Speaker 1: Welcome to the Bloomberg Penel podcast. I'm Paul Swinge. You,
Speaker 1: along with my co host Lisa Brahma wits each day
Speaker 1: we bring you the most noteworthy and useful interviews for
Speaker 1: you and your money. Whether at the grocery store or
Speaker 1: the trading floor. Find a Bloomberg Penil podcast on Apple
Speaker 1: Podcast or wherever you listen to podcasts, as well as
Speaker 1: at Bloomberg dot com. Well, Biogen and its partner said
Speaker 1: they had decided to halt a late stage study of
Speaker 1: an experimental Alzheimer's disease drug, marking another setback for drug
Speaker 1: maker's efforts to find a therapy for the degenerative ailment
Speaker 1: that knocked the stock of Biogen down nearly thirty percent
Speaker 1: so far today. UH to help us dig deeper into
Speaker 1: this story, we welcome Max Nissan. Max's the biotech format
Speaker 1: and healthcare calumnist from Bloomberg Opinion. He joins us in
Speaker 1: our Bloomberg eleven thirties three oh studios here in New York. So, Mac, Max,
Speaker 1: this is a huge deal for the company's stock down
Speaker 1: thirty What happened? So? This was one of the last
Speaker 1: really big late stage Alzheimer's studies that focused on the
Speaker 1: particular way of potentially treating the disease, focusing on on
Speaker 1: the creation of amyloid beta plaques. But um, you know,
Speaker 1: there have been a number of previous failures, really prominent
Speaker 1: ones of a very expensive of late stage trials, most
Speaker 1: recently Elli Lily and then Roche gave up on a
Speaker 1: similar medicine. So it's something that you could have seen coming.
Speaker 1: But you know, Biogen has always pointed to data and
Speaker 1: some differences in its medicine and the way it's it
Speaker 1: ran its trials that that had people hoping that that
Speaker 1: this might finally be the one to break through. But
Speaker 1: it's becoming more difficult to avoid the conclusion that this
Speaker 1: approaches is pretty fundamentally flawed in some way. Yeah, Max,
Speaker 1: to your credit, you wrote a column to this effect
Speaker 1: almost a year ago basically saying this is there's not
Speaker 1: really any evidence that this is going to work. In fact,
Speaker 1: it sort of points to the opposite. And I'm just wondering,
Speaker 1: given given that, I mean, yes, you are prescient and
Speaker 1: your your insights are are very well taken, but it's
Speaker 1: just curious that it would remove of one third of
Speaker 1: the market value of the company on these results coming out,
Speaker 1: How does that has that square with reality? And what
Speaker 1: does that say about evaluations currently? So I think a
Speaker 1: lot of this has to do with the fact that,
Speaker 1: you know, if someone actually succeeded, it would be you know,
Speaker 1: an instant blockbuster, an incredible scientific breakthrough. You know, the
Speaker 1: consensus sales for this medicine, which are supposedly risk adjusted
Speaker 1: for ten billion dollars a year, you know, and if
Speaker 1: you actually succeeded and had a clinically significant impact on Alzheimer's,
Speaker 1: that that estimate might be low. So it's that kind
Speaker 1: of tantalizing upside that had some people still invested even
Speaker 1: if the likelihood of success was demonstrably pretty low. And
Speaker 1: there's also the fact that this has been kind of
Speaker 1: a huge focus of biogen not just this this big
Speaker 1: late stage trial, but a number of other medicines focusing
Speaker 1: either on this approach to Alzheimer's or Alzheimer's in general.
Speaker 1: So this kind of diminishes confidence in those further program
Speaker 1: ms and just in you know, the ability to tackle
Speaker 1: this disease anytime soon or with existing approaches in general.
Speaker 1: So you kind of had to write off not just
Speaker 1: as you canna map this medicine, but other programs as well,
Speaker 1: and then also biogen strategy in general has been to
Speaker 1: focus on these kind of riskier neurological conditions, you know.
Speaker 1: And it's great from a kind of a human and
Speaker 1: scientific perspective that you're that they're doing that. You need
Speaker 1: someone to otherwise we're we're not going to make progress.
Speaker 1: But from an investment perspective, h it's it's pretty scary,
Speaker 1: especially when their current big money maker and multiple scourses
Speaker 1: medicines is starting to kind of level out and decline.
