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Speaker 1: Welcome to the Bloomberg Penl Podcast. I'm Paul swing you

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Speaker 1: along with my co host Lisa Brahma. With each day

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Speaker 1: we bring you the most noteworthy and useful interviews for

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Speaker 1: you and your money. Whether at the grocery store or

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Speaker 1: the trading floor, find a Bloomberg Penil podcast on Apple

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Speaker 1: podcast or wherever you listen to podcasts, as well as

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Speaker 1: at Bloomberg dot com. Well, the economists and strategists are

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Speaker 1: trying to really calculate the impact the economic impact that

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Speaker 1: the coronavirus will have on global GDP going forward, but

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Speaker 1: certainly one of the industries that is most at risk

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Speaker 1: is the global technology space. We heard Doug, Greg, Jared,

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Speaker 1: you're talking about Apple and Fox Console. Let's start there.

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Speaker 1: John Butler, Senior Telecom Service and Equipment Animals for Bloomberg Intelligence.

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Speaker 1: He joins us here on our Bloomberg Interactive Broker Studio.

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Speaker 1: So John, let's start with Apple, because that's kind of

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Speaker 1: always the poster child I think if you will for

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Speaker 1: dependence upon China and supply chain and you know kind

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Speaker 1: of it sells into China, sources out of China. Give

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Speaker 1: us a sense of what's going on with Apple with

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Speaker 1: fox Con and kind of how you think this is

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Speaker 1: going to play out. So I think the I think

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Speaker 1: Apple is in a little bit of trouble for the

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Speaker 1: current quarter. So fox Com, which is the main manufacturer

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Speaker 1: the iPhone um, has had its factories closed up until now.

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Speaker 1: Apparently this morning ten of the workforce is back at

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Speaker 1: one of two factories. But we've had a delay in

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Speaker 1: the opening after the Lunar New Year, and I think

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Speaker 1: those delays are going to continue as Beijing continues to

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Speaker 1: really try to try and lock down this virus by

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Speaker 1: limiting people's travel and in instituting quarantines before people can

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Speaker 1: get back to work and so forth. There's a difference

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Speaker 1: between a short term disruption where the demand for the

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Speaker 1: iPhone picks up right away as soon as people can

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Speaker 1: go back to the stores and as soon as production

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Speaker 1: ramps up, and a longer term disruption that actually has

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Speaker 1: a more material effect on the business overall. What's that

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Speaker 1: tipping point here for Apple? Well, I think Apple and

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Speaker 1: fox Con have both been sort of talking about moving

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Speaker 1: beyond China. There are lower cost regions in terms of

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Speaker 1: cost of production. China is getting relatively more expensive, and

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Speaker 1: I think Apple's lack of diversification in terms of where

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Speaker 1: it makes the iPhone. UH is really biting them here,

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Speaker 1: and it's a reminder that they need to diversify geographically

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Speaker 1: perhaps in terms of where they make the iPhone. So

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Speaker 1: what has Apple said, What have they said publicly about

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Speaker 1: the financial impact here? Again they get I don't know

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Speaker 1: their sales are in China. They make make most of

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Speaker 1: their stuff in China that they sell around the world.

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Speaker 1: This seems to me like it could be more than

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Speaker 1: a one quarter thing because it's gonna take a off

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Speaker 1: of these factors to get ramped up again and build

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Speaker 1: inventory and distributed and all that kind of stuff. Yeah,

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Speaker 1: I mean that's my concern, Paul, as I think this

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Speaker 1: illness now is going global. So in terms of the

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Speaker 1: impact in China, I think it's sort of confined to

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Speaker 1: let's say, the next next month or so. But more

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Speaker 1: broadly speaking, you know, for Apple, you know, there's a

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Speaker 1: concern that people aren't going out to the retail stores

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Speaker 1: as much, so I think they'll be. My opinion is

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Speaker 1: we'll see an impact in the second quarter, but if

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Speaker 1: it continues to spread globally, I think it potentially could

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Speaker 1: spill out over into third quarter. And I need to

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Speaker 1: say one thing. The company continues to say that they

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Speaker 1: factored this impact into their latest guidance, So coronavirus risk

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Speaker 1: was already an issue when they set the guidance for

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Speaker 1: the current quarter, but it has since gotten worse. One

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Speaker 1: thing that this uh The situation has really highlighted for

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Speaker 1: me is just how much of an engine China is

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Speaker 1: in terms of production of electronic parts. I mean, it's

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Speaker 1: just such a massive source of all of these products.

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Speaker 1: Can you give us any kind of size as his scopes,

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Speaker 1: any any kind of understanding of just how crucial not

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Speaker 1: only China, but in particular Wuhan, which is the hardest

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Speaker 1: hit area is for these types of products. It's hard

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Speaker 1: to say. Les. You know, the global supply chain is

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Speaker 1: so huge, and it's so diverse, and it's been diversifying geographically,

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Speaker 1: but I think you hit the nail on the head.

