WEBVTT - Building Vaccines to Counter Future Pandemics 0:00:01.800 --> 0:00:04.400 This is Bloomberg Business Week. I'm Charle Masser and I'm 0:00:04.440 --> 0:00:07.280 Bloomberg Quick Takes Tim Stanabek. We're here every day bringing 0:00:07.280 --> 0:00:09.799 you the latest news from the world of business and finance, 0:00:09.840 --> 0:00:13.600 plus technology, politics, economics, all furnessing the power of Business 0:00:13.640 --> 0:00:17.119 Week reporters and editors, not to mention our journalists and 0:00:17.120 --> 0:00:19.600 analyst in more than one and twenty countries. You can 0:00:19.640 --> 0:00:23.200 download Bloomberg Business Week and iTunes, SoundCloud, or Bloomberg dot Com. 0:00:23.400 --> 0:00:25.120 You can also listen to our radio show at two 0:00:25.160 --> 0:00:27.840 pm Eastern Time on Bloomberg Radio, or watch us on 0:00:27.880 --> 0:00:34.360 YouTube search Bloomberg Global News. Let's get our daily check 0:00:34.440 --> 0:00:38.360 on COVID. Dr Jacob B. Kraft is a biologist. He's 0:00:38.400 --> 0:00:42.800 CEO and co founder the privately held biopharma company Strand Therapeutics, 0:00:42.920 --> 0:00:45.680 and he joins us on the phone in Cambridge, Massachusetts. Jake, 0:00:45.800 --> 0:00:48.199 nice to have you here with Tim and myself. How 0:00:48.240 --> 0:00:52.239 are you doing, Jimmy L It's good to be here. UM, 0:00:52.280 --> 0:00:56.760 I'm doing fantastic. UM. You know I think that um. 0:00:56.800 --> 0:00:59.840 It is a it is a it is a challenging bud, 0:01:00.040 --> 0:01:02.640 a rewarding time to be in the bio sex sector. 0:01:02.840 --> 0:01:04.760 Why so and tell us specifically about the work that 0:01:04.760 --> 0:01:06.679 you guys are doing, because you're in this whole world 0:01:06.680 --> 0:01:09.360 of something that we've all become, UM not quite an 0:01:09.400 --> 0:01:11.080 expert on, but we know a lot more, and that 0:01:11.200 --> 0:01:17.040 is messenger RNA. Yeah. So myself as a scientist that 0:01:17.160 --> 0:01:19.240 I did my PhD and m I T focused on 0:01:19.319 --> 0:01:24.200 messenger RNA therapeutics. Going back to u UM and really 0:01:24.240 --> 0:01:26.840 even back then we were we were sitting around talking 0:01:26.880 --> 0:01:30.560 about the potential of what this technology could do. UM. Luckily, 0:01:30.720 --> 0:01:34.800 some some visionary people UM at DARTHA back then Dan 0:01:34.880 --> 0:01:39.319 Lattendorf actually um AT at the DODS Research Division DARTHA 0:01:39.520 --> 0:01:43.120 UM chose to start backing companies and research groups like 0:01:43.200 --> 0:01:47.000 my own UM to begin researching this mrn A technology 0:01:47.040 --> 0:01:49.640 as a as a therapeutic UM. That funded a lot 0:01:49.640 --> 0:01:52.120 of Maderna's work. UM, that funded work that ended up 0:01:52.120 --> 0:01:54.200 going into violent tech, and that funded the work that 0:01:54.640 --> 0:01:58.440 ended up ultimately becoming my company Strand therapeutic UM. And 0:01:58.520 --> 0:02:01.800 so it's it's a rewarding time really to see I 0:02:01.880 --> 0:02:05.279 think the power of biotech innovation, I think the power 0:02:05.440 --> 0:02:08.639 of this technology that those of us who are champions 0:02:08.680 --> 0:02:10.920 of this of this field have been promising for a 0:02:10.960 --> 0:02:14.200 long time, UM, and it's you know, it's rewarding to 0:02:14.800 --> 0:02:16.840 UH in a in a year that has been just 0:02:16.919 --> 0:02:20.959 absolutely awful. UH. I think it's it's the silver lining 0:02:21.000 --> 0:02:24.440 to see, UM, just what can happen when private industry 0:02:24.600 --> 0:02:27.760 along with the public UH and public funding can come 0:02:27.800 --> 0:02:31.200 together UH and deploy these therapeutics. Jacob, can you talk 0:02:31.200 --> 0:02:34.240 a little bit about what mRNA does to the human body, 0:02:34.280 --> 0:02:36.720 because I think there has been a lot of questions 0:02:36.840 --> 0:02:39.679 about it because it's it's perceived as being a new technology, 0:02:39.760 --> 0:02:41.720 at least for use in humans, despite the fact that 0:02:41.760 --> 0:02:45.840 it has been being researched for years. Absolutely. So