1 00:00:01,480 --> 00:00:05,360 Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live 2 00:00:05,440 --> 00:00:08,119 Speaker 1: weekdays at ten am Eastern on Affo card Playing and 3 00:00:08,280 --> 00:00:11,160 Speaker 1: Broud Auto with the Bloomberg Business app. Listen on demand 4 00:00:11,200 --> 00:00:15,520 Speaker 1: wherever you get your podcasts, or watch us live on YouTube. 5 00:00:16,520 --> 00:00:19,160 Speaker 2: Right now, we're going down to Houston, Texas. Our good 6 00:00:19,200 --> 00:00:23,079 Speaker 2: friend Alextel from Bloomberg Television. She's speaking with Dow CEO 7 00:00:23,680 --> 00:00:25,880 Speaker 2: Jim Fiddling. Let's go to that net right now. 8 00:00:26,120 --> 00:00:28,280 Speaker 3: Paul, good to hear you. I'm glad you're back from vacation. 9 00:00:28,360 --> 00:00:29,920 Speaker 3: That's right, and here with Jim Fitterling. It's such a 10 00:00:29,960 --> 00:00:31,800 Speaker 3: pleasure to have you. Thank you so much for joining. 11 00:00:31,960 --> 00:00:32,839 Speaker 4: Thank you for having me. 12 00:00:33,120 --> 00:00:36,400 Speaker 3: Is this an economy, a US economy that needs bed cuts? 13 00:00:36,520 --> 00:00:38,040 Speaker 5: What's your take on a global scale? 14 00:00:38,280 --> 00:00:41,080 Speaker 6: Yeah, it's starting to feel like the economy is gaining 15 00:00:41,120 --> 00:00:42,960 Speaker 6: a little bit of strength at the beginning of the year. 16 00:00:43,040 --> 00:00:44,880 Speaker 4: It's not. It's not robust. 17 00:00:44,960 --> 00:00:47,040 Speaker 6: Maybe a little bit early to tell if this is 18 00:00:47,400 --> 00:00:49,840 Speaker 6: a long term trend, but it's been a decent start 19 00:00:49,880 --> 00:00:53,479 Speaker 6: to the year. Electronics has been a bit stronger than 20 00:00:53,520 --> 00:00:55,920 Speaker 6: last year. Last year was a kind of a weak spot, 21 00:00:56,200 --> 00:00:58,800 Speaker 6: so our outlook is good. Automotive had a good year 22 00:00:58,920 --> 00:01:02,160 Speaker 6: last year, and I think despite the discussion around electric 23 00:01:02,280 --> 00:01:05,360 Speaker 6: vehicles and some of the flat to negative sentiment that's 24 00:01:05,360 --> 00:01:07,920 Speaker 6: in the news, the reality is I think it's going 25 00:01:07,959 --> 00:01:11,280 Speaker 6: to be another good year in the automotive sector. Housing 26 00:01:11,360 --> 00:01:14,760 Speaker 6: has been the slowest start, but there's been an uptick 27 00:01:14,840 --> 00:01:19,720 Speaker 6: and single family home starts, which is good. That usually 28 00:01:19,720 --> 00:01:21,880 Speaker 6: has a ripple effect through a lot of other durable 29 00:01:21,880 --> 00:01:26,440 Speaker 6: goods manufacturing. We haven't seen that yet, So a modest 30 00:01:26,640 --> 00:01:29,080 Speaker 6: good start to the year and we just see how 31 00:01:29,120 --> 00:01:29,720 Speaker 6: things develop. 32 00:01:29,800 --> 00:01:30,480 Speaker 5: So we're getting there. 33 00:01:30,520 --> 00:01:33,080 Speaker 3: So that begs the question that if we do, say 34 00:01:33,120 --> 00:01:35,120 Speaker 3: get two to three cuts this year, for example, from 35 00:01:35,160 --> 00:01:39,920 Speaker 3: the FED, is your expectation that we see accelerated growth 36 00:01:40,240 --> 00:01:43,080 Speaker 3: higher infletion. Does that actually start more growth? 37 00:01:43,640 --> 00:01:45,760 Speaker 6: Well, I think in the commodity space and in our 38 00:01:45,800 --> 00:01:48,760 Speaker 6: industry in particular, we tend to lead into a slow down, 39 00:01:49,280 --> 00:01:52,320 Speaker 6: and so we started to lead into this eighteen months 40 00:01:53,040 --> 00:01:55,640 Speaker 6: middle of this year will be twenty four months ago, 41 00:01:55,800 --> 00:01:58,480 Speaker 6: and we typically tend to lead out, and so it's 42 00:01:58,520 --> 00:02:00,960 Speaker 6: too early to say we're coming out, but you can 43 00:02:00,960 --> 00:02:03,680 Speaker 6: start to see shoots that are like when we see. 44 00:02:03,520 --> 00:02:06,120 Speaker 4: A recovery and of course that demand. 45 00:02:06,360 --> 00:02:08,880 Speaker 6: You know, what's missing from the economy right now is 46 00:02:08,880 --> 00:02:12,280 Speaker 6: the durable goods demand. And when that construction demand and 47 00:02:12,320 --> 00:02:15,200 Speaker 6: when that comes back, those are high volume applications, and 48 00:02:15,240 --> 00:02:18,080 Speaker 6: that demand pool is going to mean that prices are 49 00:02:18,080 --> 00:02:20,160 Speaker 6: going to move up a bit. I don't know if 50 00:02:20,200 --> 00:02:24,280 Speaker 6: I would call that necessarily inflationary, but that's just the cycle. 51 00:02:24,919 --> 00:02:26,000 Speaker 5: What do you think it's waiting for. 52 00:02:26,919 --> 00:02:29,560 Speaker 6: I think it's waiting for rate reductions, for the mortgage 53 00:02:29,639 --> 00:02:32,239 Speaker 6: rates to come down. I think that's the next big 54 00:02:32,280 --> 00:02:35,720 Speaker 6: thing that typically triggers kind of a shoot up in 55 00:02:35,840 --> 00:02:38,840 Speaker 6: the housing market, and then that triggers a lot of 56 00:02:39,160 --> 00:02:42,440 Speaker 6: other services and durable goods demand that comes behind it. 57 00:02:42,639 --> 00:02:45,359 Speaker 3: So we may see a second half recovery. I'm hopeful, 58 00:02:45,400 --> 00:02:47,960 Speaker 3: sort of what I'm hearing from you that hopeful. Is 59 00:02:47,960 --> 00:02:51,760 Speaker 3: it a similar picture over in Europe? So the chemical 60 00:02:51,840 --> 00:02:54,000 Speaker 3: sector in Europe is under a lot of pressure. I mean, INPO, 61 00:02:54,120 --> 00:02:57,600 Speaker 3: costs are high. The economy there is weaker in many 62 00:02:57,639 --> 00:02:59,080 Speaker 3: sense compared to the US. 63 00:02:59,280 --> 00:02:59,919 Speaker 5: What's your take. 64 00:03:00,320 --> 00:03:03,720 Speaker 6: European consumer demand is not nearly as strong as it 65 00:03:03,800 --> 00:03:07,280 Speaker 6: is here in the States, and of course the weight 66 00:03:07,639 --> 00:03:10,560 Speaker 6: of a higher energy costs has hit the consumer a 67 00:03:10,560 --> 00:03:14,240 Speaker 6: lot of different ways. Now we're seeing an improvement year 68 00:03:14,280 --> 00:03:18,160 Speaker 6: over year. Obviously, energies come down, but natural gas is 69 00:03:18,440 --> 00:03:21,959 Speaker 6: below ten dollars a million BTU landed in Europe, but 70 00:03:22,080 --> 00:03:25,120 Speaker 6: we sit here today at a dollar sixty and maybe 71 00:03:25,160 --> 00:03:29,399 Speaker 6: the long term trend is two fifty to three Fiftyference still. 72 00:03:29,160 --> 00:03:30,040 Speaker 4: A big difference. 73 00:03:30,120 --> 00:03:35,160 Speaker 6: And electricity, you know which most consumers purchase electricity costs 74 00:03:35,280 --> 00:03:38,160 Speaker 6: are double maybe a little bit more than what they 75 00:03:38,160 --> 00:03:40,720 Speaker 6: are here in the US. So I think, you know, 76 00:03:40,760 --> 00:03:43,920 Speaker 6: there's a big question when I look at my downstream 77 00:03:43,960 --> 00:03:46,720 Speaker 6: customers in Europe, I'm always questioning. 78 00:03:46,320 --> 00:03:47,560 Speaker 4: How long will they be there? 79 00:03:48,240 --> 00:03:50,600 Speaker 6: And if you don't have a domestic market to service 80 00:03:50,640 --> 00:03:54,000 Speaker 6: in Europe, you really can't afford to export from Europe. 81 00:03:54,160 --> 00:03:56,240 Speaker 6: So if you don't have a domestic market to service, 82 00:03:56,280 --> 00:03:58,560 Speaker 6: you have to say, you know, what does my footprint 83 00:03:58,600 --> 00:04:01,360 Speaker 6: need to be? How long can I be there in 84 00:04:01,440 --> 00:04:03,320 Speaker 6: order to be part of that economy. 85 00:04:03,440 --> 00:04:04,040 Speaker 5: That's a big deal. 86 00:04:04,160 --> 00:04:07,520 Speaker 3: You're talking about the automotive industry, construction industry, like, is 87 00:04:07,560 --> 00:04:08,600 Speaker 3: that going to move? 88 00:04:10,080 --> 00:04:11,200 Speaker 5: What's your best sense? 89 00:04:11,520 --> 00:04:14,120 Speaker 6: A lot of technology comes out of there too, I 90 00:04:14,120 --> 00:04:15,680 Speaker 6: mean beyond just the industry. 91 00:04:15,720 --> 00:04:18,120 Speaker 4: A lot of the technology that we use around. 92 00:04:17,839 --> 00:04:22,000 Speaker 6: The world starts in Europe, and so you know, exporting 93 00:04:22,040 --> 00:04:25,479 Speaker 6: technology obviously is a little bit easier than exporting product. 94 00:04:26,320 --> 00:04:31,000 Speaker 6: But we're already starting to see imports of electric vehicles 95 00:04:31,000 --> 00:04:35,279 Speaker 6: from China into Europe. We're seeing China has become a 96 00:04:35,320 --> 00:04:39,000 Speaker 6: lower cost competitor than Europe in petrochemical, so you're starting 97 00:04:39,040 --> 00:04:42,560 Speaker 6: to see product move into Europe. The Middle East obviously 98 00:04:42,640 --> 00:04:45,600 Speaker 6: has been a big supplier because of their cost position 99 00:04:46,160 --> 00:04:49,040 Speaker 6: into Europe. Europe's getting a bit of a reprieve right 100 00:04:49,040 --> 00:04:52,360 Speaker 6: now because of the Suez Canal situation, so operating rates 101 00:04:52,360 --> 00:04:55,039 Speaker 6: are up a little bit, but I think that'll once 102 00:04:55,080 --> 00:04:59,200 Speaker 6: that Israel Gaza conflict is resolved, then we'll see things 103 00:04:59,240 --> 00:04:59,920 Speaker 6: go back to normal. 104 00:05:00,120 --> 00:05:02,039 Speaker 3: Is it fair to say that you wouldn't build a 105 00:05:02,080 --> 00:05:03,360 Speaker 3: new chemical plant in. 106 00:05:03,360 --> 00:05:04,039 Speaker 5: Europe right now? 107 00:05:04,279 --> 00:05:04,960 Speaker 4: Be very tough. 