WEBVTT - 2008 Crisis Lesson: Be Greedy When Others Are Fearful 0:00:02.640 --> 0:00:05.360 Welcome to the Bloomberg Penl Podcast. I'm Paul Swinge. You, 0:00:05.360 --> 0:00:07.680 along with my co host Lisa Brahma wits each day 0:00:07.720 --> 0:00:10.240 we bring you the most noteworthy and useful interviews for 0:00:10.280 --> 0:00:12.520 you and your money. Whether at the grocery store or 0:00:12.560 --> 0:00:15.480 the trading floor. Find a Bloomberg Penl podcast on Apple 0:00:15.520 --> 0:00:17.959 Podcast or wherever you listen to podcasts, as well as 0:00:17.960 --> 0:00:24.320 at Bloomberg dot com. March nine will mark the tenth 0:00:24.320 --> 0:00:28.240 anniversary of the market bottom during the global financial crisis. 0:00:28.240 --> 0:00:30.440 On that day, the intra day low and the SMP 0:00:30.520 --> 0:00:34.080 five hundred touch six hundred and sixties six. Since then, 0:00:34.120 --> 0:00:37.360 the market is up over three So to give us 0:00:37.360 --> 0:00:38.960 a sense of kind of what has been driving the 0:00:38.960 --> 0:00:41.400 market and what to look forward to going forward, we 0:00:41.400 --> 0:00:44.400 welcome to Charlie bobrinsko A. Charlie's a vice chairman ahead 0:00:44.440 --> 0:00:46.839 of of the investment group at Ariel Investments with over 0:00:47.360 --> 0:00:51.320 close to fourteen billion dollars under management uh arials based 0:00:51.320 --> 0:00:53.400 in Chicago, but Charlie joins us here in our Bloomberg 0:00:53.440 --> 0:00:58.520 Interactive Broker's studio. Charlie, welcome to our studios. What looking back, 0:00:58.920 --> 0:01:02.360 what were some all the lessons that you guys at Ariel, 0:01:02.440 --> 0:01:05.080 you folks at Ariel, take from the financial crisis and 0:01:05.120 --> 0:01:07.399 then what's happened since over the last ten years. Yeah, 0:01:07.440 --> 0:01:10.720 some of its relearning old lessons. The biggest one is 0:01:10.760 --> 0:01:12.720 that you have to be greedy when others are fearful. 0:01:12.920 --> 0:01:15.520 And people were very fearful in two thousand and nine, 0:01:15.560 --> 0:01:17.520 and it was the best time to be a buyer, 0:01:17.840 --> 0:01:20.600 but boy didn't feel like it at the time. People 0:01:20.640 --> 0:01:23.280 felt great about stocks in two thousand and one, and 0:01:23.319 --> 0:01:25.600 it was a terrible time to invest in stocks. So 0:01:26.080 --> 0:01:28.679 by when others are selling, sell when others are buying, 0:01:28.760 --> 0:01:31.000 be greedy when those are fearful. Those are the lessons 0:01:31.040 --> 0:01:36.280 we relearned so and right now unfortunately possibly for investors, investors, 0:01:36.280 --> 0:01:39.560 for for those who are seeking those values, retail investors 0:01:39.560 --> 0:01:42.840 don't seem either particularly greedy or particularly fearful. They just 0:01:42.920 --> 0:01:45.360 kind of are following what's going on, and they're being 0:01:45.400 --> 0:01:48.640 almost dare I say it, prudent. I'm just wondering, from 0:01:48.680 --> 0:01:51.880 your perspective, is there alpha left? Is there a place 0:01:51.920 --> 0:01:55.400 for an active manager to really generate significant returns? So 0:01:55.440 --> 0:01:59.160 when we make presentations to investment committees at institutional investors, 0:01:59.200 --> 0:02:02.680 they're still pretty nervous. They keep asking questions about when 0:02:02.760 --> 0:02:04.760 is this going to end? Hasn't this rally going on 0:02:04.840 --> 0:02:07.880 too long? We're gonna have a recession here any day. 0:02:08.040 --> 0:02:11.240 There's been a shift to UM fixed income ld I 0:02:11.320 --> 0:02:14.840 investing at pension plans. We think the institutional investor is 0:02:14.840 --> 0:02:17.440 still pretty nervous. A lot of questions we get about 0:02:17.440 --> 0:02:20.760 our earnings recession coming the first two quarters, we don't 0:02:20.760 --> 0:02:23.360 see it. So I'm gonna just say that the market 0:02:23.400 --> 0:02:26.919 in general is still pretty nervous. So, Charlie, it's interesting 0:02:26.960 --> 0:02:29.000 because the markets up. The SMP is up over eleven 0:02:29.080 --> 0:02:31.359 