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Speaker 1: This is the Bloomberg Surveillance Podcast. I'm Carol Masser, along

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Speaker 1: with Manis Kranny and Katie Greifeld. Join us each day

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Speaker 1: for insight from the best in economics, geopolitics, finance and investment.

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Speaker 1: Subscribe to Bloomberg Surveillance on demand at Apple, Spotify and

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Speaker 1: anywhere you get your podcasts, and always on Bloomberg dot Com,

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Speaker 1: the Bloomberg Terminal, and of course, on the Bloomberg Business App.

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Speaker 2: Christina Hooper is the chief market strategist at Envasco.

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Speaker 3: Christina, good morning, Let's kick it off with tech.

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Speaker 2: Will the Magnificent seven be something that you've just got

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Speaker 2: to absolutely own, whether it's reluctantly or not, and then

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Speaker 2: broaden your church to perform well in twenty twenty four.

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Speaker 4: Good morning, good morning, great to be on. So I

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Speaker 4: think that the key to twenty twenty four is to

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Speaker 4: be well diversified. We certainly saw a strong performance from

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Speaker 4: the Magnificent seven from area of technology in twenty three,

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Speaker 4: but I think the story for twenty twenty four is

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Speaker 4: about at least in the first half of the year,

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Speaker 4: expectations of a reacceleration in the back half of the year,

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Speaker 4: and that suggests to me that we're likely to see

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Speaker 4: smaller caps perform better, we're likely to see cyclicals perform better.

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Speaker 4: So we certainly want to have exposure to technology. That's

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Speaker 4: part of being well diversified, and I think there are

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Speaker 4: arguments for hy tech will actually be one of the

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Speaker 4: better performing sectors. But I think it's really important to

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Speaker 4: have that exposure to smaller caps and cyclicals because those

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Speaker 4: really should benefit from a discounting of a recovery in

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Speaker 4: the back half of the year.

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Speaker 1: Christine, I always wonder, you know, when you guys look

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Speaker 1: back or you look back at twenty twenty three, is

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Speaker 1: there's something that you had missed that you wish you

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Speaker 1: had seen earlier in terms of trends, and that that

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Speaker 1: that is kind of shaping how you're thinking about the

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Speaker 1: investment environment in twenty twenty four.

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Speaker 4: Well, that was a much easier question to answer if

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Speaker 4: starting out twenty three, because twenty twenty two I think

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Speaker 4: surprised many in terms of just how quickly the FED

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Speaker 4: hiked rates and just the damage to major asset classes.

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Speaker 4: Looking back at twenty three, I think that was a

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Speaker 4: more an environment in which we expected to see something

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Speaker 4: of a bumpy landing. It didn't come as quickly as

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Speaker 4: we anticipated, and probably there are a lot of folks

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Speaker 4: who expected some kind of landing in twenty three that

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Speaker 4: didn't see it. I'm still in the camp that anticipates

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Speaker 4: a bumpy landing in twenty four as opposed to a

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Speaker 4: soft landing. I know that's not really the conventional wisdom today,

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Speaker 4: but my view is that we saw so much aggressive

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Speaker 4: tightening and it was quite synchronized across major Western developed economies.

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Speaker 4: So I don't think we're going to get away with

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Speaker 4: a truly soft landing. But I do think we're going

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Speaker 4: to see a bumpy type of landing in the first

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Speaker 4: half of the year, but it'll be quite brief and

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Speaker 4: then we can get that out of the way and

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Speaker 4: look towards a reacceleration in the back haunt.

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Speaker 5: I love that you went there.

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Speaker 1: I wonder how much of that bumpy landing goes to

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Speaker 1: something that we talked about about what global central banks

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Speaker 1: will be doing, maybe differently, maybe your paths to ease

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Speaker 1: earlier than the United States. So how does that kind

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Speaker 1: of roll into your investment thesis.

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Speaker 4: Well, I don't think that there's going to be a

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Speaker 4: lot of difference between the central banks In terms of

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Speaker 4: when they start easing, I think the more important takeaway

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Speaker 4: is that they are all going to be easing, and

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Speaker 4: I think it's going to be rather significant this year,

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Speaker 4: especially for the FED. I'm in the camp of one

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Speaker 4: hundred to one hundred and fifty basis points this year,

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Speaker 4: not because I think the economy is going to deteriorate dramatically,

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Speaker 4: but because FED officials themselves have admitted that where monetary

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Speaker 4: policy is today is very restrictive. And so if we

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Speaker 4: see a continued disinflation, which I think we will, I

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Speaker 4: think it's going to actually accelerate from here. I think

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Speaker 4: the FED is going to be forced to cut to

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Speaker 4: just get out of very restrictive territory.

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Speaker 6: And so, Christina, if we do see all of these

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Speaker 6: big developed market central banks kind of moving in tandem

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Speaker 6: when it comes to the downside, of course, cutting rates

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Speaker 6: in harmony so to speak, how does that play out

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Speaker 6: in global equity markets? Does that lead to another year

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Speaker 6: where the US is outperforming, or how does the rest

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Speaker 6: of the world shake out?

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Speaker 4: Well, I think that what we're going to see is

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Speaker 4: probably a FED cut more than other major central banks,

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Speaker 4: and so what we're likely to see is a continuation

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Speaker 4: of US dollar weakening, and that should be positive for

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Speaker 4: other areas of the world. In particular, what we're likely

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Speaker 4: to see is areas like the European stock market benefit

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Speaker 4: from more exposure to cyclicals, which I think are going

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Speaker 4: to perform better again as markets discount or reacceleration. I

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Speaker 4: also think there's a lot of opportunity, and I'm most

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Speaker 4: positive on emerging markets, which I think will also benefit

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Speaker 4: from an easing US dollar.

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Speaker 7: So, Manas I did ask about the rest of the world,

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Speaker 7: I've got.

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Speaker 2: It in to be fair, and I said, because they're

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Speaker 2: not going to save your life and give you a retirement.

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Speaker 1: Christina, we get a lot of flak from MANUS this

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Speaker 1: morning that we're two US centric, well something else.

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Speaker 2: And Jonathan Fara would get on the phone and say,

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Speaker 2: why are you talking about anything else apart from US stocks? Manus,

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Speaker 2: it's a US stock market opening show focus on the

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Speaker 2: US stocks, which.

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Speaker 3: Is fair enough.

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Speaker 7: I hope he's not watching.

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Speaker 2: No, we walking somewhere very happy and healthy and away

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Speaker 2: from here.

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Speaker 7: I would imagine so.

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Speaker 6: But Christina come into another debate that we've been having,

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Speaker 6: if you want to call it that money market funds.

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Speaker 6: There is so much cash in money market funds right now,

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Speaker 6: six trillion dollars or so by some estimates. When does

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Speaker 6: that cash come out, if at all? How sticky is

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Speaker 6: that cash, and does it belong to risk assets or

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Speaker 6: can it stay there?

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Speaker 4: So I think the big question is how overweight are

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Speaker 4: investors in money markets. Some exposure makes sense, let's face it,

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Speaker 4: that's part of being well diversified, but there is a

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Speaker 4: significant overweight on the part of some inters, and I

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Speaker 4: do think that starts to come out. It's interesting because

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Speaker 4: it could very well be something of a perfect storm

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Speaker 4: this year where we see rates start to go down,

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Speaker 4: so money market looks less attractive as a broadening of

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Speaker 4: the stock market looks more attractive. I also think an

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Speaker 4: important destination for some of that excess money market assets

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Speaker 4: is likely to be longer duration fixed income. In particular,

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Speaker 4: I'm excited about investment grade bonds, but I also see

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Speaker 4: in the US, Yes, in the US, well, lesser extent

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Speaker 4: in Europe, but definitely in the US. And I'm also

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Speaker 4: very excited about emerging market debt.

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Speaker 2: Well, let's just talk about the emerging market, because that's

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Speaker 2: twice that you've mentioned it. If I look at the

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Speaker 2: flow into ETFs in emerging markets, you're looking at twenty

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Speaker 2: six and a half billion dollars going into equity ETFs. Now,

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Speaker 2: of course, gold Mazas have been the mia Kopa moment.

