WEBVTT - Biggest Boom in Bonds Since 1980s Sparks Everything Rally 0:00:00.080 --> 0:00:02.360 Hey, it's Carol and Tim and we have something new 0:00:02.360 --> 0:00:03.160 and exciting for you. 0:00:03.400 --> 0:00:06.680 Everything you love about Bloomberg Radio is now in your car. 0:00:06.880 --> 0:00:10.160 The new Bloomberg Business App now featuring Apple CarPlay and 0:00:10.160 --> 0:00:10.800 Android Auto. 0:00:10.920 --> 0:00:14.400 Listen to your favorite Bloomberg Radio stations anytime. 0:00:13.840 --> 0:00:17.280 Plus every Bloomberg podcast, the latest news, and more, all 0:00:17.320 --> 0:00:18.360 at the click of a button. 0:00:18.520 --> 0:00:21.560 It's free and simple to use. Just download the Bloomberg 0:00:21.600 --> 0:00:24.079 Business App on your smartphone and connect your phone to 0:00:24.160 --> 0:00:24.680 your car. 0:00:24.880 --> 0:00:27.880 The Bloomberg Business App now with Apple CarPlay and Android 0:00:27.920 --> 0:00:30.720 Auto features. Download it free in the Apple App Store 0:00:30.800 --> 0:00:31.920 or on Google Play. 0:00:32.040 --> 0:00:36.440 Presented by our sponsor, Interactive Brokers, this. 0:00:36.840 --> 0:00:41.120 Is Bloomberg BusinessWeek inside from the reporters and editors who 0:00:41.200 --> 0:00:45.239 bring you America's most trusted business magazine, plus global business, 0:00:45.280 --> 0:00:49.440 finance and tech news. The Bloomberg Business Week Podcast with 0:00:49.600 --> 0:01:04.000 Carol Messer and Tim Stenebeck from Bloomberg Radio. 0:01:04.280 --> 0:01:05.840 All right, so we promised you a lot of the 0:01:05.840 --> 0:01:08.640 most read stories the Bloomberg and it does feel like 0:01:08.840 --> 0:01:11.560 the bond market man. The gains that we are seeing, 0:01:11.720 --> 0:01:15.320 the biggest boom that we've seen in decades. This month 0:01:15.319 --> 0:01:17.640 has been very different for the US treasury trade. But 0:01:17.680 --> 0:01:20.480 it's also mean, like everybody's kind of all in on everything. 0:01:20.800 --> 0:01:23.080 So let's get to it. Back with us the killer 0:01:23.160 --> 0:01:26.680 duo that wrote this story, Bloomberg News Race reporter Michael mackenzie. 0:01:27.160 --> 0:01:29.600 He is joining us as well as Liz McCormick, Bloomberg 0:01:29.640 --> 0:01:32.600 News Chief correspondent for Global macro Markets. Liz is on 0:01:32.720 --> 0:01:37.840 zoom in, New Jersey, Dynamic duo. They are the Dynamic View. Michael. 0:01:38.200 --> 0:01:40.360 I want to start with you. You two are really 0:01:40.400 --> 0:01:42.280 the bells of the bond ball right now, because I 0:01:42.280 --> 0:01:44.800 feel like it is like your world in a big 0:01:44.800 --> 0:01:46.720 way as we watch the very different trade that we've 0:01:46.720 --> 0:01:50.080 seen in November. This has not been though an easy 0:01:50.200 --> 0:01:52.480 year Michael, for the US bond market, and yet here 0:01:52.520 --> 0:01:55.840 we are in November. How remarkable has this trade really been. 0:01:57.560 --> 0:02:00.400 It's certainly been remarkable, and it's really something a lot 0:02:00.400 --> 0:02:02.840 of the active bond managers have been hoping for. They've 0:02:02.840 --> 0:02:06.120 been part of position for it pretty much since you 0:02:06.160 --> 0:02:09.000 can go back to last July last year, when they 0:02:09.000 --> 0:02:11.639 had the first kind of FED pivot. They thought inflation 0:02:11.760 --> 0:02:14.919 was transitory, and therefore they started putting bets on that 0:02:14.960 --> 0:02:17.959 the FED would stop in the middle of twenty twenty two, 0:02:18.000 --> 0:02:21.760 except the FED didn't stop. Inflation wasn't transitory. And I 0:02:21.760 --> 0:02:23.560 mean I was talking to one of the investors who 0:02:23.880 --> 0:02:26.800 over at Western Asset who's had a terrible time, but 0:02:27.480 --> 0:02:30.440 for November their funders jumped six and a half percent. 