the 0:02:46.160 --> 0:02:48.640 first thing to to say is that m RNA is 0:02:49.120 --> 0:02:52.079 a molecule that our bodies use all the time. UM. 0:02:52.120 --> 0:02:55.840 So inside if your nucleus is your is where your 0:02:55.880 --> 0:02:58.200 genome is kept, and that that's all made of d 0:02:58.360 --> 0:03:00.480 N A UM and so on your you, You of 0:03:00.520 --> 0:03:03.440 all of these genes, and those genes code for proteins 0:03:03.480 --> 0:03:06.160 and protein is really what life is. It's what makes 0:03:06.240 --> 0:03:08.760 up the substance of what we are, of what every 0:03:08.880 --> 0:03:12.520 organism is. And in order for the DNA genes to 0:03:12.600 --> 0:03:15.400 get out and become proteins out in your body. They 0:03:15.400 --> 0:03:18.400 have to be sent on on this information molecule UM, 0:03:18.600 --> 0:03:21.280 and that's what messenger RNA is. And so every day 0:03:21.320 --> 0:03:24.960 your body is turning on genes by creating messenger RNA 0:03:25.080 --> 0:03:28.480 from the DNA and using those messages to to actually 0:03:28.520 --> 0:03:33.359 actuate themselves. What messenger RNA therapeutics are are just creating 0:03:33.600 --> 0:03:37.480 that same messenger rna UM and using it to deliver 0:03:37.640 --> 0:03:41.320 different sorts of of genes that are only temporary. Right, 0:03:41.360 --> 0:03:44.880 This isn't this isn't genal modification. This actually never touches 0:03:45.200 --> 0:03:48.520 any part of your of your DNA whatsoever. But you 0:03:48.520 --> 0:03:52.240 can you can use these instructions, these messenger RNA instructions 0:03:52.280 --> 0:03:56.119 to temporarily deliver instructions into the body, and that could 0:03:56.120 --> 0:03:58.640 be used to create a vaccine. Right, that could be 0:03:58.720 --> 0:04:01.240 used to help your body train up to to learn 0:04:01.320 --> 0:04:03.960 what a virus might look like without actually delivering the 0:04:04.000 --> 0:04:07.000 virus into the body. And in the broader field of 0:04:07.040 --> 0:04:09.960 messenger RNA therapeutics, what my company Strand has been focused 0:04:10.000 --> 0:04:13.040 on is further in that technology for the use in 0:04:13.160 --> 0:04:17.680 fighting cancer, fighting rare diseases, fighting autoimmune diseases, UM, all 0:04:17.720 --> 0:04:20.960 of that can be augmented in this much safer platform 0:04:21.000 --> 0:04:23.480 than general engineering as well. So it just says we're 0:04:23.480 --> 0:04:26.000 not touching the DNA helix or double helix, we're not 0:04:26.040 --> 0:04:28.680 doing playing around with that. But what is it? And 0:04:28.720 --> 0:04:30.520 unfortunately you have to come back and talk some more 0:04:30.520 --> 0:04:32.359 because this is stuff we love to talk about. But 0:04:32.400 --> 0:04:34.279 in a minute or so, what is it that we 0:04:34.400 --> 0:04:37.640 don't know about messenger RNA that maybe puts people still 0:04:38.000 --> 0:04:39.679 on edge a little bit? And again, just got about 0:04:39.680 --> 0:04:45.599 fifty seconds. I think new technology is always, uh is 0:04:45.640 --> 0:04:48.320 always can can be a little startling to to see 0:04:48.320 --> 0:04:50.839 at first, especially when it's when it's run out um, 0:04:50.880 --> 0:04:53.839 you know, fairly fast in the public. Suye, I wouldn't 0:04:53.880 --> 0:04:56.120 say that we have a lot left to learn about 0:04:56.480 --> 0:04:59.920 um messenger RNA itself. Um, it's really I think right 0:05:00.040 --> 0:05:03.000 now about giving vaccines in the arms of people to 0:05:03.120 --> 0:05:05.680 make sure that we're not rolling the dice on you know, 0:05:05.680 --> 0:05:08.200 what are the long terms effect of a COVID infection. 