Welcome to the Bloomberg Penl Podcast. I'm Paul swing you along with my co host Lisa Brahma Waits. Each day we bring you the most noteworthy and useful interviews for you and your money. Whether at the grocery store or the trading floor. Find a Bloomberg Penl podcast on Apple podcast or wherever you listen to podcasts, as well as that Bloomberg dot com. Do you feel good about yourself because you're drinking water instead of soda? Be wary of that water? Are joining us now? Is that? Seek all?
He is author and active as member of the Council of Foreign Relations. Do what I guess here at our interactive broker studio is he is the author of a new book, Troubled Water, What's Wrong with What We Drink? I want to talk to you about the book and about the sort of larger concept here. And you said right before we went on air, I'm not here to
scare anybody. And yet when I was reading through your materials, Uh, it's a little bit unnerving to think that a lot of the water that people drink, it's not just flint Michigan, is contaminated. It's correct almost everywhere in America, there are contaminants in our drinking water, and this is probably the largest unspoken of public health threat or menace in the
United States. There's a large number of different chemicals that get into our systems through our drinking water that are having unknown effects on our bodies, on our endocrin systems, as the technical phrase that affects growth, attention, spans, sexual interest, fertility, as well as the possibility of cancer. Some of those things are already proven scientifically and some are now in
the process of being investigated. But I would argue that not being investigated aggressively enough by the e p A an organization that whether it's a Democratic or Republican president or Congress, is unfortunately inactive. We're not active enough in pursuing what we need to have pursued to get the best health profile for all Americans. All Right, So if you don't have the best water, what needs to change
within the US to improve the quality of our water. Well, first of all, there aren't nearly There are about a hundred thousand chemicals that are in commerce in the United States, maybe even more, and you would think that the would be under some type of investigation or regulation by the PA because some significant percentage of them get into our drinking water and some percentage of those have effect on
our health. But of that hundred thousand chemicals that are in commerce the United States, sounds hard to believe this, but it's true, only seventy seven zero are being regulated by the e p A for drinking water purposes. And as shocking as that low number is, even more shocking given how much chemicals is used in daily life in America. Even more shocking is the fact that the last time the e p A regulated any chemical whatsoever or any
contaminant whatsoever, was twenty three years ago. They have been inactive for generation and longer, and that is putting our health at risk. Is there any map of where we can and can drink water? Well, tell me who you live and I'll let you know. Okay, I'll give you my address after this. Seriously, it's anyone tracking or sort
of trying to do this scientifically. Well. Actually, there's an organization called the Environmental Working Group where on their website you can punch in your zip code and they can tell you, under the federally filed documents by each hility, what contaminants have been found in that ZIP codes water. Whether or not that's particularly to your particular tap, Lisa, I can't say for sure, but invite me over for lunch and I'll bring my testing you. All right, So,
water filtration plans, I thought that was the answer. Yeah, you would think so. The problem the problem POLL is that both on the wastewater side and on the water filtration, which is the where they distribute the water to our homes from, on both sides, we're using technologies that are
about a hundred or more years old. And although in the interim places have been rebuilt and they're pretty and they're nice parking lots and beautiful reception areas, the truth is that the technology is being used never grew up along with the time that America became what will call highly medicalized society, where now one of where seventy of all Americans twelve and overtake at least one pharmaceutical product
to day. Um people people about Americans twelve and overtake five or more prescription pills a day, and that all gets into our water a stream. On the inbound side, we still do we did a hundred plus years ago to get rid of cholera and dysentery and typhoid fever.
We put a dot of chlorine or chlorine like product in it to to cleanse the water, but we don't do anything to remove from that water these pharmaceutical residues and other chemicals that have found their way into our water stream, such that I'll give one example of many that are in my book Troubled Water, of just one. A scientist, independent scientists, with no act to grind, went ahead in the Great Lakes vast amount of water so
be diluted like crazy would think. She tested fish and all five of the Great Lakes, and in all five of the Great Lakes she found in their brains and in their organs and their muscle, she found residues of of all kinds of psychiatric medicines like solof and Selexa and fourteen other medications. Now, if that's going there, that water is then being sent back to our homes for us to drink, and we are getting that dosage is back in micro quantities, and we're getting that in magnified amounts.