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Speaker 2: They said, do you want to strip China from emerging markets?

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Speaker 2: So do you strip like China from the emerging market

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Speaker 2: call that you've just made, and do you want to

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Speaker 2: be longer of equity than you are of debt within

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Speaker 2: the EM trade?

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Speaker 4: No, I don't think you strip out China, although it

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Speaker 4: probably makes sense because it's such a major economy and

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Speaker 4: such a major investment destination to have it as a

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Speaker 4: separate allocation. But when I'm talking about merging markets, I'm

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Speaker 4: including China in there. I think there's potential there, especially

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Speaker 4: if we see a continued rollout of targeted policies that

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Speaker 4: are stimulative that address you know, for example, the property sector.

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Speaker 4: But there's a lot of opportunity outside China as well,

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Speaker 4: especially in Asia EM that should benefit from an improving

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Speaker 4: Chinese economy, but also have a lot of things in

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Speaker 4: their favor. I mean, if we think about some of

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Speaker 4: the Asia EM countries, demographic trends are really attractive, growing

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Speaker 4: middle class.

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Speaker 8: I mean, it's an.

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Speaker 4: Interesting time, and also valuations look quite attractive.

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Speaker 1: Hey, Christina, I feel like we'd be remissed. Just forty

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Speaker 1: five seconds. We're watching geal politics, politics in the US

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Speaker 1: later this year, the presidential election. Just very quickly thirty seconds.

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Speaker 1: How are you thinking about that?

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Speaker 4: Well, I think most investors have a long time horizon,

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Speaker 4: and so they shouldn't let what's going on the headlines,

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Speaker 4: which can sometimes be concerning and deserving, to take them

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Speaker 4: away from a long term investment plan that's well diversified. Yes,

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Speaker 4: we're likely to see gyrations that they are more short

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Speaker 4: term in nature, but for most with longtime horizons, it's

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Speaker 4: really all about being well diversified and putting on political blinders.

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Speaker 2: Okay, we've got the blinders on Christina. We are agnost

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Speaker 2: to Christina Hoop with that at Invesco, with her calls

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Speaker 2: on the equity markets. But let's talk a little bit

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Speaker 2: more about banking, because is there anybody really that can

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Speaker 2: be JP Morgan, Let's start that. It is Jared Cassey,

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Speaker 2: head of US Bank Equity Strategy and large camp Bank

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Speaker 2: analyst at RBC Campital Markets. He saved the US banking system.

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Speaker 2: Jamie Diamond did that was in.

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Speaker 5: Wait, is this eight you're talking about?

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Speaker 3: Oh no, sorry again, No, he was a right a

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Speaker 3: r years.

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Speaker 2: Of course, we're talking about Jamie Diamond, JP Morgan, First Republic,

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Speaker 2: Jerry Cassidy, good morning to you. Is there anybody can

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Speaker 2: catch up to? JP Morgan are the invincible? Everybody's invent

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Speaker 2: everybody has a everybody has a little bit of a

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Speaker 2: risk with them. Taught me through you, JP Morgan called

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Speaker 2: good morning.

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Speaker 9: Good morning, mannis this year has been a great year

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Speaker 9: for the JP Morgan shareholders and stock prist led by

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Speaker 9: Jamie Diamond. As you pointed out, the company is going

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Speaker 9: to put up some very very strong mind income numbers

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Speaker 9: this year, and there's really been a flight to safety

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Speaker 9: for many investors earlier in the year. World obviously, we

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Speaker 9: remember what happened in March with the Silicon Valley signature failures,

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Speaker 9: then of course in May with the First Republic failure,

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Speaker 9: and many long only investors were quite shaken by those

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Speaker 9: events and as a result they went into safety, and

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Speaker 9: safety was JP Morgan that has started to change, however, Man,

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Speaker 9: we've noticed it in the last four to five weeks.

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Speaker 9: Risk on has now taking precedence over risk off. JP

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Speaker 9: Morgan is still doing well, but now you're starting to

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Speaker 9: see some of the other banks that people were more

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Speaker 9: nervous about. A Bank America, for example, with their unrealized

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Speaker 9: bottom loss in their health maturity portfolio, that doesn't seem

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Speaker 9: to be as much of an issue today. The stock

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Speaker 9: has recovered nicely since the lows in October.

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Speaker 5: Sure, that's exactly where I wanted to go.

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Speaker 1: Because you shared with us a lineup of lists or

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Speaker 1: another names of banks that you would want to invest in.

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Speaker 1: I guess our own you suggest investors should own. JP

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Speaker 1: Morgan isn't on that list.

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Speaker 9: What we suggest is, if we're twenty twenty four, we

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Speaker 9: really want to go risk on, and if there is

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Speaker 9: an investor that is still concerned about the outlook for

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Speaker 9: the US economy or concerns about maybe the banking system,

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Speaker 9: then certainly owning a JP.

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Speaker 4: Morgan is the way to go.

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Speaker 8: But we don't see that.

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Speaker 9: We see in twenty twenty four the economy doing a

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Speaker 9: soft landing, if you will, We see the FED being

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Speaker 9: finished with raising short term interest rates, and if we're

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Speaker 9: right on that call, this is shaping up possibly to

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Speaker 9: be very similar to nineteen ninety five, which when you

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Speaker 9: compare it to nineteen ninety four. It was an awful

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Speaker 9: year for banks. Everybody was worried about what was going on.

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Speaker 9: The FED raise rates from three to six percent from

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Speaker 9: Ferbru M ninety four to FEBRUARM ninety five, and the

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Speaker 9: hard landing that became in ninety five, and the stocks

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Speaker 9: were up fifty five percent. So soft landing, I remember

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Speaker 9: rate being reached is very positive for risk on banks.

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Speaker 9: In twenty twenty four.

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Speaker 1: Let me throw some numbers out for radio and TV audiences.

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Speaker 1: KBW Bank Index off four and a half percent year

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Speaker 1: today of thirty four percents in October twenty seventh. Then

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Speaker 1: let's look at the regionals. Obviously front and center this year.

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Speaker 1: The KI it's off six percent year today but up

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Speaker 1: almost forty percent since October twenty fifth. So it's been

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Speaker 1: interesting to see the momentum here, like we've seen in

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Speaker 1: so many different sectors, but especially in the financial sector.

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Speaker 1: Of this list of names, so Bank of America is

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Speaker 1: on it, Huntington Bank Shares fifth, third, M and T Bank,

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Speaker 1: Western Alliance.

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Speaker 5: Is there a common theme?

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Speaker 1: I mean, you've been talking about a little bit common

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Speaker 1: theme among these names that you think investors might want

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Speaker 1: to suggest adding one of these to their portfolios.

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Speaker 9: One of the common themes is that the stocks are

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Speaker 9: not terribly expensive when you look at the valuations of

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Speaker 9: the banks today and your comparents of historical levels were

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Speaker 9: still not out or above historical valuation levels. And second,

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Speaker 9: the other thing that we have to remember is that

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Speaker 9: when you take a look at the book value and

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Speaker 9: tangible book value per share numbers for all the banks, well,

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Speaker 9: that includes the unrealized bomb losses that they have, and

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Speaker 9: they're available for sale portfolios. And as you know, with

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Speaker 9: the bond yield falling from close to five percent or

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Speaker 9: at five percent in October to under four percent, those

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Speaker 9: losses are going to drop, meaning book values and changible

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Speaker 9: book value growth is going to be faster, making the

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Speaker 9: socks even more attractive on a price to book or

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Speaker 9: price to tangible book level when you adjust for these

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Speaker 9: unrealized losses.

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Speaker 6: Well, Jared, let's go from valuations to fundamentals, because when

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Speaker 6: we think about sort of the business of banks, it

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Speaker 6: feels like trading has been pretty good, but the deal

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Speaker 6: making side of things has obviously been pretty depressed this

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Speaker 6: year and last year. Do you expect that dynamic to

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Speaker 6: flip in twenty twenty four, or at least for deal

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Speaker 6: making to maybe see a little bit of a revival.

