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Speaker 1: or watch us live on YouTube.

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Speaker 2: So this is about either Lily, it is buying another

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Speaker 2: company called hang On, let me get my notes.

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Speaker 3: Thank you.

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Speaker 2: This is why I love Paul Morphic parent. It's going

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Speaker 2: to help your gi track, which everybody really needs. Let's

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Speaker 2: be honest. Sam Zelli, Bloomberg Intelligence, Director of Research for

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Speaker 2: Global Industries and Senior Pharmaceuticals, joins us from London.

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Speaker 3: Hey Sam, what is Morphic? Do we like this deal?

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Speaker 4: What are your thoughts?

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Speaker 5: Yeah, so, Alex, thanks for having me back on it's

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Speaker 5: been a little while. So this deal is about adding

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Speaker 5: to their immunology franchise. Of course, everybody knows Lily for

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Speaker 5: the endless thing headlines that are related to GLP ones

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Speaker 5: and obesity and cancer. Today we have apparently ten cancers

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Speaker 5: that are not cured, but risk is reduced with those

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Speaker 5: types of drugs. But the reality is there's a lot

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Speaker 5: more to this company before the GLP one business ballooned

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Speaker 5: with regards to obesity, and one of the areas there

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Speaker 5: in is immunology or otherwise known as immunology and inflammation

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Speaker 5: or inflammation and immunology I and I and I and

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Speaker 5: I is also a very attractive area because these are

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Speaker 5: areas where we all have issues with arthritissoriasis, Crow's disease,

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Speaker 5: if elamentary bowel disease.

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Speaker 6: All these things are stuff that we have been suffering

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Speaker 6: from for years.

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Speaker 5: Obesity probably increases their risk too, so and there've been

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Speaker 5: a very active company in that space with three drugs

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Speaker 5: four drugs on the market already and they've been doing

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Speaker 5: deals adding to it.

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Speaker 7: SAM three point two billion dollars is not a big

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Speaker 7: big deal for Lily, But is this typical of what

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Speaker 7: we see at a big pharma companies in terms of

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Speaker 7: if they see a therapeutic or just a piece of

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Speaker 7: science as interesting to them, it's better to buy than

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Speaker 7: develop internally.

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Speaker 5: Yeah, So I would say they're around thirty to forty

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Speaker 5: percent of pharmaceutical companies. Pipelines comes from this type of interaction,

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Speaker 5: either at.

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Speaker 6: An M and a deal I e.

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Speaker 5: Bought the whole thing lock Stock and Barrel, or I

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Speaker 5: license a specific product in this case.

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Speaker 6: So I'm looking at Lily. We have a database.

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Speaker 5: Of course, we have the MAA function in the Bloomberg terminal,

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Speaker 5: but we've taken that and dissected a little bit more

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Speaker 5: and added on the bi dashboard and detail about the

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Speaker 5: types of drugs that are in.

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Speaker 6: Those deals, and MNA is one of that.

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Speaker 5: So I'm looking at twelve deals that Lily has done

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Speaker 5: in the past five years, and I'd say that only

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Speaker 5: like three or three of them are in the cardiovascular

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Speaker 5: metabolic space. I either diabetes OBS, the rest are oncology CNS,

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Speaker 5: and of course two are inflammation and immunology, and this

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Speaker 5: is one of them. So now it becomes three, right,

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Speaker 5: because that's not quite updated yet. And they're all in

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Speaker 5: the sort of range eight billion for locksow one point

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Speaker 5: one eight hundred and eighty million, two point four billion.

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Speaker 5: So we've got a good bunch of deals, and they're

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Speaker 5: all in that level which the Farmer company is called

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Speaker 5: Bolton Acquisitions, and that's their sweet spot of M and A.

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Speaker 4: See Alex.

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Speaker 7: Everybody thinks that the smart people in bi pharma healthcare

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Speaker 7: researcher guys people like Sam Fazelliot.

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Speaker 4: That's not really the case. It's this young lady named.

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Speaker 7: Grace and she's in Princeton and she maintains a world

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Speaker 7: class model that tracks the millions of drugs that are

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Speaker 7: in various stages of you know, reviews around the world,

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Speaker 7: and clients put huge value on that work that she does,

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Speaker 7: and that allows Sam and some of the other anamals

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Speaker 7: to go out there and talk about these drugs.

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Speaker 4: So Grace a great job.

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Speaker 2: As always love Paul shout out that was awesome, so true.

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Speaker 5: And he needs to This particular shout out goes to

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Speaker 5: another great lady who's called Mila, Mila Bankoskaya, who's also

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Speaker 5: part of our team.

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Speaker 6: But nobody matches up to Grace.

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Speaker 5: Of course, Grace has been in the Catalyst calendar that

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Speaker 5: year and I don't match up to her.

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Speaker 6: Nobody matches up to her.

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Speaker 2: Okay, So based on that, what are some of the

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Speaker 2: cool things that are out there, like cool drugs that

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Speaker 2: we should be talking about. We never get to talk

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Speaker 2: to you when there's no crisis, really, so what are

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Speaker 2: some cool things out there?

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Speaker 6: Yeah?

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Speaker 5: So obviously the OBC space, there's there's breakneck evolution of

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Speaker 5: different modalities being combined trying to make it much more

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Speaker 5: focused on fat, preserving some muscle, making it work better

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Speaker 5: for the liver part.

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Speaker 6: Of the disease.

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Speaker 5: And that's all going to come to fruition over the

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Speaker 5: next two or three years. On colog years, I've been

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Speaker 5: saying all along is seeing amazing developments.

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Speaker 6: You know, we're developing.

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Speaker 5: These disease hubs, as you might know, and just for

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Speaker 5: lung cancer, we're developing almost thirteen different subgroupings of lung cancer.

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Speaker 5: And it just shows you where treatment of these diseases

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Speaker 5: have got to. And the same applies in inflammation and imminology,

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Speaker 5: and in that space we're dealing with technology that is

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Speaker 5: really cool. This particular acquisition and the one that they

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Speaker 5: recently did its almost exactly a year ago, called dice therapeutics,

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Speaker 5: are all about dealing with proteins that are very intractable

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Speaker 5: to inhibition and normal drug discovery, and these two companies

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Speaker 5: have developed oral drugs small molecules that interact with these targets.

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Speaker 6: And the beauty of this, of course is do you

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Speaker 6: remember all that worry.

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Speaker 5: That when people were having about what happens with the

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Speaker 5: IRA inflation reduction acts and its impact on small molecule development,

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Speaker 5: because it specifically puts them out, saying, after nine years,

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Speaker 5: irrespective of your patterns, we're.

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Speaker 6: Going to come back in and negotiate prices.

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Speaker 5: Well, here's Lily who's done two deals that are specifically

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Speaker 5: small molecule deals. When the biology is interesting, when the

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Speaker 5: drugs are interesting, I think the deals happen. Now, whether

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Speaker 5: these will get to market or not, who knows. I mean,

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Speaker 5: farmer isn't infallible when it comes to these deals. But

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Speaker 5: this shows that when they have they see something interesting,

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Speaker 5: they go for it, irrespective of small or big.

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Speaker 7: Molecule sam People for better or worse, are living longer

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Speaker 7: and longer lives, which makes every family it seems like

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Speaker 7: it's dealing with some type of dementia, Alzheimer's and things

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Speaker 7: like that. How does the farmer, the farmer industry, healthcare adustry,

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Speaker 7: how do they think about that? How are they kind

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Speaker 7: of getting ready for that?

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Speaker 6: Yeah, so you know the beginnings. Can I just give

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Speaker 6: you an example.

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Speaker 5: An analogue for Alzheimer's disease is obesity. We've been at

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Speaker 5: this obesity game for a year, ten years, fifteen years,

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Speaker 5: twenty years. I remember one of the old drugs from

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Speaker 5: Rush Pharmaceuticals that are that's still around called ally that

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Speaker 5: reduced the amount of fat.

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Speaker 6: You absorb as you eat.

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Speaker 5: Of course, what does that create fat left in your

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Speaker 5: stomach lubrication. I'm going to leave the rest of it

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Speaker 5: your imagination, right, So, that was the idea that was

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Speaker 5: going to be helping you lose weight, maybe three percent,

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Speaker 5: four percent, five percent. And then it took a lot

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Speaker 5: of time before somebody started discovering these things saying, oh gosh,

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Speaker 5: we can get to fifteen twenty percent. If you're a

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Speaker 5: two hundred and fifty pounds person, we can help you

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Speaker 5: drop seventy pounds. That happened in obesity, I'm hopeful that

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Speaker 5: the same happens in dementia and neurodegeneratic diseases.

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Speaker 6: It's very much tougher.

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Speaker 5: I mean, all biology is tough, but CNS is tougher

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Speaker 5: because it's a black box. It's a disease that evolves

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Speaker 5: over twenty years, thirty years, and by the time you

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Speaker 5: your disease manifests, you've already had a lot of organic

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Speaker 5: change to your brain. But there is the first products

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Speaker 5: that are approved. With the first products approved, you do

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Speaker 5: get a bit more incentive to develop the next one.

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Speaker 5: Go better, Go another mile further, and that's where I'm

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Speaker 5: hoping at the very least in Alzheimer's disease and Parkinson's

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Speaker 5: we're going to be going there.

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Speaker 6: Other diseases are a bit tougher. Still, do you.

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Speaker 2: Think that we'll ever have a preventative drug for Alzheimer's

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Speaker 2: or just a treatment.

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Speaker 5: To delay well, the I think it's very tough to

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Speaker 5: prevent because how do you know who's going to get it?

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Speaker 5: That means you and I especially I, because you guys

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Speaker 5: are much longer than me, younger than me. Paul is

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Speaker 5: he's just coming out of school, right, So my thing

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Speaker 5: is that at what point do you start taking these drugs?

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Speaker 8: Right?

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Speaker 6: How do I do that? So that becomes difficult? Who

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Speaker 6: pays for it?