0:05:08.640 --> 0:05:10.920 I think that's a much more kind of serious thing, 0:05:11.279 --> 0:05:13.320 um that we need to protect ourselves against getting these 0:05:13.400 --> 0:05:16.159 vaccines out and really you know, continuing to invest in 0:05:16.160 --> 0:05:18.839 technology like this so we can be protected from future 0:05:19.080 --> 0:05:22.040 you know, pandemic outperak right or cancer, and I know 0:05:22.040 --> 0:05:24.200 that's something we barely scratched the service, So I hope 0:05:24.200 --> 0:05:26.920 you'll come back so we can continue this conversation. We've 0:05:26.920 --> 0:05:29.400 been talking to Dr Jacob B. Kraft, to CEO and 0:05:29.480 --> 0:05:32.680 co founder of Strand Therapeutics, with us on the phone 0:05:33.160 --> 0:05:37.760 in Cambridge, Massachusetts. This is Bloomberg Business Week with Carol 0:05:37.800 --> 0:05:42.159 Masser and Bloomberg Quick Takes Tim Stinovic from Bloomberg Radio. 0:05:42.560 --> 0:05:44.720 It is, without a doubt the financial story of the week. 0:05:44.760 --> 0:05:46.240 It will turn out to be one of the stories 0:05:46.279 --> 0:05:48.960 of the year about the private investment firm that continues 0:05:49.000 --> 0:05:50.799 to be at the center of one of the biggest 0:05:50.800 --> 0:05:53.440 margin calls of all time. And a member of our 0:05:53.440 --> 0:05:56.000 Bloomberg News team that broke the story is Bloomberg News 0:05:56.040 --> 0:05:58.880 Finance reporter Shrina Rajan. He's with us on the phone 0:05:58.880 --> 0:06:01.240 in New York City reporting for Business Week along with 0:06:01.240 --> 0:06:04.240 Bloomberg Business Week editor Joel Weber. He's on the access 0:06:04.279 --> 0:06:07.000 line in Brooklyn. Joel, this is a story that we 0:06:07.040 --> 0:06:09.880 are continually finding out more and more kind of every 0:06:10.000 --> 0:06:12.640 hour about it. And one of the angles that Tree 0:06:12.760 --> 0:06:15.120 is dealing with is kind of what was happening at 0:06:15.440 --> 0:06:17.239 you know, some of the big banks, like Credit Sweets, 0:06:17.279 --> 0:06:20.039 Like you had to wonder last week, what were the 0:06:20.080 --> 0:06:23.560 phone calls and conversations that were going on among the 0:06:23.560 --> 0:06:26.120 big Wall Street banks. Yeah, I think we've just all 0:06:26.160 --> 0:06:29.159 been um in awe of the story. And you know, 0:06:29.240 --> 0:06:32.560 we we first start to trickle out Friday, and then 0:06:32.600 --> 0:06:35.040 over the weekend Bloomberg News was just all over it. 0:06:35.480 --> 0:06:38.600 Um And the most surprising part that has come from 0:06:38.640 --> 0:06:41.159 Freeze letters reporting today that I saw was that the 0:06:41.200 --> 0:06:43.560 banks were all talking about this this time last week, 0:06:43.600 --> 0:06:46.200 So so sweet, kind of take us inside those conversations, 0:06:46.200 --> 0:06:49.600 like how did they begin and how did they how 0:06:49.600 --> 0:06:54.120 did they go? Oh, Joe, you're absolutely right. For all 0:06:54.160 --> 0:06:57.880 of us and the outside, you really started trickling out 0:06:58.160 --> 0:07:00.520 mid to late Friday, over the weekend, and of course 0:07:00.760 --> 0:07:02.880 to the first days of this week. But for those 0:07:02.920 --> 0:07:06.039 who have been dealing with Bill Huang and his family office, 0:07:06.560 --> 0:07:09.600 they were starting to get worried and alarmed by the 0:07:09.640 --> 0:07:13.000 middle of the week as some of his big positions 0:07:13.000 --> 0:07:16.400 were moving in the other direction, and very soon by 0:07:16.440 --> 0:07:18.840 the middle of the week, the banks did realize they 0:07:18.880 --> 0:07:21.400 had a big problem on their hands. The Risk Department 0:07:21.520 --> 0:07:25.000 that a number of Wall three banks, European banks, and 0:07:25.000 --> 0:07:28.040 even Japanese banks were starting to get worried, so they 0:07:28.080 --> 0:07:31.560 all decided to get together in an eastily arranged call 0:07:31.800 --> 0:07:33.880 that included some of the top lawyers from all of 0:07:33.920 --> 0:07:38.240 these firms, also included Bill Hong to find a solution, 0:07:38.640 --> 0:07:42.560 to figure out how to untie and unwind these positions 0:07:42.720 --> 0:07:46.360 in a tidy manner. From our reporting, we understand the 0:07:46.440 --> 0:07:48.600 Cradles in fact, was the one that was pushing for 0:07:48.680 --> 0:07:52.480 this idea of a stand still agreement, asking everyone to 0:07:53.080 --> 0:07:55.880 cool down, back off for a little bit, let's see 0:07:55.880 --> 0:07:58.040 how the price action moved and look at it again 0:07:58.280 --> 