Speaker 1: Bloomberg Audio Studios, Podcasts, radio news.
Speaker 2: This is Bloomberg Business Week, Insight from the reporters and
Speaker 2: editors that bring you America's most trusted business magazine, plus
Speaker 2: global business, finance and tech news. The Bloomberg Business Week
Speaker 2: Podcast with Carol Masser and Tim Stenovek on Bloomberg Radio.
Speaker 3: Well, if you live in and around, or work in
Speaker 3: and around New York City, you probably already know this.
Speaker 3: New York City kicking off its first congestion pricing program
Speaker 3: in the United States, part of an effort to reduce
Speaker 3: the number of vehicles in the world's most traffic clogged
Speaker 3: urban area while also raising money for transit infrastructure. General
Speaker 3: Lieber is the chief executive officer of the Metropolitan Transportation
Speaker 3: Authority are Authority, telling our Bloomberg Surveillance team of Tom
Speaker 3: Keen and Paul Sweeney on Bloomberg Radio earlier this morning,
Speaker 3: it's all about creating the twenty first century city. But
Speaker 3: he also cautioned it's not going to happen overnight.
Speaker 4: It's going to take a little while, so we're going
Speaker 4: to be watching it very closely, day by day, week
Speaker 4: by week. I don't expect to see some dramatic change
Speaker 4: on the first or the second day. Over time, we're
Speaker 4: expecting a ten to twenty percent reduction in traffic. That's
Speaker 4: what we're shooting for. New York is becoming a twenty
Speaker 4: first century city. We just did you know two train
Speaker 4: terminals the last couple of years. La Guardie air a
Speaker 4: total rebuild. It's number one in the country. JFK is
Speaker 4: getting rebuilt. I know your Newark Airport is getting investment.
Speaker 4: This is about being a twenty first century city where
Speaker 4: we don't spend all our time stuck in traffic.
Speaker 5: Well, there you have it. JOHNA.
Speaker 6: Lieber, the chief executive Officer of the Metropolitan Transit Authority
Speaker 6: with the Surveillance Team, earlier today on Bloomberg Radio, who
Speaker 6: also said he anticipates a ten percent to twenty percent
Speaker 6: reduction in New York City traffic over time. Thinking about
Speaker 6: New York City congestion, pricing, and the broader politic, especially
Speaker 6: the future of the Democratic Party, and putting it in
Speaker 6: an opinion column in The New York Times out early
Speaker 6: yesterday morning. Henry Gribbar, journalist and author of Paved Paradise,
Speaker 6: How Parking explains the world hard over, He joins us
Speaker 6: from Cambridge, Massachusetts, Henry. Good to have you back with
Speaker 6: us talk about the relationship between congestion, pricing and democratic politics,
Speaker 6: especially on a day where many Democrats are seeing the
Speaker 6: certification of president like Donald Trump and thinking to themselves, Wow,
Speaker 6: we really got to rethink how we handle ourselves over
Speaker 6: the next few years and what the future of the
Speaker 6: party looks like.
Speaker 7: Right. Sure, Well, when you look at the results of
Speaker 7: the election for November, you can see that some of
Speaker 7: the places that move strongest towards the Republican Party were
Speaker 7: the outer birds of New York City and the suburbs
Speaker 7: of New York City. So this is kind of ground
Speaker 7: zero for figuring out why some Democrats decided not to
Speaker 7: vote or decided to vote for Donald Trump. And I
Speaker 7: think one of the theories that's been in play here
Speaker 7: is that Democrats simply haven't done a good job running
Speaker 7: the places they control, which is to say, big blue
Speaker 7: cities and blue states like New York, like Boston, like Chicago,
Speaker 7: like Los Angeles, San Francisco. Right, And so in that sense,
Speaker 7: this is a pole a pretty bold urban policy gambit
Speaker 7: to show the Democrats have big ideas about how to
Speaker 7: improve these places. And one of the things that struck
Speaker 7: people in particular was the sense of disorder, and congestion
Speaker 7: pricing is nothing if not an attempt to bring order
Speaker 7: to the streets of New York City.
Speaker 3: And we will see ultimately it does bring order to
Speaker 3: New York City. Having said that, Henry, is congestion pricing,
Speaker 3: in your view, a big step toward creating the twenty
Speaker 3: first century city.