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Speaker 9: When you look at deal making within the banking system,

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Speaker 9: you're right, it's been very depressed, and the main culprit

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Speaker 9: has been interest rates. Because when you think about a

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Speaker 9: buyer of a bank another bank, they have to mark

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Speaker 9: the book to market. So when you market to market,

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Speaker 9: if you have a three percent or a four percent

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Speaker 9: asset in a seven percent or six percent yield market,

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Speaker 9: you have to reduce the value of that asset. That

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Speaker 9: has prevented deals from happening because the marks are too large.

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Speaker 9: So if rates start to continue to fall or continue

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Speaker 9: to fall in twenty four, pluss those assets pay off,

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Speaker 9: the marks will diminish, and in twenty twenty five we

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Speaker 9: think we're going to really see a lot of activity.

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Speaker 9: We're not very bullish on the big activity in twenty four.

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Speaker 9: The other thing way they keep in mind, we have

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Speaker 9: regulatory changes coming under Basil free end game, so many

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Speaker 9: of the banks want to wait and to see the

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Speaker 9: final proposals before they move. So the regulatory outlook is

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Speaker 9: also uncertain, which is weighing on EMINA activity within the

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Speaker 9: banking industry, and.

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Speaker 2: I'm sure we're here from the down himself on regulation

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Speaker 2: and Basil three I'm talking about or not just Jamie Unnar,

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Speaker 2: but all the banks years. But that's got a consequence,

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Speaker 2: hasn't it for the dividend and the payout scenario for

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Speaker 2: US banks going into next year. So lay out that

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Speaker 2: map for twenty twenty four in terms of buybacks and dividends.

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Speaker 2: Is it buyback dividend delayed but not denied?

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Speaker 9: Good question, manis I would say not. On the dividends,

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Speaker 9: evident is they're not going to be delayed in terms

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Speaker 9: of increases. The banks have been increasing the dividends, maybe

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Speaker 9: not as much as they have done in recent years.

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Speaker 8: And we expect that to continue.

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Speaker 9: But you did put your finger on the delay on

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Speaker 9: the buybacks. There have been delays in buy banks because

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Speaker 9: banks really want to see what the new capital requirements

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Speaker 9: will be, and until they really get their arms around it,

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Speaker 9: they're going to be a little more cautious. We should

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Speaker 9: have some final proposals, I think floated by the summertime,

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Speaker 9: so I think the buy banks will could potentially kick

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Speaker 9: in very strong in the second half of the year

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Speaker 9: and certainly in twenty twenty five. Because the banks all

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Speaker 9: have sufficient capital to exceed the new guidelines.

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Speaker 4: They just need to know what those are going to be.

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Speaker 3: Okay, Jered, thank you very much.

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Speaker 2: Interesting that JPM isn't on your heart ticket list for

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Speaker 2: the start of twenty twenty four.

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Speaker 1: That route in the Red Sea, twelve percent of global

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Speaker 1: trade goes like that, so if you want to look

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Speaker 1: for a significant statistic and impact potentially, so this is

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Speaker 1: why it's on our radar, and that's why we want

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Speaker 1: to get to our next guest. Stephen a Cookie's senior

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Speaker 1: fellow for Middle East and Africa Studies at the Council

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Speaker 1: on Foreign Relations, and he is watching this situation writing

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Speaker 1: about it.

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Speaker 5: I think we interrupted you this morning. Stephen.

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Speaker 1: Thank you for taking some time out because this certainly

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Speaker 1: sounds like it's top of mind for you. How are

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Speaker 1: you assessing the current situation in the Middle East as

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Speaker 1: it feels like it is escalating.

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Speaker 10: It's certainly the risk is there for a very significant escalation,

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Speaker 10: and the Huthis, who are the ones responsible for attacking

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Speaker 10: shipping in the Red Sea, are the primary actor. At

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Speaker 10: the outset of the war in Gaza, everybody look north

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Speaker 10: toward Hezballah, another Iranian proxy, but really the group that

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Speaker 10: has been most engaged in both threatening Israel with its

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Speaker 10: missiles and drones as well as the Red Sea have

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Speaker 10: been the houthis clearly at Irani, and so I think

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Speaker 10: that there is a very very significant risk of escalation there.

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Speaker 10: The American announcement of a task force to protect shipping

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Speaker 10: is a good thing. It may not, however, necessarily word

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Speaker 10: off the hoofies.

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Speaker 2: Well, Steve, we had a conversation this morning with Wendy Shita,

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Speaker 2: and the debate is this these proxies, These escalation in

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Speaker 2: the proxies, whether it's Hesbola and Lebanon or the Hoothi

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Speaker 2: rebels in the Red Sea, is a proxy war which

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Speaker 2: is much more directed against the United States, perhaps than

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Speaker 2: the direct conflict of Hamas and Israel. To what extent

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Speaker 2: is there a point at which Iran will still keep

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Speaker 2: some constraint on their proxies. Have they got full control

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Speaker 2: of their proxies? Are they the absolute controller of what happens?

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Speaker 2: Do you still think Iran is ultimately the arbiter of

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Speaker 2: escalation with the proxies.

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Speaker 10: Well, there's really a range of autonomy for these groups.

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Speaker 10: Hamas for example, is relatively more autonomous than his Ballah

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Speaker 10: or the Houthis. Certainly, when it comes to the Houthies

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Speaker 10: threats to shipping in the Red Sea, the Iranians have

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Speaker 10: a major hand to play in it. In fact, there

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Speaker 10: were reports that the Iranians were directing the Houthis through

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Speaker 10: the use of their own technology to attack certain ships

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Speaker 10: and pick targets for them. So as long as the

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Speaker 10: Iranis remains unaddressed and their ability to arm and finance

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Speaker 10: these groups, we're going to be contending with these problems.

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Speaker 10: And as you pointed out, twelve percent of global trade

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Speaker 10: goes through the Red Sea. This is a major way

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Speaker 10: in which Egypt, an extremely important country, earns hard currency.

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Speaker 10: There are all kinds of economic and geopolitical implications of

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Speaker 10: allowing the Houthis and their Iranian patrons to menace the

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Speaker 10: global economy this way.

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Speaker 6: And Stephen, when it comes to the Red Sea, Bloomberg

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Speaker 6: has reported in the past couple weeks that the US

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Speaker 6: is considering strikes on some of these hoothy bases.

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Speaker 7: And when you think.

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Speaker 6: About how this could play out, what would tip the

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Speaker 6: US strategy from deterrens actually going on the offense here.

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Speaker 10: Well, it seems at this point that the Biden administration

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Speaker 10: is satisfied with setting up a task force. I think

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Speaker 10: that will trip the United States into direct action against

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Speaker 10: the Huthis would be an attack on American warship itself.

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Speaker 10: There is precedent for the United States protecting shipping. Way

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Speaker 10: back in the late nineteen eighties, the United States reflagged

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Speaker 10: Kuwaiti oil tankers to protect them from Iranian attacks during

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Speaker 10: the Iran Iraq War. But that also came along in

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Speaker 10: parallel with direct US military action against Iranian forces to

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Speaker 10: prevent them from even threatening threatening shipping. That doesn't seem

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Speaker 10: to be the case with this task force. I think

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Speaker 10: the United States wants to remain actually on the defensive here, unless,

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Speaker 10: of course, American forces come under direct fire.

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Speaker 7: Well, that's what I want to talk about.

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Speaker 6: I mean, do you think that this task force will

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Speaker 6: be enough to be that strong enough deterrence that would

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Speaker 6: keep this contained to just acting on the defense.

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Speaker 8: No.

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Speaker 10: In short, there are already American warships in the Red

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Speaker 10: Sea that had taken action to defend against Hoothi attacks.

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Speaker 3: Yet the attacks keep coming.

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Speaker 10: It strikes me that an important part of deterrence is

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Speaker 10: also the willingness to use military.

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Speaker 3: Force to establish rules of the road.