0:08:00.560 on Monday, because they did not want to see an 0:08:00.560 --> 0:08:06.760 immediate force liquidation. Well, the clearly regional agreement they were 0:08:06.760 --> 0:08:09.880 all in it for themselves by Friday was clear because 0:08:09.880 --> 0:08:12.600 they're all broken rank And now as we see the 0:08:12.680 --> 0:08:15.560 consequence of that action, we see the big U, S Bank, 0:08:15.680 --> 0:08:19.760 Long of Stanley, Government, sax Well Sago appear to have 0:08:19.880 --> 0:08:23.160 emerged from this largely unscathed. But that is not true 0:08:23.200 --> 0:08:25.400 for an mm U of j which overnight told us 0:08:25.440 --> 0:08:28.240 that their losses could be about three million mura Al 0:08:28.240 --> 0:08:30.200 would says that has a two billion dollar claim without 0:08:30.240 --> 0:08:33.200 actually saying what its actual hit could be from this, 0:08:33.559 --> 0:08:36.680 and Credit Swift, which has still not provided a bigger 0:08:37.160 --> 0:08:43.320 what estimates on that are heading into multibillion dollars And 0:08:43.400 --> 0:08:47.559 that sort of starts to explain Swiss stance on that 0:08:47.840 --> 0:08:50.840 faithful called Last Those Day tree. What what could have 0:08:50.880 --> 0:08:54.760 been a tidier way to unwind this? You you know, 0:08:54.920 --> 0:08:56.880 you said the banks were looking for a tidier way 0:08:56.880 --> 0:08:59.400 to do this, But but how could these losses have 0:08:59.480 --> 0:09:03.160 been prevent it when the stock started moving lower? No 0:09:03.280 --> 0:09:05.160 to me, You're absolutely right. So we're still trying to 0:09:05.280 --> 0:09:08.800 piece together that part of the puzzle. But one possibility 0:09:09.000 --> 0:09:11.880 very well could be instead of the banks moving to 0:09:11.960 --> 0:09:18.080 says collateral and force some sort of liquidation event, perhaps 0:09:18.120 --> 0:09:21.160 the strategy was wait and see if the staff rebounds. 0:09:21.200 --> 0:09:23.760 Perhaps the strategy was asking some of the banks who 0:09:24.080 --> 0:09:27.880 had the potential to demand much more margin to give 0:09:28.240 --> 0:09:31.400 some sort of margin holiday. It isn't clear what the 0:09:31.440 --> 0:09:34.520 solution could have been, but what is clear is for 0:09:34.640 --> 0:09:37.080 at least some of those participants on the call, the 0:09:37.200 --> 0:09:41.160 idea that banks would move into the market by Friday 0:09:41.280 --> 0:09:44.360 and do a rapid fire sale of a number of 0:09:44.400 --> 0:09:48.360 these positions was going to be the worst case outcome, 0:09:48.600 --> 0:09:52.400 and that's what they're dealing with now. So sweet, What 0:09:52.480 --> 0:09:58.040 are the big unanswered questions that that remain Why in 0:09:58.120 --> 0:10:01.520 the now the regulators investor than everyone on the outside 0:10:01.559 --> 0:10:04.720 is trying to make sure. Is there more to come? 0:10:04.760 --> 0:10:10.240 Are we going to see more blocks, chunky doc trades happening? 0:10:10.880 --> 0:10:14.400 Is there a systemic risk? Is the market largely insulated 0:10:14.679 --> 0:10:17.280 but without a doubt? As we moved fast this into 0:10:17.400 --> 0:10:20.240 next weekend beyond in the weeks and months ahead, the 0:10:20.400 --> 0:10:23.120 big question that will emerge from the saga, and really 0:10:23.160 --> 0:10:26.880 the big focus point, will likely be around this concept 0:10:26.920 --> 0:10:31.400 of unknown hidden leverage. How is it that someone could 0:10:31.480 --> 0:10:36.440 build such concentrated positions in some fairly prominent names. These 0:10:36.440 --> 0:10:41.000 are Chinese giants, US media conglomerates, and yet no one 0:10:41.120 --> 0:10:43.720 knows about it. If you're in the cash equity market, 0:10:44.080 --> 0:10:46.600 if you build a position that is larger than five percent, 0:10:46.800 --> 0:10:49.360 that has to be regulatory filing, but appears in this 0:10:49.400 --> 0:10:52.960 case he was using the swap lines with banks that 0:10:53.200 --> 0:10:59.000 allowed him to avoid having to make any listing of 0:10:59.080 --> 0:11:01.280 what peace position and would be so we are not 0:11:01.400 --> 0:11:04.680 aware of any such disclosure. There's no outside money, so 0:11:05.080 --> 0:11:09.679 he didn't even have the usual disclosures about the size 0:11:09.679 --> 0:11:11.560 of the fund that we would get from every other 0:11:11.640 --> 0:11:15.000 hedge fund. Right, but clearly was a big, big player 0:11:15.000 --> 0:11:17.600 in the market, and estimates our ghost exploser could have 0:11:17.600 --> 0:11:20.880 been good at the fifty sixty billion dollars. That seems 0:11:20.920 --> 0:11:23.280 like a worry. That seems like an area where there 0:11:23.280 --> 0:11:25.800 will be demands for are a lot more transparency. I 0:11:25.840 --> 0:11:27.920 just want to know who's the bankers. Are their bankers 0:11:27.920 --> 0:11:30.400 on this call that just parted themselves the Steffan because 0:11:30.480 --> 0:11:35.600 we just started drink being poor? Just getta say, um, listen, 0:11:35.640 --> 0:11:37.880 this story is far from over and I'm sure regulators 0:11:37.920 --> 0:11:39.440 we know that they've been reaching out to the bank. 0:11:39.559 --> 0:11:42.520 So incredible reporting by Street. Part of the team that 0:11:42.600 --> 0:11:44.920 broke this story and has been on it from the 0:11:44.920 --> 0:11:47.840 get go. Shri Nataraja and Financial portrap Bloomberg News on 0:11:47.880 --> 0:11:49.800 the phone in New York City along with Joel Webber, 0:11:50.040 --> 0:11:52.640 editor Rep Bloomberg Business Week on the remote access from Brooklyn. Right, 0:11:52.640 --> 0:11:54.760 it was a banker right poor to drink it has 0:11:54.800 --> 0:11:58.480 to be. This is Bloomberg Business Week with Carol Masser 0:11:58.720 --> 0:12:03.040 and Bloomberg Quick Take. Tim Stinovic from Bloomberg Radio. Tough 0:12:03.080 --> 0:12:05.000 story in our minds today, Tim, no doubt about it 0:12:05.080 --> 0:12:08.640 President Biden's infrastructure plan. Yeah. Chris Condon is Federal Reserve 0:12:08.679 --> 0:12:11.400 and US Economy reporter for Bloomberg News, joins us on 0:12:11.440 --> 0:12:14.120 the phone from Virginia. Chris, it's great to have you 0:12:14.240 --> 0:12:16.360 on the show. When we think about what the Biden 0:12:16.360 --> 0:12:20.120 administration wants to do with its next phase right after 0:12:20.160 --> 0:12:23.400 this COVID recovery package that was pushed through one point 0:12:23.480 --> 0:12:28.880 nine trillion dollar plan, what is the priority for the president? Well, Tim, 0:12:28.920 --> 0:12:33.480 I think there's two overarching motivations here. Number One, they 0:12:33.520 --> 0:12:36.920 want to bring up the longer run rates of economic 0:12:37.000 --> 0:12:40.679 growth in the U S which have been historically quite 0:12:40.679 --> 0:12:44.360 disappointing for for ten or twenty years, you might say. 0:12:44.559 --> 0:12:48.560 Also very much tied into this is they want to 0:12:48.640 --> 0:12:54.320 engineer a more equal distribution of the benefits of that growth, 0:12:55.080 --> 0:12:58.840 because we do see increasingly, over a number of decades, 0:12:59.280 --> 0:13:03.600 a greater concentration wealth and income in this country at 0:13:03.600 --> 0:13:08.560 the higher echelons of that distribution, and the Democrats really 0:13:08.559 --> 0:13:10.920 would like to attack that well. And before we get 0:13:10.920 --> 0:13:14.760 into politics, Chris. Let's because this is something several I 0:13:14.760 --> 0:13:17.800 would say heads of the Federal Reserve have certainly had 0:13:17.840 --> 0:13:20.440 on their radar. Do you have and like, listen, there's 0:13:20.440 --> 0:13:23.280 lots of statistics out there about the gaps in wealth 0:13:23.320 --> 0:13:26.240 and gaps and income. Um. You lay out a couple 0:13:26.280 --> 0:13:28.600 of statistics, can you just kind of remind us of 0:13:28.640 --> 0:13:30.680 what they are? That just kind of sets the scene 0:13:30.720 --> 0:13:32.720 of where we are and how bad it's got in 0:13:32.840 --> 0:13:38.000 terms of the inequities, certainly the financial inequities in our society. Sure, sure, 0:13:38.040 --> 0:13:41.760 I mean I would promise that just a little bit 0:13:41.840 --> 0:13:46.719 by saying that there's all sorts of