WEBVTT - Array Deal Gives Pfizer Deep Cancer Expertise: Fazeli 0:00:02.640 --> 0:00:05.320 Welcome to the Bloomberg Penel podcast. I'm Paul swing you 0:00:05.360 --> 0:00:07.760 along with my co host Lisa Brahmawitz. Each day we 0:00:07.880 --> 0:00:10.440 bring you the most noteworthy and useful interviews for you 0:00:10.520 --> 0:00:12.640 and your money. Whether at the grocery store or the 0:00:12.640 --> 0:00:15.960 trading floor. Find a Bloomberg penl podcast on Apple podcast 0:00:16.120 --> 0:00:18.040 or wherever you listen to podcasts, as well as at 0:00:18.079 --> 0:00:23.599 Bloomberg dot com. I'm joined by Alex Steele here today, 0:00:23.840 --> 0:00:26.360 sitting in for Lisa Brahmowitz. Boy, I'll tell you it 0:00:26.480 --> 0:00:29.280 is good thing to be a healthcare m n a banker. 0:00:29.360 --> 0:00:32.440 There's always a deal in that space. Today Fires are 0:00:32.440 --> 0:00:35.920 announcing that it is acquiring Array bio Farmer for ten 0:00:35.960 --> 0:00:38.720 point six billion dollars. To get the latest, we welcome 0:00:38.720 --> 0:00:41.159 a good friends, Sam Fizzelli. Sam is the director of 0:00:41.200 --> 0:00:44.120 European Research for Bloomberg Intelligence, but his day job is 0:00:44.400 --> 0:00:47.159 he's one of the best pharmaceutical and healthcare analysts on 0:00:47.200 --> 0:00:49.680 the street. He joins us from our London studio. Sam, 0:00:49.720 --> 0:00:52.680 thanks so much for joining us. Um boy, this price 0:00:52.760 --> 0:00:55.520 tag is just monstrous. Does this make sense to you 0:00:55.560 --> 0:00:58.840 this deal that Fires is doing. Thank you, Paul, Yes, 0:00:59.040 --> 0:01:02.800 and good morning to both of you. UM. So you know, 0:01:02.920 --> 0:01:07.680 the visors balance sheets pretty strong. UM. The growth profile 0:01:07.680 --> 0:01:11.560 of the company going past the current patent experty for 0:01:11.840 --> 0:01:16.000 Lyrica is um. You know, they like it to be 0:01:16.480 --> 0:01:19.080 stronger than perhaps some of us think it is. We 0:01:19.120 --> 0:01:21.120 always thought they would do M A and A. What 0:01:21.280 --> 0:01:23.200 the price tag is a billion here, a billion there? 0:01:23.280 --> 0:01:26.800 What's what's that amongst friends? Right? But they're they're buying 0:01:27.680 --> 0:01:29.520 what I would consider to be one of the pre 0:01:29.600 --> 0:01:34.080 eminent UM drug developers amongst the biotechs. If you think 0:01:34.120 --> 0:01:37.319 about the number of drugs that this company is responsible 0:01:37.360 --> 0:01:39.559 for in terms of what's going out there and deals 0:01:39.600 --> 0:01:43.759 they've done, so we calculate about eight point four times 0:01:43.800 --> 0:01:47.000 twenty three sales. There's no profits to talk about just yet. 0:01:47.920 --> 0:01:50.760 Three sales. But but those are those are sales that 0:01:50.800 --> 0:01:55.160 are not the you know, they have reasonable probability of 0:01:55.200 --> 0:01:57.480 actually happening. The products have already on the market, and 0:01:57.480 --> 0:01:59.920 they're they've got some good data in hand. And then 0:02:00.200 --> 0:02:02.240 end um it is at the top end of the 0:02:02.360 --> 0:02:04.360 range that we've looked at, but it's not the most 0:02:04.440 --> 0:02:08.600 expensive UM. But you know, that is what it is. 0:02:08.680 --> 0:02:11.480 My very exam so to that point, though, I feel 0:02:11.520 --> 0:02:14.680 like getting on drugs that will were getting in the 0:02:14.720 --> 0:02:17.079 pattern for drugs that will wind up cutting chemotherapy is 0:02:17.080 --> 0:02:18.800 gonna be super super hot in the market. Do we 0:02:18.800 --> 0:02:20.720 expect in the company to come in and try and 0:02:21.200 --> 0:02:23.400 shot full of fires are out? Yeah? I don't think so. 0:02:23.440 --> 0:02:26.040 This doesn't This kind of thing doesn't usually happen when 0:02:26.120 --> 0:02:29.400 you have two managements that have agreed and there's a 0:02:29.440 --> 0:02:32.600 big price tag out there already, it just doesn't happen. 