:16:12.000 --> 0:16:14.240 It depends on who you ask, but I've seen a 0:16:14.280 --> 0:16:17.360 peak sales estimate of about five point five billion, and 0:16:17.440 --> 0:16:20.800 that that's really significant for Roche, which is seeing its 0:16:20.840 --> 0:16:24.320 three biggest drugs of asking her up in and I'll 0:16:24.400 --> 0:16:27.040 starting to see biosimilar competition over the next few years. 0:16:27.280 --> 0:16:29.760 Those stories are expected to sell twenty billion this year. 0:16:29.840 --> 0:16:32.320 So having something that kind of props up one of 0:16:32.360 --> 0:16:36.040 those franchises adds some more sales is really significant for 0:16:36.080 --> 0:16:39.640 the company. Okay, biosimilar that's generic. Basically you're you're going 0:16:39.680 --> 0:16:43.560 to have some of these really lucrative drugs become eligible 0:16:43.600 --> 0:16:46.080 for generic rip offs that can then take away profits 0:16:46.080 --> 0:16:48.840 corrected a sort of lower cost margins. That's sort of 0:16:48.840 --> 0:16:51.600 the idea, right, Yeah, So it's it's slightly trickier with 0:16:51.640 --> 0:16:53.800 these drugs. It's it's like a bit more complicated of 0:16:53.800 --> 0:16:57.040 a process to get a biosimilar proper regular generic, So 0:16:57.080 --> 0:16:59.840 the sales drop off is likely to be slower, but 0:17:00.440 --> 0:17:02.720 just the sales still are going to drop pretty significantly 0:17:02.720 --> 0:17:04.560 in the next five years. So that brings me back 0:17:04.600 --> 0:17:06.320 to the price. Do we have a sense of how 0:17:06.400 --> 0:17:09.040 much this could cost this new drug that they that 0:17:09.040 --> 0:17:12.080 they passed the test. It'll probably add some you know, 0:17:12.119 --> 0:17:15.000 an additional maybe ten dollars to the monthly list priced 0:17:15.040 --> 0:17:17.800 cost of treating a patient, although we don't know for 0:17:17.840 --> 0:17:20.919 sure until we see the actual combo on the market. 0:17:21.480 --> 0:17:23.520 And the other thing that makes us an advantage that 0:17:23.600 --> 0:17:26.560 when you have a BYR solar similar competitor, Roach can 0:17:26.600 --> 0:17:29.840 offer this too drug package, perhaps at a discount, so 0:17:29.920 --> 0:17:32.320 it might also protect sales of their older drug I 0:17:32.320 --> 0:17:34.760 which you know, the boo boost for the company. Can 0:17:34.800 --> 0:17:36.480 you give me up an up to date version of 0:17:36.520 --> 0:17:39.879 what's going on at Valiant Pharmaceuticals and what Joe Papa 0:17:39.960 --> 0:17:41.479 is up to, because I mean the stock is up 0:17:41.480 --> 0:17:43.760 about three and a quarter percent today, but I mean 0:17:43.880 --> 0:17:46.560 this is a fourteen dollar stock that well, it wasn't 0:17:46.560 --> 0:17:48.720 always a fourteen dollar stock, and a lot of people 0:17:48.760 --> 0:17:51.920 are feeling the pain. I mean as of a couple 0:17:51.960 --> 0:17:54.840 of days ago, it was something like an eighteen dollar stocks. Yeah, 0:17:55.359 --> 0:17:57.640 it's had a pretty rough couple of days go back, 0:17:57.680 --> 0:17:59.359 a couple of go back just a year or so 0:17:59.440 --> 0:18:03.080 in March and we're talking and you know, at least 0:18:03.119 --> 0:18:06.879 that it's been it's been pretty incredible. Um, what's happened? 0:18:06.920 --> 0:18:10.439 More recently? They reported fourth quarter earnings and it was 0:18:10.520 --> 0:18:12.879 the same sort of kind of grim news that that 0:18:12.960 --> 0:18:15.200 we've come to be used to for Valiant. Uh, some 0:18:15.320 --> 0:18:18.199 of like a five million dollar loss. Um, what was 0:18:18.240 --> 0:18:21.400 this thing about SALEX, SALEX Pharmaceuticals. It was some report 0:18:21.480 --> 0:18:25.600 that was not really accurate. Yeah, So someone I think 0:18:25.640 --> 0:18:28.160 took a look at the ten k so an sec 0:18:28.320 --> 0:18:31.480 investigation really to SALEX and kind of you know, pumped 0:18:31.480 --> 0:18:33.879 out a tweet. Maybe, but this is something that the 0:18:33.880 --> 0:18:38.640 company's is already disclosed and is close to settling. They've 0:18:38.640 --> 0:18:40.879 already said some cash side But but I think it 0:18:40.960 --> 0:18:43.520 does highlight, you know, beyond the fact that the results 0:18:43.520 --> 0:18:47.560 were disappointing, the debt still looms in an increasingly terrifying way, 0:18:47.840 --> 0:18:51.280 that the company is the subject that beyond SALEX fairly 0:18:51.320 --> 0:18:55.240 digging array of lawsuits and investigations that might eat into 0:18:55.280 --> 0:18:58.359 its pretty minimal pile of cash. That's it, just a 0:18:58.480 --> 0:19:03.760 monumental pile of debt, monumental pile of investigations. I mean, 0:19:04.040 --> 0:19:07.160 you know, Max Deeson Love talking to you as always. 