0:02:31.120 --> 0:02:33.760 So he was saying, you know, we got the core wrong, 0:02:33.840 --> 0:02:36.560 but things are looking better now and there's a lot 0:02:36.560 --> 0:02:38.959 of relief from those guys. 0:02:39.280 --> 0:02:41.679 Liz, I want to bring you into this conversation. Let's 0:02:41.720 --> 0:02:44.239 broad this out, so not just US treasuries, but other 0:02:44.320 --> 0:02:47.760 parts of fixed didn't come also this month, having pretty 0:02:47.760 --> 0:02:49.480 strong month here, talk to us more about that. 0:02:51.120 --> 0:02:53.839 Yeah, So the index in the story that Mike, who 0:02:53.840 --> 0:02:59.040 I feel like is my fourth brother, I had three 0:03:00.639 --> 0:03:04.000 all that good stuff exactly exactly, but it is the 0:03:04.120 --> 0:03:07.760 US AGG which is Treasury's corporates and all that other 0:03:07.800 --> 0:03:11.280 good stuff, a bunch of bond types in there, and that, like, 0:03:11.280 --> 0:03:14.120 like we show in the story, you know, having the 0:03:14.160 --> 0:03:17.480 best month since the eighties, and it's just amazing. I 0:03:17.560 --> 0:03:19.760 was saying earlier to someone that, like, look at that 0:03:19.880 --> 0:03:22.040 iron page on Bloomberg, which Mike and I used to 0:03:22.080 --> 0:03:22.680 always look at it. 0:03:22.720 --> 0:03:25.160 It was like red everywhere. That's all the bonded disease. 0:03:25.280 --> 0:03:27.280 Now it's all green. I can't believe it, you know, 0:03:27.440 --> 0:03:29.600 I mean, like from month to day, year to date, 0:03:29.960 --> 0:03:32.280 you know, and like Mike said, some of these investors, 0:03:32.280 --> 0:03:33.720 which I guess you got to give them credit. 0:03:33.760 --> 0:03:35.520 They stay the course, they take the pain. 0:03:35.920 --> 0:03:38.200 For a while, been saying it's a good time for bonds, 0:03:38.240 --> 0:03:41.600 and they haven't you know, got any let's say success 0:03:41.640 --> 0:03:43.440 on that, and now they have. I mean, this this 0:03:43.520 --> 0:03:45.400 month is just I mean, and Mike and I keep saying, 0:03:45.440 --> 0:03:47.160 it's not gonna be a straight line like this. It's 0:03:47.160 --> 0:03:49.080 not going to be sixty bases points a month, but 0:03:49.120 --> 0:03:51.120 it's definitely kind of lifted all boats. 0:03:51.160 --> 0:03:54.200 As you said, I'm pulling up the page Canadian Aggregate, 0:03:54.320 --> 0:03:58.720 China Aggregate Credit, Corporate Global Inflation, Link, Global high Yield, 0:03:58.880 --> 0:04:02.520 Penny European high Yield, and another It is all green, 0:04:02.680 --> 0:04:05.520 all green. But you know, Michael, this gets to a 0:04:05.520 --> 0:04:09.800 good point. Is this it? You know, it's been a 0:04:09.960 --> 0:04:12.920 very volatile market, to say the least, so and I 0:04:12.960 --> 0:04:16.719 do wonder does this trend continue, and what's necessary for 0:04:16.839 --> 0:04:19.880 it to continue, and does it necessarily translate into other 0:04:19.920 --> 0:04:21.320 parts of the fixed income world. 0:04:23.160 --> 0:04:26.320 That's really a great question. It's really what's got everyone 0:04:26.400 --> 0:04:29.440 thinking in the fixed income market, because clearly you've got Trogies, 0:04:29.440 --> 0:04:32.800 which is the sort of your classic defensive haven rallying strongly. 0:04:33.360 --> 0:04:35.880 But John Bonds had a great month of November two. 0:04:36.040 --> 0:04:38.800 So there's a disconnect. I think at the moment, the 0:04:38.839 --> 0:04:42.200 market's looking at soft landing because we're nowhere near the 0:04:42.279 --> 0:04:44.640 lows in treasure. You'll be saw back in March when 0:04:44.680 --> 0:04:47.599 regional banks failed and the bomb market was definitely thinking 0:04:47.640 --> 0:04:51.640 recessions coming. So now the debate it has shifted from 0:04:51.640 --> 0:04:54.200 the FED higher for longer and maybe not and maybe 0:04:54.200 --> 0:04:56.960 having a raise rates again. We now have kind of 0:04:57.000 --> 0:04:59.360 a new dynamic where the Fed, where the market now 0:04:59.440 --> 0:05:02.120 thinks the is going to cut next