September 29, 2023 • 36 mins
Bloomberg News Higher-Education Finance Reporter Janet Lorin explains that graduate students are taking on an outsized share of federal loans, and for the first time are set to outpace how much undergraduates are borrowing. Christina Shim, Global Head of Product and Strategy at IBM Sustainability Software, discusses the intersection of AI and sustainability. Bloomberg Businessweek Editor Joel Weber and Bloomberg News Senior Investigations Reporter Esmé Deprez share the details of Esmé's Businessweek Magazine story Plastic Bottles With No. 2 Recycle Symbol May Have Toxic Problem. And we Drive to the Close with Michael Sheldon, Chief Investment Officer at Hightower RDM Financial Group.
Hosts: Carol Massar and Simone Foxman. Producer: Paul Brennan.
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Speaker 1 (00:01):
This is Bloomberg Business Wait inside from the reporters and
editors who bring you America's most trusted business magazine, plus
gloom O Business Finance and tech news. The Bloomberg Business
Week Podcast with Carol Messer and Tim Stenebeck from Bloomberg Radio.
(00:22):
Open the morning and out the room.
Speaker 2 (00:26):
The teacher is teaching them.
Speaker 3 (00:29):
I'm all right, everybody, we are going to talk about
school a little bit. And now of the third quarter
is officially in the books, everyone is thinking about the
fourth quarter. And one of the things that could help
create a bit of a reality check for the world
at large, for investors, for consumers, and that is what
happens when it comes to paying back those student loans.
Speaker 4 (00:51):
Absolutely, I mean, there's been a real question mark among
all the companies that have brought this up. But also
more important, did you know graduate students are taking on
an outsized share of federal student loans. In fact, even
I feel forty seven percent of the total overall share
(01:13):
of student loans went to graduate students. And our Bloomberg
News Higher Education finance reporter Janet Lauren has a great
story on this, so definitely read it, but first listen
to her here she joins us via zoom in New
York City. So, Jennet, your story looks specifically at graduate
students who borrowed money. What did you find out?
Speaker 5 (01:35):
So, graduate students are borrowing a lot of money. In fact,
if you look at the annual disbursements between who's borrowing,
they're almost they're set to borrow more than undergraduates. And
it sounds kind of crazy because there's a lot of
people going to college and not as many people going
to graduate school. But they're borrowing quite a lot of money.
(01:57):
And the reason is because undergrad are limited to roughly
thirty thousand dollars of federal loans over four years. But
if you're going to graduate school, you can borrow quite
a lot up to the cost of attendance, and in
some cases you're talking eighty thousand or more per year,
and that also includes housing and living expenses. So that's
(02:19):
one reason. And another reason is the interest rates. This year,
if you're going to graduate school, you would be taking
out a grad plus loan with an interest rate that's
over eight percent for the first time in a dozen years,
and grad plus loans accrued during college, so you know
you're taking out a lot of money, and it's a
lot more people are going to graduate school and taking
(02:41):
these large amounts, and it's accruing, so it's roughly half
of the annual disbursements and Education Department economists are boried
as it's set to eclipse undergraduate borrowing.
Speaker 3 (02:55):
You know, I just feel like it speaks to this
bigger problem of cost of college, the loans that are
taken out, and then ultimately, Janet, does it pay off
in terms of the jobs they get. We've seen all
the studies about gett a college education and you tend
to do better when it comes to your income over time.
But having said that, these graduate students who are taking
on these loans, do they ultimately get jobs that make
(03:18):
financial sense so they pay it off pretty easily.
Speaker 5 (03:21):
Well, it's a great question. We know that college is
viewed as a ticket to a better living, but it's
just not clear about graduate degrees. It's, first of all,
it's going to depend on the type of degree and
where you're going to school. If you're going to Harvard
Law School or a top law school, or a top
MBA program or a top engineering school, chances are you'll
(03:43):
have a better chance of getting a job to pay
it off. But we spoke to some labor economists who
looked at online resumes and online job postings, and there's
a lot more people with graduate degrees in their resumes
and the job listings that looked for, you know, graduate
degrees were really stagnating. And the question is, uh, you know,
(04:06):
what are they What are the people who are employing you,
what are they valuing? Do they want to know you
have skills? Or do they even care about a graduate? Well,
and of course if you want to, yeah, oh go ahead.
Speaker 3 (04:16):
No, I was, you know, I was thinking about my
own career. Like It's like, at one point I said
to somebody, should I go back and get a graduate degree?
And I knew I was already doing journalism, and she's like,
you're doing it, that's the best.
Speaker 4 (04:25):
I had a similar experience. I don't know if Janet,
do you get a graduate No?
Speaker 3 (04:29):
I didn't.
Speaker 4 (04:30):
Ultimately thought about it, decided not to do it. But Janet,
I don't know if you've had the same experience.
Speaker 5 (04:35):
Well, I did, but I went right out of college
and it was a lot less expensive then.
Speaker 4 (04:41):
Well, and that's something your story says too, is that
the costs for these degrees have gone way way up,
and so you have people not necessarily earning as much
money in their overall careers, but then they're also having
to pay off these bills that just seem to be
wildly more expensive.
Speaker 5 (04:57):
Right, Yeah, I mean, if if you want to go
to a graduate school, find someone else to pay for it,
if your parents are able to pay for it, if
your employer is able to pay for it, if you
can go to a state program that doesn't cost a
lot of money, then you know, then in some ways
it could be an easy decision, but you have to
do this calculus. And you know, some of the borrowers
(05:19):
we spoke to in the story, they just weren't sure
what to do after college, and they thought that these
degrees would give them higher earnings, and it just doesn't
always happen that way.
Speaker 3 (05:28):
Gosh, you talk about Brielle in your story, who went
to Eckard College in twenty twelve. Anyway, she went off
to get a law degree. I mean, you note Janet
that she says it's going to take until twenty forty
five to pay off her loan. She got a law degree, right,
and she expects it to grow to about two hundred
and forty five thousand dollars worth interest. I mean that's
some serious money.
Speaker 5 (05:49):
Yeah, and she found a job that with a law
firm that she really enjoys. But as it turns out,
it doesn't require a law degree. It's working in comple flience,
which was something she would not have found otherwise if
she hadn't gone to law school. But you know, it's
just it's just a calculus and in some cases the
risk that people are taking because they thought it would
(06:11):
it would pay off, and it doesn't always pay off.
Speaker 4 (06:16):
What we have you can we talk about another story
you wrote. Uh, the school that is so steeped in
wells and prestige has also been steeped in scandal and
now searching for a new president. The area in which
it resides in and which it's so connected to, the
US tech epicenter also going through a reboot that will
no doubt impact Stanford as well. Talk to me about
(06:40):
the standing of this institution in our world at large
and how that might change. Uh if given all these factors.
Speaker 5 (06:50):
Well, Stanford is going to be just fine.
Speaker 3 (06:54):
There's going okay, all right, We're just gonna.
Speaker 5 (06:56):
Get They're going to get a good president. You know,
tens of thousands of kids are still clamoring to go there.
But they've had to deal with a lot of a
lot of scandals. Frankly, their president resigned. He there were
a lot of questions in his research. He's a really
prominent UH scientist, and he actually had to retract a
(07:20):
couple of articles, which is a pretty big deal in
the scientific community and the and this was all discovered
in the student newspaper, which is really impressive. And a
lot of the big scandals in tech or you know,
the Stanford name is dragged into it ft X, the
Crypto Exchange. That's you know, Sam bankmin Fred is going
(07:42):
on trial next week his parents. Our law schools there
in our Bloomberg colleagues had a great story a few
weeks ago about their involvement. Of course, there's you know,
Stanford dropout had a big tie to Silicon Valley, and
there's just a lot of stuff going on there. So
(08:03):
you know, we'll see. But Stanford raises more money in
some years than Harvard. They get more you know, government
research funding than schools that are hundreds of years older
than them. You know, in one sense, you know, four
Nobel Prizes in the last couple of years raising a
billion dollars. But on the other hand, you know there's
(08:24):
a lot going on there.
Speaker 3 (08:26):
Yeah, I love Stanford's fundraising alone over the last six
fiscal years exceeded seven billion dollars. Pretty serious money. And
I have to say, when Bloomberg BusinessWeek does the annual
NBA survey, it is often number one, and I think
as well, Yes, it's consistently number one, So it's kind
of where students want to go, and they seem to
like it a lot. Jennet Lauren, thank you so much.