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Speaker 10: And thus far the United States has shied away from

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Speaker 10: doing that for fear of widening the conflict. But the

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Speaker 10: Huthis and the Iranians and has seemed determined to incrementally

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Speaker 10: widen this conflict. I think with the United States on

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Speaker 10: the defensive and merely reacting to the Huthis is asking

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Speaker 10: for more trouble.

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Speaker 1: So does the US need to be more on the

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Speaker 1: offensive in some regard more so than it is. And

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Speaker 1: I say that just a headline crossing and this is

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Speaker 1: on Twitter x whatever you'd like to call it.

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Speaker 5: This is from Barack Rovit.

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Speaker 1: He's a political reporter from ox Axios, and he says

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Speaker 1: Secretary of State Tony Blincoln expected to travel to the

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Speaker 1: Middle East late next week to talk about the Gaza war.

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Speaker 1: Five US, Israeli and Arab officials. We're telling him this

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Speaker 1: blink and planning to visit Israel, the West Bank, Jordan,

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Speaker 1: the UAE, Saudi Arabian Katar.

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Speaker 5: That's pretty big trip.

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Speaker 1: And that sounds like they've got some plans or hopes

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Speaker 1: for some plans to maybe bring I don't know, to

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Speaker 1: maybe move this forward in some regard. How do you

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Speaker 1: read that, and what does the US's role need to be,

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Speaker 1: maybe in a more aggressive fashion or more not so defensive,

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Speaker 1: but much more on the offensive.

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Speaker 10: Well, certainly, Secretary Blincoln has taken the lead in the

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Speaker 10: American diplomatic efforts to stabilize the region and.

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Speaker 3: Accelerate Israel's war.

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Speaker 10: Against Tamas in order to bring it to an end

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Speaker 10: and to plan for the day after when it comes

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Speaker 10: to the Red Sea. This is really something for the

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Speaker 10: Department of Defense, and it strikes me at the United

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Speaker 10: States does need to take more action against the Hoho

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Speaker 10: thies otherwise, once again shipping in the Red Sea will

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Speaker 10: come under threat, and we'll be living with this situation

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Speaker 10: and the consequences of it for some time.

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Speaker 1: Hey, Stephen, before we go twenty seconds, what's your headline

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Speaker 1: going to be on your story?

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Speaker 5: What should it be? You think?

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Speaker 10: I don't write the headlines, but it should be precisely

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Speaker 10: what I just said. The United States needs to go

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Speaker 10: on the offensive.

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Speaker 3: All right?

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Speaker 5: Good to leave it there. Hey, thank you so much.

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Speaker 1: I know, busy morning for you, and so appreciate you

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Speaker 1: stepping out to give us a few minutes there. Stephen

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Speaker 1: A cook, He is of course of the Council on

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Speaker 1: Foreign Relations joining us here on surveillance. You know, we're

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Speaker 1: kind of thinking about big broad strokes, especially when it

440
00:22:34,240 --> 00:22:36,040
Speaker 1: comes to twenty twenty four, and especially when it comes

441
00:22:36,080 --> 00:22:38,320
Speaker 1: to the energy space, as we watch what's going on.

442
00:22:38,520 --> 00:22:41,000
Speaker 5: In the Middle East, concerns about that escalation.

443
00:22:41,600 --> 00:22:43,600
Speaker 1: We've heard a lot on that in terms of what

444
00:22:43,680 --> 00:22:47,479
Speaker 1: could potentially come in twenty twenty four. Nadie Martin Wiggan

445
00:22:47,640 --> 00:22:51,159
Speaker 1: is director of it Savellan Capital and joining us to

446
00:22:51,200 --> 00:22:53,480
Speaker 1: talk a little bit about the trade and energy and

447
00:22:53,640 --> 00:22:54,639
Speaker 1: more this morning.

448
00:22:54,960 --> 00:22:55,720
Speaker 5: Nadi, we are.

449
00:22:55,680 --> 00:22:57,800
Speaker 1: Seeing oil prices back off a little bit after that

450
00:22:57,840 --> 00:23:00,760
Speaker 1: two point seven two point eight percent run up yet yesterday.

451
00:23:01,280 --> 00:23:04,119
Speaker 1: How are you thinking about the energy trade against the

452
00:23:04,160 --> 00:23:06,280
Speaker 1: Middle Eastern backdrop?

453
00:23:07,760 --> 00:23:08,280
Speaker 8: Good morning.

454
00:23:08,640 --> 00:23:11,640
Speaker 11: I think what we saw with yesterday's move is that

455
00:23:11,680 --> 00:23:14,400
Speaker 11: the market has been positioned in quite a short way.

456
00:23:14,840 --> 00:23:16,120
Speaker 8: It has been short.

457
00:23:15,880 --> 00:23:18,960
Speaker 11: Ever since the OPEC announcement came out with Core communication,

458
00:23:19,800 --> 00:23:22,960
Speaker 11: and we now see that as we have the US,

459
00:23:23,040 --> 00:23:26,920
Speaker 11: you know, actually launching into you rock, that risk premium

460
00:23:27,040 --> 00:23:30,520
Speaker 11: is starting to come back back to the forefront of thinking.

461
00:23:30,920 --> 00:23:33,000
Speaker 8: You know, but we're not at the high as we've

462
00:23:33,000 --> 00:23:33,560
Speaker 8: seen before.

463
00:23:33,720 --> 00:23:35,960
Speaker 11: I'd say, on where we are right now, maybe up

464
00:23:36,040 --> 00:23:37,800
Speaker 11: to eighty two dollars is possible.

465
00:23:37,840 --> 00:23:39,920
Speaker 8: We are cautiously.

466
00:23:39,280 --> 00:23:42,680
Speaker 11: Optimistic about the energy complex as we started twenty twenty

467
00:23:42,680 --> 00:23:44,000
Speaker 11: four overall.

468
00:23:43,680 --> 00:23:44,959
Speaker 5: So how do you think about levels?

469
00:23:44,960 --> 00:23:47,960
Speaker 1: We all remember a much more expensive barrel of oil

470
00:23:48,560 --> 00:23:52,440
Speaker 1: years ago. I'm looking at what back in twenty twenty

471
00:23:52,520 --> 00:23:54,800
Speaker 1: two we hit about ninety one a barrel.

472
00:23:54,840 --> 00:23:56,400
Speaker 5: So I'm just thinking about how do you think about

473
00:23:56,440 --> 00:23:57,080
Speaker 5: the price action?

474
00:23:57,320 --> 00:24:00,359
Speaker 1: Do you feel comfortable putting a level out there for

475
00:24:00,440 --> 00:24:02,359
Speaker 1: maybe twenty twenty four, at least the early part of

476
00:24:02,359 --> 00:24:02,760
Speaker 1: the year.

477
00:24:03,800 --> 00:24:06,879
Speaker 11: Well, I think at the start, what the market really

478
00:24:06,920 --> 00:24:09,119
Speaker 11: wants to see, and this is something you mentioned, is

479
00:24:09,240 --> 00:24:11,400
Speaker 11: you know, we had the supply side story coming from

480
00:24:11,400 --> 00:24:15,040
Speaker 11: the US, and the market wants to see inventory.

481
00:24:14,560 --> 00:24:15,720
Speaker 8: Draws start to come.

482
00:24:15,960 --> 00:24:20,479
Speaker 11: And prior to this escalation and possible rerooting of things

483
00:24:20,520 --> 00:24:24,000
Speaker 11: through Suez and avoiding the Red Sea, we saw big

484
00:24:24,000 --> 00:24:27,040
Speaker 11: builds coming in in January. Right now now it's looking

485
00:24:27,080 --> 00:24:30,119
Speaker 11: more flatish, and we'll start to see draws in February March,

486
00:24:30,440 --> 00:24:32,280
Speaker 11: and that's where we can start see that build up

487
00:24:32,320 --> 00:24:35,560
Speaker 11: in creed prices. However, what we saw in September is

488
00:24:35,600 --> 00:24:38,360
Speaker 11: we hate a ceiling at ninety five dollars a barrel.