Speaker 7: I think one of the things that has been apparent
Speaker 7: in New York over the last five or ten years
Speaker 7: is that the amount of traffic in the central Business
Speaker 7: District is making it really hard for the city to
Speaker 7: fulfill its basic functions, to say nothing of its reputation
Speaker 7: as a global city. I mean, a building catches on fire,
Speaker 7: somebody needs an ambulance, somebody needs to make a delivery.
Speaker 7: Nobody knows how long those things are going to take
Speaker 7: because the traffic has become so bad. So I think
Speaker 7: when Lieber talks about the idea of a twenty first
Speaker 7: century city, what he's saying is we need to have
Speaker 7: a kind of liability about the ease of doing business
Speaker 7: and going about basic tasks here. And that's what congestion
Speaker 7: pricing is very much designed to do. In addition, of
Speaker 7: course to raising money for the transit system.
Speaker 3: All right, So going back to the kind of political
Speaker 3: aspect of this or what this means for the future
Speaker 3: of the Democratic Party, Henry, So, how does if New
Speaker 3: York City officials and the city kind of get it
Speaker 3: right in quotation marks if you will, how does it
Speaker 3: really kind of help everyone along the high end of
Speaker 3: the economy the lower end of the New York City economy.
Speaker 7: Sure well, I think the goals of congestion pricing are
Speaker 7: pretty clear about that that there's going to be cleaner air,
Speaker 7: there's going to be faster commute, it's going to be
Speaker 7: easier to do business, and there's going to be more
Speaker 7: money for the mass transit system that of course moves
Speaker 7: the vast majority of people in and out of Manhattan
Speaker 7: every day. The number of people drive into Manhattan is
Speaker 7: a small fraction of that. But I think the question
Speaker 7: about how to ensure its popularity among the constituents in
Speaker 7: New York City and especially in the suburbs of New
Speaker 7: York City, that's the difficult question for the Governor of
Speaker 7: New York at the local right. Because she's up for
Speaker 7: reelection next year, this has become a subject of intense
Speaker 7: political debate since she decided to you know, open up
Speaker 7: the open up the box, and tinker with the pricing,
Speaker 7: tinker with the implementation date. And so I think what
Speaker 7: she needs to do is she needs to show that
Speaker 7: this works. And the challenge is blue cities, right, we
Speaker 7: know this. They move slowly and they build things at
Speaker 7: high cost. And so when you implement a program like this,
Speaker 7: people expect to see results in exchange for the money
Speaker 7: that's being taken at those tolls. And the challenge is,
Speaker 7: how can we come up with something in New York
Speaker 7: to show results from congestion pricing really quickly? Because if
Speaker 7: the streets are you know, the traffic is down by
Speaker 7: five or six percent, that's not necessarily something that people
Speaker 7: are going to be able to point their finger at.
Speaker 7: I mean, how do you know, how do you even
Speaker 7: register that kind of decline in traffic without having some
Speaker 7: kind of infrastructural improvement to show for it. And I
Speaker 7: think that's what the city needs to accomplish.
Speaker 6: Now, will she be given the chance to actually show
Speaker 6: the improvement or any improvement, given that Donald Trump has
Speaker 6: opposed it and has vowed to get rid of it.
Speaker 6: This was put in a place before he takes office,
Speaker 6: Does he have the power to get rid of it.
Speaker 7: I don't think he does have the power to get
Speaker 7: rid of it overnight. I mean, the federal role in
Speaker 7: this was certifying the environmental review, and that part is done,
Speaker 7: So I'm not sure that the federal government can go
Speaker 7: in and rescind the approval that they've already given for
Speaker 7: the program to go forward. Of course, there are several
Speaker 7: lawsuits pending, so there's a lot of uncertainty about this proposal.
Speaker 7: But I would just say as far as it's supporters
Speaker 7: or concerned, they have somewhat rested on the assumption that
Speaker 7: congestion pricing will be popular because it has been popular
Speaker 7: in other places that have implemented it after time, Right,
Speaker 7: And that depends on showing visible improvement, on making real
Speaker 7: the infrastructure that people expect to use and receive in
Speaker 7: exchange for that money that's being taken. And they can
Speaker 7: do that right, and they can do that overnight by
Speaker 7: creating bus lanes, pedestrians spaded actually emergency vehicle lanes, right, Like,
Speaker 7: make permanent the improvement that you see before the sticker
Speaker 7: shock fades and drivers return and realize that in fact,
Speaker 7: if a lot faster to drive Manhattan.
