1 00:00:05,800 --> 00:00:08,720 Speaker 1: Welcome to the Bloomberg p m L Podcast. I'm pim Fox. 2 00:00:08,760 --> 00:00:11,520 Speaker 1: Along with my co host Lisa Bramowitz. Each day we 3 00:00:11,640 --> 00:00:15,120 Speaker 1: bring you the most important, noteworthy, and useful interviews for 4 00:00:15,200 --> 00:00:17,840 Speaker 1: you and your money, whether you're at the grocery store 5 00:00:17,960 --> 00:00:20,720 Speaker 1: or the trading floor. Find the Bloomberg p m L 6 00:00:20,840 --> 00:00:32,159 Speaker 1: Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot com. Well, 7 00:00:32,159 --> 00:00:35,440 Speaker 1: the world is turning on its head. That according to 8 00:00:35,520 --> 00:00:39,880 Speaker 1: Gathleen Kathleen Gaffney, co director of Diversified Fixed Income and 9 00:00:40,000 --> 00:00:42,639 Speaker 1: Eating Vans, who joins us here in our eleven three 10 00:00:42,680 --> 00:00:46,199 Speaker 1: Oh studios. Kathleen, thank you so much for joining us. 11 00:00:46,440 --> 00:00:48,839 Speaker 1: So I want to start with this idea that the 12 00:00:49,040 --> 00:00:54,400 Speaker 1: developing markets are emerging much more quickly and faster than 13 00:00:54,480 --> 00:00:57,880 Speaker 1: growing faster than than developed world, which are kind of sinking. 14 00:00:57,920 --> 00:01:01,120 Speaker 1: Does this mean that you like emerging markets highled debt 15 00:01:01,360 --> 00:01:05,480 Speaker 1: over US junk bonds. I do selectively. We're finding good 16 00:01:05,520 --> 00:01:12,080 Speaker 1: opportunities to invest in emerging market companies, and a handful 17 00:01:12,160 --> 00:01:16,679 Speaker 1: of them are below investment grade, but rising stars likely 18 00:01:17,160 --> 00:01:20,320 Speaker 1: to make their way onto the global stage and become 19 00:01:20,360 --> 00:01:23,800 Speaker 1: investment grade down the road. Can you just give us 20 00:01:23,840 --> 00:01:26,440 Speaker 1: some examples? So, that we understand exactly the kinds of 21 00:01:26,480 --> 00:01:31,000 Speaker 1: companies you're talking about. Well, our focus has been primarily 22 00:01:31,200 --> 00:01:34,800 Speaker 1: in Latin America. America Mobile, I know, is one of 23 00:01:34,840 --> 00:01:38,600 Speaker 1: the holdings in your fund. It is so Mexican telecom, 24 00:01:38,720 --> 00:01:43,000 Speaker 1: but high, higher quality. I'm talking about some of the 25 00:01:43,600 --> 00:01:49,400 Speaker 1: Brazilian companies and Susano is a good example. UH, paper 26 00:01:49,440 --> 00:01:55,800 Speaker 1: and pulp company. UH, low cost producer number one. Uh. 27 00:01:56,280 --> 00:02:01,680 Speaker 1: They came to market earlier this year very attractive spreads. 28 00:02:01,680 --> 00:02:04,600 Speaker 1: That was right after the new administration and there was 29 00:02:05,280 --> 00:02:08,679 Speaker 1: a lot of fear about protectionism. We saw a fair 30 00:02:08,720 --> 00:02:12,160 Speaker 1: amount of new issuance that had to come with a premium. 31 00:02:12,200 --> 00:02:16,520 Speaker 1: And what's interesting in talking to management, what we saw 32 00:02:16,720 --> 00:02:22,519 Speaker 1: was discipline and a drive to maintain that low cost status, 33 00:02:22,520 --> 00:02:26,080 Speaker 1: but without levering up. So I'm wondering, you know a 34 00:02:26,080 --> 00:02:29,720 Speaker 1: lot of people have been pouring money into emerging markets 35 00:02:29,840 --> 00:02:32,440 Speaker 1: debt as well as currencies, and this could be what's 36 00:02:32,440 --> 00:02:34,320 Speaker 1: been happening with the dollar earlier this year, with the 37 00:02:34,360 --> 00:02:39,320 Speaker 1: dollar weakening and emerging markets currencies really strengthening. Recently, it's 38 00:02:39,360 --> 00:02:42,799 Speaker 1: been the reverse. You've seen some dollar strength and UH 39 00:02:43,320 --> 00:02:45,440 Speaker 1: do you think that that will continue? That the dollar 40 00:02:45,480 --> 00:02:49,040 Speaker 1: will continue to strengthen as benchmark yields rise. And what's 41 00:02:49,040 --> 00:02:52,480 Speaker 1: the potential consequence for emerging markets in the near term. 42 00:02:52,560 --> 00:02:55,200 Speaker 1: I think you are going to see some dollar strength. 43 00:02:55,600 --> 00:02:59,880 Speaker 1: The global economy is doing well, but the focus is 44 00:03:00,000 --> 00:03:03,360 Speaker 1: on the US and the unwind of the balance sheet. 45 00:03:03,440 --> 00:03:05,760 Speaker 1: So we've seen yields start to move up in the 46 00:03:05,840 --> 00:03:08,800 Speaker 1: US is leading that is going to draw money into 47 00:03:08,840 --> 00:03:12,639 Speaker 1: the US and push the dollar higher in the short term. 48 00:03:12,720 --> 00:03:16,040 Speaker 1: That won't be so much of a problem for emerging 49 00:03:16,080 --> 00:03:21,760 Speaker 1: markets if they have a fair amount of reserves. They 50 00:03:21,760 --> 00:03:23,800 Speaker 1: got into a lot of trouble back in two thousand 51 00:03:23,880 --> 00:03:28,160 Speaker 1: thirteen when they didn't have the dollar reserves. As the 52 00:03:28,200 --> 00:03:31,480 Speaker 1: dollar strengthened, that's changed a lot. Yeah, there have been 53 00:03:31,680 --> 00:03:35,040 Speaker 1: a pretty big build up in reserves. I have to wonder, though, 54 00:03:35,560 --> 00:03:38,720 Speaker 1: you're talking about how yields should continue to rise or 55 00:03:38,760 --> 00:03:41,880 Speaker 1: are have been rising in the US and UH. Earlier 56 00:03:41,920 --> 00:03:45,600 Speaker 1: this week, Jeffrey Gunlock of Double Line said that the 57 00:03:45,920 --> 00:03:49,680 Speaker 1: treasury market was facing its moment of truth as yields 58 00:03:49,680 --> 00:03:53,320 Speaker 1: on the tenure treasury surpassed two point four percent. Do 59 00:03:53,440 --> 00:03:56,840 Speaker 1: you agree? And how high could this yield go? I 60 00:03:56,880 --> 00:04:02,160 Speaker 1: do agree? UH? And how high it os UH probably 61 00:04:02,200 --> 00:04:06,720 Speaker 1: not too high in the near term, but the important 62 00:04:06,760 --> 00:04:11,320 Speaker 1: part for the markets is that it started and we're 63 00:04:11,360 --> 00:04:15,680 Speaker 1: seeing the impact of that today. UH. We're seeing it 64 00:04:15,760 --> 00:04:20,240 Speaker 1: with some equities on the retail side. Mattel cut their dividend. UH. 65 00:04:20,279 --> 00:04:24,280 Speaker 1: One of the trends during the period after the global 66 00:04:24,279 --> 00:04:28,279 Speaker 1: financial crisis is companies haven't invested. What they've done is 67 00:04:28,320 --> 00:04:31,840 Speaker 1: they is they have borrowed and they've been buying back 68 00:04:31,880 --> 00:04:36,440 Speaker 1: their stocks. A dividend cut and we're seeing lots of 69 00:04:36,480 --> 00:04:40,800 Speaker 1: interesting things. Is earning cycle UH could indicate that they're 70 00:04:40,800 --> 00:04:44,640 Speaker 1: concerned about where their cash is and the amount of 71 00:04:44,640 --> 00:04:48,280 Speaker 1: debt relative UH two revenues or their interest expense. I 72 00:04:48,279 --> 00:04:51,159 Speaker 1: should say, Um, that's a warning sign. That's a signal. 73 00:04:51,720 --> 00:04:53,240 Speaker 1: Do you think that there's a warning sign when it 74 00:04:53,279 --> 00:04:56,280 Speaker 1: comes to high yield debt in general? Well, credit spreads 75 00:04:56,279 --> 00:05:00,760 Speaker 1: are very tight. Um. You could argue that on a 76 00:05:00,839 --> 00:05:04,920 Speaker 1: relative basis they could get tighter, but it's that absolute 77 00:05:05,000 --> 00:05:08,920 Speaker 1: level of risk. At four percent, you're not getting compensated 78 00:05:08,960 --> 00:05:11,640 Speaker 1: for a highly levered company. So if you are invested 79 00:05:11,720 --> 00:05:15,520 Speaker 1: in that particular kind of company and situation, what would 80 00:05:15,520 --> 00:05:18,400 Speaker 1: you suggest to people, I really think you have to 81 00:05:18,480 --> 00:05:25,120 Speaker 1: define credit risk high yield more broadly. That's why we 82 00:05:25,200 --> 00:05:28,400 Speaker 1: found value in emerging markets because you're able to pick 83 00:05:28,520 --> 00:05:31,560 Speaker 1: up some additional yield to compensate you for the credit 84 00:05:31,640 --> 00:05:35,719 Speaker 1: risk UH. You can also look at the bank loan market, 85 00:05:36,080 --> 00:05:39,560 Speaker 1: convertible market. There are other ways to get that credit 86 00:05:39,640 --> 00:05:43,720 Speaker 1: exposure other than just US high yield and European high yield. 87 00:05:43,720 --> 00:05:46,440 Speaker 1: The yields are even worse than in the US, so 88 00:05:46,720 --> 00:05:50,159 Speaker 1: it's a struggle. Our Our high yield exposure UH is 89 00:05:50,160 --> 00:05:53,360 Speaker 1: fairly modest right now, Kathleen, do you think that there 90 00:05:53,400 --> 00:05:57,960 Speaker 1: are certain industries within the high US hi yield universe 91 00:05:58,560 --> 00:06:02,279 Speaker 1: that are on the precipice of a pretty big fall. 92 00:06:03,560 --> 00:06:06,640 Speaker 1: We're seeing pressure today, that's for sure, But we which 93 00:06:06,720 --> 00:06:08,479 Speaker 1: which do you think is real? Which do you think 94 00:06:08,520 --> 00:06:11,200 Speaker 1: has legs. I do think that the pressure on the 95 00:06:11,240 --> 00:06:14,039 Speaker 1: retail sector is real and it's going to continue because 96 00:06:14,040 --> 00:06:15,560 Speaker 1: there's already been a lot of pain there. There has 97 00:06:15,600 --> 00:06:18,719 Speaker 1: been a lot of pain. What's interesting is we're seeing 98 00:06:18,720 --> 00:06:22,680 Speaker 1: how companies are reacting. So at the higher quality end 99 00:06:23,040 --> 00:06:26,000 Speaker 1: you see CVS and Etna. But all of it is 100 00:06:26,040 --> 00:06:29,640 Speaker 1: a result of the world is changing. We've got a 101 00:06:29,640 --> 00:06:33,680 Speaker 1: new economy tech is really driving it and it's uh, 102 00:06:33,720 --> 00:06:38,160 Speaker 1: it's going to make for some necessary decisions across industries. 103 00:06:38,760 --> 00:06:40,560 Speaker 1: Thank you for coming in and spending time with us. 104 00:06:40,640 --> 00:06:44,080 Speaker 1: Kathleen Gaffney is the co director of Diversified Fixed Income 105 00:06:44,400 --> 00:06:47,760 Speaker 1: for Eaton Vents and helps to manage over three hundred 106 00:06:47,839 --> 00:06:50,600 Speaker 1: billion dollars of assets. Based in Boston, of course, home 107 00:06:50,640 --> 00:06:54,960 Speaker 1: to Bloomberg one oh six one Boston, Newburyport and Metro 108 00:06:55,040 --> 00:07:09,200 Speaker 1: West and the South Shore. Well, it is a huge 109 00:07:09,360 --> 00:07:13,720 Speaker 1: day in tech shares today. The Nasdaq one hundred indexes 110 00:07:14,280 --> 00:07:17,640 Speaker 1: up two and a half percent, but Alphabet and Amazon 111 00:07:17,800 --> 00:07:22,120 Speaker 1: are experiencing much bigger share price pops after beating analyst 112 00:07:22,280 --> 00:07:25,280 Speaker 1: estimates when they were ported earnings after the bell yesterday. 