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Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside

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Speaker 1: my co host Matt Miller.

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Speaker 2: Every business day we bring you interviews from CEOs, market pros,

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Speaker 2: and Bloomberg experts, along with essential market moven news.

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Speaker 1: Find the Bloomberg Markets Podcast on Apple Podcasts or wherever

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Speaker 1: you listen to podcasts, and at Bloomberg dot com slash podcast.

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Speaker 1: What's new in the last twenty four hours here? What

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Speaker 1: are we seeing?

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Speaker 3: Look, the resolution with First Republic was great to see.

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Speaker 3: The market is working, the market resolution mechanism is working.

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Speaker 3: But on the other hand, there's still some uncertainty within

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Speaker 3: the regional bank space. There's lots of negativity with regards

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Speaker 3: to deposits stability, rising fundy costs, increased regulation, potentially in

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Speaker 3: inadequacy on the capital front, so there's lots of negativity.

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Speaker 2: Those things all sound like not the reason we saw

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Speaker 2: the seale off yesterday.

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Speaker 1: I mean it not.

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Speaker 2: Is it not that shorts after First Republic didn't see

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Speaker 2: any kind of relief rally and said, you know, let's

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Speaker 2: short the hell out of this basket of stocks again.

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Speaker 2: Let's let's have another run at them, because I saw

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Speaker 2: from S three data, you know, Bob Sloan shop S three.

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Speaker 2: They give us a lot of important short selling data.

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Speaker 2: Ninety six percent of KRI shares are sold short. That's amazing, really.

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Speaker 1: Wow, ninety six percent.

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Speaker 2: That means that there's only four percent of shares out

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Speaker 2: there that haven't been borrowed to sell short. And that's

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Speaker 2: probably because those share holders don't even know they have them.

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Speaker 3: Look, the short sellers have done a great job with

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Speaker 3: what happened with SBB, with signature, with First Republic and

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Speaker 3: the playbook still there. Nothing has changed from an exogy

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Speaker 3: to standpoint from Washington or the regulators to derail the

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Speaker 3: narrative that if you short a stock it could go

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Speaker 3: into receivership.

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Speaker 1: All right, I want to bring in another smart mind,

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Speaker 1: and so Matt and I could just sit on the

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Speaker 1: sidelines and let these people kind of debate it. Neil Grossman,

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Speaker 1: former CIO with t k n G Capitol, joins, is, Neil,

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Speaker 1: you've been around the block once or twice. What do

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Speaker 1: you make this bank stuff here? I mean I placed

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Speaker 1: all the blame squarely on Herman Chen and the fellow

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Speaker 1: regional bank people.

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Speaker 4: Look, there are a couple of levels of this. Number one,

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Speaker 4: it was pretty hard to accept what happened with SVB

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Speaker 4: and signats are to begin with, because senior management had

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Speaker 4: to know how badly impaired their assets.

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Speaker 2: Were, not to mention regulators at the Federal Reserve and

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Speaker 2: the FDI see they all claim to have known a

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Speaker 2: year in advance and apparently did nothing.

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Speaker 4: They didn't do anything. However, on the other side, which

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Speaker 4: I believe is in part equally culpability. A year ago today,

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Speaker 4: I think we were all together. Inflation was peaking at

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Speaker 4: nine percent, the FED was just starting to cut and

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Speaker 4: mister Powell and Coe just starting to raise. Were a

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Speaker 4: parton me. We're promising or expecting that by September of

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Speaker 4: this year, FED funds would be peaking between two and

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Speaker 4: two and a half percent. So if you're running an

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Speaker 4: institution like SVB or anything even JP Morgan, and for

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Speaker 4: the last twenty five years, you've been told to ignore

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Speaker 4: reality and ignore risk and just listen to the guy

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Speaker 4: at the FED telling you what she's gonna do. You

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Speaker 4: don't react in interrrational and conservative way.

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Speaker 2: Has anybody herman at these banks tried to put any

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Speaker 2: of the blame on the FED because it is fact

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Speaker 2: that they have raised interest rates by five hundred basis

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Speaker 2: points in about a year. Right, that would be difficult

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Speaker 2: for a lot of investors.

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Speaker 3: There has been no blame on the FED, and I

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Speaker 3: don't think you want to do that because the FED

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Speaker 3: also is your regulator, so you can be blaming the

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Speaker 3: regulators for your own problems.

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Speaker 4: Well, that's why we're here. We can blame. And by

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Speaker 4: the way, they were way too slow in raising rates

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Speaker 4: even when they started to be very clear. But at

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Speaker 4: the end of the day, you're now a year into

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Speaker 4: this SVB and signature go, which is bad enough. But

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Speaker 4: first Republic, there is no excuse before they had six

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Speaker 4: weeks right where first of all, you'd had a big

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Speaker 4: rally treasuries, which meant asset prices were actually appreciating. You

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Speaker 4: knew how impaired your capital was, and yet you didn't

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Speaker 4: do one thing to reduce your balance sheet leverage and

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Speaker 4: give yourself a chance to survive and maybe raise some

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Speaker 4: capital at the same time.

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Speaker 1: Why they didn't use them?

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Speaker 2: Why didn't they?

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Speaker 5: Yeah?

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Speaker 3: I just think that the management team are not crisis managers.

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Speaker 3: They've always been lauded for just how well they run

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Speaker 3: the bank, and so they.

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Speaker 1: Weren't in terms of customer service, in.

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Speaker 3: Terms of customer service and in terms of having above

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Speaker 3: peer evaluation. So they just weren't experienced enough to deal

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Speaker 3: with the crisis, whereas a bank like Western Alliance.

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Speaker 2: You're on the phone with Jamie Diamond. Jamie Diamond called

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Speaker 2: up the CEO of First Republic, didn't he say it, like, dude,

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Speaker 2: do this right now?

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Speaker 3: You just compare with what happened with Western Alliance. It

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Speaker 3: almost failed during the financial crisis, and they have a

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Speaker 3: litany of actions that they took in terms of increasing

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Speaker 3: the deposit coverage, insurance coverage, selling assets, a plan to

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Speaker 3: increase their capital, seeing deposits come back. So it's a

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Speaker 3: start contrast to what happened between the two managements.

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Speaker 1: So, Neil, I mean, when we'll hear from Fred Truman

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Speaker 1: j Palll later today, how much of all this banking

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Speaker 1: stuff and today, yesterday was a really bad day for

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Speaker 1: the regional banks. How much is that factor into his

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Speaker 1: calculuss analysis, his messaging.

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Speaker 4: Maybe, well, look, I think you have no choice but

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Speaker 4: to be considering it. And there's no doubt that there

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Speaker 4: is significant risks. My guess is one of the problems

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Speaker 4: with this bank and others is in fact there has

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Speaker 4: been tremendous impairment of capital due to the sharp fall

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Speaker 4: and assets the values of assets they hold. The problem

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Speaker 4: on the other side, of course, is as you've seen

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Speaker 4: the last number of days, Yeah, the data is not

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Speaker 4: really helping them, and the inflation data was higher. Look

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Speaker 4: at the ADP numbers this morning, another three hundred thousand jobs.

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Speaker 4: So you have a very strange set of circumstances where

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Speaker 4: the inflation and by the way, I think we've talked

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Speaker 4: about this, I suspect as you've move into later in

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Speaker 4: the year, you're going to have up with pressure begin

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Speaker 4: to develop again on asset price on prices.

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Speaker 2: So what does the FED do now? I mean, they're

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Speaker 2: clearly going to raise today, right twenty five basis points.

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Speaker 2: What does Powell have to say to calm markets in

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Speaker 2: terms of financial stability and to rein in inflation when

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Speaker 2: you're worried about upper pressure later in the year.

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Speaker 4: Well, a couple of things. First of all, for the

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Speaker 4: next couple of months, I mean, if you look at

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Speaker 4: gone on with oil and commodity prices, there is going

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Speaker 4: to be some downwards.

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Speaker 2: We'll drop five dollars over it was crazy.

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Speaker 4: Right, So there's going to be some temporary drop in

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Speaker 4: prices to begin with, which may give them some cover

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Speaker 4: for the moment. And I think you're seeing. You know,

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Speaker 4: they're going to continue to talk about the fact that

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Speaker 4: there seems to be some slowing in the employment picture.

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Speaker 4: And look, I don't know what you do at this

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Speaker 4: point in a general scheme of things. They have raised

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Speaker 4: rates five percent to five percent, and there's an there's

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Speaker 4: a legitimacy to be sent to say five to five

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Speaker 4: and a quarter is not really relevant. I suspect he's

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Speaker 4: going he's going to say that whether they raised today

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Speaker 4: or not, they're now going to start to step back

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Speaker 4: and give it time to see what the what the

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Speaker 4: effect is. Look, you know there's always a lag between

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Speaker 4: FED action and results, and you know that they don't

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Speaker 4: want to totally unsettled the economic system right now. So

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Speaker 4: I'm guessing that's where you head.

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Speaker 1: Now.

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Speaker 4: The problem on the other side is if he's going

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Speaker 4: to stimulate a rally in equities, and equities are quite

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Speaker 4: interesting right now as well. I mean, if you look

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Speaker 4: leaving aside the the the the banks in theory, stocks

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Speaker 4: are actually a lot higher. The banks have been getting killed,

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Speaker 4: but the stocks are actually near the highest level in

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Speaker 4: six months. But if I said, prices continue to go

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Speaker 4: up without the fundamental supporting them, then the system becomes

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Speaker 4: more more at risk to unexpected conces.

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Speaker 1: Somebody said, we had our earlier guests on said it

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Speaker 1: just kind of feels a little bit nineteen ninety nine,

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Speaker 1: two thousand and I said, oh, don't go there. I

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Speaker 1: live through that, herman. Are the regional banks expecting the

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Speaker 1: FED and the FDIC and other regulators to kind of

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Speaker 1: increase regulations on them going forwards? That the expectation for investors.

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Speaker 3: Yeah, the base case is that the capital ratios will

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Speaker 3: go up because banks will now need to incorporate the

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Speaker 3: unrealized losses and the available sales securities into the capital calculation.

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Speaker 1: Increase.

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Speaker 3: The liquidity requirements that went away during the Trump administration

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Speaker 3: for the regionals and potentially higher debt issue went to

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Speaker 3: help protect the capital structure of banks as well.

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Speaker 6: So that's the base case.

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Speaker 3: I think everybody's just expecting that if it gets worse,

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Speaker 3: then that's could be an incremental.

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Speaker 1: A know, earlier I pitched to this is me and

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Speaker 1: my pitch to Stevie Cohen, give me two billion dollars.

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Speaker 1: I'm going to buy some regional banks. I'm not sure when,

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Speaker 1: but I'm very close to buying a basket of these

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Speaker 1: high quality regionals, and I'm gonna make you thirty forty

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Speaker 1: percent twelve months.

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Speaker 4: Well, you know you can. You can actually take advantage

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Speaker 4: of the fact that not only your price is dropping,

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Speaker 4: but the volatility is going up in the regional so

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Speaker 4: you can actually write put options on on regional banks

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Speaker 4: in the end of seas let's say five percent below

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Speaker 4: the market, and I haven't looked at the prices today,

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Speaker 4: but I'll bet you get paid an awful lot of

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Speaker 4: money for that. So you break events on this type

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Speaker 4: of strategy, you're probably ten to twenty percent below market,

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Speaker 4: depending how far are you out your go guys, this

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Speaker 4: probably will be doing that.