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Speaker 5: And if they're preventative, how long do I have to

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Speaker 5: take them before I know? I mean, how do you

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Speaker 5: even do a trial there? So don't forget though, Now

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Speaker 5: that's disease. You can go into the early mild dementia

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Speaker 5: and try and slow down the disease, but step at

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Speaker 5: the time, at a step at the time, and nothink

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Speaker 5: will we'll have something, might take a decade or two,

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Speaker 5: but hopefully will have them.

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Speaker 7: And Sam again, are these is this something if we

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Speaker 7: see announcements on this front will likely be, you know,

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Speaker 7: the big form of companies that you cover making and

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Speaker 7: acquisitions of some of these smaller companies that are just

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Speaker 7: focused on this one particular thing.

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Speaker 5: Probably, and don't forget that also the large farmer companies.

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Speaker 5: I mean then the two drugs that we have on

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Speaker 5: the market today that can be and I forget what

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Speaker 5: Dunana maps caol has just been approved, so I can't

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Speaker 5: remember it a branded name.

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Speaker 6: I'm sorry, Iliy.

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Speaker 5: They both came from within either the farmer company or

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Speaker 5: the a Japanese partner. However, in the case of the

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Speaker 5: can be that came from a Scandinavian biotech, So both

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Speaker 5: of these are true.

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Speaker 6: The question is who's got the firepower.

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Speaker 5: The money to spend the billions required to develop these

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Speaker 5: and that's often ends up being the farmer companies.

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Speaker 6: It's the large farmer companies.

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Speaker 2: Do you feel like, no matter who gets to be

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Speaker 2: president in here in November, here in the US, are

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Speaker 2: we going to see massive drug pushback? Like I realized,

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Speaker 2: it's probably a campaign tactic. But President Biden coming out

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Speaker 2: last week and talking about how all the things were

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Speaker 2: so expensive and really blaming like Novo Nordos. He wrote

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Speaker 2: an app that with Bernie Sanders in USA today, what

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Speaker 2: do you.

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Speaker 5: Think I think this is a hot potato, which hand

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Speaker 5: them are going to? I think it is a I

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Speaker 5: don't think they are aiming their guns at the right

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Speaker 5: group of companies. I think you could always argue that

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Speaker 5: drug pricing because it's the easiest thing. It's a drug

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Speaker 5: that people have to buy, and it says Lily on

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Speaker 5: it right, is difficult for some people.

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Speaker 6: A lot of people can't afford them.

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Speaker 5: But there's a lot of middlemen that need to be

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Speaker 5: looked at to where the where the increasing cost comes from.

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Speaker 5: And you know what, the best way to entice people

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Speaker 5: to develop obcity drugs, to bring down the price, to

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Speaker 5: bring up competition is to allow the market to do

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Speaker 5: his job. The market will do it already. These things

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Speaker 5: are not costing ten one thousand dollars a month. We're

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Speaker 5: more closer to five hundred net. Let the market to

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Speaker 5: the job, bring more drugs. On the volume goes up,

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Speaker 5: you can drop the price.

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Speaker 4: Hey, Sam, thanks so much for joining us.

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Speaker 7: As always expansive discussion, like we like to have a

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Speaker 7: san Fazelo in all things. A big farmer in biotech Sanfazeli.

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Speaker 7: He's he runs up Bloomberg Intelligencing over there in your force,

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Speaker 7: and his day job is being one of the top

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Speaker 7: healthcare parmer analysts in the city of London. Eli Lilly

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Speaker 7: back at a bus. I've said it before, I'll say

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Speaker 7: it again in my next life. I'm coming back. I

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Speaker 7: think as a healthcare m and a banker, because everywhere

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Speaker 7: every Monday, it seems thinking to wake up and boom,

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Speaker 7: there you go, Illely buying us biotech Morphic three point

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Speaker 7: two billion dollars.

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Speaker 4: This is Bloomberg.

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Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live

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Speaker 1: weekdays at ten am Eastern on applecar Play and Android

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Speaker 1: Auto with the Bloomberg Business App. You can also listen

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Speaker 1: Just say Alexa play Bloomberg eleven thirty.

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Speaker 7: A lot of folks are getting concerned about this marketplace.

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Speaker 7: Is equity market's been higher, there's evaluation concerns. There's headwinds

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Speaker 7: about when or if this FED is going to cut rates.

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Speaker 7: There's concentration risk is probably ranks pretty highly with me.

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Speaker 7: Let's check in with a professional and see how they're

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Speaker 7: thinking about it. Shelby McFadden Investment analyst, Motley Full Asset

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Speaker 7: Management joining us from Zoom via Zoom from Alexandria, Virginia. Shelby,

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Speaker 7: how concerned are you about this marketplace? How do you

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Speaker 7: feel about this market? Are you confident that this equity

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Speaker 7: market can continue to move higher?

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Speaker 4: Where are you these days?

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Speaker 1: You know?

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Speaker 3: I would say this sort of confidence and concern is

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Speaker 3: sort of a two pronged issue, right. So the confidence,

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Speaker 3: who can say, right, we all kind of wish we

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Speaker 3: had a crystal ball, especially as active managers. But the

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Speaker 3: sort of confidence, I would say, is rooted in the

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Speaker 3: fact that this is the precise sort of market where

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Speaker 3: you can sort of find those opportunities. They may not

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Speaker 3: necessarily pay the dividend right away, and that sort of

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Speaker 3: goes to the issue of concentration that you had mentioned

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Speaker 3: in the introduction, where you know, to look for those winners,

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Speaker 3: those diamonds in the rough that may not be sort

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Speaker 3: of paying off right now, But when that return of

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Speaker 3: breath comes back, that's when we sort of get to

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Speaker 3: see the fruits of our labor. And that is right

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Speaker 3: there the crux of active management so valuations they're rich.

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Speaker 3: That can be concerning. It's never exciting to have to

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Speaker 3: sit and wait for that golden opportunity that we've been

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Speaker 3: watching out for, but it absolutely pays off from the end,

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Speaker 3: and that's why we stick to that high quality strategy.

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Speaker 2: Do you care about breath? Do you care about the

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Speaker 2: seventeen hundred stats that I read today about how you

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Speaker 2: know the top seven stocks reported x amount of the

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Speaker 2: gain in the S and P so far this year?

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Speaker 2: I say it glibly because I feel like we've been

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Speaker 2: talking about this for like nine months, So how much

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Speaker 2: do you care about that now?

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Speaker 3: I would say that breath does still matter to us,

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Speaker 3: and I even say that given the fact that we

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Speaker 3: have what are considered more concentrated portfolio. So you may

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Speaker 3: be thinking, how does that even make sense? It makes

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Speaker 3: sense in the concept rather in the realm that compared

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Speaker 3: to the SM compared to what we consider the broad market,

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Speaker 3: we are more concerned with finding opportunities that are not

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Speaker 3: necessarily just all concentrated in one space. So when we

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Speaker 3: do look at our active ETFs, they're not always going

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Speaker 3: to reflect the main stocks that are moving the market.

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Speaker 3: There are going to be some more sort of niche

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Speaker 3: concepts in there that underlie some of the main processes

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Speaker 3: that keep our economy going. So when we look from

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Speaker 3: a portfolio management perspective, breath is increasingly important to us.

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Speaker 7: Shelby, how do you think about earning season. We're going

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Speaker 7: to kick it off Thursday with some of the airlines

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Speaker 7: and then of course the big banks kicking off on Friday.

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Speaker 4: What are you looking for this quarter?

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Speaker 3: I would say, going into early earning season, you know,

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Speaker 3: we're not expecting anything to earth shaking from the big

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Speaker 3: banks for the most part, they've already gotten all of

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Speaker 3: their shakeouts going. We might hear about a little bit

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Speaker 3: of M and A activity, and you know, mainly following

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Speaker 3: the regionals after the big banks. As we go further

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Speaker 3: into earning season, I think one of the key things

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Speaker 3: that we're looking out for is going to be back

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Speaker 3: office spend, those sorts of budgets on any sort of

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Speaker 3: CRM technology advertising, all of those sorts of software platforms

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Speaker 3: that made a lot of revenue in the past couple

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Speaker 3: of years. So we're looking to see where corporate budgets

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Speaker 3: are going, but also in the retail space, how is

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Speaker 3: the consumer holding up? The summer is a little bit

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Speaker 3: more dry in terms of promotional activity around holidays. You've

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Speaker 3: got Memorial Day for Labor Day, so there's a lot

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Speaker 3: of those really big chunks of weeks where there's not

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Speaker 3: as much promotional activity, and that's where we're going to

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Speaker 3: get a truer sense of how the consumer is doing.

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Speaker 3: So we'll be having a good lookout for that sort

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Speaker 3: of easter to end of Q two.

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Speaker 2: Chunk for the back of the office spend are you

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Speaker 2: watching specifically, like if that budget grows or just that

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Speaker 2: budget stays versus shrinks, or like where it's going to

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Speaker 2: actually be going and how the money is diverted.

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Speaker 3: It's a sort of all of the above, right, because

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Speaker 3: that's all going to tell us a different story. So

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Speaker 3: if it is shrinking, that starts to tell us that

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Speaker 3: potentially companies are in a spot where they're so concerned

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Speaker 3: about their coffers that they are now less concerned about efficiency.

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Speaker 3: We think that's a little bit less likely because when

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Speaker 3: you've got shareholders, you tend to need to focus on efficiency.

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Speaker 3: So we're sort of looking for that stable to growing

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Speaker 3: for a number of companies there, their own sort of

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Speaker 3: projections are depending on a return to growth. So a

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Speaker 3: return of company's desires to have more efficiency. So I

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Speaker 3: would if I had to put money on it, I

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Speaker 3: would probably say, we're expecting to see on the whole

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Speaker 3: plot to growth in that area.

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Speaker 4: Shelby.

