1 00:00:13,440 --> 00:00:16,480 Speaker 1: Hello, and welcome to What Goes Up, a Bloomberg Weekly 2 00:00:16,520 --> 00:00:19,800 Speaker 1: Markets podcast. I'm Sara pan Zach, reporter on the Cross 3 00:00:19,800 --> 00:00:22,520 Speaker 1: Asset team, and I'm Mike Reagan, a senior editor on 4 00:00:22,520 --> 00:00:24,759 Speaker 1: the Markets Team. This week on the show, months have 5 00:00:24,880 --> 00:00:28,320 Speaker 1: calm across global equity markets have finally been shattered. The 6 00:00:28,320 --> 00:00:32,599 Speaker 1: coronavirus continues to spread, with more than eight thousand cases confirmed, 7 00:00:32,960 --> 00:00:36,879 Speaker 1: the death toll rising in China, extending balloonar New Year holiday. 8 00:00:37,120 --> 00:00:40,400 Speaker 1: On top of that of the smp F hundred market 9 00:00:40,440 --> 00:00:44,320 Speaker 1: gap reported earnings, and the Federal Reserve held interest rates steady. 10 00:00:45,080 --> 00:00:47,640 Speaker 1: And sorry, as you pointed out, as a pretty serious week, 11 00:00:47,680 --> 00:00:50,320 Speaker 1: So I'm gonna keep my dumb jokes to a minimum. 12 00:00:50,360 --> 00:00:52,680 Speaker 1: I'm not gonna eliminate them completely. That just means that 13 00:00:52,680 --> 00:00:54,760 Speaker 1: you'll have doubled the dad jokes next week, right right, 14 00:00:55,320 --> 00:00:57,600 Speaker 1: But let's get right to it with our guests here 15 00:00:57,680 --> 00:00:59,960 Speaker 1: joining us first time in the show. We're very happy 16 00:01:00,040 --> 00:01:03,480 Speaker 1: be to have her is Sema Shaw. She's a global 17 00:01:03,560 --> 00:01:07,399 Speaker 1: strategist at Principal Global Investors. Sema, welcome to the show, 18 00:01:07,600 --> 00:01:10,200 Speaker 1: Thank you very much, be happy to be here. And Sarah, 19 00:01:10,440 --> 00:01:12,520 Speaker 1: one thing I noticed on Twitter this week is that 20 00:01:12,600 --> 00:01:17,039 Speaker 1: my feed was full of experts on viruses. Did you 21 00:01:17,080 --> 00:01:20,080 Speaker 1: notice that too? Real experts? Or want to bet they're 22 00:01:20,120 --> 00:01:23,480 Speaker 1: the same experts who were experts on Iran and trade policy. 23 00:01:23,480 --> 00:01:26,640 Speaker 1: It's amazing the way Twitter cultivates these, uh, these one 24 00:01:26,640 --> 00:01:28,920 Speaker 1: size fits all experts for you. It's amazing you can 25 00:01:28,920 --> 00:01:30,760 Speaker 1: fit in being an expert within a couple of characters 26 00:01:30,760 --> 00:01:32,880 Speaker 1: on Twitter, and all of a sudden you're hailed. And 27 00:01:32,920 --> 00:01:34,959 Speaker 1: you know, I know they're experts because they have charts. 28 00:01:35,720 --> 00:01:37,240 Speaker 1: You know you're a real expert if you well, are 29 00:01:37,280 --> 00:01:39,440 Speaker 1: they verified? I think that's what really matters. Clearly I'm 30 00:01:39,480 --> 00:01:42,000 Speaker 1: being sarcastic, but my point is that I craved to 31 00:01:42,040 --> 00:01:43,800 Speaker 1: hear from someone who really knew what they were talking 32 00:01:43,800 --> 00:01:46,720 Speaker 1: about as far as the pharmaceutical and the health care industry. 33 00:01:46,760 --> 00:01:50,240 Speaker 1: So my old pal from Bloomberg Opinion, Max Nisson Opinion 34 00:01:50,240 --> 00:01:53,360 Speaker 1: calumnists writing about pharmaceuticals and healthcare. Max, Welcome to the show. 35 00:01:53,520 --> 00:01:56,080 Speaker 1: Thanks so much for having me. So, Sima, let's start 36 00:01:56,080 --> 00:01:57,920 Speaker 1: with you. You You know, I was reading one of your 37 00:01:57,960 --> 00:02:02,480 Speaker 1: recent notes that obviously came out before the coronavirus and 38 00:02:02,640 --> 00:02:06,840 Speaker 1: some of the highlights, um where you preferred international equities 39 00:02:07,120 --> 00:02:11,520 Speaker 1: over US equities. Uh, you liked EM debt over other 40 00:02:11,680 --> 00:02:16,640 Speaker 1: fixed uh income assets, cyclicals you liked, and you you've 41 00:02:16,800 --> 00:02:19,800 Speaker 1: sort of concluded that investors should be fully invested. You know, 42 00:02:19,800 --> 00:02:22,080 Speaker 1: there's that old commercial though that when the world comes 43 00:02:22,080 --> 00:02:24,639 Speaker 1: at you fast, and now we have this sort of 44 00:02:25,000 --> 00:02:26,400 Speaker 1: I hate to call it a black Swan event, but 45 00:02:26,440 --> 00:02:28,320 Speaker 1: I guess you really could call it a black swan, 46 00:02:28,400 --> 00:02:31,720 Speaker 1: this coronavirus that is sort of causing people to rethink 47 00:02:31,840 --> 00:02:36,880 Speaker 1: all of their thoughts that they had leading into Is 48 00:02:36,919 --> 00:02:38,560 Speaker 1: that happening to you at all? Are you sort of 49 00:02:38,600 --> 00:02:43,000 Speaker 1: still sticking with your your original strategy, Uh, despite all 50 00:02:43,000 --> 00:02:46,320 Speaker 1: the uncertainty around the fires. Yeah, absolutely, I think that. 51 00:02:46,400 --> 00:02:48,160 Speaker 1: I mean, first of all, this is very very early days. 52 00:02:48,200 --> 00:02:50,680 Speaker 1: We don't know how this is going to be transitioning through. 53 00:02:50,840 --> 00:02:52,960 Speaker 1: But actually I think a lot of the themes are 54 00:02:52,960 --> 00:02:55,919 Speaker 1: still very relevant, and specifically with emerging markets. We actually 55 00:02:55,919 --> 00:02:59,280 Speaker 1: like emerging emerging Asia, um, which is you know, maybe 56 00:02:59,320 --> 00:03:01,040 Speaker 1: there's a lot of question to mark, say without but 57 00:03:01,080 --> 00:03:03,079 Speaker 1: if anything, you know, from a it's a long term 58 00:03:03,120 --> 00:03:06,280 Speaker 1: strategic positioning that we see the macro story is still 59 00:03:06,280 --> 00:03:08,960 Speaker 1: pretty strong of cool sort of concerns about the growth outlook, 60 00:03:09,440 --> 00:03:12,520 Speaker 1: but potentially you could see better entry points this year. 61 00:03:12,880 --> 00:03:14,880 Speaker 1: I'm here, but you know you have to see how 62 00:03:14,919 --> 00:03:17,400 Speaker 1: this is progressing. That may well change China growth out 63 00:03:17,440 --> 00:03:19,600 Speaker 1: like and then it put things into questions. Right, we've 64 00:03:19,600 --> 00:03:23,200 Speaker 1: really seen emerging markets in Asian markets really taken absolute hit. 65 00:03:23,200 --> 00:03:25,600 Speaker 1: You look at em for example, which is the Ice 66 00:03:25,600 --> 00:03:28,079 Speaker 1: Shares ms c I Emerging Markets Index, which is of 67 00:03:28,120 --> 00:03:30,400 Speaker 1: its market cap in China at a new fresh load 68 00:03:30,480 --> 00:03:33,600 Speaker 1: versus the S and P since two thousand and three. Um. 69 00:03:33,600 --> 00:03:35,840 Speaker 1: But I also find it very interesting because last week 70 00:03:35,840 --> 00:03:39,240 Speaker 1: we heard a lot of comparisons about the coronavirus that 71 00:03:39,280 --> 00:03:41,440 Speaker 1: we're dealing with today two stars, and all of a sudden, 72 00:03:41,480 --> 00:03:44,960 Speaker 1: this week I've heard from many people, read many research 73 00:03:45,000 --> 00:03:48,520 Speaker 1: notes about how now is different and you talk about 74 00:03:48,520 --> 00:03:52,440 Speaker 1: how risk velocity is elevated. Now, how now when you 75 00:03:52,480 --> 00:03:56,360 Speaker 1: are dealing with an instance of this sort