percent this year, and one of the stats that that 0:02:31.440 --> 0:02:33.720 really caught my eye is just that this this round 0:02:33.760 --> 0:02:36.720 trip we've had since early December, that thirty seven percent 0:02:36.800 --> 0:02:39.600 move up roughly in SMP from the So when you 0:02:39.600 --> 0:02:43.080 think about that, one could argue that, gee, maybe today's 0:02:43.120 --> 0:02:44.679 now and now's the time to sell that kind of 0:02:44.720 --> 0:02:47.920 made eleven percent. Isn't that good enough? And what's your 0:02:48.000 --> 0:02:50.000 view for the remainder of this year? For example? Yeah, 0:02:50.040 --> 0:02:53.440 so are the flagship fund of arial is the aerial fund, 0:02:53.480 --> 0:02:56.239 which is actually up eighteen percent when the SMP was 0:02:56.320 --> 0:02:59.799 up eleven on Tuesday, and um, you know, I will 0:02:59.800 --> 0:03:03.400 say it was dirt cheap after the drop last quarter. 0:03:03.440 --> 0:03:05.120 At the beginning of the year we were at thirteen 0:03:05.160 --> 0:03:08.040 times forward earnings. We're not at dirt cheap anymore. We're 0:03:08.040 --> 0:03:11.120 probably close to fair value, but there are still pockets 0:03:11.160 --> 0:03:14.960 of cheapness and there's pockets of overvalued. We think there's 0:03:15.000 --> 0:03:20.120 still a safety bid of stable stocks are considered stable stocks, Utilities, 0:03:20.639 --> 0:03:25.080 high paying UM consumers, staples are still overpriced. What's not 0:03:25.720 --> 0:03:28.720 expensive are anything that's considered cyclical. You still have a 0:03:28.720 --> 0:03:31.080 lot of people thinking and recessions coming that global growth 0:03:31.120 --> 0:03:33.240 is going to close, is going to slow down. So 0:03:33.480 --> 0:03:36.960 we love the alternative asset managers KKR and Blackstone, which 0:03:36.960 --> 0:03:41.280 are considered high beta and cyclical, and they're very cheap 0:03:41.360 --> 0:03:43.800 right now, as are a lot of industrials. So I'm 0:03:43.840 --> 0:03:46.040 looking right now at SP five hundred, that's up more 0:03:46.080 --> 0:03:49.920 than eleven year to date including reinvested dividends. How much 0:03:49.920 --> 0:03:51.280 further does it have to go? What's gonna be the 0:03:51.280 --> 0:03:54.680 full year return? So we think neither we nor anybody 0:03:54.720 --> 0:03:57.560 else can have a good prediction on that. UM. We 0:03:57.640 --> 0:03:59.600 can at any given time give you a view on 0:03:59.680 --> 0:04:03.240 relati of value. But we don't think anybody's any good 0:04:03.240 --> 0:04:05.920 at at predicting the short term. We think of frankly, 0:04:05.960 --> 0:04:08.320 the secret to investing is focusing on the long term 0:04:08.320 --> 0:04:10.720 and not spending too much time worrying about the short term. However, 0:04:11.440 --> 0:04:14.640 at certain times, however, here is an exact number for 0:04:14.680 --> 0:04:19.800 the but it is actually true that that market multiples 0:04:19.880 --> 0:04:22.440 are a pretty good predictor of returns. And so when 0:04:22.480 --> 0:04:25.520 you had at the beginning of the year um our 0:04:25.600 --> 0:04:28.840 value stocks at around thirteen times, that was cheap and 0:04:29.320 --> 0:04:33.240 low p s do tend to produce high returns even 0:04:33.240 --> 0:04:35.000 in the short term. There's a great statistic that when 0:04:35.040 --> 0:04:40.520 the pe ratio drops by in the market, it's often 0:04:40.600 --> 0:04:42.960 a very good period of time to invest for even 0:04:43.000 --> 0:04:45.840 the next twelve months. Does Aerial invest all on I 0:04:45.920 --> 0:04:49.599 P O S uh Not usually UM, And the reason 0:04:49.760 --> 0:04:52.839 is because we want to UM investing companies that have 0:04:52.920 --> 0:04:57.159 a proven sustainable competitive advantage. UH. We're value investors, so 0:04:57.200 --> 0:04:58.800 we look at earnings. A lot of the companies are 0:04:58.800 --> 0:05:01.560 gonna becoming public this year have no earnings. People are 0:05:01.560 --> 0:05:05.039 talking about multiples of sales, So we would be very 0:05:05.120 --> 0:05:07.680 cautious on some of the valuations