WEBVTT - Netflix Adds Over 8 Million Customers, Extends Lead Over Rivals 0:00:00.600 --> 0:00:08.080 Bloomberg Audio Studios, Podcasts, radio news. 0:00:08.520 --> 0:00:12.880 This is Bloomberg Business Wait inside from the reporters and 0:00:13.080 --> 0:00:16.640 editors who bring you America's most trusted business magazine, plus 0:00:16.720 --> 0:00:20.840 global business, finance and tech news. The Bloomberg Business Week 0:00:20.880 --> 0:00:25.800 podcast with Carol Messer and Tim Stenebek from Bloomberg Radio. 0:00:26.600 --> 0:00:29.160 Today's Bloomberg Business Mean, we're walking chairs in. Netflix down 0:00:29.240 --> 0:00:32.280 two percent in the after hours. The company reported streaming 0:00:32.360 --> 0:00:35.320 paid net change for the second quarter that beat the 0:00:35.360 --> 0:00:39.680 average analyst estimate. But I think what has investors concerned, Carol, 0:00:40.120 --> 0:00:42.760 is the outlook and the third quarter forecast. The company 0:00:42.800 --> 0:00:45.000 seeing revenue at nine point seven three billion. That's just 0:00:45.000 --> 0:00:47.639 shy of estimates of nine point eight three billion, though 0:00:47.640 --> 0:00:49.919 it does see EPs coming in above estimates at five 0:00:49.960 --> 0:00:52.720 dollars and ten cents versus estimates of four four dollars 0:00:52.800 --> 0:00:53.600 and seventy four cents. 0:00:53.640 --> 0:00:53.840 Yeah. 0:00:53.840 --> 0:00:55.400 I really get a feel that investors are trying to 0:00:55.400 --> 0:00:57.440 make a little sense as the stock's been bouncing. It's 0:00:57.480 --> 0:01:01.440 been lower in the aftermarket, but bouncing around at different times. 0:01:01.600 --> 0:01:04.120 Let's get to it, let's make sense of it. Back 0:01:04.120 --> 0:01:04.440 with us. 0:01:04.440 --> 0:01:08.000 So grateful to have Bloomberg Intelligence, Technology Media analyst KEITHA. 0:01:08.080 --> 0:01:11.199 Ringanatan and also Bloomberg News earnings reporter Red Brown. Gither 0:01:11.319 --> 0:01:14.880 to you that number. I know you guys were looking 0:01:14.880 --> 0:01:18.000 for about five million and subscribers. They easily blew that 0:01:19.000 --> 0:01:21.440 out of the water. It seems like everybody's estimates. 0:01:21.959 --> 0:01:26.960 Oh, absolutely complete blowout, crushed it. Sixty five percent higher 0:01:27.000 --> 0:01:30.640 than obviously what consensus was expecting. So the subscriber momentum 0:01:30.680 --> 0:01:34.560 is very very much intact. And you're absolutely right there, Carol, 0:01:34.680 --> 0:01:36.959 about you know, the guidance being a little bit tepid, 0:01:37.000 --> 0:01:38.919 and I think that is what is kind of weighing 0:01:38.920 --> 0:01:40.400 on the stocks at this point of time. 0:01:40.680 --> 0:01:43.000 Are you worried about by that guidance? Forgive me, tim, 0:01:43.240 --> 0:01:44.959 Are you worried about that guidance? 0:01:45.720 --> 0:01:47.920 Yeah, because this is you know, this is where it's 0:01:47.920 --> 0:01:50.680 getting really really hard to kind of model out this company. Remember, 0:01:50.720 --> 0:01:53.880 they're going to stop reporting subscriber metrics altogether. They're going 0:01:53.960 --> 0:01:57.280 to stop reporting that average revenue per user metric altogether 0:01:57.400 --> 0:01:59.880 in a few quarters, and so it's kind of becoming 0:02:00.120 --> 0:02:02.160 hard to figure out that all of the different puts 0:02:02.200 --> 0:02:04.560 and takes. So, you know, we were kind of expecting 0:02:04.600 --> 0:02:07.720 fifteen percent revenue growth in the third quarter, that's obviously 0:02:07.760 --> 0:02:10.880 a little bit light. They point to, you know, Argentina 0:02:10.960 --> 0:02:14.040 being a source of the weakness. But then going forward, 0:02:14.080 --> 0:02:17.239 as more and more you know, subscriber growth comes from 0:02:17.400 --> 0:02:20.480 emerging markets, comes from some of these other you know, 0:02:20.520 --> 0:02:24.000 developing countries, is that really going to weigh on revenue growth? 0:02:24.000 --> 0:02:26.160 I think that becomes the big question. And then the 0:02:26.200 --> 0:02:28.840 other thing, of course, as you had pointed out earlier, 0:02:29.000 --> 0:02:32.160 was that they are not expecting a meaningful acceleration in 0:02:32.200 --> 0:02:35.000 the ad business in twenty twenty four or even in 0:02:35.040 --> 0:02:37.680 twenty twenty five, and I think that'll give investors some 0:02:37.720 --> 0:02:38.440 pause as well. 0:02:38.560 --> 0:02:40.840 What's interesting, though, is that even though revenue GITHA is 0:02:40.880 --> 0:02:43.640 coming in below estimates for the third quarter or forecast, 0:02:43.960 --> 0:02:46.000 we're seeing the company at least tell us it's going 0:02:46.040 --> 0:02:48.480 to be more efficient because earnings per share is going 0:02:48.520 --> 0:02:51.160 to be five dollars and ten cents that beats estimates, 0:02:51.200 --> 0:02:54.560 an operating margin significantly higher than the twenty five point 0:02:54.560 --> 0:02:56.880 seven percent analysts had expect coming in at twenty eight 0:02:56.919 --> 0:03:00.639 point one percent. So what's happening to Netflix where revenue 0:03:00.680 --> 0:03:02.600 is going down but efficiency is going up? 0:03:03.400 --> 0:03:05.639 Efficiency is going up big time. And this is really 0:03:05.680 --> 0:03:08.040 I mean that we've been talking about the operating leverage 0:03:08.040 --> 0:03:10.200 in this model deem for such a long time right 0:03:10.240 --> 0:03:13.200 now and this is that operating leverage that we get 0:03:13.200 --> 0:03:15.280 to see. I mean, they are giving that to us 0:03:15.320 --> 0:03:18.639 in the margin guide. Remember they had first predicted twenty 0:03:18.680 --> 0:03:21.079 four percent operating margin for the whole of twenty twenty four. 0:03:21.080 --> 0:03:22.960 They took that up to twenty five percent last quarter, 0:03:23.280 --> 0:03:26.640 now up to twenty six percent. That's a five hundred 0:03:26.720 --> 0:03:30.359 basis point increased from last year. So you know, very 0:03:30.440 --> 0:03:32.560 likely that we can see up to thirty percent margins, 0:03:32.560 --> 0:03:36.200 maybe even as early as next year. This is huge 0:03:36.200 --> 0:03:39.480 in terms of just you know what the streaming streaming 0:03:39.480 --> 0:03:43.000 models unit economics are, how they're shaping up, just because 0:03:43.000 --> 0:03:45.360 there's been so many questions about whether it could ever 0:03:45.400 --> 0:03:47.840 be profitable and whether it could ever generate those thirty 0:03:47.880 --> 0:03:50.800 percent margins that the BATV bundle was generating. And obviously 0:03:50.800 --> 0:03:54.000 we have a resounding yes with this report from Netflix. 0:03:53.720 --> 0:03:55.600 Which is why, as you said earlier, kind of Netflix 0:03:55.640 --> 0:03:57.680 stands alone and is the one to be red Brown, 0:03:57.680 --> 0:04:00.240 I want to bring you into it. Also listen to 0:04:00.720 --> 0:04:02.920 Githa and going through the numbers. What stands out for you? 0:04:03.400 --> 0:04:06.000 Yeah, I think it's just kind of this confluence of 0:04:07.000 --> 0:04:10.600 the revenue drivers that were kind of looking to pay dividends. 0:04:10.600 --> 0:04:13.040 When they say, don't look at our subscriber numbers anymore, 0:04:13.200 --> 0:04:16.400 we're all saying, okay, we won't look at the revenue growth, 0:04:16.440 --> 0:04:19.760 and they're not kind of painting as pretty as a 0:04:19.800 --> 0:04:21.799 picture I think is we would as the marker would 0:04:21.800 --> 0:04:24.600 like to see for the time being. Maybe that does 0:04:24.680 --> 0:04:27.000 raise some questions on where is the levers that they 0:04:27.040 --> 0:04:30.039 can still pull to Yeah, to hit the numbers that 0:04:30.040 --> 0:04:32.200 that you know, everyone was expecting them to do. 0:04:32.520 --> 0:04:32.880 I've read. 0:04:32.920 --> 0:04:34.839 On the content side, I mean what sticks out to you? 0:04:34.880 --> 0:04:37.960 Because the company did call out Bridgerton season three Baby Reindeer, 0:04:38.000 --> 0:04:39.280 which I heard was really good. 0:04:39.279 --> 0:04:39.880 I haven't seen that. 0:04:39.880 --> 0:04:42.239 I didn't watch Baby Rain, Bridgeton, Queen. 0:04:42.080 --> 0:04:47.160 Of Tears, The Great Indian Kapel Show, Under Paris Atlas, 0:04:47.279 --> 0:04:50.000 hit Man. Oh, I have heard of hit Man. I'm 0:04:50.040 --> 0:04:52.120 like somebody of these I'm I'm reading. I'm like, these 0:04:52.160 --> 0:04:54.080 are not on my radar at all. The Roast of 0:04:54.080 --> 0:04:57.160 Tom Brady, though that was one that everybody watched. It 0:04:57.200 --> 0:04:59.400 felt like, Yeah, I mean except for Paul Brannan, who's 0:04:59.400 --> 0:05:01.360 just shaking his head in there. Oh he watched it. Okay, 0:05:01.400 --> 0:05:02.960 he did watch it. Thumbs up, two thumbs up. 0:05:02.960 --> 0:05:04.440 All right, well Paul watched it, then it must have 0:05:04.440 --> 0:05:09.320 been good. I think you are pointing to something interesting there, 0:05:09.400 --> 0:05:11.239 is that the live I think the thing that generated 0:05:11.279 --> 0:05:14.240 the most like content not on Netflix, but the most 0:05:14.240 --> 0:05:17.640 buzz was the live roast of Tom Brady. So I 0:05:18.040 --> 0:05:19.880 was reading some analyst notes They're kind of called the 0:05:19.960 --> 0:05:23.680 content besides that a little bit lackluster this, So yeah, 0:05:23.920 --> 0:05:25.719 maybe that is again kind of pointing to the direction 0:05:25.800 --> 0:05:28.880 that they need to be heading, is the live entertainment, 0:05:29.320 --> 0:05:32.800 because yeah, it seems like if they're still attracting people 0:05:32.839 --> 0:05:34.320 with the content that they are, but it's you know, 0:05:34.360 --> 0:05:36.040 we don't get to we don't get to speak to 0:05:36.080 --> 0:05:37.719 every subscriber, but like, did you sign up because it 0:05:37.760 --> 0:05:40.280 was live TV or because it was Bridgerton? 0:05:40.400 --> 0:05:40.560 Right? 