1 00:00:02,640 --> 00:00:05,320 Speaker 1: Welcome to the Bloomberg penl podcast. I'm Paul swing you, 2 00:00:05,400 --> 00:00:07,720 Speaker 1: along with my co host Lisa Brahma wits. Each day 3 00:00:07,760 --> 00:00:10,280 Speaker 1: we bring you the most noteworthy and useful interviews for 4 00:00:10,320 --> 00:00:12,560 Speaker 1: you and your money. Whether at the grocery store or 5 00:00:12,600 --> 00:00:15,520 Speaker 1: the trading floor. Find a Bloomberg Penil podcast on Apple 6 00:00:15,560 --> 00:00:18,000 Speaker 1: podcast or wherever you listen to podcasts, as well as 7 00:00:18,000 --> 00:00:22,400 Speaker 1: at Bloomberg dot com. Let's talk industrial earnings. We had 8 00:00:22,440 --> 00:00:26,160 Speaker 1: three M, we had Caterpillar out today, Lots of uncertainty 9 00:00:26,160 --> 00:00:28,720 Speaker 1: in a second quarter, lots of uncertainty to the point 10 00:00:28,760 --> 00:00:31,080 Speaker 1: of withdrawing guidance, as we've seen from a lot of 11 00:00:31,200 --> 00:00:33,920 Speaker 1: other companies, from some of these industrial companies as well. 12 00:00:34,040 --> 00:00:36,159 Speaker 1: When we want to talk industrial companies, we talked to 13 00:00:36,159 --> 00:00:39,640 Speaker 1: town double Heart. She's covered this space for decades. She's 14 00:00:39,640 --> 00:00:42,199 Speaker 1: with Bloomberg Intelligence. Karen, thanks so much for joining us. 15 00:00:42,440 --> 00:00:46,080 Speaker 1: So three M and Caterpillar take whatever you want. The 16 00:00:46,159 --> 00:00:49,199 Speaker 1: highlights you think we need to know. Um, I'd say 17 00:00:49,280 --> 00:00:52,360 Speaker 1: number one, the breath of of the decline. So everybody 18 00:00:52,400 --> 00:00:55,000 Speaker 1: knew things are gonna be down and down double digits, 19 00:00:55,040 --> 00:00:59,000 Speaker 1: but cat every region, every segment. UM three M did 20 00:00:59,000 --> 00:01:02,800 Speaker 1: a little better because of the diversity UM. So it's 21 00:01:02,840 --> 00:01:06,279 Speaker 1: really the swiftness of the drop that UM is the issue. 22 00:01:06,520 --> 00:01:09,920 Speaker 1: Second thing is costs are doing pretty well. The decrimental 23 00:01:09,959 --> 00:01:14,160 Speaker 1: margins were not that at Caterpillar, given two cent sales declines. 24 00:01:14,200 --> 00:01:16,800 Speaker 1: They really didn't do that badly on costs because a 25 00:01:16,959 --> 00:01:19,120 Speaker 1: they haven't taking out structural costs for years and B 26 00:01:19,280 --> 00:01:22,640 Speaker 1: they did move fa UM on three m You know, 27 00:01:22,760 --> 00:01:25,559 Speaker 1: they have a diversity that actually helps them. And I 28 00:01:25,600 --> 00:01:28,600 Speaker 1: am a fan of the UM multies if they're well run, 29 00:01:28,680 --> 00:01:31,120 Speaker 1: although they're out of favor at the moment. And U 30 00:01:31,440 --> 00:01:34,440 Speaker 1: they also saw declines and they're gonna expect double digit 31 00:01:34,480 --> 00:01:37,880 Speaker 1: declines in April, but not as significant as, of course, 32 00:01:37,880 --> 00:01:40,679 Speaker 1: the deep cyclicals UM. I'd say. The other point is 33 00:01:40,680 --> 00:01:44,120 Speaker 1: everybody was talking about three ms ppe impact, you know, 34 00:01:44,200 --> 00:01:47,080 Speaker 1: all the respirators. It's less than one percent of sales. 35 00:01:47,160 --> 00:01:50,680 Speaker 1: It's certainly helped, but it wasn't a big deal. And yes, 36 00:01:50,680 --> 00:01:53,320 Speaker 1: they're all eliminating guidance, you know, go ahead, go ahead. 37 00:01:53,320 --> 00:01:55,440 Speaker 1: I'm sorry, Well, no, no, I'm wondering. I was reading 38 00:01:55,480 --> 00:01:59,200 Speaker 1: a story the other day about how executives never like 39 00:01:59,320 --> 00:02:01,680 Speaker 1: to waste a good crisis, and that basically it's a 40 00:02:01,680 --> 00:02:06,120 Speaker 1: fantastic opportunity to to accelerate moves that they would already 41 00:02:06,960 --> 00:02:09,760 Speaker 1: be doing or find it prudent to do under the 42 00:02:09,840 --> 00:02:12,919 Speaker 1: cover of it's a crisis. And there's no place that 43 00:02:12,919 --> 00:02:16,280 Speaker 1: that actually is more relevant than in the industrial space, 44 00:02:16,320 --> 00:02:19,640 Speaker 1: where there's been an incredible transformation, whether it's downsizing and 45 00:02:19,639 --> 00:02:24,440 Speaker 1: shrinking and becoming more focused or other moves. What do 46 00:02:24,520 --> 00:02:27,880 Speaker 1: you glean from the earning so far in terms of 47 00:02:28,120 --> 00:02:30,280 Speaker 1: ways that they are reshaping in the wake of this 48 00:02:30,760 --> 00:02:33,880 Speaker 1: that they may have done anyway. Yeah, I mean in 49 00:02:33,919 --> 00:02:35,960 Speaker 1: the case of the two we're talking about today, CAT 50 00:02:36,000 --> 00:02:38,799 Speaker 1: and three M, they both have long term structural programs 51 00:02:38,800 --> 00:02:41,800 Speaker 1: going on, and they have I mean CAT use the example. 52 00:02:42,240 --> 00:02:44,880 Speaker 1: Uh there there s g n A and their R 53 00:02:44,960 --> 00:02:48,079 Speaker 1: and D in sort of their non manufacturing custs were 54 00:02:48,080 --> 00:02:53,919 Speaker 1: flat um from nineteen while revenues were so I mean, 55 00:02:53,960 --> 00:02:57,560 Speaker 1: they have already been taken big chumps of um costs 56 00:02:57,560 --> 00:03:00,720 Speaker 1: and people, etcetera out of their business. But certainly they're 57 00:03:00,720 --> 00:03:03,680 Speaker 1: going to accelerate that. They're gonna call it more structuring, 58 00:03:03,760 --> 00:03:05,480 Speaker 1: but I'm sure they're going to try to hold on 59 00:03:06,080 --> 00:03:08,880 Speaker 1: to as much of the cost production as they can. 60 00:03:08,919 --> 00:03:10,919 Speaker 1: I mean. The other big change is going to happen, 61 00:03:10,960 --> 00:03:13,360 Speaker 1: of course, is supply chain is going to change a 62 00:03:13,400 --> 00:03:16,720 Speaker 1: lot because why did we learn how long supply chain 63 00:03:17,080 --> 00:03:19,920 Speaker 1: from abroad are not good? And um, so you're gonna 64 00:03:19,960 --> 00:03:21,960 Speaker 1: see a lot more. I mean three M does a 65 00:03:21,960 --> 00:03:24,040 Speaker 1: lot of local for locals still as Cato killer, but 66 00:03:24,120 --> 00:03:26,080 Speaker 1: around the margin, there's going to be changes in that 67 00:03:26,160 --> 00:03:29,600 Speaker 1: as well. Um And you know, so I think it's 68 00:03:29,600 --> 00:03:31,919 Speaker 1: going to be a continuation um. And they're going to 69 00:03:32,000 --> 00:03:34,600 Speaker 1: try to hold on as much as as much of 70 00:03:34,639 --> 00:03:37,440 Speaker 1: the cyclical structuring that they're doing as they can. So 71 00:03:37,480 --> 00:03:40,320 Speaker 1: that's I would agree with you there. So, Karen, I 72 00:03:40,360 --> 00:03:42,600 Speaker 1: know a lot of these companies, industrial companies have been 73 00:03:42,600 --> 00:03:46,240 Speaker 1: pulling their guidance like a lot of other sectors as well. 74 00:03:46,560 --> 00:03:48,600 Speaker 1: But did the management give you a sense of kind 75 00:03:48,600 --> 00:03:51,240 Speaker 1: of what their playbook is. Are they thinking that this 76 00:03:51,680 --> 00:03:54,880 