Speaker 1: So that strategy looks even more risky right now than
Speaker 1: it did a day ago. So but if you if
Speaker 1: you talk about a market that is maybe ten billion
Speaker 1: dollars a year, I mean as monstrous. These companies cannot
Speaker 1: walk away from this, right, I mean even Biogen, who's
Speaker 1: just got whacked today in a stock market, they can't
Speaker 1: really walk away, can they. I think they should consider
Speaker 1: walking away from related approaches um And one of their
Speaker 1: biggest Phase three Alzheimer's medicines is you know, another amyloid
Speaker 1: beta focused program. And then the other kind of big
Speaker 1: area that people focusing this is on the towel protein
Speaker 1: that also has a pretty bad track record, So you
Speaker 1: really need to kind of look take a take a
Speaker 1: really hard look at those programs and think about whether
Speaker 1: there's a compelling reason to keep investing in them, or
Speaker 1: is it time to move on to approaches that you
Speaker 1: know are less validated and even risk here in much
Speaker 1: earlier stage, but to take a significant step away from
Speaker 1: from a hypothesis that has kind of repeatedly proven to
Speaker 1: to fallen short, Max, I want to zoom out a
Speaker 1: little bit because this whole situation really raises a very
Speaker 1: important question about development of new drugs, uh at about
Speaker 1: the expense and the risk of them, but the necessity
Speaker 1: for the public good. Uh and sort of where development
Speaker 1: should happen, right, I mean there is some development at universities,
Speaker 1: But I mean, can you give us a sense of
Speaker 1: companies of their approach of how much money they'll invest
Speaker 1: in R and D, Whether there is sort of a
Speaker 1: reliance on you know, universities, how how that works and
Speaker 1: they determine sort of what what's worth the investment. Sure,
Speaker 1: I mean, there there's a lot of spending on R
Speaker 1: and D, both directly in terms of internal discovery and
Speaker 1: development pipelines and then externally in the form of acquisitions,
Speaker 1: licensing deals with with little biotechs or or universities. Many
Speaker 1: of those little biotexs are spun out of universities, and
Speaker 1: how to go about doing that is an incredibly difficult question,
Speaker 1: one that I think pharma has a lot of a
Speaker 1: big way along ways to go in grappling with because
Speaker 1: more of their spending is increasingly directed at at smaller populations,
Speaker 1: so cancer and rare disease because you have you have
Speaker 1: pricing power there, and the trials are smaller and cheaper.
Speaker 1: Alzheimer's trials are giant, expensive and they fail all the time.
Speaker 1: Okay when on all three fronts um but you know,
Speaker 1: this really raises a question, especially when you talk about say,
Speaker 1: vaccines that aren't very sexy and that our money losers
Speaker 1: to antibiotics, you know, things that actually everyone uses all
Speaker 1: the time and that are crucial life saving UH drugs.
Speaker 1: It just raises a question, you know, what is the
Speaker 1: correct model for this with respect to either government intervention
Speaker 1: or sponsorship or rewarding or you know, how do you
Speaker 1: how do you incentivize these companies to do that. I
Speaker 1: do think there needs to be uh a kind of
Speaker 1: grand rethinking of of how what medicines we pay for
Speaker 1: and why and how much we pay for them. If
Speaker 1: we continue to kind of leave the system of the
Speaker 1: status quo where we pay a lot for these medicines
Speaker 1: that treat a very small population, often not that effectively,
Speaker 1: and have antibiotics that are not fundamentally not profitable to develop.
Speaker 1: So there needs to be some kind of incentive, whether
Speaker 1: it's you know, the government makeing specific you know, specifically
Speaker 1: funding that research, some way to bring the prices up there.
Speaker 1: There does need to be some kind of intervention otherwise
Speaker 1: we're going to continue a further down this path that
Speaker 1: we that our current market heavily incentivizes. So that's let's
Speaker 1: just go back to Alzheimer's. Is anybody doing it right?
Speaker 1: Is anybody making headway? Um? Not not not yet. Yeah,
Speaker 1: you know, there there are companies that are taking alternative approaches.