disputes over various statistics, 0:13:47.040 --> 0:13:49.440 would you know one? But you know, if you just 0:13:49.559 --> 0:13:55.160 look at basic um distributions of income and net worth, 0:13:55.200 --> 0:13:57.560 here's a good example, and net worth of the top 0:13:57.600 --> 0:14:02.600 ten of households in ninety eight nine, that was nine 0:14:02.640 --> 0:14:05.559 point five excuse me, nine point four times as much 0:14:05.600 --> 0:14:08.720 as the middle fifth. You know, if you divide everybody 0:14:08.800 --> 0:14:13.559 up twenty percentage points each, that's nine point four times 0:14:13.559 --> 0:14:16.880 as much. That by two seven grew to thirteen times, 0:14:17.320 --> 0:14:22.240 and by two seventeen seventeen times, and that's before the 0:14:22.320 --> 0:14:27.040 pandemic hit, and that of course has fallen disproportionately on 0:14:27.160 --> 0:14:30.440 poor and middle income people. The rich suf financial assets 0:14:30.520 --> 0:14:32.920 really greater for a while, but they have bounced back 0:14:33.640 --> 0:14:37.400 uh and more since then, So those multiples will even 0:14:37.920 --> 0:14:42.200 probably have grown even more since the onset of the pandemic. 0:14:42.280 --> 0:14:45.480 And that's a good example, I think, um and that 0:14:45.600 --> 0:14:48.480 really goes back over forty years, we've seen the deterioration 0:14:48.520 --> 0:14:51.040 of that kind of both in net worth and in 0:14:51.320 --> 0:14:56.040 average incomes across the board. So, Chris, let's now get 0:14:56.040 --> 0:14:58.560 to the politics of this, because this is going to 0:14:58.640 --> 0:15:01.280 be very political, even just the way the Democrats and 0:15:01.320 --> 0:15:05.280 Republicans talk differently about inequality and inequity, using terms like 0:15:05.320 --> 0:15:09.560 structural versus not structural? How does how does? How do 0:15:09.640 --> 0:15:12.680 Democrats and Republicans come to some sort of solution? And 0:15:12.680 --> 0:15:15.200 and right now do they even see the same problems 0:15:15.200 --> 0:15:19.160 out there? Well, it is a really good question. No, 0:15:19.320 --> 0:15:21.560 they don't see the same problems. I mean, to a 0:15:21.600 --> 0:15:23.720 certain exting, yes they do. First of all, we have 0:15:23.840 --> 0:15:26.600 to say that in the United States, compared to what 0:15:26.720 --> 0:15:30.680 they're developed economies, there is a much greater tolerance of inequality. 0:15:30.880 --> 0:15:33.520 Americans have in our fabric, this idea that if you 0:15:33.560 --> 0:15:36.560 work harder, you're smarter, you invent something, and you make 0:15:36.720 --> 0:15:41.800 zillion bucks, good for you. Americans really have a problem 0:15:41.920 --> 0:15:46.080 with is an inequality of opportunities. So if a kid 0:15:46.240 --> 0:15:50.479 is smart but just can't get educational opportunities, work opportunities 0:15:50.480 --> 0:15:53.400 because they come from a poor neighborhood and their schools 0:15:53.440 --> 0:15:59.440 are crappy, their parents are connected, etcetera. If those things 0:16:00.440 --> 0:16:03.120 deep in the inequalities, that's something that most Americans have 0:16:03.160 --> 0:16:07.000 a serious barble with. Now, how do you address it? Economists, 0:16:07.000 --> 0:16:11.200 I school on both sides of the philosophical I agree 0:16:11.560 --> 0:16:18.200 that education and training absolutely deserve more resources and more attention, 0:16:18.960 --> 0:16:23.400 um so as to create that more equal set of opportunities. 0:16:24.520 --> 0:16:26.680 But it's not just more right, because it's not just 0:16:26.960 --> 0:16:30.240 more of it, but the right one that kind of 0:16:30.280 --> 0:16:34.680 opens the doors to opportunities. Right. Well, this is what 0:16:34.840 --> 0:16:38.720 makes it such a complex issue. You know, one economist said, 0:16:38.760 --> 0:16:41.080 it's not just a matter of throwing money at these things. 