113 00:07:25,360 --> 00:07:29,080 Speaker 1: Shara o Vda, Bloomberg Gadfly columnist joins us here now 114 00:07:29,120 --> 00:07:32,520 Speaker 1: and Shia. We were joking this morning that the expectation 115 00:07:32,560 --> 00:07:36,320 Speaker 1: on the street was for three cents per share for Amazon, 116 00:07:36,400 --> 00:07:40,240 Speaker 1: and they beat that. Yeah, I mean, how good is this? Yeah? 117 00:07:40,520 --> 00:07:43,880 Speaker 1: Profit doesn't matter at Amazon. Basically, it defies all the 118 00:07:44,280 --> 00:07:49,440 Speaker 1: logic of typical investing. Um, my favorite statistic is looking 119 00:07:49,520 --> 00:07:53,040 Speaker 1: at Amazon's operating profit, which they seem to try to 120 00:07:53,120 --> 00:07:57,200 Speaker 1: make as as low as possible. So the profit margin 121 00:07:57,960 --> 00:08:02,480 Speaker 1: in this quarter was zero row point seven nine, which 122 00:08:02,520 --> 00:08:06,600 Speaker 1: is as almost as close to zero as possible. Um, 123 00:08:06,640 --> 00:08:10,280 Speaker 1: what's the cash flow? Like, the cash flow is better, 124 00:08:10,960 --> 00:08:14,840 Speaker 1: but it's actually um that's actually shrinking too. I mean 125 00:08:15,200 --> 00:08:20,640 Speaker 1: Amazon has been in this period of intense spending. There's 126 00:08:20,640 --> 00:08:22,600 Speaker 1: still like cash loves more than seven and a half 127 00:08:22,680 --> 00:08:27,920 Speaker 1: billion last year, that is correct, although those yes, okay, 128 00:08:28,160 --> 00:08:31,280 Speaker 1: And I'm assuming that many people see brown boxes show 129 00:08:31,360 --> 00:08:33,720 Speaker 1: up at their homes every day. Many people see brown 130 00:08:33,760 --> 00:08:36,080 Speaker 1: boxes show I mean they look and they might actually 131 00:08:36,080 --> 00:08:39,840 Speaker 1: include medication, prescription medication in the future, plus your order 132 00:08:39,880 --> 00:08:43,320 Speaker 1: from Whole Food. It is possible that Amazon, I mean 133 00:08:43,360 --> 00:08:48,000 Speaker 1: Amazon already delivers groceries um through Amazon Fresh, but it's 134 00:08:48,040 --> 00:08:51,200 Speaker 1: likely they're getting more seriously into that business now that 135 00:08:51,240 --> 00:08:55,200 Speaker 1: they bought Okay, So to just step back for a second. 136 00:08:55,360 --> 00:08:57,360 Speaker 1: It's all about a story, right, I mean, when you've 137 00:08:57,400 --> 00:09:01,360 Speaker 1: invest in a company, particularly stock, it's about the story 138 00:09:01,440 --> 00:09:04,400 Speaker 1: that you can tell investors to get them excited about 139 00:09:04,440 --> 00:09:06,920 Speaker 1: the future. And that may be why the stock is 140 00:09:07,000 --> 00:09:11,040 Speaker 1: up twelve percent today. Amazon is, i would argue, the 141 00:09:11,080 --> 00:09:14,839 Speaker 1: most ambitious company, certainly in the technology industry right now. 142 00:09:14,840 --> 00:09:16,920 Speaker 1: You can make an argument that they're the most ambitious 143 00:09:16,960 --> 00:09:20,040 Speaker 1: company in the world right now. And the fact is 144 00:09:20,440 --> 00:09:26,960 Speaker 1: they are dominating two huge categories of spending, both retail 145 00:09:27,360 --> 00:09:31,440 Speaker 1: electronic commerce, where they're basically all the growth in in 146 00:09:31,600 --> 00:09:35,240 Speaker 1: retail spending right now, and also cloud computing, where they've 147 00:09:35,280 --> 00:09:41,800 Speaker 1: turned this Amazon web business company from zero to eighteen 148 00:09:41,840 --> 00:09:45,040 Speaker 1: billion and annual revenue and it's really a disruptive force. 149 00:09:45,200 --> 00:09:47,360 Speaker 1: And and groceries, you know, it's eight hundred billion a 150 00:09:47,440 --> 00:09:50,040 Speaker 1: year and spending in the US alone. Well, let's talk 151 00:09:50,080 --> 00:09:54,120 Speaker 1: about groceries, because they purchased whole foods, and whole foods 152 00:09:54,559 --> 00:09:57,400 Speaker 1: sort of is in the industry that typically has low margins, 153 00:09:57,400 --> 00:09:59,959 Speaker 1: which is grocery stores, and yet it has higher margin. 154 00:10:00,000 --> 00:10:04,120 Speaker 1: And then most of Amazon's businesses, including their core business, 155 00:10:04,200 --> 00:10:08,440 Speaker 1: and meanwhile their margins went down for whole foods as 156 00:10:08,960 --> 00:10:12,480 Speaker 1: Amazon cut prices. At what point does this matter that 157 00:10:12,520 --> 00:10:15,160 Speaker 1: they've gained market share by cutting prices to the point 158 00:10:15,240 --> 00:10:18,400 Speaker 1: where their margins are razor thin. Is that enough of 159 00:10:18,400 --> 00:10:21,160 Speaker 1: a strategy to get them, uh to fit their capital 160 00:10:21,200 --> 00:10:23,960 Speaker 1: structure later on? Yeah, I mean, I think two Pim's point, 161 00:10:24,160 --> 00:10:27,080 Speaker 1: it's not really about where the margins are today. It's 162 00:10:27,160 --> 00:10:32,320 Speaker 1: whether Amazon can leverage its acquisition of Whole Foods to 163 00:10:32,520 --> 00:10:36,200 Speaker 1: grab a bigger slice of one of the largest spending 164 00:10:36,240 --> 00:10:40,800 Speaker 1: categories in the world, which is food shopping. And look, 165 00:10:40,800 --> 00:10:45,520 Speaker 1: if Amazon can become a major player in um in groceries, 166 00:10:46,200 --> 00:10:50,120 Speaker 1: that again, it opens another multi billion dollar annual revenue 167 00:10:50,160 --> 00:10:52,960 Speaker 1: opportunity for this company. It's a big question whether they 168 00:10:53,000 --> 00:10:55,840 Speaker 1: can succeed. They haven't been very successful in groceries for 169 00:10:55,920 --> 00:11:00,000 Speaker 1: ten years, but they now have kind of this pretty small, 170 00:11:00,000 --> 00:11:02,959 Speaker 1: aren't asset to help them get there. I just keep 171 00:11:03,040 --> 00:11:07,040 Speaker 1: thinking of one word, borders. Remember borders books. Amazon has 172 00:11:07,080 --> 00:11:10,880 Speaker 1: a way of competing that really has changed the landscape 173 00:11:10,920 --> 00:11:15,120 Speaker 1: for a variety of industries. That's not news. I think 174 00:11:15,160 --> 00:11:17,880 Speaker 1: the big question now that people have is should they 175 00:11:17,960 --> 00:11:21,000 Speaker 1: add to their holdings? In other words, you described it. 176 00:11:21,960 --> 00:11:25,400 Speaker 1: The numbers don't really add up in the way that 177 00:11:25,480 --> 00:11:29,960 Speaker 1: many investors are taught. Yet the stock keeps moving higher. 