Speaker 1: Hello, and welcome to What Goes Up, a Bloomberg Weekly
Speaker 1: Markets podcast. I'm Sara pan Zach, reporter on the Cross
Speaker 1: Asset team, and I'm Mike Reagan, a senior editor on
Speaker 1: the Markets Team. This week on the show, months have
Speaker 1: calm across global equity markets have finally been shattered. The
Speaker 1: coronavirus continues to spread, with more than eight thousand cases confirmed,
Speaker 1: the death toll rising in China, extending balloonar New Year holiday.
Speaker 1: On top of that of the smp F hundred market
Speaker 1: gap reported earnings, and the Federal Reserve held interest rates steady.
Speaker 1: And sorry, as you pointed out, as a pretty serious week,
Speaker 1: So I'm gonna keep my dumb jokes to a minimum.
Speaker 1: I'm not gonna eliminate them completely. That just means that
Speaker 1: you'll have doubled the dad jokes next week, right right,
Speaker 1: But let's get right to it with our guests here
Speaker 1: joining us first time in the show. We're very happy
Speaker 1: be to have her is Sema Shaw. She's a global
Speaker 1: strategist at Principal Global Investors. Sema, welcome to the show,
Speaker 1: Thank you very much, be happy to be here. And Sarah,
Speaker 1: one thing I noticed on Twitter this week is that
Speaker 1: my feed was full of experts on viruses. Did you
Speaker 1: notice that too? Real experts? Or want to bet they're
Speaker 1: the same experts who were experts on Iran and trade policy.
Speaker 1: It's amazing the way Twitter cultivates these, uh, these one
Speaker 1: size fits all experts for you. It's amazing you can
Speaker 1: fit in being an expert within a couple of characters
Speaker 1: on Twitter, and all of a sudden you're hailed. And
Speaker 1: you know, I know they're experts because they have charts.
Speaker 1: You know you're a real expert if you well, are
Speaker 1: they verified? I think that's what really matters. Clearly I'm
Speaker 1: being sarcastic, but my point is that I craved to
Speaker 1: hear from someone who really knew what they were talking
Speaker 1: about as far as the pharmaceutical and the health care industry.
Speaker 1: So my old pal from Bloomberg Opinion, Max Nisson Opinion
Speaker 1: calumnists writing about pharmaceuticals and healthcare. Max, Welcome to the show.
Speaker 1: Thanks so much for having me. So, Sima, let's start
Speaker 1: with you. You You know, I was reading one of your
Speaker 1: recent notes that obviously came out before the coronavirus and
Speaker 1: some of the highlights, um where you preferred international equities
Speaker 1: over US equities. Uh, you liked EM debt over other
Speaker 1: fixed uh income assets, cyclicals you liked, and you you've
Speaker 1: sort of concluded that investors should be fully invested. You know,
Speaker 1: there's that old commercial though that when the world comes
Speaker 1: at you fast, and now we have this sort of
Speaker 1: I hate to call it a black Swan event, but
Speaker 1: I guess you really could call it a black swan,
Speaker 1: this coronavirus that is sort of causing people to rethink
Speaker 1: all of their thoughts that they had leading into Is
Speaker 1: that happening to you at all? Are you sort of
Speaker 1: still sticking with your your original strategy, Uh, despite all
Speaker 1: the uncertainty around the fires. Yeah, absolutely, I think that.
Speaker 1: I mean, first of all, this is very very early days.
Speaker 1: We don't know how this is going to be transitioning through.
Speaker 1: But actually I think a lot of the themes are
Speaker 1: still very relevant, and specifically with emerging markets. We actually
Speaker 1: like emerging emerging Asia, um, which is you know, maybe
Speaker 1: there's a lot of question to mark, say without but
Speaker 1: if anything, you know, from a it's a long term
Speaker 1: strategic positioning that we see the macro story is still
Speaker 1: pretty strong of cool sort of concerns about the growth outlook,
Speaker 1: but potentially you could see better entry points this year.
Speaker 1: I'm here, but you know you have to see how
Speaker 1: this is progressing. That may well change China growth out
Speaker 1: like and then it put things into questions. Right, we've
Speaker 1: really seen emerging markets in Asian markets really taken absolute hit.
Speaker 1: You look at em for example, which is the Ice
Speaker 1: Shares ms c I Emerging Markets Index, which is of
Speaker 1: its market cap in China at a new fresh load
Speaker 1: versus the S and P since two thousand and three. Um.
