Speaker 1: This is Bloomberg Business Week. I'm Carol Masser and I'm
Speaker 1: Bloomberg Quick Takes Tim Stanivk. We're here every day bringing
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Speaker 1: pm Eastern Time on Bloomberg Radio or watch us on
Speaker 1: YouTube search Bloomberg Global News. We are certainly seeing stocks
Speaker 1: really across the board trade hired today in a significant way.
Speaker 1: Not participating as much though in that rally is shares
Speaker 1: of Apple. They were down as much as four point
Speaker 1: six percent at their lows today, still off those lows,
Speaker 1: but still down about one point four And this has
Speaker 1: to do with the Bloomberg exclusive, a story about Apple
Speaker 1: backing off plans to increase production of its new iPhones
Speaker 1: UH this year. This is according to folks in the nose.
Speaker 1: So let's get to it with our Bloomberg News West
Speaker 1: Coast correspondent Ludlow normally on the West coast, like for us,
Speaker 1: he's on the East coast and is here in our
Speaker 1: sto here's another one. I don't think we'll let go
Speaker 1: back your stack, baby, what a treat. So what's going
Speaker 1: on here? What do we know? And it's complicated in nuance,
Speaker 1: but you know, sources tell us that just before the
Speaker 1: iPhone four teen was announced, they went to supplies and said,
Speaker 1: let's boost production by around six million units. We were
Speaker 1: thinking it would be ninety million this year for the iPhone,
Speaker 1: which was in line with last year. They requested the
Speaker 1: supplies braced for an additional six million, and according to
Speaker 1: our reporting, overnight they walked that back. And the concern
Speaker 1: is that that great demand for this new handset that
Speaker 1: they thought would be there actually didn't materialize. And we've
Speaker 1: already had some evidence of that in the pre ordered numbers.
Speaker 1: Two So when I look at Apple shares, they fell
Speaker 1: as much as four point six percent, but they've been
Speaker 1: steadily pairing their losses. And this doesn't sound like a
Speaker 1: good story for Apple right, less demand for its highest
Speaker 1: priced iPhones or for those super expensive high marking phones.
Speaker 1: Yet it's not as bad as you might think either.
Speaker 1: So the Cell side in particular is sanguine because most
Speaker 1: of them were modeling for ninety million units anyway, So
Speaker 1: they look at this report and they go, well, it
Speaker 1: hasn't really changed anything for us. It's still ninety million.
Speaker 1: There there are some specific pieces of reporting that's so
Speaker 1: important that there's evidence that the consumer, particularly in China,
Speaker 1: is going for that higher end model that the fourteen
Speaker 1: pro Okay, So while there might be concerned about overall volume,
Speaker 1: they are selling the more expensive hand set, and so
Speaker 1: if they stick to that original ninety million goal, which
Speaker 1: was modeled by the Street, then maybe those higher A
Speaker 1: sps can boost the top line, even if just a little,
Speaker 1: because they're selling more of them are more expensive. What
Speaker 1: I thought was interesting, and I bet you picked up
Speaker 1: on this our Bloomberg intelligence team, Ana Grana, you know,
Speaker 1: reminding us um because this was about, oh, I guess
Speaker 1: the belief that there was, as you said, China demand,
Speaker 1: European demand weak. And he reminded us that those two
Speaker 1: regions are about Apple's total sales eat. I mean that's massive, right,
Speaker 1: So we need to think about macro stories here, right, Yeah,
Speaker 1: this is the why do we care about this? And
Speaker 1: it's the rich people buy iPhones, and even in a recession,
Speaker 1: they still buy iPhones. What we're looking for is the
Speaker 1: kind of bigger picture effect. We know that the smartphone
Speaker 1: market is soft, particularly in China. The preorder data report
Speaker 1: from Jeffreys this Monday showed wasn't great in China, but
Speaker 1: good for the higher price models. We need some lens
Speaker 1: with We know what the FED is doing, we know
Speaker 1: about the outlook for recessions around the world and inflation.
Speaker 1: What we do is we look to the company movement
Speaker 1: and action to try and get another kind of read
Speaker 1: on the consumer. And I think a lot of what
Speaker 1: this story did would say things are pretty bad and
Speaker 1: key key markets still they're going to sell a lot.
