Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside
Speaker 1: my co host Matt Miller.
Speaker 2: Every business day we bring you interviews from CEOs, market pros,
Speaker 2: and Bloomberg experts, along with essential market moven news.
Speaker 1: Find the Bloomberg Markets Podcast on Apple Podcasts or wherever
Speaker 1: you listen to podcasts, and at Bloomberg dot com. Slash
Speaker 1: podcast looks good to Allison Williams. She's a senior banks
Speaker 1: analyst at Bloomberg Intelligence. You worked at Morgan Stanley, Allison,
Speaker 1: you've covered this doc forever. Just put into perspective mister
Speaker 1: Gorman's reign here, How does the street pursue his his
Speaker 1: performance at CEO.
Speaker 3: So obviously the biggest thing that Gorman did when he
Speaker 3: was at Morgan Stanley is to transform the business to
Speaker 3: wealth and asset management. So twenty six percent and twenty ten,
Speaker 3: that went to fifty to two percent in twenty twenty two.
Speaker 3: That's of pre text income. And I would say that,
Speaker 3: you know, for me personally, when I was at Morgan Stanley,
Speaker 3: the first time I met James Gorman was at Merrilynch
Speaker 3: and he did a tremendous job there, came into Morgan
Speaker 3: Stanley to run their wealth business, you know, was elevated
Speaker 3: to CEO. Really has transformed that business. At this that
Speaker 3: does sort of perhaps give an edge to Andy Sapperstein.
Speaker 3: He's the one who's running wealth management now he's an
Speaker 3: heir apparent along with Ted Pick who runs the institutional business.
Speaker 3: But Ted Pick also has done a tremendous job with
Speaker 3: their trading business, turning things around first in fixed income
Speaker 3: and then the broader business and gaining share in both
Speaker 3: fixed income and equities under over the long term.
Speaker 1: So he said within twelve months, Allison, and that's a
Speaker 1: relatively short time frame. Do you have a sense or
Speaker 1: of when this may occurs or natural time?
Speaker 4: Do you think so?
Speaker 3: I think that this is a natural time. If we
Speaker 3: think back to when Lloyd Blankfein retired, you know, he
Speaker 3: made the point at the time that he wanted to
Speaker 3: step away in a commer time for markets and turnover
Speaker 3: leadership before we had before we had more turmoil, and
Speaker 3: I think that did successfully put David Solomon in place
Speaker 3: with time to have looked at the business. If you
Speaker 3: recall they had their first investor day and within weeks
Speaker 3: we had the global pandemic take hold, and so I
Speaker 3: think the reason why this is timely for Morgan Stanley is,
Speaker 3: you know, we're just past the pandemic. There's still a
Speaker 3: lot of economic and monetary policy and certainly for sure,
Speaker 3: but as you know, Paul, there there always is, there's
Speaker 3: always going to be, but we're past the pandemic where
Speaker 3: we've digested the company has digested two major acquisitions that
Speaker 3: they did. He traded eaton Vance, and so it does
Speaker 3: seem a commer time and perhaps the right time to
Speaker 3: pass the baton.
Speaker 1: Any is this gonna be a typical succession where you've
Speaker 1: got too clear and maybe even a third person in
Speaker 1: the running for the job that whoever does not get
Speaker 1: the job then leaves the firm?
Speaker 4: Is that kind of the expectation here?
Speaker 3: I mean that that is what does tend to happen.
Speaker 3: These are Ted and Andy are both very strong leaders
Speaker 3: and as I said, have have in their own right
Speaker 3: their own success stories that have contributed to the overall firm. Certainly,
Speaker 3: I think that each does have bigger aspirations. So you know,
Speaker 3: that's that's the kind of thing I think we'll have
Speaker 3: to say.
Speaker 1: Do we have any idea what James Gorman is thinking
Speaker 1: to do here? Is this a true retirement or expect
Speaker 1: him to show up some other place in a meaningful way.
Speaker 3: I think that I think it is a true retirement.
Speaker 3: He's sort of going out on top right, and he
Speaker 3: is going to He has that that he will stay
Speaker 3: with the firm, as you know, is sort of typical,
Speaker 3: you know, just just as Kenjacob said the other day
Speaker 3: with Blizzard. You know he will he will stay on
Speaker 3: the firm. It will ensure some continuity with the clients
Speaker 3: and with the management. But again you never say never.
Speaker 4: Yep, you know what.
Speaker 1: This kind of my second thought after seeing this news
Speaker 1: first left being you know, good for mister Gorman because
Speaker 1: he's had a heck of a run. The second thought
Speaker 1: was this has to shine the light once again on
Speaker 1: Jamie Diamond and JP Morgan. No one wants Jamie Diamond
Speaker 1: to leave. I can't imagine any of the shareholders, any
Speaker 1: of the board members. But if I were a board member,
Speaker 1: I'd be just making sure we have our ducks in
Speaker 1: a row. As it relates to any type of succession,
Speaker 1: what's the feeling at Morgan Stanley these days? I'm sorry
Speaker 1: at JP Morgan these days.
Speaker 3: So I think, as you know, Jamie Diamond is consistently
Speaker 3: asked the question because that is one of the biggest
Speaker 3: concerns for investors. You know, we look at James Gorman,
Speaker 3: who is at the helm for a long period of time,
Speaker 3: but Jamie Diamond is really the one who led JP
Speaker 3: Morgan even bef for the global financial crisis and has
Speaker 3: had continuity even through the most recent crisis, and he
Speaker 3: has consistently said that you know, there are plans in place.
Speaker 3: I'm sure it's something that he and the board talk
Speaker 3: with all the time, and they always have a huge
Speaker 3: slate of contenders at any point in time at JP
Speaker 3: Morgan in terms of who could be next to run
Speaker 3: the bank. To your point earlier, we have seen some
Speaker 3: of those contenders leave in previous shakeups or potentially just
Speaker 3: getting a little bit antsy in terms of wanting to
Speaker 3: go on to do other things, and they sort of
Speaker 3: prooferate some of the other banks across Wall Street in
Speaker 3: terms of their leadership. But also extremely timely since we
Speaker 3: do have the JP Morgan Investor Day on Monday.
Speaker 4: Oh, what's the number one thing you are going to
Speaker 4: be looking for? What could make news for us on Monday?
Speaker 3: The number one thing I'm looking looking for and that
Speaker 3: could make news is anything that they would say on
Speaker 3: the expense front. Right, So we have a look into
Speaker 3: a lot of the macro variables, but expenses are really
Speaker 3: something that are truly up to management discretion, to the
Speaker 3: investment opportunities that they see, and so we think that
Speaker 3: that's where we could potentially get the biggest surprise. We
Speaker 3: have already already gotten a big lift to the net
Speaker 3: interest income outlook with their most recent earnings. Could we
Speaker 3: get further upside there? I would say yes, potentially. We
Speaker 3: think that they were being conserva still a little bit
Speaker 3: conservative when we look at sort of the underlying variables,
Speaker 3: keeping in mind that monetary policy is uncertain, so could
Speaker 3: get a little bit there. We will get an update
Speaker 3: on trading and banking fees. Again, we can see in
Speaker 3: the environment banking fees studying at a lower level. Trading
Speaker 3: is still good, but probably softer than a year ago.
Speaker 3: Credit will also be a big focus. Are there any
Speaker 3: incremental Is there any incremental insight we could get, especially
Speaker 3: with regard to commercial real estate, office lounge, etca. We
Speaker 3: expect maybe they'll provide some more granularity, but again looking
Speaker 3: for these expenses great.
Speaker 1: Steff I'm sure we'll be chatting with you next week
Speaker 1: on that. Allison Williams, Senior Global Banks analyst at Bloomberg Intelligence,
Speaker 1: is also the co director of Research for the Americas
Speaker 1: for Bloomberg Contelligency.
Speaker 5: You're listening to the team.
Speaker 6: Ken's a live program Bloomberg Markets weekdays at ten am
Speaker 6: Eastern on Bloomberg dot com, the iHeartRadio app and the
Speaker 6: Bloomberg Business app, or listen on demand wherever you get
Speaker 6: your podcasts.
Speaker 1: Big News Adam Morgan Stanley, I think the right move.
Speaker 1: It just shows what a nice succession plan can look like.