Also for eating the fish. I'm just trying. I'm going through the sub extrapolation getting increasingly concerned. I'm just wondering, you know, how normal is this with other countries as well? I mean, is there just sort of this problem globally or is the US particularly bad. The more the more industrialized, the more industrialized society is, the more likely you are
to have these problems. Now, there are some countries, UH, particularly Israel and Singapore that have very aggressive systems for purifying their water for reasons unrelated to UH necessarily health reasons, but really for water scarcity reasons. They have a reason
to do this. And there are some parts of the United States, and I talked about in a chapter Orange County, California, which has made a decision to basically ignore the e p A guidelines, go way above it, and they demonstrate the fact that using known technologies at very reasonable prices, you can have the safest drinking water possible you can of pure water. All you would think that if they had Zoloft in the water, Prozac or something, everybody'd be
a little b happier a little bit exactly. So it's seth So private versus public water utilities tell us the compare and contrast there. Okay, So, so this was a piece that I wrote the other day for The Wall Street Journal, and I wanna I wanna highlight something that is a completely unknown fact in American life. Even when I talk to members of Congress and senators, they have no idea. This is the case. You would think, rationally speaking, fifty states, maybe every state should have at least one
water utility, maybe two, maybe three. So maybe there should be three hundred, four hundred, maybe five. What are utilities? United States? Tops? Even though you could say that one utility could cover several states, we have in the United States over fifty thousand what are utilities? One county, Los Angeles County has two hundred separate water utilities. These are
very tiny. They have no ability to have the financial well wherewithal in order to get the financing that they need to make sure that they can hire up to date up that they can buy up to date technologies, hire the most advanced scientists and engineers, and also fix
their broken infrastructure. Because this is crazy, just real quick, here, who has the interest of keeping all of these smaller util it is open the utilities, okay, so, but no one in the public, Lisa, nobody in the public should for a second think that this is a good idea, and it isn't a good idea. That's why one of the main thrust of my book talking about public health and water is to say that four big takeaways from my book, one of which is we must consolidate our
drinking water utilities. And by the way, a second point that I made in the Journal article is that it turns out that about fift of American utilities are in private hands, which is invest your own hands, whether they're
public companies or private companies. Remarkably, digging deep into e p A health data, which a couple of professors have done, you you learned something remarkable, which is that although you would think that public utilities have the public's interests in mind, actually there's a much higher incidence of contaminated water in public utilities. And the reason for that is because mayors want to keep the price of water low and therefore they don't get the outcomes you want. Set Segal, thanks
so much for joining fascinating thing discussion. Set single activist, author, member of the Council Foreign Relations, author of Troubled Water, What's Wrong with What We Drink? That's coming October one, and also author of Let there Be Water Israel Solution for water star starved world. I am very interested in that. Tom Freedom of New York Times op ed today on that topic, using the work of Seth. Very interesting. Time to check in with Bloomberg Opinion. We're joined by Pining
columnist Eric Outunus. He's a senior et F analysts for Bloomberg Intelligence and Eric, when you come in here, typically we talk about what new cool et F. Vanguard is launching a little bit different twists. Today Now they're talking about getting into the private equity business. What's going on one of our favorite ETF issuer. Yeah. I mean, anytime you hear Vanguard getting into something, most people shutter, especially if you're in that business. But I would say, if
you're in private equity, don't worry so much. This is really aimed at the advisory business, wealth management. This is Vanguard. That's what they want to disrupt here. So if you are an advisor and you want to get bigger clients, institutional clients, you need private equity. So this is just to sort of round out their other offerings. It's right
in the press release. It says here part of an ongoing effort to further expand the suite of products to our advisory clients, and Tim Buckley said back in March of last year, we have been really he's the CEO, He's the CEO of Vanguard. To me, this quote is really who should be on alert here. We have been really pleased with the price competition we have introduced in the mutual fund sphere. We liked that we have had that much of an impact that the area that really
needs to come down in price is advice. Okay, this is this is really a compelling point because my first initial uh take on this was this is where the fees are private equity, and so of course Vanguard's gonna want to get into private equity, but it's being submanaged by somebody else. This isn't necessarily them building out their own private equity capacity within the house. This is more about what are saying, which is to have a bigger suite of offerings to institutions. Is that is that the
right read of this? Yeah, I'm gonna bet there's no uh that. There was nothing in the press release about the what the cost would be, But I'm gonna bet it's going to be on the cheaper side for a private equity fund, probably on the expensive side. If you're talking et F prices, but Vanguard is not going to do anything that's like, you know, too controlled price wise. So then granted, the big loser here is the advisory business.