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Speaker 7: Earlier today, we were speaking with the head economists at

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Speaker 7: MasterCard to get a sense of kind of how the consumer.

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Speaker 3: Is behave shell Meyer.

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Speaker 9: Yes, love her, excellent, excellent, We love you too, and

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Speaker 9: she she's saying, just the data that they see, the

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Speaker 9: consumer is still spending and the consumer looks pretty healthy.

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Speaker 4: How do you think about it?

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Speaker 3: You know, it's interesting because some of the recent pieces

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Speaker 3: that I've read have pointed to the fact that there's

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Speaker 3: a big cohort of millennials and young or older rather

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Speaker 3: gen z that are coming into the stage of their

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Speaker 3: lives where they have to purchase certain necessities. The amount

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Speaker 3: of money in life that they spend is just growing

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Speaker 3: because it has to. And then when you put on

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Speaker 3: top of that the sort of economy that we're in

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Speaker 3: where things are more inflationary. We know that we're fighting that.

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Speaker 3: Right now, you switsh those two things together and we

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Speaker 3: get a picture that looks like a very healthy consumer

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Speaker 3: on the top. You know, the superficial most level, and

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Speaker 3: as we sort of drill down, we see a sort

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Speaker 3: of obligation to spend when we look at the fact

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Speaker 3: that retailers of things like shoes, shoes are broadly pretty

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Speaker 3: weak right now, and so we think about the fact

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Speaker 3: that people are not wanting to pick up those little

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Speaker 3: things in the store, those little articles of clothing, you know,

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Speaker 3: extra pairs of socks, things like that that you used

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Speaker 3: to kind of use to comfort yourself. You drill down

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Speaker 3: to that you realize a lot of the spending is

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Speaker 3: not so discretionary and healthy in the sense that money

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Speaker 3: is being spent, but the discretionary spend not as much.

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Speaker 3: So I think we have to really drill down to

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Speaker 3: see what the consumer is feeling. How do you play it?

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Speaker 3: I think the way to play it is one as

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Speaker 3: you meant, there's a way to play it with MasterCard,

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Speaker 3: which is they're a toll taker, so you go ahead

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Speaker 3: and just frankly take advantage of the fact that cars

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Speaker 3: are going to be swite. Another way to play it

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Speaker 3: is taking the premium end of the consumer. So when

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Speaker 3: we think about companies like Costco, they're offering value, but

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Speaker 3: they're offering really sticky value in the way that they're

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Speaker 3: a little bit higher on the income schedule. Another way

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Speaker 3: to play it is Amazon. You look at the fact

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Speaker 3: that they are retail, They've got a strong retail base,

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Speaker 3: and then they've also got their aws space, so they

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Speaker 3: really rooted themselves pretty deeply inconvenience for both corporate and consumer.

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Speaker 3: So I think it really comes down to one companies

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Speaker 3: that have deeply rooted themselves across the cycle, and two

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Speaker 3: premiumization and three toll takers.

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Speaker 4: So I see you you've got cost go there.

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Speaker 7: So that kind of to me says you have, you know,

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Speaker 7: kind of a fairly constructive call on the consumer. What's

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Speaker 7: the feeling behind your costco name?

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Speaker 3: Well, one of the things we love about the costco

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Speaker 3: business and why it's in TFC and a number of

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Speaker 3: our portfolios, is that they really generate a sort of

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Speaker 3: annuity type structure. Their primary earnings are really or their

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Speaker 3: most stable earnings I should say, are coming from those memberships,

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Speaker 3: and they've really figured out a perfect timing on those

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Speaker 3: membership increases in such a way that it's almost gentle

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Speaker 3: to the customer. They've established a relationship and so when

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Speaker 3: it comes people aren't really you know, running for the fences,

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Speaker 3: and then on top of that, they've got the best

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Speaker 3: cost position in the industry. So we have actually seen

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Speaker 3: over the past eighteen months or so when we listen

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Speaker 3: in for the calls, they lower prices when they can.

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Speaker 3: And I'll even say anecdotally, when I go to Costco,

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Speaker 3: I have pointed out to my husband had said, that's

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Speaker 3: lower than it was.

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Speaker 6: A quarter ago.

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Speaker 3: So they are holding up on those promises and being

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Speaker 3: able to do that is really really important, and being

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Speaker 3: able to sure the consumer who can afford that executive

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Speaker 3: membership further solidifies their place in their peer market.

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Speaker 2: You also like Amazon, but that's less of a retail play, right,

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Speaker 2: that's more of a cloud play.

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Speaker 3: A bit, yes, so we do know that they've sort

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Speaker 3: of solidified that position in retail, but the cloud play

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Speaker 3: is right now in terms of valuation, of course, what's

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Speaker 3: really most sensitive for them. And that's also where at

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Speaker 3: this point our thesis is sort of tipping towards. So

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Speaker 3: the additional growth that we are hinging any sort of

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Speaker 3: investment on for Amazon comes from the cloud space rather

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Speaker 3: than retail, and so that's what we're predominantly looking out for.

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Speaker 3: We're looking for operational leverage there as well as continuing

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Speaker 3: to solidify their reputation and continue with innovation. So, you know,

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Speaker 3: retail is always going to be a little bit wobbly

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Speaker 3: in terms of, you know, any sort of regulations that

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Speaker 3: are coming things like that, But on the whole, it

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Speaker 3: does seem like the balance between what they do for

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Speaker 3: the consumer and their competitive position seems to be sort

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Speaker 3: of leveling out. So really the thesis hinges on aws.

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Speaker 7: Hey Shelby, who is a typical investor or customer of

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Speaker 7: Motley Full Asset Management.

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Speaker 3: Yeah, I would say a typical investor would be someone

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Speaker 3: that is looking to access high growth names in of

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Speaker 3: course you know, global but primarily US markets, but looking

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Speaker 3: to do so by stepping outside of the concentration of

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Speaker 3: the US market. So even though the portfolio itself and

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Speaker 3: an average portfolio for US is going to be fifteen

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Speaker 3: to thirty stocks, it's someone who's looking to beat the

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Speaker 3: market over the long term, over ten to fifteen years,

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Speaker 3: go ahead and build that wealth by making choices outside

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Speaker 3: of the sort of status quo. And that doesn't necessarily

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Speaker 3: mean that we're just choosing really really niche sectors that

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Speaker 3: no one's heard of, but we are looking for those

442
00:21:48,040 --> 00:21:50,200
Speaker 3: high quality companies that are going to focus on cash

443
00:21:50,240 --> 00:21:53,000
Speaker 3: flow and be a bit more resilient to the cycle

444
00:21:53,560 --> 00:21:57,320
Speaker 3: and therefore deliver focusing really on upside capture especially.

445
00:21:57,520 --> 00:22:00,239
Speaker 2: So then to that point, do you not care who

446
00:22:00,280 --> 00:22:04,600
Speaker 2: wins the White House in November? That could definitely influence policy,

447
00:22:04,680 --> 00:22:08,240
Speaker 2: particularly when it comes to climate and environmental laws. But

448
00:22:08,320 --> 00:22:10,920
Speaker 2: in general, are you able to look through that or

449
00:22:10,960 --> 00:22:11,960
Speaker 2: how do you manage it?

450
00:22:13,680 --> 00:22:15,640
Speaker 3: I would say in the short term, it's not something

451
00:22:15,680 --> 00:22:19,119
Speaker 3: that we're integrating into our strategy because it's not something

452
00:22:19,119 --> 00:22:23,040
Speaker 3: that we have control over. In the long term view,

453
00:22:23,160 --> 00:22:26,280
Speaker 3: we understand that there could be some sweeping changes, but

454
00:22:26,320 --> 00:22:30,200
Speaker 3: we do also know that that legislature will take some time.

455
00:22:30,280 --> 00:22:32,440
Speaker 3: So we keep our monitors out. We have our various

456
00:22:32,480 --> 00:22:36,240
Speaker 3: lists and various contacts that we are in touch with,

457
00:22:36,359 --> 00:22:38,399
Speaker 3: calls that we will tune into so that we can

458
00:22:38,440 --> 00:22:40,880
Speaker 3: be on top of things to adjust our models appropriately.

459
00:22:40,960 --> 00:22:44,359
Speaker 3: So I would say that in terms of our strategy,

460
00:22:44,480 --> 00:22:46,680
Speaker 3: we have to sort of be a bit agnostic.

461
00:22:46,720 --> 00:22:47,080
Speaker 6: I can't.

462
00:22:47,320 --> 00:22:49,640
Speaker 3: I don't know that I would say we can care

463
00:22:49,760 --> 00:22:52,840
Speaker 3: because that may do a disservice to our investors to

464
00:22:52,840 --> 00:22:54,680
Speaker 3: say it has to be this for us to succeed.

465
00:22:55,240 --> 00:22:57,879
Speaker 3: We are determined to make sure that we adjust accordingly

466
00:22:58,359 --> 00:23:00,880
Speaker 3: with any regulations or policies that change to make sure

467
00:23:00,880 --> 00:23:02,880
Speaker 3: that we can serve the active investor as best we can.

468
00:23:03,320 --> 00:23:05,040
Speaker 4: All Right, Shelby, thank you so much for joining us.

469
00:23:05,080 --> 00:23:05,719
Speaker 4: Shelby McFadden.

470
00:23:05,760 --> 00:23:09,480
Speaker 7: She's an investment analyst at Motley fool Asset Management. Joining

471
00:23:09,560 --> 00:23:12,080
Speaker 7: us from Alexandria, Virginia.

472
00:23:12,400 --> 00:23:16,280
Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live

473
00:23:16,359 --> 00:23:18,960
Speaker 1: weekdays at ten am Eastern on Apple Card, play in

474
00:23:19,040 --> 00:23:22,040
Speaker 1: Android auto with the Bloomberg Business app, Listen on demand

475
00:23:22,119 --> 00:23:25,760
Speaker 1: wherever you get your podcasts, or watch us live on YouTube.