178 00:11:30,400 --> 00:11:33,040 Speaker 1: So is it is it a trap? Or is this 179 00:11:33,720 --> 00:11:36,880 Speaker 1: as long as Jeff Bezos is in charge. I mean, 180 00:11:36,880 --> 00:11:40,400 Speaker 1: they're buying aircraft, they're they're launching rockets. I mean, this 181 00:11:40,480 --> 00:11:42,120 Speaker 1: is an amazing As you said, this could be the 182 00:11:42,120 --> 00:11:44,880 Speaker 1: most ambitious company around. Yeah. I mean, look, this company 183 00:11:44,920 --> 00:11:48,400 Speaker 1: has a track record of investing in things that seem 184 00:11:48,520 --> 00:11:53,000 Speaker 1: insane for a long time and then making them into successes. 185 00:11:53,040 --> 00:11:57,160 Speaker 1: So that's why you're seeing the stock price shoot up, 186 00:11:57,440 --> 00:11:59,599 Speaker 1: um even though they turned in you know, kind of 187 00:12:00,000 --> 00:12:02,480 Speaker 1: any profits. I want to bring in David Garritty he 188 00:12:02,600 --> 00:12:05,040 Speaker 1: chief executive officer of g v A Research, which is 189 00:12:05,080 --> 00:12:07,680 Speaker 1: based in Brooklyn, and David, I want to get your 190 00:12:07,760 --> 00:12:11,559 Speaker 1: take about whether you would recommend that people buy at 191 00:12:11,600 --> 00:12:16,080 Speaker 1: this point given the fact that valuations are already pretty high. Uh, 192 00:12:16,120 --> 00:12:19,160 Speaker 1: and it's sort of unclear where they go from here. 193 00:12:19,800 --> 00:12:21,920 Speaker 1: I think the thing coming off of the results yesterday 194 00:12:21,920 --> 00:12:25,200 Speaker 1: for Amazon probably were most impressed investors on the margin 195 00:12:25,840 --> 00:12:28,440 Speaker 1: is the fact that the integration of Whole Foods was 196 00:12:28,480 --> 00:12:31,920 Speaker 1: actually profitable in the quarter. Company actually made twenty one 197 00:12:31,960 --> 00:12:35,520 Speaker 1: million dollars on the revenues that Whole Foods contributed, to 198 00:12:35,600 --> 00:12:40,120 Speaker 1: the extent that Amazon, by extrapolation, can do an effective 199 00:12:40,160 --> 00:12:45,000 Speaker 1: job integrating acquisitions onto its platform. We look at the 200 00:12:45,080 --> 00:12:48,200 Speaker 1: valuation on Amazon stock and we all recoil and shock, 201 00:12:49,000 --> 00:12:50,960 Speaker 1: But what we have here is a very high priced 202 00:12:50,960 --> 00:12:54,800 Speaker 1: currency which could be used for acquisitions to the extent 203 00:12:54,880 --> 00:12:59,120 Speaker 1: that Amazon decides to accelerate and take a buy versus 204 00:12:59,160 --> 00:13:03,120 Speaker 1: build approach in going into new areas. Obviously, we've seen 205 00:13:03,160 --> 00:13:09,120 Speaker 1: concerns or possible speculation raised yesterday that Amazon was going 206 00:13:09,160 --> 00:13:13,200 Speaker 1: to get more significantly involved in the distribution of pharmaceuticals. 207 00:13:13,280 --> 00:13:17,040 Speaker 1: Drugs UH certainly a very high margin, certainly attractive area. 208 00:13:17,600 --> 00:13:20,120 Speaker 1: And if we're now looking at Amazon as being a 209 00:13:20,120 --> 00:13:24,680 Speaker 1: company that not only offers very high organic growth, but 210 00:13:24,800 --> 00:13:28,960 Speaker 1: it's an effective acquirer, then we see a possible path 211 00:13:29,040 --> 00:13:34,240 Speaker 1: here where growth could perhaps even accelerate. Echo. Tell me 212 00:13:34,280 --> 00:13:38,200 Speaker 1: about Echo and Alexa well, to the extent that we 213 00:13:38,240 --> 00:13:42,520 Speaker 1: saw prime subscriber revenues or subscription revenues rise by fifty 214 00:13:43,080 --> 00:13:46,880 Speaker 1: year over a year, typically prime buyers tend to have Alexa, 215 00:13:47,160 --> 00:13:50,280 Speaker 1: they tend to have Echo, and to that extent, there 216 00:13:50,320 --> 00:13:53,760 Speaker 1: tends to be more data capture of those higher income 217 00:13:53,800 --> 00:13:58,120 Speaker 1: households on margin, which certainly means that if we're looking 218 00:13:58,120 --> 00:14:03,040 Speaker 1: at a world where there is monetization of data as 219 00:14:03,080 --> 00:14:06,719 Speaker 1: a way to drive shareholder value, it certainly seems that 220 00:14:06,800 --> 00:14:10,840 Speaker 1: Amazon is clearly in the vanguard in the forefront in 221 00:14:10,920 --> 00:14:14,040 Speaker 1: that area. We may not necessarily be comfortable with it 222 00:14:14,480 --> 00:14:20,400 Speaker 1: from the standpoint of personal privacy, but investors are obviously 223 00:14:20,520 --> 00:14:23,400 Speaker 1: very interested in what this says about the company's ability 224 00:14:23,480 --> 00:14:30,000 Speaker 1: to tailor offerings in the future. Two consumers, real quick. Uh, 225 00:14:30,200 --> 00:14:32,560 Speaker 1: we didn't really get into Google too much, But does 226 00:14:32,560 --> 00:14:34,640 Speaker 1: this get give you a sense sure that they are 227 00:14:34,680 --> 00:14:37,960 Speaker 1: successful at selling ads and have that pressure, Uh, that 228 00:14:37,960 --> 00:14:41,280 Speaker 1: that sort of monopoly At this point, I mean, Google 229 00:14:41,400 --> 00:14:46,400 Speaker 1: is both growing insanely quickly and has very fat profit margins, 230 00:14:46,440 --> 00:14:49,480 Speaker 1: and it seems like an impossible combination. They keep hitting 231 00:14:49,480 --> 00:14:53,120 Speaker 1: it out of the park. Well, shares of Google are 232 00:14:53,200 --> 00:14:55,960 Speaker 1: up more than six and a half percent right now. 233 00:14:56,000 --> 00:14:58,360 Speaker 1: Thanks very much here over there, our Gadfly columnists when 234 00:14:58,360 --> 00:15:00,800 Speaker 1: it comes to all things technology. Our thanks also to 235 00:15:00,840 --> 00:15:16,800 Speaker 1: David Garretty, the chief executive of g v A Research. Well, 236 00:15:17,240 --> 00:15:19,840 Speaker 1: everyone may be getting ready for Halloween, and in order 237 00:15:19,880 --> 00:15:22,720 Speaker 1: to have Halloween you need costumes and party supplies. And 238 00:15:22,760 --> 00:15:24,680 Speaker 1: here to help us tell us about the industry is 239 00:15:24,760 --> 00:15:28,040 