WEBVTT - Bond Inflation Gauge Is Distorted by Fed: Jim Bianco 0:00:00.800 --> 0:00:04.040 Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside 0:00:04.040 --> 0:00:06.920 my co host Matt Miller. Every business day, we bring 0:00:06.960 --> 0:00:11.520 you interviews from CEOs, market pros, and Bloomberg experts, along 0:00:11.520 --> 0:00:15.600 with essential market moving news. Find the Bloomberg Markets Podcast 0:00:15.600 --> 0:00:18.439 on Apple Podcasts or wherever you listen to podcasts, and 0:00:18.480 --> 0:00:23.079 at Bloomberg dot com slash podcast. Ten year treasury yield 0:00:23.120 --> 0:00:26.720 now down back below one point five percent at one 0:00:26.720 --> 0:00:30.360 point four percent. That spiking yields yesterday really spooked markets 0:00:30.400 --> 0:00:32.000 and I think got some people to kind of think 0:00:32.000 --> 0:00:36.160 about valuations here, uh, think about asset allocation here. Let's 0:00:36.280 --> 0:00:38.400 get the lay of the land with Jim Bianco. He's 0:00:38.400 --> 0:00:41.720 a president and founder Bianco Research. He's also a contributor 0:00:41.920 --> 0:00:45.639 to Bloomberg Opinion based in Chicago. Jim, thanks so much 0:00:45.640 --> 0:00:47.040 for joining us here. What do you make of the 0:00:47.080 --> 0:00:49.680 action over the past couple of days, again, having yields 0:00:49.720 --> 0:00:52.800 shoot up here and we saw a lot of commodities flash, 0:00:52.840 --> 0:00:56.279 maybe some inflations of inflation signs. What do you make 0:00:56.280 --> 0:00:59.360 about what's going on? I think what you just said 0:00:59.480 --> 0:01:03.560 is right inflation signs. I've been trying to say that 0:01:03.600 --> 0:01:06.800 there is two different words that we need to keep 0:01:06.800 --> 0:01:09.640 our mind on, and that is reflation, which you hear 0:01:09.680 --> 0:01:13.760 a lot of an inflation if people use those words interchangeably, 0:01:13.959 --> 0:01:17.280 but they shouldn't because there are two different concepts. If 0:01:17.319 --> 0:01:20.399 interest rates are rising because of reflation, that is real 0:01:20.440 --> 0:01:22.840 growth is coming back, earnings are coming back, people are 0:01:22.840 --> 0:01:26.759 getting jobs. Then Chairman Paul is right, it reflects higher 0:01:26.840 --> 0:01:30.920 rates reflect a confidence in the economy. But if we're 0:01:31.000 --> 0:01:34.640 crossing over to that, it is inflation, and that is 0:01:35.080 --> 0:01:38.000 your loss of purchasing power. Your dollar in a year 0:01:38.080 --> 0:01:40.960 will buy you less than a dollar now if you 0:01:41.080 --> 0:01:45.000 own a fixed income security by the name fixed income, 0:01:45.040 --> 0:01:46.640 you don't get any more dollars in a year. You 0:01:46.640 --> 0:01:49.360 get the same number, but it buys less. You don't 0:01:49.400 --> 0:01:52.360 want to touch those securities, and that's why rates could 0:01:52.360 --> 0:01:54.000 be going up and it would be very bad for 0:01:54.040 --> 0:01:56.960 the stock market. So I think we're canting this push 0:01:57.040 --> 0:02:00.240 pull is to yes, we know the economies could come 0:02:00.280 --> 0:02:03.760 back strong this year. That's not the issue. The issue 0:02:03.800 --> 0:02:06.280 is how much of that's going to be inflation, how 0:02:06.320 --> 0:02:08.799 much of that's going to be real wealth. And with 0:02:08.840 --> 0:02:12.120 the surgeon commodities, as you've mentioned in other measures. People 0:02:12.160 --> 0:02:14.040 are getting more and more worried that we're going to 0:02:14.080 --> 0:02:16.200 see something we haven't seen in twenty five years, and 0:02:16.280 --> 0:02:20.079 that is an actual inflation boom. Jim, I've been thinking 0:02:20.080 --> 0:02:23.359 about you all morning, and not just exchange messages earlier today, 0:02:23.400 --> 0:02:25.959 but I've been thinking about your read on what we've 0:02:25.960 --> 0:02:28.200 seen in the bond market. You know, there's a question 0:02:28.200 --> 0:02:30.760 about whether it's just thin trading, or whether it's potentially 0:02:30.840 --> 0:02:34.440 leverage positions that are getting