476
00:23:26,960 --> 00:23:29,320
Speaker 2: This Monday, though, we're going to go outside the Bloomberg

477
00:23:29,359 --> 00:23:31,200
Speaker 2: Intelligence world and take a look at what's going on

478
00:23:31,520 --> 00:23:34,800
Speaker 2: with ETFs. Joining us now is Sean O'Hara, president of Pacer.

479
00:23:34,920 --> 00:23:38,359
Speaker 2: ETFs has forty five billion dollars assets under management. He

480
00:23:38,480 --> 00:23:42,080
Speaker 2: joins us from Pennsylvania. So Sean, we love this topic,

481
00:23:42,240 --> 00:23:44,919
Speaker 2: like who's buying, what, where are the flows? Where are

482
00:23:44,960 --> 00:23:47,880
Speaker 2: they coming out of We just ended the second quarter,

483
00:23:48,000 --> 00:23:49,920
Speaker 2: we're kind of kicking off the back half of the year.

484
00:23:50,400 --> 00:23:51,320
Speaker 2: What's the setup.

485
00:23:52,680 --> 00:23:54,399
Speaker 10: Well, it's the same setup as it's been for the

486
00:23:54,480 --> 00:23:56,800
Speaker 10: last six months to eighteen months, and that is that

487
00:23:57,000 --> 00:23:59,800
Speaker 10: you know, essentially five to seven stocks are really responsible

488
00:23:59,840 --> 00:24:02,159
Speaker 10: for all of the performance. So I just read an

489
00:24:02,240 --> 00:24:04,080
Speaker 10: article this morning that said I Shares had one of

490
00:24:04,160 --> 00:24:07,080
Speaker 10: its biggest NetFlow periods over six months, and I think

491
00:24:07,160 --> 00:24:10,920
Speaker 10: that's mostly driven by people buying the outright the S

492
00:24:11,000 --> 00:24:13,960
Speaker 10: and P five hundred. Obviously, the cues continue to take

493
00:24:14,000 --> 00:24:16,040
Speaker 10: in a lot of money. The one word of caution

494
00:24:16,240 --> 00:24:18,840
Speaker 10: I would say though, is that you know, mostly those

495
00:24:19,040 --> 00:24:21,680
Speaker 10: ETFs to track those broad indexes are meant to be

496
00:24:22,400 --> 00:24:27,160
Speaker 10: diversified portfolios, and what's going on today is the opposite

497
00:24:27,200 --> 00:24:30,760
Speaker 10: of diversification. So although the ETF industry continues to take

498
00:24:30,840 --> 00:24:34,760
Speaker 10: in almost record flows across the board, in these big

499
00:24:34,880 --> 00:24:38,560
Speaker 10: broad market market cap weighted ETFs, I think investors need

500
00:24:38,680 --> 00:24:42,320
Speaker 10: to be a little bit wary of the exposures. You have,

501
00:24:43,280 --> 00:24:46,480
Speaker 10: forty something percent of the cues is like seven names,

502
00:24:46,560 --> 00:24:50,520
Speaker 10: and so as it goes up, we could just as

503
00:24:50,600 --> 00:24:53,840
Speaker 10: easily see things come down as people start to view

504
00:24:53,920 --> 00:24:55,800
Speaker 10: some of these big tech names and these big AI

505
00:24:55,920 --> 00:24:59,520
Speaker 10: players as more closely or more close to fairly valued.

506
00:25:00,200 --> 00:25:03,280
Speaker 7: So how concerned are you about this market and the

507
00:25:03,320 --> 00:25:04,520
Speaker 7: concentration in this market.

508
00:25:05,520 --> 00:25:08,320
Speaker 10: Well, you know, I'm a believer in AI. I think

509
00:25:08,480 --> 00:25:10,320
Speaker 10: you don't have to be all in one way or

510
00:25:10,400 --> 00:25:13,440
Speaker 10: the other. I think, you know, perhaps from my perspective,

511
00:25:13,480 --> 00:25:15,840
Speaker 10: I'd rather be a little more balanced. I have exposure

512
00:25:15,880 --> 00:25:19,159
Speaker 10: to the AI trade in various different forms, but I

513
00:25:19,240 --> 00:25:22,879
Speaker 10: also have some lower PE, high higher quality stuff that

514
00:25:23,280 --> 00:25:25,359
Speaker 10: you know is kicking off nice dividends, and so you

515
00:25:25,440 --> 00:25:28,360
Speaker 10: can sort of wait and see what happens, and you're

516
00:25:28,480 --> 00:25:31,840
Speaker 10: less susceptible to a big drawdown. If let's say the

517
00:25:31,920 --> 00:25:34,520
Speaker 10: FED decides not to cut, or we get to the

518
00:25:34,600 --> 00:25:38,399
Speaker 10: third quarter earnings reports and those numbers have now been

519
00:25:38,440 --> 00:25:41,680
Speaker 10: adjusted high and higher, and somebody stubs their toe. You

520
00:25:41,760 --> 00:25:45,159
Speaker 10: could see a big reaction to that. So one of

521
00:25:45,240 --> 00:25:47,960
Speaker 10: the things that I think makes sense for people for

522
00:25:48,080 --> 00:25:51,440
Speaker 10: part of their portfolio is to lower the overall portfolios

523
00:25:51,480 --> 00:25:54,560
Speaker 10: PE before the market ultimately does it to them, which

524
00:25:54,600 --> 00:25:57,000
Speaker 10: it will at some point. You know, the SMP is

525
00:25:57,000 --> 00:25:59,479
Speaker 10: still trading at twenty two to twenty four times earnings,

526
00:25:59,520 --> 00:26:02,119
Speaker 10: in the nasty is over thirty five times earnings, and

527
00:26:02,240 --> 00:26:05,280
Speaker 10: those numbers, although they make us all feel happy as

528
00:26:05,320 --> 00:26:08,879
Speaker 10: we're riding them up, eventually the market is sort of

529
00:26:09,520 --> 00:26:12,399
Speaker 10: going to revert back to that mean, And those numbers

530
00:26:12,440 --> 00:26:15,320
Speaker 10: are somewhere between twenty and thirty percent above the historical

531
00:26:15,640 --> 00:26:17,440
Speaker 10: long term averages. So I think it just makes sense

532
00:26:17,480 --> 00:26:19,479
Speaker 10: maybe to be a little bit more barbelled as opposed

533
00:26:19,520 --> 00:26:20,920
Speaker 10: to all in on one trade.

534
00:26:21,560 --> 00:26:23,960
Speaker 2: So does that imply then that if you're going to

535
00:26:24,160 --> 00:26:26,000
Speaker 2: barbel at two, do you need to barbel it across

536
00:26:26,119 --> 00:26:27,560
Speaker 2: as a class? As we've seen a lot of money

537
00:26:27,560 --> 00:26:30,800
Speaker 2: contine to flow into bond ETFs, what are you noticing there?

538
00:26:31,920 --> 00:26:35,040
Speaker 10: Well, barbelling, for example, you could just as easily buy

539
00:26:35,119 --> 00:26:37,000
Speaker 10: the equal weighted version of the S and P five

540
00:26:37,080 --> 00:26:39,040
Speaker 10: hundred next to the cap weighted and that sort of

541
00:26:39,040 --> 00:26:41,919
Speaker 10: would give you that barbelle right, You'd have more exposure

542
00:26:41,960 --> 00:26:43,640
Speaker 10: to the bottom half of the S and P five

543
00:26:43,720 --> 00:26:45,760
Speaker 10: hundred and less exposure to the top half. And there's

544
00:26:45,760 --> 00:26:49,080
Speaker 10: an equal weighted version of the queues as well. In

545
00:26:49,200 --> 00:26:52,760
Speaker 10: fixed income land, I think people are mostly pretty satisfied

546
00:26:52,840 --> 00:26:55,480
Speaker 10: just sort of sitting in short term treasuries at five percent.

547
00:26:55,720 --> 00:26:57,440
Speaker 10: There's been a lot of money going into those types

548
00:26:57,480 --> 00:27:00,640
Speaker 10: of vehicles. I don't think on the fixed income side

549
00:27:00,680 --> 00:27:02,840
Speaker 10: that we're doing sort of what we've been doing on

550
00:27:02,920 --> 00:27:05,760
Speaker 10: the equity side, and that is we're underpricing risk. I mean,

551
00:27:05,840 --> 00:27:09,159
Speaker 10: spreads are fairly narrow on a historic basis, and so

552
00:27:09,680 --> 00:27:12,400
Speaker 10: you're not getting paid what you might normally get paid

553
00:27:12,440 --> 00:27:15,600
Speaker 10: to go out the credit scale, maybe to you know,

554
00:27:15,840 --> 00:27:19,240
Speaker 10: high grade corporates or to high yield and so I

555
00:27:19,320 --> 00:27:21,200
Speaker 10: think if you can just collect five percent in the

556
00:27:21,240 --> 00:27:24,199
Speaker 10: short run for that money that you maybe ultimately will deploy,

557
00:27:25,000 --> 00:27:27,119
Speaker 10: makes a little bit of sense. We're seeing some flows

558
00:27:27,160 --> 00:27:30,680
Speaker 10: into international and global. I think that's really just a

559
00:27:30,800 --> 00:27:33,879
Speaker 10: rebalancing trade. The last five years have been dominated so

560
00:27:34,000 --> 00:27:36,919
Speaker 10: much by large cap us that I think investors' portfolios

561
00:27:36,960 --> 00:27:39,200
Speaker 10: have gotten out of balance a little bit. And so

562
00:27:39,280 --> 00:27:41,280
Speaker 10: I think people are starting to push more money into

563
00:27:41,320 --> 00:27:44,199
Speaker 10: global and international. And then we've seen quite a bit

564
00:27:44,200 --> 00:27:46,840
Speaker 10: of money go into small cap for the same reason

565
00:27:46,920 --> 00:27:49,720
Speaker 10: that and that is that you know, if because of

566
00:27:49,800 --> 00:27:54,359
Speaker 10: this massive performance advantage of large cap us versus everything else,

567
00:27:54,880 --> 00:27:56,840
Speaker 10: portfolios have gotten out of whack, and I think people

568
00:27:56,880 --> 00:27:59,639
Speaker 10: are wise to sort of rebalance their portfolios that are

569
00:27:59,680 --> 00:28:03,240
Speaker 10: more in line with what a longer term objective might dictate.