Speaker 1: economic contraction that we're is occurring in the second quarter 77 00:03:54,960 --> 00:03:57,720 Speaker 1: is going to be lower for longer or do they 78 00:03:57,720 --> 00:04:00,040 Speaker 1: expect this economy wants it's to we start to but 79 00:04:00,200 --> 00:04:02,160 Speaker 1: up to to re accelerate in the second half of 80 00:04:02,200 --> 00:04:05,120 Speaker 1: the year. I think the general seems so far is 81 00:04:05,160 --> 00:04:07,320 Speaker 1: lower for longer, Like you know, second quota is going 82 00:04:07,360 --> 00:04:09,200 Speaker 1: to be terrible. Third quota is not going to be 83 00:04:09,240 --> 00:04:11,640 Speaker 1: great either. And you know a lot of these guys 84 00:04:11,640 --> 00:04:14,160 Speaker 1: still have significant US exposure where it's going to roll 85 00:04:14,280 --> 00:04:16,440 Speaker 1: down and of the shutdowns and it's probably gonna be 86 00:04:16,440 --> 00:04:20,400 Speaker 1: a roll back up. Um. Both Caterpillar M three M 87 00:04:20,520 --> 00:04:23,440 Speaker 1: did mention the snap back in China, but that's the 88 00:04:23,520 --> 00:04:26,680 Speaker 1: managed economy, so they shut it down quickly and they're 89 00:04:26,720 --> 00:04:30,520 Speaker 1: spending money, um, you know, on on stimulation and of 90 00:04:30,640 --> 00:04:33,320 Speaker 1: the economy and getting people back to work quickly as well. 91 00:04:33,360 --> 00:04:35,560 Speaker 1: So I would not and in fact that question came 92 00:04:35,600 --> 00:04:37,320 Speaker 1: up in the three M call. Could we use that 93 00:04:37,360 --> 00:04:41,320 Speaker 1: as a playbook? China is different, Um, Europe is snapping 94 00:04:41,320 --> 00:04:43,880 Speaker 1: back a little bit. US is going to roll out slowly. 95 00:04:44,000 --> 00:04:47,440 Speaker 1: Is the general sense is going to definitely be a 96 00:04:47,480 --> 00:04:49,920 Speaker 1: tough year. I will say one thing on China three 97 00:04:50,040 --> 00:04:52,119 Speaker 1: M is the economy with the diversity of their product 98 00:04:52,200 --> 00:04:54,719 Speaker 1: line they set across the boards map back. It isn't 99 00:04:54,760 --> 00:04:57,880 Speaker 1: just you know, one or two segments, So that economy 100 00:04:57,960 --> 00:05:01,080 Speaker 1: is starting to roll back up. That's that's interesting. And 101 00:05:01,320 --> 00:05:03,479 Speaker 1: just real quick here, Karen, do we have a sense 102 00:05:03,600 --> 00:05:06,400 Speaker 1: of whether the pace of the snap back is I 103 00:05:06,480 --> 00:05:09,160 Speaker 1: hate saying this. I actually am feeling a visceral response 104 00:05:09,360 --> 00:05:12,360 Speaker 1: v shaped or is it a slower it douns back 105 00:05:13,279 --> 00:05:19,320 Speaker 1: or a w or you um, the China feels like 106 00:05:19,520 --> 00:05:23,640 Speaker 1: a the you know, um us probably pretty slow roller. 107 00:05:23,760 --> 00:05:25,599 Speaker 1: And and I don't think you're gonna see good numbers still, 108 00:05:27,080 --> 00:05:31,280 Speaker 1: you know, because you know there are you know, we're 109 00:05:31,320 --> 00:05:33,640 Speaker 1: we're fighting over house fess we're gonna come back, you know. 110 00:05:33,880 --> 00:05:37,279 Speaker 1: And uh so I and really the companies are really saying, 111 00:05:37,320 --> 00:05:40,119 Speaker 1: we're going month by month, we don't know. And April, 112 00:05:40,160 --> 00:05:42,359 Speaker 1: we know is going to be down in the in 113 00:05:42,480 --> 00:05:47,200 Speaker 1: like the multi in the cyclicals, you know, but we 114 00:05:47,320 --> 00:05:50,200 Speaker 1: don't really know. And and three M, which who never 115 00:05:50,360 --> 00:05:53,800 Speaker 1: gives monthly orders, are giving monthly orders right now until 116 00:05:54,279 --> 00:05:56,760 Speaker 1: we know what the heck is going on. Emerson is 117 00:05:56,839 --> 00:05:59,560 Speaker 1: also doing it, so they don't know, but they're going 118 00:05:59,600 --> 00:06:01,360 Speaker 1: to try to give us as much as they can 119 00:06:01,400 --> 00:06:04,360 Speaker 1: along the way. They don't know. Seems to be the 120 00:06:04,360 --> 00:06:07,039 Speaker 1: theme of this earning season. Karen yu Bilhard, thank you 121 00:06:07,040 --> 00:06:09,840 Speaker 1: so much for being with US senior industrials analyst for 122 00:06:10,000 --> 00:06:13,719 Speaker 1: Bloomberg Intelligence. And you know, honestly, John Farrows raised this point. 123 00:06:13,720 --> 00:06:16,440 Speaker 1: A number of times. How can any company actually give 124 00:06:16,480 --> 00:06:19,000 Speaker 1: guidance at this point given the fact that people have 125 00:06:19,600 --> 00:06:21,760 Speaker 1: a real lack of clarity around what's going to happen. 126 00:06:21,880 --> 00:06:25,080 Speaker 1: But the fact that they're giving monthly order numbers just 127 00:06:25,120 --> 00:06:27,919 Speaker 1: to say, hey, we'll give you the data as quickly 128 00:06:28,080 --> 00:06:30,720 Speaker 1: as we get it. Yeah, exactly, And the questions, well, 129 00:06:31,080 --> 00:06:33,080 Speaker 1: what will this do to forward guidance going forward? Will 130 00:06:33,120 --> 00:06:38,960 Speaker 1: companies give less of it? Maybe it's time to check 131 00:06:39,000 --> 00:06:41,760 Speaker 1: in with Bloomberg Opinion. We're pleased to be joined by 132 00:06:41,760 --> 00:06:45,960 Speaker 1: opinion communist Dr Ellen Wall. She's a president of Transversal Consulting, 133 00:06:46,000 --> 00:06:49,080 Speaker 1: also a Bloomberg Opinion contributor. Uh. Dr Wall, thank you 134 00:06:49,120 --> 00:06:51,480 Speaker 1: so much for joining us. Boy, you know this, what 135 00:06:51,520 --> 00:06:54,039 Speaker 1: we're seeing in the oil market is just extraordinary. We 136 00:06:54,040 --> 00:06:57,000 Speaker 1: had negative prices just a week ago. We had tremendous 137 00:06:57,080 --> 00:06:59,840 Speaker 1: volatility so far, uh this week a little bit of 138 00:07:00,040 --> 00:07:02,600 Speaker 1: it today. What if you could just set the stage, 139 00:07:02,640 --> 00:07:04,919 Speaker 1: Force Ellen, and just give us a sense of where 140 00:07:05,000 --> 00:07:08,960 Speaker 1: you think the supply and demand dynamics are today for 141 00:07:09,000 --> 00:07:14,640 Speaker 1: global crude. Yeah, the supply and dynamic dynamics for um 142 00:07:14,720 --> 00:07:18,760 Speaker 1: for crude are not good. Looking at what's happening and 143 00:07:19,320 --> 00:07:23,600 Speaker 1: we've still gone I think, by the way, not good 144 00:07:23,760 --> 00:07:28,000 Speaker 1: carry on good. So that way too much oil oil 145 00:07:28,080 --> 00:07:30,920 Speaker 1: production coming on the market on the market right now, 146 00:07:31,320 --> 00:07:34,600 Speaker 1: and not nearly enough demand, and that's resulted in a 147 00:07:34,680 --> 00:07:38,200 Speaker 1: massive build in storage. And we're not just talking about 148 00:07:38,200 --> 00:07:42,400 Speaker 1: storage of crude. We're talking about gasoline stocks are way up, 149 00:07:43,080 --> 00:07:46,800 Speaker 1: diesel fuel, jet fuel. Massive amounts of this stuff is 150 00:07:46,800 --> 00:07:50,760 Speaker 1: piling up. And even though refineries are cutting their runs now, 151 00:07:51,000 --> 00:07:54,080 Speaker 1: that's leading to even more