489
00:24:38,359 --> 00:24:39,720
Speaker 8: In terms of the futures market.

490
00:24:39,720 --> 00:24:42,160
Speaker 11: The physical market was trading at above one hundred dollars

491
00:24:42,200 --> 00:24:44,680
Speaker 11: a barrel, but especially with the strength of the US dollar,

492
00:24:44,800 --> 00:24:47,920
Speaker 11: we saw that, you know, India, China, they were pulling.

493
00:24:47,600 --> 00:24:48,320
Speaker 8: Back from buying.

494
00:24:48,400 --> 00:24:51,640
Speaker 11: We had a backup of West African crud from Angola

495
00:24:51,720 --> 00:24:54,720
Speaker 11: that we haven't seen since since COVID in terms of

496
00:24:54,840 --> 00:24:58,760
Speaker 11: unsold barrels waiting to load. And so I think that

497
00:24:58,840 --> 00:25:01,800
Speaker 11: you know, the kinds of level that we saw X

498
00:25:01,840 --> 00:25:05,880
Speaker 11: having just the complete shutdown of things in the Middle East,

499
00:25:05,960 --> 00:25:09,400
Speaker 11: we're not going to see that kind of February pricing

500
00:25:09,520 --> 00:25:12,479
Speaker 11: March like we saw initially when Russia invaded Ukraine.

501
00:25:12,760 --> 00:25:16,679
Speaker 2: Nadia, good morning. You're cautiously optimistic. They must be happy

502
00:25:16,720 --> 00:25:20,040
Speaker 2: over the White House because they're able to fill up

503
00:25:20,080 --> 00:25:23,720
Speaker 2: the spr we're sub eighty dollars. But you raise the specter,

504
00:25:24,080 --> 00:25:27,480
Speaker 2: and I think this is a very interesting point. Much

505
00:25:27,520 --> 00:25:32,000
Speaker 2: criticism of the price cap that was pushed by the Americans.

506
00:25:32,480 --> 00:25:35,080
Speaker 2: You think that that will come back on the slate

507
00:25:35,480 --> 00:25:37,960
Speaker 2: in twenty twenty four, and that they will push for

508
00:25:38,119 --> 00:25:43,040
Speaker 2: tighter sanctions and perhaps a lower cap and now just

509
00:25:43,119 --> 00:25:44,960
Speaker 2: run me through where you think that falls.

510
00:25:46,240 --> 00:25:46,480
Speaker 8: Yeah.

511
00:25:46,760 --> 00:25:49,840
Speaker 11: I think they might not necessarily lower the cap of

512
00:25:49,880 --> 00:25:52,320
Speaker 11: sixty dollars a barrow, but they will enforce the cap.

513
00:25:52,400 --> 00:25:52,560
Speaker 9: Right.

514
00:25:52,800 --> 00:25:54,200
Speaker 8: So we especially when we.

515
00:25:54,200 --> 00:25:57,280
Speaker 11: Dip down into the sixties on WTI, that really gave

516
00:25:57,320 --> 00:25:59,840
Speaker 11: a green light to the Biden administration that we're a

517
00:26:00,119 --> 00:26:03,399
Speaker 11: comfortable levels in terms of the oil price. And you know,

518
00:26:03,480 --> 00:26:05,680
Speaker 11: they said they would initially buy at sixty nine dollars

519
00:26:05,680 --> 00:26:07,720
Speaker 11: a barrel. Then they told the Saudis, you know, right

520
00:26:07,800 --> 00:26:12,280
Speaker 11: before the invasion of Israel by Hamas, that you know,

521
00:26:12,440 --> 00:26:15,960
Speaker 11: seventy nine is okay. So they're in that comfortable range.

522
00:26:16,119 --> 00:26:17,120
Speaker 8: I think that if.

523
00:26:16,960 --> 00:26:18,879
Speaker 11: We were to see a creud, you know, back up

524
00:26:18,920 --> 00:26:22,480
Speaker 11: in the nineties, then that will create a stress again

525
00:26:22,600 --> 00:26:24,840
Speaker 11: on the Biden administration. But what we've seen is they're

526
00:26:24,880 --> 00:26:28,000
Speaker 11: starting to go after these tankers. We're seeing things being

527
00:26:28,160 --> 00:26:31,879
Speaker 11: backed up in terms of deliveries, especially into India because

528
00:26:31,920 --> 00:26:34,600
Speaker 11: the cost of freight and shipping is going higher. And

529
00:26:34,640 --> 00:26:38,399
Speaker 11: we reached these difficulties and this also happened in September

530
00:26:38,680 --> 00:26:41,879
Speaker 11: that you know, you start to have that complete cost

531
00:26:41,960 --> 00:26:45,560
Speaker 11: come together for a refiner and it hits their margins

532
00:26:45,640 --> 00:26:48,840
Speaker 11: and in this latest crude move that we've seen yesterday,

533
00:26:48,880 --> 00:26:51,359
Speaker 11: you know, we saw two dollars come off the refinery margin.

534
00:26:51,600 --> 00:26:53,600
Speaker 11: If they didn't have to spend tons more on the

535
00:26:53,640 --> 00:26:56,200
Speaker 11: freight cost, then that becomes problematic.

536
00:26:56,359 --> 00:26:58,240
Speaker 8: Right, So that is where.

537
00:26:58,000 --> 00:27:02,400
Speaker 11: I think it will be potentially more effective price camp.

538
00:27:04,080 --> 00:27:05,760
Speaker 8: But you know, until we get too high.

539
00:27:05,800 --> 00:27:07,280
Speaker 2: Well, isn't the truth of it that they need to

540
00:27:07,320 --> 00:27:09,280
Speaker 2: turn the screws and be a little bit more judicious

541
00:27:09,480 --> 00:27:12,520
Speaker 2: in how they treat Iranian oil, which they have been

542
00:27:12,600 --> 00:27:16,480
Speaker 2: quite liche if the reporting is to be significantly believed.

543
00:27:16,600 --> 00:27:19,560
Speaker 2: They have been easy on Iranian crewed. US crewed is

544
00:27:19,640 --> 00:27:23,200
Speaker 2: pumping like Bellio. So the supply side and the discretion

545
00:27:23,680 --> 00:27:27,439
Speaker 2: on sanctions on Iran, you know, are going to come

546
00:27:27,480 --> 00:27:30,280
Speaker 2: to bear as well in twenty twenty four, aren't they.

547
00:27:30,359 --> 00:27:30,800
Speaker 8: I think so.

548
00:27:30,880 --> 00:27:33,040
Speaker 11: You've seen in six hundred and fifty thousand barrels per

549
00:27:33,119 --> 00:27:35,639
Speaker 11: day of production growth in Iran this year. We actually

550
00:27:35,680 --> 00:27:38,000
Speaker 11: see upside of one hundred and fifty thousand barrels per

551
00:27:38,040 --> 00:27:41,080
Speaker 11: day potentially next year if the Iranians go for it.

552
00:27:41,119 --> 00:27:43,199
Speaker 8: But of course they can start to tighten that.

553
00:27:43,440 --> 00:27:45,800
Speaker 11: But I think the Biden administration has been very nervous

554
00:27:45,800 --> 00:27:47,960
Speaker 11: about doing that and doing that for Russia as well,

555
00:27:48,119 --> 00:27:50,960
Speaker 11: because the IA and all the agencies have been talking

556
00:27:51,000 --> 00:27:53,840
Speaker 11: since the war in Ukraine began that we're going to

557
00:27:53,880 --> 00:27:57,119
Speaker 11: lose a million barrels per day of Russian.

558
00:27:56,720 --> 00:27:57,840
Speaker 8: Oil any moment.

559
00:27:58,000 --> 00:28:01,440
Speaker 11: Right now, they've finally given up and the market is thinking, Okay,

560
00:28:01,520 --> 00:28:03,720
Speaker 11: we'll get two hundred three hundred thousand barrels per day

561
00:28:03,880 --> 00:28:07,879
Speaker 11: less food in or less exports in the first quarter,

562
00:28:08,240 --> 00:28:12,000
Speaker 11: but it's still big numbers if the US were really

563
00:28:12,240 --> 00:28:14,040
Speaker 11: to go after both of those countries.