Speaker 1: You know, we'll see how it plays out. But they've
Speaker 1: got a bench and they've got some good choices, so
Speaker 1: hopefully it'll work out.
Speaker 7: The race is not over.
Speaker 1: Yep, the race is not over. Let's continue our discussion.
Speaker 1: The banks will focus on some of the regional banks.
Speaker 1: We'll focus on some of the credit side of the
Speaker 1: equation because we can do that here. We have Bloomberg
Speaker 1: Intelligence four hundred analysts covering two thousand companies one hundred
Speaker 1: and thirty industries. B I go on the terminals a
Speaker 1: function you need to get access to the best research
Speaker 1: on Wall Street. Check it out Herman Chan and Arnold Kakuda.
Speaker 1: They are two of the analys we have a Bloomberg intelligence.
Speaker 1: Arnold focuses on the regional banks and I'm sorry Herman
Speaker 1: focuses on the regional banks are Arnold Kakuda focuses on
Speaker 1: the credit side of the equation for all the banks here.
Speaker 1: So Herman, let's start with you here. Any I haven't
Speaker 1: sensed any you know, kind of big potholes blowing up
Speaker 1: over the last couple of weeks. It seems to have
Speaker 1: been pretty calm. What's your read of what's happening in
Speaker 1: the regional banks based these days?
Speaker 8: It definitely has calmed down a lot. I think it's
Speaker 8: interesting that Western Alliance of all the banks is the
Speaker 8: bell weather these days, with them announcing two billion dollars
Speaker 8: of deposits in the second quarter coming back to the bank,
Speaker 8: and that's really calm the waters for the rest of
Speaker 8: the industry, which is really interesting to see.
Speaker 4: And from an industry.
Speaker 8: Perspective, we've seen deposits really stabilize over the past couple
Speaker 8: of months after the big spike down in March, and
Speaker 8: consequently there hasn't been a lot of emergency fed barns
Speaker 8: from the discount window.
Speaker 7: Now I'm curious also because what does this mean in
Speaker 7: terms of changes Herman, there's a sense that it's going
Speaker 7: to get more expensive for banks, banks of many different sizes,
Speaker 7: now that we've seen some fail. How soon our investors
Speaker 7: turning the page to look at the next phase for
Speaker 7: these banks.
Speaker 5: Yeah.
Speaker 8: I think if you look at the valuations where they're trading,
Speaker 8: the low tangible book value on average, a lot of
Speaker 8: the negativity is really priced in. So you've got tougher
Speaker 8: regulatory regime coming with tougher liquidity requirements, higher capital requirements.
Speaker 8: Arnold can talk about increasing the debt issue once. For
Speaker 8: the larger regionals, you've got higher expenses from the FDIC assessment,
Speaker 8: you have weaker margins, you have lower lending, you've got
Speaker 8: higher costs for deposits. So it's still a tough on
Speaker 8: the middle of view.
Speaker 7: I want to bring an Arnold here for a second
Speaker 7: here because the stock price story of PacWest this week
Speaker 7: makes it seem like we're all on the clear, But
Speaker 7: when you look at how their bonds are trading, it's
Speaker 7: still thirty one cents on the dollar. They've barely moved. Actually,
Speaker 7: they've kind of gotten worse throughout the month. Western Alliance
Speaker 7: has done a little better, but it's still at sixty
Speaker 7: four cents on the dollar. This is well below par.
Speaker 7: What are the bonds telling you about how investors feel
Speaker 7: about the stories?
Speaker 9: Well, I guess you know, we live in this world
Speaker 9: of you know, it's like a factory eighteen days since
Speaker 9: the Lens Bank failure, right so, you know recently.
Speaker 7: They're not even counting.
Speaker 9: I've been counting, so so yeah, it's you know, these
Speaker 9: these two banks have suffered multiple rating downgrades and definitely
Speaker 9: lots of concern. But I think, you know, and as
Speaker 9: Sermon said, these kind of are.
Speaker 4: The bell weathers right now.
Speaker 9: But really, you know, we've had a sea change in
Speaker 9: regional bank bond space. Where it used to be before
Speaker 9: twenty twenty three, these were they didn't issue a lot
Speaker 9: of debt. They traded very tight. You couldn't get enough
Speaker 9: of it. Right now it's oh my gosh, you know,
Speaker 9: these things are really dangerous. You might get zero and
Speaker 9: with upcoming regulation, these guys might need to issue a
Speaker 9: lot more debt. So so I think the way to
Speaker 9: play this is, you know, we had charge swap coming
Speaker 9: to market. I think a day or two ago, you know,
Speaker 9: and you know, we know there's gonna be more and
Speaker 9: more bank dead issues from this space, and it's gonna
Speaker 9: come really wide.
Speaker 4: So I think that's.
Speaker 9: An opportunity for you know, portfolio managers to come step
Speaker 9: in little by little if if they want to get in.
Speaker 1: All right, So just probably define if I look at
Speaker 1: the bond market for the banks, the big banks, what's.
Speaker 4: It telling you here? I mean, is it telling you
Speaker 4: that they're concerned.
Speaker 1: About there's any unusual concerns in this system? Or are
Speaker 1: they kind of trading as they should trade?
Speaker 9: Yeah? No, absolutely, the regionals have definitely underperformed, you know,
Speaker 9: definitely the you know, just just as we've seen the
Speaker 9: deposits kind of gravit towards JP Morgan. That's been kind
Speaker 9: of the safety in the space and and kind of
Speaker 9: you know, even within the big six banks, really the
Speaker 9: banks with more of a kind of regional footprint, like
Speaker 9: like the Bank of America and Wells Fargo with a
Speaker 9: lot of kind of long dated mortgages, those have underperformed
Speaker 9: a bit. But but you know, the preference definitely has
Speaker 9: been with these the biggest banks.
Speaker 7: Okay, toss up for the star panel here because you
Speaker 7: saw a shop come to market issue debt. Does that
Speaker 7: mean that the capital markets are open for the banking
Speaker 7: system and does that mean that we're kind of more
Speaker 7: close or to the all clear? You'd think back to
Speaker 7: Silicon Valley Bank trying to tap equity markets and that's
Speaker 7: set off a run on the bank.
Speaker 9: Yeah, I think you know, nobody wants to really issue
Speaker 9: equity in this market, given how much the valuations have
Speaker 9: come down, right, And I think you know it was
Speaker 9: it Western Alliance or a prafic pac Quest. Oh, you know,
Speaker 9: they looked we're looking for a solution or equity ways
Speaker 9: and then you know the opportunity wasn't right, right, So
Speaker 9: I think that that's a that's a you know, no
Speaker 9: for now. But you know the way these guys, You
Speaker 9: know that these regional banks have less regulation that they
Speaker 9: are viewed as under equitized, right, less capital because they've
Speaker 9: been able to exclude these unreal as losses and they're
Speaker 9: available for sale securities from their radiatory capital right so
Speaker 9: on on an adjusted basis compared to what the bigger
Speaker 9: banks like the JP Morgans have to do, right, they
Speaker 9: look under capitalized. So you know, we think regulation will
Speaker 9: increase from that standpoint as well.
Speaker 4: But right now they look under equitized.
Speaker 5: Right now.
Speaker 1: So when the banks report earnings, the big investment banks,
Speaker 1: oftentimes they come to the market and raised debt.
Speaker 9: What's that all about, Oh, they need to it's basically,
Speaker 9: you know, over the past three the actually, so let
Speaker 9: me step back, the past three years have been extremely
Speaker 9: active for these big jesips. And that's because global systemically
Speaker 9: important banks.
Speaker 4: Say, we have lives. We don't we're not into that stuff. Okay,
Speaker 4: that's not just an audience too. We have we have
Speaker 4: social lives. We don't know what jesips are. Okay, so
Speaker 4: go ahead.
Speaker 9: I So it's it's these systemically important banks that that
Speaker 9: if they cannot fail, right, and so part of that process,
Speaker 9: you know, we saw in two thousand and eight, the
Speaker 9: you know, when these guys got into trouble, the government
Speaker 9: had to step been with equity investments. Well, in the
Speaker 9: US and Europe, we can't have that anymore. So what
Speaker 9: we have instead is these big banks need to have
Speaker 9: a big liability stack debt really that that in a
Speaker 9: case of a crisis, that can be used as the
Speaker 9: new equity. Right, and so that's what this TI LAK
Speaker 9: regulation is total less observant capacity, and so that's where
Speaker 9: we've seen a lot of volatility with these regional banks.