0:05:40.640 --> 0:05:43.520 So yeah, it remains me seeing I guess geth. 0:05:43.560 --> 0:05:44.919 I want to go back to you earlier when we 0:05:44.960 --> 0:05:47.040 talked to you to preview what Netflix. You talked about 0:05:47.040 --> 0:05:50.000 Netflix having the durable advantage over the long term. I 0:05:50.040 --> 0:05:51.919 look at you know, part of I guess they have 0:05:52.000 --> 0:05:55.000 that durable advantages. I think about the cash that they generate, 0:05:55.440 --> 0:05:58.400 talk about cash flow and what we got from Netflix 0:05:58.440 --> 0:05:59.000 on that front. 0:06:00.240 --> 0:06:04.400 So cash flow still continues to be really, really strong, Carol. 0:06:04.480 --> 0:06:07.280 So they're still guiding to six billion dollars in cash 0:06:07.360 --> 0:06:10.960 flow this year, and remember they had generated about six 0:06:10.960 --> 0:06:12.840 and a half billion last year. But the reason we're 0:06:12.839 --> 0:06:14.640 seeing a little bit of lumpiness this year is because 0:06:14.640 --> 0:06:16.320 of all the strikes that happened last year and so 0:06:16.400 --> 0:06:18.719 much of production kind of got pushed to this year. 0:06:19.000 --> 0:06:21.800 But the real metric that we should be looking for is, 0:06:21.880 --> 0:06:24.039 you know, the twenty twenty five free cash flow, and 0:06:24.120 --> 0:06:26.839 I'm thinking just with the kind of profitability and the 0:06:26.880 --> 0:06:30.720 operating margins that they reported, you know, we could easily 0:06:30.720 --> 0:06:33.320 be seeing about ten billion dollars in free cash flow 0:06:33.400 --> 0:06:35.800 going to next year. And that now gives them a 0:06:35.839 --> 0:06:39.120 lot of flexibility. They could invest in more content, of course, 0:06:39.640 --> 0:06:42.400 but it also gives them flexibility to do buybacks, and 0:06:42.440 --> 0:06:45.400 that again it becomes then your EPs booster over the 0:06:45.400 --> 0:06:45.919 long term. 0:06:45.960 --> 0:06:48.239 They did say in the release during the second quarter, 0:06:48.320 --> 0:06:51.120 we repurchased two point six million shares for one point 0:06:51.160 --> 0:06:54.440 six billion. We have five billion remaining under our existing authorization, 0:06:55.600 --> 0:06:58.000 So I guess stay tuned to see whether or not 0:06:58.040 --> 0:07:01.080 we see more. What's the number one question you would 0:07:01.080 --> 0:07:03.240 be asking Netflix on the call here, Githa. 0:07:04.480 --> 0:07:06.520 I think a lot of concerns are still going to 0:07:06.560 --> 0:07:09.960 center around the advertising business, so I think we definitely 0:07:10.040 --> 0:07:12.320 want more clarity on that. Yes, they did give some 0:07:13.080 --> 0:07:15.760 perspective in terms of how many new signups game, but 0:07:15.760 --> 0:07:17.760 they still haven't actually given us a number in terms 0:07:17.800 --> 0:07:19.680 of how many number of subscribers are on the a 0:07:19.920 --> 0:07:22.480 year or what is the revenue that they're generating. I 0:07:22.480 --> 0:07:25.440 mean they say it's not it's deminimus, but still I 0:07:25.440 --> 0:07:27.400 think we would definitely like to have a little bit 0:07:27.400 --> 0:07:28.160 more clarity on that. 0:07:28.280 --> 0:07:28.400 RD. 0:07:28.440 --> 0:07:29.320 I want to bring you back in. 0:07:29.360 --> 0:07:31.800 You watch the earnings, you watch the market, certainly for us, 0:07:31.800 --> 0:07:33.440 I mean Netflix is a big one when we think 0:07:33.480 --> 0:07:36.280 about the earning season. We're just getting kind of started. 0:07:37.440 --> 0:07:38.360 But how are you thinking. 0:07:38.200 --> 0:07:39.680 About it in terms of maybe what it means for 0:07:39.720 --> 0:07:40.560 some of the other players. 0:07:40.640 --> 0:07:42.760 Yeah, I mean it's the first tech name, like, you know, 0:07:42.920 --> 0:07:46.120 really prominent tech name that we're getting, you know. I 0:07:46.120 --> 0:07:48.119 guess we'll have to wait and see kind of how 0:07:48.480 --> 0:07:50.960 things shake out here with the market reaction, I mean, 0:07:51.000 --> 0:07:52.800 it's it's not as bad as it guess it could be. 0:07:53.040 --> 0:07:57.040 I think there's definitely some areas of thing that'll be 0:07:57.120 --> 0:07:58.800 of optimism. I think to take away from this the 0:07:58.800 --> 0:08:01.080 fact that they did add more more subscribers, and we're 0:08:01.120 --> 0:08:05.040 expected they did it across all of their regions, even 0:08:05.080 --> 0:08:06.920 with some of that weakness that they're pulling out in 0:08:07.000 --> 0:08:10.440 Latin America, I think that still speaks to maybe some 0:08:10.480 --> 0:08:12.360 strength forward the tech companies that are a little bit 0:08:12.400 --> 0:08:15.920 more consumer facing to maybe have you know, a decent, 0:08:15.960 --> 0:08:17.120 decent earning season still. 0:08:17.000 --> 0:08:20.760 Here, hey, gtha. On page three of the earnings release, 0:08:20.960 --> 0:08:23.520 they talk about engagement and competition, and there's this donut 0:08:23.600 --> 0:08:28.160 chart that shows that streaming now accounts for forty percent 0:08:28.760 --> 0:08:33.920 of US TV screen time. Still broadcasting cable account for 0:08:34.400 --> 0:08:35.640 more than forty percent. 0:08:35.760 --> 0:08:36.120 Together. 0:08:36.880 --> 0:08:39.920 Netflix and YouTube though, are the clear leaders when it 0:08:39.960 --> 0:08:43.640 comes here, everyone else they kind of leave in the dust. 0:08:43.640 --> 0:08:46.960 That's according to Nielsen. Who are they pulling? Who are 0:08:46.960 --> 0:08:48.680 they going to pull more share from? Or who do 0:08:48.720 --> 0:08:50.959 they need to pull more share from? Is it competition 0:08:51.520 --> 0:08:54.360 or is it the traditional cable and broadcast. 0:08:54.800 --> 0:08:57.320 It's a little bit of everybody. So you know, clearly 0:08:57.360 --> 0:09:00.320 we're seeing cord cutting. I mean, we've already seen thirty 0:09:00.400 --> 0:09:04.880 million subscribers leave the PayTV ecosystem. Where have they gone, Well, 0:09:04.880 --> 0:09:07.200 they've gone to Netflix, They've gone to Amazon Prime, they've 0:09:07.200 --> 0:09:09.400 gone to all of these other streaming services. But what 0:09:09.480 --> 0:09:12.160 is going to happen is all the competing services and 0:09:12.320 --> 0:09:15.520 Netflix raised prices. People are going to have to make 0:09:15.559 --> 0:09:17.640 a choice, and they are going to make that choice, 0:09:17.640 --> 0:09:20.360 and we think that default choice is going to be Netflix. 0:09:20.480 --> 0:09:22.920 So we're going to see their share kind of increase 0:09:22.960 --> 0:09:25.200 from the current eight percent or nine percent that it 0:09:25.280 --> 0:09:28.720 is and go higher, not only because people are moving 0:09:28.720 --> 0:09:33.559 from linear to streaming, but also moving within streaming, gravitating 0:09:33.600 --> 0:09:35.199 more towards Netflix and YouTube. 0:09:35.240 --> 0:09:38.680 All right, Keitha, ten seconds left here. This is a 0:09:38.720 --> 0:09:39.480 strong report. 0:09:39.520 --> 0:09:41.000 Good report. How do you describe it? 0:09:41.880 --> 0:09:44.760 I would say definitely a very strong report in terms 0:09:44.800 --> 0:09:48.160 of subscriber momentum. You know, they've kind of checked all 0:09:48.200 --> 0:09:49.000 the boxes. 0:09:48.640 --> 0:09:49.640 Here, all right, kind of run. 0:09:49.679 --> 0:09:52.320 Hey, Keitha, thank you so much of our Bloomberg Intelligence team, 0:09:52.320 --> 0:09:55.120 and of course our Bloomberg NER's Earnings reporter are Red Brown. 0:09:56.160 --> 0:09:59.599 You're listening to the Bloomberg Business Week podcast. Catch just 0:09:59.720 --> 0:10:02.960 Lie weekday afternoons from two to five pm Eastern Listen 0:10:03.040 --> 0:10:05.200 on Apple car Play and then brought auto with a 0:10:05.200 --> 0:10:09.360 Bloomberg Business app or watching us live on YouTube. 0:10:10.600 --> 0:10:13.439 Already though on our radar the eighty hours of nevarades 0:10:13.720 --> 0:10:15.520 that trade here in the United States dropping the most 0:10:15.520 --> 0:10:17.480 in more than three years. This is after sales of 0:10:17.520 --> 0:10:20.800 the company's closely watched prostate cancer drug disappointed in the 0:10:20.840 --> 0:10:23.840 latest quarter, taking the shine off of raised profit forecast 0:10:24.120 --> 0:10:27.079 from the Swiss pharma company, Nevada shares following as much 0:10:27.120 --> 0:10:30.679 as about three percent in trading that we've seen, trimming 0:10:30.679 --> 0:10:33.199 this year's gains to about fourteen percent after sales of 0:10:33.240 --> 0:10:34.920 the treatment fell short of analyst estimates. 0:10:34.960 --> 0:10:35.400 A lot to. 0:10:35.440 --> 0:10:38.280 Unpack here, so let's get to it with vas Narasimon. 0:10:38.360 --> 0:10:40.560 He is CEO of Novardies, joining us from the company's 0:10:40.600 --> 0:10:43.800 US headquarters in East Hanover, New Jersey. Boss, great to 0:10:43.800 --> 0:10:46.959 have you here on Bloomberg. Let's talk about the quarter. 0:10:47.200 --> 0:10:50.720 You reported profit that beat expectations, you raise your forecast, 0:10:51.040 --> 0:10:54.000 your shares are down. As we mentioned, we hear in 0:10:54.040 --> 0:10:56.360 the market that there are concerns about how long your 0:10:56.400 --> 0:10:59.120 growth driver, drugs will keep delivering. Why do you think 0:10:59.120 --> 0:11:01.840 that you're having a hard time winning the market. 