year. The question 0:05:02.240 --> 0:05:04.479 is are they going to cut by just the fifty 0:05:04.600 --> 0:05:07.159 basis points or half a percentage point that they indicated 0:05:07.640 --> 0:05:10.800 in their dot plot earlier this year, or do they 0:05:10.839 --> 0:05:13.640 do more? And it really comes down to the sort 0:05:13.640 --> 0:05:17.280 of type of slowdown that we're going to get, and 0:05:17.320 --> 0:05:20.400 I think in that environment, any kind of turmoil that 0:05:20.480 --> 0:05:23.360 starts to seep into equities and the riskier parts of 0:05:23.400 --> 0:05:26.080 the credit market, any sort of shocks we get from 0:05:26.160 --> 0:05:29.159 commercial real estate over the next couple of quarters is 0:05:29.160 --> 0:05:33.440 going to really make owning yields above four percent, particularly 0:05:33.520 --> 0:05:35.680 in the sort of five year part of the treasury market, 0:05:36.040 --> 0:05:37.080 a very good trade. 0:05:37.200 --> 0:05:39.800 Well, and then, Liz, what I keep thinking about, and 0:05:39.839 --> 0:05:42.440 we talk about this in the newsroom a lot is like, Okay, okay, 0:05:42.480 --> 0:05:45.160 it does feel like things are settling down. We keep 0:05:45.160 --> 0:05:48.640 getting these inflation report like everything the softness, and yet 0:05:48.760 --> 0:05:51.479 I think about next Friday's jobs report. Does it just 0:05:51.560 --> 0:05:54.480 take one report to remind us that way to mante guys, 0:05:54.480 --> 0:05:56.400 it's not a straight line, and that is something that 0:05:56.400 --> 0:05:57.440 the FED takes note of. 0:05:59.080 --> 0:06:01.440 Yeah, I think, I mean, I think it's gonna be 0:06:01.480 --> 0:06:04.000 hard for that jobs report to kind of change the 0:06:04.080 --> 0:06:05.200 whole zeitgeist. 0:06:05.240 --> 0:06:08.640 However, I think to your point, Carol, we're gonna have a. 0:06:08.560 --> 0:06:11.960 Lot of volatility because the Fed, even the folks that 0:06:12.240 --> 0:06:16.280 like Waller who sounded quite dubvish the usual hawk this week, 0:06:16.279 --> 0:06:18.920 that's to kind of let the kindling going this week, 0:06:18.960 --> 0:06:22.440 but that they're still saying we're watching the data. I mean, 0:06:22.480 --> 0:06:25.560 of course, if things change and they kind of somehow 0:06:25.560 --> 0:06:27.640 out of nowhere to get a string of the labor 0:06:27.680 --> 0:06:32.560 market not easing, inflation bubbling back up. I'm not predicting this, 0:06:32.720 --> 0:06:35.080 but they will have to kind of at least lean 0:06:35.120 --> 0:06:37.760 in and sound hawkish. So yeah, I think that's. 0:06:37.600 --> 0:06:41.040 Why the like Waller today, not Waller like John Williams today, 0:06:41.120 --> 0:06:43.599 right saying it's quite restrictive, but it's gonna stay restrictive 0:06:43.640 --> 0:06:45.440 for some time. So they're gonna kind of keep reminding 0:06:45.520 --> 0:06:47.839 us of that exactly. 0:06:47.920 --> 0:06:49.000 And we have Pal tomorrow. 0:06:49.080 --> 0:06:51.040 He might do the same kind of I don't think 0:06:51.040 --> 0:06:53.120 they want the market to get so ahead of them. 0:06:53.160 --> 0:06:55.320 I mean, we're the market is ahead, but there's probably 0:06:55.320 --> 0:06:57.680 a limit to how much they'll you know, accept that. 0:06:58.560 --> 0:07:01.200 And Mike, I wanted you to jump back in because, 0:07:01.360 --> 0:07:05.160 as Liz mentioned, Pale does speak on the calendar twice tomorrow. 0:07:05.240 --> 0:07:07.320 This comes ahead of the blackout period next week. What 0:07:07.360 --> 0:07:10.120 do you think investors want to hear from Powell versus 0:07:10.160 --> 0:07:13.640 what we would most likely actually hear from him. 0:07:14.160 --> 0:07:17.120 Well, I don't think they want to hear him being hawkish. 