Speaker 1: This is Bloomberg Business Week. I'm Carole Masser and I'm
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Speaker 1: Search Bloomberg Global News. Our top headline at this hour
Speaker 1: the Federal Reserve of Boston announcing that Susan Collins, a
Speaker 1: University of Michigan economists, will be it's new president, marking
Speaker 1: the first time a black woman will lead one of
Speaker 1: the US Central banks twelve districts. Collins succeeds rosen Gren,
Speaker 1: who resigned from the FED in September, and Collins is
Speaker 1: to be the FMC voter starting in July. All Right,
Speaker 1: good to know and some changes. We know that there's
Speaker 1: a lot of changes going on in the FED in
Speaker 1: terms of the makeup of the f O m C.
Speaker 1: Let's get to Bloomberg News economic supporter Steve Matthews. He
Speaker 1: is on the phone from our Atlanta bureau. He is
Speaker 1: our FED watcher and uh, Susan Collins tell us about
Speaker 1: this significance here, Steve, Yeah, I mean this is a
Speaker 1: groundbreaking choice. Uh. You know, as a few years back,
Speaker 1: Raffael Bostic became the first black man to be serving
Speaker 1: as a FED president with the Atlanta Fed. Uh, and
Speaker 1: now Susan Collins will become the first black woman ever
Speaker 1: to be serving as a president of one of the
Speaker 1: twelve FED banks. And the FED has been in existence
Speaker 1: since seven so what you know, hundred and thirteen, fourteen
Speaker 1: years and there this is it seems light to be
Speaker 1: talking about this kind of thing happening, but it is happening,
Speaker 1: and that is a big significance. And for that matter,
Speaker 1: the Biden administration has talked quite a bit about diversity
Speaker 1: and trying to have a central bank that looks like America,
Speaker 1: you know, and the government that looks like America. And
Speaker 1: you've just had too uh the deplotment of two African
Speaker 1: Americans uh to the to the FED Board of Governors,
Speaker 1: which you know, they're still waiting confirmation Lisa Cook obviously.
Speaker 1: Uh So it's interesting. I've spent the last few minutes
Speaker 1: trying to to look back at her monetary policy via
Speaker 1: and you know, is shea dove, is shea hawk? And
Speaker 1: it's like, honestly, we really don't know. That's interesting because
Speaker 1: that's where my next question was going, What do we
Speaker 1: know about her policy? I mean, she's got a PhD
Speaker 1: in economics from m I t uh the Boston Fed
Speaker 1: saying a statement quote Collins is an international Maccar economist
Speaker 1: with a lifelong interest in policy and impact on living standards.
Speaker 1: She has spent you know, I've got she has thirty
Speaker 1: two papers listed with the National Bureau Economic Research, UH,
Speaker 1: and they're almost all on international economy and international developments. Uh.
Speaker 1: She's written about Korea, She's written about Asia, She's written
Speaker 1: about currencies, she's written some about China, uh, but not
Speaker 1: a whole lot about US policy, and not a whole
Speaker 1: lot and nothing that I've been able to find so
Speaker 1: far on US monetary policy. The one thing that she's
Speaker 1: written that might strike some is as interesting, if not controversial,
Speaker 1: is in the wake of the two thousand uh seven
Speaker 1: two thousand nine financial crisis. She was advocating for a
Speaker 1: week er dollar along with a co author, saying that
Speaker 1: you know, we needed to boost the the beat up
Speaker 1: the economic recovery, and one way to do that would
Speaker 1: be to have a week dollar, which will help the
Speaker 1: help exporters in particular. I want to bring in our
Speaker 1: market round table because we're obviously watching a lot of
Speaker 1: things on this Wednesday and including this headline on the
Speaker 1: new head of the Boston fab. Let's bring in Creedy
Speaker 1: group to markets correspond at Bloomberg News at Bloomberg in
Speaker 1: our interactive broker studio along with Katie Greifeld, Bloomberg News
Speaker 1: processor reporter and also Tim's co anchor over on Bloomberg
Speaker 1: Quick take, Um, Creedy, you watch the markets more broadly,
Speaker 1: there's a lot going on. We're still getting a lot
Speaker 1: of big earnings headline like this. How do you think
Speaker 1: about it? Well, it's not gonna be market moving just yet.
Speaker 1: Like Steve was saying, there's no clear indication of where
Speaker 1: the policy lies. But what is interesting that she will
Speaker 1: be a voting member in two so when we do
Speaker 1: get Senate confirmation. But I guess I would assume she
Speaker 1: will I mean, it kind of seems like it, right,
Speaker 1: but Steve is going to be the expert on that.
Speaker 1: She will not need confirmation by anyone that the way
Speaker 1: the fed uh Bank President's work is. I mean, she
Speaker 1: has been approved by the Fed's Board of Governors. There
Speaker 1: is no additional confirm confirmation needed for her for the
Speaker 1: Board of Governors, but not for the FED Bank president.
Speaker 1: I was thinking of Lisa Cook, right, and okay, forgive
Speaker 1: me so my bad. Yeah, thank you, thank you. Steve. Well,
Speaker 1: that just amps up the what's at stake here? Right
Speaker 1: When we do get that indication of what that mon
Speaker 1: Terrey policy is going to look like, her take is
Speaker 1: going to look like that's really going to be a
Speaker 1: key piece at least for the dot plot um. In
Speaker 1: terms of the markets, though, I mean, let's just stick
Speaker 1: with the bond market here. That two percent yield is
Speaker 1: something that I think is coming up on everyone's horizon.
Speaker 1: We're looking ating at one nine two on the tenure
Speaker 1: and it kind of seems like there's a little bit
Speaker 1: of relief in the markets because we pull back from
Speaker 1: that level. A similar story in the oil pulling back
Speaker 1: from that one oil there's some scary levels that I
Speaker 1: think stock the stock market investors are kind of watching,
Speaker 1: and I think the fact that we're not as close
Speaker 1: as we were a couple of days ago, that's adding
Speaker 1: to the relief out we got so close to that
Speaker 1: two mark we did. Hey, Katie Grafel, come on in here.