108 00:05:05,080 --> 00:05:08,960 Speaker 6: You'd have to be in a very specialized downstream market 109 00:05:08,960 --> 00:05:12,240 Speaker 6: that you knew could handle the higher input costs. But 110 00:05:12,520 --> 00:05:14,320 Speaker 6: I would say, in general, be very tough. 111 00:05:14,680 --> 00:05:16,600 Speaker 3: So for you, then let's take a look at inmpleation 112 00:05:16,680 --> 00:05:19,080 Speaker 3: for a second. Where are costs still rising and where 113 00:05:19,120 --> 00:05:19,760 Speaker 3: are they falling. 114 00:05:20,600 --> 00:05:24,080 Speaker 6: You're starting to see some costs I mean cost and 115 00:05:24,120 --> 00:05:27,640 Speaker 6: commodities came off pretty dramatically. I think one of the 116 00:05:27,640 --> 00:05:31,359 Speaker 6: reasons we announced our final investment decision on our project 117 00:05:31,400 --> 00:05:33,440 Speaker 6: in Canada at the end of last year was because 118 00:05:33,480 --> 00:05:35,960 Speaker 6: we were able to lock in a lot of bulk 119 00:05:36,000 --> 00:05:42,400 Speaker 6: material costs like steel, concrete, cement, all the things we 120 00:05:42,440 --> 00:05:43,440 Speaker 6: need to build a plan. 121 00:05:44,680 --> 00:05:46,640 Speaker 4: So I think that's been good now. 122 00:05:46,760 --> 00:05:49,920 Speaker 6: Obviously, as some of this construction demand and things come back, 123 00:05:50,000 --> 00:05:53,280 Speaker 6: that'll tend to rise with the cycle. But I think 124 00:05:53,320 --> 00:05:55,880 Speaker 6: if you looked at the commodity portion, a lot of 125 00:05:55,880 --> 00:05:59,680 Speaker 6: inflation came out of there. If you look at the 126 00:05:59,680 --> 00:06:03,360 Speaker 6: concer like going to the grocery store, some of that 127 00:06:03,440 --> 00:06:06,200 Speaker 6: hasn't come out yet, and so I think we're starting 128 00:06:06,200 --> 00:06:06,800 Speaker 6: to see that. 129 00:06:07,320 --> 00:06:09,200 Speaker 4: With the de stalking that happened. 130 00:06:08,960 --> 00:06:13,840 Speaker 6: Last year, no signs of really restocking in the value chain, 131 00:06:14,400 --> 00:06:15,960 Speaker 6: I think you're going to start to see some of 132 00:06:15,960 --> 00:06:18,320 Speaker 6: that consumer inflation come out to and I think that's 133 00:06:18,360 --> 00:06:20,000 Speaker 6: a little bit what the Fed's looking at. 134 00:06:20,160 --> 00:06:23,880 Speaker 3: Are you worried about tariffs come I don't know November 135 00:06:24,320 --> 00:06:26,800 Speaker 3: January from either President. 136 00:06:27,720 --> 00:06:30,160 Speaker 4: Yeah. You make a great point, both. 137 00:06:32,839 --> 00:06:35,680 Speaker 6: As a global company and as a company that's been 138 00:06:35,760 --> 00:06:40,440 Speaker 6: part of global trade for many, many years. Tariffs don't 139 00:06:40,760 --> 00:06:45,080 Speaker 6: stimulate demand anywhere, So I think what would happen under 140 00:06:45,120 --> 00:06:48,279 Speaker 6: a teriff regime is we might not be happy with 141 00:06:48,360 --> 00:06:52,440 Speaker 6: the demand result. Global free trade has been a better 142 00:06:52,520 --> 00:06:55,960 Speaker 6: platform for growth. It's been better for growth, not just 143 00:06:56,000 --> 00:06:59,320 Speaker 6: for the US, and we're advantaged, of course because of 144 00:06:59,440 --> 00:07:03,520 Speaker 6: energy among other things, but it's been great for other countries. 145 00:07:03,600 --> 00:07:06,080 Speaker 6: It's lifted so many people out of poverty, it's created 146 00:07:06,120 --> 00:07:11,000 Speaker 6: a middle class, it's allowed technology to trans transfer around 147 00:07:11,040 --> 00:07:11,760 Speaker 6: the world. 148 00:07:12,200 --> 00:07:13,720 Speaker 3: So I would also just mean that you would have 149 00:07:13,760 --> 00:07:18,480 Speaker 3: to produce and use the products in country, right, You 150 00:07:18,480 --> 00:07:20,800 Speaker 3: have to produce and do in country be totally separate 151 00:07:20,920 --> 00:07:21,480 Speaker 3: from each other. 152 00:07:21,680 --> 00:07:24,600 Speaker 6: Right When we have a supply chain today that is 153 00:07:24,640 --> 00:07:28,320 Speaker 6: not US centric and hasn't had time to reshore, so 154 00:07:28,400 --> 00:07:31,760 Speaker 6: that would become inflationary in and of itself. So I think, 155 00:07:32,120 --> 00:07:34,960 Speaker 6: you know, the thing we're trying to fight and the 156 00:07:35,000 --> 00:07:38,800 Speaker 6: tool we're using, they both could end up being inflationary. 157 00:07:38,880 --> 00:07:40,760 Speaker 4: I don't know that tariffs is the answer. 158 00:07:41,560 --> 00:07:44,160 Speaker 3: Let's turn to if you're building a new plant today, 159 00:07:44,640 --> 00:07:47,000 Speaker 3: what are you going to power it with in the 160 00:07:47,040 --> 00:07:48,880 Speaker 3: next ten to fifteen years, Like, what's going to. 161 00:07:48,800 --> 00:07:49,240 Speaker 5: Be that thing? 162 00:07:49,480 --> 00:07:53,040 Speaker 6: Well, we're all building a new plant in Canada, and 163 00:07:53,120 --> 00:07:55,400 Speaker 6: the purpose for going up there was to build the 164 00:07:55,440 --> 00:07:59,480 Speaker 6: world's first zero scope on and two emissions ethylene complex. 165 00:08:00,840 --> 00:08:02,800 Speaker 4: We will power it with hydrogen. 166 00:08:04,640 --> 00:08:08,440 Speaker 6: It's a pretty elegant solution because we actually take ethane 167 00:08:08,440 --> 00:08:11,280 Speaker 6: and natural gas liquid, we crack it to make ethylene 168 00:08:11,840 --> 00:08:15,720 Speaker 6: and we make two byproducts methane and hydrogen. Lindy will 169 00:08:15,760 --> 00:08:19,040 Speaker 6: come in and build an auto thermal reformer that'll convert 170 00:08:19,080 --> 00:08:21,520 Speaker 6: that to pure hydrogen, and that pure hydrogen will fire 171 00:08:21,600 --> 00:08:25,400 Speaker 6: the furnace. So it's a very closed loop system that 172 00:08:25,480 --> 00:08:28,280 Speaker 6: will allow us to capture all the CO two off 173 00:08:28,280 --> 00:08:33,160 Speaker 6: the auto thermal reformer and sequester that and make Zeroscope 174 00:08:33,160 --> 00:08:35,520 Speaker 6: one and two ethylene and plastics there. 175 00:08:36,280 --> 00:08:37,559 Speaker 4: It'll be the biggest. 176 00:08:37,440 --> 00:08:41,440 Speaker 6: Hydrogen carbon capture project of its kind in the world, 177 00:08:41,600 --> 00:08:43,679 Speaker 6: and it'll be the first one. First phase will be 178 00:08:43,800 --> 00:08:44,959 Speaker 6: up in twenty twenty seven. 179 00:08:45,200 --> 00:08:47,280 Speaker 3: One more question on that, when are you going to 180 00:08:47,320 --> 00:08:49,599 Speaker 3: make money off of it? And that's why way of 181 00:08:49,679 --> 00:08:53,000 Speaker 3: understanding is it to put together as soon. 182 00:08:52,840 --> 00:08:53,640 Speaker 4: As we started up. 183 00:08:53,720 --> 00:08:56,640 Speaker 6: It'll be as competitive as our project that we did 184 00:08:56,720 --> 00:09:00,480 Speaker 6: here in Texas and started up in twenty seventeen has 185 00:09:00,480 --> 00:09:03,320 Speaker 6: got a Price on Carbon, so we were able to 186 00:09:03,360 --> 00:09:05,800 Speaker 6: recover some of the higher costs of scrubbing out the 187 00:09:05,840 --> 00:09:08,720 Speaker 6: CO two from the price on carbon. And the Alberta 188 00:09:08,760 --> 00:09:12,079 Speaker 6: government and the federal government in Canada have investment tax 189 00:09:12,120 --> 00:09:15,080 Speaker 6: credits and incentives for us to put in the hydrogen 190 00:09:15,160 --> 00:09:15,959 Speaker 6: technology in. 191 00:09:15,880 --> 00:09:16,600 Speaker 4: The first place. 192 00:09:17,240 --> 00:09:19,640 Speaker 6: So both of those things mean we'll be able to 193 00:09:19,640 --> 00:09:21,959 Speaker 6: make a return like the project we build down here 194 00:09:21,960 --> 00:09:22,640 Speaker 6: in Texas. 195 00:09:23,080 --> 00:09:24,120 Speaker 4: And I think if you look. 196 00:09:24,000 --> 00:09:27,120 Speaker 6: At what we did with IRA, we also made a 197 00:09:27,120 --> 00:09:31,520 Speaker 6: big step forward one with the tax credits and the 198 00:09:31,559 --> 00:09:35,400 Speaker 6: support for new technologies, but I think more importantly the 199 00:09:35,440 --> 00:09:38,600 Speaker 6: breadth of the IRA. So we as opposed to say 200 00:09:38,640 --> 00:09:42,520 Speaker 6: the EU, which is very focused on a transition but 201 00:09:42,760 --> 00:09:45,880 Speaker 6: very specific you can only make green hydrogen a certain way. 202 00:09:46,520 --> 00:09:50,320 Speaker 6: We said, look, all forms of low carbon energy are 203 00:09:50,360 --> 00:09:52,800 Speaker 6: part of the equation, and we're going to make it 204 00:09:53,440 --> 00:09:56,040 Speaker 6: accessible for everybody to be part of the equation. So 205 00:09:56,120 --> 00:09:59,960 Speaker 6: that could be small modular nuclear, which we've signed up 206 00:10:00,320 --> 00:10:03,959 Speaker 6: with the DOE and the Advanced Reactor Demonstration program with 207 00:10:04,200 --> 00:10:07,120 Speaker 6: x Energy. We're looking at one of our sites here 208 00:10:07,160 --> 00:10:11,800 Speaker 6: in Texas, seed Drift near Victoria, Texas, and we're looking 209 00:10:11,840 --> 00:10:15,480 Speaker 6: at that site to basically replace all of our combined 210 00:10:15,480 --> 00:10:19,720 Speaker 6: cycle gas COGEN with a small modular reactor for eighty 211 00:10:19,760 --> 00:10:23,400 Speaker 6: megawatt units that would take all the power and steam. 