But does this also start to put pressure on private equity fees in a way that we really haven't seen until now. It can, and you know, you cannot underestimate Vanguard. I was looking at the flows this year. Vanguard takes in more than everybody every year, but this year what's interesting is Fidelity, black Rock, Schwab, they're all starting to catch up to Vanguard. But the reason they're catching up is because they've all just copied Vanguard and they offer
dirt cheap beta. So in a way, Vanguard is responsible for the whole enchilada. Now, if they get into private equity and they see clients, maybe come over and work with them, possible, But I see the price pressure in private equity and it talked to Paul Goldberg RP Analysts and he's very adamant about this as well. That's not gonna come for a while. We think medium long term
at best. But right now their advisory business is up to a hundred and sixty one billion, and it basically is only a couple of years old, so that's a fast growth for that business. And remember they have all these fund investors who grew up with them and now have more complicated life matters. So they've got this natural pool of money coming in that they're gonna offer advice on. And their fees are low. The highest fee you can pay is thirty basis points, but if you have over
twenty five million, they charge you five. Wow, it's just extraordinary. So who are going to be initially kind of the customers for this private equities I wouldn't think it would be appropriate for every you know, individual investor for example, Uh, institutions, right, so you're gonna have to be qualified. So here, I mean, here's the quote from the Pressure least many institutional clients seek alpha sources not readily available in the public markets.
This also speaks to a bigger issue, which is, Uh, the private equity markets are growing, public equity markets not growing as much, and some people estimating that regular fund companies are going to have to get into private equity to keep up at the times. So who are the big advisory firms that should be onnotice? I'd say, well, all the big ones Meryl ubs uh. And then also I think r A is to a degree. I think the r A business. If you are a specialist and
your local probably fine. But anyone in the middle middle level, we're bigger. I think that's who Vanguard typically takes out the big guys. How does Vanguard lower the advisory fees here? What's their secret sauce? Well, the secret sauce is the mutual ownership structure. They're basically designed like a co op, so their investors are vanguards, not a public company. That's why not much is known about it. But it's rest as Mounvern Pennsylvania private company there. They keep such a
low profile and yet six point two trillion assets under management. Yeah, every time they get new profit in they instead of you know, doing things with that money, they typically vote because the fund investors are the shareholders, so of course they're going to vote to lower the fees. So for fifties some years they've been lowering the fees on funds, and I'd like to say they they were lowering fees before it was cool. Now everybody wants to do it.
They're already at ten bibs everywhere, so in their mind, I think they are much more playing a different game. They're not looking for profits, They're looking to just lower costs for investors everywhere. So if Fidelity gets UH flows offering index mutual funds for two basis points, I think Vanguard takes that as a win for them, And I think if they can maybe have an effect on private equity,
they'll probably take that as a win as well. But I think ultimately, right now their purpose is to build out this advisory business called the Personal Advisory Service p AS probably the three scariest letters if you're an advisor right now. Yeah, p AS, Eric Valcinez, thank you so much for being with us of Bloomberg Intelligence r et
F grew here. It is a busy time down in Washington, d C. What with the State of the Union address last night by the president, impeachment wrapping up today in the Senate UH, and then the Democratic presidential race well underway. Let's get the latest returned to Lonnie Chen. Lonnie is a David and Diane Stephie research Fellow WHOEVER Institution, also a director of Domestic Public Studies and a lecture in the Public Policy program at Stanford University. Based in Stanford,
Lonnie Thanks so much for joining us. Let's start with the State of the Union address last night. What are your key takeaways? Well, you know, I thought that the speech was effective, as you know, the president's sort of campaign kickoff in earnest. You know, obviously the President has been running for re election, but the speech last night was an opportunity for him to articulate what he believes
the accomplishments of his administration has been. And if you look at the policy he discussed, a lot of it was aims squarely at the base of the Republican Party, really trying to animate and turn out those voters, which is going to be key to the success of his reelection campaign. So you saw themes like immigration, cultural issues
like abortion. These are issues obviously that aren't necessarily aimed at swing voters or independent voters, are aimed at Republicans and getting that vote out is going to be critical. So I thought as a re election campaign speech, the President did what he needed to do. Uh And and now I think it's up to Democrats to define their race and pick a nominee. Lonny, You're an incredible guest for us to have today. I'm very glad you're here.