0:02:32.720 --> 0:02:34.880 You know, I've never really seen it in biotech, So 0:02:35.000 --> 0:02:38.160 I expect not so say what what is so special 0:02:38.360 --> 0:02:41.360 about Array that would cause fires? Or to step up 0:02:41.360 --> 0:02:44.960 and pay this price. So they describe three pillars of 0:02:45.080 --> 0:02:49.400 value and we basically responded to that already, you know, react, 0:02:49.480 --> 0:02:52.120 which is the kind of thing that we've seen. UM. 0:02:52.240 --> 0:02:54.519 The there's a product on the market, or two products 0:02:54.560 --> 0:02:58.040 on the market, and there's ample opportunity for expanding that 0:02:58.080 --> 0:03:02.040 each other's products UM and those revenues, you know, it 0:03:02.040 --> 0:03:05.079 could easily be a billion or plus if they keep 0:03:05.120 --> 0:03:07.000 expanding it and fight as I can, because they have 0:03:07.120 --> 0:03:10.840 very deep pockets. UM. The company has several products that 0:03:10.880 --> 0:03:14.480 have been licensed to other companies where the potential for 0:03:14.600 --> 0:03:17.600 royalties are are meaningful. And then of course they have 0:03:17.639 --> 0:03:19.920 a bunch of scientists who have been creating these drugs 0:03:20.040 --> 0:03:22.120 and and we don't know exactly what they've got in 0:03:22.160 --> 0:03:26.560 the preclinical hands in Boulder, Colorado, but there was some 0:03:26.639 --> 0:03:29.640 hints that Fiser gave us over the call. We just 0:03:29.800 --> 0:03:32.760 listened to um which makes it sounds as if there's 0:03:32.800 --> 0:03:34.800 other products obviously expected to come along. But they've been 0:03:34.800 --> 0:03:38.880 a very productive team, so they would not split that 0:03:39.040 --> 0:03:40.920 several times they were asked this question. They would not 0:03:40.960 --> 0:03:44.600 split the value that they've ascribed to each other. Those 0:03:44.640 --> 0:03:47.960 three pillars have just told you. So, how does explain 0:03:47.960 --> 0:03:50.000 to me how in the biotech world this works? Because normally, 0:03:50.080 --> 0:03:52.640 in a different industry, if you make an acquisition, there's 0:03:52.640 --> 0:03:54.280 going to be some synergy costs you can get out 0:03:54.280 --> 0:03:55.480 of it that's gonna be a big thing. And then 0:03:55.520 --> 0:03:57.200 sort of when it's gonna be creative to earnings, and 0:03:57.240 --> 0:03:59.240 then how you sort of meld the operations and what 0:03:59.400 --> 0:04:01.440 the cultures at, et cetera. Is it like a different 0:04:01.480 --> 0:04:05.080 scenario in a biotech world. Yeah, I mean, Alex, that's 0:04:05.080 --> 0:04:07.200 a very good question. At the end of the day, here, 0:04:07.320 --> 0:04:10.520 what you're buying is knowledge and the ability and the 0:04:10.640 --> 0:04:13.840 long history of these people developing these sort of drugs. 0:04:13.840 --> 0:04:17.080 Not that Fiser hasn't got them themselves, but here's here's 0:04:17.080 --> 0:04:19.440 a bunch of scientists, they said, about a hundred scientists 0:04:19.839 --> 0:04:22.520 R and D people based in Colorado. They've said they're 0:04:22.520 --> 0:04:25.000 going to keep the current structure of a RAY in 0:04:25.080 --> 0:04:28.839 place to continue allowing it to be innovative and and 0:04:28.839 --> 0:04:31.560 and you know, pump up, pump out these drugs, and 0:04:31.560 --> 0:04:34.880 and they're go into pipers Finders pipeline as opposed to 0:04:35.080 --> 0:04:37.280 having to be licensed out because the company is too 0:04:37.279 --> 0:04:40.640 small develop everything. So in these cases, it's really not 0:04:40.720 --> 0:04:44.720 about cast savings. So say, if I'm a Fiser shareholder, UM, 0:04:44.920 --> 0:04:47.960 am I concern? What do I read into a transaction 0:04:48.000 --> 0:04:51.760 like this that g Fiser doesn't have its own pipeline. 