Speaker 1: Jim Harrison. He's the chief executive of Party City. They're 240 00:15:28,040 --> 00:15:30,680 Speaker 1: based in New Jersey, and Jim is in our studio 241 00:15:30,920 --> 00:15:33,200 Speaker 1: in New York. Jim, thanks very much for being here. 242 00:15:33,400 --> 00:15:35,880 Speaker 1: I noticed you're wearing your orange tie and the black suit. 243 00:15:35,960 --> 00:15:38,440 Speaker 1: Is that already because you're getting into the holiday spirit 244 00:15:38,440 --> 00:15:40,560 Speaker 1: here for Halloween. I've been in the holiday spirit for 245 00:15:40,600 --> 00:15:42,600 Speaker 1: at least thirty days as we've been building our stores 246 00:15:42,640 --> 00:15:45,240 Speaker 1: an inventory, and right now is it's getting really hot 247 00:15:45,320 --> 00:15:49,000 Speaker 1: in the stores. Over the next six days, seven percent 248 00:15:49,080 --> 00:15:52,320 Speaker 1: of our retail sales will occur. Annual sales wi occur 249 00:15:52,360 --> 00:15:55,040 Speaker 1: in the next six days. The interesting thing about our business, 250 00:15:55,040 --> 00:15:57,040 Speaker 1: that's about half our business is retail. The only half 251 00:15:57,080 --> 00:15:59,760 Speaker 1: is consumer products. The consumer products business is a lotless 252 00:15:59,800 --> 00:16:02,120 Speaker 1: long be It's fair to me in birthdays in America 253 00:16:02,160 --> 00:16:04,600 Speaker 1: every year, nice and smooth, and a season or a 254 00:16:04,600 --> 00:16:06,840 Speaker 1: celebration every month. So what does your house look like? 255 00:16:06,920 --> 00:16:11,840 Speaker 1: Describe how you've decorated it. Uh, we've got tombstones, We've 256 00:16:11,880 --> 00:16:15,360 Speaker 1: got pumpkins, We've got skeleton saying from trees. We've got 257 00:16:15,440 --> 00:16:17,880 Speaker 1: lights to go on at night and a doorbell that 258 00:16:18,520 --> 00:16:23,440 Speaker 1: plays creeping music. Wow, you're that family. Are the guy 259 00:16:23,480 --> 00:16:26,080 Speaker 1: you don't live next to? Right? All right? But having 260 00:16:26,120 --> 00:16:28,160 Speaker 1: said that, let's talk a little bit about the business 261 00:16:28,240 --> 00:16:30,280 Speaker 1: right now. I mean, the stock has not been doing 262 00:16:30,320 --> 00:16:33,760 Speaker 1: real well. It's down about so far this year. What 263 00:16:33,960 --> 00:16:36,480 Speaker 1: have been the challenges and what are you doing. The 264 00:16:36,480 --> 00:16:38,840 Speaker 1: biggest challenge we have is really getting our story out. 265 00:16:38,880 --> 00:16:41,120 Speaker 1: I mean, with our name being Party City, folks put 266 00:16:41,200 --> 00:16:44,000 Speaker 1: us in a retail box and they think of us 267 00:16:44,040 --> 00:16:46,800 Speaker 1: as solelyer retailer. And as a result, that retail prism 268 00:16:46,840 --> 00:16:49,720 Speaker 1: has really created a pallor if we would over our stock, 269 00:16:50,200 --> 00:16:52,720 Speaker 1: only of our four di million dollars of b d 270 00:16:52,800 --> 00:16:56,840 Speaker 1: A comes solely from our retail business on a standalone 271 00:16:56,880 --> 00:16:59,720 Speaker 1: basis comes from our wholesale business. And then the remainder 272 00:16:59,760 --> 00:17:03,360 Speaker 1: is the vertical model because we UH provide a roughly 273 00:17:03,960 --> 00:17:06,159 Speaker 1: what's in our own stores. In that world, we have 274 00:17:06,200 --> 00:17:08,879 Speaker 1: the ability to make a manufacturing profit, a wholesale profit, 275 00:17:08,920 --> 00:17:12,120 Speaker 1: and a retail profit. So is what we called either 276 00:17:12,200 --> 00:17:15,760 Speaker 1: a double or a triple. I mean we have two 277 00:17:15,800 --> 00:17:19,399 Speaker 1: layers in origin and of the triple is only of 278 00:17:19,440 --> 00:17:22,439 Speaker 1: the eighty is actually triples. Where we manufacture, we have 279 00:17:22,480 --> 00:17:26,280 Speaker 1: nine manufacturing plants around the globe. We make costumes. We 280 00:17:26,359 --> 00:17:29,560 Speaker 1: make our own uh Latex balloons in Waysia, but we 281 00:17:29,600 --> 00:17:32,840 Speaker 1: also domestically manufactured lots of product. We have a sixty 282 00:17:33,200 --> 00:17:36,639 Speaker 1: worldwide marketshare and metallic balloons we make those Minneapolis. We 283 00:17:36,680 --> 00:17:39,240 Speaker 1: manufactured plates, cups, and napkins here in the United States, 284 00:17:39,320 --> 00:17:41,840 Speaker 1: the extrude plate cups and bowls up in Rhode Island. 285 00:17:42,200 --> 00:17:44,439 Speaker 1: We do injection mold to plastics down in New Mexico. 286 00:17:45,000 --> 00:17:46,960 Speaker 1: So we do a lot of manufacturing. So our products 287 00:17:46,960 --> 00:17:49,760 Speaker 1: go not just to the party industry, but the movie theaters, 288 00:17:49,840 --> 00:17:53,040 Speaker 1: to supporting your arenas, to restaurants and bars and stuff 289 00:17:53,080 --> 00:17:56,600 Speaker 1: like that. I'm wonder and does Party City sell goods 290 00:17:56,640 --> 00:18:00,280 Speaker 1: through Amazon? And uh, you know, at some point could 291 00:18:00,320 --> 00:18:03,720 Speaker 1: you imagine not having a physical brick and mortar store 292 00:18:04,119 --> 00:18:07,040 Speaker 1: and just focus in the manufacturing. So that's really two questions. 