Speaker 3: Henry, last question, just just to kind of the payoff
Speaker 3: of your op ed in the New York Times. You
Speaker 3: say that people support the policies and the politicians that
Speaker 3: they get something out of this concept of deliverism.
Speaker 4: Right.
Speaker 3: People, if they feel like they're getting something out of it,
Speaker 3: they're going to be supportive, and that's what shows political
Speaker 3: change or political sway, and just got about a.
Speaker 7: Minute here, Yeah, that's right, And I think the premise
Speaker 7: of this, right is that these tools are being done
Speaker 7: in exchange for funding mass transit in around New York City.
Speaker 7: And the MTA has a list of improvements such as
Speaker 7: elevators to make subway stations accessible for people with strollers
Speaker 7: and wheelchairs, et cetera. But that stuff takes time, right,
Speaker 7: and it costs way more money than it should, as
Speaker 7: we know, and so reforming the construction process would help.
Speaker 7: But I think in the meantime, the low hanging fruit
Speaker 7: here is to create improvements for the vast majority of
Speaker 7: the people who travel on the surface streets, which is
Speaker 7: the people who travel by bus, right, And that's that's
Speaker 7: sort of the opportunity that they have to make these
Speaker 7: improvements visible immediately before the midterm elections come around, and
Speaker 7: this becomes the subject of every gubernatorial debate.
Speaker 3: Did you say circus streets, surface streets a surface, Okay,
Speaker 3: because sometimes I feel like a circus and that kind
Speaker 3: of I could I could jump on that one as well. Hey, Henry,
Speaker 3: great timing, and really appreciate you coming on and spending
Speaker 3: your view. Henry Goobar, journalist and author Paid Paradise, How
Speaker 3: parking explains the world hard over.
Speaker 6: So what are you getting a lot of texts about
Speaker 6: people wondering about congestion pricing. I'm getting all these texts like, hey,
Speaker 6: can you see a difference? Can you see a difference?
Speaker 6: I'm inside.
Speaker 3: Yeah, I don't know, not yet, I don't know.
Speaker 1: You're listening to the Bloomberg Business Week podcast. Catch us
Speaker 1: live weekday afternoons from two to five these during listen
Speaker 1: on Apple Play and Android Auto with the Bloomberg Business app,
Speaker 1: or watch us live on YouTube.
Speaker 6: Well, the company closed out last year with a stock
Speaker 6: price increase of eight hundred percent. No, we are not
Speaker 6: talking about any Ai Darling here. It's a biomedical services company,
Speaker 6: miso Blast, which develops drugs for cardiovascular disease on cology, hematology,
Speaker 6: and more. The company based in Australia, but it's got
Speaker 6: a market cap of about two point two billion dollars.
Speaker 6: Shares of the company's ADRs, Carol that trade in the
Speaker 6: US are aut more than fifty percent since mid December
Speaker 6: after the company's Ryan sil got FDA OK for pediatric
Speaker 6: graft versus host.
Speaker 3: It's a big development. Doctor Sylvie Etsci is chief executive
Speaker 3: officer and managing director at Misoblast and he joins us
Speaker 3: in our Bloomberg Interactive Brokers studio. So nice to have
Speaker 3: you here. Welcome, Welcome. You founded the company back in
Speaker 3: two thousand and four, so over twenty years ago. Tell
Speaker 3: us a little bit about this journey and where we
Speaker 3: are today and how significant this development is for you.
Speaker 5: Thanks for having me. Look.
Speaker 8: Royonsal is the first ever FDA approved adult cell therapy
Speaker 8: regenera of medicine cell therapy in the United States. It
Speaker 8: has taken us twenty years to get to this point,
Speaker 8: but that's just how long it takes to develop and
Speaker 8: commercialize a brand new medicines in a new class of therapies.
Speaker 8: It's the first adult stem cell product off the shelf.
Speaker 8: It's been approved for children with a devastating complication called
Speaker 8: Graphs host disease, which is a complication that occurs about
Speaker 8: fifty percent of children who have a boma transplant after
Speaker 8: they've been cured of their leukemia, and as many as
Speaker 8: seventy to ninety percent of children die from this disease.