(08:48):
Have a good and safe weekend. Higher Education Finance reporter
app Blomberg News. Joining us on zoom from New York City.
I'm Carol Massa along with Simone Foxman in for Tim Stenevik.
You're listening and watching Bloomberg Radio.
Speaker 1 (09:05):
You're listening to the Bloomberg Business Week podcast. Catch us
live weekday afternoons from three to six Eastern Listen on
Bloomberg dot com, the iHeartRadio app and the Bloomberg Business app,
or watch us live on YouTube.
Speaker 3 (09:20):
When it comes to newsflow, there's a lot. When it
comes to anything and everything to do with AI, the
European Union, in fact checking, out and examining alleged anti
competitive abuses and ships used for AI. It's a market
that we know is dominated by Nvidia, even so maybe
some concerns. We'll see where that goes. It may go nowhere.
The world does seem to be all in when it
(09:41):
comes to artificial intelligence. That Our next guest works with
companies to better use data nai efficiency, yes, but also
to help companies become more sustainable. So let's get to it.
Our guest is Christina Shims. She has Global HAAD, a
product and strategy at IMBM Sustainability Software. She is with
us on Zoom in Atlanta. Christina, Yeah, good to have
you here with us. Tell us a little bit about
(10:02):
what you guys are doing when it comes to AI
and helping companies to be more sustainable.
Speaker 6 (10:09):
Absolutely, thanks for having me.
Speaker 3 (10:10):
Yeah.
Speaker 7 (10:11):
So, look, sustainability is one of those things that is
not going away with anything. It's becoming more and more
of an issue. We're seeing it affect everyone from communities
to businesses, to governments and regulations coming out. You're seeing
it with extreme weather. You're seeing that in New York
today with the flooding and the rain that's happening and
this past summer was the hottest.
Speaker 6 (10:30):
In recorded history.
Speaker 7 (10:32):
And so what we are doing is ensuring that we
can work with our partners to make sure that they
are headed towards and leveraging technology in reaching their sustainability goals.
More than two thirds of employees wanting now work for
companies that have sustainability goals committed towards.
Speaker 3 (10:53):
But what does that mean? So what does it mean
when you are helping them? Like, what specifically? Give us
an idea if you would an example.
Speaker 7 (10:59):
Yeah, absolutely, So, Look, the biggest challenge here is data. Basically,
organizations have a really difficult time working through multiple different silos.
I'm talking hundreds of different systems and spreadsheets all around
the organizations to really get a sense for where the
baseline is.
Speaker 6 (11:16):
For their sustainability posture.
Speaker 7 (11:18):
So, if you have hundreds of different systems where you
have data, you can't necessarily make sense of it in
one single system of record. It's really difficult for organizations
to understand where they are, where they need to go,
and how to get there. And so while organizations have
these committed sustainability targets, they also have to think about
it as core to the business. This is not just
(11:39):
good for good's sake. It's also good for business, and
so what AI helps to do is to unlock the
potential of all of that data. One is, how do
you make sure that you are bringing all that data
into that single system of records so that you can
understand where you are, where you need to go, and
how to get there and how to get there? Is
what are the insights that you are able to draw
(12:01):
from the data so that.
Speaker 6 (12:03):
You can actually action on it.
Speaker 7 (12:05):
Right now, there's not a lot of time, I want
to say, not a lot of time left. We have
to act very quickly and urgently around climate and towards
sustainability for businesses and for communities. And unlocking the potential
of all of that data through AI is where this
is all going. And that's what we do with our
partners and our customers to help enable that.
Speaker 4 (12:25):
Okay, but this doesn't sound that sexy to some degree,
like this sounds like data management, data crunching. What about
this is like artificial intelligence?
Speaker 6 (12:36):
Yeah, so AI really helps.
Speaker 7 (12:37):
It's not I joke that it's really the non sexy stuff,
but that's really what helps us to get towards the
action that's needed. So AI enables better and faster decisions
on both the sustainability and on the business front. It
helps across a couple areas, right, so you mentioned the efficiencies. Yes,
it helps with energy costs, it helps with emissions. It
can help to do a couple things like monitor and
(12:59):
make pain physical assets around your infrastructure, around your factory.
Speaker 6 (13:04):
Things like that.
Speaker 7 (13:04):
It can optimize how inventory is routed around the world.
It can detect anomalies that drive zo defect goals, right,
It can write how computing, It can schedule task So yeah,
these are not really sexy things to do, but at
the end of the day, this is what really helps
to make a difference in actioning what that zero commitment
(13:24):
or what goals organizations help set.
Speaker 3 (13:26):
Christy to help us though, because AI not a new thing,
been around for decades, right, artificial intelligence, and so we
always kind of remind everybody, but the world has become
so excited with generative AI and how that takes us
maybe to a different level in terms of data management
and usefulness. So what has changed in terms of you
(13:46):
guys have been working with AI for a long time,
no doubt about it. Has something changed though in your
ability to help customers when it comes to maintaining their
sustainability targets are monitoring of those targets.
Speaker 6 (14:02):
Yeah, so that's a great question.
Speaker 7 (14:04):
One is that increasingly customers are more inclined to think
about how generative AI can actually help them with their
business and sustainability problems. There's much more appetite for customers
to inherently and intentionally use AI for these problems. Two
is that it can help make the automation and reporting
(14:28):
of data and decreasing of emissions much faster and increasingly,
I would say, especially in the last few years, even
before generative AI became the hot topic or the trendy topic,
customers were already starting to think about it because regulations and.
Speaker 6 (14:41):
Compliance were coming out.
Speaker 7 (14:42):
But this is really catapulted and accelerated, I would say
in the last year or so, you're seeing regulations come
out in the EU, increasingly in the US. You saw
what happened this past month in California with their emissions law,
and so using foundation models and using AI can actually
help to solve these problems faster. But also appetite from
(15:05):
the customer side has changed quite a bit. And so
I think a combination of how we are addressing AI
as part of what we're doing and increasing kind of
the acceleration of that using foundation models with assisting products
and new products.
Speaker 3 (15:18):
Does you know what I wonder? Does it move the
needle for you guys at IBM financially, I mean, has
generative AI and then when it comes to sustainability needs
of customers, does that create a significant new revenue stream
for you guys? And we just got about thirty seconds.
Speaker 7 (15:34):
Yeah, I will say that there's a real hunger for this, right,
there's a real appetite, there's a real hunger for this,
and customers know that this is a game changer, so they.
Speaker 6 (15:42):
Will do that.
Speaker 7 (15:43):
They will they will inherently look to adopt the technology
in a way that they know has meaning in both
their business and sustainability. And they know that we are
working with them to ensure that we're doing this in
an unpliased and a transparent way because I know that
there are some areas of AI that you know, we
need to make sure that we're doing it in the
right way. And so the customers that are most for
(16:07):
leaning and really interested in this, which I would say
all the customers that we're talking to are, so they're
making sure that they're integrating that as part of it,
with that increased apple and intentionality, and I think that
that is where the market is and where the appetite.
Speaker 5 (16:18):
Is for sure.
Speaker 3 (16:19):
All Right, appreciate that some context. Christina Shim, Global head
of Product and Strategy and IBM Sustainability Software, joining us
in zoom in Atlanta. I always feel like time will
tell I kind of like chatbots, but we'll see.
Speaker 4 (16:30):
But it would be good if people wanted to save
the environment, because it's cool.
Speaker 3 (16:35):
All in on that. This is Bloomberg.
Speaker 1 (16:38):
You're listening to the Bloomberg Business Week podcast. Catch us
live weekday afternoons from three to six Easter on Bloomberg Radio,
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live on Amazon Alexa from our flagship New York station.
Just say Alexa, play Bloomberg eleven thirty to love.
Speaker 3 (17:07):
All right, everybody's public you me. Everyone remains largely in
the dark about a process in the making of plastic.
It is known as fluorination and the toxics pfas that
are generated in the process. Those PFA's compounds found to
be so dangerous that the US Environmental Protection Agency had
moved to effectively ban them. Back in twenty fifteen, there
is one company, little known that seems to be at
(17:29):
the center of it. Got to get to this story.
It is a feature in the new issue of Bloomberg
Business Week, on newsstands, online at Bloomberg dot com, slash
business Week, and on the Bloomberg with Us. To talk
about it is Bloomberg News reporter Esme Duprez and also
the editor of Bloomberg Business Week, Jill Weber on zoom
in New York City. Jill, I feel like you just
keep bringing to me and to our audience stories about
(17:50):
things that make me a little worried, whether it's the
Google search abilities and location abilities, or whether it's plastic
and how is that maybe impacting me?
