Speaker 1: This is Bloomberg Business Week. I'm Karl Masser and I'm
Speaker 1: Bloomberg Quick Takes Tim Stanovk. We're here every day bringing
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Speaker 1: search Bloomberg Global News. A bunch of headlines out there
Speaker 1: in terms of COVID. We did see several countries moving
Speaker 1: toward easing travel restrictions, so that's happening. We see, you know,
Speaker 1: mask mandates kind of coming off and we're moving forward.
Speaker 1: Although I highly recommend you check at the Bloomberg Big
Speaker 1: Take from over the weekend, it's a reminder we're not
Speaker 1: out of the woods yet. We're not. Michelle Cortez, who's
Speaker 1: covered it for us here at Bloomberg News, is just saying, sorry, guys,
Speaker 1: there are more variants to come, and it's going to
Speaker 1: be more disruptions to things like supply chains and so on.
Speaker 1: I read it on the plane back last night and like, oh, Michelle,
Speaker 1: come on alright, So let's bring in Dr John Abanson.
Speaker 1: He's lecturer of health care policy at Harvard Medical School.
Speaker 1: He's got a new book out, Sickening, a Big Farma
Speaker 1: broke American health care and how we can repair it.
Speaker 1: He joins us on the phone from Boston. Dr Abanson,
Speaker 1: nice to have you here with Tim and myself. Let's
Speaker 1: get right to it. Your book really strikes at big Pharma.
Speaker 1: What's your mission here? My mission is too to explain
Speaker 1: to the American people that American healthcare is performing very poorly.
Speaker 1: We've ranked sixty eight in the world and healthy life expectancy,
Speaker 1: and to achieve that lowly state of health, we're spending
Speaker 1: a trillion and a half dollars more than the other
Speaker 1: wealthy countries as a percentage at GDP. So it's a disaster.
Speaker 1: We've known this for a while, so right like this
Speaker 1: has been out there, this stat I feel like whenever
Speaker 1: we talk about American healthcare systems for the last decade,
Speaker 1: at least, you know, we talked about how much we
Speaker 1: spend and how much is bad? UM? So so what
Speaker 1: do we do right? So what I have to contribute
Speaker 1: is that UM as a family talk you know, was
Speaker 1: Robert W. Johnson Fellow and trained in research design and
Speaker 1: epode theology and statistics. As my career went on, I
Speaker 1: started to see the commercial influence coming and the missing piece.
Speaker 1: We talk about these things all the time, Carol, and
Speaker 1: people are aware of it. Um. It's hard to apprehend
Speaker 1: how bad it is. But the missing piece in all
Speaker 1: this is something that I can contribute, which is that
Speaker 1: the commercial interests, doing their job to maximize the financial
Speaker 1: returns that they delivered to their investors, have taken over
Speaker 1: the knowledge that even the best doctors trust about how
Speaker 1: best to care for patients. And this extends from their
Speaker 1: determining the research agenda of our new knowledge is about
Speaker 1: drugs and devices, to controlling the conduct of the studies,
Speaker 1: the analysis of the studies. When the studies are completed
Speaker 1: and the manuscripts are sent into the journals, that the
Speaker 1: peer reviewers and the medical journal editors don't even get
Speaker 1: to see the real data. They just get to see
Speaker 1: the data that's included in the manuscript. And when the
Speaker 1: experts who write clinical practice guidelines set the standards for
Speaker 1: all doctors about what how to practice quality medicine. They
Speaker 1: don't get to see the data either. So what we've
Speaker 1: had is this quiet revolution in the control of our
Speaker 1: medical knowledge over the last twenty or thirty years. And
Speaker 1: the docs are trying to practice evidence based medicine, but
Speaker 1: they don't understand that that evidence the fundamental purpose of
Speaker 1: that evidence now is to maximize returns to investors. Can
Speaker 1: you draw a line from what you're talking about here
Speaker 1: to the nearly one million Americans who have died as
Speaker 1: a result of covid um that is our health care system,
Speaker 1: our health care system, the health of the health of
Speaker 1: American people, and to the is it billions now that
Speaker 1: have gotten the vaccine or millions that have gotten the vaccine? Yes?
