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Speaker 2: Let's get to what has been the week of whiplash
Speaker 2: when it comes to US treasuries.
Speaker 3: I really have focus on rates too around the globe.
Speaker 2: We've got a great roundtable Irid Jersey, Bloomberg Intelligence chief
Speaker 2: US interest rates strategists, and Sarah Hunt, chief market strategist
Speaker 2: at Alpine Saxon Woods, both here in studio. Traders are
Speaker 2: increasingly questioning what Treasury Secretary's next move will be after
Speaker 2: what's been I think it's safe to say a bit
Speaker 2: of a turbulent market bond market this past week.
Speaker 3: Sarah, how do you see it?
Speaker 4: I think that it was a surprise that they that
Speaker 4: he came out and said this is what we're going
Speaker 4: to do in the long end of the curve. I
Speaker 4: think everyone's been looking at worsh Chairman warsh and looking
Speaker 4: at the Fed and seeing what's going to happen with
Speaker 4: interest rates there. I don't think that people were expecting
Speaker 4: the Treasury Secrete to come out and make his own
Speaker 4: news on this particular front. And I think there are,
Speaker 4: as you can see, quite a lot of questions about one,
Speaker 4: how this is actually going to work mechanically too, whether
Speaker 4: or not this is going to actually help the long
Speaker 4: end of the curve, which was arguably the idea, because
Speaker 4: you've you round.
Speaker 3: Tripped that all it did and didn't it didn't.
Speaker 4: And on the other hand, gold is just like, okay,
Speaker 4: we're gone, and it just is going again today. And
Speaker 4: I think that that's, you know, whether or not the
Speaker 4: only signal that gold gives is that we don't like
Speaker 4: anybody else's decisions, or it's just a way to play
Speaker 4: a different angle. I think that you're seeing the reverse
Speaker 4: and interest rates didn't reverse gold, so that maybe an
Speaker 4: anticipation of further movement.
Speaker 3: Gold up five percent this week. Yeah, we've seen a
Speaker 3: big move.
Speaker 5: I mean, Ira, where do you stand on this now
Speaker 5: that this is Friday, it's been a couple of days.
Speaker 3: Yields are still moving up.
Speaker 6: Yeah, Well, yields are kind of flatish right from the
Speaker 6: beginning of the week. So yeah, it did a whole
Speaker 6: lot of nothing. You know, devil is in the details
Speaker 6: here a little bit, so you know, we won't find
Speaker 6: out the exact size, you know, he says maybe next
Speaker 6: week that they'll tell us more information. I did think
Speaker 6: it was really funny when Scott Besson said, you know,
Speaker 6: we're doing this because there's you know, low liquidity in
Speaker 6: the middle of summer and things like that. But this
Speaker 6: doesn't start till September ninth, so I'm not exactly this summer,
Speaker 6: I guess, but it's not August, it's not now. And
Speaker 6: in fairness, like I was looking at the depth of
Speaker 6: the market actually right around the time that he said that,
Speaker 6: and actually the depth of the market was not bad, right.
Speaker 6: The depth of the market was your typical summerish levels,
Speaker 6: not insanely low. So it's not like they really needed
Speaker 6: the direct liquidity support here that.
Speaker 3: I was going to say political or did the market
Speaker 3: need this? Sarah?
Speaker 7: So I you know, it's interesting.
Speaker 4: I think that people have been concerned globally about rates rising,
Speaker 4: especially on the long end, and that's been a problem
Speaker 4: for investors. It's been a problem for all these companies
Speaker 4: that are now trying to finance the entire.
Speaker 7: AI build out government.
Speaker 4: So the question is, are we doing something because this
Speaker 4: exact amount of money is going to make a change,
Speaker 4: or is the fact that we're saying we're going to
Speaker 4: do something reminding everyone that the government can come in
Speaker 4: at any time and change the game.
Speaker 7: And I think it's a little bit to me of that.
Speaker 4: I don't know how you feel about that I read,
Speaker 4: but that was my take, was a little bit like
Speaker 4: we're going to do something and not just stand there
Speaker 4: and let the market figure it out.
Speaker 8: Yeah.
Speaker 6: I think they did this, and it was kind of underwhelming, Right.
Speaker 6: It's kind of like the Federal Reserve in December of
Speaker 6: two thousand and seven when they did you know, they
Speaker 6: did a forty billion dollar program for a three hundred
Speaker 6: million dollar problem, and so something like that. Maybe there
Speaker 6: will be a little bit more shock and all. But
Speaker 6: there are risks to what they're doing too, right, like
Speaker 6: if they're going to issue a whole lot of tea
Speaker 6: bills in order to buy back a lot of debt,
Speaker 6: and let's call this what it is, if it's going
Speaker 6: to work, and if the President and Treasury Secretary are
Speaker 6: really serious about getting long end yields down, they have
Speaker 6: to do this in size, and we have to then
Speaker 6: call this an operation Twist similar to what the Treasury
Speaker 6: Department did in ninety sixties. And they if they do that,
Speaker 6: the one big risk for them is what happens if
Speaker 6: the Federal Reserve has to raise interest rates because they're
Speaker 6: going to be issuing te bills which capture that interest
Speaker 6: rate move almost immediately compared to thirty year debt, which
Speaker 6: you know obviously takes thirty years to recapture that new
Speaker 6: interest rate environment.