Speaker 8: There are no other approved therapies, and in our face retrial,
Speaker 8: we showed that we had seventy percent achieved a response
Speaker 8: rate as early as day twenty eight and overall survival
Speaker 8: over a five year period seen in fifty percent of children,
Speaker 8: which is a remarkable outcome, meaning that about.
Speaker 5: Fifty percent of children are effectively cured.
Speaker 3: Wow, you know this is going to say so off
Speaker 3: taste a little bit because when you talk about market
Speaker 3: size of a potential drug or development, if you have
Speaker 3: a child who has this, having one as a market
Speaker 3: size is enough right to have a development like this
Speaker 3: because it's a game changer potentially. But having said that,
Speaker 3: you know you are a publicly held company, you're a
Speaker 3: small cap company or a smaller market cap company, and
Speaker 3: I do wonder about the run up what is the
Speaker 3: potential market size for a drug, this particular drug.
Speaker 8: So this is the first indication for this particular drug.
Speaker 8: It has many applications and we will be developing it
Speaker 8: for other adult indications. Fundamentally, it addresses major inflammatory.
Speaker 3: Diseases, which is so many diseases.
Speaker 8: Many diseases right, inflammatory lung disease, inflammatory vowel disease like chrohns,
Speaker 8: and ulstrip of colitis.
Speaker 5: And that's adults.
Speaker 8: There are many pediatric inflammatory diseases that are not well
Speaker 8: addressed either. So this is the first of its kind.
Speaker 8: It's taken a number of years. We've now demonstrated that
Speaker 8: we understand what the FDA is looking for in terms
Speaker 8: of regulatory milestones, in terms of manufacturing, in terms of consistency,
Speaker 8: in terms of reproducibility, so that we can now show
Speaker 8: that every vial that goes out is the same as
Speaker 8: the one before. And so we have a product that
Speaker 8: we can show that it's effective and it's safe, and
Speaker 8: it's reproducible, and I think that has a fundamental value
Speaker 8: proposition and that's why we're the first to have been approved.
Speaker 6: So how does it work? What were you able to find?
Speaker 6: What did you and the team discover that makes this work.
Speaker 8: So inflammation is caused by many path pathways, of the
Speaker 8: immune system, and traditional medicines small molecules and monoclonal antibodies
Speaker 8: target individual pathways, and that's why they're not really very
Speaker 8: effective at turning off severe inflammation. And COVID Odds, for example,
Speaker 8: was an example of severe inflammametry cytokine storm. And what
Speaker 8: we've shown is that our cells, which are living packages
Speaker 8: of multiple factors that orchestrate an anti inflammatory response, are
Speaker 8: able to turn off a multi pronged immune response in
Speaker 8: a way that small molecules cannot. And that's why we
Speaker 8: achieved such a significant outcome in these children who otherwise have.
Speaker 5: A fatal disorder.
Speaker 8: But that is the mechanism by which these cells generally
Speaker 8: will act in these other diseases.
Speaker 5: So it's a tip of the iceberg for us.
Speaker 8: This product is of course it's life saving, but it's
Speaker 8: also a has a halo effect because it demonstrates that
Speaker 8: the FDA is working with us, understands that we understand
Speaker 8: the mechanism and that we can rise to a threshold
Speaker 8: as a benchmark if you like, for how cell therapies
Speaker 8: need to be developed, manufactured, and ultimately brought to the market.
Speaker 8: So the market opportunities are very large you mentioned earlier
Speaker 8: that so easily.
Speaker 3: You are assuming or guessing that it's going to be
Speaker 3: a billion dollar plus drug.
Speaker 5: For this indication. Yes, definitely, just for this indication, just
Speaker 5: for this indication.
Speaker 8: But we have Phase three assets now that either have
Speaker 8: completed or incompletion for kativascuar disease and inflammatory back pain,
Speaker 8: and those have multi billion dollar potential.
Speaker 3: It's interesting because I actually have a sister who's been involved.
Speaker 3: She's a nurse and she's an engineer, and she's been
Speaker 3: involved in the world of cancer for a long time,
Speaker 3: and increasingly the conversations I have with her is, you know,
Speaker 3: how we are finding out that inflammation causes so much,
Speaker 3: whether it's cancer or otherwise, right, so much that ails us.
