Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside
Speaker 1: my co host Matt Miller.
Speaker 2: Every business day we bring you interviews from CEOs, market pros,
Speaker 2: and Bloomberg experts, along with essential market moven news.
Speaker 1: Bind the Bloomberg Markets Podcast on Apple Podcasts or wherever
Speaker 1: you listen to podcasts, and at Bloomberg dot com slash podcast.
Speaker 1: Matt Miller, Paul Sweeney here in a Bloomberg Interactive Broker studio.
Speaker 3: We are streaming on YouTube. Go check it out there.
Speaker 1: Search Bloomberg Global News and you'll get the feed there.
Speaker 3: Nancy Curtin joins us.
Speaker 1: She is a partner Global CEO and Head of Investment
Speaker 1: Advisory at Alti Global, based in London, but joining us
Speaker 1: live here in our Bloomberg Interactive Broker studio. Nancy, thanks
Speaker 1: so much for joining us here. I'm just gonna put
Speaker 1: I'm gonna ask you guys for your big picture perspective,
Speaker 1: because twenty twenty two you couldn't hide anywhere. Equities got crushed,
Speaker 1: bonds you got crushed This year better, particularly if you're
Speaker 1: in some big cap tech names. How are you, guys
Speaker 1: at ALTI Global looking at the market right now?
Speaker 4: Okay, Well, first of all, thank you very much for
Speaker 4: having me. Delighted to be here. First of all, we
Speaker 4: entered twenty twenty three thinking it would be a better
Speaker 4: year for risk assets. You know, back to back declines
Speaker 4: in stocks and bonds quite unusual. It's only happened about
Speaker 4: two percent of the dime in one hundred years. And
Speaker 4: also sentiment was incredibly verish. But where are we now,
Speaker 4: because now the market has risen, we've remain invested throughout
Speaker 4: the year. Actually we've increased risk exposure slightly. So where
Speaker 4: do we go from here? Look, trees don't grow into
Speaker 4: the skies, So the first comment is, you know, don't
Speaker 4: expect markets to be in a linear trend upward from here.
Speaker 4: And we've seen some wobbles already this morning. That is
Speaker 4: healthy a consolidation for markets. But what do we think
Speaker 4: we think, Look, the Fed will be successful in bringing
Speaker 4: inflation down. We already see some encouraging signs. Headline inflation
Speaker 4: three percent remembers nine percent a year ago, so that's encouraging.
Speaker 5: There's some sticky bits.
Speaker 4: In core inflation, but we do think the Fed will
Speaker 4: be successful in bringing inflation down. And looking to twenty
Speaker 4: twenty four, which is what we'll start to do a
Speaker 4: couple of weeks away September, we start to look forward
Speaker 4: to next year. We think the outlook for a FED pause,
Speaker 4: if not pivot, is encouraging for risk assets.
Speaker 2: But because of a recession, right, I mean, the FED
Speaker 2: can't raise rates five hundred and fifty bases points without
Speaker 2: pushing us into a recession.
Speaker 4: You know, let's talk about the reality of the data
Speaker 4: coming in has.
Speaker 5: Been incredibly encouraging.
Speaker 4: I can't say that there may not be a mild recession,
Speaker 4: but I'll tell you the soft landing narrative is getting
Speaker 4: some increased credibility from the economic data. Let's just take
Speaker 4: a first look at the consumption numbers. Pretty strong. Have
Speaker 4: you traveled lately? I mean it's boomy, Okay, so you
Speaker 4: know the consumer still has pent up savings from the pandemic.
Speaker 4: They are using this to travel and experience obviously goods
Speaker 4: less so. But actually, we think the interesting thing this
Speaker 4: year is the US economy has been much less interest
Speaker 4: rates since.
Speaker 5: What do I mean by that?
Speaker 4: Seventy five percent of mortgages over thirty years are below
Speaker 4: four percent. In other words, they locked in lower rates
Speaker 4: a couple of years ago, companies the same things locked
Speaker 4: in lower interest rates, net interest cost us a percentage
Speaker 4: of profitability has been declining, not rising, declining. Then we
Speaker 4: have some fiscal spending one and a half trillion. These
Speaker 4: are multi year programs, but that's additive. And finally, one
Speaker 4: of our long term themes is we think that companies
Speaker 4: will be investing, capex is likely to increase, and that
Speaker 4: will be a support for economic growth looking forward. So
Speaker 4: yet we could have a mild recession. But I have
Speaker 4: to say the soft landing is getting a lot of
Speaker 4: validation from the economic numbers.
Speaker 2: I have to push back on that. Paul Go, you
Speaker 2: don't want to though, right because you're hoping for a
Speaker 2: soft landing.
Speaker 3: I'm all in.
Speaker 2: I just feel like, you know, the curve, the three
Speaker 2: month ten year inversion is typically not this wrong. We've
Speaker 2: got M two money supply contraction and Gary shillings that
Speaker 2: we got the I just so I was hanging out
Speaker 2: with Gary Shilling on Sunday. But the thing is, I think,
Speaker 2: you know, the wealthy people might still have savings, but
Speaker 2: I feel like the bottom eighty percent maybe don't have
Speaker 2: any left, and we could be getting to the edge
Speaker 2: of a cliff.
Speaker 3: Here for them.
Speaker 4: Well, let's go into the capex spend because we haven't
Speaker 4: had capital expenditures in over a decade. Like companies, why
Speaker 4: you know, why do you need to invest when labor
Speaker 4: costs are like really low and money's free and commodity
Speaker 4: prices are a week But we think the companies will
Speaker 4: be investing. This is one of the surprises we think
Speaker 4: for economic growth ahead.
Speaker 5: Already.
Speaker 4: Capex in the second quarter GDP number was up ten percent.
Speaker 4: In the recent second quarter earnings, companies in the S
Speaker 4: and P reported a fifteen percent increasing capex. Why do
Speaker 4: I go on about capex because it expands the productive
Speaker 4: potential of the economy to surprise on the upside. And
Speaker 4: by the way, did you see the labor productivity numbers
Speaker 4: three point seven percent? Let me see three point seven percent.
Speaker 4: That's up from one point two in the first quarter.
Speaker 4: And remember labor productivity is a subtraction from inflation to
Speaker 4: get your unit labor costs. Okay, so let's go back
Speaker 4: to your inverted deal curve and decline and money supply. Sure,
Speaker 4: these are normally harbingers of recessionary activity, but I would
Speaker 4: also point to the fact that eal curves have begun
Speaker 4: to steepen in the last week or so. We think
Speaker 4: this will be a trend that will continue to see.
Speaker 4: And as I said, we think there are some solid
Speaker 4: things that will support economic growth that.
Speaker 5: Weren't there in the past.
Speaker 4: Keep a close eye on capex, on shoine of manufacturing activity,
Speaker 4: spending on jen Ai, spending on energy efficiency, and taking
Speaker 4: advantage of the fiscal stimulus.
Speaker 1: All right, so I've been overweight all the Miracle seven stocks,
Speaker 1: so I've just been killing it. Can I, now, you know,
Speaker 1: change the asset out and maybe go smaller, MidCap, try
Speaker 1: to take advantage of increased capital spending, increased economic growth.
Speaker 1: Can I take my profits in those big names.
Speaker 4: Well, I wouldn't take your profits, right because we really
Speaker 4: you know, the infrastructure layer of Jenai is in the
Speaker 4: early innings here. I would try to look more broadly
Speaker 4: beyond the Magnificent seven, those other companies that will contribute
Speaker 4: to development of the infrastructure layer. We can't have Jenai
Speaker 4: and large language models without an infrastructure layer. So we
Speaker 4: do need a lot of building there. But you're right,
Speaker 4: you know they're expensive. They've discounted a lot of good news,
Speaker 4: and so what we've done is we've leaned into the underperformers,
Speaker 4: particularly MidCap, less small cap, MidCap, more quality oriented, less leverage,
Speaker 4: more exposed to what I call this onshine of manufacturing
Speaker 4: theme cap x expend et cetera. So we've leaned into
Speaker 4: value and MidCap because they're forty percent cheaper than you are,
Speaker 4: Magnificent seven, and they trade at multi decade discounts versus
Speaker 4: history and large caps as well. So that's one of
Speaker 4: the things that we've done more recently.
Speaker 2: Maybe just buy the equal weight to S and P
Speaker 2: five hundred.
Speaker 3: That's so fun.
Speaker 2: I mean, if you think the rest, if you think
Speaker 2: the rest of the stocks are going to catch up
Speaker 2: to your mech spw ring, Yeah, equal weighted.
Speaker 1: Okay, all right, So what are some you know, we
Speaker 1: had the news today Moody's kind of dumping on the
Speaker 1: banks again.