Speaker 5: Sarah, what do you think it means for the FED?
Speaker 5: Does this that all kind of alter when we do
Speaker 5: get I move find FED.
Speaker 7: I'm not sure what the answer to that is.
Speaker 4: And I don't know if there's any actual coordination going
Speaker 4: on that we don't know about.
Speaker 7: I mean, what we see is what the headlines are.
Speaker 4: We don't see what everybody's talking about it behind the
Speaker 4: closed doors. So whether or not there is a conversation,
Speaker 4: I couldn't tell you. One would hope that there might
Speaker 4: be some sort of coordination or at least an understanding,
Speaker 4: because otherwise then you start to look like you've got
Speaker 4: government departments fighting one another.
Speaker 7: So what's your take on that.
Speaker 6: Well, I think that they're not coordinating, because if they
Speaker 6: were coordinating, then the Federal Reserve would not have stopped
Speaker 6: buying tea bills. The Federal Reserve was doing these reserve
Speaker 6: management purchases, buying ten billion dollars of tea bills every
Speaker 6: single month. So if they were coordinating, and Treasury Secretary
Speaker 6: Besant said to Kevin Walsh, Hey, we're going to be
Speaker 6: issuing more tea bills to buy thirty year debt, how
Speaker 6: about you buy some of those tea bills. Well, the
Speaker 6: Fed's not buying those tea bills. So if there was coordination,
Speaker 6: it was pretty poor.
Speaker 2: Is this President Trump potentially to saying, hey, Scott besstt,
Speaker 2: I need you to do something because my fed share
Speaker 2: isn't doing something.
Speaker 3: Is it possibly?
Speaker 7: I don't absolutely possible?
Speaker 4: Right again, I think we're all trying to understand, struggling
Speaker 4: to understand exactly what the point is in the timing frame.
Speaker 2: So fast forward, Okay, so do we get answers at
Speaker 2: Jackson Hole is coming week? I mean, we have a
Speaker 2: fed share who has already shown he doesn't like to
Speaker 2: say a lot or lay out the metrics of what
Speaker 2: that you know what metrics he is following and the
Speaker 2: FED is following the FOMC in terms of figuring out
Speaker 2: monetary policy.
Speaker 3: Do you think we're going to get anything this week?
Speaker 6: Well, he's told us he's going to frame the big
Speaker 6: questions and you can lay them out.
Speaker 3: But if you don't say what you're following.
Speaker 6: Well, and this is the challenge that Kevin wore really
Speaker 6: has had, and I don't think he's done a particularly
Speaker 6: good job in communicating with the markets, because you have
Speaker 6: to give the markets something, right, you can't give them nothing,
Speaker 6: and he's basically given the markets nothing. So he has
Speaker 6: to either say give some kind of forward guidance or
Speaker 6: say if this happens, then we will react this way,
Speaker 6: so give a reaction function. You have to do one
Speaker 6: of those two things. It's interesting because you put MERPHN. King,
Speaker 6: former Bank of England governor on the Communications Task Force.
Speaker 6: This is what Murphy King wants to do. He says that, hey,
Speaker 6: we want to give the reaction function. We don't want
Speaker 6: to give forward guidance. But Kevin worsh clearly has if
Speaker 6: he read that paper, then he's not following it for sure.
Speaker 4: Well, and I also think that you're at the point
Speaker 4: now where you have to really look at that speech.
Speaker 4: If you were if it was going to be under
Speaker 4: a microscope, now it's under five.
Speaker 2: Right now, you went from yes, this is where all
Speaker 2: every LM is going to get that speech, and we're
Speaker 2: going to get analysis.
Speaker 4: And everybody was focused on the FED and then they
Speaker 4: turned to the Treasury. So now the fed's now and
Speaker 4: now they're extra focused on what they're going to say.
Speaker 4: And the fact that the communication has been I would
Speaker 4: say uneven a word that you could use, doesn't help
Speaker 4: the situation, and I think that it makes it more
Speaker 4: important to clarify whatever. So I think Jackson hole is
Speaker 4: you know, we're all going to be sitting around on
Speaker 4: Friday watching what's going.
Speaker 6: On, and we'll probably all fall asleep because it won't
Speaker 6: be very interesting, but.
Speaker 7: We're going to have to watch.
Speaker 6: Well, we're gonna be waiting for the walk, right, We're
Speaker 6: gonna be waiting for all this.
Speaker 3: Tomkenlee's are going to be there. It's going to be interesting.
Speaker 2: Sarah layer on top of this, and we've already talked
Speaker 2: with Ara about this about the data center build out,
Speaker 2: and you write in your notes the pushback against data
Speaker 2: center build That could be a blessing in disguise, as
Speaker 2: well as investor concern over CAPEX spending has been growing
Speaker 2: as the hyperscalers commit ever more.
Speaker 3: Equity and debt to the buildout.
Speaker 2: We've been talking about how the hyperscalers and everybody are
Speaker 2: related tapping credit markets and what that's done to maybe
Speaker 2: crowding out the treasury trade.
Speaker 3: What's top like, what are how.
Speaker 2: Worried are you about all of this tapping of the
Speaker 2: credit market for these AI guys.