Speaker 1: And because just a few minutes ago before we got
Speaker 1: this news, you were watching the strong tenure treasury auction.
Speaker 1: Takeaways from that, Yeah, there is bonds right now, is
Speaker 1: why we're not anywhere in two percent striking distance. You
Speaker 1: saw that the tenure treasury auction from the Treasury Department,
Speaker 1: it was it saw the lowest amount awarded to primary
Speaker 1: dealers ever. Reminder these investors, they have to bid at auction,
Speaker 1: so to see such a low allotment there, that really
Speaker 1: speaks to how much demand there is for bonds right now,
Speaker 1: which is really interesting because we're going to get a
Speaker 1: very hot CPI report tomorrow potentially, Yeah, big deal, And
Speaker 1: it's exciting that Susan Collins is a wild card. We
Speaker 1: don't know how she's going to be looking at those
Speaker 1: numbers tomorrow. So you did fun but inflation right in
Speaker 1: terms of these fixed income investments just kind of eats
Speaker 1: away at the returns. I know, but I mean there's
Speaker 1: a lot of talk that maybe this will be the
Speaker 1: peak cp I print, that we're going to start to
Speaker 1: get lower, cooler readings from here. So I mean, if
Speaker 1: that's the bet, you probably want to be buying bonds
Speaker 1: right now. All right, we gotta run, guys, Thank you
Speaker 1: so much. Are thanks to Katie and Creedy Credy. We
Speaker 1: back lit bit later on with her chart of the day,
Speaker 1: and of course our thanks to Bloomberg News Economics reporter
Speaker 1: Steve Matthews on that breaking news the Boston Fed with
Speaker 1: a new head. This is Bloomberg Business Week with Carol
Speaker 1: Messer and Bloomberg Quick Takes. Tim Stinovic on Bloomberg Radio.
Speaker 1: The investors definitely loving companies that increase their prices, and
Speaker 1: that includes the next one that we're going to talk about.
Speaker 1: We're mentioning Chippotle Mexican Girl shares jumping about ten percent
Speaker 1: most's last summer. Following last night's quarterly update, it showed
Speaker 1: that fourth quarter sales COMP sales adjusted EPs all topping estimates.
Speaker 1: Company also raising its outlook. The company CEO, Brian Nichols
Speaker 1: sang on the call he's not seeing any signs and
Speaker 1: inflation is slowing down. Specifically Tim highlighting higher beef colls,
Speaker 1: saying the company may have to raise prices again also
Speaker 1: raise wages. Well, let's bring in Jack hard Tongue, chief
Speaker 1: financial officer for Chippotle Mexican Drill. He joins us on
Speaker 1: via zoom from Chicago, so folks watching on YouTube certainly
Speaker 1: see him there. Jack. How are you. I'm great. How
Speaker 1: are you guys doing. We're doing well. Thanks. I want
Speaker 1: to jump right into it with the with the with
Speaker 1: the price s power. Considering the rising input costs that
Speaker 1: you guys called out yesterday in your earnings release, help
Speaker 1: us understand how much pricing power you have to raise
Speaker 1: the price of items on the menu in order to
Speaker 1: combat those higher input costs. Yeah, you know, it's one
Speaker 1: of these kind of mysteries if you will, TI, and
Speaker 1: that you kind of hope you never find out the reason.
Speaker 1: The reason is, if you find out, it means you've
Speaker 1: raised prices too high and it and it means customers
Speaker 1: are resisting. We've always been very thoughtful whenever we've had
Speaker 1: to raise prices, including in this environment, and frankly, every
Speaker 1: other restaurant company, grocers, everyone is raising prices. So we
Speaker 1: still think that we're kind of you know, at or
Speaker 1: maybe a little bit behind the media and what companies
Speaker 1: are doing. And so, um, what we want to do
Speaker 1: is we we while we think that we can raise
Speaker 1: prices for we'll watch and see how the inflation environment unfold.
Speaker 1: We do think we've got additional pricing power and if
Speaker 1: we need to, we'll spend it, but we'll look at
Speaker 1: other things like efficiencies and um, you know, are there
Speaker 1: other ways to find some you know, cause sating opportunities
Speaker 1: and if there aren't, and if we have to raise prices,
Speaker 1: will we'll do that, But it won't be the first
Speaker 1: thing we'll do. Where Jack, are you seeing the costs
Speaker 1: rise the most and the quickest? Is it wages or
Speaker 1: is it on the commodity side? Yeah, well, you know way,
Speaker 1: wages really increased a lot last year, and in our case,
Speaker 1: we took a big stair step. We increased our wages
Speaker 1: by about fifteen percent for all of our restaurant employees. Um,
Speaker 1: and that was you know a big impact. And then
Speaker 1: we did that in the April May timeframe. That's when
Speaker 1: it became clear to us that there was a in
Speaker 1: balance between the demand that we and other companies had
Speaker 1: for labor as the economy was opening up, and then
Speaker 1: the people coming back into the workforce that helped us significantly. UM.
Speaker 1: That allowed us to retain our existing people, that allowed
Speaker 1: us to increase application flow. You know, we're growing company,
Speaker 1: so we're constantly hiring people. Um. And so that allowed
Speaker 1: us to stabilize the workforce to the point where right
Speaker 1: now we feel like we're in a good labor position.