or a 76 00:03:56,440 --> 00:04:00,360 Speaker 1: global health epidemic or any other worry or is it 77 00:04:00,400 --> 00:04:02,440 Speaker 1: can be heightened. Can you maybe walk us through where 78 00:04:02,440 --> 00:04:05,400 Speaker 1: that is? Yeah? Sure, So we point to three different 79 00:04:05,440 --> 00:04:07,920 Speaker 1: areas where you would expect that velocity of risk to 80 00:04:07,960 --> 00:04:10,040 Speaker 1: be quicker in this kind of instance. And the first 81 00:04:10,080 --> 00:04:12,520 Speaker 1: thing is asset valuations. You know, they are a lot 82 00:04:12,560 --> 00:04:14,600 Speaker 1: more expensive than sunny what we saw in this kind 83 00:04:14,640 --> 00:04:17,280 Speaker 1: of the two thousand three episode, which means that as 84 00:04:17,320 --> 00:04:20,760 Speaker 1: we came into risk, assets were already very vulnerable to 85 00:04:20,800 --> 00:04:23,080 Speaker 1: any kind of shift in global sentiment, which is exactly 86 00:04:23,120 --> 00:04:25,920 Speaker 1: what we're seeing today. So you could see sharper pullbacks 87 00:04:25,920 --> 00:04:28,080 Speaker 1: in the market. And then the second thing, which to 88 00:04:28,120 --> 00:04:30,679 Speaker 1: me is probably the most interesting, is a social media impact. 89 00:04:31,000 --> 00:04:33,120 Speaker 1: So rewind to two thousand and three, you would see 90 00:04:33,160 --> 00:04:36,800 Speaker 1: about a hundred thousand tweets per day. Today you see 91 00:04:36,839 --> 00:04:39,440 Speaker 1: that amount in just one single minute, So that transitioning 92 00:04:39,440 --> 00:04:42,280 Speaker 1: of fear and knowledge is so much faster again, So 93 00:04:42,320 --> 00:04:45,400 Speaker 1: that's seeing that transition to portfolios quickly. And the third 94 00:04:45,440 --> 00:04:48,640 Speaker 1: thing is is probably the most important, is the global 95 00:04:48,640 --> 00:04:51,520 Speaker 1: supply chain. It's a lot more complex. Um, it's a 96 00:04:51,520 --> 00:04:54,400 Speaker 1: lot more intricate. So even companies that don't necessarily come 97 00:04:54,400 --> 00:04:57,120 Speaker 1: across like they have a direct exposure to China, somewhere 98 00:04:57,160 --> 00:05:00,520 Speaker 1: along the way, they have exposure. Boy, sorry, I wish 99 00:05:00,520 --> 00:05:02,640 Speaker 1: I had met Sima. Earlier this week, I was writing 100 00:05:02,640 --> 00:05:04,679 Speaker 1: a Business Week story where I made that exact point 101 00:05:04,720 --> 00:05:08,400 Speaker 1: that the valuation difference between now and two thousand and three. 102 00:05:08,400 --> 00:05:10,240 Speaker 1: Is that is the big difference. Very different. I would 103 00:05:10,240 --> 00:05:12,360 Speaker 1: have loved to quote quote you, but UM, just to 104 00:05:12,480 --> 00:05:15,839 Speaker 1: trill down back to some of you know, your original 105 00:05:16,000 --> 00:05:20,359 Speaker 1: strategy ideas for the year, UM, walk us through. Uh 106 00:05:20,480 --> 00:05:23,640 Speaker 1: what you're thinking about international equities? Well, why now might 107 00:05:23,680 --> 00:05:26,200 Speaker 1: be the time for them to outperform the US. UM. 108 00:05:26,320 --> 00:05:28,719 Speaker 1: We've heard heard this from some other smart people, and 109 00:05:28,760 --> 00:05:32,880 Speaker 1: I'm just curious. Um, you know your rationale for for 110 00:05:32,880 --> 00:05:35,040 Speaker 1: approaching it that way? Yeah? Sure, you know, we came 111 00:05:35,040 --> 00:05:37,200 Speaker 1: into we have a view that there's going to be 112 00:05:37,279 --> 00:05:40,800 Speaker 1: global growth stabilization and an opton so not particularly strong. 113 00:05:41,040 --> 00:05:42,920 Speaker 1: But in that kind of environment, you would actually tend 114 00:05:43,000 --> 00:05:45,800 Speaker 1: to expect more of those those emerging markets UM to 115 00:05:45,880 --> 00:05:48,320 Speaker 1: do well. Now if you even compare Europe, you know, 116 00:05:48,400 --> 00:05:50,400 Speaker 1: I did have a very good year last year, the 117 00:05:50,400 --> 00:05:54,360 Speaker 1: best year in about a decade, but it's still somewhat undervalued. 118 00:05:54,440 --> 00:05:57,520 Speaker 1: I mean, relative valuations are not as attractive UM as 119 00:05:57,560 --> 00:05:59,400 Speaker 1: a number of varias, but it is definitely more attractive 120 00:05:59,440 --> 00:06:02,200 Speaker 1: than the US. So that means that coming into this year, 121 00:06:02,240 --> 00:06:04,520 Speaker 1: as long as you have a growth outlook which is positive, 122 00:06:04,960 --> 00:06:06,680 Speaker 1: we know that central bank stimulus is going to be 123 00:06:06,720 --> 00:06:09,560 Speaker 1: in play, and this potential for fiscal stimulus in Europe. 124 00:06:09,880 --> 00:06:11,839 Speaker 1: Plus we also have taken out a lot of the 125 00:06:11,839 --> 00:06:13,520 Speaker 1: politic caaris that have been weighing on Europe for a 126 00:06:13,600 --> 00:06:16,360 Speaker 1: number of years. So to me, that means valuations and 127 00:06:16,520 --> 00:06:20,039 Speaker 1: fundamentals are all more attractive. Same thing with emerging markets, 128 00:06:20,040 --> 00:06:22,560 Speaker 1: you know, aside from what we've been seeing recently, the 129 00:06:22,640 --> 00:06:25,039 Speaker 1: growth outlook is good given the reduction of the newest 130 00:06:25,080 --> 00:06:27,960 Speaker 1: China trade tensions, there's room for monaty stimulus and the 131 00:06:28,120 --> 00:06:30,640 Speaker 1: room for fiscal stimulus. So for us, that means international 132 00:06:30,680 --> 00:06:33,039 Speaker 1: equities look more attractive. So, like you said, it is 133 00:06:33,080 --> 00:06:36,120 Speaker 1: it is early days and we need to see how 134 00:06:36,640 --> 00:06:41,279 Speaker 1: this coronavirus actually does develop and then eventually affect economic 135 00:06:41,400 --> 00:06:44,320 Speaker 1: growth growth. But we've already seen some estimates. I know, 136 00:06:44,320 --> 00:06:48,000 Speaker 1: Bloomberg Economics is estimating that it's possible that China's GDP 137 00:06:48,120 --> 00:06:50,040 Speaker 1: falls to four and a half percent. Sure, still four 138 00:06:50,080 --> 00:06:53,320 Speaker 1: and a half percent growth, but low for China's standards 139 00:06:53,360 --> 00:06:57,400 Speaker 1: as an emerging market country and a dominant global player nowadays. 140 00:06:58,120 --> 00:07:01,760 Speaker 1: Do you have to factor in the possibility that maybe 141 00:07:01,800 --> 00:07:06,320 Speaker 1: this black Swan event is wide enough that it does 142 00:07:06,720 --> 00:07:10,520 Speaker 1: derail the emerging market picture, at least in Asia and 143 00:07:10,560 --> 00:07:12,920 Speaker 1: in China, and what would have to happen to get 144 00:07:12,960 --> 00:07:15,560 Speaker 1: you to the point where you start reconsidering. I think 145 00:07:15,640 --> 00:07:17,520 Speaker 1: that's really the key point and probably the reason why 146 00:07:17,520 --> 00:07:20,040 Speaker 1: you have seen markets react in the way that they 147 00:07:20,040 --> 00:07:22,240 Speaker 1: have is because it does if it were to persist, 148 00:07:22,240 --> 00:07:25,240 Speaker 1: to put a lot of the global growth outlook into question. 