WEBVTT - The Fed, ETFs, Supply Chain, and Eli Lilly 0:00:00.840 --> 0:00:04.000 Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside 0:00:04.040 --> 0:00:05.240 my co host Matt Miller. 0:00:05.640 --> 0:00:09.600 Every business day we bring you interviews from CEOs, market pros, 0:00:09.720 --> 0:00:13.600 and Bloomberg experts, along with essential market moven news. 0:00:14.160 --> 0:00:17.279 Find the Bloomberg Markets Podcast on Apple Podcasts or wherever 0:00:17.400 --> 0:00:20.520 you listen to podcasts, and at Bloomberg dot com slash podcast. 0:00:21.040 --> 0:00:24.479 What's new in the last twenty four hours here? What 0:00:24.520 --> 0:00:25.080 are we seeing? 0:00:25.360 --> 0:00:28.800 Look, the resolution with First Republic was great to see. 0:00:28.880 --> 0:00:33.080 The market is working, the market resolution mechanism is working. 0:00:33.960 --> 0:00:36.320 But on the other hand, there's still some uncertainty within 0:00:36.360 --> 0:00:40.160 the regional bank space. There's lots of negativity with regards 0:00:40.159 --> 0:00:48.120 to deposits stability, rising fundy costs, increased regulation, potentially in 0:00:48.120 --> 0:00:52.240 inadequacy on the capital front, so there's lots of negativity. 0:00:52.920 --> 0:00:55.080 Those things all sound like not the reason we saw 0:00:55.080 --> 0:00:56.120 the seale off yesterday. 0:00:56.520 --> 0:00:58.400 I mean it not. 0:00:58.680 --> 0:01:02.840 Is it not that shorts after First Republic didn't see 0:01:02.840 --> 0:01:05.880 any kind of relief rally and said, you know, let's 0:01:05.880 --> 0:01:08.280 short the hell out of this basket of stocks again. 0:01:08.360 --> 0:01:10.320 Let's let's have another run at them, because I saw 0:01:10.600 --> 0:01:12.960 from S three data, you know, Bob Sloan shop S three. 0:01:13.000 --> 0:01:16.080 They give us a lot of important short selling data. 0:01:16.520 --> 0:01:22.560 Ninety six percent of KRI shares are sold short. That's amazing, really. 0:01:22.319 --> 0:01:23.760 Wow, ninety six percent. 0:01:23.840 --> 0:01:26.640 That means that there's only four percent of shares out 0:01:26.680 --> 0:01:28.720 there that haven't been borrowed to sell short. And that's 0:01:28.720 --> 0:01:31.160 probably because those share holders don't even know they have them. 0:01:31.319 --> 0:01:33.240 Look, the short sellers have done a great job with 0:01:33.280 --> 0:01:36.360 what happened with SBB, with signature, with First Republic and 0:01:36.440 --> 0:01:39.920 the playbook still there. Nothing has changed from an exogy 0:01:39.959 --> 0:01:43.320 to standpoint from Washington or the regulators to derail the 0:01:43.400 --> 0:01:45.640 narrative that if you short a stock it could go 0:01:46.120 --> 0:01:47.520 into receivership. 0:01:47.760 --> 0:01:49.880 All right, I want to bring in another smart mind, 0:01:50.040 --> 0:01:51.280 and so Matt and I could just sit on the 0:01:51.320 --> 0:01:53.840 sidelines and let these people kind of debate it. Neil Grossman, 0:01:53.880 --> 0:01:57.600 former CIO with t k n G Capitol, joins, is, Neil, 0:01:57.880 --> 0:01:59.640 you've been around the block once or twice. What do 0:01:59.640 --> 0:02:02.320 you make this bank stuff here? I mean I placed 0:02:02.320 --> 0:02:04.760 all the blame squarely on Herman Chen and the fellow 0:02:04.800 --> 0:02:05.720 regional bank people. 0:02:09.600 --> 0:02:12.480 Look, there are a couple of levels of this. Number one, 0:02:12.680 --> 0:02:18.000 it was pretty hard to accept what happened with SVB 0:02:18.480 --> 0:02:23.919 and signats are to begin with, because senior management had 0:02:23.960 --> 0:02:27.960 to know how badly impaired their assets. 0:02:27.520 --> 0:02:31.560 Were, not to mention regulators at the Federal Reserve and 0:02:31.639 --> 0:02:33.880 the FDI see they all claim to have known a 0:02:33.960 --> 0:02:35.920 year in advance and apparently did nothing. 0:02:35.919 --> 0:02:38.320 They didn't do anything. However, on the other side, which 0:02:38.320 --> 0:02:44.840 I believe is in part equally culpability. A year ago today, 0:02:44.840 --> 0:02:48.640 I think we were all together. Inflation was peaking at 0:02:48.720 --> 0:02:52.239 nine percent, the FED was just starting to cut and 0:02:52.880 --> 0:02:55.320 mister Powell and Coe just starting to raise. Were a 0:02:55.520 --> 0:02:59.280 parton me. We're promising or expecting that by September of 0:02:59.280 --> 0:03:02.960 this year, FED funds would be peaking between two and 0:03:02.960 --> 0:03:04.960 two and a half percent. So if you're running an 0:03:05.000 --> 0:03:09.960 institution like SVB or anything even JP Morgan, and for 0:03:10.000 --> 0:03:12.280 the last twenty five years, you've been told to ignore 0:03:12.280 --> 0:03:15.320 reality and ignore risk and just listen to the guy 0:03:15.360 --> 0:03:17.000 at the FED telling you what she's gonna do. You 0:03:17.040 --> 0:03:21.400 don't react in interrrational and conservative way. 0:03:21.480 --> 0:03:26.000 Has anybody herman at these banks tried to put any 0:03:26.080 --> 0:03:29.720 of the blame on the FED because it is fact 0:03:29.800 --> 0:03:32.200 that they have raised interest rates by five hundred basis 0:03:32.240 --> 0:03:35.160 points in about a year. Right, that would be difficult 0:03:35.200 --> 0:03:36.320 for a lot of investors. 0:03:37.240 --> 0:03:39.040 There has been no blame on the FED, and I 0:03:39.040 --> 0:03:40.680 don't think you want to do that because the FED 0:03:40.760 --> 0:03:42.800 also is your regulator, so you can be blaming the 0:03:42.800 --> 0:03:44.200 regulators for your own problems. 0:03:44.760 --> 0:03:47.400 Well, that's why we're here. We can blame. And by 0:03:47.440 --> 0:03:49.560 the way, they were way too slow in raising rates 0:03:49.600 --> 0:03:52.640 even when they started to be very clear. But at 0:03:52.640 --> 0:03:54.240 the end of the day, you're now a year into 0:03:54.280 --> 0:03:57.200 this SVB and signature go, which is bad enough. But 0:03:57.360 --> 0:04:00.680 first Republic, there is no excuse before they had six 0:04:00.760 --> 0:04:04.160 weeks right where first of all, you'd had a big 0:04:04.240 --> 0:04:09.720 rally treasuries, which meant asset prices were actually appreciating. You 0:04:09.800 --> 0:04:12.880 knew how impaired your capital was, and yet you didn't 0:04:12.880 --> 0:04:15.840 do one thing to reduce your balance sheet leverage and 0:04:15.880 --> 0:04:18.560 give yourself a chance to survive and maybe raise some 0:04:18.680 --> 0:04:19.680 capital at the same time. 0:04:19.720 --> 0:04:20.760 Why they didn't use them? 0:04:20.920 --> 0:04:21.600 Why didn't they? 0:04:22.120 --> 0:04:22.400 Yeah? 0:04:22.720 --> 0:04:27.800 I just think that the management team are not crisis managers. 0:04:27.839 --> 0:04:31.520 They've always been lauded for just how well they run 0:04:31.560 --> 0:04:32.599 the bank, and so they. 0:04:32.480 --> 0:04:34.279 Weren't in terms of customer service, in. 0:04:34.320 --> 0:04:38.520 Terms of customer service and in terms of having above 0:04:38.600 --> 0:04:44.839 peer evaluation. So they just weren't experienced enough to deal 0:04:44.880 --> 0:04:47.640 with the crisis, whereas a bank like Western Alliance. 0:04:47.640 --> 0:04:51.479 You're on the phone with Jamie Diamond. Jamie Diamond called 0:04:51.560 --> 0:04:54.880 up the CEO of First Republic, didn't he say it, like, dude, 0:04:55.320 --> 0:04:56.679 do this right now? 0:04:57.400 --> 0:04:59.479 You just compare with what happened with Western Alliance. It 0:04:59.480 --> 0:05:03.039 almost failed during the financial crisis, and they have a 0:05:03.160 --> 0:05:06.880 litany of actions that they took in terms of increasing 0:05:06.960 --> 0:05:10.880 the deposit coverage, insurance coverage, selling assets, a plan to 0:05:11.040 --> 0:05:14.919 increase their capital, seeing deposits come back. So it's a 0:05:15.040 --> 0:05:17.320 start contrast to what happened between the two managements. 0:05:17.480 --> 0:05:20.000 So, Neil, I mean, when we'll hear from Fred Truman 0:05:20.080 --> 0:05:23.240 j Palll later today, how much of all this banking 0:05:23.440 --> 0:05:25.960 stuff and today, yesterday was a really bad day for 0:05:26.000 --> 0:05:27.919 the regional banks. How much is that factor into his 0:05:28.040 --> 0:05:30.159 calculuss analysis, his messaging. 0:05:30.200 --> 0:05:32.600 Maybe, well, look, I think you have no choice but 0:05:32.880 --> 0:05:36.440 to be considering it. And there's no doubt that there 0:05:36.520 --> 0:05:39.160 is significant risks. My guess is one of the problems 0:05:39.400 --> 0:05:41.279 with this bank and others is in fact there has 0:05:41.360 --> 0:05:46.920 been tremendous impairment of capital due to the sharp fall 0:05:47.000 --> 0:05:50.560 and assets the values of assets they hold. The problem 0:05:50.600 --> 0:05:53.440 on the other side, of course, is as you've seen 0:05:53.440 --> 0:05:55.600 the last number of days, Yeah, the data is not 0:05:55.640 --> 0:05:58.960 really helping them, and the inflation data was higher. Look 0:05:59.000 --> 0:06:01.800 at the ADP numbers this morning, another three hundred thousand jobs. 0:06:01.839 --> 0:06:05.359 So you have a very strange set of circumstances where 0:06:05.920 --> 0:06:08.640 the inflation and by the way, I think we've talked 0:06:08.640 --> 0:06:11.919 about this, I suspect as you've move into later in 0:06:11.920 --> 0:06:14.360 the year, you're going to have up with pressure begin 0:06:14.440 --> 0:06:17.120 to develop again on asset price on prices. 0:06:17.200 --> 0:06:18.880 So what does the FED do now? I mean, they're 0:06:18.920 --> 0:06:22.239 clearly going to raise today, right twenty five basis points. 