Speaker 1: But I also find it very interesting because last week
Speaker 1: we heard a lot of comparisons about the coronavirus that
Speaker 1: we're dealing with today two stars, and all of a sudden,
Speaker 1: this week I've heard from many people, read many research
Speaker 1: notes about how now is different and you talk about
Speaker 1: how risk velocity is elevated. Now, how now when you
Speaker 1: are dealing with an instance of this sort or a
Speaker 1: global health epidemic or any other worry or is it
Speaker 1: can be heightened. Can you maybe walk us through where
Speaker 1: that is? Yeah? Sure, So we point to three different
Speaker 1: areas where you would expect that velocity of risk to
Speaker 1: be quicker in this kind of instance. And the first
Speaker 1: thing is asset valuations. You know, they are a lot
Speaker 1: more expensive than sunny what we saw in this kind
Speaker 1: of the two thousand three episode, which means that as
Speaker 1: we came into risk, assets were already very vulnerable to
Speaker 1: any kind of shift in global sentiment, which is exactly
Speaker 1: what we're seeing today. So you could see sharper pullbacks
Speaker 1: in the market. And then the second thing, which to
Speaker 1: me is probably the most interesting, is a social media impact.
Speaker 1: So rewind to two thousand and three, you would see
Speaker 1: about a hundred thousand tweets per day. Today you see
Speaker 1: that amount in just one single minute, So that transitioning
Speaker 1: of fear and knowledge is so much faster again, So
Speaker 1: that's seeing that transition to portfolios quickly. And the third
Speaker 1: thing is is probably the most important, is the global
Speaker 1: supply chain. It's a lot more complex. Um, it's a
Speaker 1: lot more intricate. So even companies that don't necessarily come
Speaker 1: across like they have a direct exposure to China, somewhere
Speaker 1: along the way, they have exposure. Boy, sorry, I wish
Speaker 1: I had met Sima. Earlier this week, I was writing
Speaker 1: a Business Week story where I made that exact point
Speaker 1: that the valuation difference between now and two thousand and three.
Speaker 1: Is that is the big difference. Very different. I would
Speaker 1: have loved to quote quote you, but UM, just to
Speaker 1: trill down back to some of you know, your original
Speaker 1: strategy ideas for the year, UM, walk us through. Uh
Speaker 1: what you're thinking about international equities? Well, why now might
Speaker 1: be the time for them to outperform the US. UM.
Speaker 1: We've heard heard this from some other smart people, and
Speaker 1: I'm just curious. Um, you know your rationale for for
Speaker 1: approaching it that way? Yeah? Sure, you know, we came
Speaker 1: into we have a view that there's going to be
Speaker 1: global growth stabilization and an opton so not particularly strong.
Speaker 1: But in that kind of environment, you would actually tend
Speaker 1: to expect more of those those emerging markets UM to
Speaker 1: do well. Now if you even compare Europe, you know,
Speaker 1: I did have a very good year last year, the
Speaker 1: best year in about a decade, but it's still somewhat undervalued.
Speaker 1: I mean, relative valuations are not as attractive UM as
Speaker 1: a number of varias, but it is definitely more attractive
Speaker 1: than the US. So that means that coming into this year,
Speaker 1: as long as you have a growth outlook which is positive,
Speaker 1: we know that central bank stimulus is going to be
Speaker 1: in play, and this potential for fiscal stimulus in Europe.
Speaker 1: Plus we also have taken out a lot of the
Speaker 1: politic caaris that have been weighing on Europe for a
Speaker 1: number of years. So to me, that means valuations and
Speaker 1: fundamentals are all more attractive. Same thing with emerging markets,
Speaker 1: you know, aside from what we've been seeing recently, the
Speaker 1: growth outlook is good given the reduction of the newest
Speaker 1: China trade tensions, there's room for monaty stimulus and the
Speaker 1: room for fiscal stimulus. So for us, that means international
Speaker 1: equities look more attractive. So, like you said, it is
Speaker 1: it is early days and we need to see how
Speaker 1: this coronavirus actually does develop and then eventually affect economic
Speaker 1: growth growth. But we've already seen some estimates. I know,
Speaker 1: Bloomberg Economics is estimating that it's possible that China's GDP
Speaker 1: falls to four and a half percent. Sure, still four
Speaker 1: and a half percent growth, but low for China's standards
Speaker 1: as an emerging market country and a dominant global player nowadays.
Speaker 1: Do you have to factor in the possibility that maybe
Speaker 1: this black Swan event is wide enough that it does
Speaker 1: derail the emerging market picture, at least in Asia and
Speaker 1: in China, and what would have to happen to get
Speaker 1: you to the point where you start reconsidering. I think
Speaker 1: that's really the key point and probably the reason why
Speaker 1: you have seen markets react in the way that they
Speaker 1: have is because it does if it were to persist,
Speaker 1: to put a lot of the global growth outlook into question.