570
00:28:04,200 --> 00:28:07,040
Speaker 4: Twenty twenty four is an election year. How concerned. Are

571
00:28:07,080 --> 00:28:07,480
Speaker 4: you about that?

572
00:28:07,600 --> 00:28:10,800
Speaker 7: From a I guess a stability or volatility perspective for

573
00:28:11,640 --> 00:28:13,720
Speaker 7: markets and maybe how to position yourself.

574
00:28:15,440 --> 00:28:18,479
Speaker 10: Well, you have two different agendas, right You have one

575
00:28:18,560 --> 00:28:20,640
Speaker 10: agenda that you know is going to be more government

576
00:28:20,680 --> 00:28:24,160
Speaker 10: and higher taxes theoretically, and you have another agenda that's

577
00:28:24,200 --> 00:28:28,320
Speaker 10: sort of less regulatory oversight and lower taxes. And I

578
00:28:28,359 --> 00:28:31,840
Speaker 10: think the market will be volatile between now an election day,

579
00:28:31,880 --> 00:28:35,960
Speaker 10: as you know, these candidate surge and fall in the polling,

580
00:28:36,440 --> 00:28:38,280
Speaker 10: and so it'll be interesting to see. I don't think

581
00:28:38,320 --> 00:28:41,160
Speaker 10: that now is the time to start really putting on

582
00:28:41,320 --> 00:28:45,200
Speaker 10: those election type vets into a portfolio, because there's so

583
00:28:45,520 --> 00:28:48,720
Speaker 10: much time between now and November. But I think as

584
00:28:48,760 --> 00:28:51,120
Speaker 10: we get closer to November and people start to really

585
00:28:51,200 --> 00:28:54,360
Speaker 10: develop a clear view of who they believe will ultimately

586
00:28:54,440 --> 00:28:57,520
Speaker 10: win the election, I think investors will start to position

587
00:28:57,640 --> 00:28:58,840
Speaker 10: portfolios accordingly.

588
00:28:59,280 --> 00:29:01,040
Speaker 2: What's the one where we let you go, what's like

589
00:29:01,120 --> 00:29:03,520
Speaker 2: a risk that no one's talking about or not a

590
00:29:03,560 --> 00:29:05,080
Speaker 2: lot of people are talking about that you see in

591
00:29:05,120 --> 00:29:05,840
Speaker 2: the market right now?

592
00:29:07,320 --> 00:29:09,720
Speaker 10: Well, I said what I think is the biggest risk

593
00:29:09,760 --> 00:29:11,480
Speaker 10: in the market, and that is that we're highly, highly

594
00:29:11,600 --> 00:29:14,920
Speaker 10: concentrated and this happens from time to time. It just

595
00:29:15,080 --> 00:29:17,720
Speaker 10: never lasts. We don't know how long this will last,

596
00:29:17,760 --> 00:29:20,320
Speaker 10: but it's not going to last for five years. It's

597
00:29:20,360 --> 00:29:24,040
Speaker 10: been almost two years worth of this massive imbalance in

598
00:29:24,160 --> 00:29:27,920
Speaker 10: terms of the weight in portfolios across the broad market indexes.

599
00:29:27,960 --> 00:29:32,040
Speaker 10: And I think that's one risk that Look, we're human beings, right,

600
00:29:32,240 --> 00:29:35,680
Speaker 10: and so we get ephic, and when things are going

601
00:29:35,720 --> 00:29:38,360
Speaker 10: well and we're making money on investments, we sort of

602
00:29:38,520 --> 00:29:40,960
Speaker 10: ignore some of the potential pitfalls. And so I think

603
00:29:41,040 --> 00:29:43,760
Speaker 10: the big risk is that we don't get as an

604
00:29:43,760 --> 00:29:46,560
Speaker 10: aggressive fed approach, and that we get into the third

605
00:29:46,640 --> 00:29:49,920
Speaker 10: quarter in the fourth quarter as those tech names are

606
00:29:49,960 --> 00:29:52,800
Speaker 10: sort of running uphill right. Their earnings have been growing,

607
00:29:53,200 --> 00:29:56,000
Speaker 10: but their forecasted earnings are supposed to be higher, and

608
00:29:56,280 --> 00:29:58,800
Speaker 10: if somewhere along the way and by the way, it's

609
00:29:58,880 --> 00:30:01,120
Speaker 10: much more difficult for them to make those increase earnings

610
00:30:01,200 --> 00:30:04,120
Speaker 10: numbers because of the massive size of these companies. That

611
00:30:04,240 --> 00:30:06,800
Speaker 10: could potentially be a risk that people are ignoring right now.

612
00:30:07,440 --> 00:30:08,960
Speaker 7: All right, Sean, thank you so much for joining us.

613
00:30:09,000 --> 00:30:13,320
Speaker 7: Really appreciated. Sean O'Hara, president of pacer ETFs. They're out

614
00:30:13,320 --> 00:30:17,080
Speaker 7: there on the main line of Philadelphia, Malvern. Beautiful part

615
00:30:17,240 --> 00:30:19,680
Speaker 7: of the world out there, right across the road from

616
00:30:19,760 --> 00:30:23,240
Speaker 7: the Home Vanguard Complex. All that kind of index money

617
00:30:23,320 --> 00:30:25,480
Speaker 7: is all out. There's smart folks down there in great

618
00:30:25,520 --> 00:30:26,240
Speaker 7: Affhilly area.

619
00:30:32,120 --> 00:30:35,960
Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live

620
00:30:36,080 --> 00:30:39,600
Speaker 1: weekdays at ten am Eastern on applecar Play and Android

621
00:30:39,640 --> 00:30:42,360
Speaker 1: Auto with the Bloomberg Business app. You can also listen

622
00:30:42,520 --> 00:30:45,600
Speaker 1: live on Amazon Alexa from our flagship New York station.

623
00:30:46,000 --> 00:30:50,000
Speaker 1: Just say Alexa play Bloomberg eleven thirty Alex.

624
00:30:50,080 --> 00:30:52,320
Speaker 7: You know me, There's very few places in the world

625
00:30:52,480 --> 00:30:55,080
Speaker 7: that would get me away from my beloved Jersey Shore. True,

626
00:30:55,160 --> 00:30:59,040
Speaker 7: but the low country of South Carolina is definitely in

627
00:30:59,120 --> 00:31:02,560
Speaker 7: the running. It is beautiful down there, nice people, beautiful

628
00:31:02,600 --> 00:31:04,160
Speaker 7: part of the world. And that's our next guest is

629
00:31:04,240 --> 00:31:07,280
Speaker 7: Jared Dillion. He's the founder of The Daily Dirt NP.

630
00:31:07,880 --> 00:31:10,720
Speaker 7: Jared main ways to go on this thing. I think

631
00:31:10,840 --> 00:31:13,239
Speaker 7: for a lot of investors as they look at these

632
00:31:13,280 --> 00:31:15,000
Speaker 7: stock markets, they look at their four to one k

633
00:31:15,840 --> 00:31:18,480
Speaker 7: they're doing pretty well. But boy, there's a lot of

634
00:31:18,520 --> 00:31:20,760
Speaker 7: headwines out there, and for me, maybe the biggest one

635
00:31:20,880 --> 00:31:23,840
Speaker 7: is the concentration risk in this market. It gets me

636
00:31:23,920 --> 00:31:26,040
Speaker 7: nervous when I pull out those Magnificent seven that my

637
00:31:26,120 --> 00:31:27,200
Speaker 7: market's not doing a whole lot.

638
00:31:27,560 --> 00:31:28,400
Speaker 4: How do you think about that?

639
00:31:29,840 --> 00:31:31,480
Speaker 11: Yeah, I think about it the same way as you

640
00:31:31,600 --> 00:31:35,960
Speaker 11: do if you look at Actually, you know, funny you mentioned.

641
00:31:37,040 --> 00:31:39,440
Speaker 11: I was on Twitter a couple of weeks ago and

642
00:31:39,600 --> 00:31:45,360
Speaker 11: somebody had posted a paragraph from an interview with Stan Druckenmiller,

643
00:31:46,080 --> 00:31:49,000
Speaker 11: and this was about the crash of nineteen eighty seven,

644
00:31:49,680 --> 00:31:54,000
Speaker 11: and Stan Druckenmiller had cited a couple of reasons why

645
00:31:54,760 --> 00:31:57,520
Speaker 11: he got bearish before the crash of nineteen eighty seven,

646
00:31:58,480 --> 00:32:00,640
Speaker 11: and one of them was the constant creation at the

647
00:32:00,760 --> 00:32:03,720
Speaker 11: time was the fact that the market was being led

648
00:32:03,920 --> 00:32:07,440
Speaker 11: by just a handful of names. And if you go

649
00:32:07,560 --> 00:32:11,000
Speaker 11: back in history at all these major tops, that usually

650
00:32:11,160 --> 00:32:14,240
Speaker 11: co occurs with the top is that you do have

651
00:32:14,520 --> 00:32:17,200
Speaker 11: extreme concentration, and we're certainly having that today.