Speaker 3: It seems like kind of old news.
Speaker 1: How concerned are you at all with the US banking
Speaker 1: system or maybe the global banking I'm sorry, where.
Speaker 5: Was Moody's back in March? I'm sorry?
Speaker 4: I mean, like months later we wake up and say,
Speaker 4: the small and regional banks have a bit of a well,
Speaker 4: there's you know, they're funding costs of risen and they've
Speaker 4: got exposure to commercial real estate a trillion and a
Speaker 4: half of that.
Speaker 5: That remains a risk, right, but.
Speaker 4: We've known that risk since March. That hasn't prevented markets
Speaker 4: from moving higher. We think this is a multi year development.
Speaker 4: In other words, we're we're not going to crash overnight
Speaker 4: from commercial real estate. But I do wonder where these
Speaker 4: rating agencies were back in March while we're doing the
Speaker 4: downgrades now.
Speaker 1: All right, So that's a way of saying that you're
Speaker 1: not overly concerned about the US banking system or the
Speaker 1: regional bank It is.
Speaker 5: It is.
Speaker 4: Look, you know, banking is hugely important to economic growth,
Speaker 4: and so you know regional banks are you know where
Speaker 4: you go small and medium sized businesses. And we do
Speaker 4: think lending will be more constrained. We've seen that in
Speaker 4: the SLEWS number seen your Loan Officer survey have come
Speaker 4: down a bit. But we don't think it's enough to
Speaker 4: slow the economy certainly into a deep recession, right, you know,
Speaker 4: mild recession, slow down, soft landing. It's all a bit nuanced.
Speaker 4: But don't forget cap expending, which we think will.
Speaker 1: Be sad is a takeaway from today, No question about it.
Speaker 1: You're based in London. How are things in London? Because
Speaker 1: I'm not going because it's too crowded.
Speaker 4: Okay, tourism is on fire. You go down Region Street,
Speaker 4: you can't even move. But look London, as I call
Speaker 4: a special child category. It's got lots of issues from
Speaker 4: Brexit to higher level of inflation, to slower growth to
Speaker 4: have you seen interest rates? Ah, God, don't get me started.
Speaker 4: It also has you know, a stock market that's very
Speaker 4: commodity and oil sensitive and bank sensitive.
Speaker 5: So it's a bit of a special child.
Speaker 6: Now.
Speaker 4: In terms of international exposure, we like Europe much more.
Speaker 4: We're getting exposure to industrial shares, cappac spend, luxury still
Speaker 4: continues to be quite strong. Our positive vertings growth in
Speaker 4: Europe despite the fact that economic growth has been pretty muted.
Speaker 5: So that's been where we've had exposure.
Speaker 3: All right, Nancy, thanks so much for coming in.
Speaker 1: Really appreciate you coming in live into our Bloomorg Interactive
Speaker 1: Broker studio.
Speaker 3: What's our takeaway today?
Speaker 2: We have to get Nancy back, is my takeaway. My
Speaker 2: takeaways We have to get her back. But Capex it's
Speaker 2: on that keepech for sure.
Speaker 1: Nancy's a Partner Global CIO head of Investment Advisor read
Speaker 1: Alte Global based in London, but again joining us.
Speaker 3: Here in our Bloomberg studios and Eyork. We appreciate that.
Speaker 7: You're listening to the team.
Speaker 8: Ken's our live program Bloomberg Markets weekdays at ten am
Speaker 8: Eastern on Bloomberg dot Com, the iHeartRadio app, and the
Speaker 8: Bloomberg Business or listen on demand wherever you get your podcasts.
Speaker 1: Matt Miller, Paul Sweeney here in the Bloomberg Interactor Broker Studio. Yes,
Speaker 1: we are streaming live on YouTube and go over and
Speaker 1: check it out. Just search Bloomberg Global News. Let's talk transportationation,
Speaker 1: Let's talk trucks, all that fun stuff. Lee Claskow joins us.
Speaker 1: He sector head Senior annalys Freight, Transportation and Logistics. That's
Speaker 1: a big title. It's a lot bigger than when I
Speaker 1: knew him. But he's a Bloomberg intelligence. He does it all,
Speaker 1: from the ships to the trucks, to the to the
Speaker 1: railroads and all that stuff in between.
Speaker 3: Ups Lee.
Speaker 1: United Parcel Service Big Brown had some disappointing numbers. My
Speaker 1: question is are there disappointing numbers and their guidance Is
Speaker 1: it a result of their new Teamsters contract or is
Speaker 1: it reflecting economy slowing down? Maybe people aren't getting as
Speaker 1: many boxes as they used to. What's driving it?
Speaker 9: Right?
Speaker 10: Well, first off, if you can call me can whenever
Speaker 10: you want.
Speaker 3: But you know, they had actually.
Speaker 2: A barn of fire, Lee Clasgow barn of fire.
Speaker 10: They had actually a pretty decent print on the second quarter,
Speaker 10: but they did guide down and you know, we expect
Speaker 10: the increase in costs from that new labor agreement is
Speaker 10: going to be maybe a dollar in EPs headwind. That's
Speaker 10: kind of really how we're thinking about it. Obviously, that's
Speaker 10: assuming they're not going to be able to mitigate that
Speaker 10: through productivity gains pricing, and that is what they're going
Speaker 10: to do. You know, management said that probably in the
Speaker 10: spring they're gonna they're gonna.
Speaker 11: Probably lay out how they're going to get back.
Speaker 10: To twelve percent margins on their domestic business. And that's
Speaker 10: something that you know, we're relatively bullish about because UPS
Speaker 10: has shown their ability to really embrace not only technology,
Speaker 10: but also to go into verticals or businesses that are
Speaker 10: a lot more profitable, like healthcare or the small to
Speaker 10: mid sized shipper.
Speaker 2: You know, I heard you on surveillance this morning talking
Speaker 2: about this ups story as well as the Yellow Yellow story.
Speaker 2: And I not note that they got emergency hunting last night.
Speaker 2: Did that's seventeen percent to nice?
Speaker 3: Is that not usury? Is that not a usury level?
Speaker 6: Yeah?
Speaker 10: I mean what I know, I don't cover Yellow, but
Speaker 10: what I know about the deal is that it's just
Speaker 10: it's debt, so just to finance them while they're trying
Speaker 10: to sell everything. The government is supposed to be made
Speaker 10: whole before they're able to get paid on that seventeen percent.
Speaker 11: So I mean, what do they have refinance?
Speaker 2: Just just selling their trucks and warehouses, right because they're
Speaker 2: not any customer that was going to use Yellow. As
Speaker 2: soon as they heard there was going to be a strike,
Speaker 2: was like, let's find another trucker right now.
Speaker 11: So yeah, this is not a restructuring. This is liquidation.
Speaker 10: And their trucks are old, their trailers are old. If
Speaker 10: you see them on the road relative to its peers,
Speaker 10: you'd be like, that's not a great looking truck. They're
Speaker 10: very old. They've had issues with that for.
Speaker 7: A long time.
Speaker 10: They don't own a lot of the facilities that they operated,
Speaker 10: and they lease a lot of them, but there are
Speaker 10: going to be some facilities that they could they could
Speaker 10: sell and to raise that money to pay back and
Speaker 10: only the government, but also that new round of financing.
Speaker 2: All right, So we'll wrap that up and put it
Speaker 2: to the side. In terms of ups, Can they not
Speaker 2: raise prices significantly.
Speaker 11: Well, they can.
Speaker 10: Well, let's take a step back. They can raise prices
Speaker 10: which will mitigate the inflationary pressures that they're facing. The
Speaker 10: first year of the new labor contract, there's a big
Speaker 10: step up in costs for them, so it kind of
Speaker 10: barbells in the first year. In the five year in
Speaker 10: terms of the step up, it's around a three point
Speaker 10: three k gar in terms of inflationary pressure, and that
Speaker 10: includes not only the wages that they're getting paid, but
Speaker 10: also the benefits. So if you look at it through
Speaker 10: the whole five years, it's really not that bad. But
Speaker 10: the first step up is going to be a big headwind.
Speaker 10: So you know, we think that they can go back
Speaker 10: to earnings growth in twenty twenty four.
Speaker 3: Matt's wondering what Caker is, but we'll get back to
Speaker 3: that later.
Speaker 2: I mean, I mean, this is just one of those
Speaker 2: phrases that you throw around and I think it's another
Speaker 2: thing that I always forget, But I'll.
Speaker 10: Let compound an annual growth rate.
Speaker 2: Okay, bo, there you go. You to bring it back
Speaker 2: up in this next question. I think a lot of
Speaker 2: listeners are like, hey, thanks Matt, Thanks Matt.