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Speaker 1: This is gold.

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Speaker 2: Why don't we start a buffer regional banks buffer ETF.

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Speaker 1: Yes, exactly know. But yeah, we've heard a lot of

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Speaker 1: those are all the rage right now? They are all right, Neil,

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Speaker 1: thanks so much for joining us. Neil Grossman, former CIO

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Speaker 1: a tk n G Kapital, joining us here in our studio,

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Speaker 1: as is our resident bank expert, Herman Channing. You might

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Speaker 1: as well, just you know, take the seat for the

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Speaker 1: Day Vandlinberg Interactive Broker studio. Herman Chan covers the regional

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Speaker 1: banks for Bloomberg Intelligence.

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Speaker 5: You're listening to the Team Ken's Are Live program Bloomberg

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Speaker 5: Markets weekdays at ten am Eastern on Bloomberg dot Com,

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Speaker 5: the iHeartRadio app and the Bloomberg Business App, or listen

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Speaker 1: All right, FED Day today, a lot of folks are

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Speaker 1: going to be paying attention safe for our Federal Reserve

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Speaker 1: and FED Chairman j Palll probably no more than Omar Aguilar.

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Speaker 1: He's the CEO and CIO of Schwab Asset Management. What

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Speaker 1: does that mean. Well, here's a couple of just ridiculous

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Speaker 1: stats about Schwab seven hundred and fifty five billion billion

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Speaker 1: in assets under management as of the end of last year,

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Speaker 1: third largest provider of index mutual funds and fifth largest

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Speaker 1: provider of ETFs. I don't know how they even manage

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Speaker 1: all that stuff, but somehow Omar does it. I mean

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Speaker 1: we get a few minutes of his time. Omar, thanks

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Speaker 1: so much for making some time in your schedule to

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Speaker 1: chat with us today. What are you expecting from your

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Speaker 1: Federal Reserve and kind of where do we go from here.

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Speaker 7: Hey Paul, good morning. Always happy to talk to you

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Speaker 7: and the rest of the audience. Yes, you know it

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Speaker 7: is and it isn't important. It's called Guess FED Day

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Speaker 7: and we all, you know, get together to just figure out.

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Speaker 7: I mean, I never see most of my fixed income

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Speaker 7: team so excited as FED Day. I mean, yeah, that

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Speaker 7: tells you a lot about fixed income, but in general

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Speaker 7: they get really really excited about, you know, what happens.

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Speaker 7: I would probably say the expectations, just like the rest

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Speaker 7: of the market, is that there will be at twenty

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Speaker 7: five basis points increase in the FED rates. I think

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Speaker 7: what is gonna be the probably the most interesting, you know,

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Speaker 7: part of the of the day is gonna be what

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Speaker 7: the conference called will look like and the kind of

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Speaker 7: questions and any insights that we may get from from

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Speaker 7: Jerom Powell about you know, what may come ahead. You know,

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Speaker 7: our expectations continue to be that, you know, given you know,

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Speaker 7: where we are with the stress in the banking sector,

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Speaker 7: with the potential tidening of credit conditions as a result

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Speaker 7: of the failed banks, as well as just the overall

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Speaker 7: you know, structure of this lowing down of the economy,

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Speaker 7: that there is the possibility that the Fed may actually

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Speaker 7: pause or that hint that they will pause, you know,

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Speaker 7: provided that they will have themselves thinking that inflation numbers

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Speaker 7: continue to go high. They will continue, but you know,

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Speaker 7: clearly the signs that inflation is coming down maybe on

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Speaker 7: their on their side.

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Speaker 1: Oh, Mark, we're you know, sixty sixty five percent of

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Speaker 1: the way through earning season here, and let's let's take

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Speaker 1: our eye off the FED ball for just a moment.

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Speaker 1: What are you seeing in earnings? Does anything kind of

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Speaker 1: jumping out at you, either on the plus or the

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Speaker 1: negative side.

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Speaker 7: Yes, that's a that's a great question. And yes, we're

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Speaker 7: roughly like seventy percent of the S and P already reporting,

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Speaker 7: and we continue to see that, you know, the the

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Speaker 7: numbers to be probably in line to what we expected.

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Speaker 7: The big part of the driver here, you know, tends

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Speaker 7: to be obviously that these what I call this inflation

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Speaker 7: of earnings that came out as a result of you know,

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Speaker 7: higher inflation number increasing the top line for most companies.

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Speaker 7: And now as that pricing power starts to you know,

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Speaker 7: go away, then we're starting to see just those softened

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Speaker 7: you know, pieces of that. And just to give you

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Speaker 7: a couple of things. You know, earnings that are batting

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Speaker 7: estimates by seven percent is roughly around seventy four percent

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Speaker 7: of the companies, and that's again that tells you a

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Speaker 7: little bit of the fact that, you know, earnings estimates

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Speaker 7: going into the quarter were actually load to begin with.

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Speaker 7: But that also shows you that when you compare that

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Speaker 7: to previous year, that we're going to see this, you know,

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Speaker 7: sort of this inflation of EPs, you know, compared to

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Speaker 7: what we saw last year, that is expected given where

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Speaker 7: we are in the cycle.

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Speaker 2: So what does it mean by year end, are we

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Speaker 2: in a recession?

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Speaker 7: We're We're definitely, I would probably say that on earning side, well,

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Speaker 7: we're getting to that point that the earnings recession has begun.

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Speaker 7: I think economic wise, we have gone on our theory

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Speaker 7: and our you know, continued claim is that there is

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Speaker 7: these rolling recessions of different parts of the economy that

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Speaker 7: will continue to take place. We saw already the selfness

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Speaker 7: in housing, We saw the softness in manufacturing. We haven't

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Speaker 7: seen the softness in the service sector. And I think

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Speaker 7: by the time we get to that soltness in the

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Speaker 7: service sector, we're probably gonna have a rebound in housing.

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Speaker 7: We're going to have a rebound of this, and in

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Speaker 7: many cases what we have encouraged clients to think about

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Speaker 7: it is, you know, what does that mean for your

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Speaker 7: overall portofolio. You know, we have encouraged clients to reduce duration.

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Speaker 7: There is this time period given the higher interest rates

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Speaker 7: at the front end, but this is maybe a time

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Speaker 7: for people to start thinking about rebalancing their strategy and

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Speaker 7: increasing duration given that the expectation that we're going to

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Speaker 7: be a top you know, of the FED cycle is

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Speaker 7: coming soon.

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Speaker 1: So Matt Omar is obviously a smart guy. Got his

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Speaker 1: PhD in statistics and decision sciences from Duke, so he's

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Speaker 1: a Duke Blue devil. So that's why we like talking

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Speaker 1: to him. So, Omar, you've got a gajillion and one

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Speaker 1: Schwab clients out there. What's kind of the question you're

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Speaker 1: getting most often from them these days?

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Speaker 7: Well, the bigger question is similar to when you said,

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Speaker 7: is that are we going to see a big recession?

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Speaker 7: And is this going to happen tomorrow? And what we

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Speaker 7: have described to folks is that recessions don't necessarily a

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Speaker 7: peer one morning and then that's appear the next week.

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Speaker 7: We tend to see these cycles play out. I think

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Speaker 7: what has the bigger question that we get as well,

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Speaker 7: is the recession something that we're going to see it

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Speaker 7: will be sustained. And then second question that comes right

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Speaker 7: is how about inflation? And now our answers, you know,

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Speaker 7: to those questions tend to be twofold. One is, you know,

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Speaker 7: normally every cycle, you know has a different you know pass,

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Speaker 7: and what we're seeing here is a very unique cycle

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Speaker 7: because of the tithing, of the speed of the tithing,

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Speaker 7: of central banks racing raids. So therefore we're not seeing

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Speaker 7: this similar type of cycles for that recession to just

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Speaker 7: be you know, claim as the way it was. But

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Speaker 7: what we saw, as I said earlier, is these rolling

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Speaker 7: recessions of different parts of the economy. But the good

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Speaker 7: news though is that the economy is still holding up

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Speaker 7: well and even though we're going to see some softness

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Speaker 7: on the labor report on Friday, you know, I think,

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Speaker 7: you know, that is a healthy path for getting a

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Speaker 7: full recovery.

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Speaker 1: All right, Omar, thank you so much for joining us.

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Speaker 1: Really appreciate it. Omar Aguilar, he's the CEO and CIO

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Speaker 1: of schwab Asset Management.

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Speaker 5: You're listening to the tape. Cat's are live program Bloomberg

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Speaker 5: Markets weekdays at ten am Eastern on Bloomberg Radio, the

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Speaker 5: tune in app, Bloomberg dot Com, and the Bloomberg Business App.

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Speaker 5: flagship New York station, Just say Alexa play Bloomberg eleven thirty.

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Speaker 1: Let's talk a little fixed income. And when we talk

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Speaker 1: fixed income, let's talk to somebody who kind of just

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Speaker 1: does nothing but fixed income. And our next guest certainly

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Speaker 1: fills up Bill Joanna Go Diego's co founder of bond Blocks,

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Speaker 1: and that is an ETF focusing exclusively or family of

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Speaker 1: ETFs at focus exclusively on fixed income. And when we

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Speaker 1: talk ETFs, we need Katie Greifel. Yeah, she's like an

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Speaker 1: expert here. She does an NEEDTF show with you. That's true, right,

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Speaker 1: Mondays or something.

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Speaker 2: It's usually on Mondays.

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Speaker 1: It's actually tomorrow's Okay, go figure out Thursday. That works

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Speaker 1: fine as well. Joanna, thanks so much for joining us

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Speaker 1: here at our Bloomberg Interactive Broker Studio. We appreciate you

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Speaker 1: coming into the studio. Man. There's a lot going on

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Speaker 1: out there in the fixed income space. After a disastrous

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Speaker 1: twenty two guys found your footing here in twenty twenty three,

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Speaker 1: you guys being the fixed income space.

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Speaker 8: That's right, the income is back in fixed income and

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Speaker 8: we're potentially today ending the hiking cycle. We're at the

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Speaker 8: end of a cycle and it's now time, we believe,

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Speaker 8: for investors to get right back into portfolio, reposition their

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Speaker 8: portfolios in a fixed income and take advantage of the

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Speaker 8: opportunity ahead.

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Speaker 1: We do see.

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Speaker 2: We do see pricing indicating that today's the last hike.

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Speaker 2: So you don't think there's gonna be another hike in June.

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Speaker 8: So whether there's another hike or not, we probably we

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Speaker 8: need to be thinking about these yields that are going

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Speaker 8: to be really powerful in your portfolio. They're at historic levels,

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Speaker 8: and we think investors should be, you know, getting their

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Speaker 8: allocations back into fixed income.

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Speaker 2: I wonder, I mean, we do see the two year

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Speaker 2: yielding almost four percent right coming down a little bit.

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Speaker 2: But we've spoken to you in the past. I don't

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Speaker 2: know if Katie wants to jump in here. We've also

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Speaker 2: spoken to investors who buy your products quite often in fact,

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Speaker 2: and it doesn't seem like it's the yield level that

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Speaker 2: drives that they sometimes need some of your ETFs for

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Speaker 2: certain strategies that they're trying to execute on.