build up of crude oil. 152 00:07:54,360 --> 00:07:57,040 Speaker 1: And so that's really the main issue here as I 153 00:07:57,040 --> 00:07:59,200 Speaker 1: think this in balance and supply and demand, which was 154 00:07:59,240 --> 00:08:02,720 Speaker 1: not helped, by the way by Saudi Arabia, which increased 155 00:08:02,760 --> 00:08:06,480 Speaker 1: its oil production to its maximum level of twelve million 156 00:08:06,520 --> 00:08:10,360 Speaker 1: barrels per day in April, and at the beginning of April, 157 00:08:10,560 --> 00:08:12,440 Speaker 1: you know, it seemed like that that might be okay, 158 00:08:12,480 --> 00:08:16,720 Speaker 1: but but really, uh runs economies around the world, we're 159 00:08:16,760 --> 00:08:20,320 Speaker 1: clearly shutting down. We maintain that production when clearly there 160 00:08:20,360 --> 00:08:23,120 Speaker 1: wasn't enough demand. So that kind of just piled on 161 00:08:23,680 --> 00:08:27,000 Speaker 1: to all of the other issues. So this complete imbalance 162 00:08:27,040 --> 00:08:30,480 Speaker 1: has been manifested, most significantly in the negative pricing in 163 00:08:30,480 --> 00:08:33,880 Speaker 1: the May w t I contract that just rolled. We're 164 00:08:33,880 --> 00:08:37,000 Speaker 1: seeing an exodus from the June contract as the biggest 165 00:08:37,040 --> 00:08:42,040 Speaker 1: oil et F in the United States amends it's it's contracts, 166 00:08:42,120 --> 00:08:45,160 Speaker 1: it's it's it's provisions, yet again in terms of what 167 00:08:45,200 --> 00:08:48,679 Speaker 1: it is willing to buy. My question is how long 168 00:08:48,720 --> 00:08:51,720 Speaker 1: will this complete imbalance last? A lot of people putting 169 00:08:51,800 --> 00:08:54,360 Speaker 1: faith that by to lie, things will start to ease 170 00:08:54,400 --> 00:08:57,240 Speaker 1: and people will start to use cars and fly around more. 171 00:08:57,559 --> 00:09:01,160 Speaker 1: Do you think that that optimism is misplaced? Well, I 172 00:09:01,160 --> 00:09:05,200 Speaker 1: think that that's a that's a it's not a bad assessment. Um, 173 00:09:05,280 --> 00:09:07,400 Speaker 1: I would say that's it's it's optimistic, But I don't 174 00:09:07,400 --> 00:09:10,160 Speaker 1: think it's it's too optimistic. I do think a lot 175 00:09:10,240 --> 00:09:15,760 Speaker 1: will depend on, uh, the psychological effects of this lockdown 176 00:09:15,760 --> 00:09:19,920 Speaker 1: in these quarantines, because even as states in the United 177 00:09:19,920 --> 00:09:23,680 Speaker 1: States we're seeing them start to lift quarantine restrictions and 178 00:09:23,720 --> 00:09:27,520 Speaker 1: lockdown restrictions. The question really is are people going to 179 00:09:27,600 --> 00:09:31,079 Speaker 1: feel comfortable going out of their houses, going back to work, 180 00:09:31,400 --> 00:09:35,080 Speaker 1: sending kids to school or camp? And that I think 181 00:09:35,120 --> 00:09:38,079 Speaker 1: will really set the tone for whether we're going to 182 00:09:38,200 --> 00:09:42,680 Speaker 1: seek demand roaring back or kind of slowly trickling back. 183 00:09:43,040 --> 00:09:46,560 Speaker 1: And that could really, you know, that could spill over 184 00:09:46,600 --> 00:09:50,199 Speaker 1: past the summer and then over into into the fall 185 00:09:50,280 --> 00:09:55,320 Speaker 1: and winter. Even win demand is traditionally lower, so were 186 00:09:55,640 --> 00:09:58,240 Speaker 1: we could even compound the problem if we don't have 187 00:09:58,400 --> 00:10:03,040 Speaker 1: strong summer demand by by heading into winter with lower demands. 188 00:10:03,080 --> 00:10:06,320 Speaker 1: On the other hand, okay, we could see a massive 189 00:10:06,400 --> 00:10:09,160 Speaker 1: search in gasoline demand in the United States, for example, 190 00:10:09,280 --> 00:10:11,719 Speaker 1: as if things get back to normal and people are 191 00:10:12,040 --> 00:10:16,040 Speaker 1: psychologically ready to get back out there, but air travels 192 00:10:16,040 --> 00:10:18,040 Speaker 1: not back, we could see a huge surge in gasoline 193 00:10:18,080 --> 00:10:21,000 Speaker 1: demand as people drive a lot more. So. It really, 194 00:10:21,040 --> 00:10:24,440 Speaker 1: I think depends a lot on how comfortable people feel, 195 00:10:24,679 --> 00:10:28,000 Speaker 1: and also how comfortable they're made to feel by the 196 00:10:28,080 --> 00:10:32,480 Speaker 1: authorities and medical professionals. So, Ellen, how bad is it 197 00:10:32,559 --> 00:10:34,599 Speaker 1: going to get for our friends in the U S. 198 00:10:34,640 --> 00:10:39,360 Speaker 1: Shail patch? It's already bad h and I think it's 199 00:10:39,400 --> 00:10:43,720 Speaker 1: only going to get worse. It's it's very bad. Companies 200 00:10:43,760 --> 00:10:46,600 Speaker 1: are shutting down. And the question I think now is 201 00:10:46,600 --> 00:10:49,600 Speaker 1: not just is it going to be bad for those 202 00:10:49,679 --> 00:10:51,760 Speaker 1: in the upstream, but is it going to spill over 203 00:10:51,800 --> 00:10:54,920 Speaker 1: into the midstream, into the pipeline, into the people who 204 00:10:54,920 --> 00:10:57,920 Speaker 1: are who are doing the midstream business? Uh? And are 205 00:10:57,920 --> 00:11:00,520 Speaker 1: we going to see it spilling into into that area 206 00:11:00,679 --> 00:11:04,560 Speaker 1: because um we're we're seeing we can expect more layoffs. 207 00:11:04,559 --> 00:11:07,360 Speaker 1: I think we've already seen a lot bankruptcies. But then 208 00:11:07,400 --> 00:11:09,560 Speaker 1: the question is does is still into midstream and do 209 00:11:09,640 --> 00:11:14,120 Speaker 1: we see long term damage to our midstream infrastructure and 210 00:11:14,200 --> 00:11:17,440 Speaker 1: our ability to um you get that oil to where 211 00:11:17,480 --> 00:11:21,080 Speaker 1: it needs to go, because that has for many years 212 00:11:21,200 --> 00:11:23,680 Speaker 1: been kind of the limiting factor and we were just 213 00:11:23,679 --> 00:11:27,640 Speaker 1: starting to get over that issue right when this hits 214 00:11:28,160 --> 00:11:30,600 Speaker 1: just real quick here, Allen, I'm wondering what this means 215 00:11:30,640 --> 00:11:33,160 Speaker 1: in terms of the swining oil prices for Saudi Arabia 216 00:11:33,640 --> 00:11:38,080 Speaker 1: and any potential political threat. Given how much of the 217 00:11:38,160 --> 00:11:42,400 Speaker 1: nation's budget relies on crude. I think that's that's an 218 00:11:42,400 --> 00:11:45,800 Speaker 1: issue that cannot be ignored, particularly at this point because 219 00:11:46,280 --> 00:11:49,440 Speaker 1: crude oil, I mean we have we have Brent barely 220 00:11:49,640 --> 00:11:54,160 Speaker 1: above twenty barrel, and at that level, Saudi Arabia is 221 00:11:54,200 --> 00:11:58,400 Speaker 1: making just a few dollars in royalties off of every 222 00:11:58,440 --> 00:12:02,160 Speaker 1: barrel of oil it and that's not good for the 223 00:12:02,160 --> 00:12:05,800 Speaker 1: Saudy budget. And so far, what we've seen is basically 224 00:12:06,080 --> 00:12:10,440 Speaker 1: a complete dismissal of these issues. The Socauty government is 225 00:12:10,480 --> 00:12:14,280 Speaker 1: choosing to rely on um borrowing money and that's not 