that we're seeing for 0:05:07.760 --> 0:05:10.960 companies that are coming. Charlie, why do you feel about concentration, 0:05:11.000 --> 0:05:13.279 because I've been hearing about more funds that are going 0:05:13.279 --> 0:05:17.080 in to say fifteen names, and that's it. Yeah, we're 0:05:17.160 --> 0:05:20.560 very concentrated. We believe in focus. Uh. We have in 0:05:20.600 --> 0:05:24.200 the Aerial Fund of forty stocks. Buffett talks about why 0:05:24.200 --> 0:05:26.520 it's so much better to invest in your top twenty 0:05:26.640 --> 0:05:30.480 ideas rather than putting money into your thirties best idea. 0:05:30.920 --> 0:05:34.160 We think it's if you're really diversified with a hundred stocks, 0:05:34.279 --> 0:05:37.520 very hard to beat the indexes after fees. So we 0:05:37.560 --> 0:05:41.239 believe in focus, you can know those names better. Uh. Frankly, 0:05:41.320 --> 0:05:43.960 there's stocks like KKR that are very cheap, and we'll 0:05:44.000 --> 0:05:46.359 put a lot of money into KR five percent of 0:05:46.360 --> 0:05:49.720 a position. When did you start that bet? In two 0:05:49.800 --> 0:05:53.720 thousand and thirteen when the US government downgraded Uh? Uh. 0:05:54.320 --> 0:05:56.839 When S ANDP downgraded the U S government from triple A, 0:05:57.320 --> 0:05:59.400 everybody thought the high yield market was going to close 0:05:59.400 --> 0:06:02.200 and kick Hare's stock went from eighteen to twelve, and 0:06:02.240 --> 0:06:04.599 it became a wonderful opportunity because of the two and 0:06:04.640 --> 0:06:08.400 twenty didn't go away. Um, but the stock got reduced 0:06:08.400 --> 0:06:13.000 in price by it's gone now from twelve to UH three. 0:06:13.800 --> 0:06:15.000 And then one of the reasons was it was a 0:06:15.040 --> 0:06:18.839 partnership that index funds can't buy and kk are converted 0:06:18.839 --> 0:06:21.560 into a sea corps and now everybody can buy them. 0:06:21.760 --> 0:06:23.960 Vanguard just bought eight percent of the company in the 0:06:24.040 --> 0:06:26.400 last quarter. Yeah, and I'm looking at the shares right now. 0:06:26.480 --> 0:06:32.960 KKR shares have risen more than sixty since March. Charlie Bobrinskoy, 0:06:33.040 --> 0:06:34.480 thank you so much for being with us a vice 0:06:34.560 --> 0:06:36.839 chair and head of the investment group and portfolio manager 0:06:37.040 --> 0:06:40.400 at Aerial Investments, which is in New York City, to 0:06:40.720 --> 0:06:43.560 celebrate the ten year anniversary of the financial crisis and 0:06:43.640 --> 0:06:47.880 rather celebrate what's after the financial crisis and the crisis itself. 0:07:03.320 --> 0:07:05.440 It wasn't so long ago that things were starting to 0:07:05.480 --> 0:07:07.960 look up a little bit for General Electric. There was 0:07:08.000 --> 0:07:10.840 a sense that there was going to be a restructuring, 0:07:10.960 --> 0:07:15.320 a path forward. What happened ge the shares having it's 0:07:15.480 --> 0:07:19.320 their biggest two day decline right now since November, in 0:07:19.360 --> 0:07:21.720 the red by more than four percent today. Karen you 0:07:21.840 --> 0:07:24.600 Blhart of Bloomberg Intelligence joining us here in our Interactive 0:07:24.600 --> 0:07:30.360 Broker Studios Karen covers industrials here. What's going on now? Uh, well, 0:07:30.400 --> 0:07:33.640 you know, we've had a lack of disclosure on so 0:07:33.840 --> 0:07:36.400 it has been anybody's guests. We've had no guidance for 0:07:36.480 --> 0:07:39.760 over nine months and we are a long awaiting the 0:07:39.760 --> 0:07:42.280 fourteenth where they would give us twenty nineteen. And yesterday 0:07:42.320 --> 0:07:45.040 Cult gave a little preview of what they're going to 0:07:45.080 --> 0:07:48.360 announce next week and said that negative, that cash flow, 0:07:48.400 --> 0:07:50.920 which was four point eight billion positive this year, was 0:07:50.960 --> 0:07:53.280 going to be in the negative column next year. And 0:07:53.320 --> 0:07:57.679 it was a total surprise. So what's driving this negative? 