Speaker 2 (18:03):
Yeah, so as many as reporting on this story is
sensational and it will really terrify everyone. And I've spent
the past few weeks since reading this the first version
of the story like going through my life and just
basically like flipping over every plastic bottle and container and
looking for a number two symbol, as may why is
(18:25):
number two a problem?
Speaker 8 (18:28):
Yeah?
Speaker 9 (18:28):
Well that's a big picture. I mean, this story is
about pfas, which are these enormous, you know, this enormous
class of man made chemicals that have been used for
decades to make all kinds of things you know better,
but scientists are increasingly ringing alarm bills about them as
we learn how toxic they are and the ways in
which they harm our bodies and the environment. So this, uh,
the story really is about the scientific discovery of a
(18:49):
new root of exposure to p fas. And how there's
just one company, Carol, as you said, in the US
A responsible for making them, or for generating these illegal
toxic compounds, and how despite demands from the US government
and the Department of Justice EPA, the company just flat
out refused to stop. And that number two symbol is
really important because that's the type of plastic that this
(19:11):
company typically treats. It's called HDPE plastic. It's rigid, it's
usually opaque. It's used for everything from milk judge jugs
to snowboards, and that's typically the plastic that they're treating
and as a result, generating pfas and some of the
worst p fas at that.
Speaker 2 (19:29):
So as may so much of your reporting is terrifying.
But how big is this company who owns the why
hasn't the EPA just managed to shut it down if
all this stuff is so troubling.
Speaker 9 (19:42):
Yeah, that's a great question. So Enhanced Technologies is actually
a really small company. I got a hold of some
documents from twenty eighteen. It showed they just had forty
six million dollars in annual revenue in twenty eighteen. So
obviously that's not a ton They only have a few
hundred employees. But they really built up this domestic monopoly
on this process called postmodilorination, which is this treatment of
plastic to make it stronger, and like, this treatment is
(20:03):
actually really useful. Uh, you know, plenty of companies have
wanted this treatment for decades because it makes plastics less permeable,
so you can transport you know, harsh chemicals and solvents
and things like essential oils. You know, the reason for
fluorination is that conventional plastic will permeate through the container
walls if you don't provide a barrier of some sort.
(20:24):
So that's the reason why they're fluorinating their plastic. That's
why they're they're treating this plastic in this way, right,
And so the EPA has gone after them and uh,
you know, so as the Justice Department, they have essentially
they're they're in violation of a really you know, wonky
chemical law and basically they just they say this law
doesn't apply to us, and so we're just going to continue,
(20:45):
you know, going on business as usual. Obviously as they
fight this you know, this battle with EPA and now
they fight this litigation in in federal court.
Speaker 2 (20:57):
So the the litigation obviously makes this incredibly timely. Is
there any sense of what the what the outcome of
this looks like for the timeline and also like what
about the health implications and the economic implications of whatever
the outcome becomes.
Speaker 9 (21:18):
Yeah, so the litigation is ongoing, so Enhanced kind of
is fighting two battles. They're fighting one battle against the
EPA itself to try to get official clearance to continue florinating.
There is a process for if you're generating these quote
unquote long chain p fast compounds, which are kind of
the worst of the worst, you can apply there is
an effective ban on them, but you can apply to
(21:39):
the EPA to kind of get an exemption. So that's
what they are trying to get. So they're kind of
fighting that battle. On one hand, and then they're fighting
this other battle on their other hand against the DOJ
in court and saying we're not you know, they're trying
to convince a judge that the law that the EPA
says they're breaking, that the DJ says they're breaking, that
they are exempt from it. So they have who main
(22:00):
arguments one, I mean, again it gets a little wonky,
but they say, you know, you can a VPA only
has the authority to regulate significant new uses of these chemicals,
and they've been doing this for forty years, so they're not
that doesn't qualify as new in their mind. And then yeah,
so that's kind of their main argument. They're also saying that,
you know that the quantities of these chemicals that they're
(22:21):
generating are so small and they are quote unquote impurities,
so they don't, you know, qualify for the law.
Speaker 3 (22:27):
I keep wondering, Wait, my government, I pay taxes, who's
watching out for me? But having said that, sorry, I'll
get off my soapbox. As may you are, Bloomberg New
Senior Investigations reporter. In your investigations, I'm thinking of people
who are listening and watching to this, and I'm just
curious size and scope. So how widespread is the use
Jill talked about going through his containers, I'm wondering. I look,
(22:48):
you know, I turned something upside down. I see that
recycle or whatever that code is, and I think, oh,
I'm good. So give us some size and scope in
terms of the types of containers, uh, and the different
industries that are using it, and how you know is
it likely on all of our shelves.
Speaker 9 (23:03):
Yeah, so it's it's quite hard to say for sure
because Enhanced is owned by a private equity firm. Going
back to your question, Jrol, sorry to answer that. So
they're owned by private equity firms, a private company, they
don't have to publicly disclose their customers, and the EPA
has a list of their customers and what the fluorinated
plastics are used for, but they call it confidential business information.
So when we ask for it, they said no. But basically,
(23:27):
Enhanced says they fluorinate more than two hundred million plastic
items every year. A lot of those containers are used
in the agricultural chemical industry, so for things like pesticides
and other harsh chemicals. But our investigation found that these
items that they florinate touch virtually every facet of US economy.
You know, they're used to hold weed, killers, gasoline, household cleaners, cosmetics, shampoo.
(23:49):
We actually had some independent testing done on two shampoo
bottles of companies and Bumble and Bumble and OGX Beauty
that I had reason to believe my beflorignated, and indeed
the results came back positive. So it's shampoo, you know,
it's it's body wash. So lots of things, I mean
enhanced says. So when you're when you're at home kind
(24:11):
of going through your shelves and you know, figuring out
whether you may have chlorinated plastic, you want to look
for again that number two symbol that is that is
the recycling code for h GPE. And then you want
to go to the ingredient list. You want to look
and see, you know, does it have essentral oils, pine oil,
citrus oils. There's a really widely used citrus derivative called
dley Mornin, and that's in a ton of you know, soaps,
(24:32):
and uh, I see, yeah, it's it's in a ton
of stuff, so you might want to, you know, look there.
I was also able to find the names of some
companies that Enhance has named as end users of the
company's treated plastics, and those included Bath Bath and Bodyworks
BAY or BMW, s A latter Hussavarna and moreal So,
we're talking really really wide penetration. This goes way way
(24:55):
farther than mosquito spray, which is which is the initial
product that we that was what led to the whole
discovery was mosquito spray.
Speaker 4 (25:02):
Asmis What are the health implications of this? What happens
if these p fast I guess get in your bloodstream?
Speaker 3 (25:10):
Like where does this go if you were affected by it?
Speaker 9 (25:16):
Yeah, So, for all that we know today about the
fast universe, it is really important to say, like there
is so so much more that we don't yet know,
so much more that we have let to get to
learn and to discover. However, we do know that p
fas are really good at getting into our bodies and
sticking around. So it's not like, you know, even like
caffeine or even lead, I mean, your body you know,
(25:38):
gradually gets rid of those things. P FAST They're really
good at sticking around in our bloods, They're really good
at sticking around in the environment. They're really good at
sticking around in water and it's really hard to get
them out. So, you know, we now have enough long
term data to link p fast exposure to really bad
things like cancer, birth effects in fertility. Now we're talking
a really really big class of chemicals. We don't have
(25:59):
the data to show that all p fas caused those things,
but the data that we do have is very disconcerting.
And certainly for these long chain p faas, which is
the specific subclass of p fas that fluorination of plastic generates,
those are definitely the worst of the worst, and they
are the ones that are you know, the data is
showing a most strong correlation with things like with things
(26:21):
like cancer.
Speaker 2 (26:23):
And of course, I think, you know, one of the
most other frightening, troubling problem problems that the esme's reporting
reveals is if the EPA is successful and this company
disappears from the market, the implications for all these companies
and how we deal with consumer products in general are
(26:44):
is also going to be a big problem. It's like,
you know, there's so much popic in the world, and
here we are having to figure out perhaps a health
implication we hadn't ever anticipated.
Speaker 3 (26:53):
A great investigative piece Bloomberg News senior investigations reporter Esme Duprez,
and of course the editor of Bloomberg Business Week Jail
whereber check it out. It's in the current issue. This
is Bloomberg.