0:11:01.559 --> 0:11:04.920 Over Yeah, Look, I think first it's really important to 0:11:04.920 --> 0:11:07.240 take a step back and see how well we've done 0:11:07.280 --> 0:11:09.960 over the recent years. When you look at our shares 0:11:10.040 --> 0:11:12.280 over a five to three year and even a year 0:11:12.320 --> 0:11:15.199 to day, we're really at place now where we've been 0:11:15.240 --> 0:11:17.680 trending at all time highs. So really today we've just 0:11:17.760 --> 0:11:20.000 given back a little bit of what we gain in 0:11:20.080 --> 0:11:24.079 the recent weeks, but still trading really really near all 0:11:24.120 --> 0:11:27.040 time highs for the company. I think, really demonstrating that 0:11:27.160 --> 0:11:30.880 investors are recognizing the outstanding performance we've had as we've, 0:11:31.320 --> 0:11:34.480 after one hundred billion dollars of transactions, focused into an 0:11:34.480 --> 0:11:38.319 innovative medicines pure play company that's allowed us to drive 0:11:38.360 --> 0:11:41.160 our sales growth in a dynamic way, increase our profit 0:11:41.200 --> 0:11:45.000 guidance today to even higher levels, and we feel really 0:11:45.040 --> 0:11:47.920 good now about the trajectory of the company coming out 0:11:47.920 --> 0:11:50.960 of the quarter when you look at it in the 0:11:50.960 --> 0:11:53.640 next five years, we've committed to grow five percent plus 0:11:53.679 --> 0:11:56.200 and we have the growth drivers in hand to deliver that. 0:11:56.559 --> 0:11:59.240 We also have committed to be a forty percent margin 0:11:59.240 --> 0:12:02.720 plus company, and we're already at forty percent margin today, 0:12:03.200 --> 0:12:05.280 so we're delivering against what we said we're going to 0:12:05.360 --> 0:12:05.920 do now. 0:12:05.920 --> 0:12:08.000 I think one of the things we learned today. 0:12:07.760 --> 0:12:09.959 Is it's just really important that every one of these 0:12:10.000 --> 0:12:13.439 growth drivers hit their targets. Plu Victo's a little bit behind, 0:12:13.600 --> 0:12:15.720 but we believe that in the long run we're on 0:12:15.760 --> 0:12:18.600 the right trajectory. This will be a multi billion dollar drug, 0:12:18.640 --> 0:12:21.680 and more importantly for US radio ligen therapy, this whole 0:12:21.720 --> 0:12:24.880 class of medicines we're working on could be a significant 0:12:25.080 --> 0:12:27.720 fifteen to twenty billion dollar area that we can build 0:12:27.800 --> 0:12:28.280 over time. 0:12:28.520 --> 0:12:30.840 Pluvicto, let's just go there, because that seems to be 0:12:31.000 --> 0:12:33.600 what maybe is putting so much pressure on the share price. 0:12:33.600 --> 0:12:36.120 The eightyr is down more than four percent as we 0:12:36.120 --> 0:12:38.920 seek that is your prostate cancer drug. You did or 0:12:38.960 --> 0:12:41.000 you seem to have rain did some of the optimism 0:12:41.160 --> 0:12:43.880 over it. The CFO telling reporters this morning that that 0:12:43.960 --> 0:12:46.760 next dynamic boost in sales probably won't come until the 0:12:46.840 --> 0:12:48.200 drug tests a broader label. 0:12:48.720 --> 0:12:51.720 So I am curious, are you guys raining in the optimism? 0:12:51.760 --> 0:12:55.080 What are you doing to rein in or excuse me 0:12:55.160 --> 0:12:57.480 not to Radium but to win over physicians to that 0:12:57.559 --> 0:12:59.319 medicine in particular. 0:13:00.440 --> 0:13:03.160 We're certainly not ranting in our optimism on PLAVICTI. I 0:13:03.160 --> 0:13:06.480 think what we're trying to articulate is right now we're 0:13:06.480 --> 0:13:08.160 on a run rate if you look at it in 0:13:08.200 --> 0:13:10.200 the US, of around one point two to one point 0:13:10.240 --> 0:13:11.800 three billion. We're going to add a couple of one 0:13:11.880 --> 0:13:15.280 hundred million overseas. And we always knew in this first 0:13:15.280 --> 0:13:17.720 indication we were going to reach a max of around 0:13:17.720 --> 0:13:19.880 two billion dollars. Now, the speed at which we're going 0:13:19.920 --> 0:13:22.160 to get that ramp is a little bit slower than 0:13:22.200 --> 0:13:24.600 what we've expected from that one point four to one 0:13:24.600 --> 0:13:27.120 point five level up to the two billion dollar level. 0:13:27.280 --> 0:13:29.439 It may take us a little bit longer, mostly because 0:13:29.440 --> 0:13:31.920 in the US now we have to get this medicine 0:13:32.120 --> 0:13:35.560 more broadly available with community oncology, which will take us 0:13:35.559 --> 0:13:35.960 some time. 0:13:36.200 --> 0:13:37.240 We're making those steps. 0:13:37.280 --> 0:13:39.559 We have over four hundred and fifty centers not providing 0:13:39.559 --> 0:13:42.480 the medicine. But what that's really importantly going to do 0:13:42.679 --> 0:13:45.280 is build the base which allows us when we triple 0:13:45.360 --> 0:13:48.280 the size of the population we can address next year, 0:13:48.400 --> 0:13:51.160 we hope with the approval of our next indication we'll 0:13:51.160 --> 0:13:54.000 see another ramp in the sales again towards a multi 0:13:54.000 --> 0:13:56.839 billion dollar medicine that we think will drive our growth 0:13:56.880 --> 0:13:58.520 through this decade and. 0:13:58.440 --> 0:13:59.760 Into the next decade. 0:14:00.040 --> 0:14:02.520 So I think we just want to be realistic that 0:14:02.600 --> 0:14:05.120 getting to that next phase in our first syndication is 0:14:05.160 --> 0:14:06.800 going to take time because we have to get into 0:14:06.800 --> 0:14:09.280 the community. But once we do that, we'll have built 0:14:09.280 --> 0:14:13.160 the foundation for all our future launches with radio ligend therapies. 0:14:13.320 --> 0:14:15.880 Okay, well, speaking of the next phase, let's talk about Kiskali, 0:14:16.040 --> 0:14:19.560 the breast cancer drug for early breast cancer, because analysts 0:14:19.600 --> 0:14:22.080 have pointed to a three month delay and FDA approval 0:14:22.080 --> 0:14:25.200 for it. So how confident are you, Voss that you'll 0:14:25.240 --> 0:14:27.760 win this approval in the second half for a broad 0:14:27.800 --> 0:14:28.600 group of patients. 0:14:29.840 --> 0:14:30.760 We're very confident. 0:14:30.800 --> 0:14:33.080 I mean right now with the FDA, we've submitted some 0:14:33.160 --> 0:14:35.960 manufacturing adjustments that we agreed that we needed to make. 0:14:36.280 --> 0:14:39.720 We've submitted the stability data which they always ask for 0:14:39.800 --> 0:14:42.480 when you make manufacturing changes, and we have a three 0:14:42.480 --> 0:14:45.560 month clock extension. Now it's important to note with Kiskali, 0:14:46.000 --> 0:14:50.200 we were already on what's called a priority review timeline, So. 0:14:50.200 --> 0:14:51.280 Now we've added three months. 0:14:51.360 --> 0:14:54.040 All it does is put Kiskalie back into a normal 0:14:54.240 --> 0:14:57.240 drug approval timeline, and we believe we're not going to 0:14:57.280 --> 0:14:59.440 get the approval, but everything that we've seen suggests we 0:14:59.480 --> 0:15:01.920 will get the odd label. And I think importantly what 0:15:01.960 --> 0:15:04.800 we announced this morning is we've seen that longer follow 0:15:04.920 --> 0:15:08.480 up data that continues to show the positive impact cascale 0:15:08.560 --> 0:15:12.160 is having for patients of all subtypes of early breast cancer, 0:15:12.240 --> 0:15:15.360 along with an outstanding safety profile. So we believe this 0:15:15.440 --> 0:15:18.400 will be a very significant medicine. We've guided to four 0:15:18.440 --> 0:15:21.400 billion plus in the metastatic setting, three billion plus in 0:15:21.440 --> 0:15:24.880 the early breast cancer setting, so at least seven billion dollars, 0:15:24.920 --> 0:15:27.160 and certainly if we continue to see the data of 0:15:27.240 --> 0:15:29.280 all as nicely as it has, it could be much 0:15:29.280 --> 0:15:32.120 bigger than that. So we're really excited about it. We're 0:15:32.120 --> 0:15:34.600 going to get that approval, we hope, in Q three, 0:15:34.720 --> 0:15:35.720 and then we'll take it from there. 0:15:35.840 --> 0:15:39.000 All right, you know better than most everybody is so 0:15:39.400 --> 0:15:42.320 into the GLP one diet drugs, and you did mention 0:15:43.080 --> 0:15:45.080 on the analysts call that no Artists is working on 0:15:45.080 --> 0:15:48.440 a next generation of b CD projects not advanced yet 0:15:48.480 --> 0:15:49.760 to patient trials yet. 0:15:50.080 --> 0:15:51.920 Are you willing to do now. 0:15:51.880 --> 0:15:55.160 Maybe a significant deal to a more advanced pipeline in 0:15:55.200 --> 0:15:58.040 this area, maybe to give no artists a more competitive position. 0:15:58.160 --> 0:15:59.360 Roasted one last fall. 0:16:00.120 --> 0:16:02.400 It looks like it was a pretty smart move, roasted 0:16:02.480 --> 0:16:04.880 very well yesterday and kind of awaken the market once 0:16:04.880 --> 0:16:07.800 again for the diet drugs. What about you guys and 0:16:07.800 --> 0:16:08.520 your strategy. 0:16:09.680 --> 0:16:11.160 Yeah, we've looked really closely at this. 0:16:11.240 --> 0:16:14.880 I mean, we've been in cardiovascular disease for many decades, 0:16:14.960 --> 0:16:18.120 really one of the largest cardiovascular medicines companies in the 0:16:18.160 --> 0:16:22.120 world consistently over time, and our view is that the 0:16:22.640 --> 0:16:25.720 current wave of therapies, there are many companies out there. 0:16:25.760 --> 0:16:28.800 You have two very large incumbents that are already doing well, 0:16:29.120 --> 0:16:32.640 a number of companies chasing them on the injectable GLP 0:16:32.760 --> 0:16:36.120 one or GLP one combinations, and then you have oral 0:16:36.240 --> 0:16:38.720 drugs and you have a number of companies with oral 0:16:38.800 --> 0:16:41.720 GLP ones. You know in my experience that when you 0:16:41.760 --> 0:16:44.560 have situations where it looks to be relatively easy for 0:16:44.680 --> 0:16:47.320 many companies to come into space, you're going to get 0:16:47.320 --> 0:16:50.920 payer pressure, You're going to get very difficult competitive dynamics, 0:16:51.000 --> 0:16:53.840 You're going to get rebate dynamics, particularly in the US, 0:16:54.240 --> 0:16:55.680 and so when we looked at that, and when we 0:16:55.680 --> 0:16:57.680 look at these these deals, we think to play the 0:16:57.720 --> 0:16:59.720 long game and actually say, where can we bring really 0:16:59.760 --> 0:17:04.000 differentiated medicines, medicines that could hopefully add something new less 0:17:04.080 --> 0:17:08.639 frequent dosing, maybe a better tolerability profile, maybe better muscle 0:17:08.720 --> 0:17:12.320 sparing attributes. And so that's where we've decided to focus 0:17:12.640 --> 0:17:15.960 our energy. I'm sure you will hear every month on 0:17:16.040 --> 0:17:20.440 your broadcast about another GLP one or another oral GLP 0:17:20.520 --> 0:17:23.359 one or GIP one that's come out, But that's really 0:17:23.600 --> 0:17:26.520 indicating that this market is getting extremely crowded. And I 0:17:26.520 --> 0:17:29.040 think in our sector, the companies that win are the 0:17:29.040 --> 0:17:33.800 ones that find differentiated positions with really important medicines that 0:17:33.840 --> 0:17:35.200 can replace the standard of care. 0:17:35.480 --> 0:17:37.159 And that's where we're focusing our energy. 