Speaker 4: I think that there was definitely concern about how much
Speaker 4: money was being raised, how fast, and at the same
Speaker 4: time you've got the government racing into raising I mean
Speaker 4: everyone's raising money, right, so that was an issue. Whether
Speaker 4: or not this money is actually going to have a
Speaker 4: return on investment is another question that people have been
Speaker 4: going crazy about the idea that it's an arms race,
Speaker 4: that you have to spend faster than China. The fact
Speaker 4: that there may be a bottleneck could be a blessing
Speaker 4: in this guy is just in the fact that people
Speaker 4: are worried so much about that spend and how much
Speaker 4: of that spend is coming out of debt and equity
Speaker 4: and no longer cash flow, and if that slows down,
Speaker 4: maybe that gives investors some room whether or not that
Speaker 4: becomes a further race to the top between China. I mean,
Speaker 4: I'm not sure how to look at that capex relative
Speaker 4: to other things that I think that investors are struggling.
Speaker 3: With enjoy the crowd. I don't know how to look
Speaker 3: at it either.
Speaker 2: Like I feel like increasingly we say this, we see
Speaker 2: the headlines, we see the spend, and we're trying to
Speaker 2: put it in context.
Speaker 5: I also want to ask you about where equities go
Speaker 5: from here, especially rates stay high equity, because like we
Speaker 5: haven't really seen I mean even this week, like it
Speaker 5: hasn't been carnage in the S and P five hundred,
Speaker 5: but the thirty year yields is you know, at these highs,
Speaker 5: like does this continue? Your is there really going to
Speaker 5: be some movement?
Speaker 8: Well?
Speaker 4: I sort of think that this is where Treasury came
Speaker 4: in and did something to the long end, because that
Speaker 4: was starting to get investors word and you were seeing
Speaker 4: the S and P start to degrade and the indices
Speaker 4: and other stocks underneath it as well. It's really going
Speaker 4: to be it's a combination of it's going to be
Speaker 4: about earnings. And somebody made the point this morning, and
Speaker 4: I can't remember who it was. They were saying, yeah,
Speaker 4: earnings are great. People are outspending those earnings. And that's
Speaker 4: a really good point because as we get into twenty
Speaker 4: twenty seven, are we going to continue to up the
Speaker 4: ante on spend and are the earnings going to follow?
Speaker 4: And I think that that's really earnings is the biggest
Speaker 4: problem or benefit to the S and P. And right
Speaker 4: now that's all been working in everybody's favor. If that
Speaker 4: starts to trip and that second derivative starts to go,
Speaker 4: it doesn't even have to go down, it just has
Speaker 4: to grow less fast, and that becomes an issue unto itself,
Speaker 4: given where valuations are.
Speaker 7: Can we just keep going?
Speaker 3: This is really great? Come back next Friday. Sure, I'll
Speaker 3: be in Princeton, said, all right, right, maybe a couple
Speaker 3: of weeks from now, Ivery Jersey.
Speaker 2: Thank you so much, Bloomery Intelligence, Chief you Interest Rates Strategists,
Speaker 2: and Sarah Hunt, chief market strategist at Alpine Saxon Woods.
Speaker 3: Stay with us. More from Bloomberg Business Weekdaily coming up
Speaker 3: after this.
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Speaker 2: There's a story that is definitely of great interest to
Speaker 2: the Bloomberg community, the market community, right.
Speaker 5: Yeah, it's all about the probe into the business of
Speaker 5: Guggenheim co founder and CEO Mark Walter. Of course, he
Speaker 5: just sold off the La Lakers and reports talks about
Speaker 5: other possible asset sales, and it's all about the insurance
Speaker 5: companies of Guggenheim.
Speaker 2: I feel like we keep learning more and more about
Speaker 2: the story, but it's wild. We did have a team
Speaker 2: of reporters finding out exclusively that the investigation into his businesses,
Speaker 2: his insurance business, has also led to the Department of
Speaker 2: Justice to a small but pro lific credit reader. So
Speaker 2: let's get to it here with the team's reporting. And
Speaker 2: then one of the journalists on the story is Eva
Speaker 2: Benny Morrison. She's Bloomberg new Legal reporter. She joins us
Speaker 2: here in New York City. Eva, thank you, thank you
Speaker 2: for coming on. We've been talking about this story a lot.
Speaker 2: Start with the investigation. Why is the Justice Department seeking
Speaker 2: records from Egan Jones. What do we need to understand
Speaker 2: about how this investigation continues to evolve and why.
Speaker 3: They are all of a sudden, this small.
Speaker 2: Little known maybe firm, but as we know a prolific
Speaker 2: credit reader, is all of a sudden now a target
Speaker 2: or at least of interest for the DOJ.
Speaker 9: So a key part of this investigation is looking at
Speaker 9: how some of the insurance companies linked to Mark Walter
Speaker 9: made loans to affiliated parties. Originally these transactions were marked
Speaker 9: US unaffiliated, but it since turned out that the insurance
Speaker 9: businesses have had to restate twenty billion or so worth
Speaker 9: of these assets, and along with that, many of the
Speaker 9: assets have investment grade ratings from this credit radar called
Speaker 9: Egan Jones. So what we've learned over the past few
Speaker 9: days in our reporting is that the DOJ is requesting
Speaker 9: information from Egan Jones about these ratings. So they've asked
Speaker 9: from material related to Delaware Life in Clear Spring as well.