Speaker 3: Having said that, I'm curious when you're dealing with stem cells,
Speaker 3: any boddy stem cells are used to create this, like,
Speaker 3: how is it actually made? And I'm just curious, does
Speaker 3: each drug have to be very specific to the individual
Speaker 3: using their own stem cells?
Speaker 8: This is a very important question that you're wise now. Actually,
Speaker 8: these are unique type of cells they called the miss
Speaker 8: ankam or stromal cells that have a unique property that
Speaker 8: they're not recognized as foreign when they're treated from one
Speaker 8: individual to another, and they have the other very important
Speaker 8: characteristics that can be expanded in very large numbers through
Speaker 8: the culture manufacturing process. So we start with a tiny
Speaker 8: number of very highly purified concentrated cells from a given
Speaker 8: donor an FDA approved donor screening program. Would that be
Speaker 8: an embryo, No, no, no, these are all adults out.
Speaker 8: This is from young healthy, eighteen to twenty four year
Speaker 8: old adults screened. We take a little bit of their
Speaker 8: bone marrow and isolate these cells, purify them, and then
Speaker 8: under GMP good manufacturing Practice facilities, we manufacture them. We
Speaker 8: scale them up, and we can we can make thousands
Speaker 8: of therapeutic doses from one donation. They're frozen, their cry preserved,
Speaker 8: and as through a supply chain, we we ship them
Speaker 8: from the manufacturing site to to a distributor that that
Speaker 8: warehouses them effectively at at minus one hundred and forty
Speaker 8: degrees and they shipped to the hospital and the rejection
Speaker 8: there's no there's no rejection is there's there's minimal side
Speaker 8: effects if any, very safe, very effective, and they they're
Speaker 8: an industrial way of making therapeutic stem cells in a
Speaker 8: vial where every vial is exactly the same as the
Speaker 8: vial before, and we can we can show it's the same,
Speaker 8: it's potent. We have potency essays that that allow us
Speaker 8: to quality control every every vial that goes out the door.
Speaker 5: How do you find the donors, young healthy volunteers. We
Speaker 5: screen them for any any potential Is there.
Speaker 6: Is there any sort of when you're doing this for
Speaker 6: a for profit company, Is there any sort of compensation
Speaker 6: that they get or is that not allowed?
Speaker 8: No, it is allowed. It's totally allowed, and they do
Speaker 8: get compensations. They're fairly compensated, no different than many other
Speaker 8: blood products that are also donated, plasma derived products, et cetera.
Speaker 3: What is this drove cast.
Speaker 8: Well, you know, we only got approval a couple of
Speaker 8: weeks ago, so we're right in the process of working
Speaker 8: with all the rest.
Speaker 3: I'm sure you have looked at this.
Speaker 5: Yeah.
Speaker 8: Look, the way to look at this is there are
Speaker 8: a number of gene therapies that have recently been approved.
Speaker 8: Those gene therapies give you at best fifty percent cure rates.
Speaker 8: We've now done five years survival studies and the children
Speaker 8: from our face retroth then we get about a fifty
Speaker 8: percent complete response and survival out to five years, which
Speaker 8: effectively means currerates. So I would say that we're in
Speaker 8: the same sort of ballpark as the gene therapy.
Speaker 3: Which is why this is no judgment.
Speaker 5: We have no idea.
Speaker 3: It's liked to understand.
Speaker 8: I'll look at this in a different way. We save
Speaker 8: hospitals about a million dollars in effectiveness of what they
Speaker 8: have to spend on patients in the intensive care unit.
Speaker 8: And that's, you know, putting it in a very calculated way.
Speaker 8: It's separately from the fact that we're saving children's lives.
Speaker 8: So when you look at it that way, I think
Speaker 8: if you save a million dollars in healthcare, then you
Speaker 8: can justify pricing in that order of.
Speaker 6: Magnize around a round a million dollars.
Speaker 8: We haven't yet gotten those prices, but we're in discussions
Speaker 8: with various payers.
Speaker 3: Because gene therapy treatments can cost between hundreds of thousands
Speaker 3: of dollars and several million dollars per treatment. This isn't judgy,
Speaker 3: it's just like trying to understand the marketplace. And again,
Speaker 3: if I have a child and.