0:17:37.280 --> 0:17:39.560 Well, what would you say to investors who may say 0:17:39.600 --> 0:17:42.600 that you're missing out right now on something that is 0:17:42.760 --> 0:17:45.879 obviously turning out to be pretty huge and that you 0:17:45.960 --> 0:17:48.359 know sooner than later would be better to get a 0:17:48.359 --> 0:17:49.399 competitor in the space. 0:17:50.720 --> 0:17:52.520 Yeah, I think when you look at it, most of 0:17:52.560 --> 0:17:55.199 the drugs we talk about, even the ones that have 0:17:55.240 --> 0:17:57.040 been recently in the news, are going to be launching 0:17:57.080 --> 0:17:59.520 at the end of this decade. So I think you 0:17:59.520 --> 0:18:03.040 have to step rate investor reaction to the realities of 0:18:03.480 --> 0:18:07.840 launching medicines in our industry and developing them. And so 0:18:08.359 --> 0:18:10.120 you know, I would say I think most long run 0:18:10.119 --> 0:18:12.919 investors who understand our sector would know it's prudent to 0:18:12.960 --> 0:18:15.240 think about what is the world going to look like 0:18:15.560 --> 0:18:18.440 in twenty twenty nine, twenty thirty, twenty thirty one, when 0:18:18.480 --> 0:18:21.160 a medicine that's in phase one finally comes to market, 0:18:21.359 --> 0:18:23.520 and ask yourself what would put you in a position 0:18:23.600 --> 0:18:27.119 to win at that point in time. And that's the strategy. 0:18:27.200 --> 0:18:29.240 You know, we're thinking here, it's easy. We've had it 0:18:29.240 --> 0:18:32.280 in the past with immunooncology, and that time we piled in. 0:18:32.320 --> 0:18:35.760 We did a number of deals in amunooncology that didn't 0:18:35.800 --> 0:18:37.879 work out so well. And I wonder also when you 0:18:37.920 --> 0:18:40.760 do that, you crowd out other innovation within your R 0:18:40.800 --> 0:18:44.320 and D portfolio. So rather focus on places where we 0:18:44.400 --> 0:18:48.119 have differentiation we can win, rather than being now, what 0:18:48.280 --> 0:18:51.080 might be the fourth or fifth or sixth oral of 0:18:51.080 --> 0:18:56.440 obesity first class drug or maybe the seventh or eighth 0:18:56.480 --> 0:18:57.399 injectable drug. 0:18:57.640 --> 0:19:00.480 I don't think that's a good use of our capital made. 0:19:00.359 --> 0:19:02.199 To mention to what the world you know, kind of 0:19:02.240 --> 0:19:04.639 looks like going forward. And I am curious your CFO 0:19:04.840 --> 0:19:09.280 on the call post earnings did talk about US China relations. 0:19:09.920 --> 0:19:12.720 And you know, no matter what the political scenarios are, 0:19:12.880 --> 0:19:16.560 what do you think the environment looks like for Big 0:19:16.600 --> 0:19:21.639 Pharma the business environment post the November US presidential elections? 0:19:21.680 --> 0:19:23.679 Does it matter who is in the White House? And 0:19:23.760 --> 0:19:25.000 just got about a minute here. 0:19:25.880 --> 0:19:28.359 Yeah, I think first, you know, we're you know, not 0:19:28.400 --> 0:19:31.600 taking sides with respect to the election. Most importantly, we 0:19:31.640 --> 0:19:34.640 need better policies in the United States to support innovation 0:19:35.160 --> 0:19:36.520 and support patient access. 0:19:36.600 --> 0:19:37.080 We think the. 0:19:37.040 --> 0:19:40.280 IRA is a flawed policy for at least the healthcare portions. 0:19:40.520 --> 0:19:42.680 We need to fix nine to thirteen. We need to 0:19:42.760 --> 0:19:46.800 keep addressing out of pocket by fixing the PBM situation, 0:19:46.960 --> 0:19:49.320 fixing other legislative areas like the three point forty B 0:19:49.480 --> 0:19:53.760 program that's on the US side, and hopefully whichever administration 0:19:53.880 --> 0:19:56.879 and constellational government is there takes that head on to 0:19:56.960 --> 0:20:00.040 create the right innovation ecosystem for the long run. And 0:20:00.040 --> 0:20:02.560 then I think we're obviously want free trade. We believe 0:20:02.920 --> 0:20:06.080 our ability to provide medicines around the globe is absolutely critical. 0:20:06.359 --> 0:20:08.480 China is a very important market for US, we grow 0:20:08.480 --> 0:20:11.600 double digit, but also Japan and Europe, and so we're 0:20:11.640 --> 0:20:14.479 hopeful that we can keep shaping policies that recognize that 0:20:14.480 --> 0:20:18.040 ours is a very global industry. Healthcare is a global area, 0:20:18.119 --> 0:20:20.639 and we need policies that enable us to work freely 0:20:20.680 --> 0:20:22.720 around the globe to bring our medicines to as many 0:20:22.760 --> 0:20:23.800 patients as possible. 0:20:25.040 --> 0:20:27.680 Boss, So appreciate your time today. Thank you so much, 0:20:27.840 --> 0:20:30.760 Really appreciate it. Bos Narasimon. He's the CEO of Novartist, 0:20:30.840 --> 0:20:33.879 joining us from their headquarters in the United States in 0:20:33.960 --> 0:20:35.440 East Hanover at New Jersey. 0:20:37.480 --> 0:20:41.359 You're listening to the Bloomberg Business Week podcast. Listen live 0:20:41.440 --> 0:20:44.239 each weekday starting at two pm Eastern on Apple car 0:20:44.359 --> 0:20:47.320 Play and ANDROYD Auto with the Bloomberg Business app. You 0:20:47.359 --> 0:20:50.639 can also listen live on Amazon Alexa from our flagship 0:20:50.680 --> 0:20:54.480 New York station just Say Alexa playing Bloomberg eleven thirty. 0:20:56.200 --> 0:20:58.080 We also post had an IPO today. 0:20:58.160 --> 0:21:01.840 Ardenhell Partners began trading around twelve thirty eight pm Wall 0:21:01.840 --> 0:21:04.960 Street time, the stock opening at fourteen dollars a share. 0:21:05.320 --> 0:21:07.600 It was a red sticky I think on the Bloomberg 0:21:08.080 --> 0:21:10.600 opening at fifteen dollars a year, was below its IPO price. 0:21:11.000 --> 0:21:11.879 Just some numbers for you. 0:21:11.920 --> 0:21:14.199 The company raising one hundred and ninety two million in 0:21:14.240 --> 0:21:17.280 that IPO, shrinking the size of the share sale, pricing 0:21:17.320 --> 0:21:20.600 it below a marketed range, so selling twelve million shares 0:21:21.280 --> 0:21:22.440 for sixteen dollars each. 0:21:22.480 --> 0:21:23.240 This was yesterday. 0:21:23.680 --> 0:21:26.040 They had marketed about fourteen point three million shares for 0:21:26.080 --> 0:21:27.400 twenty to twenty two apiece. 0:21:27.720 --> 0:21:28.640 I'm looking at the stock. 0:21:28.680 --> 0:21:30.679 It is lower in the trade, but we're looking at 0:21:30.680 --> 0:21:33.080 a market captain of about two point two billion dollars. 0:21:33.200 --> 0:21:35.360 Okay, So let's get more on the business, on the outlook, 0:21:35.359 --> 0:21:37.480 and of course the IPO with the president and CEO 0:21:37.480 --> 0:21:40.600 of Ardent Health, owner of thirty hospitals in eight markets, 0:21:40.640 --> 0:21:43.560 six different states, and many more sites of care, a 0:21:43.560 --> 0:21:45.880 couple hundred of them. Actually, we got Marty Botnik here 0:21:46.040 --> 0:21:48.359 in our studio. Marty, good to have you. First of all, 0:21:48.400 --> 0:21:52.640 congratulations on the IPO. This day a long long time coming. 0:21:52.440 --> 0:21:53.800 For you and the team. Thank you. 0:21:53.800 --> 0:21:55.399 You know, I'm delighted to be here and it's an 0:21:55.400 --> 0:21:58.240 exciting day for our company. And most importantly, the twenty 0:21:58.280 --> 0:22:00.840 four thousand team members. We have caring patients across the 0:22:00.960 --> 0:22:02.240 United States. So it's a great day. 0:22:02.280 --> 0:22:02.600 Thank you. 0:22:02.960 --> 0:22:06.320 Carol mentioned the reception not ideal on an IPO day 0:22:06.359 --> 0:22:08.280 when you see a share price fall when it starts 0:22:08.280 --> 0:22:09.040 to trade. 0:22:09.119 --> 0:22:10.359 The market is down overall. 0:22:10.440 --> 0:22:12.520 So yeah, to be fair, the market is down overall. 0:22:13.080 --> 0:22:15.800 But give us your thoughts around that in the way 0:22:15.800 --> 0:22:17.400 that it's been received, at least on the first day. 0:22:17.680 --> 0:22:17.880 Yeah. 0:22:17.920 --> 0:22:20.280 Now, we're really excited about the future of this company. 0:22:20.320 --> 0:22:23.199 We've got a strong balance sheet, modest leverage, and a 0:22:23.200 --> 0:22:25.800 strong growth profile that we're confident in the future in 0:22:25.920 --> 0:22:28.200 And so this is something that you know, this is 0:22:28.240 --> 0:22:31.440 a long journey. I'm an endurance athlete and I tell 0:22:31.480 --> 0:22:33.320 my team all the time that this is a marathon, 0:22:33.359 --> 0:22:35.040 not a sprint, and any one day is not going 0:22:35.080 --> 0:22:37.119 to make or break our training. And that's how we 0:22:37.160 --> 0:22:38.800 think this. This is the starting point of a new 0:22:38.880 --> 0:22:39.600 journey from this company. 0:22:39.640 --> 0:22:41.000 We'll speak about endurance. 0:22:41.040 --> 0:22:43.520 Right the second time you guys filed for IPO, did 0:22:43.520 --> 0:22:47.080 it in twenty eighteen you withdrew in twenty twenty? Was 0:22:47.080 --> 0:22:49.960 it much much better market conditions to do it now? 0:22:50.359 --> 0:22:52.320 Well, we've been preparing for this for years and I 0:22:52.320 --> 0:22:54.240 don't believe you can ever time the market. That's not 0:22:54.280 --> 0:22:55.760 what we were trying to do. We've got a great 0:22:55.800 --> 0:22:58.480 company that's poised for growth, and so we were really 0:22:58.520 --> 0:23:00.000 making sure that we can come out of the market 0:23:00.119 --> 0:23:02.280 is a strong public company and we know that the 0:23:02.320 --> 0:23:04.760 performance and the growth trajector we have is going to 0:23:04.800 --> 0:23:05.720 set us up for the future. 