1 00:00:02,640 --> 00:00:05,320 Speaker 1: Welcome to the Bloomberg Penel podcast. I'm Paul Swinge. You, 2 00:00:05,360 --> 00:00:07,680 Speaker 1: along with my co host Lisa Brahma wits each day 3 00:00:07,720 --> 00:00:10,240 Speaker 1: we bring you the most noteworthy and useful interviews for 4 00:00:10,280 --> 00:00:12,520 Speaker 1: you and your money. Whether at the grocery store or 5 00:00:12,560 --> 00:00:15,480 Speaker 1: the trading floor. Find a Bloomberg Penil podcast on Apple 6 00:00:15,520 --> 00:00:17,959 Speaker 1: Podcast or wherever you listen to podcasts, as well as 7 00:00:17,960 --> 00:00:21,880 Speaker 1: at Bloomberg dot com. Well, Biogen and its partner said 8 00:00:21,880 --> 00:00:24,599 Speaker 1: they had decided to halt a late stage study of 9 00:00:24,640 --> 00:00:28,840 Speaker 1: an experimental Alzheimer's disease drug, marking another setback for drug 10 00:00:28,840 --> 00:00:32,080 Speaker 1: maker's efforts to find a therapy for the degenerative ailment 11 00:00:32,640 --> 00:00:35,560 Speaker 1: that knocked the stock of Biogen down nearly thirty percent 12 00:00:35,720 --> 00:00:38,640 Speaker 1: so far today. UH to help us dig deeper into 13 00:00:38,640 --> 00:00:42,080 Speaker 1: this story, we welcome Max Nissan. Max's the biotech format 14 00:00:42,120 --> 00:00:45,240 Speaker 1: and healthcare calumnist from Bloomberg Opinion. He joins us in 15 00:00:45,280 --> 00:00:48,920 Speaker 1: our Bloomberg eleven thirties three oh studios here in New York. So, Mac, Max, 16 00:00:49,000 --> 00:00:51,280 Speaker 1: this is a huge deal for the company's stock down 17 00:00:51,360 --> 00:00:55,480 Speaker 1: thirty What happened? So? This was one of the last 18 00:00:55,880 --> 00:00:59,680 Speaker 1: really big late stage Alzheimer's studies that focused on the 19 00:00:59,720 --> 00:01:04,320 Speaker 1: particular way of potentially treating the disease, focusing on on 20 00:01:04,480 --> 00:01:08,320 Speaker 1: the creation of amyloid beta plaques. But um, you know, 21 00:01:08,520 --> 00:01:11,759 Speaker 1: there have been a number of previous failures, really prominent 22 00:01:11,840 --> 00:01:15,880 Speaker 1: ones of a very expensive of late stage trials, most 23 00:01:15,920 --> 00:01:18,840 Speaker 1: recently Elli Lily and then Roche gave up on a 24 00:01:18,880 --> 00:01:21,360 Speaker 1: similar medicine. So it's something that you could have seen coming. 25 00:01:21,560 --> 00:01:24,520 Speaker 1: But you know, Biogen has always pointed to data and 26 00:01:24,680 --> 00:01:27,200 Speaker 1: some differences in its medicine and the way it's it 27 00:01:27,319 --> 00:01:30,040 Speaker 1: ran its trials that that had people hoping that that 28 00:01:30,200 --> 00:01:32,760 Speaker 1: this might finally be the one to break through. But 29 00:01:33,080 --> 00:01:36,280 Speaker 1: it's becoming more difficult to avoid the conclusion that this 30 00:01:36,400 --> 00:01:39,920 Speaker 1: approaches is pretty fundamentally flawed in some way. Yeah, Max, 31 00:01:40,240 --> 00:01:42,760 Speaker 1: to your credit, you wrote a column to this effect 32 00:01:43,760 --> 00:01:46,720 Speaker 1: almost a year ago basically saying this is there's not 33 00:01:46,880 --> 00:01:49,160 Speaker 1: really any evidence that this is going to work. In fact, 34 00:01:49,240 --> 00:01:51,560 Speaker 1: it sort of points to the opposite. And I'm just wondering, 35 00:01:52,320 --> 00:01:54,800 Speaker 1: given given that, I mean, yes, you are prescient and 36 00:01:54,880 --> 00:01:58,160 Speaker 1: your your insights are are very well taken, but it's 37 00:01:58,200 --> 00:02:00,880 Speaker 1: just curious that it would remove of one third of 38 00:02:01,000 --> 00:02:04,680 Speaker 1: the market value of the company on these results coming out, 39 00:02:04,880 --> 00:02:07,800 Speaker 1: How does that has that square with reality? And what 40 00:02:07,880 --> 00:02:11,359 Speaker 1: does that say about evaluations currently? So I think a 41 00:02:11,440 --> 00:02:12,919 Speaker 1: lot of this has to do with the fact that, 42 00:02:13,160 --> 00:02:16,639 Speaker 1: you know, if someone actually succeeded, it would be you know, 43 00:02:16,720 --> 00:02:20,720 Speaker 1: an instant blockbuster, an incredible scientific breakthrough. You know, the 44 00:02:21,639 --> 00:02:25,440 Speaker 1: consensus sales for this medicine, which are supposedly risk adjusted 45 00:02:25,840 --> 00:02:29,560 Speaker 1: for ten billion dollars a year, you know, and if 46 00:02:29,600 --> 00:02:34,000 Speaker 1: you actually succeeded and had a clinically significant impact on Alzheimer's, 47 00:02:34,240 --> 00:02:36,600 Speaker 1: that that estimate might be low. So it's that kind 48 00:02:36,600 --> 00:02:40,720 Speaker 1: of tantalizing upside that had some people still invested even 49 00:02:40,800 --> 00:02:45,280 Speaker 1: if the likelihood of success was demonstrably pretty low. And 50 00:02:45,360 --> 00:02:47,000 Speaker 1: there's also the fact that this has been kind of 51 00:02:47,040 --> 00:02:50,040 Speaker 1: a huge focus of biogen not just this this big 52 00:02:50,160 --> 00:02:53,440 Speaker 1: late stage trial, but a number of other medicines focusing 53 00:02:53,480 --> 00:02:56,080 Speaker 1: either on this approach to Alzheimer's or Alzheimer's in general. 54 00:02:56,480 --> 00:03:00,000 Speaker 1: So this kind of diminishes confidence in those further program 55 00:03:00,160 --> 00:03:03,760 Speaker 1: ms and just in you know, the ability to tackle 56 00:03:03,880 --> 00:03:07,800 Speaker 1: this disease anytime soon or with existing approaches in general. 