Speaker 6: It's the cost doesn't matter, it doesn't matter.
Speaker 8: I would expect this all costs incurred for this treatment
Speaker 8: for this disease are going to be reimbursed by all
Speaker 8: the major.
Speaker 5: Healthcare right absolutely.
Speaker 6: How do you know that?
Speaker 8: We've had already multiple conversations with all the major insurers
Speaker 8: and we've been welcomed. The data supports what I'm saying.
Speaker 6: FDA approval obviously a huge deal. But what about outside
Speaker 6: the US.
Speaker 5: Well, you already have a partnership in Japan.
Speaker 8: This similar product to this has been already in use
Speaker 8: for the last five years. It's safe, it's effective, it
Speaker 8: generates a sustainable revenue stream. Beyond Japan, we will be
Speaker 8: looking at Europe in due course, but our primary focus
Speaker 8: is the US without without doubt.
Speaker 3: Just real quickly, So I don't know, take me six months,
Speaker 3: twelve months, three years, what might this replace as a
Speaker 3: current treatment for whatever ailments?
Speaker 6: Like?
Speaker 3: How are you thinking about it?
Speaker 5: So for this disease, gevisual are there are no approved.
Speaker 3: Treatments for each other as you branch out.
Speaker 8: So other two big areas that we're focusing on our
Speaker 8: inflammatory disease and heart failure. OK, And we've completed a
Speaker 8: large face retrial of more than five hundred patients published
Speaker 8: in some major Kadiovasca journals, and what we've shown is
Speaker 8: surprisingly an eighty to ninety percent reduction over a three
Speaker 8: year period in heart attacks and strokes and mortality in
Speaker 8: patients who have the highest risk for those actors, on
Speaker 8: top of already taking all the various drugs that are
Speaker 8: available for heart failure. In addition, we've also recently published
Speaker 8: the study and Children with Congenital Heart Disease, where a
Speaker 8: single injection of ourselves into the left entricle has has
Speaker 8: almost doubled the size of the left ventricle, which allows
Speaker 8: the surgeon a whole different approach to an outcome.
Speaker 3: Stay in touch. We'd love to hear more.
Speaker 5: Thank you very for having me.
Speaker 3: Doctor Sylvie Etesk, chief executive Officer Managing director of Miso
Speaker 3: Blast joining us right here in studios. You are listening
Speaker 3: to Bloomberg Business Week.
Speaker 2: You are listening to the Bloomberg Business Week podcast. Catch
Speaker 2: us live weekday afternoons from two to five pm Eastern
Speaker 2: Listen on Apple CarPlay and the Android Auto with the
Speaker 2: Bloomberg Business app, or watch us live on YouTube.
Speaker 7: Marcle, I'll bet you let me drive.
Speaker 6: Oh no, no, no, no, this is not a toy, honey.
Speaker 3: Please gravel. Great, I want to drive.
Speaker 5: A good question.
Speaker 2: This is the drive to the clothes now plunks for
Speaker 2: music Well Briar, Jon and Don on Bloomberg Radio.
Speaker 3: All right, TikTok, everybody, eighteen minutes to go until we
Speaker 3: wrap up the Monday trade. Definitely off our best levels
Speaker 3: of the session. In fact, the doubt a little bit
Speaker 3: in the red here, but you're still looking at a
Speaker 3: gain of about more than two hundred points. I heard
Speaker 3: that from Charlie and Bill Maloney. Up about one percent
Speaker 3: on that Nasdaq one hundred, just up about half a
Speaker 3: percent on the S and P five hundred. But there
Speaker 3: is a lot coming out investors, and a lot more
Speaker 3: to come this week in terms of economic news. Fed minutes,
Speaker 3: So strap in everybody.
Speaker 6: I mean, we started this first Monday of twenty twenty
Speaker 6: five with quite a bit of news. President like Donald
Speaker 6: Trump denying that Washington Post report that his aids are
Speaker 6: considering narrowing as tariff plan so that it would only
Speaker 6: apply to limited, specific critical imports. Carol Our next guest,
Speaker 6: says that tariffs from China could pose a big risk
Speaker 6: to the economy if they're actually implemented.