0:07:17.160 --> 0:07:19.120 I think they want to hear sort of being at 0:07:19.200 --> 0:07:22.320 least sort of mimicking what John Williams said. I think 0:07:22.440 --> 0:07:24.600 I expect they will hear that, I think Powe will 0:07:24.640 --> 0:07:27.640 play it pretty close to his chest. He'll essentially say, look, 0:07:28.280 --> 0:07:30.160 they're in a good spot. They just have to sit 0:07:30.200 --> 0:07:31.880 back and watch the data, which is what all the 0:07:31.920 --> 0:07:36.560 bonded market has to do as well. And ultimately it's 0:07:36.640 --> 0:07:38.560 kind of now out of the Fed's hands. The data 0:07:38.640 --> 0:07:41.960 is going to determine just whether or not the bomb markets, 0:07:42.400 --> 0:07:45.960 you know, thinking of rate cuts coming potentially as early 0:07:46.040 --> 0:07:49.640 as next March, do come to fruition. I mean, if 0:07:49.680 --> 0:07:52.320 inflation continues to fall, and if we start to see 0:07:52.320 --> 0:07:56.200 the employment market we can probably not not turn next week, 0:07:56.280 --> 0:07:59.520 but probably more in the early next year, then you're 0:07:59.520 --> 0:08:01.400 going to see the market we'll start to run ahead 0:08:01.440 --> 0:08:04.080 of the Fed. I mean, talking to investors this week 0:08:04.200 --> 0:08:06.600 is notable how some of them have been a's one 0:08:06.680 --> 0:08:08.880 said to me, I've been through five easing cycles. We 0:08:09.000 --> 0:08:12.800 know what happens here once it gets going, and the 0:08:12.840 --> 0:08:15.960 market wants to jump ahead of this, and so I 0:08:16.000 --> 0:08:18.520 think that's really the key point to keep to remember. 0:08:18.720 --> 0:08:20.320 Well, and that's what I was thinking about, Liz, like, 0:08:20.360 --> 0:08:22.000 I'm looking at the story that you guys put out, 0:08:22.160 --> 0:08:24.640 you know, I'm curious what you know Pimco's doing double lines, 0:08:24.680 --> 0:08:27.119 doing you know, what are the positions and you guys, 0:08:27.360 --> 0:08:29.360 you know, say how that they've been kind of loading 0:08:29.400 --> 0:08:32.080 up on longer day to debt and that just keeps unrising. 0:08:33.559 --> 0:08:35.960 Yeah, And Mike was out there, not this week, but 0:08:36.080 --> 0:08:38.480 last kind of visiting all them, you know, right in 0:08:38.520 --> 0:08:41.640 their shops and I'm you know, kind of upfront and center, 0:08:41.679 --> 0:08:44.120 and they were saying, and it's you know, that didn't 0:08:44.160 --> 0:08:45.880 work out the next day or so, but their long 0:08:46.000 --> 0:08:48.760 term investors saying, you know, hey, you're you know, we 0:08:48.840 --> 0:08:51.560 all love cash. Everyone's saying cash at about five percent. 0:08:51.640 --> 0:08:53.920 But they were telling Mike there's going to be a 0:08:53.960 --> 0:08:56.320 point where you're missing out, like it's kind of time 0:08:56.360 --> 0:08:59.079 to get into further out the curve. And boy, they 0:08:59.160 --> 0:09:02.520 nailed that call what happened this week, but that there's 0:09:02.559 --> 0:09:05.000 a point where because I always say, you can't react 0:09:05.040 --> 0:09:07.400 fast enough. That's why you know, all the textbooks the 0:09:07.760 --> 0:09:10.920 long term investment don't jump around because by time you know, 0:09:11.120 --> 0:09:13.800 us average folks say, oh wow, the cash rate went 0:09:13.840 --> 0:09:16.280 down so much, you've missed a lot of opportunity and 0:09:16.440 --> 0:09:18.920 the stock market and the bond market. So that's why 0:09:18.920 --> 0:09:20.560 they were saying, hey, you've got to get ahead of 0:09:20.559 --> 0:09:21.920 this and kind of go out the curve. 0:09:22.040 --> 0:09:24.840 Well, Lasstock, guys, this is not just a US thing, obviously, 0:09:24.920 --> 0:09:26.720 it's a global thing, right, and you have global central 0:09:26.760 --> 0:09:29.280 bankers at work and everybody dealing maybe with the different 0:09:30.520 --> 0:09:35.040 economic or inflationary pictures. So Mike, how does that complicate 0:09:35.240 --> 0:09:37.760 maybe to what comes next or make it even more interesting? 