57 00:03:07,880 --> 00:03:09,840 Speaker 1: So you kind of had to write off not just 58 00:03:10,040 --> 00:03:13,240 Speaker 1: as you canna map this medicine, but other programs as well, 59 00:03:13,760 --> 00:03:16,840 Speaker 1: and then also biogen strategy in general has been to 60 00:03:16,960 --> 00:03:21,040 Speaker 1: focus on these kind of riskier neurological conditions, you know. 61 00:03:21,120 --> 00:03:23,040 Speaker 1: And it's great from a kind of a human and 62 00:03:23,120 --> 00:03:26,440 Speaker 1: scientific perspective that you're that they're doing that. You need 63 00:03:26,560 --> 00:03:28,760 Speaker 1: someone to otherwise we're we're not going to make progress. 64 00:03:29,040 --> 00:03:32,440 Speaker 1: But from an investment perspective, h it's it's pretty scary, 65 00:03:32,600 --> 00:03:35,960 Speaker 1: especially when their current big money maker and multiple scourses 66 00:03:36,040 --> 00:03:38,880 Speaker 1: medicines is starting to kind of level out and decline. 67 00:03:39,040 --> 00:03:42,920 Speaker 1: So that strategy looks even more risky right now than 68 00:03:43,000 --> 00:03:45,120 Speaker 1: it did a day ago. So but if you if 69 00:03:45,120 --> 00:03:47,160 Speaker 1: you talk about a market that is maybe ten billion 70 00:03:47,200 --> 00:03:50,000 Speaker 1: dollars a year, I mean as monstrous. These companies cannot 71 00:03:50,200 --> 00:03:52,760 Speaker 1: walk away from this, right, I mean even Biogen, who's 72 00:03:53,120 --> 00:03:55,200 Speaker 1: just got whacked today in a stock market, they can't 73 00:03:55,240 --> 00:03:59,440 Speaker 1: really walk away, can they. I think they should consider 74 00:03:59,560 --> 00:04:04,240 Speaker 1: walking away from related approaches um And one of their 75 00:04:04,360 --> 00:04:09,640 Speaker 1: biggest Phase three Alzheimer's medicines is you know, another amyloid 76 00:04:09,720 --> 00:04:12,920 Speaker 1: beta focused program. And then the other kind of big 77 00:04:13,040 --> 00:04:15,320 Speaker 1: area that people focusing this is on the towel protein 78 00:04:15,600 --> 00:04:17,840 Speaker 1: that also has a pretty bad track record, So you 79 00:04:17,920 --> 00:04:20,080 Speaker 1: really need to kind of look take a take a 80 00:04:20,160 --> 00:04:24,679 Speaker 1: really hard look at those programs and think about whether 81 00:04:24,760 --> 00:04:27,880 Speaker 1: there's a compelling reason to keep investing in them, or 82 00:04:28,240 --> 00:04:31,360 Speaker 1: is it time to move on to approaches that you 83 00:04:31,400 --> 00:04:33,840 Speaker 1: know are less validated and even risk here in much 84 00:04:33,880 --> 00:04:38,000 Speaker 1: earlier stage, but to take a significant step away from 85 00:04:38,560 --> 00:04:41,280 Speaker 1: from a hypothesis that has kind of repeatedly proven to 86 00:04:41,680 --> 00:04:43,960 Speaker 1: to fallen short, Max, I want to zoom out a 87 00:04:44,000 --> 00:04:47,480 Speaker 1: little bit because this whole situation really raises a very 88 00:04:47,560 --> 00:04:51,559 Speaker 1: important question about development of new drugs, uh at about 89 00:04:51,600 --> 00:04:54,560 Speaker 1: the expense and the risk of them, but the necessity 90 00:04:54,760 --> 00:04:58,120 Speaker 1: for the public good. Uh and sort of where development 91 00:04:58,200 --> 00:05:01,720 Speaker 1: should happen, right, I mean there is some development at universities, 92 00:05:01,839 --> 00:05:03,760 Speaker 1: But I mean, can you give us a sense of 93 00:05:03,960 --> 00:05:07,320 Speaker 1: companies of their approach of how much money they'll invest 94 00:05:07,400 --> 00:05:10,080 Speaker 1: in R and D, Whether there is sort of a 95 00:05:10,160 --> 00:05:14,440 Speaker 1: reliance on you know, universities, how how that works and 96 00:05:14,520 --> 00:05:17,440 Speaker 1: they determine sort of what what's worth the investment. Sure, 97 00:05:17,440 --> 00:05:19,760 Speaker 1: I mean, there there's a lot of spending on R 98 00:05:19,839 --> 00:05:23,280 Speaker 1: and D, both directly in terms of internal discovery and 99 00:05:23,360 --> 00:05:27,560 Speaker 1: development pipelines and then externally in the form of acquisitions, 100 00:05:28,000 --> 00:05:32,160 Speaker 1: licensing deals with with little biotechs or or universities. Many 101 00:05:32,160 --> 00:05:34,920 Speaker 1: of those little biotexs are spun out of universities, and 102 00:05:35,240 --> 00:05:38,640 Speaker 1: how to go about doing that is an incredibly difficult question, 103 00:05:39,040 --> 00:05:41,640 Speaker 1: one that I think pharma has a lot of a 104 00:05:41,800 --> 00:05:44,119 Speaker 1: big way along ways to go in grappling with because 105 00:05:44,520 --> 00:05:48,640 Speaker 1: more of their spending is increasingly directed at at smaller populations, 106 00:05:49,279 --> 00:05:52,000 Speaker 1: so cancer and rare disease because you have you have 107 00:05:52,120 --> 00:05:55,640 Speaker 1: pricing power there, and the trials are smaller and cheaper. 108 00:05:55,880 --> 00:05:59,840 Speaker 1: Alzheimer's trials are giant, expensive and they fail all the time. 109 00:06:00,040 --> 00:06:03,400 Speaker 1: Okay when on all three fronts um but you know, 110 00:06:03,680 --> 00:06:06,000 Speaker 1: this really raises a question, especially when you talk about say, 111 00:06:06,120 --> 00:06:08,400 Speaker 1: vaccines that aren't very sexy and that our money losers 112 00:06:09,120 --> 00:06:12,520 Speaker 1: to antibiotics, you know, things that actually everyone uses all 113 00:06:12,560 --> 00:06:16,080 Speaker 1: the time and that are crucial life saving UH drugs. 