Speaker 1: I always feel like, I know when you tempered back
Speaker 1: the Apple numbers, but they still kind of blow me away. Yes,
Speaker 1: even the expectations. If if it's a lower number, it's
Speaker 1: still a lot of stuff. I like what Global Equities
Speaker 1: Research said. They called Apple the first casualty of recession
Speaker 1: and said that the collapse demand for these iPhones is
Speaker 1: just a tip of the iceberg. You could see a
Speaker 1: lot of layoffs across and through the Apple supply chain.
Speaker 1: In the months to come yes and take this is
Speaker 1: one part of a whole. The next piece of evidence
Speaker 1: we looked to his Micron earnings Thursday. Why biggest maker
Speaker 1: of memory chips d RAM also a huge supply to
Speaker 1: Apple If their earnings are soft, more evidence that the
Speaker 1: broader market for electronics slowing down. The one thing then
Speaker 1: also intrigued by two when it comes to Apple is
Speaker 1: that they have the ability to just call it. Their
Speaker 1: suppliers say we want six million more and then a
Speaker 1: couple of days or months later say you know what,
Speaker 1: no scrap that we're not doing that anymore. And the
Speaker 1: suppliers just have no not going to say, you're not
Speaker 1: going to say that's fine. Whatever we plan to all
Speaker 1: those people were going to bring in, we're not bring
Speaker 1: them in now. And the equity pain was felt in Asia,
Speaker 1: for those suppliers in Europe, for st micro in here
Speaker 1: in the United States, and they all scrambled. We heard
Speaker 1: from sources one supply completely shifted production to just the
Speaker 1: pro the higher end. Well, what if that doesn't stick
Speaker 1: and people end up wanting the cheaper models. Well, as
Speaker 1: we reach out to Apple and look for some commentary
Speaker 1: or some clarity on this, I mean, what is it,
Speaker 1: you know, top of mind for you, if you're sitting
Speaker 1: down with the CEO of Apple, what would you want
Speaker 1: to be asking them right now other than to confirm
Speaker 1: pla is this true? An Apple spokesperson declined to comment
Speaker 1: for the story. You know, Apple is a company that's
Speaker 1: had tremendous growth, and what we're talking about here is
Speaker 1: flat unit growth ninety million last year this year. That's
Speaker 1: a lot of iPhones. But at the top line, I
Speaker 1: think that the consensus is for two revenue growth. That's
Speaker 1: not what Apple does. You know, we've been through the
Speaker 1: pandemic era cycle, we've been through the five G supercycle.
Speaker 1: What's going to lift them up into that next phase
Speaker 1: of growth? And there's a lot resting on people buying
Speaker 1: the expensive Pro hand set. And that's why there's a
Speaker 1: lot of questions about Tim Cook as well, because he's
Speaker 1: not the visionary that Steve Jobs was. He's an incrementalist, right.
Speaker 1: He makes the iPhones better and improves the guts, but
Speaker 1: maybe not the actual aesthetic of the phone that people
Speaker 1: get excited about. So the iPhone fourteen and the Pro,
Speaker 1: the Pro had fancy camera features, very high speck but
Speaker 1: what was the update. It was satellite enabled capabilities. If
Speaker 1: you're stuck up a mountain or you're in the ocean,
Speaker 1: you can connect via your iPhone. Very rich people. Right,
Speaker 1: there's the thing. Who's that helping? Like? Is that going
Speaker 1: to hiking up? It doesn't matter whether I will I
Speaker 1: will say, like I'm looking to upgrade my phone again,
Speaker 1: but I keep looking for something that's an incremental or
Speaker 1: bigger boost a change. Um, and that that better camera
Speaker 1: in the satellite capability doesn't do it for you. Camera
Speaker 1: that does dishes is a laundry like that kind of thing. No,
Speaker 1: but it's like it's an important stock to watch. But
Speaker 1: I do think you guys are right. You pointed out
Speaker 1: it was down four point six percent. It's lows. It's
Speaker 1: come off of that with the overall rally. But um,
Speaker 1: Redmont gun and stuff. He has all the details very early.
Speaker 1: So yeah, yeah, to see him like a big scoop
Speaker 1: by Bloomberg News, does seem a bit at the company
Speaker 1: or something like he has lots of friends at Apple.
