Slow-Walking Regulation On Vaping Is Being Challenged

and healthcare for Bloomberg Opinion. He joins us here in a Bloomberg eleventh three oh Studios. So, Max, yesterday the President came out swinging pretty hard against the manufacturers of

vaping products. What's the story. Yeah, absolutely so. So this is kind of coming into the news and become more controversial lately because there have been a spade of illnesses and deaths related to to vaping, and then more broadly, over the past couple of years, we've seen the really rapid uptake of these products by by teenagers, many of them underaged, and a lot of them gravitating towards flavored products.

So the residents announcement yesterday focused on those uh they're gonna move towards trying to clear the market of these flavored products that have been so popular and and also on top of that keep kind of press for for more, more more to be done on the safety issue, which is related but separate, I guess to the flavored and and the the use by teens. Max. How much is this relegated to illegal vaping products that have been tied to certain uses of oil that when uh evaporated into

the lungs can cause all sorts of problems. How much is tied to the vaping products sold by the vehemoth tobacco companies, So that that's still very much up in the air, it looks like from the data we have, and this is very limited because you know, the investigation is still go ongoing. They're looking at samples in different products. But but there is some evidence to suggest that a lot of the kind of acute issues are tied to people using these sort of bootleg and black market products,

specifically H T hc UM. So people vaping marijuana have been kind of overrepresented among those who've been sick. But at this point, you know, we we know so little about the safety of these products the long term impact that we can't really rule anything out. And then there's sort of the broader issue of you know, if if we have these potentially emergent safety issues, how how much should we be you know, letting these products get a relatively unrelated foothold on the market, which sort of in

the case in the past couple of years. Um, you know, the the FDA has been sort of slow to to put a regulatory regime in place and then make companies apply for approval and and do some some kind of more rigorous testing. So I think even if the product the problem, you know, the most acute health problem is tied to these illegal products, uh, it's still probably behooves

the US government to take a more active role. And then specifically comes to the flavor products, Um, there's you know, crystal clear evidence that that these are the ones that teams gravity towards so a band makes sense. They're so max That's kind of goes to you know, one of the areas I thought was very interesting, it's just how did some of these how did these products get to the market with It seems to me just fund the outside is little to know f D a analysis approval

with so little known about the health risks. I'm just surprised that we've It's almost like shutting the door after the horses kind of fled. That's exactly what we're seeing here. So the FDA only gained sort of regulatory oversight over this market back in it had been sort of even more than it is now a no man's land, and so that that sort of began to the initial process of building a regulatory apparatus trying to figure out how

to regulate these. Initially, companies were supposed to have to apply for approval by by two eighteen, but then when the Trump administration came to power, they bumped that deadline back and and that's the period when we saw Jewel kind of you know, hit the market and then create this whole sort of a big trans Asian And I think the motivation behind that wasn't necessarily a bad thing.

It's this hope that this could be as valuable cessation device away for adult smokers to switch from combustible cigarettes. But we're now finding out with the embrace of this by by from you know, non smokers, uh, and the potential safety issues. I think that argument is sort of going out the window, which makes that that decision to slow walk the regulatory regime a little bit less defensible.

So this is actually the implications of this are pretty vast, because you've seen the big tobacco companies come out and try to present vaping products as a safer alternative. I mean, that really has been the future of some of these tobacco companies. And I'm wondering, do you think that regulators are prepared to force tobacco companies to stop using that, to stop saying this is safer when there's not necessarily the evidence to back it. So I think that's beginning

to a certain extent. I recently. I think earlier this week we saw the f D send a letter to Jewel about about some of its marketing practices, and then when they actually start having to apply for marketing approval, you know, that's not just about safety, but it's about what kind of claims you can make on the market. I think that's an area where where there's definitely room for the for a regulatory crackdown, And you know, it may very well be that over time that this does

prove to be a safer alternative in some cases. I think the issue is that, you know, unlike Europe, where these are pretty well regulated and you can make a better a better case, potentially, we just have a lot of people that are using this for for something other than switching or cessation, and uh, until we have a much stronger marketing and regulatory regime where we're you know, it's it's not a market that that can really make

that claim broadly. Thank you so much, Maxneis and Bloomberg Opinion healthcare columnist joining us, and of course you can read all of his columns as well as all the others. They're really fantastic. Read them on the Bloomberg terminal O P I n go, or you can read them at Bloomberg dot com slash Opinion. It's quantitative easing forever. That is the message from the European Central Bank, which cut illustrates further below zero today and revived bond purchase until