114 00:06:16,240 --> 00:06:18,880 Speaker 1: It just raises a question, you know, what is the 115 00:06:19,000 --> 00:06:22,880 Speaker 1: correct model for this with respect to either government intervention 116 00:06:23,360 --> 00:06:26,680 Speaker 1: or sponsorship or rewarding or you know, how do you 117 00:06:26,960 --> 00:06:29,640 Speaker 1: how do you incentivize these companies to do that. I 118 00:06:30,080 --> 00:06:33,280 Speaker 1: do think there needs to be uh a kind of 119 00:06:33,440 --> 00:06:37,360 Speaker 1: grand rethinking of of how what medicines we pay for 120 00:06:37,480 --> 00:06:39,480 Speaker 1: and why and how much we pay for them. If 121 00:06:39,560 --> 00:06:42,200 Speaker 1: we continue to kind of leave the system of the 122 00:06:42,240 --> 00:06:45,320 Speaker 1: status quo where we pay a lot for these medicines 123 00:06:45,600 --> 00:06:49,440 Speaker 1: that treat a very small population, often not that effectively, 124 00:06:50,040 --> 00:06:55,360 Speaker 1: and have antibiotics that are not fundamentally not profitable to develop. 125 00:06:55,800 --> 00:06:58,320 Speaker 1: So there needs to be some kind of incentive, whether 126 00:06:58,400 --> 00:07:02,040 Speaker 1: it's you know, the government makeing specific you know, specifically 127 00:07:02,080 --> 00:07:05,480 Speaker 1: funding that research, some way to bring the prices up there. 128 00:07:05,560 --> 00:07:07,680 Speaker 1: There does need to be some kind of intervention otherwise 129 00:07:07,720 --> 00:07:10,440 Speaker 1: we're going to continue a further down this path that 130 00:07:10,560 --> 00:07:15,080 Speaker 1: we that our current market heavily incentivizes. So that's let's 131 00:07:15,120 --> 00:07:17,320 Speaker 1: just go back to Alzheimer's. Is anybody doing it right? 132 00:07:17,440 --> 00:07:22,720 Speaker 1: Is anybody making headway? Um? Not not not yet. Yeah, 133 00:07:22,840 --> 00:07:26,280 Speaker 1: you know, there there are companies that are taking alternative approaches. 134 00:07:26,400 --> 00:07:28,720 Speaker 1: There's interest in this, but yeah, that that kind of 135 00:07:28,760 --> 00:07:33,360 Speaker 1: basic research, but there's nothing right now that's kind of 136 00:07:33,480 --> 00:07:36,400 Speaker 1: in a big potentially you know, the sort of child 137 00:07:36,440 --> 00:07:39,240 Speaker 1: that could get a medicine approved that that is of 138 00:07:39,360 --> 00:07:42,840 Speaker 1: a kind of dramatically different approach than things that we've 139 00:07:42,880 --> 00:07:45,160 Speaker 1: seen that have failed in the past. So there's a 140 00:07:45,240 --> 00:07:46,600 Speaker 1: lot of work yet to be done, and a lot 141 00:07:46,640 --> 00:07:48,880 Speaker 1: of that's gonna end up having to be I think 142 00:07:48,960 --> 00:07:53,200 Speaker 1: in in small biotechs and and at universities UM where 143 00:07:53,520 --> 00:07:56,520 Speaker 1: there's a little bit more more tolerance for failure. Uh 144 00:07:56,760 --> 00:07:59,760 Speaker 1: So we'll see what happens. I continue to be hopeful, 145 00:08:00,680 --> 00:08:03,480 Speaker 1: but where we're a long way off still. Max Nison, 146 00:08:03,520 --> 00:08:05,679 Speaker 1: thank you so much for being with us. Max Neison 147 00:08:05,720 --> 00:08:08,680 Speaker 1: is a Blomberg opinion columnist who covers the biotech and 148 00:08:08,960 --> 00:08:11,960 Speaker 1: all things health topics. I gotta say his column back 149 00:08:12,000 --> 00:08:15,080 Speaker 1: in July of last year, he said, this isn't the 150 00:08:15,160 --> 00:08:18,760 Speaker 1: home runs. Some investors were looking forward respect to Alzheimer's 151 00:08:18,840 --> 00:08:37,200 Speaker 1: treatments that Biojean was trying to develop. The Federal Reserve 152 00:08:37,440 --> 00:08:40,840 Speaker 1: sent a very clear message to markets yesterday they were 153 00:08:40,880 --> 00:08:44,480 Speaker 1: not playing to high grades this year or possibly again 154 00:08:44,760 --> 00:08:48,640 Speaker 1: in this credit cycle, signaling a very devish turn. The 155 00:08:48,800 --> 00:08:52,040 Speaker 1: question is do they have some sort of insight into 156 00:08:52,040 --> 00:08:54,920 Speaker 1: the U S economy that the rest of the market doesn't, 157 00:08:54,960 --> 00:08:58,199 Speaker 1: and are they seeing something that is weaker than what 158 00:08:58,320 --> 00:09:01,240 Speaker 1: we have been talking about and seeing. Joining us now 159 00:09:01,520 --> 00:09:04,320 Speaker 1: in our Bloomberg Interactive Broker Studios, God leving On, Chief 160 00:09:04,360 --> 00:09:07,600 Speaker 1: economists for North America at the Conference Board. The Leading 161 00:09:07,640 --> 00:09:11,079 Speaker 1: Economic Indicator Index came out today with an update that 162 00:09:11,280 --> 00:09:14,600 Speaker 1: was better than expected, showing an actual increase in February 163 00:09:14,640 --> 00:09:19,640 Speaker 1: to zero point two. Uh increasing to zero point I'm 164 00:09:19,720 --> 00:09:24,320 Speaker 1: just wondering, is this indicating that the FED is responding 165 00:09:24,360 --> 00:09:27,439 Speaker 1: to something else other than weakness in the economy. I 166 00:09:27,760 --> 00:09:30,520 Speaker 1: think so. I don't think the FED knows more than 167 00:09:30,600 --> 00:09:33,079 Speaker 1: the rest of us about the economy and about the 168 00:09:33,200 --> 00:09:38,079 Speaker 1: future of the economy. UM. I think that the weakness 169 00:09:38,160 --> 00:09:40,920 Speaker 1: and economy that we are seeing right now is not 170 00:09:41,120 --> 00:09:46,280 Speaker 1: a surprise. I think it's a reaction to a very 171 00:09:46,360 --> 00:09:52,120 Speaker 1: traumatic December in the especially in retail sales and some 172 00:09:52,320 --> 00:09:55,520 Speaker 1: of the declining industrial production and you orders that we 173 00:09:55,600 --> 00:09:59,160 Speaker 1: are seeing since then. He is a result of that decline. 