Speaker 9: This doesn't suggest that by any means that Egan Jones
Speaker 9: is a target, but sort of shows the wide net
Speaker 9: that prosecutors are casting to try and figure out how
Speaker 9: billions of dollars are worth, sorry, billions of dollars worth
Speaker 9: of loans from these insurers ended up being funneled out
Speaker 9: to affiliated parties.
Speaker 5: What does it signal when a company when an insurance
Speaker 5: company is using a credit reading firm like Egan Jones.
Speaker 5: I mean, look, I mean they're approved, they're able to
Speaker 5: give credit readings.
Speaker 3: So it's not necessarily not bad.
Speaker 5: But what can we learn about you know, the fact
Speaker 5: that this company was working with this particular reading agency.
Speaker 9: I think you know, these insurance businesses were big clients
Speaker 9: for Egan Jones. I think from what we can gather,
Speaker 9: at least a fifth of the assets related to Mark
Speaker 9: Well Walter's insurance companies relied on Egan Jones ratings. So
Speaker 9: I think it shows despite Egan Jones being a relatively
Speaker 9: small firm, it does play a really outsized role in
Speaker 9: rating a lot of the assets in the insurance industry,
Speaker 9: particularly at a time where Will Street has really seized
Speaker 9: upon using policy hold of funds for other investments.
Speaker 2: Right, and as you guys right remind us an investment
Speaker 2: grade reading from a firm like Egan Jones can help
Speaker 2: lower the amount of capital the insurance must hold in
Speaker 2: case the assets sour, so allowing them to run essentially
Speaker 2: their businesses more efficiently. It's just kind of a good understanding,
Speaker 2: you know, Ava, we were talking about this after this
Speaker 2: story broke, and it's just this idea we saw it
Speaker 2: during the mortgage meltdown and the two thousand and eight crisis,
Speaker 2: that kind of somewhat cozy relationship right between ratings agencies
Speaker 2: and the companies that need those ratings. I'm not saying
Speaker 2: anything is untoward, but what are we hearing from the company,
Speaker 2: from the US Attorney's office in Manhattan, from TWUG Global, Like,
Speaker 2: what are they all saying about this?
Speaker 9: I can definitely speak to the US Attorney's office in
Speaker 9: Manhattan because that is a key part.
Speaker 10: Of my bait.
Speaker 9: And you know, we've heard from leadership over the past
Speaker 9: twelve months that they are very interested in what is
Speaker 9: happening in private credit.
Speaker 10: It's going out, it's going down.
Speaker 9: They're looking at how it's grown so quickly, whether marks
Speaker 9: are being applied correctly, and how the role of these
Speaker 9: third party firms, what role they kind of play in
Speaker 9: assuring investors that this stuff that they're investing in is
Speaker 9: in fact investment grade. And ratings agency is one Ratings
Speaker 9: agencies are one particular area that prosecutors have been very
Speaker 9: much interested in.
Speaker 5: Okay, so you're following this story. There's a lot of
Speaker 5: layers to this, you know, this kind of saga here.
Speaker 5: What is top of mind for you? What what are
Speaker 5: you watching next as you continue to kind of report
Speaker 5: this out.
Speaker 9: Yeah, absolutely so I am. I'm keeping a keen eye
Speaker 9: on where this how this all ends. For Mark Walter,
Speaker 9: We've seen that he has started selling down some of
Speaker 9: his assets, so for example, selling his steak in the
Speaker 9: Lakers recently were agreeing to it at least, and you know,
Speaker 9: seeing whether the by the insurance company saying that going
Speaker 9: to restate a lot of these transactions and some of
Speaker 9: these lines are going to be paid down, whether that's
Speaker 9: enough for regulators and for the DOJ to be satisfied
Speaker 9: with that as an outcome, or if the investigation continues
Speaker 9: at full throttle and we say we see some kind
Speaker 9: of penalty for some of the players.
Speaker 2: Involved here, how long am I it take to get
Speaker 2: some kind of resolution about what's the next step forward here,
Speaker 2: especially on a legal basis, just quickly?
Speaker 9: Yeah, Look, financial crime cases, investigations can take a very
Speaker 9: long time. We know this one has been going since
Speaker 9: at least the fall last year. So it's anyone's guest. Really,
Speaker 9: it could take months, it could take weeks. We'll just
Speaker 9: have to watch and.
Speaker 3: Say, yeah, it's very interesting.
Speaker 2: We know it's certainly something that's always top of mind
Speaker 2: for folks here on Wall Street and certainly those who
Speaker 2: read into the Bloomberg terminal. Hey, Eva, thank you, We
Speaker 2: really appreciate it. Eva, Benny Morrison and Bloomberg new senior
Speaker 2: legal reporter joining us there.
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Speaker 2: Well, President Trump said he would allow terror relief for
Speaker 2: some ground beef imports and a bit to lower prices
Speaker 2: for American consumers. It's a key concern ahead of November
Speaker 2: midterm elections. We talked about it with our own Jason
Speaker 2: Jeff Mason earlier in the two o'clock hour. Here's what
Speaker 2: the President said though on truth Social he said that
Speaker 2: for the next ninety days, the United States will allow
Speaker 2: up to three hundred thousand metric tons of product for
Speaker 2: ground beef to be imported with no out of quota tariff.
Speaker 2: President went on to say, we have a commitment that
Speaker 2: this beef will be sold at twenty five percent below
Speaker 2: current market prices. I still feel like, and I think
Speaker 2: folks think, there are still more details to be known.