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Speaker 1: China is still the world's factory floor. So for Apple,

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Speaker 1: even beyond han Hai, there are other manufacturers for them

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Speaker 1: in China that are being impacted by coronavirus. In terms

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Speaker 1: of pegging an actual number onto what what percent of

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Speaker 1: total global electronic manufacturing is in China, it's anyone's gas,

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Speaker 1: I'll throw out seventy as a guest in it. But

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Speaker 1: I I actually have no idea. I've never really run

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Speaker 1: the numbers. So so John, one of the things for Apple,

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Speaker 1: the bookcases five G. Is there any risk to this

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Speaker 1: manufacturing supply chain issue impacting what could be a this

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Speaker 1: five G story building for Apple? Not yet, Paul. You know,

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Speaker 1: they typically need a couple of months of lead time

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Speaker 1: in terms of building the new devices. That would put

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Speaker 1: us in July in terms of the start of production,

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Speaker 1: maybe even mid June conservatively, And I think at least

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Speaker 1: in China we're going to be clear of this crisis

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Speaker 1: by then. The real issue is Apple is reportedly going

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Speaker 1: to launch the iPhone nine, a low cost sequel to

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Speaker 1: the iPhone se if you remember that one priced at

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Speaker 1: three and that was going to have a March launched date,

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Speaker 1: according to Bloomberg. And so we'll see what happens there.

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Speaker 1: I have a feeling that's almost certainly going to get

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Speaker 1: pushed out by this, by this epidemic. You know, I

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Speaker 1: could just keep speaking with you, and one thing that

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Speaker 1: you said that when you walked in that really was

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Speaker 1: compelling to me, John, was about the factory floor, the

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Speaker 1: fox con to floor, and how they have to increase

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Speaker 1: the ventilation and make it safer for people to come back,

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Speaker 1: and what that will take in order to get the

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Speaker 1: sign off, And there are all these questions there. There

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Speaker 1: are a lot of little things you don't think about.

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Speaker 1: So when you're manufacturing the iPhone, you need really superior

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Speaker 1: ventilation to limit dust the risk of dust getting into

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Speaker 1: the devices. But that also that kind of system promotes

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Speaker 1: the spread of a virus, and so somehow they're going

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Speaker 1: to have to work out a solution to that, and

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Speaker 1: that I think is one of many small items that

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Speaker 1: we don't always think about. John Butler, thank you so much.

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Speaker 1: Always illuminating. John Butler, Senior Telecom Services and Equipment Analyst

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Speaker 1: for Bloomberg Intelligence, joining us here in our interactive broker studios. Well,

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Speaker 1: it's great, Jared said, you just can't keep a good

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Speaker 1: market down. We have the it's up a hundred and

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Speaker 1: twelve points, and it's you know, it's kind of shrugging

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Speaker 1: off the coronavirus. It appears, uh to help us get

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Speaker 1: a sense of what is going on at their Scott

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Speaker 1: Clemen's Chief Investment Strategies for Brown Brothers Harriman uh based

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Speaker 1: in Pittsburgh and actually in here in Bloomberg Inactor Broker Studio.

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Speaker 1: You're based in New York though York. Yeah, that's right, Yeah,

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Speaker 1: absolutely so, Scott, thanks for being on our studio again.

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Speaker 1: You know, at least night, earlier in the morning, we

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Speaker 1: were looking at commodities, and commodities are all down, the

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Speaker 1: medals are down and kind of reflecting presumably uncertain global

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Speaker 1: GDP growth exacerbated by the concerns of the coronavirus. No

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Speaker 1: such issue really with the equity markets. What do you

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Speaker 1: make of that? At the risk of dating myself, I'm

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Speaker 1: I've referred to this as the time x market. Remember

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Speaker 1: those old commercials that takes a licking and keeps on ticking.

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Speaker 1: Think about what this market has been confronted by just

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Speaker 1: in the past couple of months, between escalation of tensions

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Speaker 1: in the Middle East around your end, of course, the

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Speaker 1: presidential impeachment and trial, and now the coronavirus. I think

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Speaker 1: that investors are looking through all of this noise to

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Speaker 1: the underlying fundamental driver that is personal consumption. Sixty eight

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Speaker 1: of GDP is personal spending. As long as the labor

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Speaker 1: market is healthy, as long as the housing market is healthy,

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Speaker 1: that engine of economic activity and therefore earnings and therefore

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Speaker 1: the market is okay. I thought you were gonna say,

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Speaker 1: they're all looking at the under underlying driver, which is

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Speaker 1: the Federal Reserve helps, doesn't it? Well? I mean, but

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Speaker 1: how much is that? That sort of what's driving that? Well,

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Speaker 1: it's meaningful. I think of that as an insurance policy

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Speaker 1: of sorts. Not only the feds willingness to lower interest

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Speaker 1: rates last year and send the signal that they intend

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Speaker 1: to keep them so this year, but the balance sheet

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Speaker 1: operations as well. So you've got a fundamental backdrop of

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Speaker 1: a decent economic environment, not great, but durable, stable economic

