WEBVTT - Cushing's Toudouze Discusses Energy 'Renaissance' 0:00:04.760 --> 0:00:07.720 Welcome to the Bloomberg P and L Podcast. I'm pim 0:00:07.800 --> 0:00:11.080 Fox along with my co host Lisa Abramowitz. Each day 0:00:11.119 --> 0:00:14.360 we bring you the most important, noteworthy, and useful interviews 0:00:14.400 --> 0:00:16.560 for you and your money, whether at the grocery store 0:00:16.800 --> 0:00:19.360 or the trading floor. Find the Bloomberg P and L 0:00:19.480 --> 0:00:28.440 Podcast on iTunes, SoundCloud and at Bloomberg dot com. I 0:00:28.480 --> 0:00:31.920 want to prepare for what is ahead in the oil industry. 0:00:32.080 --> 0:00:34.560 I get confused looking at all the inputs in similar 0:00:34.640 --> 0:00:37.159 argument for iron Ore that perhaps the rally has gone 0:00:37.200 --> 0:00:39.920 on too long, has been made for the oil industry, 0:00:39.960 --> 0:00:43.440 that perhaps oil prices have gotten too high and are 0:00:43.520 --> 0:00:45.600 due for a fall. I want to bring in Libby 0:00:45.680 --> 0:00:48.800 two does, a partner and portfolio manager at Cushing Asset 0:00:48.880 --> 0:00:52.040 Management UH to talk a little bit about what we 0:00:52.080 --> 0:00:56.440 should be paying attention to with respect to oil. So, Libby, 0:00:56.520 --> 0:01:00.320 there is so much going on from the political angle, 0:01:00.360 --> 0:01:02.080 where you've got President Trump, who does seem to be 0:01:02.120 --> 0:01:05.880 supportive of fossil fuels, but then policy changes that could 0:01:05.880 --> 0:01:08.920 prove to be challenging frankly for some of the big 0:01:09.440 --> 0:01:12.240 energy companies that do business in the Middle East. What 0:01:12.319 --> 0:01:15.440 are you focusing on to determine the course ahead. Yeah, 0:01:15.640 --> 0:01:18.200 I think when you look at the crude oil, just 0:01:18.240 --> 0:01:22.600 like any other commodity, there are three main things supply, demand, 0:01:22.680 --> 0:01:27.480 in inventories, and right now we have several things that 0:01:27.600 --> 0:01:30.480 are impacting that. We have rig counts that of course 0:01:30.920 --> 0:01:35.119 impacts supply. Those are going up, so the fear of overproduction, 0:01:35.280 --> 0:01:40.600 we've got that happening. We've got potential import tax on 0:01:40.800 --> 0:01:44.760 crude oil, which again that'll affect the big integrated companies, 0:01:44.760 --> 0:01:48.080 but there are a lot of smaller domestic independent E 0:01:48.240 --> 0:01:51.800 and P companies that that won't affect refiners. They could 0:01:51.800 --> 0:01:53.960 potentially be hurt, but it depends on the details of 0:01:53.960 --> 0:01:57.480 the tax, so you really have to dig into the details. 0:01:57.520 --> 0:02:01.200 But if you take a step back, Trump centered policy 0:02:01.480 --> 0:02:07.880 is reduced regulatory burden, increase production, increase infrastructure, and support export. 0:02:08.160 --> 0:02:12.480 All of that is very positive for the United States. Lebby, 0:02:12.520 --> 0:02:14.520 I'm wondering if you could help me just get my 0:02:14.639 --> 0:02:17.959 mind around the world of master limited partnerships. I used 0:02:18.000 --> 0:02:22.480 to pretend that I knew something about energy transfer partners 0:02:22.520 --> 0:02:26.160 but then it all went and it got complicated, and 0:02:26.200 --> 0:02:28.480 I think you would agree that it went from being 0:02:28.600 --> 0:02:33.640 something that was driven by demand for the yield uh 0:02:33.720 --> 0:02:37.640 specifically the payouts, because payouts from mlp s are treated 0:02:37.680 --> 0:02:40.120 as payouts let's say, from a real estate investment trust, 0:02:40.200 --> 0:02:43.880 so it passes through directly to the investor. So I'm 0:02:43.880 --> 0:02:45.960 wondering if you could just give me a view of 0:02:46.000 --> 0:02:49.280 what's going on in the MLP space, and you might 0:02:49.320 --> 0:02:52.960 even want to use uh, you know, enterprise energy transfer 0:02:53.000 --> 0:02:56.280 partners almost as an example. Well, it's interesting you pick 0:02:56.400 --> 0:02:59.600 energy transfer because that's probably one of the most complicated 0:02:59.720 --> 0:03:03.240 of the energy infrastructure compa's Yeah, exactly. Most of them 0:03:03.240 --> 0:03:08.920 are pretty straightforward. It's a fee based business to transport, process, store, 0:03:09.120 --> 0:03:14.160 crude oil, natural gas. I think that MLPs, which as 0:03:14.200 --> 0:03:17.280 you mentioned, used to be a yield story, probably still 0:03:17.320 --> 0:03:19.880 are a yield story in relative terms. Even though we're 0:03:19.880 --> 0:03:23.320 in a rising rate environment, yields are still fairly low, 0:03:23.440 --> 0:03:27.480 so people are looking for yield reads utilities that's expensive yield. 