Speaker 9: So maybe they're not global systemic important, but you know,
Speaker 9: maybe if these guys had a big debt stack, then
Speaker 9: they can reequitize in a case of of an issue, right,
Speaker 9: And so that's where we're headed.
Speaker 7: You know, I'm interested, Herman, do you think part of
Speaker 7: the reason shrob was able to raise money in bond
Speaker 7: markets and from what I understand at slightly more favorable
Speaker 7: terms than they initially set out for. Is there a
Speaker 7: huge difference between how investors view like a Schwab versus.
Speaker 4: A pack list.
Speaker 7: Is Schwab viewed as much safer?
Speaker 10: Oh?
Speaker 8: I think definitely, just given the stable a deposit base
Speaker 8: and they Schwab hasn't had to restructure there their entire
Speaker 8: balance sheet, like like a Western Alliance has, where Western
Speaker 8: Alliance is looking to sell assets and seeing deposits down
Speaker 8: somewhat like twenty percent enter quarter in the first quarter.
Speaker 5: So you can just.
Speaker 8: See from the equity valuations where PacWest is trading well
Speaker 8: south of Tantoba book value. And what investors are thinking
Speaker 8: about now is that how much can the bank return
Speaker 8: back to a normal situation versus the straw is still
Speaker 8: operating in a normal fashion.
Speaker 1: So I happen to think, I guess what I learned
Speaker 1: during this whole crisis from I guess your stuff and
Speaker 1: others is there's the US has roughly more than four
Speaker 1: thousand regional banks. I happen to think that's a strength
Speaker 1: of our banking system visa visa Europe, where they have less.
Speaker 4: Banks, they have more national banks. A Is that true?
Speaker 1: Do you think that's the strength of our banking system?
Speaker 1: And B maybe if not, is there gonna be some
Speaker 1: consolidation going forward?
Speaker 4: It is?
Speaker 8: It is a strength because I think of it as
Speaker 8: shopping for for a suitor or a jacket. If you
Speaker 8: go to Brooks Brothers, you can buy something off the rack,
Speaker 8: and that's it's going to be too regular for me
Speaker 8: what you too are so you know what you're getting.
Speaker 8: But the region banks offer a bit more of a
Speaker 8: bespoke typ experience where where they will work with the
Speaker 8: barrow or you know, it's not going to be a
Speaker 8: cookie cutter type loan that you would get at a
Speaker 8: JP Morgan or a b of A. And these these
Speaker 8: regional banks know their community a bit better, so I
Speaker 8: can can structure a deal that's more favorable for that
Speaker 8: potential borrower. So that's that's something that that is helpful
Speaker 8: for the US economy where where you have credit more
Speaker 8: credit availability versus other regions and geographies like in Europe.
Speaker 1: All right, guys, thanks so much for joining us. Really
Speaker 1: appreciated two experts folks. I can't tell you how fortunate
Speaker 1: we are to have these folks available to us, Hermit
Speaker 1: chan and Arnold Kakuda. They cover the bank's equities, fixed income,
Speaker 1: credit side, the whole thing that got the banks covered,
Speaker 1: along with Allison Williams on some of the bigger banks.
Speaker 1: There so great great research coming out of Bloomberg Intelligence.
Speaker 4: They're both joining us here in our Bloomberg Interactive Broker Studio.
Speaker 6: You're listening to the tape. Catch our live program Bloomberg
Speaker 6: Markets weekdays at ten am Eastern on Bloomberg Radio, the
Speaker 6: tune in app, Bloomberg dot Com, and the.
Speaker 5: Bloomberg Business App.
Speaker 6: You can also listen live on Amazon Alexa from our
Speaker 6: flagship New York station. Just say Alexa play Bloomberg eleven thirty.
Speaker 1: You know, we talk a lot, Schanali about inflation, but
Speaker 1: where one of the areas I see it most is
Speaker 1: in food prices, whether it's you know, at a restaurant
Speaker 1: or in the supermarket. And here's an article just from
Speaker 1: a week or so ago from Bloomberg News. US price
Speaker 1: is a baby formula and baby food jump by the
Speaker 1: most on record to an all time high last month,
Speaker 1: that would be April. Data from the Bureau of Labor
Speaker 1: Statistics showed Wednesday prices in the category rose by four
Speaker 1: point three percent in April from the prior month and
Speaker 1: from a year ago throughout eight point eight percent. So
Speaker 1: I said, we need to figureut what's going on there,
Speaker 1: and fortunately we have a great guest who can help
Speaker 1: us out there.
Speaker 4: Laura Mody.
Speaker 1: She's this It's THEEO and co founder of Bobby and
Speaker 1: Bobby is a baby formula delivery startup that sells direct
Speaker 1: to consumer and offers a subscription service to parents across
Speaker 1: the US.
Speaker 4: So a pretty cool business.
Speaker 1: We've been talking to Lara a lot over the last
Speaker 1: several years during a pandemic when there really was a
Speaker 1: you know, a concern about the availability of baby formula.
Speaker 1: So Lara give us a sense of where the baby
Speaker 1: formula is, where, where the market is for baby formula now.
Speaker 1: I mean, the pricing is just and the price inflation
Speaker 1: is just really dramatic, isn't it.
Speaker 8: It is.
Speaker 11: Good morning, Paul, great to stat with you again. It is,
Speaker 11: And you know, I think it's also disheartening on the
Speaker 11: back of what parents have just gone through, which is
Speaker 11: a very tough year for formula and just not being
Speaker 11: able to find it. Now we're finally seeing shells get
Speaker 11: stopped and they are seeing prices go up. I mean,
Speaker 11: look where this is coming from. Is it really is
Speaker 11: because of the shortage. A few things happened off the
Speaker 11: back of last year, and the first is I believe
Speaker 11: in March, the FDA came out with new regulations they're
Speaker 11: really supported off leveling safety and that's forced ultimately a
Speaker 11: change in production and infrastructure with the hopes of improving
Speaker 11: safety getting more formula to market, and the consequences of
Speaker 11: that was seeing an increase in price.
Speaker 7: I'm kind of curious here about how you got the
Speaker 7: job done, Laura. I think you have such an interesting background.
Speaker 7: You've been written about as a wartime CEO for your
Speaker 7: work during this infant formula crisis. You've worked with some
Speaker 7: really interesting names including Gwyneth Paltrow to raise some of
Speaker 7: the money to get this done. How do you bring
Speaker 7: people on board?
Speaker 11: Great question. Honestly, it's approaching this in the complete opposite
Speaker 11: way that the industry has for the last few decades.
Speaker 11: It's representing your customers who they are. I'm the only
Speaker 11: female CEO of an infant formula company, and it starts there.
Speaker 11: And we have been able to relate to parents throughout
Speaker 11: this shortage by making one of the toughest decisions when
Speaker 11: the shortage hit, which was we became the only formula
Speaker 11: company to reliably continue to serve our subscribers, and I
Speaker 11: have to make a really tough call at the time
Speaker 11: to stop growing the business while we kept product in
Speaker 11: stock for our current subscribers.
Speaker 1: So where are you in terms of your company, Bobby?
Speaker 1: Just give us a sense of how, you know, the
Speaker 1: last couple of years have been for you during the pandemic,
Speaker 1: and maybe you know how are things right now.
Speaker 11: They've been a long few years and they've definitely been
Speaker 11: accelerated obviously throughout the pandemic and then the shortage. We're
Speaker 11: in a position right now where we're serving about three
Speaker 11: to four percent of baby born in the US continuing
Speaker 11: to grow, but growth also comes with having to invest
Speaker 11: in infrastructure and supply. So our sites are an outset
Speaker 11: on what are we doing to be able to grow
Speaker 11: our supply and continue to serve more of the population,
Speaker 11: And that in itself just takes further investment, which I'm
Speaker 11: setting my eyes.
Speaker 7: On setting your eyes on. The other thing you've done, too,
Speaker 7: beyond expanding a business here, is that you've taken to
Speaker 7: Congress as well to make changes to kind of solve
Speaker 7: some of the crisis that had been seen in the shortages.