0:07:57.720 --> 0:08:00.320 Surprising casual? Which of the remaining businesses? I know, I 0:08:00.360 --> 0:08:02.320 know they've sold off a lot of businesses. They've really 0:08:02.360 --> 0:08:05.840 focused what's causing the problems now, good old power. But 0:08:05.920 --> 0:08:07.800 in addition to that, and this is one of the 0:08:07.800 --> 0:08:11.200 problems with the last year, they apparently got a billion 0:08:11.240 --> 0:08:14.000 plus in pre payments from their little renewable business, okay, 0:08:14.080 --> 0:08:17.200 which they didn't mention when cash flow was better than expected. Right, 0:08:17.440 --> 0:08:20.320 this year they have to start delivering that stuff. That business, 0:08:20.320 --> 0:08:22.400 that little tiny business is going to shift from a 0:08:22.440 --> 0:08:25.840 billion positive to probably you know, I don't know up 0:08:25.880 --> 0:08:28.320 to a billion negatives, So that's two billion of the shortfall. 0:08:28.360 --> 0:08:30.160 Why didn't they tell us there was a one time 0:08:30.240 --> 0:08:33.559 last year? But this, but this raises another question. Right, 0:08:33.800 --> 0:08:36.760 one sort of hallmark of general Electrics problems has been 0:08:37.200 --> 0:08:40.200 I don't know if accounting issues is sort of a 0:08:40.240 --> 0:08:44.439 strong way of putting it, but the inaccurate accounting statements 0:08:44.600 --> 0:08:47.440 or statements that have not fully disclosed the depth of 0:08:47.480 --> 0:08:50.960 the problems at the organization for a variety of reasons. 0:08:51.160 --> 0:08:53.760 Does this just sort of confirmed that nothing on that 0:08:53.840 --> 0:08:57.920 front has dramatically changed and that these surprises will keep coming. Well, 0:08:58.080 --> 0:09:00.480 that that is part of it. People are hanging their 0:09:00.480 --> 0:09:01.880 hat on you know, this is a this is a 0:09:01.960 --> 0:09:04.040 you know, an honest guy, a really good operator. He's 0:09:04.040 --> 0:09:07.360 gonna he's gonna, you know, give us, you know, the details, 0:09:07.480 --> 0:09:10.280 and uh, this was like dropping a bomb. And and 0:09:10.360 --> 0:09:13.280 but the second one is power. Power. You know it's 0:09:13.280 --> 0:09:15.280 gonna it's taking him longer to get his arms around it. 0:09:15.400 --> 0:09:18.440 I don't have any doubt that he will. But Power 0:09:18.480 --> 0:09:20.800 is going to be worse this year. And again some 0:09:20.840 --> 0:09:23.200 of that could have been disclosed. These are very long 0:09:23.320 --> 0:09:26.240 term contracts. They did very bad contracts over the last 0:09:26.240 --> 0:09:28.640 two years just to get orders on the books, and 0:09:28.679 --> 0:09:30.760 guess what now they've got to ship them and they're 0:09:30.800 --> 0:09:35.120 shipping very probably some some deals at losses and that's 0:09:35.120 --> 0:09:38.040 going to be a multi year workout, you know, kind 0:09:38.080 --> 0:09:39.880 of like an engineering construction company that gets a bad 0:09:39.880 --> 0:09:42.640 contract and takes years to work through the backlog. Right. Um, 0:09:42.679 --> 0:09:45.599 but then also, um, you know, the cost structure is 0:09:45.720 --> 0:09:48.520 not anywhere near in line with where revenues are today, 0:09:48.760 --> 0:09:50.760 and that's ongoing. He laid they laid off twenty four 0:09:50.840 --> 0:09:52.960 thousand people in that division a loan last year. They've 0:09:53.000 --> 0:09:55.400 cut a number of plants. It's not enough. So that's 0:09:55.400 --> 0:09:57.240 what he's telling us. They have to do more. Okay, 0:09:57.280 --> 0:09:59.440 so let's now they've they've done a lot in terms 0:09:59.480 --> 0:10:02.040 of the the M and A, the restructuring in the company. 0:10:02.080 --> 0:10:04.000 Do you think that they are done with that in 0:10:04.080 --> 0:10:06.440 terms of selling what I guess people would call non 0:10:06.440 --> 0:10:08.920 core assets. Are the assets that g has today is 0:10:08.960 --> 0:10:11.880 that it now they still have about fourteen billion in 0:10:12.040 --> 0:10:16.280 stock ownership of Baker Hughes that that business is already offline, 0:10:16.360 --> 0:10:18.640 it's it's being run independently, but they have a fourteen 0:10:18.679 --> 0:10:22.680 billion dollar ownership there. They have about another four billion 0:10:22.720 --> 0:10:24.559 that they can get out of the web tech business 0:10:24.559 --> 0:10:26.680 that they sold um, and then it's going to be 0:10:27.080 --> 0:10:29.280 smaller units I think from here. But even in the 0:10:29.320 --> 0:10:32.959 power division there's two pieces now that the non gas piece. 