Speaker 1: It's not it's not like we're completely you know, over
Speaker 1: the challenge. It's still a challenge, but we're as good
Speaker 1: of a labor staffing position now as we were even
Speaker 1: before the pandemic. And uh, you know, I don't know
Speaker 1: that every company could say that right now. Hey Jack,
Speaker 1: do you feel like, in terms of the labor shortages
Speaker 1: and the crunch that we're hitting peak and that things
Speaker 1: will start to get better? And same same side, the
Speaker 1: same questions on on the pricing side of things. Do
Speaker 1: you feel like we're getting kind of inflation peak? If
Speaker 1: you will? Yeah, I don't think either are over. I
Speaker 1: think labor is going to continue to go up, but
Speaker 1: I would expect there won't be another kind of shock,
Speaker 1: like like when we we were kind of at the
Speaker 1: leading edge when we raise prices in the May or
Speaker 1: wages in the May June time. Frank most other hospitality
Speaker 1: and restaurant companies have followed since then. I think they're
Speaker 1: going to be increases, meaningful increases, but I don't expect
Speaker 1: that there will be another fifteen percent jump. What we're
Speaker 1: seeing right now is there are pockets where when there
Speaker 1: are shortages that you're gonna have to maybe raise wages
Speaker 1: at a in a preemptive manner rather than just, you know,
Speaker 1: rather than risking falling behind you know, the wages in
Speaker 1: that market. From a commodity standpoint, most of our channel
Speaker 1: has been in beef. That's been throughout the year, and
Speaker 1: in the fourth quarter it hit us again. Freight as well,
Speaker 1: especially we get a lot of our packaging in from
Speaker 1: outside the US, and freight has been a real challenge,
Speaker 1: not only just to get enough supply because there's such
Speaker 1: bottlenecks at the boards, but also the cost of freight
Speaker 1: is going up significantly. Our outlook suggests that um nothing
Speaker 1: is going to ease in terms of material or great
Speaker 1: an inflation to let the earliest later in the year,
Speaker 1: maybe not even until Wow. So it sticks around for
Speaker 1: a while. Hey, I'm curious about wages too, because that's
Speaker 1: something that we've talked to a lot of economists, Jack,
Speaker 1: that that stays with you, that cost. And I'm curious,
Speaker 1: I've spent a lot of time with your previous administration
Speaker 1: that you guys pride yourself and holding onto workers and
Speaker 1: grooming them to move up the chain. So will those
Speaker 1: higher labor costs be problematic maybe down the road. No.
Speaker 1: In fact, we still pride ourselves on our people culture.
Speaker 1: You know, we we promoted nineteen thousand people last year.
Speaker 1: That's that's what you do when you have a thriving,
Speaker 1: growing company. Um, We've like the idea that when crew
Speaker 1: join us today, that they can join us for a
Speaker 1: job today, but that can turn into a career over time,
Speaker 1: and even that they don't stay with chipotlea their entire career.
Speaker 1: We will teach them skills like how to cook in
Speaker 1: a real restaurant, will teach them how to leave people,
Speaker 1: will teach them how to run a business. And if
Speaker 1: they say with us, that's fantastic. If not, if they're
Speaker 1: still going to learn life skills. And so we run
Speaker 1: all of our restaurants where unique in the restaurant industry
Speaker 1: where we have almost three thousand restaurants. None of them
Speaker 1: are franchised. So we need to have the ability to
Speaker 1: hire great people, to develop great people, and and to
Speaker 1: give them opportunities to move into management roles. And that's
Speaker 1: that's alive and well. Edge Fully, Hey, I want to
Speaker 1: talk a little bit about growth and expansion physical expansion here.
Speaker 1: In your release yesterday, you said, based on those successive
Speaker 1: small town locations that are delivering unit economics at or
Speaker 1: better than traditional Chipotle locations, you are now you now
Speaker 1: believe there can be at least seven thousand Chippotle restaurants
Speaker 1: in North America, up from that prior goal of six
Speaker 1: thousand restaurants. Talk to us about the competition for real
Speaker 1: estate here and how difficult it is to actually find
Speaker 1: compelling real estate opportunities in a market like this. Yeah,
Speaker 1: you know, it's always been a challenge. There's always broke
Speaker 1: companies out there. But um, we do really well. And
Speaker 1: the reason we do well is that, as I mentioned,
Speaker 1: we're company owned, so we can make quick decisions. We
Speaker 1: have a dynamite real estate development team and so they're
Speaker 1: out there. They know the brokers, they know the sites,
Speaker 1: they know how to dig great sites. UM. And when
Speaker 1: we show up and knock on the door of a
Speaker 1: landlord or developer and we're interested in space, they love
Speaker 1: to have chuppote L in their UM in their development.
Speaker 1: The reason is we bring traffic to their development. And
Speaker 1: so if we're in a center where there's five or
Speaker 1: six or seven different tenants there, UM, they can count
Speaker 1: on the fact that Chippotele will bring a lot of
Speaker 1: people to their center, they will recognize some of the
Speaker 1: other tenants as well. UM. So UM you know, so
Speaker 1: we get a lot of attention and we're one of
Speaker 1: the preferred tenants out there. UM. We also have been
Speaker 1: very successful in not just securing the sites, but also
Speaker 1: getting the approval to get a chapot Lang, which that's
Speaker 1: our version of a digital drive through UM. And even
Speaker 1: if we don't have a free standard and it's a
Speaker 1: it's a great convenience for our customers and our landlords
Speaker 1: and developers have been working really well with us to
Speaker 1: make sure we can get the chippot Lane and so
Speaker 1: that's that's because we really bring um, you know, something
Speaker 1: to their center that they're really after, and that's that's
Speaker 1: more foot traffic That's what I wanted to ask you though. Um,
Speaker 1: you guys out at your first digital only chippot Lane restaurant.
Speaker 1: I believe it was late last year. Uh in New
Speaker 1: York State. How's that going in? Is there? What are
Speaker 1: the expansion plans with that? Yeah, it's it's actually really good.
Speaker 1: We have to now fully digital restaurants. What that means
Speaker 1: is there's no front line. So if you walk into
Speaker 1: a restaurant, you're not going to see a front line
Speaker 1: with a register where you can order and then pay.
Speaker 1: Everything has to be ordered ahead. You can order ahead
Speaker 1: and pick up um in in one of the two
Speaker 1: cases we've got chipot Lane, so you can order ahead,
Speaker 1: not get out of your car. You still can get
Speaker 1: out of your car and walk into the restaurant if
Speaker 1: you if you like, and our team will treat you
Speaker 1: to great experience, but you have to order ahead there.