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Speaker 1: environment with the insurance policy of easy monetary policy. That's

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Speaker 1: a pretty powerful combination. Alright. So again, we've, you know,

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Speaker 1: had such a great twenty nineteen, uh, even with some headwinds,

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Speaker 1: twenties a pretty solid start as well. What sectors should

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Speaker 1: we be looking at here, given that we're eleven years

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Speaker 1: or so into this economic cycle? Is it defensive? Do

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Speaker 1: I go back out on the risk curve? What am

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Speaker 1: I do? On the equity side? We like those equity

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Speaker 1: sectors in plays that depend on this underlying fundamental strength

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Speaker 1: in in the consumer, so consumer discretionary consumer staples. They're

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Speaker 1: sort of old fashioned what we used to call the

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Speaker 1: blue chips. They pay dividends. They're not terribly exciting or sexy.

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Speaker 1: They're not Tesla going up and down ten or fiftent

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Speaker 1: a day. But for investors who are interested in preservation

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Speaker 1: of wealth and long term accumulation of wealth, potentially with

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Speaker 1: some income needs on the side that healthy dividend yields

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Speaker 1: can meet, that's the sectors of the market where we

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Speaker 1: find the best value in the best long term place.

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Speaker 1: What about the Russell tooth Hausand I'm gonna throw this

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Speaker 1: at you because I harp on this every same day

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Speaker 1: I'm looking at it. It's the small cap small MidCap

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Speaker 1: shares that have underperformed down on the year, even as

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Speaker 1: you see new records on the sp and as yet,

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Speaker 1: and that's not a new thing. If you look at

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Speaker 1: the performance of large cap versus small cap domestic stocks

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Speaker 1: going about three years, five years, seven years, end years,

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Speaker 1: even the large caps have outpaced the small and medium

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Speaker 1: caps and and it surprises me. But what's the message

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Speaker 1: you Well, you would think in an environment in which

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Speaker 1: there are concerns about global trade well predating the coronavirus outbreak.

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Speaker 1: I mean, think of just the ongoing China U S

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Speaker 1: trade dispute. Domestic companies ought to be doing better than

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Speaker 1: than than companies with a big multinational exposure. So we

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Speaker 1: we have in our portfolios actually dialed up that smaller

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Speaker 1: MidCap exposure. We've also dialed up the non dollar exposure

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Speaker 1: as well, because non dollar assets, both emerging and international,

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Speaker 1: have vastly lagged the good old fashioned SNP five. So

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Speaker 1: we think increasingly that's where the value plays are. That's

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Speaker 1: not a barish call on the markets. It's just an

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Speaker 1: observation of where the bigger opportunities live. I'm glad you

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Speaker 1: mentioned emerging markets because we've been talking about that as

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Speaker 1: well this morning, and I'm looking to bring up the

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Speaker 1: five year chart of the MSCI Emerging Markets Index versus

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Speaker 1: the SMP five and clear underperformance and then underperformance even

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Speaker 1: widened out a little bit in what's the catalyst for

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Speaker 1: Can an emerging markets call work in a world where

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Speaker 1: we have trade tensions phase one, deal or notwithstanding, and

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Speaker 1: you know, maybe some kind of threat the global growth

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Speaker 1: from this exogenous factor I called the coronavirus it's it's hard, Paul,

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Speaker 1: because those are substantial obstacles to sentiment at least. But

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Speaker 1: if you look back even and and I don't have

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Speaker 1: it in front of me, but in a mind's eye,

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Speaker 1: over a ten year trailing period, the SP five large

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Speaker 1: cap us is outpaced emerging markets in dollars like for

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Speaker 1: like comparison by a thousand basis points annualized. That's an

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Speaker 1: extraordinary rate of performance differential. It doesn't necessarily mean their

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Speaker 1: valuation opportunities in the emerging world, but it's strongly hints

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Speaker 1: at it. The problem, of course, with a value based

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Speaker 1: investing approaches. As good as it is, and it's what

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Speaker 1: we do, it's our bread and butter, it's a horrible

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Speaker 1: timing tool because cheap things can get cheaper, and that's

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Speaker 1: been the story and emerging markets. But the valuation gap

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Speaker 1: between the developed world and the emerging world is wider

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Speaker 1: than it's been since the summer of and you have

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Speaker 1: to cast your memory back. But that was the sort

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Speaker 1: of getting close to the peak of the dot com

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Speaker 1: bubble here in the States, but rolling crises throughout the

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Speaker 1: rest of the world. Venezuelan debt crisis. Tai Bak crisis,

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Speaker 1: Russian debt pretty hard, horrible time for emerging echoties. We're

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Speaker 1: back to that level of gap between valuations of the

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Speaker 1: two markets. When does the coronavirus and more importantly, the

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Speaker 1: ripple effects from it economically becomes something more than noise

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Speaker 1: and potentially even change your thesis. It's a good question,

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Speaker 1: and the difficulty with that is as unpredictable as the

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Speaker 1: virus itself is. People's reaction to it is even more unpredictable.