212 00:10:23,120 --> 00:10:25,439 Speaker 4: At the site to zero carbon. Wow. 213 00:10:26,200 --> 00:10:29,920 Speaker 6: That's a big project, but we think we can do 214 00:10:30,000 --> 00:10:34,640 Speaker 6: that and help Xynergy bring that cost competitive with hydrogen 215 00:10:34,679 --> 00:10:39,040 Speaker 6: carbon capture or combined cycle gas with CO two scrubbing. 216 00:10:39,679 --> 00:10:41,800 Speaker 4: We think we can be competitive with both of those. 217 00:10:42,240 --> 00:10:43,040 Speaker 5: Jim, so great. 218 00:10:43,080 --> 00:10:45,480 Speaker 3: I love getting that perspective, the global perspective and the 219 00:10:45,840 --> 00:10:47,040 Speaker 3: energy transition perspective. 220 00:10:47,040 --> 00:10:49,880 Speaker 5: Thanks so much. In Fiddling a CEO of doubt, Paul 221 00:10:49,920 --> 00:10:50,880 Speaker 5: and Molly back to you. 222 00:10:51,200 --> 00:10:53,760 Speaker 2: All right, Thanks very much. Alex appreciate that. That's Alex Steele. 223 00:10:53,800 --> 00:10:56,680 Speaker 2: She was sitting down with dal CEO Jim Fiddling in 224 00:10:56,720 --> 00:10:58,400 Speaker 2: Bloomberg's Houston bureau. 225 00:10:58,440 --> 00:11:03,800 Speaker 1: There you're listening to the Bloomberg Intelligence Podcast. Catch us 226 00:11:03,840 --> 00:11:07,240 Speaker 1: live weekdays at ten am Eastern on applecard Play and 227 00:11:07,240 --> 00:11:10,160 Speaker 1: Android Auto with the Bloomberg Business Act. You can also 228 00:11:10,240 --> 00:11:13,720 Speaker 1: listen live on Amazon Alexa from our flagship New York station, 229 00:11:14,080 --> 00:11:17,839 Speaker 1: Just Say Alexa playing Bloomberg eleven thirty. 230 00:11:18,360 --> 00:11:20,920 Speaker 2: All right, let's check in with Ira Jersey. He is 231 00:11:20,960 --> 00:11:24,199 Speaker 2: our go to guy on markets, the treasure markets that 232 00:11:24,280 --> 00:11:27,400 Speaker 2: really prices in kind of where this FED may want 233 00:11:27,400 --> 00:11:29,720 Speaker 2: to go. Here, our Jersey chief interest rate strategist for 234 00:11:29,720 --> 00:11:34,640 Speaker 2: Bloomberg Intelligence, joining us from the confines of our Princeton University, 235 00:11:35,200 --> 00:11:39,160 Speaker 2: our Princeton, New Jersey set down there. IIRA again, not 236 00:11:39,200 --> 00:11:42,520 Speaker 2: looking for anything tomorrow, but you're the smart money. When 237 00:11:42,520 --> 00:11:44,120 Speaker 2: we've heard of the smart money, we talk about the 238 00:11:44,160 --> 00:11:45,080 Speaker 2: Irad Jerseys of the world. 239 00:11:45,120 --> 00:11:46,160 Speaker 7: What are you going to be listening for? 240 00:11:46,800 --> 00:11:48,600 Speaker 8: Yeah, I'm going to be looking for a couple of things, Paul. 241 00:11:48,640 --> 00:11:51,280 Speaker 8: So number one is a balanceee policy. 242 00:11:51,280 --> 00:11:51,920 Speaker 7: You know, we've been. 243 00:11:51,840 --> 00:11:55,360 Speaker 8: Waiting for more information and details on how that was 244 00:11:55,400 --> 00:11:58,720 Speaker 8: going to develop over time, and at the last meeting, 245 00:11:58,840 --> 00:12:01,120 Speaker 8: Jay Powell said, hey, hey, the next meeting, we're going 246 00:12:01,160 --> 00:12:03,240 Speaker 8: to start talking about what we're going to do. So 247 00:12:03,679 --> 00:12:05,839 Speaker 8: I'll be listening in this post meeting press conference as 248 00:12:05,880 --> 00:12:08,760 Speaker 8: to what are the options maybe they're considering. There won't 249 00:12:08,760 --> 00:12:11,559 Speaker 8: be any decisions and they won't make a and there 250 00:12:11,600 --> 00:12:13,720 Speaker 8: won't be a lot of detail yet, but yeah, you know, 251 00:12:13,760 --> 00:12:15,800 Speaker 8: what are they thinking in terms of timing and also 252 00:12:15,840 --> 00:12:18,640 Speaker 8: in terms of size of how they're going to cut 253 00:12:18,679 --> 00:12:23,200 Speaker 8: back their asset asset run off So that's number one, 254 00:12:23,200 --> 00:12:25,120 Speaker 8: and then number two is obviously some of the nuanced 255 00:12:25,120 --> 00:12:27,880 Speaker 8: in details. How do the dots change, And in particular, 256 00:12:27,920 --> 00:12:29,480 Speaker 8: I'm not going to really look at the twenty twenty 257 00:12:29,520 --> 00:12:31,400 Speaker 8: four dots, you know, there's a lot of focus on that, 258 00:12:31,760 --> 00:12:33,760 Speaker 8: but it's the twenty twenty five dots that are going 259 00:12:33,840 --> 00:12:35,720 Speaker 8: to matter for like the long term end of the 260 00:12:35,720 --> 00:12:40,000 Speaker 8: treasury market and also for the mortgage market. So look 261 00:12:40,040 --> 00:12:42,680 Speaker 8: at those twenty twenty five dots. How low does the 262 00:12:42,720 --> 00:12:44,840 Speaker 8: Fed still think it's going to cut interest rates? Is 263 00:12:44,840 --> 00:12:46,760 Speaker 8: it going to be lower than what they've said, or 264 00:12:46,800 --> 00:12:49,040 Speaker 8: maybe are they going to you know, cut a little 265 00:12:49,120 --> 00:12:53,240 Speaker 8: less than they said based on their projections of those dots. 266 00:12:53,480 --> 00:12:55,640 Speaker 9: Well, let's get into the projections also a little bit 267 00:12:55,679 --> 00:12:58,720 Speaker 9: more that this is going to be the first updated 268 00:12:58,760 --> 00:13:01,480 Speaker 9: summary of economic projects we're going to get this year. 269 00:13:01,600 --> 00:13:04,480 Speaker 9: So the twenty twenty three dots at the end of 270 00:13:04,600 --> 00:13:07,440 Speaker 9: in December that we saw had those three cuts priced 271 00:13:07,440 --> 00:13:09,960 Speaker 9: in for this year. As you said, maybe to twenty 272 00:13:10,000 --> 00:13:13,240 Speaker 9: twenty four dots less interesting than twenty five. But we're 273 00:13:13,240 --> 00:13:17,719 Speaker 9: also going to get updated inflation projections, updated GDP projections, 274 00:13:18,040 --> 00:13:20,160 Speaker 9: any movement a sense might happen in there. 275 00:13:21,200 --> 00:13:25,320 Speaker 8: Yeah, I think that the GDP projections maybe not so much, 276 00:13:25,360 --> 00:13:29,080 Speaker 8: but the CPI projections and the PC core PC projections 277 00:13:29,120 --> 00:13:30,880 Speaker 8: probably have to move up a little bit just based 278 00:13:30,920 --> 00:13:34,040 Speaker 8: on the data and information that we've gotten so far. 279 00:13:34,360 --> 00:13:36,320 Speaker 8: I would be pretty surprised if we didn't get an 280 00:13:36,400 --> 00:13:39,800 Speaker 8: uptick in what they call the central tendency. So keep 281 00:13:39,840 --> 00:13:42,800 Speaker 8: in mind when you see the summary of economic projections, 282 00:13:43,120 --> 00:13:45,800 Speaker 8: they come up with what's called the central tendency, which 283 00:13:45,840 --> 00:13:47,800 Speaker 8: is a trimmed mean they take off some of the 284 00:13:48,120 --> 00:13:50,800 Speaker 8: outliers and then say, here's the central tendency that we 285 00:13:50,880 --> 00:13:53,600 Speaker 8: think that CPI and GDP are going to be in 286 00:13:53,640 --> 00:13:55,760 Speaker 8: this year. So I would be pretty surprised if those 287 00:13:55,800 --> 00:13:57,800 Speaker 8: didn't come up. The other one to watch, of course, 288 00:13:58,679 --> 00:14:01,960 Speaker 8: is going to be there expectation of the employment situation. 289 00:14:02,080 --> 00:14:05,360 Speaker 8: So where's the unemployment rate going in their forecast, because 290 00:14:05,679 --> 00:14:09,680 Speaker 8: that is obviously the second key to their dual mandate 291 00:14:09,800 --> 00:14:11,880 Speaker 8: besides besides the inflation. 292 00:14:12,640 --> 00:14:13,800 Speaker 7: That besides inflation. 293 00:14:14,200 --> 00:14:16,880 Speaker 8: So right now they don't have to worry about the 294 00:14:18,080 --> 00:14:20,960 Speaker 8: employment situation because things are very tight, so a three 295 00:14:20,960 --> 00:14:23,360 Speaker 8: point nine percent unemployment and the like. But if their 296 00:14:23,400 --> 00:14:26,600 Speaker 8: forecast suggests that maybe employment is going to remain better 297 00:14:27,040 --> 00:14:30,640 Speaker 8: than what the December SEP had said. Then there's the 298 00:14:30,680 --> 00:14:33,080 Speaker 8: possibility that maybe at some point in the not too 299 00:14:33,120 --> 00:14:36,760 Speaker 8: distant future they might go from three cuts to two. 300 00:14:36,680 --> 00:14:38,480 Speaker 7: Cuts in the dot plot come June. 301 00:14:39,120 --> 00:14:41,000 Speaker 8: Of course, there's a lot of data we get before then, 302 00:14:41,080 --> 00:14:44,240 Speaker 8: but I think that in order to prepare the market 303 00:14:44,280 --> 00:14:46,560 Speaker 8: for that, one of the ways that it can it 304 00:14:46,600 --> 00:14:49,920 Speaker 8: can do so without without having two or more members 305 00:14:50,000 --> 00:14:52,120 Speaker 8: move their dots up, would be to say, hey, we 306 00:14:52,240 --> 00:14:54,280 Speaker 8: actually think the employment situation is going to be better 307 00:14:54,680 --> 00:14:57,080 Speaker 8: than we thought just three months ago. 308 00:14:57,880 --> 00:15:01,520 Speaker 2: So IRA w I r PG, the WORP function. We 309 00:15:01,520 --> 00:15:04,440 Speaker 2: started the year with six the market pricing in approximately 310 00:15:04,480 --> 00:15:07,800 Speaker 2: six rate cuts were now down to approximately three. Does 311 00:15:07,840 --> 00:15:09,800 Speaker 2: that seem more realistic to you? 312 00:15:11,040 --> 00:15:14,160 Speaker 8: That's been our call since last October, So yeah, it's 313 00:15:14,200 --> 00:15:16,640 Speaker 8: like come back. You know, quite frankly that that pricing 314 00:15:16,640 --> 00:15:18,960 Speaker 8: of six cuts was one of the three things that 315 00:15:19,000 --> 00:15:22,320 Speaker 8: we highlighted as maybe being the biggest missed pricings in 316 00:15:22,360 --> 00:15:26,800 Speaker 8: the rates market. That and also inflation expectations, because we 317 00:15:26,880 --> 00:15:30,880 Speaker 8: had five year inflation expectations earlier in the year approaching 318 00:15:30,880 --> 00:15:32,960 Speaker 8: two percent, and we thought that that was somewhat too 319 00:15:33,000 --> 00:15:36,400 Speaker 8: low and unrealistically low and that they would probably have 320 00:15:36,480 --> 00:15:40,119 Speaker 8: to come up. So three cuts at this point seems reasonable. 