0:10:32.960 --> 0:10:35.360 There's stuff in there that they can sell um. But 0:10:35.440 --> 0:10:40.160 I think the big stuff is probably behind us. So alright, 0:10:40.240 --> 0:10:43.080 So of course, I'm sorry. I am very focused on 0:10:43.120 --> 0:10:44.920 the debt side of this, just because that is the 0:10:45.000 --> 0:10:47.720 nature of my d n A. That is I'm sorry, 0:10:47.800 --> 0:10:49.680 it is who I am. I'm looking right now. General 0:10:49.720 --> 0:10:54.400 Electric perpetual bonds UH five debt is the biggest loser 0:10:54.520 --> 0:10:57.960 among the investment grading universe today. Another decline in price 0:10:58.080 --> 0:11:01.560 that means higher implied borrowing call. How crucial is it 0:11:01.600 --> 0:11:04.280 the General Electric gets its act together and is able 0:11:04.360 --> 0:11:07.760 to give better disclosure and frankly, a better view into 0:11:07.840 --> 0:11:09.880 just how much more can sell in the valuations that 0:11:09.920 --> 0:11:13.520 will be able to achieve in order to avoid paying 0:11:13.760 --> 0:11:17.680 criminally high interest rates are prohibitively high interest rates and 0:11:17.720 --> 0:11:20.480 a potential downgrade. Well, I think they bought some time 0:11:20.520 --> 0:11:23.160 with that twenty billion dollar assets sale that they announced 0:11:23.240 --> 0:11:27.560 last week that will significantly help the debt burden. They're 0:11:27.600 --> 0:11:29.320 not going to get the money until the fourth quarter 0:11:29.320 --> 0:11:32.120 of next year. But uh, you know, there's a good 0:11:32.120 --> 0:11:34.839 shot that the credit agency agencies will say, look, we 0:11:34.920 --> 0:11:37.760 gotta get a lot of cash coming. And um, it's 0:11:37.920 --> 0:11:40.520 the deal with Danaher uh. And I think that really 0:11:40.600 --> 0:11:43.319 brought them time the sales at selling something for three 0:11:43.360 --> 0:11:45.600 billion or five billion or four billion, there was still 0:11:45.640 --> 0:11:48.160 a lot of worry. Um, and now this they got 0:11:48.200 --> 0:11:50.560 a chunk of change coming, which will I think alleviate 0:11:50.600 --> 0:11:53.440 some of that those fairs. The one risk is what 0:11:53.720 --> 0:11:58.160 if some of these these unknown liabilities are much bigger 0:11:58.160 --> 0:12:01.240 than we think. Right. There's a lot of lawsuits out there. Um, 0:12:01.320 --> 0:12:03.400 you know, there's a number, there's a long term healthcare 0:12:03.440 --> 0:12:05.920 insurance thing that do they really have their arms around that? 0:12:06.240 --> 0:12:09.600 So I think they're okay with this big asset sail 0:12:10.320 --> 0:12:13.960 if nothing big hits them, you know, unexpectedly. But there's 0:12:14.040 --> 0:12:16.320 room for that. There's room for the unexpected here. All right. 0:12:16.400 --> 0:12:18.719 Let's lastly, let's talk about the dividend. I'm looking on 0:12:18.720 --> 0:12:22.360 the Bloomberg terminal. Now there's a forty two um ascent 0:12:22.679 --> 0:12:26.080 dividend yielding about three point eight percent. Is that safe? No, 0:12:26.280 --> 0:12:31.480 they cut the dividend um to a penny because so 0:12:32.800 --> 0:12:35.920 so it's um they had and they're saving four billion 0:12:35.920 --> 0:12:38.400 dollars by doing that. Well, actually it's an eight billion 0:12:38.440 --> 0:12:43.240 annual cost that's now uh not like millions. So this 0:12:43.240 --> 0:12:46.560 this is not the GE we grew up with, building, growing, 0:12:46.640 --> 0:12:50.000 buying dividends for widows and orphans. That's that those days 0:12:50.000 --> 0:12:52.480 are gone, right. You know, he's said down the road 0:12:52.520 --> 0:12:54.200 he wants to be two and a half times leverage 0:12:54.200 --> 