Speaker 1: Billions um yes uh? Part of the line uh. The
Speaker 1: COVID vaccines and are both the height of what farmer
Speaker 1: can do for us. And it shows also that their
Speaker 1: business model of maximizing their profits is not going to
Speaker 1: work in the end, because what we've done is we
Speaker 1: have these fabulous vaccines while we pay a lot, the
Speaker 1: drug companies are making a lot. But fine, But what
Speaker 1: happened is that there was no UH control on where
Speaker 1: those vaccines were sold, so they're being sold where the
Speaker 1: drug companies can make the most money, and the third
Speaker 1: world is getting left out of this. So Africa has
Speaker 1: a vaccination rate of approximately I think now. And what's
Speaker 1: happening is that Delta variant came from India when four
Speaker 1: of people were vaccinated. The O wrong variant came from
Speaker 1: South Africa when ten percent of South Africans were vaccinated.
Speaker 1: And the business model of the pharmaceutical companies, the vaccine
Speaker 1: manufacturers is to keep selling their drugs for top dollar.
Speaker 1: But it's a global pandemic and until everybody's safe, nobody's stakes.
Speaker 1: And these variants like Delta and omicron are going to
Speaker 1: keep coming back to affect Americans and we're going to
Speaker 1: keep having waves of this as your as Mitchelle, your
Speaker 1: reporter road. So who do we target? You know, I've
Speaker 1: had a brother who is in pharmaceuticals for a long
Speaker 1: time and we've had some great debates go round and round.
Speaker 1: But I do wonder how do we make it better.
Speaker 1: You mentioned we spend so much, and I'm very grateful
Speaker 1: having traveled and been exposed to sometimes healthcare systems outside
Speaker 1: the United States. I do know that we are privileged,
Speaker 1: but not everybody is equally privileged, and yet the costs
Speaker 1: are extreme and it's sometimes cumbersome and difficult to manage.
Speaker 1: Just got about a minute left here, So what do
Speaker 1: we do? What's your top two things that you change
Speaker 1: that we make it better? Yeah, Carol, there are a
Speaker 1: couple of things that would would really improve it. One is,
Speaker 1: we in the United States do not have Health Technology Assessment.
Speaker 1: So the FDA tells us what tells us doctors what
Speaker 1: drugs we can prescribe, but it doesn't tell us what
Speaker 1: drugs we should prescribe in terms of being most effective
Speaker 1: and most efficient. So we need an external body that
Speaker 1: can tell doctors what the data really show about whether
Speaker 1: new therapies are better than older therapies, um, and what
Speaker 1: the most cost effective medicine is. The other thing that
Speaker 1: we absolutely need is transparency of clinical trial data. It's
Speaker 1: craziness to be trusting journal articles because they're peer reviewed.
Speaker 1: When the peer reviewers don't have access to the data,
Speaker 1: it makes no sense. It takes us. Now forgive me,
Speaker 1: we're running out of time. Sounds like some things that
Speaker 1: we need to put front and center. I do hope
Speaker 1: you'll come back, because I think this is a converse
Speaker 1: station that we've got to spend a bit more time
Speaker 1: with us, and and not really even gracious with your
Speaker 1: time today. Dr John grab Abramson over at Harvard Medical School.
Speaker 1: Check out his book Sickening, How Big Farmer Brook American
Speaker 1: Healthcare and How we can repair It. You're listening to
Speaker 1: Bloomberg Radio. You're listening to Bloomberg Business Week with Carol
Speaker 1: Messer and Bloomberg Quick Takes Tim Stinovic on Bloomberg Radio.
Speaker 1: But in the current issue of Bloomberg Business Week, a
Speaker 1: story about unicorns, you know, the startup companies worth about
Speaker 1: a billion or more. And as it turns out, Tim
Speaker 1: more being minted every day. In fact, some are being
Speaker 1: their couple being minted every single day in two It's
Speaker 1: almost like, Joel Weber, we need a new name for unicorn.
Speaker 1: Joel Webber is at her at Bloomberg Business Week. He's
Speaker 1: with us in the Bloomberg Interactive Broker Studio. The story
Speaker 1: we're referring to is by Ellen Hewitt, startups reporter for
Speaker 1: Bloomberg News. She joins us on the phone from San Francisco.