whatever today in an announcement. Interestingly, the bond market reaction has been a full circle. Yields sharply higher on the front end in Germany. You've got the euro strengthening versus the dollar after initially weakening to try to help us make sense of all of these market moves and going forward what some of the e CPS actions will mean for the currency. Jukes joins US now Global Fixing come strategist for so see it's a general So kid, why

is the market responding? Perhaps not the way that Mario Draggy would have wanted. Um, Well, the turnaround came pretty much after all. The news came in so um that he announced the quantity of easing details in the first ten minutes of his of his talking what they were going to do, the new lower revised forecasts on growth, concerns about inflation or all of that's in the front and we were going down at that point. And then after that, really there's no new negative news for the currency.

That came through, just a Q and A session, a joke about how the one thing everyone agreed about was that the DISCO policy ought to do more of the work from now on in UM and the market just mounted back the other way. Hindsight trading would be a wonderful thing to be allowed to do, but the market was barrish to the euro has been for a long time.

We were expecting something, We got a package, and we just needed a constant diet of of of euro negative news and and maybe this sort of summarizes up where Mario Mario dragging has got to as he as he closes out his time at ECB effectively, UM, it's really hard work to push the euro down any further. The minute you stopped talking, it just doesn't want to go

on going down because we're really historical week levels. So kids, from your perspective, how effective do you think the moves we saw today from the ECB could really be on the European wide economy? UM? Pessimistic, but by instinct, I mean, you know, sort of the the caveat to that is what would happen if you didn't do them, in sense of, you know, what would happen in terms of the currency.

If he'd come around and done nothing today, we might have shot that up, we might have shot Bundy olds that, we might have done things that would have been damaging to everybody except President Trump's happiness at breakfast. And so so you have to you have to start off them that. But I don't get a sense really that UM continuing to supply more and more bond buying, keeping bond shields really low, having further negative interest rates really has much

of an impact. And I don't know underlying credit growth, which isn't really the problem that you know, Europe suffering from a world trade slowdown and suffering from a global disinflation problem. It's suffering Germany in particular, suffering from what's

happening in China. Um, to my mind, if you want to offset weakness in China, why not offset it since it affects Germany most with easier fiscal policy in Germany to upgrade some of their roads and some of their infrastructure, that would be a fine thing to do from that country. But but but but putting the financial sectors of the point that's closer to the one where they're going to

charge people. Um, they're going to charge people fees on their checking accounts if we push much further and so on. I don't know that that's I don't know that that really boosts economic activity much. Let's talk about QI forever. What's the easy to be going to buy? I mean, they own so much of the of the regions dead at this point, are they just basically going to own all of it at some point and then start buying up buildings and stocks and I think that's sort of

the piece. I mean, this isn't QUEI forever until you change the capital key, until you turn around and you increase the pool of what it is they are allowed to buy. So this is this is qui with um, you know, slightly slower pace of bond buying than some people have expected. But for as long as for as long as they want to keep on going, or for as long as there's anything for them to buy, or for as long as there's anything to buy, until they change what they're allowed to buy. But they'll have to

they'll have to cross that bridge. And in a sense, it was that piece. Is part of what happened today is saying, well, what does Quei forever mean? I'm only going to buy you know I can. I'm only going to buy these particular biscuits. I'll buy them forever. No, you'll buy the muntil they run out. And that's how it works. Um so so I think we we well,

we'll cross that bridge another day. But I thought you could interpret this if you really wanted to, as a plea from Mario dractures were either going to really you know, challenge our man date by expanding what we buy or you guys in charge of fiscal policy, you've got to come and help. That's exactly where I want to go, kit were Marry Drawing made several references to the need for fiscal stimulus from some of the leading European economies. In reality, how much influence does the ECB have over

individual countries in their fiscal policy. Um, she may be more with Christine Lagarde at the ECBs and with Mario Dragging in a sense that you know, um, she's a She's seven heavyweight. At every big I m F G seven meeting you've you've you've had She's She's been there, she you know, has been involved. Mayo drag has has been, you know, the savior of the Eurozone really sorting it out. Without him, I don't know where we would have been for the last um eight years since he since he

turned up. Um So I think they have an influence. But counter to that, there's a lot of dogma in Europe. You know, politicians don't like aggressive fiscally, particularly in Germany. And if you remember back to the G seven meeting UM in southwestern France and Burrits, there was nothing in