0:09:39.679 --> 0:09:42.720 Well, I think globally the economy is slowing. We haven't 0:09:42.720 --> 0:09:45.760 really seen the revival of Chinese growth which everyone expected 0:09:45.760 --> 0:09:47.520 earlier this year. It's been one another one of these 0:09:47.559 --> 0:09:51.800 missed sort of trades. You've got the oil price not 0:09:51.840 --> 0:09:54.560 really getting much love here, even though Opex just announced 0:09:54.720 --> 0:09:58.959 it intends to cut supply. So that's kind of telling 0:09:58.960 --> 0:10:02.880 you the economy is. It is slowing, and it's quite 0:10:02.920 --> 0:10:05.520 clear when you look at the inflation data across regions 0:10:05.920 --> 0:10:09.680 it is slowing in unison. So that tends to suggest 0:10:09.760 --> 0:10:11.240 that we are going to go through a period of 0:10:11.320 --> 0:10:14.280 softer growth, inflation, easy back, and it is going to 0:10:14.280 --> 0:10:17.400 give central banks a lot more room to maneuver, although 0:10:17.400 --> 0:10:19.600 I'm not sure the Bank of England has that luxury. 0:10:19.720 --> 0:10:23.360 Unfortunately, exactly just twenty five seconds left list. Part of 0:10:23.360 --> 0:10:25.640 me is like, I'm so suspect because I feel like 0:10:26.360 --> 0:10:28.840 I have been fooled so many times over the last 0:10:28.880 --> 0:10:31.480 couple of years. Is that a fair way to feel 0:10:31.559 --> 0:10:32.960 or do you feel like something's different now? 0:10:34.120 --> 0:10:36.560 Yeah, Carol, I think I've been you and my team. 0:10:36.600 --> 0:10:37.280 I'm always like. 0:10:37.320 --> 0:10:38.240 Ah, that's the motion. 0:10:40.960 --> 0:10:44.360 But I think this time it feels a little bit different. 0:10:44.400 --> 0:10:47.160 That it's pretty broad based, and like Mike said, and 0:10:47.200 --> 0:10:49.720 I think before we went on, I believe I saw 0:10:49.800 --> 0:10:53.120 Goldman Sachs European economists pull forward when they say the 0:10:53.160 --> 0:10:55.600 ECB starts cutting next year because they had a soft 0:10:55.600 --> 0:10:59.920 inflation data out overnight, and so I think we are 0:11:00.080 --> 0:11:03.280 seeing the disinflation, so we're okay, maybe we can trust. 0:11:03.200 --> 0:11:05.720 All right, So appreciate it, guys. Bloomberg News rates report 0:11:05.720 --> 0:11:08.280 of Michael mackenzie, also the fourth brother of Liz McCormick. 0:11:08.559 --> 0:11:11.559 Just kidding, and of course Liz McCormick. Bloomberg newschie courseponder 0:11:11.559 --> 0:11:14.199 for Global macromarkets. It's among the most read. It's really 0:11:14.200 --> 0:11:15.960 what this month has been so much about it and it 0:11:16.000 --> 0:11:17.800 really is about today's narrative. 0:11:17.880 --> 0:11:22.040 Thanks guys, This is Bloomberg you're listening to the Bloomberg 0:11:22.080 --> 0:11:26.000 Business Week podcast. Catch US Live weekday afternoons from three 0:11:26.000 --> 0:11:30.040 to six Eastern Listen on Bloomberg dot com, the iHeartRadio app, 0:11:30.080 --> 0:11:34.120 and the Bloomberg Business App, or watch US Live on YouTube. 0:11:34.920 --> 0:11:38.160 Let's get back to something that totally impacts a lot 0:11:38.200 --> 0:11:42.200 of Americans. Bloomberg Editorial Board writing about this in September. 0:11:42.200 --> 0:11:45.840 The US prescription drug market very different. Patients and providers 0:11:45.840 --> 0:11:49.560 don't make decisions about whether treatment offers good value middlemen do. 0:11:50.040 --> 0:11:54.520 These intermediaries, which design prescription drug coverage and negotiate discounts 0:11:54.559 --> 0:11:57.280 for health plans, get bigger fees for more expensive medications, 0:11:57.280 --> 0:11:59.840 and as a result, you've got payers such as Medicare 0:12:00.280 --> 0:12:02.760 can't be sure that they're getting a good deal. And 0:12:02.960 --> 0:12:05.960 other countries do it very differently. So let's get to it. 0:12:06.040 --> 0:12:07.800 Some thoughts on how it all works in the US 0:12:08.080 --> 0:12:10.840 with US is Gbi, Professor of Health Policy Management at 0:12:10.920 --> 0:12:13.880 Johns Hopkins