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Speaker 8: Yeah, exactly. I mean you can take this simple X

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Speaker 8: half an X one they are that's the sixth month

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Speaker 8: and the one year treasury products we have. I mean,

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Speaker 8: they're really excellent, excellent places to sort of you know,

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Speaker 8: stay in there for safety, low volatility, also tax exempt

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Speaker 8: from state taxes because it's a treasury portfolio. I think

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Speaker 8: there's been really with these yields in that feature. Like,

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Speaker 8: I think it's a really great place for investors to

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Speaker 8: use for cash management. So those that's a fairly simple

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Speaker 8: trade all of our clients have been making this year.

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Speaker 8: But we also think that investors should be looking opportunistically

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Speaker 8: at credit because you know, as we enter the next

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Speaker 8: phase of this cycle, and whether or not you believe

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Speaker 8: there's an economic slowdown coming, you know, there are opportunities

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Speaker 8: here across different credit ratings and credit that are really

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Speaker 8: compelling because the yields are giving you a huge head

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Speaker 8: start in returns. This year, well, it's.

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Speaker 9: Really interesting if you look at the flow show across

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Speaker 9: the whole industry, fixed income ETFs have taken in something

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Speaker 9: to the tune of sixty five billion dollars this year

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Speaker 9: equity ETFs, and there's a ton more of them. They've

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Speaker 9: only taken in somewhere in the neighborhood of forty billions.

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Speaker 2: So in fact, when you type in ETF go, the

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Speaker 2: launch screen default to equities.

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Speaker 9: Because I mean they make up the bulk of assets still.

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Speaker 9: But obviously fixed income ETFs have taken in the bulk

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Speaker 9: of flows at least when it comes to twenty twenty three.

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Speaker 9: You and I were talking a little bit earlier this

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Speaker 9: morning about how if you look at the common position

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Speaker 9: of those fixed income flows, you are seeing a little

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Speaker 9: bit of a dynamic shift.

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Speaker 8: Yeah, so there's two things we're observing right now. Is

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Speaker 8: in treasuries, you're seeing obviously there's kind of equal flows

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Speaker 8: this year to date in both the short end of

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Speaker 8: treasuries and also now year to date in the long end.

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Speaker 8: So you're seeing investors take a little bit of risk

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Speaker 8: on in their portfolio, is at least in the treasury space.

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Speaker 8: And that's someone that's taken on risk understanding that maybe

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Speaker 8: there is going to be an economic slowdown and bond

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Speaker 8: prices may rise towards the end of the year. And

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Speaker 8: then what we just tapped into which I think is

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Speaker 8: really interesting is just in April, you're seeing people shift

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Speaker 8: back into corporate debt and also high yield, and that's

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Speaker 8: a space that we've been we've launched into, you know,

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Speaker 8: significantly across credit ratings and across sectors, and we really believe,

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Speaker 8: as I mentioned before, there's a lot of relative opportunity

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Speaker 8: within high yield versus just looking at it so broadly.

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Speaker 9: So you mentioned that people when it comes to the

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Speaker 9: treasury market specifically, people taking a little bit more risk

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Speaker 9: going out the curve duration risk, But at the same time,

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Speaker 9: it feels like investors are also taking on more credit risk.

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Speaker 9: Also to your point, high yield ETFs coming back into

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Speaker 9: vogue a little bit here. How do you marry those

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Speaker 9: two things? Because when I think long duration treasuries, I think,

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Speaker 9: oh my goodness, this economy is going to slow down.

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Speaker 9: Why might high yield also be seeing love in this environment?

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Speaker 8: Well, I think that what people don't haven't been able

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Speaker 8: to see more as clearly as they should and Hyael

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Speaker 8: is that the categories are very different. And so for

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Speaker 8: something like if you just look at the very first

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Speaker 8: high yield category of XPB, it actually has the lowest

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Speaker 8: default rate amongst the high yield category.

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Speaker 2: If there's high yield, and there's high there.

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Speaker 8: High it's only one percent in XPB in our product XBB,

438
00:21:46,720 --> 00:21:48,840
Speaker 8: And it's if you can get access to a big

439
00:21:48,880 --> 00:21:52,440
Speaker 8: diversified portfolio in that credit writing space, you know, you're

440
00:21:52,480 --> 00:21:55,520
Speaker 8: looking at yields that are you know, close to seven percent,

441
00:21:55,960 --> 00:21:58,320
Speaker 8: and that's it. That's a really interesting thing. So if

442
00:21:58,359 --> 00:22:01,560
Speaker 8: you're worried about a weakening I cannot conditions, you should

443
00:22:01,560 --> 00:22:04,200
Speaker 8: consider adding some XBB to your portfolio because it's the

444
00:22:04,280 --> 00:22:08,000
Speaker 8: least exposed to this risk over time, and so you

445
00:22:08,119 --> 00:22:12,440
Speaker 8: now have an opportunity to be more precise, more timely

446
00:22:12,560 --> 00:22:15,120
Speaker 8: tools to really take advantage of what's coming.

447
00:22:15,200 --> 00:22:15,360
Speaker 4: Well.

448
00:22:15,400 --> 00:22:19,000
Speaker 2: So it's I mean, we're all worried about weakening economic conditions,

449
00:22:19,000 --> 00:22:21,120
Speaker 2: but if you think that they're not going to get

450
00:22:21,119 --> 00:22:24,040
Speaker 2: so weak that everybody defaults, this is what you buy, right.

451
00:22:23,960 --> 00:22:26,439
Speaker 8: Yeah, exactly. And then even if you go, you know,

452
00:22:26,480 --> 00:22:29,919
Speaker 8: a little further down the credit rating scale, some people

453
00:22:29,960 --> 00:22:32,240
Speaker 8: take a view and this is why we created so

454
00:22:32,240 --> 00:22:34,600
Speaker 8: many products. In a granular way. Some people could give you,

455
00:22:34,840 --> 00:22:38,280
Speaker 8: I mean, this is your favorite, the triple C product. Okay,

456
00:22:38,400 --> 00:22:43,080
Speaker 8: so it has a yield that's almost fourteen percent, So

457
00:22:43,480 --> 00:22:46,560
Speaker 8: it has a yield that's almost fourteen percent. So there

458
00:22:46,600 --> 00:22:49,359
Speaker 8: are investors out there. Like you said, even just taking

459
00:22:49,400 --> 00:22:53,600
Speaker 8: that really long treasure review sounds really you know, compelling

460
00:22:53,640 --> 00:22:56,800
Speaker 8: to you. But the truth is, like, if you believe

461
00:22:57,280 --> 00:22:59,120
Speaker 8: the risk of recession in the second half of twenty

462
00:22:59,160 --> 00:23:03,119
Speaker 8: twenty three is over, you could consider some X triple C.

463
00:23:03,840 --> 00:23:08,399
Speaker 8: It offers a higher yield, and it's just it's something

464
00:23:08,400 --> 00:23:10,679
Speaker 8: that like it. So I went back into high yield.

465
00:23:11,160 --> 00:23:13,119
Speaker 8: You may, you know, take a small portion of your

466
00:23:13,200 --> 00:23:17,320
Speaker 8: high old exposure and tilt a little bit with these products.

467
00:23:17,359 --> 00:23:20,760
Speaker 9: Really quickly, we have a question from a listener writing in,

468
00:23:20,960 --> 00:23:23,840
Speaker 9: when are you going to bring an investment grade sector

469
00:23:23,840 --> 00:23:25,680
Speaker 9: suite of products into the market. We only have about

470
00:23:25,680 --> 00:23:26,480
Speaker 9: thirty seconds left.

471
00:23:26,800 --> 00:23:32,480
Speaker 8: We just filed for three triple B products two weeks ago,

472
00:23:32,720 --> 00:23:34,480
Speaker 8: and what we've done is we've carved them up into

473
00:23:34,520 --> 00:23:37,880
Speaker 8: maturity buckets, not sectors yet, but we always will take

474
00:23:37,920 --> 00:23:40,120
Speaker 8: suggestions and we have looked at sectors and I think

475
00:23:40,119 --> 00:23:42,200
Speaker 8: it's an interesting thing that you know, fixed incomes should

476
00:23:42,200 --> 00:23:42,800
Speaker 8: be more ganular.

477
00:23:43,000 --> 00:23:45,320
Speaker 1: Right watch the space, Watch the space, and you guys

478
00:23:45,359 --> 00:23:48,800
Speaker 1: have it completely covered on the ETF front, joined Diego's

479
00:23:48,800 --> 00:23:51,000
Speaker 1: co founder of bond Blocks, joining us live here in

480
00:23:51,040 --> 00:23:54,919
Speaker 1: our Bloomberg Interactive Broker Studio as it does Katie Greifel.

481
00:23:55,080 --> 00:23:57,400
Speaker 1: She covers all things on the ETF front. You guys

482
00:23:57,400 --> 00:23:58,560
Speaker 1: got your show on tomorrow.

483
00:23:58,600 --> 00:24:02,520
Speaker 2: Tomorrow Tomorrow, souly. Our show is Monday, is at one pm.

484
00:24:02,880 --> 00:24:03,960
Speaker 2: It's called ETFIQ.

485
00:24:06,119 --> 00:24:09,480
Speaker 5: You're listening to the team Ken's are live program Bloomberg

486
00:24:09,600 --> 00:24:12,960
Speaker 5: Markets weekdays at ten am Eastern on Bloomberg dot com,

487
00:24:13,040 --> 00:24:16,200
Speaker 5: the iHeartRadio app and the Bloomberg Business App, or listen

488
00:24:16,240 --> 00:24:18,520
Speaker 5: on demand wherever you get your podcasts.

489
00:24:20,600 --> 00:24:23,639
Speaker 1: Looking forward to this next discussion. It's about logistics moving

490
00:24:23,800 --> 00:24:27,520
Speaker 1: stuff around. You know, all the boxes on railroads and

491
00:24:27,600 --> 00:24:30,240
Speaker 1: trucks and who knows what else. Drew Wiklson he does

492
00:24:30,280 --> 00:24:33,040
Speaker 1: this stuff. He's the CEO of RXO, which is a

493
00:24:33,080 --> 00:24:37,440
Speaker 1: tech enabled broker services platform that will spun out of

494
00:24:37,440 --> 00:24:41,399
Speaker 1: its parent XPO. I guess recently, I'm looking at the

495
00:24:41,520 --> 00:24:43,719
Speaker 1: RXO stock and it's got a market cap at two

496
00:24:43,720 --> 00:24:45,760
Speaker 1: point three billion, it's up fifteen and a half percent

497
00:24:46,080 --> 00:24:49,320
Speaker 1: this year, up seven and three quarters percent today, and

498
00:24:49,359 --> 00:24:52,080
Speaker 1: the parent company stock XPOS up thirty five percent. So

499
00:24:52,119 --> 00:24:54,359
Speaker 1: it looks like shareholders are winning all over the place

500
00:24:54,400 --> 00:24:55,520
Speaker 1: with this spin out story.

501
00:24:55,560 --> 00:24:55,720
Speaker 4: Here.

502
00:24:56,280 --> 00:24:58,520
Speaker 1: RXO reported numbers last night, so we appreciate getting a

503
00:24:58,520 --> 00:25:01,120
Speaker 1: few minutes of Drew's time. So, Drew, you guys reported

504
00:25:01,160 --> 00:25:04,480
Speaker 1: your earnings last night. What are the highlights from ROXO

505
00:25:04,640 --> 00:25:05,919
Speaker 1: and the logistics business?