the communicuet about major threats to global growth. You know, there was plenty of things that were discussed, but I didn't I didn't hear President mac Hall talking about, you know, the dangers of another European recession anywhere in there and what they needed to get together to do for a big growth push. So I don't think the politicians are quite on the same page as the markets and central banks yet. I mean, Europe at least on growth, to be honest. But yeah, that's not to say that that's

not to say they'll ignore Christine Lagarde. I think that would be wrong. The thing they do that. I do want to just bring you some breaking news. CNBC is coming out and reporting the White House is not considering an interim China deal, and you're seeing the rally and status pair back a bit with a NAZDAC up now just for tents of a percent in the SMP up two tenths of a percent. And I wonder when we talk of about headwinds to growth, whether we're really just

talking about trade disputes. I mean, how much of what central banks do at this point kit will be dictated almost entirely upon whether there is some sort of easing and global trade tensions um. Yeah. The trouble with the global trade ens is they come and go and come and go and come and go, and time passes, if you like, in the sense that uh, you know that that that the impact on corporate profitability for example, just continues to um feeds through and that's not something it's

going to go away. Beast planted on my desk a couple of hours ago from my colleague Albert Edwards, who is known as one of the big bears of most things in the markets, warning about you know what the profit cycle and what it means for recession risks and and my senses and I'm really sort of feels sitting in the UK every day that uncertainty about trade with deals on off, tariffs up, not uf postponed, but not postponed forever. What's going to happen? Time goes on in

that process and on the procession risk grows globally. Kid Duke's chief Global ex Strategists for Society General, joining us from London, Thank you so much for your thoughts on the E C. B UH news we had this morning. This week, Lisa and I were in Boston for the Boston Fintech Week, where we met a lot of cool entrepreneurs bringing their technology to the financial services industry. One of the participants at the Boston Fintech Week is Mike Massaro,

CEO of fly Wire. UM. Mike joins us here from Boston. Mike, thanks so much for joining us. So we think about finance, fintech and just bringing more technology to financial services. Give us a little sense of what your company, fly Wire is all about. Sure, thanks Paul, thanks for having me. Uh.

Flywire really helps with global cross border payment challenges. So we look at vertical markets such as education, healthcare, travel, uh, and they're really complicated when comes to how money moves around the world and uh, and what we're doing is we're making that much much simpler. We're making it easy for people to pay, for instance, from China to attend a place like Harvard UM and and those transactions have

typically gone over the banking rails historically. And what fly Wire has done is we've made it a lot easier for those institutions, uh, you know, educational, medical, or travel companies to to collect money all over the world. So what are some of the obstacles that make this much more difficult than people might imagine, Which is send over your money and be done with that. You know, one

thing is the transaction size. Right, A lot of consumers we think about buying you know, five or ten or even things on e commerce when the transaction size goes north of thousands of dollars, sometimes tens of thousands of dollars um only so many consumers can even put a transaction of that size on a credit card, so they need other ways to pay, traditionally through their bank accounts or alternatives, um. And so it's really difficult for the billers or the receivers of money as well to manage

all the changing dynamics and payments. Right, as much as everybody's trying to make payments easier, they're probably the most complicated they've ever been. Right, More global commerce, more regulation, more security vulnerabilities, all of those things make it more challenging. So, uh, you know, both the receivers have had a hard time with it, but it also the payers haven't had a great experience because there aren't great ways to pay outside

the traditional international bank wire. So, Mike, one of the big issues I know for all of us, all consumers, as we transact more and more online, is security. Give us a sense of kind of how you guys approach security because you're talking about, as you mentioned, kind of some some bigger sums of money. Yeah, you know, it's critical to be part of that trusted environment, right. So

you know, flyware doesn't help you send money anywhere. Right, it's very purpose built, so we work with the receivers. So it's a it's a trusted receiver on one side. In many ways, it's almost like a closed loop, right, because the money ultimately is going to Yale or Mass General Hospital, u c L A Medical Center um OR or you know somebody like um USC from an educational perspective, so you know that one side of the transaction, you know it's where it's going to go, and you know

the purpose of those funds. So that in it in itself is a big game changer when it comes to cross border payments. And then the challenge that we had to do is we had to build a platform that could understand all the regulatory and security requirements within the various countries. Uh. So you know, for instance, in places like China, India, Korea, you have various kind of checks that have to occur either with the financial system or documentation.