Speaker 7: I didn't know what.
Speaker 3: Kegar was either, exactly Matt's favorite.
Speaker 1: One of Matt's favorite functions on the Bloomberg Kriminal is
Speaker 1: comp get comparative returns.
Speaker 3: So I put that up.
Speaker 1: For UPS and FedEx. UPS over the last five years
Speaker 1: is compounding and annual growth in the stock price eleven
Speaker 1: point seventy five percent, a little bit better than they
Speaker 1: s and p FedEx only three point four percent. Why
Speaker 1: has UPS been rewarded more in the stock market versus FedEx?
Speaker 3: Is it a different model?
Speaker 10: Yeah, it really depends on the timeframe you're looking at,
Speaker 10: Like this year, FedEx has been on fire relative to UPS.
Speaker 2: But I like the comp function because it just defaults
Speaker 2: to five years, and I think that's a great time
Speaker 2: period to look at.
Speaker 10: And over that five year period, you know, UPS started
Speaker 10: right sizing their network, selling businesses that maybe didn't make
Speaker 10: a lot of money, like they're less than truckload business.
Speaker 10: The same business that Yellow was in LTL LTL less
Speaker 10: than truckload and they were a unionized carrier, and they
Speaker 10: were they were getting on a good year one hundreds
Speaker 10: to two hundred basis points in margins. It was just
Speaker 10: not a great business. So they sold that. They're investing
Speaker 10: heavenly in technology. They are automating their facilities, you know,
Speaker 10: they're they're reducing the numbers of o's or mistakes like
Speaker 10: if the wrong shipment goes on the wrong.
Speaker 11: Truck by half. They're just they're.
Speaker 10: Doing really just a great job in their investment cycle.
Speaker 10: And not only that, like I said earlier, they're focusing
Speaker 10: on more profitable businesses. They're focusing on the healthcare businesses
Speaker 10: and the small to mid sized businesses.
Speaker 6: They had a.
Speaker 10: Somewhat of an outsider. She was a board member, Carol Toomey.
Speaker 10: She came into CEO a couple of years ago. I
Speaker 10: think it's like two years nep by now, and she's
Speaker 10: really done an excellent job. People were very you know,
Speaker 10: kind of not sure if she was the right person,
Speaker 10: but she's proved all of her critics wrong and UPS
Speaker 10: has really been operating on all cylinders.
Speaker 2: But now if their costs are going to go up
Speaker 2: and they have to raise prices. Does this give FedEx
Speaker 2: a chance to take a way more share and do
Speaker 2: better well?
Speaker 10: UPS on their call this morning they called out that
Speaker 10: about one point two million packages per day were diverted
Speaker 10: because of the potential for the strike, and they said
Speaker 10: about a third of that went to FedEx, about a
Speaker 10: third of that went to the US Postal Service, and
Speaker 10: another third once is regional carriers that you and I
Speaker 10: probably don't know the names of smaller players, and you
Speaker 10: know they will probably win back some of that freight FedEx.
Speaker 11: Some of it might be.
Speaker 10: Sticky, but at the end of the day, you know,
Speaker 10: a shipper will use a particular FedEx or UPS not
Speaker 10: just on price, but a lot of it has to
Speaker 10: do its service. And if they were with UPS before
Speaker 10: because of service, are probably going to go back to
Speaker 10: UPS real quick.
Speaker 3: Were we in a supply chain? Are we kind of fixed?
Speaker 3: Do you think just a global supply chain?
Speaker 7: Right?
Speaker 3: What are something?
Speaker 11: Is always it fixed?
Speaker 8: Yeah?
Speaker 10: No, because every week it's something new, right, Okay, Like
Speaker 10: it's whether the Canadian West Coast ports just got you know,
Speaker 10: that just ended, So there's always something different, you know,
Speaker 10: the Panama Canal, there's not enough water for.
Speaker 3: Ships, Is that right?
Speaker 12: Uh?
Speaker 10: Yeah, they have They have to operate with less freight
Speaker 10: on them, and it makes it a lot more expensive
Speaker 10: than to send the freight through the Panama Canal.
Speaker 1: There's a great book I read about the building of
Speaker 1: the Panama can I forget who wrote it, but it
Speaker 1: is an awesome book.
Speaker 3: It's a great story. Makes me I want to go
Speaker 3: to the Panama.
Speaker 11: Can app When did you read that? I'm going to
Speaker 11: guess you read that twenty years ago.
Speaker 3: No, couple three years ago, maybe before you.
Speaker 7: There's a drought there the lake that fills it up.
Speaker 7: Is that's the problem? All right?
Speaker 1: Ten seconds, Leek clasical transportation analyst Bloomberg Intelligence joins us.
Speaker 8: You're listening to the tape cans Are live program Bloomberg
Speaker 8: Markets weekdays at ten am Eastern on Bloomberg Radio, the
Speaker 8: tune in app, Bloomberg dot Com, and.
Speaker 7: The Bloomberg Business App.
Speaker 8: You can also listen live on Amazon Alexa from our
Speaker 8: flagship New York station just say Alexa playing Bloomberg eleven thirty.
Speaker 3: All right, what kind of the news today?
Speaker 1: One of the news drivers this morning has been Moodies
Speaker 1: downgrading the credit ratings of a bunch of the regional
Speaker 1: super regional banks. It seems like where were you when
Speaker 1: we needed your butt? Here we are Chris Whalen joins us,
Speaker 1: Chairman of Whale and Global Advisors. We always look to
Speaker 1: talk to Chris, particularly about the banks. I mean, Chris,
Speaker 1: help us out. You're an expert in this rating stuff
Speaker 1: in the banks. Chris, what do you think about Moodies
Speaker 1: and their call here?
Speaker 13: The Moody's action today was very specific. They were looking
Speaker 13: at certain banks and they took the decision to downgrade them.
Speaker 13: What I think, and that's going to come more. We're
Speaker 13: going to see a lot more of this because they're
Speaker 13: adjusting their entire ratings complex for banks to the changes
Speaker 13: we see in the market and to the higher interest rates.
Speaker 13: So the basil obviously is going to reduce profitability. So
Speaker 13: there's a lot of negatives that they're adjusting to. But
Speaker 13: the thing we have to be aware of is that
Speaker 13: when you see a sovereign downgrade for the United States,
Speaker 13: and we can no longer ignore a S and P
Speaker 13: as we have for the past decade. Right, we have
Speaker 13: two of them now, so everybody's going to have to
Speaker 13: use double level plus instead of triple A. And what
Speaker 13: that means is that the big banks, the ones that
Speaker 13: get uplift because there's an assumption of sovereign support, are
Speaker 13: going to go down a notch. And and I think
Speaker 13: you can assume all the agencies will have to adjust.
Speaker 13: In Japan they give you two notches for the big banks.
Speaker 13: In Europe they give you two notches because there's an
Speaker 13: assumption that they're going to bail them out. In the
Speaker 13: US not so much. You know, if any man for why.
Speaker 2: Not after what we just saw, you know, we got
Speaker 2: we got dec.
Speaker 13: You know, we're tempting fate. When we have politicians who
Speaker 13: think they can borrow money forever and who go around
Speaker 13: worried about global warming and ESG instead of doing their jobs,
Speaker 13: then this is what happens. People in the Buiden administration
Speaker 13: were terribly surprised. And it just shows you how how
Speaker 13: there's a lack of seriousness in Washington on fiscal issues.
Speaker 13: It's stunning on both sides. By the way, By the.
Speaker 2: Way, Chris I was, I sat down with Gary Shielding
Speaker 2: to talk about a lot of this stuff on Sunday afternoon, right,
Speaker 2: And the one the one question or the one problem
Speaker 2: that we don't really see clearly is the possibility of
Speaker 2: a debt bomb. You know, if we're continually running trillion
Speaker 2: dollar deficits, yeah, zero percent or at two or three percent,
Speaker 2: it's no big deal. But once you climb to five
Speaker 2: and a half to six, it starts to get worrisome.
Speaker 2: So what point is it too difficult for the United
Speaker 2: States to service it's growing debt.
Speaker 13: Well, it's not just the United States. There's a whole
Speaker 13: raft of sovereign issuers underneath the US, including all the
Speaker 13: agencies you have, all the states and the cities which
Speaker 13: ultimately depend on support from the federal government implicitly. Right,
Speaker 13: So there's a lot going on. And if we do
Speaker 13: a funding, say at the beginning of next year, where
Speaker 13: we're also doing an emergency bailout for a couple of
Speaker 13: cities that have been downgraded and can't issue bonds anymore
Speaker 13: at the old spreads, right, So the pricing is going
Speaker 13: to continue to change. Obviously throughout the whole complex. Pricing
Speaker 13: is going up credit and then some of them are
Speaker 13: going to be downgraded. I think New York City is
Speaker 13: going to be downgraded. So we'll be back in the seventies,
Speaker 13: you know, and I don't think the US is ready
Speaker 13: for that because we have so much debt at the
Speaker 13: federal level.