174 00:09:59,240 --> 00:10:02,079 Speaker 1: But the fundamental terms of the economy I think are 175 00:10:02,280 --> 00:10:05,800 Speaker 1: not very different than they were three or four months ago. Um, 176 00:10:06,080 --> 00:10:11,120 Speaker 1: And I think they're surprisingly dovish. Yeah. It's interesting to 177 00:10:11,559 --> 00:10:13,400 Speaker 1: get the data that came up in the Leading Economic 178 00:10:13,440 --> 00:10:16,199 Speaker 1: Indicator today from the Conference Board, better than expected, showing 179 00:10:16,280 --> 00:10:19,400 Speaker 1: some strength. UM. So what do you think the FED 180 00:10:19,640 --> 00:10:23,079 Speaker 1: is looking at to effectively double down on their dovishness 181 00:10:23,160 --> 00:10:25,600 Speaker 1: if you will yesterday? What what what are they saying 182 00:10:25,600 --> 00:10:29,120 Speaker 1: that maybe we're not? Yeah. I just think they made 183 00:10:29,160 --> 00:10:32,280 Speaker 1: the decision when they saw that in December that they 184 00:10:32,320 --> 00:10:34,480 Speaker 1: are going to be blamed for a recession if it 185 00:10:34,640 --> 00:10:37,880 Speaker 1: was to come, and they don't. They are scared and 186 00:10:38,000 --> 00:10:41,640 Speaker 1: they don't want this responsibility. I think they because of that, 187 00:10:41,760 --> 00:10:45,960 Speaker 1: they made the shift, and they're using the economic outlook 188 00:10:46,080 --> 00:10:51,600 Speaker 1: is almost as an excuse to m justified their shift. 189 00:10:51,920 --> 00:10:55,079 Speaker 1: But I don't think there is indeed the reason to 190 00:10:55,200 --> 00:10:59,600 Speaker 1: be very dovish or very pessimistic about the future outlook. 191 00:11:00,000 --> 00:11:04,120 Speaker 1: Think they made a mistake. Um, I think it really 192 00:11:04,240 --> 00:11:09,480 Speaker 1: depends on your ideology and other things. I think that thing. Yeah, 193 00:11:09,520 --> 00:11:14,120 Speaker 1: I think that there is certainly more likelihood of increasing 194 00:11:14,200 --> 00:11:17,920 Speaker 1: inflation then I think the FED leads us to believe. 195 00:11:18,120 --> 00:11:20,839 Speaker 1: Right now, I think if we close our eyes and 196 00:11:21,400 --> 00:11:26,040 Speaker 1: use our imagination and use the forecast of most economist, 197 00:11:26,120 --> 00:11:29,080 Speaker 1: what we'll get is an economy that is growing by 198 00:11:29,120 --> 00:11:31,600 Speaker 1: two to two and a half percent in the next 199 00:11:31,760 --> 00:11:37,240 Speaker 1: six months or so, labor market tightening further, wages accelerating further, 200 00:11:37,840 --> 00:11:42,480 Speaker 1: and in that scenario, I think having a higher inflation 201 00:11:42,679 --> 00:11:45,920 Speaker 1: is a very likely outcome is that bad. I mean, 202 00:11:46,240 --> 00:11:49,959 Speaker 1: higher wages isn't very good thing, that's a good So again, 203 00:11:50,000 --> 00:11:53,880 Speaker 1: it depends what your goals are. If if your main 204 00:11:54,000 --> 00:11:56,839 Speaker 1: goal is to control inflation and make sure that it 205 00:11:56,960 --> 00:12:02,240 Speaker 1: doesn't go above what your comforts on, then I think 206 00:12:03,240 --> 00:12:06,640 Speaker 1: this is a mistake. If you're willing to let inflation 207 00:12:06,760 --> 00:12:11,719 Speaker 1: go higher or risk that inflation go higher, but have 208 00:12:12,080 --> 00:12:15,280 Speaker 1: more people joined the labor market and having higher wages 209 00:12:15,400 --> 00:12:18,400 Speaker 1: than I think that's a very legitimate decision. So to 210 00:12:18,480 --> 00:12:21,680 Speaker 1: what extent do you think the FED chairman power are 211 00:12:21,720 --> 00:12:25,319 Speaker 1: being influenced by some of the geopolitical issues in the world, 212 00:12:25,920 --> 00:12:31,160 Speaker 1: China slowing down, trade issues with China, European Union certainly 213 00:12:31,200 --> 00:12:33,959 Speaker 1: the economic weakness there and Brexit just adding on to it. 214 00:12:34,000 --> 00:12:36,480 Speaker 1: How much do you think they took those issues into 215 00:12:36,559 --> 00:12:40,439 Speaker 1: account in kind of surprising the market with their town yesterday. 216 00:12:41,280 --> 00:12:46,480 Speaker 1: I think it's it's a factor that affects the outlook definitely, 217 00:12:47,040 --> 00:12:51,160 Speaker 1: but it's not something that is new. The weakening in 218 00:12:51,400 --> 00:12:54,079 Speaker 1: China and Europe has been going on for several months. 219 00:12:54,800 --> 00:12:57,760 Speaker 1: I think, if anything, in terms of the fundamentals, they 220 00:12:57,800 --> 00:12:59,760 Speaker 1: are good news. In recent months, the end of the 221 00:13:00,240 --> 00:13:05,440 Speaker 1: down the increasing stock prices, the improvement or the smaller 222 00:13:05,559 --> 00:13:07,720 Speaker 1: chances of a trade war with China. I think all 223 00:13:07,760 --> 00:13:10,960 Speaker 1: of those are good things, and I think that would 224 00:13:11,000 --> 00:13:15,839 Speaker 1: be reflected in the outlook going forward. I'm still going 225 00:13:15,920 --> 00:13:18,640 Speaker 1: back to inflation, the idea that inflation could pick up 226 00:13:18,720 --> 00:13:22,199 Speaker 1: more than people expect later this year. What's going to 227 00:13:22,280 --> 00:13:25,520 Speaker 1: be driving that. Why is this time different, this late 228 00:13:25,559 --> 00:13:28,559 Speaker 1: in the cycle, since we haven't seen a real acceleration 229 00:13:28,600 --> 00:13:34,760 Speaker 1: inflation until now, right, I think we didn't have as 230 00:13:34,920 --> 00:13:37,800 Speaker 1: fast of a wage growth as we have right now. 231 00:13:37,960 --> 00:13:41,720 Speaker 1: I think the in twenty eighteen, it's the first time 232 00:13:41,760 --> 00:13:45,120 Speaker 1: that we actually saw a visible increasing wages in the 233 00:13:45,200 --> 00:13:49,080 Speaker 1: main measures, they're getting close to three and a half percent. 