Speaker 1: Check out her story. It's featured in the current issue
Speaker 1: of Bloomberg Business Week. It's available on the Bloomberg and
Speaker 1: at bloomberg dot com slash business Week. So what do
Speaker 1: you think, Joel um a new name for Unicorn because
Speaker 1: they're not all that rare. I don't know what name
Speaker 1: that would be. Uh So maybe Ellen hasn't. But Ellen
Speaker 1: sent up a flare uh a couple of weeks ago
Speaker 1: and basically said, we're about to hit an interesting threshold,
Speaker 1: which is one thousand startups that will be worth a
Speaker 1: billion or more UM, which I think is a really
Speaker 1: interesting moment to kind of look back at this, Like,
Speaker 1: I mean, in the tech world, this has been a
Speaker 1: trend that has really helped define where where companies go
Speaker 1: and increasingly where public markets go. Um. And it didn't
Speaker 1: take that long for us to get there. Um. So, Ellen,
Speaker 1: what was the thousand Unicorn? So there's arguably too because
Speaker 1: there were actually two that became you know, We're born
Speaker 1: quote unquote on February second, which was happened to be
Speaker 1: the day that we hit the thousand number. We chose
Speaker 1: to profile one of them. It was a company called
Speaker 1: produc Upboard, and I could not have come up with
Speaker 1: a more inside baseball Silicon Valley company had I tried.
Speaker 1: They make software for product managers UM to help them
Speaker 1: more effectively manage UM product development, which just means like
Speaker 1: building a new app or a new feature or something
Speaker 1: like that. And it's it's just like, you know, pms
Speaker 1: are a big deal at tech companies and this is
Speaker 1: just a product made for them. They're based in San Francisco.
Speaker 1: I mean it was like it was pretty funny, UM.
Speaker 1: But yeah, I mean, they just it was a huge
Speaker 1: deal for them, UM, But most people don't fat And
Speaker 1: I like, as reporters, if we get pitched a company
Speaker 1: saying like hey we raised money and now our unicorn,
Speaker 1: like that doesn't move the needle for us at all.
Speaker 1: So if it wasn't called a unicorn, what would call well,
Speaker 1: what's funny is? I talked to um alien Lee, who
Speaker 1: is the VC who originally came up with the term,
Speaker 1: and she said, when she was first writing the blog
Speaker 1: post about unicorns, she was like, I was trying to
Speaker 1: think of a a term, and I thought of like
Speaker 1: home run or monster hit or these things that were
Speaker 1: like pretty cheesy. And I told her, I was like,
Speaker 1: I as a writer, I'm so glad that you picked
Speaker 1: unicorn because there are a lot of fun metaphors you
Speaker 1: can make with it. UM that helps us up, you know,
Speaker 1: any sort of article about improvided very memorable art for
Speaker 1: magazine stories. Yeah, the arts spread is amazing. I really
Speaker 1: encourage everyone to look at the at the print version.
Speaker 1: It's it's quite beautiful. Including Actually, I have actually wondered
Speaker 1: when the unicorn really looks like, because I've never seen
Speaker 1: one in the wildly. I have this Bloomberg Business Week
Speaker 1: article in the art associated with it to show me.
Speaker 1: Hey Ellen, I'm I'm wondering why these companies are staying
Speaker 1: private longer. It's just something you explore in the piece um. Traditionally,
Speaker 1: companies that have been worth so much they would have
Speaker 1: you know, I p o well. And if you look
Speaker 1: at the uniform list, so at the time that the
Speaker 1: term was first coined, which was the most valuable private
Speaker 1: company that was on that list was Twitter? It was
Speaker 1: worth ten billion dollars. Now, if you look at the list,
Speaker 1: the most valuable unicorns on the list are Bike Dance
Speaker 1: at a hundred forty billion dollars um, SpaceX that around
Speaker 1: a hundred billion, and Stripe that I think and I mean,
Speaker 1: is you know, an order of magnitude above what we
Speaker 1: used to have less than a decade ago. And you
Speaker 1: know a lot of the big names that used to
Speaker 1: be on the Unicorn list are public, like Uber Lift,
Speaker 1: you know, Airbnb, We work all these companies. That being said,
Speaker 1: obviously there's a lot more flexibility for companies to stay
Speaker 1: private longer. And I think, you know, Stripe is a
Speaker 1: good example. They've just their ability to raise money is
Speaker 1: limitless in the private markets. Why would they go public?