0:23:05.800 --> 0:23:07.240 So the market conditions had nothing. 0:23:07.040 --> 0:23:07.600 To do with it. 0:23:07.920 --> 0:23:11.639 Now, we really see the tapping the IPO market as 0:23:11.680 --> 0:23:14.400 a currency for our future growth and that's what we're 0:23:14.400 --> 0:23:15.040 focused on. 0:23:15.560 --> 0:23:19.880 There have only been five healthcare services IPOs so far 0:23:19.920 --> 0:23:24.600 this year, including yours, so there aren't that many of them. 0:23:25.119 --> 0:23:27.480 Why is now the right time to go public? And 0:23:27.520 --> 0:23:29.359 also how do you differentiate yourself out there? 0:23:29.840 --> 0:23:31.960 Yeah, So for us, we always said we will go 0:23:32.000 --> 0:23:34.080 public when we're ready, and we are ready. Our team 0:23:34.080 --> 0:23:36.560 has been working relentlessly to prepare for this moment. We're 0:23:36.600 --> 0:23:38.600 going to be a strong public company and we said 0:23:38.640 --> 0:23:41.080 we'll go ready when it's time for us to grow, 0:23:41.400 --> 0:23:43.720 and we know that the markets right now are ripe. 0:23:43.840 --> 0:23:46.080 We've got a lot of inbound interest based upon the 0:23:46.160 --> 0:23:48.879 joint venture partnerships and the markets that we're in to 0:23:48.960 --> 0:23:52.000 continue to build, and we've got multiple growth strategies. 0:23:51.520 --> 0:23:51.840 To do that. 0:23:52.240 --> 0:23:54.919 Marty, talk about the markets you're in. What is the strategy, 0:23:54.960 --> 0:23:57.760 because my understanding is you're very much in a Q 0:23:57.960 --> 0:24:02.639 care mid sized urban markets, growing populations. Explain kind of 0:24:02.680 --> 0:24:04.600 the thesis for the growth trajectory. 0:24:04.680 --> 0:24:08.000 Yeah, we operate in mid sized urban communities and we 0:24:08.040 --> 0:24:10.960 go really deep into those communities. Hospitals are obviously the 0:24:11.280 --> 0:24:14.359 front door of what people see, but every day we 0:24:14.440 --> 0:24:17.359 see twenty times more patients in our outpatient clinics than 0:24:17.400 --> 0:24:19.639 we do our hospitals, and so we really believe in 0:24:19.640 --> 0:24:23.639 building an ecosystem of care around the person. As the patient, 0:24:23.720 --> 0:24:26.399 as a person and a consumer, they have choice and 0:24:26.440 --> 0:24:28.760 so not everybody has to come to the hospital for care. 0:24:29.000 --> 0:24:31.639 We want to have an ecosystem that provides for that 0:24:31.720 --> 0:24:32.240 care wherever. 0:24:32.280 --> 0:24:34.159 And however, they needed explain a little bit more the 0:24:34.200 --> 0:24:35.840 reason we are, you know, I want to ask that 0:24:35.920 --> 0:24:38.199 Tim and I had a great conversation with a doctor 0:24:39.240 --> 0:24:42.840 at a public health hospital, public hospital, i should say, 0:24:42.880 --> 0:24:45.800 in San Francisco, and talked a lot about the pressure 0:24:45.840 --> 0:24:47.680 on doctors in the medical community to kind of get 0:24:47.680 --> 0:24:50.159 through their patients quickly and as a result, they're not 0:24:50.320 --> 0:24:51.400 talking to their patients. 0:24:51.560 --> 0:24:53.000 What does it mean when you say. 0:24:52.880 --> 0:24:55.520 You want to develop the care around a patient when 0:24:55.720 --> 0:24:58.840 we've all experienced out and out. I can't even get 0:24:58.880 --> 0:25:01.280 appointments that doctors, we'll call me back in six months 0:25:01.359 --> 0:25:03.760 or have aout an appointment six months. How do you 0:25:03.880 --> 0:25:06.760 develop care around a patient when there's a lot of 0:25:06.760 --> 0:25:07.840 stress points right now? 0:25:08.080 --> 0:25:09.680 Yeah, no, it's a great question. I'll give you a 0:25:09.720 --> 0:25:12.359 personal antidote. I was training for an iron man and 0:25:12.400 --> 0:25:14.000 I got hit by a car. So I got to 0:25:14.040 --> 0:25:15.640 be a patient for the first time. 0:25:16.359 --> 0:25:17.160 Cycling wow. 0:25:17.440 --> 0:25:18.919 And so I got to be a patient for the 0:25:18.960 --> 0:25:21.680 first time probably in my career outside of a clinic 0:25:21.800 --> 0:25:23.959 visit or something. And what I realized is we have 0:25:24.080 --> 0:25:27.480 really great caregivers in this industry, and we have challenging 0:25:27.560 --> 0:25:31.040 systems and processes, and this industry hasn't always catered to 0:25:31.080 --> 0:25:33.960 people's input, or their money or their time, and so 0:25:34.040 --> 0:25:36.200 at aren't putting the patient at the center of everything 0:25:36.240 --> 0:25:38.639 that we do. Has become our north star, and so 0:25:38.920 --> 0:25:42.160 we're creating that ecosystem that we want to embrace technology 0:25:42.359 --> 0:25:44.880 to make it easier for our caregivers to deliver care 0:25:44.920 --> 0:25:47.399 to those patients and safer and more effective for patients 0:25:47.440 --> 0:25:50.320 to receive it. So that is a really big portion 0:25:50.400 --> 0:25:52.080 of our strategy and how we go at it. 0:25:52.320 --> 0:25:53.120 How do you do it? 0:25:53.200 --> 0:25:55.399 And then as a publicly held company where you know, 0:25:55.600 --> 0:25:57.439 Tim and I and everybody's going to be watching those 0:25:57.520 --> 0:26:00.600 quarterly reports, how do you balance making sure you provide 0:26:00.600 --> 0:26:05.080 that care and really put the patient first, but also 0:26:05.119 --> 0:26:07.800 you've got to be a profitable company and we're all 0:26:07.800 --> 0:26:08.480 watching well. 0:26:08.520 --> 0:26:11.040 I mean, having great people is the start of it. 0:26:11.240 --> 0:26:15.000 And our chief medical officer always says creating good process 0:26:15.080 --> 0:26:17.840 workflows lead to good clinical outcomes, which lead to good 0:26:17.840 --> 0:26:20.880 financial outcomes. I've been doing this for over twenty five years, 0:26:20.920 --> 0:26:22.920 and what I've always said is that if we take 0:26:23.000 --> 0:26:26.120 care of the patient, provide good service, good quality, good safety, 0:26:26.240 --> 0:26:28.800 the finances won't follow. And that's what we've seen. 0:26:29.359 --> 0:26:30.760 I want to go back to that anecdote that you 0:26:30.760 --> 0:26:34.480 shared about becoming a patient because you know, obviously we're 0:26:34.760 --> 0:26:37.439 glad that that wasn't a worse outcome because that can 0:26:37.480 --> 0:26:40.000 be really bad when a cyclist is hit by a car. Obviously, 0:26:40.720 --> 0:26:44.960 but how did that specifically change the way that you're 0:26:44.960 --> 0:26:47.840 doing business? Like what changes did you make as a 0:26:47.840 --> 0:26:49.399 result of becoming a patient. 0:26:49.600 --> 0:26:49.800 Yeah. 0:26:50.000 --> 0:26:51.919 I told that story, which we don't have time to 0:26:51.920 --> 0:26:54.359 get into, to our entire leadership, and I said, this 0:26:54.520 --> 0:26:57.199 is an opportunity. My wife said, God gave me a 0:26:57.200 --> 0:27:00.080 second chance to be here and do something with that. 0:27:00.200 --> 0:27:03.160 And so, whether it was banned the clipboards in terms 0:27:03.160 --> 0:27:05.640 of making it easier for patients to get into our clinics, 0:27:06.000 --> 0:27:08.959 focusing on technology that again is going to allow our 0:27:09.040 --> 0:27:11.520 nurses to be able to provide more effective care. You know, 0:27:11.560 --> 0:27:14.359 we're not immune from the headwinds that this industry has faced. 0:27:14.400 --> 0:27:17.560 There's been a lot of turnover and nursing physician burnout 0:27:17.600 --> 0:27:20.600 issues that you were talking about, Caro, Yes, and so 0:27:20.640 --> 0:27:23.399 we are just embracing technology to make that easier for 0:27:23.400 --> 0:27:24.040 our consumers. 0:27:24.040 --> 0:27:24.639 We think about it. 0:27:24.680 --> 0:27:27.160 I can control my whole world from my iPhone no 0:27:27.200 --> 0:27:29.880 matter where I'm at, but in healthcare it's always been 0:27:29.880 --> 0:27:30.720 a challenge. 0:27:30.440 --> 0:27:32.200 We call necessarily hippo compliant. 0:27:32.280 --> 0:27:34.720 Yeah, Well, you call somebody, you go through a phone tree, 0:27:34.760 --> 0:27:36.959 you get disconnected or rerouted. So we want to make 0:27:36.960 --> 0:27:38.800 it easy for people to access our system. 0:27:38.840 --> 0:27:42.040 They're still using facts to send and CD ROMs for MRIs, 0:27:42.240 --> 0:27:43.159 for example. 0:27:42.800 --> 0:27:45.439 And so we've introduced virtual nursing, if you know, bringing 0:27:45.480 --> 0:27:47.600 more nurses to the bedside to help take care of 0:27:47.600 --> 0:27:51.280 the more detailed, cumbersome, time consuming tasks, so our nurses 0:27:51.320 --> 0:27:53.919 at the bedside can go and address acute emergencies for 0:27:54.040 --> 0:27:57.520 the patient. And so being very thoughtful and thoughtical about 0:27:57.560 --> 0:28:01.200 how we are embracing technology, importing our team members and 0:28:01.520 --> 0:28:04.040 creating good retention. That's what this is about. 0:28:04.119 --> 0:28:06.119 What do you do with the IPO proceeds? What's the 0:28:06.440 --> 0:28:08.880 focus for a lot of investing going forward right now? 0:28:09.000 --> 0:28:11.439 Yeah, No, we are a company that's poised for growth. 0:28:11.440 --> 0:28:14.200 We have built a scalable platform that we know is 0:28:14.240 --> 0:28:16.280 in demand. You know that there's still a lot of 0:28:16.280 --> 0:28:19.000 hospital struggling. We've had a lot of inbound interest in 0:28:19.119 --> 0:28:22.320 terms of expanding our footprint, and so these proceeds are 0:28:22.640 --> 0:28:24.600 to help fuel the next round of growth as we 0:28:24.640 --> 0:28:26.840 grow into new communities and continue to invest in the 0:28:26.840 --> 0:28:28.080 communities that we're in today. 