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Speaker 1: Institutional reaction to it is more unpredictable. So not to

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Speaker 1: diminish the human tragedy of it, the decisions by various

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Speaker 1: governments to quarantine whole cities, to shut down air roots,

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Speaker 1: to shut down trade kind of the right thing to do.

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Speaker 1: You want to limit the susceptible part of the population

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Speaker 1: to the virus spread. But it will certainly punch a

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Speaker 1: hole in first quarter GDP. I think we'll get an

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Speaker 1: early indication of that from some Bell Weather companies. Mean

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Speaker 1: listen to not only earnings report, but interim reports from

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Speaker 1: fed X or UPS or inn Boeing on airport airplane orders,

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Speaker 1: certainly airlines themselves. We won't get the GDP numbers to

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Speaker 1: late April distant distant future from now. So we're listening

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Speaker 1: to the anecdotal information coming out of companies. So far,

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Speaker 1: we think it's sort of a tenth of a percent

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Speaker 1: two tenths of a percent hit to GDP domestic GDP

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Speaker 1: in the first quarter, but there's no question that if

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Speaker 1: the response to it exacerbates as exacerbated, the hit could

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Speaker 1: be bigger. It's an election year. Do we care historically

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Speaker 1: as equity investors? Historically no, But there's nothing about this

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Speaker 1: election that's historically normal. Um and and and part of

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Speaker 1: the challenge, Paul, is that the Democratic field in particular

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Speaker 1: is still so wide that we haven't really honed in

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Speaker 1: on what genuine policy proposals might be. So I could

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Speaker 1: certainly spend some time analyzing the most recent tax proposal

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Speaker 1: or trade proposal from any number of Democratic camps, but

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Speaker 1: at this point candidates are still lying for lanes. They're

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Speaker 1: still throwing more ideas out than there are actual policies,

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Speaker 1: so it's hard to tell. I think once we get

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Speaker 1: past probably not until Super Tuesday, will that field begin

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Speaker 1: to narrow to a point where we can actually analyze

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Speaker 1: what the likely implications are of a smaller handful of

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Speaker 1: potential democratic outcomes. There's no question in my mind, though,

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Speaker 1: that political developments this year could be the cause, or

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Speaker 1: at least the blame for a market correction the likes

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Speaker 1: of which we haven't seen since August of last year.

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Speaker 1: We'll sort of overdo one the blame for it. I

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Speaker 1: like the way you catch that. Scott Clemens, Uh, well

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Speaker 1: well crafted. Scott Clement's chief investment strategist at Brown Brothers Harriman,

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Speaker 1: overseeing about forty billion dollars, and he joins us here

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Speaker 1: in our interactive progress studios. One of the fallouts are

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Speaker 1: from the Senate acquittal of President Trump. As President Trump

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Speaker 1: has kind of, you know, seeking retribution on on those

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Speaker 1: that he feels were against him during the impeachment process.

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Speaker 1: We saw, uh on Friday, um, you know, two days

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Speaker 1: after being acquitted, Gordon Sunlin and announced that he had

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Speaker 1: been at outside as the US ambassador of the European Union.

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Speaker 1: Army Lieutenant Colonel Vidmann from the National Security Council also

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Speaker 1: let go. So lots of issues going on here as

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Speaker 1: it relates to kind of the fallout from the impeachment process.

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Speaker 1: To get some color, we welcome Clint Watts Clints, Distinguished

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Speaker 1: Research fell for the Farm Policy Research Institute, is also

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Speaker 1: a Senior Fellow at the Center for Cyber and Homeland

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Speaker 1: Security George Washington University. Clint, so lots going on here.

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Speaker 1: We also had some New York being part of a

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Speaker 1: global entry program being revoked by the president. So the

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Speaker 1: question is how much does all of this impact kind

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Speaker 1: of our national security, our security apparatus. What are some

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Speaker 1: of the fallouts do you think if any? I think

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Speaker 1: the big thing is that people will become reflexive and withhold,

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Speaker 1: Meaning if I were in government right now, I think

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Speaker 1: you'd always try and engauge, Uh, do you deliver the

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Speaker 1: president something he doesn't want to hear? And what are

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Speaker 1: the consequences of that? And I think it's pretty consistent

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Speaker 1: over the president's term here that you see him being

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Speaker 1: retaliatory if he doesn't necessarily get what he wants or

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Speaker 1: here already wants. And he also sees the US government

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Speaker 1: officials longtime public servants as loyalists or not loyalists, which

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Speaker 1: means you have to pick a side, and so that

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Speaker 1: can be troubling both in terms of executing national security

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Speaker 1: and formed policy. For sure, I thought Gordon silence testimony

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Speaker 1: was quite remarkable when when he went to UH Congress,

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Speaker 1: because he basically said everybody was in on this and

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Speaker 1: I was in on it. I thought it was fine,

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Speaker 1: and this is what actually happened. And so when you

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Speaker 1: look at kind of how this is played out now,

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Speaker 1: UH over the last couple of months, now he suddenly

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Speaker 1: on the on the stick end instead of the carrot.

