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Speaker 1: We US and Chinese negotiators have concluded their latest round
Speaker 1: of talks, a trade talks, of course, that were underway
Speaker 1: in Stockholm, with an agreement to extend their tart truth
Speaker 1: truth or so it seems. We have some questions here.
Speaker 1: US Treasury Secretary Scott Besson and US Trade Representative Jamison
Speaker 1: Greer holding a press conference last hour in Stockholm, the
Speaker 1: Treasury Secretary saying an extension not a done deal.
Speaker 3: If we boomerang back to the April second level, if
Speaker 3: they would go to thirty four. I noticed as the
Speaker 3: earlier question said that the Chinese Deputy minister did say
Speaker 3: that we had agreed on a pause. We have not.
Speaker 3: Nothing is agreed until we speak with President Trump. He's
Speaker 3: on Air Force one, I believe, doing a press conference
Speaker 3: right now, and we will be seeing him in the
Speaker 3: Oval tomorrow to go over the deal with him, and
Speaker 3: then he'll decide if the pause continues.
Speaker 1: As is all right. That, of course, was US Treasury
Speaker 1: Secretary Scott bess And earlier in Stockholm with more on
Speaker 1: where we are. Bloomberg News correspondent Oliver Crook was in
Speaker 1: the room where it happened in Stockholm, where that press
Speaker 1: conference was went underway just about thirty thirty five minutes ago.
Speaker 1: Oliver pause, no pause. I think we're all still kind
Speaker 1: of scratching our head to understand exactly what was agreed to.
Speaker 4: Yeah, I think we were too a little bit, and
Speaker 4: that was helpful for the Secretary of the Treasury to
Speaker 4: give a little cast, a little bit more light on that.
Speaker 4: You know, far be it from Donald Trump to withhold
Speaker 4: any suspense from us. Basically, the two days of negotiations
Speaker 4: that we had by the Chinese Vice Premier, the US
Speaker 4: Treasury Secretary I'm the ambassador on trade, Jamison Greer ended
Speaker 4: a couple hours ago. Then they briefed the media and
Speaker 4: it ended, it seemed initially by the Chinese saying that
Speaker 4: they basically a ninety day pause. The continuation of the
Speaker 4: truce between the United States and China that that would
Speaker 4: continue for another period of time.
Speaker 5: They didn't specify the period of time.
Speaker 4: Then we started to hear from the Americans with a
Speaker 4: slightly different story that basically this is still conditional to
Speaker 4: Donald Trump's approval. We understand that Scott Befson did speak
Speaker 4: with Donald Trump after the conversations before he gave that
Speaker 4: press briefing, but he's going to give a more complete
Speaker 4: briefing a little bit tomorrow in the Oval Office in
Speaker 4: the White House in order to get the final sign
Speaker 4: off from Donald Trump, who may you know, change his mind,
Speaker 4: may demand something else. But again, we the deadline that
Speaker 4: we're facing here is August the twelfth, when these terrif
Speaker 4: rates will shoot.
Speaker 5: Right back up.
Speaker 4: So for the market, this is really a crucial thing
Speaker 4: to get over the line.
Speaker 6: Interestingly enough, at least the equity market not reacting much
Speaker 6: to this news. Perhaps it was priced in, perhaps there
Speaker 6: was the expectation that there would be some sort of
Speaker 6: extension here. I want to go to rare Earth, specifically
Speaker 6: Oliver and what we learned about the way that rare earths,
Speaker 6: not just today but really over the last few months,
Speaker 6: have taken center stage when it comes to these negotiations,
Speaker 6: what do we know about that?
Speaker 4: Well, what I think is interesting is that there were
Speaker 4: concessions on rare earth. There were concessions in exchange for that,
Speaker 4: on the Age twenty chips by Nvidia, by the United States,
Speaker 4: the allowing of selling them into China. And we should
Speaker 4: say that one could interpret this as a sort of
Speaker 4: act of goodwill on both sides in order to try
Speaker 4: to make progress. But the reality of the situation is
Speaker 4: that for each of these economies, they're dependent on the other.
Speaker 4: There is no alternative for these technologies. This is not
Speaker 4: just an act of good will. This is the leverage
Speaker 4: that China holds over the United States. It is the
Speaker 4: leverage that the United States holds over China. And they
Speaker 4: did manage to make some breakthroughs on that. And again
Speaker 4: this is something that was active in the discussions with
Speaker 4: the delegation from China and the United States.
Speaker 5: Today we heard from Jamison.
Speaker 4: Greer saying that I don't want to talk about magnets basically. Ever, again,
Speaker 4: as far as they're concerned, the magnets should be flowing.
Speaker 5: They are flowing now, and.
Speaker 4: That this should be a close topic and that they
Speaker 4: can then put that aside in order to make progress
Speaker 4: on the many other issues that are sort of large
Speaker 4: issues between the China and the United States, they'd like
Speaker 4: to basically put into it, and as far as they're concerned,
Speaker 4: they hope it's done all right, Oliver.
Speaker 1: Back in June, President she of China, we know, invited
Speaker 1: President Trump to Beijing. Are the two leaders talking at
Speaker 1: all during these talks? Are they just waiting until I
Speaker 1: don't know the final terms. What's what's kind of going
Speaker 1: on behind the scenes here?
Speaker 4: Yeah, I mean our impression is that the last time
Speaker 4: that they spoke, this came up during the press conference,
Speaker 4: was in the call that they held in June. We
Speaker 4: understand that Shijiping did invite Donald Trump and the first
Speaker 4: Lady Millennia Trump to China at some point. There has
Speaker 4: been some discussions today. I think there was a Donald
Speaker 4: Trump truth saying that basically he's not seeking a discussion
Speaker 4: with President Jijenping, but he has been invited. But this
Speaker 4: is really at the crux of the issue here, right.
