1 00:00:02,960 --> 00:00:10,840 Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. You're listening to the 2 00:00:10,880 --> 00:00:15,040 Speaker 1: Bloomberg Intelligence Podcast. Catch us live weekdays at ten am 3 00:00:15,080 --> 00:00:18,759 Speaker 1: Eastern on Applecarplay and Android Auto with the Bloomberg Business App. 4 00:00:18,800 --> 00:00:22,000 Speaker 1: Listen on demand wherever you get your podcasts, or watch 5 00:00:22,079 --> 00:00:24,040 Speaker 1: us live on YouTube. 6 00:00:25,079 --> 00:00:28,240 Speaker 2: Alex Ci alongside Paul Sweeny, Welcome to Bloomberg Intelligence Radio. 7 00:00:28,280 --> 00:00:30,960 Speaker 2: We are broadcasting to you live from Interactive Brokers Studio 8 00:00:31,080 --> 00:00:34,120 Speaker 2: right here in Midtown Manhattan. Also check us out on 9 00:00:34,159 --> 00:00:36,680 Speaker 2: YouTube as well. What do you do in the market? 10 00:00:36,960 --> 00:00:38,960 Speaker 2: I mean the Nastak one hundred is up by two percent. 11 00:00:39,080 --> 00:00:42,519 Speaker 2: It has been an extremely difficult week in the market 12 00:00:42,600 --> 00:00:44,880 Speaker 2: if you count last Friday, just in terms of understanding 13 00:00:44,880 --> 00:00:47,720 Speaker 2: where we are, where positioning is and is the market complacent? 14 00:00:47,720 --> 00:00:50,479 Speaker 2: I mentioned the Vicks at twenty five. Joining us now 15 00:00:50,560 --> 00:00:52,920 Speaker 2: is Brian Whale and chief investment officer and a generalist 16 00:00:53,000 --> 00:00:56,520 Speaker 2: portfolio manager over at TCW joins US now. Hey, Brian, 17 00:00:57,480 --> 00:00:59,840 Speaker 2: are we complacent here at this point or is this 18 00:00:59,880 --> 00:01:00,880 Speaker 2: a buying opportunity? 19 00:01:03,440 --> 00:01:05,600 Speaker 3: I think it's a buying opportunity in the bond market. 20 00:01:05,640 --> 00:01:07,120 Speaker 3: We've had a little bit of a backup. I think 21 00:01:07,160 --> 00:01:10,000 Speaker 3: everything we saw you know, earlier this week Sunday night 22 00:01:10,040 --> 00:01:12,319 Speaker 3: into Monday was it was a bit of panic. You know, 23 00:01:12,360 --> 00:01:15,120 Speaker 3: we've been in the very barished camp with regards to 24 00:01:15,160 --> 00:01:18,559 Speaker 3: the economy. But even we would were dismissing the notion 25 00:01:18,640 --> 00:01:22,000 Speaker 3: of some intermeding cut. We thought that was that was 26 00:01:22,520 --> 00:01:24,800 Speaker 3: a foolish way to think about the world. So I 27 00:01:24,800 --> 00:01:26,800 Speaker 3: think this is this is kind of calm, This is 28 00:01:26,800 --> 00:01:29,280 Speaker 3: the market kind of settling in here a little bit. 29 00:01:29,680 --> 00:01:31,720 Speaker 3: You know, even though we've backed off in bond yields 30 00:01:32,319 --> 00:01:34,440 Speaker 3: since the lows on Monday morning, if if you just 31 00:01:34,440 --> 00:01:36,760 Speaker 3: take a step back for a second, you know, the 32 00:01:36,880 --> 00:01:39,080 Speaker 3: five year as just kind of an indicator of yields 33 00:01:39,120 --> 00:01:42,039 Speaker 3: has come down fifty basis points since we started the quarter, 34 00:01:42,080 --> 00:01:44,360 Speaker 3: so since you know, since July one, and that's a 35 00:01:44,360 --> 00:01:47,120 Speaker 3: big move. And I think that's very much in line 36 00:01:47,200 --> 00:01:50,280 Speaker 3: with you know, the the notions and everyone in the 37 00:01:50,280 --> 00:01:53,560 Speaker 3: fairytale camp of no landing kind of being shaken a 38 00:01:53,560 --> 00:01:55,400 Speaker 3: little bit. We've seen a couple of months of of 39 00:01:55,520 --> 00:01:59,760 Speaker 3: slowing economic data and the one economic kind of data 40 00:01:59,800 --> 00:02:01,760 Speaker 3: point that had been holding up that no landing camp, 41 00:02:01,800 --> 00:02:04,280 Speaker 3: which was the headline payrolls number, you know, that got 42 00:02:04,320 --> 00:02:06,640 Speaker 3: knocked off a little bit on Friday, and so if 43 00:02:06,640 --> 00:02:08,639 Speaker 3: you kind of forget the noise early in the week, 44 00:02:08,680 --> 00:02:10,600 Speaker 3: this looks like a kind of the right place to 45 00:02:10,639 --> 00:02:12,200 Speaker 3: settle in Brian. 46 00:02:12,560 --> 00:02:14,679 Speaker 4: When you walked out onto the TCW trading floor on 47 00:02:14,720 --> 00:02:17,280 Speaker 4: Monday morning, what were your traders telling you? 48 00:02:20,360 --> 00:02:24,760 Speaker 3: It was, you know that metrics didn't make sense. Things 49 00:02:24,800 --> 00:02:27,800 Speaker 3: were moving all over the place. Liquidity was very poor. 50 00:02:28,360 --> 00:02:29,760 Speaker 3: You know, you saw the vicks. You know, I think 51 00:02:29,800 --> 00:02:31,359 Speaker 3: at one point it was that you know, in toyday 52 00:02:31,440 --> 00:02:35,400 Speaker 3: was well over fifty, which looked it was in a sixties. Yeah, 53 00:02:35,400 --> 00:02:36,800 Speaker 3: it looked more like an apple. It looked like it 54 00:02:36,800 --> 00:02:38,760 Speaker 3: looked like an It looked like a like a stock 55 00:02:38,800 --> 00:02:40,160 Speaker 3: market crash. 56 00:02:40,160 --> 00:02:40,560 Speaker 1: It didn't. 57 00:02:40,600 --> 00:02:43,960 Speaker 3: It did not look like a market where a headline employee. 58 00:02:44,000 --> 00:02:46,120 Speaker 3: You know, the rate should have been one hundred and 59 00:02:46,120 --> 00:02:48,880 Speaker 3: seventy five thousand growth on the payrolls number, and it 60 00:02:48,880 --> 00:02:52,040 Speaker 3: came in one hundred and fourteen thousand, and the unemployment 61 00:02:52,120 --> 00:02:53,720 Speaker 3: rate went from you know, four point one to four 62 00:02:53,760 --> 00:02:57,680 Speaker 3: point three. I mean, that's that's that's indi indicative of 63 00:02:57,680 --> 00:03:00,360 Speaker 3: a slowing economy and a slower labor for worse than 64 00:03:00,360 --> 00:03:02,480 Speaker 3: maybe one that's weaker than the market was expecting, and 65 00:03:02,520 --> 00:03:04,639 Speaker 3: it probably will cause the FED to have to cut 66 00:03:04,639 --> 00:03:07,639 Speaker 3: more aggressively than the market was pricing beforehand. But sure, 67 00:03:07,720 --> 00:03:08,680 Speaker 3: it sure wasn't panic. 68 00:03:09,160 --> 00:03:12,000 Speaker 5: Well what did you make of the ten year auction yesterday? 69 00:03:12,000 --> 00:03:12,680 Speaker 5: It wasn't good. 70 00:03:12,840 --> 00:03:15,120 Speaker 2: It just was pretty bad again, thirty year coming today? 71 00:03:15,120 --> 00:03:18,280 Speaker 2: The three year was fine. You know, our jersey tells 72 00:03:18,280 --> 00:03:19,359 Speaker 2: me I should care about these things. 73 00:03:19,360 --> 00:03:20,000 Speaker 6: I know, yeah, I know. 74 00:03:20,400 --> 00:03:21,320 Speaker 5: What did you make that? 75 00:03:22,720 --> 00:03:24,480 Speaker 3: You know, it's it's it's it's the same thing I 76 00:03:24,480 --> 00:03:26,480 Speaker 3: make of what I this morning. You know, it's it's 77 00:03:26,520 --> 00:03:28,960 Speaker 3: gappy price action. It's it's it's a nervous market. I mean, 78 00:03:29,000 --> 00:03:31,560 Speaker 3: you saw, you know, a little bit of supply. You know, 79 00:03:31,639 --> 00:03:33,680 Speaker 3: the street pushes it around. You got a higher yield 80 00:03:33,680 --> 00:03:36,560 Speaker 3: this morning. You know, initial jobless games come in just 81 00:03:36,560 --> 00:03:39,640 Speaker 3: a hair under expectations. Although the four week moving average 82 00:03:39,720 --> 00:03:43,720 Speaker 3: keeps moving up, continue it continued claims continues to stay hi. 83 00:03:44,000 --> 00:03:46,280 Speaker 3: So the fact that we're off ten basis points in 84 00:03:46,320 --> 00:03:48,880 Speaker 3: the market is just it's a market trying to find 85 00:03:48,920 --> 00:03:51,600 Speaker 3: its footing, almost trying to you know, almost trying to 86 00:03:51,760 --> 00:03:53,240 Speaker 3: catch its breath a little bit, which is which is 87 00:03:53,240 --> 00:03:55,320 Speaker 3: a healthy thing. I think what we would contend is, 88 00:03:55,880 --> 00:03:58,040 Speaker 3: you know, this is maybe not the breath you take 89 00:03:58,560 --> 00:04:00,360 Speaker 3: because everything is going to be all right, more like 90 00:04:00,360 --> 00:04:02,400 Speaker 3: the breath you take before you take the punch. And 91 00:04:02,480 --> 00:04:04,080 Speaker 3: so you know, over the next few over the next 92 00:04:04,120 --> 00:04:06,360 Speaker 3: few months, what we're probably going to see, at least 93 00:04:06,360 --> 00:04:08,560 Speaker 3: we expect is is more of the same, which is 94 00:04:08,560 --> 00:04:11,480 Speaker 3: the economic data continuing to slow and the FED is 95 00:04:11,480 --> 00:04:12,520 Speaker 3: going to have to react to that. 96 00:04:13,600 --> 00:04:17,120 Speaker 4: Brian, where do you see opportunities in the fixing can 97 00:04:17,200 --> 00:04:19,080 Speaker 4: market here? Given some of the volatility we've seen over 98 00:04:19,080 --> 00:04:20,200 Speaker 4: the last several days. 99 00:04:21,520 --> 00:04:25,000 Speaker 3: It's a boring answer. I'd say the opportunities maybe agency 100 00:04:25,040 --> 00:04:27,159 Speaker 3: mortgages aside, but at a high level of the opportunities 101 00:04:27,560 --> 00:04:30,160 Speaker 3: is in duration and in liquidity, like keep keep your 102 00:04:30,200 --> 00:04:33,520 Speaker 3: powder dry, because you know, I'm not saying we're going 103 00:04:33,560 --> 00:04:35,359 Speaker 3: to have vixed days of you know, of north of 104 00:04:35,440 --> 00:04:39,600 Speaker 3: sixty again. But if we enter the fall and the 105 00:04:39,680 --> 00:04:42,400 Speaker 3: narrative and you start reading more about a recession and 106 00:04:42,880 --> 00:04:46,080 Speaker 3: the job market turns from one of where companies are 107 00:04:46,200 --> 00:04:49,440 Speaker 3: just not hiring but actually starts to fire, what you're 108 00:04:49,480 --> 00:04:52,159 Speaker 3: going to see then is concerned about earnings growth and 109 00:04:52,200 --> 00:04:54,400 Speaker 3: the ability of companies to service their debt, and then 110 00:04:54,440 --> 00:04:58,400 Speaker 3: there's going to be conversation around downgrades and what happens 111 00:04:58,400 --> 00:05:01,119 Speaker 3: then in terms of pricing and like our trading floor 112 00:05:01,120 --> 00:05:03,920 Speaker 3: and the opportunities we're looking for. Corporate bonds are going 113 00:05:03,920 --> 00:05:07,400 Speaker 3: to get cheaper relative to treasuries, highyield bonds, emerging market bonds, 114 00:05:07,400 --> 00:05:09,880 Speaker 3: they're all going to get cheaper. And that's the that's 115 00:05:09,920 --> 00:05:12,360 Speaker 3: a really nice buying opportunity because in the bond world now, 116 00:05:12,400 --> 00:05:15,640 Speaker 3: not only can you kind of buy cheap credit and 117 00:05:15,680 --> 00:05:19,000 Speaker 3: get the benefits of spread duration and that's another conversation, 118 00:05:19,040 --> 00:05:20,960 Speaker 3: but you can also get carry and you can also 119 00:05:21,000 --> 00:05:24,120 Speaker 3: get the advantage of like diversification into portfolio because you know, 120 00:05:24,120 --> 00:05:26,320 Speaker 3: with yields across the curve right now at four percent, 121 00:05:26,760 --> 00:05:28,560 Speaker 3: you know, bonds can be bonds again, so they can 122 00:05:28,600 --> 00:05:31,760 Speaker 3: act as that hedge of that offset into an environment 123 00:05:31,760 --> 00:05:33,760 Speaker 3: where we get volatility and equities to cline. 124 00:05:33,839 --> 00:05:34,960 Speaker 5: So two things with corporates. 125 00:05:35,040 --> 00:05:37,440 Speaker 2: One, we saw a record amount of issuance yesterday in 126 00:05:37,480 --> 00:05:40,760 Speaker 2: the investment grade market all year. And then also the 127 00:05:40,800 --> 00:05:43,200 Speaker 2: spreads have not blown out at all like in the 128 00:05:43,240 --> 00:05:45,200 Speaker 2: last few days. Yeah, they moved up, but we haven't 129 00:05:45,200 --> 00:05:47,320 Speaker 2: blown out. And I'm just wondering if there's more priced 130 00:05:47,360 --> 00:05:48,679 Speaker 2: appreciation here to come. 131 00:05:49,880 --> 00:05:52,800 Speaker 3: Definitely, it's a trillion dollars a little over a trillion 132 00:05:52,839 --> 00:05:55,680 Speaker 3: dollars of issuance year to date, which is very high. 133 00:05:55,720 --> 00:05:57,880 Speaker 3: But yeah, look like just to put things in kind 134 00:05:57,880 --> 00:06:01,200 Speaker 3: of context for everybody here and watch this stuff day 135 00:06:01,200 --> 00:06:03,960 Speaker 3: to day. I mean, you know, investment, great corporate bonds 136 00:06:04,120 --> 00:06:07,000 Speaker 3: kind of on the tight end, meaning like the amount 137 00:06:07,000 --> 00:06:09,440 Speaker 3: of yield you get over treasuries doesn't get much tighter 138 00:06:09,440 --> 00:06:11,839 Speaker 3: than about point eight percent, you know, eighty basis points. 139 00:06:11,839 --> 00:06:15,040 Speaker 3: We're sitting at about one hundred basis points. Historical averages 140 00:06:15,240 --> 00:06:18,920 Speaker 3: just even excluding like big moves like the Great Financial Crisis, 141 00:06:19,160 --> 00:06:21,560 Speaker 3: historical averages are about one hundred and twenty one hundred 142 00:06:21,560 --> 00:06:23,480 Speaker 3: and twenty five basis points. So you know that was 143 00:06:23,560 --> 00:06:25,280 Speaker 3: kind of us too on Monday when it's like, look 144 00:06:25,480 --> 00:06:27,680 Speaker 3: the market, everybody's got to calm down a little bit. Like, 145 00:06:28,360 --> 00:06:30,920 Speaker 3: you know, at one hundred basis points over, corporate bonds 146 00:06:30,960 --> 00:06:35,520 Speaker 3: still look expensive. So be patient. You know, this this 147 00:06:35,720 --> 00:06:37,880 Speaker 3: may not be a recession that we kind of jump 148 00:06:37,920 --> 00:06:40,080 Speaker 3: into in and overnight. This just may be an old 149 00:06:40,080 --> 00:06:42,599 Speaker 3: fashioned recession where we're just going to have to walk 150 00:06:42,640 --> 00:06:44,680 Speaker 3: our way into it. So as an investor, you've got 151 00:06:44,680 --> 00:06:47,000 Speaker 3: to keep that kind of long term perspective in mind 152 00:06:47,760 --> 00:06:50,640 Speaker 3: and preserve that capital. You know, if you've got that cash, 153 00:06:50,920 --> 00:06:53,200 Speaker 3: that's worth a lot because you'll be able to spend 154 00:06:53,240 --> 00:06:56,160 Speaker 3: it in very wise ways, probably throughout the remainder of 155 00:06:56,200 --> 00:06:57,520 Speaker 3: the year and into early next year. 156 00:06:58,120 --> 00:07:00,880 Speaker 4: So, Brian, when the phone calls do from Wall Street 157 00:07:01,000 --> 00:07:04,000 Speaker 4: with these new issues, what kind of calls do you take? 158 00:07:04,279 --> 00:07:05,200 Speaker 6: Do you take everything? 159 00:07:05,320 --> 00:07:08,520 Speaker 4: I mean, because you've got capital deploy are you focusing 160 00:07:08,600 --> 00:07:11,200 Speaker 4: just on the highest quality stuff? What kind of phone 161 00:07:11,240 --> 00:07:12,880 Speaker 4: calls do you take from Wall Street these days? 162 00:07:13,560 --> 00:07:16,320 Speaker 3: I think the way I've described is like, don't call 163 00:07:16,400 --> 00:07:18,560 Speaker 3: us when you think we need you, call us when 164 00:07:18,600 --> 00:07:21,480 Speaker 3: you need us. You know that that's that is That 165 00:07:21,640 --> 00:07:24,680 Speaker 3: is like a good way to describe what we call 166 00:07:24,760 --> 00:07:26,920 Speaker 3: like the liquidity premium, which is and I was talking 167 00:07:26,920 --> 00:07:29,440 Speaker 3: about cash before, like you know, if you want the 168 00:07:29,480 --> 00:07:31,680 Speaker 3: opportunities when people are calling you on the phone and 169 00:07:31,680 --> 00:07:34,280 Speaker 3: saying we've got a problem or somebody needs to sell 170 00:07:34,360 --> 00:07:36,640 Speaker 3: and et cetera, and it's like, Okay, what you hear 171 00:07:37,120 --> 00:07:38,840 Speaker 3: seems like going on to like a dealer's like a 172 00:07:38,920 --> 00:07:40,760 Speaker 3: car lot, you know, somebody's like, look, I got to 173 00:07:40,800 --> 00:07:43,080 Speaker 3: get rid of this thing, you know, blah blah. Same thing. Like, 174 00:07:43,280 --> 00:07:45,560 Speaker 3: as an investor, you want to wait for the opportunities 175 00:07:45,560 --> 00:07:48,680 Speaker 3: where Wall Street calls you and says, look, here's an opportunity. 176 00:07:49,200 --> 00:07:51,960 Speaker 3: Here's the price. I know, you know where regular market 177 00:07:51,960 --> 00:07:54,520 Speaker 3: pricing is, and you know, what do you think? And 178 00:07:54,800 --> 00:07:58,080 Speaker 3: that's that's what you wait for. It It happens kind 179 00:07:58,080 --> 00:08:00,640 Speaker 3: of infrequently, but that's where you can make the big money. 180 00:08:01,240 --> 00:08:04,520 Speaker 5: Where do you think we're going to see the most volatility? 181 00:08:05,600 --> 00:08:08,960 Speaker 3: That's a good question, you know. In the short term, 182 00:08:09,080 --> 00:08:11,480 Speaker 3: you know, we'll see it uh in uh and obviously 183 00:08:11,480 --> 00:08:14,160 Speaker 3: in interest rates. I think the next thing that would 184 00:08:14,160 --> 00:08:15,960 Speaker 3: probably be a your what we call these high data 185 00:08:16,040 --> 00:08:19,360 Speaker 3: parts of fixed income, like like high yield and emerging markets. 186 00:08:19,440 --> 00:08:22,520 Speaker 3: I think down the line, you know, so so the 187 00:08:22,560 --> 00:08:26,040 Speaker 3: public liquid markets will react first, and that's where you 188 00:08:26,080 --> 00:08:28,119 Speaker 3: will see the vall also throw you know, they'll probably 189 00:08:28,120 --> 00:08:31,560 Speaker 3: see some some currency volatility in there too. But down 190 00:08:31,600 --> 00:08:34,040 Speaker 3: the line, if we do get a true recession, there'll 191 00:08:34,040 --> 00:08:36,720 Speaker 3: be a shake up, you know, in in everybody's favorite 192 00:08:36,760 --> 00:08:39,480 Speaker 3: market today, which is private credit, and there's there's some 193 00:08:39,559 --> 00:08:41,880 Speaker 3: you know, private credits here to stay and and you know, 194 00:08:41,880 --> 00:08:44,760 Speaker 3: there's some some great things about it. However, it's been 195 00:08:44,800 --> 00:08:47,040 Speaker 3: too easy for too long uh and there's going to 196 00:08:47,080 --> 00:08:49,120 Speaker 3: have to be a shakeout uh And and that's a 197 00:08:49,120 --> 00:08:51,160 Speaker 3: healthy thing for the market in the long term. And 198 00:08:51,200 --> 00:08:53,000 Speaker 3: so in the short term, focus on those kind of 199 00:08:53,040 --> 00:08:56,520 Speaker 3: liquid markets like like like high yield bonds for instance, 200 00:08:56,960 --> 00:09:01,440 Speaker 3: UH currencies, and then in the longer term that'll probably 201 00:09:01,520 --> 00:09:03,480 Speaker 3: roll into less liquid parts of the market. 202 00:09:04,000 --> 00:09:05,640 Speaker 4: All Right, Brian, thanks so much for joining us. Really 203 00:09:05,640 --> 00:09:08,760 Speaker 4: appreciate Brian Whalen. He's a chief investment officer. That means 204 00:09:08,760 --> 00:09:11,600 Speaker 4: he's a big dude and a generalist portfolio manager TCW. 205 00:09:11,840 --> 00:09:14,040 Speaker 4: I tell you I've worked at TCW when I was 206 00:09:14,040 --> 00:09:15,920 Speaker 4: on a cell side twenty some odd years. 