506
00:25:06,800 --> 00:25:09,360
Speaker 10: Thanks for having me, Paul and Matt. When you look

507
00:25:09,359 --> 00:25:11,960
Speaker 10: at what the highlights were, the first is that while

508
00:25:12,000 --> 00:25:15,639
Speaker 10: the macro economy is tough right now, we took market

509
00:25:15,640 --> 00:25:18,439
Speaker 10: share and we grew volume by six percent on a

510
00:25:18,520 --> 00:25:20,800
Speaker 10: year every year basis. So while there's less volume out

511
00:25:20,800 --> 00:25:24,160
Speaker 10: there in the freight world, we're able to grow and

512
00:25:23,880 --> 00:25:27,240
Speaker 10: grow profitably. We have best in class margins where our

513
00:25:27,560 --> 00:25:33,160
Speaker 10: brokerage gross profit percentage came in at sixteen point three percent.

514
00:25:33,480 --> 00:25:37,280
Speaker 10: That's well ahead of where the industry came in. And

515
00:25:37,320 --> 00:25:40,000
Speaker 10: the last point that I'll make is our technology continues

516
00:25:40,040 --> 00:25:43,639
Speaker 10: to work. We've invested in technology from day one, and

517
00:25:43,720 --> 00:25:46,959
Speaker 10: our technology is allowing us to operate at best in

518
00:25:47,080 --> 00:25:50,960
Speaker 10: class gross profit percentage. It's helping us grow volume, and

519
00:25:51,000 --> 00:25:54,360
Speaker 10: it's helping us continue to increase our employee productivity. So

520
00:25:54,680 --> 00:25:57,080
Speaker 10: we're very pleased with the results for the quarter and

521
00:25:57,119 --> 00:25:58,440
Speaker 10: fill our best days are ahead of us.

522
00:26:00,560 --> 00:26:03,840
Speaker 2: Are you not worried about a slow down in overall volume?

523
00:26:03,920 --> 00:26:10,160
Speaker 2: We were hearing from some shippers. Ups is one for sure,

524
00:26:10,200 --> 00:26:12,160
Speaker 2: but there are a couple others Fernando Valley was talking

525
00:26:12,200 --> 00:26:16,480
Speaker 2: about who have said we're in a freight recession already.

526
00:26:17,720 --> 00:26:21,560
Speaker 10: We absolutely are seeing a slowdown in the overall macro economy,

527
00:26:21,600 --> 00:26:24,080
Speaker 10: and as I said, there's less volume out there. But

528
00:26:24,119 --> 00:26:27,679
Speaker 10: we've done things that are idiosyncratic to our business that

529
00:26:27,720 --> 00:26:30,199
Speaker 10: are allowing us to grow volume on a year of

530
00:26:30,200 --> 00:26:34,080
Speaker 10: a year basis despite the tough macro. Again, our technology

531
00:26:34,119 --> 00:26:36,760
Speaker 10: is best in class. It does things like help customers

532
00:26:36,760 --> 00:26:38,879
Speaker 10: decide what day of the week they should ship something,

533
00:26:39,240 --> 00:26:41,960
Speaker 10: what mode of transportation they should use. So when they

534
00:26:42,000 --> 00:26:44,920
Speaker 10: look at this as a tool and they are consolidating

535
00:26:44,960 --> 00:26:47,880
Speaker 10: the number of carriers that they're working with, even though

536
00:26:47,920 --> 00:26:50,359
Speaker 10: the pie for them may get smaller, our piece of

537
00:26:50,400 --> 00:26:53,280
Speaker 10: the pie is getting larger, and it positions us very

538
00:26:53,320 --> 00:26:54,720
Speaker 10: well for when the market and flex.

539
00:26:55,040 --> 00:26:58,200
Speaker 1: So Drew explain to us kind of your business, because

540
00:26:58,320 --> 00:27:00,840
Speaker 1: you're not really like owning rare roads and trucks and

541
00:27:00,840 --> 00:27:03,920
Speaker 1: things like that. You're more kind of logistics and software

542
00:27:03,920 --> 00:27:06,600
Speaker 1: and a brokerage business. Can you explain kind of what

543
00:27:06,720 --> 00:27:09,320
Speaker 1: you guys do day to day, who your customers are.

544
00:27:10,400 --> 00:27:12,800
Speaker 10: Yeah, we work with a lot of the Fortune one

545
00:27:12,840 --> 00:27:15,679
Speaker 10: hundred and five hundred companies and we're a best in

546
00:27:15,760 --> 00:27:18,680
Speaker 10: class tech enabled truck brokers. So what we do is

547
00:27:18,760 --> 00:27:22,520
Speaker 10: help the largest shippers in the world connect with massive

548
00:27:22,520 --> 00:27:25,639
Speaker 10: amounts of capacity. We do business with fifty eight of

549
00:27:25,680 --> 00:27:28,639
Speaker 10: the Fortune one hundred and over two hundred of the

550
00:27:28,640 --> 00:27:31,840
Speaker 10: Fortune five hundred, and we give them access to about

551
00:27:31,840 --> 00:27:34,840
Speaker 10: a million and a half trucks and these are mostly

552
00:27:35,040 --> 00:27:38,760
Speaker 10: small to mid sized cares, typical sized cares. As a

553
00:27:38,840 --> 00:27:41,000
Speaker 10: large shipper, you wouldn't sign up, but as we're able

554
00:27:41,000 --> 00:27:44,760
Speaker 10: to aggregate capacity for our customers, it's a huge benefit

555
00:27:44,840 --> 00:27:45,120
Speaker 10: to them.

556
00:27:45,720 --> 00:27:50,919
Speaker 2: Do we see smooth logistics in terms of the US

557
00:27:51,320 --> 00:27:54,240
Speaker 2: or North American supply chain now? I mean, has everything

558
00:27:54,280 --> 00:27:57,560
Speaker 2: been figured out that was all stopped up over the

559
00:27:57,640 --> 00:27:59,520
Speaker 2: last couple of years of the pandemic.

560
00:28:00,720 --> 00:28:02,960
Speaker 10: I don't think there's anything that's been smooth about the

561
00:28:03,000 --> 00:28:04,320
Speaker 10: last few years.

562
00:28:04,320 --> 00:28:07,000
Speaker 2: If you go from but we are we back to

563
00:28:07,400 --> 00:28:09,160
Speaker 2: normal now, is what I'm wondering.

564
00:28:10,200 --> 00:28:14,720
Speaker 10: You're seeing inventory levels at much stronger levels than what

565
00:28:14,760 --> 00:28:16,440
Speaker 10: they were last year. So if you go to last

566
00:28:16,520 --> 00:28:20,760
Speaker 10: year and retailing e commerce specifically, customers were talking to

567
00:28:20,840 --> 00:28:24,880
Speaker 10: us about destocking their inventory, and we're having conversations now

568
00:28:24,920 --> 00:28:27,960
Speaker 10: of how they are restocking their inventory and continuing to

569
00:28:28,000 --> 00:28:30,320
Speaker 10: get it out to the end consumer, and we're a

570
00:28:30,320 --> 00:28:31,960
Speaker 10: great choice for them to be able to use for that.

571
00:28:32,760 --> 00:28:34,960
Speaker 1: Who do you compete against, Drew, Who's share are you

572
00:28:35,040 --> 00:28:38,160
Speaker 1: taking based upon the results you've reported last night? Are

573
00:28:38,200 --> 00:28:38,840
Speaker 1: you this morning?

574
00:28:39,680 --> 00:28:42,080
Speaker 10: Yeah, So we take share from everybody. We're not picky

575
00:28:42,120 --> 00:28:44,240
Speaker 10: on where the share comes from. What we do is

576
00:28:44,280 --> 00:28:46,560
Speaker 10: we look at the customer as a whole and see

577
00:28:46,600 --> 00:28:49,080
Speaker 10: where we can provide value and where our service is

578
00:28:49,120 --> 00:28:52,240
Speaker 10: best fit. And if you think about our top twenty customers,

579
00:28:52,560 --> 00:28:55,200
Speaker 10: we grew volume with our top twenty customers, which again

580
00:28:55,280 --> 00:28:57,680
Speaker 10: is some of the biggest brands in the country. We

581
00:28:57,680 --> 00:29:00,600
Speaker 10: grew volume with them by thirteen per sent on a

582
00:29:00,640 --> 00:29:03,480
Speaker 10: year of a year basis. So our largest customers come

583
00:29:03,520 --> 00:29:05,480
Speaker 10: back to us year after year, and they don't just

584
00:29:05,520 --> 00:29:07,360
Speaker 10: come back to us and award us with what we

585
00:29:07,400 --> 00:29:10,600
Speaker 10: did the previous year, because we've got great service, because

586
00:29:10,640 --> 00:29:13,880
Speaker 10: we've got the best technology in the industry, and we've

587
00:29:13,880 --> 00:29:17,200
Speaker 10: got great operators who know and understand the market, they're

588
00:29:17,240 --> 00:29:18,800
Speaker 10: rewarding us with more freight.

589
00:29:19,760 --> 00:29:22,720
Speaker 2: When you look at the future, Drew and you have

590
00:29:23,000 --> 00:29:27,760
Speaker 2: so much experience with XPO before becoming CEO of RXO,

591
00:29:28,600 --> 00:29:32,479
Speaker 2: do you see you know, EV trucks, Do you see

592
00:29:32,560 --> 00:29:34,920
Speaker 2: an automated fleet or how far off is that?

593
00:29:36,160 --> 00:29:40,520
Speaker 10: It's something where we're talking to EV manufacturers on an

594
00:29:40,520 --> 00:29:43,320
Speaker 10: ongoing basis right now. I think the one thing that

595
00:29:43,400 --> 00:29:45,160
Speaker 10: you have to watch is while I do think that

596
00:29:45,280 --> 00:29:48,160
Speaker 10: you will see EV pick up as a trend, you

597
00:29:48,280 --> 00:29:50,680
Speaker 10: have to watch to see how long the truck will

598
00:29:50,680 --> 00:29:53,080
Speaker 10: be able to drive before it has to be charged again.

599
00:29:53,440 --> 00:29:56,320
Speaker 10: So if you think of average length of haull across

600
00:29:56,760 --> 00:29:59,920
Speaker 10: across the industry, is you know, plus six hundred mile,

601
00:30:00,680 --> 00:30:03,120
Speaker 10: you know right now today you would have to stop

602
00:30:03,320 --> 00:30:06,800
Speaker 10: and recharge before reaching your destination. And so I think

603
00:30:06,840 --> 00:30:10,560
Speaker 10: the end state whenever you're able to have a truck

604
00:30:10,880 --> 00:30:14,120
Speaker 10: drive further operating hours and be able to go from

605
00:30:14,200 --> 00:30:17,880
Speaker 10: shipper to constantee and deliver that that's the end state

606
00:30:17,920 --> 00:30:19,600
Speaker 10: of where we're going. But on short hauls, I think

607
00:30:19,600 --> 00:30:21,520
Speaker 10: that it's something that you're going to see in the

608
00:30:21,080 --> 00:30:22,160
Speaker 10: near term.

609
00:30:22,640 --> 00:30:24,480
Speaker 1: It's true give us the latest on kind of the

610
00:30:24,560 --> 00:30:28,719
Speaker 1: labor piction picture within the logistics pipeline in the United States.