Speaker 4: The Chinese, in the last few decades have been building
Speaker 4: out their economy, have been building out.
Speaker 5: Their status on the global stage.
Speaker 4: They don't want to be seen sort of bowing theatrically
Speaker 4: to the United States on these trade issues. The Europeans
Speaker 4: have much less of a problem with that. They're being
Speaker 4: much more pragmatic about these sorts of things. But for
Speaker 4: the Chinese, this is not just about trade. This is
Speaker 4: about their status on the global stage. And I'll remind
Speaker 4: you that in Trump won the first Trump administration, these
Speaker 4: trade negotiations between the Chinese and the United States, they
Speaker 4: were held in Washington, d C. These discussions today are
Speaker 4: being held in Geneva, the United Kingdom, and Stockholm in
Speaker 4: neutral sort of third party places. And we've seen what
Speaker 4: China's appetite is to escalate this trade where if they
Speaker 4: have to, they shot the tariff up to one hundred
Speaker 4: and twenty five percent, which is how we got to
Speaker 4: this truce. But that is the sort of dynamic going
Speaker 4: into this. Both leaders want to appear strong and need
Speaker 4: to exert their leverage on the other.
Speaker 6: What are the questions that remain unanswered at this point
Speaker 6: in terms of the details, the nitty gritty and what
Speaker 6: really needs to be hashed out here.
Speaker 4: Yeah, so, I mean, there are a panoply of different issues.
Speaker 4: For example, there's the issue of TikTok right, there is
Speaker 4: a buyer potentially for TikTok in the United States, so
Speaker 4: says Donald Trump, the Chinese still need to give a
Speaker 4: nod to sell that. That is apparently something that did
Speaker 4: not come up in these conversations. There is the question
Speaker 4: of fentanyl Bess and says that he is not pleased
Speaker 4: with sort of how things have been progressing there.
Speaker 5: China could still be doing more.
Speaker 4: I mean, there is the issue of Russia, which increasingly
Speaker 4: we've seen Donald Trump change his position on Russia and
Speaker 4: Vladimir Putin, and we had a large discussion apparently between
Speaker 4: the two delegations today on the question of Russia and
Speaker 4: Scott Besson again airing their displeasure at the continued buying
Speaker 4: of fossil fuels both from Russia and China, but also
Speaker 4: that dual use military technology that they're seeing increasingly on
Speaker 4: the battlefield in Ukraine. So these were active discussions. And
Speaker 4: then there's also this question of the secondary sanctions that
Speaker 4: Trump is now talking about imposing on people who buy
Speaker 4: crude oil from Russia if Putin does not come to
Speaker 4: the negotiating table in the next ten days.
Speaker 5: This came up in the.
Speaker 4: Press conference and when asked you know whether or not
Speaker 4: the Chinese position had altered. Scott Besson said, basically, the
Speaker 4: Chinese take their sovereignty very seriously.
Speaker 5: They don't really want to be told what to do.
Speaker 4: And if they want to pay one hundred percent tariffs
Speaker 4: as a consequence of buying Russian oil, than they will.
Speaker 1: Secretary of the Treasury Scott Essen said, we understand China's
Speaker 1: agenda much better. What is really the Chinese agenda? What
Speaker 1: is really the US agenda? Is it just for both
Speaker 1: to kind of get wins here ultimately.
Speaker 4: Well, what's interesting is again what we see in the
Speaker 4: dynamic with the European Union.
Speaker 5: And the United States.
Speaker 4: You have a situation with Japan, the UK, the EU
Speaker 4: where they almost want to appear to be giving more
Speaker 4: to Trump than they are sort of potentially giving these
Speaker 4: sort of you know, big, sort of sweeping statements of
Speaker 4: committing to buying you know, seven hundred and fifty billion
Speaker 4: dollars of energy, you know, investment pledges of six hundred billion.
Speaker 4: These are sort of big concessions. But again, there is
Speaker 4: a lot of room to fudge these sorts of things.
Speaker 4: With China, you have sort of the opposite dynamic where
Speaker 4: the Chinese do not want to appear to be giving more.
Speaker 4: They want to appear to be giving less. And I
Speaker 4: think that really is the tone in these discussions. And
Speaker 4: I think that again, what this meeting was supposed to
Speaker 4: do is to kick the can down the road another
Speaker 4: ninety days. You didn't get that today. I think that
Speaker 4: everyone is hopeful, and we should say overall, the tone
Speaker 4: that we got from this press conference from the ambassador,
Speaker 4: from the Treasury Secretary, they were saying, these were very,
Speaker 4: very constructive discussions, and even if we didn't get a
Speaker 4: deal today, they're sort of were signalings maybe why you're
Speaker 4: seeing modest reaction in the market that they will get
Speaker 4: it over the line, right, And.
Speaker 1: We know another thing that will be a focal point
Speaker 1: is the Treasury Secretary say that they'll meet with the
Speaker 1: President in the Oval Office tomorrow. All Right, Gonna leave
Speaker 1: it there, Oliver, Thank you so much. Oliver Crook, Bloomberg
Speaker 1: News out there in Stockholm.
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Speaker 1: I'll about you.
Speaker 5: Let me drive.
Speaker 6: Oh no, no, no, no, this is not a toy, honey.
Speaker 4: Please.
Speaker 1: Lest I want to drive. It's a good question. This
Speaker 1: is the drive to the clothes plunks for me.
Speaker 2: Well, Ja don on Bloomberg Radio.
Speaker 1: All right, TikTok, everybody, just about eighteen minutes to go
Speaker 1: until we wrap up the trade on this Tuesday. It's
Speaker 1: kind of fomcee because we know.
Speaker 6: The Fed is fed Tuesday.