207 00:09:16,280 --> 00:09:18,520 Speaker 6: I knew I had like four or five relationships good 208 00:09:18,520 --> 00:09:19,440 Speaker 6: relationships there. 209 00:09:19,679 --> 00:09:21,920 Speaker 5: Oh, really smart, super smart. 210 00:09:22,000 --> 00:09:23,720 Speaker 6: Yeah, I mean like across. 211 00:09:23,320 --> 00:09:26,160 Speaker 4: The board, like I avoided the fixicing floor, like the plague. 212 00:09:26,320 --> 00:09:28,280 Speaker 4: I went to the equity floor because that's they were. 213 00:09:28,679 --> 00:09:28,880 Speaker 7: You know. 214 00:09:29,120 --> 00:09:32,480 Speaker 2: That's so I think people are really smart when they 215 00:09:32,520 --> 00:09:34,920 Speaker 2: can break things down in language that I understand. Like 216 00:09:34,920 --> 00:09:36,720 Speaker 2: that's the pure sign, Like you're so smart you can 217 00:09:36,800 --> 00:09:37,839 Speaker 2: dumb it down right, And. 218 00:09:37,760 --> 00:09:40,600 Speaker 3: That's how Brian Wentlest principle was where can I make 219 00:09:40,600 --> 00:09:41,160 Speaker 3: the most money? 220 00:09:41,200 --> 00:09:42,199 Speaker 6: Where can I make the most. 221 00:09:42,000 --> 00:09:44,000 Speaker 5: Money as he should? Exactly as he should. 222 00:09:44,200 --> 00:09:46,400 Speaker 4: I tell you go to Los Angeles. There's two meetings. 223 00:09:46,400 --> 00:09:50,120 Speaker 4: You have to get TCW and Capitol Group. Everything else 224 00:09:50,200 --> 00:09:50,840 Speaker 4: is just gravy. 225 00:09:50,880 --> 00:09:52,160 Speaker 6: If you get that, that's like. 226 00:09:52,200 --> 00:09:54,360 Speaker 4: Eighty percent of the votes, eighty percent of the commission 227 00:09:54,360 --> 00:09:55,720 Speaker 4: dollars out of those two shops. 228 00:09:55,800 --> 00:09:58,559 Speaker 5: Yeah, duh, Tucker, he didn't know that, Geese. 229 00:10:00,600 --> 00:10:04,480 Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live 230 00:10:04,559 --> 00:10:08,080 Speaker 1: weekdays at ten am Eastern on applecard Play and Android 231 00:10:08,120 --> 00:10:10,880 Speaker 1: Auto with the Bloomberg Business App. You can also listen 232 00:10:11,000 --> 00:10:14,120 Speaker 1: live on Amazon Alexa from our flagship New York station, 233 00:10:14,480 --> 00:10:18,240 Speaker 1: Just say Alexa play Bloomberg eleven thirty. 234 00:10:19,000 --> 00:10:21,160 Speaker 4: All right, let's check in with our good friend Claudia Sam. 235 00:10:21,240 --> 00:10:24,439 Speaker 4: She's a chief economist, that New Century Advisor's former Federal 236 00:10:24,440 --> 00:10:28,480 Speaker 4: Reserve economist, and a Bloomberg opinion columnist. And she's got 237 00:10:28,480 --> 00:10:30,839 Speaker 4: this thing called the Sam Rule. Now, I'm not an economist. 238 00:10:30,840 --> 00:10:34,440 Speaker 4: I think marginal revenue, marginal cost. That's my extensive knowledge 239 00:10:34,600 --> 00:10:35,360 Speaker 4: of economics. 240 00:10:35,760 --> 00:10:37,319 Speaker 6: Claudia, thanks so much, for joining us here. 241 00:10:37,440 --> 00:10:40,040 Speaker 4: Can you just summarize for our listeners our viewers what 242 00:10:40,080 --> 00:10:44,280 Speaker 4: the sum rule says and was it triggered on Friday 243 00:10:44,360 --> 00:10:45,680 Speaker 4: with the job support. 244 00:10:46,559 --> 00:10:49,640 Speaker 7: So it's a recession indicator. So it uses changes in 245 00:10:49,679 --> 00:10:53,720 Speaker 7: the unemployment rate over a year to it has a 246 00:10:53,760 --> 00:10:58,840 Speaker 7: threshold and compares that to historical episodes of recessions. And 247 00:10:59,120 --> 00:11:01,520 Speaker 7: you know that's when it turns on. It has turned 248 00:11:01,559 --> 00:11:04,640 Speaker 7: on historically inside in the early months of not a forecast, 249 00:11:04,640 --> 00:11:07,800 Speaker 7: in the early months of a recession. And with the 250 00:11:08,120 --> 00:11:11,480 Speaker 7: employment report on July it the som rull crossed the 251 00:11:11,679 --> 00:11:16,840 Speaker 7: half a percentage point threshold, and so it's indicating a recession. 252 00:11:17,200 --> 00:11:21,080 Speaker 7: Are we in a recession my expert opinion looking broadly 253 00:11:21,120 --> 00:11:25,000 Speaker 7: as no, we are not, but that increasing unemployment rate 254 00:11:25,000 --> 00:11:27,520 Speaker 7: that we have seen over a year plus is very 255 00:11:27,559 --> 00:11:30,240 Speaker 7: disconcerting and we're not pointed in the right direction in 256 00:11:30,320 --> 00:11:32,040 Speaker 7: terms of where we're trending. 257 00:11:32,440 --> 00:11:35,040 Speaker 2: This is why I really loved your Bloomberg opinion piece yesterday, 258 00:11:35,040 --> 00:11:36,840 Speaker 2: because it feels like a lot of people are coming 259 00:11:36,880 --> 00:11:39,599 Speaker 2: on talking about your rule and how that is de 260 00:11:39,720 --> 00:11:42,120 Speaker 2: facto then we're in a recession. As reason for the 261 00:11:42,160 --> 00:11:45,760 Speaker 2: FED to do something, maybe bigger or an emergency way, 262 00:11:45,880 --> 00:11:47,640 Speaker 2: and you come out with an article that says US 263 00:11:47,679 --> 00:11:50,480 Speaker 2: isn't in a recession despite the indicator, my recession rule 264 00:11:50,559 --> 00:11:51,560 Speaker 2: was meant to be broken. 265 00:11:51,840 --> 00:11:52,760 Speaker 5: What does that mean. 266 00:11:55,000 --> 00:11:59,440 Speaker 7: When we think about this cycle from the pandemic on 267 00:11:59,480 --> 00:12:01,920 Speaker 7: the last four and a half years, the disruptions to 268 00:12:01,960 --> 00:12:06,000 Speaker 7: the US economy have been in many ways unprecedented, and 269 00:12:06,360 --> 00:12:10,319 Speaker 7: in particular, we've had some really big disruptions to supply, 270 00:12:11,040 --> 00:12:14,640 Speaker 7: which are typical boom and bust indicators recession, high inflation, 271 00:12:14,720 --> 00:12:18,319 Speaker 7: low inflation. Those are about demand and so the some 272 00:12:18,559 --> 00:12:23,360 Speaker 7: rule I, in my opinion, is getting overstated by some 273 00:12:23,400 --> 00:12:26,079 Speaker 7: of the really abrupt shifts and labor supply in the 274 00:12:26,200 --> 00:12:31,040 Speaker 7: last several years. And that's just some of the unployment 275 00:12:31,080 --> 00:12:33,720 Speaker 7: rate increase is the good kind. It's people who come 276 00:12:33,760 --> 00:12:36,960 Speaker 7: in want to work, they will get jobs. It'll be growth. 277 00:12:37,320 --> 00:12:40,720 Speaker 7: But in the interim that looks like the unemployment rate 278 00:12:40,800 --> 00:12:44,439 Speaker 7: rising in the recession, there's some of the bad unemployment 279 00:12:44,480 --> 00:12:46,319 Speaker 7: in there too. So that's where it gets really hard, 280 00:12:46,360 --> 00:12:49,000 Speaker 7: and you know, it's difficult to hear. I'm happy to 281 00:12:49,040 --> 00:12:52,640 Speaker 7: have sparked a robust conversation. This is really really important 282 00:12:53,120 --> 00:12:57,280 Speaker 7: to know if we're in or headed towards a recession 283 00:12:57,320 --> 00:13:00,720 Speaker 7: because our policy actions that can be taken, and so 284 00:13:00,840 --> 00:13:04,800 Speaker 7: you know, it's it's I'm using the tool and other 285 00:13:04,920 --> 00:13:06,600 Speaker 7: data just like anybody else. 286 00:13:07,440 --> 00:13:09,880 Speaker 4: So, Claudia, what do you make of an unemployment rate 287 00:13:09,920 --> 00:13:11,120 Speaker 4: of four point three percent? 288 00:13:11,600 --> 00:13:14,679 Speaker 6: To me, in my experience, that's still low. 289 00:13:14,800 --> 00:13:17,400 Speaker 4: I guess if you want to get concerned about the trend, 290 00:13:17,520 --> 00:13:17,800 Speaker 4: I e. 291 00:13:17,880 --> 00:13:19,600 Speaker 6: It's moving higher, that's a concern. 292 00:13:19,679 --> 00:13:22,840 Speaker 4: But in and of itself four point three percent, how 293 00:13:22,880 --> 00:13:24,400 Speaker 4: does that kind of stack up for you? 294 00:13:25,559 --> 00:13:25,719 Speaker 3: Right? 295 00:13:25,760 --> 00:13:29,800 Speaker 7: So, if if our concern is about the direction we're 296 00:13:29,840 --> 00:13:32,400 Speaker 7: pointed in, are we headed towards the recession? Are we 297 00:13:32,520 --> 00:13:36,360 Speaker 7: enter recession? The relevant metric is the change and the 298 00:13:36,440 --> 00:13:40,720 Speaker 7: unemployment rate. The level is important. Sometimes it's unsustainably low, 299 00:13:40,760 --> 00:13:43,320 Speaker 7: like earlier when we had the labor shortages, the unemployment 300 00:13:43,360 --> 00:13:44,640 Speaker 7: rate in the United States, when I got down to 301 00:13:44,679 --> 00:13:47,360 Speaker 7: three point four percent, that was because we were missing 302 00:13:47,360 --> 00:13:49,960 Speaker 7: some workers too, right, Like that wasn't going to stick. 303 00:13:50,040 --> 00:13:52,920 Speaker 7: So sometimes, like you know, within bounds, sometimes the level 304 00:13:52,920 --> 00:13:55,640 Speaker 7: does tell us something. But at four point three percent, 305 00:13:55,720 --> 00:13:59,959 Speaker 7: this is very much consistent with the demographics of our 306 00:14:00,559 --> 00:14:04,440 Speaker 7: We have an older, more experienced workforce four percent unemployment 307 00:14:04,520 --> 00:14:08,640 Speaker 7: that that's much more like you would expect or predict, 308 00:14:08,960 --> 00:14:10,960 Speaker 7: So that we're not four point three is not like, 309 00:14:11,000 --> 00:14:14,040 Speaker 7: oh wow, this is really low. It's not sustainable. And 310 00:14:14,080 --> 00:14:17,520 Speaker 7: we've gone into recessions in the past with lower unemployment 311 00:14:17,559 --> 00:14:20,240 Speaker 7: than now and also higher so the level itself is 312 00:14:20,360 --> 00:14:23,080 Speaker 7: not a protection against a recession. 