Speaker 1: There's interest in this, but yeah, that that kind of
Speaker 1: basic research, but there's nothing right now that's kind of
Speaker 1: in a big potentially you know, the sort of child
Speaker 1: that could get a medicine approved that that is of
Speaker 1: a kind of dramatically different approach than things that we've
Speaker 1: seen that have failed in the past. So there's a
Speaker 1: lot of work yet to be done, and a lot
Speaker 1: of that's gonna end up having to be I think
Speaker 1: in in small biotechs and and at universities UM where
Speaker 1: there's a little bit more more tolerance for failure. Uh
Speaker 1: So we'll see what happens. I continue to be hopeful,
Speaker 1: but where we're a long way off still. Max Nison,
Speaker 1: thank you so much for being with us. Max Neison
Speaker 1: is a Blomberg opinion columnist who covers the biotech and
Speaker 1: all things health topics. I gotta say his column back
Speaker 1: in July of last year, he said, this isn't the
Speaker 1: home runs. Some investors were looking forward respect to Alzheimer's
Speaker 1: treatments that Biojean was trying to develop. The Federal Reserve
Speaker 1: sent a very clear message to markets yesterday they were
Speaker 1: not playing to high grades this year or possibly again
Speaker 1: in this credit cycle, signaling a very devish turn. The
Speaker 1: question is do they have some sort of insight into
Speaker 1: the U S economy that the rest of the market doesn't,
Speaker 1: and are they seeing something that is weaker than what
Speaker 1: we have been talking about and seeing. Joining us now
Speaker 1: in our Bloomberg Interactive Broker Studios, God leving On, Chief
Speaker 1: economists for North America at the Conference Board. The Leading
Speaker 1: Economic Indicator Index came out today with an update that
Speaker 1: was better than expected, showing an actual increase in February
Speaker 1: to zero point two. Uh increasing to zero point I'm
Speaker 1: just wondering, is this indicating that the FED is responding
Speaker 1: to something else other than weakness in the economy. I
Speaker 1: think so. I don't think the FED knows more than
Speaker 1: the rest of us about the economy and about the
Speaker 1: future of the economy. UM. I think that the weakness
Speaker 1: and economy that we are seeing right now is not
Speaker 1: a surprise. I think it's a reaction to a very
Speaker 1: traumatic December in the especially in retail sales and some
Speaker 1: of the declining industrial production and you orders that we
Speaker 1: are seeing since then. He is a result of that decline.
Speaker 1: But the fundamental terms of the economy I think are
Speaker 1: not very different than they were three or four months ago. Um,
Speaker 1: And I think they're surprisingly dovish. Yeah. It's interesting to
Speaker 1: get the data that came up in the Leading Economic
Speaker 1: Indicator today from the Conference Board, better than expected, showing
Speaker 1: some strength. UM. So what do you think the FED
Speaker 1: is looking at to effectively double down on their dovishness
Speaker 1: if you will yesterday? What what what are they saying
Speaker 1: that maybe we're not? Yeah. I just think they made
Speaker 1: the decision when they saw that in December that they
Speaker 1: are going to be blamed for a recession if it
Speaker 1: was to come, and they don't. They are scared and
Speaker 1: they don't want this responsibility. I think they because of that,
Speaker 1: they made the shift, and they're using the economic outlook
Speaker 1: is almost as an excuse to m justified their shift.
Speaker 1: But I don't think there is indeed the reason to
Speaker 1: be very dovish or very pessimistic about the future outlook.
Speaker 1: Think they made a mistake. Um, I think it really
Speaker 1: depends on your ideology and other things. I think that thing. Yeah,
Speaker 1: I think that there is certainly more likelihood of increasing
Speaker 1: inflation then I think the FED leads us to believe.
Speaker 1: Right now, I think if we close our eyes and
Speaker 1: use our imagination and use the forecast of most economist,
Speaker 1: what we'll get is an economy that is growing by
Speaker 1: two to two and a half percent in the next
Speaker 1: six months or so, labor market tightening further, wages accelerating further,
Speaker 1: and in that scenario, I think having a higher inflation
Speaker 1: is a very likely outcome is that bad. I mean,
Speaker 1: higher wages isn't very good thing, that's a good So again,
Speaker 1: it depends what your goals are. If if your main
Speaker 1: goal is to control inflation and make sure that it
Speaker 1: doesn't go above what your comforts on, then I think
Speaker 1: this is a mistake. If you're willing to let inflation
Speaker 1: go higher or risk that inflation go higher, but have
Speaker 1: more people joined the labor market and having higher wages
Speaker 1: than I think that's a very legitimate decision. So to
Speaker 1: what extent do you think the FED chairman power are
Speaker 1: being influenced by some of the geopolitical issues in the world,
Speaker 1: China slowing down, trade issues with China, European Union certainly
Speaker 1: the economic weakness there and Brexit just adding on to it.