Speaker 3: No, it's a really important point time for our drive
Speaker 3: to the closed guest with us as Tony Roth, he's
Speaker 3: chief investment officer at Wilmington Trust and he joins us
Speaker 3: from the greater Philadelphia area, of course, in the great
Speaker 3: state of Pennsylvania. Hey, Tony, good to have you here
Speaker 3: with us. Timely guest to have on since we've been
Speaker 3: so focused about what may or may not be when
Speaker 3: it comes to the presidle x tariff plans. Talked to
Speaker 3: us though, specifically about tariffs from China and the risk
Speaker 3: to the economy.
Speaker 9: Well, if we have an amount of incremental tariffs heral
Speaker 9: that equaled the amount that we had with the first
Speaker 9: Trunk presidency, it would be about fifty billion dollars of
Speaker 9: incremental revenue. But if we had an amount, and that's
Speaker 9: not a lot, by the way, and it's not a
Speaker 9: lot of tariffs. On the other hand, if we had
Speaker 9: an amount of tariffs that was consistent with what the
Speaker 9: President has described, we would see total imports from China
Speaker 9: drop from currently fourteen percent of total imports to probably
Speaker 9: over course of his presidency, to five percent of total imports,
Speaker 9: and we would see a very significant increase in CPI
Speaker 9: over a one year basis. It would not constitute structural inflation,
Speaker 9: so it would happened one time as these tariffs took hold.
Speaker 9: When they took hold, it probably take some time for
Speaker 9: tariffs of that significance to take hold. But because those
Speaker 9: tariffs would be so large, if in fact they happened
Speaker 9: along the lines of the former president has described, we
Speaker 9: would see a pretty significant impact to GDP, to the
Speaker 9: point where we could even have a recession. Because our
Speaker 9: baseline is for only around one point seven one point
Speaker 9: eight percent growth for this year, which is lower than
Speaker 9: the overall Street. So there's not as much margin for
Speaker 9: the economy in our view as the Street thinks. And
Speaker 9: if in fact the President goes that hard on these tariffs,
Speaker 9: you could really see that inflationary impact on the economy,
Speaker 9: on consumers, and you could see the economy slide into recession.
Speaker 6: We've spoken to some guests over the past couple of
Speaker 6: months after the president, one in November who reminded us
Speaker 6: that the tariffs that the former president wanted to put
Speaker 6: into place during his first term when he said it,
Speaker 6: the tariffs were implemented, i e. What he says goes
Speaker 6: when it comes to tariffs is the market taking into
Speaker 6: account the full risk of tariffs.
Speaker 9: Here, Clearly they're not taking the full risk. If the
Speaker 9: measure is what he's described in this election, which is
Speaker 9: to say, one hundred percent tariffs on China up to
Speaker 9: twenty five percent tariffs on most of our other trading partners,
Speaker 9: that's not remotely taken into account. I think that the
Speaker 9: dynamic that we saw, however, in the market today is
Speaker 9: a microcosm for what we're going to experience over the
Speaker 9: course of at least the first half of the year,
Speaker 9: which is to say, you're going to see this president
Speaker 9: act as a negotiator. He's not going to want to
Speaker 9: give up any of his leverage. And so when stories
Speaker 9: come out that suggests perhaps in practice he recognizes the
Speaker 9: risk to economic growth and inflation that tariffs pose, he's
Speaker 9: going to push back hard on that, and that's going
Speaker 9: to cause volatility in the markets, much like we saw today.
Speaker 9: And so while the markets are not pricing in the
Speaker 9: degree of tariffs that he's talked about, probably aptly so,
Speaker 9: because the degree of tariffs that he's talked about this
Speaker 9: time around are so much greater than they were the
Speaker 9: first term, is very unlikely that he would in fact
Speaker 9: move to implement tariffs of that scale.
Speaker 3: However, it is also an individual, the president elect, that
Speaker 3: watches the financial markets pretty closely, and he doesn't necessarily,
Speaker 3: or at least many have told us, doesn't want to
Speaker 3: see them fall apart on his watch. So how might
Speaker 3: that be a bit of a checks and balances in
Speaker 3: terms of Trump policy. It's not like he's looking to
Speaker 3: get re elected at the end of this term.