You have to collect to make sure the funds can securely move and so that's part of what we've done, is as as building Flower and the technology platform we've built in to really check that we're both satisfying the security and compliance requirements within the country, but also taking that effort in that those issues away from our clients,

which are the ones receiving them. Any Mike, a lot of people going to blockchain and actually that these cross border payments are a key place for blockchain products crypto assets to play an important role to basically transfer something in a very easy, seamless way. Is that something that is on your horizon at all that your company is

looking into? Yeah, you know, I think we're always I'm a big believer in the underlying blockchain technology associated to validating transactions or having a shared kind of global ledger. I think crypto has turned a little more into speculation lately. UM, And I think ultimately if you look years and years out, UM there is likely to be a digital cryptocurrency based off some kind of fiat currency. UM. I think how long that takes to develop? I think people have been

wrong so far. UM. I think it's going to take time, But I think it will get there. Uh. And the way we look at the world is if people want to pay in a certain method, UM, we want to make sure Flywire has that method available, whether they're using PayPal, American Express, Visa, or their bank or something like Allie pay wee chat in China. We want to have all

those methods there. So, you know, if crypto really takes off from a consumer perspective, UM, and the and they're looking for a certain cryptocurrency, UM, that's something that Flywire would definitely consider. So, Mike, what are some of the areas of growth for your company right now? Is more and more people transact online. You know, there's there's really uh it really falls into three different buckets. Geographic expansion

for US UH. You know, if you look at the verticals were in education, healthcare, and travel, they are truly global industries. Uh. And so there are students crossing borders to study from places like UM China to Australia or New Zealand. Right there's obviously one point one million students coming to the United States every year. UM. International patients are the same way, They're crossing borders all the time for medical care. UH. And and anybody that lives in

a majorly developed city. Um. You know, all the all the top hospitals in the United States have international patient programs. So geographic expansion really getting out there and making sure more people know about the fly Wire solution. And then I would say the second um is around more capabilities.

Right where our clients asked us to help with cross border they're actually now looking because payments get more complicated, they're actually looking for us to just offload all their payments, right, and so we're starting to expand and do that as well. UM, So you've got kind of geographic expansion, you have providing more products and services related to payments for existing clients. And then it's the vertical expansion. Right. We just launched

this travel sector a year ago. It's growing over year on year for us, and we're helping people as they travel around the world just make it easier to pay for, you know, an adventure trip or a luxury trip. Mike Massaro, thank you so much for being with us. Mike Massaro is chief executive officer of fly Wire, based in Boston. He is in Boston today for the Fintech Week conference and he's participating in it on a panel called a

personalization of payments and a purpose driven market. There's more than a thirty trillion dollars of assets undermanaged that are subject to non traditional criteria such as environmental, social governance and impact analysis in order to determine where they are going to go. Where those dollars are going to go, the question is how much does this money actually change company behavior or create social value? Here to answer that,

Vicram Gandhi, Professor at Harvard Business School. He also has been an investment banker for twenty three years at Morgan Stanley and Credit Swiss. You're also he's also on the board a senior advisor to the Canada Pension Plan Investment Board. Professor Gandhi, thank you so much for being with us. So let's start there. How much social value are these

E s G funds actually creating? At least? I think if you look at the whole spectrum, as you mentioned the thirty trillion dollars, still a majority of that is what one would call negative screens, and that is excluding stocks that you don't want to own your portfolio. A big trend and that is really around fossil fuels, etcetera. Recently, but there's been a tobacco, alcohol, religious beliefs in the past, and the question remains as to whether those negative screens

actually create value. I think they in terms of changing behavior. I think there's a reflection of values, but not necessarily changing behavior because for every seller there's a bar and unless there's an overwhelming um uh majority on the cell side, you're not going to increase the cost of capital essentially necessarily of the companies. But what we are seeing is a is a pretty conscious trend towards moving from that aspect to what one would call e s G integration

as well as engagement. And the debate about divestiturevis engagement continues, but there's more and more large institutional investors beyond just making public announcements about it, actually focusing on the engagement side to push companies to change behavior with with a with an eas G, with with an e s G

framework in mind. So yeah, so victims. So in my experiences we're talking and just before we went on airs, just this seems to in my experience come primarily from Europe first, i e. The focus on e s G, environmental sustainability, governance, impact investing, um is it. Where where are we in terms of the United States and some of the big mutual funds and then the big companies

and how are they adapting if at all. Well, it's clearly, as you said Europe, nearly half the assets in Europe, you know, off the trill trillion that you said, half the half the assets in Europe have some sort of E s G overlay. That number is closely in the US,

but the growth has been pretty strong. And I think if you look if you talk to the large pension plans, even some of the passive investors UM, they clearly are are focused on the fact that if you are a long term holder of stocks UM and the passive in the index investors by definition are they own the market. Is that if you don't factor an E s G into your analysis, you probably are not making good investment decisions.