234 00:13:49,840 --> 00:13:52,800 Speaker 1: And I think also revenues will grow more slowly in 235 00:13:53,800 --> 00:13:56,679 Speaker 1: simply because the economy will slow down. So when you 236 00:13:56,800 --> 00:14:00,000 Speaker 1: have an increase in labor cost and slow down in revenue, 237 00:14:00,520 --> 00:14:04,520 Speaker 1: that will put a significant pressure on profits, and companies 238 00:14:04,600 --> 00:14:07,280 Speaker 1: in many cases will choose to shift some of the 239 00:14:07,360 --> 00:14:10,520 Speaker 1: costs to the consumer. So I think I think we 240 00:14:10,640 --> 00:14:13,280 Speaker 1: now have a better chance of getting higher inflation than 241 00:14:13,360 --> 00:14:16,800 Speaker 1: any time in this expansion. God Levanon, thank you so much. 242 00:14:16,800 --> 00:14:19,800 Speaker 1: We appreciate you. Coming in god Lebanon, chief Economist for 243 00:14:19,840 --> 00:14:22,600 Speaker 1: North America for the conference board, joining us in our 244 00:14:22,640 --> 00:14:45,520 Speaker 1: Bloomberg Interactive Broker studio. Well, yesterday we had the FED 245 00:14:45,840 --> 00:14:49,440 Speaker 1: double down on its dobish stance, perhaps maybe seeing something 246 00:14:49,520 --> 00:14:51,360 Speaker 1: in the economy that the rest of us don't see. 247 00:14:51,800 --> 00:14:53,520 Speaker 1: To dig into that a little bit more, we welcome 248 00:14:53,560 --> 00:14:57,040 Speaker 1: our guest Bill Zox. Bill is the chief investment Officer 249 00:14:57,120 --> 00:15:00,440 Speaker 1: of fixed income at Diamond Hill Capital Management approximate nineteen 250 00:15:00,440 --> 00:15:03,440 Speaker 1: billion dollars under management, based in Columbus, Ohio, but he 251 00:15:03,560 --> 00:15:06,360 Speaker 1: joins us here in a Bloomberg Interactive Broker studio. Bill 252 00:15:06,440 --> 00:15:10,440 Speaker 1: welcomed to our studio. What did you take away from 253 00:15:10,640 --> 00:15:13,880 Speaker 1: the Fed's report and from the comments from chair Chairman 254 00:15:13,880 --> 00:15:16,840 Speaker 1: Pal yesterday? Well, I was surprised. I think the FED 255 00:15:17,040 --> 00:15:20,800 Speaker 1: was clearly too tight in December. The Fed needs to 256 00:15:20,960 --> 00:15:25,040 Speaker 1: pay attention to market signals, but in this case, now 257 00:15:25,160 --> 00:15:27,640 Speaker 1: the Fed is paying too much attention to market signals. 258 00:15:27,680 --> 00:15:30,640 Speaker 1: I think that the Fed is overcorrected and gone too 259 00:15:30,760 --> 00:15:33,160 Speaker 1: far in the other direction, given the market even more 260 00:15:33,240 --> 00:15:36,200 Speaker 1: than what it really wants or needs at this stage. Well, 261 00:15:36,240 --> 00:15:39,920 Speaker 1: what's the consequence, I mean, what's the what's the detrimental consequence. Well, 262 00:15:39,960 --> 00:15:42,480 Speaker 1: I think it's it's not a good situation when you've 263 00:15:42,680 --> 00:15:47,320 Speaker 1: basically priced volatility out of all assets are largely priced 264 00:15:47,400 --> 00:15:50,400 Speaker 1: volatility out. I think it's better when assets are are 265 00:15:50,480 --> 00:15:54,080 Speaker 1: priced for some volatility. So basically, the fear here is 266 00:15:54,240 --> 00:15:56,760 Speaker 1: that if the FED holds rates too long, it can 267 00:15:56,880 --> 00:15:59,760 Speaker 1: create I don't want to say bubbles, but certainly excesses 268 00:15:59,840 --> 00:16:02,200 Speaker 1: and different areas in different markets. And people point to 269 00:16:02,280 --> 00:16:04,920 Speaker 1: stocks or HW yield bonds. But the interesting thing is 270 00:16:05,000 --> 00:16:07,200 Speaker 1: is that following the FED meeting, you didn't really see 271 00:16:07,320 --> 00:16:10,720 Speaker 1: that gut reaction. You actually saw the knee jerk was 272 00:16:10,880 --> 00:16:14,200 Speaker 1: risk off and you saw credit spreads widen. Actually, so 273 00:16:14,520 --> 00:16:16,520 Speaker 1: how do you sort of square these sort of uh, 274 00:16:17,080 --> 00:16:20,760 Speaker 1: these these these developments. Well, we've seen such a tremendous 275 00:16:20,840 --> 00:16:25,360 Speaker 1: move back in risk assets since late last year, and 276 00:16:25,440 --> 00:16:27,400 Speaker 1: I think if you look at the treasury market, should 277 00:16:27,440 --> 00:16:30,000 Speaker 1: high yield spreads are about four d basis points right now. 278 00:16:30,080 --> 00:16:32,600 Speaker 1: If you look at the treasury market, high old spreads 279 00:16:32,600 --> 00:16:35,320 Speaker 1: should probably be somewhat wider than that. There's a disconnect 280 00:16:35,400 --> 00:16:38,800 Speaker 1: between the two markets. So where are you thinking about? 281 00:16:39,160 --> 00:16:41,200 Speaker 1: Where do you see opportunity? Where do you see value. 282 00:16:41,240 --> 00:16:43,000 Speaker 1: I know you principally play in the high yield market. 283 00:16:43,040 --> 00:16:45,480 Speaker 1: Is that right? So where are you seeing some opportunity here? 284 00:16:45,880 --> 00:16:50,040 Speaker 1: Principally in the high yield market? But uh, ironically, as 285 00:16:50,200 --> 00:16:53,640 Speaker 1: high yield investors are moving up in quality, they're making 286 00:16:53,720 --> 00:16:57,280 Speaker 1: double B corporate bonds very rich, and his investment grade 287 00:16:57,280 --> 00:17:00,760 Speaker 1: investors are moving up in quality, they're actually making triple 288 00:17:00,840 --> 00:17:04,320 Speaker 1: B bonds, certain triple B bonds attractive. So one theme 289 00:17:04,520 --> 00:17:07,280 Speaker 1: is to sell double bees that are priced like investment 290 00:17:07,320 --> 00:17:10,760 Speaker 1: grade and buy triple bees that are priced like high yield. 