0:06:22.800 --> 0:06:26.800 What does Powell have to say to calm markets in 0:06:26.880 --> 0:06:31.839 terms of financial stability and to rein in inflation when 0:06:31.920 --> 0:06:33.680 you're worried about upper pressure later in the year. 0:06:33.760 --> 0:06:35.680 Well, a couple of things. First of all, for the 0:06:35.720 --> 0:06:37.440 next couple of months, I mean, if you look at 0:06:37.560 --> 0:06:40.840 gone on with oil and commodity prices, there is going 0:06:40.880 --> 0:06:41.719 to be some downwards. 0:06:41.760 --> 0:06:44.520 We'll drop five dollars over it was crazy. 0:06:44.200 --> 0:06:46.840 Right, So there's going to be some temporary drop in 0:06:46.960 --> 0:06:49.840 prices to begin with, which may give them some cover 0:06:50.000 --> 0:06:54.000 for the moment. And I think you're seeing. You know, 0:06:54.040 --> 0:06:56.000 they're going to continue to talk about the fact that 0:06:56.000 --> 0:06:59.800 there seems to be some slowing in the employment picture. 0:07:00.480 --> 0:07:02.240 And look, I don't know what you do at this 0:07:02.279 --> 0:07:06.560 point in a general scheme of things. They have raised 0:07:06.640 --> 0:07:09.479 rates five percent to five percent, and there's an there's 0:07:09.480 --> 0:07:12.320 a legitimacy to be sent to say five to five 0:07:12.320 --> 0:07:15.160 and a quarter is not really relevant. I suspect he's 0:07:15.160 --> 0:07:18.520 going he's going to say that whether they raised today 0:07:18.640 --> 0:07:21.400 or not, they're now going to start to step back 0:07:21.560 --> 0:07:23.240 and give it time to see what the what the 0:07:23.280 --> 0:07:26.400 effect is. Look, you know there's always a lag between 0:07:26.440 --> 0:07:31.480 FED action and results, and you know that they don't 0:07:31.560 --> 0:07:36.520 want to totally unsettled the economic system right now. So 0:07:37.160 --> 0:07:38.640 I'm guessing that's where you head. 0:07:38.760 --> 0:07:39.000 Now. 0:07:39.200 --> 0:07:41.800 The problem on the other side is if he's going 0:07:41.880 --> 0:07:44.640 to stimulate a rally in equities, and equities are quite 0:07:44.680 --> 0:07:46.720 interesting right now as well. I mean, if you look 0:07:47.040 --> 0:07:52.400 leaving aside the the the the banks in theory, stocks 0:07:52.400 --> 0:07:54.560 are actually a lot higher. The banks have been getting killed, 0:07:54.560 --> 0:07:56.440 but the stocks are actually near the highest level in 0:07:57.440 --> 0:08:01.320 six months. But if I said, prices continue to go 0:08:01.440 --> 0:08:05.200 up without the fundamental supporting them, then the system becomes 0:08:06.400 --> 0:08:09.880 more more at risk to unexpected conces. 0:08:10.040 --> 0:08:12.080 Somebody said, we had our earlier guests on said it 0:08:12.120 --> 0:08:13.760 just kind of feels a little bit nineteen ninety nine, 0:08:13.800 --> 0:08:15.840 two thousand and I said, oh, don't go there. I 0:08:15.920 --> 0:08:20.160 live through that, herman. Are the regional banks expecting the 0:08:20.200 --> 0:08:23.200 FED and the FDIC and other regulators to kind of 0:08:24.320 --> 0:08:27.840 increase regulations on them going forwards? That the expectation for investors. 0:08:27.960 --> 0:08:31.160 Yeah, the base case is that the capital ratios will 0:08:31.160 --> 0:08:34.560 go up because banks will now need to incorporate the 0:08:34.640 --> 0:08:39.120 unrealized losses and the available sales securities into the capital calculation. 0:08:39.840 --> 0:08:40.240 Increase. 0:08:40.280 --> 0:08:44.640 The liquidity requirements that went away during the Trump administration 0:08:44.760 --> 0:08:47.880 for the regionals and potentially higher debt issue went to 0:08:48.320 --> 0:08:51.199 help protect the capital structure of banks as well. 0:08:51.240 --> 0:08:52.160 So that's the base case. 0:08:52.400 --> 0:08:54.840 I think everybody's just expecting that if it gets worse, 0:08:54.880 --> 0:08:56.720 then that's could be an incremental. 0:08:56.360 --> 0:08:59.680 A know, earlier I pitched to this is me and 0:08:59.679 --> 0:09:02.240 my pitch to Stevie Cohen, give me two billion dollars. 0:09:02.760 --> 0:09:04.680 I'm going to buy some regional banks. I'm not sure when, 0:09:04.920 --> 0:09:07.160 but I'm very close to buying a basket of these 0:09:07.240 --> 0:09:09.520 high quality regionals, and I'm gonna make you thirty forty 0:09:09.520 --> 0:09:10.280 percent twelve months. 0:09:10.320 --> 0:09:12.440 Well, you know you can. You can actually take advantage 0:09:12.480 --> 0:09:14.280 of the fact that not only your price is dropping, 0:09:14.320 --> 0:09:16.480 but the volatility is going up in the regional so 0:09:16.520 --> 0:09:20.720 you can actually write put options on on regional banks 0:09:20.720 --> 0:09:23.760 in the end of seas let's say five percent below 0:09:23.840 --> 0:09:26.360 the market, and I haven't looked at the prices today, 0:09:26.400 --> 0:09:27.839 but I'll bet you get paid an awful lot of 0:09:27.880 --> 0:09:29.800 money for that. So you break events on this type 0:09:29.800 --> 0:09:32.360 of strategy, you're probably ten to twenty percent below market, 0:09:32.360 --> 0:09:34.760 depending how far are you out your go guys, this 0:09:34.880 --> 0:09:35.840 probably will be doing that. 0:09:35.920 --> 0:09:36.560 This is gold. 0:09:36.600 --> 0:09:41.199 Why don't we start a buffer regional banks buffer ETF. 0:09:40.840 --> 0:09:43.440 Yes, exactly know. But yeah, we've heard a lot of 0:09:43.440 --> 0:09:45.600 those are all the rage right now? They are all right, Neil, 0:09:45.760 --> 0:09:48.120 thanks so much for joining us. Neil Grossman, former CIO 0:09:48.200 --> 0:09:50.880 a tk n G Kapital, joining us here in our studio, 0:09:51.160 --> 0:09:53.960 as is our resident bank expert, Herman Channing. You might 0:09:54.000 --> 0:09:56.520 as well, just you know, take the seat for the 0:09:56.600 --> 0:10:00.000 Day Vandlinberg Interactive Broker studio. Herman Chan covers the regional 0:10:00.520 --> 0:10:01.760 banks for Bloomberg Intelligence. 0:10:03.360 --> 0:10:06.800 You're listening to the Team Ken's Are Live program Bloomberg 0:10:06.840 --> 0:10:10.200 Markets weekdays at ten am Eastern on Bloomberg dot Com, 0:10:10.280 --> 0:10:13.439 the iHeartRadio app and the Bloomberg Business App, or listen 0:10:13.520 --> 0:10:15.760 on demand wherever you get your podcasts. 0:10:17.520 --> 0:10:20.280 All right, FED Day today, a lot of folks are 0:10:20.280 --> 0:10:22.560 going to be paying attention safe for our Federal Reserve 0:10:22.840 --> 0:10:27.400 and FED Chairman j Palll probably no more than Omar Aguilar. 0:10:27.440 --> 0:10:31.840 He's the CEO and CIO of Schwab Asset Management. What 0:10:31.880 --> 0:10:35.040 does that mean. Well, here's a couple of just ridiculous 0:10:35.080 --> 0:10:38.640 stats about Schwab seven hundred and fifty five billion billion 0:10:38.679 --> 0:10:40.840 in assets under management as of the end of last year, 0:10:41.080 --> 0:10:44.720 third largest provider of index mutual funds and fifth largest 0:10:44.720 --> 0:10:48.000 provider of ETFs. I don't know how they even manage 0:10:48.040 --> 0:10:49.960 all that stuff, but somehow Omar does it. I mean 0:10:50.000 --> 0:10:51.719 we get a few minutes of his time. Omar, thanks 0:10:51.760 --> 0:10:54.000 so much for making some time in your schedule to 0:10:54.080 --> 0:10:57.400 chat with us today. What are you expecting from your 0:10:57.440 --> 0:11:01.960 Federal Reserve and kind of where do we go from here. 0:11:03.360 --> 0:11:06.000 Hey Paul, good morning. Always happy to talk to you 0:11:06.080 --> 0:11:09.840 and the rest of the audience. Yes, you know it 0:11:09.920 --> 0:11:12.560 is and it isn't important. It's called Guess FED Day 0:11:12.559 --> 0:11:15.320 and we all, you know, get together to just figure out. 0:11:15.360 --> 0:11:18.520 I mean, I never see most of my fixed income 0:11:19.000 --> 0:11:21.160 team so excited as FED Day. I mean, yeah, that 0:11:21.200 --> 0:11:23.400 tells you a lot about fixed income, but in general 0:11:23.720 --> 0:11:26.600 they get really really excited about, you know, what happens. 0:11:26.840 --> 0:11:29.360 I would probably say the expectations, just like the rest 0:11:29.360 --> 0:11:30.959 of the market, is that there will be at twenty 0:11:31.000 --> 0:11:34.320 five basis points increase in the FED rates. I think 0:11:34.360 --> 0:11:37.280 what is gonna be the probably the most interesting, you know, 0:11:37.400 --> 0:11:39.480 part of the of the day is gonna be what 0:11:39.520 --> 0:11:41.760 the conference called will look like and the kind of 0:11:41.840 --> 0:11:45.559 questions and any insights that we may get from from 0:11:45.640 --> 0:11:49.720 Jerom Powell about you know, what may come ahead. You know, 0:11:49.800 --> 0:11:53.360 our expectations continue to be that, you know, given you know, 0:11:53.440 --> 0:11:57.160 where we are with the stress in the banking sector, 0:11:57.640 --> 0:12:01.640 with the potential tidening of credit conditions as a result 0:12:01.720 --> 0:12:04.679 of the failed banks, as well as just the overall 0:12:05.040 --> 0:12:07.840 you know, structure of this lowing down of the economy, 0:12:08.320 --> 0:12:11.280 that there is the possibility that the Fed may actually 0:12:11.400 --> 0:12:14.200 pause or that hint that they will pause, you know, 0:12:14.320 --> 0:12:17.680 provided that they will have themselves thinking that inflation numbers 0:12:17.679 --> 0:12:19.920 continue to go high. They will continue, but you know, 0:12:20.000 --> 0:12:22.760 clearly the signs that inflation is coming down maybe on 0:12:22.800 --> 0:12:23.880 their on their side. 0:12:24.080 --> 0:12:26.439 Oh, Mark, we're you know, sixty sixty five percent of 0:12:26.480 --> 0:12:29.080 the way through earning season here, and let's let's take 0:12:29.080 --> 0:12:30.800 our eye off the FED ball for just a moment. 