Speaker 7: Talk to us about that process.
Speaker 11: Well, look, Bobby's entire existence is to reform the industry.
Speaker 11: It's not just to get out there and sell infant formula.
Speaker 11: When you look at the ingredients, the way the product
Speaker 11: is made of, even how it's sold, and the narrative
Speaker 11: that surrounds it, it is fundamentally broken. So when the
Speaker 11: shortage hit, we put out a hotline to allow customers
Speaker 11: to call in with their fire and fury, basically to
Speaker 11: tell Congress what needs to change. We created Bobby for
Speaker 11: Change dot org, which allowed us to go out and
Speaker 11: really fight for policy changes to support parents, to support
Speaker 11: mothers where they're at and one of those policy changes
Speaker 11: that we're looking to change is to put out a
Speaker 11: bill to be able to support more product and more
Speaker 11: manufacturing domestically in the US so that we don't experience
Speaker 11: a shortage again. I'm very fortunately happen to be here
Speaker 11: in DC beside it all and to see the action
Speaker 11: and momentum from this has been wonderful.
Speaker 4: So lar why isn't the marketplace taking care of this itself?
Speaker 4: Why do we need regulation?
Speaker 1: Aren't the manufacturers themselves saying we need the diversify our manufacturing,
Speaker 1: We need to diversify our suppliers. Isn't this what are
Speaker 1: the big players in this baby food business saying?
Speaker 11: I think in a regulated industry there's really three legs
Speaker 11: to the stool on this. There is the private sector,
Speaker 11: of course, and companies themselves are looking for ways to diversify.
Speaker 11: But because it is regulated, it's also having the support
Speaker 11: of both government and the FDA as well. And if
Speaker 11: those three agencies can come together and figure out how
Speaker 11: within the next seven to ten years, we can look
Speaker 11: back at a truly reformed industry and I mean reformed
Speaker 11: domestically using domestic suppliers, local farmers, and be proud of
Speaker 11: our instant formula. Then I think those three bodies will
Speaker 11: have done the right job, but it will take the
Speaker 11: three of them coming together.
Speaker 7: Three of them coming together. I think it's the past
Speaker 7: question on as suppliers here are interesting, but equally, you know,
Speaker 7: I'd like to double down on this idea here that
Speaker 7: you worked at Airbnb, you worked at Google finance. What
Speaker 7: role is Internet playing and helping you get the job done?
Speaker 11: I think I think it starts with just the mindset
Speaker 11: of being able to look at a traditional industry and
Speaker 11: say that we can do differently. Airbnb was born on
Speaker 11: the back of seeing travel being different and disrupting really
Speaker 11: the travel industry. So we come at this with the
Speaker 11: mindset which is it can be different and the status
Speaker 11: quo isn't good enough. But I also do believe that technology,
Speaker 11: whether it's tracking supply and the data surrounding in stock rates,
Speaker 11: which frankly, if they were all in place to begin with,
Speaker 11: we would be staring at the shortage today. So I
Speaker 11: think using data and you know, even dare I say
Speaker 11: this's movement towards AI as well, I do believe can
Speaker 11: get us into a position where we're not going to
Speaker 11: be dealing with another crisis in the future, and we've
Speaker 11: just gotten ahead of this.
Speaker 1: Lauria, we just got about thirty seconds left over the
Speaker 1: next year or two. What's the biggest challenge opportunity for
Speaker 1: your company?
Speaker 12: Bobby and I think.
Speaker 11: It really is production. We need to be in a
Speaker 11: position where we are not waiting on the edge of
Speaker 11: our seats and questioning if another shortage happens, we'll be
Speaker 11: able to serve the market. We need to break up
Speaker 11: concentration and competition and introduce more players to the market.
Speaker 1: Laura Modi, thank you so much for joining us. Lara Moti,
Speaker 1: she's a CEO and co founder of Bobby and Bobby
Speaker 1: is a baby formula delivery startup that sells direct to
Speaker 1: consumer and offers a subscription service to parents across the US.
Speaker 1: When we first got introduced to Laura, you know, a
Speaker 1: few years ago during the pandemic, when we really had
Speaker 1: that shortage in that if you think back in how
Speaker 1: serious that was at the time, and we needed a
Speaker 1: smart voice to kind of explain it all to us,
Speaker 1: explain the challenges, and Laura was that person. So like
Speaker 1: checking in with larav every once in a while to
Speaker 1: see how that business and the you know, the greater
Speaker 1: food business and distribution business, how that's playing out.
Speaker 6: You're listening to the team Ken's our line program, Bloomberg
Speaker 6: Markets weekdays at ten am Eastern on Bloomberg dot Com,
Speaker 6: the iHeartRadio app and the Bloomberg Business app, or listening
Speaker 6: on demand wherever you get your podcasts.
Speaker 4: Right now, we're bringing Ira Jersey.
Speaker 1: He's the chief US interest rate strategist for Bloomberg Intelligence. So, Ira,
Speaker 1: we've got current FED Chairman Jpal, former FED chair Ben
Speaker 1: Bernanke making some comments today.
Speaker 4: What are you taking away here?
Speaker 13: Well, first, I'm taking away that there's multiple headlines going
Speaker 13: on at the same time and it's hard to pay attention.
Speaker 13: That's number one. Number two, you know, I think Chair
Speaker 13: Powell's comments about forward guidance and about the market not
Speaker 13: pricing what the dot plot says, and that it seems
Speaker 13: like the market has a different forecast than the FED,
Speaker 13: and you know, hinting that we think that we'll be
Speaker 13: right based on the incoming data that we've seen recently.
Speaker 13: I think it is interesting it's not going to be
Speaker 13: enough to job own the market as significantly, maybe as
Speaker 13: the hopes it would. You know, I think the fact
Speaker 13: that we're pricing in significant chance of rake cuts later
Speaker 13: this year is easing financial conditions and actually might be
Speaker 13: making their job a little bit harder than it would
Speaker 13: be if we were pricing for the FED to be
Speaker 13: on hold a bit longer than we currently are.
Speaker 7: To the point on competing headlines, you had this idea
Speaker 7: here that the banking stress is taking hold from Powell,
Speaker 7: but then you have the debt ceiling talks. At the
Speaker 7: same time, you had a big drop off and yields
Speaker 7: from the Powell comments or not big, but you know,
Speaker 7: meaningful time to day, and then you know you're seeing
Speaker 7: a slight rise once again, if you think about it,
Speaker 7: we're just getting all these headlines. We're still getting Powell headlines,
Speaker 7: the most recent being that FED was expecting further tightening
Speaker 7: until recently, which is significant, which force wins out the
Speaker 7: fiscal strains or the or the monetary ones.
Speaker 13: Well, I think near term, the market's going to probably
Speaker 13: react to the debt ceialing angst quite significantly. So our
Speaker 13: model still shows that the government runs out of money
Speaker 13: on June fifth, if someone doesn't get paid on that day,
Speaker 13: and then the June sixth tea bills are significantly at
Speaker 13: risk of maybe missing a payment. And so I think
Speaker 13: that the markets and and risk assets and in particular
Speaker 13: are going to wind up moving, you know, quite dramatically,
Speaker 13: probably on some of these debt ceiling headlines. You know,
Speaker 13: it's not obvious what the Republicans are trying to get
Speaker 13: out of these negotiations. You know, it's like, you know,
Speaker 13: obviously the Democrats want something clean, that the Republicans want
Speaker 13: to use this as a bargaining chip to try to
Speaker 13: reduce government spending uh and and reduce deficits. But at
Speaker 13: the same time, you know that there's there's a time
Speaker 13: to do that, and there's a time not to. And
Speaker 13: you know, I'm sympathetic to the idea that deficits are
Speaker 13: too high, that the stock of that outstanding right now
Speaker 13: is making liquidity in some markets, and even in the
Speaker 13: treasury market itself a challenge just because of the of
Speaker 13: the quantum of of treasury securities available. So but at
Speaker 13: the same time, you know, you play this game when
Speaker 13: when the right you're working on a budget, not when
Speaker 13: you're working on whether or not you're going to pay
Speaker 13: your bill.
Speaker 5: Right.