226 00:12:14,320 --> 00:12:16,839 Speaker 1: a bad idea, said, maybe it definitely has more room 227 00:12:16,920 --> 00:12:20,800 Speaker 1: to borrow, but they're not. I think we're seeing them 228 00:12:20,800 --> 00:12:23,680 Speaker 1: not really look at the long term nifications here. Dubai 229 00:12:23,760 --> 00:12:27,160 Speaker 1: just announced that they're cutting cutting their expenses, and so 230 00:12:27,320 --> 00:12:30,200 Speaker 1: it's really unclear as to whether they're going to see 231 00:12:30,200 --> 00:12:33,520 Speaker 1: a need to cut expenses. Uh, the country could could 232 00:12:33,559 --> 00:12:36,800 Speaker 1: be seeing some serious financial problems, which, as we know, 233 00:12:36,880 --> 00:12:40,160 Speaker 1: can lead to political unrest. Ellen Wall, thank you so 234 00:12:40,240 --> 00:12:42,880 Speaker 1: much for being with us. Ellen Wild, President of Transversal 235 00:12:42,920 --> 00:12:51,439 Speaker 1: Consulting and a Bloomberg opinion contributor. In some ways, the 236 00:12:51,520 --> 00:12:53,960 Speaker 1: US equity market is going to be put to the 237 00:12:54,000 --> 00:12:57,760 Speaker 1: test this week as the big tech companies report earnings. 238 00:12:57,760 --> 00:13:01,760 Speaker 1: The question is how much further can US talks rally 239 00:13:01,800 --> 00:13:05,000 Speaker 1: if they don't necessarily have the leadership of the tech 240 00:13:05,000 --> 00:13:08,000 Speaker 1: giants joining us. Now Jim Pulse in chief investment strategist 241 00:13:08,520 --> 00:13:11,960 Speaker 1: at the Loophole Group joining us. I'm wondering, Jim, do 242 00:13:12,000 --> 00:13:16,880 Speaker 1: you feel like the market cannot continue rallying without the support. 243 00:13:16,960 --> 00:13:18,839 Speaker 1: And I don't want to say big tech. We're really 244 00:13:18,840 --> 00:13:24,760 Speaker 1: talking Amazon, Microsoft and Netflix here. I think I could. 245 00:13:24,920 --> 00:13:28,640 Speaker 1: I think I think that it. It would be hard 246 00:13:28,720 --> 00:13:32,080 Speaker 1: if they are going to collapse, Lisa, you know, over 247 00:13:32,120 --> 00:13:34,960 Speaker 1: a sustained period, have a big collapse. I think that 248 00:13:35,000 --> 00:13:39,800 Speaker 1: would be hard for the market to avoid going down 249 00:13:39,840 --> 00:13:43,200 Speaker 1: again in a big way. But if they just underperformed, 250 00:13:43,640 --> 00:13:47,600 Speaker 1: I think that's maybe even to be expected somewhat in 251 00:13:47,640 --> 00:13:52,040 Speaker 1: the sense that UM, you know, look look where we 252 00:13:52,080 --> 00:13:55,800 Speaker 1: are here, where there's now greater expectations of restarting the 253 00:13:55,880 --> 00:14:03,640 Speaker 1: economy after shutting it off the position UM and with 254 00:14:03,800 --> 00:14:07,440 Speaker 1: that comes I think new leadership, and you're seeing that 255 00:14:08,240 --> 00:14:11,480 Speaker 1: and things like the performance of the high Beata SMP, 256 00:14:11,720 --> 00:14:19,400 Speaker 1: Hiberta Index, small caps, cyclical stocks, you know, over defensive stocks, UM, 257 00:14:19,440 --> 00:14:24,320 Speaker 1: even international markets doing better. I think it's real likely, 258 00:14:24,360 --> 00:14:27,240 Speaker 1: which often happens at the start of a new recovery. 259 00:14:27,520 --> 00:14:30,320 Speaker 1: If you off the markets starting to look in discount path, 260 00:14:31,280 --> 00:14:34,560 Speaker 1: is that's the type of leadership you get. UM, So 261 00:14:34,680 --> 00:14:36,920 Speaker 1: it might well be the new era of growth if 262 00:14:36,920 --> 00:14:40,240 Speaker 1: you will, does have a period of under performance as 263 00:14:40,320 --> 00:14:43,920 Speaker 1: the economy re emerges from the code UH from the 264 00:14:43,920 --> 00:14:48,720 Speaker 1: coronavirus crisis, and I don't I think that could happen 265 00:14:48,760 --> 00:14:51,520 Speaker 1: within the context of the general rising market. Even though 266 00:14:51,600 --> 00:14:55,720 Speaker 1: under performance by some of these most popular areas. So, James, 267 00:14:55,880 --> 00:14:58,800 Speaker 1: the you're hearing more and more from scientists and medical 268 00:14:58,800 --> 00:15:03,440 Speaker 1: professionals that it's possible, probably likely that the virus or 269 00:15:03,600 --> 00:15:06,880 Speaker 1: return in some form and the fall in winter. Do 270 00:15:06,880 --> 00:15:09,640 Speaker 1: you think the market's discounting that risk properly as we 271 00:15:09,680 --> 00:15:12,600 Speaker 1: start thinking about reopening and and maybe a V or 272 00:15:12,680 --> 00:15:14,720 Speaker 1: a U shaped recovery at the end of the year. 273 00:15:17,760 --> 00:15:20,040 Speaker 1: Who knows for sure, Paul. I mean, there's very little 274 00:15:20,080 --> 00:15:24,520 Speaker 1: about this whole crisis that everyone knows, um including myself. 275 00:15:26,160 --> 00:15:28,680 Speaker 1: But you know, I do think one of the things 276 00:15:28,720 --> 00:15:31,960 Speaker 1: that's likely to happen that there hasn't been a lot 277 00:15:31,960 --> 00:15:36,200 Speaker 1: of discussion about, is sure, it's gonna take a while 278 00:15:36,240 --> 00:15:39,720 Speaker 1: before this virus is gone. It's going to take a 279 00:15:39,720 --> 00:15:43,120 Speaker 1: while before we get all parts of the economy back 280 00:15:43,200 --> 00:15:49,320 Speaker 1: functioning again, even in general, let alone at full capacity. However, 281 00:15:50,080 --> 00:15:53,480 Speaker 1: that does not mean that there might come sort of 282 00:15:53,520 --> 00:16:00,280 Speaker 1: an appreciation among investors in general, companies, police officials that 283 00:16:00,440 --> 00:16:06,480 Speaker 1: both this virus and the economy can coexist, and you know, 284 00:16:06,680 --> 00:16:11,240 Speaker 1: both can be there and be a functioning capacity. I 285 00:16:11,280 --> 00:16:14,280 Speaker 1: don't think it's one or the other necessary, which is 286 00:16:14,320 --> 00:16:17,560 Speaker 1: what we had here of late. I think in part 287 00:16:17,640 --> 00:16:21,400 Speaker 1: because the primary issue has been the hospital crisis, and 288 00:16:21,440 --> 00:16:24,720 Speaker 1: we've come a long ways in increasing our capacity and 289 00:16:24,720 --> 00:16:27,640 Speaker 1: abilities there, and we're probably even if we have a 290 00:16:27,680 --> 00:16:31,240 Speaker 1: re emergency, viruses not like to be as severe as 291 00:16:31,320 --> 00:16:36,280 Speaker 1: the first time, And that combination means that we might 292 00:16:36,440 --> 00:16:41,400 Speaker 1: certainly have re emergent virus problems down the road, but 293 00:16:42,040 --> 00:16:43,960 Speaker 1: that doesn't necessarily mean we're going to have to close 294 00:16:44,000 --> 00:16:47,080 Speaker 1: everything back up again. I think we're already learning how 295 00:16:47,080 --> 00:16:51,520 Speaker 1: to operate within the context of a live virus so um. 296 00:16:51,560 --> 00:16:53,760 Speaker 1: I think one of the realizations that even the market 297 00:16:53,840 --> 00:16:59,960 Speaker 1: might be coming to is that both can coexist. Collection 298 00:17:00,080 --> 00:17:03,320 Speaker 1: and your calm assessment of markets is a very nice 299 00:17:03,720 --> 