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Speaker 1: So I think it can be troublesome over time. It's

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Speaker 1: very hard to run a government that way. There's a

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Speaker 1: question about the morale among national security professionals. Then there's

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Speaker 1: a question about national security itself with some of the measures,

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Speaker 1: and when we talk about the Global Entry issues, basically

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Speaker 1: President Trump proposing to bar New Yorkers from enrolling in

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Speaker 1: it or or applying for it newly, there's a question

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Speaker 1: of how much of a national security threat our programs

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Speaker 1: like Global Reentry and things where people have expedited access

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Speaker 1: through through security lines. I mean, is there some true

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Speaker 1: threat that has emerged as a result of them. Yeah,

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Speaker 1: I don't think there's been a true threat. I think

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Speaker 1: you know, by and large, what you find is that

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Speaker 1: if you give more data the data and information the government,

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Speaker 1: you give up more privacy of your information. Then you

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Speaker 1: can get accelerated through these processes. I think what's interesting

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Speaker 1: about it is is a really place of the access

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Speaker 1: to the wealthy, meaning that if you have money, you

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Speaker 1: can buy these things. It's not a cheap service. I

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Speaker 1: think it's a couple hundred dollars that you have to do.

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Speaker 1: You have to spend additional time to go after the

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Speaker 1: airport and gets screen and so if you're someone of

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Speaker 1: lower means, you're obviously not going to be able to

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Speaker 1: do that. Um, So it's kind of an access program.

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Speaker 1: It does beg the question though, of like who uh

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Speaker 1: can get that access and you know, what are the

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Speaker 1: requirements for it? Or does it give people extra value

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Speaker 1: like if your foreign adversary, can you work your way

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Speaker 1: into those systems. It's unlikely, it's probably a low probability event,

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Speaker 1: but it just shows that there's not a universal acceptance

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Speaker 1: of what security is, that there are different standards for

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Speaker 1: different kinds of people. So Clint, as it relates to

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Speaker 1: some of these whistleblowers and the retribution, I'm thinking about

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Speaker 1: the again the Army Lieutenant Colonel Alexander Vinman being pushed

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Speaker 1: out of his position, is that is that in the prerogative.

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Speaker 1: To what extent is that in the prerogative of President Trump?

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Speaker 1: How common is that type of thing or is this

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Speaker 1: kind of out of the bounds it is in the

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Speaker 1: prerogative of the president to do that. It's just quite uncommon.

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Speaker 1: You know. I just saw a report I think a

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Speaker 1: couple of hours ago that Ben Man was already asking

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Speaker 1: or you know, sort of requesting to be moved from

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Speaker 1: his position when his natural time was to come through.

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Speaker 1: Usually these are one, two or three year assignments, you know,

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Speaker 1: for the military folks to go over to the White

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Speaker 1: House on these details. And but why not let that

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Speaker 1: just naturally come to pass? Why do you have to

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Speaker 1: force the issue? Um, I don't see anything Vinman did

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Speaker 1: as being out of line. He was asked to go

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Speaker 1: testify the Congress, which has oversight function. He did when

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Speaker 1: he had concerns inside the government. He went through an

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Speaker 1: approved and uh not a wide open public process. So

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Speaker 1: that sort of begs the question, what do we expect

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Speaker 1: these people in the government to do when called to Congress?

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Speaker 1: And it really also shows just how weak, uh, the

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Speaker 1: legislative branch and oversight of Congress has become in comparison

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Speaker 1: to the executive branch. President Trump has pushed the limits

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Speaker 1: on all of these things, and it so just begs

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Speaker 1: the question, why do this if he might have cycled

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Speaker 1: out in the next few weeks or months, why go

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Speaker 1: this extra step and really pushing him out of the

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Speaker 1: White House, other than to make a public spectacle of it. Yeah, clean,

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Speaker 1: I do want to just h if I were Tom Keane,

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Speaker 1: rip up the script um just a little bit, because

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Speaker 1: I know your most recent book, Messing with the Enemy,

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Speaker 1: Surviving in a social media world of hackers, terrorists, Russians

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Speaker 1: and fake news that while all of this uh political

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Speaker 1: drama is going on. We got the announcement from Attorney

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Speaker 1: General Bill bar today about the Equifax Equifax hack back

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Speaker 1: in two thousand and seventeen, basically charging China's People's Liberation

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Speaker 1: Army for hacking into Equifax and stealing the information of

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Speaker 1: millions and millions of customers. I'm wondering, do you feel,

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Speaker 1: on the balance, like we've gotten safer or less safe

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Speaker 1: when it comes to our ability to counter and detect

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Speaker 1: some of these potential hacks. I think we've gotten a

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Speaker 1: lot better. What I would point out, I was thrilled

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Speaker 1: at the Justice Department did that today. What I point

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Speaker 1: out though, is that actually occurred in two thousand and seventeen.