321 00:15:40,880 --> 00:15:43,800 Speaker 8: It's because you know, obviously the Federal Reserve could cut five, 322 00:15:44,040 --> 00:15:46,880 Speaker 8: they could cut one, right, they could cut zero. So 323 00:15:46,960 --> 00:15:50,120 Speaker 8: I think that that's a more reasonable midpoint of potential 324 00:15:50,160 --> 00:15:52,880 Speaker 8: outcomes than is that than was the six cuts that 325 00:15:52,920 --> 00:15:55,120 Speaker 8: were priced in January. 326 00:15:55,280 --> 00:15:56,840 Speaker 7: And yeah, you know, you look. 327 00:15:56,680 --> 00:15:58,640 Speaker 8: At the rest of the treasury market, like two year 328 00:15:58,720 --> 00:16:02,400 Speaker 8: yields at four point four point seven percent, two year 329 00:16:02,440 --> 00:16:04,920 Speaker 8: yields are exactly pricing for three cuts this year and 330 00:16:04,960 --> 00:16:08,080 Speaker 8: three cuts next year. So you know, I think that that, 331 00:16:08,200 --> 00:16:10,680 Speaker 8: you know, those are pretty close to fair value. When 332 00:16:10,680 --> 00:16:13,520 Speaker 8: they were down at four point four percent, they were uh, 333 00:16:13,800 --> 00:16:16,120 Speaker 8: you know, obviously a little bit overpriced, and now it's 334 00:16:16,120 --> 00:16:18,160 Speaker 8: it's more more realistic pricing. 335 00:16:18,200 --> 00:16:20,240 Speaker 7: I think for the potential policy outcomes. 336 00:16:20,520 --> 00:16:22,280 Speaker 9: How much do you think Powell is going to get 337 00:16:22,280 --> 00:16:25,720 Speaker 9: into the cadence of rate cuts. I think it was 338 00:16:25,800 --> 00:16:29,680 Speaker 9: maybe Vice Chair Jefferson who had brought up recently that 339 00:16:29,800 --> 00:16:32,520 Speaker 9: in I think it was in Greenspan's tenure that the 340 00:16:32,560 --> 00:16:35,280 Speaker 9: Fed had cut and then you know, waited a couple 341 00:16:35,240 --> 00:16:38,360 Speaker 9: of meetings cut again. So maybe the you know, the 342 00:16:38,400 --> 00:16:41,120 Speaker 9: stop and go nature of coming down. If Powell might 343 00:16:41,440 --> 00:16:44,760 Speaker 9: allude to how that spacing is going to play out. 344 00:16:45,000 --> 00:16:47,240 Speaker 8: Yeah, I doubt that that the chair is going to 345 00:16:47,400 --> 00:16:50,960 Speaker 8: say anything completely outrageous, so he'll leave his options open. 346 00:16:51,600 --> 00:16:53,720 Speaker 7: But I wouldn't be surprised if he mentioned. 347 00:16:53,440 --> 00:16:57,200 Speaker 8: That, uh that a stop, stop go or not going 348 00:16:57,240 --> 00:17:00,560 Speaker 8: every meeting, not cutting every meeting is a realistic potility. 349 00:17:00,640 --> 00:17:04,760 Speaker 8: And clearly, you know, three cuts this year would require 350 00:17:04,840 --> 00:17:07,880 Speaker 8: them to skip at least one meeting, if not too 351 00:17:08,280 --> 00:17:10,200 Speaker 8: depending on when they started, right, So it wouldn't it 352 00:17:10,240 --> 00:17:13,200 Speaker 8: wouldn't surprise me personally if the Federal Reserve did cut 353 00:17:13,200 --> 00:17:16,679 Speaker 8: in June and then waited again until September to see 354 00:17:16,880 --> 00:17:19,720 Speaker 8: what the economy was doing, get you wind up getting, 355 00:17:19,920 --> 00:17:22,760 Speaker 8: you know, to almost three more months of data in 356 00:17:22,800 --> 00:17:28,040 Speaker 8: between June and the September meeting. So given that, you know, 357 00:17:28,080 --> 00:17:31,440 Speaker 8: I think that that going in June actually gives the 358 00:17:31,920 --> 00:17:35,920 Speaker 8: Fed a lot more optionality. You know, cutting in July 359 00:17:36,560 --> 00:17:39,960 Speaker 8: would also give them similar optionality where maybe they cut 360 00:17:40,000 --> 00:17:42,480 Speaker 8: in July and then they don't cut again until November 361 00:17:42,840 --> 00:17:45,000 Speaker 8: and then wait till December. Right, And there's the possibility 362 00:17:45,000 --> 00:17:47,560 Speaker 8: that if the economy continues to be pretty good, then 363 00:17:47,600 --> 00:17:50,000 Speaker 8: there's no reason for the FED to necessarily cut in December. 364 00:17:50,040 --> 00:17:52,120 Speaker 8: And you only get fifty basis points of cuts this year, 365 00:17:52,800 --> 00:17:54,800 Speaker 8: so that would not be a surprise, you know, going 366 00:17:54,880 --> 00:17:57,480 Speaker 8: in a measured pace, right, something like that. That was 367 00:17:57,520 --> 00:18:01,720 Speaker 8: the green Span hiking cycle back in the mid two 368 00:18:01,760 --> 00:18:03,800 Speaker 8: thousands when he said, you know, we're going to go 369 00:18:03,800 --> 00:18:07,359 Speaker 8: to measured pace, So this could be something similar. It's 370 00:18:07,480 --> 00:18:09,800 Speaker 8: been hard for the FED in the past to calibrate 371 00:18:09,840 --> 00:18:13,080 Speaker 8: things that way because they're always they've always been reacting 372 00:18:13,119 --> 00:18:16,720 Speaker 8: to some crisis or some massive downturn in the economy 373 00:18:16,760 --> 00:18:20,040 Speaker 8: that was where they were behind the curve. So I 374 00:18:20,040 --> 00:18:21,720 Speaker 8: think the FED at this point would like to get 375 00:18:21,720 --> 00:18:24,520 Speaker 8: in front of the curve and start to cut. The 376 00:18:24,600 --> 00:18:28,320 Speaker 8: risk is that they make the mistake of reaccelerating inflation, right, 377 00:18:28,359 --> 00:18:30,919 Speaker 8: and that's something that a lot of market participants are 378 00:18:31,000 --> 00:18:33,760 Speaker 8: very worried about as well. So the FED is in 379 00:18:33,840 --> 00:18:37,040 Speaker 8: a tough place right here, quite frankly, so doing nothing 380 00:18:37,160 --> 00:18:39,520 Speaker 8: is actually the path of least resistance, at least until 381 00:18:39,760 --> 00:18:42,639 Speaker 8: it's clear that the economy is slowing enough that they 382 00:18:42,640 --> 00:18:44,040 Speaker 8: can feel comfortable cutting rates. 383 00:18:44,119 --> 00:18:46,520 Speaker 9: Yeah. Well, I mean that's there's going to be a 384 00:18:46,600 --> 00:18:48,480 Speaker 9: kind of a high bar to get that amount of 385 00:18:48,520 --> 00:18:51,040 Speaker 9: slowing between now and June. Now, I mean, looking at 386 00:18:51,080 --> 00:18:53,600 Speaker 9: the data that we've gotten for the first two months 387 00:18:53,600 --> 00:18:56,560 Speaker 9: of the year, it looks like inflation is still pretty firm, 388 00:18:56,800 --> 00:19:01,639 Speaker 9: the job market's still pretty strongly seen a ton of that, 389 00:19:01,840 --> 00:19:04,760 Speaker 9: like you know, slowing activity that that you know, Powell 390 00:19:04,840 --> 00:19:07,760 Speaker 9: said in his congressional testimony that they're not far from 391 00:19:07,760 --> 00:19:10,720 Speaker 9: getting that level of confidence to start cutting rates. But 392 00:19:11,119 --> 00:19:13,520 Speaker 9: I don't think we've really gotten much news since those 393 00:19:13,520 --> 00:19:15,880 Speaker 9: comments that would make them more confident. 394 00:19:17,320 --> 00:19:19,760 Speaker 8: Yeah, I don't disagree with that. I think that that's 395 00:19:19,800 --> 00:19:22,320 Speaker 8: the reason why the markets, you know, now pricing for 396 00:19:22,440 --> 00:19:25,439 Speaker 8: a July cut instead of a June first cut. But 397 00:19:25,640 --> 00:19:28,679 Speaker 8: you still get another three months of data. There's still 398 00:19:29,119 --> 00:19:31,360 Speaker 8: there are some signs that the economy is slowing. When 399 00:19:31,359 --> 00:19:33,159 Speaker 8: you look at some of the uh some of the 400 00:19:33,160 --> 00:19:37,240 Speaker 8: survey data, for example, you're you're seeing some confidence levels 401 00:19:37,280 --> 00:19:40,199 Speaker 8: going down a little bit. You do have some some 402 00:19:40,359 --> 00:19:43,560 Speaker 8: areas of consumption that are slowing pretty meaningfully. So so 403 00:19:43,680 --> 00:19:46,800 Speaker 8: all is not great, but it's also as you note, 404 00:19:47,040 --> 00:19:50,560 Speaker 8: it's it's fine, right, and and fine means that the 405 00:19:50,600 --> 00:19:52,919 Speaker 8: FED doesn't necessarily need to cut interest rates. You know 406 00:19:53,000 --> 00:19:55,159 Speaker 8: what what the FED would love to do is to 407 00:19:55,560 --> 00:19:58,840 Speaker 8: kind of cut interest rates following how much inflation is falling. 408 00:19:59,720 --> 00:20:02,920 Speaker 8: The The challenge with that is which inflation measure you're 409 00:20:02,920 --> 00:20:05,520 Speaker 8: targeting and does the market understand that? And I think 410 00:20:05,560 --> 00:20:09,800 Speaker 8: that that's maybe a communications issue that Jay Powell and 411 00:20:09,840 --> 00:20:12,360 Speaker 8: some other members of the FED could address, because are 412 00:20:12,359 --> 00:20:16,320 Speaker 8: they happy with having with having the Fed funds rate 413 00:20:16,400 --> 00:20:20,600 Speaker 8: three hundred basis points above inflation based on you know, 414 00:20:20,680 --> 00:20:22,719 Speaker 8: one of the measures of inflation. That's where it is, 415 00:20:23,000 --> 00:20:25,760 Speaker 8: and that would seem to be high and very restrictive. 