00:17:07,160 Speaker 1: contrast with sometimes my my gut fear when I read 300 00:17:07,200 --> 00:17:09,840 Speaker 1: some of the headlines that cross and you know, Moody's 301 00:17:09,880 --> 00:17:14,840 Speaker 1: sending me a report fair enough, but you know, at 302 00:17:14,880 --> 00:17:17,600 Speaker 1: least you know you know there there is there is 303 00:17:17,640 --> 00:17:20,000 Speaker 1: sort of sanity and preservation. Right now. We should note 304 00:17:20,000 --> 00:17:22,920 Speaker 1: that we are seeing the NASDAC turned down negative seven 305 00:17:22,920 --> 00:17:24,960 Speaker 1: tenths of a percent right now, in the SP is 306 00:17:25,000 --> 00:17:27,159 Speaker 1: just up a tenth of a percent to do up 307 00:17:27,320 --> 00:17:29,760 Speaker 1: about a quarter of a percent, And I think to 308 00:17:29,840 --> 00:17:32,280 Speaker 1: your point, you could have both the sort of reality 309 00:17:32,320 --> 00:17:35,560 Speaker 1: of the unfolding crisis and also look to the other 310 00:17:35,720 --> 00:17:39,440 Speaker 1: side of this. I guess, then, are you buying into 311 00:17:39,440 --> 00:17:41,720 Speaker 1: this rally? Are you just sort of sitting tight and 312 00:17:41,760 --> 00:17:49,919 Speaker 1: not expecting armageddon? Um? I definitely. And my approach, I 313 00:17:49,920 --> 00:17:55,320 Speaker 1: guess is what we're doing star gapl Boil is kind 314 00:17:55,359 --> 00:18:00,520 Speaker 1: of sitting with an overweight new era UM a mile overweight. 315 00:18:00,600 --> 00:18:07,159 Speaker 1: I think, yeah, well, not just not just tech but 316 00:18:07,400 --> 00:18:09,960 Speaker 1: kind of new era growth. It's a little broader than 317 00:18:10,000 --> 00:18:13,240 Speaker 1: just tech, but certainly teching colms, part of healthcare, part 318 00:18:13,240 --> 00:18:19,000 Speaker 1: of consumer discretionary. UM. You know, I I think I'm 319 00:18:19,040 --> 00:18:22,840 Speaker 1: okay with with sitting in an overweight in that area. 320 00:18:23,119 --> 00:18:26,160 Speaker 1: But what I'm doing is taking advantage of any weak 321 00:18:26,280 --> 00:18:29,159 Speaker 1: periods here, which will probably have some more and I 322 00:18:29,200 --> 00:18:33,639 Speaker 1: would start to add more in the broader participation is 323 00:18:33,680 --> 00:18:36,440 Speaker 1: in this market that haven't done that well even in 324 00:18:36,440 --> 00:18:39,240 Speaker 1: the last bowl. I look, as I said to High 325 00:18:39,280 --> 00:18:43,000 Speaker 1: Beta SMP high Baya, that I'd looked to cyclical sectors 326 00:18:43,359 --> 00:18:46,320 Speaker 1: would look too small caps. I've looked at international and 327 00:18:46,480 --> 00:18:50,200 Speaker 1: add some of those compoets here because I think they 328 00:18:50,280 --> 00:18:53,800 Speaker 1: are likely to have leadership over the next year as 329 00:18:53,800 --> 00:18:56,800 Speaker 1: we as we sort of re emerge from this this thing. 330 00:18:56,880 --> 00:19:01,040 Speaker 1: You know, you mentioned the fear, and to me, that's 331 00:19:01,040 --> 00:19:05,160 Speaker 1: a that's a good thing. I think historically whenever we've 332 00:19:05,160 --> 00:19:08,600 Speaker 1: had really high levels of fear, and we've got all 333 00:19:08,720 --> 00:19:10,879 Speaker 1: three fears in this one. If you're losing your money 334 00:19:10,880 --> 00:19:13,439 Speaker 1: in the stock market, if you're losing your job, and 335 00:19:13,440 --> 00:19:16,720 Speaker 1: the fear of losing your life, if you're on steroids, 336 00:19:16,720 --> 00:19:20,240 Speaker 1: if you will. Typically that's led to good returns and 337 00:19:20,320 --> 00:19:27,120 Speaker 1: risk assets. Look, I know, but look where we are 338 00:19:27,119 --> 00:19:29,840 Speaker 1: in this crisis too. You know. We we start when 339 00:19:29,840 --> 00:19:32,200 Speaker 1: it first hit in China, we thought, well that that's 340 00:19:32,200 --> 00:19:35,800 Speaker 1: not really a problem. And then well, it's just gonna 341 00:19:35,800 --> 00:19:39,280 Speaker 1: be a temporary problem. And then it was this is 342 00:19:39,359 --> 00:19:45,200 Speaker 1: full blown crisis. And now it's evolved too. Oh, it's 343 00:19:45,240 --> 00:19:47,800 Speaker 1: never gonna go away. It's gonna last wherever, it's gonna 344 00:19:47,880 --> 00:19:52,400 Speaker 1: fundamentally change capitalism. It's never gonna go away. I think 345 00:19:52,440 --> 00:19:55,720 Speaker 1: that's the stages of a crisis that we're in the 346 00:19:55,800 --> 00:19:59,359 Speaker 1: last stage at least committing Hey, James, thanks so much 347 00:19:59,400 --> 00:20:03,879 Speaker 1: for joining us. We appreciate it, appreciate your calm perception 348 00:20:03,960 --> 00:20:05,880 Speaker 1: of what's going on in the Marcus James Paulson, chief 349 00:20:05,920 --> 00:20:09,200 Speaker 1: investment Strategies for the Luthold Group, on the phone from Minneapolis. 350 00:20:09,240 --> 00:20:11,680 Speaker 1: We always appreciate his thoughts in the markets here, and 351 00:20:11,720 --> 00:20:13,240 Speaker 1: at least you were just mentioning you kind of did 352 00:20:13,240 --> 00:20:15,159 Speaker 1: a quick market check here. The market's really kind of 353 00:20:15,320 --> 00:20:18,520 Speaker 1: rolled over after a strong opening here as I guess, 354 00:20:18,520 --> 00:20:21,520 Speaker 1: we're digesting earnings and thinking about what the Fed may 355 00:20:21,680 --> 00:20:24,760 Speaker 1: or may not say tomorrow. Yeah, good luck, good luck 356 00:20:24,800 --> 00:20:27,480 Speaker 1: trying to find a narrative for this market. That's all 357 00:20:27,520 --> 00:20:29,639 Speaker 1: I want to say. I mean, for minutes a minute, 358 00:20:29,720 --> 00:20:31,720 Speaker 1: you could change the narrative, and it's easy to do 359 00:20:31,760 --> 00:20:36,320 Speaker 1: it one way or another. Right now, let's take a 360 00:20:36,359 --> 00:20:39,119 Speaker 1: look at the pharmaceutical industry after we did get some 361 00:20:39,160 --> 00:20:42,399 Speaker 1: results from Merk and Fiser, and before we dig into those, 362 00:20:42,600 --> 00:20:45,400 Speaker 1: we are going to be joined by Max Niece and biotech, 363 00:20:45,440 --> 00:20:48,200 Speaker 1: pharma and healthcare columnist for Bloomberg Opinion. And I never 364 00:20:48,240 --> 00:20:50,960 Speaker 1: want to miss up a chance to ask Max about 365 00:20:51,040 --> 00:20:54,399 Speaker 1: vaccine development, where we are in terms of that, and 366 00:20:54,560 --> 00:21:00,000 Speaker 1: how well international pharmaceutical companies as well as scientists are 367 00:21:00,000 --> 00:21:03,240 Speaker 1: cooperating to move as quickly as possible to make this happen. 