0:28:28.520 --> 0:28:31.560 Equity Group Investments is the majority owner of an affiliate 0:28:31.600 --> 0:28:34.320 of Equity Group Investments, I should say, and they're going 0:28:34.359 --> 0:28:36.760 to continue to hold the majority shareholder voting power. Just 0:28:36.840 --> 0:28:40.760 very briefly, twenty seconds, does that give you more freedom 0:28:40.840 --> 0:28:41.800 or does it constrain you. 0:28:42.400 --> 0:28:44.560 Equity Group has been a great partner. They've been part 0:28:44.560 --> 0:28:47.040 of us for nine years and for this audience, which 0:28:47.080 --> 0:28:48.840 I know Sam Zel I wish he could have been 0:28:48.840 --> 0:28:51.080 here to celebrate with us today. This would have been 0:28:51.120 --> 0:28:53.760 his fourteenth company that when public Key had that vision 0:28:53.800 --> 0:28:56.040 for us. And so they're a great partner and we'll 0:28:56.080 --> 0:28:58.240 continue to see us grow. We've doubled the size of 0:28:58.240 --> 0:29:00.400 the company since they've been a part of us, and 0:29:00.440 --> 0:29:01.880 we're going to continue on that trajectory. 0:29:01.920 --> 0:29:03.400 All right, good leave it on that note, look forward 0:29:03.400 --> 0:29:05.080 to hearing more in the future. Thank you so much 0:29:05.120 --> 0:29:07.959 for coming in the presidency of Ardent Health. Marty Botnik 0:29:08.040 --> 0:29:10.960 joining us in studio. As we mentioned an IPO today, 0:29:11.000 --> 0:29:13.440 it's first day of trading. Stockdown right now just about 0:29:13.440 --> 0:29:15.160 two and a half percent. Will continue to track it 0:29:15.200 --> 0:29:15.920 into the clothes. 0:29:16.680 --> 0:29:20.200 You're listening to the Bloomberg Business Week podcast. Catch us 0:29:20.240 --> 0:29:23.480 live weekday afternoons from two to five pm Eastern Listen 0:29:23.520 --> 0:29:25.680 on Apple card Play and then brut Auto with a 0:29:25.680 --> 0:29:28.680 Bloomberg Business act or watch us live on YouTube. 0:29:30.000 --> 0:29:30.760 You know, our. 0:29:30.640 --> 0:29:33.800 Focus is certainly the RNC. Donald Trump is set to 0:29:33.800 --> 0:29:36.800 address his party tonight for the first time since officially 0:29:36.800 --> 0:29:41.080 becoming the presidential nominee and surviving an assassination attempt, with 0:29:41.120 --> 0:29:43.520 a speech aimed at uniting Republicans and his campaign to 0:29:43.600 --> 0:29:45.280 defeat President Joe Biden. 0:29:45.520 --> 0:29:48.200 Meantime, President Biden faces a growing drumbeat of calls from 0:29:48.240 --> 0:29:51.280 lawmakers for him to stand aside, with The Washington Post 0:29:51.280 --> 0:29:54.800 reporting today that former President Barack Obama has told allies 0:29:54.840 --> 0:29:57.640 that Biden needs to consider his viability as a candidate. 0:29:57.800 --> 0:30:00.280 Margaret Tealov is the director of Institute for dem Cristy, 0:30:00.360 --> 0:30:04.560 Journalism and citizens Citizenship at Syracuse University. She's been on 0:30:04.600 --> 0:30:07.600 the ground in Milwaukee. She is also a former colleague 0:30:07.640 --> 0:30:11.240 Senior White House correspondent for Bloomberg News and contributes to Axis. 0:30:11.240 --> 0:30:13.840 She joins us from the RNC Milwaukee. Margaret's so great 0:30:13.840 --> 0:30:14.760 to have you here with us. 0:30:14.800 --> 0:30:15.280 How are you. 0:30:16.720 --> 0:30:19.080 Thanks, It's so great to be back home as it were. 0:30:20.160 --> 0:30:22.440 I'm doing great, but this has been an exhausting week. 0:30:22.520 --> 0:30:26.440 As you can imagine what this seemed like, sort of 0:30:26.480 --> 0:30:33.000 the most least action filled election here for so many 0:30:33.320 --> 0:30:36.360 months was like, Okay, we know Donald Trump, we know 0:30:36.480 --> 0:30:39.040 Joe Biden. We know the contours of this race. It's 0:30:39.040 --> 0:30:42.920 about turn out. What else could happen? That's every reporter's mistake. 0:30:42.960 --> 0:30:45.720 In the last three weeks, we've seen a complete turn 0:30:45.760 --> 0:30:49.400 of fortune. Donald Trump and his followers here at the 0:30:49.440 --> 0:30:52.000 convention feel that all the winds favor him now, and 0:30:52.040 --> 0:30:54.680 so you see a tremendous amount of almost jubilation and 0:30:54.840 --> 0:30:58.400 enthusiasm in the convention hall. At least these folks think 0:30:58.600 --> 0:31:00.760 it's now his race to lose. 0:31:00.920 --> 0:31:02.920 Yeah, it's hard not to feel whipsaw the headlines. 0:31:02.960 --> 0:31:04.720 It feels like of the last couple of weeks changing 0:31:04.840 --> 0:31:08.360 very dramatically, you know, post the debate with Joe Biden 0:31:08.520 --> 0:31:11.520 and a really tough showing there, and of course the 0:31:11.560 --> 0:31:14.760 assassination attempt on Donald Trump, and then of course just 0:31:14.800 --> 0:31:17.440 the momentum that we're seeing at the RNC. Having said that, 0:31:17.480 --> 0:31:20.360 are you getting ready to be whipsawd again in terms 0:31:20.360 --> 0:31:24.160 of maybe Joe Biden stepping aside at least for the 0:31:24.200 --> 0:31:26.360 next run here it come November. 0:31:28.360 --> 0:31:29.960 We might very well. I think we all need to 0:31:30.040 --> 0:31:32.520 be prepared for any contingency. What we're hearing here on 0:31:32.560 --> 0:31:35.480 the ground from folks around the former president, former President 0:31:35.520 --> 0:31:38.080 Trump and his orbit is that they don't think it 0:31:38.120 --> 0:31:42.240 makes any difference. They're running against the Biden administration and 0:31:42.320 --> 0:31:46.440 Democrats record and the inflation and some of the other 0:31:46.480 --> 0:31:49.880 economic factors of the last few years. They think, if 0:31:49.880 --> 0:31:52.360 it's not Biden, they're most likely to be running against Harris, 0:31:52.400 --> 0:31:54.800 and if they're running against Haterras, they're run against Biden. 0:31:55.360 --> 0:31:57.680 They're saying that even if it were to be someone else, 0:31:58.520 --> 0:32:00.920 they think they would still run against the Biden record. 0:32:01.400 --> 0:32:03.800 But in reality, I think they have not really prepared 0:32:03.880 --> 0:32:07.040 for a different contest that is not against Joe Biden 0:32:07.120 --> 0:32:10.000 or Kamala Harris. So the next few days are going 0:32:10.040 --> 0:32:13.720 to be obviously very determinative, and nobody knows what's going 0:32:13.760 --> 0:32:16.080 to happen or when it's going to happen, and that 0:32:16.080 --> 0:32:18.720 that is the only wild card per se at this convention. 0:32:18.840 --> 0:32:21.360 You know, Vance well received last night, I would say, 0:32:21.560 --> 0:32:24.520 not jubilant, but the crowd liked him and was interested 0:32:24.560 --> 0:32:27.160 in his message, and I think outside of the convention hall, 0:32:27.200 --> 0:32:29.720 it's a message they are banking on that resonating in 0:32:29.800 --> 0:32:30.800 Ross belt states. 0:32:31.080 --> 0:32:33.200 That's so interesting to hear that. I want to go 0:32:33.200 --> 0:32:36.520 back to what you were saying about a potential change 0:32:36.520 --> 0:32:38.440 at the top of the ticket. What if there isn't 0:32:38.480 --> 0:32:40.520 a change at the top of the ticket, how do 0:32:40.800 --> 0:32:44.120 how does the nominating process move forward when there is 0:32:44.120 --> 0:32:46.680 so much division within the Democratic Party, at least in 0:32:46.880 --> 0:32:50.760 certain levels, and also when you know, every little moment 0:32:51.160 --> 0:32:54.560 of the current president's day is sort of seized on 0:32:54.720 --> 0:32:56.800 for signs that he's not fit to run. 0:32:58.840 --> 0:32:59.000 Uh. 0:32:59.120 --> 0:33:01.560 Yeah, I think you're asking a question about a lot 0:33:01.560 --> 0:33:04.880 of journalists covering stories are asking, and that a lot 0:33:04.880 --> 0:33:07.520 of Democrats who have a vested interest in this race 0:33:07.880 --> 0:33:10.040 are asking. I mean, there are a few different ways 0:33:10.040 --> 0:33:12.760 that if President Biden decides that he's going to continue 0:33:13.520 --> 0:33:15.920 his re election, but there's a few different ways that 0:33:16.240 --> 0:33:19.560 things could emerge. Either, Number one, they could do a 0:33:20.120 --> 0:33:24.400 virtual nomination. There is a possibility that that could happen 0:33:24.440 --> 0:33:27.600 as soon as next week, but it just doesn't feel 0:33:27.640 --> 0:33:30.720 like that's where the mood of Democratic delegates is now. 0:33:31.400 --> 0:33:35.280 He could be nominated at the convention, or there could 0:33:35.280 --> 0:33:38.880 be a challenge. So those are essentially the scenarios that 0:33:39.160 --> 0:33:42.760 all of the Trump campaigns planning is for a campaign 0:33:42.800 --> 0:33:45.160 to run against Joe Biden. So I don't think they're 0:33:45.200 --> 0:33:48.239 looking at switching it up. But I think even if 0:33:48.360 --> 0:33:51.440 Biden decides to stay in the race, his campaign is 0:33:51.440 --> 0:33:54.520 going to need to rethink the way they are messaging 0:33:54.800 --> 0:33:57.280 in the final weeks of the race because right now, 0:33:58.560 --> 0:34:01.720 the majority of the American public, and it seems that 0:34:01.800 --> 0:34:08.879 in some bully majority Democrats are not confident that he's 0:34:08.880 --> 0:34:11.040 the best student to carry on for the next four years. 0:34:11.080 --> 0:34:14.080 Well, the presidential race is on, so is the messaging race. 0:34:14.440 --> 0:34:16.520 I'm looking at your election graph report that you guys 0:34:16.560 --> 0:34:19.000 have put out. More than twenty two hundred Facebook pages 0:34:19.200 --> 0:34:22.319 have run ads since last fall mentioning US presidential candidates 0:34:22.320 --> 0:34:27.480 collectively exceeding one billion impressions billion with a B as 0:34:27.480 --> 0:34:30.200 of the end of April. That's according to your analysis. 