Speaker 1: Oh my god, alright, folks, we gotta run low. Bloomberg
Speaker 1: News West Coast correspondent. He is here on the East
Speaker 1: Coast for a bit, joining us here in our interactive
Speaker 1: broker studio. This is Bloomberg. This is Bloomberg Business Week
Speaker 1: with Carol Masser and Bloomberg Quick Takes Tim Stinovic on
Speaker 1: Bloomberg Radio. It's a story we covered big time yesterday
Speaker 1: about what was up with using what's app that led
Speaker 1: to surveillance failures across Wall Street. More than two billion
Speaker 1: in fines already levied to a roster of firms including
Speaker 1: b of A City, Goldman, Morgan Stanley, eleven Wall Street
Speaker 1: banks in total prevailing to stop staff from using unauthorized
Speaker 1: messaging platforms. Scarlett, this is one of our most read
Speaker 1: stories on the Bloomberg today. I'm just looking at some
Speaker 1: of the bank's named. It's hard to find a bank
Speaker 1: that we know that's not included in this list. Hannah
Speaker 1: Lovett has been following this story from the beginning and
Speaker 1: she joins us. Now, Hannah, there's been more than two
Speaker 1: billion dollars and finds levied so far, as Carol was
Speaker 1: just saying, but the banks are now taking action in
Speaker 1: a different way as well. They just opened the vault
Speaker 1: to let her in and welcome um. What kind of
Speaker 1: compliance steps of regulatory measures? Regulatory solutions are these banks
Speaker 1: coming up with. Yeah, So beyond the fines that came
Speaker 1: out in the orders yesterday, they agreed to um hire
Speaker 1: compliance consultants to make sure that they're you know, monitoring
Speaker 1: and preserving these messages lay, Yeah, to the extent that
Speaker 1: they're supposed to be. And you know that the these
Speaker 1: firms are required by law to do this. And that
Speaker 1: was already um you know, becoming an issue just because
Speaker 1: of the proliferation of these messaging apps UM you know
Speaker 1: what's up signal you name it UM. So that was
Speaker 1: already a thing pre COVID. And then if you think about,
Speaker 1: you know, what happened in early when everyone was working
Speaker 1: from home and like you know, you you went from
Speaker 1: saying something to your colleague next to you to maybe
Speaker 1: like tapping out a message. So that wasn't what started this,
Speaker 1: but that definitely made it a bigger deal. I do
Speaker 1: feel like it's part of our world, right, we were
Speaker 1: talking before we got going. I mean, how often do
Speaker 1: I like send myself to my Gmail or something something
Speaker 1: I want to do for work or just a memory.
Speaker 1: It's kind of what's fun about We're not fun? What's
Speaker 1: interesting about the stories? We get more and more details.
Speaker 1: Is we're finding out about the worst offenders. So what
Speaker 1: do we know about them and what level and what
Speaker 1: kinds of things they were doing? And do we know
Speaker 1: names totally? Um, well, we don't know names. We don't
Speaker 1: know names. Why not because they did not name them
Speaker 1: in the orders. Okay. My suspicion is if they start
Speaker 1: to name people, you'd get people the high at the
Speaker 1: highest level, as you get all kinds of people like
Speaker 1: who would not be ensnared in this right? I mean,
Speaker 1: I think, you know, as demonstrated by like you said,
Speaker 1: it was like virtually every major bank yesterday. And you know,
Speaker 1: they said that the investigations on going, so there could
Speaker 1: be more, but like you know, it was everywhere. I
Speaker 1: think that was a general conclusion, um, And they did
Speaker 1: this whole thing. You know, we had a story earlier
Speaker 1: this year about how the US was mandating this look
Speaker 1: this like strategic look across the board into you know,
Speaker 1: thirty thirty five phones at each firm, um, and that
Speaker 1: was mandated to kind of get a sense of the
Speaker 1: magnitude of this and how much was happening. And clearly,
Speaker 1: you know, they all ended up getting fined around the
Speaker 1: same thing, like that's it's like, oh, you're all doing
Speaker 1: it drilled down though, Like there's like tell us about
Speaker 1: be of A and what we found out for you
Speaker 1: because because the specifics to me are kind of interesting,
Speaker 1: so we have an idea. Right. Also, they disclosed to
Speaker 1: most and penalties as well. Right, they definitely the most
Speaker 1: um they did, but they did by the CFCC, so
Speaker 1: they their sec fine was the same everyone else and
Speaker 1: the gosh a little more CFCC. But there's so so
Speaker 1: basically the way that these things were structured was that