Speaker 1: For it is kind of ish. They began their two
Speaker 1: day meeting today.
Speaker 6: Yeah.
Speaker 7: For J.
Speaker 6: Powell, every day is a FED day.
Speaker 1: Yeah, I guess it is.
Speaker 6: Some days, Mike's key. Every day is a FED day.
Speaker 1: Some days a construction day. Some days I mean a
Speaker 1: pressure day.
Speaker 6: We'll talk about that.
Speaker 1: We do have stocks hovering near their loads of the session.
Speaker 1: We did see yields ticking down a little bit. We
Speaker 1: had a lot of economic news that came our way.
Speaker 1: Let's get to it with Danielle di Martino Booth. She
Speaker 1: is CEO and chief strategist of QI Research, formerly at
Speaker 1: the Dallas Fed. Back here in our Bloomberg Interactive Brokers studio.
Speaker 1: Nice to have you here. How are you. I'm doing
Speaker 1: very well today.
Speaker 8: How are you doing okay to be here, counting my blessings, happy,
Speaker 8: my children are healthy, all of those things.
Speaker 1: Yeah, I agree, right like every day. Those are the
Speaker 1: things that certainly matter and make us feel much better.
Speaker 1: Having said that, we're thinking about the FED and kind
Speaker 1: of the late that lays ahead of them, or that
Speaker 1: they're considering right now, the plate of economic data, anecdotal
Speaker 1: data news from the White House a day where we
Speaker 1: think there's an extension between US China talks, but it
Speaker 1: sounds like that hasn't been confirmed quite yet. What do
Speaker 1: you think is top of mind for the FED as
Speaker 1: they are sitting and meeting. You know, there's a lot
Speaker 1: going on.
Speaker 8: I think there's probably a sense of despondency and regret
Speaker 8: right now.
Speaker 1: At the FED.
Speaker 8: I think that the full array of data would have
Speaker 8: them cutting rates tomorrow if not for you know, the
Speaker 8: constancy of the humiliation coming out of the White House. So,
Speaker 8: I mean, you don't see the labor differential in the
Speaker 8: Consumer Confidence report decline for seven months, which it did today,
Speaker 8: Jobs hard to get rose up to the highest since
Speaker 8: March of twenty twenty one. You don't see that outside
Speaker 8: of We've never seen it outside of recession.
Speaker 6: So what I'm hearing you say is that the pressure
Speaker 6: from the White House is to ky rates is having
Speaker 6: the exact opposite effect on the Federal Reserve.
Speaker 1: It absolutely is.
Speaker 8: I mean, at this point it's kind of a matter
Speaker 8: of integrity because you don't want to appear that you're
Speaker 8: cow towing, acquiessing, whatever you want to call it. But
Speaker 8: it's to the detriment of the of the real economy.
Speaker 8: And that's exactly what we're seeing, and for heaven's sake,
Speaker 8: it's on both sides of the dual mandate. When we
Speaker 8: had case Shiller hit this morning, three months ago, the
Speaker 8: three month annualized rate was plus one point six percent.
Speaker 8: This morning, the three month annualized rate was negative three
Speaker 8: point seven three percent. There is a fast decline in
Speaker 8: shelter inflation going on, and that is the biggest input
Speaker 8: to CPI. So the Fed is winning big on the
Speaker 8: inflation front and it is losing on the labor front.
Speaker 6: So if the Fed can't cut tomorrow as a result
Speaker 6: of politics fifty basis points in September and signal that
Speaker 6: they're doing that.
Speaker 1: From Jackson Hall, is it twenty twenty four.
Speaker 6: It's not. It's twenty twenty five.
Speaker 8: I know, but that would be an exact repeat, now,
Speaker 8: wouldn't it.
Speaker 6: It would be it would be do you think they
Speaker 6: should do that?
Speaker 1: I think they're going to end up doing that.
Speaker 8: And you know, I'll add another little tidbit on politics.
Speaker 8: Just because Waller and Christopher Waller and Michelle Bowman are
Speaker 8: Trump appointees, I don't think that should necessarily negate their
Speaker 8: expected descents tomorrow.
Speaker 3: Well. J.
Speaker 6: Powell is a Trump appointing, of course he was.
Speaker 8: Of course he was, and to thumping Senate votes that
Speaker 8: were even almost as thumping when he was reconfirmed. So
Speaker 8: he's very much a bipartisan type of FED chair. Again,
Speaker 8: it's a shame. It's a shame that they're not able
Speaker 8: to act tomorrow.
Speaker 1: Danielle, do you think the presidential policies and certainly how
Speaker 1: they were presented in terms of tax cuts and spending,
Speaker 1: that they would be good for the economy? And we
Speaker 1: certainly had a guest on yesterday who thinks that there
Speaker 1: will be somewhat stimulative and that the FED doesn't necessarily
Speaker 1: need to be cutting rates at this point. To be fair,
Speaker 1: we do have an extension on this US China trade deal,
Speaker 1: so we don't know exactly what this is going to
Speaker 1: play out. And to be fair, we do know that
Speaker 1: tariffs are going to be higher they already have been,
Speaker 1: So why wouldn't it be smart for the Fed to
Speaker 1: maybe hold back until they really know what they're dealing with,
Speaker 1: because it would be terrible right to.
Speaker 8: Have the Fed cut and they have to raise rates again.
Speaker 8: It would be Arthur Burns all over again and the reducs.
Speaker 8: And I completely understand that. But your vacation intentions are falling.
Speaker 8: Hilton just announced negative one point five percent year over
Speaker 8: year for revenue per available room. Domestic air travel is down,
Speaker 8: Spending on services is down as much as it is
Speaker 8: because if there is any goods inflation, they're simply you
Speaker 8: can't squeeze blood out of a rock. There's only so
Speaker 8: much in a household budget when inflation adjusted earnings are falling,
Speaker 8: which they are. And underemployment is just off the Richter scale.