Speaker 1: It's the same story that we've heard people worrying about
Speaker 1: for the last ten years. And and the reason you
Speaker 1: see all these public market investors coming to the private markets,
Speaker 1: these companies are not interested in going public if they
Speaker 1: don't have to. They really don't have to write there's
Speaker 1: so much money out there. So Ellen, what does it
Speaker 1: take for a reporter who follows startups to get excited,
Speaker 1: especially when it's not so unusual for there to be
Speaker 1: a billion dollar company? And I think about our audience,
Speaker 1: who is listening when we talk about these companies that
Speaker 1: hit that billion dollar status. What are the ones that
Speaker 1: they should be maybe paying more attention to. Is it
Speaker 1: that nineteen billion. What is it? Oh my gosh, Well
Speaker 1: it's funny because yeah, now as a result of how
Speaker 1: many unicorns there are, you are seeing these ridiculous neologisms
Speaker 1: like umu decacorn a classic, right, so ten billion or more.
Speaker 1: But somebody was telling me hecticorn is now in vogue
Speaker 1: because that's a hundred billion or more. I mean it's
Speaker 1: it's um or like mega. You know, people talking about
Speaker 1: mega funding rounds now of like a hundred million or
Speaker 1: more and funding I mean, the goal post just move farther.
Speaker 1: And so I think as reporters, yeah, we are looking
Speaker 1: for companies that stand out for some other reason. Um
Speaker 1: and I think what's tough is like for the company's perspective,
Speaker 1: like hitting a billion dollar valuation is a really good
Speaker 1: sign that you've built something very strong. This is what
Speaker 1: the PC's have told me. It's like, I means you
Speaker 1: you've got a good product, but it's no longer enough
Speaker 1: stand out on that alone own and especially these companies
Speaker 1: are really competing over recruiting, so that that tends to
Speaker 1: be a place where they hope that having this public
Speaker 1: high or this high valuation that has made public through
Speaker 1: news reports, that will help but it tends not to
Speaker 1: help with recruiting. They need to show that they're special
Speaker 1: in some other way. And are we going to anticipate
Speaker 1: in any sort of slow down in these valuations or
Speaker 1: is the money free flowing right now in Silicon Valley.
Speaker 1: I mean it feels like it's just been so many
Speaker 1: years of people saying like, is there going to be
Speaker 1: a slowdown in the private markets and there, and there
Speaker 1: really hasn't been. Obviously. You see individual companies that maybe
Speaker 1: were overvalued, like we work with airines or whatever, and
Speaker 1: you see them collapse. But I mean, the trend lines
Speaker 1: have only been going up, and even when there's been
Speaker 1: volatility and the public markets, that hasn't usually shown up
Speaker 1: as strongly in the private markets. And look, covid was
Speaker 1: actually really good for all these companies, which was kind
Speaker 1: of surprising too. I mean a lot of them make software,
Speaker 1: and the more digital our lives become, you know, the
Speaker 1: more the more these become valuable. I gotta acorn. That's
Speaker 1: what I would do, all right, Ellen Hughett, great stuff.
Speaker 1: Check it out online. It's really gorgeous in terms of
Speaker 1: how it's laid out. She's our startups reporter at Bloomberg
Speaker 1: News and our thanks to Joe Webber, editor of Business Week.
Speaker 1: It's in the current issue of the magazine. This is
Speaker 1: Bloomberg business Week with Carol Messer and Bloomberg Quick Takes
Speaker 1: Tim Stinovic on Bloomberg Radio. Well, on Friday, Bloomberg Live
Speaker 1: hosting its Power Players Summit. Tim and I were there.
Speaker 1: It's bringing together folks in the sports world. And at
Speaker 1: the event, it caught up with Jimmy Pittaro, chairman ESPN
Speaker 1: and Sports content of the Disney Company. Also George Pine,
Speaker 1: founder and CEO Brewing Capital, talk about meeting sports fans
Speaker 1: wherever they are and that included the gambling world and
Speaker 1: social media. Does what you do on social ultimately drive
Speaker 1: to other platforms. Maybe people get a snippet of something
Speaker 1: and then they all took ultimately want to see more.