564
00:28:14,280 --> 00:28:16,040
Speaker 1: Can I just say, I'm kind of like blown as

565
00:28:16,040 --> 00:28:18,400
Speaker 1: I'm hearing like the levels of production and more production

566
00:28:18,600 --> 00:28:21,800
Speaker 1: and whatever happened to like alternative fuels and the discussions

567
00:28:21,800 --> 00:28:22,280
Speaker 1: around that.

568
00:28:22,600 --> 00:28:25,159
Speaker 6: It's definitely not in this conversation, I'll say that, but

569
00:28:25,240 --> 00:28:27,560
Speaker 6: I want to keep the conversation going on production and

570
00:28:27,680 --> 00:28:32,120
Speaker 6: specifically talk about US production, because US shale production obviously

571
00:28:32,160 --> 00:28:33,680
Speaker 6: been on fire this year.

572
00:28:34,000 --> 00:28:36,360
Speaker 7: Just to go through some of these numbers Naudia.

573
00:28:36,400 --> 00:28:40,840
Speaker 6: This time last year, the US government forecasting domestic production

574
00:28:40,880 --> 00:28:43,960
Speaker 6: would average twelve point five million dollars of barrels a

575
00:28:44,040 --> 00:28:46,480
Speaker 6: day in this current quarter, but in recent days that

576
00:28:46,680 --> 00:28:50,560
Speaker 6: estimate was bumped to thirteen point three million. That difference

577
00:28:50,720 --> 00:28:54,720
Speaker 6: is the equivalent of adding a new Venezuela to global supplies.

578
00:28:54,760 --> 00:28:57,440
Speaker 6: You think about this fantastic growth that we've seen in

579
00:28:57,520 --> 00:28:59,960
Speaker 6: US shale, do you think that momentum will continue.

580
00:29:01,120 --> 00:29:04,080
Speaker 11: I think there's a seasonality, right, So in the first

581
00:29:04,120 --> 00:29:06,680
Speaker 11: half of the year, and especially the first three four months,

582
00:29:06,880 --> 00:29:10,120
Speaker 11: we will probably see that momentum slow down, even flatten.

583
00:29:10,520 --> 00:29:13,400
Speaker 11: You know, they're even forecasting a dip the EIA, which

584
00:29:13,440 --> 00:29:16,160
Speaker 11: we're a bit skeptical about because you.

585
00:29:16,120 --> 00:29:18,120
Speaker 8: Know, the market is doing well.

586
00:29:18,160 --> 00:29:21,880
Speaker 11: We've seen energy stocks start to come back now when

587
00:29:21,920 --> 00:29:23,840
Speaker 11: you look at their pricing and all these M and

588
00:29:23,880 --> 00:29:27,360
Speaker 11: A deals are being viewed positively, right, But there is

589
00:29:27,400 --> 00:29:30,200
Speaker 11: this seasonality and you tend to have this pickup in

590
00:29:30,240 --> 00:29:32,200
Speaker 11: the second half of the year. That is when you

591
00:29:32,240 --> 00:29:35,280
Speaker 11: see those numbers. And historically the IA has tried to

592
00:29:35,320 --> 00:29:38,360
Speaker 11: revise up that that production figure by six hundred thousand

593
00:29:38,360 --> 00:29:41,000
Speaker 11: barrels per day by year end. So when we look

594
00:29:41,040 --> 00:29:43,800
Speaker 11: towards next year, the forecasts are for around four hundred

595
00:29:43,800 --> 00:29:47,480
Speaker 11: thousand barrels per day production growth, and typically that's a

596
00:29:47,720 --> 00:29:51,480
Speaker 11: very low number. You either see it decline in production

597
00:29:52,040 --> 00:29:54,880
Speaker 11: or you see it increase, you know, more like six

598
00:29:55,000 --> 00:29:57,560
Speaker 11: hundred eight hundred one point one million barrels per day.

599
00:29:57,800 --> 00:30:01,760
Speaker 11: So I think we'll see this in the first part

600
00:30:01,760 --> 00:30:03,920
Speaker 11: of the year, which will give strength I think in

601
00:30:04,040 --> 00:30:07,440
Speaker 11: support to the market. It will then help OPEK think

602
00:30:07,480 --> 00:30:11,040
Speaker 11: about bringing back some production, especially in the second half

603
00:30:11,040 --> 00:30:12,960
Speaker 11: of the year when they expect demand to pick up

604
00:30:13,000 --> 00:30:14,400
Speaker 11: depending on the interest rates.

605
00:30:14,200 --> 00:30:15,880
Speaker 8: Situation in the US.

606
00:30:16,040 --> 00:30:18,400
Speaker 11: But then they need to be careful because you have

607
00:30:18,640 --> 00:30:21,240
Speaker 11: this ketchup and I think what the market really got

608
00:30:21,240 --> 00:30:23,760
Speaker 11: wrong this year is we didn't see rig counts come up. Right,

609
00:30:24,040 --> 00:30:27,360
Speaker 11: We've had three mile laterals. They're talking about four mile

610
00:30:27,440 --> 00:30:30,800
Speaker 11: laterals in the shale patch. And this is something that

611
00:30:30,880 --> 00:30:33,040
Speaker 11: now the market is aware that this can happen, so

612
00:30:33,080 --> 00:30:34,560
Speaker 11: they're going to be watching it. So they're not going

613
00:30:34,600 --> 00:30:38,720
Speaker 11: to be expecting fifty rigs to come up every month

614
00:30:38,880 --> 00:30:42,000
Speaker 11: in order to have this supply coming forward.

615
00:30:42,040 --> 00:30:44,760
Speaker 8: Will be much more aware of it, I think, and prepared.

616
00:30:45,440 --> 00:30:47,960
Speaker 6: All right, Nadia twenty seconds though it sounds like you're

617
00:30:47,960 --> 00:30:51,320
Speaker 6: saying that US shale production and OPEC they will get

618
00:30:51,360 --> 00:30:52,720
Speaker 6: closer to the same page.

619
00:30:53,920 --> 00:30:57,240
Speaker 11: Absolutely, they want to support a market I think long term,

620
00:30:57,320 --> 00:31:00,360
Speaker 11: and then this is where the shale producers they still

621
00:31:00,360 --> 00:31:04,200
Speaker 11: talk about capital discipline and giving money to shareholders, but

622
00:31:04,240 --> 00:31:08,760
Speaker 11: they're actually doing a lot in terms of activity and production.

623
00:31:09,160 --> 00:31:12,120
Speaker 11: So they are trying to find that happy balancing point.

624
00:31:12,160 --> 00:31:14,640
Speaker 11: And you know, when we think about global trade and

625
00:31:15,000 --> 00:31:17,880
Speaker 11: how things work, you know, it's good for America's energy security.

626
00:31:17,960 --> 00:31:20,760
Speaker 11: It's also good for shipping because you then have this

627
00:31:20,880 --> 00:31:23,680
Speaker 11: alternate rate that of course can be much longer if

628
00:31:23,680 --> 00:31:26,040
Speaker 11: you're going all the way to Asia, especially if you

629
00:31:26,080 --> 00:31:29,200
Speaker 11: have to miss sue US. But you know, going to Europe,

630
00:31:29,320 --> 00:31:33,440
Speaker 11: we also have that level of production to replace Russia.

631
00:31:33,560 --> 00:31:35,800
Speaker 1: All right, good to know and some good macro thoughts

632
00:31:35,840 --> 00:31:37,560
Speaker 1: when it comes to certainly the energy markets.

633
00:31:37,600 --> 00:31:38,480
Speaker 5: Nadia, thank you so much.

634
00:31:38,560 --> 00:31:41,360
Speaker 1: Natia Martin Wigan, a civilian capital, joining us on a

635
00:31:41,400 --> 00:31:43,120
Speaker 1: day when we see crude a little bit lower in

636
00:31:43,160 --> 00:31:55,760
Speaker 1: today's trade. Let's get to it with Cel Hardy, research

637
00:31:55,760 --> 00:31:57,600
Speaker 1: analyst over at CFRA so group.