149 00:07:25,520 --> 00:07:28,400 Speaker 1: So you know, again, this year global growth should be okay, 150 00:07:28,400 --> 00:07:30,200 Speaker 1: we don't. We were never expecting it to be like 151 00:07:30,200 --> 00:07:33,000 Speaker 1: twenty six where China really booms growth around the world, 152 00:07:33,360 --> 00:07:35,480 Speaker 1: but it was putting a bottom kind of a floor 153 00:07:35,560 --> 00:07:38,280 Speaker 1: under European growth and it was lifting merging Asia. So 154 00:07:38,320 --> 00:07:40,760 Speaker 1: if you work to see China growth really persisting beyond 155 00:07:40,760 --> 00:07:42,559 Speaker 1: that really sharp Q and dip that I think everyone 156 00:07:42,600 --> 00:07:44,880 Speaker 1: is expecting, but into Q two and certainly into the 157 00:07:44,920 --> 00:07:48,240 Speaker 1: second half, then you know, you start to take away 158 00:07:48,280 --> 00:07:50,800 Speaker 1: the foundations of that global graph outlook. And the other 159 00:07:50,840 --> 00:07:53,600 Speaker 1: thing is is you know where is the China hits 160 00:07:53,600 --> 00:07:56,200 Speaker 1: So we know from the consumer side that in stars 161 00:07:56,280 --> 00:07:58,400 Speaker 1: it bounces back very quickly. People just differ a lot 162 00:07:58,440 --> 00:08:02,840 Speaker 1: of their purchases, people go back to the airlines, etcetera. If, however, 163 00:08:02,880 --> 00:08:04,880 Speaker 1: it leaks into the second half of the year and 164 00:08:04,920 --> 00:08:07,240 Speaker 1: you start to see the production size, so you see 165 00:08:07,480 --> 00:08:11,360 Speaker 1: factories staying closed. Then those global big firms that we 166 00:08:11,400 --> 00:08:13,560 Speaker 1: all know of who at the moment have enough stock 167 00:08:13,560 --> 00:08:16,240 Speaker 1: paths to to to deliver to their customers, if they 168 00:08:16,240 --> 00:08:18,640 Speaker 1: start running out, that's when you start to see a 169 00:08:18,720 --> 00:08:20,720 Speaker 1: real potential growth. And that's when we would be worried. 170 00:08:21,760 --> 00:08:23,600 Speaker 1: You know, seem I was a English major, not a 171 00:08:23,600 --> 00:08:26,360 Speaker 1: finance major, so I'm prone to think in bad analogies, 172 00:08:26,560 --> 00:08:31,280 Speaker 1: and I keep thinking about this as sort of the way, uh, 173 00:08:31,840 --> 00:08:35,760 Speaker 1: you'll have like a bad, nasty cold winner that sort 174 00:08:35,760 --> 00:08:40,040 Speaker 1: of depresses g DP, maybe hurts some companies earnings. UM. 175 00:08:40,160 --> 00:08:42,680 Speaker 1: Maybe some other companies use it as an excuse for 176 00:08:42,720 --> 00:08:46,000 Speaker 1: their under performance, But eventually the market is very good 177 00:08:46,040 --> 00:08:49,280 Speaker 1: at just sort of looking past those soft spots caused 178 00:08:49,320 --> 00:08:54,640 Speaker 1: by say a nasty winner full of blizzards in the US. UM. 179 00:08:54,679 --> 00:08:56,840 Speaker 1: And I'm wonder if if a similar thing could happen 180 00:08:56,920 --> 00:08:59,080 Speaker 1: well as you say, you know, could the market just 181 00:08:59,200 --> 00:09:02,720 Speaker 1: kind of look passed this episode, especially if the sort 182 00:09:02,760 --> 00:09:06,480 Speaker 1: of the rate of growth and the infection slows down. UM. 183 00:09:07,040 --> 00:09:08,360 Speaker 1: Is that a safe way to look at it? Do 184 00:09:08,360 --> 00:09:11,040 Speaker 1: you think or is there the danger that uh, as 185 00:09:11,080 --> 00:09:12,920 Speaker 1: you said, if it bleeds into the second quarter, is 186 00:09:12,960 --> 00:09:16,600 Speaker 1: there something more long lasting damage that can be done, 187 00:09:17,240 --> 00:09:20,439 Speaker 1: uh say to you know, uh, the credit of some 188 00:09:20,440 --> 00:09:24,040 Speaker 1: some vulnerable companies, that sort of thing. If this sort 189 00:09:24,040 --> 00:09:27,440 Speaker 1: of lasts a bit longer than we then we hope anyway, 190 00:09:27,760 --> 00:09:30,760 Speaker 1: that's that's exactly it. So as of today, the way 191 00:09:30,800 --> 00:09:33,640 Speaker 1: we sit is UM. You know, assuming a photos a 192 00:09:33,640 --> 00:09:37,120 Speaker 1: point where it peaks relatively soon and then UM starts 193 00:09:37,120 --> 00:09:38,520 Speaker 1: to fade out, then we would expect the market to 194 00:09:38,520 --> 00:09:41,520 Speaker 1: bounce back. Now, going into again this year, with osset 195 00:09:41,559 --> 00:09:45,079 Speaker 1: markets so value so value so highly and with growth 196 00:09:45,160 --> 00:09:47,480 Speaker 1: solid but not very very strong, we knew that the 197 00:09:47,520 --> 00:09:50,000 Speaker 1: market was really vulnerable to these kind of political shifts 198 00:09:50,440 --> 00:09:52,400 Speaker 1: UM and already we've seen the US and runt right 199 00:09:52,400 --> 00:09:55,480 Speaker 1: attention is already not markets, coronavirus another one, and we 200 00:09:55,520 --> 00:09:57,679 Speaker 1: may well see this going through the year. But as 201 00:09:57,679 --> 00:09:59,480 Speaker 1: long as there's no recession on the horizon and we 202 00:09:59,520 --> 00:10:02,240 Speaker 1: know the central makes is still there plugging in that liquidity, 203 00:10:02,440 --> 00:10:05,040 Speaker 1: then we would expect that to be some recovery. It 204 00:10:05,120 --> 00:10:07,920 Speaker 1: changes when you have a more sustainable impact on the 205 00:10:07,920 --> 00:10:10,959 Speaker 1: growth outlook, which is really starting to hurt companies from 206 00:10:10,960 --> 00:10:13,680 Speaker 1: a production standpoint. So for me, that's your that's where 207 00:10:13,679 --> 00:10:16,400 Speaker 1: it tilts into the more dangerous side. So you mentioned 208 00:10:16,440 --> 00:10:19,640 Speaker 1: central banks providing liquidity, and we did have a BOE 209 00:10:19,679 --> 00:10:21,840 Speaker 1: meeting this week, we did hear from the Federal Reserve. 210 00:10:22,280 --> 00:10:26,320 Speaker 1: Is there anything that Jerome Powell said or that the 211 00:10:26,360 --> 00:10:28,000 Speaker 1: FED said in the statement that he said in the 212 00:10:28,040 --> 00:10:33,640 Speaker 1: press conference thereafter, um, that you found interesting. I think 213 00:10:33,679 --> 00:10:36,000 Speaker 1: the market reaction was quite a bit, quite interesting. We 214 00:10:36,000 --> 00:10:38,920 Speaker 1: saw a very steep bond rally, we see stocks start 215 00:10:39,000 --> 00:10:40,920 Speaker 1: to sell off. I heard a couple of people try 216 00:10:41,000 --> 00:10:44,280 Speaker 1: to extrapolate that to me that maybe markets are are 217 00:10:44,360 --> 00:10:47,199 Speaker 1: trying to see what the FED thinks about the growth outlook. 218 00:10:47,200 --> 00:10:49,600 Speaker 1: Maybe the growth outlook isn't as strong as people had 219 00:10:49,600 --> 00:10:52,880 Speaker 1: thought previously. Do you think you can extrapolate that from 220 00:10:52,880 --> 00:10:55,559 Speaker 1: what we saw or not quite yet? Definitely, not quite yet. 221 00:10:55,640 --> 00:10:56,960 Speaker 1: I mean, I think it just goes to show that 222 00:10:57,000 --> 00:11:00,679 Speaker 1: the markets possession with the Fed still lives, even though 223 00:11:00,720 --> 00:11:02,520 Speaker 1: you know, we have a fairly good idea about what 224 00:11:02,559 --> 00:11:04,400 Speaker 1: they'll be doing for the rest of the year. There's 225 00:11:04,440 --> 00:11:06,200 Speaker 1: a lot to try and read into it. I don't 226 00:11:06,320 --> 00:11:09,200 Speaker 1: actually would give Powell ten out of ten for giving 227 00:11:09,200 --> 00:11:12,000 Speaker 1: a really good, clear communication message. And I wouldn't have 228 00:11:12,040 --> 00:11:15,840 Speaker 1: really expected to the market to be so disrupted. You know, 229 00:11:16,280 --> 00:11:20,560 Speaker 1: I'm interested in that notion. You talk about emerging Asia debt. 230 00:11:21,200 --> 00:11:24,440 Speaker 1: How does the trade war sort of fit into all this? 231 00:11:24,559 --> 00:11:26,640 Speaker 1: I mean, I obviously that that's such a wild card 232 00:11:26,679 --> 00:11:29,720 Speaker 1: with the coronavirus. I mean, can China really sort of 233 00:11:29,760 --> 00:11:33,319 Speaker 1: meet its uh it's requirements of the trade deal? And 234 00:11:33,600 --> 00:11:36,240 Speaker 1: how will the US? Will they cut them some slack? 