368 00:21:04,640 --> 00:21:07,439 Speaker 1: So it does seem like there there is a broad 369 00:21:07,560 --> 00:21:14,040 Speaker 1: movement towards cooperation UM companies, sharing science, beginning to focus 370 00:21:14,040 --> 00:21:17,720 Speaker 1: on the issue of manufacturing its scale, which is the 371 00:21:17,760 --> 00:21:19,439 Speaker 1: thing you have to worry about once you actually have 372 00:21:19,480 --> 00:21:22,800 Speaker 1: an effective vaccine UM. There there was a report this 373 00:21:22,840 --> 00:21:26,280 Speaker 1: week from from an organization called SEPPI that's working to 374 00:21:26,440 --> 00:21:29,600 Speaker 1: do some that coordination in advanced candidates that they hope 375 00:21:29,600 --> 00:21:32,640 Speaker 1: there may be a vaccine available for sort of limited 376 00:21:32,640 --> 00:21:35,760 Speaker 1: emergency use by by the end of this year. But 377 00:21:35,840 --> 00:21:39,280 Speaker 1: again that would be in very small quantities and only 378 00:21:39,320 --> 00:21:42,919 Speaker 1: if everything goes very very right. So I still looking 379 00:21:42,960 --> 00:21:45,720 Speaker 1: probably at at some time next year or later for 380 00:21:45,960 --> 00:21:49,560 Speaker 1: first sort of the broadly available vaccine that it would 381 00:21:49,600 --> 00:21:52,160 Speaker 1: take to to really get get life back to normal. 382 00:21:52,800 --> 00:21:55,760 Speaker 1: So Mark did report earnings today and they waited in 383 00:21:56,160 --> 00:21:58,359 Speaker 1: on the potential for a vaccine. What do they have 384 00:21:58,400 --> 00:22:02,600 Speaker 1: to say? So Mark is a company that that has 385 00:22:02,600 --> 00:22:05,080 Speaker 1: been a little bit later to to sort of join 386 00:22:05,200 --> 00:22:09,679 Speaker 1: the fray UM. They they are actually the one company 387 00:22:09,720 --> 00:22:13,720 Speaker 1: of the major pharmaceutical groups that's actually successfully developed a 388 00:22:13,800 --> 00:22:16,960 Speaker 1: vaccine in a response to pandemic. So anything that they 389 00:22:17,040 --> 00:22:20,200 Speaker 1: end up doing is worth responding or at least worth 390 00:22:20,240 --> 00:22:23,439 Speaker 1: watching very closely, though they will be at least to 391 00:22:23,560 --> 00:22:27,240 Speaker 1: some extent behind some of the other efforts that started sooner, 392 00:22:27,440 --> 00:22:30,600 Speaker 1: of course, hopeful that that that past experience will lead 393 00:22:30,640 --> 00:22:34,600 Speaker 1: them to a faster and more effective result at some point. 394 00:22:35,480 --> 00:22:38,040 Speaker 1: So Max, So that's the the updil on the vaccine. 395 00:22:38,040 --> 00:22:42,000 Speaker 1: How about testing, that's the more immediate issue here, Testing equipment, 396 00:22:42,040 --> 00:22:48,200 Speaker 1: testing laboratories. Where are we on that? So there has 397 00:22:48,240 --> 00:22:51,040 Speaker 1: been some some genuine improvement and in the last week 398 00:22:51,160 --> 00:22:53,680 Speaker 1: or so in terms of the testing rate, and and 399 00:22:53,720 --> 00:22:57,439 Speaker 1: we just got a plan from the Trump administration um 400 00:22:57,480 --> 00:23:00,320 Speaker 1: that that should hopefully bring a little bit more of 401 00:23:00,520 --> 00:23:06,200 Speaker 1: federal attention, funding and coordination to the issue. Their their 402 00:23:06,240 --> 00:23:09,720 Speaker 1: goal of the Trump Ministry School is somewhat short of 403 00:23:09,760 --> 00:23:13,080 Speaker 1: what some experts have called for, which is a really 404 00:23:13,200 --> 00:23:16,880 Speaker 1: dramatic increase in testing such that you know, people could 405 00:23:16,920 --> 00:23:20,040 Speaker 1: could be tested multiple times of months, those on the 406 00:23:20,040 --> 00:23:22,160 Speaker 1: front line things like that. Um, you know, it'll take 407 00:23:22,200 --> 00:23:24,960 Speaker 1: sometimes to get to the point where we have really 408 00:23:25,080 --> 00:23:29,600 Speaker 1: robust diagnostic testing, let alone that sort of broader surveillance 409 00:23:30,040 --> 00:23:34,000 Speaker 1: and antibody testing. But definite progress and uh, it's covered 410 00:23:34,000 --> 00:23:37,320 Speaker 1: by the Trump administration should help some extent. I remember 411 00:23:37,840 --> 00:23:40,560 Speaker 1: a long time ago, about I don't know, three months ago, 412 00:23:40,600 --> 00:23:44,080 Speaker 1: and other diseases and other medicines were in the forefront 413 00:23:44,200 --> 00:23:48,400 Speaker 1: of people's minds, in particular with cancer and the development there. 414 00:23:48,600 --> 00:23:51,320 Speaker 1: And I'm wondering, you know, fives are in particular has 415 00:23:51,359 --> 00:23:55,159 Speaker 1: been particularly on the front lines with new drugs to 416 00:23:55,240 --> 00:23:59,119 Speaker 1: combat cancer. We got their earnings. Let's talk about some 417 00:23:59,160 --> 00:24:02,000 Speaker 1: of the other things we're learning aside from the coronavirus, 418 00:24:02,040 --> 00:24:05,440 Speaker 1: because life does go on another way, is too sure. 419 00:24:05,640 --> 00:24:08,720 Speaker 1: So the two main things at point to from from 420 00:24:08,760 --> 00:24:13,040 Speaker 1: Fiser Murk a nive artists also reported today the impact 421 00:24:13,040 --> 00:24:16,520 Speaker 1: that you see in terms of their business cuts in 422 00:24:16,600 --> 00:24:19,520 Speaker 1: sort of two waves. The first is that they are 423 00:24:19,520 --> 00:24:23,440 Speaker 1: seeing some reduced sales for for drugs like cancer drugs 424 00:24:23,480 --> 00:24:27,439 Speaker 1: they're administered in a hospital settings as people have a 425 00:24:27,440 --> 00:24:30,400 Speaker 1: harder time doing that safely, does certain things you can't avoid, 426 00:24:30,440 --> 00:24:33,480 Speaker 1: and so they're they're doing all right. But Murk, for example, 427 00:24:33,520 --> 00:24:35,959 Speaker 1: did cut it's expected to sales because it has a 428 00:24:36,040 --> 00:24:38,080 Speaker 1: high proportion of those kind of drugs. In terms of 429 00:24:38,119 --> 00:24:41,359 Speaker 1: the long run, there there may be a slowdown in 430 00:24:41,359 --> 00:24:44,560 Speaker 1: in various drugs development efforts because it's, as you might imagine, 431 00:24:44,560 --> 00:24:48,399 Speaker 1: it really hard to run a cancer drug trial right now. UM, 432 00:24:48,560 --> 00:24:51,359 Speaker 1: you're thinking about getting a lot of immuno compromise people 433 00:24:51,760 --> 00:24:55,440 Speaker 1: to one place, and often to traditional clinical trial sites 434 00:24:55,480 --> 00:24:58,520 Speaker 1: which are at hospitals and husion suits that are being 435 00:24:58,600 --> 00:25:00,720 Speaker 1: used for other things right now. So it's it's both 436 00:25:00,760 --> 00:25:03,280 Speaker 1: kind of a short term financial impact and a long 437 00:25:03,440 --> 00:25:07,160 Speaker 1: term disruption of research. Um, it will be some time 438 00:25:07,200 --> 00:25:10,199 Speaker 1: before we find the real extent of both of those. 