Speaker 1: That's that's exactly the strategy. So well, so yes, it
Speaker 1: does work. I will tell you that this is just
Speaker 1: one little anecdope. I was speaking at a conference UH
Speaker 1: sales conference and we're having this exact discussion, and afterwards,
Speaker 1: an executive came up to me and said, I just
Speaker 1: want you to know I have I have two teenagers
Speaker 1: and they were both introduced to ESPN on Snap and
Speaker 1: now they're watching first take and get up on traditional television.
Speaker 1: So for me, that's the strategy. You know, we of
Speaker 1: course want to be there and will continue to be
Speaker 1: there on those platforms, but it's a way to grow awareness.
Speaker 1: So it's a way to grow affinity and and and
Speaker 1: get this younger generation just generally excited about ESPN. And
Speaker 1: you know the other thing that's interesting now is gambling.
Speaker 1: Well that's sports, right, I mean, thirty one million people
Speaker 1: are supposed to bet on the game Sunday. Eight billion
Speaker 1: dollars will be waged legally. By the way, up we
Speaker 1: have a company called Odds Schegar that it's kind of
Speaker 1: a kayak for betting in the UK. We're bringing it
Speaker 1: to America and in the first three days of New
Speaker 1: York being live, we did of the budget revenue for
Speaker 1: the year, so obviously we budgeted it too low, but
Speaker 1: the gambling as sticky as well. So when you think
Speaker 1: about gambling, social media, digital media, understanding what people want,
Speaker 1: you know, the world's world's changing around us. Howes gambling
Speaker 1: turn into somebody who ultimately goes to ESPN? Does it work?
Speaker 1: I mean, well, look so here's wrong, guys. We're in it.
Speaker 1: We are in the space. We've been in the space
Speaker 1: for for several years. Disney actually said this week he's
Speaker 1: bullish on sports, including betting. He is bullish on both. Um,
Speaker 1: I will tell you we've been in the space. We
Speaker 1: have content. We have dedicated segments on Sports Center. Scott
Speaker 1: Van pelt has has his Sports Center where he does
Speaker 1: a segment called Bad Beats. We have dedicated podcast, we
Speaker 1: have a dedicated area on ESPN dot com. We have
Speaker 1: a ESPN branded studio in Vegas on the Strip um
Speaker 1: that generates betting specific programming on on a regular basis.
Speaker 1: We've done the research, and of course we were treading
Speaker 1: carefully here over the past few years, still investing, but
Speaker 1: but really looking closely at the data. And what we
Speaker 1: saw is that Number One, our fans are no longer
Speaker 1: just okay with it. They're demanding it. They expect ESPN
Speaker 1: to be offering this betting experience within our environment. Number Two,
Speaker 1: and this is really interesting, we didn't see any negative
Speaker 1: impact on the Disney brand. I mean, for those of
Speaker 1: you that don't know, the Walt Disney Company owns ESPN.
Speaker 1: So we've wanted to be careful in that regard to
Speaker 1: and what we're seeing was it was neutral or positive
Speaker 1: even on the Disney brand. So because I think people
Speaker 1: thought family brand, how could you get into betting? Well,
Speaker 1: you see, you see all the leagues now, in all
Speaker 1: the major leagues, In fact, every league you're in, nineteen
Speaker 1: times more likely to watch a sporting event if you
Speaker 1: make a bet. So if I'm a broadcaster sports, how
Speaker 1: can I not do it? Like if they don't do it,
Speaker 1: everybody else will. They'll be at a disadvantage. ESPN really doesn't.
Speaker 1: I can say no, no, it's you don't have a choice.
Speaker 1: They have to. They have, like he said, he has
Speaker 1: to be where the fans are, and he has to
Speaker 1: give the fans what they want. Yeah, we're in a battle.
Speaker 1: We're in a battle for people's time. We're and we're
Speaker 1: not just competing against the traditional sports media companies. We
Speaker 1: all know this. We're competing against Instagram and Snap and
Speaker 1: Fortnite and Netflix, and so we have to be aggressive here.