0:19:07.200 --> 0:19:11.679 He's a Gadfly columnist covering biotech, pharma, and healthcare of 0:19:11.720 --> 0:19:14.760 Bloomberg News. You can find gad Flight columns on the 0:19:14.880 --> 0:19:30.600 terminal at NI gad Fly or on the Bloomberg website. 0:19:31.760 --> 0:19:36.240 President Trump has pledged to cut the e p a's budget. 0:19:36.600 --> 0:19:41.119 Environmental Protection Agency's budget by twenty five percent. That is 0:19:41.320 --> 0:19:44.760 part of President Trump's overall budget for the US, and 0:19:44.760 --> 0:19:47.280 we're gonna dig a little bit into what this might 0:19:47.560 --> 0:19:50.320 mean for specific programs within the e p A. I 0:19:50.320 --> 0:19:53.800 want to bring in Rob Barnett, senior energy policy analyst 0:19:53.880 --> 0:19:58.240 with Bloomberg Intelligence. Rob which areas of the e p 0:19:58.320 --> 0:20:04.280 A are likely to get cut most under President Trump's proposal. Well, 0:20:04.320 --> 0:20:07.120 I would keep in mind that it's just a proposal 0:20:07.240 --> 0:20:12.359 at this point, but we certainly expect that whether the 0:20:12.440 --> 0:20:15.399 budget truly gets cut or not, which is ultimately a 0:20:15.400 --> 0:20:20.280 matter for Congress to decide, that the Environmental Protection Agency 0:20:20.560 --> 0:20:25.560 is going to do a whole lot less rulemaking under 0:20:25.560 --> 0:20:28.880 President Trump than it did under former President Barack Obama. 0:20:29.000 --> 0:20:35.840 So this includes everything from greenhouse gas regulations UH to 0:20:36.080 --> 0:20:41.720 potentially even conventional pollutant regulations. So we expect a big 0:20:41.960 --> 0:20:47.520 slowdown in terms of agency process under the leadership of 0:20:47.560 --> 0:20:51.840 Scott Pruitt. Whether or not we have these budget cuts 0:20:51.960 --> 0:20:55.880 or not rob the the e p A is an 0:20:55.960 --> 0:21:01.720 eight billion dollar budget agency. It has fifteen thousand employees. 0:21:02.359 --> 0:21:04.840 Who is a Scott Pruitt give us an idea of 0:21:04.880 --> 0:21:09.639 his backers and his background. Well, he's the former Attorney 0:21:09.640 --> 0:21:14.600 general from Oklahoma, and he has had a pretty anti 0:21:14.800 --> 0:21:17.920 e p A stance from his prior perch. He's one 0:21:17.920 --> 0:21:21.840 of these attorney generals that sued the e p A 0:21:22.000 --> 0:21:26.879 numerous times under former President Barack Obama to try to 0:21:27.119 --> 0:21:32.959 block regulations. And so we see a very fundamental shift 0:21:33.600 --> 0:21:38.840 from how President Barack Obama viewed the e p A 0:21:39.440 --> 0:21:43.040 versus how we expected to be viewed under President Trump 0:21:43.080 --> 0:21:47.880 and Scott Pruett. Their goal is to really slow put 0:21:47.880 --> 0:21:52.480 the brakes on anything related to greenhouse gases. So the 0:21:52.560 --> 0:21:55.439 first and foremost that means they're going to try to 0:21:55.600 --> 0:22:00.560 tackle this regulation called the Clean Power Plan and actually 0:22:00.600 --> 0:22:03.000 take it off the books. Now that process could take 0:22:03.040 --> 0:22:06.440 a few years, but instead of taking the staff for 0:22:06.560 --> 0:22:10.639 the agency and having them craft new regulations, they're probably 0:22:10.640 --> 0:22:12.800 going to use the staff to actually kind of put 0:22:12.840 --> 0:22:16.879 the brakes on, putts on existing regulations, and try and 0:22:16.920 --> 0:22:19.000 walk them back a little bit. So it's a really 0:22:19.040 --> 0:22:23.600 different type of agency and their Donald Trump. So given that, Rob, 0:22:23.720 --> 0:22:26.320 are we already starting to see a lot of departures 0:22:26.359 --> 0:22:28.520 from the e p A of long standing members of 0:22:28.560 --> 0:22:35.359 the agency, potentially even career employees leaving. You know, there 0:22:35.359 --> 0:22:39.159 have there are always departures of professional staff when you 0:22:39.200 --> 0:22:43.359 have a new administration come in. By and large, the 0:22:43.560 --> 0:22:47.600