Speaker 1: it was in order for each firm and there was
Speaker 1: an area of like a couple of paragraphs where it
Speaker 1: was the specifics for each firm. So be avail I'll
Speaker 1: just look at it. Um a managing director at the
Speaker 1: investment bank with the US wide role sent and received
Speaker 1: thousands of messages including the colleagues, clients and personnelity other firms,
Speaker 1: and then the head of an equity's trading desk texted
Speaker 1: with more than fifty colleagues and numerous people outside the
Speaker 1: firm and like so that was what be eviated. You
Speaker 1: can go down the list and truly it was like
Speaker 1: you know, this m D and this part of the
Speaker 1: bank did you know send this many thousand messages to
Speaker 1: these people and and it really was just every Yeah,
Speaker 1: it was like copy and paste, you know. And you
Speaker 1: guys reporting because you say when you're talking about be
Speaker 1: and forgive me for singling it out, because if you
Speaker 1: could pick a Scarlett said, uh Stanley, no, mora Ubs
Speaker 1: City credit suite, it covers No, She's right, she covers
Speaker 1: all ahead of a trading desk told brokers at others
Speaker 1: to delete message they messages they had exchanged on personal
Speaker 1: devices and to switch to signal, which, as we know,
Speaker 1: is encrypted according to the CFTC. So is it just
Speaker 1: a case of we were just kind of talking to
Speaker 1: each other, we weren't trying to hide anything, or is
Speaker 1: it something deeper? And that's why it's worries. I think
Speaker 1: that's one of the things that TVD about this whole
Speaker 1: investigation is like, you know, at this stage they're not
Speaker 1: calling out wrongdoing, they're like found within the messages. They're
Speaker 1: calling out the wrongdoing that is that these messages were
Speaker 1: happening in the first place. But you know, when the
Speaker 1: JPM order came out in December and again yesterday when
Speaker 1: these came out, like it clearly states that the investigation
Speaker 1: is ongoing, So I think that will be you know,
Speaker 1: something that I will certainly be paying attention to going
Speaker 1: forward is is what else might come out of this?
Speaker 1: So when we say that the investigation is ongoing, do
Speaker 1: we think do we suspect that there will be more
Speaker 1: fines levied or will it be a case of the
Speaker 1: banks will say yeah, yeah, yeah, we get that there's
Speaker 1: a lot of wrongdoing. Let us figure out what we
Speaker 1: need to do and come up with our own solutions.
Speaker 1: That's a good question. You feel like what else? That
Speaker 1: is a good question. I mean, I wouldn't necessarily rule
Speaker 1: out any of that. I think that you know, a
Speaker 1: lot of banks were named yesterday, some weren't, So we could,
Speaker 1: you know, if if it's indeed ubiquitous a quad across
Speaker 1: the industry as it as it seems, we might be
Speaker 1: able to look there um and then beyond that. Yet
Speaker 1: anything in the underlying messages that they would find, uh,
Speaker 1: that would be a case of wrongdoing. But we haven't
Speaker 1: gotten there that. I have a quick question, how can
Speaker 1: you communicate with clients or colleagues then if you need
Speaker 1: to use your device and just kind of about twenty seconds, Yeah, um,
Speaker 1: I mean email. I think they have like an app
Speaker 1: installed now that does the tracking so they can use that,
Speaker 1: or like a company issued phone. Yes, so much just
Speaker 1: put in place after the financial crisis. Will people be fired?
Speaker 1: Do you think after this they were at drap Morgan
Speaker 1: TBD or to come kind of levet you and the
Speaker 1: team and the reporting has been really great on this
Speaker 1: and we really appreciate getting an update. Or Hannah Levit,
Speaker 1: she is financial reporter at Bloomberg News, joining us in
Speaker 1: our interactive Broker studio. You're listening to Bloomberg Business Week
Speaker 1: with Carol mass Her and Bloomberg Quick Takes Tim Stinovic
Speaker 1: on Bloomberg Radio. Well, on a day where we are
Speaker 1: focusing so much on Biogen and the very promising results
Speaker 1: of that company's Alzheimer's drug, we are reminded once again
Speaker 1: about those big biotech and big farmer names that continue
Speaker 1: to work on better treatments, are new ones to tap
Speaker 1: some of our major medical ailments. So that brings us
Speaker 1: to a story in the upcoming a new issue of
Speaker 1: Bloomberg Business Week. That's story already online at Bloomberg dot
Speaker 1: com Slash business Week, and of course on the Bloomberg Terminal.