235 00:11:36,320 --> 00:11:38,840 Speaker 1: Will they? You know, I think most of us believe 236 00:11:38,880 --> 00:11:42,240 Speaker 1: they probably won't. UM. Some of the comments we've seen 237 00:11:42,280 --> 00:11:46,880 Speaker 1: from Lightheiser and other officials seemed to indicate that, sorry, 238 00:11:46,880 --> 00:11:50,199 Speaker 1: you're not off the hook just because of this issue. Um, 239 00:11:50,520 --> 00:11:53,439 Speaker 1: does that make the rest of Asia sort of a 240 00:11:53,480 --> 00:11:56,920 Speaker 1: little more attractive than China? It does in some ways. 241 00:11:57,080 --> 00:11:59,080 Speaker 1: And you know, one of the good things that we 242 00:11:59,120 --> 00:12:01,720 Speaker 1: did see about Asia even last year was a number 243 00:12:01,720 --> 00:12:04,360 Speaker 1: of these countries, you know, Asia is more than than China, 244 00:12:04,400 --> 00:12:07,160 Speaker 1: and a number of these countries such as Indonesia Malaysia, 245 00:12:07,200 --> 00:12:09,360 Speaker 1: really try to make some structural changes that meant that 246 00:12:09,400 --> 00:12:12,439 Speaker 1: they could benefit from supply chain diversion. And I think 247 00:12:12,480 --> 00:12:14,800 Speaker 1: investors should really be aware that these are these are 248 00:12:14,920 --> 00:12:18,679 Speaker 1: long term beneficial impacts, so there is potential for them 249 00:12:18,679 --> 00:12:21,640 Speaker 1: to continue to benefit. UM. I think with how this 250 00:12:21,720 --> 00:12:24,960 Speaker 1: progresses with the US China trade tensions, UM, it really 251 00:12:25,000 --> 00:12:27,599 Speaker 1: depends on the electorate in election. Yet the government is 252 00:12:27,600 --> 00:12:29,320 Speaker 1: going to listen to the electorate. If they feel like 253 00:12:29,320 --> 00:12:31,800 Speaker 1: the US is going easy on China, then I think 254 00:12:31,800 --> 00:12:34,120 Speaker 1: we should expect those tensions to return. If they feel like, 255 00:12:34,320 --> 00:12:36,440 Speaker 1: actually we should cut them some sluck, then I think 256 00:12:36,480 --> 00:12:38,839 Speaker 1: everything fades out. Where do you stand on the growth 257 00:12:38,920 --> 00:12:42,080 Speaker 1: versus value debacle? Just because typically I feel like when 258 00:12:42,120 --> 00:12:44,040 Speaker 1: we speak with someone and they are more so on 259 00:12:44,080 --> 00:12:47,280 Speaker 1: the international equity side, it's a valuation question and typically 260 00:12:47,559 --> 00:12:51,040 Speaker 1: within the US are globally they're favoring value stocks as well. 261 00:12:51,080 --> 00:12:53,560 Speaker 1: But this month I find it very interesting, and I 262 00:12:53,600 --> 00:12:56,000 Speaker 1: wonder if you are on the value side, if it's 263 00:12:56,120 --> 00:12:59,320 Speaker 1: testing your patients, because if you look at SMP five 264 00:12:59,400 --> 00:13:03,040 Speaker 1: hundred in excess that separate growth versus value companies, we've 265 00:13:03,080 --> 00:13:06,320 Speaker 1: actually now seen the strongest month for growth versus value 266 00:13:06,320 --> 00:13:08,480 Speaker 1: since all the way back in early two thousand nine, 267 00:13:08,600 --> 00:13:11,320 Speaker 1: before we saw the bottom back in March of oh nine. 268 00:13:12,000 --> 00:13:15,400 Speaker 1: So can you maybe walk us through your thought process there. Yeah, absolutely, 269 00:13:15,480 --> 00:13:19,240 Speaker 1: you know, we we like I like value over momentum. 270 00:13:19,280 --> 00:13:22,720 Speaker 1: I think of it more from a technical perspective. So 271 00:13:23,080 --> 00:13:25,560 Speaker 1: the main reason being that, yes, we see an up term, 272 00:13:25,600 --> 00:13:29,800 Speaker 1: but because it's not particularly strong, the fundamental case for 273 00:13:29,840 --> 00:13:33,160 Speaker 1: shifting that into that rotation isn't necessarily there. But when 274 00:13:33,200 --> 00:13:36,480 Speaker 1: you have such a dislocation in valuations, it's almost rude 275 00:13:36,520 --> 00:13:39,600 Speaker 1: not to start increasing your exposure to value because when 276 00:13:39,600 --> 00:13:41,280 Speaker 1: that pop comes, you don't want to be on the 277 00:13:41,280 --> 00:13:43,400 Speaker 1: wrong side of it. But having said that, is it 278 00:13:43,440 --> 00:13:45,480 Speaker 1: going to be a sustainable rotation when it comes through. 279 00:13:45,559 --> 00:13:48,600 Speaker 1: Probably not until you get a strong growth pickup, and 280 00:13:48,640 --> 00:13:51,120 Speaker 1: that may not be till the next cycle. Like you 281 00:13:51,160 --> 00:13:56,960 Speaker 1: call it a debacle, I hear about it all the time. 282 00:13:58,200 --> 00:14:01,560 Speaker 1: I attribute my underperformance to the debacle of the debacle 283 00:14:01,600 --> 00:14:06,040 Speaker 1: of growth versus value. Uh See. I think a lot 284 00:14:06,080 --> 00:14:10,680 Speaker 1: of US investors, UM, when you start talking about international equities, 285 00:14:10,760 --> 00:14:14,840 Speaker 1: they get um a little nervous about sort of bottoms 286 00:14:14,920 --> 00:14:17,920 Speaker 1: up stock picking in the rest of the world. Um, 287 00:14:17,960 --> 00:14:21,080 Speaker 1: they're just not as familiar with sort of you know, 288 00:14:21,120 --> 00:14:24,680 Speaker 1: the reporting requirements and the and the research involved in 289 00:14:25,240 --> 00:14:29,040 Speaker 1: picking uh. Individual international companies, especially E. M. So how 290 00:14:29,080 --> 00:14:33,680 Speaker 1: would you sort of express abolishness uh in international equities? 291 00:14:33,720 --> 00:14:35,480 Speaker 1: Would it be in sort of E t F that 292 00:14:35,600 --> 00:14:40,360 Speaker 1: track certain nations were certain say E M as a whole. 