Speaker 1: How much do you think they took those issues into
Speaker 1: account in kind of surprising the market with their town yesterday.
Speaker 1: I think it's it's a factor that affects the outlook definitely,
Speaker 1: but it's not something that is new. The weakening in
Speaker 1: China and Europe has been going on for several months.
Speaker 1: I think, if anything, in terms of the fundamentals, they
Speaker 1: are good news. In recent months, the end of the
Speaker 1: down the increasing stock prices, the improvement or the smaller
Speaker 1: chances of a trade war with China. I think all
Speaker 1: of those are good things, and I think that would
Speaker 1: be reflected in the outlook going forward. I'm still going
Speaker 1: back to inflation, the idea that inflation could pick up
Speaker 1: more than people expect later this year. What's going to
Speaker 1: be driving that. Why is this time different, this late
Speaker 1: in the cycle, since we haven't seen a real acceleration
Speaker 1: inflation until now, right, I think we didn't have as
Speaker 1: fast of a wage growth as we have right now.
Speaker 1: I think the in twenty eighteen, it's the first time
Speaker 1: that we actually saw a visible increasing wages in the
Speaker 1: main measures, they're getting close to three and a half percent.
Speaker 1: And I think also revenues will grow more slowly in
Speaker 1: simply because the economy will slow down. So when you
Speaker 1: have an increase in labor cost and slow down in revenue,
Speaker 1: that will put a significant pressure on profits, and companies
Speaker 1: in many cases will choose to shift some of the
Speaker 1: costs to the consumer. So I think I think we
Speaker 1: now have a better chance of getting higher inflation than
Speaker 1: any time in this expansion. God Levanon, thank you so much.
Speaker 1: We appreciate you. Coming in god Lebanon, chief Economist for
Speaker 1: North America for the conference board, joining us in our
Speaker 1: Bloomberg Interactive Broker studio. Well, yesterday we had the FED
Speaker 1: double down on its dobish stance, perhaps maybe seeing something
Speaker 1: in the economy that the rest of us don't see.
Speaker 1: To dig into that a little bit more, we welcome
Speaker 1: our guest Bill Zox. Bill is the chief investment Officer
Speaker 1: of fixed income at Diamond Hill Capital Management approximate nineteen
Speaker 1: billion dollars under management, based in Columbus, Ohio, but he
Speaker 1: joins us here in a Bloomberg Interactive Broker studio. Bill
Speaker 1: welcomed to our studio. What did you take away from
Speaker 1: the Fed's report and from the comments from chair Chairman
Speaker 1: Pal yesterday? Well, I was surprised. I think the FED
Speaker 1: was clearly too tight in December. The Fed needs to
Speaker 1: pay attention to market signals, but in this case, now
Speaker 1: the Fed is paying too much attention to market signals.
Speaker 1: I think that the Fed is overcorrected and gone too
Speaker 1: far in the other direction, given the market even more
Speaker 1: than what it really wants or needs at this stage. Well,
Speaker 1: what's the consequence, I mean, what's the what's the detrimental consequence. Well,
Speaker 1: I think it's it's not a good situation when you've
Speaker 1: basically priced volatility out of all assets are largely priced
Speaker 1: volatility out. I think it's better when assets are are
Speaker 1: priced for some volatility. So basically, the fear here is
Speaker 1: that if the FED holds rates too long, it can
Speaker 1: create I don't want to say bubbles, but certainly excesses
Speaker 1: and different areas in different markets. And people point to
Speaker 1: stocks or HW yield bonds. But the interesting thing is
Speaker 1: is that following the FED meeting, you didn't really see
Speaker 1: that gut reaction. You actually saw the knee jerk was
Speaker 1: risk off and you saw credit spreads widen. Actually, so
Speaker 1: how do you sort of square these sort of uh,
Speaker 1: these these these developments. Well, we've seen such a tremendous
Speaker 1: move back in risk assets since late last year, and
Speaker 1: I think if you look at the treasury market, should
Speaker 1: high yield spreads are about four d basis points right now.