0:03:27.680 --> 0:03:30.680 MLPs are still cheap yield. But today, in the age 0:03:30.680 --> 0:03:35.080 of the energy renaissance, which we're truly in, the story 0:03:35.240 --> 0:03:39.360 is growth and so there are a ton of energy 0:03:39.400 --> 0:03:43.120 infrastructure companies that are going to be able to grow 0:03:43.560 --> 0:03:49.200 these distributions that can be five six seven percent on average. 0:03:49.080 --> 0:03:51.480 Where do we get a list? I can give you 0:03:51.520 --> 0:03:54.200 a whole list of energy infrastructure count so so olivy 0:03:54.560 --> 0:03:58.200 you oversee almost four billion dollars of assets. Where where 0:03:58.240 --> 0:04:02.360 are you investing right now? So right now, given the uh, 0:04:02.720 --> 0:04:06.120 what we've come through sixteen and coming out of the 0:04:06.160 --> 0:04:10.280 trough and the energy cycle, it's been interesting because the 0:04:10.360 --> 0:04:14.080 upstream companies, the production companies, there are price times volume game. 0:04:14.200 --> 0:04:18.440 Price went down crude those companies, cash flows went down. 0:04:18.839 --> 0:04:23.440 The MLP companies went down right in conjunction with the 0:04:23.480 --> 0:04:26.680 production companies, but their cash flows didn't go down. Why 0:04:26.680 --> 0:04:29.240 because it's just a volume game. So as long as 0:04:29.279 --> 0:04:32.000 the demand was there, the cash flows were going to 0:04:32.080 --> 0:04:34.680 be there, and so the opportunity. There are a lot 0:04:34.760 --> 0:04:39.880 of MLPs that now have trade a very attractive valuations, 0:04:40.560 --> 0:04:43.480 whether they have parents that have billions of dollars of 0:04:43.600 --> 0:04:47.080 infrastructure to drop down, or they become a value story 0:04:47.200 --> 0:04:50.480 because they've been beaten up unfairly. Let's do the value story. 0:04:50.640 --> 0:04:53.159 Tell us give us a couple of examples. Okay, so 0:04:53.440 --> 0:04:56.720 h n g L Energy Partners company that has been 0:04:56.839 --> 0:05:03.160 um was really beat up. Saw it's yield blowout tot um. 0:05:03.200 --> 0:05:07.479 They have, uh, they have done several things to improve 0:05:07.480 --> 0:05:11.960 their balance sheet, bring leverage down. Uh. Their big pipeline, 0:05:12.080 --> 0:05:16.480 Grand Makes of Pipeline is now online, it's moving crude, 0:05:17.000 --> 0:05:21.559 and they entered into a strategic partnership with oak Tree. 0:05:22.000 --> 0:05:24.720 This is going to provide all kinds of opportunities. They 0:05:24.720 --> 0:05:27.480 are going to be able to grow that distribution twenty 0:05:27.480 --> 0:05:30.960 plus percent this year and in three years after that 0:05:31.120 --> 0:05:34.960 at ten plus. So how do you, as an investor 0:05:35.000 --> 0:05:37.599 away from oak Tree get in on that? So you 0:05:37.640 --> 0:05:40.360 buy the public stock and g L and g L 0:05:40.480 --> 0:05:43.880 right and g L trades right now four dollars somewhere 0:05:43.920 --> 0:05:47.159 around there, and you say growth, that's what you want 0:05:47.160 --> 0:05:49.279 to be looking for, right, because I often note that 0:05:49.320 --> 0:05:52.520 in dividend portfolios people are saying it's not just the yield, 0:05:52.760 --> 0:05:55.400 it's whether the company can actually grow the dividend into 0:05:55.440 --> 0:05:59.160 the future. All right, that was a value name, correct? Yes? Okay, 0:05:59.160 --> 0:06:02.600 what what you say that? There are maybe names out 0:06:02.600 --> 0:06:05.599 there also that are just going to provide new growth. Yeah, 0:06:05.680 --> 0:06:09.800 so let me touch on them. The fact that this 0:06:09.880 --> 0:06:14.120 business is going to have uh five billion dollars of 0:06:14.160 --> 0:06:17.240 infrastructure that has to be built out in the United 0:06:17.240 --> 0:06:21.880 States to handle the existing supply sources. So you have 0:06:22.600 --> 0:06:26.680 many companies who have a very nice footprint in the US, 0:06:27.400 --> 0:06:32.080 companies like Williams Partners that's the premier natural gas UH 0:06:32.360 --> 0:06:35.839 pipeline system in the United States. This is a company 0:06:35.880 --> 0:06:39.960 that has done some things to reduce their cost of 0:06:40.040 --> 0:06:42.960 capital UH. It's a company that is going to be 0:06:43.000 --> 0:06:46.920 able to grow at five to seven percent UH and 0:06:46.720 --> 0:06:51.760 a company that UM is really in the premier sweet 0:06:51.800 --> 0:06:56.880 spot of the energy renaissance. Williams Companies Williams Companies ticker 0:06:57.040 --> 0:07:01.600 w p Z. So right now, how much of your 0:07:01.640 --> 0:07:04.440 investments are predicated on the idea that oil prices will 0:07:04.440 --> 0:07:07.400 not fluctuate too much to the downside, meaning, you know, 0:07:07.520 --> 0:07:10.360 beyond forty five a barrel or lower. Yeah, that's a 0:07:10.360 --> 0:07:15.560 great point because the energy infrastructure business and and the 0:07:15.600 --> 0:07:18.560 success of the energy infrastructure business is predicated on the 0:07:18.640 --> 0:07:23.920 energy supply chain functioning normally. And when you get down 0:07:24.120 --> 0:07:29.280 below fifty dollars UH, it's difficult for producers. There are 0:07:29.320 --> 0:07:31.880 some that can can operate in that area, but there 0:07:31.920 --> 0:07:37.080 it's difficult for some producers to operate economically. So that 0:07:37.200 --> 0:07:41.280 becomes an issue if you get too higher prices, say 0:07:41.320 --> 0:07:46.040 we blow out, you have demand destruction, either of those things. 0:07:46.080 --> 0:07:47.920 Heard it, but we think we're writing the sweet spot 0:07:47.920 --> 0:07:51.840 fifty six. Thank you very much to do his partner, 0:07:51.920 --> 0:08:08.840 portfolio manager Cushing Asset Management. Apple. It's been touted as 0:08:08.880 --> 0:08:12.600 the world's most expensive company, at least by market share 0:08:12.600 --> 0:08:15.720 at one point or another. Apple coming out with their 0:08:15.760 --> 0:08:18.880 results after the market closes today here to tell us more. 0:08:18.920 --> 0:08:25.120 Michael Scanlan, portfolio manager Manu Life Asset Management, based in Boston. Michael, 0:08:25.200 --> 0:08:27.080 thanks for being with us. All right, so give us 0:08:27.080 --> 0:08:31.440 your your best estimate, guestimate and everything Apple. What's gonna happen? 0:08:31.480 --> 0:08:33.720 What are they gonna tell us? Thanks for having me. 0:08:34.000 --> 0:08:35.400 You know, I think when you when you look at 0:08:35.440 --> 0:08:38.600 the report tonight, there's obviously the results from last quarter. 0:08:39.040 --> 0:08:42.280 I think the bigger focus for everybody, uh they released 0:08:42.280 --> 0:08:45.080 tonight and conduct the conference call later on this evening 0:08:45.200 --> 0:08:47.680 will likely be more focused on what the guidance is 0:08:47.720 --> 0:08:50.720 going forward forward. I still think when you look at 0:08:50.720 --> 0:08:52.679 this company last year, there was a lot of focus 0:08:52.760 --> 0:08:54.400 on the fact that it was actually a down year 0:08:54.440 --> 0:08:58.320 for them in terms of revenues and uh, the actual 0:08:58.360 --> 0:09:00.960 iPhone units that they sold this year, they should give 0:09:01.000 --> 0:09:03.400 the back on a growth trajectory getting back to where 0:09:03.440 --> 0:09:05.520 they were in two thousand fifteen. So you know that 0:09:05.559 --> 0:09:08.000 will likely help prevent the type of stell off that 0:09:08.040 --> 0:09:10.599 we saw early last year in the stock. Have we 0:09:10.640 --> 0:09:14.400 gotten any indications already about what their iPhone sales are 0:09:14.440 --> 0:09:17.360 going to be like? And how much is the response 0:09:17.520 --> 0:09:23.560 to Apple's earnings hinged on that all important iPhone sales number. Well, 0:09:23.600 --> 0:09:25.440 I think when you look at the quarter, you know, 0:09:25.520 --> 0:09:29.000 people tend to focus, uh probably laser like focus on 0:09:29.040 --> 0:09:30.880 that growth margin number that they were report. And there 0:09:30.880 --> 0:09:32.400 are some one off items that they have had the 0:09:32.480 --> 0:09:35.240 last couple of quarters, especially last quarter with FX and 0:09:35.280 --> 0:09:37.800 some other things. Uh, and you know the stock tends 0:09:37.840 --> 0:09:40.120 to overreact to that number. You know, if you take 0:09:40.120 --> 0:09:43.160 a longer term focus on the Apple, you know it's 0:09:43.240 --> 0:09:46.320 it's a stock that offers a phenomenal total return. Right. 0:09:46.320 --> 0:09:48.480 You get thirty five billion dollars of stock being bought 0:09:48.480 --> 0:09:50.680 back every year, You get just about a two percent 0:09:50.760 --> 0:09:53.720 dividend that buy backs about six percent of the company. 0:09:53.840 --> 0:09:55.920 See you add those two things together, you're getting an 0:09:55.920 --> 0:09:58.240 eight percent return before they do anything in terms of 0:09:58.400 --> 0:10:02.520 earnings growth or multiple expansions for the name. Well, well, 0:10:02.600 --> 0:10:04.240 just to do a little bit more math to make 0:10:04.280 --> 0:10:07.600 your head spin, we're talking about sales of anywhere between 0:10:07.640 --> 0:10:11.360 seventies six and seventy eight billion. That would actually be 0:10:11.440 --> 0:10:16.000 the highest revenue in a single quarter ever. Also gross 0:10:16.040 --> 0:10:18.640 margins of between thirty eight and thirty eight and a 0:10:18.679 --> 0:10:23.040 half percent. That does compared to about forty in the 0:10:23.120 --> 0:10:24.959 year ago quarter. Correc think that's one of the big 0:10:24.960 --> 0:10:27.040 things too. I mean, you look at this company. Nobody 0:10:27.320 --> 0:10:30.240 makes money in smartphones, right, and people are talking about 0:10:30.240 --> 0:10:32.360 this new Google Pixel phone, and you know, even the 0:10:32.400 --> 0:10:35.920 most robust projections are nowhere near the two thirty million 0:10:36.080 --> 0:10:39.280 or so iPhones at Apple cells in a year. So 0:10:39.520 --> 0:10:42.000 you know, the numbers are big. Yes, the market cap 0:10:42.040 --> 0:10:44.520 is big, but when you look at it from evaluation standpoint, 0:10:44.559 --> 0:10:47.440 I mean, Apples at roughly thirteen thirteen and a half 0:10:47.440 --> 0:10:50.000 times this year, even cheaper than that, maybe nine and 0:10:50.040 --> 0:10:52.240 a half times free cash flow because they're pre cash 0:10:52.240 --> 0:10:54.559 flows greater than the EPs. So it's not like you're 0:10:54.559 --> 0:10:58.720 paying a premium multiple for those huge absolute numbers that 0:10:58.760 --> 0:11:02.120 you just mentioned. My uh, as an investor, how much 0:11:02.160 --> 0:11:06.520 you're hoping to hear from Apple about bigger pushes into 0:11:06.679 --> 0:11:10.920 for example, content creation or new apps and new services, 0:11:12.000 --> 0:11:14.960 So that that's been a big controversy on the stock. 0:11:15.040 --> 0:11:16.800 And you know, the last quarter, when you think back 0:11:16.840 --> 0:11:18.520 to the earnings called, they spent a lot of time 0:11:18.559 --> 0:11:22.400 talking about the services business there and the strong growth 0:11:22.400 --> 0:11:25.120 trajectory and the contribution that they get because that's pretty 0:11:25.160 --> 0:11:28.400 high margin revenues, so that's really critical. I wouldn't expect 0:11:28.440 --> 0:11:30.480 that you're going to hear anything new tonight in terms 0:11:30.480 --> 0:11:33.400 of new product lines or anything that along those lines. 0:11:33.640 --> 0:11:35.440 They tend to keep that pretty close to the vest, 0:11:35.480 --> 0:11:39.680 and obviously they have those well advertised product announcements that 0:11:39.720 --> 0:11:43.760 they do. That being said, there is um uh, you know, 0:11:43.800 --> 0:11:46.079 a lot of the talk right now in the industry 0:11:46.080 --> 0:11:49.560 in terms of original content production being Netflix and Amazon. 