0:12:31.240 --> 0:12:33.240 What are you seeing in earnings? Does anything kind of 0:12:33.320 --> 0:12:34.960 jumping out at you, either on the plus or the 0:12:35.000 --> 0:12:35.680 negative side. 0:12:36.559 --> 0:12:39.400 Yes, that's a that's a great question. And yes, we're 0:12:39.600 --> 0:12:43.160 roughly like seventy percent of the S and P already reporting, 0:12:43.320 --> 0:12:46.319 and we continue to see that, you know, the the 0:12:46.679 --> 0:12:49.559 numbers to be probably in line to what we expected. 0:12:49.600 --> 0:12:53.280 The big part of the driver here, you know, tends 0:12:53.280 --> 0:12:56.200 to be obviously that these what I call this inflation 0:12:56.280 --> 0:12:58.959 of earnings that came out as a result of you know, 0:12:59.040 --> 0:13:03.000 higher inflation number increasing the top line for most companies. 0:13:03.200 --> 0:13:05.640 And now as that pricing power starts to you know, 0:13:05.679 --> 0:13:08.720 go away, then we're starting to see just those softened 0:13:08.800 --> 0:13:10.319 you know, pieces of that. And just to give you 0:13:10.360 --> 0:13:12.920 a couple of things. You know, earnings that are batting 0:13:13.080 --> 0:13:16.560 estimates by seven percent is roughly around seventy four percent 0:13:16.600 --> 0:13:19.520 of the companies, and that's again that tells you a 0:13:19.559 --> 0:13:22.000 little bit of the fact that, you know, earnings estimates 0:13:22.000 --> 0:13:24.960 going into the quarter were actually load to begin with. 0:13:25.080 --> 0:13:27.680 But that also shows you that when you compare that 0:13:27.760 --> 0:13:30.800 to previous year, that we're going to see this, you know, 0:13:30.920 --> 0:13:33.880 sort of this inflation of EPs, you know, compared to 0:13:33.920 --> 0:13:36.280 what we saw last year, that is expected given where 0:13:36.280 --> 0:13:37.199 we are in the cycle. 0:13:38.080 --> 0:13:40.720 So what does it mean by year end, are we 0:13:40.760 --> 0:13:41.439 in a recession? 0:13:42.640 --> 0:13:47.080 We're We're definitely, I would probably say that on earning side, well, 0:13:47.160 --> 0:13:50.880 we're getting to that point that the earnings recession has begun. 0:13:51.520 --> 0:13:54.280 I think economic wise, we have gone on our theory 0:13:54.320 --> 0:13:57.640 and our you know, continued claim is that there is 0:13:58.080 --> 0:14:01.320 these rolling recessions of different parts of the economy that 0:14:01.400 --> 0:14:04.280 will continue to take place. We saw already the selfness 0:14:04.320 --> 0:14:08.040 in housing, We saw the softness in manufacturing. We haven't 0:14:08.120 --> 0:14:10.719 seen the softness in the service sector. And I think 0:14:10.760 --> 0:14:12.560 by the time we get to that soltness in the 0:14:12.600 --> 0:14:15.880 service sector, we're probably gonna have a rebound in housing. 0:14:15.960 --> 0:14:17.520 We're going to have a rebound of this, and in 0:14:17.559 --> 0:14:20.720 many cases what we have encouraged clients to think about 0:14:20.760 --> 0:14:22.680 it is, you know, what does that mean for your 0:14:22.720 --> 0:14:26.600 overall portofolio. You know, we have encouraged clients to reduce duration. 0:14:26.720 --> 0:14:29.120 There is this time period given the higher interest rates 0:14:29.120 --> 0:14:31.600 at the front end, but this is maybe a time 0:14:31.640 --> 0:14:34.680 for people to start thinking about rebalancing their strategy and 0:14:34.760 --> 0:14:37.920 increasing duration given that the expectation that we're going to 0:14:37.960 --> 0:14:40.760 be a top you know, of the FED cycle is 0:14:40.800 --> 0:14:41.400 coming soon. 0:14:42.120 --> 0:14:44.840 So Matt Omar is obviously a smart guy. Got his 0:14:44.960 --> 0:14:49.880 PhD in statistics and decision sciences from Duke, so he's 0:14:49.920 --> 0:14:51.840 a Duke Blue devil. So that's why we like talking 0:14:51.840 --> 0:14:54.880 to him. So, Omar, you've got a gajillion and one 0:14:54.920 --> 0:14:58.960 Schwab clients out there. What's kind of the question you're 0:14:58.960 --> 0:15:01.440 getting most often from them these days? 0:15:02.800 --> 0:15:05.200 Well, the bigger question is similar to when you said, 0:15:05.280 --> 0:15:07.240 is that are we going to see a big recession? 0:15:07.320 --> 0:15:09.480 And is this going to happen tomorrow? And what we 0:15:09.800 --> 0:15:12.760 have described to folks is that recessions don't necessarily a 0:15:12.760 --> 0:15:15.840 peer one morning and then that's appear the next week. 0:15:16.280 --> 0:15:18.880 We tend to see these cycles play out. I think 0:15:18.920 --> 0:15:22.040 what has the bigger question that we get as well, 0:15:22.160 --> 0:15:25.080 is the recession something that we're going to see it 0:15:25.120 --> 0:15:28.400 will be sustained. And then second question that comes right 0:15:28.600 --> 0:15:31.080 is how about inflation? And now our answers, you know, 0:15:31.120 --> 0:15:34.480 to those questions tend to be twofold. One is, you know, 0:15:34.560 --> 0:15:37.800 normally every cycle, you know has a different you know pass, 0:15:38.120 --> 0:15:40.520 and what we're seeing here is a very unique cycle 0:15:40.640 --> 0:15:43.840 because of the tithing, of the speed of the tithing, 0:15:43.920 --> 0:15:48.080 of central banks racing raids. So therefore we're not seeing 0:15:48.320 --> 0:15:51.520 this similar type of cycles for that recession to just 0:15:51.640 --> 0:15:53.640 be you know, claim as the way it was. But 0:15:53.720 --> 0:15:56.600 what we saw, as I said earlier, is these rolling 0:15:56.680 --> 0:15:59.480 recessions of different parts of the economy. But the good 0:15:59.520 --> 0:16:02.000 news though is that the economy is still holding up 0:16:02.040 --> 0:16:04.680 well and even though we're going to see some softness 0:16:04.720 --> 0:16:07.720 on the labor report on Friday, you know, I think, 0:16:07.840 --> 0:16:10.240 you know, that is a healthy path for getting a 0:16:10.280 --> 0:16:11.040 full recovery. 0:16:11.120 --> 0:16:12.720 All right, Omar, thank you so much for joining us. 0:16:12.720 --> 0:16:16.520 Really appreciate it. Omar Aguilar, he's the CEO and CIO 0:16:16.720 --> 0:16:18.120 of schwab Asset Management. 0:16:18.440 --> 0:16:21.560 You're listening to the tape. Cat's are live program Bloomberg 0:16:21.600 --> 0:16:25.200 Markets weekdays at ten am Eastern on Bloomberg Radio, the 0:16:25.280 --> 0:16:28.520 tune in app, Bloomberg dot Com, and the Bloomberg Business App. 0:16:28.560 --> 0:16:31.360 You can also listen live on Amazon Alexa from our 0:16:31.360 --> 0:16:36.400 flagship New York station, Just say Alexa play Bloomberg eleven thirty. 0:16:38.200 --> 0:16:40.440 Let's talk a little fixed income. And when we talk 0:16:40.520 --> 0:16:43.680 fixed income, let's talk to somebody who kind of just 0:16:43.720 --> 0:16:46.720 does nothing but fixed income. And our next guest certainly 0:16:46.720 --> 0:16:50.359 fills up Bill Joanna Go Diego's co founder of bond Blocks, 0:16:50.920 --> 0:16:55.040 and that is an ETF focusing exclusively or family of 0:16:55.400 --> 0:16:58.120 ETFs at focus exclusively on fixed income. And when we 0:16:58.200 --> 0:17:02.080 talk ETFs, we need Katie Greifel. Yeah, she's like an 0:17:02.120 --> 0:17:05.480 expert here. She does an NEEDTF show with you. That's true, right, 0:17:05.640 --> 0:17:06.520 Mondays or something. 0:17:06.520 --> 0:17:07.960 It's usually on Mondays. 0:17:08.000 --> 0:17:11.639 It's actually tomorrow's Okay, go figure out Thursday. That works 0:17:11.640 --> 0:17:14.280 fine as well. Joanna, thanks so much for joining us 0:17:14.359 --> 0:17:16.560 here at our Bloomberg Interactive Broker Studio. We appreciate you 0:17:16.640 --> 0:17:19.600 coming into the studio. Man. There's a lot going on 0:17:19.680 --> 0:17:23.280 out there in the fixed income space. After a disastrous 0:17:23.320 --> 0:17:26.960 twenty two guys found your footing here in twenty twenty three, 0:17:27.119 --> 0:17:28.760 you guys being the fixed income space. 0:17:28.920 --> 0:17:32.320 That's right, the income is back in fixed income and 0:17:32.400 --> 0:17:36.480 we're potentially today ending the hiking cycle. We're at the 0:17:36.560 --> 0:17:39.160 end of a cycle and it's now time, we believe, 0:17:39.160 --> 0:17:42.639 for investors to get right back into portfolio, reposition their 0:17:42.640 --> 0:17:45.080 portfolios in a fixed income and take advantage of the 0:17:45.119 --> 0:17:46.120 opportunity ahead. 0:17:46.160 --> 0:17:47.320 We do see. 0:17:49.520 --> 0:17:51.920 We do see pricing indicating that today's the last hike. 0:17:52.119 --> 0:17:53.879 So you don't think there's gonna be another hike in June. 0:17:54.280 --> 0:17:57.320 So whether there's another hike or not, we probably we 0:17:57.359 --> 0:17:59.720 need to be thinking about these yields that are going 0:17:59.800 --> 0:18:04.720 to be really powerful in your portfolio. They're at historic levels, 0:18:04.800 --> 0:18:08.480 and we think investors should be, you know, getting their 0:18:08.520 --> 0:18:10.119 allocations back into fixed income. 