416 00:20:25,760 --> 00:20:27,000 Speaker 7: And that's one of the reasons. 417 00:20:26,720 --> 00:20:30,479 Speaker 8: Why when when Ja Palell or Chris Waller or some 418 00:20:30,520 --> 00:20:32,919 Speaker 8: of these other members of the Fed Reserve say that 419 00:20:33,000 --> 00:20:35,440 Speaker 8: rates are restrictive, Yep, that's what they're talking about, right, 420 00:20:35,480 --> 00:20:38,080 Speaker 8: that difference between the FED funds rate and inflation. 421 00:20:38,280 --> 00:20:40,520 Speaker 2: All right, Ira, great stuff, Really appreciate getting couple of 422 00:20:40,520 --> 00:20:43,399 Speaker 2: minutes of your time before this important FED meeting tomorrow. 423 00:20:43,440 --> 00:20:47,320 Speaker 2: That's our Jersey chief US interest rate strategist for Bloomberg Intelligence. 424 00:20:48,000 --> 00:20:52,239 Speaker 1: No, you're listening to the Bloomberg Intelligence podcast. Catch us 425 00:20:52,320 --> 00:20:55,280 Speaker 1: Live weekdays at ten am Eastern on FO card playing 426 00:20:55,320 --> 00:20:57,960 Speaker 1: and broud Auto with the Bloomberg Business app. Listen on 427 00:20:58,000 --> 00:21:01,280 Speaker 1: demand wherever you get your podcast are what just live 428 00:21:01,400 --> 00:21:03,879 Speaker 1: on YouTube again? 429 00:21:04,040 --> 00:21:07,240 Speaker 2: Waiting to Fed tomorrow and not much as expected from 430 00:21:07,560 --> 00:21:10,320 Speaker 2: the Fed and their statement and from jpal Steady as 431 00:21:10,320 --> 00:21:11,919 Speaker 2: she goes. I guess Marcus is trying to get a 432 00:21:11,960 --> 00:21:16,280 Speaker 2: sense of when the FED will begin cutting rates this year. 433 00:21:16,359 --> 00:21:18,600 Speaker 2: Where's theercenaria where maybe they pushed out the next year. 434 00:21:19,440 --> 00:21:21,480 Speaker 2: It certainly is impacting the markets. Let's check in with 435 00:21:21,520 --> 00:21:24,160 Speaker 2: a professional on this stuff. Phil Orlando, chief equity market 436 00:21:24,200 --> 00:21:27,159 Speaker 2: strategist and head of Client portfolio Management and federator at 437 00:21:27,160 --> 00:21:30,119 Speaker 2: Hermes joins us via zoom. So Phil, what are you 438 00:21:30,200 --> 00:21:33,439 Speaker 2: looking for from the Fed tomorrow and do you expect 439 00:21:33,440 --> 00:21:35,400 Speaker 2: it to change your outlook? 440 00:21:37,640 --> 00:21:39,760 Speaker 10: Paul, good morning, Thank you very much for having me 441 00:21:39,840 --> 00:21:43,240 Speaker 10: back on. We are very much out of sync with 442 00:21:43,359 --> 00:21:46,280 Speaker 10: the market. You know, as you and I talked I 443 00:21:46,280 --> 00:21:50,879 Speaker 10: guests earlier this year, the consensus view on Wall Street 444 00:21:51,000 --> 00:21:55,320 Speaker 10: was that there'd be six or seven rate cuts this year, 445 00:21:55,359 --> 00:21:58,720 Speaker 10: with the first one starting tomorrow, you know, due to 446 00:21:58,760 --> 00:22:04,119 Speaker 10: immaculate disinflation and the immaculate pivot thesis. And we just 447 00:22:04,200 --> 00:22:07,040 Speaker 10: didn't see that. We were sort of in the three 448 00:22:07,119 --> 00:22:11,680 Speaker 10: cut camp, with the first one coming maybe in July, July, November, 449 00:22:11,720 --> 00:22:14,480 Speaker 10: December was sort of the way we were timing this out. 450 00:22:15,320 --> 00:22:17,679 Speaker 10: And what's transpired over the last couple of months is 451 00:22:17,720 --> 00:22:22,000 Speaker 10: that inflation, you know, as we discussed, is a little 452 00:22:22,000 --> 00:22:26,160 Speaker 10: sticky or a little more persistent than perhaps the consensus thought, 453 00:22:26,440 --> 00:22:30,760 Speaker 10: and the FED recognizing that, has been trying to tamp 454 00:22:30,880 --> 00:22:36,080 Speaker 10: down some of this enthusiasm for a significant number of 455 00:22:36,119 --> 00:22:40,080 Speaker 10: rate cuts. So fast forward to tomorrow, we expect the 456 00:22:40,080 --> 00:22:43,639 Speaker 10: Federal Reserve to do literally nothing. We still think that 457 00:22:43,720 --> 00:22:47,040 Speaker 10: first cut is coming in July, and I think the 458 00:22:47,080 --> 00:22:50,359 Speaker 10: market is going to talk about what we've seen with 459 00:22:50,560 --> 00:22:54,439 Speaker 10: CPI and PPI and PCE over the last four or 460 00:22:54,480 --> 00:22:58,800 Speaker 10: five months, in that the rapid decline that we saw 461 00:22:58,840 --> 00:23:01,320 Speaker 10: from the middle of twenty two two into the end 462 00:23:01,320 --> 00:23:04,680 Speaker 10: of twenty three has now gotten chopping. Well. We've actually 463 00:23:04,720 --> 00:23:09,040 Speaker 10: seen an increase in inflation a little bit over the 464 00:23:09,080 --> 00:23:12,760 Speaker 10: last couple of months due to energy and food prices, 465 00:23:12,800 --> 00:23:16,959 Speaker 10: and housing and labor cost pressures and all the things 466 00:23:17,000 --> 00:23:19,600 Speaker 10: that you and I talked about earlier this year. 467 00:23:20,160 --> 00:23:22,960 Speaker 9: What's the trade that you're preparing for Phil in terms 468 00:23:23,000 --> 00:23:25,520 Speaker 9: of tomorrow, maybe you and your team, if you've played, 469 00:23:25,600 --> 00:23:28,280 Speaker 9: you know, run out a few scenarios. Obviously the you know, 470 00:23:28,440 --> 00:23:32,680 Speaker 9: interest rate move being expected to be zero, but looking 471 00:23:32,720 --> 00:23:35,919 Speaker 9: at more in terms of what might happen with the dots, 472 00:23:36,000 --> 00:23:39,000 Speaker 9: what might happen with the economic projections? Have you guys 473 00:23:39,000 --> 00:23:41,920 Speaker 9: come up with a game plan of how to move 474 00:23:41,920 --> 00:23:44,879 Speaker 9: in either direction depending on what those materials show. 475 00:23:45,960 --> 00:23:49,600 Speaker 10: Fabulous question, Molly, And there are two parts to this. 476 00:23:49,760 --> 00:23:51,720 Speaker 10: I want to focus on the dot part of your 477 00:23:51,760 --> 00:23:55,080 Speaker 10: question first. And the one thing that sort of confounded 478 00:23:55,200 --> 00:23:58,920 Speaker 10: us at the last SEP a week or so before 479 00:23:59,000 --> 00:24:04,520 Speaker 10: Christmas was the fed's forecast that core PCEE inflation would 480 00:24:04,600 --> 00:24:07,479 Speaker 10: get to their two percent target. But by the end 481 00:24:07,520 --> 00:24:10,679 Speaker 10: of calendar twenty six, literally three years from now, and 482 00:24:10,720 --> 00:24:13,399 Speaker 10: we're at two point eight percent now, down from like 483 00:24:13,440 --> 00:24:16,000 Speaker 10: five point six percent, you know, a year and a 484 00:24:16,000 --> 00:24:19,439 Speaker 10: half ago, two years ago. So in our minds we're saying, Okay, 485 00:24:19,560 --> 00:24:23,280 Speaker 10: is the FED being too conservative because they screwed up 486 00:24:23,320 --> 00:24:26,199 Speaker 10: that whole transitory thing a couple of years ago and 487 00:24:26,240 --> 00:24:29,320 Speaker 10: they don't want to make the same mistake twice, or 488 00:24:29,359 --> 00:24:32,760 Speaker 10: are they trying to tell us something that they recognize, 489 00:24:32,920 --> 00:24:36,440 Speaker 10: you know, taking a really deep dive into the data 490 00:24:36,520 --> 00:24:40,359 Speaker 10: that achieving this last mile, getting core PC down to 491 00:24:40,400 --> 00:24:42,879 Speaker 10: two percent is going to be really hard, and we 492 00:24:42,960 --> 00:24:46,840 Speaker 10: need to adjust expectations within the market. So that that's 493 00:24:46,880 --> 00:24:49,480 Speaker 10: sort of one issue. What does the FED do with 494 00:24:49,640 --> 00:24:54,359 Speaker 10: that dot? That two percent core PCE by the end 495 00:24:54,400 --> 00:24:57,440 Speaker 10: of calendar twenty six dot? Did that stay exactly where 496 00:24:57,440 --> 00:25:00,840 Speaker 10: it is or do they move that? Upon point? Is 497 00:25:01,320 --> 00:25:04,600 Speaker 10: the market question, how do we invest for this? And 498 00:25:05,200 --> 00:25:07,520 Speaker 10: over the last say, three or four months, there's been 499 00:25:07,520 --> 00:25:12,480 Speaker 10: a significant divergence in the marketplace. Benchmark ten year treasury yields, 500 00:25:12,760 --> 00:25:16,199 Speaker 10: which were three point eight percent you know, in the 501 00:25:16,240 --> 00:25:18,240 Speaker 10: fourth quarter of last year, are now sitting at four 502 00:25:18,400 --> 00:25:21,600 Speaker 10: thirty all right, so we've backed up fifty basis points 503 00:25:21,600 --> 00:25:24,399 Speaker 10: and treasury yields over the last couple of months. The 504 00:25:24,480 --> 00:25:27,200 Speaker 10: S and P five hundred is up nine percent year 505 00:25:27,240 --> 00:25:30,680 Speaker 10: to date, it's up twenty seven percent since it's low 506 00:25:30,720 --> 00:25:35,040 Speaker 10: the end of October. That's incongruous that there needs to 507 00:25:35,080 --> 00:25:38,000 Speaker 10: be more in synct. Frankly, I think the bond market's 508 00:25:38,040 --> 00:25:42,480 Speaker 10: got it right. The backup in rates over the course 509 00:25:42,480 --> 00:25:44,960 Speaker 10: of the last couple of months because of the disappointment 510 00:25:44,960 --> 00:25:48,240 Speaker 10: with inflation, in our view, is the right move. Equity 511 00:25:48,320 --> 