611
00:30:28,800 --> 00:30:30,960
Speaker 1: You know, whether it's the truckers or or some of

612
00:30:31,000 --> 00:30:33,640
Speaker 1: the other pieces of the puzzle, because a lot of

613
00:30:33,640 --> 00:30:35,800
Speaker 1: the trucks are saying, boy, it's always hard to maintain

614
00:30:35,840 --> 00:30:38,120
Speaker 1: and keep our drivers, but it's been even harder over

615
00:30:38,120 --> 00:30:39,160
Speaker 1: the last several years.

616
00:30:39,160 --> 00:30:39,320
Speaker 4: Help.

617
00:30:39,440 --> 00:30:41,320
Speaker 1: Is that still a big, big issue for you and

618
00:30:41,400 --> 00:30:42,560
Speaker 1: your customers.

619
00:30:43,160 --> 00:30:46,200
Speaker 10: Yeah, all of last year we saw capacity coming into

620
00:30:46,320 --> 00:30:48,560
Speaker 10: the market, and so the first quarter was really the

621
00:30:48,560 --> 00:30:52,840
Speaker 10: first time that we saw capacity exit the market. And

622
00:30:53,000 --> 00:30:55,920
Speaker 10: for our business, that's actually a good thing because anytime

623
00:30:55,960 --> 00:30:58,640
Speaker 10: there are shifts in the market, customers are going to

624
00:30:58,760 --> 00:31:01,320
Speaker 10: lean on carriers who they trust the most and that's

625
00:31:01,360 --> 00:31:03,800
Speaker 10: been us. So as you start to see the load

626
00:31:03,840 --> 00:31:07,720
Speaker 10: to truck ratio increase over time, what you'll see is

627
00:31:07,760 --> 00:31:11,200
Speaker 10: you'll see tender rejection start to pick up from asset

628
00:31:11,280 --> 00:31:14,480
Speaker 10: based carriers. And that's where a company like RXO can

629
00:31:14,520 --> 00:31:15,640
Speaker 10: come in and be a big winner.

630
00:31:16,480 --> 00:31:19,120
Speaker 1: So when you talk to your customers, when you talk

631
00:31:19,120 --> 00:31:22,680
Speaker 1: to your transportation partners, what's their view of the economy

632
00:31:22,680 --> 00:31:23,920
Speaker 1: over the next twelve to eighteen months.

633
00:31:24,800 --> 00:31:27,760
Speaker 10: I think there's still a lot of uncertainty on the

634
00:31:27,800 --> 00:31:30,920
Speaker 10: macro economy as a whole, and so as you start

635
00:31:30,960 --> 00:31:33,160
Speaker 10: to look into the back half of the year, there

636
00:31:33,160 --> 00:31:35,880
Speaker 10: are some encouraging signs for US. I talked earlier about

637
00:31:36,160 --> 00:31:39,880
Speaker 10: retail and e commerce inventory levels picking up. We've seen

638
00:31:39,960 --> 00:31:44,760
Speaker 10: pickups in healthcare and technology and home furnishing as verticals.

639
00:31:44,760 --> 00:31:46,920
Speaker 10: So there are some encouraging signs. And I just talked

640
00:31:46,920 --> 00:31:51,160
Speaker 10: about capacity exiting the market. That's again that's actually a

641
00:31:51,200 --> 00:31:54,240
Speaker 10: good thing for our business at this point in the cycle.

642
00:31:54,320 --> 00:31:56,520
Speaker 10: So there are some encouraging signs, but I don't think

643
00:31:56,520 --> 00:31:58,959
Speaker 10: that anybody's got the crystal ball to when they can

644
00:31:59,000 --> 00:32:01,080
Speaker 10: point to when this market and inflection will be, whether

645
00:32:01,080 --> 00:32:03,000
Speaker 10: it's Q three, Q four, Q one.

646
00:32:03,440 --> 00:32:05,880
Speaker 1: All right, Really appreciate getting some of your time. Drew

647
00:32:05,880 --> 00:32:09,200
Speaker 1: Wilkelson Wilkerson, he's the CEO of RXO. The ticker is

648
00:32:09,480 --> 00:32:11,480
Speaker 1: our XO. Pop that in your terminal and you can

649
00:32:11,520 --> 00:32:14,000
Speaker 1: see the stocks up eight point three percent today. They

650
00:32:14,080 --> 00:32:17,080
Speaker 1: reported some better than expected results this morning in the

651
00:32:17,120 --> 00:32:20,720
Speaker 1: market reacting favorably to that. So love talking to the

652
00:32:20,720 --> 00:32:23,920
Speaker 1: folks into the logistics business in the supply chain issue

653
00:32:24,280 --> 00:32:26,320
Speaker 1: that was such a big issue starting with the pandemic

654
00:32:26,680 --> 00:32:29,080
Speaker 1: and maybe getting a little bit more back to normal.

655
00:32:29,320 --> 00:32:32,400
Speaker 5: You're listening to the tape Can's our live program Bloomberg

656
00:32:32,440 --> 00:32:36,040
Speaker 5: Markets weekdays at ten am Eastern on Bloomberg Radio, the

657
00:32:36,120 --> 00:32:39,320
Speaker 5: tune in app, Bloomberg dot Com, and the Bloomberg Business App.

658
00:32:39,360 --> 00:32:42,200
Speaker 5: You can also listen live on Amazon Alexa from our

659
00:32:42,200 --> 00:32:46,600
Speaker 5: flagship New York station, Just say Alexa play Bloomberg eleven thirty.

660
00:32:48,400 --> 00:32:50,560
Speaker 1: Let's get a sense of what to do with these

661
00:32:50,600 --> 00:32:52,640
Speaker 1: markets here. We're going to get a lot of cross

662
00:32:52,720 --> 00:32:55,520
Speaker 1: currents out there with Divot, with earnings coming out, with

663
00:32:55,560 --> 00:32:59,000
Speaker 1: the FED decision today, with some bank uncertainty. Let's get

664
00:32:59,000 --> 00:33:01,960
Speaker 1: a couple of pros in here. Daviddet's senior investment strategist

665
00:33:01,960 --> 00:33:05,080
Speaker 1: at Pepack Private Wealth Management, and Tim Courtney, cee IO

666
00:33:05,240 --> 00:33:09,960
Speaker 1: at Eccential Wealth Advisors join us here. Let's talk. Let's

667
00:33:09,960 --> 00:33:12,440
Speaker 1: start with you, Tim, what are you telling your clients

668
00:33:12,440 --> 00:33:15,320
Speaker 1: here in a very uncertain time after coming out of

669
00:33:15,360 --> 00:33:18,480
Speaker 1: a brutal twenty twenty two in terms of equities and debt?

670
00:33:18,600 --> 00:33:19,960
Speaker 1: What are you telling your clients these days?

671
00:33:21,680 --> 00:33:24,080
Speaker 11: Yeah, you know, what we've been saying is just kind

672
00:33:24,080 --> 00:33:29,240
Speaker 11: of the simple message of continue to diversify, and you know,

673
00:33:29,560 --> 00:33:35,400
Speaker 11: we are still working through so many distortions of historic proportions.

674
00:33:35,440 --> 00:33:37,640
Speaker 11: In twenty twenty and twenty twenty one, coming off of

675
00:33:37,640 --> 00:33:42,120
Speaker 11: those zero rates, you had capital labor flowing into areas.

676
00:33:42,160 --> 00:33:44,920
Speaker 11: You've got capital moving back out of those and labor

677
00:33:44,920 --> 00:33:48,760
Speaker 11: moving back out of those areas. So many distortions, it's

678
00:33:48,840 --> 00:33:52,920
Speaker 11: hard to just be able to make sense of how

679
00:33:53,240 --> 00:33:57,080
Speaker 11: the market is readjusting to to more normal times with

680
00:33:57,160 --> 00:34:01,120
Speaker 11: normal rates. And so we're saying, look, there's lots of

681
00:34:01,200 --> 00:34:05,080
Speaker 11: discounts out there. The market appears to be pricing in

682
00:34:05,160 --> 00:34:10,760
Speaker 11: some troubles for small caps international value stocks. That's typically

683
00:34:10,760 --> 00:34:14,239
Speaker 11: what you would see going into some slowdowns or potentially recession.

684
00:34:14,920 --> 00:34:18,520
Speaker 11: The market has already discounted those. In some cases, small

685
00:34:18,560 --> 00:34:21,439
Speaker 11: caps are trading about thirty percent lower than their twenty

686
00:34:21,520 --> 00:34:24,400
Speaker 11: year average, and so it's okay to go get some

687
00:34:24,480 --> 00:34:28,080
Speaker 11: exposure there. Own some small caps, own some international stocks

688
00:34:28,440 --> 00:34:31,040
Speaker 11: as well as some of the larger growth stocks, which

689
00:34:31,160 --> 00:34:34,040
Speaker 11: should see their way through a recession, you know, in

690
00:34:34,280 --> 00:34:34,920
Speaker 11: a better way.

691
00:34:35,920 --> 00:34:38,000
Speaker 2: Are you not terribly concerned about a recession? A lot

692
00:34:38,000 --> 00:34:41,040
Speaker 2: of people coming on this program say they expect a

693
00:34:41,080 --> 00:34:44,320
Speaker 2: recession to be short and shallow. Nonetheless, you know that,

694
00:34:44,840 --> 00:34:46,960
Speaker 2: you know, it could be worse, especially if we continue

695
00:34:46,960 --> 00:34:47,800
Speaker 2: to get bank runs.

696
00:34:49,600 --> 00:34:52,799
Speaker 11: Yeah, you know, the story on the recession has gone

697
00:34:52,840 --> 00:34:54,600
Speaker 11: back and forth. At the beginning of the year, it

698
00:34:54,640 --> 00:34:57,520
Speaker 11: was we're definitely going into recession, and then we had

699
00:34:57,520 --> 00:35:00,400
Speaker 11: strong numbers in February and it was, well, we can

700
00:35:00,440 --> 00:35:02,279
Speaker 11: avoid it, and then we had the bank failures, and

701
00:35:02,320 --> 00:35:04,680
Speaker 11: now we're back into Okay, we're definitely going into recession.

702
00:35:05,760 --> 00:35:10,600
Speaker 11: You know, I'm not so sure this recession, if it

703
00:35:10,640 --> 00:35:14,319
Speaker 11: comes this year. I do also think it's likely to

704
00:35:14,400 --> 00:35:19,400
Speaker 11: be shorter and probably lighter, just because there is so

705
00:35:19,600 --> 00:35:22,720
Speaker 11: much capital out there still. Even with the housing gains,

706
00:35:22,760 --> 00:35:25,560
Speaker 11: the stock gains, even though we pulled back in twenty two,

707
00:35:25,840 --> 00:35:28,920
Speaker 11: stocks are still hugely higher from where they were just

708
00:35:28,960 --> 00:35:31,080
Speaker 11: a few years ago. So there's a lot of wealth,

709
00:35:31,120 --> 00:35:34,080
Speaker 11: a lot of dollars out there, and just anecdotally, there's

710
00:35:35,040 --> 00:35:37,680
Speaker 11: still a lot of spending and we're seeing that in

711
00:35:37,800 --> 00:35:41,000
Speaker 11: earnings come through. Earnings are coming through, Okay, So I

712
00:35:41,520 --> 00:35:44,040
Speaker 11: think that it likely will be a little bit lighter

713
00:35:45,160 --> 00:35:47,319
Speaker 11: than a deep recession, and it's priced in in a

714
00:35:47,320 --> 00:35:47,960
Speaker 11: lot of areas.