0:18:11.760 --> 0:18:15.520 I wonder, I mean, we do see the two year 0:18:15.600 --> 0:18:18.200 yielding almost four percent right coming down a little bit. 0:18:18.400 --> 0:18:20.120 But we've spoken to you in the past. I don't 0:18:20.119 --> 0:18:22.359 know if Katie wants to jump in here. We've also 0:18:22.359 --> 0:18:25.480 spoken to investors who buy your products quite often in fact, 0:18:25.880 --> 0:18:28.919 and it doesn't seem like it's the yield level that 0:18:29.000 --> 0:18:32.720 drives that they sometimes need some of your ETFs for 0:18:33.359 --> 0:18:35.760 certain strategies that they're trying to execute on. 0:18:35.960 --> 0:18:38.919 Yeah, exactly. I mean you can take this simple X 0:18:38.920 --> 0:18:41.200 half an X one they are that's the sixth month 0:18:41.240 --> 0:18:43.719 and the one year treasury products we have. I mean, 0:18:43.760 --> 0:18:47.119 they're really excellent, excellent places to sort of you know, 0:18:47.240 --> 0:18:52.640 stay in there for safety, low volatility, also tax exempt 0:18:52.760 --> 0:18:55.240 from state taxes because it's a treasury portfolio. I think 0:18:55.240 --> 0:18:58.239 there's been really with these yields in that feature. Like, 0:18:58.280 --> 0:18:59.960 I think it's a really great place for investors to 0:19:00.080 --> 0:19:03.440 use for cash management. So those that's a fairly simple 0:19:03.480 --> 0:19:05.720 trade all of our clients have been making this year. 0:19:05.960 --> 0:19:10.000 But we also think that investors should be looking opportunistically 0:19:10.080 --> 0:19:13.040 at credit because you know, as we enter the next 0:19:13.080 --> 0:19:15.639 phase of this cycle, and whether or not you believe 0:19:15.840 --> 0:19:18.880 there's an economic slowdown coming, you know, there are opportunities 0:19:18.880 --> 0:19:22.000 here across different credit ratings and credit that are really 0:19:22.000 --> 0:19:25.040 compelling because the yields are giving you a huge head 0:19:25.080 --> 0:19:27.040 start in returns. This year, well, it's. 0:19:26.960 --> 0:19:29.240 Really interesting if you look at the flow show across 0:19:29.280 --> 0:19:33.399 the whole industry, fixed income ETFs have taken in something 0:19:33.440 --> 0:19:36.080 to the tune of sixty five billion dollars this year 0:19:36.119 --> 0:19:39.440 equity ETFs, and there's a ton more of them. They've 0:19:39.440 --> 0:19:42.560 only taken in somewhere in the neighborhood of forty billions. 0:19:42.600 --> 0:19:45.200 So in fact, when you type in ETF go, the 0:19:45.280 --> 0:19:47.840 launch screen default to equities. 0:19:47.440 --> 0:19:50.600 Because I mean they make up the bulk of assets still. 0:19:50.640 --> 0:19:53.200 But obviously fixed income ETFs have taken in the bulk 0:19:53.240 --> 0:19:55.440 of flows at least when it comes to twenty twenty three. 0:19:55.600 --> 0:19:57.520 You and I were talking a little bit earlier this 0:19:57.600 --> 0:20:00.480 morning about how if you look at the common position 0:20:00.600 --> 0:20:03.320 of those fixed income flows, you are seeing a little 0:20:03.320 --> 0:20:04.800 bit of a dynamic shift. 0:20:05.080 --> 0:20:07.679 Yeah, so there's two things we're observing right now. Is 0:20:07.920 --> 0:20:11.240 in treasuries, you're seeing obviously there's kind of equal flows 0:20:11.320 --> 0:20:13.840 this year to date in both the short end of 0:20:13.840 --> 0:20:17.480 treasuries and also now year to date in the long end. 0:20:17.720 --> 0:20:20.560 So you're seeing investors take a little bit of risk 0:20:20.640 --> 0:20:22.919 on in their portfolio, is at least in the treasury space. 0:20:23.240 --> 0:20:26.119 And that's someone that's taken on risk understanding that maybe 0:20:26.160 --> 0:20:28.679 there is going to be an economic slowdown and bond 0:20:28.720 --> 0:20:31.160 prices may rise towards the end of the year. And 0:20:31.200 --> 0:20:33.720 then what we just tapped into which I think is 0:20:33.760 --> 0:20:38.080 really interesting is just in April, you're seeing people shift 0:20:38.119 --> 0:20:42.840 back into corporate debt and also high yield, and that's 0:20:42.840 --> 0:20:45.879 a space that we've been we've launched into, you know, 0:20:45.920 --> 0:20:50.520 significantly across credit ratings and across sectors, and we really believe, 0:20:50.520 --> 0:20:52.760 as I mentioned before, there's a lot of relative opportunity 0:20:52.760 --> 0:20:55.360 within high yield versus just looking at it so broadly. 0:20:55.640 --> 0:20:57.760 So you mentioned that people when it comes to the 0:20:57.800 --> 0:21:01.400 treasury market specifically, people taking a little bit more risk 0:21:01.400 --> 0:21:04.280 going out the curve duration risk, But at the same time, 0:21:04.320 --> 0:21:07.040 it feels like investors are also taking on more credit risk. 0:21:07.080 --> 0:21:10.360 Also to your point, high yield ETFs coming back into 0:21:10.400 --> 0:21:13.520 vogue a little bit here. How do you marry those 0:21:13.720 --> 0:21:17.560 two things? Because when I think long duration treasuries, I think, 0:21:17.640 --> 0:21:20.840 oh my goodness, this economy is going to slow down. 0:21:21.320 --> 0:21:25.000 Why might high yield also be seeing love in this environment? 0:21:25.280 --> 0:21:27.880 Well, I think that what people don't haven't been able 0:21:27.920 --> 0:21:30.280 to see more as clearly as they should and Hyael 0:21:30.359 --> 0:21:32.399 is that the categories are very different. And so for 0:21:32.480 --> 0:21:34.720 something like if you just look at the very first 0:21:34.800 --> 0:21:38.840 high yield category of XPB, it actually has the lowest 0:21:38.840 --> 0:21:41.040 default rate amongst the high yield category. 0:21:41.160 --> 0:21:42.800 If there's high yield, and there's high there. 0:21:42.840 --> 0:21:46.520 High it's only one percent in XPB in our product XBB, 0:21:46.720 --> 0:21:48.840 And it's if you can get access to a big 0:21:48.880 --> 0:21:52.440 diversified portfolio in that credit writing space, you know, you're 0:21:52.480 --> 0:21:55.520 looking at yields that are you know, close to seven percent, 0:21:55.960 --> 0:21:58.320 and that's it. That's a really interesting thing. So if 0:21:58.359 --> 0:22:01.560 you're worried about a weakening I cannot conditions, you should 0:22:01.560 --> 0:22:04.200 consider adding some XBB to your portfolio because it's the 0:22:04.280 --> 0:22:08.000 least exposed to this risk over time, and so you 0:22:08.119 --> 0:22:12.440 now have an opportunity to be more precise, more timely 0:22:12.560 --> 0:22:15.120 tools to really take advantage of what's coming. 0:22:15.200 --> 0:22:15.360 Well. 0:22:15.400 --> 0:22:19.000 So it's I mean, we're all worried about weakening economic conditions, 0:22:19.000 --> 0:22:21.120 but if you think that they're not going to get 0:22:21.119 --> 0:22:24.040 so weak that everybody defaults, this is what you buy, right. 0:22:23.960 --> 0:22:26.439 Yeah, exactly. And then even if you go, you know, 0:22:26.480 --> 0:22:29.919 a little further down the credit rating scale, some people 0:22:29.960 --> 0:22:32.240 take a view and this is why we created so 0:22:32.240 --> 0:22:34.600 many products. In a granular way. Some people could give you, 0:22:34.840 --> 0:22:38.280 I mean, this is your favorite, the triple C product. Okay, 0:22:38.400 --> 0:22:43.080 so it has a yield that's almost fourteen percent, So 0:22:43.480 --> 0:22:46.560 it has a yield that's almost fourteen percent. So there 0:22:46.600 --> 0:22:49.359 are investors out there. Like you said, even just taking 0:22:49.400 --> 0:22:53.600 that really long treasure review sounds really you know, compelling 0:22:53.640 --> 0:22:56.800 to you. But the truth is, like, if you believe 0:22:57.280 --> 0:22:59.120 the risk of recession in the second half of twenty 0:22:59.160 --> 0:23:03.119 twenty three is over, you could consider some X triple C. 0:23:03.840 --> 0:23:08.399 It offers a higher yield, and it's just it's something 0:23:08.400 --> 0:23:10.679 that like it. So I went back into high yield. 0:23:11.160 --> 0:23:13.119 You may, you know, take a small portion of your 0:23:13.200 --> 0:23:17.320 high old exposure and tilt a little bit with these products. 0:23:17.359 --> 0:23:20.760 Really quickly, we have a question from a listener writing in, 0:23:20.960 --> 0:23:23.840 when are you going to bring an investment grade sector 0:23:23.840 --> 0:23:25.680 suite of products into the market. We only have about 0:23:25.680 --> 0:23:26.480 thirty seconds left. 0:23:26.800 --> 0:23:32.480 We just filed for three triple B products two weeks ago, 0:23:32.720 --> 0:23:34.480 and what we've done is we've carved them up into 0:23:34.520 --> 0:23:37.880 maturity buckets, not sectors yet, but we always will take 0:23:37.920 --> 0:23:40.120 suggestions and we have looked at sectors and I think 0:23:40.119 --> 0:23:42.200 it's an interesting thing that you know, fixed incomes should 0:23:42.200 --> 0:23:42.800 be more ganular. 0:23:43.000 --> 0:23:45.320 Right watch the space, Watch the space, and you guys 0:23:45.359 --> 0:23:48.800 have it completely covered on the ETF front, joined Diego's 0:23:48.800 --> 0:23:51.000 co founder of bond Blocks, joining us live here in 0:23:51.040 --> 0:23:54.919 our Bloomberg Interactive Broker Studio as it does Katie Greifel. 0:23:55.080 --> 0:23:57.400 She covers all things on the ETF front. You guys 0:23:57.400 --> 0:23:58.560 got your show on tomorrow. 0:23:58.600 --> 0:24:02.520 Tomorrow Tomorrow, souly. Our show is Monday, is at one pm. 0:24:02.880 --> 0:24:03.960 It's called ETFIQ. 0:24:06.119 --> 0:24:09.480 You're listening to the team Ken's are live program Bloomberg 0:24:09.600 --> 0:24:12.960 Markets weekdays at ten am Eastern on Bloomberg dot com, 0:24:13.040 --> 0:24:16.200 the iHeartRadio app and the Bloomberg Business App, or listen 0:24:16.240 --> 0:24:18.520 on demand wherever you get your podcasts. 