0:04:51.800 --> 0:04:54.400 Maybe it's R and D. Isn't that good or that 0:04:54.480 --> 0:04:57.800 successful that it forces them to go out and buy um, 0:04:58.279 --> 0:05:01.440 you know products. Yeah, No, I don't think that's fair. Um, 0:05:01.520 --> 0:05:04.760 I think I think it's more about um. You know, 0:05:04.800 --> 0:05:07.200 in the pharmaceutical business, it's all about shots on goal 0:05:07.320 --> 0:05:10.200 because once you take that shot, you don't actually know 0:05:10.200 --> 0:05:11.800 whether it's going to go in or not. So you've 0:05:11.839 --> 0:05:14.520 got to have a number of opportunities running at the 0:05:14.520 --> 0:05:16.760 same time to see which one actually comes to fruition. 0:05:17.080 --> 0:05:19.080 They have a number of drugs that are that are 0:05:19.120 --> 0:05:22.279 looking interesting and exciting, and you know, it's two steps forward, 0:05:22.360 --> 0:05:24.919 one step back with pharma. So you've got to expand 0:05:24.960 --> 0:05:28.000 the range that you've got access to and then make 0:05:28.040 --> 0:05:30.960 sure that you have the wherewithal to do it. Which 0:05:31.000 --> 0:05:33.680 fires it does? I just asked the dumb question here, 0:05:33.720 --> 0:05:35.760 so like, literally, is it possible that there's a drug 0:05:35.839 --> 0:05:37.960 that could reduce the need for chemo? Like is that real? 0:05:38.080 --> 0:05:41.599 Because that's amazing. Yeah. No, absolutely, And you know what 0:05:41.720 --> 0:05:44.560 I was told years ago, there's no dumb questions, So 0:05:44.800 --> 0:05:49.400 there are there totally a but and certainly this is 0:05:49.400 --> 0:05:52.480 not dumb at all because there's that's exactly where pharmaceutical 0:05:52.480 --> 0:05:55.560 industry wants to go and cancer patients want to go. 0:05:56.080 --> 0:05:59.080 I mean, it's important to realize that there's a little 0:05:59.080 --> 0:06:01.400 bit of a slogan slogan that's going on there too, 0:06:01.480 --> 0:06:05.800 because these aren't drugs that are that are side effect free. 0:06:06.200 --> 0:06:09.040 It's just a different to chemo. They may not include, 0:06:09.040 --> 0:06:11.160 know the usual things that chemo has got going with 0:06:11.200 --> 0:06:13.960 it is the hair loss and the vomiting, and you 0:06:13.960 --> 0:06:17.039 know none of these things are nice, right uh? And 0:06:17.120 --> 0:06:21.400 you know a blood blood accounts going down and really 0:06:21.440 --> 0:06:23.600 feeling fatigued, and who wants to be fatigued when you're 0:06:23.600 --> 0:06:26.560 trying to get treated? Right? So, but these drugs do 0:06:26.640 --> 0:06:28.880 have their own side effects, let's not let's not forget that. 0:06:29.160 --> 0:06:32.479 And this is a triple combination they're using for colorectal 0:06:32.560 --> 0:06:34.920 cancer going forward, right, Sam fas Ali, thank you so 0:06:35.000 --> 0:06:37.120 much for breaking down this deal for us. Sam as 0:06:37.160 --> 0:06:40.320 the director of Research European Research for Bloomberg Intelligence, joining 0:06:40.400 --> 0:06:58.920 us from the London studio, we'll trade tensions between China 0:06:59.040 --> 0:07:01.159 and the U. S cant need a summer, putting even 0:07:01.360 --> 0:07:04.200 more focus on the G twenty meeting coming up later 0:07:04.240 --> 0:07:07.760 this month. To get the latest on the trade discussions 0:07:07.760 --> 0:07:10.600 between US and China. We welcome Leland Miller's CEO of 0:07:10.640 --> 0:07:13.640 the China Basebook International, joining us here in our Bloomberg 0:07:13.640 --> 0:07:16.120 Interactive Broker studio. Len and thanks so much for being 0:07:16.160 --> 0:07:19.360 with us. From your perspective, what is the latest with 0:07:19.520 --> 0:07:22.440 the US and China? Are things kind of off again 0:07:22.520 --> 0:07:25.200 on again? Where are we I think that nothing has 0:07:25.240 --> 0:07:29.120 fundamentally changed since President Trump uh levied the last set 0:07:29.120 --> 0:07:31.440 of tariffs a number of weeks ago. Now, if you 0:07:31.520 --> 0:07:34.360 read the headlines, it looks like we're descending into true gloom. 0:07:34.560 --> 0:07:38.000 The Chinese are preparing for the long fight. President Trump 0:07:38.080 --> 0:07:40.600 is getting excited about the idea of going big on 0:07:40.640 --> 0:07:44.400 tariffs into it's a political winner. Uh. Nobody can get along. 