Speaker 7: But here we are again, And the thing is that
Speaker 7: to most of the country and to most of the world,
Speaker 7: what they see as a bunch of sparring in Washington
Speaker 7: for something that usually works itself out at the very end,
Speaker 7: but for more hom sitting covering markets, banks, market makers,
Speaker 7: investment firms that are levered towards treasury and repo markets.
Speaker 7: There are more worries and this gentle sense of panic
Speaker 7: under the market right that things will be very volatile
Speaker 7: and potentially throw things off course. You know, how drastic
Speaker 7: are we going to have to see? I mean, do
Speaker 7: you think we'll have to get to the point that
Speaker 7: the Fed would have to step in? I mean, at
Speaker 7: what point are some of these sharp moves is going
Speaker 7: to be troubling for the market.
Speaker 13: Well, I don't think that the Fed will step in,
Speaker 13: because you know, their their job is financial stability, and
Speaker 13: if Congress doesn't want financial stability, then you know that
Speaker 13: the Fed Reserve is going to be the uh a
Speaker 13: financial stabilizer of less resort.
Speaker 6: But but that.
Speaker 13: Probably doesn't come unless the unless the government actually defaults
Speaker 13: on the debt.
Speaker 11: I would suspect we're downgraded.
Speaker 13: Right, Well, yeah, down but downgraded doesn't necessarily mean a
Speaker 13: whole heck of a lot. Mandates don't change. So most
Speaker 13: mandates for fixed income investors globally is that you can buy,
Speaker 13: you know, a sovereign government debt of OECD countries, you
Speaker 13: know agency debt. So in the United States, most most
Speaker 13: mandates say treasuries agencies, and then you know investment grade
Speaker 13: or or triple A corporates, right so so so so
Speaker 13: treasuries are still a completely separate asset class from that
Speaker 13: that are that are devoid of ratings, at least for now.
Speaker 13: You know that might that could change in the future potentially,
Speaker 13: But you look at somewhere like Japan. Japan hasn't had
Speaker 13: a triple A credit rating in ages and ages, and
Speaker 13: yet their interest rates don't have a particular problem. So,
Speaker 13: you know, sovereign ratings for investment grade, for for very
Speaker 13: high rated company countries that issue debt primarily in their
Speaker 13: own currency, really don't mean a whole act of a lot,
Speaker 13: because it really has more to do with investor sentiment
Speaker 13: and with not with the ability to pay, but the
Speaker 13: willingness to pay, which is exactly what we're dealing with
Speaker 13: right now with the dead limit IRA.
Speaker 1: What do you think are the the upcoming key data
Speaker 1: points that we need to we need to be focusing on.
Speaker 1: Maybe the FED is focusing on what should we be
Speaker 1: looking for.
Speaker 13: Yeah, so we have the PC data coming up next week.
Speaker 13: You know, that's probably the biggest one that that we have.
Speaker 13: You know, we get a revision and GDP that's you know,
Speaker 13: not probably not going to be significantly market moving, but
Speaker 13: the PC data that we get because that's for April,
Speaker 13: so that's going to be important for uh, you know,
Speaker 13: where GDP and where consumer spending and what the inflationary
Speaker 13: impulse is. Remember that the PC deflator uses similar data
Speaker 13: to the CPI, but but the weightings are different. So
Speaker 13: the weightings are weighted more toward what actually was purchased
Speaker 13: in the month of April. So that's one reason why
Speaker 13: the Fed Reserve concentrates on that particular measure, and so
Speaker 13: there will be some modest differences between that data and
Speaker 13: what we got in CPI. But but regardless, you're still
Speaker 13: likely to see the inflation continuing to move lower, but
Speaker 13: just at a you know, but still wind up you know,
Speaker 13: well above four percent for example, on a year on
Speaker 13: year basis for the headline PC.
Speaker 1: And in that scenario, IRA does a FED just kind
Speaker 1: of sit on the sidelines and wait, and that it really.
Speaker 4: Is a pause.
Speaker 13: Yeah, that's what I think the Fed's most likely to do.
Speaker 13: And Powell did hint at that during his remarks today,
Speaker 13: And and I think that the FED would it would
Speaker 13: behove the Fed at this point just to take a
Speaker 13: weight and see action. They can talk about, you know,
Speaker 13: the long and variable legs of how monetary policy works.
Speaker 13: They can still say, like the banking sector is, you know,
Speaker 13: still tightening financial conditions. You look at the senior loan,
Speaker 13: the survey and some other measures of credit conditions, and
Speaker 13: they can say that, you know, credit conditions are modestly tightening,
Speaker 13: and we're just going to take away and see approach.
Speaker 13: And of course so they'll say that symmetric you know
Speaker 13: that in the future, if inflation does in fact, you know, rebound,
Speaker 13: we can hike more. I think if he couches it
Speaker 13: in those kind of language, then maybe the market will
Speaker 13: wake up and we'll start to price out some of
Speaker 13: the cuts that are currently in the market, kind of
Speaker 13: as a risk management measure.
Speaker 1: All right, Ira, thanks so much for joining us. I
Speaker 1: really appreciate getting your insights.
Speaker 6: You're listening to the tape Cat's our live program Bloomberg
Speaker 6: markets weekdays at ten am Eastern on Bloomberg Radio, the
Speaker 6: tune in app, Bloomberg dot Com, and.
Speaker 5: The Bloomberg Business App.
Speaker 6: You can also listen live on Amazon Alexa from our
Speaker 6: flagship New York station. Just say Alexa play Bloomberg eleven thirty.
Speaker 1: We need the roundtable list in a big way. We've
Speaker 1: got some smart people that are joining us. So we've
Speaker 1: got Abigail Doolittle, she covers all the markets for Bloomberg Television.
Speaker 1: She joins us here in our studio, Billy House. He's
Speaker 1: down in Washington, DC Congress for Bloomberg News. He's going
Speaker 1: to join us, give us the latest on what's happening
Speaker 1: with these debt talks, and then we have a real
Speaker 1: treat here. Monica Defend, chief strategist at Amundi. A Mundi
Speaker 1: is an extraordinarily large global investor. Will get a great
Speaker 1: global view of kind of how the markets are viewing
Speaker 1: what's happening here in the States and abroad.
Speaker 4: Abigail, let's start with you. What have we seen in
Speaker 4: these markets?
Speaker 14: A little bit of inter day volatility, if not a lot,
Speaker 14: and it's cross asset and of course has to do
Speaker 14: with all these different headlines that we've seen. Now, I'll
Speaker 14: start off with feed shair J.
Speaker 4: Powell.
Speaker 14: Every now and then he drops, I don't want to
Speaker 14: say a bomb, but a surprise, and I would I
Speaker 14: would characterize his thought that rates may not need to
Speaker 14: rise as high given credit stress as a possible, not pivot,
Speaker 14: but a nuance worth watching going forward, because he's been
Speaker 14: pretty consistent in his message to my memory over basically
Speaker 14: the last year, saying that the Fed is hike rates
Speaker 14: are going higher. The hikes may get smaller, but they're
Speaker 14: going to go higher higher. And now all of a
Speaker 14: sudden he's saying, whoa credit stress, bank turmoil, bank crisis.
Speaker 14: So maybe not as high now on that we saw
Speaker 14: stocks take a little bit of a dip, But I'll
Speaker 14: stress the word little because right now we have that
Speaker 14: S and P five hundred down two tens of one percent,
Speaker 14: although on on interday basis it has been a turnaround
Speaker 14: of almost less than a percent, but close to Chanale
Speaker 14: not so long ago, was talking about the huge move
Speaker 14: we've seen in yields. Yields had been hired than they
Speaker 14: were lower by a considerable amount. They gave up fourteen
Speaker 14: basis points on that headline now about flat on the day,
Speaker 14: the dollar down a little bit, and then following Powell
Speaker 14: having this, I'm going to call it the Powell nuance.
Speaker 14: I know it doesn't sound as good as a Powell pivot,
Speaker 14: but just to be accurate, the debt limit talks hit
Speaker 14: a roadblock, and on that we saw stocks drop a
Speaker 14: little bit too.
Speaker 1: Right, all right, let's just bring up Billy House because
Speaker 1: I need to figure out what's going on down in Washington, DC.
Speaker 12: Job, this is in the driver's seat. I think we
Speaker 12: could safely.