293 00:14:40,680 --> 00:14:44,320 Speaker 1: You know, how how how would one US investor uh 294 00:14:44,560 --> 00:14:48,720 Speaker 1: sort of take advantage of international performance? You know, And 295 00:14:48,760 --> 00:14:50,960 Speaker 1: that that's a really really important question going into this 296 00:14:51,040 --> 00:14:54,640 Speaker 1: year because yes, the overall emerging market story is quite positive, 297 00:14:54,840 --> 00:14:57,560 Speaker 1: but you absolutely need to know your country. Um, if 298 00:14:57,600 --> 00:14:59,600 Speaker 1: you look back over the last kind of ten fifteen years, 299 00:14:59,640 --> 00:15:02,080 Speaker 1: a lot of the emerging markets have pursued very sensible 300 00:15:02,760 --> 00:15:05,640 Speaker 1: macro policies, so you know, they've started to take account 301 00:15:05,720 --> 00:15:07,840 Speaker 1: or you don't want too many too much debt imbalance 302 00:15:07,880 --> 00:15:10,400 Speaker 1: and you won't have low inflation, and they've done really well. 303 00:15:10,680 --> 00:15:12,520 Speaker 1: And now going into this yet a lot of them 304 00:15:12,560 --> 00:15:15,600 Speaker 1: have space to cut interest rates further, and some have 305 00:15:15,720 --> 00:15:18,440 Speaker 1: space to do fiscal stimulus. Others don't have room to 306 00:15:18,440 --> 00:15:20,400 Speaker 1: do fiscal stimulus, but they're going to do it anyway, 307 00:15:20,400 --> 00:15:23,480 Speaker 1: because now what we're seeing is a lot of governments 308 00:15:23,480 --> 00:15:26,280 Speaker 1: are starting to put to put their domestic politics ahead 309 00:15:26,400 --> 00:15:29,800 Speaker 1: of that macro stability, and that's relatively new again, So 310 00:15:29,880 --> 00:15:31,520 Speaker 1: you have to know your countries you have to know 311 00:15:31,560 --> 00:15:34,440 Speaker 1: where those domestic hotspots are going to come about, and 312 00:15:34,480 --> 00:15:36,880 Speaker 1: this is kind of where active management and stockpicking becomes 313 00:15:36,960 --> 00:15:40,080 Speaker 1: very important. Are there any individual countries that you're really 314 00:15:40,080 --> 00:15:42,440 Speaker 1: pounding the table on in any that you're saying, well, 315 00:15:42,600 --> 00:15:44,760 Speaker 1: keep me away, but but don't pay on the table 316 00:15:44,800 --> 00:15:50,200 Speaker 1: here because it will hurt people's years reverberates like yeah, okay, 317 00:15:50,640 --> 00:15:54,240 Speaker 1: you know again coronavirus aside, If we're looking out over 318 00:15:54,280 --> 00:15:57,440 Speaker 1: the long term, we like some parts of South Korea, 319 00:15:58,400 --> 00:16:02,480 Speaker 1: especially even the chipmakers. We actually like China consumer discretionary, 320 00:16:02,520 --> 00:16:04,400 Speaker 1: which I know, as we sit today it looked at 321 00:16:04,400 --> 00:16:05,920 Speaker 1: like a tough one, but hopefully we're going to get 322 00:16:05,920 --> 00:16:08,720 Speaker 1: a good entry point. And we still like Brazil because 323 00:16:08,760 --> 00:16:11,320 Speaker 1: from a macro perspective it's a little bit more sensible 324 00:16:11,360 --> 00:16:13,880 Speaker 1: than than many of the others. There are areas such 325 00:16:13,920 --> 00:16:16,560 Speaker 1: as Turkey in South Africa which from evaluation perspective do 326 00:16:16,600 --> 00:16:19,080 Speaker 1: look really attractive, but every time that there is any 327 00:16:19,160 --> 00:16:23,000 Speaker 1: kind of upheaval, they will be hit first. What's behind 328 00:16:23,040 --> 00:16:26,080 Speaker 1: the chipmaker bullishness? I mean, I know I've throwned on 329 00:16:26,160 --> 00:16:28,800 Speaker 1: and on about five G being just a really big 330 00:16:28,840 --> 00:16:32,160 Speaker 1: game changer coming up and artificial intelligence all that is 331 00:16:32,200 --> 00:16:34,080 Speaker 1: that is that part of it or is it? Is 332 00:16:34,120 --> 00:16:37,680 Speaker 1: it more sort of a world evaluation story. It's more 333 00:16:37,720 --> 00:16:39,840 Speaker 1: of the former. You know, the kind of the five 334 00:16:39,920 --> 00:16:42,920 Speaker 1: G story is there. It's not going away. Um. You 335 00:16:42,960 --> 00:16:45,800 Speaker 1: know they chipmakers have been beaten up before, but they 336 00:16:45,880 --> 00:16:48,040 Speaker 1: kind of rebound. And also there's really a boom and 337 00:16:48,040 --> 00:16:50,440 Speaker 1: bust type of trade it is. And if you expect 338 00:16:50,520 --> 00:16:52,880 Speaker 1: to see growth and even a growth up to and then, 339 00:16:53,120 --> 00:16:55,920 Speaker 1: you should see chipmakers do well. I don't necessarily believe 340 00:16:55,960 --> 00:16:57,520 Speaker 1: that it's not going to be hit by tensions, and 341 00:16:57,600 --> 00:17:00,560 Speaker 1: especially on the US China stuff. One might be a 342 00:17:00,560 --> 00:17:19,200 Speaker 1: tougher year, but at least be positive. Max. Let's let's 343 00:17:19,200 --> 00:17:21,919 Speaker 1: bring you into this because you know, all eyes have 344 00:17:22,040 --> 00:17:24,639 Speaker 1: turned to the coronavirus this week. To me, one of 345 00:17:24,680 --> 00:17:27,119 Speaker 1: the most amazing things is this notion that China is 346 00:17:27,160 --> 00:17:29,760 Speaker 1: going to build a hospital in like two weeks, two 347 00:17:29,800 --> 00:17:31,760 Speaker 1: to three weeks. Uh, you know, who knows if they'll 348 00:17:31,800 --> 00:17:33,359 Speaker 1: meet that goal. But if they get it done in 349 00:17:33,440 --> 00:17:35,680 Speaker 1: a month, I'll still be impressed. But you know, as 350 00:17:35,720 --> 00:17:39,679 Speaker 1: we've talked about before, Uh, it's not so simple in 351 00:17:40,040 --> 00:17:45,040 Speaker 1: the pharmaceutical world as far as getting a vaccine for 352 00:17:45,080 --> 00:17:47,840 Speaker 1: this virus on the market. Talk us through, like what 353 00:17:47,960 --> 00:17:52,480 Speaker 1: is a realistic timeline to actually think of a vaccine 354 00:17:52,520 --> 00:17:55,840 Speaker 1: getting through the whole clinical trial phase and onto the 355 00:17:55,880 --> 00:17:59,080 Speaker 1: market with a situation like this. Yeah, absolutely, I mean 356 00:17:59,200 --> 00:18:03,040 Speaker 1: for actually getting you know, a quick response vaccine to 357 00:18:03,119 --> 00:18:06,679 Speaker 1: the market for a novel epidemic. There isn't really a 358 00:18:06,720 --> 00:18:09,439 Speaker 1: good precedent that. The best one I can point to 359 00:18:09,600 --> 00:18:12,640 Speaker 1: is with the Bola, where it took not not one 360 00:18:12,680 --> 00:18:16,879 Speaker 1: outbreak but several to actually eventually get a vaccine to market. 361 00:18:17,240 --> 00:18:19,280 Speaker 1: There's this whole sort of saga where you know, a 362 00:18:19,720 --> 00:18:23,480 Speaker 1: public Canadian lab developed what looked like a promising vaccine, 363 00:18:23,760 --> 00:18:26,720 Speaker 1: it got licensed to a company than another company, the 364 00:18:26,760 --> 00:18:29,159 Speaker 1: company never developed it, and then when there was a 365 00:18:29,160 --> 00:18:32,000 Speaker 1: new outbreak, the w h O more or less forced 366 00:18:32,200 --> 00:18:35,720 Speaker 1: this smaller biotech to license the vaccine to MRK in 367 00:18:35,760 --> 00:18:38,920 Speaker 1: two thousand fourteen, and then the next step, the next 368 00:18:38,960 --> 00:18:41,480 Speaker 1: outbreak rolled around. Finally they were able to get it 369 00:18:41,480 --> 00:18:45,520 Speaker 1: into the fields that beyond just the development. Actually getting 370 00:18:45,520 --> 00:18:48,159 Speaker 1: a vaccine into kind of a hot zone and and 371 00:18:48,359 --> 00:18:50,840 Speaker 1: running a clinical trials its own side of challenges, and 372 00:18:50,840 --> 00:18:54,439 Speaker 1: then finally only actually approved in two thousand nineteen. So 373 00:18:54,440 --> 00:18:57,119 Speaker 1: that's that's the good case. That's sort of a multi 374 00:18:57,200 --> 00:18:59,960 Speaker 1: year But in terms of you know, if for the 375 00:18:59,800 --> 00:19:03,200 Speaker 1: in this case obvious trying to speed up the development 376 00:19:03,200 --> 00:19:06,680 Speaker 1: pathway from that, UM, I think you've seen at least 377 00:19:06,720 --> 00:19:09,520 Speaker 1: one company saying that they're hoping to get into sort 378 00:19:09,520 --> 00:19:12,960 Speaker 1: of initial human trials by April within a few months. 