Speaker 1: If you look at the treasury market, high old spreads
Speaker 1: should probably be somewhat wider than that. There's a disconnect
Speaker 1: between the two markets. So where are you thinking about?
Speaker 1: Where do you see opportunity? Where do you see value.
Speaker 1: I know you principally play in the high yield market.
Speaker 1: Is that right? So where are you seeing some opportunity here?
Speaker 1: Principally in the high yield market? But uh, ironically, as
Speaker 1: high yield investors are moving up in quality, they're making
Speaker 1: double B corporate bonds very rich, and his investment grade
Speaker 1: investors are moving up in quality, they're actually making triple
Speaker 1: B bonds, certain triple B bonds attractive. So one theme
Speaker 1: is to sell double bees that are priced like investment
Speaker 1: grade and buy triple bees that are priced like high yield.
Speaker 1: That's really interesting going forward, I'm wondering, are we out
Speaker 1: of Goldilocks? Where is the FED remains? Do wish? Uh?
Speaker 1: And and even stops it's a balance sheet roll off
Speaker 1: that won't be as supportive for credit going forward because
Speaker 1: of how much it's already rallied. That's exactly right. I
Speaker 1: think Goldilocks was basically priced into the market, and now, uh,
Speaker 1: for the data to confirm a Goldilocks scenario like that
Speaker 1: is very unlikely. So that means that bad news will
Speaker 1: be bad news when it comes to the economy. I
Speaker 1: think that's right. So you know, one of the things
Speaker 1: I think a lot of people. Obviously, we're surprised. I
Speaker 1: think I'm sensing your sense of surprise about how doubbish
Speaker 1: the FED was. You say, do you think they are
Speaker 1: seeing something that maybe the market is not, and if so,
Speaker 1: what do you think that could be. I don't think
Speaker 1: that's the case, but the market is very concerned about that. Uh,
Speaker 1: you know, I think that. I just don't understand. The
Speaker 1: FED was not paying enough attention to market signals in December.
Speaker 1: Now they're paying too much attention. That's all I can say.
Speaker 1: I thought I thought it should be more of a
Speaker 1: give and take with the markets. When you talk about
Speaker 1: the high old bond market, there have been a number
Speaker 1: of idiosyncratic moves. It's sort of up moving from a
Speaker 1: macro driven market to a very micro driven market with
Speaker 1: specific companies either doing really well, they're dead, or really poorly.
Speaker 1: I'm just wondering, specifically within sectors companies, where do you
Speaker 1: see the opportunities right now? Yeah, you know, I'll give
Speaker 1: you one example that's sort of interesting and there to
Speaker 1: Detroit companies. It's consistent with a theme that I just mentioned.
Speaker 1: It's Motor City, a single casino credit in Detroit and
Speaker 1: Ford Motor and we're buying Ford motor and we've sold
Speaker 1: motor City. That's what I was talking about before. Motor City,
Speaker 1: a double B low double be credit priced inside of
Speaker 1: two d basis points credit spread. Forward opened up the
Speaker 1: investment grade market this year with a three year bond
Speaker 1: priced at three basis points over treasury. So there's a
Speaker 1: disconnect for you. Are there some sectors in the high
Speaker 1: yield to sectors within the hig yield that you like
Speaker 1: right now? Um or? Is everything a little rich from
Speaker 1: your perspective? I mean it's you have to be careful.
Speaker 1: We're late cycle. You've got to be careful in the
Speaker 1: high yield market. But we always like financials more than
Speaker 1: our peers, and and we definitely find things to do
Speaker 1: in financials. I'll give you another Detroit Credit Credit Acceptance,
Speaker 1: a subprime auto lender, which is a very well managed company.
Speaker 1: You're bullish on Detroit? Do we do like Detroit? Even
Speaker 1: though from Columbus, Ohio? I like Detroit Credits. So, Bill,
Speaker 1: you said late cycle. When do you expect the cycle
Speaker 1: to turn and defaults to really meaningfully pick up? Yeah?