Speaker 1: Now that being said, my job is to protect the
Speaker 1: brand at all costs. And if I saw any data
Speaker 1: that that that indicated to me that that this was
Speaker 1: a dangerous position to be taking we wouldn't do it.
Speaker 1: Even if there was financial upside, we wouldn't. We wouldn't
Speaker 1: do it. I have to protect the brand. But we're not.
Speaker 1: We're just not seeing that um any worries about the
Speaker 1: integrity of sports in general, especially as we know it's
Speaker 1: teams getting in right, the league's getting in I mean,
Speaker 1: everybody is really kind of all in when it comes
Speaker 1: to betting and gambling. Well, you know, around the world,
Speaker 1: they've been doing it for a long time without really
Speaker 1: any issue. I mean, there's always an inititive integrity. But
Speaker 1: I would argue you had that whether it was legal
Speaker 1: or illegal. I mean, one of the things we're finding
Speaker 1: is that legal bettings way up makes sense. I'd rather
Speaker 1: make a legal bet than an illegal bet, right, So
Speaker 1: if I don't have the choice to make a legal bet,
Speaker 1: it's probably better. But no, we I don't. I don't
Speaker 1: think there's any evidence that it's been a real issue.
Speaker 1: I mean, in Europe they've been betting for quite a
Speaker 1: long time. Yeah, And look, one of the somewhat connected
Speaker 1: to that. One of the things that we bring to
Speaker 1: the table, I think is is our brand, which represents
Speaker 1: trust a certain level of credibility. So anyway, we see
Speaker 1: opportunity here, but of course we're going to do it responsibly,
Speaker 1: right and just tread carefully and go slowly. One of
Speaker 1: the things you see the leaves, which I think is
Speaker 1: really smart to that point, is talking about doing advertising
Speaker 1: the NFL about responsible gaming. I think that's one of
Speaker 1: the learnings that wasn't done well around the world, and
Speaker 1: you see some of the countries of increasing regulation, and
Speaker 1: I think the leagues here in the US they're trying
Speaker 1: to get ahead of it by initially bring up do
Speaker 1: this responsibly alright. That, of course was Jimmy Pittaro, he's
Speaker 1: chairman of ESPN and sports content for the Walt Disney Company.
Speaker 1: And George Pine, founder and CEO Brewing Capital, who has
Speaker 1: three generations in his family who have been involved in
Speaker 1: the NFL. So I'm really cool individuals to talk about
Speaker 1: what's going on. Not the first time I've heard that
Speaker 1: engagement metric about the likelihood of you actually watching an event.
Speaker 1: It goes up significantly if you end up betting on it.
Speaker 1: And of course the leagues are gonna want to get involved,
Speaker 1: But how do you keep it pure? Carol, integrity right,
Speaker 1: integrity of the game signs in locker rooms, videos, trainings.
Speaker 1: I don't know, I don't know. And I think of
Speaker 1: Brian Flores, the former of Miami coach head coach, his lawsuit. Uh.
Speaker 1: And part of the concerns, or at least claims or
Speaker 1: allegations were that the owner you know, was offering money
Speaker 1: for him to lose games, right to improve other position
Speaker 1: in the draft. But so you just rose. I don't
Speaker 1: know what to say. Um, but everybody is all in
Speaker 1: when it comes to gaming, and and these guys just
Speaker 1: talking about wanting to be wherever the fans are. Truly
Speaker 1: it means multiple, multiple platforms. Check out more, go to
Speaker 1: Bloomberg Live dot com. Yeah, but you let me drive? No? No,
Speaker 1: all right, please level, I want to drive. It's a
Speaker 1: good question. Drive drive to the globe. Dawn on radio?
Speaker 1: All right, just about ten minutes left in today's trading session,
Speaker 1: getting ready to wrap up this Valentine's Day of trading.
Speaker 1: Now a little love on Wall Street. In fact, it's
Speaker 1: a pretty volatile relationship. I like what you did there, Carol.
Speaker 1: Have you been waiting a year to say that? What
Speaker 1: would have happened if stocks are in the green today?
Speaker 1: This is what happens when you get no sleep, Yeah, exactly.