0:07:44.440 --> 0:07:46.720 We're attacking their technology companies. So there's a lot of 0:07:46.760 --> 0:07:49.600 reasons why people think that this is disintegrating and that 0:07:49.640 --> 0:07:51.840 the deal is being taken off the table has already 0:07:51.840 --> 0:07:53.960 taken I don't think that's the case. As a matter 0:07:54.000 --> 0:07:56.680 of fact. I think that if President she re engages 0:07:56.720 --> 0:07:59.600 at G twenty, which we expect him to do, then 0:07:59.640 --> 0:08:02.680 the press it and is prepared to punt full tariffs 0:08:02.720 --> 0:08:04.800 and restart the talks. And I think that that's actually 0:08:04.800 --> 0:08:07.200 where we're heading right now. Why would you do that? 0:08:07.640 --> 0:08:09.680 In that Trump said, if you don't do this, I'm 0:08:09.680 --> 0:08:11.920 gonna love you tariffs on you. So why would you 0:08:12.080 --> 0:08:14.680 then look like he's caving. Well, none of this is 0:08:14.680 --> 0:08:16.520 optimal for Shi jun Ping, but you have to look 0:08:16.560 --> 0:08:19.080 at the downside on this. So right now, Uh, they're 0:08:19.080 --> 0:08:22.160 looking at the potential of their being tariffs on all 0:08:22.280 --> 0:08:26.040 five dred billion of Chinese imports. In addition to the 0:08:26.080 --> 0:08:29.160 fact that Huawei, which is arguably the most if not 0:08:29.200 --> 0:08:31.560 one of the most important SSO's in China, is on 0:08:31.640 --> 0:08:33.880 deathwatch because of what the Commerce Department has been doing 0:08:33.960 --> 0:08:35.679 to it and what the White House has been doing 0:08:35.720 --> 0:08:38.079 to it. So right now, none of this is optimal. 0:08:38.160 --> 0:08:40.200 But it was also not optimal to send Leo hu 0:08:40.760 --> 0:08:45.480 uh the night that Trump was was announcing tariffs. It 0:08:45.840 --> 0:08:48.080 was a body blow to the Chinese. It looked bad. 0:08:48.120 --> 0:08:51.199 But at the same time they're measuring the circumstances as 0:08:51.240 --> 0:08:53.480 being you know, what is the best we can get 0:08:53.480 --> 0:08:54.959 out of this, and the best they can get out 0:08:54.960 --> 0:08:57.520 of this is get a deal with Trump on trade 0:08:57.640 --> 0:08:59.760 so that they're not worrying about this for the for 0:09:00.000 --> 0:09:03.840 a twenty So does the what's going on in Hong Kong? 0:09:03.880 --> 0:09:06.360 Does that impact President she and and how he might 0:09:06.400 --> 0:09:08.720 be perceiving these negotiations. That's kind of a body blow 0:09:08.760 --> 0:09:12.240 again or a black guy to President She with what 0:09:12.320 --> 0:09:14.680 happened in Hong Kong. Is that is that cann influence 0:09:14.720 --> 0:09:17.640 the trade discussions. You know, it might Um, all of 0:09:17.640 --> 0:09:19.960 this has to come down to the fact whether she 0:09:20.240 --> 0:09:23.920 can look strong while engaging with President Trump. Now, President 0:09:23.920 --> 0:09:27.880 Trump could have put out the olive branch to President She. Instead, 0:09:27.880 --> 0:09:30.160 he he basically said, if you don't come and meet 0:09:30.200 --> 0:09:31.600 with me, I'm gonna be really mean to you, and 0:09:31.600 --> 0:09:34.040 we're gonna we're gonna crush you. That doesn't make things 0:09:34.200 --> 0:09:37.160 easy for the Chinese. At the same time, there's a 0:09:37.200 --> 0:09:39.400 lot of a lot of hysterics going on right now, 0:09:39.800 --> 0:09:41.600 and she jumping has to look at this. You know, 0:09:41.640 --> 0:09:43.480 how do I not look weak but at the same 0:09:43.520 --> 0:09:47.000 time engage enough to get all these irons off the 0:09:47.040 --> 0:09:50.280 fire so that I can concentrate on the domestic economy. Uh, 0:09:50.800 --> 0:09:54.199 the Chinese economy under the type of tariff pressure we're 0:09:54.200 --> 0:09:57.199 talking about, will have a much harder time later this year. 0:09:57.240 --> 0:09:59.080 And I think President She is balancing the pros and 0:09:59.120 --> 0:10:02.360 cons making sure he has a consensus in the leadership. 