439 00:25:10,200 --> 00:25:13,760 Speaker 1: Companies are still being pretty cautious about making really forward 440 00:25:13,800 --> 00:25:16,680 Speaker 1: looking projections given the sort of early stage of the 441 00:25:16,720 --> 00:25:20,719 Speaker 1: epidemic and the recovery from it. Max, you cover all 442 00:25:20,760 --> 00:25:25,280 Speaker 1: things healthcare, how come there's not a Manhattan Project equivalent 443 00:25:26,040 --> 00:25:32,040 Speaker 1: for UM treatments and vaccines for this virus. So to 444 00:25:32,160 --> 00:25:34,240 Speaker 1: a certain extent, there is that there is a lot 445 00:25:34,280 --> 00:25:38,159 Speaker 1: of public funding being directed through organizations like set B, 446 00:25:38,359 --> 00:25:43,360 Speaker 1: through through Barada UM towards supporting organizations that that are 447 00:25:43,400 --> 00:25:46,960 Speaker 1: working on these treatments. I think more, very much, so 448 00:25:47,400 --> 00:25:50,159 Speaker 1: more has to be done in terms of you know, 449 00:25:50,560 --> 00:25:54,639 Speaker 1: doing surge funding, coordinating efforts, making sure that the best 450 00:25:54,760 --> 00:25:57,600 Speaker 1: candidates get as much funding as they could possibly need, 451 00:25:57,880 --> 00:26:00,840 Speaker 1: and then the most expensive problem, the one that really 452 00:26:00,880 --> 00:26:03,840 Speaker 1: needs that Manhattan Project effort. Something that I know Bill 453 00:26:03,880 --> 00:26:06,960 Speaker 1: Gates is devoting some attention and resources to, is when 454 00:26:06,960 --> 00:26:10,560 Speaker 1: you have viable vaccine, how do you rapidly deploy it 455 00:26:10,720 --> 00:26:14,000 Speaker 1: produce it at a global scale. That's something that that 456 00:26:14,119 --> 00:26:17,200 Speaker 1: really hasn't been done before and is going to require 457 00:26:17,280 --> 00:26:20,439 Speaker 1: an enormous amount of spending and wasteful spending in that 458 00:26:20,560 --> 00:26:23,399 Speaker 1: if you wait for, um, you know, concrete proof that 459 00:26:23,480 --> 00:26:25,640 Speaker 1: this is the best possible vaccine, the one that works, 460 00:26:25,840 --> 00:26:28,720 Speaker 1: to even start building manufacturing, they won't even be ready 461 00:26:28,800 --> 00:26:30,879 Speaker 1: nearly in times. You're gonna have to build some manufacturing 462 00:26:30,920 --> 00:26:33,919 Speaker 1: that you'll never knew, never end up using. Considering that 463 00:26:33,960 --> 00:26:37,560 Speaker 1: a lot of these vaccines use different and novel technology. 464 00:26:37,720 --> 00:26:40,240 Speaker 1: So that's the thing where I think you can you 465 00:26:40,320 --> 00:26:43,560 Speaker 1: should have a dramatic increase in funding and attention because 466 00:26:43,560 --> 00:26:46,720 Speaker 1: that is a difficult, huge and thorny problem that will 467 00:26:46,720 --> 00:26:48,480 Speaker 1: need to be solved in the next year or two. 468 00:26:49,080 --> 00:26:51,720 Speaker 1: We're speaking with Max Nis and biotech, pharma and healthcare 469 00:26:51,760 --> 00:26:55,639 Speaker 1: columnist for Bloomberg Opinion. And Max, since we have you, 470 00:26:55,760 --> 00:26:58,040 Speaker 1: and since we have some time, I want to take 471 00:26:58,080 --> 00:27:01,400 Speaker 1: this conversation a step further, not just as far as 472 00:27:01,560 --> 00:27:04,440 Speaker 1: where we put money to develop the vaccine and to 473 00:27:04,480 --> 00:27:08,679 Speaker 1: do it quickly, but the entire ecosystem of creating vaccines 474 00:27:08,720 --> 00:27:12,080 Speaker 1: and these crucial medicines. And I'm struck by Joseph stigletz 475 00:27:12,400 --> 00:27:15,960 Speaker 1: uh column in Project Syndicate, Nobel Prize winner economist at 476 00:27:16,000 --> 00:27:19,040 Speaker 1: Columbia University, where he was saying that the entire structure 477 00:27:19,119 --> 00:27:23,040 Speaker 1: of drug creation is flawed and really goes against creating 478 00:27:23,040 --> 00:27:25,440 Speaker 1: some of these crucial medicines. Can you speak a little 479 00:27:25,480 --> 00:27:28,600 Speaker 1: bit to that and how maybe there'll be a rethink 480 00:27:28,720 --> 00:27:32,720 Speaker 1: of the incentives around creating new medicines that could potentially 481 00:27:32,760 --> 00:27:36,560 Speaker 1: be beneficial going forward. Oh. Absolutely, this is a real 482 00:27:36,720 --> 00:27:42,520 Speaker 1: hobby horse of mind. And the medicines that we incentivize 483 00:27:42,560 --> 00:27:45,239 Speaker 1: are are the ones that are the most profitable, and 484 00:27:45,320 --> 00:27:47,840 Speaker 1: often specifically the ones that are most profitable in the 485 00:27:47,880 --> 00:27:50,640 Speaker 1: United States. Now, what that often means is a lot 486 00:27:50,680 --> 00:27:54,280 Speaker 1: of money goes towards rare disease drugs, towards cancer drugs 487 00:27:54,280 --> 00:27:57,119 Speaker 1: that are really expensive and don't get a lot of 488 00:27:57,119 --> 00:28:00,280 Speaker 1: reimbursement pressure because there aren't that many people that that 489 00:28:00,400 --> 00:28:03,720 Speaker 1: get any given cancer disease. What that leaves behind our 490 00:28:03,760 --> 00:28:08,520 Speaker 1: our vaccines, and especially vaccines for infectious diseases, which you 491 00:28:08,560 --> 00:28:11,080 Speaker 1: know by their very nature, they they often arise and 492 00:28:11,119 --> 00:28:14,440 Speaker 1: in less developed countries, they arise at moments of great 493 00:28:14,480 --> 00:28:17,320 Speaker 1: public health need where there's not a lot of tolerance 494 00:28:17,359 --> 00:28:19,880 Speaker 1: for for high pricing. UM. And then when you point 495 00:28:19,920 --> 00:28:24,960 Speaker 1: to another potential source of future pandemics UM antibiotic resistant bacteria. 496 00:28:25,400 --> 00:28:28,439 Speaker 1: The incentive if you actually develop a good UM, a 497 00:28:28,480 --> 00:28:31,240 Speaker 1: good medicine for those is to use it as little 498 00:28:31,280 --> 00:28:35,080 Speaker 1: as possible. So UM, you know, the pricing, the things 499 00:28:35,080 --> 00:28:37,679 Speaker 1: that we we tend to value and pay money for 500 00:28:38,200 --> 00:28:40,560 Speaker 1: are not the ones that we want to most incentivize. 501 00:28:40,800 --> 00:28:43,400 Speaker 1: I very much hope that we can begin to build 502 00:28:43,840 --> 00:28:47,560 Speaker 1: different incentives so there's not just uh an incentive to 503 00:28:47,560 --> 00:28:50,000 Speaker 1: to kind of jump in when there's a crisis, but 504 00:28:50,120 --> 00:28:53,240 Speaker 1: to develop the sort of long term pipelines and technology 505 00:28:53,800 --> 00:28:56,120 Speaker 1: that that will help when when the next crisis runs 506 00:28:56,120 --> 00:28:59,440 Speaker 1: around us to be more prepared at a global level. 507 00:29:00,200 --> 00:29:02,320 Speaker 1: So Max, just I know you talked to lots of 508 00:29:02,320 --> 00:29:05,720 Speaker 1: different people within the health spare, healthcare space, scientists and 509 00:29:05,720 --> 00:29:07,880 Speaker 1: and doctors and so on. You know, I guess one 510 00:29:07,880 --> 00:29:10,640 Speaker 1: thing to me is a lay person here. This is 511 00:29:10,680 --> 00:29:14,720 Speaker 1: a virus. It's similar to other coronaviruses, maybe even the 512 00:29:14,720 --> 00:29:18,200 Speaker 1: common cold, maybe the flu. It doesn't appear from that 513 00:29:18,280 --> 00:29:22,040 Speaker 1: perspective that we have to literally start from ground zero 514 00:29:22,200 --> 00:29:25,160 Speaker 1: and have these biotech companies, these farmers companies saying they 515 00:29:25,280 --> 00:29:27,640 Speaker 1: just you know, it's going to take a lot of 516 00:29:27,680 --> 00:29:30,600 Speaker 1: time like any other new drug. Again, am I reading 517 00:29:30,640 --> 00:29:33,320 Speaker 1: that wrong? Is this so different that most of these 518 00:29:33,320 --> 00:29:37,520 Speaker 1: scientists really are starting from ground zero? So you know, 519 00:29:37,600 --> 