379 00:19:12,960 --> 00:19:15,760 Speaker 1: It's a company called Maderna using sort of this new 380 00:19:15,800 --> 00:19:19,480 Speaker 1: modern approach to rapidly creating vaccines and then from there, 381 00:19:19,640 --> 00:19:21,399 Speaker 1: um you know, that would just be your first in 382 00:19:21,480 --> 00:19:24,600 Speaker 1: human safety tests. From there you get to larger trials 383 00:19:24,720 --> 00:19:27,240 Speaker 1: and then actually figuring out how to manufacture the thing 384 00:19:27,280 --> 00:19:31,160 Speaker 1: at scale, which Maderna probably can't do. UM. So we're 385 00:19:31,200 --> 00:19:35,360 Speaker 1: looking at a timeline of years rather than months. Unfortunately, 386 00:19:35,640 --> 00:19:38,960 Speaker 1: and obviously all clinical trials don't succeed, you know, is 387 00:19:38,960 --> 00:19:41,640 Speaker 1: there most of them don't? So is is there any 388 00:19:42,080 --> 00:19:44,679 Speaker 1: you know, notion to think that maybe a vaccine uh 389 00:19:44,960 --> 00:19:47,880 Speaker 1: for a virus like this would have a greater sort 390 00:19:47,880 --> 00:19:50,480 Speaker 1: of success rate in clinical trials just you know, because 391 00:19:50,520 --> 00:19:53,520 Speaker 1: there's so much effort being thrown out. I would hope so, 392 00:19:53,600 --> 00:19:55,720 Speaker 1: and and it depends on who exactly it's going to 393 00:19:55,800 --> 00:19:58,240 Speaker 1: come from. You know, there's a lot of uncertainty o there, 394 00:19:58,240 --> 00:20:01,199 Speaker 1: whether Maderna's you know not will approach of work. A 395 00:20:01,240 --> 00:20:03,639 Speaker 1: bunch of smaller companies even than Madurana working on it, 396 00:20:03,840 --> 00:20:06,400 Speaker 1: and then over the longer term you have Johnson and Johnson, 397 00:20:06,720 --> 00:20:10,479 Speaker 1: one of the few remaining large pharmaceutical companies that actually 398 00:20:10,520 --> 00:20:13,639 Speaker 1: has a big vaccine unit. They're working on something to 399 00:20:13,960 --> 00:20:16,439 Speaker 1: on some you know, a nine month to a year timeline, 400 00:20:16,920 --> 00:20:19,400 Speaker 1: I think was the one they mentioned that probably has 401 00:20:19,560 --> 00:20:22,080 Speaker 1: a greater chance of success just given you know, the 402 00:20:22,320 --> 00:20:25,679 Speaker 1: weight of resources and expertise behind it. But you know, 403 00:20:26,080 --> 00:20:29,919 Speaker 1: vaccines are something they're understood comparatively well. The question is, 404 00:20:30,000 --> 00:20:33,600 Speaker 1: you know, rapid development for a new virus, how effective 405 00:20:33,600 --> 00:20:35,800 Speaker 1: it can be, how rapid you know that trade off 406 00:20:36,320 --> 00:20:38,640 Speaker 1: um and you know trying to do it is rapidly possible. 407 00:20:38,680 --> 00:20:41,480 Speaker 1: Still having something that's effective and safe is still sort 408 00:20:41,480 --> 00:20:45,440 Speaker 1: of an unanswered question. We have seen some various biopharmaceutical 409 00:20:45,480 --> 00:20:49,320 Speaker 1: stocks rallying on the idea that maybe they will be 410 00:20:49,359 --> 00:20:51,200 Speaker 1: the one to come out with a vaccine, and you 411 00:20:51,200 --> 00:20:53,280 Speaker 1: you think about how long this takes. Sure, you need 412 00:20:53,320 --> 00:20:55,719 Speaker 1: to develop the science, there's plenty of regulations, you need 413 00:20:55,720 --> 00:20:57,440 Speaker 1: to deal with. But you also wrote a great column 414 00:20:57,760 --> 00:21:00,480 Speaker 1: on how kind of for some of these pharmaceutical companies 415 00:21:00,520 --> 00:21:02,639 Speaker 1: it's it's not really top of mind for them, or 416 00:21:02,640 --> 00:21:05,520 Speaker 1: maybe not in their best interests to go about working 417 00:21:05,800 --> 00:21:09,360 Speaker 1: to create a vaccine for an epidemic or a pandemic. 418 00:21:09,480 --> 00:21:12,840 Speaker 1: I mean, why is that so if in the case 419 00:21:12,920 --> 00:21:15,719 Speaker 1: that you know, you actually develop a vaccine for an epidemic, 420 00:21:16,040 --> 00:21:19,840 Speaker 1: if it's successful, it controls in and then you're done. 421 00:21:19,480 --> 00:21:24,720 Speaker 1: You know. Um, the biggest revenue drivers for from school companies, UM, 422 00:21:24,760 --> 00:21:28,040 Speaker 1: you know, they're they're chronic medicines for chronic conditions, things 423 00:21:28,040 --> 00:21:31,200 Speaker 1: that people took for years, or medicines for cancer, where 424 00:21:31,400 --> 00:21:33,440 Speaker 1: you know, you can charge a really high price because 425 00:21:33,480 --> 00:21:37,320 Speaker 1: comparatively few people get every subvariant of cancer that you're 426 00:21:37,560 --> 00:21:40,240 Speaker 1: you know, the little tiny segment of lung cancer patients 427 00:21:40,240 --> 00:21:43,199 Speaker 1: in your medicine targets. So, um, you know, there just 428 00:21:43,359 --> 00:21:47,040 Speaker 1: isn't that ability to to charge such a high price 429 00:21:47,080 --> 00:21:49,280 Speaker 1: in these cases because you know, more often than non 430 00:21:49,320 --> 00:21:52,000 Speaker 1: infection diseases are in LUSS, they break out in less 431 00:21:52,000 --> 00:21:55,720 Speaker 1: developed countries. Um. And you see that these new viruses 432 00:21:55,800 --> 00:21:58,199 Speaker 1: they tend to be transient. If you look at Stars. 433 00:21:58,359 --> 00:22:00,440 Speaker 1: You know, they were a good way along on a 434 00:22:00,520 --> 00:22:03,359 Speaker 1: virus than it petered out. So there's just not an 435 00:22:03,359 --> 00:22:06,560 Speaker 1: incentive to have the sort of rapid development capacity to 436 00:22:06,680 --> 00:22:10,280 Speaker 1: throw resources into something that might not ever generate a 437 00:22:10,359 --> 00:22:12,880 Speaker 1: return for you. And uh, and that's why another reason 438 00:22:12,920 --> 00:22:15,440 Speaker 1: why I'm skeptical of these companies that are popping, in 439 00:22:15,480 --> 00:22:17,359 Speaker 1: addition to the fact that some of them, many of 440 00:22:17,400 --> 00:22:20,000 Speaker 1: them in fact, don't actually have the sort of proof 441 00:22:20,000 --> 00:22:22,800 Speaker 1: you'd like to see, um that they can actually rapidly 442 00:22:22,840 --> 00:22:25,320 Speaker 1: generate a medicine. You know, you you'll see them put 443 00:22:25,320 --> 00:22:27,280 Speaker 1: out these sort of press releases every time there's a 444 00:22:27,280 --> 00:22:31,400 Speaker 1: pandemic scare and then not and there. Yeah, then there's 445 00:22:31,440 --> 00:22:34,879 Speaker 1: the question of would this actually be profitable, which is, 446 00:22:34,960 --> 00:22:37,679 Speaker 1: you know, an unfortunate question to ask, but it's a 447 00:22:37,720 --> 00:22:40,320 Speaker 1: really real one. And it's why you see fewer companies 448 00:22:40,600 --> 00:22:43,520 Speaker 1: focusing on this fear with the capacity both for vaccines 449 00:22:43,520 --> 00:22:46,639 Speaker 1: and another sort of key issue for antibiotics, where the 450 00:22:46,640 --> 00:22:50,159 Speaker 1: pipeline of new products is miniscule. Uh. You know, a 451 00:22:50,240 --> 00:22:52,280 Speaker 1: lot of a lot of big companies have just entirely 452 00:22:52,320 --> 00:22:54,920 Speaker 1: given up on it, and that that's another potential source 453 00:22:54,960 --> 00:22:58,600 Speaker 1: of a pandemic at abiotics in bacteria. The profit problem 454 00:22:58,600 --> 00:23:01,200 Speaker 1: is even worse there because if you develop an effective 455 00:23:01,240 --> 00:23:04,240 Speaker 1: new antibiotic, the biggest incentive is to use it as 456 00:23:04,240 --> 00:23:07,720 Speaker 1: a little as possible so resistance doesn't develop. So it 457 00:23:07,800 --> 00:23:10,600 Speaker 1: kind of points the need for a different incentive structure 458 00:23:11,000 --> 00:23:12,919 Speaker 1: for these public health issues than the one that we 459 00:23:13,000 --> 00:23:16,560 Speaker 1: currently used to to get companies to develop innovative medicines. 