0:11:50.320 --> 0:11:53.360 Apple has dipped their toe into that area very very 0:11:53.360 --> 0:11:57.240 slightly with this karaoke in cars initiative that they have. 0:11:58.000 --> 0:11:59.800 You know, I think the market would reward the stock 0:11:59.840 --> 0:12:02.960 if you can ultimately do something with the TV product 0:12:03.000 --> 0:12:06.280 where you can get a skinny down chord shaped type 0:12:06.280 --> 0:12:08.760 bundle product. But thus far they haven't been able to 0:12:08.760 --> 0:12:13.000 reach an agreement with the content providers. Hey, no, Michael, 0:12:13.440 --> 0:12:16.960 you follow much more than than Apple, and I'm wondering 0:12:17.480 --> 0:12:19.480 if you can sort of give us a little bit 0:12:19.520 --> 0:12:23.880 of a window into the John Hancock Balanced Fund and 0:12:23.960 --> 0:12:26.640 some of the other funds that you run. Sure, so 0:12:27.400 --> 0:12:29.920 you know, specific to the John Hancock Balanced Fund. Tech 0:12:30.040 --> 0:12:33.040 is a pretty healthy wait for us in the portfolio, 0:12:33.600 --> 0:12:36.040 and you know, it's it's an area where we've done 0:12:36.200 --> 0:12:39.520 pretty well from an individual stock selection perspective. Tech thus 0:12:39.559 --> 0:12:42.000 far this year has been a pretty good sector. I 0:12:42.040 --> 0:12:46.240 believe it's second the second best returning sector only two materials, 0:12:46.240 --> 0:12:48.600 and we've had some nice winners in there with Seagate 0:12:48.640 --> 0:12:52.599 reporting blowout earnings last week. Applied Materials has had a 0:12:52.640 --> 0:12:54.920 really nice run here to start the year. Facebook has 0:12:54.960 --> 0:12:57.319 been another big winner for us. I guess if you 0:12:57.400 --> 0:12:59.400 were to look at it and point to the negative, 0:13:00.000 --> 0:13:02.160 really the only blemish for us thus far this year 0:13:02.200 --> 0:13:04.960 in tech has been Google, which you know, when you 0:13:05.000 --> 0:13:07.080 when you sort of back out the one off items 0:13:07.120 --> 0:13:09.760 that they had this quarter. Um, you know, that's still 0:13:09.760 --> 0:13:11.280 a name that we like a lot, and it is 0:13:11.360 --> 0:13:15.920 our biggest position in the portfolio overall, um by you know, 0:13:16.000 --> 0:13:18.120 quite a wired margin over the number two holding that 0:13:18.160 --> 0:13:20.559 we have. Well, I'll just tell you that the fund 0:13:20.640 --> 0:13:22.439 is up I think a little bit more than one 0:13:22.480 --> 0:13:26.439 point so far this year. Michael Scalon, thank you so 0:13:26.559 --> 0:13:29.720 much for joining us. Michael Scalin, folio manager for Manu 0:13:29.840 --> 0:13:46.560 Life Asset Management, talking about Apple. Max Neeson, my Bloomberg 0:13:46.559 --> 0:13:51.320 Gadfly columnist, my neighbor who sits next to me all day. Uh, Max, 0:13:51.360 --> 0:13:53.400 I want to talk to you about a lot of 0:13:53.400 --> 0:13:55.480 things going on. There's certainly a lot of earnings coming 0:13:55.480 --> 0:13:57.720 out from the pharmaceutical companies, but we need to really 0:13:57.760 --> 0:14:00.800 start with some of the rhetorics we've heard from President 0:14:00.800 --> 0:14:04.640 Trump after his meeting with some pharmaceutical CEOs. Can you 0:14:04.679 --> 0:14:07.080 give us your impression of the comments that we've heard 0:14:07.080 --> 0:14:09.760 so far. Yeah, So we're we're kind of just starting 0:14:09.800 --> 0:14:12.240 to get some details that are coming out of the meeting, 0:14:12.880 --> 0:14:14.920 from the part that the press eded on and and 0:14:14.960 --> 0:14:17.640 from the ceo that are now out of the meeting. 0:14:18.280 --> 0:14:22.240 Trump did bring up pharmaceutical pricing again, called it astronomical. 0:14:23.040 --> 0:14:26.720 That's obviously not a particularly good sign for the industry, 0:14:26.800 --> 0:14:30.000 but that aside, it seemed to be comparatively friendly. He 0:14:30.120 --> 0:14:34.080 talked up friendly at tax reform and some de regulation 0:14:34.160 --> 0:14:36.600 at the f d A which might be a little 0:14:36.640 --> 0:14:39.680 bit more mixed, But um, the pricing thing is still 0:14:39.720 --> 0:14:42.560 out there, and that's kind of kind of remain illuming, toright. 