unwound, you know, convexity hedging, 0:02:34.840 --> 0:02:37.640 you name it, technical factor, or whether this is actually 0:02:37.680 --> 0:02:41.760 a belief in inflation that perhaps isn't being reflected in 0:02:41.800 --> 0:02:44.880 a tips market, in a in a securities market that 0:02:44.960 --> 0:02:48.200 is distorted by thin liquidity and a whole host of 0:02:48.200 --> 0:02:53.840 other issues. Can you just what's going on? Yeah? So, 0:02:53.840 --> 0:02:57.880 so two things. Um, There is the treasury real rates 0:02:58.000 --> 0:03:01.600 market or TIPS securities, Treasury inflay and protective securities, and 0:03:01.680 --> 0:03:04.240 we look at the difference between those securities and nominal 0:03:04.320 --> 0:03:06.520 rates to get what's called the inflation break even rate 0:03:06.600 --> 0:03:11.000 as an indicator of the future of inflation. The biggest 0:03:11.000 --> 0:03:13.320 buyer in that market is the FED. They have bought 0:03:13.400 --> 0:03:15.760 more bonds in the last year tips bonds than have 0:03:15.840 --> 0:03:18.640 been issued, and the amount of outstanding for the public 0:03:18.720 --> 0:03:21.320 is actually declining. That's how many they bought. So my 0:03:21.400 --> 0:03:23.919 point there is they've got a giant footprint all over 0:03:23.960 --> 0:03:27.440 that market, and I've been doubting the measures that we've 0:03:27.480 --> 0:03:31.160 been getting out of that market. So that is an 0:03:31.160 --> 0:03:34.239 inflation indicator that people said, look, there's no problem there. Yeah, 0:03:34.280 --> 0:03:36.720 but it could also be because the Fed stomping all 0:03:36.720 --> 0:03:39.360 over it. But to your other point about what's going 0:03:39.400 --> 0:03:41.760 on in the bond market, if you're not a bond 0:03:41.840 --> 0:03:43.960 geek like I am, and I'm gonna put you in 0:03:44.000 --> 0:03:50.080 the bond, yeah, and you look at yields and you go, oh, 0:03:50.280 --> 0:03:52.440 they're on their way to one and a half, and 0:03:52.520 --> 0:03:54.280 some people say they might be a two by the 0:03:54.360 --> 0:03:56.480 end of the year. I'm an equity investor. I own 0:03:56.480 --> 0:04:00.320 a business. Who cares it's two percent, it's not a deal. 0:04:00.360 --> 0:04:01.840 And it goes to two and a half, it's not 0:04:01.880 --> 0:04:04.480 a big deal. You know, if your bond investor, it 0:04:04.560 --> 0:04:08.720 matters a lot because you could wind up with with 0:04:08.840 --> 0:04:12.440 total return losses that could be very, very big. If 0:04:12.480 --> 0:04:16.919 you've owned thirty year bonds this year, you're down on 0:04:17.000 --> 0:04:18.880 the year on the thirty year bond one of the 0:04:18.880 --> 0:04:22.400 worst first two months of a year in history. And 0:04:22.480 --> 0:04:25.400 if you're buying bonds on leverage, because you can do 0:04:25.440 --> 0:04:28.520 that through the repo market, you can leverage your positions 0:04:28.560 --> 0:04:32.120 all you want. You could have catastrophic losses. If we 0:04:32.160 --> 0:04:35.520 have a two percent yield coming in the next few months, 0:04:35.600 --> 0:04:38.039 and if the bond market is in a bad place, 0:04:38.560 --> 0:04:41.480 all capital markets are in a bad place as well too, 0:04:41.520 --> 0:04:44.400 So it's not a worry. I don't think at this 0:04:44.520 --> 0:04:48.400 point that you know two percent on the tenure Treasury 0:04:48.640 --> 0:04:52.080 is going to crush the economy with super high interest rates. 0:04:52.240 --> 0:04:56.880 War is two percent could create havoc in the credit markets, 0:04:56.960 --> 0:04:59.440 and that could hurt the economy. The ability to raise 0:04:59.520 --> 0:05:02.520 money ye to do two things that you're you're comfortable 0:05:02.560 --> 0:05:05.799 with doing that could come into question. We're not there now, 0:05:06.279 --> 0:05:08.520 but we've got to stop doing this, so we don't 0:05:08.520 --> 0:05:10.720 go there. All right, I'm gonna annoy Paul and ask 0:05:10.839 --> 0:05:13.120 a question that's in the weeds. But you mentioned this 0:05:13.160 --> 0:05:16.360 tips market. You mentioned this sort