Speaker 4: Say yeah, yeah, I don't know.
Speaker 1: All right, Bill, You're done in DC here. Now, when
Speaker 1: the GOOP negotiators walked out, did they angrily walk out?
Speaker 1: Did they did they hop skin walk out? Like what's
Speaker 1: going on down there?
Speaker 10: Well? I wouldn't say they stormed out, but they certainly
Speaker 10: walked out abruptly after the meeting. Shortly after them again
Speaker 10: and the lead negotiator for Kevin McCarthy, the speaker, Garrett
Speaker 10: Grays of Louisiana, said that they were being unreasonable, meaning
Speaker 10: the White House team, and that things were being put
Speaker 10: on pause. He didn't know if they were going to
Speaker 10: meet again today or even this weekend. He didn't get
Speaker 10: provided any specifics, but we believe it has something to
Speaker 10: do with the discussions over work requirements and the hesitance
Speaker 10: of the White House to embrace anything that the House
Speaker 10: Republicans want in that regard.
Speaker 12: Where's the speaker?
Speaker 10: The speaker and I'm standing right here in front of
Speaker 10: a door in which he's supposed to arrive at the
Speaker 10: Capitol and walk through at any second. He touched down
Speaker 10: apparently at the airport around eleven thirty and makes his
Speaker 10: way over here. We hope to get details from him,
Speaker 10: and details that are a lot broader. He's been giving
Speaker 10: us last two days of over pessimism, I mean over
Speaker 10: optimism apparently, but who knows these things? People play roles,
Speaker 10: and again we're on pause. We don't know if it's
Speaker 10: a breakdown really, but they're calling it a pause.
Speaker 1: Monica, I want to bring you in here, Monica defend
Speaker 1: chief strategist at a Mundi Monica, How do how do
Speaker 1: investors view what's happening in Washington, this this long, tortuous
Speaker 1: path of just trying to get to a point where
Speaker 1: the United States government can at least pay its bills.
Speaker 4: How do you think the markets are viewing it? All
Speaker 4: over the world?
Speaker 15: Yeah, thank you. Well, you know, I'm so lucky because
Speaker 15: I am based in Europe, and I have to say,
Speaker 15: guys that how we see things in Europe it might
Speaker 15: be a little bit different from how are you ask, colleague,
Speaker 15: So where it seems to us that there is and
Speaker 15: they will be definitely a lot of noise may be
Speaker 15: entering in June on the market. So still we are
Speaker 15: not that concerning that a technical the force the war
Speaker 15: happens in our opinion, but we might be more worried
Speaker 15: on the people. So these things might play out with
Speaker 15: people not getting there the salaries or spending cuts to
Speaker 15: kick in, and this might be painful for the US economy.
Speaker 12: Well, it's to date we've been climbing a wall of worry.
Speaker 12: Can we climb more with this added worry?
Speaker 15: Well, I think that this might be, but it really
Speaker 15: depends what kind of worries you are looking for, whether
Speaker 15: it is or not market and monectivity. Yes, this will materialize,
Speaker 15: it is it is likely so as we've seen so far.
Speaker 15: But then when it goes down to more entrenched consequences
Speaker 15: on the economic cycle, while we expect this to be
Speaker 15: less likely.
Speaker 4: So the market, sorry.
Speaker 1: That blue button thing, so abigail these markets here, What
Speaker 1: do you think the market is kind of factoring in here?
Speaker 1: It relates to this debt, silly negotiations. The things have
Speaker 1: been kind of the optics has been kind of building
Speaker 1: for the last twenty four to thirty six hours.
Speaker 4: And this was a little bit of surprise here.
Speaker 14: Yes, maybe a little bit of a surprise for sure.
Speaker 14: On the other hand, if you go back to twenty eleven,
Speaker 14: it really went down right to the wire. So I
Speaker 14: think that if investors traders thought that this was this
Speaker 14: pause is a breakdown, you would see a massive move
Speaker 14: flight to safety and out of risk assets. And I'm
Speaker 14: also about to pull up a term chart here because
Speaker 14: there's a very interesting divergence. It's a slight divergence. It
Speaker 14: suggests that investors don't think that there's going to.
Speaker 4: Be a default.
Speaker 14: And I'm just trying to find this here. Ooh boy boy. Here,
Speaker 14: let's see. I'm just looking for the Yeah, I'm we're
Speaker 14: the charters. This is less of a churches chart and
Speaker 14: more of a rates chart. Talking about I'll describe it,
Speaker 14: which is I just I'm curious to see where the
Speaker 14: current levels are. I think this is going to be
Speaker 14: this chart which basically those tea bills that are maturing
Speaker 14: in May. Okay, So this is interesting. It's moving a
Speaker 14: little bit. So the tea bills maturing in May. On
Speaker 14: this announcement, they went from being around three point fifty
Speaker 14: to now above four percent. So we're seeing a little
Speaker 14: bit of a premium place there. Investors demanding a little
Speaker 14: bit more of a premium for bills that are maturing
Speaker 14: next week May twenty fifth, and then the following Tuesday,
Speaker 14: May thirtieth, and then those bills d in June. They're
Speaker 14: all above five percent, so that divergence is still there.
Speaker 14: It had been wider. Prior to today. It had been a
Speaker 14: two percent divergence. So for those bills maturing this month
Speaker 14: with no debt sealing drama or imminency of not being
Speaker 14: able to pay immediately on these bills, it was demanding
Speaker 14: three fifty relative to five point fifty for the other ones.
Speaker 14: The thing I would point out, though it's an interesting divergence,
Speaker 14: it tells you, yes, the markets are not totally asleep.
Speaker 14: They're aware that there is this stress down in Washington.
Speaker 14: But if anybody thought that the government we're truly going
Speaker 14: to go into default, I would make the case that
Speaker 14: those June bills they would be at I don't know
Speaker 14: how you would price this out. It would be bond math,
Speaker 14: but it would be ten percent because you'd be looking
Speaker 14: at the possibility of not getting your your premium back
Speaker 14: or your principle back. Although I don't know for how
Speaker 14: long I was having a complicated discussion with Doug Prisner
Speaker 14: and neither of us knew the answer on this, but
Speaker 14: that you would get your principle back at some point
Speaker 14: in the future. But then you're talking about opportunity cost.
Speaker 12: Hey, Billy House on Capitol Hill waiting for the speaker,
Speaker 12: how much money do we have left?
Speaker 8: Uh?
Speaker 10: You know, I don't know as of today. I do
Speaker 10: know that there's differences of opinion. The Speaker, trying to
Speaker 10: push a deal swiftly, is saying that just the process
Speaker 10: here getting a bill written and then of course approved
Speaker 10: and dealing with the you know, the flanks of both
Speaker 10: parties who will pose anything, just makes makes the deadline
Speaker 10: that June one tended to deadline almost we've almost we're
Speaker 10: pushing right up against it already.
Speaker 5: Yep.
Speaker 1: Hey, Monica, I want to get your perspective from Europe here.
Speaker 1: I mean, we see the central banks around the world,
Speaker 1: the ECB, the the Bank of England, even the Bank
Speaker 1: of Japan. How how well do you think this policy
Speaker 1: seems fairly coordinated? But I mean, what's the what are
Speaker 1: you expecting next from some of these central banks?
Speaker 15: Well when it goes to the ECB, but also the
Speaker 15: Bank of England, and we think they're going to continue
Speaker 15: to bike.
Speaker 10: Okay, thank you guys.
Speaker 4: The reason sorry, go ahead, man, the.
Speaker 15: Reason and the reason being that the inflation is proving
Speaker 15: speaker and then then expected while when it turns to
Speaker 15: the said, we think they're going to pause with all
Speaker 15: the consequences of this myself for example on the on
Speaker 15: the US dollar. But we had the Juster Shnabel making
Speaker 15: her statements in a speech that been just released one
Speaker 15: hour ago, saying that we need to disentangle financial stability
Speaker 15: from from inflation, and inflation will be the main target
Speaker 15: for the for the central bank. Actually, how we see
Speaker 15: three fifty as a terminal rate because we don't think
Speaker 15: that eventually economists might afford the hot terminal rate at
Speaker 15: four or above.
Speaker 12: Monarcha. As you're speaking and looking at the tacks, you know,
Speaker 12: we almost closed our record high for the German dacks.