Speaker 1: These are early days. These are early experiments. We do
Speaker 1: think there's gonna be opportunities for what we call a
Speaker 1: seam location, meaning you could have a lot of totally
Speaker 1: restaurants in a certain trade area and then there's an
Speaker 1: underserved area kind of in the middle that might be
Speaker 1: a great spot for a smaller restaurant that has just
Speaker 1: chicot lane um and no frontline ordering. So UM, it's
Speaker 1: early days and we'll find where these make the most sense.
Speaker 1: But they're up both thoughts to a great start in
Speaker 1: that same vein digital sales. For one, for the full
Speaker 1: year forty five point six percent of sales. Carol mentioned
Speaker 1: how they shot up during the pandemic. What's a way
Speaker 1: for investors to think about that digital versus physical mix
Speaker 1: when we do get to the other side of the pandemic,
Speaker 1: where does it stabilize? Yeah, you know, our our guests,
Speaker 1: and it really is just a guess that it probably
Speaker 1: bounces at about at or in that low forty percent range.
Speaker 1: When we look at our markets throughout the country and others,
Speaker 1: you know, different markets have have had different impacts from
Speaker 1: covid um and they have come out of covid faster
Speaker 1: or slower. When we look at the ones that were
Speaker 1: least impacted, um, they didn't fall below at range. And
Speaker 1: when we look at the fort of digital sales today,
Speaker 1: the is are mostly our loyal customers. They come very often,
Speaker 1: they tend to spend more, and they really like the
Speaker 1: digital channel. The convenience of digital Once you get into
Speaker 1: our app once you sign up as a loyalty member,
Speaker 1: is so easy that our customers tend to stick with it.
Speaker 1: So I would see that will probably stay in this
Speaker 1: you know, load and mid range UM, and then we'll
Speaker 1: bounce up from there as more and more customers discovery digital.
Speaker 1: The reality is, even though it's almost forty percent of
Speaker 1: our business, the majority, the largest group of our customers
Speaker 1: have never tried digital. So there's still a big opportunity
Speaker 1: for us. Hey, Jack, just got about a minute or
Speaker 1: so left here. You've been at to potl for what
Speaker 1: twenty years? You've seen a lot at that name alone
Speaker 1: McDonald's before that. You understand this industry. But this is
Speaker 1: an interesting time coming off a pandemic. Uh. We love
Speaker 1: to hear from the c suite. What's top of mind
Speaker 1: for you right now? Yeah, I mean the most important
Speaker 1: thing to me and our entire executive team is people. Um.
Speaker 1: I mean, we have a food ethos um. We really
Speaker 1: take pride in the quality of food that we source,
Speaker 1: the quality food that we cook in the restaurant. But
Speaker 1: all of that with great people. That means great people
Speaker 1: on the front lines, it means great managers for the
Speaker 1: two fifty restaurants we're going to open up, you know
Speaker 1: during this year. It means great people in our office
Speaker 1: as well to support our restaurants. The reason we are
Speaker 1: company owned in that franchise is it takes a lot
Speaker 1: of hard work, a lot of care and a commitment
Speaker 1: to a purpose to actually care about the food, how
Speaker 1: we source it, how we cook and training customers a
Speaker 1: great experience. And so as long as we have a
Speaker 1: great pipeline of people joining Chipotle developing into the management ranks,
Speaker 1: we'll have a bright, bright bright future. That's that's that's
Speaker 1: something that's going to be a high priority really in
Speaker 1: any environment for us. All right. The only thing that
Speaker 1: would have made it this better is having some guacamole
Speaker 1: with you. I'm just gonna say in the house, but
Speaker 1: you're making me hungry me as well. Um, Jack, thank
Speaker 1: you so much. Hello to all of your team, and
Speaker 1: we really appreciate it. That's of course Jack Carton. He's
Speaker 1: the chief financial officer of Chipotle Mexican Grill. On the
Speaker 1: Zoom from Chicago, this stock it is one of the
Speaker 1: performers on the S and P five hundred today. You're
Speaker 1: listening to Bloomberg Bus. This Week with Carol Messer and
Speaker 1: Bloomberg Quick Takes Tim Stinovic on Bloomberg Radio. Super Bowl yep,
Speaker 1: it's this weekend big matchup between the Bengals and the
Speaker 1: Rams and Bloomberg I got sum my microphone on Go Bengals.
Speaker 1: The cover story of Bloomberg Business Week this week is
Speaker 1: about the Big Game and the betting apps that want
Speaker 1: you to come for the game. And then you know it,
Speaker 1: Tim staying Gamble forever. Yeah, and you're certainly seeing the
Speaker 1: ad spend to accompany their desire to actually get you
Speaker 1: on the platforms. Joel Weber is that at Bloomberg Business
Speaker 1: Weeki's with us in the Bloomberg Interactive Broker studio. Peter
Speaker 1: Robisson Projects and investigated investigations reporter for Bloomberg News. He
Speaker 1: joins us on the phone from Seattle. Joel, it certainly
Speaker 1: feels like, and it's clear reading this story by by
Speaker 1: Peter and Ira, that there has been this sea change
Speaker 1: when it comes to the acceptance of sports betting from
Speaker 1: something that was illegal and you know, prevented people from
Speaker 1: joining halls of fames, uh, to something that is actually
Speaker 1: being embraced by the league's What happened uh, the smartphone.
Speaker 1: It's kind of kind of true though, I think, um,
Speaker 1: what with the story really goes into here is the
Speaker 1: look everybody's We've long seen what sports gambling can do,
Speaker 1: and there it's always been a concern that the integrity
Speaker 1: of the game would be in question. Um and and
Speaker 1: that is a legitimate concern. As as Peter and Ira
Speaker 1: write in the story, basically every every sport in every
Speaker 1: league around the world that has had to deal with
Speaker 1: legal betting has had to confront this question of like
Speaker 1: is does this have the potential to undermine the sanctity
Speaker 1: of the game? And uh, that was a thing that
Speaker 1: the NFL obsessed over for years and did not want
Speaker 1: to embrace uh gambling. And then it was just like
Speaker 1: never mind and and part of that was the money.