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Speaker 1: So there's some some things to think about. One, what

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Speaker 1: China was doing and has done and continues to do,

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Speaker 1: is build up big data from around the world, and

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Speaker 1: big data powers artificial intelligence. It is the fuel for

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Speaker 1: that machine. The more data you have, the more you

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Speaker 1: can learn, The more you can learn, the more you

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Speaker 1: can power your economy. And this comes out of time.

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Speaker 1: We're here in the United States, we're talking about data

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Speaker 1: privacy and beating kind of beating up on big tech

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Speaker 1: in our own country. China is running wild in the space,

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Speaker 1: and so they have fuel from their own country and

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Speaker 1: from the West now. And so when we look at

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Speaker 1: how we retaliate on this, we're talking about four hackers.

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Speaker 1: I think that they came out in the indictment. They

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Speaker 1: probably hacked thousands more times in the last two years

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Speaker 1: to and half years since that happened, And it really

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Speaker 1: shows how long it takes to do one of these

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Speaker 1: investigations and how weak are retaliatory measures really are. We're

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Speaker 1: going to indicte those four hackers and nothing will happen

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Speaker 1: to them. Ultimately, but the good news is we're finally

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Speaker 1: coming around to building a system and doing something about

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Speaker 1: something we've not been able to do really for the

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Speaker 1: last decade. Clint Watts, thank you so much for being

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Speaker 1: with us. Clint Watts, Distinguished Research Fellow for a Foreign

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Speaker 1: policy research institute. Also the author of Messing with the Enemy,

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Speaker 1: Surviving in a social media world of hackers, terrorists, Russians

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Speaker 1: and fake news. Yeah, essentially, the commentary about the hacking,

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Speaker 1: it's just a question even you think about that, and

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Speaker 1: it's just, you know, as good as the defenses can be,

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Speaker 1: as much money as companies invest in protecting their data,

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Speaker 1: the other side is also making strides as well. So

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Speaker 1: it seems like what we've heard from the experts as

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Speaker 1: it relates to hacking, cybersecurity a never ending, you know,

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Speaker 1: kind of battle between the hackers and the folks being hacked.

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Speaker 1: So we'll obviously pay attention to that. I think it's fitting, Paul,

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Speaker 1: at a time when gold is absolutely in vogue for

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Speaker 1: us to focus on another precious stone of sorts or metal,

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Speaker 1: non precious metal stone, diamonds. Let's talk diamonds, and luckily

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Speaker 1: we have with us the expert w as our president

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Speaker 1: and co founder of Gemological Science International, based in New York,

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Speaker 1: joining us here in our interactive broker studios focusing on evaluating,

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Speaker 1: studying precious gems and in particular diamonds for years. And Debbie,

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Speaker 1: I just want to get started because we've had people

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Speaker 1: on this program talking about lab grown diamonds and if

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Speaker 1: that's going to absolutely revolutionize the entire industry because you

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Speaker 1: can't tell the difference. Have you seen real in roads

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Speaker 1: made by the lab grown diamond producers? And do you

431
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Speaker 1: think that it does materially affect the value of the

432
00:23:44,200 --> 00:23:48,240
Speaker 1: naturally found diamond? Yeah? Well, um, right now, overall it's

433
00:23:48,280 --> 00:23:51,119
Speaker 1: an eighty seven billion dollar industry and only two percent

434
00:23:51,200 --> 00:23:55,320
Speaker 1: of that right now is lab grown diamonds. Um that

435
00:23:55,600 --> 00:23:58,600
Speaker 1: you can definitely as a laboratory, we see both on

436
00:23:58,680 --> 00:24:02,000
Speaker 1: a daily basis, So we certify natural diamonds and we

437
00:24:02,119 --> 00:24:05,680
Speaker 1: also certify lab grown diamonds. They are not the same thing,

438
00:24:05,840 --> 00:24:09,200
Speaker 1: and it's important for consumers to really understand what the

439
00:24:09,280 --> 00:24:12,600
Speaker 1: key differences are. Um, either option is fine as long

440
00:24:12,640 --> 00:24:15,600
Speaker 1: as you really understand what you're purchasing and also the

441
00:24:15,680 --> 00:24:19,680
Speaker 1: reason for your purchase. But from let's say a gemological standpoint,

442
00:24:19,760 --> 00:24:23,720
Speaker 1: they have the same chemical, optical, and physical properties, but

443
00:24:24,400 --> 00:24:27,120
Speaker 1: they're not the same in the sense of their origin,

444
00:24:27,240 --> 00:24:29,159
Speaker 1: where they came from, and also the time that they

445
00:24:29,240 --> 00:24:34,360
Speaker 1: took to grow. So natural diamonds are billions of years old,

446
00:24:34,440 --> 00:24:37,560
Speaker 1: they're formed hundreds of miles beneath the Earth's surface. They're rare,

447
00:24:37,600 --> 00:24:40,840
Speaker 1: they're precious. No two are ever the same, and the

448
00:24:41,000 --> 00:24:45,440
Speaker 1: supply of the supply will eventually exhaust itself. UM. Lab