Bloomberg School of Public Health, which is supported 0:12:13.880 --> 0:12:16.120 by Michael R. Bloomberg, of course, founder of Bloomberg LP 0:12:16.280 --> 0:12:20.000 and Bloomberg Philanthropies. G is on zoom in Washington, dcg 0:12:20.240 --> 0:12:23.319 Nice to have you here. With Jess and myself talk 0:12:23.360 --> 0:12:27.360 to us about this. These intermediaries, formacy benefit managers. You know, 0:12:27.480 --> 0:12:28.800 I think we all thought that they were going to 0:12:28.880 --> 0:12:32.079 make it all more efficient, and I guess we thought 0:12:32.120 --> 0:12:35.080 it would be better for consumers. Why is it not 0:12:35.160 --> 0:12:36.320 working out as we all thought? 0:12:38.040 --> 0:12:42.000 It's actually not working for cheap generical drugs. So we 0:12:42.080 --> 0:12:46.440 found one hundred dollars paid by medicare actually forty one dollars. 0:12:46.440 --> 0:12:49.680 We'll go to PBM just as a spread as profit 0:12:50.240 --> 0:12:52.920 and then manufacturers only got thirty dollars. 0:12:52.920 --> 0:12:56.080 So yah, the words PBM's profit problem. 0:12:56.080 --> 0:12:59.160 The spread is already thirty percent more than what a 0:12:59.200 --> 0:13:02.720 manufacturers get in their revenue, and the pharmacy you got 0:13:02.800 --> 0:13:06.160 it seventeen dollars and then holds it like a twelve dollars. 0:13:06.200 --> 0:13:09.040 So you can see this whole supply chain is very 0:13:09.080 --> 0:13:11.280 efficient for the GW drugs. 0:13:12.200 --> 0:13:14.080 So how did that happen? I mean, how is it 0:13:14.120 --> 0:13:18.240 that that? You know? And we've done some stories, certainly 0:13:18.559 --> 0:13:21.720 Bloomberg Business Week has done some stories. Increasingly we're looking 0:13:21.760 --> 0:13:24.960 at what's going on? How can it be better? You 0:13:25.000 --> 0:13:28.280 guys did a study, What did you look at specifically? 0:13:28.360 --> 0:13:31.160 What did you find so you. 0:13:31.120 --> 0:13:32.760 Know why this happened. 0:13:33.280 --> 0:13:36.440 Everybody want to get a big cut, the high spread 0:13:36.640 --> 0:13:41.320 if it's possible, but in most markets you can't because 0:13:41.320 --> 0:13:43.640 of competition. Right, if you're too grady you have a 0:13:43.720 --> 0:13:46.200 high cut, guys, what will be driven out of the market. 0:13:46.559 --> 0:13:49.400 But the PBI market is very different. It's not very competitive. 0:13:49.880 --> 0:13:53.960 So this lack of competition allows the PBMs, like we 0:13:54.040 --> 0:13:57.680 have only three large PBMs to generate such a high, 0:13:58.080 --> 0:14:01.080 large spread. So in other words, you are powerful. You 0:14:01.160 --> 0:14:04.160 can charge high from insurance and then you can pay 0:14:04.240 --> 0:14:07.160 load to pharmacies. That's what we found in our study. 0:14:07.320 --> 0:14:10.440 What Shocking Money would say is if the government was involved, 0:14:10.440 --> 0:14:12.120 do you think that they would be saying, hey, go guys, 0:14:12.200 --> 0:14:15.080 this isn't okay, this isn't right. And I do feel 0:14:15.120 --> 0:14:18.080 like there's, you know, slowly, some momentum to do that. 0:14:19.040 --> 0:14:22.440 What are you anticipating potentially on the regulatory. 0:14:21.800 --> 0:14:26.120 Front right now on the hill, there's some proposals to 0:14:26.320 --> 0:14:29.800 ban the spread pressing. But guess what if we do 0:14:29.920 --> 0:14:33.680 not change the market dynamics, we cut the spread pressing, 0:14:33.840 --> 0:14:35.480 and then other things will pop up. 0:14:35.560 --> 0:14:37.280 Right, It's like a waterbed effect. 0:14:37.800 --> 0:14:40.440 So I think the fundamentally, we need to address the 0:14:40.560 --> 0:14:42.040 market in efficiencies. 0:14:42.640 --> 0:14:44.480 You know, insurance. 0:14:44.080 --> 0:14:50.080 Actually works very well for high cost, expensive, low frequency things. 