Speaker 1: Um so, so Peter like, this has been a sea
Speaker 1: change just within the last couple of years. What makes
Speaker 1: this year's Super Bowl especially the one to watch when
Speaker 1: it comes to sports betting, Well, one big thing that
Speaker 1: changed is that online sports betting is now legal in
Speaker 1: New York and you saw a massive, massive uptake, more
Speaker 1: than a million people created new accounts. Um and the
Speaker 1: thing that the light bulb moment for me was was
Speaker 1: reading a report from Golden Sacks, which which pointed out
Speaker 1: that these apps over time might each have fifteen million customers,
Speaker 1: and that's the number who watch a usual NFL game,
Speaker 1: And so when you have that many eyeballs and that
Speaker 1: many people coming regularly on your site, it gives you
Speaker 1: a lot of power. And in a lot of other
Speaker 1: countries that the gambling sites are are the way people
Speaker 1: watch these games, and it's it's the filter through which
Speaker 1: the games are watched, which which seems like a really
Speaker 1: big deal for for all these sports over time. What
Speaker 1: I find so fat well, what I find fascinating He
Speaker 1: just wants to talk about the now Go bank was
Speaker 1: I got it, um. But what I think is interesting
Speaker 1: the MLB was early uh in on on draft kings,
Speaker 1: Robert Kraft, Jerry Jones. I mean colleges they went from
Speaker 1: like not doing anything to all of a sudden they're
Speaker 1: investing in big time and there's meetings kind of I
Speaker 1: feel like, was it was a craft Sun who brokered
Speaker 1: kind of a meeting with one of the betting apps.
Speaker 1: Like it's just interesting how entrenched it's become. Yeah, there
Speaker 1: there there was preparation behind the scenes for this moment,
Speaker 1: even before the Supreme Court opened the floodgates with its
Speaker 1: ruling legalizing sports betting outside of Nevada. In even before that,
Speaker 1: as we report in the story, Roger Goodell met with
Speaker 1: Jason Robbins from Draft Kings UH in a Boston suburb
Speaker 1: with the craft with with Robert Kraft and his son
Speaker 1: and UH fantasy. As another person we talked to said,
Speaker 1: you know, fantasy was really the wedge that helped these
Speaker 1: leagues get comfortable. It was almost like a soft launch
Speaker 1: for for gain bling. And it also showed the leagues
Speaker 1: and everybody how popular this is. Okay, the question of purity,
Speaker 1: how do they keep it pure? It's a really good
Speaker 1: question and it sounds like one that the league is
Speaker 1: still working out itself. We we talked to the chief
Speaker 1: compliance officer for the NFL and they have developed an
Speaker 1: online training course. They have stepped up their discussions with
Speaker 1: league personnel about what information can be shared outside the
Speaker 1: league because with so many prop bets, including what color
Speaker 1: is the gatorade going to be that's dumped on the
Speaker 1: coach's head, there's a lot of potential what what what
Speaker 1: color is it going to be? Blue? Right? And I
Speaker 1: guess one distinction is that those bets that tend to
Speaker 1: be on offshore books, which are are less regulated. But
Speaker 1: the point remains that there's a lot of potential for uh,
Speaker 1: for shenanigans, and so the league is trying to get
Speaker 1: ahead of that. They've also had workshops with players where
Speaker 1: they bring in what they've called bad guys who have
Speaker 1: been caught before, you know, trying to groom players in
Speaker 1: six games. And you know that the skeptics will say
Speaker 1: that that you can't you know, do that uh with
Speaker 1: complete success and and really any one case it's gonna
Speaker 1: it creates a huge perception problem. Uh. And and you
Speaker 1: know you saw that even in the Premier League recently
Speaker 1: where a yellow card given late in the match has
Speaker 1: has you know, caused a fury on on Twitter with
Speaker 1: people claiming that that there's somehow a fixed So it
Speaker 1: just it changes the way people watch games. When when
Speaker 1: betting is so entrenched, how much money is you know
Speaker 1: slashing around here for the NFL, Like, what's the what's
Speaker 1: they're they're taking all this It's it's already substantial. It's
Speaker 1: in the hundreds of millions, you know, just just one
Speaker 1: deal that the NFL signed with the data provider is
Speaker 1: reportedly worth a hundred and twenty million a year to it,
Speaker 1: and over time, they're they're talking a billion a year,
Speaker 1: which is a lot of money for a league that Uh.
Speaker 1: In the pandemic year, it took in twelve billion, so
Speaker 1: uh and Goldman's talking, you know, thirty thirty billion plus
Speaker 1: over time just in the US. UM. You know, you
Speaker 1: mentioned the data providers there. That was the thing that
Speaker 1: I learned in the story. Can you talk more about
Speaker 1: what what's happening in the back ends and and that
Speaker 1: that data because those are those are companies that many
Speaker 1: people may not have heard of. Yeah, and and and
Speaker 1: they're fascinating companies. It's companies. Um. One of them is
Speaker 1: called Genius, and others called sport Radar in some cases
Speaker 1: you know, again, the leagues are taking equity investments in
Speaker 1: these companies. So the NFL has a stake in Genius.
Speaker 1: And what these companies do really is they go to
Speaker 1: events around the world and they collect they do a
Speaker 1: live feed of the game, they collect data from it,
Speaker 1: they collect statistics, and those statistics and the feed let's
Speaker 1: sports books around the world. Uh, lay odds on on
Speaker 1: you know, both the game them and events during the game,
Speaker 1: and it's it's you know, it's incredible how many events
Speaker 1: are covered. Some of these companies are covering, you know,
Speaker 1: hundred thousand, two hundred thousand plus events a year, even
Speaker 1: in lower tier leagues. Hey, Peter. One of the promises
Speaker 1: that or at least the selling points that these apps
Speaker 1: are and services are making to the leagues is this
Speaker 1: idea of engagement and the way that it drives engagement
Speaker 1: two levels that the teams want to see in the
Speaker 1: leagues want to see. What do we know about the
Speaker 1: relationship between the way that people bet, who bets and
Speaker 1: to what extent they actually pay more attention and tune
Speaker 1: in and see the ads in the games? Well, I know,
Speaker 1: Genius has a statistic that people are more likely to
Speaker 1: watch a game if if they're placing a bet on it.