Speaker 5 (27:05):
Mark a journal.
Speaker 8 (27:09):
How about you let me drive?
Speaker 7 (27:10):
Oh no, no, no, no, who's going to drive?
Speaker 4 (27:13):
Honey?
Speaker 1 (27:14):
Please? How do the riding gravels? Let's mate, I want
to drive.
Speaker 9 (27:17):
It's a good question time session.
Speaker 1 (27:24):
This is the drive to the Globe.
Speaker 6 (27:27):
Dot com for me. I think we'll buy around.
Speaker 1 (27:29):
On Bloomberg Radio.
Speaker 3 (27:31):
All right, everybody, just about eighteen minutes left to go
in the Friday trading sessions. We're getting ready to wrap
up the day, the week, and actually the third quarter.
Speaker 4 (27:39):
And it's going to be looking like a negative end
for the S and P five hundred and the Dow Jones.
So uh, not necessarily optimism on this rainy Friday, at
least here in New York.
Speaker 3 (27:49):
No, it's been a wacky third quarter, to be quite honest.
So let's get to it. Michael Sheldon is back with US,
executive director and chief investment Officer for High Tower RDM
Financial Group. He is back with US on Zoom in
West Connecticut. Michael how are you.
Speaker 8 (28:03):
Fine? Thanks? Trying to stay drying up here. It's probably
pouring in the city.
Speaker 3 (28:06):
Also, it's crazy and we're all just, you know, trying
to figure out how we're going to ultimately get home.
But we'll get through it. We'll get through it, just
like we'll get through this year in this market environment.
It was an interesting day where I think there was
some relief coming off of the core PC number. We
know that's an important read for the US Central Bank.
And then we had the New York Fed President come
(28:26):
out and talking and reminding us about hire for longer,
And I think now I almost feel like in Mike
Michael mcke or Michael McKey pointed out this idea of
I guess we're trying to figure out what higher for
longer ultimately means longer? Is it a couple of months,
six months a year? How do you see it?
Speaker 8 (28:43):
Well, I think sort of first looking at the markets,
I think September has lived up to its reputation as
being a difficult month for the markets, and we had
a pretty good first few months of the year, but
things that sort of tailed off here recently in terms
of Fed policy, we had we've had five and a
quarter percent points of rate increases over the past year
and a half, and one of the things we wonder
(29:03):
about is how much that is really truly filtered into
the overall economy. So one thing that's important for investors
to remember is we are towards the tail end of
this aggressive rate hiking cycle, and I'm not sure if
we're going to get one more rate hike or not.
That's a possibility. By the way, the government shutdown could
basically delay some of the important economic data that the
(29:24):
FED needs, so that's something to keep an eye on.
But I think we could get one more rate hike
and then the FED would probably go on hold. I
will tell you that historically, at least looking at the
past thirteen rate hiking cycles, once the FED has stopped
raising rates, they've actually started cutting rates on average about
eight months later. So if the last rate hike was
in September, that means the first rate cut would be
(29:46):
on May. In May of next year, although this is
anything but a normal cycle.
Speaker 4 (29:51):
Yeah, so then if they hike once more, we're looking
at maybe July middle of next year. I mean, the
question I have for you, though, is the one you raised.
Do you think that all of this aggressive tightening has
really played into what we're seeing among consumers, among corporate behavior,
or do you think there's more that we just haven't
seen yet.
Speaker 8 (30:12):
Yeah, that's a tough call. I mean, coming into this year,
the consensus opinion and there was every reason to think
that we were going to be headed for a downturn
in the economy somewhere in the middle of the year.
And a lot of those economic statistics, whether you look
at the yield curve, leaning Economic Index, that Senior Loan Survey,
those sort of indicators still points to some period of weakness.
But the economy has been incredibly resilient and really on
(30:34):
the heels of the US consumer. We have seen some
pockets of weakness in areas like housing and manufacturing, and
those are certainly areas to watch, I think in terms
of the consumer, that's still really the lynchpin right now.
You know, if you look at the monthly numbers, and
we'll get out the jobs numbers next Friday, they have
been slowing, but the weekly job la claims are close
(30:55):
to the lowest levels we've seen in some times. So
it is a mixed picture, and I think we need
to keep an eye on the consumer.
Speaker 3 (31:00):
I think someone brings up a really good point. Like
we talked so long coming off the pandemic about all
the labor hoarding that was going on because employees are employers.
Excuse me, We're so concerned about being able to find
the workers they needed because it was such a tight
laborer market. Do you think corporations are in that same
situation that they'll hold on of workers a little bit
more if they're not quite sure which way we are
going to go, rather than quickly make the moves to
(31:22):
make sure that their balance sheets look good to investors.
Speaker 8 (31:25):
Yeah, I think you're going to see some of that
in terms of the job market. If you look at
the JOLT data which comes out that's the job opening
in labor turnover numbers. Those come out next Tuesday, So
that'll also give us some additional sense on the sort
of availability of workers in labor.
Speaker 3 (31:40):
Do you trust me? Let me just break in for
a sec. Because we had a great Bloomberg story on
the terminal about ghosting, like ghosting in terms of job
hostings where people would apply for listings and then like
kind of never hear anything or they'd go away, and
so it kind of feeds into Michael, the idea that
do we trust the labor data that we're seeing from
the You know that there's been some debate about is
(32:02):
it really painting an accurate picture? So go ahead, continue on.
Speaker 8 (32:06):
That's a good point. About a year ago or a
year and a half ago, I did read a report
that was put out by the BLS, So there was
a lot of talk about with the with the demand
for workers so strong, which is really unprecedented in the
last twenty years or so. But remember the Jolt state
only goes back to about two thousand, so we don't
have a multi decade track record for this. But there
(32:27):
was a report I believe that the BLS put out
saying that they believed the data they were providing was accurate,
meaning there was a strong demand for workers that wasn't
being filled. So I think we can only go by that.
I mean, there are a lot of anecdotal reports out
there as well, which we need to watch. There are
other things that supply chain issues are improving. We see
(32:48):
prices coming down. For example, the core PCE today came
down at three point nine percent, which is the lowest
since twenty twenty. So parts of the economy are softening up,
which it means seen only likely that the demand for
workers should slow somewhat compared to what we've seen over
the past couple of years coming out of the pandemic.
Speaker 4 (33:07):
Do you think that companies have done enough to prepare
for this would be recession or downturn that even if
we get sort of the official definition of a recession,
you know that they're prepared and that the earnings recession
is potentially over.
Speaker 8 (33:23):
Well, that's a good question. I think you did see
some of about six months to a year ago. You
did see, especially some of the larger technology companies start
to take the initiative and downsize. They probably hire too
aggressively coming out of out of COVID, and they started
to downsize some of their some of their hirings, and
that's help profitability. So margins will certainly be important to
watch in terms of the markets. I think one of
(33:45):
the most important things going forward is earnings This year
are currently forecasts to be flatish, but looking ahead to
twenty twenty four and twenty five, corporate profits are currently
forecast to jump double digits. So we do have some
important headwinds right now from higher interest rates, the dollar
and oil prices, but I will keep a close eye
on corporate profits because stocks tend to follow the direction
(34:08):
of profits, at least over time.
Speaker 3 (34:10):
I think I agree with you. That's a fundamental that
really will drive potentially investor decisions. Having said that, b
of A Michael out with their latest when it comes
to global investment flows, global equities had inflows driven by
US stocks, while all other ASEAD classes severed outflows. This
is for the week ending two September twenty seventh, again
from BAA, and this will also included the first withdrawals
(34:32):
for bonds in twenty seven weeks. Just thirty seconds. What's
your investment thesis here and play well.
Speaker 8 (34:38):
I think on the fixed income side, if you haven't
already extended your duration, you want to start thinking about
that because interest rates are the highest level in several years.
Money market rates tend to follow the direction of the
Fed funds rates, so ultimately when the Fed cuts rates
down the road, you want to start adding some duration
to your portfolios to lock in these higher yields. And
that's an important part of your portfolio. You know that
(35:00):
goes along with stocks over time.
Speaker 3 (35:02):
All right, But you're not ruling out stocks ten seconds now.
Speaker 8 (35:05):
I think we're sort of an arrange bound market right now,
probably forty two to forty three hundred on the low side. Well,
we have some headwinds right now. Keep an eye on
the SED. We're starting the FEDS towards the end of
its rate cycle. Interest rates will ultimately peak, and aflation
is coming down.