313 00:14:23,440 --> 00:14:26,280 Speaker 2: Paul pointing to himself when he said older workforce seasoned, 314 00:14:26,320 --> 00:14:31,520 Speaker 2: we think season experience, Claudia to that point, how do 315 00:14:31,600 --> 00:14:33,840 Speaker 2: I understand the fact that you had a huge move 316 00:14:33,880 --> 00:14:37,120 Speaker 2: in the bond market when initial jobless claims came out. 317 00:14:37,200 --> 00:14:41,480 Speaker 2: They're volatile, their seasonality, they change, and yet we're still 318 00:14:41,680 --> 00:14:44,240 Speaker 2: having such market sensitivity to that. 319 00:14:44,360 --> 00:14:46,280 Speaker 5: Where does that kind of tell you about where we are? 320 00:14:47,360 --> 00:14:50,920 Speaker 7: Right? Well, this is very much this question about the 321 00:14:51,040 --> 00:14:56,440 Speaker 7: dynamics the recession, right, It's not this isn't about this 322 00:14:56,520 --> 00:14:58,000 Speaker 7: hole rule, but it captures it. 323 00:14:58,080 --> 00:14:58,200 Speaker 8: Right. 324 00:14:58,240 --> 00:15:00,960 Speaker 7: This is why this almost worked historic is you get 325 00:15:01,000 --> 00:15:05,240 Speaker 7: periods where the unemployment rate starts coming up gradually, and 326 00:15:05,280 --> 00:15:07,640 Speaker 7: then it picks up steam, and then it goes up 327 00:15:07,680 --> 00:15:10,400 Speaker 7: a lot. And we had some signals that were in 328 00:15:10,400 --> 00:15:12,840 Speaker 7: this stage. It's been going up slowly and gradually, and 329 00:15:12,880 --> 00:15:15,360 Speaker 7: with the July employment report, things look like they were 330 00:15:15,360 --> 00:15:19,120 Speaker 7: picking up steam in the wrong way, and so that's 331 00:15:19,160 --> 00:15:21,680 Speaker 7: the concern. And then then what we're looking for and 332 00:15:21,800 --> 00:15:26,680 Speaker 7: claims data is is that momentum there or was it 333 00:15:26,800 --> 00:15:28,800 Speaker 7: just the weather or this that you know? And so 334 00:15:28,840 --> 00:15:31,880 Speaker 7: I think that's this reaction because we're kind of on this. 335 00:15:33,520 --> 00:15:35,400 Speaker 7: It's not like we're on the knife's edge, but the 336 00:15:35,520 --> 00:15:39,480 Speaker 7: dynamics are like it makes a big difference at this 337 00:15:39,560 --> 00:15:42,640 Speaker 7: point if the increase in the unemployment rates speed up 338 00:15:42,680 --> 00:15:44,800 Speaker 7: or not, because once they get going, they tend to 339 00:15:45,080 --> 00:15:48,280 Speaker 7: you have these negative feedback loops and then you're not 340 00:15:48,280 --> 00:15:50,200 Speaker 7: talking about a half a percentage point increase and then 341 00:15:50,240 --> 00:15:52,280 Speaker 7: employment you're talking about a three percentage point increase. 342 00:15:52,920 --> 00:15:56,920 Speaker 4: Claudia talked to us about the migration component to the 343 00:15:57,040 --> 00:16:00,560 Speaker 4: labor market. How has that impacted the number because again 344 00:16:00,560 --> 00:16:03,200 Speaker 4: we've had a surge in migration on the southern border. 345 00:16:02,920 --> 00:16:05,080 Speaker 6: For the last several years. How's that impacted the numbers? 346 00:16:05,080 --> 00:16:05,520 Speaker 6: Do you think? 347 00:16:06,680 --> 00:16:06,800 Speaker 3: Right? 348 00:16:06,840 --> 00:16:11,200 Speaker 7: Well, first thing, having the immigration and we've had other 349 00:16:11,840 --> 00:16:14,040 Speaker 7: prime age labor force participation that is higher in the 350 00:16:14,160 --> 00:16:16,560 Speaker 7: US right now than it's been in general. So it's 351 00:16:16,600 --> 00:16:19,840 Speaker 7: not just about immigrants. But we it was very important 352 00:16:19,880 --> 00:16:23,600 Speaker 7: to have more labor supply address these labor shortages that 353 00:16:23,640 --> 00:16:26,360 Speaker 7: we'd had, and this has taken prior pressure off of 354 00:16:26,400 --> 00:16:30,680 Speaker 7: wages and inflation and so like that's very good. And 355 00:16:30,760 --> 00:16:35,160 Speaker 7: then we have more supply of workers and that and 356 00:16:35,280 --> 00:16:38,640 Speaker 7: hiring has moderated, right like, the pace has slow down some. 357 00:16:38,760 --> 00:16:40,680 Speaker 7: So now we're in the opposite direction of the jobs 358 00:16:40,680 --> 00:16:43,200 Speaker 7: need to catch up to the workers. So if you 359 00:16:43,240 --> 00:16:47,360 Speaker 7: think about that, this is all in adjustment right like 360 00:16:47,360 --> 00:16:49,720 Speaker 7: where it's it's more of a timing issue. And when 361 00:16:49,960 --> 00:16:53,800 Speaker 7: the reason that the labor supply causing increasing unployment rates 362 00:16:53,800 --> 00:16:56,080 Speaker 7: a good thing is when they when those new workers 363 00:16:56,120 --> 00:16:59,720 Speaker 7: do get jobs, they help us expand the economy, which 364 00:16:59,760 --> 00:17:03,120 Speaker 7: is the exact opposite of this kind of recession watch contracting. 365 00:17:04,240 --> 00:17:08,440 Speaker 7: But I will say, you know, employers have different margins 366 00:17:08,480 --> 00:17:12,800 Speaker 7: to adjust labor demand writ large, and we have seen 367 00:17:13,400 --> 00:17:18,520 Speaker 7: the hiring rates at employers come down to levels that are, 368 00:17:19,440 --> 00:17:23,119 Speaker 7: you know, line up with much higher unemployment rates than 369 00:17:23,119 --> 00:17:25,359 Speaker 7: in the past. So it could be just employers are 370 00:17:25,400 --> 00:17:27,080 Speaker 7: not wanting to lay off as much because they got 371 00:17:27,119 --> 00:17:31,879 Speaker 7: burned in this crisis, and so we're seeing you know, 372 00:17:31,920 --> 00:17:34,720 Speaker 7: it's harder if you're coming in labor force to get jobs. 373 00:17:34,720 --> 00:17:37,399 Speaker 7: So this is really tricky labor market treat and that 374 00:17:37,440 --> 00:17:39,280 Speaker 7: means every single scrap of data we get on the 375 00:17:39,320 --> 00:17:41,400 Speaker 7: labor market is a big deal. 376 00:17:41,600 --> 00:17:43,320 Speaker 2: So Claudia, before I let you go in, but a 377 00:17:43,359 --> 00:17:46,480 Speaker 2: minute left. I'm looking at WERP WRP on the terminal. 378 00:17:46,720 --> 00:17:48,680 Speaker 2: It's looking at twenty five basis points of cuts in 379 00:17:48,720 --> 00:17:49,720 Speaker 2: the next three meetings. 380 00:17:49,800 --> 00:17:51,080 Speaker 5: Is that fair pricing? Right now? 381 00:17:52,359 --> 00:17:55,440 Speaker 7: That is my baseline. I think that's fair fair pricing 382 00:17:55,600 --> 00:17:59,359 Speaker 7: the FED. There is more slowing in the labor market 383 00:17:59,440 --> 00:18:02,440 Speaker 7: than I think is comfortable. We don't need to get 384 00:18:02,480 --> 00:18:04,600 Speaker 7: into a recession for the FED to start acting, So 385 00:18:04,640 --> 00:18:07,200 Speaker 7: I think a little picking up the pace some in 386 00:18:07,280 --> 00:18:10,399 Speaker 7: like three consecutive cuts makes sense. But they're going to 387 00:18:10,480 --> 00:18:13,920 Speaker 7: be very attuned to you know, we've got more information 388 00:18:13,960 --> 00:18:16,000 Speaker 7: on labor market between now in September. 389 00:18:16,960 --> 00:18:19,080 Speaker 4: All right, Claudia, thank you so much for joining us. 390 00:18:19,240 --> 00:18:21,520 Speaker 4: Really appreciate getting some of your time. Claudia sam she 391 00:18:21,640 --> 00:18:24,760 Speaker 4: is the chief economist at New Century Advisors, former Federal 392 00:18:24,800 --> 00:18:29,719 Speaker 4: Reserve economist, and a Bloomberg Opinion opinion writers. We appreciate 393 00:18:29,720 --> 00:18:31,359 Speaker 4: getting some of her time. She's a creator of the 394 00:18:31,400 --> 00:18:35,919 Speaker 4: Psalm rule, a recession indicator, which says, maybe it's not 395 00:18:36,080 --> 00:18:39,600 Speaker 4: tripped today, but it's certainly suggesting that the risks of 396 00:18:39,640 --> 00:18:41,200 Speaker 4: a recession or higher certainly. 397 00:18:40,920 --> 00:18:41,400 Speaker 6: In your term. 398 00:18:41,480 --> 00:18:43,359 Speaker 2: But I love her candor of like, look, I think 399 00:18:43,440 --> 00:18:45,240 Speaker 2: some people are taking this and running with us like 400 00:18:45,240 --> 00:18:47,600 Speaker 2: a little bit too far. There's some more nuances. I 401 00:18:47,640 --> 00:18:51,160 Speaker 2: love that because you don't get that very often, particularly 402 00:18:51,480 --> 00:18:53,720 Speaker 2: in a market that for so long appeared so one 403 00:18:53,800 --> 00:18:56,040 Speaker 2: sided in terms of positioning, that that kind. 404 00:18:55,880 --> 00:18:57,920 Speaker 5: Of nuance is quite important. 405 00:18:57,960 --> 00:19:01,040 Speaker 2: And I have to wonder how complacent and are we still? 406 00:19:01,200 --> 00:19:03,520 Speaker 2: I mean that fade yesterday was not a good sign. 407 00:19:03,680 --> 00:19:04,440 Speaker 6: No it wasn't. 408 00:19:04,720 --> 00:19:06,760 Speaker 4: But again we got the SMP, you know, up one 409 00:19:06,760 --> 00:19:10,760 Speaker 4: point six percent here today, the Russell up one and 410 00:19:10,760 --> 00:19:12,720 Speaker 4: a half percent, the NASTAC up one point eight percent, 411 00:19:12,760 --> 00:19:15,480 Speaker 4: so kind of per some broad market moves hired today. 412 00:19:15,600 --> 00:19:18,360 Speaker 5: Yeah, and the visit twenty five. I remember those days 413 00:19:18,359 --> 00:19:20,080 Speaker 5: where it was twelve, like two weeks ago. 414 00:19:21,320 --> 00:19:25,200 Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live 415 00:19:25,280 --> 00:19:28,360 Speaker 1: weekdays at ten am Eastern on Apple card playing Android 416 00:19:28,400 --> 00:19:31,440 Speaker 1: Auto with the Bloomberg Business app. Listen on demand wherever 417 00:19:31,560 --> 00:19:34,680 Speaker 1: you get your podcasts or watch us live on YouTube. 