Speaker 1: So let's get to it. It's about how big Pharma
Speaker 1: is chasing a fifty five billion dollar prize of safer
Speaker 1: blood thinners. The story from Bloomberg News healthcare reporter Angelica
Speaker 1: Angelica Peebles. She's on the phone in San Diego. Hey, Angelica,
Speaker 1: nice to have you here with Scarlet Food and myself.
Speaker 1: So tell us about your story and what you set
Speaker 1: out to do. Big Pharma is really searching for new
Speaker 1: treatments for blood clots, and that's because we have some
Speaker 1: really good treatments right now, namely Eloquence and z Arelto.
Speaker 1: They are some of the best selling drugs in the world,
Speaker 1: but they also carry some pretty big risks um namely bleeding.
Speaker 1: It can take a variety of forms, whether that's just
Speaker 1: bruising a little bit more easily, or in rare cases,
Speaker 1: turning into brain bleeding, which can of course be lethal.
Speaker 1: So it's just a really big prize out there for
Speaker 1: these companies to create something that's just as effective as
Speaker 1: the treatments we have now, but safer. And that's how
Speaker 1: the companies landed on a different enzyme. It's called factor
Speaker 1: eleven A, and basically there's this whole chain plotting system
Speaker 1: in your body. We won't have We don't get into
Speaker 1: all the details. But right now the main drugs target
Speaker 1: one enzyme and now they're going after another, and it's
Speaker 1: still relatively early. We just have um more recent data
Speaker 1: and the companies still have to do these really big
Speaker 1: trials to prove that they work. But if they do
Speaker 1: UM it could mean a lot of companies and of
Speaker 1: course for patients. So when we say big farmah, which
Speaker 1: companies are doing the chasing hair, Which ones are investing
Speaker 1: a lot of time and money into this. There are
Speaker 1: a lot of companies in this game, but the biggest
Speaker 1: ones that we're focusing on right now are Bristol Myers,
Speaker 1: squib Johnson and Johnson and those two of our partners.
Speaker 1: And then there which is of course the German company
Speaker 1: behind Asprin, and those are the ones that are going
Speaker 1: into these big trials UM and are. They're both working
Speaker 1: on pills that you can take. There's another company called
Speaker 1: Antos and they are spin out from nov Artists and
Speaker 1: they are using UM biologic drugs, so it would be
Speaker 1: infused or injected. I mean some of these names A
Speaker 1: Delica are already bringing in some money for these big
Speaker 1: farmer names, aren't they yeah, eloquence and are relative or
Speaker 1: huge money makers, And they will lose their patent exclusivity
Speaker 1: um within the next few years, and that means that
Speaker 1: generic treatments will be able to come onto the market,
Speaker 1: presumably undercutting the price, and that poses a big question
Speaker 1: for those companies on how they'll replace that money, and
Speaker 1: so they see these new drugs as a way to
Speaker 1: fill that whole. Of course, um they'll have to compete
Speaker 1: against the now the cheaper drugs that are already on
Speaker 1: the market. But that's why it's so important to show
Speaker 1: that these drugs are much safer, because if that's the case,
Speaker 1: then they can treat far more patients people who right
Speaker 1: now either can't or don't want to take a drug
Speaker 1: that might um cause them to bleed out. God's a
Speaker 1: bit if they cut themselves, cut themselves shaving, or something
Speaker 1: along those lines, so it could expand the market for them.
Speaker 1: It's interesting that big farms chasing this because we know
Speaker 1: that in a lot of ailments UM it's often the
Speaker 1: smaller biotech companies that are doing a lot of the
Speaker 1: investing in some kind of new medical solution or some
Speaker 1: kind of farmers pharmacist pharmacological solution to ems. Yeah, but
Speaker 1: the fact that big farmers in here shows that the
Speaker 1: potential to make money here is massive. Are there smaller
Speaker 1: companies that are perhaps making headway doing anything interesting in
Speaker 1: this space? There are smaller companies, Anthos being one of them.