0:10:02.400 --> 0:10:06.040 But I think that that they are inclined to go forward. See, 0:10:06.040 --> 0:10:07.640 that's what I don't understand is that I feel like 0:10:07.880 --> 0:10:10.719 a lot of the rhetoric is, uh, it's both. It's 0:10:10.760 --> 0:10:13.160 so important for both of them. Therefore, they're going to 0:10:13.200 --> 0:10:17.160 have to do that. Um in essence, if g accepts 0:10:17.160 --> 0:10:19.080 the fact that they're gonna be tariffs un China no 0:10:19.120 --> 0:10:21.040 matter what, and then President Trump's gonna ramp up the 0:10:21.040 --> 0:10:24.839 tariffs no matter what. He neutralizes Trump. Well, I think 0:10:24.880 --> 0:10:27.320 that in President She's mine if he can get signals 0:10:27.320 --> 0:10:29.080 on the U. S side that the tariffs are going 0:10:29.120 --> 0:10:31.000 to come off in a deal. So, first of all, 0:10:31.000 --> 0:10:33.400 in order to continue the talks, President She would have 0:10:33.440 --> 0:10:36.880 to get some pledges from President Trump. First, is Huawei 0:10:37.000 --> 0:10:38.959 is part of the deal. Second, that we're gonna be 0:10:39.000 --> 0:10:40.959 start peeling these tariffs off and you're not gonna put 0:10:41.000 --> 0:10:43.160 more tariffs on while we continue to talk. So they 0:10:43.160 --> 0:10:45.880 create a new timeline. This is agonizing for for for 0:10:45.920 --> 0:10:48.320 trade and China watchers, but this is the way the 0:10:48.320 --> 0:10:51.800 things work. And if he can get an understanding that 0:10:52.000 --> 0:10:54.000 you know, they were very close before they were nineties 0:10:54.000 --> 0:10:55.800 seven percent of the way there. This idea that they 0:10:55.800 --> 0:10:58.120 had they didn't get most of it finalized is wrong. 0:10:58.440 --> 0:11:00.640 They're very close. They have to back to where they 0:11:00.679 --> 0:11:03.160 were before, and if they do that, then they're very 0:11:03.160 --> 0:11:05.800 close for President She getting a deal that will pull 0:11:05.840 --> 0:11:09.560 off most probably not all, but most of the of 0:11:09.600 --> 0:11:12.800 the terrorists. They have now no more tariffs, a respite 0:11:12.840 --> 0:11:16.320 for for Huawei, a reprieve for Huawei. These are big things. 0:11:16.360 --> 0:11:19.080 So these are things that they cannot underestimate. Uh and 0:11:19.080 --> 0:11:21.880 and and walk away from out of mere pride. So 0:11:21.960 --> 0:11:25.040 Leland just talking about President she how strong is his 0:11:25.120 --> 0:11:30.679 position in China today? It's it has been remarkable that 0:11:30.720 --> 0:11:34.000 there has been pushback against she in the state media, 0:11:34.280 --> 0:11:37.440 among dissidents. I don't think his his position is in 0:11:37.520 --> 0:11:41.199 any way threatened, but it is remarkable that he is 0:11:41.240 --> 0:11:43.360 getting flak for for his handling of the trade, ward 0:11:43.400 --> 0:11:46.480 handling of the economy. Now this makes it even more 0:11:46.520 --> 0:11:48.720 important he doesn't look weak going forward. But I don't 0:11:48.760 --> 0:11:51.120 think there's a question. While while this is not a 0:11:51.360 --> 0:11:55.280 one person to solitary and dictatorship of any kind, he 0:11:55.440 --> 0:11:58.880 is the leader of China. He guides policy. And while 0:11:58.960 --> 0:12:01.400 he needs to make sure that he is not deeply 0:12:01.440 --> 0:12:06.440 offending the this Paulpiro Standing Committee, he still runs the show. 0:12:06.679 --> 0:12:09.320 So this is his this is his show to run 0:12:09.400 --> 0:12:11.720 in terms of trade. And if he thinks he can 0:12:11.840 --> 0:12:14.560 he can negotiate with President Trump, you know they're best 0:12:14.559 --> 0:12:17.160 friends after all, uh, then then he'll move forward on 0:12:17.200 --> 0:12:20.560 this so Um John author's Boomberg Opinion Columnists writes a 0:12:20.559 --> 0:12:23.400 lot about Dorek magnus book Red Flags. I don't know 0:12:23.440 --> 0:12:25.000 if you've