So that the discussions gone from let's tick the box, Okay, we've looked at s G, We've gone on our Bloomberg terminal and found our E s G metrics and done it to moving on to risk management, saying this is a core part of risk management. And then I think we're also starting to see trends in some of the pension plans of incorporating E s G to generate alpha is that how do we bring in s G factors? But companies that are actually doing it well because they

are potentially alpha generators. So I think that trend is there and in fact is accelerating. Professor Gandhi, how much alpha are we talking about? Can you give us an example? Well, for example, one of the leaders and you have a case on this in our course. And you know, we've written about twenty two new cases here for our course, me and our colleague of mine, which we teach in

the NBA class at Harvard UH. One one of the cases there is a company called Generation Investment Management which was set up by David Blood and vice president Gore and who and they incorporate E s G into the investment process right from the start. And they have fifteen years now they've been in existence and gone from a few hundred millions to now they've managed about twenty five billion. They have generated consistently generated alpha on on on their portfolio.

And we're starting to see um various other plans. As I said, allocate some percentage of their assets to this to this UH asset. The investing style if you Will has a head fund industry writ large. How have they in terms of adopting this, I mean they're looking for any edge they can degenerate alpha And if I guess he made the incredible pitch to them that this isn't their best interests, I would think that way they would make a part of their investment process. Yeah. So I

think they're there too. Um if you if you view them as long term investors, they are bringing in as risk management. But another interesting case we did was on John A Partners. As you know, they're a pretty active investor and an activist investor in fact, and they announced last year that they were going to set up a billion dollar fund to bring in their activist mindset by by identifying companies that are underperforming necessarily on the E s G front and pushing that and that using their

activist methodology with the E s G framework. So I think you're clearly seeing more of that. Um, you're probably seeing less of it in hedge funds though compared to I say long only managers that have a longer term perspective, because risk management for them becomes a key issue. I do also think that to make change happen, this mindset of quarterly earnings versus long term investing has to change.

I'm wondering, giving your role as a senior advisor to the Canada Pension Plan Investment Board, how are you advising they take into account some of these E s G criteria. So as if you talk to the Canada's c p p i B, you know when they talk about a quarter, they're talking about not ninety days, They're talking about twenty five years. That's quarter for them, So you know they have they they'll be having more inflows uh than outflows

for the foreseeable future. And they're going to go from four hundred billion Canadian roughly now to seven eight hundred billions in just five or seven years. So they have a very long term horizon. And from a risk management perspective, they are proactively incorporating e s G when they make any investment decision. I mean, I've advised them on making

investments in India and Asia, etcetera. And I could see that that that this this mechanism of dick the box due diligence to risk management, and now they're also experimenting on incorporaing e s G from an alpha generation perspective. Just I guess broadly speaking, you've been you know, looking at this for a while. Are there certain industries that, for lack of a better word, screen well from an e S dre impact and maybe some industries that don't.

So an interesting case which we have written was on State Streets. So State Street Or a couple of years ago on Women's Day launched an e t F called SHE and it was seeded by large pension plan basically to identify investments where the leadership both on the board as well as leadership there was a significant of agenda or diversity, not because there was a social aspect to it, but it was also that you know, there's been enough studies which show that doversity leads to business better business

decisions which will lead to hopefully financial performance and stock prices. And when they did but they couldn't veer away from the index too much. And so when they did that analysis, they found that they would be heavily overweight on consumer durables, consumer staples, some of the consumer oriented companies, and highly underweight on technology, energy and financial services. So that kind of would be uh interesting dynamic as to it shows that on those e S g Metrics that they looked

at the diversity between the industries. Very interesting. Vicar and Gandhi, thank you so much for joinings professor at Harvard Business School. We appreciate your thoughts on impact investing an E. S. G. Thanks for listening to the Bloomberg P and L podcast. You can subscribe in listen to interviews at Apple Podcasts or whatever podcast platform you prefer. Paul Sweeney, I'm on Twitter at pt Sweeney. I'm Lisa abram Woyits I'm on

Twitter at Lisa abram Woits one. Before the podcast, you can always catch us worldwide on Bloomberg Radio