293 00:18:07,119 --> 00:18:08,639 Speaker 1: Let me start with the first question in terms of 294 00:18:08,680 --> 00:18:12,040 Speaker 1: Amazon on the party side of the business. Uh, our 295 00:18:12,080 --> 00:18:15,080 Speaker 1: products is so generally available on marketplace. Amazon does not 296 00:18:15,640 --> 00:18:17,439 Speaker 1: bring in their the party goods per se, and if 297 00:18:17,440 --> 00:18:20,160 Speaker 1: they did, they would be from us because we basically 298 00:18:20,160 --> 00:18:22,240 Speaker 1: held all the i p as well as the broadest 299 00:18:22,240 --> 00:18:26,360 Speaker 1: selection of anybody in the marketplace in terms of our 300 00:18:26,400 --> 00:18:30,200 Speaker 1: stores and opening stores. We Uh. Recent surveys have shown 301 00:18:30,359 --> 00:18:33,520 Speaker 1: this this recent season on a number of surveys, anywhere 302 00:18:33,520 --> 00:18:37,600 Speaker 1: from six consumers want to go to a store to 303 00:18:37,640 --> 00:18:41,040 Speaker 1: buy their Halloween goods thirty five will look online for inspiration, 304 00:18:41,359 --> 00:18:45,040 Speaker 1: but sixty plus percent anywhere from sixty five want to 305 00:18:45,040 --> 00:18:47,480 Speaker 1: actually go into stores. And if you think about even 306 00:18:47,520 --> 00:18:50,960 Speaker 1: Halloween and our business, we're a collection business on party side. 307 00:18:51,280 --> 00:18:52,920 Speaker 1: So if having a brattle shower, you're gonna buy a 308 00:18:52,960 --> 00:18:54,840 Speaker 1: bunch of stuff, are you are in the two bucks 309 00:18:55,720 --> 00:18:58,440 Speaker 1: coordinated icon and imagery, and you're gonna make a house 310 00:18:58,520 --> 00:19:02,480 Speaker 1: festive and decorative. So it's a discutionary purchased lots excuse. 311 00:19:02,800 --> 00:19:05,679 Speaker 1: On the Halloween side, our point differentiations. We call it 312 00:19:05,720 --> 00:19:07,280 Speaker 1: mix it, match up, make it your own. So if 313 00:19:07,280 --> 00:19:10,080 Speaker 1: you wanted to be Spider Girl, for instance, you could 314 00:19:10,119 --> 00:19:12,960 Speaker 1: go to Party City and have twenty different Spider Girl 315 00:19:13,000 --> 00:19:15,880 Speaker 1: outfits that you could construct with all the accessories and 316 00:19:15,880 --> 00:19:19,800 Speaker 1: and separates that we provide Amazon. Other folks on the 317 00:19:19,800 --> 00:19:22,199 Speaker 1: web will Mark. They provide costume in a bag. We 318 00:19:22,240 --> 00:19:24,560 Speaker 1: do costumes a bag, but it's a relatively small part 319 00:19:24,560 --> 00:19:26,640 Speaker 1: of it. Whole home we're offering Spider Woman. You think 320 00:19:26,640 --> 00:19:30,880 Speaker 1: I should do that? Yes, by all means, I want 321 00:19:30,880 --> 00:19:34,000 Speaker 1: to know about a purchase that you did recently of 322 00:19:34,080 --> 00:19:37,119 Speaker 1: a company called grand Mark, and I just so that 323 00:19:37,280 --> 00:19:40,520 Speaker 1: may offer a way to expand the conversation A little 324 00:19:40,520 --> 00:19:42,800 Speaker 1: bit sure. So grand Mark is a company in Mexico. 325 00:19:42,880 --> 00:19:46,040 Speaker 1: They're a distributor. They're essentially very similar to our wholesale 326 00:19:46,040 --> 00:19:47,960 Speaker 1: business here in the US in terms of going to 327 00:19:47,960 --> 00:19:51,199 Speaker 1: the broader market. They also have a manufacturing footprint and 328 00:19:51,320 --> 00:19:53,800 Speaker 1: it's basically income papers. So a lot of products that 329 00:19:53,840 --> 00:19:56,919 Speaker 1: we currently sourced from China, lead of banners, stickers, gift bags, 330 00:19:56,920 --> 00:19:59,120 Speaker 1: gift wrap, we're actually starting to make ourselves and are 331 00:19:59,200 --> 00:20:01,720 Speaker 1: now our own fact tree in in Monterey. Okay, my 332 00:20:01,800 --> 00:20:04,240 Speaker 1: quick question there was then the whole trade issue. Are 333 00:20:04,240 --> 00:20:07,800 Speaker 1: you concerned about any of the issues related to trade, 334 00:20:07,960 --> 00:20:10,159 Speaker 1: NAFTA and so on. It's once again, we're dealing with 335 00:20:10,200 --> 00:20:12,760 Speaker 1: such a nominal price point that it's not really an issue. 336 00:20:13,440 --> 00:20:15,879 Speaker 1: What's the biggest challenge right now for Party City? The 337 00:20:15,880 --> 00:20:18,080 Speaker 1: biggest challenge for Party Sort Serria now is making sure 338 00:20:18,119 --> 00:20:19,600 Speaker 1: that we stay ahead of the curve in terms of 339 00:20:19,600 --> 00:20:22,360 Speaker 1: the consumer. The consumer today, especially the younger consumers, looking 340 00:20:22,359 --> 00:20:25,639 Speaker 1: for experiential and so having a house party is maybe 341 00:20:25,680 --> 00:20:27,600 Speaker 1: not number one on their list. They want to go 342 00:20:27,640 --> 00:20:29,840 Speaker 1: to a theater, they want to go to restaurant, they 343 00:20:29,880 --> 00:20:31,360 Speaker 1: want to go on a cruise, they want they want 344 00:20:31,359 --> 00:20:34,159 Speaker 1: to experience as part of that celebration. So we're building 345 00:20:34,160 --> 00:20:36,800 Speaker 1: out what we call our Alternative Markets Group to get 346 00:20:36,880 --> 00:20:39,240 Speaker 1: in front of that curve, so that we're going into 347 00:20:39,240 --> 00:20:41,919 Speaker 1: the cruise ships and into the restaurants and providing the 348 00:20:41,960 --> 00:20:44,480 Speaker 1: products that will make those celebrations special. So do you 349 00:20:44,520 --> 00:20:48,159 Speaker 1: also have people that kind of cultivate what that experience 350 00:20:48,200 --> 00:20:51,480 Speaker 1: would be for the cruise or for the restaurant or 351 00:20:51,480 --> 00:20:54,760 Speaker 1: whatever else. Right, So it comes comes into the numbers 352 00:20:54,720 --> 00:20:58,040 Speaker 1: different ways. One in terms of creating environmental decorations, that's kits. 353 00:20:58,119 --> 00:21:02,600 Speaker 1: In terms of creating for the celebrations themselves, creating a 354 00:21:02,680 --> 00:21:05,040 Speaker 1: suite of products and men use that consumers can go 355 00:21:05,119 --> 00:21:09,040 Speaker 1: on select, and then we use our e commerce capabilities 356 00:21:09,040 --> 00:21:12,359 Speaker 1: actually to ship directly to U two restaurants or wherever. 