Speaker 3: But it makes sense, you know what I thought. I
Speaker 3: saw Amanda Gordon, who.
Speaker 2: Covers like Hoidy Toydy parties, right, big charity events out
Speaker 2: at the Hamptons and stuff. She had a piece out
Speaker 2: covering John Paulson who talked about the rising crime that
Speaker 2: he's witnessing here in New York and talking about how
Speaker 2: all his friends are moving down to Florida. Then I
Speaker 2: saw another piece that New York is going to open
Speaker 2: a migrant relief center on Randall's Island for another I
Speaker 2: think two thousand immigrants, but we're already supporting fifty seven
Speaker 2: two hundred. If you have the big tax payers moving
Speaker 2: to West Palm Beach and we're bringing in, you know,
Speaker 2: tens of thousands of immigrants, is it going to be
Speaker 2: a problem for our tax base and for rising cost.
Speaker 13: Well, obviously, you know New York is predicated on having
Speaker 13: a very strong commercial foundation. They're the ones who pay
Speaker 13: for everything, all the infrastructure you see in New York City,
Speaker 13: the metro everything. You can't do it as a residential community, man,
Speaker 13: You just can't. There's not enough revenue. And if you
Speaker 13: were to tax the owners of apartments or you could
Speaker 13: call them tenants, really they are in the same boat.
Speaker 13: You can't possibly tax them enough to pay for everything.
Speaker 13: So I think you'll see reduction in services. The progressive
Speaker 13: mandate that says everybody is owed housing and support as
Speaker 13: soon as they show up, and you know a smile, right,
Speaker 13: is going to change because I think all of these
Speaker 13: legacy cities in the northern tier are going to have
Speaker 13: to downsize rather dramatically. It's going to look like Detroit
Speaker 13: because remember, you know these cities were here for industrial
Speaker 13: purposes two centuries ago. Why are they here today? What's
Speaker 13: their economic Aggressionale right, Texas knows why it's here today.
Speaker 13: They're here to make money. But I'm not sure you
Speaker 13: want to live down there. You know what's so funny
Speaker 13: is a lot of my business friends have moved south
Speaker 13: to Florida and Texas, but they don't spend the summer there.
Speaker 2: No, all my friends who moved to Florida keep track
Speaker 2: of the days that they're here in New York, like
Speaker 2: I can't stay for another three days or else I'm
Speaker 2: going to get text.
Speaker 13: But listen, there are literally hundreds of thousands, if not
Speaker 13: millions of people who work in mortgage finance and real
Speaker 13: estate and everything else who have moved out of California
Speaker 13: New York and have gone to Texas and Florida because
Speaker 13: of cost. They literally cannot have a person servicing and
Speaker 13: performing loan in California today. Too expensive. You might be
Speaker 13: able to do distress assets, but you certainly can't do
Speaker 13: bread and butter, you know, servicing, because it's just so
Speaker 13: expensive to create that seat for that employee. Can't do it.
Speaker 13: All right, Well, these states have to come up with
Speaker 13: a reason to exist. I don't care whether it's California,
Speaker 13: New York, Illinois. They all have to go back to
Speaker 13: the drawing board, say why are we here? How do
Speaker 13: we make money? You know? And that's gonna be a
Speaker 13: tough conversation in New York. I think it's.
Speaker 3: Probably gotta start in Washington, many would say. Chris Whalen.
Speaker 1: Chris Whalen is a chairman Whale and Global Advisors. Give
Speaker 1: us us some color here on kind of what we
Speaker 1: heard from Moody chair at the bank downgrade and Chris
Speaker 1: suggesting that it's not just the US government, but it
Speaker 1: will trickle down to you know, everything underneath the US government,
Speaker 1: including states and cities, and that's where we might you know,
Speaker 1: really see something.
Speaker 8: You're listening to the team can's are live program Bloomberg
Speaker 8: Markets weekdays at ten am Eastern on Bloomberg dot com,
Speaker 8: the iHeartRadio app and the Bloomberg Business app, or listen
Speaker 8: on demand wherever you get your podcasts.
Speaker 1: Nancy Tangler, c IO at Laffer Tangler Investments, joins us. Nancy,
Speaker 1: thanks much for joining us. Tg l R is a
Speaker 1: new ETF. Tell us about it.
Speaker 12: Oh gosh, thanks so much. Pre advertising, Yeah, we much
Speaker 12: TTLR today. It's an actively managed dividend growth strategy. So
Speaker 12: we focus and always have by the way, since nineteen
Speaker 12: eighty four when I got into the business. We focus
Speaker 12: on relative yield because management at large cap companies set
Speaker 12: the dividend policy based on what they think long term
Speaker 12: sustainable earnings powers is. So it's a great shortcut. We
Speaker 12: don't have to worry as much about earning estimates as
Speaker 12: we do. Are they able to pay the dividend? Are
Speaker 12: they able to grow the dividend? And then being an
Speaker 12: industry leader, which are the names that we own with
Speaker 12: great management teams that rounds out the portfolio, so it
Speaker 12: acts differently than maybe a more traditional equity income strategy.
Speaker 12: We don't have utilities in this portfolio. We have one
Speaker 12: rate because we're looking for growth at the end of
Speaker 12: the day, just like every other investor.
Speaker 2: So Nancy Matt Miller here, Hi, thanks for joining us.
Speaker 2: I'm mat What what holdings do you have in the ETF.
Speaker 2: What are the biggest stocks that you're allocating.
Speaker 12: Well, So one of our largest holdings is d which
Speaker 12: you know we bought at because of a great capital
Speaker 12: allocation plan they reached at one point they were returning
Speaker 12: almost one hundred percent of free cash flow to investors.
Speaker 12: But in addition, as time has passed, we're going to
Speaker 12: get VMware in this transaction as well that should be
Speaker 12: closing soon. And the AI bump, which has really driven
Speaker 12: the stock this year, but dividend growth has been five
Speaker 12: year annualized about twenty four percent. So that's that's one
Speaker 12: of our largest holdings. We are overweight tech in this portfolio,
Speaker 12: which you maybe wouldn't normally think about in a dividend
Speaker 12: growth strategy, but there actually are a lot of great companies.
Speaker 12: Oracle would be another one that pay the dividend, you know,
Speaker 12: have a yield about in line with the market a
Speaker 12: little bit above, and they're growing in about twelve percent
Speaker 12: a year. And oh, by the way, they're probably the
Speaker 12: cheapest AI generative AI cloud computing platform. So that's kind
Speaker 12: of given the stock a new burst.
Speaker 3: So we AI antie.
Speaker 2: A lot of people have been saying AI bubble to
Speaker 2: me over the past couple of days. Analysts on the
Speaker 2: street are using that term.
Speaker 3: Do you think this is an AI bubble?
Speaker 12: I don't. I think a couple of things. First of all,
Speaker 12: we know we have a very tight labor force. You're
Speaker 12: not dragging the baby boomers back in with the networth
Speaker 12: of about seventy five trillion collectively, so we're going to
Speaker 12: be living with this, with this tight labor market for
Speaker 12: some time. And if you go back and look historically
Speaker 12: in other periods of tight labor markets, what you'll see
Speaker 12: is that tech spending as a percent of GDP goes
Speaker 12: up pretty dramatically one to two percent. And then in
Speaker 12: addition to that, you get the earnings flowing through to
Speaker 12: the company. So technology stocks have always outperformed in period
Speaker 12: previous periods of labor shortage. This one is predicted by
Speaker 12: the government to go from twenty fifteen where they think
Speaker 12: it began all the way through twenty forty seven. So
Speaker 12: I would use weakness in these stocks to add I mean,
Speaker 12: the question is can they monetize. Microsoft has shown us
Speaker 12: that they intend to monetize a generative AI with their
Speaker 12: co pilot offering.
Speaker 1: So for this TF, what's a I guess, what's a
Speaker 1: model name to put in there? In terms of dividend
Speaker 1: yield and dividend growth? What do you guys look for
Speaker 1: in order to put that into this portfolio.
Speaker 12: So we start with the valuation, which is relative yield,
Speaker 12: and what we're looking for is our companies who have
Speaker 12: a dividend paying culture, so they are committed to the dividend.