0:14:50.120 --> 0:14:53.920 That's why we are kigh insurance does all cover all change, right, 0:14:54.000 --> 0:14:56.720 our home insurance does all cover got a cleaning. But 0:14:56.760 --> 0:15:01.720 for drugs they're they're relatively cheap, so you very complex 0:15:02.320 --> 0:15:05.200 insurance to cover it. Actress not efficient. No study is 0:15:05.240 --> 0:15:09.720 found for many patients the alto pocket costs is already 0:15:09.840 --> 0:15:13.320 higher the cash pay. Let's say if they go to 0:15:13.400 --> 0:15:17.440 Kudak's Mark Cuban cost plus company, I'm in a pharmacy 0:15:17.720 --> 0:15:21.120 without doing their insurance, they pay a lower price than 0:15:21.240 --> 0:15:23.800 if they use their insurance for the auto polking. 0:15:23.920 --> 0:15:27.080 So that tells us insurance Actress is not efficient. Let's 0:15:27.200 --> 0:15:29.200 get it. Let's say push. 0:15:29.600 --> 0:15:32.120 Yeah, yeah, no, no, no no. It's fascinating. I was thinking 0:15:32.120 --> 0:15:35.680 about and kind of prepping for this story. Other countries, 0:15:36.080 --> 0:15:38.560 you know, whether it's Australia, the UK, they don't have 0:15:38.680 --> 0:15:42.680 this middleman because they've got a single negotiator, the government, 0:15:42.760 --> 0:15:46.440 their governments that can press essentially the drug manufacturers right 0:15:46.600 --> 0:15:47.440 for discounts. 0:15:47.920 --> 0:15:48.160 Uh. 0:15:48.200 --> 0:15:53.040 And they regularly are doing oversight, doing cost effectiveness assessments. 0:15:53.400 --> 0:15:55.680 And so their prescription drug spending is a fraction of 0:15:55.720 --> 0:15:59.680 the United States. So you know, anytime you throw in 0:15:59.680 --> 0:16:02.720 the middle man, there's going to be increased cost. But 0:16:02.760 --> 0:16:06.520 it does sound like it's getting out of control. You say, though, 0:16:06.560 --> 0:16:08.840 in particular, that there should be an end to insurance 0:16:08.880 --> 0:16:11.520 coverage of low cost generic drugs. You're saying, we don't 0:16:11.520 --> 0:16:14.000 need it, right, because they're so inexpensive. 0:16:14.840 --> 0:16:15.120 Uh huh. 0:16:15.320 --> 0:16:18.280 Actually, ill save everybody in money, right, we got higher 0:16:18.640 --> 0:16:21.120 take home pay, we got a lower premium, or you know, 0:16:21.240 --> 0:16:24.000 they can put government towards sponsors, can put more money 0:16:24.160 --> 0:16:26.240 in our House sittings account that we can use it 0:16:26.280 --> 0:16:28.880 for buying the generic drugs writing now is five dollars 0:16:28.920 --> 0:16:32.240 per months from Amazon Pharmacy, and then we can use 0:16:32.240 --> 0:16:34.520 that for all sorts of social becoming for health. 0:16:34.360 --> 0:16:37.120 Right, and then that can actually improve our health. 0:16:37.480 --> 0:16:39.760 Yeah, it's interesting. It's certainly you know, you wonder if 0:16:39.760 --> 0:16:43.440 it'll come up in the upcoming politics politicians, uh, when 0:16:43.440 --> 0:16:45.960 they are out on the campaign trail for the November elections, 0:16:45.960 --> 0:16:49.120 because it certainly impacts a lot of Americans. Gee, thank 0:16:49.160 --> 0:16:51.600 you so much. Gibai. She's professor of health policy and 0:16:51.640 --> 0:16:54.680 Management at Johns Hopkins Bloomberg School of Public Health. Joining 0:16:54.760 --> 0:16:56.760 us on zoom from Washington, d C. 0:16:57.760 --> 0:17:01.640 You're listening to the Bloomberg Business Podcast. Catch us live 0:17:01.720 --> 0:17:05.399 weekday afternoons from three to six Easter on Bloomberg Radio, 0:17:05.600 --> 0:17:08.879 the Bloomberg Business App, and YouTube. You can also listen 0:17:08.960 --> 0:17:12.080 live on Amazon Alexa from our flagship New York station 0:17:12.520 --> 0:17:18.280 Just say Alexa playing Bloomberg eleven thirty. 