357 00:21:12,920 --> 00:21:15,399 Speaker 1: Thank you so much for joining us, and a picture 358 00:21:15,440 --> 00:21:18,359 Speaker 1: of your home. It's sound. Jim Harrison, chief executive officer 359 00:21:18,400 --> 00:21:21,640 Speaker 1: of Party City gearing up and has been gearing up 360 00:21:21,680 --> 00:21:24,199 Speaker 1: for the past thirty days for Halloween. Thank you so 361 00:21:24,280 --> 00:21:39,960 Speaker 1: much for joining us. Healthcare CVS Health Corp. Is reportedly 362 00:21:40,040 --> 00:21:44,600 Speaker 1: considering a blockbuster buyout of health Ensure Etna, and here 363 00:21:44,640 --> 00:21:47,280 Speaker 1: to talk about what this deal would mean for the 364 00:21:47,359 --> 00:21:51,760 Speaker 1: broader healthcare industry as well as how exactly CVS would 365 00:21:51,800 --> 00:21:55,000 Speaker 1: pay for. This is Max Neeson, Max Newson, Bloomberg gad Flight, 366 00:21:55,040 --> 00:21:58,359 Speaker 1: columnists covering all things health related. Uh Max, thank you 367 00:21:58,400 --> 00:22:00,000 Speaker 1: so much for joining us. So can you give us 368 00:22:00,040 --> 00:22:02,320 Speaker 1: the sense, first of all, of what the logic is 369 00:22:02,359 --> 00:22:05,200 Speaker 1: behind this tie up and how likely it is at 370 00:22:05,200 --> 00:22:08,160 Speaker 1: this point. Yeah. So there's kind of a two part 371 00:22:08,240 --> 00:22:12,120 Speaker 1: logic to this. The first is generally in healthcare UM 372 00:22:12,160 --> 00:22:16,000 Speaker 1: you know, vertical consolidation has benefits IF CVS, which in 373 00:22:16,000 --> 00:22:20,320 Speaker 1: addition to running pharmacies, is a pharmacy benefit manager, owns 374 00:22:20,320 --> 00:22:22,919 Speaker 1: and ensure UM you know, all those things that you're 375 00:22:22,960 --> 00:22:25,520 Speaker 1: Insure wants you to do to make to make your 376 00:22:25,560 --> 00:22:29,439 Speaker 1: healthcare cheaper. H use a mail order pharmacy, go to 377 00:22:29,520 --> 00:22:32,320 Speaker 1: a cheap clinic instead of the doctor. It can push 378 00:22:32,440 --> 00:22:37,000 Speaker 1: all of those ETNA enrollees to its businesses. So there's 379 00:22:37,000 --> 00:22:39,480 Speaker 1: that kind of direct benefit. And there's also the fact 380 00:22:39,560 --> 00:22:43,040 Speaker 1: that there aren't that many other places for CBS to expand, 381 00:22:43,359 --> 00:22:47,760 Speaker 1: uh it expressed scripts and United Health already control the 382 00:22:47,840 --> 00:22:51,000 Speaker 1: vast majority of the pharmacy benefit industry. There's not that 383 00:22:51,040 --> 00:22:52,800 Speaker 1: much expense. You could do there, and we saw with 384 00:22:52,840 --> 00:22:55,280 Speaker 1: Walgreens and right Aid you can't buy that many more 385 00:22:55,280 --> 00:22:58,160 Speaker 1: pharmacies without running into any trust issues. So I mean 386 00:22:58,200 --> 00:23:00,800 Speaker 1: it does make sense in that sense, all right, Max. 387 00:23:00,840 --> 00:23:02,240 Speaker 1: So I'm trying to get my head around this. But 388 00:23:02,240 --> 00:23:04,119 Speaker 1: at least right now I know that the investors and 389 00:23:04,200 --> 00:23:06,440 Speaker 1: CVS and not too thrilled about this deal because the 390 00:23:06,480 --> 00:23:10,680 Speaker 1: stock is down nearly four percent. CVS already has a 391 00:23:10,680 --> 00:23:15,680 Speaker 1: contract with another insurer, Anthem, correct, Yeah, so that that's 392 00:23:15,720 --> 00:23:18,679 Speaker 1: something they just signed. Anthem is starting a PBMs of 393 00:23:18,720 --> 00:23:22,919 Speaker 1: its own, but it's letting letting CVS run a substantial 394 00:23:22,960 --> 00:23:25,200 Speaker 1: portion of it. That was just a week ago that 395 00:23:25,240 --> 00:23:26,840 Speaker 1: they signed that, So that it's obviously going to be 396 00:23:26,880 --> 00:23:30,919 Speaker 1: a complicating factor right and right now. The leverage that 397 00:23:31,000 --> 00:23:36,119 Speaker 1: a CVS has in order to negotiate drug prices is 398 00:23:36,200 --> 00:23:41,679 Speaker 1: why because they have a lock on business directly tied 399 00:23:41,880 --> 00:23:44,760 Speaker 1: to whatever the insurance company is that we provider that 400 00:23:44,800 --> 00:23:48,360 Speaker 1: you have. Yeah, so they have a big set of clients, 401 00:23:48,440 --> 00:23:53,160 Speaker 1: both insurers also employers that contract with them to negotiate 402 00:23:53,160 --> 00:23:57,480 Speaker 1: their drug prices. That kind of amalgamation lets them um 403 00:23:57,520 --> 00:23:59,960 Speaker 1: push for lower prices. The way they do that is 404 00:24:00,119 --> 00:24:02,040 Speaker 1: by having a series of drug lists, they have a 405 00:24:02,080 --> 00:24:05,720 Speaker 1: what's called a preferred formulary where they can exclude certain drugs, 406 00:24:06,119 --> 00:24:08,320 Speaker 1: so they can say, if you don't give us a discount, 407 00:24:08,440 --> 00:24:10,800 Speaker 1: we're going to push people to your competitors drug. The 408 00:24:10,840 --> 00:24:12,720 Speaker 1: more people they have, the more leverage they have in 409 00:24:12,760 --> 00:24:14,760 Speaker 1: those kind of negotiations. So this is this would be 410 00:24:14,800 --> 00:24:17,480 Speaker 1: a tie up that would be incredible for their bargaining position. 411 00:24:18,080 --> 00:24:22,000 Speaker 1: How much is this a defensive move in anticipation of 412 00:24:22,119 --> 00:24:26,240 Speaker 1: Amazon dot Com plowing into healthcare as everybody suspects they will. 413 00:24:27,080 --> 00:24:29,560 Speaker 1: I mean, I think it's it's pretty clearly one because 414 00:24:29,640 --> 00:24:32,440 Speaker 1: Amazon is a threat to so many parts of CBS 415 00:24:32,520 --> 00:24:35,920 Speaker 1: is business. If it gets more directly into medicine. Um, 416 00:24:35,960 --> 00:24:38,399 Speaker 1: you know, there's the PBM part, if Amazon decides to 417 00:24:38,400 --> 00:24:42,399 Speaker 1: play a role there, Uh, there's retail pharmacies. Um. So 418 00:24:42,440 --> 00:24:45,440 Speaker 1: obviously moving to diversify and having kind of a captive 419 00:24:46,080 --> 00:24:49,080 Speaker 1: uh set of clients would really be a benefit for 420 00:24:49,119 --> 00:24:51,160 Speaker 1: the company because at the end of the day, Amazon 421 00:24:51,320 --> 00:24:54,760 Speaker 1: is bigger, better funded, and better at the Internet. So 422 00:24:55,080 --> 00:24:57,080 Speaker 1: they're a threat. Well, but let's talk a little bit 423 00:24:57,119 --> 00:25:00,320 Speaker 1: about the funding, right, because this is not a cheap 424 00:25:00,359 --> 00:25:04,120 Speaker 1: purchase which is probably why CBS shares have been falling. 