00:25:52,760 Speaker 10: markets seem to be overly optimistic, and perhaps that's because 512 00:25:52,800 --> 00:25:55,520 Speaker 10: of the performance of what now turns out to be 513 00:25:55,640 --> 00:25:59,840 Speaker 10: the you know, the mag one. In Vidia is nearly 514 00:26:00,560 --> 00:26:04,440 Speaker 10: a ten bagger over the last eighteen months. Now in 515 00:26:04,560 --> 00:26:07,040 Speaker 10: Video is down about thirteen percent over the last couple 516 00:26:07,040 --> 00:26:10,800 Speaker 10: of weeks. So maybe from that oversold position and video 517 00:26:10,840 --> 00:26:13,320 Speaker 10: is going to start to ratchet back to more reasonable 518 00:26:13,400 --> 00:26:17,680 Speaker 10: valuation levels, and maybe the equity market, reflecting what's going 519 00:26:17,720 --> 00:26:20,320 Speaker 10: on in the bond market, but begins to come back 520 00:26:20,359 --> 00:26:22,520 Speaker 10: to more reasonable levels as well. 521 00:26:22,560 --> 00:26:25,000 Speaker 2: I were speaking, Phil Orlando, chief equity market strategist or 522 00:26:25,040 --> 00:26:27,520 Speaker 2: federator Hermes coming up in just moments, we're gonna bring 523 00:26:27,520 --> 00:26:29,920 Speaker 2: you a TV simulcast Bloomberg's Alex Steele. She's speaking with 524 00:26:30,000 --> 00:26:33,359 Speaker 2: dal CEO Jim Fiddling in Houston. So we'll bring that 525 00:26:33,400 --> 00:26:33,720 Speaker 2: to you. 526 00:26:33,640 --> 00:26:34,360 Speaker 7: In just moments. 527 00:26:34,520 --> 00:26:37,679 Speaker 2: Hey, Phil, So, given that backdrop on rates, am I 528 00:26:37,720 --> 00:26:38,960 Speaker 2: buying them or am I selling them? 529 00:26:39,000 --> 00:26:39,160 Speaker 10: Here? 530 00:26:39,200 --> 00:26:39,760 Speaker 7: What are we doing? 531 00:26:41,160 --> 00:26:42,160 Speaker 10: Rates? Or stocks? 532 00:26:42,880 --> 00:26:43,360 Speaker 7: Stocks? 533 00:26:44,359 --> 00:26:44,720 Speaker 4: All right? 534 00:26:45,080 --> 00:26:48,080 Speaker 10: So our view going into this year is that we 535 00:26:48,119 --> 00:26:50,760 Speaker 10: would have a barbell shaped year in terms of S 536 00:26:50,800 --> 00:26:53,560 Speaker 10: and P five hundred performance. We thought we'd get out 537 00:26:53,600 --> 00:26:56,560 Speaker 10: of the gate in great shape, and clearly we have. Frankly, 538 00:26:56,880 --> 00:26:59,520 Speaker 10: we've gotten out of the gate in two grade a shape. 539 00:26:59,680 --> 00:27:01,679 Speaker 10: Our full year target for the S and P five 540 00:27:01,800 --> 00:27:04,840 Speaker 10: hundred and fifty two hundred, and we're essentially there now. 541 00:27:05,280 --> 00:27:07,639 Speaker 10: We thought there'd be a lot of chopping volatility in 542 00:27:07,680 --> 00:27:11,720 Speaker 10: the summer associated with the Fed's first rate cut, which 543 00:27:11,720 --> 00:27:15,000 Speaker 10: we thought would start in July. Typically stocks go down 544 00:27:15,359 --> 00:27:17,879 Speaker 10: when the stock when the FED starts cutting, and we 545 00:27:17,880 --> 00:27:19,919 Speaker 10: think there's gonna be a lot of volatility in the 546 00:27:19,960 --> 00:27:24,119 Speaker 10: summer and fall going into the election, and then we 547 00:27:24,119 --> 00:27:26,959 Speaker 10: think there's going to be a powerful sort of post 548 00:27:27,000 --> 00:27:30,520 Speaker 10: election sigh of relief rally that takes us back to 549 00:27:30,560 --> 00:27:35,320 Speaker 10: fifty two hundred. So the equity trade here over say 550 00:27:35,320 --> 00:27:38,320 Speaker 10: the next six months is going to be one where 551 00:27:38,359 --> 00:27:40,560 Speaker 10: I think the froth comes off of a lot of 552 00:27:40,600 --> 00:27:44,479 Speaker 10: the growth and the technology names that have done phenomenally well, 553 00:27:44,800 --> 00:27:46,960 Speaker 10: you know, over the last eighteen months, and I think 554 00:27:46,960 --> 00:27:49,040 Speaker 10: a lot of the sectors that frankly have been left 555 00:27:49,040 --> 00:27:55,720 Speaker 10: for dead, domestic large cap value, domestic small camp growth, international, 556 00:27:56,240 --> 00:27:58,240 Speaker 10: I think you're going to see sort of a reversion 557 00:27:58,240 --> 00:28:00,680 Speaker 10: of the mean changing of the guard, if you will, 558 00:28:01,520 --> 00:28:04,680 Speaker 10: and those stocks, I think we'll have a better next 559 00:28:04,760 --> 00:28:07,800 Speaker 10: couple of quarters than the growth and tech stocks have 560 00:28:07,840 --> 00:28:09,400 Speaker 10: had over the last eighteen months. 561 00:28:09,560 --> 00:28:12,280 Speaker 9: So if your call is for the first rate cut 562 00:28:12,320 --> 00:28:15,680 Speaker 9: coming in July, and you've been hanging with that call 563 00:28:15,720 --> 00:28:17,680 Speaker 9: for several months now, you must be feeling pretty good 564 00:28:17,760 --> 00:28:19,880 Speaker 9: right now these days. How about that? I mean, how 565 00:28:19,880 --> 00:28:22,399 Speaker 9: many people not too long ago we're thinking tomorrow is 566 00:28:22,440 --> 00:28:25,040 Speaker 9: when you know the recuts really start rolling. 567 00:28:26,160 --> 00:28:29,720 Speaker 10: Well, it's there's good and bad to that. We were 568 00:28:29,880 --> 00:28:32,240 Speaker 10: feeling a little nervous at the end of last year 569 00:28:32,240 --> 00:28:35,520 Speaker 10: in the beginning of this year because we were completely 570 00:28:35,600 --> 00:28:37,320 Speaker 10: out of sync with the market and we're sort of 571 00:28:37,359 --> 00:28:39,840 Speaker 10: scratching our heads, sitting around the table saying we've got 572 00:28:39,880 --> 00:28:43,440 Speaker 10: to be missing something. And it turns out that we 573 00:28:43,520 --> 00:28:46,240 Speaker 10: got this one right, or at least it appears so 574 00:28:46,360 --> 00:28:50,760 Speaker 10: at this point, tomorrow's another day or inflation data, more 575 00:28:50,880 --> 00:28:54,920 Speaker 10: labor market data, more economic data generally, and this is 576 00:28:54,960 --> 00:28:58,800 Speaker 10: a game that continues to play out. We come back 577 00:28:58,840 --> 00:29:01,120 Speaker 10: every day and evaluate, you know, what's going to happen 578 00:29:01,200 --> 00:29:02,160 Speaker 10: from this point forward. 579 00:29:03,200 --> 00:29:05,640 Speaker 2: So, Phil, how about the energy space here, I'm just 580 00:29:05,640 --> 00:29:08,840 Speaker 2: looking at WTA crude oil moving higher yet again today 581 00:29:08,840 --> 00:29:10,800 Speaker 2: at over eighty three dollars for barrel. How do you 582 00:29:10,840 --> 00:29:12,000 Speaker 2: guys think about the energy space? 583 00:29:12,760 --> 00:29:14,840 Speaker 10: Well, Paul, again, this is one of the things we 584 00:29:14,880 --> 00:29:17,160 Speaker 10: talked about at the beginning of the year. Energy is 585 00:29:17,200 --> 00:29:20,840 Speaker 10: an overweight for us, with WTI sitting at sixty five 586 00:29:20,920 --> 00:29:23,760 Speaker 10: dollars at the beginning of the year. Our view is 587 00:29:23,760 --> 00:29:27,120 Speaker 10: that it was mispriced, yep, particularly given the volatility in 588 00:29:27,160 --> 00:29:30,520 Speaker 10: the Middle East and the fact that our strategic petroleum 589 00:29:30,560 --> 00:29:33,040 Speaker 10: reserve is sitting at half We felt that CREWD would 590 00:29:33,080 --> 00:29:35,800 Speaker 10: get into that eighty to ninety dollars a barrel neighborhood 591 00:29:36,200 --> 00:29:38,680 Speaker 10: by the end of this year. And you said, we're 592 00:29:38,720 --> 00:29:41,760 Speaker 10: now in the low eighties three months in, so crude 593 00:29:41,800 --> 00:29:45,280 Speaker 10: is actually is absolutely moving in the right direction, right all. 594 00:29:45,240 --> 00:29:47,400 Speaker 2: Right, Phil, thanks so much for joining us. Always appreciate 595 00:29:47,400 --> 00:29:50,280 Speaker 2: getting your thoughts there. Phil Orlando, Chief faculty market strategist 596 00:29:50,280 --> 00:29:52,719 Speaker 2: and head of Client portfolio Management at Federated Hermes. 597 00:29:54,160 --> 00:29:58,040 Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live 598 00:29:58,120 --> 00:30:01,200 Speaker 1: week days at ten am Eastern Apple car Play and 599 00:30:01,160 --> 00:30:04,120 Speaker 1: Android Auto with a Bloomberg Business app. You can also 600 00:30:04,160 --> 00:30:07,680 Speaker 1: listen live on Amazon Alexa from our flagship New York station. 601 00:30:08,040 --> 00:30:11,080 Speaker 1: Just say Alexa playing Bloomberg eleven thirty. 602 00:30:12,160 --> 00:30:15,200 Speaker 2: One of the most read stories on the terminal today, 603 00:30:15,240 --> 00:30:17,560 Speaker 2: Molly Oprah. If you put that in the headline, that's 604 00:30:17,560 --> 00:30:18,120 Speaker 2: going to get. 605 00:30:17,960 --> 00:30:19,880 Speaker 9: That's a good way to get some hits going on. 606 00:30:20,000 --> 00:30:22,480 Speaker 2: Oprah hypes Zepp it bound and we go vy, but 607 00:30:22,560 --> 00:30:25,960 Speaker 2: keeps her choice secret. So apparently she's out there. She's 608 00:30:26,000 --> 00:30:29,280 Speaker 2: become kind of the unofficial spokesperson for his GLP one 609 00:30:29,440 --> 00:30:31,480 Speaker 2: drugs that are all the rage here, just to. 610 00:30:31,440 --> 00:30:33,080 Speaker 9: Catch all of them, because we don't know which one 611 00:30:33,120 --> 00:30:33,760 Speaker 9: she's on right now. 612 00:30:33,760 --> 00:30:35,720 Speaker 2: That's right, Well, they're all great. 613 00:30:36,120 --> 00:30:36,560 Speaker 7: I guess that. 614 00:30:36,680 --> 00:30:37,920 Speaker 9: Whatever she's doing, it's working. 