of inflation expectations market, 0:05:16.720 --> 0:05:18.440 and this is really key because a lot of people 0:05:18.520 --> 0:05:21.240 keep pointing to it to show that actually inflation expectations 0:05:21.240 --> 0:05:23.840 are going down over the long term even as treasure 0:05:23.880 --> 0:05:26.640 yields go up. This doesn't make sense in a lot 0:05:26.680 --> 0:05:30.840 of ways. Are you saying the inflation expectations as measured 0:05:30.839 --> 0:05:34.240 by the market are highly inaccurate based on the distortions, 0:05:34.279 --> 0:05:37.280 based on the amount of that market that's been dominated, 0:05:37.320 --> 0:05:40.680 that's been hoovered up by the Federal Reserve. Yes, And 0:05:40.680 --> 0:05:44.400 I'll even back up one step further. Inflation expectations is 0:05:44.400 --> 0:05:47.080 a predictor of where inflation is gonna go. We've had 0:05:47.080 --> 0:05:49.839 these markets for twenty years have not been very good 0:05:49.880 --> 0:05:52.240 at all. They have not been a very good indicator 0:05:52.320 --> 0:05:55.839 of what actually happens in the beginning. Now you throw 0:05:55.880 --> 0:05:59.600 in the fact that the largest single buyer is the 0:05:59.680 --> 0:06:03.760 Federal Reserve in these markets, and you've seen real interest 0:06:03.839 --> 0:06:08.719 rates falling all year long. If the economy is going 0:06:08.760 --> 0:06:11.840 to boom at five, six or seven percent, which would 0:06:11.880 --> 0:06:14.839 be if you believe Goldman's forecast, seven percent real, that 0:06:14.880 --> 0:06:18.159 would be the fastest yearly growth in forty years. If 0:06:18.200 --> 0:06:21.160 we had that happened this year, real rates should be 0:06:21.279 --> 0:06:24.440 rising in that kind of environment. But the falling, or 0:06:24.520 --> 0:06:27.120 at least the tips market has been falling. Why because 0:06:27.160 --> 0:06:30.080 the fit is relentlessly buying these every day. In fact, 0:06:30.080 --> 0:06:32.520 they publish every day how much they buy, and it's 0:06:32.520 --> 0:06:35.120 in the several billions every single day that they buy 0:06:35.120 --> 0:06:40.560 of this market. So I'll quote the British economist Charles Goodheart, 0:06:40.600 --> 0:06:43.960 he's a good friend to John Farrell's. When a measure, 0:06:44.520 --> 0:06:48.160 when a measure becomes a target, it seeks being a measure. 0:06:48.480 --> 0:06:53.280 Will look at Yes, we're looking at tips as a 0:06:53.320 --> 0:06:56.680 measure of where the market things inflation is. But if 0:06:56.680 --> 0:06:59.440 the FETE is targeting it by all of their buying, 0:06:59.640 --> 0:07:03.120 it's no longer a measure. So that's what I've been saying. 0:07:03.120 --> 0:07:05.880 I think conceptually it's right. You know, over the last 0:07:05.920 --> 0:07:09.000 few months, tips break evens have been going up. But 0:07:09.080 --> 0:07:10.640 when you want to get into the weeds and say 0:07:10.640 --> 0:07:12.520 well they picked three weeks ago and this and that, 0:07:12.880 --> 0:07:15.280 be careful now because you got that big footprint of 0:07:15.320 --> 0:07:17.760 the FEDS stomping all over that market, and it might 0:07:17.800 --> 0:07:21.000 be giving signals that aren't the measure that you think 0:07:21.040 --> 0:07:24.520 they are. Jim Bianco, thank you so much for being 0:07:24.520 --> 0:07:28.440 with us, Jim Bianco of Bianco Research. It's always wonderful 0:07:28.480 --> 0:07:31.880 having you on Honestly, I was actually really looking forward 0:07:31.880 --> 0:07:34.080 to hearing what he had to say because he always 0:07:34.160 --> 0:07:38.200 has such nuanced views pairing but the technical Paul, with 0:07:38.480 --> 0:07:41.440 the fundamental and really that tips market concept. I know 0:07:41.520 --> 0:07:43.640 it's in the weeds, but it's really important. It is. 0:07:43.680 --> 0:07:45.720 And we hear a lot of strategists and a lot 0:07:45.760 --> 0:07:48.720 of fun managers talk about that tip tips market and uh, 0:07:48.960 --> 0:07:51.000 you know it's interesting that you know, kind of bringing 0:07:51.000 --> 0:07:54.000 in also the FED buying and how that's impacting the 0:07:54.000 --> 0:07:58.520 market and rates across the rake curve. Yeah, honestly fascinating discussion. 