Speaker 3: What we do know or what we.
Speaker 2: Don't know is what we want to ask our next reporter,
Speaker 2: Alena Pang is Bloomberg News agriculture reporter.
Speaker 3: She joins us on set.
Speaker 2: Elena, You've been following what's been going on in beef prices.
Speaker 2: We've all moaned about the high cost. What is significant
Speaker 2: about what we got from the president or is there
Speaker 2: still stuff to be known.
Speaker 11: The biggest unknown, I think is where the supplies are
Speaker 11: coming from. People are watching that really closely. I think
Speaker 11: the biggest bets are probably Australia, Brazil, Argentina. I think
Speaker 11: this move has been really interesting for the market because
Speaker 11: it's the latest in a series that Trump has tried
Speaker 11: to do so. He already tried to boost imports from Argentina,
Speaker 11: which for the first half of the year are about
Speaker 11: double what they were last year. Already, and soon the
Speaker 11: US is expected to resume live cattle shipments from Mexico
Speaker 11: also to ease supplies, and so I think a move
Speaker 11: of the scope from the President really goes to show
Speaker 11: just how stubborn that pricing has been that.
Speaker 3: Further action is needed.
Speaker 5: Okay, but you know, when you think about it, if
Speaker 5: there's a cattle shortage, how much can tariff policy really
Speaker 5: help that? And realistically what else can policy makes do
Speaker 5: to combat that.
Speaker 11: Yeah, it's a really hard situation for the industry. So
Speaker 11: what we see right now are really short term band
Speaker 11: aid fixes. In terms of imports, they're very much helping
Speaker 11: to fill the shortfall in demand, but the US net
Speaker 11: produces most of its beef already on its own, so imports,
Speaker 11: even as they're rising to a record share, record share,
Speaker 11: still sub twenty percent. And now we're in this really
Speaker 11: weird situation where US ranchers are trying to rebuild the herd,
Speaker 11: but that takes a long time. So basically the calculus
Speaker 11: they're trying to do is do I sell my animal
Speaker 11: for me right now and get really high prices back,
Speaker 11: or do I wait to keep that animal for breeding
Speaker 11: later on? And it's been really hard to do that.
Speaker 11: When you see this type of move the live cattle
Speaker 11: futures market plummeted today, So that's another move that's creating
Speaker 11: uncertainty for ranchers. Even more well, we happen to have
Speaker 11: a rancher with us. We are delighted to have back
Speaker 11: with us. He joined us earlier in the week.
Speaker 3: Van's Howard.
Speaker 2: He's CEO in Portfolio manage or of Howard Capital Management.
Speaker 3: We know that. But in addition to managing.
Speaker 2: Money, he owns and operates the bar Sea Ranch in Madisonville, Texas.
Speaker 2: They do specialize and registered long porn cattle. We want
Speaker 2: to bring you into the conversation that we're having here
Speaker 2: vance What do we need to understand about this business
Speaker 2: and what we're seeing in terms of policy out of
Speaker 2: the White House.
Speaker 12: Well, you know, they've kind of got themselves on a
Speaker 12: little bit of a pinch because you know, we do
Speaker 12: have a shortage of cattle right now. You know, if
Speaker 12: you look at Tyson, they shut down two meat packing
Speaker 12: plants about two weeks ago, one in Illinois, one in
Speaker 12: Utah for lack of supply, meaning they don't have the
Speaker 12: cattle to deal with. And you've got two different kinds
Speaker 12: of county.
Speaker 2: Goat all, right, a little bit of our freeze there.
Speaker 2: We'll see if we can get back to Vance. You know, Eileen,
Speaker 2: I want to go back to you. You follow this
Speaker 2: sector we talked about on the weekend with you about
Speaker 2: what Tyson has been doing because they just don't have
Speaker 2: the cattle, so they don't.
Speaker 3: Need the plants up and running. Yeah, exactly.
Speaker 11: The meatpackers have been in a situation for basically since
Speaker 11: the start of twenty twenty four where they paying so
Speaker 11: much for cattle that they're losing money on every head
Speaker 11: that they process, and so they've gradually Tyson, JBS, Car, Gilt,
Speaker 11: they've all sort of pulled back capacity a little bit
Speaker 11: to try to ease that competition for supplies. To be sure,
Speaker 11: the companies are still profitable, but that's largely in their
Speaker 11: other segments like chicken. The beef business itself is losing
Speaker 11: money and Tyson, having already closed plants this time around,
Speaker 11: reported earnings again that again missed the mark cut their
Speaker 11: outlook and they're right sizing more Vance.
Speaker 2: I think we've reconnected with you. Maybe there was a
Speaker 2: cattle listening and count or something.
Speaker 12: And they maybe they put a tear iff on.
Speaker 2: Me exactly, maybe, so, so continue with your thought in
Speaker 2: terms of understanding the broader cattle mark, because it isn't
Speaker 2: just been terriffs.
Speaker 3: There's been other things that have been impacting the supply.