460 00:23:16,920 --> 00:23:19,479 Speaker 1: And I know I've seen stories about how China itself 461 00:23:19,560 --> 00:23:21,840 Speaker 1: is trying to develop a vaccine um, but I don't 462 00:23:21,880 --> 00:23:24,919 Speaker 1: really know much about China's pharmaceutical industry and and the 463 00:23:25,040 --> 00:23:28,040 Speaker 1: sort of development process. There is there any confidence to 464 00:23:28,080 --> 00:23:31,040 Speaker 1: be had, any hope that they themselves could could come 465 00:23:31,080 --> 00:23:34,080 Speaker 1: up with a vaccine. There's certainly that hope, Although obviously 466 00:23:34,160 --> 00:23:37,359 Speaker 1: not as long of a history of successfully developing medicines, 467 00:23:37,480 --> 00:23:40,880 Speaker 1: especially novel ones. It's more robust than it used to be. 468 00:23:40,960 --> 00:23:44,600 Speaker 1: You know, you've seen a greater wave of approvals of medicines. 469 00:23:44,680 --> 00:23:47,359 Speaker 1: Both a lot of them tend to be you know, 470 00:23:47,400 --> 00:23:49,359 Speaker 1: sort of copycasts of medicines that have already you know, 471 00:23:49,480 --> 00:23:52,399 Speaker 1: validated targets. Things we've already seen as supposed to holy 472 00:23:52,480 --> 00:23:55,359 Speaker 1: novel medicines but you know, they're they're the ones who 473 00:23:55,400 --> 00:23:58,280 Speaker 1: have the greatest access to virus material. They're seeing what 474 00:23:58,320 --> 00:24:00,560 Speaker 1: it looks like every day. So I'm hopeful that that 475 00:24:00,680 --> 00:24:02,879 Speaker 1: there might be a developed enough infrastructure there to to 476 00:24:02,920 --> 00:24:05,439 Speaker 1: get this done and at least not now, you know, 477 00:24:05,520 --> 00:24:07,520 Speaker 1: to begin to build it up for you know what 478 00:24:07,600 --> 00:24:10,720 Speaker 1: inevitably will be another epidemic in the future. Sarah, I 479 00:24:11,040 --> 00:24:14,560 Speaker 1: think that's uh. It means it's time for our tradition. 480 00:24:14,600 --> 00:24:17,399 Speaker 1: The craziest thing I saw in markets this week, and 481 00:24:17,440 --> 00:24:19,280 Speaker 1: I gotta say I was impressed when I told Max 482 00:24:19,320 --> 00:24:22,119 Speaker 1: about this thing we do. We said, oh, no problem, 483 00:24:22,160 --> 00:24:24,320 Speaker 1: I see I cover biotech. I see a crazy thing 484 00:24:24,359 --> 00:24:26,720 Speaker 1: every day in the market. It really is to be 485 00:24:27,000 --> 00:24:28,800 Speaker 1: so high hopes for Max. Max hit us with the 486 00:24:28,840 --> 00:24:31,239 Speaker 1: craziest thing you saw on markets? Okay, the craziest thing 487 00:24:31,320 --> 00:24:34,920 Speaker 1: I saw this week was a small biotechnology company called 488 00:24:35,040 --> 00:24:38,399 Speaker 1: veer Um, already up on the news that it was 489 00:24:38,440 --> 00:24:43,720 Speaker 1: working on an antibody medicine for for the virus. Then um, 490 00:24:43,760 --> 00:24:45,359 Speaker 1: I'm not sure if he's the CEO or the chairman, 491 00:24:45,400 --> 00:24:49,280 Speaker 1: but George Skang Goes affiliated with the company, former Biogen CEO, 492 00:24:49,400 --> 00:24:53,680 Speaker 1: got on TV and then the stock pumped. An additional Um, 493 00:24:53,720 --> 00:24:56,200 Speaker 1: you know this is something that only happens in biotech, 494 00:24:56,359 --> 00:25:01,200 Speaker 1: where like this tiny piece of incredib we speculative news 495 00:25:01,200 --> 00:25:04,240 Speaker 1: in this case about a company that you know has 496 00:25:04,640 --> 00:25:07,440 Speaker 1: the barest track record you know, is still working on 497 00:25:07,760 --> 00:25:10,040 Speaker 1: getting medicines to market. It's like, no, we're gonna do this, 498 00:25:10,080 --> 00:25:13,280 Speaker 1: We're gonna do it real fast, and then not even mentioning, 499 00:25:13,320 --> 00:25:17,840 Speaker 1: you know, doing it profitably, which is another wide open question. So, um, 500 00:25:17,880 --> 00:25:20,520 Speaker 1: you know that that's something to watch in biotech in general, 501 00:25:20,840 --> 00:25:24,360 Speaker 1: and you know specifically when you see these epidemics, Um, 502 00:25:24,480 --> 00:25:26,720 Speaker 1: you know those stock pops are are really not based 503 00:25:26,760 --> 00:25:29,119 Speaker 1: on much. I'll say for my crazy thing, I was 504 00:25:29,119 --> 00:25:31,320 Speaker 1: scrambling a little bit this week and I immediately went 505 00:25:31,440 --> 00:25:34,600 Speaker 1: and looked at a couple of biotechnology companies, although I 506 00:25:34,640 --> 00:25:36,680 Speaker 1: decided not to go that route so we won't overlap. 507 00:25:36,720 --> 00:25:39,720 Speaker 1: I'm going to start a combo blockchain and biotech company, 508 00:25:40,040 --> 00:25:46,560 Speaker 1: and it's just you know, it's been tried. Alright, Sora, 509 00:25:46,720 --> 00:25:48,440 Speaker 1: what do you have for us this week? And the 510 00:25:48,520 --> 00:25:50,760 Speaker 1: craziest thing you saw on markets? All right? So I 511 00:25:50,800 --> 00:25:53,080 Speaker 1: didn't stick with biotech, but I did, in a way 512 00:25:53,560 --> 00:25:56,960 Speaker 1: take the easy way out. I have to do Tesla 513 00:25:57,400 --> 00:26:01,800 Speaker 1: because it really is just on freaking believable. Back in June, 514 00:26:01,840 --> 00:26:05,640 Speaker 1: Tesla was trading around one dollars to share. Now after 515 00:26:05,720 --> 00:26:08,119 Speaker 1: reported earnings this week, sure we got a revenue be 516 00:26:09,080 --> 00:26:11,359 Speaker 1: the company projected it will deliver at least five hundred 517 00:26:11,400 --> 00:26:15,959 Speaker 1: thousand vehicles this year. Cash flow did look strong, but 518 00:26:16,040 --> 00:26:18,520 Speaker 1: we saw it jump even further. And now shares are 519 00:26:18,560 --> 00:26:21,280 Speaker 1: worth roughly six hundred and fifty dollars, so more than 520 00:26:21,359 --> 00:26:25,280 Speaker 1: triple what it was worth really just half a year ago, 521 00:26:25,400 --> 00:26:27,919 Speaker 1: just a couple of months ago. And it is just 522 00:26:28,000 --> 00:26:31,000 Speaker 1: unbelievable because I feel like so many people out there 523 00:26:31,040 --> 00:26:34,679 Speaker 1: are rooting against Tesla, and you get short interest in 524 00:26:34,680 --> 00:26:37,280 Speaker 1: the company and it's sky high. People are just waiting 525 00:26:37,800 --> 00:26:41,560 Speaker 1: for this to unravel, and so far it just has 526 00:26:41,600 --> 00:26:44,600 Speaker 1: not been even close to happening. Yeah, you wonder how 527 00:26:44,680 --> 00:26:47,480 Speaker 1: much the short interest is part of the rally, right, 528 00:26:47,520 --> 00:26:50,240 Speaker 1: You wonder how much covering never ending a short bed 529 00:26:50,280 --> 00:26:52,520 Speaker 1: against Elon. But it is just crazy. It's pretty good. 530 00:26:52,520 --> 00:26:54,439 Speaker 1: It's pretty good, alright. See we well, I'm sure this 531 00:26:54,480 --> 00:26:57,040 Speaker 1: is the craziest podcast you've been on all weeks. So 532 00:26:57,480 --> 00:26:59,399 Speaker 1: you are on the hook to for the craziest thing 533 00:26:59,400 --> 00:27:02,160 Speaker 1: you've seen this week. Okay, well, look, we've all heard 534 00:27:02,160 --> 00:27:05,600 Speaker 1: of the coronavirus. I'm guessing we've all heard of Corona beer. 535 00:27:07,440 --> 00:27:10,479 Speaker 1: Where are you going with us? Yeah? You know, it's worrying. 