Speaker 1: Of course they came from a big barma company, but
Speaker 1: they're doing it alone now, and there are more. But
Speaker 1: really this is a perfect um perfect disease, a perfect
Speaker 1: indication if you will, for big pharma because so many
Speaker 1: people um experience blood clots. In fact, blood clots are
Speaker 1: responsible um for an estimated one in four deaths worldwide,
Speaker 1: which I was shocked to hear, And so that really
Speaker 1: suits itself well for a big company to go after
Speaker 1: running these trials will take thousands, if not you know,
Speaker 1: many more patients around the world, and it will take
Speaker 1: a lot of money to actually prove that these works.
Speaker 1: That this is a perfect opportunity for big farma to play. Hey, Angelica,
Speaker 1: is this part of kind of where finally reaping the
Speaker 1: benefits of that huge mapping of the genome and really
Speaker 1: just getting to understand on a much greater, deeper, smarter
Speaker 1: level genetics in terms of creating methodologies or pharma or
Speaker 1: treatments that really can target different individuals who maybe didn't
Speaker 1: respond so well to a previous treatment. Good question, Thank you.
Speaker 1: The way that UM scientists decided to factor or focus
Speaker 1: on factor eleven a, which is that enzyme, is because
Speaker 1: of genetic data, So that is UM. You know, this
Speaker 1: is one example of how genetics are marrying drug development
Speaker 1: and how we're using UM the information that our genetics
Speaker 1: provide to create better drugs. And the scientists found was
Speaker 1: that there were certain people who maybe they've led a
Speaker 1: little bit more than your average person, say if they
Speaker 1: were getting their teeth cleaned, but they didn't bleed as
Speaker 1: much as people with other forms of hemophilia. And at
Speaker 1: the same time, they appeared to be at less risk
Speaker 1: of stroke than the normal population. And so that gave
Speaker 1: scientists a clue that going after this particular enzyme and
Speaker 1: actually blocking it could give you the benefit of, you know,
Speaker 1: preventing blood without this unnecessary this added burden of potentially
Speaker 1: unwanted bleeding. And so that was really how this all
Speaker 1: came about, and we're just going to see more and
Speaker 1: more of this going forward. So Angelica big picture, when
Speaker 1: we talk about treatments for Alzheimer's, for instance, it very
Speaker 1: much feels like one step for two steps for one
Speaker 1: step back. What's the trajectory like for a new safer
Speaker 1: blood than or is it similarly staggered and frustrating? Drug
Speaker 1: development is never perfect, and companies will remind you oftentimes
Speaker 1: that they fail more than they succeed. And what's interesting
Speaker 1: about the Phase two data that Bear, as well as
Speaker 1: the Silmyer, squib and Johnson and Johnson presented last month,
Speaker 1: is that the drugs actually failed in their trial, and
Speaker 1: that caused a lot of concern that maybe these don't
Speaker 1: work as well as these thought they do. The company said, look,
Speaker 1: these studies weren't powered to show just how well the
Speaker 1: drugs work. It was more about finding the right dose
Speaker 1: and making sure that they live up to their promise
Speaker 1: of being safer. Um right now, there's a lot more
Speaker 1: skepticism that they might not be everything that we thought
Speaker 1: they would be. So if their Phase three trials are
Speaker 1: not guaranteed to succeed by any means, and they could
Speaker 1: very well fail, we'll have to see. Yeah, my brother
Speaker 1: who worked in the pharmaceuticals for a long time and
Speaker 1: we had debate about the cost of pharmaceuticals and treatments
Speaker 1: is like, keep in mind that this takes a long
Speaker 1: time to develop stuff, and a lot of stuff doesn't
Speaker 1: pan out, so we'd always go kind of round and round.
Speaker 1: It's like a lottery. Yeah. Bloomberg News healthcare reporter Angelica
Speaker 1: Peoples judging us on the phone from San Diego. That
Speaker 1: story in the upcoming new issue of Bloomberg Business Week
Speaker 1: on newsstands tomorrow. Already online a Bloomberg dot com slash
Speaker 1: Business weekend, of course, on the Bloomberg terminal brom Journal. Yeah,
Speaker 1: but you let me drive? Oh no, no, no Ah
Speaker 1: night please album Bobart Rivals. I want to drive. It's
Speaker 1: a good question. This is good ride to the clothes
Speaker 1: well radio, all right, everybody, just about ten minutes left
Speaker 1: in today's trading session, and man, we are seeing some
Speaker 1: buying here in the last few minutes of trading, as
Speaker 1: Dug mansioned those equity averages well above two percent, two
Speaker 1: point three percent higher on the SNP NAZDAC hired by
Speaker 1: almost two and a half percent. We're pretty much at
Speaker 1: our best levels of the session. This is we've seen
Speaker 1: yields back off, so Let's get to it. Let's get
Speaker 1: to the drive to the close with Doug Cioca, CEO
Speaker 1: and partner at Cavar Capital Partners over a billion in
Speaker 1: assets under management. He joins us on the phone in Leewood, Kansas,
Speaker 1: uh and joins us on the phone from there. How
Speaker 1: are you, Doug. I'm doing very well. How are you doing?