449
00:24:45,520 --> 00:24:49,280
Speaker 1: grown diamonds are really technology at its finest. You can

450
00:24:49,560 --> 00:24:53,600
Speaker 1: they're grown in factories over weeks or months, and because

451
00:24:53,680 --> 00:24:56,159
Speaker 1: we can always grow more, the supply is infinite, and

452
00:24:56,240 --> 00:24:59,040
Speaker 1: that does leave a lot of possibilities for where it

453
00:24:59,119 --> 00:25:02,480
Speaker 1: can be used. So are people still buying diamonds as

454
00:25:02,680 --> 00:25:04,959
Speaker 1: much as they used to? What's the trend in kind

455
00:25:05,000 --> 00:25:09,080
Speaker 1: of diamond demand? Yeah? Absolutely so people are still buying diamonds,

456
00:25:09,080 --> 00:25:11,200
Speaker 1: and I think consumers are just doing this a lot

457
00:25:11,359 --> 00:25:14,879
Speaker 1: differently than they used to. UM. I think retailers have

458
00:25:15,000 --> 00:25:19,040
Speaker 1: done a really great job of enhancing the consumers overall

459
00:25:19,320 --> 00:25:22,879
Speaker 1: buying experience and shopping experience, So whether it's online or

460
00:25:22,960 --> 00:25:25,600
Speaker 1: in store, and today for consumers it's become a real

461
00:25:25,760 --> 00:25:29,119
Speaker 1: integrated journey. Many will start online to do a lot

462
00:25:29,200 --> 00:25:32,399
Speaker 1: of research or homework about what they're buying, and then

463
00:25:32,440 --> 00:25:35,080
Speaker 1: they'll walk into a store to really look, see, feel,

464
00:25:35,119 --> 00:25:38,520
Speaker 1: and experience the product. And it's all about really creating

465
00:25:39,000 --> 00:25:43,159
Speaker 1: an informative, educational, and really memorable experience. It's all about

466
00:25:43,600 --> 00:25:45,760
Speaker 1: when the consumer wants to buy, how they want to buy,

467
00:25:45,960 --> 00:25:48,600
Speaker 1: and where they want to buy. And they're still buying

468
00:25:48,720 --> 00:25:52,720
Speaker 1: diamonds today. I'm startling to understand the correlation between the

469
00:25:52,840 --> 00:25:56,760
Speaker 1: haven us at sort of store value and precious gems.

470
00:25:56,800 --> 00:25:58,960
Speaker 1: We certainly see it with gold to a large degree,

471
00:25:58,960 --> 00:26:01,560
Speaker 1: although there are a lot of factors. Is there a

472
00:26:01,640 --> 00:26:05,480
Speaker 1: sort of commensurate increase in value during times of uncertainty

473
00:26:05,560 --> 00:26:10,320
Speaker 1: for diamonds, For diamonds, yes, definitely. UM diamonds historically have

474
00:26:10,560 --> 00:26:14,560
Speaker 1: always maintained their value. UM diamonds have inherent value, and

475
00:26:15,359 --> 00:26:18,600
Speaker 1: over time they do appreciate. You know, I think many

476
00:26:19,040 --> 00:26:21,760
Speaker 1: consumers the reason that they like natural diamonds as they

477
00:26:21,800 --> 00:26:24,200
Speaker 1: can always upgrade, they can trade it in, there's a

478
00:26:24,240 --> 00:26:27,520
Speaker 1: secondhand market for them. With lab grown diamonds. Right now,

479
00:26:27,560 --> 00:26:30,680
Speaker 1: it's still something that's very new, so we're uncertain about

480
00:26:30,720 --> 00:26:33,960
Speaker 1: the long term value of it and of course, since

481
00:26:34,000 --> 00:26:36,760
Speaker 1: it's something we can continue to grow more and more

482
00:26:37,440 --> 00:26:40,200
Speaker 1: um with time, that could mean that the value will

483
00:26:40,200 --> 00:26:42,200
Speaker 1: go down a little bit. So on this show we

484
00:26:42,240 --> 00:26:44,680
Speaker 1: talk a lot about investing in stocks and bonds, and

485
00:26:44,760 --> 00:26:46,560
Speaker 1: one of the things we hear about from investors has

486
00:26:46,560 --> 00:26:51,359
Speaker 1: increased interests in e s g. Environmental social governance, and

487
00:26:51,440 --> 00:26:54,040
Speaker 1: I know in the diamond industry that's a big issue

488
00:26:54,040 --> 00:26:55,639
Speaker 1: as well. You hear I'm sure you're getting more and

489
00:26:55,720 --> 00:26:59,800
Speaker 1: more questions from consumers about that. What's what's kind of

490
00:26:59,840 --> 00:27:01,800
Speaker 1: this status of the other industries that related to that,

491
00:27:01,960 --> 00:27:03,760
Speaker 1: where the diamonds come from and how they're sourced and

492
00:27:03,800 --> 00:27:06,240
Speaker 1: all that. Yeah. Absolutely, I mean consumers are all about

493
00:27:06,280 --> 00:27:09,400
Speaker 1: transparency and they want to know all about their diamonds,

494
00:27:09,560 --> 00:27:12,040
Speaker 1: where they came from. It's interesting at g s I,

495
00:27:12,200 --> 00:27:15,119
Speaker 1: we were one of the first laboratories to offer a

496
00:27:15,280 --> 00:27:18,320
Speaker 1: Minds to Market report, which tells you all about your

497
00:27:18,359 --> 00:27:20,919
Speaker 1: diamonds journey from the mind all the way to the market.