0:34:30.280 --> 0:34:32.279 But one of the things that you guys identified that 0:34:32.440 --> 0:34:37.880 is troubling is these inauthentic actors. Information versus misinformation. It 0:34:37.960 --> 0:34:40.560 is critical, especially when it comes to a presidential race. 0:34:41.840 --> 0:34:42.440 Oh, that's right. 0:34:42.520 --> 0:34:44.600 I'm glad you're in this project. I'd love to tell 0:34:44.640 --> 0:34:49.200 you a little bit about it. My institute at Syracuse University, 0:34:49.200 --> 0:34:52.640 which is focused on the connection between people's civic involvement, 0:34:52.640 --> 0:34:54.920 their trust and government and their trust in the news, right, 0:34:54.960 --> 0:34:57.920 that's our sweet spot. Was very happy to be able 0:34:57.960 --> 0:35:00.239 to apply for and receive a grant from a company 0:35:00.280 --> 0:35:03.640 called neo Forge. If you have not heard of these guys, 0:35:03.680 --> 0:35:07.120 they're really interesting. They've been involved in everything from NASA 0:35:07.160 --> 0:35:10.960 projects and projects in London to that great reporting on 0:35:11.000 --> 0:35:14.839 the Panama papers. And what they are is they are 0:35:15.560 --> 0:35:19.399 an analytics and graph database company. And if you think 0:35:19.440 --> 0:35:24.480 about spreadsheets or kind of the old school researcher in 0:35:24.520 --> 0:35:27.680 times of in terms of ros and columns, they allow 0:35:27.719 --> 0:35:29.359 you to see in sort of more of a three day, 0:35:29.520 --> 0:35:33.279 three D way, the hidden connections between actors and you 0:35:33.320 --> 0:35:37.520 can see patterns that are hard to uncover. My lead researcher, 0:35:37.600 --> 0:35:40.800 my colleague Jenny Stromergali, and her team built these searches, 0:35:40.880 --> 0:35:45.520 these algorithms to look at messaging right now in paid 0:35:45.560 --> 0:35:49.680 ads on Facebook and Instagram, and that is what they found. 0:35:50.040 --> 0:35:53.200 A portion of these ads around the campaign involved in 0:35:53.280 --> 0:35:57.480 authentic influencers. These are groups that seem like they're unique 0:35:57.560 --> 0:36:01.120 and different, but they're really appear to just be shells 0:36:01.120 --> 0:36:06.360 of other groups. They're carrying the same often misleading videos 0:36:06.520 --> 0:36:10.520 or texts. Some of them are spreading financial scams, and 0:36:10.560 --> 0:36:14.400 as social media platforms like Facebook seek to shut them down, 0:36:14.600 --> 0:36:17.840 there's another one under a slightly different name, just ready 0:36:17.880 --> 0:36:21.319 to pop up and carry on. In some cases, these 0:36:21.360 --> 0:36:24.160 could be misleading voters about policy, and often they are. 0:36:24.360 --> 0:36:27.960 Sometimes they're just financial scams, and so they're taking advantage 0:36:27.960 --> 0:36:31.719 of people's interest in the presidential election in order to 0:36:31.960 --> 0:36:35.680 capture voluntarily their credit card information, their CBC code, and 0:36:35.680 --> 0:36:37.640 then they're getting bills for things they never thought they 0:36:37.640 --> 0:36:40.760 were authorized. And so you really is it is really 0:36:41.120 --> 0:36:44.280 voter beware because they're not just trying to manipulate your vote, 0:36:44.360 --> 0:36:46.680 they're just trying to take your money too. And that's 0:36:46.680 --> 0:36:49.480 not the majority of ads, but it's impossible to tell 0:36:49.520 --> 0:36:52.880 the difference when you're just online and market information. 0:36:53.040 --> 0:36:56.720 We only have about forty seconds left, but I'm wondering 0:36:57.080 --> 0:37:01.959 if you think that the social media company are doing enough. 0:37:03.719 --> 0:37:06.200 The reason our research only looks at Facebook and Instagram 0:37:06.280 --> 0:37:08.759 is it's the only research we have access to. And 0:37:09.120 --> 0:37:11.440 my group is not an advocacy group. We don't lobby 0:37:11.680 --> 0:37:17.960 for anything. But I'll tell you, just as journalist, Congress 0:37:18.280 --> 0:37:21.320 needs to get much more involved in compelling these social 0:37:21.360 --> 0:37:24.840 media platforms, other ones to make this kind of information 0:37:24.880 --> 0:37:27.960 available if they truly want to stop it. It's impossible 0:37:27.960 --> 0:37:30.080 to stop it on their own if they don't, if 0:37:30.120 --> 0:37:33.320 the public and journalists and researchers don't also have access 0:37:33.320 --> 0:37:34.360 to do this sort of tracking. 0:37:34.600 --> 0:37:36.239 I feel like journalists know this. We have to really 0:37:36.320 --> 0:37:38.839 understand our sources and where things are coming from. That's 0:37:38.920 --> 0:37:42.640 kind of journalism one oh one. But even as you know, voters, citizens, 0:37:42.760 --> 0:37:44.920 especially in a social media world where we get so 0:37:45.000 --> 0:37:47.239 much of our news from social media, you have to 0:37:47.239 --> 0:37:50.400 be really smart about understanding exactly where the sources. And 0:37:50.440 --> 0:37:55.240 that's true certainly when it comes to political campaign messaging. Margaret, 0:37:55.360 --> 0:37:59.280 great to reconnect, Really appreciate your time today, Margaret talav 0:37:59.600 --> 0:38:02.160 She is director of the Institute for Democracy, Journalism and 0:38:02.200 --> 0:38:05.439 Citizenship at Syracus University and of course, former senior White 0:38:05.440 --> 0:38:08.000 House correspondent here at Bloomberg News. Joining us from the 0:38:08.080 --> 0:38:09.560 RNC in Milwaukee. 0:38:10.239 --> 0:38:16.319 Bromarco a journal Now about you? Let me drive? 0:38:16.600 --> 0:38:18.600 Oh no, no, no, no, who's gone to drive? 0:38:19.680 --> 0:38:20.160 Honey? 0:38:20.160 --> 0:38:20.520 Please? 0:38:20.600 --> 0:38:23.839 How do the ride gravels? Let's mate, I want to drive. 0:38:23.840 --> 0:38:30.440 It's good question that try. 0:38:30.840 --> 0:38:33.360 This is the drive to the Globe dot. 0:38:33.239 --> 0:38:35.080 Com Tim Mefeck, Well, buy a round. 0:38:35.400 --> 0:38:37.240 Don on Bloomberg Radio. 0:38:37.520 --> 0:38:39.800 All right, everybody, just about eighteen minutes left in today's 0:38:39.800 --> 0:38:42.840 trading session on this Thursday, July eighteen. Charlie just breaking 0:38:42.880 --> 0:38:44.799 down the numbers. We're just coming off our loads of 0:38:44.800 --> 0:38:48.440 the session. But it's definitely more of a risk trade 0:38:48.920 --> 0:38:50.600 or risk off trade, I should say. If I look 0:38:50.600 --> 0:38:52.160 at the S and P five hundred though, if I 0:38:52.200 --> 0:38:55.600 pull it up on the Bloomberg, I've got yeah, most 0:38:55.640 --> 0:38:57.840 names lower three hundred and eighty one names to the downside. 0:38:57.840 --> 0:39:00.000 Tim one hundred and twenty gaining ground two unchained. 0:39:00.560 --> 0:39:04.000 It's pretty amazing to see. Oh, thank you for turning 0:39:04.040 --> 0:39:08.680 on my microphone. 0:39:06.840 --> 0:39:07.239 What I was saying. 0:39:07.280 --> 0:39:09.880 It's pretty notable to see the broad based decline today, 0:39:10.000 --> 0:39:11.560 also hitting the rest of two thousand. As we just 0:39:11.560 --> 0:39:13.640 heard from Charlie. Let's see what Max Wasserman has to 0:39:13.640 --> 0:39:16.120 say about it. He's founder in senior portfolio manager at 0:39:16.160 --> 0:39:19.920 the Ria Miramar Capital. He joins us from Northbrook, Illinois. Max, 0:39:19.960 --> 0:39:20.400 how are you. 0:39:21.239 --> 0:39:22.800 I'm doing well? Thank you? Were you guys? 0:39:22.880 --> 0:39:24.680 We're doing pretty well. Hey, we're gonna get to your 0:39:24.680 --> 0:39:26.839 stock picks because you send us. Thanks for sending us 0:39:26.840 --> 0:39:29.680 some really interesting companies to talk about in a second. 0:39:29.719 --> 0:39:32.120 But I want to talk big picture first, because you're 0:39:32.760 --> 0:39:35.320 you argue that that the haves are doing pretty well 0:39:35.480 --> 0:39:38.040 in our country, but the have nots are not doing 0:39:38.080 --> 0:39:40.080 so well. Talk a little bit about that. 0:39:41.280 --> 0:39:41.440 Well. 0:39:41.480 --> 0:39:43.960 When I say the haves with ability is to trade down, 0:39:44.080 --> 0:39:46.640 what we're seeing is people who have their resources are 0:39:46.680 --> 0:39:50.120 trading down in their picks, so they still have the ability, 0:39:50.320 --> 0:39:54.799 but inflation, high cost real estate is affecting their choices more. 0:39:55.080 --> 0:39:57.800 People who don't have that ability, you know, they're really 0:39:57.800 --> 0:40:00.000 suffering more. I mean, if you only have ten dollars 0:40:00.280 --> 0:40:03.040 and inflation's higher, then it's a hitting you harder than 0:40:03.040 --> 0:40:06.080 someone who has one hundred dollars who has more flexibility. 0:40:06.320 --> 0:40:08.760 So what we're seeing is that people in the lower 0:40:08.800 --> 0:40:12.160 to middle class are being hit by the inflation, the 0:40:12.280 --> 0:40:16.640 rising costs, and their ability to navigate through this expensive 0:40:16.640 --> 0:40:19.759 inflationary environment is much harder than someone who has much 0:40:19.800 --> 0:40:20.960 more discretionary income. 0:40:21.840 --> 0:40:25.000 Always important to point out, and we have been saying, 0:40:25.480 --> 0:40:28.000 I feel like fairly regularly too, that we have to 0:40:28.040 --> 0:40:30.680 remember that our society, not everybody's in the stock market. 0:40:30.680 --> 0:40:32.280 A lot of people are not, and that Wall Street 0:40:32.280 --> 0:40:37.040 is not necessarily main street. Why are you, though, thinking 0:40:37.040 --> 0:40:39.080 that it's really important to make the point that you 0:40:39.160 --> 0:40:39.520 just did. 0:40:41.040 --> 0:40:42.799 Well, I think what you just said. 0:40:42.920 --> 0:40:46.120 I mean basically, a stock market, you know, is reflecting 0:40:46.320 --> 0:40:48.840 financial assets and everything that goes into that, you know, 0:40:48.880 --> 0:40:52.200 federal fund policy, fiscal policy. But if you look at 0:40:52.200 --> 0:40:53.759 people are living the day to day and they go 0:40:53.800 --> 0:40:57.120 to the grocery store, you know, higher inflation, higher cost 0:40:57.160 --> 0:41:00.480 of goods, you know, milk, gas, it affects their day 0:41:00.520 --> 0:41:03.720 to day and it makes tough choices where people again 0:41:03.760 --> 0:41:05.719 who have the ability. So if you look at where 0:41:05.760 --> 0:41:08.399 people are shopping, you look at are they trading down, 0:41:08.480 --> 0:41:11.640 so you look at companies that can benefit from the 0:41:11.760 --> 0:41:14.680 change in consumer spending. So that's really the key thing. 