Speaker 12: Uh is you're continuing the out form the US and
Speaker 12: will that continue.
Speaker 15: To be To be honest with you, we've been slashing
Speaker 15: down our exposure overall on UH ON equities with the
Speaker 15: with the concern related to to GDP numbers and economic cycle,
Speaker 15: and we said that why we expect the US enter
Speaker 15: sessions UH cou four UH you area. We are still flattish.
Speaker 15: So probably let's see how the clouds will get clear
Speaker 15: out on the ECB and then we will might reconsider
Speaker 15: any opposition. But honestly, we doubt that we will have
Speaker 15: US striking our performance of Europe versus the US, and
Speaker 15: we prefer to see it on the corcual site.
Speaker 1: All right, Monica, thank you very much for joining us.
Speaker 1: We really appreciate you coming out and spending a couple
Speaker 1: of minutes with us. Monica defend head and chief strategist
Speaker 1: at Mundi Institute, Abigail Dolittle covers all.
Speaker 4: The markets for US for Bloomberg News.
Speaker 1: We appreciate getting her time and Billy House down and Washington, DC,
Speaker 1: literally on the steps of Congress waiting to see how
Speaker 1: that news breaks down there with the talks. Want to
Speaker 1: bring you John Authors here Bloomberg Opinion A columnists, Uh, John,
Speaker 1: A lot going on, a lot of big picture stuff
Speaker 1: here with it that ceiling, we've got the Federal reserve.
Speaker 4: Kind of how do you put it all together?
Speaker 1: Because I can tell you just looking at the screen
Speaker 1: right here, the market minute by minutes, trying to figure
Speaker 1: out what's going on.
Speaker 16: I think with the debt ceiling, this isn't going to
Speaker 16: be terribly helpful. People might ask why I'm being paid
Speaker 16: by salary. You can't really make much of it. It
Speaker 16: is the classic example of something that markets cannot deal
Speaker 16: with well, which is very low probability extreme events. Not
Speaker 16: only that it's a political event rather than a financial
Speaker 16: one that would then have financial consequences. So you know,
Speaker 16: it's completely reasonable that it would be having the kind
Speaker 16: of effect it will. That the odds are very strong
Speaker 16: that we're not going to have a default. I suppose
Speaker 16: I would try to perhaps if there's one key issue
Speaker 16: that is hadn't looked at too much because people think
Speaker 16: of it as being so binary. Back in twenty eleven,
Speaker 16: the really big depth ceiling set to the market tanked
Speaker 16: much further after the deal had been done successfully other
Speaker 16: than it had done when the brinkmanship was still going on,
Speaker 16: basically because the Obama administration agreed to cuts that seemed
Speaker 16: implausibly difficult to implement to many in the market. I
Speaker 16: think perhaps the actual detail of whats concessions might be
Speaker 16: made isn't so binary, and perhaps we should be focusing
Speaker 16: more on that. You do see some signs that that's
Speaker 16: what people are beginning to look.
Speaker 12: At, hey John, Since the beginning of the year s
Speaker 12: and p. Five hundred up nine percent nasdanca what over
Speaker 12: twenty percent?
Speaker 16: Twenty two? The last I checked twenty two?
Speaker 12: Is this being held together? There would spit and chewing gum.
Speaker 16: It's being held together. I wrote this up last night.
Speaker 16: It's been woken held together, firstly by an absence of
Speaker 16: new bad news. So earnings for the first quarter were
Speaker 16: a bit better than pretty bearish expectations. The unemployment still
Speaker 16: hasn't absolutely tanked, Inflation isn't coming down as quickly as
Speaker 16: many would want, but at least it's not continuing to write,
Speaker 16: so that there is an absence of clear bad news,
Speaker 16: which is always good, because there was a lot of
Speaker 16: bad news in the price and then you've got the
Speaker 16: perverse effect of the banking crisis appears to have been
Speaker 16: that the amount of liquidity that was available for banks
Speaker 16: to borrow against their bonds. Money is fungible, it finds
Speaker 16: its way to where it can make a return, so
Speaker 16: that money is having an affec even though the said
Speaker 16: funds rate stays high. And then finally we have and
Speaker 16: this is another classic thing that markets find it very
Speaker 16: difficult to deal with. Is a genuine, a genuine boom,
Speaker 16: a genuine moment of excitement this time over AI. And
Speaker 16: I don't want to seem I don't know enough about
Speaker 16: the subject to really declaim as to how it's going
Speaker 16: to pan out. But you know, the Internet obviously really
Speaker 16: did change our lives in the end, and that didn't
Speaker 16: mean that you couldn't lose a heck of a lot
Speaker 16: of money along the way trying to figure it out.
Speaker 16: I think that's all.
Speaker 1: Right, John, thank you so much for joining us. We
Speaker 1: appreciate you hopping on there. When we want to know
Speaker 1: about AI, We've probably got some. I'm going to somebody,
Speaker 1: you know, Robert.
Speaker 12: Telling you pets AI revived.
Speaker 1: It's coming. It's coming, all right, John Tucker, fall sween
Speaker 1: here with you. We're gonna have more coming up this
Speaker 1: is board.
Speaker 6: You're listening to the tape Cat's are live program Bloomberg
Speaker 6: Markets weekdays at ten am Eastern on Bloomberg Radio, the
Speaker 6: tune in app, Bloomberg dot Com, and the.
Speaker 5: Bloomberg Business App.
Speaker 6: You can also listen live on Amazon Alexa from our
Speaker 6: flagship New York station, Just say Alexa play Bloomberg eleven thirty.
Speaker 4: All right, Charlie calla. Thank you so much.
Speaker 1: We appreciate that. All Right, we got John Tucker as
Speaker 1: a co host today, so I figure we got to
Speaker 1: talk weed, right John, I mean, let's go.
Speaker 12: There, shall I take the perspective of a parent of.
Speaker 1: Yes, I am kids, So yeah, John, john'son not a
Speaker 1: big fan of this whole legalized cannabis thing. But our
Speaker 1: next guest is Andres Fajardo, close enough, CEO of Clever
Speaker 1: Leaves ticker CLVR joints us Here Andres, you're based in Bogota, Columbia.
Speaker 1: You're up here talk to us about your company. How
Speaker 1: do you guys operate within the cannabis space?
Speaker 17: No, thanks for having me here. And you know, Leaves
Speaker 17: a say company that was born with a very simple idea,
Speaker 17: which was you have to grow cannabis where you should,
Speaker 17: and then you have to sell it where you should
Speaker 17: and that sounds a little silly, but regulation, you know,
Speaker 17: has made companies to grow cannabis where they are selling it,
Speaker 17: and that never makes sense. So we set up a
Speaker 17: company with operations in Colombia back in twenty sixteen. H
Speaker 17: you know, we're a company that right there is the
Speaker 17: first one to get licensed. We're the largest right now
Speaker 17: over there with one point eight million square feet of cultivation.
Speaker 17: I would say that we're quite unique because we have,
Speaker 17: you know, all of the pharmaceutical certifications that you required
Speaker 17: to actually ship medical cannabis, you know, across borders. We
Speaker 17: have the European certification that allows us to do that,
Speaker 17: the Brazilian one, the Colombian one, and we also have
Speaker 17: the cost So we are a very unique company with
Speaker 17: low cost, high quality, high scale of products that are
Speaker 17: shipping currently, you know, from Colombia to Brazil, to Germany
Speaker 17: to Australia to the UK. So that's our business model.
Speaker 17: We're a little different, and we're basically here to disrupt
Speaker 17: the cannabis markets as.
Speaker 12: It is patchwork in the United States where states some
Speaker 12: states have approved it, but on the federal level, it's
Speaker 12: still illegal and you stay away from the United States
Speaker 12: because of that. Exactly.
Speaker 17: We operate where there are federally legal markets where import
Speaker 17: and export is permitted. The US, uh, you know, has
Speaker 17: legalized in a state by state basis with differences, which
Speaker 17: is within its each state and companies you know are
Speaker 17: called them as those because there are basically mini companies
Speaker 17: in each of the different states.
Speaker 12: So so what you you don't operate in the United States.
Speaker 5: We don't know.
Speaker 12: You couldn't be because of important we couldn't.