Speaker 8: So these are very real phenomena, and I promise you
Speaker 8: the FIT is deliberating about all of them.
Speaker 6: You said unemployment is off the rich underemployment.
Speaker 1: Okaycter employment just a few years ago.
Speaker 8: If you were going from where my mother lives in
Speaker 8: College Station to the Bush Airport in Houston. An Uber
Speaker 8: driver is making ninety dollars for that particular ride. Now
Speaker 8: they're making thirty five forty dollars for the same exact drive.
Speaker 3: Why.
Speaker 8: Because the gig economy is saturated with individuals who have
Speaker 8: exhausted their unemployment benefits. Right, your exhaustion rate for continuing
Speaker 8: claimants continuing jobless claimants is thirty nine point six percent.
Speaker 8: That means it thirty nine point six percent of people
Speaker 8: who are among the almost two million continuing job as
Speaker 8: claimants have run through what the states pay. You better
Speaker 8: be driving for Uber or door Dash.
Speaker 6: I had this, this exact conversation that Daniel's outlining with
Speaker 6: a lift driver in San Diego when we were there, Carol.
Speaker 6: He had been out of work since the pandemic, highly
Speaker 6: qualified to work in I believe, aeronautical engineering, and could
Speaker 6: not find a job.
Speaker 1: Look who would have said that two years ago.
Speaker 6: So again, this is an anecdote coming from me.
Speaker 8: It's an anecdotomy, I understand. But I have a rising
Speaker 8: college senior. I cannot tell you how many of his
Speaker 8: friends are coming to me and saying I can't get
Speaker 8: a job.
Speaker 6: I can't get a job. I can't get a job.
Speaker 8: I couldn't get an into my internship was canceled. There's
Speaker 8: a hiring freeze. I mean, there is a class of
Speaker 8: twenty twenty four. The only thing that's better about it
Speaker 8: is that it's better than the class of twenty twenty five.
Speaker 1: Yeah, I know, it's interesting anecdotal because I've seen the
Speaker 1: reporting too, and I too have a daughter who just
Speaker 1: graduated and she's got a job, thankful, and has since
Speaker 1: last fall. And all of our peers they have gotten jobs.
Speaker 1: So it's like, I don't know, I'm trying to understand
Speaker 1: exactly where this economy is. The Atlanta Fedge is coming
Speaker 1: out and upping its GDP forecasts. I mean that export
Speaker 1: number is higher than we thought it was going to be.
Speaker 8: I mean that's like GDP trade math. But who's not
Speaker 8: going to be paying attention to consumption when we see
Speaker 8: GDP in the morning.
Speaker 1: But net, net, how do you see the Trump administration policies?
Speaker 1: Are they stimulative? They are certainly sold as being good
Speaker 1: back for the US economy. That's your original question. Than
Speaker 1: Mike concern is or I think many would say their
Speaker 1: concern is that the Fed's got to be really careful.
Speaker 8: So the assumption is that the horse that we lead
Speaker 8: to water is going to drink right, because the only
Speaker 8: the thrust of the bill is preventing a negative income
Speaker 8: shock such that the tax cuts do not expire at
Speaker 8: the end of this year.
Speaker 1: So you're preventing a negative income shock.
Speaker 8: You're certainly not sending money out into the economy in
Speaker 8: the sense that it was in the post pandemic era
Speaker 8: the Cares Act.
Speaker 1: That's not happening.
Speaker 8: So I mean, maybe uber and lyft drivers are going
Speaker 8: to get a lift right because they're not going to
Speaker 8: get taxed on those on the tips that they make.
Speaker 8: But again, we are seeing consistent and persistent declines in
Speaker 8: capital expenditure plans, and so you.
Speaker 1: Can lead the horse to water, but can you make
Speaker 1: that horse drink? So just fifteen seconds. So the valuations,
Speaker 1: the record after record that we've seen the S and
Speaker 1: P five hundred, do you think that's not warranted? Considering
Speaker 1: it sounds like I don't is hope a strategy? So
Speaker 1: you would say, no, we're overvalued, and it's I would
Speaker 1: certainly think, so, all right, going to leave it there.
Speaker 1: Fun to have you here, Danielle de Martin. You know Booth.
Speaker 1: She's CEO and chief strategiest of QI Research, joining us here.
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Speaker 6: Carol summed up well on our editorial call this morning
Speaker 6: when she said, let's get Brook Sutherland on to talk planes,
Speaker 6: trains and automobiles.
Speaker 1: And so Brook, we all love to know this space.
Speaker 6: That's why she's here with us. I just want to
Speaker 6: give everyone an idea of the planes part of this.
Speaker 6: Boeing almost halted its cash burn in the second quarter
Speaker 6: and I reported a smaller than expected loss. The trainsportion
Speaker 6: of this is Union Pacific a green to acquire Norfolk
Speaker 6: Southern in a seventy two billion dollar cash and stock transaction.
Speaker 6: And automobiles. We have to stretch this one a little bit,
Speaker 6: I know. So Okay ups shares tumbled after the company
Speaker 6: said economic volatile, they continues to roil its operations, but hey,
Speaker 6: they got a lot of trucks Carol think it's fair
Speaker 6: to say it counts as automobiles, all right, So let's
Speaker 6: get to it.
Speaker 1: Let's get to Brook Sutherland. She's Bloomberg News Boston Bureau,
Speaker 1: chief writer of the Bloomberg Industrial Strength newsletter, and she
Speaker 1: joins us from the Boston bureau. Brook, we do want
Speaker 1: to start with trains mega merger. Why is this the
Speaker 1: right time for a deal, especially in a day when
Speaker 1: Norfolk their shares are down, they lowered their outlook for
Speaker 1: full year revenue growth. I mean, is this combination going
Speaker 1: to make it better?