0:24:20.600 --> 0:24:23.639 Looking forward to this next discussion. It's about logistics moving 0:24:23.800 --> 0:24:27.520 stuff around. You know, all the boxes on railroads and 0:24:27.600 --> 0:24:30.240 trucks and who knows what else. Drew Wiklson he does 0:24:30.280 --> 0:24:33.040 this stuff. He's the CEO of RXO, which is a 0:24:33.080 --> 0:24:37.440 tech enabled broker services platform that will spun out of 0:24:37.440 --> 0:24:41.399 its parent XPO. I guess recently, I'm looking at the 0:24:41.520 --> 0:24:43.719 RXO stock and it's got a market cap at two 0:24:43.720 --> 0:24:45.760 point three billion, it's up fifteen and a half percent 0:24:46.080 --> 0:24:49.320 this year, up seven and three quarters percent today, and 0:24:49.359 --> 0:24:52.080 the parent company stock XPOS up thirty five percent. So 0:24:52.119 --> 0:24:54.359 it looks like shareholders are winning all over the place 0:24:54.400 --> 0:24:55.520 with this spin out story. 0:24:55.560 --> 0:24:55.720 Here. 0:24:56.280 --> 0:24:58.520 RXO reported numbers last night, so we appreciate getting a 0:24:58.520 --> 0:25:01.120 few minutes of Drew's time. So, Drew, you guys reported 0:25:01.160 --> 0:25:04.480 your earnings last night. What are the highlights from ROXO 0:25:04.640 --> 0:25:05.919 and the logistics business? 0:25:06.800 --> 0:25:09.360 Thanks for having me, Paul and Matt. When you look 0:25:09.359 --> 0:25:11.960 at what the highlights were, the first is that while 0:25:12.000 --> 0:25:15.639 the macro economy is tough right now, we took market 0:25:15.640 --> 0:25:18.439 share and we grew volume by six percent on a 0:25:18.520 --> 0:25:20.800 year every year basis. So while there's less volume out 0:25:20.800 --> 0:25:24.160 there in the freight world, we're able to grow and 0:25:23.880 --> 0:25:27.240 grow profitably. We have best in class margins where our 0:25:27.560 --> 0:25:33.160 brokerage gross profit percentage came in at sixteen point three percent. 0:25:33.480 --> 0:25:37.280 That's well ahead of where the industry came in. And 0:25:37.320 --> 0:25:40.000 the last point that I'll make is our technology continues 0:25:40.040 --> 0:25:43.639 to work. We've invested in technology from day one, and 0:25:43.720 --> 0:25:46.959 our technology is allowing us to operate at best in 0:25:47.080 --> 0:25:50.960 class gross profit percentage. It's helping us grow volume, and 0:25:51.000 --> 0:25:54.360 it's helping us continue to increase our employee productivity. So 0:25:54.680 --> 0:25:57.080 we're very pleased with the results for the quarter and 0:25:57.119 --> 0:25:58.440 fill our best days are ahead of us. 0:26:00.560 --> 0:26:03.840 Are you not worried about a slow down in overall volume? 0:26:03.920 --> 0:26:10.160 We were hearing from some shippers. Ups is one for sure, 0:26:10.200 --> 0:26:12.160 but there are a couple others Fernando Valley was talking 0:26:12.200 --> 0:26:16.480 about who have said we're in a freight recession already. 0:26:17.720 --> 0:26:21.560 We absolutely are seeing a slowdown in the overall macro economy, 0:26:21.600 --> 0:26:24.080 and as I said, there's less volume out there. But 0:26:24.119 --> 0:26:27.679 we've done things that are idiosyncratic to our business that 0:26:27.720 --> 0:26:30.199 are allowing us to grow volume on a year of 0:26:30.200 --> 0:26:34.080 a year basis despite the tough macro. Again, our technology 0:26:34.119 --> 0:26:36.760 is best in class. It does things like help customers 0:26:36.760 --> 0:26:38.879 decide what day of the week they should ship something, 0:26:39.240 --> 0:26:41.960 what mode of transportation they should use. So when they 0:26:42.000 --> 0:26:44.920 look at this as a tool and they are consolidating 0:26:44.960 --> 0:26:47.880 the number of carriers that they're working with, even though 0:26:47.920 --> 0:26:50.359 the pie for them may get smaller, our piece of 0:26:50.400 --> 0:26:53.280 the pie is getting larger, and it positions us very 0:26:53.320 --> 0:26:54.720 well for when the market and flex. 0:26:55.040 --> 0:26:58.200 So Drew explain to us kind of your business, because 0:26:58.320 --> 0:27:00.840 you're not really like owning rare roads and trucks and 0:27:00.840 --> 0:27:03.920 things like that. You're more kind of logistics and software 0:27:03.920 --> 0:27:06.600 and a brokerage business. Can you explain kind of what 0:27:06.720 --> 0:27:09.320 you guys do day to day, who your customers are. 0:27:10.400 --> 0:27:12.800 Yeah, we work with a lot of the Fortune one 0:27:12.840 --> 0:27:15.679 hundred and five hundred companies and we're a best in 0:27:15.760 --> 0:27:18.680 class tech enabled truck brokers. So what we do is 0:27:18.760 --> 0:27:22.520 help the largest shippers in the world connect with massive 0:27:22.520 --> 0:27:25.639 amounts of capacity. We do business with fifty eight of 0:27:25.680 --> 0:27:28.639 the Fortune one hundred and over two hundred of the 0:27:28.640 --> 0:27:31.840 Fortune five hundred, and we give them access to about 0:27:31.840 --> 0:27:34.840 a million and a half trucks and these are mostly 0:27:35.040 --> 0:27:38.760 small to mid sized cares, typical sized cares. As a 0:27:38.840 --> 0:27:41.000 large shipper, you wouldn't sign up, but as we're able 0:27:41.000 --> 0:27:44.760 to aggregate capacity for our customers, it's a huge benefit 0:27:44.840 --> 0:27:45.120 to them. 0:27:45.720 --> 0:27:50.919 Do we see smooth logistics in terms of the US 0:27:51.320 --> 0:27:54.240 or North American supply chain now? I mean, has everything 0:27:54.280 --> 0:27:57.560 been figured out that was all stopped up over the 0:27:57.640 --> 0:27:59.520 last couple of years of the pandemic. 0:28:00.720 --> 0:28:02.960 I don't think there's anything that's been smooth about the 0:28:03.000 --> 0:28:04.320 last few years. 0:28:04.320 --> 0:28:07.000 If you go from but we are we back to 0:28:07.400 --> 0:28:09.160 normal now, is what I'm wondering. 0:28:10.200 --> 0:28:14.720 You're seeing inventory levels at much stronger levels than what 0:28:14.760 --> 0:28:16.440 they were last year. So if you go to last 0:28:16.520 --> 0:28:20.760 year and retailing e commerce specifically, customers were talking to 0:28:20.840 --> 0:28:24.880 us about destocking their inventory, and we're having conversations now 0:28:24.920 --> 0:28:27.960 of how they are restocking their inventory and continuing to 0:28:28.000 --> 0:28:30.320 get it out to the end consumer, and we're a 0:28:30.320 --> 0:28:31.960 great choice for them to be able to use for that. 0:28:32.760 --> 0:28:34.960 Who do you compete against, Drew, Who's share are you 0:28:35.040 --> 0:28:38.160 taking based upon the results you've reported last night? Are 0:28:38.200 --> 0:28:38.840 you this morning? 0:28:39.680 --> 0:28:42.080 Yeah, So we take share from everybody. We're not picky 0:28:42.120 --> 0:28:44.240 on where the share comes from. What we do is 0:28:44.280 --> 0:28:46.560 we look at the customer as a whole and see 0:28:46.600 --> 0:28:49.080 where we can provide value and where our service is 0:28:49.120 --> 0:28:52.240 best fit. And if you think about our top twenty customers, 0:28:52.560 --> 0:28:55.200 we grew volume with our top twenty customers, which again 0:28:55.280 --> 0:28:57.680 is some of the biggest brands in the country. We 0:28:57.680 --> 0:29:00.600 grew volume with them by thirteen per sent on a 0:29:00.640 --> 0:29:03.480 year of a year basis. So our largest customers come 0:29:03.520 --> 0:29:05.480 back to us year after year, and they don't just 0:29:05.520 --> 0:29:07.360 come back to us and award us with what we 0:29:07.400 --> 0:29:10.600 did the previous year, because we've got great service, because 0:29:10.640 --> 0:29:13.880 we've got the best technology in the industry, and we've 0:29:13.880 --> 0:29:17.200 got great operators who know and understand the market, they're 0:29:17.240 --> 0:29:18.800 rewarding us with more freight. 0:29:19.760 --> 0:29:22.720 When you look at the future, Drew and you have 0:29:23.000 --> 0:29:27.760 so much experience with XPO before becoming CEO of RXO, 0:29:28.600 --> 0:29:32.479 do you see you know, EV trucks, Do you see 0:29:32.560 --> 0:29:34.920 an automated fleet or how far off is that? 0:29:36.160 --> 0:29:40.520 It's something where we're talking to EV manufacturers on an 0:29:40.520 --> 0:29:43.320 ongoing basis right now. I think the one thing that 0:29:43.400 --> 0:29:45.160 you have to watch is while I do think that 0:29:45.280 --> 0:29:48.160 you will see EV pick up as a trend, you 0:29:48.280 --> 0:29:50.680 have to watch to see how long the truck will 0:29:50.680 --> 0:29:53.080 be able to drive before it has to be charged again. 0:29:53.440 --> 0:29:56.320 So if you think of average length of haull across 0:29:56.760 --> 0:29:59.920 across the industry, is you know, plus six hundred mile, 0:30:00.680 --> 0:30:03.120 you know right now today you would have to stop 0:30:03.320 --> 0:30:06.800 and recharge before reaching your destination. And so I think 0:30:06.840 --> 0:30:10.560 the end state whenever you're able to have a truck 0:30:10.880 --> 0:30:14.120 drive further operating hours and be able to go from 0:30:14.200 --> 0:30:17.880 shipper to constantee and deliver that that's the end state 0:30:17.920 --> 0:30:19.600 of where we're going. But on short hauls, I think 0:30:19.600 --> 0:30:21.520 that it's something that you're going to see in the 0:30:21.080 --> 0:30:22.160 near term. 0:30:22.640 --> 0:30:24.480 It's true give us the latest on kind of the 0:30:24.560 --> 0:30:28.719 labor piction picture within the logistics pipeline in the United States. 0:30:28.800 --> 0:30:30.960 You know, whether it's the truckers or or some of 0:30:31.000 --> 0:30:33.640 the other pieces of the puzzle, because a lot of 0:30:33.640 --> 0:30:35.800 the trucks are saying, boy, it's always hard to maintain 0:30:35.840 --> 0:30:38.120 and keep our drivers, but it's been even harder over 0:30:38.120 --> 0:30:39.160 the last several years. 