652
00:32:18,040 --> 00:32:20,080
Speaker 2: So what does that then mean? I mean, just because

653
00:32:20,680 --> 00:32:23,560
Speaker 2: history doesn't always repeat at rhymes that whole thing, which

654
00:32:23,640 --> 00:32:27,120
Speaker 2: like I also roll my eyes at that too, And

655
00:32:27,240 --> 00:32:29,040
Speaker 2: what that looks like. No one's going to doubt that

656
00:32:29,120 --> 00:32:30,880
Speaker 2: we're in some kind of bubble, but no one knows

657
00:32:30,920 --> 00:32:32,960
Speaker 2: what the bubble winds up looking like and how it bursts,

658
00:32:32,960 --> 00:32:34,760
Speaker 2: and that puts people in a really big buying if

659
00:32:34,760 --> 00:32:35,680
Speaker 2: they're trying to make money.

660
00:32:37,160 --> 00:32:39,520
Speaker 11: Well, the way I look at this is that the

661
00:32:39,680 --> 00:32:44,280
Speaker 11: cost to protect a portfolio that looks like the S

662
00:32:44,360 --> 00:32:47,680
Speaker 11: and P five hundred is the lowest that it has

663
00:32:47,800 --> 00:32:51,880
Speaker 11: been since twenty nineteen. If you go back towards the

664
00:32:52,000 --> 00:32:55,640
Speaker 11: end of twenty nineteen, options became very cheap, and then

665
00:32:55,680 --> 00:32:59,560
Speaker 11: you had the pandemic in twenty twenty and they exploded

666
00:32:59,600 --> 00:33:03,440
Speaker 11: in value. You this is the cheapest that protection has

667
00:33:03,600 --> 00:33:07,800
Speaker 11: been in the last five years. So you know, a

668
00:33:07,920 --> 00:33:10,680
Speaker 11: day that I think about in particular is February twenty seventh,

669
00:33:10,800 --> 00:33:14,600
Speaker 11: two thousand and seven. That was the day that China

670
00:33:15,280 --> 00:33:19,040
Speaker 11: raised reserve requirements and the ABX dropped by ten points

671
00:33:19,560 --> 00:33:22,600
Speaker 11: and the VICS exploded from ten to twenty in a day.

672
00:33:23,560 --> 00:33:26,920
Speaker 11: Usually when you transition out of low ball regimes into

673
00:33:26,960 --> 00:33:29,840
Speaker 11: a high ball regimes, it is a very violent move.

674
00:33:31,280 --> 00:33:33,800
Speaker 7: So, Jared, we're going to be starting earnings at the

675
00:33:33,880 --> 00:33:35,160
Speaker 7: end of this week. We have the some of the

676
00:33:35,200 --> 00:33:39,760
Speaker 7: airlines and then the big banks on Friday. Is this

677
00:33:39,880 --> 00:33:43,000
Speaker 7: earning season a catalyst or a potential risk for this market?

678
00:33:43,040 --> 00:33:43,440
Speaker 6: Do you think.

679
00:33:44,920 --> 00:33:46,640
Speaker 11: I don't think it's much of a risk. You know,

680
00:33:46,800 --> 00:33:52,040
Speaker 11: it's it's funny we've gotten we've gotten a slowdown in

681
00:33:52,080 --> 00:33:54,520
Speaker 11: the economic data that has happened for the last month

682
00:33:54,640 --> 00:33:57,440
Speaker 11: or so. Really, the only strong piece of economic data

683
00:33:57,520 --> 00:34:01,800
Speaker 11: we've gotten in a while was last month's payroll report,

684
00:34:01,880 --> 00:34:04,800
Speaker 11: which came in at two hundred and seventy thousand, which

685
00:34:04,880 --> 00:34:08,919
Speaker 11: then was revised lower this month. J Powell last week

686
00:34:09,120 --> 00:34:13,200
Speaker 11: was commenting on how he's seeing disinflationary forces. I think

687
00:34:13,320 --> 00:34:17,400
Speaker 11: earnings are a lagging indicator, and I think that the

688
00:34:17,480 --> 00:34:20,200
Speaker 11: economy is slowing down, but it's I don't think it's

689
00:34:20,239 --> 00:34:22,000
Speaker 11: going to show up in this quarter's earnings.

690
00:34:23,520 --> 00:34:27,439
Speaker 2: Do you think that for investors it's going to matter

691
00:34:27,640 --> 00:34:31,080
Speaker 2: more how when the Fed starts cutting, what the results

692
00:34:31,120 --> 00:34:34,160
Speaker 2: of the presidential election are, or what earnings, particularly from

693
00:34:34,160 --> 00:34:35,719
Speaker 2: the AI names deliver this quarter.

694
00:34:37,360 --> 00:34:39,640
Speaker 11: I think the biggest factor out of the three that

695
00:34:39,719 --> 00:34:42,640
Speaker 11: you mentioned is the presidential election. I mean that's going

696
00:34:42,719 --> 00:34:46,800
Speaker 11: to determine the path for monetary policy going forward in

697
00:34:46,840 --> 00:34:51,520
Speaker 11: twenty twenty five, in twenty twenty six, and if if

698
00:34:51,960 --> 00:34:55,920
Speaker 11: Trump gets re elected in November, then I think what

699
00:34:56,120 --> 00:34:59,920
Speaker 11: you're going to see is probably a rate cut cycle

700
00:35:00,680 --> 00:35:04,799
Speaker 11: that lasts throughout twenty twenty five. You might see one

701
00:35:04,880 --> 00:35:07,520
Speaker 11: hundred to one hundred and fifty basis points of great cuts.

702
00:35:08,120 --> 00:35:10,120
Speaker 11: I think if Biden gets re elected, I think it's

703
00:35:10,200 --> 00:35:11,680
Speaker 11: more of the same. I think it's more of a

704
00:35:11,800 --> 00:35:16,240
Speaker 11: higher for longer trade. So yeah, for sure, the election

705
00:35:16,400 --> 00:35:17,879
Speaker 11: is going to be the biggest catalyst there.

706
00:35:19,000 --> 00:35:20,200
Speaker 4: Jared, what do you again?

707
00:35:20,239 --> 00:35:23,239
Speaker 7: We've talked about the concentration risk here and if I

708
00:35:23,280 --> 00:35:24,839
Speaker 7: don't know, I guess somebody wants to be brave enough

709
00:35:24,880 --> 00:35:26,400
Speaker 7: to try to break away from that and look to

710
00:35:26,520 --> 00:35:29,480
Speaker 7: other areas of the market. Do you see opportunities in

711
00:35:29,560 --> 00:35:31,520
Speaker 7: other areas of the market, whether it be a valuation

712
00:35:31,840 --> 00:35:34,520
Speaker 7: entry point or whether it's just some parts of the

713
00:35:34,560 --> 00:35:36,120
Speaker 7: market are just kind of mispriced.

714
00:35:37,840 --> 00:35:39,200
Speaker 1: Well, I think I think the.

715
00:35:39,280 --> 00:35:44,320
Speaker 11: Biggest opportunity is some kind of reversion in the style

716
00:35:44,440 --> 00:35:48,840
Speaker 11: box trade. If you know, we've had large cap growth

717
00:35:48,960 --> 00:35:53,279
Speaker 11: outperforming small cap value for the last twenty years, and

718
00:35:53,680 --> 00:35:56,839
Speaker 11: you know, I started my career in nineteen ninety nine

719
00:35:57,560 --> 00:36:00,600
Speaker 11: and that was also a time with large growth was

720
00:36:00,640 --> 00:36:05,080
Speaker 11: outperforming small cap value. But when small cap value turned

721
00:36:05,400 --> 00:36:07,520
Speaker 11: around two thousand and one or two thousand and two.

722
00:36:08,239 --> 00:36:10,640
Speaker 11: That was a really big move and it made the

723
00:36:10,760 --> 00:36:14,480
Speaker 11: careers of a lot of investors. So I think if

724
00:36:14,520 --> 00:36:16,680
Speaker 11: you can time that right, if you can catch that,

725
00:36:17,400 --> 00:36:18,920
Speaker 11: then that's a really big opportunity.

726
00:36:19,239 --> 00:36:21,880
Speaker 2: I mean, I feel like, yes, how like what are

727
00:36:21,880 --> 00:36:23,319
Speaker 2: the sign I mean, mister, are both of you guys

728
00:36:23,320 --> 00:36:24,799
Speaker 2: who've been in the market for a while, like, how

729
00:36:24,840 --> 00:36:26,759
Speaker 2: do you time that? Because I feel like everyone's waiting

730
00:36:26,800 --> 00:36:29,600
Speaker 2: for small caps to have their moment, slash value to

731
00:36:29,680 --> 00:36:31,680
Speaker 2: have their moment, and that moment.

732
00:36:31,640 --> 00:36:32,520
Speaker 3: Is like fleeting.

733
00:36:32,640 --> 00:36:34,480
Speaker 2: It's like, here's a week and then see you later.

734
00:36:35,920 --> 00:36:38,399
Speaker 11: Yeah, that's exactly what it's been. You've had these You've

735
00:36:38,440 --> 00:36:41,120
Speaker 11: had these sort of blips along the way where value

736
00:36:41,160 --> 00:36:43,640
Speaker 11: outperforms and then it goes back to getting killed again.

737
00:36:43,920 --> 00:36:46,400
Speaker 11: I don't really have the answer to that, although you know,

738
00:36:47,120 --> 00:36:50,680
Speaker 11: I will say that the average stock in the S

739
00:36:50,760 --> 00:36:54,240
Speaker 11: and P five hundred is not super expensive. The median

740
00:36:54,360 --> 00:36:57,719
Speaker 11: stock in the SMP is about in eighteen pe, which

741
00:36:57,880 --> 00:37:00,960
Speaker 11: you know is pretty reasonable over time. It's really a

742
00:37:01,080 --> 00:37:03,839
Speaker 11: handful of stocks on the high end that have gotten

743
00:37:03,920 --> 00:37:04,759
Speaker 11: really expensive.