Speaker 1: So you know, again, this year global growth should be okay,
Speaker 1: we don't. We were never expecting it to be like
Speaker 1: twenty six where China really booms growth around the world,
Speaker 1: but it was putting a bottom kind of a floor
Speaker 1: under European growth and it was lifting merging Asia. So
Speaker 1: if you work to see China growth really persisting beyond
Speaker 1: that really sharp Q and dip that I think everyone
Speaker 1: is expecting, but into Q two and certainly into the
Speaker 1: second half, then you know, you start to take away
Speaker 1: the foundations of that global graph outlook. And the other
Speaker 1: thing is is you know where is the China hits
Speaker 1: So we know from the consumer side that in stars
Speaker 1: it bounces back very quickly. People just differ a lot
Speaker 1: of their purchases, people go back to the airlines, etcetera. If, however,
Speaker 1: it leaks into the second half of the year and
Speaker 1: you start to see the production size, so you see
Speaker 1: factories staying closed. Then those global big firms that we
Speaker 1: all know of who at the moment have enough stock
Speaker 1: paths to to to deliver to their customers, if they
Speaker 1: start running out, that's when you start to see a
Speaker 1: real potential growth. And that's when we would be worried.
Speaker 1: You know, seem I was a English major, not a
Speaker 1: finance major, so I'm prone to think in bad analogies,
Speaker 1: and I keep thinking about this as sort of the way, uh,
Speaker 1: you'll have like a bad, nasty cold winner that sort
Speaker 1: of depresses g DP, maybe hurts some companies earnings. UM.
Speaker 1: Maybe some other companies use it as an excuse for
Speaker 1: their under performance, But eventually the market is very good
Speaker 1: at just sort of looking past those soft spots caused
Speaker 1: by say a nasty winner full of blizzards in the US. UM.
Speaker 1: And I'm wonder if if a similar thing could happen
Speaker 1: well as you say, you know, could the market just
Speaker 1: kind of look passed this episode, especially if the sort
Speaker 1: of the rate of growth and the infection slows down. UM.
Speaker 1: Is that a safe way to look at it? Do
Speaker 1: you think or is there the danger that uh, as
Speaker 1: you said, if it bleeds into the second quarter, is
Speaker 1: there something more long lasting damage that can be done,
Speaker 1: uh say to you know, uh, the credit of some
Speaker 1: some vulnerable companies, that sort of thing. If this sort
Speaker 1: of lasts a bit longer than we then we hope anyway,
Speaker 1: that's that's exactly it. So as of today, the way
Speaker 1: we sit is UM. You know, assuming a photos a
Speaker 1: point where it peaks relatively soon and then UM starts
Speaker 1: to fade out, then we would expect the market to
Speaker 1: bounce back. Now, going into again this year, with osset
Speaker 1: markets so value so value so highly and with growth
Speaker 1: solid but not very very strong, we knew that the
Speaker 1: market was really vulnerable to these kind of political shifts
Speaker 1: UM and already we've seen the US and runt right
Speaker 1: attention is already not markets, coronavirus another one, and we
Speaker 1: may well see this going through the year. But as
Speaker 1: long as there's no recession on the horizon and we
Speaker 1: know the central makes is still there plugging in that liquidity,
Speaker 1: then we would expect that to be some recovery. It
Speaker 1: changes when you have a more sustainable impact on the
Speaker 1: growth outlook, which is really starting to hurt companies from
Speaker 1: a production standpoint. So for me, that's your that's where
Speaker 1: it tilts into the more dangerous side. So you mentioned
Speaker 1: central banks providing liquidity, and we did have a BOE
Speaker 1: meeting this week, we did hear from the Federal Reserve.
Speaker 1: Is there anything that Jerome Powell said or that the
Speaker 1: FED said in the statement that he said in the
Speaker 1: press conference thereafter, um, that you found interesting. I think
Speaker 1: the market reaction was quite a bit, quite interesting. We
Speaker 1: saw a very steep bond rally, we see stocks start
Speaker 1: to sell off. I heard a couple of people try
Speaker 1: to extrapolate that to me that maybe markets are are
Speaker 1: trying to see what the FED thinks about the growth outlook.
Speaker 1: Maybe the growth outlook isn't as strong as people had
Speaker 1: thought previously. Do you think you can extrapolate that from
Speaker 1: what we saw or not quite yet? Definitely, not quite yet.