0:12:57.120 and and and a competitive dividend. But that's really quite 0:12:57.160 --> 0:12:59.560 a bit down the road. Count double hard. Thank you 0:12:59.600 --> 0:13:03.040 so much, uh, Karen Uberhart, senior industrial analysts been covering 0:13:03.040 --> 0:13:06.000 GE forever, not the age you She's our our best 0:13:06.000 --> 0:13:23.360 in Bloomberg Intelligence, so thanks so much. As usual, there 0:13:23.520 --> 0:13:26.080 is a lot of news in the healthcare space. First, 0:13:26.120 --> 0:13:29.240 we have the announcement that the FDA has approved Johnson 0:13:29.280 --> 0:13:33.000 and Johnson nasal spray that works to I guess alleviate 0:13:33.080 --> 0:13:35.680 symptoms of depression. We also have news that of the 0:13:35.760 --> 0:13:39.760 sudden resignation of the Food and Drug Administration's Commissioner, Scott 0:13:39.800 --> 0:13:42.200 gott Leaps. Help us break down all that's going on 0:13:42.240 --> 0:13:45.080 in healthcare, We bringing our friend, Max Nis and Max's biotech, 0:13:45.120 --> 0:13:49.000 pharma and healthcare columnist for Bloomberg Opinion. He joins us 0:13:49.000 --> 0:13:51.640 here in our Bloomberg eleven three year studios. Max, welcome 0:13:51.679 --> 0:13:55.080 once again. Uh this Johnson and Johnson News. The story 0:13:55.120 --> 0:13:57.800 seems like a big deal, is it? It definitely is. 0:13:57.880 --> 0:14:02.520 So it's the first kind of real novel depression medicine 0:14:02.600 --> 0:14:06.000 in more than a decade, and it's the first one, 0:14:06.240 --> 0:14:08.080 you know, in an even longer time that has kind 0:14:08.080 --> 0:14:11.400 of a genuinely different way of working on the brain. 0:14:11.760 --> 0:14:13.920 And then kind of the third differentiation factors that it's 0:14:13.920 --> 0:14:16.920 it's fast acting. What we have generally takes you know, 0:14:16.960 --> 0:14:19.000 weeks to kick in. You have to build kind of 0:14:19.040 --> 0:14:22.520 a concentration up over time. So this has the potential 0:14:22.560 --> 0:14:25.000 be used in a lot of interesting different ways for 0:14:25.160 --> 0:14:27.200 people that are kind of in you know, an acute 0:14:27.200 --> 0:14:31.600 moment of crisis or who just don't respond to existing therapies. 0:14:31.840 --> 0:14:34.480 And that that is a pretty big population. So you 0:14:34.520 --> 0:14:38.600 know what else is fast acting cocaine ventanyl? I mean 0:14:38.880 --> 0:14:41.680 is is this is ketamine? Is this potentially the next 0:14:41.720 --> 0:14:44.960 opioid crisis? So you know, it's it's a it's a 0:14:45.000 --> 0:14:48.360 relative of ketamine and a close one. And I think 0:14:48.440 --> 0:14:51.240 the potential for abuse is something that the FDA definitely 0:14:52.000 --> 0:14:55.200 considered as opposed to you know, whether it's the equivalent 0:14:55.240 --> 0:14:57.120 of just giving someone a party drug that they did 0:14:57.280 --> 0:15:01.560 run kind of you know, randomized you know, late stage trials, 0:15:01.640 --> 0:15:04.600 in control trials in really sick patients and it did 0:15:04.640 --> 0:15:07.360 have an impact. Well flipping on its head, right, have 0:15:07.480 --> 0:15:10.680 there been studies done of people who let's say, uh, 0:15:10.720 --> 0:15:13.840 it took katamine or took other party drugs, took ecstasy, 0:15:13.920 --> 0:15:16.360 and that that actually helped with depression? You know that 0:15:16.400 --> 0:15:18.600 there have been a lot of attempts to to study this, 0:15:18.680 --> 0:15:21.240 but not in kind of the scale and riggor of 0:15:21.240 --> 0:15:24.760 of this trial. And you know, beyond the fact that it, 0:15:25.000 --> 0:15:27.800 you know, has this kind of psychoactive effect that that 0:15:27.880 --> 0:15:30.920 people have chased, uh, there does seem to be some 0:15:31.040 --> 0:15:34.440 kind of you know, scientific evidence that there is an 0:15:34.480 --> 0:15:36.920 effect on the brain that you know, there's there's like 0:15:36.960 --> 0:15:41.080 a medical thesis that they're chasing here for why it 0:15:41.160 --> 0:15:43.920 might help people with depression. It's not let's give people 0:15:44.080 --> 0:15:46.000 a happy drug and let's see if they get happy. 