if you've read that yet, but he talks 0:12:25.000 --> 0:12:27.840 about why She's China is in jeopardy and a lot 0:12:27.880 --> 0:12:30.120 of the conversations surrounding the book is really interesting in 0:12:30.160 --> 0:12:32.200 that Maw and Deng both had their own models for 0:12:32.240 --> 0:12:34.880 communist China, but that g has a totally different one 0:12:35.200 --> 0:12:37.080 and that that's going to affect all these kind of 0:12:37.120 --> 0:12:40.800 trade decisions and arguments. Um, would you agree in that 0:12:40.880 --> 0:12:43.200 you can't look back at the last hundred years of 0:12:43.280 --> 0:12:45.400 China growth and extrapolate that to the next hundred. Is 0:12:45.400 --> 0:12:47.040 that we're in a whole new growth kind of paradigm. 0:12:47.120 --> 0:12:50.280 Is that true? I think She's challenges are enormous, and 0:12:50.280 --> 0:12:52.720 he made it much more difficult for himself when he 0:12:52.800 --> 0:12:56.080 not only named himself president for life, but then he 0:12:56.160 --> 0:12:58.360 ensconced it formally like this could have been the back 0:12:58.480 --> 0:13:01.000 background of everything. Everyone knows she's not going anywhere, but 0:13:01.000 --> 0:13:04.320 he made sure to make a public public issue of it. 0:13:04.360 --> 0:13:06.679 When he did that, he tied his fortunes in very 0:13:06.720 --> 0:13:09.000 closely with out of the Chinese economy and that of 0:13:09.120 --> 0:13:12.280 China generally, so that anything bad that apps the Chinese economy, 0:13:12.280 --> 0:13:13.920 who do you have to blame Chi Jinping? Who do 0:13:13.960 --> 0:13:16.480 you if if China undergoes problems, who do you have 0:13:16.520 --> 0:13:18.480 to blame? Chi Jinping? So he has made his life 0:13:18.559 --> 0:13:21.120 much more difficult. I don't think he's going anywhere. I 0:13:21.160 --> 0:13:23.280 do think that the pressures on him are going to 0:13:23.320 --> 0:13:25.320 be immense in the next few years, with the with 0:13:25.440 --> 0:13:28.480 the with the economy, even under the best set of circumstances. 0:13:28.880 --> 0:13:31.080 Uh So, this will be tough, and we could emerge 0:13:31.120 --> 0:13:33.280 from this a few years from now with more of 0:13:33.320 --> 0:13:36.480 a consensus based leadership, which she's still there, but not 0:13:36.520 --> 0:13:39.720 with as much control depending on things how things end 0:13:39.800 --> 0:13:42.640 up in the next eighteen months. How how would you 0:13:42.679 --> 0:13:44.719 characterize the Chinese economy right now? Is it a six 0:13:44.760 --> 0:13:46.719 at six and percent grower or something less than that? 0:13:47.400 --> 0:13:49.640 It's not growing at six percent? You know, the GDP 0:13:49.800 --> 0:13:55.120 numbers are always uh political narratives put but put into 0:13:55.120 --> 0:13:56.920 a number. Uh that said, you know, we have we 0:13:56.960 --> 0:13:59.160 have data coming in right now, and we're we're we're 0:13:59.160 --> 0:14:01.480 gonna be announcing next week. But what I would say 0:14:01.520 --> 0:14:04.040 is watch very closely to what the Chinese are saying. 0:14:04.240 --> 0:14:06.959 There's a lot of talk this week from Beijing about 0:14:06.960 --> 0:14:09.240 how they have all these options in terms of stimulus 0:14:09.280 --> 0:14:10.960 if they need them. And one of the things that 0:14:11.000 --> 0:14:12.959 we've made very clear in the past is that when 0:14:13.000 --> 0:14:14.800 the Chinese are talking a lot about all the options 0:14:14.840 --> 0:14:19.000 they have, they typically have already started utilizing. Okay, So 0:14:19.120 --> 0:14:20.840 I think that that's that's where we're going, and we'll 0:14:20.840 --> 0:14:22.000 be able to talk a little bit more of this 0:14:22.320 --> 0:14:24.040 a few days. Good. We'll have you back for that, 0:14:24.080 --> 0:14:25.880 because I think that's one of the underpinnings of the 0:14:25.920 --> 0:14:28.880 negotiations and the assumptions is how strong is China's economy. 