Speaker 12: Well it has been, and you know, when you look
Speaker 12: at the high cost but cattle right now where there's
Speaker 12: a lot of ranchers that want to sell at this
Speaker 12: high So you know, building back up the supply over
Speaker 12: ninety days may be more of a challenge than what
Speaker 12: people people realize, and what you're seeing with ground beef
Speaker 12: is different than what you're seeing with prime. Prime is
Speaker 12: at the fourth fourth highest price it's ever been in history,
Speaker 12: which is way up there. Now ground beef is dropped
Speaker 12: down quite a bit. But then again, you've got to
Speaker 12: look at the different kind of cattle. You've got live
Speaker 12: cattle and you've got fully grown cattle. Live cattle is
Speaker 12: about four to eight hundred pound calf or a steer,
Speaker 12: so it's a little bit cheaper. It's not a fully
Speaker 12: cow that's going to deliver the most amount of a beef.
Speaker 12: But I think there's a lot of challenges here and
Speaker 12: with the tariffs coming off, I think it benefits Canada,
Speaker 12: but also they think it can benefit us too. As
Speaker 12: far as dropping down some of these costs of you know,
Speaker 12: I'm own two restaurants too, and our cost of hand,
Speaker 12: our cost of prime stakes or through the roof.
Speaker 5: Okay, but over the long term, do those kind of
Speaker 5: downward price pressures continue from these tariffs, this tariff relief
Speaker 5: or do you we need to see more?
Speaker 10: Well, you're going to.
Speaker 12: I think you're gonna have to see more. I don't
Speaker 12: think niney days is going to put it in anything.
Speaker 12: And I mean, you know, a cow's got to breed,
Speaker 12: it's got to deliver a calf, it's got to grow
Speaker 12: up to the point that it can be eat. I mean,
Speaker 12: you can see my rug back there. We ate that guy,
Speaker 12: but so that's that's a cow hid back there. But
Speaker 12: it's going to take time to redo this. And again
Speaker 12: with high prices of cat, especially prime, you know, you're
Speaker 12: seeing a lot of ranchers that are selling off. But hey,
Speaker 12: here's one thing, and Carol and I talked about this
Speaker 12: last week when I was in New York. You know,
Speaker 12: we've got Elon Musk coming in with a semiconductor plant
Speaker 12: which is buying thousands of acres around Grimes County, in
Speaker 12: between college station and hospital. We're the rural part of
Speaker 12: Texas where with a lot of ranchers wells, he buys
Speaker 12: these ranch lands up. That's driving up the cost of land,
Speaker 12: which is you know a lot of ranchers are selling
Speaker 12: into that profit margin, so that's also going to increase
Speaker 12: the profit The profitability factor is a cow profitable if
Speaker 12: your land's real expensive anymore. So there's a lot of
Speaker 12: different dynamics going on here.
Speaker 2: So great for you guys who own the land for perhaps,
Speaker 2: but not necessarily great for reconsumers.
Speaker 12: That's exactly right. You know, I've got a good friend
Speaker 12: of mine, a good business partner. He's getting bought out
Speaker 12: by Elon Musk right now. I think he might have
Speaker 12: signed a contract last week for that semiconductor plant going
Speaker 12: into Grimes County, and they paid him a premium price
Speaker 12: to where he said, I can't, I cannot not take it.
Speaker 2: You know, I just got to say just one last question, Vince.
Speaker 2: You know, it makes me think about the food production,
Speaker 2: like when we're competing for things like data centers or
Speaker 2: what have you, or semiconductor plants. I mean, you've got
Speaker 2: to have places to produce food, and increasingly we want
Speaker 2: to make sure we have production domestically because if anything
Speaker 2: COVID taught us, supply chains can be impacted pretty quickly.
Speaker 12: And not only that, Caroll, is when you expand on that,
Speaker 12: it's incredibly dangerous for us not to control our food supply.
Speaker 12: That's not a good thing either. And by the way,
Speaker 12: when you import cattle from different countries, you know, I
Speaker 12: know the FDA does their job, but you know they're
Speaker 12: eating what they're feeding them down there, and so who
Speaker 12: knows what that is. On our ranch, we raise grass
Speaker 12: fed cattle with no preserved as no additives, and we
Speaker 12: try to stay away from any type of chemicals because
Speaker 12: we were trying to eat healthy down here. But you know,
Speaker 12: who knows what you're getting sometimes when you're getting some
Speaker 12: beef from overseas.
Speaker 3: Elena, last thought from you in terms of as you
Speaker 3: watch this market.
Speaker 11: I think we're starting to see interesting cues on the
Speaker 11: demand side that Carol and I talked about recently. The
Speaker 11: July fourth period is peak demand grilling season, and we
Speaker 11: sort of started seeing consumers become a little bit more hesitant,
Speaker 11: not necessarily demand destruction, like they're still buying it, but
Speaker 11: they're saying, we're not willing to keep buying more if
Speaker 11: it's at these prices, and you know, economics won a
Speaker 11: one curve. Either demand will have to come down or
Speaker 11: the supply will have to come back up from a
Speaker 11: significant herd rebuild, and I think everyone's sort of watching
Speaker 11: to see which one will pay first.
Speaker 2: All right, well, great stuff as always, Vance, Howard, thank
Speaker 2: you so much double duty in the last week.
Speaker 3: Really appreciate it, of course. Yeah, b Well, have a
Speaker 3: good weekend.
Speaker 2: Vance Howard, CEO and portfolio manager of Howard Capital Management.
Speaker 2: He owns and operates the bar Sea Ranch in Madison, Madisonville, Texas,
Speaker 2: specializing in registered long horn cattle and our own Eileena
Speaker 2: Pan also doing double duty for us when it comes
Speaker 2: to what's going on in the beef market.