Speaker 1: All right, let's get to it with Michael Sheldon. He's
Speaker 1: executive director and chief investment officer at High Tower r
Speaker 1: d M Financial Group based in Westport, Connecticut, and that's
Speaker 1: where we find him on the phone on this Monday. Michael,
Speaker 1: how are you good? Thanks very much and happy Valentine
Speaker 1: States everyone in our viewers. Yeah, no, absolutely, it's been
Speaker 1: a wacky day. I was just looking at some of
Speaker 1: the swings in the major averages, like two percent on
Speaker 1: the NAZACK one hundred, about one and a half percent
Speaker 1: on the S and P five. Um hmm. How do
Speaker 1: you make sense of a day like today when we're
Speaker 1: watching the tensions the geopolitical concerns involving Russia and Ukraine
Speaker 1: and the rest of the world. But we've also got
Speaker 1: some nervousness about how aggressive the Fed. Maybe, yeah, I
Speaker 1: think from the markets unfortunately, we're probably going to be
Speaker 1: in the sort of trading range and markets are likely
Speaker 1: to remain unsettled for for the near term until we
Speaker 1: have more clarity on on the outlook for inflation shifting
Speaker 1: FED policy and more recently the situation in Russia. Russia
Speaker 1: and the Ukraine. What do you make of the situation
Speaker 1: in Russia and Ukraine. Because we had Christina Hooper from
Speaker 1: Investco on Quick take Stock earlier today and she mentioned
Speaker 1: that oftentimes geopolitical shocks like this are relatively short lived
Speaker 1: in terms of effects to the markets, but she said
Speaker 1: this one could be different because of the impact on oil. Yeah,
Speaker 1: I think it's certainly a wild card. It's really tough
Speaker 1: to figure out what Putin's intentions are at this point. Um,
Speaker 1: he could just be trying to cement his legacy as
Speaker 1: as a dictator or leader of Russia. You know. We
Speaker 1: look back also at a number of geopolitical events going
Speaker 1: back as far back. Ash's looked at about twenty five
Speaker 1: of these and granted each one is different, but what
Speaker 1: had showed is that on average s D S and
Speaker 1: P five hundred fell about one point one percent on
Speaker 1: the day of a j geo political event, and it
Speaker 1: fell a total of about five almost five percent over
Speaker 1: the next twenty days, but eventually recovered its losses over
Speaker 1: the next forty three days. So most of these events
Speaker 1: have been fairly limited with the market rebounding, and of
Speaker 1: course each period is different. Russia is a pretty big
Speaker 1: player here. I think they supply about ten percent of
Speaker 1: the world's oil, and they also supply about one third
Speaker 1: of Europe's natural gas. So the implications of what happens
Speaker 1: UH certainly could be far reaching, probably more so for
Speaker 1: Europe than for the US. What's more problematic the geo
Speaker 1: political concerns, the reminder that the pandemic is far from over,
Speaker 1: and it's a global pandemic and until the world is
Speaker 1: out of it, none of us are out of it.
Speaker 1: Or is it that fundamentally? As our Gina Martin Adams
Speaker 1: reminded us that we are seeing analysts bring down their
Speaker 1: expectations for earnings, but yet we're still looking for a
Speaker 1: nine revenue growth, which, as she said, still fantastic. What
Speaker 1: is the thing investors really need to be focusing on, Well,
Speaker 1: you left one thing off your lip, which is the FED.
Speaker 1: And I think at the top of the list is
Speaker 1: the FED right now. The you know, I think that
Speaker 1: because of concerns about the level and stickiness of inflation,
Speaker 1: that's put pressure on the FED to finally start raising
Speaker 1: interest rates and um a short term after that they're
Speaker 1: likely to start QT. So I think there's a lot
Speaker 1: of uncertainty about the pace and timing and ultimate destination
Speaker 1: of what's going to happen to the short term rates.
Speaker 1: And I think importantly the Fed's aware that the yield
Speaker 1: curve is narrowing. That's the that's the gap between two
Speaker 1: year and ten year yields, so the yield curve is narrowing.
Speaker 1: I think the Michigan Consumer Compidence Index, for example, which
Speaker 1: came out last week, fell to an eleven year low.