0:08:01.000 --> 0:08:02.760 And we want to turn our attention to the medical 0:08:02.760 --> 0:08:05.200 advances that we have seen which have been turbo charged 0:08:05.240 --> 0:08:07.160 by the pandemic. And Paul, I do think that one 0:08:07.280 --> 0:08:10.760 emerging aspect of the pandemic is all the money and 0:08:10.800 --> 0:08:15.360 all the attention on the need for biopharmaceutical investment as 0:08:15.360 --> 0:08:18.320 well as research and joining us now is someone very 0:08:18.360 --> 0:08:20.760 much on the forefront of that. Dr Steve Cutler, chief 0:08:20.760 --> 0:08:24.480 executive officer of Icon PLC, based in Dublin. Just to 0:08:24.480 --> 0:08:27.000 give you a sense, Icon had a tie up with 0:08:27.040 --> 0:08:29.640 p r A Health Sciences. It was the largest healthcare 0:08:29.680 --> 0:08:33.520 transaction deal this year. Twelve billion dollars, and both companies 0:08:34.160 --> 0:08:37.720 help basically run the clinical trials for drug makers and 0:08:37.760 --> 0:08:40.240 medical device developers, and they've been on the front lines 0:08:40.640 --> 0:08:43.520 of some of these medical advancements. Dr Cutler, thank you 0:08:43.600 --> 0:08:45.280 so much for being with us. Can you give us 0:08:45.320 --> 0:08:49.880 a sense of just how much the pandemic has turbo 0:08:50.040 --> 0:08:53.319 charged what really has been in the works for a while, 0:08:53.360 --> 0:08:58.160 which is investment in biopharmaceutical development. Yeah, Good morning, Paul, 0:08:58.200 --> 0:09:01.880 Good morning Lisa. The pandemics certainly has been obviously a 0:09:01.880 --> 0:09:04.640 tragic event, you know, across our society, but there have 0:09:04.800 --> 0:09:06.840 been some silver linings since, at least for us in 0:09:06.880 --> 0:09:09.480 our business, and the way in which we've run clinical 0:09:09.520 --> 0:09:13.200 trials now has has fundamentally changed in terms of approval times, 0:09:13.559 --> 0:09:16.120 in terms of the types of technology we're able to 0:09:16.160 --> 0:09:19.480 apply to running clinical trials, and quite frankly, in terms 0:09:19.480 --> 0:09:22.640 of the awareness of society of clinical trials and the 0:09:22.679 --> 0:09:25.320 benefits of clinical trials. We think that all plays into 0:09:25.559 --> 0:09:29.320 a very positive environment for our organization going forward, and 0:09:29.360 --> 0:09:32.240 hence one of the reasons that we've we've we've made 0:09:32.240 --> 0:09:36.360 this union with pr A Okay, doctor, this is a 0:09:36.400 --> 0:09:38.839 big deal for you guys. Per A is a big 0:09:39.000 --> 0:09:43.199 company as well. Talked us about the real drivers, the 0:09:43.280 --> 0:09:47.680 strategic drivers behind putting these two companies together. Here. Yeah, 0:09:47.840 --> 0:09:50.600 there's a couple of them. Certainly, we've seen we've been 0:09:50.640 --> 0:09:53.400 competing with pra A for for a number of years now, 0:09:53.520 --> 0:09:55.680 twenty thirty years since we've been in existence, and they've 0:09:55.679 --> 0:09:58.400 been a very strong competitor there and a very a 0:09:58.480 --> 0:10:01.679 very good competitor over that time. And and they're very 0:10:01.679 --> 0:10:04.960 strong cultural fits. So so when you bring too large 0:10:05.040 --> 0:10:08.720 people related businesses together, the culture, the focus, the core 0:10:08.880 --> 0:10:11.280 values of the organizations are very important. We see a 0:10:11.320 --> 0:10:14.000 lot of similarities there. We've made an assessment really over 0:10:14.040 --> 0:10:17.400 the last few years in terms of our other competitors 0:10:17.559 --> 0:10:19.680 and the fit we had with p r A really 0:10:19.720 --> 0:10:22.000 really really brought them to the four in terms of 0:10:22.000 --> 0:10:24.959 their benefits and the advantages. There's really a couple of them. 0:10:24.960 --> 0:10:27.280 For us as a large organizer, we moved from being 0:10:27.559 --> 0:10:29.920 we were six, they were seven, or vice versa in 0:10:30.000 --> 0:10:32.640 terms of our league table in revenues in the organiz 0:10:32.920 --> 0:10:35.480 we now move as a combined organization to number two 0:10:35.480 --> 0:10:37.600 in the industry. So we are and we're number one 0:10:37.640 --> 0:10:39.520 in a number of the segments. So we are we 0:10:39.600 --> 0:10:43.560 have the scale now to really deliver innovative solutions and 0:10:43.600 --> 0:10:46.280 creative solutions for for our customers across the globe. We 0:10:46.280 --> 0:10:48.920 have the depth and the breadth of resources, and that's 0:10:49.080 --> 0:10:51.800 very important in the clinical trials game because we run 0:10:51.880 --> 0:10:54.480 trials all over the world in all sorts of different 0:10:54.480 --> 0:10:58.080 therapeutic areas. The other component is the technology side of things. 0:10:58.080 --> 0:11:01.240 As I said, through the pandemic, we've realized that applying 0:11:01.559 --> 0:11:05.079 the new technology is the ability to access patient data 0:11:05.160 --> 0:11:09.160 remotely and to monitor patient data remotely in a confidential 0:11:09.160 --> 0:11:12.079 and private manner allows us to be much more efficient. 0:11:12.280 --> 0:11:14.480 And as we as we run those sort of trials 0:11:14.520 --> 0:11:17.319 and we run what we call more decentralized clinical trials 0:11:17.320 --> 0:11:20.120 where patients don't have to go to sites we can 0:11:20.200 --> 0:11:23.120 we can monitor patients at home. We have those sort 0:11:23.160 --> 0:11:26.640 of services. Pr A bring a mobile health platform to that. 0:11:26.720 --> 0:11:30.040 We can offer a really compelling vision in that space 0:11:30.120 --> 0:11:32.520 for for our customers, so we can be much more efficient, 0:11:32.760 --> 0:11:36.079 I believe going forward. And then finally for our shareholders, 0:11:36.120 --> 0:11:39.440 there's significant value in this in this union. And you 0:11:39.440 --> 0:11:41.160 know from an accretion point of view, from a long 0:11:41.280 --> 0:11:44.679 term revenue and the sustainable growth perspective. Dr Cutler, It's 0:11:44.679 --> 0:11:46.800 been a real write in twelve months for a lot 0:11:46.840 --> 0:11:49.080 of people around the world, and I'm trying to find 0:11:49.120 --> 0:11:51.800 silver linings every day for my children, and one of 0:11:51.840 --> 0:11:54.120 them that I try to lean upon is that perhaps 0:11:54.160 --> 0:11:57.400 we'll get biopharmaceutical research that are cure the cold, or 0:11:57.480 --> 0:12:00.560 cure cancer, cure all sorts of elm ends that we 0:12:00.679 --> 0:12:03.880 have with us today. Do you see those kinds of 0:12:03.960 --> 0:12:08.400 seismic advancements that are made because of the money put 0:12:08.600 --> 0:12:11.880 behind my pharmaceutical research as a result of the pandemic? 0:12:13.800 --> 0:12:15.920 So much? Are we're going to cure cancer because of 0:12:15.960 --> 0:12:21.800 the I think I know, I think we're all very 0:12:21.800 --> 0:12:24.199 focused on that. That's a very big part of our portfolio. 0:12:24.679 --> 0:12:27.360 But what we what we have seen is a real 0:12:27.600 --> 0:12:30.480 focus on clinical trials and the ability to get clinical 0:12:30.520 --> 0:12:34.240 trials moving much faster and a much less bureaucratic fashion 0:12:34.480 --> 0:12:36.200 than we've seen in the past. Of what I'm seeing 0:12:36.600 --> 0:12:39.080 is it would be much more efficient going forward in 0:12:39.120 --> 0:12:41.920 the way we run clinical trials, whether they be decentralized 0:12:41.960 --> 0:12:44.559 or the more traditional And so what we see is 0:12:44.600 --> 0:12:48.520 our sponsors will have more opportunity to put more drugs 0:12:48.520 --> 0:12:50.840 through the pipeline, so to speak, to have more shots 0:12:50.840 --> 0:12:54.440 on goal to get pharmaceuticals and get good drugs to market, 0:12:54.440 --> 0:12:58.079 whether they be cancer drugs, whether they be pandemic or vaccines, 0:12:58.120 --> 0:13:00.840 whether they be other other drugs. That's what we see. 0:13:01.040 --> 0:13:03.680 The pandemic has really caused us to rethink the way 0:13:03.720 --> 0:13:05.560 we do things and know that we can do things 0:13:05.559 --> 0:13:08.280 in very different ways. We were involved in the large 0:13:08.440 --> 0:13:12.079 Visor biointech trial that was one of our big, big studies. 