418 00:19:36,520 --> 00:19:39,600 Speaker 2: Alex Steel here alongside Paul Sweeney. This is Bloomberg Intelligence Radio. 419 00:19:39,680 --> 00:19:41,560 Speaker 2: We keep you up to date on all the business 420 00:19:41,600 --> 00:19:43,679 Speaker 2: news and economics and finance that you need with our 421 00:19:43,760 --> 00:19:46,920 Speaker 2: Bloomberg Intelligence lens because they cover two thousand companies and 422 00:19:46,920 --> 00:19:48,679 Speaker 2: one hundred and thirty industries worldwide. 423 00:19:48,920 --> 00:19:50,200 Speaker 5: We also like to dig deep. 424 00:19:50,040 --> 00:19:54,320 Speaker 2: Into the amazing reporting here that we have throughout Bloomberg News. 425 00:19:55,200 --> 00:19:56,879 Speaker 2: And there's a couple of things on that point. One 426 00:19:57,080 --> 00:19:59,000 Speaker 2: is we're going to go to Madison Mueller, who's going 427 00:19:59,080 --> 00:20:02,160 Speaker 2: to talk about Eli Lilley earnings, because that was quite interesting. 428 00:20:02,280 --> 00:20:04,840 Speaker 5: The other is we're going to talk about ozempic town. 429 00:20:05,600 --> 00:20:06,400 Speaker 5: It's a big take. 430 00:20:06,720 --> 00:20:08,600 Speaker 2: You can check it out on our podcast, you can 431 00:20:08,720 --> 00:20:11,280 Speaker 2: check it out in Bloomberg Business Week as well, but 432 00:20:11,400 --> 00:20:15,159 Speaker 2: it's saying it found the biggest town in the United 433 00:20:15,160 --> 00:20:18,720 Speaker 2: States that uses ozempic. It was really cool, great anecdotal evidence, 434 00:20:18,720 --> 00:20:21,199 Speaker 2: and I have lots of questions. Madison joins us now 435 00:20:21,800 --> 00:20:25,119 Speaker 2: in studio verses. Take us through Eli Lily earnings. Is 436 00:20:25,160 --> 00:20:29,480 Speaker 2: this a pure like market share grab from Novo to Ali? 437 00:20:30,560 --> 00:20:33,080 Speaker 9: Not quite yet, So that's what we're We're We've been 438 00:20:33,160 --> 00:20:36,880 Speaker 9: closely watching. Lily is narrowing the gap with Novo Nordisk. 439 00:20:37,480 --> 00:20:40,640 Speaker 9: The sales are coming quite close. I mean, Lily had 440 00:20:40,960 --> 00:20:43,840 Speaker 9: one point two billion in sales of zep Bound, which 441 00:20:43,920 --> 00:20:46,880 Speaker 9: only launched a few months ago, and Novo Nordists had 442 00:20:47,200 --> 00:20:49,720 Speaker 9: one point seven billion in sales of its weight loss 443 00:20:49,800 --> 00:20:52,600 Speaker 9: drugg we Go V, which they reported yesterday. And we 444 00:20:52,720 --> 00:20:54,879 Speaker 9: Gov's been on the market for several years. So Lily 445 00:20:55,119 --> 00:20:59,119 Speaker 9: is like really moving fast. Sales are ramping up extremely quickly, 446 00:20:59,280 --> 00:21:01,639 Speaker 9: and we are watching closely to see what happens. 447 00:21:01,800 --> 00:21:05,760 Speaker 4: I guess the next step for these drugs is I 448 00:21:05,800 --> 00:21:09,560 Speaker 4: guess an oral yea, exactly where are we on that? 449 00:21:09,840 --> 00:21:10,640 Speaker 6: What are the companies saying? 450 00:21:10,760 --> 00:21:13,840 Speaker 9: Both companies have been working on pills, which obviously they 451 00:21:13,880 --> 00:21:16,600 Speaker 9: think could help not only expand the market in the US, 452 00:21:16,680 --> 00:21:19,639 Speaker 9: but expand x US because there are certain markets that 453 00:21:19,800 --> 00:21:22,960 Speaker 9: research has shown prefer pills over shots. 454 00:21:23,840 --> 00:21:27,320 Speaker 10: Japan is one of them, interestingly, so that's kind of 455 00:21:27,359 --> 00:21:30,920 Speaker 10: the next step here. Both of the companies are studying 456 00:21:31,000 --> 00:21:31,600 Speaker 10: these drugs. 457 00:21:32,600 --> 00:21:35,959 Speaker 9: Novo, though, has had a lot of trouble with supply 458 00:21:36,280 --> 00:21:39,560 Speaker 9: and particularly making enough of the active ingredient that's used 459 00:21:39,600 --> 00:21:42,479 Speaker 9: in their drugs. The pill uses the same active ingredient 460 00:21:42,560 --> 00:21:44,639 Speaker 9: and it uses more of it, so they're kind of 461 00:21:44,800 --> 00:21:48,160 Speaker 9: struggling right now. They can't really launch that pill until 462 00:21:48,200 --> 00:21:49,280 Speaker 9: they get a handle on supply. 463 00:21:50,880 --> 00:21:53,160 Speaker 2: Let's go to the big philps are about that didn't 464 00:21:53,200 --> 00:21:54,560 Speaker 2: turn on my mic. Let's go to the big take 465 00:21:54,600 --> 00:21:57,480 Speaker 2: because that was quite interesting and it feeds into the 466 00:21:57,520 --> 00:22:00,280 Speaker 2: whole story. And the title is what it's like when 467 00:22:00,320 --> 00:22:03,080 Speaker 2: o zepic takes over an entire town. 468 00:22:04,000 --> 00:22:09,240 Speaker 4: Wait, great story, thank you, thank you, because I spent 469 00:22:09,320 --> 00:22:10,639 Speaker 4: a ton of time in Bowling Green, Kentucky. 470 00:22:10,800 --> 00:22:11,720 Speaker 10: Really, I know of what you. 471 00:22:11,720 --> 00:22:14,520 Speaker 4: Speak and I send it to a buddy who lives there. 472 00:22:14,960 --> 00:22:16,520 Speaker 4: She knows half the people in the article. 473 00:22:16,600 --> 00:22:18,159 Speaker 10: That's really Oh that's awesome. 474 00:22:18,560 --> 00:22:18,760 Speaker 3: Wow. 475 00:22:19,000 --> 00:22:22,120 Speaker 5: I'm just really curious as to how you found this town. 476 00:22:22,560 --> 00:22:25,399 Speaker 9: So we worked with the data team on this story, 477 00:22:25,520 --> 00:22:28,680 Speaker 9: and we got data at the three zip code levels, 478 00:22:28,720 --> 00:22:31,600 Speaker 9: so we're looking at, you know, cities and sort of 479 00:22:31,640 --> 00:22:34,840 Speaker 9: their surrounding areas, and we were looking all across the country. 480 00:22:35,040 --> 00:22:38,639 Speaker 9: A few other spots came up, like Huntsville, Alabama, and 481 00:22:38,760 --> 00:22:41,639 Speaker 9: we kind of were digging around to see just if 482 00:22:41,680 --> 00:22:44,359 Speaker 9: people were talking about the drugs online. You know if 483 00:22:44,400 --> 00:22:46,720 Speaker 9: there were doctors in the area that were prescribing them. 484 00:22:47,080 --> 00:22:50,440 Speaker 9: And we honed in on Bowling Green specifically because Kentucky 485 00:22:50,520 --> 00:22:53,480 Speaker 9: as a state has the highest concentration of weight loss 486 00:22:53,520 --> 00:22:55,680 Speaker 9: drug users in the country. So we were like, oh, well, 487 00:22:56,040 --> 00:22:58,040 Speaker 9: if this city is showing up in our data, this 488 00:22:58,200 --> 00:23:01,119 Speaker 9: is probably a good a good place to go and 489 00:23:01,200 --> 00:23:03,640 Speaker 9: see what's happening. And so started talking to people there 490 00:23:03,720 --> 00:23:07,119 Speaker 9: and like you know, it kind of spreads like wildfire. 491 00:23:07,160 --> 00:23:08,800 Speaker 9: You talk to one person who's on the drugs and 492 00:23:08,800 --> 00:23:10,840 Speaker 9: they're like, oh, talk to my friend, talk to my neighbor. 493 00:23:10,960 --> 00:23:12,840 Speaker 9: They're on the drugs too, And it just kind of 494 00:23:13,400 --> 00:23:14,920 Speaker 9: was easy to find people after that. 495 00:23:15,160 --> 00:23:15,960 Speaker 6: Why is that? 496 00:23:16,080 --> 00:23:18,800 Speaker 4: Why is it the use so concentrated in a place 497 00:23:18,840 --> 00:23:20,880 Speaker 4: like Kentucky. Is that just simply because there's more people 498 00:23:21,080 --> 00:23:24,640 Speaker 4: there that qualify from a I guess a weight perspective. 499 00:23:24,480 --> 00:23:26,240 Speaker 10: Right, I Mean, that's a piece of it, which is 500 00:23:26,640 --> 00:23:27,479 Speaker 10: actually a good thing. 501 00:23:27,560 --> 00:23:29,520 Speaker 9: I Mean, we hear so much about the drugs in 502 00:23:29,640 --> 00:23:32,399 Speaker 9: New York and in Hollywood, but when we're looking at 503 00:23:32,400 --> 00:23:35,080 Speaker 9: actual obesity rates, those aren't the places that have the 504 00:23:35,160 --> 00:23:39,840 Speaker 9: highest concentration of people with obesity or diabetes. In Kentucky, 505 00:23:40,560 --> 00:23:44,040 Speaker 9: there are high rates of obesity and diabetes. There's also 506 00:23:44,320 --> 00:23:47,439 Speaker 9: there were large employers in the area that were covering 507 00:23:47,480 --> 00:23:49,879 Speaker 9: the drugs so people could get access to them. Bowling 508 00:23:49,920 --> 00:23:53,399 Speaker 9: Green in particular is a very middle class area, so 509 00:23:53,840 --> 00:23:56,600 Speaker 9: when people couldn't get coverage for the drugs, they were 510 00:23:56,600 --> 00:23:58,600 Speaker 9: willing to pay out of pocket for it. So that 511 00:23:58,760 --> 00:24:02,080 Speaker 9: kind of made the conditions ripe for these drugs to 512 00:24:02,160 --> 00:24:03,359 Speaker 9: take off in Bowling Green. 513 00:24:04,160 --> 00:24:07,000 Speaker 2: When when you write the article, you also talk about 514 00:24:07,160 --> 00:24:10,920 Speaker 2: compound drugs here, just walk us through what a compound 515 00:24:11,000 --> 00:24:14,440 Speaker 2: drug is, why it's allowed, and is it legit. 