715
00:35:48,320 --> 00:35:50,839
Speaker 1: Hey, David You've been at this game a long time. Here,

716
00:35:52,120 --> 00:35:53,920
Speaker 1: how do you put all this together? We've got a

717
00:35:53,960 --> 00:35:57,239
Speaker 1: FED decision today, We've got some turmoil slash crisis in

718
00:35:57,320 --> 00:35:59,879
Speaker 1: the bank space, and you know, right in the midst

719
00:35:59,880 --> 00:36:02,160
Speaker 1: of earnings, what are you telling your clients here?

720
00:36:02,920 --> 00:36:06,320
Speaker 12: Well, you know, it all comes down to the time horizon.

721
00:36:06,440 --> 00:36:09,080
Speaker 12: I mean, if you've got a time horizon that goes

722
00:36:09,120 --> 00:36:11,239
Speaker 12: past the end of this week, I think there's a

723
00:36:11,239 --> 00:36:14,120
Speaker 12: lot of great places to put your money to work.

724
00:36:14,239 --> 00:36:17,200
Speaker 12: I mean, let's look at some of the big advantages.

725
00:36:17,239 --> 00:36:20,040
Speaker 12: One is, you've got a market that's eighteen percent off

726
00:36:20,080 --> 00:36:22,960
Speaker 12: of it's all time high. You know, we've always come

727
00:36:23,040 --> 00:36:25,400
Speaker 12: back to that. You know, is that going to be

728
00:36:25,719 --> 00:36:28,279
Speaker 12: this year? Probably not. If that's in three years, that

729
00:36:28,320 --> 00:36:30,440
Speaker 12: looks pretty good relative to stuff and your money under

730
00:36:30,480 --> 00:36:33,360
Speaker 12: the mattress. We know the FED is probably going to

731
00:36:33,440 --> 00:36:35,920
Speaker 12: raise today. What's it going to do going forward? We

732
00:36:36,000 --> 00:36:38,759
Speaker 12: do know it's close to finishing its work. We do

733
00:36:38,840 --> 00:36:41,920
Speaker 12: know that inflation has come down dramatically since last summer,

734
00:36:42,120 --> 00:36:44,080
Speaker 12: and that's been one of the big problems that the

735
00:36:44,080 --> 00:36:47,319
Speaker 12: FED is reacting to. The economy is staying reasonable. We've

736
00:36:47,360 --> 00:36:50,440
Speaker 12: just got a nice report coming out of ADP with

737
00:36:50,480 --> 00:36:53,600
Speaker 12: far more jobs created in the private sector than we expected.

738
00:36:53,760 --> 00:36:56,520
Speaker 12: We still have positive job gration, So I think buying

739
00:36:56,600 --> 00:36:59,680
Speaker 12: stocks for the long term still makes sense here, but

740
00:36:59,760 --> 00:37:03,040
Speaker 12: we would avoid some of the megacap tech stocks, which

741
00:37:03,040 --> 00:37:05,200
Speaker 12: have accounted for close to eighty percent of the games

742
00:37:05,239 --> 00:37:08,600
Speaker 12: this year, and anything that's touting AI be very cautious.

743
00:37:08,760 --> 00:37:12,319
Speaker 2: Wait, I thought, first of all, that's that's well said. Yeah,

744
00:37:12,320 --> 00:37:14,919
Speaker 2: that's something that we're going to clip and probably use

745
00:37:15,000 --> 00:37:17,840
Speaker 2: in commercials from now on. With the what about Amazon?

746
00:37:17,880 --> 00:37:20,760
Speaker 2: I thought you liked Amazon and they're a megacap tech stock.

747
00:37:21,280 --> 00:37:23,839
Speaker 12: And I love the fact that it fell after a

748
00:37:23,880 --> 00:37:27,960
Speaker 12: better than expected earnings report because they said it didn't

749
00:37:27,960 --> 00:37:31,560
Speaker 12: make a convincing AI case. I think they're just being honest.

750
00:37:31,920 --> 00:37:35,600
Speaker 12: But you know, here's the thing. You've got the two

751
00:37:35,719 --> 00:37:39,239
Speaker 12: best businesses on the planet. One is cloud, the other

752
00:37:39,360 --> 00:37:42,200
Speaker 12: is e commerce. We know that those businesses are going

753
00:37:42,280 --> 00:37:44,879
Speaker 12: to be growing double digit rates for as far as

754
00:37:44,880 --> 00:37:47,160
Speaker 12: you can look out into the future. We know they're

755
00:37:47,239 --> 00:37:49,880
Speaker 12: number one in both by the cloud, they're double the

756
00:37:49,920 --> 00:37:53,880
Speaker 12: size of Microsoft. We also know that Amazon is down

757
00:37:54,120 --> 00:37:57,000
Speaker 12: forty five percent frons high, So you're not buying it

758
00:37:57,040 --> 00:37:59,160
Speaker 12: at a peak. You know what I love here is

759
00:37:59,239 --> 00:38:02,239
Speaker 12: Amazon's trade about two times sales, or you can buy

760
00:38:02,280 --> 00:38:07,160
Speaker 12: Microsoft eleven time sales. Amazon's got the better cloud business,

761
00:38:07,160 --> 00:38:10,279
Speaker 12: and you're paying about one fifth as much. Amazon's even

762
00:38:10,320 --> 00:38:13,240
Speaker 12: trained less for eBay, who has the better e commerce site.

763
00:38:14,360 --> 00:38:17,040
Speaker 2: Compelling valuation there for a lot of folks, that's for sure.

764
00:38:17,120 --> 00:38:18,879
Speaker 2: Amazon's the answer to David's question.

765
00:38:18,920 --> 00:38:21,320
Speaker 1: I think that is, Hey, hey, Tim, are there sectors?

766
00:38:21,360 --> 00:38:24,800
Speaker 1: Are there areas where you're saying to your clients, let's

767
00:38:24,960 --> 00:38:27,200
Speaker 1: put a little put some chips on the table here,

768
00:38:27,520 --> 00:38:29,200
Speaker 1: you know, whether it's an equity so or fixed income?

769
00:38:31,840 --> 00:38:35,880
Speaker 11: Yeah, yeah, well, you know, I I don't know that

770
00:38:35,880 --> 00:38:39,600
Speaker 11: there's any any specific areas. There are some areas that

771
00:38:39,640 --> 00:38:43,040
Speaker 11: we probably would avoid, you know, when you're looking on

772
00:38:43,080 --> 00:38:47,880
Speaker 11: the fixed income side, you know, with spreads being still

773
00:38:47,960 --> 00:38:52,759
Speaker 11: really narrow, really compressed, there are some areas that just

774
00:38:52,800 --> 00:38:55,680
Speaker 11: don't the risk reward doesn't look like they make sense,

775
00:38:55,800 --> 00:38:58,960
Speaker 11: you know, owning some higher yield bonds, some riskier bonds,

776
00:38:59,600 --> 00:39:03,320
Speaker 11: you know, going into a recession or a potential recession,

777
00:39:03,400 --> 00:39:06,279
Speaker 11: even if it's light you it probably doesn't make sense

778
00:39:06,320 --> 00:39:08,759
Speaker 11: to get you know, slightly higher yields from there, if

779
00:39:08,800 --> 00:39:11,360
Speaker 11: you're going to take on that risk, you know, you

780
00:39:11,440 --> 00:39:14,840
Speaker 11: might just consider going into equities instead with with higher upsides.

781
00:39:15,320 --> 00:39:18,320
Speaker 11: So we're we're we're looking to avoid some of the areas.

782
00:39:18,840 --> 00:39:22,200
Speaker 11: I would agree with, you know, the comment that some

783
00:39:22,239 --> 00:39:25,080
Speaker 11: of the megacaps look a little expensive. You know, you

784
00:39:25,120 --> 00:39:27,520
Speaker 11: may not want to overweight there. The market is certainly

785
00:39:27,560 --> 00:39:32,200
Speaker 11: overweighted in the megacap the space, and so you know,

786
00:39:32,200 --> 00:39:34,160
Speaker 11: maybe you didn't want to take a full weight there,

787
00:39:34,719 --> 00:39:38,080
Speaker 11: but otherwise, you know, I think, just broadly, now that

788
00:39:38,080 --> 00:39:42,359
Speaker 11: that rates are higher and things have more normalized, you know,

789
00:39:42,560 --> 00:39:45,120
Speaker 11: outside of those few areas maybe where the risk returned

790
00:39:45,120 --> 00:39:47,920
Speaker 11: doesn't line up, I think getting exposure in most broad

791
00:39:47,920 --> 00:39:52,640
Speaker 11: asset classes, including you know, including real assets like commodities

792
00:39:52,640 --> 00:39:54,600
Speaker 11: in real estate. Real estate had a really poor year

793
00:39:54,680 --> 00:39:59,799
Speaker 11: last year. It's still risky, but there's with with rates higher,

794
00:39:59,840 --> 00:40:02,239
Speaker 11: you could look to put some money into real estate

795
00:40:02,400 --> 00:40:03,560
Speaker 11: in those areas as well.

796
00:40:03,920 --> 00:40:09,200
Speaker 2: David, you like Alexandria real Estate Equities. What is that company?

797
00:40:09,280 --> 00:40:11,040
Speaker 2: AARI is the ticker.

798
00:40:11,320 --> 00:40:15,480
Speaker 12: Absolutely so it's the only pure play in office space

799
00:40:15,719 --> 00:40:19,759
Speaker 12: for the biotech industry, and I think that makes more

800
00:40:19,800 --> 00:40:22,719
Speaker 12: sense than conventional office space for less of lawyers and

801
00:40:22,760 --> 00:40:25,759
Speaker 12: accounts because you know you're just not going to work

802
00:40:25,800 --> 00:40:30,000
Speaker 12: from home for your lab work. The companies that have

803
00:40:30,000 --> 00:40:32,279
Speaker 12: about forty percent from the start of the year four

804
00:40:32,320 --> 00:40:34,960
Speaker 12: percent dividend yield, it's a unique property that I think

805
00:40:35,000 --> 00:40:35,759
Speaker 12: can rebound here.

806
00:40:35,800 --> 00:40:38,879
Speaker 1: Okay, David Deets, we appreciate it. Tim Courtney appreciate as well.

807
00:40:38,920 --> 00:40:40,480
Speaker 1: Getting the latest on these markets.

808
00:40:40,920 --> 00:40:44,040
Speaker 5: You're listening to the tape cats our live program Bloomberg

809
00:40:44,080 --> 00:40:47,680
Speaker 5: Markets weekdays at ten am Eastern on Bloomberg Radio, the

810
00:40:47,760 --> 00:40:50,959
Speaker 5: tune in app, Bloomberg dot Com, and the Bloomberg Business App.

811
00:40:51,000 --> 00:40:53,839
Speaker 5: You can also listen live on Amazon Alexa from our

812
00:40:53,840 --> 00:41:00,120
Speaker 5: flagship New York station Just Say Alexa playing Bloomberg eleven thirty.