Speaker 9: Yeah, that's a really great point. And what I would
Speaker 9: say is I would keep a very close eye in
Speaker 9: the ten year yield because right now we're around four
Speaker 9: to sixty maybe a little bit less at this time
Speaker 9: of day. Were over four sixty yearlier today. But the
Speaker 9: ten year is really a great proxy for how the
Speaker 9: markets are viewing the overall program economic program from this
Speaker 9: new administration. And if we move to a level that
Speaker 9: starts getting into the four seventy five to five percent range,
Speaker 9: that's going to really scare this president, and it's going
Speaker 9: to really cause the president to pull back on whatever
Speaker 9: it is that may be causing bond yields to rise
Speaker 9: in that direction, likely probably an excess of fiscal spending
Speaker 9: and increasing the deficit, so on and so forth. The
Speaker 9: bond Midgetlantis come out and onward from there, it's going
Speaker 9: to be inflationary and it's going to cause the FED
Speaker 9: to non in fact be able to look to lower
Speaker 9: rage further from here. And so I think that yes,
Speaker 9: he's going to be sensitive to the stock market, but
Speaker 9: he's also going to be a lot more sensitive to
Speaker 9: the bond market than he has been in the past
Speaker 9: as well, given that we have this scenario now where
Speaker 9: if the long term bond goes much above where it
Speaker 9: is today, you're going to have a crushing impact on
Speaker 9: the deficit.
Speaker 3: And you are definitely seeing a buifurcation between like the
Speaker 3: two and the ten right now. In terms of expectations,
Speaker 3: I just want to kind of follow up. While the
Speaker 3: president elect doesn't necessarily look to get reelected, folks in
Speaker 3: Congress will look to get re elected and so they're
Speaker 3: not going to want policies that maybe, you know, kill
Speaker 3: markets or kill the economy. So it's just something you
Speaker 3: know to impress to keep on.
Speaker 6: Our That's a good point, hey, Tony. One thing I
Speaker 6: didn't hear you say in terms of risks was anything
Speaker 6: related to mass deportations or immigration policy and sort of
Speaker 6: what that does or what that.
Speaker 5: Could do to the economy.
Speaker 6: How are you looking at that?
Speaker 5: Yeah, it's a great point.
Speaker 9: In fact, we just came out with our we're coming
Speaker 9: out with our outlook for the year tomorrow in fact
Speaker 9: called investing in a shoot and Ladder's economy, and the
Speaker 9: basic idea is that we're in an environment where we're
Speaker 9: moving gradually upwards. We do have a baseline forecast of
Speaker 9: around one or three quarter percent out for growth, but
Speaker 9: there are these ideas of these long shoots you could
Speaker 9: you could you could hit if you if you get
Speaker 9: these big tariffs, say that the shoot for the immigration
Speaker 9: scenario is probably not as great because we have a
Speaker 9: baseline forecast in any event, to see unemployment move upwards
Speaker 9: this year at around four point seven percent, and immigration
Speaker 9: is going to take notwithstanding all of the noise around
Speaker 9: immigrating millions of people, deplorting millions of people, it's going
Speaker 9: to take some time for that to all take effects.
Speaker 9: And we're in an environment right now where the labor
Speaker 9: market is not doing so great. So I don't think
Speaker 9: that the immigration for twenty twenty five anyway, or the
Speaker 9: deportation issues are going to present the biggest shoot. I
Speaker 9: think the biggest shoot is really going to be around
Speaker 9: the terrif issue that we've already covered, although I certainly
Speaker 9: would keep an eye on that deportation issue as we
Speaker 9: get into next as we get closer to next year,
Speaker 9: and as we get into potentially a stronger economic cycle.
Speaker 5: Again.
Speaker 3: No, you're right, and there's a lot of employers who
Speaker 3: say we need these workers. I'm going to leave with there, Tony.
Speaker 3: Thank you so much. Tony Roth, Chief Investment Officer at
Speaker 3: Wilmington Trust.
Speaker 2: This is the Bloomberg Business Week podcast, available on Apple, Spotify,
Speaker 2: and anywhere else you get your podcasts. Listen live weekday
Speaker 2: afternoons from two to five pm Eastern on Bloomberg dot com,
Speaker 2: the iHeartRadio app, tune In, and the Bloomberg Business App.
Speaker 2: You can also watch us live every weekday on YouTube
Speaker 2: and always on the Bloomberg terminal.