Speaker 1: I mean, I think it just goes to show that
Speaker 1: the markets possession with the Fed still lives, even though
Speaker 1: you know, we have a fairly good idea about what
Speaker 1: they'll be doing for the rest of the year. There's
Speaker 1: a lot to try and read into it. I don't
Speaker 1: actually would give Powell ten out of ten for giving
Speaker 1: a really good, clear communication message. And I wouldn't have
Speaker 1: really expected to the market to be so disrupted. You know,
Speaker 1: I'm interested in that notion. You talk about emerging Asia debt.
Speaker 1: How does the trade war sort of fit into all this?
Speaker 1: I mean, I obviously that that's such a wild card
Speaker 1: with the coronavirus. I mean, can China really sort of
Speaker 1: meet its uh it's requirements of the trade deal? And
Speaker 1: how will the US? Will they cut them some slack?
Speaker 1: Will they? You know, I think most of us believe
Speaker 1: they probably won't. UM. Some of the comments we've seen
Speaker 1: from Lightheiser and other officials seemed to indicate that, sorry,
Speaker 1: you're not off the hook just because of this issue. Um,
Speaker 1: does that make the rest of Asia sort of a
Speaker 1: little more attractive than China? It does in some ways.
Speaker 1: And you know, one of the good things that we
Speaker 1: did see about Asia even last year was a number
Speaker 1: of these countries, you know, Asia is more than than China,
Speaker 1: and a number of these countries such as Indonesia Malaysia,
Speaker 1: really try to make some structural changes that meant that
Speaker 1: they could benefit from supply chain diversion. And I think
Speaker 1: investors should really be aware that these are these are
Speaker 1: long term beneficial impacts, so there is potential for them
Speaker 1: to continue to benefit. UM. I think with how this
Speaker 1: progresses with the US China trade tensions, UM, it really
Speaker 1: depends on the electorate in election. Yet the government is
Speaker 1: going to listen to the electorate. If they feel like
Speaker 1: the US is going easy on China, then I think
Speaker 1: we should expect those tensions to return. If they feel like,
Speaker 1: actually we should cut them some sluck, then I think
Speaker 1: everything fades out. Where do you stand on the growth
Speaker 1: versus value debacle? Just because typically I feel like when
Speaker 1: we speak with someone and they are more so on
Speaker 1: the international equity side, it's a valuation question and typically
Speaker 1: within the US are globally they're favoring value stocks as well.
Speaker 1: But this month I find it very interesting, and I
Speaker 1: wonder if you are on the value side, if it's
Speaker 1: testing your patients, because if you look at SMP five
Speaker 1: hundred in excess that separate growth versus value companies, we've
Speaker 1: actually now seen the strongest month for growth versus value
Speaker 1: since all the way back in early two thousand nine,
Speaker 1: before we saw the bottom back in March of oh nine.
Speaker 1: So can you maybe walk us through your thought process there. Yeah, absolutely,
Speaker 1: you know, we we like I like value over momentum.
Speaker 1: I think of it more from a technical perspective. So
Speaker 1: the main reason being that, yes, we see an up term,
Speaker 1: but because it's not particularly strong, the fundamental case for
Speaker 1: shifting that into that rotation isn't necessarily there. But when
Speaker 1: you have such a dislocation in valuations, it's almost rude
Speaker 1: not to start increasing your exposure to value because when
Speaker 1: that pop comes, you don't want to be on the
Speaker 1: wrong side of it. But having said that, is it
Speaker 1: going to be a sustainable rotation when it comes through.
Speaker 1: Probably not until you get a strong growth pickup, and
Speaker 1: that may not be till the next cycle. Like you
Speaker 1: call it a debacle, I hear about it all the time.
Speaker 1: I attribute my underperformance to the debacle of the debacle
Speaker 1: of growth versus value. Uh See. I think a lot
Speaker 1: of US investors, UM, when you start talking about international equities,
Speaker 1: they get um a little nervous about sort of bottoms
Speaker 1: up stock picking in the rest of the world. Um,
Speaker 1: they're just not as familiar with sort of you know,
Speaker 1: the reporting requirements and the and the research involved in
Speaker 1: picking uh. Individual international companies, especially E. M. So how
Speaker 1: would you sort of express abolishness uh in international equities?
Speaker 1: Would it be in sort of E t F that
Speaker 1: track certain nations were certain say E M as a whole.
Speaker 1: You know, how how how would one US investor uh
Speaker 1: sort of take advantage of international performance? You know, And
Speaker 1: that that's a really really important question going into this
Speaker 1: year because yes, the overall emerging market story is quite positive,
Speaker 1: but you absolutely need to know your country. Um, if
Speaker 1: you look back over the last kind of ten fifteen years,
Speaker 1: a lot of the emerging markets have pursued very sensible
Speaker 1: macro policies, so you know, they've started to take account
Speaker 1: or you don't want too many too much debt imbalance
Speaker 1: and you won't have low inflation, and they've done really well.