813
00:41:01,520 --> 00:41:05,120
Speaker 1: Some news out in the pharma space today Lily drug

814
00:41:05,320 --> 00:41:10,120
Speaker 1: slows Alzheimer's disease and final stage study UH shares of

815
00:41:10,160 --> 00:41:13,160
Speaker 1: Eli Lellyer up six point five percent today. In part

816
00:41:13,239 --> 00:41:14,800
Speaker 1: on that news, we want to get the latest on

817
00:41:14,840 --> 00:41:16,239
Speaker 1: what that means for Lily, what it means for the

818
00:41:16,280 --> 00:41:20,120
Speaker 1: space and all things pharmas we do that with Sam Fizzelli.

819
00:41:20,160 --> 00:41:22,080
Speaker 1: He is the head of European Research and he is

820
00:41:22,120 --> 00:41:25,920
Speaker 1: a pharmaceutical analyst at Bloomberg Intelligence based in London. God

821
00:41:26,000 --> 00:41:27,960
Speaker 1: knows where he is in any given day, but he

822
00:41:28,040 --> 00:41:30,359
Speaker 1: is based in London. So Sam, talk to us about

823
00:41:30,400 --> 00:41:33,560
Speaker 1: this fit this farmer news from Eli Lilly. What's it

824
00:41:33,680 --> 00:41:36,560
Speaker 1: mean for Lily and for this disease?

825
00:41:37,160 --> 00:41:40,040
Speaker 6: Hey, Paul, I'm actually sitting in the studio in lod Yes,

826
00:41:40,120 --> 00:41:42,799
Speaker 6: there we go, so so based on in the in

827
00:41:42,840 --> 00:41:48,480
Speaker 6: the in the mothership. So look, any positive news for

828
00:41:48,520 --> 00:41:52,440
Speaker 6: this devastating disease has to be taken positive. You know,

829
00:41:53,080 --> 00:41:55,840
Speaker 6: it is no question that we need drugs for treating

830
00:41:56,480 --> 00:42:00,920
Speaker 6: this curse that's going to be at some point, hopefully

831
00:42:00,920 --> 00:42:04,200
Speaker 6: not affecting you and I, but somebody close to us potentially.

832
00:42:04,280 --> 00:42:08,000
Speaker 6: So the question, however, is well, how good is this

833
00:42:08,120 --> 00:42:10,440
Speaker 6: data and how does it set up Lily compared to

834
00:42:10,480 --> 00:42:14,160
Speaker 6: the competition. Well, it certainly gives Lily an opportunity to

835
00:42:14,200 --> 00:42:17,920
Speaker 6: play in the in the to be a contributor in

836
00:42:17,920 --> 00:42:20,160
Speaker 6: this business, and that that that is going to be

837
00:42:20,200 --> 00:42:23,160
Speaker 6: a positive, There's no question about that. But how much

838
00:42:23,360 --> 00:42:25,480
Speaker 6: you know, you look at the efficacy that they reported,

839
00:42:26,000 --> 00:42:28,399
Speaker 6: it's not that different to another drug that we talked

840
00:42:28,400 --> 00:42:30,640
Speaker 6: about just about a year ago as the data was

841
00:42:30,760 --> 00:42:34,600
Speaker 6: rolling out, and that was biogens the Camby now that's

842
00:42:34,600 --> 00:42:39,080
Speaker 6: on the market. So twenty nine percent reduction in the

843
00:42:39,120 --> 00:42:42,840
Speaker 6: speed of decline versus twenty seven percent for the Camby

844
00:42:43,200 --> 00:42:46,600
Speaker 6: different trials. But that's what we're seeing. The issue we

845
00:42:46,719 --> 00:42:49,840
Speaker 6: have and the worry I have, is that the Lily

846
00:42:49,920 --> 00:42:53,280
Speaker 6: drug has higher side effects. There's a particular side effect

847
00:42:53,320 --> 00:42:56,640
Speaker 6: that they look at in for Azhonma's patients and it

848
00:42:56,680 --> 00:42:59,520
Speaker 6: seems to have not exactly not quite double, but it

849
00:42:59,520 --> 00:43:02,040
Speaker 6: seems to have quite a higher rate of that particular

850
00:43:02,040 --> 00:43:05,160
Speaker 6: side effect, and that's something that worries me about its commercial.

851
00:43:04,800 --> 00:43:06,120
Speaker 2: Wait, what's the side effect?

852
00:43:07,600 --> 00:43:09,759
Speaker 6: So what you get with these drugs, with all of

853
00:43:09,800 --> 00:43:16,280
Speaker 6: them is something called amyloid related imaging abnormality ARIA. Yeah,

854
00:43:16,320 --> 00:43:18,160
Speaker 6: and a lot of them are exactly just that you

855
00:43:18,239 --> 00:43:22,000
Speaker 6: scan the brain and you find these weird dots around it,

856
00:43:22,080 --> 00:43:25,960
Speaker 6: and that's being called ARIA. Some of them cause inflammation,

857
00:43:26,120 --> 00:43:28,880
Speaker 6: real inflammation, and unfortunately there is a version of it

858
00:43:28,920 --> 00:43:32,960
Speaker 6: where there's little hemorrhages. Now that doesn't sound good, right, So,

859
00:43:33,520 --> 00:43:35,400
Speaker 6: and that's what you want to try and avoid. Now,

860
00:43:35,440 --> 00:43:38,919
Speaker 6: the Kenby has a much lower percentage of patients who

861
00:43:39,120 --> 00:43:43,560
Speaker 6: suffer the hemorrhage type aria h than the data that

862
00:43:43,560 --> 00:43:47,120
Speaker 6: we've seen from dunanamap from Lily. So that's the question

863
00:43:47,239 --> 00:43:49,040
Speaker 6: that I think a lot of physicians are going to

864
00:43:49,080 --> 00:43:52,360
Speaker 6: be asking, how good is the efficacy? And am I

865
00:43:52,440 --> 00:43:54,600
Speaker 6: going to be wanting to put my patients through this

866
00:43:54,680 --> 00:43:57,000
Speaker 6: given that they're going to you know, these are elderly

867
00:43:57,040 --> 00:43:59,520
Speaker 6: patients already, if they get these side effects of what

868
00:43:59,640 --> 00:44:00,760
Speaker 6: we have going to manage.

869
00:44:00,560 --> 00:44:03,920
Speaker 1: It, Sam, What are the folks in the medical community,

870
00:44:03,960 --> 00:44:06,799
Speaker 1: the scientific community, what do they believe is the realistic

871
00:44:07,560 --> 00:44:10,920
Speaker 1: I guess ultimate treatment of Alzheimer's.

872
00:44:11,520 --> 00:44:13,640
Speaker 6: You know, Paul, it's just pretty much like cancer. I

873
00:44:13,719 --> 00:44:18,240
Speaker 6: think if you think about it, the biology is multifaceted.

874
00:44:18,760 --> 00:44:21,360
Speaker 6: There are many things that are going wrong in the brain.

875
00:44:21,480 --> 00:44:24,920
Speaker 6: And remember, by the time you get to the deficits

876
00:44:24,960 --> 00:44:28,520
Speaker 6: in memory and cognition, you've had this disease developing for

877
00:44:28,600 --> 00:44:31,560
Speaker 6: ten years, fifteen years. So what everybody's trying to do

878
00:44:31,640 --> 00:44:35,319
Speaker 6: is to go as early as possible, identify markers, and

879
00:44:35,400 --> 00:44:38,840
Speaker 6: find treatments that have side effects that you can manage

880
00:44:38,880 --> 00:44:40,800
Speaker 6: for somebody who's going to get treated for ten years,

881
00:44:41,600 --> 00:44:44,719
Speaker 6: but also gives really seriously slows down the risk of

882
00:44:44,760 --> 00:44:48,080
Speaker 6: you developing that later Alzheimer's. That's the holy grail. So

883
00:44:49,120 --> 00:44:51,640
Speaker 6: you know this is in patients that have got some

884
00:44:52,040 --> 00:44:55,400
Speaker 6: signs of cognitive decline already. We need to get earlier

885
00:44:55,560 --> 00:44:58,480
Speaker 6: and there are definitely going to be more than one

886
00:44:58,520 --> 00:45:00,600
Speaker 6: way of doing it and possibly come nations.

887
00:45:01,320 --> 00:45:09,520
Speaker 2: Why are Lily's drug is called done nanomab and Biogen's

888
00:45:09,560 --> 00:45:12,880
Speaker 2: drug is add you canomab.

889
00:45:12,800 --> 00:45:16,720
Speaker 6: And that was the old one it canomap.

890
00:45:16,120 --> 00:45:18,680
Speaker 2: Or well, the same question, then what's the mab?

891
00:45:18,800 --> 00:45:19,520
Speaker 1: What are these things?

892
00:45:19,719 --> 00:45:22,319
Speaker 6: The maps? The maps are antibodies, so basically they are

893
00:45:22,600 --> 00:45:28,240
Speaker 6: biological biologicals I either manufactured, you have them in your blood.

894
00:45:28,239 --> 00:45:30,360
Speaker 6: You know when you got your vaccine for COVID. A

895
00:45:30,400 --> 00:45:33,120
Speaker 6: lot of the action against the virus initially when the

896
00:45:33,160 --> 00:45:36,080
Speaker 6: virus enters your body is done by antibodies. They are

897
00:45:36,160 --> 00:45:39,720
Speaker 6: highly specific. They're buying to one particular tiny little area

898
00:45:39,880 --> 00:45:42,960
Speaker 6: on a cell or a protein or whatever it is

899
00:45:43,360 --> 00:45:46,160
Speaker 6: and deactivate it. And that's what their job is, I mean,

900
00:45:46,200 --> 00:45:49,880
Speaker 6: really really making it a lot simpler than biology.

901
00:45:49,920 --> 00:45:51,080
Speaker 2: Does we need you to do that?

902
00:45:52,040 --> 00:45:54,200
Speaker 6: So that's what this is. You injected and of course

903
00:45:54,239 --> 00:45:56,040
Speaker 6: what you're doing here is injecting it into the blood

904
00:45:56,040 --> 00:45:58,640
Speaker 6: stream and then hoping that a bunch of it gets

905
00:45:58,680 --> 00:46:01,160
Speaker 6: into the brain. Of course, the brain is very privileged.

906
00:46:01,560 --> 00:46:03,920
Speaker 6: It's protected from your bloodstream because we put a lot

907
00:46:03,960 --> 00:46:05,200
Speaker 6: of stuff in our blood stream.

908
00:46:05,239 --> 00:46:10,799
Speaker 2: Unfortunately, but so certainly ideal goodness. This is this still

909
00:46:10,840 --> 00:46:13,480
Speaker 2: an attack on the plaque. This is a simple idea

910
00:46:13,480 --> 00:46:16,200
Speaker 2: that I have found easy to understand that there's some

911
00:46:16,280 --> 00:46:18,920
Speaker 2: kind of plaque that forms around our synapses or something

912
00:46:19,000 --> 00:46:22,960
Speaker 2: like that, and that that's the Alzheimer's problem, and we

913
00:46:23,000 --> 00:46:24,759
Speaker 2: need to get that plaque away, just like we do

914
00:46:24,800 --> 00:46:26,080
Speaker 2: when we're kind of brushing our teeth.

915
00:46:26,160 --> 00:46:28,200
Speaker 6: Right, I thought you said your knowledge was elementary.

916
00:46:28,520 --> 00:46:29,759
Speaker 1: That was pretty they impressed me.