Given the fact that you've advised the Romney and Rubio Republican presidential campaigns, and you've seen the way that the sausage is made in a lot of ways. I'm wondering, especially as some of the polls come out, the Gallop one in particular, showing President Trump with a record high approval rating, the bifurcation right now, the sort of dispersion between the Republicans and the Democrats becoming increasingly sort of
excuse me, a hard line in their approaches. And I'm wondering, from your perspective, do we have a sense of whether the Republican Party or the Democratic Party is getting bigger in terms of representing overall population in the country. Yeah, that's a really good question. I think the Republican Party, by and large, the base has consolidated in the Republican Party. And what I don't think you're seeing necessarily a whole
lot of people affiliating with the Republican Party now. I think what you are seeing is a lot of people who have decided that they'll support President Trump regardless of the partisan label. Uh. You know, we oftentimes talk about, for example, Midwestern voters in states like Iowa and Michigan that voted for President Obama twice, but in voted for President Trump. I don't know they would consider themselves Republicans or Democrats. I think they might consider themselves Trump voters
first and foremost on the Democratic party side. I don't see their share of the electorate growing, unless you're talking about again, because solidating their support in coastal and urban areas. So I think what's happening is increasingly a phenomenon where voters are are trying to say that they're independent, and
we have to really dissect what independent means. That mean that they're truly independent in the sense that they could vote for a Republican or a Democrat, or does it mean that they're independent in a more traditional sense, which is that they lean one way or the other and
are inclined to vote for a Democratic Republican. I tend to think we're in an era where people are are dealigning themselves from political parties, and what that means is opportunity for politicians like Trump who are a little bit out of the box, a little bit Lonnie. So the impeachment process wrapping up today, officially at least within the Senate, what do you think, if anything, the lasting impact will
be on President Trump, particularly as he heads into reelection mode. Yeah, I've been saying for a while, I think that this impeachment saga is going to be a distant memory by the time we get to October and the fall campaign leading into the November elections. I really think that, you know, while it's dominating the news now, I think by and large, voters are going to be concerned about a whole different set of other issues, not not impeachment, by the time
they go to cast their votes. I think the pocketbook issues, jobs in the economy, healthcare, those are going to be the important ones that voters are going to turn to. So I know the the impeachment saga is difficult to to not cover, but the reality is that for most voters this is not going to be an issue that
they particularly care about. Lonnie, Since you've advised both the Marco Rubio and Romney campaigns, both of those individuals have come out against President Trump throughout his presidency, certainly early on and before he became presidents have their views changed? I mean sort of among moderate Republicans, are they are they more supportive of President Trump now? Well, I think Senator Rubio has has been, you know, pretty supportive, particularly over the last couple of months or so. I think
he's been supportive on policy. I think with respect of this impeachment debate, it's been pretty clear. He's been pretty forceful, I think, in arguing that he doesn't believe this is a removable offense. And he also, you may recall, voted against trying to hear from additional witnesses. So I think he's been fairly conventional. He has spoken out against the president a few times on on some foreign policy issues, but by and large, I think he's been he's been
pretty consistent in supporting the president. Senator Romney, I think, has been in a slightly different position, and he's obviously been seen as more of a maverick. I think that reflects the fact, first of all, that, um, you know, Senator Romney has been somebody who comes politically from a different kind of constituency. He's got got some more political safety, one would argue, than Senator Rubio does in Florida, which
is a swing in your state. And I do think that Senator Romney is a different phase of his career. Quite frankly, Um, you know, he's been the nominee the Republican Party, he's been somebody who's been an elder statesman in the Republican Party for a while. Um, I think he's had the latitude in the freedom to frankly speak his mind or but this is this is a this is a compelling point. He's more in a position to speak his mind. Do other Republicans feel similarly to him
when they're not speaking in public? Yeah, Well that's the that's the key, uh modifier there, lisays when they're not in public. I think a lot of Republicans privately, are are you not happy with the president's behavior on the Ukraine situation? They would say that privately, but publicly they haven't. They haven't stood out and said that because they fear the repercussions and or they believe that the way the Republican Party is now, there would be electoral consequences to
speaking out against presidents. So yeah, there definitely is this dichotomy between private and public. Lonnie, just real quickly thirty seconds. How do you handicap the democratic field? We had that Debacco in the Iowa caucus is just right now? How do you handicap that field? I think it's going to consolidate to you know, one progressive and one moderate. I see probably Bernie standards as the inside track on the progressive side. On the moderate side, it's tough to tell.
Pete Bota did well in Iowa, but it remains to be seen if he can win in diverse states. And I think the biggest beneficiary from last night might actually be Mike Bloomberg because of the opportunity he has going forward to compete and really the only person with the resources to compete once we get the Super Tuesday, which is a big hall of delegates, which is at the end of the day, what matters. Lonnie Chen, thank you
so much for being with us. Lonnie Chen is the David and Diane Stephy Research Fellow at the Hoover Institution, also Director of Domestic Policy Studies and lecturer in the Public Policy Program at Stanford University. We should say Mike Bloomberg is the founder and majority owner of Bloomberg LP, which owns this radio station. Just as a disclaimer, and we will continue to follow what happens with respect to the ongoing elections. Thanks for listening to the Bloomberg pen
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