638
00:31:57,680 --> 00:31:58,440
Speaker 5: Good to have you here.

639
00:31:58,800 --> 00:32:01,000
Speaker 1: Healthcare talk about it, gave you some of the big

640
00:32:01,080 --> 00:32:03,560
Speaker 1: macro backdrop, but it does feel like there's some stuff

641
00:32:03,600 --> 00:32:07,000
Speaker 1: going on. Look back at twenty twenty three. Are there

642
00:32:07,040 --> 00:32:09,560
Speaker 1: trends that we saw that you assume will kind of

643
00:32:09,560 --> 00:32:10,960
Speaker 1: carry over to twenty twenty four.

644
00:32:12,680 --> 00:32:14,400
Speaker 4: Yeah, hi, thanks for having good morning.

645
00:32:14,560 --> 00:32:17,000
Speaker 12: We think twenty twenty three was a difficult year for

646
00:32:17,080 --> 00:32:20,160
Speaker 12: the healthcare sector. We sell us some weakness and relativity

647
00:32:20,240 --> 00:32:25,000
Speaker 12: and significant variances in terms of performances across companies, and

648
00:32:25,080 --> 00:32:27,840
Speaker 12: despite its defense of nature, the sector overall has been

649
00:32:27,880 --> 00:32:30,320
Speaker 12: weaker compared to the other sectors since the beginning of

650
00:32:30,360 --> 00:32:33,600
Speaker 12: the year. The SMB five hundred Healthcare index was down

651
00:32:33,640 --> 00:32:36,440
Speaker 12: by zero point seven percent here to date, which compared

652
00:32:36,480 --> 00:32:39,120
Speaker 12: to the SMB five hundred it is remarkable performance of

653
00:32:39,560 --> 00:32:42,680
Speaker 12: nearly twenty five percent gain during the same period. But

654
00:32:42,920 --> 00:32:45,760
Speaker 12: leaving this behind, we expect twenty twenty four to be

655
00:32:45,840 --> 00:32:48,479
Speaker 12: the year of gradual recovery, especially for by the pharma.

656
00:32:49,400 --> 00:32:53,400
Speaker 12: Our chief investment Strategies expects a rotation from twenty twenty

657
00:32:53,440 --> 00:32:57,200
Speaker 12: three worst performers to put twenty twenty four's best performers

658
00:32:57,240 --> 00:33:00,880
Speaker 12: and sold off healthcare sub industries such as pharmaceuticals and

659
00:33:01,200 --> 00:33:05,440
Speaker 12: technology Relatively Overall, markets should offer nice buying opportunity and

660
00:33:05,480 --> 00:33:07,280
Speaker 12: sector and valuations.

661
00:33:07,000 --> 00:33:10,000
Speaker 2: So we need to, as it were, segregate the healthcare

662
00:33:10,080 --> 00:33:13,120
Speaker 2: market discerningly, perhaps in the same way as when people

663
00:33:13,160 --> 00:33:14,080
Speaker 2: say let's buy tech.

664
00:33:14,920 --> 00:33:16,680
Speaker 3: You need to be a little bit more discerning.

665
00:33:16,760 --> 00:33:19,160
Speaker 2: Just take us a little bit further into that narrative

666
00:33:19,200 --> 00:33:22,479
Speaker 2: about how we segregate out the winners and the losers.

667
00:33:22,480 --> 00:33:24,280
Speaker 2: We spend a lot of time talking about weight loss

668
00:33:24,360 --> 00:33:25,320
Speaker 2: drugs and where they go.

669
00:33:25,520 --> 00:33:26,760
Speaker 3: Those are the big blockbusters.

670
00:33:26,800 --> 00:33:29,640
Speaker 2: Eli Lilly up fifty six percent on the year, you

671
00:33:29,720 --> 00:33:33,320
Speaker 2: got Nova, Noordick Our forty seven percent a year to date.

672
00:33:33,400 --> 00:33:36,320
Speaker 3: So if you take me beyond borders and.

673
00:33:36,280 --> 00:33:38,720
Speaker 2: A little bit deeper, where can I achieve a similar

674
00:33:38,760 --> 00:33:41,600
Speaker 2: return in perhaps a more diversified field.

675
00:33:43,160 --> 00:33:45,120
Speaker 12: So when we look at the performance of the ten

676
00:33:45,160 --> 00:33:48,960
Speaker 12: sub industries individually within the healthcare sector during twenty twenty three,

677
00:33:49,520 --> 00:33:53,800
Speaker 12: we noticed there are different essentially performances. For example, headcare

678
00:33:53,880 --> 00:33:58,520
Speaker 12: suppliescare facilities, and healthcare distributors where the clear performers here

679
00:33:58,520 --> 00:34:01,840
Speaker 12: to date. On the other hand, healthcare services, healthcare technology

680
00:34:01,880 --> 00:34:05,239
Speaker 12: and life slience tools services were the worst performers. So

681
00:34:05,400 --> 00:34:09,080
Speaker 12: or all, we expect increadny performance throughout twenty twenty four

682
00:34:09,480 --> 00:34:12,640
Speaker 12: as the comparison base gets easier versus twenty twenty three.

683
00:34:13,080 --> 00:34:15,160
Speaker 12: As you may know, a number of companies within the

684
00:34:15,160 --> 00:34:18,480
Speaker 12: healthcare sector continue to face here and year of comparisons

685
00:34:18,560 --> 00:34:22,200
Speaker 12: due to sharp deck lines and COVID nineteen related revenues. So,

686
00:34:22,239 --> 00:34:25,600
Speaker 12: along with the anticipated margin improvement driven by ongoing costs

687
00:34:25,600 --> 00:34:29,520
Speaker 12: initiatives taken throughout twenty twenty three, I think gradual recovery.

688
00:34:29,080 --> 00:34:30,040
Speaker 4: Should be in the cars.

689
00:34:30,800 --> 00:34:34,040
Speaker 12: Also, our technical analysis team at Lowry Research and see

690
00:34:34,040 --> 00:34:36,920
Speaker 12: a great business things that certain healthcare sub industries are

691
00:34:36,960 --> 00:34:40,920
Speaker 12: showing positive trend patterns, such as the beaten down healthcare services.

692
00:34:41,400 --> 00:34:43,640
Speaker 6: So let's zoom out, let's talk about the sector overall,

693
00:34:43,719 --> 00:34:45,960
Speaker 6: and let's talk about some of these weight loss drugs,

694
00:34:45,960 --> 00:34:48,560
Speaker 6: because that's really been all anyone has wanted to talk

695
00:34:48,600 --> 00:34:51,040
Speaker 6: about for the past couple months or so.

696
00:34:51,040 --> 00:34:53,120
Speaker 7: So, like we mentioned at the top.

697
00:34:52,960 --> 00:34:56,120
Speaker 6: I mean, you've seen certain companies just have run away years,

698
00:34:56,200 --> 00:34:59,160
Speaker 6: especially when you think about the likes of Novo Ordice.

699
00:34:58,880 --> 00:35:01,000
Speaker 7: Overseas, ELI l over here.

700
00:35:01,040 --> 00:35:03,600
Speaker 6: But it's been interesting that it seems like so that's

701
00:35:03,640 --> 00:35:06,440
Speaker 6: dragging down the rest of the sector when you think

702
00:35:06,440 --> 00:35:10,040
Speaker 6: about the disruption and the ozembic effect, if you want

703
00:35:10,040 --> 00:35:12,200
Speaker 6: to call it that. I know that that's specific to

704
00:35:12,239 --> 00:35:14,680
Speaker 6: one company, but the ozempic effect on some of the

705
00:35:14,760 --> 00:35:17,640
Speaker 6: other companies in the healthcare sector.

706
00:35:19,080 --> 00:35:22,920
Speaker 12: So we think that essentially will continue to become a

707
00:35:22,960 --> 00:35:26,680
Speaker 12: more valuable company during twenty twenty four, will continue to

708
00:35:27,080 --> 00:35:29,320
Speaker 12: write the hype around the JLP one.