516 00:24:15,080 --> 00:24:18,200 Speaker 9: Yeah, I mean that has been a really big thing 517 00:24:18,280 --> 00:24:20,040 Speaker 9: and a really big part of this weight loss drug 518 00:24:20,119 --> 00:24:23,400 Speaker 9: market as of recently because you know, and that fits 519 00:24:23,440 --> 00:24:26,120 Speaker 9: in with this supply issue. LILLI and Novo have really 520 00:24:26,200 --> 00:24:29,479 Speaker 9: been struggling to keep up with supplies. So when drugs 521 00:24:29,520 --> 00:24:33,159 Speaker 9: are in shortage. Officially, these compounding pharmacies are allowed to 522 00:24:33,240 --> 00:24:38,000 Speaker 9: make similar versions, copycat versions, we call them, to help, 523 00:24:38,280 --> 00:24:41,440 Speaker 9: you know, patients who are unable to get prescriptions. 524 00:24:40,840 --> 00:24:41,399 Speaker 10: For the drugs. 525 00:24:41,680 --> 00:24:44,800 Speaker 9: But what's happened is, you know, in this gap, it's 526 00:24:44,920 --> 00:24:47,840 Speaker 9: kind of allowed these compounding pharmacies to proliferate, and not 527 00:24:48,040 --> 00:24:51,960 Speaker 9: all of them are exactly legitimate. And so there's a 528 00:24:52,000 --> 00:24:55,080 Speaker 9: lot of medical spas that are using the compounding drugs, 529 00:24:55,160 --> 00:24:58,440 Speaker 9: telehealth companies that are selling the compounding drugs, like Hymns 530 00:24:58,480 --> 00:25:01,200 Speaker 9: and hers is one that comes up, and in Bowling 531 00:25:01,240 --> 00:25:04,159 Speaker 9: Green it's really taken off as well. There's like all 532 00:25:04,240 --> 00:25:07,320 Speaker 9: of these medical spas popping up, weight loss clinics popping 533 00:25:07,400 --> 00:25:11,520 Speaker 9: up that are offering compounded or just illegitimate versions of 534 00:25:11,560 --> 00:25:14,320 Speaker 9: the drugs, and you know, that's become a big thing 535 00:25:14,400 --> 00:25:14,920 Speaker 9: there as well. 536 00:25:15,080 --> 00:25:19,520 Speaker 4: Well for the compounded drugs, are they are they as effective? 537 00:25:19,600 --> 00:25:21,400 Speaker 6: Are they safe? What do we know about them? 538 00:25:21,640 --> 00:25:24,160 Speaker 9: That's kind of the problem is because you know, pharmaceutical 539 00:25:24,200 --> 00:25:27,840 Speaker 9: products are so tightly regulated and require so many studies 540 00:25:27,920 --> 00:25:30,800 Speaker 9: from these drug makers, but the compounded drugs are not 541 00:25:30,880 --> 00:25:33,000 Speaker 9: studied and they're not regulated in the same way. 542 00:25:33,119 --> 00:25:34,920 Speaker 10: There's not the same FDA oversight. 543 00:25:35,040 --> 00:25:38,160 Speaker 9: So when we think about are these drugs as effective, 544 00:25:38,400 --> 00:25:40,880 Speaker 9: the answer is like, we don't really know because we don't. 545 00:25:40,680 --> 00:25:44,040 Speaker 10: Have studies that prove that indefinitely, Why would. 546 00:25:43,800 --> 00:25:44,920 Speaker 5: That ever be allowed? 547 00:25:45,040 --> 00:25:47,160 Speaker 2: I don't mean understand like it's it's a tight supply 548 00:25:47,240 --> 00:25:49,280 Speaker 2: shortage YadA YadA. But then why is it like, here's 549 00:25:49,280 --> 00:25:51,360 Speaker 2: an option take a drug that you don't really know work, 550 00:25:51,440 --> 00:25:51,960 Speaker 2: So what's in it? 551 00:25:52,000 --> 00:25:52,760 Speaker 10: Why is that allowed? 552 00:25:53,040 --> 00:25:55,760 Speaker 9: It's because, I mean, normally, like compounding, the reason that 553 00:25:56,119 --> 00:25:59,320 Speaker 9: it exists is more on like an individual basis. 554 00:25:59,359 --> 00:26:02,040 Speaker 10: So if a person is allergic to a certain. 555 00:26:02,280 --> 00:26:05,679 Speaker 9: Ingredient or like a coloring and a drug, compounding pharmacies 556 00:26:05,720 --> 00:26:09,040 Speaker 9: can you know, tailor make those drugs for that specific patient. 557 00:26:10,000 --> 00:26:11,800 Speaker 9: Or if a drug is in shortage and a person 558 00:26:11,880 --> 00:26:14,440 Speaker 9: can't get access to it. It's not really supposed to be. 559 00:26:15,359 --> 00:26:17,720 Speaker 9: They're not supposed to be acting like drug makers. But 560 00:26:17,840 --> 00:26:19,920 Speaker 9: that's kind of what we're seeing happening with these weight 561 00:26:19,960 --> 00:26:22,120 Speaker 9: loss drugs because of the demand for them. 562 00:26:22,680 --> 00:26:27,480 Speaker 4: I mean, great stuff, Madison Moeller, your cohorts, co authors 563 00:26:27,720 --> 00:26:32,160 Speaker 4: Devin Leonard and Tanna's mayor Johnny MCGANI yet mcganni, Okay, 564 00:26:32,520 --> 00:26:35,200 Speaker 4: that's the big take story today a Bloomberg Business Week, 565 00:26:35,800 --> 00:26:38,520 Speaker 4: what it's like when ozepic takes over an entire town. 566 00:26:38,640 --> 00:26:41,639 Speaker 4: In this case, they focused on Bowling Green, Kentucky. 567 00:26:42,040 --> 00:26:43,479 Speaker 2: I did like in the story, I talked about how 568 00:26:43,520 --> 00:26:46,480 Speaker 2: there was like a wellness thing, and then you also 569 00:26:46,600 --> 00:26:49,080 Speaker 2: like Botox next door because it's a zempic. 570 00:26:48,800 --> 00:26:49,880 Speaker 5: Face everyone talks about. 571 00:26:50,000 --> 00:26:51,520 Speaker 2: But like you lose all that weight really fast, but 572 00:26:51,560 --> 00:26:53,919 Speaker 2: then you got all the skin kind of flapping around everywhere. 573 00:26:54,440 --> 00:26:55,920 Speaker 5: The botox to fix it. 574 00:26:56,040 --> 00:27:01,600 Speaker 4: Bowling Green, Kentucky. They make Chevrolet Corvette's and they make underwear. 575 00:27:02,080 --> 00:27:05,040 Speaker 6: Thank you, thanks for the loom Is Baby loom In. 576 00:27:06,040 --> 00:27:07,040 Speaker 7: Really yeah, so that's what. 577 00:27:07,160 --> 00:27:08,040 Speaker 5: Let's also go there. 578 00:27:08,200 --> 00:27:08,680 Speaker 6: That's awesome. 579 00:27:08,680 --> 00:27:10,840 Speaker 5: Okay, so we have like a working. 580 00:27:10,720 --> 00:27:13,480 Speaker 6: Scabrola everyone to thanks. 581 00:27:14,480 --> 00:27:16,919 Speaker 4: Health reporter Bloomberg News, join's life here in a Bloomberg 582 00:27:16,960 --> 00:27:20,880 Speaker 4: Interactive Brokers studio, doing some great reporting on these weight 583 00:27:20,920 --> 00:27:25,200 Speaker 4: loss drugs, which are really really becoming a big phenomenon 584 00:27:25,440 --> 00:27:26,560 Speaker 4: in the healthcare space. 585 00:27:28,119 --> 00:27:31,960 Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live 586 00:27:32,080 --> 00:27:35,000 Speaker 1: weekdays at ten am Eastern on Apple car Play and 587 00:27:35,119 --> 00:27:38,000 Speaker 1: Android Auto with the Bloomberg Business App. You can also 588 00:27:38,119 --> 00:27:41,600 Speaker 1: listen live on Amazon Alexa from our flagship New York station. 589 00:27:42,000 --> 00:27:44,720 Speaker 1: Just say Alexa play Bloomberg eleven thirty. 590 00:27:46,280 --> 00:27:48,080 Speaker 2: Let's keep going on an under armor here that stock 591 00:27:48,160 --> 00:27:50,560 Speaker 2: up by twenty percent of quinnam Goyle, a senior US 592 00:27:50,640 --> 00:27:53,600 Speaker 2: e commerce and retail analyst of Bloomberg Intelligence, She joins us, 593 00:27:53,640 --> 00:27:56,359 Speaker 2: Now what part of this is like, who if it 594 00:27:56,400 --> 00:27:59,080 Speaker 2: could have been worse versus we really like the stock 595 00:27:59,119 --> 00:27:59,720 Speaker 2: and its growth. 596 00:28:01,119 --> 00:28:04,439 Speaker 11: I think, you know they're executing right. This is the start, 597 00:28:04,600 --> 00:28:07,360 Speaker 11: but make no mistake, they have a long long way 598 00:28:07,400 --> 00:28:10,240 Speaker 11: to go. I think the fact that they beat expectations 599 00:28:10,400 --> 00:28:13,680 Speaker 11: is a good sign that they've stopped the bleeding and 600 00:28:13,880 --> 00:28:18,120 Speaker 11: it's getting better. But getting to positive sales is still 601 00:28:18,240 --> 00:28:20,280 Speaker 11: going to be a long while. In fact, before we 602 00:28:20,400 --> 00:28:23,720 Speaker 11: see actually some meaningful improvement in product, which is a 603 00:28:23,800 --> 00:28:26,280 Speaker 11: key part of the story, it's not going to be 604 00:28:26,440 --> 00:28:30,000 Speaker 11: for another nine to twelve months, so there's still a 605 00:28:30,080 --> 00:28:34,159 Speaker 11: lot of time. The environment is still very fickle, and 606 00:28:34,600 --> 00:28:36,439 Speaker 11: you know, when you look at their guidance, which they 607 00:28:36,680 --> 00:28:41,280 Speaker 11: did raise, it doesn't suggest that things are getting materially better. 608 00:28:41,480 --> 00:28:44,240 Speaker 11: In fact, there's a little bit of caution built into 609 00:28:44,320 --> 00:28:48,040 Speaker 11: the guidance as they expect Asia Pacific region to get weaker. 610 00:28:48,160 --> 00:28:52,120 Speaker 11: They're having freight expense pressures and also four X pressures, 611 00:28:52,280 --> 00:28:55,320 Speaker 11: so it's not all rosy as it seems looking at 612 00:28:55,360 --> 00:28:57,600 Speaker 11: the share price. But they are making improvement. 613 00:28:58,280 --> 00:29:01,080 Speaker 4: What do they need to restricture here or do they 614 00:29:01,160 --> 00:29:04,200 Speaker 4: just need to have more cooler stuff in the stores. 