291 00:17:11,680 --> 00:17:14,800 Speaker 1: That's really interesting going forward, I'm wondering, are we out 292 00:17:14,920 --> 00:17:18,560 Speaker 1: of Goldilocks? Where is the FED remains? Do wish? Uh? 293 00:17:18,840 --> 00:17:21,439 Speaker 1: And and even stops it's a balance sheet roll off 294 00:17:22,040 --> 00:17:25,520 Speaker 1: that won't be as supportive for credit going forward because 295 00:17:25,520 --> 00:17:28,359 Speaker 1: of how much it's already rallied. That's exactly right. I 296 00:17:28,400 --> 00:17:32,560 Speaker 1: think Goldilocks was basically priced into the market, and now, uh, 297 00:17:32,960 --> 00:17:36,720 Speaker 1: for the data to confirm a Goldilocks scenario like that 298 00:17:36,920 --> 00:17:39,440 Speaker 1: is very unlikely. So that means that bad news will 299 00:17:39,440 --> 00:17:42,159 Speaker 1: be bad news when it comes to the economy. I 300 00:17:42,240 --> 00:17:44,480 Speaker 1: think that's right. So you know, one of the things 301 00:17:44,520 --> 00:17:46,159 Speaker 1: I think a lot of people. Obviously, we're surprised. I 302 00:17:46,200 --> 00:17:48,719 Speaker 1: think I'm sensing your sense of surprise about how doubbish 303 00:17:48,880 --> 00:17:50,679 Speaker 1: the FED was. You say, do you think they are 304 00:17:50,840 --> 00:17:53,760 Speaker 1: seeing something that maybe the market is not, and if so, 305 00:17:53,880 --> 00:17:57,400 Speaker 1: what do you think that could be. I don't think 306 00:17:57,480 --> 00:18:00,679 Speaker 1: that's the case, but the market is very concerned about that. Uh, 307 00:18:00,840 --> 00:18:02,720 Speaker 1: you know, I think that. I just don't understand. The 308 00:18:02,800 --> 00:18:05,920 Speaker 1: FED was not paying enough attention to market signals in December. 309 00:18:06,320 --> 00:18:08,520 Speaker 1: Now they're paying too much attention. That's all I can say. 310 00:18:08,560 --> 00:18:10,080 Speaker 1: I thought I thought it should be more of a 311 00:18:10,160 --> 00:18:12,640 Speaker 1: give and take with the markets. When you talk about 312 00:18:12,680 --> 00:18:15,840 Speaker 1: the high old bond market, there have been a number 313 00:18:15,920 --> 00:18:19,280 Speaker 1: of idiosyncratic moves. It's sort of up moving from a 314 00:18:19,400 --> 00:18:22,720 Speaker 1: macro driven market to a very micro driven market with 315 00:18:22,840 --> 00:18:27,160 Speaker 1: specific companies either doing really well, they're dead, or really poorly. 316 00:18:27,320 --> 00:18:31,520 Speaker 1: I'm just wondering, specifically within sectors companies, where do you 317 00:18:31,640 --> 00:18:36,159 Speaker 1: see the opportunities right now? Yeah, you know, I'll give 318 00:18:36,200 --> 00:18:39,240 Speaker 1: you one example that's sort of interesting and there to 319 00:18:39,440 --> 00:18:42,639 Speaker 1: Detroit companies. It's consistent with a theme that I just mentioned. 320 00:18:43,080 --> 00:18:47,399 Speaker 1: It's Motor City, a single casino credit in Detroit and 321 00:18:47,560 --> 00:18:51,359 Speaker 1: Ford Motor and we're buying Ford motor and we've sold 322 00:18:51,400 --> 00:18:54,200 Speaker 1: motor City. That's what I was talking about before. Motor City, 323 00:18:54,720 --> 00:18:57,280 Speaker 1: a double B low double be credit priced inside of 324 00:18:57,320 --> 00:19:00,920 Speaker 1: two d basis points credit spread. Forward opened up the 325 00:19:01,040 --> 00:19:03,640 Speaker 1: investment grade market this year with a three year bond 326 00:19:03,680 --> 00:19:08,200 Speaker 1: priced at three basis points over treasury. So there's a 327 00:19:08,280 --> 00:19:10,720 Speaker 1: disconnect for you. Are there some sectors in the high 328 00:19:10,800 --> 00:19:12,680 Speaker 1: yield to sectors within the hig yield that you like 329 00:19:12,960 --> 00:19:15,800 Speaker 1: right now? Um or? Is everything a little rich from 330 00:19:15,920 --> 00:19:18,720 Speaker 1: your perspective? I mean it's you have to be careful. 331 00:19:18,800 --> 00:19:21,639 Speaker 1: We're late cycle. You've got to be careful in the 332 00:19:21,680 --> 00:19:24,320 Speaker 1: high yield market. But we always like financials more than 333 00:19:24,760 --> 00:19:27,639 Speaker 1: our peers, and and we definitely find things to do 334 00:19:27,720 --> 00:19:31,600 Speaker 1: in financials. I'll give you another Detroit Credit Credit Acceptance, 335 00:19:31,640 --> 00:19:34,560 Speaker 1: a subprime auto lender, which is a very well managed company. 336 00:19:34,600 --> 00:19:37,920 Speaker 1: You're bullish on Detroit? Do we do like Detroit? Even 337 00:19:37,920 --> 00:19:42,040 Speaker 1: though from Columbus, Ohio? I like Detroit Credits. So, Bill, 338 00:19:42,160 --> 00:19:46,280 Speaker 1: you said late cycle. When do you expect the cycle 339 00:19:46,400 --> 00:19:50,120 Speaker 1: to turn and defaults to really meaningfully pick up? Yeah? 340 00:19:50,119 --> 00:19:53,760 Speaker 1: I mean that that that's hard to call. Uh, you know, 341 00:19:53,920 --> 00:19:57,920 Speaker 1: I think that the cycle the FED is doing what 342 00:19:58,119 --> 00:20:01,080 Speaker 1: it can to extend the cycle, but things can shift 343 00:20:01,240 --> 00:20:04,320 Speaker 1: very quickly and and markets will probably drive it like 344 00:20:04,440 --> 00:20:07,280 Speaker 1: they did in the fourth quarter, where fundamentally not a 345 00:20:07,320 --> 00:20:10,520 Speaker 1: lot was happening, but the massive increase in volatility and 346 00:20:10,600 --> 00:20:15,600 Speaker 1: markets increased the probability of recession quite dramatically. Thank you 347 00:20:15,680 --> 00:20:18,440 Speaker 1: so much for being with us. Bill's ocks. He is 348 00:20:18,520 --> 00:20:21,080 Speaker 1: the chief Investment Officer of fixed Income at Diamond Hill 349 00:20:21,320 --> 00:20:25,360 Speaker 1: Capital Management. Joining us here in our Bloomberg Interactive Brokers 350 00:20:25,400 --> 00:20:42,440 Speaker 1: Studios Well Levi Strauss. They priced their ip O last 351 00:20:42,520 --> 00:20:45,639 Speaker 1: night at seventeen dollars per share, that was above the 352 00:20:45,920 --> 00:20:48,240 Speaker 1: I p O range of fourteen and sixteen, and looking 353 00:20:48,280 --> 00:20:50,440 Speaker 1: on my Bloomberg terminal right now, the stock is not 354 00:20:50,560 --> 00:20:53,000 Speaker 