Speaker 7: That's certainly the hope. And you know, frankly, I really
Speaker 7: think the railroad industry is out of better ideas to
Speaker 7: grow at this point. You know, we've really seen stagnating
Speaker 7: or even declining volumes in the rail industry in recent years,
Speaker 7: just given the competition from the trucking industry in particular.
Speaker 7: If you think about it, trucks can go pretty much
Speaker 7: wherever they want. There's your automobile reference there, but you
Speaker 7: versus trains are really limited to the tracks that they have,
Speaker 7: and that does put them at a bit of a
Speaker 7: competitive disadvantage, even though there are advantages in other respects.
Speaker 7: For you know, they tend to be more energy efficient,
Speaker 7: they tend to be less costly, and so, you know,
Speaker 7: I think the railroads are thinking to really chip away
Speaker 7: at that market sharehold that the trucking industry has. They
Speaker 7: have to make things more efficient for their customers, and
Speaker 7: the idea would be that if you could set up
Speaker 7: a network that's truly coast to coast from California to
Speaker 7: New York, that that would take out some of those
Speaker 7: pain points that turned customers off from the railroad industry.
Speaker 6: I was struck on Friday when we spoke to Kyle
Speaker 6: Porter and I read his piece on this book that
Speaker 6: this would be the only US transcontinental railroad. It would,
Speaker 6: It would, And that's a result of you know, the
Speaker 6: past what one hundred and fifty plus years of anti
Speaker 6: trust action?
Speaker 7: Is that why, you know, there's really been a lot
Speaker 7: of consolidation in the railroad industry. Who've just more recently
Speaker 7: sort of been in this period of pause, partly just
Speaker 7: because it had consolidated so much. But you did see,
Speaker 7: you know a little bit of a step forward with
Speaker 7: Canadian Pacific ultimately buying Kansas City Southern, and that I guess,
Speaker 7: you know, sort of has started the wheels grinding again
Speaker 7: in terms of could even more consolidation be possible in
Speaker 7: this industry? You know, I do still think that that's
Speaker 7: a bit of an open question of how regulators will
Speaker 7: respond to this deal. That Kansas City Southern deal was
Speaker 7: approved under sort of a loophole to these tougher two
Speaker 7: thousand and one merger rules that the rail industry's primary
Speaker 7: regulator has adopted that requires any merger to benefit the
Speaker 7: public interest. So it's done enough just to show that
Speaker 7: you are preserving competition. You will have to actually enhance
Speaker 7: competition and provide proof that you're actually benefiting communities and
Speaker 7: the greater public interests. And so that's a very high
Speaker 7: bar that hasn't yet not actually been met. And so
Speaker 7: you know, Union Pacific and Northern Southern are betting on,
Speaker 7: you know, a more welcoming regulatory landscape that might finally
Speaker 7: allow a deal like this to come to fruition. But
Speaker 7: we really don't know.
Speaker 1: It ain't done until it's done, right, all right, let's
Speaker 1: go to UPS just because shares have been tumbling after
Speaker 1: the company said economic volatility continues to roil its operations.
Speaker 1: UPS is another great indicator on the US economy so
Speaker 1: I'm trying to make sense of economy versus company specific.
Speaker 7: You know, I think it's a mix of both. I
Speaker 7: think if you look at UPS's business in particular, they
Speaker 7: are uniquely affected by some of the trade dynamics that
Speaker 7: we've seen, particularly you know, the alterations have been made
Speaker 7: to that deminimous exemption. And then on the other hand,
Speaker 7: there really are struggling in their business. I mean, this
Speaker 7: is an area that really boomed during the pandemic as
Speaker 7: people were at home and we're ordering so much stuff,
Speaker 7: and you had you know, UPS em FedEx really trying
Speaker 7: to add capacity to meet that demand. And then now
Speaker 7: we're on the other side of that, as consumers have
Speaker 7: shifted their spending back to services. UPS is trying to
Speaker 7: cut cost to be competitive after that labor deal that
Speaker 7: it struck earlier. And you know, I think you're really
Speaker 7: seeing sort of a confluence of events that that's really
Speaker 7: pressuring UPS from multiple angles.
Speaker 1: So no forecast for the year. I mean, that's it
Speaker 1: is a massive lack of visibility.
Speaker 7: It is unusual, although we have heard, you know, similar
Speaker 7: comments from other companies talking about just how hard it
Speaker 7: is to get your hands around what that demand picture
Speaker 7: looks like in the back of the year, you know,
Speaker 7: a lot of reticence in terms of committing to that
Speaker 7: growth doubt. Look, we have seen, you know, companies go
Speaker 7: ahead and put guidance out there, but I do think,
Speaker 7: you know, to UPS's credit, there are a number of
Speaker 7: unknowns remaining in the back half of the year, and
Speaker 7: they're taking more of a wait and see approach. Yeah.
Speaker 6: I was particularly surprised about this one, Brook because we
Speaker 6: did have the airlines come out about a quarter ago,
Speaker 6: and you know, we talked about Delta and then of
Speaker 6: course United as well, and then you know, three months later,
Speaker 6: they've essentially turned a corner and they're talking about how
Speaker 6: great things are. Yet we're not seeing that or hearing
Speaker 6: that from Carol Tomey over at UPS. Look, these are
Speaker 6: apples and oranges when we talk about the businesses here.
Speaker 6: But what is unique about UPS's business that they don't
Speaker 6: have visibility that other companies do.
Speaker 3: Well.