Speaker 1: You know, certainly if your money is at stake, you're
Speaker 1: you're more likely to watch or at least to watch
Speaker 1: a portion of it. Uh So that's one big factor.
Speaker 1: I mean. The other factor we get into in the
Speaker 1: stories is just the possibility of addiction that that you know,
Speaker 1: as one person pointed out, uh, you know that that
Speaker 1: you know, people between the men between the ages of
Speaker 1: fourteen to thirty five are especially likely to gamble. I
Speaker 1: think that that increase in rates already, that is like
Speaker 1: such an important point in this because it looks like
Speaker 1: a ton of fun, Like there's all these funny prop beds.
Speaker 1: Then it's like, oh, by the way, you know, eighteen
Speaker 1: to thirty five, Like, can you imagine how many people
Speaker 1: are going to get addicted out of this because it
Speaker 1: seems like nothing. And then it's like, oh, wow, that
Speaker 1: just drained my bank account. That's your future cover story.
Speaker 1: You know it's coming. Well, you know, we can start
Speaker 1: with this one and we'll see where it goes. Well,
Speaker 1: I think it's interesting to have this story. We've got
Speaker 1: the Super Bowl, and then of course you've got the
Speaker 1: former Miami Dolphins head coach Brian Flores his suit, which
Speaker 1: included a claim that the owner of the team had
Speaker 1: offered him money to throw the game for each games
Speaker 1: high for the next year. This is going to be
Speaker 1: a big conversation, continues to be ahead of the Super Bowl.
Speaker 1: Um our. Thanks you, Joe Weber, Editor of BusinessWeek. Peter Robinson,
Speaker 1: Projects and Investigations reporter at Bloomberg News. The cover story
Speaker 1: check it out. You're listening to Bloomberg Business Week with
Speaker 1: Carol Messer and Bloomberg Quick Takes Tim Stinovic on Bloomberg Radio.
Speaker 1: Another stock jumping on earnings today or its latest quarterly update.
Speaker 1: Have A Pharmaceutical up about seven percent after reporting that
Speaker 1: fourth quarter earnings beat estimates. Core Schultz as president and
Speaker 1: CEO of tv A Pharmaceutical, on the phone from Parsippany,
Speaker 1: New Jersey. Core, how are you. I'm very fine. How
Speaker 1: are you doing doing well? Thanks? Hey, I want to
Speaker 1: just briefly touch on the quarter and then jump into
Speaker 1: some other stuff. Um T have A shares up seven
Speaker 1: percent now. It was up nine percent in or day
Speaker 1: after reporting those earnings. Whilst Fargo says two could be
Speaker 1: the trough for TV sales even as growth remains elusive.
Speaker 1: Where are you going for growth? We will go in
Speaker 1: for growth in our key products. So we have two
Speaker 1: products on the market. Jovi for prevention on migraine, which
Speaker 1: is a verificacious, convenient solution for people suffering from chronic
Speaker 1: migraine during check once a month or once every third month.
Speaker 1: It's the longest acting anti cyp in the marketplace, and
Speaker 1: it gives you a really significant reduction in your micraine days.
Speaker 1: So that's one product is penetrating nicely in US and
Speaker 1: Europe right now and that will be driving growth in
Speaker 1: calling coming ten years, I would say. And then we
Speaker 1: have Osteto, which is the product that is indicated for
Speaker 1: two things. One is Huntington's disease Korea and Huntington's at
Speaker 1: least involuntary movements and tart of this keynesia, which is
Speaker 1: also significant involuntary movements that really disturb, you know, people's
Speaker 1: lives and and it's really difficult to have a job
Speaker 1: and function socially when you have these involuntary movements. And
Speaker 1: Osteto is currently doing very well, growing nicely. It will
Speaker 1: sort of surpass a billion dollars this year, and we
Speaker 1: see that it's a huge potential because tart of this
Speaker 1: keynesia has not been treated in the past, because there's
Speaker 1: been no drug to treat it, and now we have
Speaker 1: this possibility. And right now, out of the probably five
Speaker 1: hundred thousand people suffering from chart of dyskinesia, there's less
Speaker 1: than six percent being on on therapy and getting help.
Speaker 1: So another big growth driver. And the third thing is
Speaker 1: that this year we hope to get approval mid year
Speaker 1: from FDA on a new long acting antipsychotic therapy sparred
Speaker 1: on l AI in a new and improved way of
Speaker 1: long acting. Most antipsychotics that are long acting treating for
Speaker 1: people who suffer from mental illness is long acting by
Speaker 1: a depot that is injected in some muscular so a
Speaker 1: long needle that injects the depot deep into your muscle tissue.
Speaker 1: This is a new and better product that's subcutaneous, so
Speaker 1: a small, thin needle, very short, very easy to inject.
Speaker 1: And it's really important because when you suffer from schizophrenia,
Speaker 1: every time you relapse, you actually lose some of your
Speaker 1: cognitive function of your brain. So you want people not
Speaker 1: to relapse. You want them on long acting play oky.
Speaker 1: But if it's painful and inconvenient and people go for
Speaker 1: the oral tablets and then they go off the tablets
Speaker 1: at some point in time to get a psychosis, and
Speaker 1: it's real bad news for them. So this will be
Speaker 1: would be good for patients and we hope to launch
Speaker 1: this year. Well. Court we appreciate that, and and because
Speaker 1: our investors and not our investors, but the investment audience
Speaker 1: and certainly our listeners want to know what's coming down
Speaker 1: the pipeline. Having said that, I feel like they don't
Speaker 1: think it's a clean story until all of the lawsuits
Speaker 1: and litigation over the opioid settlements is done. You guys
Speaker 1: did do million dollar opioid settlement with Texas that was
Speaker 1: on February four. More deals maybe ahead, at least that's
Speaker 1: what our Bloomberg intelligence team is writing. And you have
Speaker 1: said that you might pay as much as three point
Speaker 1: six billion in US settlements. Are we talking about cash settlements?