0:13:12.280 --> 0:13:14.480 We were able to get that done so much faster 0:13:14.520 --> 0:13:16.960 than we normally do with these clinical trials, and so 0:13:17.040 --> 0:13:19.200 that that really lays the groundwork, I think for a 0:13:19.280 --> 0:13:24.319 very very strong future in our business. Dr Cutler, thank 0:13:24.320 --> 0:13:26.720 you so much for joining us. We appreciate that. Dr 0:13:26.800 --> 0:13:30.000 Stephen Cutler. He's the chief executive officer of Icon PLC. 0:13:30.200 --> 0:13:33.440 They are based in Dublin. Just announced this week a 0:13:33.600 --> 0:13:36.680 big deal, the biggest healthcare transactions so far this year, 0:13:37.320 --> 0:13:40.840 Icon acquiring p r A Health Sciences. That's a company 0:13:40.880 --> 0:13:44.400 based in Raleigh, North Carolina. Total transaction value of twelve 0:13:44.679 --> 0:13:48.840 billion dollars um and you know Lisa's As Dr Cutler mentioned, 0:13:49.120 --> 0:13:51.760 it was really great to see how some of these 0:13:51.800 --> 0:13:54.080 how quickly these tests and these trials were done. I 0:13:54.120 --> 0:13:56.760 gotta say, can you tell where my mind's at? And basically, 0:13:56.880 --> 0:13:58.680 what is it done? What is it over? Can we 0:13:58.760 --> 0:14:00.840 end the pandemic? I mean, how many times gonna answer 0:14:00.880 --> 0:14:02.960 that question from my kids before I start passing it 0:14:03.000 --> 0:14:06.000 on to every guest that comes on, especially people on 0:14:06.040 --> 0:14:08.320 the front lines, to know the answer. That's where we 0:14:08.360 --> 0:14:11.400 all are. And the good news, Lisa is the metrics 0:14:11.400 --> 0:14:14.280 are really trending in the right direction. So that is 0:14:14.320 --> 0:14:18.000 certainly good news at a very difficult year. Yes, it 0:14:18.080 --> 0:14:20.480 is that time of year again where we hear from 0:14:20.640 --> 0:14:24.320 Warren Buffett and his faith will parse every single word 0:14:24.360 --> 0:14:28.960 he has to say. Cat chick Lynsky follows Warren Buffett follows, 0:14:28.960 --> 0:14:32.320 the finance industry, follows the insurance and Street is really 0:14:32.360 --> 0:14:35.560 the ace on this. She's from Bloomberg News. Cat, we 0:14:35.640 --> 0:14:38.920 haven't really heard that much from Mr Buffett over the 0:14:39.000 --> 0:14:43.280 last year with all that's been going on. What do 0:14:43.320 --> 0:14:45.440 you expect is see and hear and read When we 0:14:45.480 --> 0:14:48.440 do get his letter, well, I think it means it's 0:14:48.480 --> 0:14:50.880 going to pack more of a punch, because you know, yeah, 0:14:50.920 --> 0:14:53.520 we heard from him last May at his annual meetings. 0:14:53.600 --> 0:14:56.320 But during that meeting he sort of expressed caution about 0:14:56.360 --> 0:14:59.600 the whole situation, about the pandemic and especially about the 0:14:59.640 --> 0:15:02.800 econom outcomes from it. So I think its shareholders are 0:15:02.840 --> 0:15:05.720 really looking to this letter to sort of provide some clarity, 0:15:05.760 --> 0:15:08.960 because you know, the letter does describe how Berkshire did 0:15:08.960 --> 0:15:11.960 over the past year. But people really turned to Buffett 0:15:12.000 --> 0:15:14.120 too as kind of a business leader and you know, 0:15:14.240 --> 0:15:17.120 a successful investor, and they want to know his thoughts 0:15:17.120 --> 0:15:20.320 on lots of issues, including the presidential election, in which 0:15:20.320 --> 0:15:23.720 he was really actually quite silent about, and the race 0:15:23.800 --> 0:15:27.360 protests that swept the nation last year, and even more 0:15:27.480 --> 0:15:30.920 investing type issues like the Reddit mania. You know, depending 0:15:30.920 --> 0:15:33.840 on when he put pen to paper um and actually 0:15:33.840 --> 0:15:35.800 wrote this letter, I think people will be interested to 0:15:35.840 --> 0:15:38.040 hear if if he has