425 00:25:04,440 --> 00:25:07,119 Speaker 1: And they really don't have the cash to pay for this. 426 00:25:07,200 --> 00:25:10,840 Speaker 1: So this would be a pretty substantial leveraged buyout. Now, 427 00:25:11,760 --> 00:25:14,080 Speaker 1: it absolutely would be. I mean, it would definitely have 428 00:25:14,880 --> 00:25:17,760 Speaker 1: a stock component, but it's unclear how much of that 429 00:25:17,760 --> 00:25:19,080 Speaker 1: they'd build people to do. It's going to be a 430 00:25:19,119 --> 00:25:21,960 Speaker 1: significant cash outlet. C this doesn't have a ton of cash. 431 00:25:21,960 --> 00:25:24,120 Speaker 1: They already have more than twenty billion dollars in debt 432 00:25:24,480 --> 00:25:27,480 Speaker 1: and this deal, based on some of the figures being 433 00:25:27,480 --> 00:25:32,399 Speaker 1: thrown around, could cost seventy billion dollars. That's close to 434 00:25:32,560 --> 00:25:35,480 Speaker 1: CBS market cap. So it's obviously gonna be a really 435 00:25:35,480 --> 00:25:38,040 Speaker 1: big one. Hey, Max, what if you could just give 436 00:25:38,119 --> 00:25:40,040 Speaker 1: us an idea of what your thoughts are about the 437 00:25:40,119 --> 00:25:43,000 Speaker 1: very business model that says, if we can put as 438 00:25:43,160 --> 00:25:47,600 Speaker 1: many individuals and as many corporations in between you and 439 00:25:47,720 --> 00:25:51,240 Speaker 1: the service or the Uh No, seriously, the service or 440 00:25:51,400 --> 00:25:54,960 Speaker 1: the product that you're buying. Uh isn't I thought that 441 00:25:55,040 --> 00:25:57,360 Speaker 1: was going to be done away with because of technology, 442 00:25:57,359 --> 00:25:59,560 Speaker 1: you get rid of all the middlemen, you go direct 443 00:25:59,600 --> 00:26:04,000 Speaker 1: to con sumer. Why can't that happen? Why can't they 444 00:26:04,040 --> 00:26:05,800 Speaker 1: do it? Why are they're waiting for Amazon to give 445 00:26:05,880 --> 00:26:09,520 Speaker 1: them the kick. Um. I mean it's because being a 446 00:26:09,560 --> 00:26:14,399 Speaker 1: middleman is extraordinarily profitable. But when you have when you 447 00:26:14,440 --> 00:26:17,000 Speaker 1: have Amazon breathing down your neck, I mean we've already 448 00:26:17,000 --> 00:26:19,720 Speaker 1: been through that. In the financial industry, you had, you know, 449 00:26:19,840 --> 00:26:23,520 Speaker 1: broke a wide swath of brokers now their advisors because 450 00:26:23,600 --> 00:26:27,040 Speaker 1: you can't make money, you know, on pennies. So I 451 00:26:27,080 --> 00:26:29,959 Speaker 1: mean that's kind of the hope of what people that 452 00:26:30,200 --> 00:26:32,080 Speaker 1: if that's Amazon's hope, if they want to get into 453 00:26:32,160 --> 00:26:34,040 Speaker 1: this business, do you see that as viable? Do you 454 00:26:34,080 --> 00:26:37,600 Speaker 1: think that trend is going to happen? You know, the 455 00:26:37,720 --> 00:26:44,040 Speaker 1: question is whether Amazon wants another very complicated, low margin business. Um. 456 00:26:44,119 --> 00:26:47,200 Speaker 1: You know, they have sort of unlimited capacity for it, it 457 00:26:47,040 --> 00:26:50,680 Speaker 1: it seems so I wouldn't rule it out. The defense 458 00:26:50,760 --> 00:26:53,680 Speaker 1: that you know, the wholesalers and PBMs are are putting 459 00:26:53,720 --> 00:26:57,280 Speaker 1: out is that you know, this is complicated their regulatory issues. 460 00:26:57,680 --> 00:26:59,760 Speaker 1: But you know, in time, Amazon would be able to 461 00:26:59,760 --> 00:27:01,879 Speaker 1: figure that out, and its scale will always give it 462 00:27:01,920 --> 00:27:04,040 Speaker 1: a chance. I was just gonna say, you know, it's interesting. 463 00:27:04,240 --> 00:27:06,959 Speaker 1: Shares the Amazon today or up eight and a half percent, 464 00:27:07,240 --> 00:27:11,040 Speaker 1: shares of Etna down one point three shares, the CVS 465 00:27:11,160 --> 00:27:13,760 Speaker 1: down four percent. That kind of tells you something, Max, 466 00:27:13,920 --> 00:27:18,560 Speaker 1: really quick, how likely is this to get through? I'm 467 00:27:18,600 --> 00:27:25,520 Speaker 1: gonna say about fifty fifty, you know, just the divide 468 00:27:25,560 --> 00:27:30,400 Speaker 1: between CVS is obvious need and the potential regulatory and 469 00:27:30,440 --> 00:27:33,919 Speaker 1: funding issues on the other side. So we'll see and 470 00:27:33,960 --> 00:27:36,199 Speaker 1: you're gonna be following it. For this, I appreciate it. 471 00:27:36,200 --> 00:27:39,159 Speaker 1: Thank you very much, Max and Nisson Bloomberg. I have 472 00:27:39,240 --> 00:27:41,240 Speaker 1: some insurance claims. Maybe you can help me with two 473 00:27:41,840 --> 00:27:44,359 Speaker 1: Max and Neis and our gad Blight columns when it 474 00:27:44,400 --> 00:27:50,919 Speaker 1: come out healthcare. Indeed, thanks for listening to the Bloomberg 475 00:27:50,920 --> 00:27:53,600 Speaker 1: P and L podcast. You can subscribe and listen to 476 00:27:53,640 --> 00:27:58,159 Speaker 1: interviews at Apple Podcasts, SoundCloud, or whatever podcast platform you prefer. 477 00:27:58,560 --> 00:28:02,160 Speaker 1: I'm pim Fox. I'm on Twitter at pim Fox. I'm 478 00:28:02,160 --> 00:28:05,560 Speaker 1: on Twitter at Lisa abramowits one before the podcast. You 479 00:28:05,600 --> 00:28:08,119 Speaker 1: can always catch us worldwide on Blueberg Radio.