615 00:30:38,000 --> 00:30:40,120 Speaker 2: It's working for her Madison Ulla Joints, and she's a 616 00:30:40,120 --> 00:30:44,240 Speaker 2: healthcare reporter for Bloomberg near she's a reporter on this story. 617 00:30:45,160 --> 00:30:48,080 Speaker 2: What's Oprah's role here with these drugs. 618 00:30:48,520 --> 00:30:51,320 Speaker 11: Well, we're used to seeing Oprah as the face of 619 00:30:51,480 --> 00:30:54,719 Speaker 11: weight Watchers obviously for the last almost a decade. And 620 00:30:54,760 --> 00:30:57,080 Speaker 11: she said recently that she was exiting the board of 621 00:30:57,080 --> 00:31:00,160 Speaker 11: Weight Watchers, and then she said that it was to 622 00:31:00,200 --> 00:31:03,720 Speaker 11: avoid potential perceptions of conflict of interest, and then she's 623 00:31:03,800 --> 00:31:06,160 Speaker 11: doing this special now, which was all about weight loss. 624 00:31:06,360 --> 00:31:09,360 Speaker 2: She did special on ABC Television, Yeah, on Abc. Was 625 00:31:09,400 --> 00:31:11,560 Speaker 2: it a paid promotion or it was not. 626 00:31:11,920 --> 00:31:14,160 Speaker 11: Novo Nordisks said that they didn't have any you know, 627 00:31:14,280 --> 00:31:18,000 Speaker 11: financial anything to do with Oprah really, and she's not, 628 00:31:18,280 --> 00:31:21,080 Speaker 11: you know, to our knowledge, doesn't have a partnership with 629 00:31:21,160 --> 00:31:24,360 Speaker 11: either of the drug manufacturers. But you know, people that 630 00:31:24,400 --> 00:31:27,120 Speaker 11: were watching the show and were on Twitter last night 631 00:31:27,200 --> 00:31:29,920 Speaker 11: sort of reacting to it, said that it watched and 632 00:31:30,240 --> 00:31:32,440 Speaker 11: seemed sort of like an infomercial for the drugs. 633 00:31:32,760 --> 00:31:34,640 Speaker 9: Yeah, tell us a little bit more about who was 634 00:31:34,680 --> 00:31:36,320 Speaker 9: on it. You were telling us before we got on 635 00:31:36,360 --> 00:31:38,640 Speaker 9: the air here that there were some doctors, but maybe 636 00:31:38,680 --> 00:31:40,600 Speaker 9: they kind of glanced over the side effects a bit 637 00:31:40,640 --> 00:31:42,760 Speaker 9: and that this was really just a big, you know, 638 00:31:42,880 --> 00:31:44,880 Speaker 9: hype up moment for these weight loss drugs. 639 00:31:44,960 --> 00:31:47,840 Speaker 11: Yeah, so they heard from patients, there were doctors. There 640 00:31:47,880 --> 00:31:51,000 Speaker 11: were executives from Nova Nordisk and Eli Lilly on the 641 00:31:51,040 --> 00:31:54,280 Speaker 11: program as well. The majority of the program was sort 642 00:31:54,320 --> 00:31:57,080 Speaker 11: of centered on patient experiences with these drugs, but it 643 00:31:57,120 --> 00:32:01,640 Speaker 11: really didn't get into details about the side effects, sort 644 00:32:01,680 --> 00:32:04,480 Speaker 11: of glossed over them, and the doctor that they had 645 00:32:04,520 --> 00:32:07,160 Speaker 11: on talking about them said that the side effects were overhyped. 646 00:32:08,080 --> 00:32:10,800 Speaker 2: Really, so again that kind of goes to the editorial 647 00:32:10,840 --> 00:32:13,280 Speaker 2: integrity of it. I mean I'm not a journalist, but. 648 00:32:14,160 --> 00:32:16,520 Speaker 5: Really, yeah, I mean are we all journalists? 649 00:32:16,840 --> 00:32:21,960 Speaker 11: Yes, there was definitely I think that it served a purpose. 650 00:32:22,000 --> 00:32:24,800 Speaker 11: And Oprah is on these drugs. She's had a great 651 00:32:25,080 --> 00:32:27,760 Speaker 11: experience with them, so she says, and that's sort of 652 00:32:27,800 --> 00:32:31,800 Speaker 11: what the program was centered around, and really spoke to 653 00:32:32,160 --> 00:32:34,200 Speaker 11: that positive experience on the drugs. 654 00:32:34,440 --> 00:32:37,280 Speaker 9: So what are Oprah's feelings toward Weight Watchers right now? 655 00:32:37,280 --> 00:32:38,880 Speaker 9: I mean, this is, like you said, she has been 656 00:32:38,920 --> 00:32:41,600 Speaker 9: the face of that company for so many years and 657 00:32:42,160 --> 00:32:44,520 Speaker 9: now just like really seems to be doing like, you know, 658 00:32:44,560 --> 00:32:47,720 Speaker 9: a total one to eighty and that weight Watchers would 659 00:32:47,720 --> 00:32:49,880 Speaker 9: probably be on the losing end of the success of 660 00:32:49,920 --> 00:32:50,800 Speaker 9: these drugs. 661 00:32:50,920 --> 00:32:51,160 Speaker 7: Yeah. 662 00:32:51,280 --> 00:32:53,880 Speaker 11: Yeah, And she asked, I mean, weight Watchers CEO was 663 00:32:53,960 --> 00:32:57,640 Speaker 11: on this program, and she asked a very pointed question, 664 00:32:57,800 --> 00:33:00,280 Speaker 11: you know, what is the role and what's the point 665 00:33:00,280 --> 00:33:02,560 Speaker 11: of weight Watchers now that we have these medications, which 666 00:33:02,560 --> 00:33:05,160 Speaker 11: I think is sort of the question that the whole 667 00:33:05,200 --> 00:33:09,080 Speaker 11: industry has been asking, and the diet industry and analysts 668 00:33:09,120 --> 00:33:12,600 Speaker 11: and everyone and you know, weight Watchers. CEO said that 669 00:33:12,680 --> 00:33:15,720 Speaker 11: there is still a role for them to play in 670 00:33:15,840 --> 00:33:19,200 Speaker 11: supporting the community spporting people's weight loss journeys. But I 671 00:33:19,200 --> 00:33:21,520 Speaker 11: guess that still sort of remains to be seen because 672 00:33:22,240 --> 00:33:24,800 Speaker 11: their sock's not doing due all right now. 673 00:33:24,600 --> 00:33:27,720 Speaker 2: I really hesitate to ask this question, but since you 674 00:33:27,840 --> 00:33:30,240 Speaker 2: reported on it, what is ozembic face. 675 00:33:32,000 --> 00:33:35,400 Speaker 11: Yes, so, ozempic face is another sort of trend that 676 00:33:35,440 --> 00:33:37,720 Speaker 11: we're seeing happen right now, especially here in New York. 677 00:33:38,440 --> 00:33:41,800 Speaker 11: People who have rapid weight loss from the weight loss 678 00:33:41,840 --> 00:33:44,840 Speaker 11: drugs are getting this hollowed out look in their cheeks, 679 00:33:44,840 --> 00:33:46,880 Speaker 11: which I mean it happens with weight loss. It's not 680 00:33:47,040 --> 00:33:49,600 Speaker 11: just from the drugs, but it's the rapid weight loss 681 00:33:49,600 --> 00:33:51,840 Speaker 11: that sort of makes it more noticeable. So then they're 682 00:33:51,880 --> 00:33:56,200 Speaker 11: seeking out plastic surgery clinics medspots to get botox or 683 00:33:56,240 --> 00:33:58,840 Speaker 11: facelifts and sort of help offset those effects. 684 00:33:58,960 --> 00:34:01,680 Speaker 9: Add that to the list all the winners and losers 685 00:34:01,720 --> 00:34:04,480 Speaker 9: off what comes out of ozetic I mean we've I 686 00:34:04,480 --> 00:34:06,800 Speaker 9: mean the original kind of knock on effect was like, oh, 687 00:34:06,840 --> 00:34:09,319 Speaker 9: you know, all the potato chip companies, maybe not so 688 00:34:09,360 --> 00:34:12,680 Speaker 9: good for them, and now plastic surgery coming up. So 689 00:34:12,719 --> 00:34:15,000 Speaker 9: it's just like the hollowing out of your face. You've 690 00:34:15,000 --> 00:34:16,440 Speaker 9: got the saggy skin there. 691 00:34:16,280 --> 00:34:19,399 Speaker 11: And yeah, yeah, like the extra loose skin ab view, 692 00:34:19,400 --> 00:34:22,120 Speaker 11: which is makes botox has said that this could be 693 00:34:22,160 --> 00:34:24,880 Speaker 11: a potential you know, boon for Botox sales going forward 694 00:34:24,880 --> 00:34:26,399 Speaker 11: and said that at earnings last quarter. 695 00:34:26,480 --> 00:34:27,719 Speaker 9: So it's like I can't keep up. 696 00:34:27,880 --> 00:34:31,799 Speaker 2: Yeah, So on these GLP drugs, where are we in 697 00:34:31,920 --> 00:34:34,800 Speaker 2: terms of uh, I know someone who has a prescription, 698 00:34:34,920 --> 00:34:36,640 Speaker 2: but this person cannot get it filled because there's not 699 00:34:36,719 --> 00:34:39,680 Speaker 2: enough supply where and it is not me? Where are 700 00:34:39,280 --> 00:34:40,280 Speaker 2: they not insured? 701 00:34:41,120 --> 00:34:41,839 Speaker 9: Right? 702 00:34:41,880 --> 00:34:44,719 Speaker 2: So that two questions, Yeah, where are we on ramping 703 00:34:44,800 --> 00:34:47,919 Speaker 2: up supply to meet demand? And then secondarily who pays 704 00:34:47,920 --> 00:34:48,440 Speaker 2: for this stuff? 705 00:34:48,600 --> 00:34:51,160 Speaker 11: Yeah? I mean the supply problem has been a huge 706 00:34:51,200 --> 00:34:54,360 Speaker 11: issue and Nova Noorda, Skinnyla Lily are investing billions of 707 00:34:54,400 --> 00:34:57,520 Speaker 11: dollars to ramp up supply to try to meet demand. 708 00:34:57,560 --> 00:35:00,239 Speaker 11: But you know, I've seen an analyst notes there like 709 00:35:00,239 --> 00:35:03,120 Speaker 11: the demand for these products just seems like it's insatiable 710 00:35:03,239 --> 00:35:05,920 Speaker 11: and at this point they're already coming from behind. So 711 00:35:06,440 --> 00:35:09,520 Speaker 11: and all of these investments in production capacity like take 712 00:35:09,560 --> 00:35:11,680 Speaker 11: a couple of years to come online. So we're sort 713 00:35:11,719 --> 00:35:14,440 Speaker 11: of just still racing to keep up with it. It's 714 00:35:14,800 --> 00:35:17,160 Speaker 11: you know, probably Lily said it is probably going to 715 00:35:17,200 --> 00:35:19,480 Speaker 11: be you know, not this year that they're able to 716 00:35:19,520 --> 00:35:23,439 Speaker 11: meet supply, maybe next year. So we're still still trying 717 00:35:23,480 --> 00:35:26,160 Speaker 11: to ramp up the supply there. And then in terms 718 00:35:26,160 --> 00:35:29,640 Speaker 11: of paying for it, we have like I think fifty 719 00:35:29,680 --> 00:35:34,640 Speaker 11: percent of commercial plans cover the drugs for obesity, A 720 00:35:34,680 --> 00:35:38,160 Speaker 11: third of state health plans through Medicaid cover the drugs. 