0:30:39.160 --> 0:30:39.320 Help. 0:30:39.440 --> 0:30:41.320 Is that still a big, big issue for you and 0:30:41.400 --> 0:30:42.560 your customers. 0:30:43.160 --> 0:30:46.200 Yeah, all of last year we saw capacity coming into 0:30:46.320 --> 0:30:48.560 the market, and so the first quarter was really the 0:30:48.560 --> 0:30:52.840 first time that we saw capacity exit the market. And 0:30:53.000 --> 0:30:55.920 for our business, that's actually a good thing because anytime 0:30:55.960 --> 0:30:58.640 there are shifts in the market, customers are going to 0:30:58.760 --> 0:31:01.320 lean on carriers who they trust the most and that's 0:31:01.360 --> 0:31:03.800 been us. So as you start to see the load 0:31:03.840 --> 0:31:07.720 to truck ratio increase over time, what you'll see is 0:31:07.760 --> 0:31:11.200 you'll see tender rejection start to pick up from asset 0:31:11.280 --> 0:31:14.480 based carriers. And that's where a company like RXO can 0:31:14.520 --> 0:31:15.640 come in and be a big winner. 0:31:16.480 --> 0:31:19.120 So when you talk to your customers, when you talk 0:31:19.120 --> 0:31:22.680 to your transportation partners, what's their view of the economy 0:31:22.680 --> 0:31:23.920 over the next twelve to eighteen months. 0:31:24.800 --> 0:31:27.760 I think there's still a lot of uncertainty on the 0:31:27.800 --> 0:31:30.920 macro economy as a whole, and so as you start 0:31:30.960 --> 0:31:33.160 to look into the back half of the year, there 0:31:33.160 --> 0:31:35.880 are some encouraging signs for US. I talked earlier about 0:31:36.160 --> 0:31:39.880 retail and e commerce inventory levels picking up. We've seen 0:31:39.960 --> 0:31:44.760 pickups in healthcare and technology and home furnishing as verticals. 0:31:44.760 --> 0:31:46.920 So there are some encouraging signs. And I just talked 0:31:46.920 --> 0:31:51.160 about capacity exiting the market. That's again that's actually a 0:31:51.200 --> 0:31:54.240 good thing for our business at this point in the cycle. 0:31:54.320 --> 0:31:56.520 So there are some encouraging signs, but I don't think 0:31:56.520 --> 0:31:58.959 that anybody's got the crystal ball to when they can 0:31:59.000 --> 0:32:01.080 point to when this market and inflection will be, whether 0:32:01.080 --> 0:32:03.000 it's Q three, Q four, Q one. 0:32:03.440 --> 0:32:05.880 All right, Really appreciate getting some of your time. Drew 0:32:05.880 --> 0:32:09.200 Wilkelson Wilkerson, he's the CEO of RXO. The ticker is 0:32:09.480 --> 0:32:11.480 our XO. Pop that in your terminal and you can 0:32:11.520 --> 0:32:14.000 see the stocks up eight point three percent today. They 0:32:14.080 --> 0:32:17.080 reported some better than expected results this morning in the 0:32:17.120 --> 0:32:20.720 market reacting favorably to that. So love talking to the 0:32:20.720 --> 0:32:23.920 folks into the logistics business in the supply chain issue 0:32:24.280 --> 0:32:26.320 that was such a big issue starting with the pandemic 0:32:26.680 --> 0:32:29.080 and maybe getting a little bit more back to normal. 0:32:29.320 --> 0:32:32.400 You're listening to the tape Can's our live program Bloomberg 0:32:32.440 --> 0:32:36.040 Markets weekdays at ten am Eastern on Bloomberg Radio, the 0:32:36.120 --> 0:32:39.320 tune in app, Bloomberg dot Com, and the Bloomberg Business App. 0:32:39.360 --> 0:32:42.200 You can also listen live on Amazon Alexa from our 0:32:42.200 --> 0:32:46.600 flagship New York station, Just say Alexa play Bloomberg eleven thirty. 0:32:48.400 --> 0:32:50.560 Let's get a sense of what to do with these 0:32:50.600 --> 0:32:52.640 markets here. We're going to get a lot of cross 0:32:52.720 --> 0:32:55.520 currents out there with Divot, with earnings coming out, with 0:32:55.560 --> 0:32:59.000 the FED decision today, with some bank uncertainty. Let's get 0:32:59.000 --> 0:33:01.960 a couple of pros in here. Daviddet's senior investment strategist 0:33:01.960 --> 0:33:05.080 at Pepack Private Wealth Management, and Tim Courtney, cee IO 0:33:05.240 --> 0:33:09.960 at Eccential Wealth Advisors join us here. Let's talk. Let's 0:33:09.960 --> 0:33:12.440 start with you, Tim, what are you telling your clients 0:33:12.440 --> 0:33:15.320 here in a very uncertain time after coming out of 0:33:15.360 --> 0:33:18.480 a brutal twenty twenty two in terms of equities and debt? 0:33:18.600 --> 0:33:19.960 What are you telling your clients these days? 0:33:21.680 --> 0:33:24.080 Yeah, you know, what we've been saying is just kind 0:33:24.080 --> 0:33:29.240 of the simple message of continue to diversify, and you know, 0:33:29.560 --> 0:33:35.400 we are still working through so many distortions of historic proportions. 0:33:35.440 --> 0:33:37.640 In twenty twenty and twenty twenty one, coming off of 0:33:37.640 --> 0:33:42.120 those zero rates, you had capital labor flowing into areas. 0:33:42.160 --> 0:33:44.920 You've got capital moving back out of those and labor 0:33:44.920 --> 0:33:48.760 moving back out of those areas. So many distortions, it's 0:33:48.840 --> 0:33:52.920 hard to just be able to make sense of how 0:33:53.240 --> 0:33:57.080 the market is readjusting to to more normal times with 0:33:57.160 --> 0:34:01.120 normal rates. And so we're saying, look, there's lots of 0:34:01.200 --> 0:34:05.080 discounts out there. The market appears to be pricing in 0:34:05.160 --> 0:34:10.760 some troubles for small caps international value stocks. That's typically 0:34:10.760 --> 0:34:14.239 what you would see going into some slowdowns or potentially recession. 0:34:14.920 --> 0:34:18.520 The market has already discounted those. In some cases, small 0:34:18.560 --> 0:34:21.439 caps are trading about thirty percent lower than their twenty 0:34:21.520 --> 0:34:24.400 year average, and so it's okay to go get some 0:34:24.480 --> 0:34:28.080 exposure there. Own some small caps, own some international stocks 0:34:28.440 --> 0:34:31.040 as well as some of the larger growth stocks, which 0:34:31.160 --> 0:34:34.040 should see their way through a recession, you know, in 0:34:34.280 --> 0:34:34.920 a better way. 0:34:35.920 --> 0:34:38.000 Are you not terribly concerned about a recession? A lot 0:34:38.000 --> 0:34:41.040 of people coming on this program say they expect a 0:34:41.080 --> 0:34:44.320 recession to be short and shallow. Nonetheless, you know that, 0:34:44.840 --> 0:34:46.960 you know, it could be worse, especially if we continue 0:34:46.960 --> 0:34:47.800 to get bank runs. 0:34:49.600 --> 0:34:52.799 Yeah, you know, the story on the recession has gone 0:34:52.840 --> 0:34:54.600 back and forth. At the beginning of the year, it 0:34:54.640 --> 0:34:57.520 was we're definitely going into recession, and then we had 0:34:57.520 --> 0:35:00.400 strong numbers in February and it was, well, we can 0:35:00.440 --> 0:35:02.279 avoid it, and then we had the bank failures, and 0:35:02.320 --> 0:35:04.680 now we're back into Okay, we're definitely going into recession. 0:35:05.760 --> 0:35:10.600 You know, I'm not so sure this recession, if it 0:35:10.640 --> 0:35:14.319 comes this year. I do also think it's likely to 0:35:14.400 --> 0:35:19.400 be shorter and probably lighter, just because there is so 0:35:19.600 --> 0:35:22.720 much capital out there still. Even with the housing gains, 0:35:22.760 --> 0:35:25.560 the stock gains, even though we pulled back in twenty two, 0:35:25.840 --> 0:35:28.920 stocks are still hugely higher from where they were just 0:35:28.960 --> 0:35:31.080 a few years ago. So there's a lot of wealth, 0:35:31.120 --> 0:35:34.080 a lot of dollars out there, and just anecdotally, there's 0:35:35.040 --> 0:35:37.680 still a lot of spending and we're seeing that in 0:35:37.800 --> 0:35:41.000 earnings come through. Earnings are coming through, Okay, So I 0:35:41.520 --> 0:35:44.040 think that it likely will be a little bit lighter 0:35:45.160 --> 0:35:47.319 than a deep recession, and it's priced in in a 0:35:47.320 --> 0:35:47.960 lot of areas. 0:35:48.320 --> 0:35:50.839 Hey, David You've been at this game a long time. Here, 0:35:52.120 --> 0:35:53.920 how do you put all this together? We've got a 0:35:53.960 --> 0:35:57.239 FED decision today, We've got some turmoil slash crisis in 0:35:57.320 --> 0:35:59.879 the bank space, and you know, right in the midst 0:35:59.880 --> 0:36:02.160 of earnings, what are you telling your clients here? 0:36:02.920 --> 0:36:06.320 Well, you know, it all comes down to the time horizon. 0:36:06.440 --> 0:36:09.080 I mean, if you've got a time horizon that goes 0:36:09.120 --> 0:36:11.239 past the end of this week, I think there's a 0:36:11.239 --> 0:36:14.120 lot of great places to put your money to work. 0:36:14.239 --> 0:36:17.200 I mean, let's look at some of the big advantages. 0:36:17.239 --> 0:36:20.040 One is, you've got a market that's eighteen percent off 0:36:20.080 --> 0:36:22.960 of it's all time high. You know, we've always come 0:36:23.040 --> 0:36:25.400 back to that. You know, is that going to be 0:36:25.719 --> 0:36:28.279 this year? Probably not. If that's in three years, that 0:36:28.320 --> 0:36:30.440 looks pretty good relative to stuff and your money under 0:36:30.480 --> 0:36:33.360 the mattress. We know the FED is probably going to 0:36:33.440 --> 0:36:35.920 raise today. What's it going to do going forward? We 0:36:36.000 --> 0:36:38.759 do know it's close to finishing its work. We do 0:36:38.840 --> 0:36:41.920 know that inflation has come down dramatically since last summer, 0:36:42.120 --> 0:36:44.080 and that's been one of the big problems that the 0:36:44.080 --> 0:36:47.319 FED is reacting to. The economy is staying reasonable. We've 0:36:47.360 --> 0:36:50.440 just got a nice report coming out of ADP with 0:36:50.480 --> 0:36:53.600 far more jobs created in the private sector than we expected. 