Speaker 1: Is that a real number? And what's the timeline? So
Speaker 1: what we talk about is a mixture of cash and product,
Speaker 1: and we, of course, being the largest generic manufact during
Speaker 1: the world, doing more medicine than anybody else, we have
Speaker 1: the locky position that we can provide products that are
Speaker 1: needed to combat the opioid epidemic. And what we have
Speaker 1: agreed with Texas is that we're providing a hundred fifty
Speaker 1: million dollars in cash over fifteen years, and we are
Speaker 1: providing generic knock and spray, which is a product used
Speaker 1: when people have an overdose situation. So it's a very
Speaker 1: useful product to fight overdose deaths. And this product, by
Speaker 1: the way, is actually manufactured in our facility in Salt
Speaker 1: Lake City on a dedicated line we have there. So
Speaker 1: it's also you know, good good for the US that
Speaker 1: it's a US manufactured product we're supplying. But core you
Speaker 1: know that there are some lawyers for some of the
Speaker 1: plain TIFFs that question the value of the drug component,
Speaker 1: the cost of that um and our skeptical, you know,
Speaker 1: skeptical about you know, basing maybe every any kind of
Speaker 1: national deal on what what what happened in the Texas settlement?
Speaker 1: So what do your expect patients? Will it continue to
Speaker 1: be this combination of drugs and maybe a smaller cash component,
Speaker 1: or might you have to pony up some significant cash
Speaker 1: going forward to to put this completely behind you? You know,
Speaker 1: what you're seeing in Texas is really that we have
Speaker 1: changed the mixture, because if you go back a bit
Speaker 1: more than two years when we had the framework settlement
Speaker 1: with the state ages where both Johnson Johnson, the three
Speaker 1: distributors and we came up with a solution. The solution
Speaker 1: for j n J and the distributors were sold based
Speaker 1: on cash and we were the only ones having a
Speaker 1: combination of cash and product. Back then, it was two
Speaker 1: million dollars in cash and twenty three billion dollars in product.
Speaker 1: Now we have of course switched that dramatically around now
Speaker 1: you could say with the Luciana settlement and with the
Speaker 1: Texas settlement. And in the Texas settlement the value is
Speaker 1: two thirds cash one third product. So there's been a
Speaker 1: significant change. And it's no secret that the plane of lawyers,
Speaker 1: they don't get fees based on the product. So of
Speaker 1: course from there earns perspective, it's much better to see
Speaker 1: cast and product, and you could see I think the
Speaker 1: mix we have now in Texas is both very good
Speaker 1: for the population in Texas people suffering from sofistance Altimore,
Speaker 1: profitable for the planing lawyers. Everybody has to agree. At
Speaker 1: the end of the day. It makes me optimistic we
Speaker 1: can reach a nationwide settlement by the end of the year.
Speaker 1: It just quickly, yes, no, within the next two months,
Speaker 1: is all right. I gotta run court. Thank you so much.
Speaker 1: I wish we had more time, course salts to his president,
Speaker 1: chief executive officer Teva Pharmaceutical on the phone from Precipiti
Speaker 1: in New Jersey. Excuse me, but we are definitely seeing
Speaker 1: the stock move higher in the trade today now, But
Speaker 1: you want me drive? Oh no, no, no, no home please,
Speaker 1: I'll do the right gravels. I don't want to drive.
Speaker 1: It's good question, good drive. This is the drive to
Speaker 1: the Globe Radio. All right, everybody, we are just about
Speaker 1: ten and a half minutes away from the closing bail
Speaker 1: and what's been another busy week for earnings. We've got
Speaker 1: a bunch coming after the clothes in concluding, of course,
Speaker 1: Walt Disney Company. That's the big one. Uber Sonos, Ye,
Speaker 1: don't forget about supply chain questions when it comes to
Speaker 1: Sonos and Mattel. And also as people are getting out
Speaker 1: in the world post pandemic, maybe they're not so into
Speaker 1: buying sound systems and the light right for their home.
Speaker 1: That's an important question that we're gonna ask CEOs Patrick
Speaker 1: Spence tomorrow when we interview. We will, indeed, all right,
Speaker 1: we're gonna break it all down after the closing. The meantime,
Speaker 1: let's get some thoughts from our next guest, our drive
Speaker 1: to the closed guest Eric Jackson back with us, founder
Speaker 1: president of the Toronto based hedgephone E M J Capital
Speaker 1: with us on the phone once again in Toronto. Eric,
Speaker 1: good to have you back. How are you and I'm
Speaker 1: doing great. How are you guys doing? Okay? Doing okay? Uh,
Speaker 1: exhausted already here, but that's why we love this world. Um. Hey,
Speaker 1: we've been doing this a lot. We've been checking in
Speaker 1: with managers now that we're in a new year. How
Speaker 1: did twenty one turn out for you guys in terms
Speaker 1: of performance? Because you you, we know you were like
Speaker 1: what back in but curious about how last year played out? Well,
Speaker 1: it was. It was a challenging year for sure. I
Speaker 1: think that they growth and tech stocks in particular, UM
Speaker 1: probably topped out for one in mid February, and so
Speaker 1: we're really almost coming up on a one year anniversary
Speaker 1: of that date, where you know, you've you've had a
Speaker 1: few pockets, uh in those twelve months where things have
Speaker 1: rallied back, but uh, it's been a huge correction. So
Speaker 1: I don't know if a year ago, basically folks were
Speaker 1: already anticipating the interest rate discussions that we've been deep
Speaker 1: into over these class whatever four or five in six
Speaker 1: weeks um. But but growth stocks and small cap stocks
Speaker 1: and the Russell stocks you know haven't really had a
Speaker 1: hard time. So uh, it's been challenging for sure. It's
Speaker 1: been it was its big, big change from for sure.