Speaker 7: I don't know, you I don't think everything is great
Speaker 7: for the airlines either. You know, they've been willing to
Speaker 7: put guidance back out there, but the guidance that they
Speaker 7: have moved forward with is lower than what they were expecting.
Speaker 7: Before tariffs came into the picture. And you know, of course,
Speaker 7: we did see that demand pull back in the immediate
Speaker 7: after math of the tariffs, and some of the airlines,
Speaker 7: particularly those with businesses that cater more to premium flyers
Speaker 7: or business travelers, are expecting more of a rebound in
Speaker 7: the back half of the year. But that uncertainty is
Speaker 7: still there and is still impacting the airlines, just in
Speaker 7: different ways. And so, you know, I think to UPS's point,
Speaker 7: there are a number of different factors here, and their
Speaker 7: business is uniquely affected by terriffs because it's much more direct.
Speaker 7: With airlines what you're looking at as sort of more
Speaker 7: indirect consequences. Does consumers feel the pain from inflation and
Speaker 7: goods and maybe rethink that trip that they were planning
Speaker 7: to take?
Speaker 6: All right? Well, speaking of airlines, let's talk about one
Speaker 6: company that provides those narrow and wide body jets, and
Speaker 6: that is Boeing. Shares down four percent today, Johnson reporting
Speaker 6: that Boeing almost halted its cash burn in the second quarter,
Speaker 6: indicating a turnaround initiated by Kelly Ortberg a year ago
Speaker 6: is paying off as the company delivers more aircraft. One
Speaker 6: thing that I've noticed about Boeing over the last few
Speaker 6: months is the way they're being used as this bargaining
Speaker 6: chip when it comes to trade negotiations. And I'm wondering,
Speaker 6: Brook in your view, how much of a boon could
Speaker 6: that be for the company that's trying to turn itself around.
Speaker 7: It's definitely a benefit. And what's interesting is that, you know,
Speaker 7: in Trump's last trade war, Boeing frequently complained about being
Speaker 7: used as a pawn. We saw China, you know, more
Speaker 7: or less halt new orders of Boeing planes as a
Speaker 7: way of exerting leverage in those trade negotiations. And now
Speaker 7: you know, the shoe is someone on the other foot,
Speaker 7: and we see countries more or less tripping over themselves
Speaker 7: to you know, trumpet their purchases of Boeing planes. This
Speaker 7: is one of the highest value exports that the US has,
Speaker 7: and so as a means of sort of chipping away
Speaker 7: at that trade deficit, a big blowing Boeing airplane purchase
Speaker 7: can really go a long ways.
Speaker 1: So Boeing, I mean every time I feel like, I mean,
Speaker 1: the stock's down four percent today. Thoughts in terms of
Speaker 1: the outlook and what we kind of need to continue
Speaker 1: to focus on with this one. Is it all just
Speaker 1: about orders? It's also about making sure I no other
Speaker 1: issues with their planes.
Speaker 7: Your thoughts on this, I mean, I think that might
Speaker 7: be a little bit of profit taking here. We have
Speaker 7: seen a pretty good rally and Boeing shares heading into earnings.
Speaker 7: I mean, this was a very good quarter for them,
Speaker 7: especially just given all of the cashlow challenges that they had.
Speaker 7: And I can think you now, you know, the question
Speaker 7: is they've got to keep doing this. They've got to
Speaker 7: keep chugging along. But is this the best stock to
Speaker 7: own in aerospace right now or are there potentially other
Speaker 7: opportunities out there? And I think that's some of what's
Speaker 7: playing out in investor's lines right now.
Speaker 1: Yeah, definitely a good point. I mean, the stock is
Speaker 1: up nearly thirty percent year to date, so it really
Speaker 1: has had quite a bounce back after having a really
Speaker 1: tough time for a while. Brook, thank you so much.
Speaker 1: We did it around the world when it comes to transportation,
Speaker 1: and then some Brooks Southerland of course. Bloomberg News Boston
Speaker 1: Bureau chief joining us there from our Boston bureau.
Speaker 2: You are listening to the Bloomberg Business Weekdaily podcast. Catch
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Speaker 2: Listen on Apple CarPlay and Android Auto with the Bloomberg
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Speaker 1: For US Health and Human Services Secretary Robert F. Kennedy Junior,
Speaker 1: he has suggested that psychedelic therapy for depression and trauma
Speaker 1: has the Trump administration support. This actually was in a
Speaker 1: report by the Associated Press earlier this month that the
Speaker 1: Secretary recently talked to members of Congress about and we're
Speaker 1: guessing that it may have caught the attention of the
Speaker 1: team over at the publicly traded small cap company Compass Pathways.
Speaker 1: We wanted to know more, and let's get to Kabir Noth.
Speaker 1: He's chief executive officer of Compass Pathways, and he joins
Speaker 1: us here in studio. Kabir, welcome, Welcome. Remind our audience
Speaker 1: about the work you are doing and your synthetic psilocybin
Speaker 1: experimental drug for treatment resistant depression. Tell us about where
Speaker 1: you are, what this drug is, and what it has shown.
Speaker 3: To do so far.
Speaker 9: Thanks very much, Carol on Tim and it's great to
Speaker 9: join you here. So yes, a Compass Pathways, we're a
Speaker 9: company in the final stages of developing synthetic psilocybin as
Speaker 9: a potential treatment for treatment resistant depression, or what we
Speaker 9: call patients living with persistent depression. That's a big problem,
Speaker 9: affecting some three million people in the US, and it's debilitating.
Speaker 9: Many of them are unable to work. The majority will
Speaker 9: have had some sort of suicidal thoughts in the course
Speaker 9: of their depressive illness. So we're a leading psychedelic company
Speaker 9: and potentially the closest to regulatory approval.