0:41:14.760 --> 0:41:17.040 Who has the money and who doesn't have the money? 0:41:17.320 --> 0:41:20.200 And what we're still seeing, even in this environment of 0:41:20.239 --> 0:41:24.600 the halves, the stock market is extremely well off right now. 0:41:24.600 --> 0:41:26.239 And I say extremely because you're still looking at an 0:41:26.239 --> 0:41:29.479 index about seventeen percent up. So people who have money 0:41:29.480 --> 0:41:32.399 in four oh one case, they're not feeling hurt even 0:41:32.440 --> 0:41:34.640 with any pullback in the market. They're feeling like they're 0:41:34.640 --> 0:41:36.960 doing well. But people who don't have money in the market, 0:41:37.120 --> 0:41:38.920 who have to go to the grocery store, who have 0:41:38.960 --> 0:41:41.440 to pump the gas, who have to they're feeling inflation 0:41:41.560 --> 0:41:44.600 a lot more tangibly interesting. 0:41:44.680 --> 0:41:46.799 Yeah, I mean, it's not something. It's interesting that we're 0:41:46.800 --> 0:41:51.399 talking about this now when inflation has come down max then, right, 0:41:52.000 --> 0:41:54.040 you know, and you know because we were talking a 0:41:54.040 --> 0:41:57.040 lot about this over the last eighteen months. But the 0:41:57.120 --> 0:42:02.000 FED is I'm not going to say it's but every 0:42:02.080 --> 0:42:04.000 person we talk to pretty much says there's going to 0:42:04.000 --> 0:42:06.560 be a soft landing, and the FED chair is pretty 0:42:06.560 --> 0:42:09.120 confident that we will see inflation return to that target 0:42:09.120 --> 0:42:11.960 two percent. Why is this on your radar right now 0:42:12.040 --> 0:42:12.960 as we speak. 0:42:13.800 --> 0:42:16.080 Well, I think what you're going to see is you're 0:42:16.080 --> 0:42:18.880 going to see a hiccup. You're always going to do it. 0:42:18.920 --> 0:42:21.800 There's no such thing as a pure smooth landing. It 0:42:21.840 --> 0:42:24.080 could be sparked by politics, it could be doing anything. 0:42:24.239 --> 0:42:27.839 But with these valuations levels at this high, at what 0:42:27.880 --> 0:42:30.080 we have right now at the S and P, the Nasdaq, 0:42:30.480 --> 0:42:33.000 anything that hiccups this market's going to pull it back. 0:42:33.440 --> 0:42:35.920 But the reason I'm bringing that up is because everybody 0:42:35.960 --> 0:42:38.840 knows it, and everybody's been concentrating their investments in the 0:42:38.880 --> 0:42:42.880 top seven technology stocks. Like there's a big discrepancy between 0:42:42.880 --> 0:42:45.560 the S and P five hundred, which is cap weighted, 0:42:45.840 --> 0:42:47.799 and the equal weighted index of the S and P. 0:42:48.320 --> 0:42:51.680 And the general market itself has been struggling, but the 0:42:51.719 --> 0:42:54.359 market caps of these big large tech companies have been 0:42:54.360 --> 0:42:57.560 doing extremely well. So when you listen to companies reports, 0:42:57.600 --> 0:42:59.839 as I do, you listen to conference calls, you're seeing 0:42:59.840 --> 0:43:02.799 the majority of companies are being hurt by inflation. They're 0:43:02.840 --> 0:43:05.800 being hurt by the cost of goods, and that reflects 0:43:05.800 --> 0:43:08.360 the consumer. But the high tech has been immune for 0:43:08.440 --> 0:43:09.480 now do you. 0:43:09.520 --> 0:43:13.200 Need to be or should we be worried about the rotation? 0:43:14.000 --> 0:43:17.200 But what's interesting even today the you know, we've seen 0:43:17.239 --> 0:43:22.239 megacap tech pulling back, but we've also small caps were 0:43:22.280 --> 0:43:24.680 on or moved to the upside a rise, a little 0:43:24.719 --> 0:43:27.080 bit of a trend there, but we're seeing small caps 0:43:27.120 --> 0:43:34.040 financial shares also way down today, concerns about economic weakness. 0:43:34.480 --> 0:43:37.880 Is there something though in the economic outlook that should 0:43:37.920 --> 0:43:40.120 make us start to be as investors a little bit 0:43:40.160 --> 0:43:43.440 more worried and concerned about some kind of economic downturn? 0:43:44.719 --> 0:43:46.319 Well, I think there's two ways you look at from 0:43:46.320 --> 0:43:49.440 the ambassadors from people are relying on income like fixed 0:43:49.480 --> 0:43:52.120 income or money markets. Right now, they're getting about five 0:43:52.120 --> 0:43:55.319 percent on short term money markets. So if the cond 0:43:55.560 --> 0:43:58.239 to slow down in the FED cut interest rates, that's 0:43:58.280 --> 0:44:00.680 going to affect those people looking for or what I 0:44:00.760 --> 0:44:03.840 call safe money market returns of five percent, So that 0:44:04.000 --> 0:44:07.200 could affect them. Although a rotation in the market is 0:44:07.320 --> 0:44:10.560 perfectly healthy. When you look at these valuations of these 0:44:10.640 --> 0:44:13.560 top tech they're thirty seven forty times earnings. When that 0:44:13.680 --> 0:44:15.960 money comes out, it's going back into companies that have 0:44:16.080 --> 0:44:18.360 been hit hard. You know, you know, you look at healthcare, 0:44:18.400 --> 0:44:21.240 you look at financials, you look consumer staples. These stocks 0:44:21.280 --> 0:44:24.160 have already reflected this slow down in the market, so 0:44:24.200 --> 0:44:27.759 when money comes into them, that creates opportunity. So if 0:44:27.800 --> 0:44:30.000 we look at risk reward in the market, we think 0:44:30.040 --> 0:44:33.759 you have better reward outside of technology than in the 0:44:33.800 --> 0:44:35.160 fact that your technology. 0:44:35.480 --> 0:44:37.680 So let's go there. Hershey is one of the names 0:44:37.719 --> 0:44:40.160 that you like. It's up three percent year to date. 0:44:40.880 --> 0:44:42.000 Tell us why Hershey? 0:44:42.600 --> 0:44:46.760 Have you ever had a more come on, Carol? Why Hershey? 0:44:47.120 --> 0:44:48.160 How do you not like s'mortes? 0:44:48.239 --> 0:44:48.439 Yeah? 0:44:50.320 --> 0:44:50.680 I got. 0:44:52.080 --> 0:44:53.600 In diseases beyond. 0:44:54.760 --> 0:44:57.880 But we're dividend investors, so we're looking for companies that 0:44:57.920 --> 0:45:00.560 are miss priced playing a good dividend. Now it's paying 0:45:00.560 --> 0:45:03.640 about two point eight percent the average dividend increase, where 0:45:03.760 --> 0:45:07.160 five years been twelve percent, trained roughly twenty times earnings. 0:45:07.360 --> 0:45:09.560 Five year average is twenty three. And it's been hit 0:45:09.640 --> 0:45:13.200 by cocoa prices. So cocoa prices inflation's been hurting them. 0:45:13.320 --> 0:45:15.760 But their organic growth is still two to four percent. 0:45:16.239 --> 0:45:18.120 So when I look at a company that's traded in 0:45:18.200 --> 0:45:21.759 a discounts, what's five year average underlining growth is still there. 0:45:22.040 --> 0:45:24.480 It's paying me a growing dividend. You know, the year 0:45:24.600 --> 0:45:26.919 high on the stop was roughly about two forty eight, 0:45:27.400 --> 0:45:29.440 So I'm not buying it near the top. I'm actually 0:45:29.440 --> 0:45:31.440 buying it near the lower half where it's been trading. 0:45:31.719 --> 0:45:34.680 I think there's more upsides, especially as inflation comes down. 0:45:35.000 --> 0:45:37.920 This company should benefit when it has organic growth already. 0:45:38.560 --> 0:45:39.960 Okay, I want to get to one more. We only 0:45:39.960 --> 0:45:42.800 have about forty seconds left. But you like defense stocks, 0:45:42.840 --> 0:45:45.560 including General Dynamics up thirteen percent so far this year, 0:45:45.640 --> 0:45:47.319 around two hundred ninety three dollars a share. 0:45:47.719 --> 0:45:48.480 Make your case for it. 0:45:49.480 --> 0:45:51.840 Okay, look at eighty percent of it is defense and 0:45:51.920 --> 0:45:54.360 twenty percent is the Gulf Stream. So eighty percent is 0:45:54.440 --> 0:45:57.640 the Striker, the Abrams tanks and the nuclear subs. So 0:45:57.680 --> 0:45:59.439 if you look at China, you look at nuclear subs, 0:45:59.480 --> 0:46:01.640 you're looking at Eastern Europe, you're looking at the striker, 0:46:01.840 --> 0:46:04.239 looking at Abram tates the Middle East, then you got 0:46:04.280 --> 0:46:06.600 twenty percent of their business at golf Stream is coming 0:46:06.640 --> 0:46:09.319 online with the new G seven hundreds, which would really 0:46:09.440 --> 0:46:12.040 help them benefit them. So we think it's a core 0:46:12.600 --> 0:46:15.560 defense company, and it has a cyclical kit with the 0:46:16.200 --> 0:46:19.520 airline industry with the G seven hundred eight hundred series, 0:46:19.680 --> 0:46:21.320 which would really propel their earnings. 0:46:22.040 --> 0:46:23.359 All right, good to leave it on that note. 0:46:23.480 --> 0:46:26.040 The stock, by the way, General Dynamics up about thirteen 0:46:26.120 --> 0:46:29.480 percent so far here in twenty twenty four. Max Wasserman, 0:46:29.760 --> 0:46:32.200 thank you so much, Founder and senior portfolio manager at 0:46:32.239 --> 0:46:36.920 the registered investment advisor mir Mark Capital. Joining us from Northbrook, Illinois. 0:46:37.600 --> 0:46:40.799 This is the Bloomberg Business Week podcast of a Little 0:46:40.880 --> 0:46:44.440 on Apple, Spotify and anywhere else you can get your podcasts. 0:46:44.920 --> 0:46:48.200 Listen live weekday afternoons from two to five pm Eastern 0:46:48.400 --> 0:46:51.759 on Bloomberg dot com, the iHeartRadio app tune In, and 0:46:51.840 --> 0:46:54.560 the Bloomberg Business app. You can also watch us live 0:46:54.680 --> 0:46:58.600 every weekday on YouTube and always on the Bloomberg terminalone