Speaker 3 (35:20):
All right, Have a dry and safe weekend. Michael Sheldon,
Executive Director, chief Investment Officer at High Tower RDM Financial
Group on zoom in Westport, Connecticut.
Speaker 1 (35:28):
This is the Bloomberg Business Week Podcast, a little Apple, Spotify,
and anywhere else you get your podcast. Listen live weekday
afternoons from three to six Eastern on Bloomberg dot com,
the iHeartRadio app, tune In, and the Bloomberg Business App.
You can also watch us live every weekday on YouTube
and always on the Bloomberg terminal alone.
This is Bloomberg Business Wait inside from the reporters and
editors who bring you America's most trusted business magazine, plus
gloom O Business Finance and tech news. The Bloomberg Business
Week Podcast with Carol Messer and Tim Stenebeck from Bloomberg Radio.
(00:22):
Open the morning and out the room.
Speaker 2 (00:26):
The teacher is teaching them.
Speaker 3 (00:29):
I'm all right, everybody, we are going to talk about
school a little bit. And now of the third quarter
is officially in the books, everyone is thinking about the
fourth quarter. And one of the things that could help
create a bit of a reality check for the world
at large, for investors, for consumers, and that is what
happens when it comes to paying back those student loans.
Speaker 4 (00:51):
Absolutely, I mean, there's been a real question mark among
all the companies that have brought this up. But also
more important, did you know graduate students are taking on
an outsized share of federal student loans. In fact, even
I feel forty seven percent of the total overall share
(01:13):
of student loans went to graduate students. And our Bloomberg
News Higher Education finance reporter Janet Lauren has a great
story on this, so definitely read it, but first listen
to her here she joins us via zoom in New
York City. So, Jennet, your story looks specifically at graduate
students who borrowed money. What did you find out?
Speaker 5 (01:35):
So, graduate students are borrowing a lot of money. In fact,
if you look at the annual disbursements between who's borrowing,
they're almost they're set to borrow more than undergraduates. And
it sounds kind of crazy because there's a lot of
people going to college and not as many people going
to graduate school. But they're borrowing quite a lot of money.
(01:57):
And the reason is because undergrad are limited to roughly
thirty thousand dollars of federal loans over four years. But
if you're going to graduate school, you can borrow quite
a lot up to the cost of attendance, and in
some cases you're talking eighty thousand or more per year,
and that also includes housing and living expenses. So that's
(02:19):
one reason. And another reason is the interest rates. This year,
if you're going to graduate school, you would be taking
out a grad plus loan with an interest rate that's
over eight percent for the first time in a dozen years,
and grad plus loans accrued during college, so you know
you're taking out a lot of money, and it's a
lot more people are going to graduate school and taking
(02:41):
these large amounts, and it's accruing, so it's roughly half
of the annual disbursements and Education Department economists are boried
as it's set to eclipse undergraduate borrowing.
Speaker 3 (02:55):
You know, I just feel like it speaks to this
bigger problem of cost of college, the loans that are
taken out, and then ultimately, Janet, does it pay off
in terms of the jobs they get. We've seen all
the studies about gett a college education and you tend
to do better when it comes to your income over time.
But having said that, these graduate students who are taking
on these loans, do they ultimately get jobs that make
(03:18):
financial sense so they pay it off pretty easily.
Speaker 5 (03:21):
Well, it's a great question. We know that college is
viewed as a ticket to a better living, but it's
just not clear about graduate degrees. It's, first of all,
it's going to depend on the type of degree and
where you're going to school. If you're going to Harvard
Law School or a top law school, or a top
MBA program or a top engineering school, chances are you'll
(03:43):
have a better chance of getting a job to pay
it off. But we spoke to some labor economists who
looked at online resumes and online job postings, and there's
a lot more people with graduate degrees in their resumes
and the job listings that looked for, you know, graduate
degrees were really stagnating. And the question is, uh, you know,
(04:06):
what are they What are the people who are employing you,
what are they valuing? Do they want to know you
have skills? Or do they even care about a graduate? Well,
and of course if you want to, yeah, oh go ahead.
Speaker 3 (04:16):
No, I was, you know, I was thinking about my
own career. Like It's like, at one point I said
to somebody, should I go back and get a graduate degree?
And I knew I was already doing journalism, and she's like,
you're doing it, that's the best.
Speaker 4 (04:25):
I had a similar experience. I don't know if Janet,
do you get a graduate No?
Speaker 3 (04:29):
I didn't.
Speaker 4 (04:30):
Ultimately thought about it, decided not to do it. But Janet,
I don't know if you've had the same experience.
Speaker 5 (04:35):
Well, I did, but I went right out of college
and it was a lot less expensive then.
Speaker 4 (04:41):
Well, and that's something your story says too, is that
the costs for these degrees have gone way way up,
and so you have people not necessarily earning as much
money in their overall careers, but then they're also having
to pay off these bills that just seem to be
wildly more expensive.
Speaker 5 (04:57):
Right, Yeah, I mean, if if you want to go
to a graduate school, find someone else to pay for it,
if your parents are able to pay for it, if
your employer is able to pay for it, if you
can go to a state program that doesn't cost a
lot of money, then you know, then in some ways
it could be an easy decision, but you have to
do this calculus. And you know, some of the borrowers
(05:19):
we spoke to in the story, they just weren't sure
what to do after college, and they thought that these
degrees would give them higher earnings, and it just doesn't
always happen that way.
Speaker 3 (05:28):
Gosh, you talk about Brielle in your story, who went
to Eckard College in twenty twelve. Anyway, she went off
to get a law degree. I mean, you note Janet
that she says it's going to take until twenty forty
five to pay off her loan. She got a law degree, right,
and she expects it to grow to about two hundred
and forty five thousand dollars worth interest. I mean that's
some serious money.
Speaker 5 (05:49):
Yeah, and she found a job that with a law
firm that she really enjoys. But as it turns out,
it doesn't require a law degree. It's working in comple flience,
which was something she would not have found otherwise if
she hadn't gone to law school. But you know, it's
just it's just a calculus and in some cases the
risk that people are taking because they thought it would
(06:11):
it would pay off, and it doesn't always pay off.
Speaker 4 (06:16):
What we have you can we talk about another story
you wrote. Uh, the school that is so steeped in
wells and prestige has also been steeped in scandal and
now searching for a new president. The area in which
it resides in and which it's so connected to, the
US tech epicenter also going through a reboot that will
no doubt impact Stanford as well. Talk to me about
(06:40):
the standing of this institution in our world at large
and how that might change. Uh if given all these factors.
Speaker 5 (06:50):
Well, Stanford is going to be just fine.
Speaker 3 (06:54):
There's going okay, all right, We're just gonna.
Speaker 5 (06:56):
Get They're going to get a good president. You know,
tens of thousands of kids are still clamoring to go there.
But they've had to deal with a lot of a
lot of scandals. Frankly, their president resigned. He there were
a lot of questions in his research. He's a really
prominent UH scientist, and he actually had to retract a
(07:20):
couple of articles, which is a pretty big deal in
the scientific community and the and this was all discovered
in the student newspaper, which is really impressive. And a
lot of the big scandals in tech or you know,
the Stanford name is dragged into it ft X, the
Crypto Exchange. That's you know, Sam bankmin Fred is going
(07:42):
on trial next week his parents. Our law schools there
in our Bloomberg colleagues had a great story a few
weeks ago about their involvement. Of course, there's you know,
Stanford dropout had a big tie to Silicon Valley, and
there's just a lot of stuff going on there. So
(08:03):
you know, we'll see. But Stanford raises more money in
some years than Harvard. They get more you know, government
research funding than schools that are hundreds of years older
than them. You know, in one sense, you know, four
Nobel Prizes in the last couple of years raising a
billion dollars. But on the other hand, you know there's
(08:24):
a lot going on there.
Speaker 3 (08:26):
Yeah, I love Stanford's fundraising alone over the last six
fiscal years exceeded seven billion dollars. Pretty serious money. And
I have to say, when Bloomberg BusinessWeek does the annual
NBA survey, it is often number one, and I think
as well, Yes, it's consistently number one, So it's kind
of where students want to go, and they seem to
like it a lot. Jennet Lauren, thank you so much.
(08:48):
Have a good and safe weekend. Higher Education Finance reporter
app Blomberg News. Joining us on zoom from New York City.
I'm Carol Massa along with Simone Foxman in for Tim Stenevik.
You're listening and watching Bloomberg Radio.