536 00:27:11,040 --> 00:27:16,000 Speaker 1: From January the eighties to January, the number of searches 537 00:27:16,240 --> 00:27:21,040 Speaker 1: of Corona beer virus in Google jump by two thousand 538 00:27:20,440 --> 00:27:24,480 Speaker 1: three Corona beera virus. And the most worrying thing of 539 00:27:24,520 --> 00:27:27,159 Speaker 1: that is that it means that it wasn't zero before, 540 00:27:27,320 --> 00:27:29,679 Speaker 1: so people were already searching for something to do with 541 00:27:29,760 --> 00:27:33,160 Speaker 1: Corona beer. So I wonder if what's going through people's heads. 542 00:27:33,200 --> 00:27:36,440 Speaker 1: Do they think that this is originating from Corona as 543 00:27:36,480 --> 00:27:40,960 Speaker 1: in the Corona beer or I hate to imagine what's 544 00:27:40,960 --> 00:27:43,000 Speaker 1: going through the heads of these people. Maybe we could 545 00:27:43,040 --> 00:27:45,240 Speaker 1: just start selling the naming rights to viruses to sort 546 00:27:45,240 --> 00:27:48,160 Speaker 1: of help raise some money for research. I don't know. Well, 547 00:27:48,160 --> 00:27:50,360 Speaker 1: this is something I was thinking about because you think 548 00:27:50,359 --> 00:27:53,040 Speaker 1: about stars, you think about murders, you think about ebolavirus, 549 00:27:53,080 --> 00:27:56,360 Speaker 1: and we are talking about this virus that originated out 550 00:27:56,400 --> 00:28:00,280 Speaker 1: of Wuhan as the coronavirus. But technically the coronavirus is 551 00:28:00,359 --> 00:28:02,520 Speaker 1: like a family of virus says it's not actually the 552 00:28:02,600 --> 00:28:06,359 Speaker 1: name of it, but it was actually named. But I 553 00:28:06,400 --> 00:28:08,200 Speaker 1: think it's a name that none of us feel comfortable 554 00:28:08,200 --> 00:28:10,240 Speaker 1: pronouncing over and over again. I'm glad you didn't say 555 00:28:10,440 --> 00:28:13,320 Speaker 1: you were also thinking about naming rights for us, because 556 00:28:13,359 --> 00:28:16,600 Speaker 1: it is terrible thought and I'm kind of ashamed myself. 557 00:28:16,880 --> 00:28:19,199 Speaker 1: I'm absolutely not thinking that. Will leave it to you, 558 00:28:19,400 --> 00:28:21,920 Speaker 1: all right, to your your turn. Well, of course, my 559 00:28:22,200 --> 00:28:25,280 Speaker 1: craziest thing has to do with the coronavirus too, and 560 00:28:25,320 --> 00:28:30,800 Speaker 1: it's this massive sell off in carnival cruise lines stock 561 00:28:31,520 --> 00:28:36,280 Speaker 1: because there was a ship in Italy where someone started, 562 00:28:36,560 --> 00:28:39,200 Speaker 1: uh coming down with some some symptoms that may have 563 00:28:39,240 --> 00:28:42,240 Speaker 1: been coronavirus. And I think it's like seven thousand people 564 00:28:42,240 --> 00:28:46,360 Speaker 1: on this ship all of a sudden quarantined ship. I mean, 565 00:28:46,480 --> 00:28:49,200 Speaker 1: what a nightmare. But I think it really it's you know, 566 00:28:49,360 --> 00:28:52,320 Speaker 1: it's worrisome from the point of how quickly this type 567 00:28:52,320 --> 00:28:55,000 Speaker 1: of thing could go pear shaped, you know, how how 568 00:28:55,240 --> 00:29:01,040 Speaker 1: the paranoia about this could really um start affecting the economy, 569 00:29:01,080 --> 00:29:03,800 Speaker 1: even if the even if the actual human toll has 570 00:29:03,800 --> 00:29:07,320 Speaker 1: not yet gotten that bed outside of China, um, just 571 00:29:07,360 --> 00:29:10,000 Speaker 1: the paranoia about it. What do you think about that 572 00:29:10,040 --> 00:29:14,280 Speaker 1: at all, sort of that the psychological effect on confidence, absolutely, 573 00:29:14,320 --> 00:29:16,040 Speaker 1: I mean even in stars. Actually a lot of the 574 00:29:16,080 --> 00:29:19,680 Speaker 1: impact was from the uncertainty and fear which stop people 575 00:29:19,680 --> 00:29:22,720 Speaker 1: from going out and socializing in public places. And you're 576 00:29:22,720 --> 00:29:25,080 Speaker 1: already starting to see that effect. And also again it's 577 00:29:25,120 --> 00:29:27,520 Speaker 1: like I said, the social media impact, that rush of 578 00:29:27,880 --> 00:29:31,080 Speaker 1: fear just goes across the world very very quickly. Now 579 00:29:31,760 --> 00:29:34,080 Speaker 1: I don't like to socialize in public places anymore. I'm 580 00:29:34,160 --> 00:29:36,920 Speaker 1: kind of a loner, Sarah, so are you. I don't 581 00:29:36,960 --> 00:29:40,480 Speaker 1: I don't really get that sense from you. Mike. I 582 00:29:40,480 --> 00:29:42,720 Speaker 1: don't like to. I do you know when you're forced to. 583 00:29:43,080 --> 00:29:46,880 Speaker 1: My wife makes me go, Ingle makes you and you 584 00:29:46,920 --> 00:29:49,440 Speaker 1: have no choice but to say yes. But we will 585 00:29:49,440 --> 00:29:51,880 Speaker 1: certainly be tracking the spread of the virus over the 586 00:29:51,880 --> 00:29:54,960 Speaker 1: next week and any market fell out that may come 587 00:29:55,640 --> 00:29:58,280 Speaker 1: or may not come. But with that said, Semasha and 588 00:29:58,320 --> 00:30:00,440 Speaker 1: Max Nisson, thank you so much for joining this show today. 589 00:30:00,720 --> 00:30:03,360 Speaker 1: Thank you very much, Thanks so much for having me 590 00:30:11,720 --> 00:30:14,640 Speaker 1: what goes up? We'll be back next week. Until then, 591 00:30:14,720 --> 00:30:16,880 Speaker 1: you can find us on the Bloomberg Terminal website and 592 00:30:17,000 --> 00:30:20,120 Speaker 1: app or wherever you get your podcasts. We'd love it 593 00:30:20,120 --> 00:30:22,040 Speaker 1: if you took the time to rate interview the show 594 00:30:22,080 --> 00:30:25,320 Speaker 1: on Apple Podcast so more listeners can find us, and 595 00:30:25,440 --> 00:30:28,120 Speaker 1: you can find us on Twitter. Follow me at at 596 00:30:28,160 --> 00:30:32,200 Speaker 1: Sarah Ponzach, Mike is a Reaganonymous, and Max Neeson is 597 00:30:32,240 --> 00:30:36,840 Speaker 1: at Max Neeson. You can also follow Bloomberg podcast at podcasts. 598 00:30:37,440 --> 00:30:40,280 Speaker 1: What Goes Up is produced by Tofar Foreheads and edited 599 00:30:40,280 --> 00:30:43,800 Speaker 1: by Darrell Dillard. The head of Bloomberg Podcast is Francesca Levie. 600 00:30:43,960 --> 00:31:00,280 Speaker 1: Thanks for listening, See you next time. BA