0:36:53.760 --> 0:36:56.520 We still have positive job gration, So I think buying 0:36:56.600 --> 0:36:59.680 stocks for the long term still makes sense here, but 0:36:59.760 --> 0:37:03.040 we would avoid some of the megacap tech stocks, which 0:37:03.040 --> 0:37:05.200 have accounted for close to eighty percent of the games 0:37:05.239 --> 0:37:08.600 this year, and anything that's touting AI be very cautious. 0:37:08.760 --> 0:37:12.319 Wait, I thought, first of all, that's that's well said. Yeah, 0:37:12.320 --> 0:37:14.919 that's something that we're going to clip and probably use 0:37:15.000 --> 0:37:17.840 in commercials from now on. With the what about Amazon? 0:37:17.880 --> 0:37:20.760 I thought you liked Amazon and they're a megacap tech stock. 0:37:21.280 --> 0:37:23.839 And I love the fact that it fell after a 0:37:23.880 --> 0:37:27.960 better than expected earnings report because they said it didn't 0:37:27.960 --> 0:37:31.560 make a convincing AI case. I think they're just being honest. 0:37:31.920 --> 0:37:35.600 But you know, here's the thing. You've got the two 0:37:35.719 --> 0:37:39.239 best businesses on the planet. One is cloud, the other 0:37:39.360 --> 0:37:42.200 is e commerce. We know that those businesses are going 0:37:42.280 --> 0:37:44.879 to be growing double digit rates for as far as 0:37:44.880 --> 0:37:47.160 you can look out into the future. We know they're 0:37:47.239 --> 0:37:49.880 number one in both by the cloud, they're double the 0:37:49.920 --> 0:37:53.880 size of Microsoft. We also know that Amazon is down 0:37:54.120 --> 0:37:57.000 forty five percent frons high, So you're not buying it 0:37:57.040 --> 0:37:59.160 at a peak. You know what I love here is 0:37:59.239 --> 0:38:02.239 Amazon's trade about two times sales, or you can buy 0:38:02.280 --> 0:38:07.160 Microsoft eleven time sales. Amazon's got the better cloud business, 0:38:07.160 --> 0:38:10.279 and you're paying about one fifth as much. Amazon's even 0:38:10.320 --> 0:38:13.240 trained less for eBay, who has the better e commerce site. 0:38:14.360 --> 0:38:17.040 Compelling valuation there for a lot of folks, that's for sure. 0:38:17.120 --> 0:38:18.879 Amazon's the answer to David's question. 0:38:18.920 --> 0:38:21.320 I think that is, Hey, hey, Tim, are there sectors? 0:38:21.360 --> 0:38:24.800 Are there areas where you're saying to your clients, let's 0:38:24.960 --> 0:38:27.200 put a little put some chips on the table here, 0:38:27.520 --> 0:38:29.200 you know, whether it's an equity so or fixed income? 0:38:31.840 --> 0:38:35.880 Yeah, yeah, well, you know, I I don't know that 0:38:35.880 --> 0:38:39.600 there's any any specific areas. There are some areas that 0:38:39.640 --> 0:38:43.040 we probably would avoid, you know, when you're looking on 0:38:43.080 --> 0:38:47.880 the fixed income side, you know, with spreads being still 0:38:47.960 --> 0:38:52.759 really narrow, really compressed, there are some areas that just 0:38:52.800 --> 0:38:55.680 don't the risk reward doesn't look like they make sense, 0:38:55.800 --> 0:38:58.960 you know, owning some higher yield bonds, some riskier bonds, 0:38:59.600 --> 0:39:03.320 you know, going into a recession or a potential recession, 0:39:03.400 --> 0:39:06.279 even if it's light you it probably doesn't make sense 0:39:06.320 --> 0:39:08.759 to get you know, slightly higher yields from there, if 0:39:08.800 --> 0:39:11.360 you're going to take on that risk, you know, you 0:39:11.440 --> 0:39:14.840 might just consider going into equities instead with with higher upsides. 0:39:15.320 --> 0:39:18.320 So we're we're we're looking to avoid some of the areas. 0:39:18.840 --> 0:39:22.200 I would agree with, you know, the comment that some 0:39:22.239 --> 0:39:25.080 of the megacaps look a little expensive. You know, you 0:39:25.120 --> 0:39:27.520 may not want to overweight there. The market is certainly 0:39:27.560 --> 0:39:32.200 overweighted in the megacap the space, and so you know, 0:39:32.200 --> 0:39:34.160 maybe you didn't want to take a full weight there, 0:39:34.719 --> 0:39:38.080 but otherwise, you know, I think, just broadly, now that 0:39:38.080 --> 0:39:42.359 that rates are higher and things have more normalized, you know, 0:39:42.560 --> 0:39:45.120 outside of those few areas maybe where the risk returned 0:39:45.120 --> 0:39:47.920 doesn't line up, I think getting exposure in most broad 0:39:47.920 --> 0:39:52.640 asset classes, including you know, including real assets like commodities 0:39:52.640 --> 0:39:54.600 in real estate. Real estate had a really poor year 0:39:54.680 --> 0:39:59.799 last year. It's still risky, but there's with with rates higher, 0:39:59.840 --> 0:40:02.239 you could look to put some money into real estate 0:40:02.400 --> 0:40:03.560 in those areas as well. 0:40:03.920 --> 0:40:09.200 David, you like Alexandria real Estate Equities. What is that company? 0:40:09.280 --> 0:40:11.040 AARI is the ticker. 0:40:11.320 --> 0:40:15.480 Absolutely so it's the only pure play in office space 0:40:15.719 --> 0:40:19.759 for the biotech industry, and I think that makes more 0:40:19.800 --> 0:40:22.719 sense than conventional office space for less of lawyers and 0:40:22.760 --> 0:40:25.759 accounts because you know you're just not going to work 0:40:25.800 --> 0:40:30.000 from home for your lab work. The companies that have 0:40:30.000 --> 0:40:32.279 about forty percent from the start of the year four 0:40:32.320 --> 0:40:34.960 percent dividend yield, it's a unique property that I think 0:40:35.000 --> 0:40:35.759 can rebound here. 0:40:35.800 --> 0:40:38.879 Okay, David Deets, we appreciate it. Tim Courtney appreciate as well. 0:40:38.920 --> 0:40:40.480 Getting the latest on these markets. 0:40:40.920 --> 0:40:44.040 You're listening to the tape cats our live program Bloomberg 0:40:44.080 --> 0:40:47.680 Markets weekdays at ten am Eastern on Bloomberg Radio, the 0:40:47.760 --> 0:40:50.959 tune in app, Bloomberg dot Com, and the Bloomberg Business App. 0:40:51.000 --> 0:40:53.839 You can also listen live on Amazon Alexa from our 0:40:53.840 --> 0:41:00.120 flagship New York station Just Say Alexa playing Bloomberg eleven thirty. 0:41:01.520 --> 0:41:05.120 Some news out in the pharma space today Lily drug 0:41:05.320 --> 0:41:10.120 slows Alzheimer's disease and final stage study UH shares of 0:41:10.160 --> 0:41:13.160 Eli Lellyer up six point five percent today. In part 0:41:13.239 --> 0:41:14.800 on that news, we want to get the latest on 0:41:14.840 --> 0:41:16.239 what that means for Lily, what it means for the 0:41:16.280 --> 0:41:20.120 space and all things pharmas we do that with Sam Fizzelli. 0:41:20.160 --> 0:41:22.080 He is the head of European Research and he is 0:41:22.120 --> 0:41:25.920 a pharmaceutical analyst at Bloomberg Intelligence based in London. God 0:41:26.000 --> 0:41:27.960 knows where he is in any given day, but he 0:41:28.040 --> 0:41:30.359 is based in London. So Sam, talk to us about 0:41:30.400 --> 0:41:33.560 this fit this farmer news from Eli Lilly. What's it 0:41:33.680 --> 0:41:36.560 mean for Lily and for this disease? 0:41:37.160 --> 0:41:40.040 Hey, Paul, I'm actually sitting in the studio in lod Yes, 0:41:40.120 --> 0:41:42.799 there we go, so so based on in the in 0:41:42.840 --> 0:41:48.480 the in the mothership. So look, any positive news for 0:41:48.520 --> 0:41:52.440 this devastating disease has to be taken positive. You know, 0:41:53.080 --> 0:41:55.840 it is no question that we need drugs for treating 0:41:56.480 --> 0:42:00.920 this curse that's going to be at some point, hopefully 0:42:00.920 --> 0:42:04.200 not affecting you and I, but somebody close to us potentially. 0:42:04.280 --> 0:42:08.000 So the question, however, is well, how good is this 0:42:08.120 --> 0:42:10.440 data and how does it set up Lily compared to 0:42:10.480 --> 0:42:14.160 the competition. Well, it certainly gives Lily an opportunity to 0:42:14.200 --> 0:42:17.920 play in the in the to be a contributor in 0:42:17.920 --> 0:42:20.160 this business, and that that that is going to be 0:42:20.200 --> 0:42:23.160 a positive, There's no question about that. But how much 0:42:23.360 --> 0:42:25.480 you know, you look at the efficacy that they reported, 0:42:26.000 --> 0:42:28.399 it's not that different to another drug that we talked 0:42:28.400 --> 0:42:30.640 about just about a year ago as the data was 0:42:30.760 --> 0:42:34.600 rolling out, and that was biogens the Camby now that's 0:42:34.600 --> 0:42:39.080 on the market. So twenty nine percent reduction in the 0:42:39.120 --> 0:42:42.840 speed of decline versus twenty seven percent for the Camby 0:42:43.200 --> 0:42:46.600 different trials. But that's what we're seeing. The issue we 0:42:46.719 --> 0:42:49.840 have and the worry I have, is that the Lily 0:42:49.920 --> 0:42:53.280 drug has higher side effects. There's a particular side effect 0:42:53.320 --> 0:42:56.640 that they look at in for Azhonma's patients and it 0:42:56.680 --> 0:42:59.520 seems to have not exactly not quite double, but it 0:42:59.520 --> 0:43:02.040 seems to have quite a higher rate of that particular 0:43:02.040 --> 0:43:05.160 side effect, and that's something that worries me about its commercial. 0:43:04.800 --> 0:43:06.120 Wait, what's the side effect? 