0:14:42.680 --> 0:14:44.720 I'm sure that the CEO has tried to kind of 0:14:44.760 --> 0:14:47.600 talk him away from his preferred remedy, which is allowing 0:14:47.680 --> 0:14:50.800 Medicare to negotiate drug prices directly. Those are the issues, 0:14:50.880 --> 0:14:54.680 right that drug price, uh, competition perhaps, and maybe even 0:14:54.680 --> 0:14:57.040 the bidding they were talking about, you know, bidding for 0:14:57.240 --> 0:15:01.920 specific contracts that would not necessarily petitive bidding. Yeah, that 0:15:01.920 --> 0:15:04.960 that would be definitely a big downside risk for a 0:15:05.000 --> 0:15:06.720 lot of firms that do a lot of business with 0:15:06.760 --> 0:15:09.560 the government. The government, you know, if it chooses to 0:15:09.720 --> 0:15:15.200 has essentially unlimited negotiating leverage because they grant the monopolies 0:15:15.240 --> 0:15:18.360 that these companies rely on. So if they use that 0:15:18.400 --> 0:15:21.440 as a negotiating tool, they can pretty much push prices 0:15:21.480 --> 0:15:24.800 down whatever they want. They can set prices, so there's 0:15:24.840 --> 0:15:26.200 a lot of kind of a wide range of things 0:15:26.240 --> 0:15:29.440 can happen, from just getting the same rebates that are 0:15:29.440 --> 0:15:32.280 seen on the private market to something much more drastic, 0:15:32.440 --> 0:15:34.920 which is what I think firms are afraid of. You know, Max, 0:15:34.960 --> 0:15:37.400 based on the market reaction, do we have a sense 0:15:37.480 --> 0:15:42.360 of what his President Trump's rhetoric means of astronomical pricing? 0:15:42.360 --> 0:15:44.080 I mean, do people have a sense of what the 0:15:44.080 --> 0:15:47.240 implications are for these companies based on the stock price 0:15:47.320 --> 0:15:51.640 moves subsequent to the language being released. You know, it's 0:15:51.760 --> 0:15:53.760 very much a guessing game whether this is going to 0:15:53.840 --> 0:15:56.760 be a serious policy pushed by the president or if 0:15:56.760 --> 0:15:58.840 he just wanted what happened today, you know, all the 0:15:58.840 --> 0:16:02.000 seas to combine sort of kissed the ring and promise 0:16:02.040 --> 0:16:07.680 to move manufacturing back and higher Americans, um or if um, 0:16:07.760 --> 0:16:09.880 you know. And then there's the other kind of outstanding issue, 0:16:09.920 --> 0:16:12.680 which is can Trump actually get the Republican Party to 0:16:12.720 --> 0:16:17.560 come along on a policy that they've historically opposed. So really, um, 0:16:17.600 --> 0:16:21.200 I think the CEOs and investors are still kind of 0:16:21.200 --> 0:16:23.520 trying to guess what's going to happen next. Yeah, well 0:16:23.560 --> 0:16:25.160 it is a challenge. I mean, I just I would 0:16:25.160 --> 0:16:27.000 throw this quote at you and then you can tell 0:16:27.040 --> 0:16:30.520 me which president said this. The pricing has been astronomical. 0:16:31.040 --> 0:16:32.720 Now you could fill in the blank with a lot 0:16:32.720 --> 0:16:35.640 of different presidents named there, because the many presidents have 0:16:35.720 --> 0:16:40.880 been critical of the pharmaceutical industry for the prices of drugs. Yeah, 0:16:40.880 --> 0:16:44.360 and that was today. Yeah, and that that's that's not 0:16:44.400 --> 0:16:47.120 a quote you want to hear from the President exactly. 0:16:47.200 --> 0:16:50.400 Another thing you don't want to hear is that the 0:16:50.520 --> 0:16:55.520 US court system doesn't believe that you have a sufficient 0:16:55.840 --> 0:16:58.560 patent restriction on some of your drugs. And that seems 0:16:58.560 --> 0:17:01.480 to be what happened with Tava Parmaceuticals, which plunged to 0:17:01.520 --> 0:17:04.960 its lowest in more than a decade following um. Yeah, 0:17:05.000 --> 0:17:07.399 there's a there's an amazing story because there was stuff 0:17:07.440 --> 0:17:10.720 going on. Just can you send mac sinistrate about Tava 0:17:10.800 --> 0:17:13.520 and how it came to be its generic business plus Yeah, 0:17:13.720 --> 0:17:16.800 and it's in