Speaker 1: I'm doing okay, I'm doing okay. But I gotta ask
Speaker 1: you something really important to happened here in New York City.
Speaker 1: I don't know if everybody saw it, but our New
Speaker 1: York City Mayor Eric Adams actually making some amends about
Speaker 1: New York versus Kansas. Here's what he had to say.
Speaker 1: New York has a brand and when people see it,
Speaker 1: it means something. You know when we go there. It's
Speaker 1: not Kansas doesn't have a brand when you go there. Okay,
Speaker 1: you from Kansas out New York City Mayor Eric Adams
Speaker 1: um having some fun about branding. But come on, Doug,
Speaker 1: you know you are from Kansas. One of the reasons
Speaker 1: I love talking to people around the country, especially when
Speaker 1: it comes to markets in the economy, is we get
Speaker 1: a different perspective. So come on in. Yeah, we were
Speaker 1: shocked to learn that we were the land of no
Speaker 1: brand the last night. Imagine it made its way around
Speaker 1: our local media circuit, and so it's actually kind of
Speaker 1: kicked up a lot of sort of spontaneous contributions to
Speaker 1: define the brand of Kansas. And I don't know if
Speaker 1: you want to invoke the national basketball champion Kansas Jayhawks
Speaker 1: from this year, our agricultural contribution in the world, grade schools,
Speaker 1: low crime, and lest us never forget the birthplace of
Speaker 1: American treasure had left. So, oh my gosh, Oh that's
Speaker 1: a good point. You know, I got thought of that.
Speaker 1: You make a good point, good, a really good point. Um.
Speaker 1: I gotta say I love the heartland. And like I said,
Speaker 1: I love talking to people, especially when it comes to
Speaker 1: financial markets and trying to get a grasp of what's
Speaker 1: going on in terms of sentiment across the country. And
Speaker 1: when we go to you, Doug, we get that. Tell us,
Speaker 1: how does it feel in Kansas right now? Are you
Speaker 1: guys have freaked out as much as we all are
Speaker 1: about recession, fed moves, higher rates, what's going on overseas?
Speaker 1: Give us give us some perspective here. Yeah, I think
Speaker 1: all of that, I mean, and it is we know
Speaker 1: I mean, being in the Midwest is wonderful and we
Speaker 1: love sort of the set of values in the Midwestern
Speaker 1: mentality and friendliness, but you know that the market is global,
Speaker 1: and we feel as plugged in here is I think
Speaker 1: I probably would if I was sitting in Chicago, New
Speaker 1: York and London. So I think the way information makes
Speaker 1: its way around the universe these days, and we don't
Speaker 1: certainly don't feel disconnected, and the psyche of certainly our
Speaker 1: clients is fragile. I think just the crossed asset class
Speaker 1: correlation that has defined the first nine months of this
Speaker 1: year has been really pronounced. And I think that unfortunately,
Speaker 1: when when you have to go through some um expectation resetting,
Speaker 1: when you get these resets and valuations, and you just
Speaker 1: try to frame perspective on what that can mean well
Speaker 1: into the future, and we're very optimistic, and I think,
Speaker 1: unfortunately you have to plow through this um. It sounds
Speaker 1: silly to be optimistic in the face of perspective recession
Speaker 1: in a bare market, but we can't help but be
Speaker 1: so you have to plow through this. And I wonder
Speaker 1: there's this word disorder that comes up a lot these days. Uh,
Speaker 1: Jenny Yellen says there's no disorder in the markets at
Speaker 1: least stateside. Larry Summer says, yes, there was in the
Speaker 1: UK bond market. Uh, but he sees risks of breakdowns
Speaker 1: to come. How do investors prepare for that possibility of
Speaker 1: breakdowns to come? Do you just sit in cash? You
Speaker 1: move to cash? Do you uh sit tighten, not do anything.