615 00:29:05,520 --> 00:29:10,400 Speaker 11: I think it's everything. It's definitely product product disking. In retail, 616 00:29:10,520 --> 00:29:12,920 Speaker 11: they do need to improve their product positioning as well 617 00:29:13,000 --> 00:29:15,640 Speaker 11: as what they offer. Aside from that, they also have 618 00:29:15,800 --> 00:29:18,800 Speaker 11: to improve how they market this product. Under Armour has 619 00:29:18,880 --> 00:29:22,560 Speaker 11: gone through these restructuring efforts multiple times now, so this 620 00:29:22,720 --> 00:29:26,200 Speaker 11: isn't something new to them. They've overpenetrated in the off 621 00:29:26,280 --> 00:29:30,920 Speaker 11: price category, they've over discounted, They've become basically a promotional banner, 622 00:29:31,320 --> 00:29:33,080 Speaker 11: and now they're trying to do what they tried to 623 00:29:33,160 --> 00:29:36,760 Speaker 11: do again previously, is to restructure themselves as a more 624 00:29:36,840 --> 00:29:40,800 Speaker 11: premium brand. Can they do it, yes, but it's going 625 00:29:40,920 --> 00:29:45,800 Speaker 11: to take effort and time and they have the means 626 00:29:45,840 --> 00:29:48,120 Speaker 11: to do it. They have the expertise. But remember there 627 00:29:48,120 --> 00:29:50,640 Speaker 11: are much smaller brand than a Nike and Adida, so 628 00:29:50,720 --> 00:29:53,360 Speaker 11: they don't have those deep pockets to help them. But 629 00:29:53,760 --> 00:29:56,200 Speaker 11: it will take time for them to actually get this underway. 630 00:29:56,520 --> 00:29:58,960 Speaker 2: So isn't this like a really rough time to try 631 00:29:59,000 --> 00:30:01,120 Speaker 2: and like rebe a premium brand. 632 00:30:02,880 --> 00:30:05,680 Speaker 11: It's tough, but under Armour isn't a dead brand, right. 633 00:30:05,800 --> 00:30:09,800 Speaker 11: Everyone still recognizes under Armour and it isn't a brand 634 00:30:09,920 --> 00:30:11,959 Speaker 11: that has kind of died and is not coming back 635 00:30:12,000 --> 00:30:14,440 Speaker 11: to life. People recognize the name, people still use it 636 00:30:14,520 --> 00:30:18,360 Speaker 11: in sports. They have seventy athletes across twenty eighteens and 637 00:30:18,400 --> 00:30:21,720 Speaker 11: the Olympics right now. So it's not dead and yes 638 00:30:21,800 --> 00:30:24,080 Speaker 11: it can be repositioned, but it will take time. 639 00:30:24,680 --> 00:30:27,400 Speaker 4: So in this part of the retail space that you cover, Punum, 640 00:30:28,320 --> 00:30:31,560 Speaker 4: the Nikes, the Underarmers of the world, the Adidas, which 641 00:30:31,600 --> 00:30:33,720 Speaker 4: is correct way to pronounce. 642 00:30:33,440 --> 00:30:38,320 Speaker 5: It, Oh, Matt Miller, is that you yes, off, how's. 643 00:30:38,120 --> 00:30:39,960 Speaker 6: The consumer there in that part of the world. 644 00:30:41,240 --> 00:30:44,320 Speaker 11: So the consumer isn't in the best place today. We've 645 00:30:44,400 --> 00:30:47,400 Speaker 11: seen the consumer indicators, whether it's the unemployment rate, which 646 00:30:47,440 --> 00:30:51,479 Speaker 11: we closely watch is now over four percent. They're lofty. 647 00:30:51,560 --> 00:30:54,440 Speaker 11: Amazon said it on their call just last week that 648 00:30:54,600 --> 00:30:57,880 Speaker 11: they do expect consumer volatility and macro pressures to build. 649 00:30:58,040 --> 00:31:01,800 Speaker 11: There will be more discounting. So you know, the consumer 650 00:31:01,880 --> 00:31:04,880 Speaker 11: is choosing, they're being picky, they're trading down, they're pulling back. 651 00:31:05,200 --> 00:31:07,880 Speaker 11: It's not the best consumer environment heading into the back half. 652 00:31:08,240 --> 00:31:10,200 Speaker 2: So how much time do we need to give, then, say, 653 00:31:10,720 --> 00:31:14,320 Speaker 2: under armour to fix all of this? Because what is 654 00:31:14,360 --> 00:31:17,160 Speaker 2: in neusyncratic versus the macro environment. That feels like it's 655 00:31:17,160 --> 00:31:18,600 Speaker 2: going to draw this process out a bit. 656 00:31:19,800 --> 00:31:21,680 Speaker 11: It's definitely going to draw it out a little bit, 657 00:31:21,840 --> 00:31:24,720 Speaker 11: especially if at worsens. We heard them say that promotions 658 00:31:24,800 --> 00:31:27,560 Speaker 11: will tick up, which was a major driver to better 659 00:31:27,640 --> 00:31:30,120 Speaker 11: gross margins in the second quarter. That was really a 660 00:31:30,200 --> 00:31:33,320 Speaker 11: large part of the outperformance there. But that said, you're 661 00:31:33,360 --> 00:31:37,360 Speaker 11: talking about a ten percent decline in North America, double 662 00:31:37,440 --> 00:31:41,120 Speaker 11: digit declines in the quarter. Is still expecting double digit 663 00:31:41,200 --> 00:31:44,520 Speaker 11: declines in the rest of the year, their fiscal year. 664 00:31:45,000 --> 00:31:47,000 Speaker 11: It's a long way before we can see, you know, 665 00:31:47,240 --> 00:31:50,120 Speaker 11: continuous positive growth. That's say, you know, definitely well over 666 00:31:50,200 --> 00:31:51,360 Speaker 11: a year, if not longer. 667 00:31:52,040 --> 00:31:53,680 Speaker 6: Put them oil. Thank you so much. We appreciate it. 668 00:31:53,720 --> 00:31:54,280 Speaker 6: Putt them oil. 669 00:31:54,520 --> 00:31:56,800 Speaker 4: She has our senior anamals covering all the retail stuff 670 00:31:56,920 --> 00:32:00,239 Speaker 4: for Bloomberg Intelligence. Given the latest here on our good 671 00:32:00,280 --> 00:32:05,040 Speaker 4: friends at under Armour based in Baltimore, Maryland. Kevin Plank 672 00:32:05,160 --> 00:32:07,440 Speaker 4: is the founder of that thing. Pretty good story there overall, 673 00:32:07,480 --> 00:32:10,280 Speaker 4: but as Puna mentioned, a lot of competition. 674 00:32:10,360 --> 00:32:11,719 Speaker 6: They need to restructure a little bit there. 675 00:32:13,200 --> 00:32:17,080 Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us Live 676 00:32:17,200 --> 00:32:20,720 Speaker 1: weekdays at ten am Eastern on Applecar Play and Android 677 00:32:20,720 --> 00:32:23,480 Speaker 1: Auto with the Bloomberg Business app. You can also listen 678 00:32:23,640 --> 00:32:26,680 Speaker 1: live on Amazon Alexa from our flagship New York station, 679 00:32:27,080 --> 00:32:29,840 Speaker 1: Just say Alexa playing Bloomberg eleven thirty. 680 00:32:31,320 --> 00:32:34,320 Speaker 6: I'll tell you what's not working today, Warner Brothers Discovery. 681 00:32:34,360 --> 00:32:34,640 Speaker 3: I don't know. 682 00:32:34,680 --> 00:32:37,240 Speaker 4: When I covered these stocks, they were ripping. But I 683 00:32:37,280 --> 00:32:39,640 Speaker 4: don't know this new generation of media analysts. I don't 684 00:32:39,640 --> 00:32:41,440 Speaker 4: know what they're doing here. Kevin here, he joins us here. 685 00:32:41,720 --> 00:32:44,880 Speaker 4: He's a senior media associate for Bloomberg Intelligence. He works 686 00:32:44,920 --> 00:32:49,480 Speaker 4: with my good buddy Getha ranganathin covering the media space. Here, Kevin, 687 00:32:49,560 --> 00:32:51,560 Speaker 4: this is a tough one here. I mean, talk to 688 00:32:51,640 --> 00:32:54,880 Speaker 4: us about what's happening with Warner Brothers Discovery taking a 689 00:32:54,960 --> 00:32:56,520 Speaker 4: big write down today. 690 00:32:56,560 --> 00:32:58,760 Speaker 6: What was the write down for exactly? 691 00:32:58,920 --> 00:32:59,320 Speaker 8: Exactly? 692 00:32:59,600 --> 00:33:00,560 Speaker 6: Thanks for me on Paul. 693 00:33:01,440 --> 00:33:01,680 Speaker 3: It was. 694 00:33:01,960 --> 00:33:04,760 Speaker 8: It's it's bad, it's not great. Obviously, we're still in 695 00:33:04,840 --> 00:33:09,080 Speaker 8: a very transitory period and media expectations were certainly tempered 696 00:33:09,120 --> 00:33:11,440 Speaker 8: coming into the quarter. I think they've been that way 697 00:33:11,480 --> 00:33:15,000 Speaker 8: for a little while now. Obviously, Warner stopped giving us 698 00:33:15,040 --> 00:33:17,000 Speaker 8: adjusted ebit a guidance at the beginning of the year, 699 00:33:18,040 --> 00:33:20,000 Speaker 8: but that said, you know, it was worse than expected, 700 00:33:20,720 --> 00:33:22,480 Speaker 8: and it's really really I think the headline is on 701 00:33:22,600 --> 00:33:24,200 Speaker 8: the network side, as you just said, that's where that 702 00:33:24,320 --> 00:33:27,160 Speaker 8: nine billion dollar write down was coming from. And the 703 00:33:27,240 --> 00:33:28,960 Speaker 8: visibility isn't great. You know, they're they're going to be 704 00:33:29,040 --> 00:33:30,640 Speaker 8: losing it's all of it's certain they're gonna be losing 705 00:33:30,640 --> 00:33:33,320 Speaker 8: the NBA contract in twenty twenty five, twenty six. So 706 00:33:34,240 --> 00:33:35,720 Speaker 8: it's really been a game for a long time for 707 00:33:35,800 --> 00:33:38,360 Speaker 8: traditional media. Can they scale up their streaming services while 708 00:33:38,680 --> 00:33:42,040 Speaker 8: PayTV continues to melt. But it's it's tough, but. 709 00:33:42,080 --> 00:33:43,320 Speaker 5: They're streaming wasn't terrible. 710 00:33:43,440 --> 00:33:46,120 Speaker 2: It was really just the traditional ad business and also 711 00:33:47,240 --> 00:33:49,680 Speaker 2: the movie business like done too fine, Like I'll see it, 712 00:33:49,720 --> 00:33:50,640 Speaker 2: but please you ain't. 713 00:33:50,480 --> 00:33:51,040 Speaker 5: A don't pool. 714 00:33:52,160 --> 00:33:54,200 Speaker 8: It's exactly right, that's exactly right. The ads were really 715 00:33:54,240 --> 00:33:56,240 Speaker 8: where they're filling a lot of the weakness as you know, 716 00:33:56,280 --> 00:33:58,360 Speaker 8: those linear ad dollars are moving towards connected TV. 717 00:33:59,080 --> 00:34:00,320 Speaker 6: Streaming was was pretty good. 718 00:34:00,320 --> 00:34:02,480 Speaker 8: They had some nice international launches during the quarter, So 719 00:34:02,520 --> 00:34:05,440 Speaker 8: those net ads came in above expected and they are 720 00:34:05,560 --> 00:34:07,840 Speaker 8: actually one of the few that are are starting to 721 00:34:07,960 --> 00:34:09,759 Speaker 8: get to the inflection point where we're starting to see 722 00:34:09,800 --> 00:34:12,400 Speaker 8: some profit, but again it's so much smaller compared to 723 00:34:12,440 --> 00:34:14,080 Speaker 8: their legacy TV business that's still. 