debt, it's really were it's a it's 0:17:16.840 --> 0:17:19.919 a pretty fascinating company that that's in pretty rough shape 0:17:20.000 --> 0:17:22.800 right now. So they're the world's largest generic company and 0:17:23.320 --> 0:17:26.240 very much the world's largest generic company after they spend 0:17:26.280 --> 0:17:31.200 forty billion to buy Allorgan's legacy generic's portfolio. Now the 0:17:31.240 --> 0:17:34.639 purchase price for that deal and its detload are larger 0:17:34.680 --> 0:17:38.240 than its market cap after this uh setback to its 0:17:38.280 --> 0:17:40.719 lead drug, It's which is a multiple scrosser strug. So 0:17:40.760 --> 0:17:42.760 I totally bungled it. What is the setback? Can you 0:17:42.840 --> 0:17:46.200 explain it? Yeah? Absolutely. So they have a drug called 0:17:46.240 --> 0:17:49.640 capac zone. It treats multiple scorros is. Actually the lead 0:17:49.640 --> 0:17:53.159 patent expired some years ago, but they got patents on 0:17:53.200 --> 0:17:56.560 a more convenient dosage of the drug was just a 0:17:56.560 --> 0:17:59.080 couple of times a week instead of more frequently, so 0:17:59.119 --> 0:18:01.760 that they managed to switch patients to that and kind 0:18:01.760 --> 0:18:04.240 of extend the sales life of this drug much farther 0:18:04.359 --> 0:18:07.000 than anyone expected. But this might be the end of 0:18:07.040 --> 0:18:09.840 the road for that strategy because the patents on that 0:18:09.920 --> 0:18:14.200 extension got knocked down by by the district court. Holy cow, 0:18:14.359 --> 0:18:17.200 Tava has more than a hundred billion dollars of debt. 0:18:17.760 --> 0:18:22.000 That's insane. That's according to Bloomberg the A G G 0:18:22.160 --> 0:18:26.560 D function. Uh m hmm. I wonder if that's accurate. Well, 0:18:26.720 --> 0:18:28.920 so I'm going to check that. But it shares it down. 0:18:29.680 --> 0:18:33.680 Uh Does Tava have a generics business that would be 0:18:33.760 --> 0:18:37.520 attractive if it was spun off? I mean, well, the 0:18:37.760 --> 0:18:42.200 generics business is the business. It's it's more than substantially 0:18:42.240 --> 0:18:44.720 more than half of the revenue and should grow to 0:18:44.960 --> 0:18:48.040 half the profit this year. Kind of as the the 0:18:48.080 --> 0:18:52.000 activist acquisition matures. So I mean the they've kind of 0:18:52.400 --> 0:18:55.639 made that acquisition in order to reduce dependence on on 0:18:55.800 --> 0:18:58.120 copac zone, so that that's kind of what they're betting 0:18:58.160 --> 0:19:01.600 on too, you know, see synergies from that and improved performance, 0:19:01.640 --> 0:19:05.680 but to date it's been pretty difficult. They haven't seen 0:19:05.720 --> 0:19:08.600 the expected to return from that deal or um or 0:19:08.760 --> 0:19:12.000 improving the generic's business for a while now. Another being 0:19:12.080 --> 0:19:15.080 hit by the slowdown in the generic's business is Fiser. 0:19:15.160 --> 0:19:17.840 Can you talk about uh that company? Their shares are 0:19:17.840 --> 0:19:21.399 currently falling after their report. Yeah, so they they missed 0:19:21.400 --> 0:19:24.600 on EPs in the fourth quarter and also gave revenue 0:19:24.640 --> 0:19:28.200 forecast that came in below expectations because they expect to 0:19:28.240 --> 0:19:31.760 see greater than expected genneric compet shoot on their branded drugs, 0:19:32.000 --> 0:19:34.800 So they're gonna lose sales to generics companies like Teva 0:19:35.200 --> 0:19:38.800 at at an accelerated rate and don't quite have the 0:19:38.880 --> 0:19:42.919 horses in terms of newly approved or or expanding drugs 0:19:42.960 --> 0:19:44.919 to to kind of make up for to the degree 0:19:44.960 --> 0:19:47.879 that animals expected. So that's why they're down. Just just 0:19:48.000 --> 0:19:51.840 to clarify, when you set a hundred and thirty billions, 0:19:52.280 --> 0:19:54.360 you were looking at Israeli shekels I did the math. 0:19:54.440 --> 0:19:57.480 It's okay, thirty five billion, thirty four points seven billions, 0:19:57.560 --> 0:20:01.080 all right, thank I love it. This is why you 0:20:01.119 --> 0:20:04.000 have a bloomberg, uh you know, a Max