Speaker 12: They sometimes state, as McDonald's does, that it's a portion
Speaker 12: of what they think long term sustainable earnings power is,
Speaker 12: but most of these companies it's implied. So we own
Speaker 12: some of the usual suspects that you would expect to
Speaker 12: see in an equity income strategy. So home Depot would
Speaker 12: be an example. We also own we just have been
Speaker 12: adding to our positions in Starbucks, we own Walmart. But
Speaker 12: then we also have this exposure overweight a pretty big
Speaker 12: overweight to industrials and then a modest overweight to technology.
Speaker 12: So these companies have long histories of paying the dividend
Speaker 12: and it gives us information as well as it contributes
Speaker 12: pretty materially the total turn, especially the dividend growth part.
Speaker 2: Did you do you know channel checks? Looking at the
Speaker 2: appetite for new ETFs. Obviously last year was a banner
Speaker 2: year for ETF launches. We've seen them slow down a
Speaker 2: little bit this year. Still strong growth though. What's your
Speaker 2: view on the ETF nancy as an investment vehicle?
Speaker 12: So I just just finished the second edition of my book,
Speaker 12: The Women's Guide to Successful Investing, and has a whole
Speaker 12: chapter on ETFs. I think they play a very important
Speaker 12: role in investors' portfolios. This particular strategy would serve as
Speaker 12: a core that you would sort of decorate around with
Speaker 12: more aggressive, higher risk ETFs. We launched it because our
Speaker 12: minimums are pretty high and we were turning away a
Speaker 12: lot of people that were interested in working with us.
Speaker 12: So this is one way we can, you know, make
Speaker 12: our strategy accessible to them, and it's been it's been
Speaker 12: an interesting experience and the launch went off pretty well today.
Speaker 12: So we're pretty happy about that.
Speaker 2: The expense ratio is a little bit steep, ninety five
Speaker 2: basis points. Does that stay there or do you bring
Speaker 2: it down once you get more flows.
Speaker 12: I think we bring it down. I mean I also
Speaker 12: wrote a whole chapter on how fees are the biggest
Speaker 12: erodor of total return and so you need to pay
Speaker 12: attention to that. So we're very committed in our in
Speaker 12: our wealth practice, and then with this fund to be
Speaker 12: a reasonable access point for individuals and to add value
Speaker 12: above and beyond the benchmark, which we've been able to
Speaker 12: do historically in our separately managed accounts.
Speaker 2: I thought, Paul, we could ask Nancy about Apple, you know,
Speaker 2: because it's been it's a bug in your bonnet.
Speaker 1: It is to be in your bonnet exactly. So Nancy,
Speaker 1: you look at you mentioning your overweight tech. How frustrating
Speaker 1: is it to see a company as great as Apple
Speaker 1: with a cash flow it has to pay a dividend
Speaker 1: less than one percent.
Speaker 12: I know when we got into that stock, this is
Speaker 12: the crazy thing. I don't think anyone remembers. This was
Speaker 12: at three percent and twenty thirteen. It was above the
Speaker 12: tenure at that time, and they were growing the dividend,
Speaker 12: So we actually began accumulating our positions that at that
Speaker 12: point added to it over the years. Have basically sold
Speaker 12: the majority of our holdings. But this particular ETF does
Speaker 12: have a small allocation, about two and a half percent
Speaker 12: to that particular stock, and I think it is important
Speaker 12: that management continues to grow the dividend, but they could
Speaker 12: continue to grow it in a lot more aggressive fashion.
Speaker 12: So I am a little bit frustrated by that and
Speaker 12: some of the other great you know technology companies, cloud
Speaker 12: computing like Google and even Amazon. The only way you
Speaker 12: can generate income off of those is to sell covered calls,
Speaker 12: So but we're not doing that in this Do buybacks?
Speaker 2: Do cash buybacks make you feel any better?
Speaker 12: I mean yes, but I mean it's more sentiment in
Speaker 12: my view, just like splitting a stock. But yeah, like
Speaker 12: Service Now just announced they are engaging in their first
Speaker 12: share by back. You know that's going to put a
Speaker 12: floor under the stock at some point. But so we
Speaker 12: look at that. It's important to us, but it's not
Speaker 12: our overriding concern. And when we're when we're looking for
Speaker 12: new names.
Speaker 1: Yeah, looking at Apple, the indicated yield zero point five percent,
Speaker 1: that's the bad news. I guess the good news is
Speaker 1: they've five year net growth seven point two six percent,
Speaker 1: so they are growing it. But again a lot of
Speaker 1: folks like myself think we could see we should see you,
Speaker 1: you know, to two and a half three percent divid
Speaker 1: in yield on that name, but that's not how they
Speaker 1: view their use of cash. Nancy Tangler, thanks so much
Speaker 1: for joining us. Nancy is the CIO of Laffertangler Investments
Speaker 1: and their new ETF out today looking at dividends and
Speaker 1: dividend growth. Tg l R is the ticker you're listening.
Speaker 8: To the tape. Catch are live program Bloomberg Markets weekdays
Speaker 8: at ten am Eastern on Bloomberg Radio, the tune in app,
Speaker 8: Bloomberg dot Com, and the.
Speaker 7: Bloomberg Business App.
Speaker 8: You can also listen live on Amazon Alexa from our
Speaker 8: flagship New York station Just say Alexa, playing Bloomberg eleven.
Speaker 1: Matt Miller, Paul Sweeney live here in the Bloomberg Interactive
Speaker 1: Broker Studio.
Speaker 3: We are streaming on.
Speaker 1: YouTube, so just head over to YouTube and search Bloomberg
Speaker 1: Global News and that'll bring you to the video feed.
Speaker 1: I want to get right to our next guest, Margie
Speaker 1: Petel senior portfolio manager a all Spring Global Investments, joins us,
Speaker 1: marg I want to get the benefit here of your experience.
Speaker 1: Here we're pretty much through earnings for this cycle. What
Speaker 1: are your takeaways?
Speaker 14: Well, once again, the second quarter surprised on the upside
Speaker 14: like the first quarter did. Shows that companies are in
Speaker 14: good shape. Revenues are okay, profit margins are following up,
Speaker 14: which is very important, and really there is no saw
Speaker 14: in the companies are seeing any kind of a broad
Speaker 14: brush decline and economic activities. So the outwork for third
Speaker 14: quarterbooks at least reasonable, so maybe better than people have
Speaker 14: been thinking. And the whole thought or recession once again
Speaker 14: seems to be be pushed out a little bit over
Speaker 14: the horizon.
Speaker 2: So Margo, when are you When is your expectation or
Speaker 2: a recession? Because all the signs are there, and I
Speaker 2: realized that the current and backward looking data still aren't
Speaker 2: as bad. On the other hand, the Fed raised interest
Speaker 2: rates five hundred and fifty basis points in like a
Speaker 2: year and a half, so it's coming right.
Speaker 14: Well, it's coming that we may have to wait longer
Speaker 14: than people think. I think two several reasons. One, corporations
Speaker 14: has spent the last decade of near zero rates, restructuring
Speaker 14: the balance sheets, so they really aren't a sensitive to
Speaker 14: higher short term rates as they have been in previous cycles.
Speaker 14: Same thing with consumers who are having a little bit
Speaker 14: of a slow down in housing, but many homeowners are
Speaker 14: able again to refinance, locking long term low rates on
Speaker 14: the houses, so they're not actually heard. And in fact,
Speaker 14: i'd say the margins consumers are probably benefiting from getting
Speaker 14: higher rates on their savings. With unemployment at three point
Speaker 14: six percent, it's very, very hard to say that we're
Speaker 14: on the Brinker recession, and especially when there's no sector
Speaker 14: of the economy you can point to that's about ready
Speaker 14: to tumble distress to feed over into some kind of
Speaker 14: a general recession. So I just don't see a recession
Speaker 14: any time in your time.
Speaker 1: Well, margre given that background, is it reasonable for some people,
Speaker 1: like in the fixed income space, maybe take on some
Speaker 1: incremental risk in terms of maybe moving out in duration,
Speaker 1: maybe even moving to high yield.
Speaker 3: How do you think about that?
Speaker 14: Well, high yield has not been very risky last year
Speaker 14: or this year. It's actually still the best performing part
Speaker 14: in the fixed income market when you look at maturity
Speaker 14: adjusted and I think it will still be probably above
Speaker 14: average compared to treasuries. The way I look at treasuries,
Speaker 14: we have such an enormous amount of supply that has
Speaker 14: to come, that has to be absorbed. That says to
Speaker 14: be that we may have a relative scarcity of corporate
Speaker 14: credits that people would like to buy versus treasuries. So
Speaker 14: we might actually see old spreads, the amount of extrebo
Speaker 14: to get in corporates over treasuries shrink from these levels.