0:17:19.080 --> 0:17:25.200 INChO Hell. 0:17:27.480 --> 0:17:30.520 All right, he's back, Sam Altman back at open Ai. 0:17:30.920 --> 0:17:33.800 He asked a leader of chucchipt maker open Ai. But 0:17:34.040 --> 0:17:37.119 he's back at the company, returning there to the company 0:17:37.119 --> 0:17:39.080 that fired him earlier this month. It was quite a 0:17:39.160 --> 0:17:42.919 power struggle that shocked the tech industry, gave us all whiplash, 0:17:42.960 --> 0:17:46.200 brought attention to the conflicts around how to safely build 0:17:46.280 --> 0:17:51.440 artificial intelligence. And this story written by Sheren Gafari. It 0:17:51.520 --> 0:17:54.040 is in the new issue of Bloomberg Business Weeek, which 0:17:54.119 --> 0:17:57.120 is out on newstands as we speak on the Bloomberg 0:17:57.200 --> 0:18:00.960 terminal and also at Bloomberg dot com Slash Business Week. 0:18:01.000 --> 0:18:02.840 But it's interesting. He may be back, but there's a 0:18:02.880 --> 0:18:05.840 lot more that he's got to deal with, including governance issues. 0:18:05.880 --> 0:18:08.000 So let's get to it with us. As Rachel Matt's 0:18:08.000 --> 0:18:10.199 AI reporter at Bloomberg News, she is out there on 0:18:10.280 --> 0:18:13.480 zoom in San Francisco, right here in our Bloomberg Interactor 0:18:13.480 --> 0:18:17.600 Brokers studio, Bloomberg business Week Technology editor Joshua Brustin along 0:18:17.600 --> 0:18:19.840 with the editor of Bloomberg Business Week, Jill Weber. As 0:18:19.840 --> 0:18:24.040 we said here in studio, so Joel Sam Altman, winning 0:18:24.080 --> 0:18:27.520 the appened, Yeah, I was like, it ain't over. 0:18:27.960 --> 0:18:30.160 I was like on vacation and I left and he 0:18:30.320 --> 0:18:32.280 was in charge of O an AI. 0:18:33.600 --> 0:18:35.320 Track of I came back. 0:18:35.160 --> 0:18:38.080 And he was still in charge. So like like nothing happened. 0:18:39.040 --> 0:18:40.960 That's not true at all. Of course, a lot of 0:18:41.080 --> 0:18:45.040 stuff changed on the way, and I couldn't stop reading 0:18:45.080 --> 0:18:49.400 about it because it was just one of the most 0:18:49.440 --> 0:18:51.800 incredible stories of the year. And I think we're all 0:18:52.160 --> 0:18:54.160 still waiting to figure out what it all means. 0:18:54.160 --> 0:18:56.400 And I keep saying TVD, TVD. 0:18:56.320 --> 0:18:59.560 SAM and open AI and and all of that. But 0:19:00.119 --> 0:19:02.600 to break it all down, Josh, like, what were the 0:19:02.680 --> 0:19:04.880 stories that we wanted to have in this week's issue 0:19:04.880 --> 0:19:06.560 and what do we know and what do we not 0:19:06.760 --> 0:19:07.199 yet know? 0:19:08.440 --> 0:19:10.479 Well, I think there are two big things that we 0:19:10.480 --> 0:19:12.880 covered in the issue. The first thing is just what's 0:19:12.880 --> 0:19:16.720 going on with Sam Altman. Obviously, he was very surprisingly 0:19:16.760 --> 0:19:21.199 fired and then very quickly brought back as CEO of 0:19:21.240 --> 0:19:23.760 this company, which is right in the middle of all 0:19:23.760 --> 0:19:26.520 the discussion around tech and AI over the course of 0:19:26.520 --> 0:19:29.560 the year, and in some ways he's brought back and 0:19:29.600 --> 0:19:32.199 his reputation has been really bolstered. I mean, anytime that 0:19:32.240 --> 0:19:35.160 you are the boss of a company and ninety five 0:19:35.200 --> 0:19:37.639 percent of the employees say they will quit if you 0:19:37.680 --> 0:19:40.520 are not brought back as boss, that's unusual. I mean, 0:19:40.920 --> 0:19:43.480 I've had jobs before. I feel like it's not always 0:19:43.480 --> 0:19:44.760 how people feel about the boss. 0:19:46.080 --> 0:19:48.880 But there's how much was about the value of the company. 0:19:49.440 --> 0:19:51.880 Oh yeah, for sure, there were there are some financial 0:19:51.960 --> 0:19:55.000 reasons that these employees wanted Sam back. There was there's 0:19:55.000 --> 0:19:57.320 a large tender offer in which they would be given 0:19:57.359 --> 0:20:01.560 a chance to cash out shares. Employe and the investors 0:20:01.560 --> 0:20:04.920 who were part of this deal were getting a little 0:20:04.920 --> 0:20:07.639 bit queasy about going through with it if Sam Almond 0:20:07.720 --> 0:20:10.720