thoughts on kind of where 0:15:38.080 --> 0:15:41.000 all that stock market speculations stand. Well, this ninety year 0:15:41.040 --> 0:15:43.640 old chief executive officer, the Oracle of Omaha, is one 0:15:43.640 --> 0:15:47.320 of the most famed investors ever to hit Wall Street, 0:15:47.400 --> 0:15:49.640 and yet I do wonder, especially as he takes a 0:15:49.720 --> 0:15:53.080 less of a role at the company, how much import 0:15:53.320 --> 0:15:56.520 his views have at this point given the other companies 0:15:56.560 --> 0:16:00.120 that have sort of filled the void and entered the front, 0:16:00.120 --> 0:16:02.600 the front running seat in terms of influence. I mean, 0:16:02.720 --> 0:16:06.160 has this letter waned with respect to how it's perceived 0:16:06.200 --> 0:16:09.440 on Wall Street? Well so, I I you know, I 0:16:09.480 --> 0:16:12.600 asked that question to these investors who follow him religiously, 0:16:12.640 --> 0:16:15.240 like why do you keep reading it? Because obviously, you know, 0:16:15.520 --> 0:16:17.360 you can look back at his letters at the dot 0:16:17.360 --> 0:16:19.040 com bubble and that sort of gives you a sense 0:16:19.080 --> 0:16:21.000 of what he might think about with you know, the 0:16:21.040 --> 0:16:24.880 current stock market um situation we're seeing. But I do 0:16:25.040 --> 0:16:28.480 think that investors still look to him because he does 0:16:28.560 --> 0:16:31.920 have this historical perspective and if you've ever watched him 0:16:32.000 --> 0:16:33.760 speak at these events, I mean you can tell he 0:16:33.800 --> 0:16:37.720 really has an incredible memory, an incredible recall of everything 0:16:37.720 --> 0:16:40.400 he's read and seen and done, and I think that 0:16:40.520 --> 0:16:43.480 does lend his words still some weight. You know, he 0:16:43.520 --> 0:16:46.640 can really he can take all that you know, we've 0:16:46.840 --> 0:16:49.720 had to kind of ingest over the past year in 0:16:49.800 --> 0:16:52.240 terms of the news and what's happening, and and he 0:16:52.280 --> 0:16:55.280 can sort of step back and say, you know, compared 0:16:55.320 --> 0:16:57.760 to his you know, ninety years of history of being 0:16:57.760 --> 0:17:00.600 on this planet, here's kind of you know, take on it. 0:17:01.640 --> 0:17:03.920 So alright, Cat, one of the things that people really 0:17:03.920 --> 0:17:05.879 are the last several years have really focused on is 0:17:05.920 --> 0:17:07.800 what to do with all that cash. I'm looking at 0:17:07.800 --> 0:17:11.200 the f A function on the Bloomberg terminal for Berkshire Hathway, 0:17:11.200 --> 0:17:13.720 and you know, four hundred over four undred billion dollars 0:17:13.760 --> 0:17:15.919 in cash on the balance. Yes, there's a little bit 0:17:15.920 --> 0:17:21.000 of depth, super super cash rich here. What's the expectation here? 0:17:21.040 --> 0:17:24.240 Can he put that money to work? Yeah? So we 0:17:24.280 --> 0:17:26.879 actually have closer to a hundred and forty five billion 0:17:26.880 --> 0:17:29.439 dollars of cash to work, which is actually close to 0:17:29.440 --> 0:17:31.640 a record for Berkshire, and it is hard. I mean, 0:17:32.440 --> 0:17:35.840 you know, he needs to find bigger deals, bigger stock 0:17:35.880 --> 0:17:39.000 purchases that actually move the needle and kind of generate 0:17:39.080 --> 0:17:42.760 even higher returns for the conglomerate. And when you're you know, 0:17:42.880 --> 0:17:45.280 fighting off private equity firms who are bidding for the 0:17:45.320 --> 0:17:48.679 same company you are, and now the kind of spack boom, 0:17:48.760 --> 0:17:50.720 I think it's made it a lot more challenging for 0:17:50.760 --> 0:17:53.280 Bershire to say, you know, here, here we are as 0:17:53.400 --> 0:17:56.640 a clear you know, buyer of these companies. And so 0:17:56.680 --> 0:17:59.000 I think that's why we've seen trends like he was 0:17:59.040 --> 0:18:02.120 a massive purchaser of stock, at least through the first 0:18:02.160 --> 0:18:06.119 nine months. It's one of his biggest years ever for 0:18:06.160 --> 0:18:09.480 repurchasing stock, which for most companies is so routine, but 0:18:09.560 --> 0:18:12.520 for Bucket, I think it really underscores this point. But 0:18:12.640 --> 0:18:16.959 he's he is willing to expand his horizons if he 0:18:17.000 --> 0:18:19.919 needs to to find ways to deploy that cash. But 0:18:20.000 --> 0:18:23.000 obviously he would love that elephant size deal to come around. 