709
00:35:31,280 --> 00:35:31,720
Speaker 8: Interests.

710
00:35:32,400 --> 00:35:35,319
Speaker 12: So essentially we are school very embolish and Allilaly, which

711
00:35:35,320 --> 00:35:39,239
Speaker 12: generates more than a publicist revenue from its diets portfolio,

712
00:35:39,480 --> 00:35:42,640
Speaker 12: but it's also very well diversified in other therapy areas

713
00:35:42,640 --> 00:35:46,160
Speaker 12: that as carriouscular innology, neuro science, and oncology. We think

714
00:35:46,239 --> 00:35:48,680
Speaker 12: oncology is still a very big area and in cot

715
00:35:48,719 --> 00:35:52,480
Speaker 12: remain the largest therapy area in by pharma generating strong

716
00:35:52,520 --> 00:35:55,879
Speaker 12: sales or in twenty twenty four within our coverage, would

717
00:35:55,880 --> 00:36:00,279
Speaker 12: think Merk and Alilay are the best position companies key

718
00:36:00,280 --> 00:36:01,480
Speaker 12: on college with prime choices.

719
00:36:02,200 --> 00:36:03,600
Speaker 7: It's interesting to hear you say that.

720
00:36:03,680 --> 00:36:06,520
Speaker 6: I come back to a call from BMO earlier this

721
00:36:06,640 --> 00:36:11,040
Speaker 6: month basically raising Amgen to outperform on its obesity drug potential.

722
00:36:11,320 --> 00:36:14,840
Speaker 6: Their reasoning came back down to valuation that basically you

723
00:36:14,840 --> 00:36:17,480
Speaker 6: think about the promise of Amgem's pipeline.

724
00:36:17,520 --> 00:36:19,000
Speaker 7: Of course it doesn't.

725
00:36:18,760 --> 00:36:21,919
Speaker 6: Really match what Eli Lilly has on the market rate now,

726
00:36:22,000 --> 00:36:24,880
Speaker 6: but basically Eli Lilly is trading at such a premium

727
00:36:25,040 --> 00:36:26,719
Speaker 6: it's time to look at maybe some of the more

728
00:36:26,880 --> 00:36:30,160
Speaker 6: least less expensive options, if you want to call them that.

729
00:36:30,239 --> 00:36:31,760
Speaker 7: When you're thinking about.

730
00:36:31,600 --> 00:36:34,439
Speaker 6: Analyzing ELI, Lily and the like, how much are you're

731
00:36:34,480 --> 00:36:36,520
Speaker 6: taking valuation into account?

732
00:36:37,840 --> 00:36:41,520
Speaker 12: Oh? Absolutely, we take evaluation seriously. But we think that

733
00:36:41,719 --> 00:36:46,279
Speaker 12: essentially there's still a good rally potentially for Alliate two

734
00:36:46,320 --> 00:36:49,560
Speaker 12: twenty pointy four because we see several catalysts. It's not

735
00:36:49,680 --> 00:36:54,239
Speaker 12: just the ABT's portfolio, but we think the company has

736
00:36:54,280 --> 00:36:57,560
Speaker 12: really solid medium to long term good prospects as a

737
00:36:57,640 --> 00:37:01,919
Speaker 12: diversified portfolio, strong brands, design, innovation. We have seen several

738
00:37:02,000 --> 00:37:06,279
Speaker 12: new product launches and I always also beg on recent acquisitions,

739
00:37:06,560 --> 00:37:08,680
Speaker 12: and the company has a strong balance sheet, which is

740
00:37:08,680 --> 00:37:14,960
Speaker 12: a key differentiator. We think the near term space therapy

741
00:37:15,080 --> 00:37:18,440
Speaker 12: is development will be important. For example of Alzheimer's disease.

742
00:37:18,480 --> 00:37:21,480
Speaker 12: The nanimap will be a key development this year and

743
00:37:21,560 --> 00:37:24,440
Speaker 12: workers up a diet. We think we may be seeing

744
00:37:24,560 --> 00:37:26,640
Speaker 12: other approals for other indications which.

745
00:37:26,480 --> 00:37:27,440
Speaker 8: Are going to be important.

746
00:37:28,760 --> 00:37:32,000
Speaker 2: We saw another headline yes Prisulla mar coming out to

747
00:37:32,320 --> 00:37:35,080
Speaker 2: putting a four billion dollar offer on the table for

748
00:37:36,120 --> 00:37:40,759
Speaker 2: Raised Bio. What is it that justifies in farm a

749
00:37:41,120 --> 00:37:43,080
Speaker 2: mega merger? I don't know whether we can put four

750
00:37:43,080 --> 00:37:46,680
Speaker 2: billion dollar in the category of mega merger, But what

751
00:37:46,719 --> 00:37:48,480
Speaker 2: do you expect for next year? What is it that

752
00:37:48,640 --> 00:37:51,680
Speaker 2: justifies doing deals in twenty twenty four. Are we going

753
00:37:51,680 --> 00:37:54,080
Speaker 2: to see more both on acquisitions like this or is

754
00:37:54,080 --> 00:37:57,040
Speaker 2: it going to be a something significant.

755
00:37:58,560 --> 00:38:02,040
Speaker 12: So for bio pharmaceutical companies, deals can be as important

756
00:38:02,080 --> 00:38:05,120
Speaker 12: for growth as scientific discoveries, as they can really help

757
00:38:05,160 --> 00:38:08,960
Speaker 12: companies struggling to grow. Internally, we have seen an increasing

758
00:38:09,040 --> 00:38:11,040
Speaker 12: number of by former companies turning to M and A

759
00:38:11,239 --> 00:38:15,000
Speaker 12: us here for innovation and increase their revenues by opmenting

760
00:38:15,000 --> 00:38:18,640
Speaker 12: their pipelines or entering the therapeutic areas. So we think

761
00:38:19,120 --> 00:38:21,600
Speaker 12: for twenty twenty four we're going to see a similar

762
00:38:21,680 --> 00:38:24,160
Speaker 12: lead level of activities. But at the same time you're

763
00:38:24,160 --> 00:38:27,040
Speaker 12: also seeing some anti trush risk on the rise. For example,

764
00:38:27,080 --> 00:38:30,040
Speaker 12: we're seeing the Militrade permission to be taking a more

765
00:38:30,080 --> 00:38:34,319
Speaker 12: active stents on anti prest review. However, we think this

766
00:38:34,400 --> 00:38:36,759
Speaker 12: is not stopping the large companies to look for large

767
00:38:36,760 --> 00:38:39,440
Speaker 12: deals because they really need to invest and focus on innovation.

768
00:38:39,880 --> 00:38:41,960
Speaker 1: Yeah, no, that's always right, So it has to be

769
00:38:42,200 --> 00:38:45,080
Speaker 1: forefront in terms of future growth for these companies, so hearty,

770
00:38:45,200 --> 00:38:47,520
Speaker 1: Thank you, so much, so hearty of CFRA joining us

771
00:38:47,719 --> 00:38:50,640
Speaker 1: to talk about the healthcare sector. Subscribe to the Bloomberg

772
00:38:50,680 --> 00:38:53,839
Speaker 1: Surveillance Podcast on Apple, Spotify, and anywhere else you get

773
00:38:53,840 --> 00:38:57,399
Speaker 1: your podcasts. Listen live every weekday starting at seven am

774
00:38:57,480 --> 00:39:01,080
Speaker 1: Eastern on Bloomberg dot com, the iHeart Reading a tune in,

775
00:39:01,200 --> 00:39:03,680
Speaker 1: and the Bloomberg Business App. You can watch us live

776
00:39:03,719 --> 00:39:07,000
Speaker 1: on Bloomberg Television and always on the Bloomberg Terminal. Thanks

777
00:39:07,000 --> 00:39:09,360
Speaker 1: so much for listening. I'm Carol Master, and this is

778
00:39:09,400 --> 00:39:09,960
Speaker 1: Bloomberg