Speaker 1: And I think FED members are aware of the fact
Speaker 1: that if there are too many aggressive rate hikes, that
Speaker 1: can actually harm the economy. But they are also aware
Speaker 1: of that inflation is that at forty year high, So
Speaker 1: I think they have to address the inflation part. But
Speaker 1: I think they're probably going to start off with quarter
Speaker 1: point hikes and see how things go and remain some
Speaker 1: and and continue to have some flexibility as we go
Speaker 1: through the year. So do you anticipate a quarter point
Speaker 1: hike in March and then a quarter point hike at
Speaker 1: each subsequent meeting. Well, we have seven more rate meetings
Speaker 1: this year, so I think a quarter point in March.
Speaker 1: I think not enough FED officials have signaled their um
Speaker 1: likelihood or their need for that they're wanting to do
Speaker 1: fifty basis points, so I think that's a little too
Speaker 1: aggressive at the first meeting. That could change, but I
Speaker 1: think a quarter point in March, probably a quarter point
Speaker 1: in May, a quarter point in June. That's seventy basis points,
Speaker 1: and I wouldn't be surprised to see one or two
Speaker 1: more in the second half of the year. But again,
Speaker 1: I do think the economy could change as we shift
Speaker 1: and go through the year. So nothing is written in stone,
Speaker 1: but the Fed does have to start taking action, and
Speaker 1: I think they also definitely have to address their balance sheet,
Speaker 1: which increased from about four trillion to nine trillion, so
Speaker 1: I would expect that to start running off as well
Speaker 1: as we get into the summer. So what do we
Speaker 1: do as an investor? As you watch, especially markets kind
Speaker 1: of bounced back and forth. I mean, we went through
Speaker 1: a day earlier where travel stocks are rallying as a
Speaker 1: as a whole on expectations of easing of attentions over
Speaker 1: in Russia and Ukraine, and then we saw them sell
Speaker 1: off and then do just bouncing around. It's really you know,
Speaker 1: your day may start one way Michael and then end
Speaker 1: another or go through several gyrations in uh, you know,
Speaker 1: one market day Yeah, they're challenging time to be an
Speaker 1: investor for sure. We think this year in two thousand
Speaker 1: twenty two, markets are likely to be rotational in nature
Speaker 1: and sort of a lot like we saw last year,
Speaker 1: where at some point people would be worried about too
Speaker 1: much inflation as they are today, but down the road
Speaker 1: they may be worried about not enough growth. So I
Speaker 1: think between growth and value. I think you want to
Speaker 1: have a balance between both growth and value, especially with
Speaker 1: interest rates rising right now. We've been very much overweight
Speaker 1: growth over the past decade or so and it's turned
Speaker 1: out pretty well in terms of a tail and for portfolios,
Speaker 1: but on the margin, we're starting to shift more, a
Speaker 1: little bit more to the middle between growth and value,
Speaker 1: and I think you want to have a little bit
Speaker 1: of more, a little more more balance in your portfolios
Speaker 1: as we go through this year. So what does that
Speaker 1: look like? What was it? What does balance look like?
Speaker 1: So balance means you want to have some technology in
Speaker 1: your portfolios, because there's some exciting areas and artificial intelligence
Speaker 1: and five G and drive a less cars and all
Speaker 1: those types of things. So you want to have that
Speaker 1: and that provides the growth for that that investors need
Speaker 1: to meet their long term investment objectives. But you also
Speaker 1: need to have some exposure to areas like health care
Speaker 1: for example, which we call it sort of like garp
Speaker 1: or growth at a reasonable price, and then some energy
Speaker 1: and financial exposure as well. So the one areas were
Speaker 1: not sort of loading up on right now are consumer
Speaker 1: staples and utilities because we think it's kind of too
Speaker 1: early in the cycle to get ultra defensive at this point,
Speaker 1: and it's not a lot of attractive growth in those
Speaker 1: in those sectors. All Right, we gotta run. Hey, Michael,
Speaker 1: thank you so much. Have a good week. Michael Sheldon.
Speaker 1: He's executive director and chief investment officer at high Tower
Speaker 1: r DM Financial Group, based in Westport, Connecticut, which is
Speaker 1: where we found him on the phone on this Valentine's
Speaker 1: Day Monday. Thanks for listening to Bloomberg Business Week. Download
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