Speaker 14: And remember defaults throwing a little over three percent, So
Speaker 14: even in the high old market, you're not seeing much distress.
Speaker 1: So all right, if no real recession this year, I mean,
Speaker 1: how should we think about this equity market, which has
Speaker 1: really been driven this year by those magnificent seven stocks.
Speaker 1: Do we start to try to rotate maybe out of them,
Speaker 1: or maybe try to diversify way out of them into
Speaker 1: some mid cap stocks, maybe some cyclical names.
Speaker 14: Well, I still think the better trade is with larger
Speaker 14: cap stocks because we don't really know what's going to happen. Secondly,
Speaker 14: it looks as if growth in the second half of
Speaker 14: the year will continue to be I think very very modest,
Speaker 14: so high growing companies will be hard to find so
Speaker 14: I think that some of the very large cap stocks
Speaker 14: have been favorites so far this year may well continue
Speaker 14: to perform because they still have the guaranteed growth. So
Speaker 14: we're looking more for large cap companies where they have
Speaker 14: either an industry that's on the secular up swing or
Speaker 14: looks as if they can continue to have above their maturities.
Speaker 2: That's pretty amazing because it seems like Margie the biggest companies.
Speaker 3: On the S and P five hundred.
Speaker 2: Then you know Apple, Microsoft, Amazon, and Nvidia, Alphabet Meta,
Speaker 2: maybe Tesla. These companies you're looking at as growth companies
Speaker 2: but also in a sense safe havens.
Speaker 14: Well that's right, and ever since the first quarter when
Speaker 14: they all produce pretty good earnings, they have act to
Speaker 14: a safe haven. Certainly they have enormously liquid balance sheets
Speaker 14: that they are safe haven. And I think from here
Speaker 14: on the market's going to look at these stocks more individually.
Speaker 14: For example, we saw Apple really come down a bit
Speaker 14: since they've reported rather disappointing results, and the other some
Speaker 14: of the other fag names of Microsoft, Meta have produced
Speaker 14: very good results, and so those have continued to tuggle
Speaker 14: on in advance. So we think it's really going to
Speaker 14: be determined by results. Are these high growing stocks still
Speaker 14: high growing or any of them running into roadblocks that
Speaker 14: may take them down, So we think it'll be more individual.
Speaker 14: We still think in general the larger companies will tend
Speaker 14: to do well because they have all the strengths to
Speaker 14: operate in a low growth market.
Speaker 3: Margy.
Speaker 1: Earlier today, Matt and I were talking with a guest
Speaker 1: who's firm launched an ETF today that focuses on dividends,
Speaker 1: dividend growth, and dividend yield.
Speaker 3: How do you think about dividends?
Speaker 14: Well, I think dividends are nice, and in a slow
Speaker 14: growth market, which I think will now be in, probably
Speaker 14: dividends will be a bigger component of total return for
Speaker 14: stocks than we've seen over the last say five years
Speaker 14: or so. However, I still think it comes down to
Speaker 14: individual stocks, not so much a dividend rate, because often
Speaker 14: stock set up high dividend yields are likely to be
Speaker 14: equity under performers. Stocks of low dividends are likely to
Speaker 14: raise their dividends over time. So rather than ETF one
Speaker 14: size fits all, we'd rather just look at companies that
Speaker 14: have we think the ability to raise their dividends or
Speaker 14: reasonable dividends for the growth rate or likelihood to raise
Speaker 14: their dividends.
Speaker 2: Are those companies going to be some of the same
Speaker 2: that are the Magnificent seven? I mean, are they going
Speaker 2: to be growth companies, safe havens and able to raise dividends.
Speaker 14: Well, I think companies are pretty cautious about raising their dividends,
Speaker 14: more so than buying back stock. So we still think
Speaker 14: that the technology sector will have companies that raise their dividends.
Speaker 14: We think the industrial sector has turned the corner and
Speaker 14: we think they're likely to have higher cash flow and
Speaker 14: raiser dividends. And even in some of the healthcare names
Speaker 14: healthcare books as if it's under a cloud hangover from
Speaker 14: COVID and different things. But we think even there we
Speaker 14: should see some modest increases in dividends over the next.
Speaker 7: Year or two.
Speaker 1: How about energy, Margie, We're looking at wtach crude oil
Speaker 1: just under eighty two dollars a barrel, up from about
Speaker 1: sixty seven to sixty eight just about five weeks ago.
Speaker 1: So how do you guys think about the energy space.
Speaker 14: We have a very modest exposure and energy because we
Speaker 14: really aren't interested in making a plate on the price
Speaker 14: of oil. We think there's a lot of roadblocks politically
Speaker 14: for some companies really expanding their earnings where they might
Speaker 14: like to. So we're kind of form on the sector.
Speaker 1: All right, Margie, We really appreciate getting a few minutes
Speaker 1: of your time. Margie Ptel, Senior portfolio manager at all
Speaker 1: Spring Global Investment. Still keeping a relatively optimistic outlook on
Speaker 1: the risk assets even in a slower growth environment.
Speaker 8: You're listening to the tape Cat's are live program Bloomberg
Speaker 8: Markets weekdays at ten am Eastern on Bloomberg Radio, the
Speaker 8: tune in app, Bloomberg dot Com.
Speaker 7: And the Bloomberg Business App.
Speaker 8: You can also listen live on Amazon Alexa from our
Speaker 8: flagship New York station. Just say Alexa, play Bloomberg eleven thirty.
Speaker 1: Matt Miller, Paul Sweeney here in a Bloomberg Interactive at
Speaker 1: Brokers Studio, or streaming live on YouTube, which is Head
Speaker 1: over to that intraweb thing and search Bloomberg Global News
Speaker 1: and don't take You'll find our video feed there. Eli Lilly, Novo, Nordisk,
Speaker 1: two big farmer companies all time highs today. Look at
Speaker 1: those charts, they're just absolutely monster charts, particularly in the
Speaker 1: last twenty years.
Speaker 3: So We're going to figure out what's going on there.
Speaker 1: Something about an obesity drug here and reducing heart attacks.
Speaker 1: All good news, all big news, But we need to
Speaker 1: get talked to somebody who's actually an expert in this stuff.
Speaker 1: Michael Shaw, Senior industry analyst at Bloomberg Intelligence. He's based
Speaker 1: in London. Mikey, thanks so.
Speaker 3: Much for joining us here.
Speaker 1: Could you tell us what is going on with the
Speaker 1: Novo Nordisk by and also by extension, Eli Lilly, what's
Speaker 1: going on today?
Speaker 9: Yeah, So, Novo basically had a landmark trial readout, so
Speaker 9: I looked at WIGOVI and cardiovascular outcomes. Now, the base
Speaker 9: case for this was a seventeen percent risk reduction on
Speaker 9: CARDIOVASCAR outcomes, and really with a result we sawt of
Speaker 9: like a home run result. So it actually reported a
Speaker 9: twenty percent benefit. And what's more is that all drivers
Speaker 9: of the compet at endpoint, so heart failure and KINDIVASCAR death,
Speaker 9: they all drove that benefit.
Speaker 6: So really a home run result for Novo.
Speaker 3: That, Mikey.
Speaker 2: The the main question people ask me, and that I
Speaker 2: also want to know the answer to about these drugs
Speaker 2: is what could the long term effects be? You know,
Speaker 2: if you're shooting yourself in the leg with these every
Speaker 2: week for the next you know, ten years.
Speaker 11: What happens to your body?
Speaker 9: Well, I think it's clear that we've seen, you know,
Speaker 9: we've seen substantial weight loss associated with these products. So
Speaker 9: Novo's Wigovi's got about well, showed up to eighteen percent,
Speaker 9: to Zeppetite showed more than twenty percent.
Speaker 6: In terms of the.
Speaker 9: Side effects, well, I mean initially, you know, the glping
Speaker 9: one class in general is associated with GI side effects,
Speaker 9: so gashri intestinal side effects, things like nausea, vomiting, et cetera.
Speaker 9: You know, this is a class of drug that's that's
Speaker 9: been used for years in diabetes, and you know, there
Speaker 9: have have been kind of anecdotal reports of things like
Speaker 9: suicidal ideation that we've seen in the in the news recently.
Speaker 2: Hang on out, so what say, what is it suicide?
Speaker 6: Suicidal ideation?
Speaker 9: Yes, but you got to also remember, you know, you know,
Speaker 9: these these patients you know OBC, and they could be
Speaker 9: actually other other things contributing to that. So nothing's been
Speaker 9: seen in you know, nothing was seen in the clinical
Speaker 9: trials and the large clinical trials, So you know, I think.