Speaker 1: And now going into this yet a lot of them
Speaker 1: have space to cut interest rates further, and some have
Speaker 1: space to do fiscal stimulus. Others don't have room to
Speaker 1: do fiscal stimulus, but they're going to do it anyway,
Speaker 1: because now what we're seeing is a lot of governments
Speaker 1: are starting to put to put their domestic politics ahead
Speaker 1: of that macro stability, and that's relatively new again, So
Speaker 1: you have to know your countries you have to know
Speaker 1: where those domestic hotspots are going to come about, and
Speaker 1: this is kind of where active management and stockpicking becomes
Speaker 1: very important. Are there any individual countries that you're really
Speaker 1: pounding the table on in any that you're saying, well,
Speaker 1: keep me away, but but don't pay on the table
Speaker 1: here because it will hurt people's years reverberates like yeah, okay,
Speaker 1: you know again coronavirus aside, If we're looking out over
Speaker 1: the long term, we like some parts of South Korea,
Speaker 1: especially even the chipmakers. We actually like China consumer discretionary,
Speaker 1: which I know, as we sit today it looked at
Speaker 1: like a tough one, but hopefully we're going to get
Speaker 1: a good entry point. And we still like Brazil because
Speaker 1: from a macro perspective it's a little bit more sensible
Speaker 1: than than many of the others. There are areas such
Speaker 1: as Turkey in South Africa which from evaluation perspective do
Speaker 1: look really attractive, but every time that there is any
Speaker 1: kind of upheaval, they will be hit first. What's behind
Speaker 1: the chipmaker bullishness? I mean, I know I've throwned on
Speaker 1: and on about five G being just a really big
Speaker 1: game changer coming up and artificial intelligence all that is
Speaker 1: that is that part of it or is it? Is
Speaker 1: it more sort of a world evaluation story. It's more
Speaker 1: of the former. You know, the kind of the five
Speaker 1: G story is there. It's not going away. Um. You
Speaker 1: know they chipmakers have been beaten up before, but they
Speaker 1: kind of rebound. And also there's really a boom and
Speaker 1: bust type of trade it is. And if you expect
Speaker 1: to see growth and even a growth up to and then,
Speaker 1: you should see chipmakers do well. I don't necessarily believe
Speaker 1: that it's not going to be hit by tensions, and
Speaker 1: especially on the US China stuff. One might be a
Speaker 1: tougher year, but at least be positive. Max. Let's let's
Speaker 1: bring you into this because you know, all eyes have
Speaker 1: turned to the coronavirus this week. To me, one of
Speaker 1: the most amazing things is this notion that China is
Speaker 1: going to build a hospital in like two weeks, two
Speaker 1: to three weeks. Uh, you know, who knows if they'll
Speaker 1: meet that goal. But if they get it done in
Speaker 1: a month, I'll still be impressed. But you know, as
Speaker 1: we've talked about before, Uh, it's not so simple in
Speaker 1: the pharmaceutical world as far as getting a vaccine for
Speaker 1: this virus on the market. Talk us through, like what
Speaker 1: is a realistic timeline to actually think of a vaccine
Speaker 1: getting through the whole clinical trial phase and onto the
Speaker 1: market with a situation like this. Yeah, absolutely, I mean
Speaker 1: for actually getting you know, a quick response vaccine to
Speaker 1: the market for a novel epidemic. There isn't really a
Speaker 1: good precedent that. The best one I can point to
Speaker 1: is with the Bola, where it took not not one
Speaker 1: outbreak but several to actually eventually get a vaccine to market.
Speaker 1: There's this whole sort of saga where you know, a
Speaker 1: public Canadian lab developed what looked like a promising vaccine,
Speaker 1: it got licensed to a company than another company, the
Speaker 1: company never developed it, and then when there was a
Speaker 1: new outbreak, the w h O more or less forced
Speaker 1: this smaller biotech to license the vaccine to MRK in
Speaker 1: two thousand fourteen, and then the next step, the next
Speaker 1: outbreak rolled around. Finally they were able to get it
Speaker 1: into the fields that beyond just the development. Actually getting
Speaker 1: a vaccine into kind of a hot zone and and
Speaker 1: running a clinical trials its own side of challenges, and
Speaker 1: then finally only actually approved in two thousand nineteen. So
Speaker 1: that's that's the good case. That's sort of a multi
Speaker 1: year But in terms of you know, if for the
Speaker 1: in this case obvious trying to speed up the development
Speaker 1: pathway from that, UM, I think you've seen at least
Speaker 1: one company saying that they're hoping to get into sort
Speaker 1: of initial human trials by April within a few months.