Speaker 3: She's Bloomberg News Agricule reporter. Stay with us more from
Speaker 3: Bloomberg Business Week Daily coming up after this.
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Speaker 2: We want to kind of get to it because the
Speaker 2: excitement was over this personalized vaccine developed by Maderna and Merk.
Speaker 2: We mentioned it with the team and TV that reduced
Speaker 2: the recurrence of melanoma in a large late stage trial,
Speaker 2: raising expectations for treating the deadly's form of skin cancer.
Speaker 2: That's important, but it also provided the strongest evidence yet
Speaker 2: that messenger RNA technology will have a successful second act.
Speaker 2: It leads us to a Bloomberg opinion piece that caught
Speaker 2: our attention.
Speaker 5: Yeah, and on why this vaccine may be a marvel.
Speaker 5: So it's Lisa Jarvis. She's a Bloomberg opinion columnist covering biotech, healthcare,
Speaker 5: and the pharmaceutical industry. Previously, she was executive editor of
Speaker 5: Chemical and Engineering News. Lisa, thanks for joining us. Just
Speaker 5: talk to us about the significance of Could we call
Speaker 5: it a breakthrough here in an mRNA technology?
Speaker 10: Yeah, I think it's actually two breakthroughs.
Speaker 8: One for mRNA technology because we have not seen in
Speaker 8: a large stage trial an mRNA based therapy succeed in cancer,
Speaker 8: and it's also a breakthrough when it comes to personalized
Speaker 8: cancer vaccines in general. That's something people have been trying
Speaker 8: to work towards for decades.
Speaker 10: The idea has been around for literally more than a century, but.
Speaker 8: Biotech companies have been working on it for several decades,
Speaker 8: and so to have a late stage trial offer concrete
Speaker 8: evidence that this idea of using our own immune system
Speaker 8: priming it in order to fight cancer itself works is
Speaker 8: a big deal.
Speaker 3: Yeah, it's kind of interesting.
Speaker 2: I feel like Lisa, we've been talking about this for
Speaker 2: a while, right, and really utilizing the body to figure
Speaker 2: out how to fight serious diseases or whether it's cancer,
Speaker 2: I mean, a.
Speaker 3: Big step forward. What else has to be done though,
Speaker 3: because there was so much.
Speaker 2: Investor enthusiasm this week over it, especially in particular for Maderna.
Speaker 8: Yeah, I mean I think step one is for all
Speaker 8: of us to see the full results from this study.
Speaker 8: So we're going to want to see the details to
Speaker 8: understand the magnitude of the benefit.
Speaker 10: But I think the much.
Speaker 8: Bigger deal is that melanoma, though this is a this
Speaker 8: is a huge advance. Melanoma is kind of considered a
Speaker 8: low hanging fruit when it comes to cancer. Skin cancers
Speaker 8: have a lot of mutations that make it easier for
Speaker 8: immune cells to see them, and so we want to
Speaker 8: know that this is going to work outside of that,
Speaker 8: and certainly work in Maderena have a number of trials
Speaker 8: going and lung cancer, bladder cancer, and kidney cancer to
Speaker 8: prove that that's possible. But you know, we're going to
Speaker 8: have to wait for the readouts to know, you know,
Speaker 8: whether or this is a broadly applicable advance.
Speaker 5: And okay, remind us the results that we've gotten so
Speaker 5: far about the efficacy because you know, I guess we're
Speaker 5: just not used to hearing about.
Speaker 3: Vaccines as a treatment or something.
Speaker 8: Yeah, So I think I think one thing that can
Speaker 8: be hard to wrap our mind around is that with
Speaker 8: the vaccine, you're actually, at this stage trying to keep
Speaker 8: the cancer from coming back. So you're teaching your immune
Speaker 8: system not just to beat down the cancer right now,
Speaker 8: but far into the future so that it kind of
Speaker 8: recognizes what a cancer cell looks like. So we don't
Speaker 8: have the numbers on this phase three trial, but we
Speaker 8: do have numbers from a smaller phase two trial that
Speaker 8: was long lasting.
Speaker 10: It looked out.
Speaker 8: Over five years and showed that for both recurrence of
Speaker 8: cancer and for these distant metasses so you know, the
Speaker 8: cancers writing other parts of the body, it was an
Speaker 8: improvement of forty nine percent over ki truda, which is
Speaker 8: merks very effective cancer, you know, therapy on its own.
Speaker 10: So that's a very big advance.
Speaker 8: And I'll just note, as I did in my column
Speaker 8: that he Turta had already really changed the paradigm when
Speaker 8: it came to melanoma, and so to do better than
Speaker 8: that by this much is why people are so excited.
Speaker 2: Yeah, I think about you know, we've learned so much
Speaker 2: in terms of how to dealing with problems or with
Speaker 2: the heart, right, but cancer continues to be a really.
Speaker 3: Tricky healthcare problem.
Speaker 7: I mean, there's.
Speaker 2: Alzheimer's, there's other things too as well. But I just
Speaker 2: think about it because cancer can impact people differently, right,
Speaker 2: and so and bodies can can impact it. I've seen
Speaker 2: people with stage three or stage four who come back,
Speaker 2: and then there are others who don't. So it's just interesting.
Speaker 2: But this idea of kind of personalizing, but it is
Speaker 2: still also what's interesting is it's a double.