Speaker 6: You've used the word potential twice. You said it's a
Speaker 6: potential treatment and then you said potentially you're a leading
Speaker 6: company there when it comes to FDA approval. Is it unproven?
Speaker 9: We have generated robust evidence now from two studies. The
Speaker 9: first was published a couple of years ago, and then
Speaker 9: just last month we released more data from the first
Speaker 9: of our final stage studies. What can I tell you
Speaker 9: about that first safety this we didn't see any unexpected
Speaker 9: safety signals in this treatment of patients living with persistent depression.
Speaker 9: And secondly, after just a single treatment, after six weeks,
Speaker 9: we saw a significant reduction in depressive symptoms. And just
Speaker 9: to emphasize that, because you'll be aware of the kind
Speaker 9: of the typical paradigm of antidepressants, something you take daily.
Speaker 9: This was a single treatment and with the effect measured
Speaker 9: after six weeks. Now we have already are two for
Speaker 9: two in terms of these trials clinical trials that we've conducted.
Speaker 9: But we're continuing to see more evidence generated, first in
Speaker 9: one of these late stage trials, and second we have
Speaker 9: another study ongoing where we're also looking at the impact
Speaker 9: potentially of another treatment.
Speaker 1: We should point out that about a month ago, in
Speaker 1: that study came out, the stock your shares tumbled almost
Speaker 1: fifty percent, hitting a record low. What I guess I
Speaker 1: want to understand, so it was below what Wall Street expected.
Speaker 1: It did meet your goal from what I understand, your
Speaker 1: company goal, but Wall Street was very disappointed. Tell us
Speaker 1: how this works. How does one psilocybin treatment kind of
Speaker 1: cure depression? Persistent depression.
Speaker 9: Psilocybin you can think of as if you like a key,
Speaker 9: a key that unlocks a door or a set of
Speaker 9: doors in the brain, and while those doors are open,
Speaker 9: that enables the patient to work through some of their
Speaker 9: fixed negative thinking and potentially have relief from their depressive symptoms.
Speaker 9: To do that, there is a profound subjective experience, so
Speaker 9: there is a psychedelic experience that lasts six to eight hours,
Speaker 9: and as I say, during the course of that the
Speaker 9: drug is working in such a way that it unlocks
Speaker 9: these doors and allows the person, the patient to engage
Speaker 9: with some of those negative thoughts and potentially, as I say,
Speaker 9: get relief for those depressive symptoms. The fact is, as
Speaker 9: I say, we've seen and what's amazing, that one single
Speaker 9: treatment can show sustained effects at least through to six
Speaker 9: weeks and potentially longer. In our earlier trial, our earlier
Speaker 9: clinical study that we did, we saw that for many
Speaker 9: patients that were sustained out to twelve weeks.
Speaker 1: What's many? How many? Forgive me tim, like, I'm just
Speaker 1: curious how many.
Speaker 9: So that was a study of around two hundred and
Speaker 9: thirty patients of whom a significant number were on what
Speaker 9: we call the active dose of the medication, and what
Speaker 9: we saw was a quarter of them had from that
Speaker 9: single dose they were actually sustained freer depression out to
Speaker 9: twelve weeks. And in this population of people who have
Speaker 9: typically tried multiple treatments and for whom very little is
Speaker 9: any longer working, that was a remarkable response.
Speaker 6: When patients do take this single dose. What is the
Speaker 6: environment that they're in during that six to eight hours,
Speaker 6: and are they guided in some way by therapists of sorts.
Speaker 9: It's a physically it's a calm, comfortable setting. They have
Speaker 9: the option of ey shades, there's music playing, and there
Speaker 9: are appropriate safety safeguards in place. Psilocybin is a very
Speaker 9: inner directed mechanism, so what actually happens is the patient
Speaker 9: has this profound influence, but where there is somebody in
Speaker 9: the room, it's largely silent. There is not directed therapy
Speaker 9: in the course of that intervention.
Speaker 6: How do you run an effective clinical trial for a
Speaker 6: drug that the experience is such that the person knows
Speaker 6: they've taken this drug rather than a placebo. Somebody who
Speaker 6: takes a placebo is not going to have a psychedelic
Speaker 6: reaction to the placebo.
Speaker 9: At Compass, we thought about this before we even started
Speaker 9: our studies. So our prior big study, the one I
Speaker 9: reference with two hundred and thirty patients, we design that
Speaker 9: in such a way that there was the choice of
Speaker 9: three different doses of psilocybin. One was a low dose,
Speaker 9: a second was an intermediate dose, and in patients who've
Speaker 9: never had this experience, before. That's truly confounding in terms
Speaker 9: of they cannot tell whether they got a medium dose
Speaker 9: or a high dose of that drug. This is important because,
Speaker 9: as you say, otherwise it will be very obvious. But
Speaker 9: that design was very effective for that earlier stage study
Speaker 9: we did, and we've replicated that design in one of
Speaker 9: our late stage studies.
Speaker 1: We're talking with Kabir Andathi's chief executive officer of Compass
Speaker 1: Pathways here in studio. You keep saying synthetic. What's the
Speaker 1: difference between synthetic and naturally occurring?
Speaker 9: So we are manufacturing a pill to the highest standards
Speaker 9: of purity, no contamination. We know exactly what is in
Speaker 9: the pill. This is a manufactured pill that we are
Speaker 9: treating with.
Speaker 1: So that you know exactly in terms of dosage. Is
Speaker 1: that what I'm saying, So if naturally occurring is different.
Speaker 9: Potentially it is naturally occurring whereas well as is synthetic.
Speaker 9: So we know exactly what's in it, We know the
Speaker 9: exact pill. What will it cost It's primeriture to speculate
Speaker 9: on that at the moment we're still conducting these final
Speaker 9: stages of our studies.