724 00:34:13,880 --> 00:34:14,480 Speaker 6: The bread and butter. 725 00:34:15,040 --> 00:34:17,000 Speaker 8: And on the studio side, you're right, they had some good, 726 00:34:17,280 --> 00:34:19,400 Speaker 8: good results with Dune. They had a good launch with 727 00:34:19,920 --> 00:34:23,279 Speaker 8: Godzilla x Kong. They also had some misses. Furiosa was 728 00:34:23,320 --> 00:34:25,839 Speaker 8: one that didn't quite do as well. And of course 729 00:34:25,880 --> 00:34:27,600 Speaker 8: on the video game side, that's also been quite weak, 730 00:34:27,719 --> 00:34:30,520 Speaker 8: especially of some against some difficult comps against last year 731 00:34:30,520 --> 00:34:31,600 Speaker 8: with the Hogwarts legacy. 732 00:34:31,880 --> 00:34:37,120 Speaker 4: All right, sixteen point seven billion dollar market cap, that's 733 00:34:37,200 --> 00:34:39,000 Speaker 4: one thing, but then you look at the balance sheet 734 00:34:39,239 --> 00:34:41,879 Speaker 4: and they got forty billion dollars of debt. Oh my god, 735 00:34:42,040 --> 00:34:45,239 Speaker 4: what is this company? I mean, John Malone's a shareholder, 736 00:34:46,120 --> 00:34:47,240 Speaker 4: an agent of change. 737 00:34:47,080 --> 00:34:47,600 Speaker 6: If nothing else. 738 00:34:47,960 --> 00:34:50,360 Speaker 4: Is there an expectation the marketplace, Kevin, that this is 739 00:34:50,400 --> 00:34:51,160 Speaker 4: a company that needs to. 740 00:34:51,160 --> 00:34:53,759 Speaker 6: Be restructured, split up, acquired. 741 00:34:53,920 --> 00:34:57,879 Speaker 8: I mean, it's certainly been speculated on management. Of course, 742 00:34:57,960 --> 00:34:59,920 Speaker 8: you know, declined to comment on on rumors like that. 743 00:35:00,080 --> 00:35:03,560 Speaker 8: At they're certainly prioritizing their cash flow to to pay 744 00:35:03,640 --> 00:35:05,759 Speaker 8: down their debt right now. Certainly a lot of that 745 00:35:05,880 --> 00:35:09,560 Speaker 8: is going towards their their interest payments. It's it's difficult 746 00:35:09,600 --> 00:35:11,839 Speaker 8: to say, you know, it's really really difficult. Obviously when 747 00:35:11,880 --> 00:35:14,120 Speaker 8: you look across kind of the media landscape. They are 748 00:35:14,200 --> 00:35:17,040 Speaker 8: partnering together with with bundling. Obviously we have Venue Sports 749 00:35:17,120 --> 00:35:18,880 Speaker 8: coming this fall, so. 750 00:35:19,600 --> 00:35:21,279 Speaker 5: That again help me understand that one. 751 00:35:21,600 --> 00:35:24,800 Speaker 8: It's it's the streaming sports JV. Essentially they're going to 752 00:35:24,840 --> 00:35:27,520 Speaker 8: be it's like a skinny paid TV bundle. So essentially 753 00:35:27,560 --> 00:35:30,000 Speaker 8: you know you're getting those cable TV channels, but it's 754 00:35:30,000 --> 00:35:33,359 Speaker 8: all over the internet. Right, So again, that's Warner that's Fox, 755 00:35:33,440 --> 00:35:37,040 Speaker 8: that's that's Disney's ESPN. But it's not NBC Universal, it's 756 00:35:37,080 --> 00:35:40,000 Speaker 8: not NBC Universal, it's not Paramount CBS Sports. 757 00:35:41,280 --> 00:35:42,920 Speaker 6: It's a disaster. It's a digster. 758 00:35:43,080 --> 00:35:45,600 Speaker 4: We had when I was running this industry, we had 759 00:35:45,640 --> 00:35:47,879 Speaker 4: people paying their cable operator one hundred bucks a month. 760 00:35:48,440 --> 00:35:51,000 Speaker 4: The cable operator made money, and the cable operator paid 761 00:35:51,000 --> 00:35:53,000 Speaker 4: a lot of money to the Viacoms and Warner Brothers 762 00:35:53,040 --> 00:35:55,600 Speaker 4: Discoveries of the world for their cable networks. They made money, 763 00:35:56,280 --> 00:35:58,759 Speaker 4: lots of big audiences, advertisers made money. 764 00:35:59,000 --> 00:35:59,719 Speaker 6: Everything was good. 765 00:35:59,760 --> 00:36:02,040 Speaker 4: And then the young guy folks come into the industry 766 00:36:02,120 --> 00:36:04,520 Speaker 4: and they change it. They start the streaming service and 767 00:36:04,640 --> 00:36:07,720 Speaker 4: now they're scrambling for dollars. Is there an expectation, Kevin, 768 00:36:07,800 --> 00:36:11,480 Speaker 4: that we're somewhere near a point where it all shakes 769 00:36:11,560 --> 00:36:12,240 Speaker 4: out or something. 770 00:36:12,480 --> 00:36:14,239 Speaker 8: Yeah, I think so, And then you make it sound 771 00:36:14,400 --> 00:36:17,839 Speaker 8: so wonderful fact that money there Again, if you look 772 00:36:17,840 --> 00:36:20,640 Speaker 8: at a I mean, certainly Netflix is crushing right now, 773 00:36:20,680 --> 00:36:22,680 Speaker 8: you know. There their their margins are are so great. 774 00:36:22,760 --> 00:36:25,600 Speaker 8: You know, they just up their margin guidance, cash flow 775 00:36:25,719 --> 00:36:28,319 Speaker 8: really really strong and certainly seemed to be winning these 776 00:36:28,320 --> 00:36:32,000 Speaker 8: streaming wars. But again, you know, it's it's evolving, right, 777 00:36:32,040 --> 00:36:35,440 Speaker 8: it's it's continuing. We're looking at price increases. Obviously, when 778 00:36:35,440 --> 00:36:37,120 Speaker 8: you're looking at you know, kind of a more mature 779 00:36:37,200 --> 00:36:39,279 Speaker 8: market like the US, the focus is on urpoop, So 780 00:36:39,280 --> 00:36:41,080 Speaker 8: how are you going to raise arpoo there? There are 781 00:36:41,080 --> 00:36:45,200 Speaker 8: a few different levers exactly exactly there it is, uh 782 00:36:45,360 --> 00:36:47,360 Speaker 8: so you can do that. They're just price raises. Obviously, 783 00:36:47,400 --> 00:36:49,400 Speaker 8: they're trying to build out their advertising like we were 784 00:36:49,440 --> 00:36:51,400 Speaker 8: talking about before. And then the other big lever is 785 00:36:51,440 --> 00:36:54,160 Speaker 8: the password crackdown. So Netflix did that last year. Disney's 786 00:36:54,160 --> 00:36:55,719 Speaker 8: going to be implementing that in earnest and. 787 00:36:56,880 --> 00:36:58,080 Speaker 6: Has that been material like did that. 788 00:36:58,200 --> 00:37:00,920 Speaker 10: Oh no, it really helped, yeah, very much. 789 00:37:00,960 --> 00:37:05,600 Speaker 4: So yeah, okay, when you offspring, we're upset because they've 790 00:37:05,600 --> 00:37:07,359 Speaker 4: been skating on my coattails for a long time. 791 00:37:07,440 --> 00:37:08,400 Speaker 5: I guess also them. 792 00:37:08,400 --> 00:37:10,160 Speaker 2: The question is, at some point, I don't know if 793 00:37:10,160 --> 00:37:12,759 Speaker 2: we're here yet, people are just gonna get fed up 794 00:37:12,760 --> 00:37:15,080 Speaker 2: with all the pricing increases which I cannot keep track, 795 00:37:15,120 --> 00:37:16,440 Speaker 2: and they're gonna do the thing where they go through 796 00:37:16,480 --> 00:37:19,120 Speaker 2: and they're like no, no, no, yes, yes, and they're 797 00:37:19,120 --> 00:37:19,880 Speaker 2: gonna start cutting. 798 00:37:19,960 --> 00:37:21,799 Speaker 5: Have we seen that yet a little bit? 799 00:37:21,920 --> 00:37:24,160 Speaker 8: A little bit again. You know, if you look at Netflix, 800 00:37:24,280 --> 00:37:26,840 Speaker 8: their their turn levels are so low compared to their peers. 801 00:37:26,880 --> 00:37:28,640 Speaker 8: But you do see a lot of those serial churners. 802 00:37:28,680 --> 00:37:30,000 Speaker 8: You know, they'll sign up, they'll watch a show that 803 00:37:30,080 --> 00:37:32,640 Speaker 8: they like, and then they'll cancel. Right, So they're they're 804 00:37:32,680 --> 00:37:35,080 Speaker 8: trying to combat that. They're still keeping you know, again, 805 00:37:35,160 --> 00:37:37,040 Speaker 8: they they being you know, most of these streamers, they're 806 00:37:37,040 --> 00:37:40,080 Speaker 8: still keeping that competitive entry price with their ad supported tires. 807 00:37:40,120 --> 00:37:41,680 Speaker 8: So what they're trying to do is either you have 808 00:37:41,760 --> 00:37:44,120 Speaker 8: to pay a lot for a premium product or pay 809 00:37:44,239 --> 00:37:45,040 Speaker 8: less and watch ads. 810 00:37:45,239 --> 00:37:47,279 Speaker 6: All right, Kevin, good stuff, you can come back. You 811 00:37:47,360 --> 00:37:47,920 Speaker 6: passed the test. 812 00:37:48,000 --> 00:37:51,279 Speaker 4: Kevin Near, senior media associate analysts that Bloomberg can telepressure. 813 00:37:51,280 --> 00:37:53,200 Speaker 4: I didn't hire them, but Geitha did, so that's good 814 00:37:53,239 --> 00:37:53,880 Speaker 4: enough for me. 815 00:37:54,040 --> 00:37:54,560 Speaker 6: That's all I need. 816 00:37:54,920 --> 00:37:58,160 Speaker 4: He's here at Bloomberg Interactive Broker Studio, and most importantly. 817 00:37:57,840 --> 00:37:59,319 Speaker 6: He's based in New York City. 818 00:37:59,600 --> 00:38:00,640 Speaker 4: None this Princeton stuff. 819 00:38:00,640 --> 00:38:01,680 Speaker 6: You want to be a player, you got to be 820 00:38:01,760 --> 00:38:03,680 Speaker 6: in big town. That's what I always say. Kevin here, 821 00:38:03,719 --> 00:38:04,600 Speaker 6: Thanks for joining us here. 822 00:38:04,800 --> 00:38:09,279 Speaker 1: This is the Bloomberg Intelligence Podcast, available on apples, Spotify, 823 00:38:09,480 --> 00:38:12,640 Speaker 1: and anywhere else you'll get your podcasts. Listen live each 824 00:38:12,719 --> 00:38:15,879 Speaker 1: weekday ten am to noon Eastern on Bloomberg dot com, 825 00:38:16,200 --> 00:38:19,560 Speaker 1: the iHeartRadio app, tune In, and the Bloomberg Business app. 826 00:38:19,719 --> 00:38:22,680 Speaker 1: You can also watch us live every weekday on YouTube 827 00:38:22,920 --> 00:38:24,720 Speaker 1: and always on the Bloomberg terminal