0:14:29.160 --> 0:14:32.120 Uh the stronger dis presumably the tough to tougher stance 0:14:32.200 --> 0:14:34.080 they can take with the U S. Well. What I 0:14:34.160 --> 0:14:35.800 find really interesting though, and it's going to go to 0:14:35.920 --> 0:14:38.920 ubs uh and to have them using a bond deal 0:14:38.960 --> 0:14:41.600 over the Chinese pig. Statement from Paul Donovan either Chief 0:14:41.600 --> 0:14:45.480 Economists is that we talk different languages, like the West 0:14:45.600 --> 0:14:48.200 end China are just they talk different languages, they have 0:14:48.240 --> 0:14:50.280 different priorities and like that to me is like a 0:14:50.360 --> 0:14:53.320 whole big rainbow, uh in or not rainbow, but like 0:14:53.400 --> 0:14:55.760 big cloud as to how the conversation must be going 0:14:55.800 --> 0:14:58.360 when it comes to trade exactly. Leland Miller, CEO of 0:14:58.360 --> 0:15:00.360 the China Bag Book International, thank you some much for 0:15:00.480 --> 0:15:20.160 joining us and breaking down the ongoing trade discussions. Well, 0:15:20.200 --> 0:15:22.920 this week is Central bank week. We've got the FED, 0:15:23.000 --> 0:15:25.520 We've got the Bank of Japan, the Bank of England 0:15:25.560 --> 0:15:27.640 all meeting and of course the f O m c 0:15:28.040 --> 0:15:32.200 uh Well, FED Chairman Pal speaking on Wednesday, so clearly 0:15:32.240 --> 0:15:34.200 the markets are focusing on that. To get a sense 0:15:34.200 --> 0:15:36.720 of what we might expect, we welcome our next guest, 0:15:36.880 --> 0:15:40.400 Matt Mailey, Managing director and equity strategist at Miller Tebec 0:15:40.720 --> 0:15:43.480 based in Newton, Massachusetts. Matt, thanks so much for joining us. 0:15:43.840 --> 0:15:46.880 What do you expect to hear from FED Chairman Pal 0:15:47.120 --> 0:15:49.760 this week? Well, to be honest with you, I think 0:15:49.960 --> 0:15:51.720 the market is gonna be a little disappointed. I think 0:15:51.760 --> 0:15:54.880 the FED chairman will be a little less devish than 0:15:54.960 --> 0:15:58.080 people are expecting. Um no, no, no, less dovish and 0:15:58.440 --> 0:16:00.480 it has been. There's no question they've made a a 0:16:00.760 --> 0:16:05.200 change to a more tubbish tone, but their actions I 0:16:05.240 --> 0:16:07.640 just think in the past, especially in the past ten years, 0:16:08.000 --> 0:16:10.280 where you know central bank acuidity has been so important 0:16:10.280 --> 0:16:13.360 to the markets. Uh, they have they haven't acted until 0:16:13.360 --> 0:16:17.320 we've seen a more significant move both in the UH 0:16:17.400 --> 0:16:20.240 in the economy and UH in the economic data and 0:16:20.320 --> 0:16:23.000 in the in the markets. Uh. The Fed's a little 0:16:23.000 --> 0:16:27.360 bit more market dependent than they than they admit to. 0:16:27.600 --> 0:16:29.800 They are very data dependent, but they're also market dependent. 0:16:30.240 --> 0:16:33.400 So how is the market actually position for this because 0:16:33.440 --> 0:16:36.360 a huge run up and utilities evaluation is super high, 0:16:36.600 --> 0:16:39.800 Yet their utilities and defensives for a reason. So like 0:16:39.840 --> 0:16:43.600 what's the positioning resk here? Well, you know, if if 0:16:43.640 --> 0:16:49.080 they do uh uh signal a definitive uh change in 0:16:49.120 --> 0:16:52.320 their in their actions by actually saying that they're going 0:16:52.320 --> 0:16:56.240 to raise cuts pretty much no matter what uh in July. Uh, 0:16:56.280 --> 0:16:59.120 that's gonna have a lot of people uh caught offsides. 