0:16:41.120 --> 0:16:43.040 Are You know, if they were easy to solve, they 0:16:43.040 --> 0:16:46.680 would have been solved decades ago. And there are loads 0:16:46.720 --> 0:16:49.000 of theories about how we should go about Just one 0:16:49.040 --> 0:16:54.560 example Biden wants to make community college tuition free. Conserner 0:16:54.600 --> 0:16:57.560 economists say, hold on, you're getting it wrong here. You 0:16:57.680 --> 0:17:01.120 have to incentivize the colleges by time eyeing the assistance 0:17:01.400 --> 0:17:04.479 to the outcomes. I think it could getting degrees at 0:17:04.480 --> 0:17:07.679 community college, are they getting jobs and good jobs? And 0:17:07.720 --> 0:17:10.560 the ones that do that are should get more assistants 0:17:10.640 --> 0:17:15.120 at schools at it um. So that's just one example, um. 0:17:15.200 --> 0:17:18.960 And then, of course is the taxation issue. Massive disagreement 0:17:19.000 --> 0:17:24.000 about this. Conservatives believe that wealth is being demonized in 0:17:24.080 --> 0:17:26.720 the US UM and that it's kind of a cheap, 0:17:27.160 --> 0:17:31.000 populous ploy to go after the rich and say they 0:17:31.040 --> 0:17:35.280 must be taxed more. Liverpools will say, look, we've tried 0:17:36.040 --> 0:17:39.840 to allow corporations and wealthy people to keep more of 0:17:39.880 --> 0:17:42.919 their income under your theory that this would help the 0:17:43.000 --> 0:17:47.960 overcomony more by investing job creating adventures, but hasn't really 0:17:48.080 --> 0:17:50.640 quite worked out that way. Let's get them to pay 0:17:50.720 --> 0:17:56.760 more a greater share and invest that in education, infrastructure, 0:17:57.240 --> 0:18:00.560 which to the best of which has dispersed more rightly, 0:18:00.800 --> 0:18:03.800 great healthcare, which can improve the quality of the labor 0:18:04.160 --> 0:18:07.560 about you. So again, as you say, care a huge 0:18:07.680 --> 0:18:11.320 philosophical difference on this um and we're not like to 0:18:11.359 --> 0:18:14.480 see those difference in just solved. We're going to see 0:18:14.480 --> 0:18:18.040 one side pushed through legislation. Hey Chris, justin fifteen seconds, 0:18:18.040 --> 0:18:20.359 is there a chance that Biden can do this with 0:18:20.480 --> 0:18:23.480 getting any Republican support unlike what he did at the 0:18:23.480 --> 0:18:27.280 one point nine trillion dollar stimulus package relief package. I 0:18:27.320 --> 0:18:30.560 do not believe. No, not such a large package. If 0:18:30.560 --> 0:18:33.040 they broke off one piece here, they're like a pure 0:18:33.359 --> 0:18:37.520 surface transit infrastructure piece that could get maybe some Republican 0:18:37.960 --> 0:18:42.520 proposal support, but highly skeptically. Well, we're gonna hear more 0:18:42.560 --> 0:18:45.320 from the President on all of this starting tomorrow, at 0:18:45.400 --> 0:18:47.520 least we expect to. Hey Chris Connan, thank you so 0:18:47.600 --> 0:18:49.639 much for breaking it down. He is Federal Reserve and 0:18:49.760 --> 0:18:53.080 US Economy reporter at Bloomberg News joining us on the 0:18:53.080 --> 0:18:56.080 phone from Virginiam. A little bit bomb that this might 0:18:56.119 --> 0:18:59.000 not go through, especially the infrastructure part. Yeah, Like, like 0:18:59.160 --> 0:19:01.159 Chris said, there's a agreement on sort of what the 0:19:01.200 --> 0:19:04.520 problem is, just not on the way to attack it. 0:19:04.560 --> 0:19:10.639 I'm broad mac a journal Yeah, but you let me 0:19:10.760 --> 0:19:15.159 drive Oh no, no, no, no, who's going to drive home? Honey, please, 0:19:15.240 --> 0:19:18.640 I'll do the right rivel let me. I want to drive, 0:19:21.400 --> 0:19:34.480 just drive baby, the questions trying. This is the drive 0:19:34.560 --> 0:19:38.040 to the globe commune. Thanks, we'll drive us to dawn 0:19:38.320 --> 0:19:41.639 on Bloomberg Radio. All right, folks, just about nine and 0:19:41.640 --> 0:19:44.280 a half minutes, nine minutes, ten minutes left in today's 0:19:44.280 --> 0:19:47.000 trading session. Let's get to it with Iria Rothberg, co 0:19:47.160 --> 0:19:50.280 portfolio manager and managing member of broad Run Investment Management, 0:19:50.320 --> 0:19:52.920 that is a subadvisor to the Hennessy Focus Fund, which, 0:19:52.960 --> 0:19:56.040 by the way, uh is that more than so far 0:19:56.080 --> 0:19:58.639 this year, putting it into the nine percentile according to 0:19:58.800 --> 0:20:01.880 our data. And he joins us on the phone from Virginia. 