Speaker 6: The safety of these drugs is kind of well.
Speaker 9: Documented and and you know, there's been a lot of
Speaker 9: experience already with with diabetes.
Speaker 2: All right, So just to sort out what's on the
Speaker 2: market here and who owns it the.
Speaker 1: One Mic and his team did a big report on
Speaker 1: just this whole places obesity stuff.
Speaker 2: I mean, I'm I think this could be a game
Speaker 2: changer for the Western world. Uh, you know, obviously if
Speaker 2: there are no long term side effects, I don't want
Speaker 2: to be giving birth to a three eyed fish later.
Speaker 2: But uh so Novo nor Disc does we gov and
Speaker 2: ozempic right, those are both from Novo nor Disc And
Speaker 2: then Lily has tears zeppatide as well as re retattrue tide.
Speaker 6: Is that right, Yeah, that's correct.
Speaker 3: Yeah, So.
Speaker 9: Basically we gave you in a zempiic are both the
Speaker 9: same molecules, just we gave you the higher days that's
Speaker 9: marketed or approved in obesity. Zempick is approved in diabetes.
Speaker 9: Tozeptide is marketed under the brand name Munjari for diabetes,
Speaker 9: and it should get approved in you know, towards the
Speaker 9: end of the year for obesity. And then rettrue Tide
Speaker 9: is a compound that they've got in there in their
Speaker 9: in their pipeline which has yeah, which is you know,
Speaker 9: shown potentially better data than totide on weight loss. So
Speaker 9: that's something coming through the pipeline, all right.
Speaker 1: But the anytime I talk to you, Mikey or Sam,
Speaker 1: it always comes down Sam Faz, your partner in crime.
Speaker 1: It always comes down to who pays for this stuff?
Speaker 1: So who pays for this stuff in the big markets
Speaker 1: around the country.
Speaker 2: I saw I saw by the way that the University
Speaker 2: of Texas has taken these drugs off of its insured
Speaker 2: coverage coverage list because the University of Texas system was
Speaker 2: paying five million dollars a month for its employees to
Speaker 2: get hold of these things.
Speaker 9: So yeah, So I mean that's a key question at
Speaker 9: the moment given the size of the well, the potential
Speaker 9: size of this indication. You know, historically, what we've seen
Speaker 9: with these drugs is b see. You know, it's been
Speaker 9: kind of more of a lifestyle choice. It's been an
Speaker 9: out of pocket market. But we haven't seen the weight
Speaker 9: loss data that that's you know, associated with these drugs historically.
Speaker 9: So now with this outcomes data in hand, that's really
Speaker 9: going to drive broad reinbursement, and I think it's going
Speaker 9: to be tough for pairs to kind of not cover
Speaker 9: these drugs. Is that, you know, if we're GOV showing
Speaker 9: a twenty percent reduction and kind of carti of out
Speaker 9: of their risk and cool that heart failure is kind
Speaker 9: of one of the leading causes of death in the US.
Speaker 9: And also it has you know, cost associated with it,
Speaker 9: which are kind of a significant burden on the healthcare system.
Speaker 9: So you know, the long long term savings you know
Speaker 9: that these drugs could potentially offer, you know, are going
Speaker 9: to be huge.
Speaker 6: It's kind of of.
Speaker 2: Course, you could achieve the same savings or certainly similar
Speaker 2: savings that people would just eat less ice cream and
Speaker 2: go to the gym more often. Right, So that's the
Speaker 2: that's the problem, true too, that the insurance that the
Speaker 2: companies paying for the insurance probably have, like my employees
Speaker 2: either make horrible choices and take this drug and then
Speaker 2: I pay five million dollars a month, or my employees
Speaker 2: make good choices and I don't pay anything and no
Speaker 2: one needs to take drugs.
Speaker 6: Yeah, that's true. True, that's true too.
Speaker 1: All right, Mikey, All right, that's your BC side. I
Speaker 1: got my plays there and I know how to do that.
Speaker 1: Another big area that we'd love to see some breakthroughs
Speaker 1: and maybe your companies will do it. It's just kind
Speaker 1: of dementia broadly defined. As the world population ages, it
Speaker 1: becomes a bigger and bigger problem for a lot more people.
Speaker 1: What's what's your industry, what's the farmer? What's a BioPharm
Speaker 1: market in industry? What are they doing there?
Speaker 9: I mean we've seen I mean it's not my area
Speaker 9: of area of focus, but we've we've obviously seen the
Speaker 9: kembe from Bigen and Essie come through, and then we've
Speaker 9: got Lily with d nanamap, so you know, these are
Speaker 9: treatments for Alzheimer's. Limbeck as well has got has shown
Speaker 9: kind of positive data for Alzheimer's agitation, so that's like
Speaker 9: a supplemental indication for one of their drugs for results
Speaker 9: resultsy So you know these are you know, this is
Speaker 9: an area where you know the success rate has has
Speaker 9: not always been high, and you know drugs associated with
Speaker 9: being developed in these eras are kind of highly risk adjusted.
Speaker 9: So yeah, I guess it remains to be seen. It's
Speaker 9: not an area that I focus on a particular. So
Speaker 9: my colleague, you know, Sam Fazzelli, to look at that please,
Speaker 9: But there's certainly kind of developments in the in the pipeline, all.
Speaker 1: Right, So what's next for you know, the Eli Liliza
Speaker 1: of the world, the the Novo's, I mean, these sacks
Speaker 1: all time highs.
Speaker 3: What do you think they do?
Speaker 1: Are they continue to go out and and buy what
Speaker 1: they can't develop? It seems like every Monday we come
Speaker 1: in and there's a big farm at m and a t.
Speaker 2: Rate and does anybody else make one of these appetites
Speaker 2: of pressant shots?
Speaker 9: Yes, I mean we've seen kind of a Rally and Amjin,
Speaker 9: We've seen a rally and Viking, both of them have
Speaker 9: JLP one drugs in their pipeline. Other companies include Zealand,
Speaker 9: Alti Mune and Fizes also got like an oral JLP
Speaker 9: one as well, So several companies developing these jlping one
Speaker 9: drugs for obesity. In terms of what's next in the space,
Speaker 9: so I think we're going to constantly see this back
Speaker 9: and forth between Lily and Novo on the on the
Speaker 9: innovation front, So we've uh Lily, Nova's got goo v
Speaker 9: Lily is going to bring into zeppatide. Nova's then got
Speaker 9: Cagari Semma, which is a combination product and then we've
Speaker 9: also recently seen, you know, really strong data for retis
Speaker 9: true Tide, which is a triple agonist, unlike to Ze Petite,
Speaker 9: which is a dual agonist, so it's targeting three three
Speaker 9: things instead of two.
Speaker 1: All right, So, Mikey, it's really important for you and
Speaker 1: for healthcare investors to follow where different drugs are in
Speaker 1: the regulatory pipeline. You guys actually have a model of that,
Speaker 1: don't you.
Speaker 9: Yeah, we have a track. We have a model on
Speaker 9: the syste Yeah, we have a track on the system.
Speaker 1: And it's the best as best on Wall Street by far.
Speaker 1: Who's the person that manages that again, who's the person?
Speaker 6: Oh yeah, so Sam and I look at it.
Speaker 1: Yeah, all right, it's the best on the street. They
Speaker 1: track every single get to it. We'll find it. I'll
Speaker 1: get it for you in a second. But it's it's
Speaker 1: just the best. If you're a healthcare geek, you have
Speaker 1: to have this same because you have to know where
Speaker 1: drugs are, when the tests are coming, all that kind
Speaker 1: of stuff.
Speaker 3: And the Bloomberg Intelligence guys do that.
Speaker 1: Mike you Shaw, Senior industry antals Bloomberg Intelligence. I appreciate
Speaker 1: getting some time there. Eli Lilly Novo both all time highs.
Speaker 8: Here today, you're listening to the tape cats Are Live
Speaker 8: program Bloomberg Markets weekdays at ten am Eastern on Bloomberg Radio,
Speaker 8: the tune in app, Bloomberg dot Com.
Speaker 7: And the Bloomberg Business App.
Speaker 8: You can also listen live on Amazon Alexa from our
Speaker 8: flagship New York station, Just say Alexa Play Bloomberg eleven thirty.
Speaker 1: Ryan Lockwood joins it sees the CFO of Carparts dot
Speaker 1: Com trades on the Nasdaq. PRTs is a symbol company
Speaker 1: went public back in two thousand and seven. They did
Speaker 1: a secondary offering very adroitly in twenty twenty when they
Speaker 1: stuck got a nice pop from the pandemic.
Speaker 3: Ryan, thanks so much for joining us here. Again.