0:16:59.560 --> 0:17:02.000 Not only the utility stocks very strong, but you know, 0:17:02.280 --> 0:17:05.320 consumer staples another defensive group has been very strong, and 0:17:05.359 --> 0:17:07.120 I think that the people will start to shift out 0:17:07.119 --> 0:17:09.960 of that and go into some of them uh more 0:17:10.000 --> 0:17:12.960 growthy names. Obviously a technology et cetera. When we've seen 0:17:12.960 --> 0:17:15.400 the semiconductor stock kind of roll over recently, they could 0:17:15.440 --> 0:17:18.240 bounce back. UM, I don't necessarily think that's going to 0:17:18.359 --> 0:17:21.880 happen again. I'm more cautious than I think a lot 0:17:21.880 --> 0:17:24.680 of people are. But the thing that really concerns mean 0:17:24.760 --> 0:17:28.120 most is that the stock market is definitely pricing in 0:17:28.520 --> 0:17:31.119 the a FED move to a much more doublish stance 0:17:31.800 --> 0:17:34.760 because it's not moving higher due to a better economy 0:17:34.840 --> 0:17:36.800 or better earnings. As we've seen that a lot of 0:17:37.000 --> 0:17:40.000 estimates for both economic growth and estimates for the SMP 0:17:40.720 --> 0:17:42.679 have come down in the last two weeks. Not move up. 0:17:42.800 --> 0:17:45.080 Wouldn't be amazing if if the JJ Powell came out 0:17:45.080 --> 0:17:47.560 and he's like, Okay, guys, we're gonna cut this many 0:17:47.600 --> 0:17:50.000 times at this date and that's what we're gonna do. 0:17:50.119 --> 0:17:54.760 Take care of see you later, And was like, so, 0:17:54.880 --> 0:17:57.080 no question, he won't make it that quite that definitive. 0:17:57.080 --> 0:18:00.199 But if he you know, they usually tell you, you know, 0:18:00.240 --> 0:18:04.840 really telegraphic well in advance. So how he portrays, uh, 0:18:05.160 --> 0:18:06.920 how the July meeting is gonna go, it's gonna be 0:18:07.000 --> 0:18:10.480 very important. So Matt, if in fact they FED is 0:18:10.520 --> 0:18:13.200 not quite as dublish as maybe the market is currently discounting, 0:18:13.320 --> 0:18:16.359 how do you play it right here? Well, Uh, you know, 0:18:16.440 --> 0:18:19.520 it's it's hard to number one. I do think like 0:18:19.560 --> 0:18:22.560 I said that that the with earnings estimates coming down, 0:18:23.320 --> 0:18:26.840 the consensus earning as earnings estimates, the economy is slowing 0:18:26.880 --> 0:18:29.639 a little bit. I think raising a little bit of 0:18:29.680 --> 0:18:32.200 cash and and and by and if you want to 0:18:32.240 --> 0:18:34.760 put more more money to work by those defensive groups 0:18:34.800 --> 0:18:37.520 with buy them on weakness. You look at the overbought 0:18:37.520 --> 0:18:41.119 condition of the consumer staples which have been very obviously 0:18:41.240 --> 0:18:43.119 very strong. They've made new all time highs. Same with 0:18:43.200 --> 0:18:45.680 the utilities. But of the consumer staples names, I think 0:18:45.680 --> 0:18:47.879 and it would be the good ones. But most importantly, 0:18:48.080 --> 0:18:50.960 if we do get another leg lower, which would not 0:18:51.000 --> 0:18:52.399 be the worst thing in the world. I mean, you know, 0:18:52.480 --> 0:18:54.840 we're only down seven percent. That's a normal and healthy 0:18:54.840 --> 0:18:57.159 move in any market, much less one that's being evolved 0:18:57.160 --> 0:18:59.520 in a trade war. Uh. When you get that kind 0:18:59.520 --> 0:19:02.000 of down much like we got in December, and I'm 0:19:02.000 --> 0:19:04.840 not calling for decline like we got in the fourth 0:19:04.920 --> 0:19:06.760 quarter of last year. But you get something down in 0:19:06.800 --> 0:19:09.200 the correction terry of ten or twelve, and you've got 0:19:09.240 --> 0:19:11.240 some money on the sidelines. You can put that to 0:19:11.280 --> 0:19:14.439 work in your favorite names at really good prices. But 0:19:14.480 --> 0:19:16.679 if you're prepared in advance, you can take advantage of it. 0:19:16.720 --> 0:19:18.159 If you don't have that cash on the sidelines, you 0:19:18.200 --> 0:19:19.800 won't be able to. How else are you gonna hedge 0:19:19.800 --> 0:19:22.720 looking for derivatives or anything along those lines too, Well, 0:19:22.760 --> 0:19:24.840 people can certainly do that. Uh. The one thing I 0:19:25.320 --> 0:19:27.920 you know, that I worry about that is that the 0:19:28.160 --> 0:19:31.040 VIX is a little high given how much the market 0:19:31.119 --> 0:19:33.199 is rallying, So that makes the hedging a little bit 0:19:33.200 --> 0:19:35.080 more expensive than it was, you know, say a couple 0:19:35.119 --> 0:19:38.040