Speaker 1: It's a company called Maderna using sort of this new
Speaker 1: modern approach to rapidly creating vaccines and then from there,
Speaker 1: um you know, that would just be your first in
Speaker 1: human safety tests. From there you get to larger trials
Speaker 1: and then actually figuring out how to manufacture the thing
Speaker 1: at scale, which Maderna probably can't do. UM. So we're
Speaker 1: looking at a timeline of years rather than months. Unfortunately,
Speaker 1: and obviously all clinical trials don't succeed, you know, is
Speaker 1: there most of them don't? So is is there any
Speaker 1: you know, notion to think that maybe a vaccine uh
Speaker 1: for a virus like this would have a greater sort
Speaker 1: of success rate in clinical trials just you know, because
Speaker 1: there's so much effort being thrown out. I would hope so,
Speaker 1: and and it depends on who exactly it's going to
Speaker 1: come from. You know, there's a lot of uncertainty o there,
Speaker 1: whether Maderna's you know not will approach of work. A
Speaker 1: bunch of smaller companies even than Madurana working on it,
Speaker 1: and then over the longer term you have Johnson and Johnson,
Speaker 1: one of the few remaining large pharmaceutical companies that actually
Speaker 1: has a big vaccine unit. They're working on something to
Speaker 1: on some you know, a nine month to a year timeline,
Speaker 1: I think was the one they mentioned that probably has
Speaker 1: a greater chance of success just given you know, the
Speaker 1: weight of resources and expertise behind it. But you know,
Speaker 1: vaccines are something they're understood comparatively well. The question is,
Speaker 1: you know, rapid development for a new virus, how effective
Speaker 1: it can be, how rapid you know that trade off
Speaker 1: um and you know trying to do it is rapidly possible.
Speaker 1: Still having something that's effective and safe is still sort
Speaker 1: of an unanswered question. We have seen some various biopharmaceutical
Speaker 1: stocks rallying on the idea that maybe they will be
Speaker 1: the one to come out with a vaccine, and you
Speaker 1: you think about how long this takes. Sure, you need
Speaker 1: to develop the science, there's plenty of regulations, you need
Speaker 1: to deal with. But you also wrote a great column
Speaker 1: on how kind of for some of these pharmaceutical companies
Speaker 1: it's it's not really top of mind for them, or
Speaker 1: maybe not in their best interests to go about working
Speaker 1: to create a vaccine for an epidemic or a pandemic.
Speaker 1: I mean, why is that so if in the case
Speaker 1: that you know, you actually develop a vaccine for an epidemic,
Speaker 1: if it's successful, it controls in and then you're done.
Speaker 1: You know. Um, the biggest revenue drivers for from school companies, UM,
Speaker 1: you know, they're they're chronic medicines for chronic conditions, things
Speaker 1: that people took for years, or medicines for cancer, where
Speaker 1: you know, you can charge a really high price because
Speaker 1: comparatively few people get every subvariant of cancer that you're
Speaker 1: you know, the little tiny segment of lung cancer patients
Speaker 1: in your medicine targets. So, um, you know, there just
Speaker 1: isn't that ability to to charge such a high price
Speaker 1: in these cases because you know, more often than non
Speaker 1: infection diseases are in LUSS, they break out in less
Speaker 1: developed countries. Um. And you see that these new viruses
Speaker 1: they tend to be transient. If you look at Stars.
Speaker 1: You know, they were a good way along on a
Speaker 1: virus than it petered out. So there's just not an
Speaker 1: incentive to have the sort of rapid development capacity to
Speaker 1: throw resources into something that might not ever generate a
Speaker 1: return for you. And uh, and that's why another reason
Speaker 1: why I'm skeptical of these companies that are popping, in
Speaker 1: addition to the fact that some of them, many of
Speaker 1: them in fact, don't actually have the sort of proof
Speaker 1: you'd like to see, um that they can actually rapidly
Speaker 1: generate a medicine. You know, you you'll see them put
Speaker 1: out these sort of press releases every time there's a
Speaker 1: pandemic scare and then not and there. Yeah, then there's
Speaker 1: the question of would this actually be profitable, which is,
Speaker 1: you know, an unfortunate question to ask, but it's a
Speaker 1: really real one. And it's why you see fewer companies
Speaker 1: focusing on this fear with the capacity both for vaccines
Speaker 1: and another sort of key issue for antibiotics, where the
Speaker 1: pipeline of new products is miniscule. Uh. You know, a
Speaker 1: lot of a lot of big companies have just entirely
Speaker 1: given up on it, and that that's another potential source
Speaker 1: of a pandemic at abiotics in bacteria. The profit problem
Speaker 1: is even worse there because if you develop an effective
Speaker 1: new antibiotic, the biggest incentive is to use it as
Speaker 1: a little as possible so resistance doesn't develop. So it
Speaker 1: kind of points the need for a different incentive structure
Speaker 1: for these public health issues than the one that we
Speaker 1: currently used to to get companies to develop innovative medicines.