Speaker 1 (09:05):
You're listening to the Bloomberg Business Week podcast. Catch us
live weekday afternoons from three to six Eastern Listen on
Bloomberg dot com, the iHeartRadio app and the Bloomberg Business app,
or watch us live on YouTube.
Speaker 3 (09:20):
When it comes to newsflow, there's a lot. When it
comes to anything and everything to do with AI, the
European Union, in fact checking, out and examining alleged anti
competitive abuses and ships used for AI. It's a market
that we know is dominated by Nvidia, even so maybe
some concerns. We'll see where that goes. It may go nowhere.
The world does seem to be all in when it
(09:41):
comes to artificial intelligence. That Our next guest works with
companies to better use data nai efficiency, yes, but also
to help companies become more sustainable. So let's get to it.
Our guest is Christina Shims. She has Global HAAD, a
product and strategy at IMBM Sustainability Software. She is with
us on Zoom in Atlanta. Christina, Yeah, good to have
you here with us. Tell us a little bit about
(10:02):
what you guys are doing when it comes to AI
and helping companies to be more sustainable.
Speaker 6 (10:09):
Absolutely, thanks for having me.
Speaker 3 (10:10):
Yeah.
Speaker 7 (10:11):
So, look, sustainability is one of those things that is
not going away with anything. It's becoming more and more
of an issue. We're seeing it affect everyone from communities
to businesses, to governments and regulations coming out. You're seeing
it with extreme weather. You're seeing that in New York
today with the flooding and the rain that's happening and
this past summer was the hottest.
Speaker 6 (10:30):
In recorded history.
Speaker 7 (10:32):
And so what we are doing is ensuring that we
can work with our partners to make sure that they
are headed towards and leveraging technology in reaching their sustainability goals.
More than two thirds of employees wanting now work for
companies that have sustainability goals committed towards.
Speaker 3 (10:53):
But what does that mean? So what does it mean
when you are helping them? Like, what specifically? Give us
an idea if you would an example.
Speaker 7 (10:59):
Yeah, absolutely, So, Look, the biggest challenge here is data. Basically,
organizations have a really difficult time working through multiple different silos.
I'm talking hundreds of different systems and spreadsheets all around
the organizations to really get a sense for where the
baseline is.
Speaker 6 (11:16):
For their sustainability posture.
Speaker 7 (11:18):
So, if you have hundreds of different systems where you
have data, you can't necessarily make sense of it in
one single system of record. It's really difficult for organizations
to understand where they are, where they need to go,
and how to get there. And so while organizations have
these committed sustainability targets, they also have to think about
it as core to the business. This is not just
(11:39):
good for good's sake. It's also good for business, and
so what AI helps to do is to unlock the
potential of all of that data. One is, how do
you make sure that you are bringing all that data
into that single system of records so that you can
understand where you are, where you need to go, and
how to get there and how to get there? Is
what are the insights that you are able to draw
(12:01):
from the data so that.
Speaker 6 (12:03):
You can actually action on it.
Speaker 7 (12:05):
Right now, there's not a lot of time, I want
to say, not a lot of time left. We have
to act very quickly and urgently around climate and towards
sustainability for businesses and for communities. And unlocking the potential
of all of that data through AI is where this
is all going. And that's what we do with our
partners and our customers to help enable that.
Speaker 4 (12:25):
Okay, but this doesn't sound that sexy to some degree,
like this sounds like data management, data crunching. What about
this is like artificial intelligence?
Speaker 6 (12:36):
Yeah, so AI really helps.
Speaker 7 (12:37):
It's not I joke that it's really the non sexy stuff,
but that's really what helps us to get towards the
action that's needed. So AI enables better and faster decisions
on both the sustainability and on the business front. It
helps across a couple areas, right, so you mentioned the efficiencies. Yes,
it helps with energy costs, it helps with emissions. It
can help to do a couple things like monitor and
(12:59):
make pain physical assets around your infrastructure, around your factory.
Speaker 6 (13:04):
Things like that.
Speaker 7 (13:04):
It can optimize how inventory is routed around the world.
It can detect anomalies that drive zo defect goals, right,
It can write how computing, It can schedule task So yeah,
these are not really sexy things to do, but at
the end of the day, this is what really helps
to make a difference in actioning what that zero commitment
(13:24):
or what goals organizations help set.
Speaker 3 (13:26):
Christy to help us though, because AI not a new thing,
been around for decades, right, artificial intelligence, and so we
always kind of remind everybody, but the world has become
so excited with generative AI and how that takes us
maybe to a different level in terms of data management
and usefulness. So what has changed in terms of you
(13:46):
guys have been working with AI for a long time,
no doubt about it. Has something changed though in your
ability to help customers when it comes to maintaining their
sustainability targets are monitoring of those targets.
Speaker 6 (14:02):
Yeah, so that's a great question.
Speaker 7 (14:04):
One is that increasingly customers are more inclined to think
about how generative AI can actually help them with their
business and sustainability problems. There's much more appetite for customers
to inherently and intentionally use AI for these problems. Two
is that it can help make the automation and reporting
(14:28):
of data and decreasing of emissions much faster and increasingly,
I would say, especially in the last few years, even
before generative AI became the hot topic or the trendy topic,
customers were already starting to think about it because regulations and.
Speaker 6 (14:41):
Compliance were coming out.
Speaker 7 (14:42):
But this is really catapulted and accelerated, I would say
in the last year or so, you're seeing regulations come
out in the EU, increasingly in the US. You saw
what happened this past month in California with their emissions law,
and so using foundation models and using AI can actually
help to solve these problems faster. But also appetite from
(15:05):
the customer side has changed quite a bit. And so
I think a combination of how we are addressing AI
as part of what we're doing and increasing kind of
the acceleration of that using foundation models with assisting products
and new products.
Speaker 3 (15:18):
Does you know what I wonder? Does it move the
needle for you guys at IBM financially, I mean, has
generative AI and then when it comes to sustainability needs
of customers, does that create a significant new revenue stream
for you guys? And we just got about thirty seconds.
Speaker 7 (15:34):
Yeah, I will say that there's a real hunger for this, right,
there's a real appetite, there's a real hunger for this,
and customers know that this is a game changer, so they.
Speaker 6 (15:42):
Will do that.
Speaker 7 (15:43):
They will they will inherently look to adopt the technology
in a way that they know has meaning in both
their business and sustainability. And they know that we are
working with them to ensure that we're doing this in
an unpliased and a transparent way because I know that
there are some areas of AI that you know, we
need to make sure that we're doing it in the
right way. And so the customers that are most for
(16:07):
leaning and really interested in this, which I would say
all the customers that we're talking to are, so they're
making sure that they're integrating that as part of it,
with that increased apple and intentionality, and I think that
that is where the market is and where the appetite.
Speaker 5 (16:18):
Is for sure.
Speaker 3 (16:19):
All Right, appreciate that some context. Christina Shim, Global head
of Product and Strategy and IBM Sustainability Software, joining us
in zoom in Atlanta. I always feel like time will
tell I kind of like chatbots, but we'll see.
Speaker 4 (16:30):
But it would be good if people wanted to save
the environment, because it's cool.
Speaker 3 (16:35):
All in on that. This is Bloomberg.
Speaker 1 (16:38):
You're listening to the Bloomberg Business Week podcast. Catch us
live weekday afternoons from three to six Easter on Bloomberg Radio,
the Bloomberg Business app and YouTube. You can also listen
live on Amazon Alexa from our flagship New York station.
Just say Alexa, play Bloomberg eleven thirty to love.
Speaker 3 (17:07):
All right, everybody's public you me. Everyone remains largely in
the dark about a process in the making of plastic.
It is known as fluorination and the toxics pfas that
are generated in the process. Those PFA's compounds found to
be so dangerous that the US Environmental Protection Agency had
moved to effectively ban them. Back in twenty fifteen, there
is one company, little known that seems to be at
(17:29):
the center of it. Got to get to this story.
It is a feature in the new issue of Bloomberg
Business Week, on newsstands, online at Bloomberg dot com, slash
business Week, and on the Bloomberg with Us. To talk
about it is Bloomberg News reporter Esme Duprez and also
the editor of Bloomberg Business Week, Jill Weber on zoom
in New York City. Jill, I feel like you just
keep bringing to me and to our audience stories about
(17:50):
things that make me a little worried, whether it's the
Google search abilities and location abilities, or whether it's plastic
and how is that maybe impacting me?