Speaker 1: I'm looking at your long term chart and just looks
Speaker 1: like a lot of other pandemic charts where you have
Speaker 1: this surge in twenty twenty as people behaviors chain during
Speaker 1: the pandemic, and then it's been kind of a slow
Speaker 1: bleed off after we get post pandemic. Here, talk to
Speaker 1: us how your business kind of changed during that you know,
Speaker 1: twenty twenty period, pre that period during the pandemic and
Speaker 1: kind of where we are now.
Speaker 15: Yeah, so our business thanks for having me. Our business
Speaker 15: did change a little bit, but actually a lot of
Speaker 15: the change came from a new management team that came
Speaker 15: in twenty nineteen. So part of what we did was
Speaker 15: revitalize the business and focus it more on the customer.
Speaker 7: You know, we.
Speaker 15: Obviously benefited from some of the stimulus and some of
Speaker 15: the online shopping that came from e commerce, but combined
Speaker 15: with that, we changed to a more stockship model that
Speaker 15: it provides more value to the customer. We improve the website.
Speaker 15: So there's a lot of things going on as part
Speaker 15: of the story.
Speaker 1: What are the drivers of your business? Like when I
Speaker 1: look at your financial model, what are the key drivers
Speaker 1: that I need to get right?
Speaker 15: I think the key drivers for our business what you're
Speaker 15: going to see over the next three to five years
Speaker 15: is a combination of reasonable revenue growth with with combined
Speaker 15: with operating leverage. So there's a lot of things we
Speaker 15: can do to improve marketing, expense, fulfillment expense, fixed operating leverage.
Speaker 15: And we've done a lot of improvements over time. They've
Speaker 15: all been relatively sticky, and we continue to drive improvements
Speaker 15: over the next you know, three to five years all.
Speaker 1: Right, so what give me a sense of kind of
Speaker 1: who your customer is and kind of how do they
Speaker 1: really interact with Carparks dot Com.
Speaker 15: Yeah, so our customer is going to be generally a
Speaker 15: value oriented, do it yourselfer who is relatively sophisticated or
Speaker 15: looking to do some easy jobs and save some money.
Speaker 15: Compared to brick and mortar stores, we're fifty to sixty
Speaker 15: percent cheaper. So if someone's willing to wait one or
Speaker 15: two days to get their part online, they can have
Speaker 15: significant value. And that's especially useful at a time like this.
Speaker 1: All right, so how do I you know in your business,
Speaker 1: how do you drive top line demands? Is just having
Speaker 1: more stuff, more skews that they may need or is
Speaker 1: it marketing promotion?
Speaker 3: How do you try it drive your top line?
Speaker 15: You know, for us driving top line, you know, there's
Speaker 15: a lot of value that we provide high quality parts,
Speaker 15: but what we're really looking to do is take the
Speaker 15: stress out of car repair. If you have a car
Speaker 15: that's out of warranty, that check engine that comes on,
Speaker 15: there's not really a great resource for people. And that's
Speaker 15: what we try to do is provide information, high quality parts,
Speaker 15: great value pricing and if you can't put it on yourself,
Speaker 15: we'll even connect you to a local mechanic. So we're
Speaker 15: really trying to provide a one stop shop for customers
Speaker 15: that takes the stress out.
Speaker 2: Of car repair.
Speaker 3: So help.
Speaker 1: You know, it seems like what we understand here in
Speaker 1: the post pandemic world that Detroit says it's going to
Speaker 1: build fewer cars, So the days of seventeen and a
Speaker 1: half million SAR might be over. Maybe it's fifteen fifteen
Speaker 1: and a half million cars. That means cars got to
Speaker 1: I guess, lasts longer, use cars, all that kind of stuff.
Speaker 3: Is that good for your business? Definitely?
Speaker 15: I think that's that's right when you look at SAR.
Speaker 15: You know, we had obviously a very lower SAR, you know,
Speaker 15: kind of coming into this year and part of last
Speaker 15: year due to interest rates. SAR might come down, but
Speaker 15: cars definitely have been lasted longer. They're going to commute
Speaker 15: last longer, and I think consumers are going to try
Speaker 15: to drive value by repairing their car having it lasts longer,
Speaker 15: and I think we're a great resource for them.
Speaker 1: Talk to us about I'm not sure if this is
Speaker 1: part of your business model, but we've seen in another
Speaker 1: retail spaces by now Pay Later. Is that something you
Speaker 1: guys offer? Is that a driver?
Speaker 3: How do you think about that? Yeah, that is a driver.
Speaker 15: So over the last couple of years, we've seen buy Now,
Speaker 15: Pay Later actually triple. It was running pretty steady around
Speaker 15: two and a half percent of revenue for e commerce,
Speaker 15: and recently it popped up. At the end of Q
Speaker 15: two it was running seven point nine percent, So we
Speaker 15: have seen a large uptake in that. I think it's
Speaker 15: a way that consumers are trying to balance the needs,
Speaker 15: their everyday needs with their car repair needs.
Speaker 1: You know, it's funny you go to the Consumer Electronics
Speaker 1: show and it's really an auto show, you know, with
Speaker 1: a little bit of technology around it. I mean, I
Speaker 1: think the auto industry, you know, controls way more than
Speaker 1: half the space they're out there in Vegas. How has
Speaker 1: like the computerization, the increase in technology and automobiles, How
Speaker 1: has that impacted your business?
Speaker 6: There?
Speaker 15: Actually hasn't been that much as an impact. You know.
Speaker 15: What we sell is a lot of the normal everyday
Speaker 15: items you need to repair your car. So even with
Speaker 15: a highly electric cut fied vehicle or even an EEV
Speaker 15: like a Tesla, they still have headlights, tail lights, door handles,
Speaker 15: ac compressors, radiators, all the normal nuts and bolts you
Speaker 15: might call it that go into a car. Even the
Speaker 15: most modern of all cars still has those basics.
Speaker 1: Okay, So you're not getting into the electronics and that
Speaker 1: type of stuff. That's something that you know, an onneer
Speaker 1: would have to go to the dealer or something like that.
Speaker 15: That's correct, Yeah, and I think those are usually very durable.
Speaker 15: So the ecu as you might call it, inside of
Speaker 15: a car that manages the brains of everything is very robust.
Speaker 15: The things that go out for people are the everyday
Speaker 15: items like the AC compressor, the window regulator that makes
Speaker 15: the window.
Speaker 7: Go up down.
Speaker 1: So is your competition kind of just my local car
Speaker 1: dealer in town.
Speaker 15: Our local competition is going to be really the brick
Speaker 15: and mortar, the big brick and mortars you might think about,
Speaker 15: or maybe a dealership where I think people that don't
Speaker 15: know about us might just walk in and pay three
Speaker 15: hundred dollars for a headlight without realizing that they could
Speaker 15: come to our website wait one or two days. You know,
Speaker 15: we cover ninety eight percent of the country and two
Speaker 15: day shipping, they could buy that same part for one
Speaker 15: hundred and thirty five dollars.
Speaker 3: So it's interesting.
Speaker 1: I'm just kind of wondering again kind of the growth
Speaker 1: of the business. It seems like, can you acquire customers?
Speaker 1: Can you market and say hey, you can do this,
Speaker 1: Like I'm not a handy person. I'm not a but
Speaker 1: if you say, hey, you can install this headlight.
Speaker 15: That's exactly right. So we recently just launched a line
Speaker 15: of YouTube instructional videos starting with a four to foot
Speaker 15: and fifty. It's the nation's most popular car, showing you
Speaker 15: how to replace a lot of parts on that. We're
Speaker 15: going to the Dodge Ram And we also recently launched
Speaker 15: a Spanish language version of this channel to kind of
Speaker 15: hit more audiences and make people feel comfortable that they
Speaker 15: can do these repairs themselves.
Speaker 1: That makes sense, all right, Ran, Thanks for taking the time.
Speaker 1: Appreciate learning a little bit about your company and kind
Speaker 1: of its expectations and kind of how the what are
Speaker 1: the drivers of this company? Ryan Lockwood, He's a CFO
Speaker 1: carparks dot com. You can check out the stock it
Speaker 1: is trades on the Nastaq p r TS.
Speaker 2: Thanks for listening to the Bloomberg Markets podcasts. You can
Speaker 2: subscribe and listen to interviews at Apple Podcasts or whatever.
Speaker 3: Podcast platform you prefer. I'm Matt Miller.
Speaker 2: I'm on Twitter at Matt Miller nineteen seventy three.
Speaker 3: And I'm Faul Sweeney. I'm on Twitter at pt Sweeney.
Speaker 1: Before the podcast, you can always catch us worldwide at
Speaker 1: Bloomberg Radio