721 00:35:38,200 --> 00:35:41,200 Speaker 11: Medicare does not cover weight loss drugs, so it's very 722 00:35:41,280 --> 00:35:43,719 Speaker 11: patchy still, and a lot of people are paying out 723 00:35:43,760 --> 00:35:44,160 Speaker 11: of pocket. 724 00:35:44,560 --> 00:35:46,920 Speaker 9: I want to come back to Oper's role in all 725 00:35:46,960 --> 00:35:49,600 Speaker 9: of this, because I really find it interesting that, like 726 00:35:49,680 --> 00:35:51,600 Speaker 9: we've been saying, this is still like, you know, these 727 00:35:51,640 --> 00:35:54,680 Speaker 9: drugs are relatively in their infancy, and we don't really 728 00:35:54,760 --> 00:35:56,879 Speaker 9: know a ton of the side effects at least over 729 00:35:56,880 --> 00:35:59,080 Speaker 9: the longer term yet. And I just find it kind 730 00:35:59,080 --> 00:36:02,400 Speaker 9: of amazing that somebody with a reputation like Oprah is 731 00:36:03,040 --> 00:36:05,120 Speaker 9: I mean, obviously I would think, you know, she's done 732 00:36:05,160 --> 00:36:07,520 Speaker 9: her research on this to the extent that it's available, 733 00:36:07,560 --> 00:36:09,759 Speaker 9: but it's kind of amazing to you know, just be 734 00:36:09,880 --> 00:36:14,319 Speaker 9: putting herself so behind all of this when like I mean, 735 00:36:14,360 --> 00:36:16,239 Speaker 9: so many people really trust her and I don't. 736 00:36:16,560 --> 00:36:16,960 Speaker 5: I don't know. 737 00:36:17,040 --> 00:36:19,080 Speaker 9: I think maybe the skeptic in me is just thinking, 738 00:36:19,120 --> 00:36:20,960 Speaker 9: like there's got to be some risk to that from 739 00:36:20,960 --> 00:36:23,520 Speaker 9: her reputational perspective, this could backfire. 740 00:36:23,680 --> 00:36:25,640 Speaker 11: Yeah, I mean I think that's like that's a risk 741 00:36:25,680 --> 00:36:28,319 Speaker 11: that the companies are it's in the back of their 742 00:36:28,400 --> 00:36:31,920 Speaker 11: minds too. I mean, it's so important, and there is 743 00:36:32,000 --> 00:36:35,640 Speaker 11: such a long history of safety issues with weight loss drugs. 744 00:36:35,680 --> 00:36:38,120 Speaker 11: I mean, Fenn Fenn in the nineties was shown to 745 00:36:38,160 --> 00:36:40,719 Speaker 11: cause heart problems. There was a weight loss drug in 746 00:36:40,760 --> 00:36:43,480 Speaker 11: the EU that was pulled from the market after it 747 00:36:43,520 --> 00:36:48,480 Speaker 11: was shown to cause suicide, and you know, neurological problems. 748 00:36:48,560 --> 00:36:51,200 Speaker 11: So there's just I think that the bar for safety 749 00:36:51,239 --> 00:36:53,279 Speaker 11: with these drugs is really high, and that's something to 750 00:36:53,400 --> 00:36:54,520 Speaker 11: just be really cognizant of. 751 00:36:54,640 --> 00:36:56,680 Speaker 9: I mean, let's not forget too most of these drugs, 752 00:36:56,719 --> 00:37:00,719 Speaker 9: weren't they also originated to treat diabetes, right, not weight loss, right. 753 00:37:00,480 --> 00:37:02,600 Speaker 11: And so we know from like twenty years of the 754 00:37:03,280 --> 00:37:05,920 Speaker 11: you know, diabetes drugs being around that they are safe 755 00:37:05,920 --> 00:37:09,520 Speaker 11: and they're definitely safer than older drugs, but they're being 756 00:37:09,600 --> 00:37:13,920 Speaker 11: used so widely now by people who don't necessarily have 757 00:37:13,960 --> 00:37:16,279 Speaker 11: diabetes or obesity, and so that's sort of the risk 758 00:37:16,440 --> 00:37:19,640 Speaker 11: is like we don't know what the risks are in 759 00:37:19,760 --> 00:37:23,080 Speaker 11: patients who you know, they haven't really been studied or 760 00:37:23,239 --> 00:37:24,560 Speaker 11: weren't the target population. 761 00:37:24,680 --> 00:37:27,319 Speaker 2: What do the companies say about getting these drugs in 762 00:37:27,360 --> 00:37:30,120 Speaker 2: a pill format or all for format because that a movie, 763 00:37:30,120 --> 00:37:31,520 Speaker 2: it'd be another driver in usage. 764 00:37:31,680 --> 00:37:33,759 Speaker 11: Yeah, that's the next big thing and that's both of 765 00:37:33,920 --> 00:37:37,000 Speaker 11: you know, Novo Nordiskannilai, Lilly are working on pills. That's 766 00:37:37,080 --> 00:37:41,080 Speaker 11: sort of the next exciting thing that people are watching for. 767 00:37:41,120 --> 00:37:43,839 Speaker 11: And it also could help with supply because pills are 768 00:37:43,880 --> 00:37:47,040 Speaker 11: a little bit easier to manufacture than the weight loss shots. 769 00:37:47,920 --> 00:37:50,279 Speaker 11: Could help with you know, the active ingredients as well 770 00:37:50,280 --> 00:37:52,759 Speaker 11: because it's a little bit different, So that might help 771 00:37:52,760 --> 00:37:55,160 Speaker 11: from the supply standpoint. It also might make them more 772 00:37:55,200 --> 00:37:58,520 Speaker 11: accessible potentially cheaper. So it's it's a big deal. 773 00:37:58,920 --> 00:38:01,440 Speaker 9: How do people decide, you know, if you're looking to, 774 00:38:01,760 --> 00:38:04,200 Speaker 9: you know, be taking one of these drugs, whether it's 775 00:38:04,560 --> 00:38:09,080 Speaker 9: zet bound with govy ozempic, Like, how do people differentiate 776 00:38:09,160 --> 00:38:11,520 Speaker 9: between all of these or they kind of like roughly 777 00:38:11,600 --> 00:38:14,360 Speaker 9: looked at fairly equally from a consumer perspective. 778 00:38:14,520 --> 00:38:17,680 Speaker 11: I mean, so ozempic and manduro which is Lily's sort 779 00:38:17,680 --> 00:38:21,200 Speaker 11: of version of ozempic, those are four diabetes and then 780 00:38:22,160 --> 00:38:25,280 Speaker 11: with gov and zet bound are the weight loss drugs. 781 00:38:25,280 --> 00:38:27,960 Speaker 11: Those are for obesity. And so it really depends on 782 00:38:28,120 --> 00:38:30,680 Speaker 11: insurance coverage most of the time, and the doctors are 783 00:38:30,719 --> 00:38:33,440 Speaker 11: the ones that are prescribing it. So they've told me, 784 00:38:33,600 --> 00:38:35,520 Speaker 11: you know, doctors have told me they tend to prescribe 785 00:38:35,520 --> 00:38:38,959 Speaker 11: the one that insurance will cover, and so it's sort 786 00:38:39,000 --> 00:38:39,960 Speaker 11: of dependent on that. 787 00:38:40,040 --> 00:38:43,400 Speaker 7: But interesting, okay, in otherwise, what could this be? 788 00:38:43,480 --> 00:38:43,520 Speaker 4: Like? 789 00:38:43,560 --> 00:38:44,359 Speaker 5: A thousand a month? 790 00:38:44,440 --> 00:38:44,600 Speaker 7: Right? 791 00:38:44,680 --> 00:38:44,960 Speaker 4: Right? 792 00:38:45,040 --> 00:38:46,080 Speaker 11: A thousand a month or more? 793 00:38:46,200 --> 00:38:46,759 Speaker 7: Is that what it is? 794 00:38:46,800 --> 00:38:49,000 Speaker 11: Really? And you have to do it for the rest 795 00:38:49,040 --> 00:38:50,000 Speaker 11: of your life if. 796 00:38:49,960 --> 00:38:51,320 Speaker 7: You want to, really, if you want to keep the 797 00:38:51,360 --> 00:38:51,920 Speaker 7: weight off. 798 00:38:51,800 --> 00:38:54,439 Speaker 9: Right and that hollow face, yes, and then. 799 00:38:54,400 --> 00:38:58,480 Speaker 2: At exactly round and round it goes all right, Madison, 800 00:38:58,560 --> 00:39:00,319 Speaker 2: thanks so much for joining us. Great reporting there. 801 00:39:00,360 --> 00:39:00,959 Speaker 7: Manis Muller. 802 00:39:01,160 --> 00:39:05,319 Speaker 2: She's a Bloomberg News health reporter and talking about her, 803 00:39:05,400 --> 00:39:07,080 Speaker 2: she's got a couple of great stories out there, one 804 00:39:07,120 --> 00:39:09,319 Speaker 2: on the Oprah and the other one on o zepic face. 805 00:39:09,480 --> 00:39:13,520 Speaker 9: I mean, boy, I'm I'm just floored still at like 806 00:39:13,640 --> 00:39:15,160 Speaker 9: the you know ripple effect of. 807 00:39:15,120 --> 00:39:17,440 Speaker 2: All of this, right, I mean, having you know, these 808 00:39:17,440 --> 00:39:20,000 Speaker 2: consumer propits companies CEOs come on and talk about ozepic 809 00:39:20,040 --> 00:39:23,320 Speaker 2: and impact on their business. Yeah, that was incredibly silly 810 00:39:23,320 --> 00:39:23,840 Speaker 2: but maybe not. 811 00:39:24,080 --> 00:39:26,200 Speaker 9: Yeah, and now that you've got this new problem to 812 00:39:26,200 --> 00:39:28,200 Speaker 9: deal with that, like, you know, you look great, you're 813 00:39:28,239 --> 00:39:30,799 Speaker 9: slim down, but now your faces all all hold out 814 00:39:30,840 --> 00:39:32,640 Speaker 9: And I mean, just man, how do you explain that 815 00:39:32,680 --> 00:39:33,280 Speaker 9: to your friends? 816 00:39:33,320 --> 00:39:33,480 Speaker 4: You know? 817 00:39:33,680 --> 00:39:36,080 Speaker 2: Right, I don't know, but yeah I am seeing people. 818 00:39:36,880 --> 00:39:38,000 Speaker 7: Boy, you lost a lot of weight. 819 00:39:38,520 --> 00:39:41,000 Speaker 2: Oh yeah, yeah, I mean it's it's out there, even 820 00:39:41,000 --> 00:39:42,439 Speaker 2: with the regular folk. 821 00:39:42,680 --> 00:39:47,200 Speaker 1: This is the Bloomberg Intelligence podcast, available on Apple, Spotify, 822 00:39:47,400 --> 00:39:50,320 Speaker 1: and anywhere else you will get your podcasts. 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