917
00:46:29,760 --> 00:46:33,560
Speaker 6: There, Yeah, I'm well done. Absolutely right, These things begin

918
00:46:33,640 --> 00:46:37,160
Speaker 6: to form in brains. Not everybody who dies and has

919
00:46:37,160 --> 00:46:41,080
Speaker 6: a brain looked at and has got plaques actually got Alzheimer's.

920
00:46:41,080 --> 00:46:43,920
Speaker 6: That's one of the problems. Only some people do so

921
00:46:44,680 --> 00:46:47,319
Speaker 6: at least what we know here now, two trials, two

922
00:46:47,400 --> 00:46:52,040
Speaker 6: drugs that lower plaques have been able to produce some efficacy.

923
00:46:52,239 --> 00:46:54,600
Speaker 6: We need to push that boundary that bar higher and

924
00:46:54,680 --> 00:46:55,440
Speaker 6: higher and higher.

925
00:46:55,840 --> 00:46:58,600
Speaker 1: And Sam, is this something in the next few years

926
00:46:58,719 --> 00:47:00,680
Speaker 1: or is this kind of like cancer or there really

927
00:47:00,800 --> 00:47:03,240
Speaker 1: isn't any kind of light at the end of the tunnel.

928
00:47:03,239 --> 00:47:06,880
Speaker 6: Maybe Yeah, I mean, I think with Alzheimer's we're going

929
00:47:06,920 --> 00:47:09,280
Speaker 6: to end up having the same sort of situation where

930
00:47:09,400 --> 00:47:12,720
Speaker 6: you're getting a thirty percent reduction in the decline. Remember,

931
00:47:12,800 --> 00:47:15,440
Speaker 6: this is not as stopping, although in some people it

932
00:47:15,480 --> 00:47:18,080
Speaker 6: probably will so if you're one of those lucky people,

933
00:47:18,080 --> 00:47:21,160
Speaker 6: But this is reducing the rate to decline. And what

934
00:47:21,200 --> 00:47:23,239
Speaker 6: you want to do is take that from twenty nine

935
00:47:23,239 --> 00:47:26,120
Speaker 6: percent to forty percent to fifty percent to sixty percent

936
00:47:26,160 --> 00:47:28,160
Speaker 6: and if you're lucky tow one hundred percent. So that

937
00:47:28,280 --> 00:47:30,719
Speaker 6: and without side effects. Of course, as I said that,

938
00:47:30,719 --> 00:47:33,239
Speaker 6: that's rarely going to be the outcome, but that's what

939
00:47:33,360 --> 00:47:35,359
Speaker 6: people are working on different mechanisms.

940
00:47:35,680 --> 00:47:35,839
Speaker 11: Here.

941
00:47:35,960 --> 00:47:39,200
Speaker 6: We are attacking plaque. Should we attack another molecule in

942
00:47:39,200 --> 00:47:42,160
Speaker 6: the brain called TAW. People are trying that. Should we

943
00:47:42,200 --> 00:47:45,520
Speaker 6: go after the inflammation that these things cause? People are

944
00:47:45,520 --> 00:47:48,480
Speaker 6: trying that. It would be a long long way, But

945
00:47:48,560 --> 00:47:51,440
Speaker 6: I'm optimistic that with these little wins we're going to

946
00:47:51,440 --> 00:47:53,920
Speaker 6: be able to see a better upsidey.

947
00:47:54,040 --> 00:47:57,759
Speaker 1: So investing in farmers stocks, Sam, I'm just looking at

948
00:47:57,800 --> 00:48:00,319
Speaker 1: kind of the trailing twelve month performance of some these

949
00:48:01,000 --> 00:48:03,160
Speaker 1: on in. You know, I got Lily up fifty percent.

950
00:48:03,239 --> 00:48:05,799
Speaker 1: That's great, it's fifty two week high. But nobody else

951
00:48:05,880 --> 00:48:08,120
Speaker 1: is really doing I guess Murkers up forty percent. But

952
00:48:08,239 --> 00:48:10,880
Speaker 1: is it You can't just say I'm going long Farmer,

953
00:48:10,960 --> 00:48:14,000
Speaker 1: can It's really company by company, drug by drug.

954
00:48:14,719 --> 00:48:17,759
Speaker 6: Well, Macro has has done that. I mean, you know,

955
00:48:17,840 --> 00:48:21,160
Speaker 6: as we had recession coming and worries about interest rate

956
00:48:21,239 --> 00:48:24,200
Speaker 6: rises and worries, and you know, the defensive the defensive

957
00:48:24,239 --> 00:48:27,800
Speaker 6: play is farma. So one of the defensive plays is farmer.

958
00:48:28,120 --> 00:48:30,640
Speaker 6: So so you can you can pile into some etf

959
00:48:31,239 --> 00:48:35,760
Speaker 6: or some form of a basket. But as you rightly say,

960
00:48:36,120 --> 00:48:38,400
Speaker 6: there are some who've done phenomenally well and over in

961
00:48:38,440 --> 00:48:40,759
Speaker 6: Europe you'll see that nova notice kids. But Lily has

962
00:48:40,800 --> 00:48:44,759
Speaker 6: been one of the best performer. They had many things

963
00:48:44,800 --> 00:48:47,680
Speaker 6: going right for them, and it's been a fantastically well

964
00:48:47,680 --> 00:48:50,360
Speaker 6: managed story in the past three or four or five years.

965
00:48:50,760 --> 00:48:53,560
Speaker 6: As their pipeline has evolved, their margins got better, and

966
00:48:53,719 --> 00:48:56,480
Speaker 6: of course these drugs hit. You just keep adding to

967
00:48:56,560 --> 00:49:00,720
Speaker 6: that baseline of of your salesforce and you keep pushing

968
00:49:00,760 --> 00:49:03,839
Speaker 6: that revenue up and hopefully your margin up. So and

969
00:49:03,880 --> 00:49:07,000
Speaker 6: in the meantime, you treat people, I mean, how can

970
00:49:07,040 --> 00:49:08,440
Speaker 6: you be in a better business.

971
00:49:08,280 --> 00:49:10,800
Speaker 2: And well, people who pay a heck of a lot

972
00:49:11,560 --> 00:49:14,759
Speaker 2: for your drugs here and far less everywhere else. Is

973
00:49:15,080 --> 00:49:17,759
Speaker 2: that the case? Do we Americans subsidize the rest of

974
00:49:17,800 --> 00:49:19,400
Speaker 2: the world in terms of drug prices?

975
00:49:19,719 --> 00:49:23,600
Speaker 6: Yeah? But then you do you do? And the problem

976
00:49:23,600 --> 00:49:27,320
Speaker 6: the difference therefore, is that US has usually got access

977
00:49:27,320 --> 00:49:31,400
Speaker 6: to first to drugs first year, two years, three years,

978
00:49:31,440 --> 00:49:35,160
Speaker 6: four years ahead of other countries. So the patients are

979
00:49:35,280 --> 00:49:38,799
Speaker 6: reaping the benefit, and a lot of the industry, and

980
00:49:38,840 --> 00:49:41,840
Speaker 6: the biotech industry is based out of there. That's jobs.

981
00:49:42,200 --> 00:49:44,480
Speaker 6: So look, I'm not defending prices. This is not our

982
00:49:44,880 --> 00:49:47,080
Speaker 6: what I'm doing here. There are probably some prices that

983
00:49:47,120 --> 00:49:50,960
Speaker 6: should be lower, absolutely, but the system has so many

984
00:49:51,040 --> 00:49:52,880
Speaker 6: middle men in it that need to be sorted out.

985
00:49:52,920 --> 00:49:55,520
Speaker 6: And you know that some of the of the politicians

986
00:49:55,520 --> 00:49:58,279
Speaker 6: are going after the PBMs, so many this is the

987
00:49:58,280 --> 00:50:02,160
Speaker 6: pharmacy benefit maledges. So many middlemen that that just death

988
00:50:02,239 --> 00:50:04,120
Speaker 6: needs to be cleaned out and sort it out. But

989
00:50:04,239 --> 00:50:07,160
Speaker 6: let's just remember, I think Lily's talked about this. The

990
00:50:07,239 --> 00:50:09,400
Speaker 6: cost of obesity, for example, to the US is a

991
00:50:09,400 --> 00:50:12,920
Speaker 6: trillion dollars a year. Their estimate. How much would you

992
00:50:12,960 --> 00:50:15,480
Speaker 6: spend on an obesity reducing drug if you could cut

993
00:50:15,520 --> 00:50:16,160
Speaker 6: that by half?

994
00:50:16,719 --> 00:50:19,440
Speaker 2: Oh yeah, I'm all in because as soon as I

995
00:50:19,480 --> 00:50:21,920
Speaker 2: get that obesie reduction drug, I'm gonna go get a

996
00:50:22,000 --> 00:50:22,800
Speaker 2: root beer float.

997
00:50:23,440 --> 00:50:24,960
Speaker 1: You know, we can eat.

998
00:50:24,840 --> 00:50:27,600
Speaker 2: Anything we want, never exercise, and still say skinny.

999
00:50:28,400 --> 00:50:28,720
Speaker 5: Yeah.

1000
00:50:28,760 --> 00:50:31,560
Speaker 2: Well no, thank you so much pharmacy industry.

1001
00:50:32,520 --> 00:50:34,279
Speaker 1: Sam's gonna push back on that, all right, Sam, thanks

1002
00:50:34,280 --> 00:50:36,680
Speaker 1: so much for joining us. Always appreciate checking in with you.

1003
00:50:36,680 --> 00:50:40,000
Speaker 1: Sam Fazzelli, Folks, he runs the research business for Bloomberg

1004
00:50:40,000 --> 00:50:41,920
Speaker 1: Intelligence over in Europe. He's got like, I know, one

1005
00:50:42,000 --> 00:50:44,360
Speaker 1: hundred people reporting to him, and he's also the top

1006
00:50:44,480 --> 00:50:48,560
Speaker 1: pharmaceutical analyst in the city of London, so we appreciate

1007
00:50:48,600 --> 00:50:50,600
Speaker 1: getting some of his time. So he's there doing all

1008
00:50:50,600 --> 00:50:52,560
Speaker 1: that for Bloomberg Intelligence. He's based out of London, but

1009
00:50:52,600 --> 00:50:54,800
Speaker 1: we never really know where he is. He's always traveling

1010
00:50:54,800 --> 00:50:55,600
Speaker 1: all over the place.

1011
00:50:56,040 --> 00:50:59,160
Speaker 2: Thanks for listening to the Bloomberg Markets podcast. You can

1012
00:50:59,200 --> 00:51:02,960
Speaker 2: subscribe and listen to interviews on Apple Podcasts or whatever

1013
00:51:03,040 --> 00:51:04,560
Speaker 2: podcast platform you prefer.

1014
00:51:04,920 --> 00:51:05,720
Speaker 1: I'm Matt Miller.

1015
00:51:06,000 --> 00:51:09,400
Speaker 2: I'm on Twitter at Matt Miller nineteen seventy three, and

1016
00:51:09,520 --> 00:51:12,080
Speaker 2: I'm Faull Sweeney. I'm on Twitter at pt Sweeney Before

1017
00:51:12,160 --> 00:51:14,960
Speaker 2: the podcast. You can always catch us worldwide at Bloomberg

1018
00:51:15,040 --> 00:51:16,279
Speaker 2: Radio