0:20:01.920 --> 0:20:03.800 Are good to have you here on Bloomberg. How are you? 0:20:04.680 --> 0:20:09.240 I'm doing well. How are you Carol? Doing okay? Doing okay? Um, 0:20:09.400 --> 0:20:11.040 why don't you start abroad before we kind of dig 0:20:11.040 --> 0:20:14.080 a bit into your market, into your fund and it's holding. 0:20:14.359 --> 0:20:17.760 How do you see this market environment right now? This 0:20:17.840 --> 0:20:21.840 is an interesting market environments. There are certainly um pockets 0:20:21.960 --> 0:20:25.399 of exuberance in the market, particularly in high growth and 0:20:25.480 --> 0:20:29.560 concept companies. It seems like in this low interest rate, 0:20:29.720 --> 0:20:33.640 low growth environment of the pandemic that investors are looking 0:20:33.680 --> 0:20:36.200 to find the next Amazon, They're looking to buy lottery tickets. 0:20:36.200 --> 0:20:39.280 Everybody's looking for the next trillion dollar market cap company. 0:20:39.520 --> 0:20:43.679 And as a consequence, you see people routinely paying thirty 0:20:43.920 --> 0:20:46.639 thirty five times sales for businesses with negative twenty year 0:20:46.680 --> 0:20:49.719 negative thirty percent but don margin. And you know, at 0:20:49.720 --> 0:20:53.280 the same time, the market overall is perfectly reasonably valued, 0:20:53.320 --> 0:20:56.639 with the sprading at about twenty two times Ford earnings 0:20:56.640 --> 0:20:59.560 since arts portfolio trading at a discount training at about 0:20:59.600 --> 0:21:03.359 seven times for earnings, where we see even better growth 0:21:03.440 --> 0:21:05.720 in the market. So you know, we think it's possible 0:21:05.760 --> 0:21:11.159 to find really compelling investment opportunities UM, improven businesses with 0:21:11.240 --> 0:21:15.399 long growth runways, UM, just not in the hot names 0:21:15.520 --> 0:21:19.160 or hot sectors that you talked about UM on TV 0:21:19.280 --> 0:21:21.800 every day. Let's talk about some of those, IRA, because 0:21:21.840 --> 0:21:24.280 I know one of your picks is restoration Hardware. Why 0:21:24.280 --> 0:21:28.560 are you seeing opportunity there? Sure to understand Restoration Hardware, 0:21:28.560 --> 0:21:31.920 you really need to understand It's chairman and CEO, Gary Friedman, 0:21:32.720 --> 0:21:35.800 was about of the company, and uh, I through rewind 0:21:35.840 --> 0:21:40.040 the clock about twenty years. Restoration Hardware Hardware was a 0:21:40.119 --> 0:21:44.119 nearly bankrupt company before UM Gary came in and turned 0:21:44.119 --> 0:21:47.560 things around. And today, you know, our age is really 0:21:47.560 --> 0:21:52.240 the leading UH luxury home furnishings brand in the United States, 0:21:52.280 --> 0:21:54.200 and we think over time that will become the leading 0:21:54.200 --> 0:21:58.760 brand globally. UM. They're really climbing the luxury mountains, mountains mountains. 0:21:58.800 --> 0:22:00.960 You know, as I mentioned, twenty years ago, they had 0:22:01.000 --> 0:22:03.679 a m they had a box of laundry detergent on 0:22:03.720 --> 0:22:06.280 the front of their catalog. And today, you know, if 0:22:06.280 --> 0:22:09.560 you walk into their New York design gallery ninety thousand 0:22:09.600 --> 0:22:13.600 square feed, six levels, you know, a rooftop restaurant. UM. 0:22:14.280 --> 0:22:17.919 You know, it's quite a different experience. UM. And you know, 0:22:19.400 --> 0:22:23.119 sorry two, they're going to be expanding into England and 0:22:23.200 --> 0:22:27.000 into Paris and taking this successful concept globally. And so 0:22:27.040 --> 0:22:28.840 we think they're in the early inning. It's about a 0:22:28.880 --> 0:22:31.800 three billion dollars a company with about three billion dollars 0:22:31.800 --> 0:22:34.560 of revenue today. We think over time they can eclipse 0:22:35.480 --> 0:22:39.600 of revenue. So UM, very very exciting concept with a 0:22:39.680 --> 0:22:42.359 talented management team. It's a very different company. You know, 0:22:42.400 --> 0:22:46.000