Speaker 1: And I know I've seen stories about how China itself
Speaker 1: is trying to develop a vaccine um, but I don't
Speaker 1: really know much about China's pharmaceutical industry and and the
Speaker 1: sort of development process. There is there any confidence to
Speaker 1: be had, any hope that they themselves could could come
Speaker 1: up with a vaccine. There's certainly that hope, Although obviously
Speaker 1: not as long of a history of successfully developing medicines,
Speaker 1: especially novel ones. It's more robust than it used to be.
Speaker 1: You know, you've seen a greater wave of approvals of medicines.
Speaker 1: Both a lot of them tend to be you know,
Speaker 1: sort of copycasts of medicines that have already you know,
Speaker 1: validated targets. Things we've already seen as supposed to holy
Speaker 1: novel medicines but you know, they're they're the ones who
Speaker 1: have the greatest access to virus material. They're seeing what
Speaker 1: it looks like every day. So I'm hopeful that that
Speaker 1: there might be a developed enough infrastructure there to to
Speaker 1: get this done and at least not now, you know,
Speaker 1: to begin to build it up for you know what
Speaker 1: inevitably will be another epidemic in the future. Sarah, I
Speaker 1: think that's uh. It means it's time for our tradition.
Speaker 1: The craziest thing I saw in markets this week, and
Speaker 1: I gotta say I was impressed when I told Max
Speaker 1: about this thing we do. We said, oh, no problem,
Speaker 1: I see I cover biotech. I see a crazy thing
Speaker 1: every day in the market. It really is to be
Speaker 1: so high hopes for Max. Max hit us with the
Speaker 1: craziest thing you saw on markets? Okay, the craziest thing
Speaker 1: I saw this week was a small biotechnology company called
Speaker 1: veer Um, already up on the news that it was
Speaker 1: working on an antibody medicine for for the virus. Then um,
Speaker 1: I'm not sure if he's the CEO or the chairman,
Speaker 1: but George Skang Goes affiliated with the company, former Biogen CEO,
Speaker 1: got on TV and then the stock pumped. An additional Um,
Speaker 1: you know this is something that only happens in biotech,
Speaker 1: where like this tiny piece of incredib we speculative news
Speaker 1: in this case about a company that you know has
Speaker 1: the barest track record you know, is still working on
Speaker 1: getting medicines to market. It's like, no, we're gonna do this,
Speaker 1: We're gonna do it real fast, and then not even mentioning,
Speaker 1: you know, doing it profitably, which is another wide open question. So, um,
Speaker 1: you know that that's something to watch in biotech in general,
Speaker 1: and you know specifically when you see these epidemics, Um,
Speaker 1: you know those stock pops are are really not based
Speaker 1: on much. I'll say for my crazy thing, I was
Speaker 1: scrambling a little bit this week and I immediately went
Speaker 1: and looked at a couple of biotechnology companies, although I
Speaker 1: decided not to go that route so we won't overlap.
Speaker 1: I'm going to start a combo blockchain and biotech company,
Speaker 1: and it's just you know, it's been tried. Alright, Sora,
Speaker 1: what do you have for us this week? And the
Speaker 1: craziest thing you saw on markets? All right? So I
Speaker 1: didn't stick with biotech, but I did, in a way
Speaker 1: take the easy way out. I have to do Tesla
Speaker 1: because it really is just on freaking believable. Back in June,
Speaker 1: Tesla was trading around one dollars to share. Now after
Speaker 1: reported earnings this week, sure we got a revenue be
Speaker 1: the company projected it will deliver at least five hundred
Speaker 1: thousand vehicles this year. Cash flow did look strong, but
Speaker 1: we saw it jump even further. And now shares are
Speaker 1: worth roughly six hundred and fifty dollars, so more than
Speaker 1: triple what it was worth really just half a year ago,
Speaker 1: just a couple of months ago. And it is just
Speaker 1: unbelievable because I feel like so many people out there
Speaker 1: are rooting against Tesla, and you get short interest in
Speaker 1: the company and it's sky high. People are just waiting
Speaker 1: for this to unravel, and so far it just has
Speaker 1: not been even close to happening. Yeah, you wonder how
Speaker 1: much the short interest is part of the rally, right,
Speaker 1: You wonder how much covering never ending a short bed
Speaker 1: against Elon. But it is just crazy. It's pretty good.