498
00:27:21,280 --> 00:27:23,680
Speaker 1: And I think it's really important for people to understand

499
00:27:23,800 --> 00:27:27,280
Speaker 1: also the millions of jobs that the industry provides around

500
00:27:27,320 --> 00:27:30,240
Speaker 1: the world, the social benefits that we provide, and how

501
00:27:30,320 --> 00:27:34,119
Speaker 1: we sustain local economies around the world. We provide jobs

502
00:27:34,200 --> 00:27:36,920
Speaker 1: in some of the most remote regions in the world

503
00:27:37,040 --> 00:27:41,760
Speaker 1: in Africa, India and Northwest Canada, Western Australia, deep in Siberia,

504
00:27:41,880 --> 00:27:45,159
Speaker 1: and by providing these high quality and safe jobs and

505
00:27:45,200 --> 00:27:48,720
Speaker 1: also through the local sourcing of products and services, were

506
00:27:48,720 --> 00:27:54,720
Speaker 1: able to really provide significant, long lasting, positive um impacts

507
00:27:54,760 --> 00:27:57,879
Speaker 1: on these economies. And if we can bring in even Botswana.

508
00:27:57,920 --> 00:28:00,800
Speaker 1: Botswana is probably a great example of this because it's

509
00:28:00,920 --> 00:28:04,560
Speaker 1: one of the world's greatest development success stories. And before

510
00:28:04,640 --> 00:28:07,080
Speaker 1: diamonds were discovered there there were only four miles of

511
00:28:07,119 --> 00:28:10,560
Speaker 1: paved roads. Today there's over four thousand. Poverty has been

512
00:28:10,600 --> 00:28:14,040
Speaker 1: cut in half. Every child receives a free education. There's

513
00:28:14,080 --> 00:28:17,040
Speaker 1: now over three hundred schools. And this is really all

514
00:28:17,119 --> 00:28:20,040
Speaker 1: because of the economic stability our industry is able to

515
00:28:20,400 --> 00:28:24,320
Speaker 1: provide to help create basic infrastructure, healthcare, education and clean water.

516
00:28:24,960 --> 00:28:26,320
Speaker 1: W as a thanks so much for joining us. We

517
00:28:26,320 --> 00:28:28,439
Speaker 1: appreciate you coming in your de w as our president

518
00:28:28,520 --> 00:28:32,199
Speaker 1: co founder Gemological Science uh International based here in New York,

519
00:28:32,280 --> 00:28:34,760
Speaker 1: joining us here in our Bloomberg inactive broker's studio. I

520
00:28:34,840 --> 00:28:37,560
Speaker 1: didn't know there was such a thing as lab grown diamonds.

521
00:28:37,600 --> 00:28:40,760
Speaker 1: Idea yeah, so it's actually a growing, a growing industry

522
00:28:40,800 --> 00:28:43,560
Speaker 1: that basically they've come out with a way to actually

523
00:28:44,040 --> 00:28:48,680
Speaker 1: replicate the billions of years that it took to generate diamonds.

524
00:28:49,080 --> 00:28:50,680
Speaker 1: But then it sort of raises a question of their

525
00:28:50,680 --> 00:28:52,840
Speaker 1: store of value. But I of course start looking at

526
00:28:52,880 --> 00:28:54,680
Speaker 1: store of value, and you know, if you want to

527
00:28:54,720 --> 00:28:57,720
Speaker 1: raise questions about anything, if bitcoins considered a store of value,

528
00:28:57,880 --> 00:29:01,040
Speaker 1: you know, I mean, but you know, what what what

529
00:29:01,240 --> 00:29:04,400
Speaker 1: is value? Exactly right? Thanks for listening to the Bloomberg

530
00:29:04,440 --> 00:29:06,600
Speaker 1: P and L podcast. You can subscribe and listen to

531
00:29:06,680 --> 00:29:09,880
Speaker 1: interviews at Apple Podcasts or whatever podcast platform you prefer.

532
00:29:10,120 --> 00:29:12,760
Speaker 1: I'm Paul Sweeney. I'm on Twitter at pt Sweeney. I'm

533
00:29:12,840 --> 00:29:15,719
Speaker 1: Lisa abram Wits. I'm on Twitter at Lisa abram Woits one.

534
00:29:15,960 --> 00:29:18,560
Speaker 1: Before the podcast, you can always catch us worldwide. I'm

535
00:29:18,600 --> 00:29:19,400
Speaker 1: Bloomberg Radio