Speaker 3: Treatment, right.
Speaker 2: I mean, that's what's interesting as well.
Speaker 8: Right, I mean I think, well, I think one of
Speaker 8: the things that we have advantage here is that you
Speaker 8: can really personalize this and market Maderna are doing that.
Speaker 8: So they take your patient's own tumor and they sequence
Speaker 8: it and then they use AI to find the mutations
Speaker 8: that are probably the most likely driving their cancer and
Speaker 8: for our immune system to respond to. And the idea
Speaker 8: is just like when we get a regular vaccine that
Speaker 8: you know it's gonna combat the cancer now, which the
Speaker 8: key truth to is helping, but that also it's giving
Speaker 8: our immune cells these kind of mugshots you know when
Speaker 8: the enemy comes back that we want to shut down
Speaker 8: and that it can roar into action, which has really
Speaker 8: been difficult. We have a lot of treatments that work
Speaker 8: very well in the short term, but not aren't curative,
Speaker 8: aren't giving people a lot of years where they're not
Speaker 8: anxious about, you know, a recurrence, which is which is difficult.
Speaker 2: Right, recurrents are spreading elsewhere, so right, if you could
Speaker 2: shut it down, you think about what that would do
Speaker 2: for people's outlook and their ability to survive this longer
Speaker 2: much longer term.
Speaker 10: Yeah, and I think even just their quality of life,
Speaker 10: being able to.
Speaker 8: Make decisions in the longer term without having that kind
Speaker 8: of constant worry. You know, we have to see the data,
Speaker 8: we have to know how long it's lasting. But I
Speaker 8: think this is so exciting because it changes the way
Speaker 8: that we treat cancer, you know, and it could really
Speaker 8: be meaningful for a lot of people, especially if it
Speaker 8: works outside in melanoma. And that is not to diminish
Speaker 8: the accomplishment in melanoma, which does affect you know, over
Speaker 8: a hundred thousand people in the US each year.
Speaker 3: So what else do we need to watch for.
Speaker 5: I feel like a lot of times in biotech and pharma,
Speaker 5: different companies start racing and competing. Are there other companies
Speaker 5: trying to do what Maderna is doing right now?
Speaker 10: Yeah?
Speaker 8: I mean BioNTech, which is the other company that we
Speaker 8: all came to know during COVID because they had partnered with.
Speaker 10: Buiser on their vaccine.
Speaker 8: They've been working on this like Mark since before the pandemic.
Speaker 8: We've got smaller companies that are working on it as well.
Speaker 8: I think one thing that we really should be advocating
Speaker 8: for at this point is more investment. I mean, this
Speaker 8: should be encouraging us to go all in because we
Speaker 8: know that it's a concept that finally has been proven.
Speaker 8: There has been some cutbacks when it comes to research
Speaker 8: in mRNA, and so I think, you know, trying to
Speaker 8: really put the foot on the pedal, but the so
Speaker 8: that we can get to a place where these are reality. Now,
Speaker 8: I'll just say too, like these trials, these late seaged
Speaker 8: trials take time. I think we're going to see some
Speaker 8: more readouts coming up and other types of cancers that
Speaker 8: will give us the first hint of you know, what
Speaker 8: our expectations should be when it comes to mRNA vaccines
Speaker 8: potential in a treating cancer broadly.
Speaker 2: Yeah, And I think about some of those tricky cancers,
Speaker 2: having had pancreatic in my family, my husband's family, I mean,
Speaker 2: it's a terrible cancer, and maybe this provides a way
Speaker 2: of really tackling that one, because really, once once it
Speaker 2: is diagnosed, there's not a lot of hope for the individuals.
Speaker 2: One of the things I want to ask you, though, Lisa,
Speaker 2: before we wrap up here. You end the story saying
Speaker 2: the other question hanging over this otherwise good news is
Speaker 2: whether it will convince them any medical science skeptics and
Speaker 2: conspiracy theorists that messenger RNA isn't so nefarious. After all,
Speaker 2: we saw that coming out of COVID right about a way,
Speaker 2: is this going to alter your genetic material? And you
Speaker 2: know there are other things that came out of it
Speaker 2: just remind us and does something like this maybe change
Speaker 2: how the scientific community and the community overall look at
Speaker 2: messenger RNA.
Speaker 8: I mean, I certainly hope so, you know, it's a
Speaker 8: fleeting effect in our body, it's a vaccine. It's showing
Speaker 8: you something in the short term. It's not changing your DNA,
Speaker 8: and so I hope it's convincing. And you know, who
Speaker 8: can tell. But I hope that the people that were
Speaker 8: very worried in the skeptics and conspiracy theorists, who may
Speaker 8: have a family member that really could benefit from something
Speaker 8: like this, you know, open their minds a little bit
Speaker 8: and see that, you know, it's a technology we're supporting.
Speaker 10: We really needed make the investment.
Speaker 2: Yeah, it does feel like I don't know, it does
Speaker 2: feel like a breakthrough right in a lot of different ways,
Speaker 2: and I'm excited to kind of see where the research
Speaker 2: goes from here.
Speaker 3: Lisa, thanks so much.
Speaker 2: I'm glad we could bring everybody your column, especially after
Speaker 2: week where we saw certainly investors.
Speaker 3: Taking note of this move from Aderna. Lisa Jarvis, thank you.
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