Speaker 1: But expensive and would it be something I mean if
Speaker 1: you get a approval, is it safe to make the
Speaker 1: assumption that it would be covered.
Speaker 9: The whole premise for founding Compass Pathways was to enable
Speaker 9: that form of broad access. So the reason that the
Speaker 9: company has gone through doing these rigorous, robust clinical studies
Speaker 9: so that we is exactly so that we can discuss
Speaker 9: that with the FDA potential for regulatory approval, and then
Speaker 9: if we're fortunate enough to get there, the chance to
Speaker 9: negotiate with both commercial insurers and government pairs. Let's remind
Speaker 9: ourselves that these three million people that I referred to,
Speaker 9: they are relying on insurers, commercial insurers and government pairs
Speaker 9: to actually cover their drugs. I believe we will be
Speaker 9: able to demonstrate significant value given how different this is
Speaker 9: from other treatments available today in depression.
Speaker 6: Kabir Carol mentioned that the Associated Press reported earlier this
Speaker 6: month that RFK Junior recently talked to members of Congress
Speaker 6: about psychedelic therapy for depression and trauma. Apart from that,
Speaker 6: have you seen any real signs of support for the
Speaker 6: administration for this new class of drugs or type of
Speaker 6: type of treatment.
Speaker 9: We have had support from the FDA throughout our development process.
Speaker 9: We have breakthrough designation.
Speaker 6: Before Robert F. Kennedy Junior took over ASH, and we
Speaker 6: have had.
Speaker 9: A motivated and engaged agency. We're excited to see the
Speaker 9: voices from HHS from Veterans Affairs today suggesting that they
Speaker 9: also see the potential for this class, and we're very
Speaker 9: happy to work to see how we could potentially accelerate
Speaker 9: access while at the same time ensuring that we continue
Speaker 9: to generate really good, robust, good evidence that these are
Speaker 9: safe and effective.
Speaker 1: Talk to us about timeline, though, is it I feel
Speaker 1: like we've been I know Blimberg has been reporting on
Speaker 1: this class of drugs and treatments, and I think we've
Speaker 1: all seen pieces that yours right for a long time
Speaker 1: that for people who or other treatments don't seem to
Speaker 1: be making a change for them. So I don't know,
Speaker 1: is is it another few years, is it the end
Speaker 1: of this year, is it the end of next year?
Speaker 1: And is it that the Trump administration could somehow settle
Speaker 1: this through much more quickly.
Speaker 9: I think there are clearly people in the current administration who,
Speaker 9: as I say, see the potential of this. Well, we
Speaker 9: want to make sure we do this right as well,
Speaker 9: So we want to make sure we do that in
Speaker 9: the right way, with the right rigor.
Speaker 8: And so on.
Speaker 9: We are conducting, as I say, the final stages of studies.
Speaker 9: We have two ongoing of which the second will wrap
Speaker 9: up in the second half of next year. The data
Speaker 9: we released last month, though it hasn't yet been reviewed
Speaker 9: by the FDA, we have a meeting planned with them
Speaker 9: where we'll discuss with them and we'll discuss the potential
Speaker 9: for any acceleration of a filing and a regulatory process.
Speaker 1: Do you also think about other usages, whether it's PTSD
Speaker 1: and other applications, And I'm just curious where what you
Speaker 1: might be exploring in that world.
Speaker 9: Our next priority beyond persistent depression is indeed PTSD. That
Speaker 9: is something with very high prevalence, some thirteen million in
Speaker 9: the US, for which there are only two very old
Speaker 9: drugs approved, and unfortunately recently there have been two advisory
Speaker 9: committees recommending against new drugs in that space. So yes,
Speaker 9: we see PTSD as a key area. We generated some
Speaker 9: data last year and we will be announcing the design
Speaker 9: of another late stage trial for PTSD immanently.
Speaker 6: I know the USFDA is the gold standard for going
Speaker 6: through the regulatory process to be viewed by the world
Speaker 6: as a credible treatment for something. But these days, is
Speaker 6: it worth going after approval in another country to try
Speaker 6: to do this on a smaller scale to prove that yes,
Speaker 6: it indeed works.
Speaker 9: We will be exploring approval in a range of countries.
Speaker 9: So our studies have been international, US, Canada, Europe as well.
Speaker 9: We have taken advice over the years from the European
Speaker 9: regulatory authorities. We're a UK based company as well, so
Speaker 9: we've been speaking to the MHRA, the regulatory authority in
Speaker 9: the UK. So yes, this is a problem for patients
Speaker 9: across the world and we would look to exploit it
Speaker 9: where we cat.
Speaker 1: Kabir just got about thirty forty seconds. We're actually me
Speaker 1: talking with the CEO of Astra Zeneca right after this.
Speaker 1: I'm just curious in terms of big Farmer, have you
Speaker 1: had any preliminary discussions with larger, larger pharmaceutical partners interested
Speaker 1: in commercialization, co commercialization or distribution.
Speaker 9: What I know is the big farmer is tracking this
Speaker 9: space closely, and what's been great is to see the
Speaker 9: re entry of some big farmer back into psychiatry over
Speaker 9: the last couple of years. So I know they watched
Speaker 9: this space. But we at Compass are determined that we
Speaker 9: can do this ourselves and are excited about the opportunity
Speaker 9: to bring this potential new treatment to patients who so
Speaker 9: clearly need it.
Speaker 1: So no strategic alignment that you would consider. You plan
Speaker 1: on doing this alone.
Speaker 9: That's our plan.
Speaker 1: Okay, great stuff, Stay in touch. Thank you, let us
Speaker 1: know how things are going. I really appreciate it. Kiberer,
Speaker 1: be well. Kiberath, He's chief executive officer of Compass Pathways,
Speaker 1: joining us right here in studio.
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