1: open for trading yet today, but it is indicating even 355 00:20:53,119 --> 00:20:54,920 Speaker 1: higher at twenty and a half to twenty one and 356 00:20:54,960 --> 00:20:57,520 Speaker 1: a half is the range. So clearly a lot of 357 00:20:57,560 --> 00:21:00,439 Speaker 1: investor appetite for this name. To help us kind breakdown 358 00:21:00,520 --> 00:21:01,800 Speaker 1: the deal and take a look at the company in 359 00:21:01,840 --> 00:21:05,520 Speaker 1: the space is Hen razutas Hen is the apparel and 360 00:21:05,640 --> 00:21:08,639 Speaker 1: Footwell Footwear an also Bloomberg Intelligence. He joins us on 361 00:21:08,640 --> 00:21:11,520 Speaker 1: our Bloomberg Interactive Brooker's studio. Hen, thanks so much for 362 00:21:11,640 --> 00:21:14,720 Speaker 1: coming in. So what does the market really like about 363 00:21:14,800 --> 00:21:16,520 Speaker 1: this name? I mean, again, it seems like a lot 364 00:21:16,600 --> 00:21:19,639 Speaker 1: of demand above where investors are or the investment bankers 365 00:21:19,800 --> 00:21:23,959 Speaker 1: initially put the ip O range on, right. So obviously 366 00:21:24,000 --> 00:21:26,879 Speaker 1: a big name with a long legacy, big history in 367 00:21:27,000 --> 00:21:29,879 Speaker 1: the apparel space. Um that we don't see too many 368 00:21:29,960 --> 00:21:31,520 Speaker 1: I p o s and in the space in the 369 00:21:31,600 --> 00:21:33,760 Speaker 1: last year's you know, we would more companies bankrupt or 370 00:21:33,880 --> 00:21:37,840 Speaker 1: going private. So that's that's a that's unusual. What I 371 00:21:37,920 --> 00:21:40,680 Speaker 1: think people like about it is a very uh, relatively 372 00:21:40,760 --> 00:21:42,880 Speaker 1: low valuation they put on the deal in the first place, 373 00:21:43,080 --> 00:21:45,600 Speaker 1: UM on an if it that basis, it was about 374 00:21:45,640 --> 00:21:49,479 Speaker 1: eight and a half UM, where the industry averages around eleven. 375 00:21:50,200 --> 00:21:52,160 Speaker 1: So I think that's kind of the movement we've seen 376 00:21:52,240 --> 00:21:56,239 Speaker 1: this morning. Why are they doing an IPO or why 377 00:21:56,320 --> 00:21:58,080 Speaker 1: have they just one one? I guess and we're waiting 378 00:21:58,119 --> 00:22:01,359 Speaker 1: to see how it actually trades. But why now? Right? 379 00:22:01,400 --> 00:22:03,560 Speaker 1: So eve Strice is a company, you know, family owned 380 00:22:03,560 --> 00:22:06,280 Speaker 1: company house family, um, you know own it for ages 381 00:22:06,400 --> 00:22:09,800 Speaker 1: and I think you know, to have some liquidity in 382 00:22:09,880 --> 00:22:12,040 Speaker 1: their stake they have in the company. They're they're putting 383 00:22:12,040 --> 00:22:15,159 Speaker 1: out the percent of the company. So what is all right, 384 00:22:15,200 --> 00:22:17,040 Speaker 1: So what's the investment case here is this? Is this 385 00:22:17,160 --> 00:22:19,920 Speaker 1: like any kind of growth in this business? UM? What 386 00:22:20,000 --> 00:22:22,359 Speaker 1: are investors buying here? Right? So first of all, the 387 00:22:22,400 --> 00:22:25,160 Speaker 1: core business is the bottoms, right that the genes, it's 388 00:22:25,160 --> 00:22:28,480 Speaker 1: about sev The revenue, it's a it's a big category, 389 00:22:28,680 --> 00:22:31,600 Speaker 1: all right, it's about hundred billion dollars. And then I 390 00:22:31,640 --> 00:22:34,440 Speaker 1: think about this specific company, UM a lot like Nike 391 00:22:34,560 --> 00:22:36,560 Speaker 1: what we see in Athletic. In every region that they 392 00:22:36,600 --> 00:22:39,240 Speaker 1: operate there they hold the number one position. So in 393 00:22:39,240 --> 00:22:41,440 Speaker 1: the US it is almost thirteen percent of market share 394 00:22:41,600 --> 00:22:44,879 Speaker 1: just one company. UH in any other region are number one. 395 00:22:44,920 --> 00:22:47,040 Speaker 1: Europe they're only number two. So I think people are 396 00:22:47,040 --> 00:22:48,840 Speaker 1: looking at it saying, you know, it's the best in 397 00:22:48,960 --> 00:22:52,240 Speaker 1: breed in that specific category that's to start. UM. I 398 00:22:52,359 --> 00:22:55,159 Speaker 1: think after they're going public, they do have opportunities to 399 00:22:55,280 --> 00:22:58,440 Speaker 1: venture out of the core business, to go into there's 400 00:22:58,440 --> 00:23:03,840 Speaker 1: a story today about going into tops, sweatshirt, T shirts, etcetera. UM, accessories, footwear, 401 00:23:04,160 --> 00:23:06,679 Speaker 1: those are all under penetary categories that they can use 402 00:23:06,760 --> 00:23:09,479 Speaker 1: the brand name to venture into. This is such an 403 00:23:09,560 --> 00:23:11,480 Speaker 1: interesting I p o at a time when retail is 404 00:23:11,520 --> 00:23:15,400 Speaker 1: called under question in an Amazon era, when branding doesn't 405 00:23:15,560 --> 00:23:19,280 Speaker 1: necessarily mean quite as much. Uh, for them to sort 406 00:23:19,320 --> 00:23:22,119 Speaker 1: of bring back the nostalgia of the nineties eighties and 407 00:23:22,359 --> 00:23:25,399 Speaker 1: say anything or you know, the blue jeans and the 408 00:23:25,640 --> 00:23:29,160 Speaker 1: gene jacket, the jean shirts, etcetera. Uh, it is sort 409 00:23:29,200 --> 00:23:31,840 Speaker 1: of interesting. I actually want to go there is it 410 00:23:31,960 --> 00:23:35,640 Speaker 1: Does branding matter in an era of Amazon when people 411 00:23:35,720 --> 00:23:38,640 Speaker 1: just are really looking for the item and not necessarily 412 00:23:38,800 --> 00:23:41,480 Speaker 1: the name. Well, absolutely, I think branding matters, and I 413 00:23:41,560 --> 00:23:44,000 Speaker 1: think you know that's something that Paul talked about yesterday 414 00:23:44,040 --> 00:23:46,119 Speaker 1: and turn on Netflix. Content is a king right. So 415 00:23:46,200 --> 00:23:51,000 Speaker 1: in our our business, um so retail, the brands are 416 00:23:51,119 --> 00:23:54,639 Speaker 1: the content. So for them it doesn't necessarily you know, 417 00:23:54,880 --> 00:23:57,160 Speaker 1: matters if you sell it through the materior department stores 418 00:23:57,160 --> 00:23:59,440 Speaker 1: at J. C. Penny or Macy's, or you sell it 419 00:23:59,560 --> 00:24:01,480 Speaker 1: on your own website, or you sell it the Amazon. 