Speaker 1: I mean that that that's hard to call. Uh, you know,
Speaker 1: I think that the cycle the FED is doing what
Speaker 1: it can to extend the cycle, but things can shift
Speaker 1: very quickly and and markets will probably drive it like
Speaker 1: they did in the fourth quarter, where fundamentally not a
Speaker 1: lot was happening, but the massive increase in volatility and
Speaker 1: markets increased the probability of recession quite dramatically. Thank you
Speaker 1: so much for being with us. Bill's ocks. He is
Speaker 1: the chief Investment Officer of fixed Income at Diamond Hill
Speaker 1: Capital Management. Joining us here in our Bloomberg Interactive Brokers
Speaker 1: Studios Well Levi Strauss. They priced their ip O last
Speaker 1: night at seventeen dollars per share, that was above the
Speaker 1: I p O range of fourteen and sixteen, and looking
Speaker 1: on my Bloomberg terminal right now, the stock is not
Speaker 1: open for trading yet today, but it is indicating even
Speaker 1: higher at twenty and a half to twenty one and
Speaker 1: a half is the range. So clearly a lot of
Speaker 1: investor appetite for this name. To help us kind breakdown
Speaker 1: the deal and take a look at the company in
Speaker 1: the space is Hen razutas Hen is the apparel and
Speaker 1: Footwell Footwear an also Bloomberg Intelligence. He joins us on
Speaker 1: our Bloomberg Interactive Brooker's studio. Hen, thanks so much for
Speaker 1: coming in. So what does the market really like about
Speaker 1: this name? I mean, again, it seems like a lot
Speaker 1: of demand above where investors are or the investment bankers
Speaker 1: initially put the ip O range on, right. So obviously
Speaker 1: a big name with a long legacy, big history in
Speaker 1: the apparel space. Um that we don't see too many
Speaker 1: I p o s and in the space in the
Speaker 1: last year's you know, we would more companies bankrupt or
Speaker 1: going private. So that's that's a that's unusual. What I
Speaker 1: think people like about it is a very uh, relatively
Speaker 1: low valuation they put on the deal in the first place,
Speaker 1: UM on an if it that basis, it was about
Speaker 1: eight and a half UM, where the industry averages around eleven.
Speaker 1: So I think that's kind of the movement we've seen
Speaker 1: this morning. Why are they doing an IPO or why
Speaker 1: have they just one one? I guess and we're waiting
Speaker 1: to see how it actually trades. But why now? Right?
Speaker 1: So eve Strice is a company, you know, family owned
Speaker 1: company house family, um, you know own it for ages
Speaker 1: and I think you know, to have some liquidity in
Speaker 1: their stake they have in the company. They're they're putting
Speaker 1: out the percent of the company. So what is all right,
Speaker 1: So what's the investment case here is this? Is this
Speaker 1: like any kind of growth in this business? UM? What
Speaker 1: are investors buying here? Right? So first of all, the
Speaker 1: core business is the bottoms, right that the genes, it's
Speaker 1: about sev The revenue, it's a it's a big category,
Speaker 1: all right, it's about hundred billion dollars. And then I
Speaker 1: think about this specific company, UM a lot like Nike
Speaker 1: what we see in Athletic. In every region that they
Speaker 1: operate there they hold the number one position. So in
Speaker 1: the US it is almost thirteen percent of market share
Speaker 1: just one company. UH in any other region are number one.
Speaker 1: Europe they're only number two. So I think people are
Speaker 1: looking at it saying, you know, it's the best in
Speaker 1: breed in that specific category that's to start. UM. I
Speaker 1: think after they're going public, they do have opportunities to
Speaker 1: venture out of the core business, to go into there's
Speaker 1: a story today about going into tops, sweatshirt, T shirts, etcetera. UM, accessories, footwear,
Speaker 1: those are all under penetary categories that they can use
Speaker 1: the brand name to venture into. This is such an
Speaker 1: interesting I p o at a time when retail is
Speaker 1: called under question in an Amazon era, when branding doesn't
Speaker 1: necessarily mean quite as much. Uh, for them to sort
Speaker 1: of bring back the nostalgia of the nineties eighties and
Speaker 1: say anything or you know, the blue jeans and the
Speaker 1: gene jacket, the jean shirts, etcetera. Uh, it is sort
Speaker 1: of interesting. I actually want to go there is it
Speaker 1: Does branding matter in an era of Amazon when people
Speaker 1: just are really looking for the item and not necessarily
Speaker 1: the name. Well, absolutely, I think branding matters, and I
Speaker 1: think you know that's something that Paul talked about yesterday
Speaker 1: and turn on Netflix. Content is a king right. So
Speaker 1: in our our business, um so retail, the brands are
Speaker 1: the content. So for them it doesn't necessarily you know,
Speaker 1: matters if you sell it through the materior department stores
Speaker 1: at J. C. Penny or Macy's, or you sell it
Speaker 1: on your own website, or you sell it the Amazon.