Speaker 1: Well it's so interesting though, Eric, because like about a
Speaker 1: year ago we had you on the program, if my
Speaker 1: memory serves me, read a couple of companies that you
Speaker 1: talked about. UM. One included up Start, which finished the
Speaker 1: year wow up two. Also, I know you were bullish
Speaker 1: a year ago on Bombardier that had a great year
Speaker 1: up close to two. So were you I mean, talked
Speaker 1: about your positioning in those if you can, and and
Speaker 1: to what extent that you know helped performance for you
Speaker 1: in UM both were you know, big big positives for sure,
Speaker 1: UM both incredibly UM you know, sort of tell the
Speaker 1: tape tale of the tape of the whole markets because
Speaker 1: with up Start you're talking about syntact that came public
Speaker 1: in December to really no fanfare and no one was
Speaker 1: paying attention to it. It's IPO price is twenty dollars.
Speaker 1: Peaked up last year just over four dollars UM. Then
Speaker 1: it bottomed two and a half weeks ago. I think
Speaker 1: it was like seventy four dollars and now too as
Speaker 1: today it's up to like I think it was like
Speaker 1: a hundred to ten last time I look today, So huge, huge, moves. UM,
Speaker 1: so I own, I'll start I own Bombardier. UM. Bombardier
Speaker 1: was more kind of like a you know, a company
Speaker 1: that was sort of left for debt and had a
Speaker 1: great run last year as has approved, like like the
Speaker 1: private check company was not it was not going to
Speaker 1: default on any debt. UM, and so it's been it's
Speaker 1: a lot less bottle bottles tell in comparison, but you know, yeah,
Speaker 1: positioning wise to him, I mean, to go through that
Speaker 1: kind of a draw down, I mean, you have to
Speaker 1: learn to take profits along the way with some of
Speaker 1: these big moves. But nothing changed operationally in either business
Speaker 1: or you know, in most growth or tech businesses. That's
Speaker 1: been the funny part, especially the last three or four months.
Speaker 1: Nothing's changed operationally for most of these companies, but the
Speaker 1: markets basically freaked out. Everything got sold a lot of
Speaker 1: these names. You know, we're off fifty seven. So even today,
Speaker 1: even though like some of these stocks have bounced just
Speaker 1: the last couple of weeks, there's still there's still you know,
Speaker 1: I would say the majority of growth technages out there
Speaker 1: that that are still majorly discounted. So you have to
Speaker 1: do your work. You have to like look into them. Um,
Speaker 1: and don't just trust them. So the main narrative that
Speaker 1: you hear on radio or TV where you have the
Speaker 1: people come on and say, oh, you can't buy growth
Speaker 1: or tech stocks and this rising very great environment. I
Speaker 1: only want to, you know, buy stocks and I can
Speaker 1: drop on my feet and value stocks and this and that.
Speaker 1: I mean you just yesterday this company Joe, you know,
Speaker 1: basically a flying taxi company. No revenue was up. I
Speaker 1: think it's up another eight percent today. So you know,
Speaker 1: you gotta you gotta do your own homework and make
Speaker 1: make the best desistence for yourself. So is it easier
Speaker 1: to be long or short right now? Uh? It's easier
Speaker 1: to be long right now, I'd say for sure, Carol,
Speaker 1: because you know, even some of the most um beat
Speaker 1: up stocks. Um, you know that we're easy shorts just
Speaker 1: maybe like a month ago or six weeks ago, Uh
Speaker 1: have all been levitating. So um, you know it's you
Speaker 1: have to watch your short's. I mean, like like look
Speaker 1: at Peloton for example. You know that's that's sort of
Speaker 1: like a cautionary tale and massive you want to get
Speaker 1: leaning too far one way being sure of stock. I
Speaker 1: mean as of yesterday, I think Peloton was year today
Speaker 1: at up six percent for the year, while Facebook was
Speaker 1: down thirty five percent. So that's funny, hey, um, because
Speaker 1: we don't think about those two in comparison. Right, Hey, Eric,
Speaker 1: wondering about some stocks that you know you're looking at
Speaker 1: that your bullish on. Let's start with National Cash Register
Speaker 1: ticker n CR. Why are you optimistic? Well, it's it's
Speaker 1: like a it's a it's a pure value play. Um,
Speaker 1: you know, it's it's uh, most people don't even know
Speaker 1: it's still of stock, but it's it's still around. It's
Speaker 1: got two big businesses, one that caters to kind of
Speaker 1: retail and restaurants selling you know, self serve checkout machines,
Speaker 1: that sort of thing, and then another vertical, which is
Speaker 1: focused on a t M s and banks. And so
Speaker 1: it's even though they totally transformed their business over the
Speaker 1: last couple of years and now something like over seven
Speaker 1: percent of revenues are recurring as opposed to one time revenues. Uh,
Speaker 1: it's it's just a really cheap stock. Um, you know
Speaker 1: that has sort of been forgotten about. So yesterday they
Speaker 1: had an earnings and called the announced that they basically
Speaker 1: or the board is exploring their options. So it's a
Speaker 1: forty dollar stock today or forty three uh. My analysis
Speaker 1: suggests that it's worth over a hundred bucks if the
Speaker 1: pieces were sold off. So that's one where um, you know,
Speaker 1: I'm happy to hold it and all ways to thinks
Speaker 1: the play out, it seems like the management is kind
Speaker 1: of throwing in the town now because they're sort of
Speaker 1: set up with being ignored. So that's that's definitely one
Speaker 1: that's UH. I think has UH is one to watch. Well.
Speaker 1: We always enjoyed talking with you and really appreciated Eric. Thanks.
Speaker 1: Eric Jackson, foundering president of E m J Capital, joining
Speaker 1: us on the phone from Toronto. Thanks for listening to
Speaker 1: Bloomberg Business Week. Download the podcast on iTunes, soundcrowd, or
Speaker 1: Bloomberg dot com, and you can also listen to our
Speaker 1: radio show at two pm Eastern on Bloomberg Radio or
Speaker 1: watch us on YouTube search Bloomberg Global News m RH