420 00:24:01,760 --> 00:24:05,959 Speaker 1: Um it really you can shift between channels and actually 421 00:24:06,040 --> 00:24:09,320 Speaker 1: moving away from meteor department stores, moving to your own channels, 422 00:24:09,359 --> 00:24:12,080 Speaker 1: selling it on your website, you sell it for a 423 00:24:12,160 --> 00:24:14,840 Speaker 1: higher price point, you sell it for a higher margin. Um, 424 00:24:15,119 --> 00:24:17,760 Speaker 1: you do have to pay fulfillment shipping, et cetera. UM, 425 00:24:17,840 --> 00:24:19,679 Speaker 1: but it does give you a lot of growth opportunities 426 00:24:19,720 --> 00:24:22,719 Speaker 1: that didn't have before. So Levi Strauss obviously is an 427 00:24:22,840 --> 00:24:25,439 Speaker 1: iconic name here in the United States, cowboys and all 428 00:24:25,480 --> 00:24:28,920 Speaker 1: that kind of stuff. How has that brand traveled outside 429 00:24:28,960 --> 00:24:30,959 Speaker 1: of the US. What percentage of the sales are outside 430 00:24:30,960 --> 00:24:32,560 Speaker 1: of the US And is that an area they think 431 00:24:32,560 --> 00:24:36,600 Speaker 1: they can grow? Right, So it's it's about outside the US. UM, 432 00:24:37,080 --> 00:24:39,520 Speaker 1: it's definitely an area they that can grow. They're really 433 00:24:39,560 --> 00:24:42,600 Speaker 1: penetrated UM in a lot of different markets globally, UM 434 00:24:42,760 --> 00:24:46,480 Speaker 1: or Asia. UM. You know, China, it's only two percent 435 00:24:46,560 --> 00:24:49,040 Speaker 1: on their total sales. So obviously China is a much 436 00:24:49,119 --> 00:24:51,879 Speaker 1: larger market than that. And traditionally what we've seen with 437 00:24:52,000 --> 00:24:54,240 Speaker 1: China with American brands is they come in, they get 438 00:24:54,440 --> 00:24:56,800 Speaker 1: the brand perception in the market can be a lot 439 00:24:56,880 --> 00:24:59,840 Speaker 1: more premium than what it's getting here in the US U, 440 00:25:00,280 --> 00:25:03,200 Speaker 1: so they might have, you know, more price power in 441 00:25:03,760 --> 00:25:07,440 Speaker 1: markets like Asia. So there's definitely opportunities there. Can we 442 00:25:07,520 --> 00:25:11,120 Speaker 1: just touch quickly on Nike because it is March madness, right, 443 00:25:11,600 --> 00:25:14,960 Speaker 1: So is Nike really benefiting here or are we going 444 00:25:15,080 --> 00:25:18,440 Speaker 1: to have a potential problem because of the little snaffoo 445 00:25:19,000 --> 00:25:22,000 Speaker 1: in the speaker situation. Right, let's hope that no shoes 446 00:25:22,040 --> 00:25:25,040 Speaker 1: are going to be blowed up. I mean it's not 447 00:25:25,160 --> 00:25:27,360 Speaker 1: on the first day and definitely not the Duke. Um. 448 00:25:28,560 --> 00:25:31,040 Speaker 1: You know, Nike does well every year in the ncu 449 00:25:31,080 --> 00:25:34,040 Speaker 1: W in terms of the number of teams that they're sponsoring, 450 00:25:34,160 --> 00:25:35,480 Speaker 1: and in the end of the day, it comes down 451 00:25:35,520 --> 00:25:37,840 Speaker 1: to how much exposure they're getting. And we put out 452 00:25:38,040 --> 00:25:40,200 Speaker 1: a number out there that we calculated it based on, 453 00:25:41,080 --> 00:25:45,639 Speaker 1: um the number of of of how much time you 454 00:25:46,040 --> 00:25:50,280 Speaker 1: the logos are visible on the live broadcast the entire 455 00:25:50,400 --> 00:25:52,600 Speaker 1: n C double A. It's probably equivalent about two fifty 456 00:25:52,600 --> 00:25:57,280 Speaker 1: million dollars in advertising dollars. Yeah, that's it's a big number. 457 00:25:57,520 --> 00:26:00,280 Speaker 1: And my jaw just dropped because the thing that that 458 00:26:00,560 --> 00:26:03,480 Speaker 1: you can calculate sort the value of every second on 459 00:26:03,560 --> 00:26:05,800 Speaker 1: a court. That's right, And that's why they're paying the 460 00:26:05,840 --> 00:26:07,800 Speaker 1: big bucks to school. They are and they're putting you know, 461 00:26:07,840 --> 00:26:10,959 Speaker 1: they're putting a lot of money and behind those those teams. Um, 462 00:26:11,280 --> 00:26:14,760 Speaker 1: Nike's leading the you know, over fifty of the teams, 463 00:26:14,800 --> 00:26:18,400 Speaker 1: but under Armer has the teams. That's the record number 464 00:26:18,520 --> 00:26:20,640 Speaker 1: for them. Um, I think they wish that the rest 465 00:26:20,680 --> 00:26:22,560 Speaker 1: of the business we do as as good as as 466 00:26:22,640 --> 00:26:26,640 Speaker 1: the number of teams they they sponsoring. Yeah, Is, thanks 467 00:26:26,640 --> 00:26:28,879 Speaker 1: you so much for being with us. Is is the 468 00:26:29,000 --> 00:26:33,720 Speaker 1: apparel and footwear analyst for Bloomberg Intelligence. Thanks for listening 469 00:26:33,760 --> 00:26:36,160 Speaker 1: to the Bloomberg P and L podcast. You can subscribe 470 00:26:36,160 --> 00:26:38,960 Speaker 1: and listen to interviews at Apple Podcasts or whatever podcast 471 00:26:39,000 --> 00:26:42,479 Speaker 1: platform you prefer. Paul Sweeney, I'm on Twitter at PT Sweeney. 472 00:26:42,600 --> 00:26:44,840 Speaker 1: I'm Lisa abram Woy. It's I'm on Twitter at Lisa A. 473 00:26:44,880 --> 00:26:47,679 Speaker 1: Bramwoit's one before the podcast. You can always catch us 474 00:26:47,800 --> 00:26:49,359 Speaker 1: worldwide on Bloomberg Radio.