Speaker 1: It's pretty good, alright. See we well, I'm sure this
Speaker 1: is the craziest podcast you've been on all weeks. So
Speaker 1: you are on the hook to for the craziest thing
Speaker 1: you've seen this week. Okay, well, look, we've all heard
Speaker 1: of the coronavirus. I'm guessing we've all heard of Corona beer.
Speaker 1: Where are you going with us? Yeah? You know, it's worrying.
Speaker 1: From January the eighties to January, the number of searches
Speaker 1: of Corona beer virus in Google jump by two thousand
Speaker 1: three Corona beera virus. And the most worrying thing of
Speaker 1: that is that it means that it wasn't zero before,
Speaker 1: so people were already searching for something to do with
Speaker 1: Corona beer. So I wonder if what's going through people's heads.
Speaker 1: Do they think that this is originating from Corona as
Speaker 1: in the Corona beer or I hate to imagine what's
Speaker 1: going through the heads of these people. Maybe we could
Speaker 1: just start selling the naming rights to viruses to sort
Speaker 1: of help raise some money for research. I don't know. Well,
Speaker 1: this is something I was thinking about because you think
Speaker 1: about stars, you think about murders, you think about ebolavirus,
Speaker 1: and we are talking about this virus that originated out
Speaker 1: of Wuhan as the coronavirus. But technically the coronavirus is
Speaker 1: like a family of virus says it's not actually the
Speaker 1: name of it, but it was actually named. But I
Speaker 1: think it's a name that none of us feel comfortable
Speaker 1: pronouncing over and over again. I'm glad you didn't say
Speaker 1: you were also thinking about naming rights for us, because
Speaker 1: it is terrible thought and I'm kind of ashamed myself.
Speaker 1: I'm absolutely not thinking that. Will leave it to you,
Speaker 1: all right, to your your turn. Well, of course, my
Speaker 1: craziest thing has to do with the coronavirus too, and
Speaker 1: it's this massive sell off in carnival cruise lines stock
Speaker 1: because there was a ship in Italy where someone started,
Speaker 1: uh coming down with some some symptoms that may have
Speaker 1: been coronavirus. And I think it's like seven thousand people
Speaker 1: on this ship all of a sudden quarantined ship. I mean,
Speaker 1: what a nightmare. But I think it really it's you know,
Speaker 1: it's worrisome from the point of how quickly this type
Speaker 1: of thing could go pear shaped, you know, how how
Speaker 1: the paranoia about this could really um start affecting the economy,
Speaker 1: even if the even if the actual human toll has
Speaker 1: not yet gotten that bed outside of China, um, just
Speaker 1: the paranoia about it. What do you think about that
Speaker 1: at all, sort of that the psychological effect on confidence, absolutely,
Speaker 1: I mean even in stars. Actually a lot of the
Speaker 1: impact was from the uncertainty and fear which stop people
Speaker 1: from going out and socializing in public places. And you're
Speaker 1: already starting to see that effect. And also again it's
Speaker 1: like I said, the social media impact, that rush of
Speaker 1: fear just goes across the world very very quickly. Now
Speaker 1: I don't like to socialize in public places anymore. I'm
Speaker 1: kind of a loner, Sarah, so are you. I don't
Speaker 1: I don't really get that sense from you. Mike. I
Speaker 1: don't like to. I do you know when you're forced to.
Speaker 1: My wife makes me go, Ingle makes you and you
Speaker 1: have no choice but to say yes. But we will
Speaker 1: certainly be tracking the spread of the virus over the
Speaker 1: next week and any market fell out that may come
Speaker 1: or may not come. But with that said, Semasha and
Speaker 1: Max Nisson, thank you so much for joining this show today.
Speaker 1: Thank you very much, Thanks so much for having me
Speaker 1: what goes up? We'll be back next week. Until then,
Speaker 1: you can find us on the Bloomberg Terminal website and
Speaker 1: app or wherever you get your podcasts. We'd love it
Speaker 1: if you took the time to rate interview the show
Speaker 1: on Apple Podcast so more listeners can find us, and
Speaker 1: you can find us on Twitter. Follow me at at
Speaker 1: Sarah Ponzach, Mike is a Reaganonymous, and Max Neeson is
Speaker 1: at Max Neeson. You can also follow Bloomberg podcast at podcasts.
Speaker 1: What Goes Up is produced by Tofar Foreheads and edited
Speaker 1: by Darrell Dillard. The head of Bloomberg Podcast is Francesca Levie.
Speaker 1: Thanks for listening, See you next time. BA