0:18:23.280 --> 0:18:25.320 One thing I'm curious to hear is he's been really 0:18:25.359 --> 0:18:28.760 adamant about American exceptionalism and the growth of the economy, 0:18:28.880 --> 0:18:31.159 talking about how lucky it is to be born in 0:18:31.200 --> 0:18:35.119 America and the growth of the nation uh continuing, and 0:18:35.119 --> 0:18:37.399 he sort of has had complete faith in that for 0:18:37.480 --> 0:18:40.560 a long time. He's been right to a large degree. 0:18:40.560 --> 0:18:43.960 And yet as he tries to diversify his investments, I'm 0:18:44.000 --> 0:18:46.080 curious to know whether he will change his tune at 0:18:46.119 --> 0:18:48.160 all when we see some of the dynamism coming out 0:18:48.160 --> 0:18:50.520 of other places in the world. What's your sense of 0:18:50.560 --> 0:18:54.600 that based on the rhetoric out of Warren Buffett's shop, 0:18:54.640 --> 0:18:58.600 out of his colleagues, UH, just generally at a Berkshire Hathaway, 0:18:59.359 --> 0:19:02.760 I do agree like He's always been very optimistic about America, 0:19:02.800 --> 0:19:04.840 and I think that will continue. I think we'll probably 0:19:04.840 --> 0:19:07.760 still hear from him about, you know, the positive attributes 0:19:07.840 --> 0:19:10.400 he thinks of this country and our systems and how 0:19:10.440 --> 0:19:13.040 they work. Obviously, it'll probably be tempered with, you know, 0:19:13.080 --> 0:19:15.240 how do you view that in terms of the riots 0:19:15.280 --> 0:19:16.920 we saw at the capital and some of the other 0:19:16.920 --> 0:19:19.720 stresses we've had in this democracy over the past year. 0:19:20.160 --> 0:19:23.680 But I do think he is more willing to venture abroad, 0:19:23.760 --> 0:19:26.159 and we saw that last year where he piled the 0:19:26.720 --> 0:19:30.560 billion dollars into Japanese trading house stocks. And I think 0:19:30.640 --> 0:19:33.199 this shows not only the influence of his deputies. I 0:19:33.200 --> 0:19:35.280 think they do have an influence on him kind of 0:19:35.320 --> 0:19:38.800 expanding through horizons, but I think it shows that if 0:19:38.880 --> 0:19:41.160 Berkshire is really going to be able to deploy its 0:19:41.200 --> 0:19:44.680 funds successfully and generate these higher returns, they're going to 0:19:44.800 --> 0:19:46.720 have to start looking abroad. They're going to have to 0:19:46.760 --> 0:19:50.360 figure out different economies and these different types of companies, 0:19:50.400 --> 0:19:54.520 like these trading companies in Japan, and figure out which 0:19:54.520 --> 0:19:57.400 ones are actually gonna fit because Berkshire just is fishing 0:19:57.400 --> 0:20:00.600 in too small of a pond right now. Cat. Thanks 0:20:00.680 --> 0:20:03.840 very much. We really appreciated Cat Chiglinsky, financial reporter for 0:20:03.880 --> 0:20:08.000 Bloomberg News, giving us the latest on Bertrad Hathaway, Hathaway, 0:20:08.080 --> 0:20:10.080 Warren Buffett. Again, it's that time of the year where 0:20:10.080 --> 0:20:12.840 we will hear from the Oracle of Omaha with his 0:20:13.040 --> 0:20:16.720 annual investment letters. Cat was mentioning lots to parse through there. 0:20:19.720 --> 0:20:22.679 All right, let's turn our attention to fiscal stimulus. It 0:20:22.680 --> 0:20:24.560 looks like the House is scheduled to take up the 0:20:24.560 --> 0:20:28.000 stimulus bill on the floor of the Chamber today, with 0:20:28.119 --> 0:20:31.960 passage expected late in the evening or potentially Saturday. Let's 0:20:32.000 --> 0:20:35.080 get the latest on what may or may not be 0:20:35.160 --> 0:20:38.159 included in that bill. We do that with Eric Wasson, 0:20:38.200 --> 0:20:40.879 Bloomberg Congressional reporter. Eric, thanks so much for joining us. 0:20:41.520 --> 0:20:44.399