744
00:37:06,640 --> 00:37:09,879
Speaker 7: So Jared Alex and I were just discussing a story

745
00:37:09,880 --> 00:37:13,480
Speaker 7: in the Bloomberg Turmoil about how younger people are beginning

746
00:37:13,520 --> 00:37:16,280
Speaker 7: to trade at a much younger age. So, for example,

747
00:37:16,400 --> 00:37:19,359
Speaker 7: gen Z started investing when they're nineteen on average, that's

748
00:37:19,360 --> 00:37:22,239
Speaker 7: according to Charles Schwab. That compares to thirty two for

749
00:37:22,360 --> 00:37:24,640
Speaker 7: gen X and thirty five for baby boomers. So people

750
00:37:24,640 --> 00:37:27,520
Speaker 7: are getting into the market a lot younger. Are you

751
00:37:27,640 --> 00:37:30,000
Speaker 7: seeing that in your business, in your newsletter business and

752
00:37:30,040 --> 00:37:30,759
Speaker 7: your commentaries.

753
00:37:31,920 --> 00:37:32,920
Speaker 5: Well, it's funny.

754
00:37:32,640 --> 00:37:37,160
Speaker 11: Because in my spare time, I'm also an adjunct professor

755
00:37:37,280 --> 00:37:41,239
Speaker 11: at Coastal Carolina University, and I teach these young people,

756
00:37:42,000 --> 00:37:45,120
Speaker 11: and I would say that jibes with my experience. I've

757
00:37:45,360 --> 00:37:49,160
Speaker 11: you know, in my last class, I would say about

758
00:37:49,320 --> 00:37:52,120
Speaker 11: forty to fifty percent of the class had brokerage accounts.

759
00:37:52,920 --> 00:37:54,759
Speaker 11: They had no idea what they were doing. I mean,

760
00:37:54,800 --> 00:37:59,000
Speaker 11: they were just screwing around, but they but they and

761
00:37:59,080 --> 00:38:01,920
Speaker 11: a lot of them tradeto by the way. Yeah, so

762
00:38:02,520 --> 00:38:05,880
Speaker 11: it's a mixture of crypto and in video and stuff

763
00:38:06,000 --> 00:38:08,799
Speaker 11: like that. But yeah, they are starting at a younger age.

764
00:38:09,040 --> 00:38:10,400
Speaker 2: Is this like a good thing or a bad thing?

765
00:38:10,440 --> 00:38:13,000
Speaker 2: We were debating this earlier, Like, I mean, it's a

766
00:38:13,040 --> 00:38:15,000
Speaker 2: good way to lose money, but isn't it also good

767
00:38:15,040 --> 00:38:17,280
Speaker 2: to kind of make money and be and take control

768
00:38:17,320 --> 00:38:19,000
Speaker 2: of your finances. Like, what do you think about that?

769
00:38:20,360 --> 00:38:22,239
Speaker 11: Well, I think it's a I think it's a good thing.

770
00:38:22,360 --> 00:38:25,080
Speaker 11: But I don't think anybody's taking control over their finances.

771
00:38:25,160 --> 00:38:27,680
Speaker 11: I think what they're doing is learning. I think they're

772
00:38:27,800 --> 00:38:31,680
Speaker 11: learning how to invest, and they're making mistakes in early

773
00:38:31,800 --> 00:38:34,440
Speaker 11: age when they can afford to make mistakes. If they

774
00:38:34,600 --> 00:38:38,400
Speaker 11: lose eight hundred bucks on video or some crypto token,

775
00:38:38,880 --> 00:38:42,520
Speaker 11: there really are no consequences. The consequences are if you

776
00:38:42,600 --> 00:38:45,360
Speaker 11: start investing later and you're investing real money and you

777
00:38:45,440 --> 00:38:48,080
Speaker 11: make mistakes, then then that's that's hard to reverse.

778
00:38:48,960 --> 00:38:51,880
Speaker 4: All right, Jared, thanks so much for joining us. Jared Dillon.

779
00:38:51,960 --> 00:38:55,680
Speaker 7: He's the founder of the Daily Dirt nep, a financial

780
00:38:56,080 --> 00:38:58,600
Speaker 7: column and or money letter that goes out.

781
00:38:58,760 --> 00:39:00,399
Speaker 4: It's been doing that for quite some time.

782
00:39:02,239 --> 00:39:06,120
Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live

783
00:39:06,239 --> 00:39:09,760
Speaker 1: weekdays at ten am Eastern on applecar Play and Android

784
00:39:09,800 --> 00:39:12,520
Speaker 1: Auto with the Bloomberg Business app. You can also listen

785
00:39:12,680 --> 00:39:15,719
Speaker 1: live on Amazon Alexa from our flagship New York station,

786
00:39:16,120 --> 00:39:18,880
Speaker 1: Just say Alexa play Bloomberg eleven thirty.

787
00:39:19,840 --> 00:39:22,520
Speaker 2: We take it to Bloomberg n EF that research is

788
00:39:22,560 --> 00:39:26,799
Speaker 2: also awesome. They cover commodities, power, transport, industry, buildings, AG

789
00:39:27,000 --> 00:39:31,800
Speaker 2: sectors as well as cost cutting technologies and sustainability issues

790
00:39:31,840 --> 00:39:34,280
Speaker 2: and the goal is to help business, finance, and governments

791
00:39:34,640 --> 00:39:37,760
Speaker 2: navigate the change as we move towards a green future.

792
00:39:38,560 --> 00:39:41,480
Speaker 2: Speaking of let's go to green. Martin Tangler is head

793
00:39:41,520 --> 00:39:45,239
Speaker 2: of green Hydrogen over at Bloomberg and EF and he

794
00:39:45,400 --> 00:39:48,120
Speaker 2: joins us. Now, Martin, I'm just asking for Paul, what's

795
00:39:48,200 --> 00:39:49,040
Speaker 2: green hydrogen?

796
00:39:51,120 --> 00:39:53,200
Speaker 8: So just to give you a correction, I'm the head

797
00:39:53,200 --> 00:39:55,040
Speaker 8: of hydrogen research, not just green hydrogen.

798
00:39:55,080 --> 00:39:56,120
Speaker 2: Okay, good to know.

799
00:39:56,320 --> 00:39:56,719
Speaker 6: We like that.

800
00:39:58,239 --> 00:40:03,200
Speaker 8: Green hydrogen is one way of producing hydrogen via electrolysis.

801
00:40:03,320 --> 00:40:08,440
Speaker 8: So that's splitting water into oxygen and hydrogen using green electricity.

802
00:40:08,560 --> 00:40:09,800
Speaker 8: So that's what green hydroen is.

803
00:40:10,960 --> 00:40:16,399
Speaker 7: So explain to us where this technology green hydrogen? Where

804
00:40:16,480 --> 00:40:19,280
Speaker 7: are we in terms of the development of this technology.

805
00:40:20,840 --> 00:40:22,880
Speaker 6: Yeah, so this is a really.

806
00:40:24,160 --> 00:40:27,480
Speaker 8: It's an old technology. At its core, we've used it

807
00:40:27,640 --> 00:40:30,239
Speaker 8: for more than one hundred years. We've done electrolysis of

808
00:40:30,360 --> 00:40:34,960
Speaker 8: breaking up water molecules into hydrogen oxygen. What's new though,

809
00:40:35,600 --> 00:40:39,919
Speaker 8: is that this time we want to use green electricity

810
00:40:40,120 --> 00:40:44,239
Speaker 8: in order to reduce the emissions from the production of

811
00:40:44,760 --> 00:40:48,160
Speaker 8: what's called gray hydrogen. Gray hydrogen being hydrogen made from

812
00:40:48,160 --> 00:40:53,399
Speaker 8: fossil fuels without any capturing of the resulting CO two,

813
00:40:53,440 --> 00:40:55,480
Speaker 8: which is how we might make the vast majority of

814
00:40:55,520 --> 00:40:59,359
Speaker 8: the hydrogen today, and many countries, many governments have been

815
00:40:59,480 --> 00:41:02,840
Speaker 8: incentive devising the production of green and sometimes also so

816
00:41:03,000 --> 00:41:06,960
Speaker 8: called blue hydrogen that's gray with carbon capture and storage

817
00:41:06,960 --> 00:41:10,799
Speaker 8: attached to that, so that we can decarbonize a deproduction

818
00:41:11,440 --> 00:41:14,759
Speaker 8: of the gray hydrogen that we already produced today one

819
00:41:14,800 --> 00:41:17,000
Speaker 8: hundred million tons. It's a lot of hydrogen we make,

820
00:41:17,520 --> 00:41:20,680
Speaker 8: and also to use hydrogen in some other sectors to

821
00:41:20,800 --> 00:41:24,799
Speaker 8: decarbonize things like steel production, for example, or shipping where

822
00:41:24,880 --> 00:41:26,520
Speaker 8: it's really hard to do electrification.

823
00:41:27,880 --> 00:41:31,160
Speaker 2: Why do we want hydrogen? It is very expensive to split.

824
00:41:31,520 --> 00:41:33,600
Speaker 2: It is more expensive if you are going to split

825
00:41:33,680 --> 00:41:37,480
Speaker 2: a hydrogen and oxygen using renewable energy.

826
00:41:37,600 --> 00:41:38,560
Speaker 3: So why do we want it?

827
00:41:38,640 --> 00:41:40,320
Speaker 2: What's the end product? So awesome?

828
00:41:42,000 --> 00:41:45,040
Speaker 8: Yeah, So we want it, as I've said, in order

829
00:41:45,120 --> 00:41:49,600
Speaker 8: to reduce emissions. That's the only reason honestly. Today, making

830
00:41:49,680 --> 00:41:53,160
Speaker 8: green hydrogen, as you said, Alex, is more expensive than

831
00:41:53,239 --> 00:41:56,279
Speaker 8: making gray hydrogen, and in turn making gray hydrogen is

832
00:41:56,320 --> 00:41:58,839
Speaker 8: more expensive than using fossil fuels because hydrogen is made

833
00:41:59,080 --> 00:42:01,400
Speaker 8: gray hydrogen is made from those fossil fuels. So we

834
00:42:01,520 --> 00:42:04,600
Speaker 8: only use hydrogen in sectors where it is required for

835
00:42:04,680 --> 00:42:08,440
Speaker 8: the chemical properties of it today, So that's production of fertilizers,

836
00:42:08,840 --> 00:42:12,399
Speaker 8: things like ammonia NH three. You cannot make NH three

837
00:42:12,480 --> 00:42:13,719
Speaker 8: without putting H in there.