Speaker 17: We are and we're a NaSTA listed company too, which
Speaker 17: means we're not a plant touching you know, company in
Speaker 17: the US at all.
Speaker 12: So we have an operation in the US.
Speaker 17: It's a nutraceutical business that does nothing related to cannabis
Speaker 17: at this point, you know, but it is a potential
Speaker 17: pathway to the US when it opens up. But for now,
Speaker 17: we're focused on medical cannabis produced in Columbia and sent
Speaker 17: all over the world.
Speaker 1: All right, So what are some of your growth markets?
Speaker 1: What are some of the markets that you guys are
Speaker 1: experienced the most success.
Speaker 4: It's very interesting, you know.
Speaker 17: First, you know, I sound like a broken record, but
Speaker 17: I think Brazil, Brazil is going to become one of
Speaker 17: the largest medical markets in terms of patient counts. I think,
Speaker 17: you know, as soon at the end of this year.
Speaker 17: And the regulation in Brazil has been shaped in such
Speaker 17: a way that it has allowed for the larger pharmaceutical
Speaker 17: companies in that country to actually participate.
Speaker 12: It's highly regulated.
Speaker 17: You can take two years to register a product. It's
Speaker 17: very pharmaceutical. But once you're in, it's sticky. It has
Speaker 17: high barriers to entry. And with the power of large
Speaker 17: pharmaceutical companies like for example, our case where we have
Speaker 17: a you know, a partnership with High Parapharma or one
Speaker 17: of the largest pharmaceutical companies in Brazil and Green Cerry
Speaker 17: cannabis company over there, you know, it has huge potential.
Speaker 17: People don't look at it because well, first Brazil, South
Speaker 17: America is going to be big. Well Brazil is one
Speaker 17: of the largest economies in the world. So yes, Australia
Speaker 17: is another way is very interesting one. Australia, although it's
Speaker 17: a low population, some market that's been developing, has been
Speaker 17: growing and now it's becoming more demanding in terms of
Speaker 17: the certifications and the requirements of the products. So while
Speaker 17: we were growing, you know, we had a product that
Speaker 17: was probably overspec Now the requirements are increasing, so some
Speaker 17: of our competitors are being left out, which opens up
Speaker 17: a significant opportunity for us in Australia. Yeah, in other markets,
Speaker 17: I would say Germany is an interesting market for sure.
Speaker 17: You know, there is a change in legislation. It's still
Speaker 17: medical that we're going to go adult use. You know,
Speaker 17: people were all bullish on it. It will happen. It
Speaker 17: won't happen soon, as I've always said. Uh, but it
Speaker 17: basically expands medical It gives us, you know, additional time,
Speaker 17: and it broadens the opportunity for us.
Speaker 1: What's the difference between medical or medicinal cannabis and recreational
Speaker 1: in terms of is it the same product? That's just
Speaker 1: a question of how you market it.
Speaker 17: The product is basically the same. I would say the
Speaker 17: greatest you know difference is that the medical requires a
Speaker 17: prescription most while the adult uses use it, you know,
Speaker 17: for for different reasons. It doesn't mean that maybe somebody
Speaker 17: who uses adult use cannabis cannot use it for an
Speaker 17: illness they have.
Speaker 4: It's probably or or vice versa.
Speaker 17: But it's basically prescription.
Speaker 12: Uh.
Speaker 1: You know, would would you consider getting in your market,
Speaker 1: So you're in getting into adult use.
Speaker 12: We would, we would.
Speaker 17: I think that a very interesting tailwind for us, for example,
Speaker 17: is that in Colombia, you know, the adult use regulation
Speaker 17: has passed six out of the eight debates that must
Speaker 17: happen in Congress before becoming effective.
Speaker 12: We're missing too, you know.
Speaker 17: We hope that they pass in the next month and
Speaker 17: a half and that will be a tremendous market for
Speaker 17: us in terms of the size. You know, in Colombia, Uh,
Speaker 17: you know, we have one of the largest or highest
Speaker 17: GDP sorry no GDP, but a per capita consumption of
Speaker 17: beer and alcohol.
Speaker 12: So it's a.
Speaker 17: Country that you know likes to enjoy life. Uh, you know,
Speaker 17: uh for for the opportunity for cannabis, uh, when it
Speaker 17: legalizes for adult is going to be great. And we
Speaker 17: have a very good position to be in.
Speaker 12: To the legal company, a publicly traded company. Like did
Speaker 12: you run into in Colombia the illegal drug trade a
Speaker 12: conflict there?
Speaker 4: Not at all, not at all.
Speaker 17: It's completely different. The channels are completely different. You know,
Speaker 17: we don't even even you know, you weren't stepping on
Speaker 17: anybody's not really that's the reality.
Speaker 4: Not so Andre if you're here in New York City.
Speaker 1: Here, I'm sure you've been walking up and down the
Speaker 1: streets of New York and you see every block has
Speaker 1: gotten multiple.
Speaker 12: Okay, every time I leave this building, I'm not saying
Speaker 12: it's here, but it's just like the smell wafting through
Speaker 12: the air.
Speaker 4: It's the new World order. You gotta get used to it.
Speaker 1: Yeah, but I mean every block I got three or
Speaker 1: four of these stores, and by the way, they're not legal.
Speaker 4: What do you make about how we're doing it here
Speaker 4: in the States and maybe even in New York.
Speaker 17: You know, as I said, we don't know operating in
Speaker 17: the US. But what I do know from from our
Speaker 17: peers who do is, you know, there are states that
Speaker 17: are getting it right, that are doing it, you know,
Speaker 17: in a more organized way.
Speaker 5: You know.
Speaker 17: The only way I think you can really maintain a
Speaker 17: business that's so highly regulated and has you know, makes
Speaker 17: you produce where you need to sell, is such it
Speaker 17: is one where you control supply a little bit, when
Speaker 17: you know, when you control the whole supply chain. So
Speaker 17: there are some states doing that. You have you know,
Speaker 17: states like California where very few people are making money
Speaker 17: because there's a lot of supply et cetera, et cetera.
Speaker 11: And New York.
Speaker 17: You know, New York is one of these states that
Speaker 17: everybody's paying attention to. And I think, you know, there's
Speaker 17: a problem with the evolution of regulation, but also in
Speaker 17: reality with the you know, making sure that there is enforcement. Right,
Speaker 17: because some of these things continue, it's going to make
Speaker 17: it more difficult for the more legal cannemies operators.
Speaker 12: Twenty seconds, you came to market through the vehicle a SPAC, right,
Speaker 12: Why was that like twenty seconds?
Speaker 5: Now?
Speaker 17: We we were looking to find in the company. Further,
Speaker 17: we wanted to have access to the NASDAK and the markets.
Speaker 17: We had the operations that allowed us to be in
Speaker 17: the in the NASDAK, and it was a good way
Speaker 17: to do it back in twenty twenty.
Speaker 4: Yeah, back in the day that was the time of
Speaker 4: the SPACs. Well, so much for that, So much for that. Yeah, exactly,
Speaker 4: all right, Andres, thank you so much for joining us.
Speaker 4: Really appreciate you coming into the studio here.
Speaker 1: Andres Fajardo, CEO of Cleve Releaves that is a Nasdaq
Speaker 1: traded stock CLVR, talking about the cannabis business, the medical
Speaker 1: and I didn't.
Speaker 12: Give my anti cannabis rant get you to thank me
Speaker 12: for that.
Speaker 1: Yep, as a parent, I get where you're coming from.
Speaker 1: But this is the new world order, at least in
Speaker 1: a lot of states here in the US. All Right,
Speaker 1: we're gonna have more coming up. We get a little
Speaker 1: bit of red on the screen. That continues. We'll have
Speaker 1: some some more coming up.
Speaker 4: This is Bloomberg.
Speaker 2: Thanks for listening to the Bloomberg Markets podcasts. You can
Speaker 2: subscribe and listen to interviews at Apple Podcasts or whatever
Speaker 2: podcast platform you prefer. I'm Matt Miller. I'm on Twitter
Speaker 2: at Matt Miller nineteen seventy three.
Speaker 4: And I'm fall Sweeney. I'm on Twitter at pt Sweeney.
Speaker 1: Before the podcast, you can always catch us worldwide at
Speaker 1: Bloomberg Radio com.