Speaker 2 (18:03):
Yeah, so as many as reporting on this story is
sensational and it will really terrify everyone. And I've spent
the past few weeks since reading this the first version
of the story like going through my life and just
basically like flipping over every plastic bottle and container and
looking for a number two symbol, as may why is
(18:25):
number two a problem?
Speaker 8 (18:28):
Yeah?
Speaker 9 (18:28):
Well that's a big picture. I mean, this story is
about pfas, which are these enormous, you know, this enormous
class of man made chemicals that have been used for
decades to make all kinds of things you know better,
but scientists are increasingly ringing alarm bills about them as
we learn how toxic they are and the ways in
which they harm our bodies and the environment. So this, uh,
the story really is about the scientific discovery of a
(18:49):
new root of exposure to p fas. And how there's
just one company, Carol, as you said, in the US
A responsible for making them, or for generating these illegal
toxic compounds, and how despite demands from the US government
and the Department of Justice EPA, the company just flat
out refused to stop. And that number two symbol is
really important because that's the type of plastic that this
(19:11):
company typically treats. It's called HDPE plastic. It's rigid, it's
usually opaque. It's used for everything from milk judge jugs
to snowboards, and that's typically the plastic that they're treating
and as a result, generating pfas and some of the
worst p fas at that.
Speaker 2 (19:29):
So as may so much of your reporting is terrifying.
But how big is this company who owns the why
hasn't the EPA just managed to shut it down if
all this stuff is so troubling.
Speaker 9 (19:42):
Yeah, that's a great question. So Enhanced Technologies is actually
a really small company. I got a hold of some
documents from twenty eighteen. It showed they just had forty
six million dollars in annual revenue in twenty eighteen. So
obviously that's not a ton They only have a few
hundred employees. But they really built up this domestic monopoly
on this process called postmodilorination, which is this treatment of
plastic to make it stronger, and like, this treatment is
(20:03):
actually really useful. Uh, you know, plenty of companies have
wanted this treatment for decades because it makes plastics less permeable,
so you can transport you know, harsh chemicals and solvents
and things like essential oils. You know, the reason for
fluorination is that conventional plastic will permeate through the container
walls if you don't provide a barrier of some sort.
(20:24):
So that's the reason why they're fluorinating their plastic. That's
why they're they're treating this plastic in this way, right,
And so the EPA has gone after them and uh,
you know, so as the Justice Department, they have essentially
they're they're in violation of a really you know, wonky
chemical law and basically they just they say this law
doesn't apply to us, and so we're just going to continue,
(20:45):
you know, going on business as usual. Obviously as they
fight this you know, this battle with EPA and now
they fight this litigation in in federal court.
Speaker 2 (20:57):
So the the litigation obviously makes this incredibly timely. Is
there any sense of what the what the outcome of
this looks like for the timeline and also like what
about the health implications and the economic implications of whatever
the outcome becomes.
Speaker 9 (21:18):
Yeah, so the litigation is ongoing, so Enhanced kind of
is fighting two battles. They're fighting one battle against the
EPA itself to try to get official clearance to continue florinating.
There is a process for if you're generating these quote
unquote long chain p fast compounds, which are kind of
the worst of the worst, you can apply there is
an effective ban on them, but you can apply to
(21:39):
the EPA to kind of get an exemption. So that's
what they are trying to get. So they're kind of
fighting that battle. On one hand, and then they're fighting
this other battle on their other hand against the DOJ
in court and saying we're not you know, they're trying
to convince a judge that the law that the EPA
says they're breaking, that the DJ says they're breaking, that
they are exempt from it. So they have who main
(22:00):
arguments one, I mean, again it gets a little wonky,
but they say, you know, you can a VPA only
has the authority to regulate significant new uses of these chemicals,
and they've been doing this for forty years, so they're not
that doesn't qualify as new in their mind. And then yeah,
so that's kind of their main argument. They're also saying that,
you know that the quantities of these chemicals that they're
(22:21):
generating are so small and they are quote unquote impurities,
so they don't, you know, qualify for the law.
Speaker 3 (22:27):
I keep wondering, Wait, my government, I pay taxes, who's
watching out for me? But having said that, sorry, I'll
get off my soapbox. As may you are, Bloomberg New
Senior Investigations reporter. In your investigations, I'm thinking of people
who are listening and watching to this, and I'm just
curious size and scope. So how widespread is the use
Jill talked about going through his containers, I'm wondering. I look,
(22:48):
you know, I turned something upside down. I see that
recycle or whatever that code is, and I think, oh,
I'm good. So give us some size and scope in
terms of the types of containers, uh, and the different
industries that are using it, and how you know is
it likely on all of our shelves.
Speaker 9 (23:03):
Yeah, so it's it's quite hard to say for sure
because Enhanced is owned by a private equity firm. Going
back to your question, Jrol, sorry to answer that. So
they're owned by private equity firms, a private company, they
don't have to publicly disclose their customers, and the EPA
has a list of their customers and what the fluorinated
plastics are used for, but they call it confidential business information.
So when we ask for it, they said no. But basically,
(23:27):
Enhanced says they fluorinate more than two hundred million plastic
items every year. A lot of those containers are used
in the agricultural chemical industry, so for things like pesticides
and other harsh chemicals. But our investigation found that these
items that they florinate touch virtually every facet of US economy.
You know, they're used to hold weed, killers, gasoline, household cleaners, cosmetics, shampoo.
(23:49):
We actually had some independent testing done on two shampoo
bottles of companies and Bumble and Bumble and OGX Beauty
that I had reason to believe my beflorignated, and indeed
the results came back positive. So it's shampoo, you know,
it's it's body wash. So lots of things, I mean
enhanced says. So when you're when you're at home kind
(24:11):
of going through your shelves and you know, figuring out
whether you may have chlorinated plastic, you want to look
for again that number two symbol that is that is
the recycling code for h GPE. And then you want
to go to the ingredient list. You want to look
and see, you know, does it have essentral oils, pine oil,
citrus oils. There's a really widely used citrus derivative called
dley Mornin, and that's in a ton of you know, soaps,
(24:32):
and uh, I see, yeah, it's it's in a ton
of stuff, so you might want to, you know, look there.
I was also able to find the names of some
companies that Enhance has named as end users of the
company's treated plastics, and those included Bath Bath and Bodyworks
BAY or BMW, s A latter Hussavarna and moreal So,
we're talking really really wide penetration. This goes way way
(24:55):
farther than mosquito spray, which is which is the initial
product that we that was what led to the whole
discovery was mosquito spray.
Speaker 4 (25:02):
Asmis What are the health implications of this? What happens
if these p fast I guess get in your bloodstream?
Speaker 3 (25:10):
Like where does this go if you were affected by it?
Speaker 9 (25:16):
Yeah, So, for all that we know today about the
fast universe, it is really important to say, like there
is so so much more that we don't yet know,
so much more that we have let to get to
learn and to discover. However, we do know that p
fas are really good at getting into our bodies and
sticking around. So it's not like, you know, even like
caffeine or even lead, I mean, your body you know,
(25:38):
gradually gets rid of those things. P FAST They're really
good at sticking around in our bloods, They're really good
at sticking around in the environment. They're really good at
sticking around in water and it's really hard to get
them out. So, you know, we now have enough long
term data to link p fast exposure to really bad
things like cancer, birth effects in fertility. Now we're talking
a really really big class of chemicals. We don't have
(25:59):
the data to show that all p fas caused those things,
but the data that we do have is very disconcerting.
And certainly for these long chain p faas, which is
the specific subclass of p fas that fluorination of plastic generates,
those are definitely the worst of the worst, and they
are the ones that are you know, the data is
showing a most strong correlation with things like with things
(26:21):
like cancer.
Speaker 2 (26:23):
And of course, I think, you know, one of the
most other frightening, troubling problem problems that the esme's reporting
reveals is if the EPA is successful and this company
disappears from the market, the implications for all these companies
and how we deal with consumer products in general are
(26:44):
is also going to be a big problem. It's like,
you know, there's so much popic in the world, and
here we are having to figure out perhaps a health
implication we hadn't ever anticipated.
Speaker 3 (26:53):
A great investigative piece Bloomberg News senior investigations reporter Esme Duprez,
and of course the editor of Bloomberg Business Week Jail
whereber check it out. It's in the current issue. This
is Bloomberg.
Speaker 5 (27:05):
Mark a journal.
Speaker 8 (27:09):
How about you let me drive?
Speaker 7 (27:10):
Oh no, no, no, no, who's going to drive?