838
00:42:13,840 --> 00:42:14,000
Speaker 6: Right.

839
00:42:14,680 --> 00:42:18,239
Speaker 8: Same goes for all refining. You need hydrogen and for

840
00:42:18,360 --> 00:42:20,279
Speaker 8: future as I've said, we're going to need it for

841
00:42:20,800 --> 00:42:24,000
Speaker 8: sectors that are going to be really hard to decarbonize

842
00:42:24,120 --> 00:42:27,640
Speaker 8: using electrification. For example, it's really hard to run a

843
00:42:27,840 --> 00:42:30,840
Speaker 8: ship that runs across half the world on batteries. You

844
00:42:31,000 --> 00:42:33,400
Speaker 8: just don't have enough batteries. Batteries are too heavy, they

845
00:42:33,520 --> 00:42:36,560
Speaker 8: take up too much space. We need something denser, and

846
00:42:36,719 --> 00:42:39,320
Speaker 8: one way we could do that, for example, is to

847
00:42:39,480 --> 00:42:43,880
Speaker 8: combine hydrogen and nitrogen into ammonia, or hydrogen carbon and

848
00:42:43,960 --> 00:42:47,399
Speaker 8: oxygen into methanol and use those to power the ship

849
00:42:47,480 --> 00:42:49,280
Speaker 8: instead as a more energy dense fuel.

850
00:42:50,239 --> 00:42:53,239
Speaker 7: Martin Which countries or which parts of the world are

851
00:42:53,360 --> 00:42:55,759
Speaker 7: leading in this green hydrogen move.

852
00:42:57,719 --> 00:43:00,080
Speaker 8: This is a really hard one to say. If you

853
00:43:00,120 --> 00:43:02,400
Speaker 8: asked people five years ago, they tell you, it's totally

854
00:43:02,520 --> 00:43:05,960
Speaker 8: Japan that's leading. Japan is the first country that had

855
00:43:06,000 --> 00:43:09,120
Speaker 8: a hydrogen strategy way back when in twenty fourteen, when

856
00:43:09,200 --> 00:43:12,480
Speaker 8: nobody has even thought about hygien to the extent that

857
00:43:12,840 --> 00:43:16,200
Speaker 8: many people are today. But now you could say the

858
00:43:16,440 --> 00:43:21,359
Speaker 8: real leaders are the US and European Union and its

859
00:43:21,440 --> 00:43:24,560
Speaker 8: member states. In the US, as you're probably aware, the

860
00:43:24,600 --> 00:43:28,440
Speaker 8: Inflation Reduction Act was passed back in August twenty twenty two.

861
00:43:28,880 --> 00:43:32,000
Speaker 8: There were some pretty generous tax credits for the production

862
00:43:32,239 --> 00:43:36,239
Speaker 8: of green and blue hydrogen, and we're seeing especially the

863
00:43:36,280 --> 00:43:39,919
Speaker 8: blue hygiene projects in the US now coming through because

864
00:43:39,960 --> 00:43:42,440
Speaker 8: the economics could actually work out on green. It's a

865
00:43:42,520 --> 00:43:46,120
Speaker 8: bit more difficult because companies are still waiting on guidance

866
00:43:46,160 --> 00:43:49,440
Speaker 8: as to the rules under which they could claim these credits.

867
00:43:49,760 --> 00:43:52,600
Speaker 8: In Europe, there's a lot of excitement. Europe is the

868
00:43:52,680 --> 00:43:56,640
Speaker 8: one place since probably the most sincere desire to decarbonize

869
00:43:56,680 --> 00:43:59,680
Speaker 8: and the strongest policies to do that. We have carbon prices,

870
00:44:00,200 --> 00:44:03,120
Speaker 8: mandates to use hydrogen. There's very few other places where

871
00:44:03,120 --> 00:44:07,120
Speaker 8: you have actual mandates that require use of hydrogen for

872
00:44:07,440 --> 00:44:11,840
Speaker 8: for example, shipping or aviation. That's what we're seeing in Europe.

873
00:44:12,800 --> 00:44:14,759
Speaker 2: They have a question that I keep hearing about is

874
00:44:14,880 --> 00:44:17,160
Speaker 2: you know, the IRA, for example, did a great job

875
00:44:17,280 --> 00:44:20,200
Speaker 2: in incentivizing production of it, helping bring down the cost.

876
00:44:20,600 --> 00:44:23,080
Speaker 2: But where it looks like things are falling short is

877
00:44:23,160 --> 00:44:26,719
Speaker 2: the demand side. So despite those subsidies, the buyer and

878
00:44:26,760 --> 00:44:29,440
Speaker 2: the seller costs for hydrogen is still very far apart,

879
00:44:29,600 --> 00:44:32,759
Speaker 2: and that's creating a difficulty in securing that demand. Where

880
00:44:32,920 --> 00:44:34,520
Speaker 2: is that gap right now? And how do you see

881
00:44:34,560 --> 00:44:35,800
Speaker 2: that evolving?

882
00:44:37,680 --> 00:44:41,359
Speaker 8: Yeah, that's actually the key issue, Alex. You really hit

883
00:44:41,360 --> 00:44:44,759
Speaker 8: the nail on the head. There's so many projects out there,

884
00:44:44,840 --> 00:44:46,960
Speaker 8: and we have a database for that at BNF, So

885
00:44:47,120 --> 00:44:49,200
Speaker 8: for those of you who have access, definitely do come

886
00:44:49,239 --> 00:44:51,200
Speaker 8: and check it out if you haven't already. We have

887
00:44:51,239 --> 00:44:55,360
Speaker 8: a database of production projects. So that's all the projects

888
00:44:55,520 --> 00:44:57,560
Speaker 8: or all the companies with all their projects that would

889
00:44:57,600 --> 00:45:01,360
Speaker 8: want to produce hydrogen. And we're talking tens of millions

890
00:45:01,360 --> 00:45:04,080
Speaker 8: of tons, sixty million tons by twenty thirty, So that's

891
00:45:04,760 --> 00:45:06,680
Speaker 8: compared to hundred that we already make today with the

892
00:45:06,719 --> 00:45:08,960
Speaker 8: gray hygroens. It's a vast, vast increase that we could

893
00:45:09,040 --> 00:45:12,760
Speaker 8: see if only there was actually someone who would kindly

894
00:45:12,880 --> 00:45:17,080
Speaker 8: want to buy that green hydrogen or that blue hydrogen,

895
00:45:17,440 --> 00:45:20,160
Speaker 8: and why don't they want to buy it because it's expensive,

896
00:45:20,400 --> 00:45:23,560
Speaker 8: like I've said at the beginning, and what's needed to

897
00:45:23,680 --> 00:45:27,760
Speaker 8: bridge that well. First, ideally the cost of renewables should

898
00:45:27,760 --> 00:45:29,720
Speaker 8: come down, and they will be coming down, as benf

899
00:45:29,800 --> 00:45:33,480
Speaker 8: keeps writing, that's great, because the key input into the

900
00:45:33,480 --> 00:45:36,239
Speaker 8: production of green hydrogen is the cost of green electricity.

901
00:45:36,800 --> 00:45:39,279
Speaker 8: Then we need to see the cost of electrolyzers, so

902
00:45:39,360 --> 00:45:43,360
Speaker 8: that's the machines that split the water into oxygen and hydrogen.

903
00:45:43,400 --> 00:45:46,719
Speaker 8: They'd need to get cheaper. That's going to happen, but

904
00:45:47,160 --> 00:45:50,360
Speaker 8: so far we've seen the opposite. The costs have actually

905
00:45:50,400 --> 00:45:53,959
Speaker 8: gone up. The supply chain issues with hydrogen with electrolyizers

906
00:45:54,000 --> 00:45:57,240
Speaker 8: have been quite challenging. And finally we need to see policy,

907
00:45:57,840 --> 00:46:00,960
Speaker 8: and we see a lot of policy on the supply side.

908
00:46:01,000 --> 00:46:03,319
Speaker 8: So the US, for example, forty five v forty five

909
00:46:03,440 --> 00:46:06,680
Speaker 8: q credits for the from the IRA for the production

910
00:46:07,480 --> 00:46:11,120
Speaker 8: of green or blue hydrogen. That's great, but that's probably

911
00:46:11,200 --> 00:46:13,239
Speaker 8: not enough, maybe enough for blue, but not enough for

912
00:46:13,320 --> 00:46:16,200
Speaker 8: green to want somebody to buy it. So that's where

913
00:46:16,200 --> 00:46:19,600
Speaker 8: the European Union comes in with things like quote as

914
00:46:19,719 --> 00:46:22,560
Speaker 8: mandates that a certain sector must use a certain amount

915
00:46:22,800 --> 00:46:26,200
Speaker 8: of hydrogen by a certain date. And that's a pretty

916
00:46:26,239 --> 00:46:31,359
Speaker 8: crude way of enforcing hydrogen demand. And there's many, many

917
00:46:31,520 --> 00:46:33,279
Speaker 8: pros and cons of that, but that's one way to

918
00:46:33,320 --> 00:46:33,960
Speaker 8: get it done.

919
00:46:33,920 --> 00:46:35,440
Speaker 4: All right, Martin, thank you so much for joining us.

920
00:46:35,480 --> 00:46:39,560
Speaker 7: Martin Tangler, head of hydrogen Research at DNEPP.

921
00:46:40,440 --> 00:46:44,960
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922
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923
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924
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