0:15:46.120 --> 0:15:49.160 Known some mats, I know, the antidepressant market in general 0:15:49.280 --> 0:15:51.760 is a monster market. Is there a sense of how 0:15:51.800 --> 0:15:54.880 big this sub part of it is, so that that's 0:15:54.920 --> 0:15:59.040 the big question. You know, treatment resistant population is potentially 0:15:59.040 --> 0:16:01.400 millions of people. The question is how many of them 0:16:01.440 --> 0:16:04.520 are are going to end up getting getting Johnson and 0:16:04.600 --> 0:16:07.640 Johnson drugs. And that's that's a trickier question. This isn't 0:16:07.720 --> 0:16:09.640 you know, you just get a pack of pills and 0:16:09.680 --> 0:16:12.560 take them. You have to go to a licensed office, 0:16:13.200 --> 0:16:16.280 take it, and then sit there for two hours while 0:16:16.280 --> 0:16:19.680 you're monitors for symptoms of association and sedition. Then you're 0:16:19.680 --> 0:16:22.240 not supposed to operate heavy machinery for the rest of it. 0:16:22.320 --> 0:16:24.200 It's gotta find someone to give you a ride, so 0:16:24.240 --> 0:16:26.320 that that's a really hard thing for for people that 0:16:26.360 --> 0:16:30.320 are working to do. And then you know, this isn't 0:16:30.320 --> 0:16:33.640 something that your average psychiatrists is equipped to handle, so 0:16:33.680 --> 0:16:36.520 that that is likely to kind of keep it from 0:16:36.800 --> 0:16:39.880 reaching its full addressable market at least anytime soon. And 0:16:40.280 --> 0:16:42.000 I just want to be very clear. I mean, I've 0:16:42.000 --> 0:16:44.240 sort of been talking about this with a light tone, 0:16:44.440 --> 0:16:48.680 but it's really not frankly underscores how much the epidemic 0:16:48.720 --> 0:16:53.120 of suicides in this country has absolutely been exploding, especially 0:16:53.160 --> 0:16:55.760 among the younger populations. I do want to shift gears 0:16:55.800 --> 0:16:58.960 a little bit to the Food and Drug Administration UH 0:16:59.280 --> 0:17:02.760 or just basically the chief of the US Food and 0:17:02.840 --> 0:17:06.680 Drug Administration, UH, Scott Gottlieb resigned suddenly. It seems like 0:17:06.720 --> 0:17:09.639 there was nothing on toward it and why he resigned. 0:17:09.680 --> 0:17:12.680 There was no kind of push, It was a personal issue. 0:17:13.520 --> 0:17:15.760 How big of a loss is this and how much 0:17:15.800 --> 0:17:19.680 does it affect the industries? Yeah, I think it's pretty significant. Um, 0:17:20.000 --> 0:17:23.720 everyone likes Scott. He he you know that there's even you, 0:17:24.680 --> 0:17:27.320 even even me, Um, you know, obviously there's some such 0:17:27.520 --> 0:17:30.960 people that really like, you know, selling tobacco and vape 0:17:30.960 --> 0:17:35.000 pens less fans because he took kind of an aggressive 0:17:35.040 --> 0:17:37.600 regulatory stance on them. But he was seen as someone 0:17:37.720 --> 0:17:41.880 that that understood the industry, worked really hard and pushed 0:17:42.240 --> 0:17:44.439 on a lot of significant public health issues in a 0:17:44.440 --> 0:17:48.320 way that you hadn't really seen from previous commissioners. It 0:17:48.359 --> 0:17:50.000 can be a quiet job, and you know, it's a 0:17:50.680 --> 0:17:54.560 technical administrative post, but he turned into something that was 0:17:54.600 --> 0:17:58.200 a lot more communicative and and active on the policy front. 0:17:58.640 --> 0:18:00.840 So I think he he will bend, and not just 0:18:00.920 --> 0:18:03.159 by by drug makers who saw him as someone that 0:18:03.240 --> 0:18:06.440 was really pushing to modernize the agency and and make 0:18:06.440 --> 0:18:08.600 it easier for innovative therapies to make it to market, 0:18:08.840 --> 0:18:11.280 but but for further country as a whole. You know, Uh, 0:18:11.600 --> 0:18:13.840 it's really the exception when you have kind of a 0:18:13.920 --> 0:18:18.200 relatively drama free and competent um leader of an agency 0:18:18.920 --> 0:18:21.320 in this day and age of relative to the past. 0:18:21.600 --> 0:18:25.040 So is there any sense of who's going to replace Gottlieb? 