Speaker 4 (27:13):
Honey?
Speaker 1 (27:14):
Please? How do the riding gravels? Let's mate, I want
to drive.
Speaker 9 (27:17):
It's a good question time session.
Speaker 1 (27:24):
This is the drive to the Globe.
Speaker 6 (27:27):
Dot com for me. I think we'll buy around.
Speaker 1 (27:29):
On Bloomberg Radio.
Speaker 3 (27:31):
All right, everybody, just about eighteen minutes left to go
in the Friday trading sessions. We're getting ready to wrap
up the day, the week, and actually the third quarter.
Speaker 4 (27:39):
And it's going to be looking like a negative end
for the S and P five hundred and the Dow Jones.
So uh, not necessarily optimism on this rainy Friday, at
least here in New York.
Speaker 3 (27:49):
No, it's been a wacky third quarter, to be quite honest.
So let's get to it. Michael Sheldon is back with US,
executive director and chief investment Officer for High Tower RDM
Financial Group. He is back with US on Zoom in
West Connecticut. Michael how are you.
Speaker 8 (28:03):
Fine? Thanks? Trying to stay drying up here. It's probably
pouring in the city.
Speaker 3 (28:06):
Also, it's crazy and we're all just, you know, trying
to figure out how we're going to ultimately get home.
But we'll get through it. We'll get through it, just
like we'll get through this year in this market environment.
It was an interesting day where I think there was
some relief coming off of the core PC number. We
know that's an important read for the US Central Bank.
And then we had the New York Fed President come
(28:26):
out and talking and reminding us about hire for longer,
And I think now I almost feel like in Mike
Michael mcke or Michael McKey pointed out this idea of
I guess we're trying to figure out what higher for
longer ultimately means longer? Is it a couple of months,
six months a year? How do you see it?
Speaker 8 (28:43):
Well, I think sort of first looking at the markets,
I think September has lived up to its reputation as
being a difficult month for the markets, and we had
a pretty good first few months of the year, but
things that sort of tailed off here recently in terms
of Fed policy, we had we've had five and a
quarter percent points of rate increases over the past year
and a half, and one of the things we wonder
(29:03):
about is how much that is really truly filtered into
the overall economy. So one thing that's important for investors
to remember is we are towards the tail end of
this aggressive rate hiking cycle, and I'm not sure if
we're going to get one more rate hike or not.
That's a possibility. By the way, the government shutdown could
basically delay some of the important economic data that the
(29:24):
FED needs, so that's something to keep an eye on.
But I think we could get one more rate hike
and then the FED would probably go on hold. I
will tell you that historically, at least looking at the
past thirteen rate hiking cycles, once the FED has stopped
raising rates, they've actually started cutting rates on average about
eight months later. So if the last rate hike was
in September, that means the first rate cut would be
(29:46):
on May. In May of next year, although this is
anything but a normal cycle.
Speaker 4 (29:51):
Yeah, so then if they hike once more, we're looking
at maybe July middle of next year. I mean, the
question I have for you, though, is the one you raised.
Do you think that all of this aggressive tightening has
really played into what we're seeing among consumers, among corporate behavior,
or do you think there's more that we just haven't
seen yet.
Speaker 8 (30:12):
Yeah, that's a tough call. I mean, coming into this year,
the consensus opinion and there was every reason to think
that we were going to be headed for a downturn
in the economy somewhere in the middle of the year.
And a lot of those economic statistics, whether you look
at the yield curve, leaning Economic Index, that Senior Loan Survey,
those sort of indicators still points to some period of weakness.
But the economy has been incredibly resilient and really on
(30:34):
the heels of the US consumer. We have seen some
pockets of weakness in areas like housing and manufacturing, and
those are certainly areas to watch, I think in terms
of the consumer, that's still really the lynchpin right now.
You know, if you look at the monthly numbers, and
we'll get out the jobs numbers next Friday, they have
been slowing, but the weekly job la claims are close
(30:55):
to the lowest levels we've seen in some times. So
it is a mixed picture, and I think we need
to keep an eye on the consumer.
Speaker 3 (31:00):
I think someone brings up a really good point. Like
we talked so long coming off the pandemic about all
the labor hoarding that was going on because employees are employers.
Excuse me, We're so concerned about being able to find
the workers they needed because it was such a tight
laborer market. Do you think corporations are in that same
situation that they'll hold on of workers a little bit
more if they're not quite sure which way we are
going to go, rather than quickly make the moves to
(31:22):
make sure that their balance sheets look good to investors.
Speaker 8 (31:25):
Yeah, I think you're going to see some of that
in terms of the job market. If you look at
the JOLT data which comes out that's the job opening
in labor turnover numbers. Those come out next Tuesday, So
that'll also give us some additional sense on the sort
of availability of workers in labor.
Speaker 3 (31:40):
Do you trust me? Let me just break in for
a sec. Because we had a great Bloomberg story on
the terminal about ghosting, like ghosting in terms of job
hostings where people would apply for listings and then like
kind of never hear anything or they'd go away, and
so it kind of feeds into Michael, the idea that
do we trust the labor data that we're seeing from
the You know that there's been some debate about is
(32:02):
it really painting an accurate picture? So go ahead, continue on.
Speaker 8 (32:06):
That's a good point. About a year ago or a
year and a half ago, I did read a report
that was put out by the BLS, So there was
a lot of talk about with the with the demand
for workers so strong, which is really unprecedented in the
last twenty years or so. But remember the Jolt state
only goes back to about two thousand, so we don't
have a multi decade track record for this. But there
(32:27):
was a report I believe that the BLS put out
saying that they believed the data they were providing was accurate,
meaning there was a strong demand for workers that wasn't
being filled. So I think we can only go by that.
I mean, there are a lot of anecdotal reports out
there as well, which we need to watch. There are
other things that supply chain issues are improving. We see
(32:48):
prices coming down. For example, the core PCE today came
down at three point nine percent, which is the lowest
since twenty twenty. So parts of the economy are softening up,
which it means seen only likely that the demand for
workers should slow somewhat compared to what we've seen over
the past couple of years coming out of the pandemic.
Speaker 4 (33:07):
Do you think that companies have done enough to prepare
for this would be recession or downturn that even if
we get sort of the official definition of a recession,
you know that they're prepared and that the earnings recession
is potentially over.
Speaker 8 (33:23):
Well, that's a good question. I think you did see
some of about six months to a year ago. You
did see, especially some of the larger technology companies start
to take the initiative and downsize. They probably hire too
aggressively coming out of out of COVID, and they started
to downsize some of their some of their hirings, and
that's help profitability. So margins will certainly be important to
watch in terms of the markets. I think one of
(33:45):
the most important things going forward is earnings This year
are currently forecasts to be flatish, but looking ahead to
twenty twenty four and twenty five, corporate profits are currently
forecast to jump double digits. So we do have some
important headwinds right now from higher interest rates, the dollar
and oil prices, but I will keep a close eye
on corporate profits because stocks tend to follow the direction
(34:08):
of profits, at least over time.
Speaker 3 (34:10):
I think I agree with you. That's a fundamental that
really will drive potentially investor decisions. Having said that, b
of A Michael out with their latest when it comes
to global investment flows, global equities had inflows driven by
US stocks, while all other ASEAD classes severed outflows. This
is for the week ending two September twenty seventh, again
from BAA, and this will also included the first withdrawals
(34:32):
for bonds in twenty seven weeks. Just thirty seconds. What's
your investment thesis here and play well.
Speaker 8 (34:38):
I think on the fixed income side, if you haven't
already extended your duration, you want to start thinking about
that because interest rates are the highest level in several years.
Money market rates tend to follow the direction of the
Fed funds rates, so ultimately when the Fed cuts rates
down the road, you want to start adding some duration
to your portfolios to lock in these higher yields. And
that's an important part of your portfolio. You know that
(35:00):
goes along with stocks over time.
Speaker 3 (35:02):
All right, But you're not ruling out stocks ten seconds now.
Speaker 8 (35:05):
I think we're sort of an arrange bound market right now,
probably forty two to forty three hundred on the low side. Well,
we have some headwinds right now. Keep an eye on
the SED. We're starting the FEDS towards the end of
its rate cycle. Interest rates will ultimately peak, and aflation
is coming down.
Speaker 3 (35:20):
All right, Have a dry and safe weekend. Michael Sheldon,
Executive Director, chief Investment Officer at High Tower RDM Financial
Group on zoom in Westport, Connecticut.
Speaker 1 (35:28):
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