00:29:41,320 Speaker 1: this is actually kind of getting back to incentives. You know, 520 00:29:41,360 --> 00:29:44,920 Speaker 1: the closest cousin that we know about to this coronavirus 521 00:29:45,160 --> 00:29:49,280 Speaker 1: is Stars, and there were Nasson efforts developed a vaccine, 522 00:29:49,680 --> 00:29:54,120 Speaker 1: but since that outbreak peter out, there was no financial 523 00:29:54,160 --> 00:29:57,200 Speaker 1: motivation to keep developing in and because we don't have 524 00:29:57,320 --> 00:30:01,600 Speaker 1: well developed incentive structures or or long term financing structures 525 00:30:01,640 --> 00:30:07,160 Speaker 1: for developing vaccines that don't have a profitable economic future, uh, 526 00:30:07,200 --> 00:30:10,560 Speaker 1: those vaccines stopped getting developed. So we didn't make a 527 00:30:10,600 --> 00:30:14,160 Speaker 1: lot of the discoveries about coronaviruses that might help this 528 00:30:14,240 --> 00:30:17,000 Speaker 1: time around. Um, you know, there there are some vaccines 529 00:30:17,040 --> 00:30:20,680 Speaker 1: for animal coronaviruses, but none of them are are especially effective. 530 00:30:20,880 --> 00:30:23,080 Speaker 1: It just all comes down to the fact that making 531 00:30:23,160 --> 00:30:27,880 Speaker 1: vaccines is incredibly difficult, and making a vaccine for a 532 00:30:27,960 --> 00:30:32,160 Speaker 1: comparatively new and poorly understood virus, even though it's related 533 00:30:32,200 --> 00:30:34,520 Speaker 1: to ones we know, it still does take a lot 534 00:30:34,560 --> 00:30:38,000 Speaker 1: of work from scratch to develop a long lasting and 535 00:30:38,080 --> 00:30:41,760 Speaker 1: in robust immune response. That's just a fundamentally difficult scientific 536 00:30:41,840 --> 00:30:44,600 Speaker 1: problem and one that well, there have been you know, 537 00:30:44,680 --> 00:30:47,800 Speaker 1: real recent advances, there's still a lot that we're learning 538 00:30:47,800 --> 00:30:50,640 Speaker 1: on the fly. The most advanced candidate, or one of 539 00:30:50,920 --> 00:30:53,120 Speaker 1: is what's called an m R and a vaccine. The 540 00:30:53,200 --> 00:30:55,800 Speaker 1: good nice part about it is that it's very adaptable. 541 00:30:55,880 --> 00:30:58,720 Speaker 1: It's something that can be produced quickly in response to 542 00:30:58,720 --> 00:31:01,760 Speaker 1: a new pathogen. We we don't know and we're going 543 00:31:01,800 --> 00:31:03,200 Speaker 1: to kind of have to find out on the fly 544 00:31:04,000 --> 00:31:08,200 Speaker 1: is whether it's safe, reliable, and effective and beyond that 545 00:31:08,680 --> 00:31:11,360 Speaker 1: able to be produced on a mass scale. So it 546 00:31:11,440 --> 00:31:13,640 Speaker 1: really is unfortunately a lot of work that does have 547 00:31:13,720 --> 00:31:16,640 Speaker 1: to be done from scratch, both drough to you know, 548 00:31:16,880 --> 00:31:20,800 Speaker 1: bad incentives, under investment and sometimes the wrong priorities and 549 00:31:20,840 --> 00:31:23,720 Speaker 1: any where we spend money. In the meantime, there's another 550 00:31:23,800 --> 00:31:26,200 Speaker 1: kind of immunity, heart immunity that could be created by 551 00:31:26,240 --> 00:31:29,959 Speaker 1: people getting the virus potentially we don't know, and not 552 00:31:30,040 --> 00:31:32,680 Speaker 1: being able to get it. Maybe again, we aren't sure. 553 00:31:33,040 --> 00:31:34,960 Speaker 1: W h O has put something out saying that there's 554 00:31:34,960 --> 00:31:37,240 Speaker 1: no evidence showing that you do get immunity to the 555 00:31:37,320 --> 00:31:39,840 Speaker 1: virus once you already have it and developed the anybodies. 556 00:31:39,840 --> 00:31:42,760 Speaker 1: But there is a question of how much of the 557 00:31:42,800 --> 00:31:46,040 Speaker 1: population and the hardest hit area in in the United States, 558 00:31:46,440 --> 00:31:48,720 Speaker 1: how much of the population has been exposed and there 559 00:31:48,720 --> 00:31:51,480 Speaker 1: have been studies. Is this right that there about of 560 00:31:51,520 --> 00:31:55,920 Speaker 1: the population has already been exposed max. So that that's 561 00:31:56,040 --> 00:32:00,840 Speaker 1: one study and fundamentally that's an extra lation from a 562 00:32:00,880 --> 00:32:09,680 Speaker 1: limited sample size based on a test of unknown specificity test. Yeah, 563 00:32:10,360 --> 00:32:12,520 Speaker 1: you know so, I I wouldn't be surprised if the 564 00:32:12,560 --> 00:32:16,280 Speaker 1: final answer, once we have more data from a series 565 00:32:16,320 --> 00:32:20,000 Speaker 1: of reliable tests, isn't too far off from there. But um, 566 00:32:20,280 --> 00:32:22,640 Speaker 1: it may be that that it is substantially less than 567 00:32:22,680 --> 00:32:26,000 Speaker 1: that once we get a sample size that better represents 568 00:32:26,080 --> 00:32:29,960 Speaker 1: the broader population and a more reliable test. And then 569 00:32:30,000 --> 00:32:32,560 Speaker 1: on the question of of herd immunity. Um, that that's 570 00:32:32,600 --> 00:32:34,880 Speaker 1: one where we don't just need to you know, this 571 00:32:35,040 --> 00:32:37,720 Speaker 1: one round of testing. We need to do that test 572 00:32:37,800 --> 00:32:40,920 Speaker 1: and then follow people for months in order to get 573 00:32:40,960 --> 00:32:44,920 Speaker 1: a sense of whether reinfection is possible and who might 574 00:32:44,960 --> 00:32:48,280 Speaker 1: be vulnerable. UM. You know that those common coronavirus is 575 00:32:48,320 --> 00:32:51,760 Speaker 1: those seasonal ones we mentioned before. People lose immunity inside 576 00:32:51,760 --> 00:32:55,040 Speaker 1: a year. That's why they come back seasonally. UM, if 577 00:32:55,120 --> 00:32:57,560 Speaker 1: that's the case for for this virus, then if we 578 00:32:58,040 --> 00:33:00,920 Speaker 1: reopen and cautiously, if we we aren't Julian, and we 579 00:33:00,960 --> 00:33:04,480 Speaker 1: may see you know, really robust seasonal reoccurrence. And that's 580 00:33:04,520 --> 00:33:07,760 Speaker 1: something that we really need to understand and that should 581 00:33:07,760 --> 00:33:11,360 Speaker 1: inform the sort of ongoing response for not just you know, 582 00:33:11,400 --> 00:33:14,400 Speaker 1: the next few months, but for years of it. Max Neeson, 583 00:33:14,560 --> 00:33:16,680 Speaker 1: thank you so much for taking all this time with us. 584 00:33:16,720 --> 00:33:20,800 Speaker 1: Max Neison, biotech, pharma and healthcare calumnist with Bloomberg Opinion, 585 00:33:21,040 --> 00:33:25,280 Speaker 1: joining us on the phone from New York. Thanks for 586 00:33:25,320 --> 00:33:28,120 Speaker 1: listening to the Bloomberg PANL podcast. You can subscribe and 587 00:33:28,160 --> 00:33:31,280 Speaker 1: listen to interviews at Apple Podcasts or whatever podcast platform 588 00:33:31,360 --> 00:33:34,400 Speaker 1: you prefer. I'm Paul Sweeney. I'm on Twitter at pt Sweeney. 589 00:33:34,480 --> 00:33:36,640 Speaker 1: I'm Lisa abram Boy. It's I'm on Twitter at Lisa 590 00:33:36,640 --> 00:33:39,400 Speaker 1: abram Woit's one before the podcast. You can always catch 591 00:33:39,440 --> 00:33:41,240 Speaker 1: us worldwide. I'm Bloomberg Radio.