Speaker 1: Look at my four oh one kid, I kind of
Speaker 1: wish I had moved to cash. I'm just gonna put
Speaker 1: that out there. Yeah, I think we we could have
Speaker 1: used an expression for a while and just talking about
Speaker 1: managing for the short term and investing for the long
Speaker 1: term and keeping a certain amount of capital out of
Speaker 1: the path. That's insanity, I think is just prudent um
Speaker 1: asset management. But I think more than anything, And and
Speaker 1: you know, the feed seems to think that um, their
Speaker 1: experimentation is not live. Right. This is not like a
Speaker 1: randomized control trial or only one group of constituents is
Speaker 1: impacted by their actions, right, their direct implications and many
Speaker 1: indirect implications. Where right, no area of a globally intertwined
Speaker 1: economy is going to be immune from some of the
Speaker 1: things they're doing. And I heard an interview with Lizzianne
Speaker 1: Saunders the other day, and she made a really good
Speaker 1: point about the SET trying to differentiate between financial market
Speaker 1: volatility and financial system instability. And I do think the
Speaker 1: FED seems at best apesthetic to the former, but hopefully
Speaker 1: you know not to the ladder, and with taking place
Speaker 1: within the UK is a pretty good example of the ladder. Yeah,
Speaker 1: financial market uh, movement volatility is certainly what we're seeing
Speaker 1: right now. If you were to take a step back,
Speaker 1: what is the what is the tail? What is the
Speaker 1: dog here? What's driving what here? Yeah, it's a great question,
Speaker 1: you know. I think what's interesting when you do take
Speaker 1: the step back, right is if you if you are
Speaker 1: kind of understanding accountability, which for the exercise is beneficial,
Speaker 1: so you can ask your tave a pathway forward and
Speaker 1: then you understand the accountability. Why we have inflation. We
Speaker 1: had a lot on the demand side because coming out
Speaker 1: of the pandemic, we had a bunch of stimulus that
Speaker 1: justifiably came to the economy the bestically and globally and
Speaker 1: likely overstayed uh the necessary point of being retained. And
Speaker 1: then you have some of the externalities, right that have
Speaker 1: taken place because of supply mind disruptions in Russia, Ukraine
Speaker 1: and over in China, and I think what you try
Speaker 1: to do is then find the combination of steps with
Speaker 1: extraction of liquidity, being mindful of the things that are
Speaker 1: out of your control, and then use a term that
Speaker 1: Powell used in his press conference four times but it
Speaker 1: is not actually incorporated into practice, understand that the implementation
Speaker 1: is going to be long and variable, and that would
Speaker 1: require a set of patients to understand the direct impact
Speaker 1: of some of these military policy initiatives. If you had
Speaker 1: that opportunity, I think you take a little the volatility
Speaker 1: out of the system, but you restore much more needed
Speaker 1: stability to this. Hey, Doug, what's a smart metric to
Speaker 1: keep an eye on for investors? Where I feel like
Speaker 1: the metrics is a lot of volatility in them, and
Speaker 1: I'm not quite sure what we should be focusing on
Speaker 1: at this point. You know what's been fascinating curls this week?
Speaker 1: Despite the hawkersh tone of the FED meeting, follow through
Speaker 1: at that FED Lessons event on Friday, and then reinforce
Speaker 1: through harsh language of Mester Cash Carrian Bullard, the terminal
Speaker 1: rate projection has dropped every day this week and now
Speaker 1: from the four point four for March and next year
Speaker 1: because the market thinks this said we'll see the fruits
Speaker 1: of its labor comes through in better cp I PC
Speaker 1: or job reads or the realization of these global ramifications
Speaker 1: courtesy what took place in the UK, and that may
Speaker 1: cause the said to pause, right, maybe a little bit
Speaker 1: ahead of at SCP projections, right. I think that would
Speaker 1: be a really good thanks for them to deliberate about doing.
Speaker 1: That's interesting, which also I keep thinking about what Charlie
Speaker 1: Evans told CNBC in terms of maybe uh FED rate
Speaker 1: moves potentially topping out come March. Doug Cioca, we love you,
Speaker 1: We love Kansas, chief executive officer partner at of Our
Speaker 1: Capital Partners, joining us on the phone from Leewood, Kansas.
Speaker 1: He's got about a billion dollars more than that under
Speaker 1: management at his firm. Thanks for listening to Bloomberg Business Week.
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