just to 0:20:04.040 --> 0:20:09.520 continue that that thought, No, don't. She's worried to continue 0:20:09.560 --> 0:20:12.359 that that thought. You know, we heard today earlier about 0:20:12.400 --> 0:20:14.800 the ups and they kind of said, you know, foreign 0:20:15.040 --> 0:20:18.920 currency issues hurt their results. Do you hear that from 0:20:18.960 --> 0:20:23.360 pharmaceutical companies um on on a pretty frequent basis? I mean, 0:20:23.480 --> 0:20:25.640 you know, they do business all of the world, and 0:20:26.640 --> 0:20:29.680 the strong dollars is not necessarily to their benefit. And 0:20:29.880 --> 0:20:32.800 you know, most of the largest pharmaceutical companies in the 0:20:32.800 --> 0:20:36.119 world reporting dollars, so they're they're facing that and you 0:20:36.160 --> 0:20:40.520 know everything from the Euro two two problems in Venezuela. 0:20:40.640 --> 0:20:43.840 So it's definitely. They keep a lot of their currency overseas. 0:20:43.840 --> 0:20:46.600 You know, they do exactly, which is why you saw 0:20:46.720 --> 0:20:49.080 the the You know, they keep a lot of cash overseas. 0:20:49.280 --> 0:20:51.840 You saw that massive thirty billion dollar actially on deal, 0:20:52.200 --> 0:20:55.119 which was as much about using that currency in a 0:20:55.200 --> 0:20:59.680 tax efficient manner as it was in actually expecting and 0:21:00.200 --> 0:21:05.280 speaking with the president today, Max Neeson, Thanks very much, 0:21:05.440 --> 0:21:08.720 our gad fly when it comes to all things healthcare 0:21:09.040 --> 0:21:22.879 as well as pharmaceutical related. I want to bring in 0:21:23.000 --> 0:21:27.000 Patrick donohue. He's a German government reporter for Bloomberg in Berlin, 0:21:27.160 --> 0:21:30.840 and Patrick, Um, just can we start with uh, your 0:21:30.920 --> 0:21:34.119 lay of the land and Angela Merkel's response to this 0:21:34.200 --> 0:21:40.159 assertion via President Trump's administration. Yeah. Sure. Michael was asked 0:21:40.160 --> 0:21:43.919 about Peter Navarro's comments shortainly after he made them. Um. 0:21:44.200 --> 0:21:50.240 The specific accusation was that Germany, Germany benefits from a 0:21:50.280 --> 0:21:54.280 grossly undervalued thunder valued euro. Um. I mean, German officials 0:21:54.280 --> 0:21:58.360 are pretty used to defending themselves against criticism about an 0:21:58.400 --> 0:22:02.399 excessive trades there plus, But in this case, Michael simply 0:22:02.440 --> 0:22:06.359 said that Germany upholds the independence of the e c 0:22:06.520 --> 0:22:09.640 B and that she plans she's happy to do nothing 0:22:09.640 --> 0:22:12.720 about the exchange rate. Well, she might not want to 0:22:12.760 --> 0:22:14.840 do anything about the exchange rate, but traders might have 0:22:14.880 --> 0:22:19.600 a different idea. Well, I mean, it's it's it was 0:22:19.680 --> 0:22:21.680 kind of uh, I mean, it seemed to be a 0:22:21.800 --> 0:22:25.880 version of this the of a standard criticism of Germany's 0:22:26.640 --> 0:22:29.960 current account silurplus and the frame at Peter Navarro was 0:22:30.000 --> 0:22:34.240 speaking to the Financial Times. Um, he seemed to articulate 0:22:34.320 --> 0:22:37.040 this as a reason why they were dropping The US 0:22:37.080 --> 0:22:41.200 administration was dropping U T TIP the MARKEEEU U S 0:22:41.240 --> 0:22:44.840 trade agreement, and that to show that the EU was 0:22:44.960 --> 0:22:48.480 not a bilateral partner, but was a multi lateral partner. 0:22:48.520 --> 0:22:52.920 Therefore they would not pursue it. So, Uh, Navarro's comments 0:22:52.920 --> 0:22:55.560 seemed to go in a lot of directions. You know, 0:22:55.840 --> 0:22:58.600 it sort of brings up this other story that's on 0:22:58.640 --> 0:23:01.879 the Bloomberg this morning. Let's talking about how the EU 0:23:02.080 --> 0:23:06.920 President Donald Tusk said that the Nation Block is facing 0:23:06.960 --> 0:23:10.199 the most dire threats in its six decade history, in 0:23:10.359 --> 0:23:14.280 large part because of President Trump's pronouncements as well as 0:23:14.320 --> 0:23:21.080 those by his staff. Um, what do you make of that? Well, you, 0:23:21.920 --> 0:23:25.760