0:18:25.160 --> 0:18:28.520 And and and just in general, the big farm and 0:18:28.600 --> 0:18:30.520 all their lobbyists, did they have an influence on who 0:18:30.600 --> 0:18:34.719 gets selected? Um? You know, I imagine we're we're not 0:18:34.760 --> 0:18:37.280 going to get someone that they really hate, just because 0:18:37.560 --> 0:18:40.040 that is a big lobby and and it's one that 0:18:40.080 --> 0:18:42.640 has a lot of influence in Congress. But but there 0:18:42.720 --> 0:18:45.000 is a chance that we could get a left field candidate. 0:18:45.080 --> 0:18:47.119 And I'm just thinking of you know, the people that 0:18:47.160 --> 0:18:50.720 were rumored to be considered alongside Scott Gotlieb. One of 0:18:50.760 --> 0:18:53.800 them was kind of a Peter theel affiliated investor who 0:18:53.880 --> 0:18:58.560 um has some some pretty um out of the mainstream 0:18:58.800 --> 0:19:01.879 I'll save views on on regulation of medicines, which is 0:19:01.920 --> 0:19:05.479 to say that they shouldn't be regulated very much. Uh 0:19:05.560 --> 0:19:07.560 that that's um a position that you might think that 0:19:07.640 --> 0:19:11.560 drug makers are in favor of, but actually would potentially 0:19:11.560 --> 0:19:15.000 be pretty chaotic, so that that's a potential negative. But 0:19:15.119 --> 0:19:18.879 we could just get you know, a pretty mainstream bureaucrat 0:19:18.920 --> 0:19:20.879 as well. It won't be as exciting as Gottlie, but 0:19:20.960 --> 0:19:22.879 probably won't cause any harm, So we'll see. You know, 0:19:22.920 --> 0:19:25.359 you started off talking about this with respect that tobacco 0:19:25.520 --> 0:19:29.040 companies and invaping companies were not that excited about him 0:19:29.080 --> 0:19:31.480 being there and are more excited about him leaving. We 0:19:31.520 --> 0:19:33.840 did see a pop in their shares. Do you expect 0:19:33.920 --> 0:19:35.960 that to last or do you think that any successor 0:19:36.359 --> 0:19:39.600 would would adopt the same kinds of policies. Uh, you know, 0:19:39.960 --> 0:19:42.640 I I wouldn't be too surprised if they at least 0:19:42.680 --> 0:19:45.840 continue got Leave's efforts. Maybe they won't be as kind 0:19:45.880 --> 0:19:50.040 of publicly energetic about them. Um, but you know, I 0:19:50.280 --> 0:19:55.000 don't think there's much of a push that these these 0:19:55.040 --> 0:19:57.880 companies can make to to kind of combat the general 0:19:58.000 --> 0:20:01.000 rise of of kind of further regulations industries. On the 0:20:01.560 --> 0:20:05.400 public health impact is is pretty obvious. You don't want 0:20:05.400 --> 0:20:09.119 people getting addicted to tobacco or or Nicktine products, one 0:20:09.160 --> 0:20:11.679 wear another and uh, it's the role of the FDA 0:20:11.720 --> 0:20:13.359 and one wear another to to take a role in that. 0:20:13.440 --> 0:20:16.359 So how is the FDA today? Is it generally perceived 0:20:16.520 --> 0:20:20.560 as a good bipartisan view or is it really And 0:20:20.600 --> 0:20:23.160 then then in the lap of big pharma or on consumers, 0:20:23.200 --> 0:20:25.800 where is you have to kind of proceed right now? Uh? 0:20:25.880 --> 0:20:28.680 You know, I think the god Leave FDA at least 0:20:28.760 --> 0:20:31.760 was was kind of respected to a certain extent by 0:20:31.880 --> 0:20:34.000 by people on both sides of the aisle, which is 0:20:34.280 --> 0:20:37.360 an achievement in itself. I think you'll find people that 0:20:37.359 --> 0:20:40.560 that do feel that it tends to lean too much 0:20:40.560 --> 0:20:42.600 in the way of of pharma. And and that was 0:20:42.640 --> 0:20:45.159 a criticism of god lea who who had some industry experience, 0:20:45.280 --> 0:20:47.320 But at the same time he did things that were 0:20:47.440 --> 0:20:49.680 kind of to the detriment of the industry, calling people 0:20:49.680 --> 0:20:54.600 out for kind of abuses of the generic approval system UM, 0:20:54.640 --> 0:20:58.080 for pricing things like that and UM. But on the 0:20:58.119 --> 0:20:59.560 other hand, you have people that want to push for 0:20:59.600 --> 0:21:02.000