Speaker 1: Um it really you can shift between channels and actually
Speaker 1: moving away from meteor department stores, moving to your own channels,
Speaker 1: selling it on your website, you sell it for a
Speaker 1: higher price point, you sell it for a higher margin. Um,
Speaker 1: you do have to pay fulfillment shipping, et cetera. UM,
Speaker 1: but it does give you a lot of growth opportunities
Speaker 1: that didn't have before. So Levi Strauss obviously is an
Speaker 1: iconic name here in the United States, cowboys and all
Speaker 1: that kind of stuff. How has that brand traveled outside
Speaker 1: of the US. What percentage of the sales are outside
Speaker 1: of the US And is that an area they think
Speaker 1: they can grow? Right, So it's it's about outside the US. UM,
Speaker 1: it's definitely an area they that can grow. They're really
Speaker 1: penetrated UM in a lot of different markets globally, UM
Speaker 1: or Asia. UM. You know, China, it's only two percent
Speaker 1: on their total sales. So obviously China is a much
Speaker 1: larger market than that. And traditionally what we've seen with
Speaker 1: China with American brands is they come in, they get
Speaker 1: the brand perception in the market can be a lot
Speaker 1: more premium than what it's getting here in the US U,
Speaker 1: so they might have, you know, more price power in
Speaker 1: markets like Asia. So there's definitely opportunities there. Can we
Speaker 1: just touch quickly on Nike because it is March madness, right,
Speaker 1: So is Nike really benefiting here or are we going
Speaker 1: to have a potential problem because of the little snaffoo
Speaker 1: in the speaker situation. Right, let's hope that no shoes
Speaker 1: are going to be blowed up. I mean it's not
Speaker 1: on the first day and definitely not the Duke. Um.
Speaker 1: You know, Nike does well every year in the ncu
Speaker 1: W in terms of the number of teams that they're sponsoring,
Speaker 1: and in the end of the day, it comes down
Speaker 1: to how much exposure they're getting. And we put out
Speaker 1: a number out there that we calculated it based on,
Speaker 1: um the number of of of how much time you
Speaker 1: the logos are visible on the live broadcast the entire
Speaker 1: n C double A. It's probably equivalent about two fifty
Speaker 1: million dollars in advertising dollars. Yeah, that's it's a big number.
Speaker 1: And my jaw just dropped because the thing that that
Speaker 1: you can calculate sort the value of every second on
Speaker 1: a court. That's right, And that's why they're paying the
Speaker 1: big bucks to school. They are and they're putting you know,
Speaker 1: they're putting a lot of money and behind those those teams. Um,
Speaker 1: Nike's leading the you know, over fifty of the teams,
Speaker 1: but under Armer has the teams. That's the record number
Speaker 1: for them. Um, I think they wish that the rest
Speaker 1: of the business we do as as good as as
Speaker 1: the number of teams they they sponsoring. Yeah, Is, thanks
Speaker 1: you so much for being with us. Is is the
Speaker 1: apparel and footwear analyst for Bloomberg Intelligence. Thanks for listening
Speaker 1: to the Bloomberg P and L podcast. You can subscribe
Speaker 1: and listen to interviews at Apple Podcasts or whatever podcast
Speaker 1: platform you prefer. Paul Sweeney, I'm on Twitter at PT Sweeney.
Speaker 1: I'm Lisa abram Woy. It's I'm on Twitter at Lisa A.
Speaker 1: Bramwoit's one before the podcast. You can always catch us
Speaker 1: worldwide on Bloomberg Radio.