0:43:07.600 --> 0:43:09.759 So what you get with these drugs, with all of 0:43:09.800 --> 0:43:16.280 them is something called amyloid related imaging abnormality ARIA. Yeah, 0:43:16.320 --> 0:43:18.160 and a lot of them are exactly just that you 0:43:18.239 --> 0:43:22.000 scan the brain and you find these weird dots around it, 0:43:22.080 --> 0:43:25.960 and that's being called ARIA. Some of them cause inflammation, 0:43:26.120 --> 0:43:28.880 real inflammation, and unfortunately there is a version of it 0:43:28.920 --> 0:43:32.960 where there's little hemorrhages. Now that doesn't sound good, right, So, 0:43:33.520 --> 0:43:35.400 and that's what you want to try and avoid. Now, 0:43:35.440 --> 0:43:38.919 the Kenby has a much lower percentage of patients who 0:43:39.120 --> 0:43:43.560 suffer the hemorrhage type aria h than the data that 0:43:43.560 --> 0:43:47.120 we've seen from dunanamap from Lily. So that's the question 0:43:47.239 --> 0:43:49.040 that I think a lot of physicians are going to 0:43:49.080 --> 0:43:52.360 be asking, how good is the efficacy? And am I 0:43:52.440 --> 0:43:54.600 going to be wanting to put my patients through this 0:43:54.680 --> 0:43:57.000 given that they're going to you know, these are elderly 0:43:57.040 --> 0:43:59.520 patients already, if they get these side effects of what 0:43:59.640 --> 0:44:00.760 we have going to manage. 0:44:00.560 --> 0:44:03.920 It, Sam, What are the folks in the medical community, 0:44:03.960 --> 0:44:06.799 the scientific community, what do they believe is the realistic 0:44:07.560 --> 0:44:10.920 I guess ultimate treatment of Alzheimer's. 0:44:11.520 --> 0:44:13.640 You know, Paul, it's just pretty much like cancer. I 0:44:13.719 --> 0:44:18.240 think if you think about it, the biology is multifaceted. 0:44:18.760 --> 0:44:21.360 There are many things that are going wrong in the brain. 0:44:21.480 --> 0:44:24.920 And remember, by the time you get to the deficits 0:44:24.960 --> 0:44:28.520 in memory and cognition, you've had this disease developing for 0:44:28.600 --> 0:44:31.560 ten years, fifteen years. So what everybody's trying to do 0:44:31.640 --> 0:44:35.319 is to go as early as possible, identify markers, and 0:44:35.400 --> 0:44:38.840 find treatments that have side effects that you can manage 0:44:38.880 --> 0:44:40.800 for somebody who's going to get treated for ten years, 0:44:41.600 --> 0:44:44.719 but also gives really seriously slows down the risk of 0:44:44.760 --> 0:44:48.080 you developing that later Alzheimer's. That's the holy grail. So 0:44:49.120 --> 0:44:51.640 you know this is in patients that have got some 0:44:52.040 --> 0:44:55.400 signs of cognitive decline already. We need to get earlier 0:44:55.560 --> 0:44:58.480 and there are definitely going to be more than one 0:44:58.520 --> 0:45:00.600 way of doing it and possibly come nations. 0:45:01.320 --> 0:45:09.520 Why are Lily's drug is called done nanomab and Biogen's 0:45:09.560 --> 0:45:12.880 drug is add you canomab. 0:45:12.800 --> 0:45:16.720 And that was the old one it canomap. 0:45:16.120 --> 0:45:18.680 Or well, the same question, then what's the mab? 0:45:18.800 --> 0:45:19.520 What are these things? 0:45:19.719 --> 0:45:22.319 The maps? The maps are antibodies, so basically they are 0:45:22.600 --> 0:45:28.240 biological biologicals I either manufactured, you have them in your blood. 0:45:28.239 --> 0:45:30.360 You know when you got your vaccine for COVID. A 0:45:30.400 --> 0:45:33.120 lot of the action against the virus initially when the 0:45:33.160 --> 0:45:36.080 virus enters your body is done by antibodies. They are 0:45:36.160 --> 0:45:39.720 highly specific. They're buying to one particular tiny little area 0:45:39.880 --> 0:45:42.960 on a cell or a protein or whatever it is 0:45:43.360 --> 0:45:46.160 and deactivate it. And that's what their job is, I mean, 0:45:46.200 --> 0:45:49.880 really really making it a lot simpler than biology. 0:45:49.920 --> 0:45:51.080 Does we need you to do that? 0:45:52.040 --> 0:45:54.200 So that's what this is. You injected and of course 0:45:54.239 --> 0:45:56.040 what you're doing here is injecting it into the blood 0:45:56.040 --> 0:45:58.640 stream and then hoping that a bunch of it gets 0:45:58.680 --> 0:46:01.160 into the brain. Of course, the brain is very privileged. 0:46:01.560 --> 0:46:03.920 It's protected from your bloodstream because we put a lot 0:46:03.960 --> 0:46:05.200 of stuff in our blood stream. 0:46:05.239 --> 0:46:10.799 Unfortunately, but so certainly ideal goodness. This is this still 0:46:10.840 --> 0:46:13.480 an attack on the plaque. This is a simple idea 0:46:13.480 --> 0:46:16.200 that I have found easy to understand that there's some 0:46:16.280 --> 0:46:18.920 kind of plaque that forms around our synapses or something 0:46:19.000 --> 0:46:22.960 like that, and that that's the Alzheimer's problem, and we 0:46:23.000 --> 0:46:24.759 need to get that plaque away, just like we do 0:46:24.800 --> 0:46:26.080 when we're kind of brushing our teeth. 0:46:26.160 --> 0:46:28.200 Right, I thought you said your knowledge was elementary. 0:46:28.520 --> 0:46:29.759 That was pretty they impressed me. 0:46:29.760 --> 0:46:33.560 There, Yeah, I'm well done. Absolutely right, These things begin 0:46:33.640 --> 0:46:37.160 to form in brains. Not everybody who dies and has 0:46:37.160 --> 0:46:41.080 a brain looked at and has got plaques actually got Alzheimer's. 0:46:41.080 --> 0:46:43.920 That's one of the problems. Only some people do so 0:46:44.680 --> 0:46:47.319 at least what we know here now, two trials, two 0:46:47.400 --> 0:46:52.040 drugs that lower plaques have been able to produce some efficacy. 0:46:52.239 --> 0:46:54.600 We need to push that boundary that bar higher and 0:46:54.680 --> 0:46:55.440 higher and higher. 0:46:55.840 --> 0:46:58.600 And Sam, is this something in the next few years 0:46:58.719 --> 0:47:00.680 or is this kind of like cancer or there really 0:47:00.800 --> 0:47:03.240 isn't any kind of light at the end of the tunnel. 0:47:03.239 --> 0:47:06.880 Maybe Yeah, I mean, I think with Alzheimer's we're going 0:47:06.920 --> 0:47:09.280 to end up having the same sort of situation where 0:47:09.400 --> 0:47:12.720 you're getting a thirty percent reduction in the decline. Remember, 0:47:12.800 --> 0:47:15.440 this is not as stopping, although in some people it 0:47:15.480 --> 0:47:18.080 probably will so if you're one of those lucky people, 0:47:18.080 --> 0:47:21.160 But this is reducing the rate to decline. And what 0:47:21.200 --> 0:47:23.239 you want to do is take that from twenty nine 0:47:23.239 --> 0:47:26.120 percent to forty percent to fifty percent to sixty percent 0:47:26.160 --> 0:47:28.160 and if you're lucky tow one hundred percent. So that 0:47:28.280 --> 0:47:30.719 and without side effects. Of course, as I said that, 0:47:30.719 --> 0:47:33.239 that's rarely going to be the outcome, but that's what 0:47:33.360 --> 0:47:35.359 people are working on different mechanisms. 0:47:35.680 --> 0:47:35.839 Here. 0:47:35.960 --> 0:47:39.200 We are attacking plaque. Should we attack another molecule in 0:47:39.200 --> 0:47:42.160 the brain called TAW. People are trying that. Should we 0:47:42.200 --> 0:47:45.520 go after the inflammation that these things cause? People are 0:47:45.520 --> 0:47:48.480 trying that. It would be a long long way, But 0:47:48.560 --> 0:47:51.440 I'm optimistic that with these little wins we're going to 0:47:51.440 --> 0:47:53.920 be able to see a better upsidey. 0:47:54.040 --> 0:47:57.759 So investing in farmers stocks, Sam, I'm just looking at 0:47:57.800 --> 0:48:00.319 kind of the trailing twelve month performance of some these 0:48:01.000 --> 0:48:03.160 on in. You know, I got Lily up fifty percent. 0:48:03.239 --> 0:48:05.799 That's great, it's fifty two week high. But nobody else 0:48:05.880 --> 0:48:08.120 is really doing I guess Murkers up forty percent. But 0:48:08.239 --> 0:48:10.880 is it You can't just say I'm going long Farmer, 0:48:10.960 --> 0:48:14.000 can It's really company by company, drug by drug. 0:48:14.719 --> 0:48:17.759 Well, Macro has has done that. I mean, you know, 0:48:17.840 --> 0:48:21.160 as we had recession coming and worries about interest rate 0:48:21.239 --> 0:48:24.200 rises and worries, and you know, the defensive the defensive 0:48:24.239 --> 0:48:27.800 play is farma. So one of the defensive plays is farmer. 0:48:28.120 --> 0:48:30.640 So so you can you can pile into some etf 0:48:31.239 --> 0:48:35.760 or some form of a basket. But as you rightly say, 0:48:36.120 --> 0:48:38.400 there are some who've done phenomenally well and over in 0:48:38.440 --> 0:48:40.759 Europe you'll see that nova notice kids. But Lily has 0:48:40.800 --> 0:48:44.759 been one of the best performer. They had many things 0:48:44.800 --> 0:48:47.680 going right for them, and it's been a fantastically well 0:48:47.680 --> 0:48:50.360 managed story in the past three or four or five years. 0:48:50.760 --> 0:48:53.560 As their pipeline has evolved, their margins got better, and 0:48:53.719 --> 0:48:56.480 of course these drugs hit. You just keep adding to 0:48:56.560 --> 0:49:00.720 that baseline of of your salesforce and you keep pushing 0:49:00.760 --> 0:49:03.839 that revenue up and hopefully your margin up. So and 0:49:03.880 --> 0:49:07.000 in the meantime, you treat people, I mean, how can 0:49:07.040 --> 0:49:08.440 you be in a better business. 0:49:08.280 --> 0:49:10.800 And well, people who pay a heck of a lot 0:49:11.560 --> 0:49:14.759 for your drugs here and far less everywhere else. Is 0:49:15.080 --> 0:49:17.759 that the case? Do we Americans subsidize the rest of 0:49:17.800 --> 0:49:19.400 the world in terms of drug prices? 0:49:19.719 --> 0:49:23.600 Yeah? But then you do you do? And the problem 0:49:23.600 --> 0:49:27.320 the difference therefore, is that US has usually got access 0:49:27.320 --> 0:49:31.400 to first to drugs first year, two years, three years, 0:49:31.440 --> 0:49:35.160 four years ahead of other countries. So the patients are 0:49:35.280 --> 0:49:38.799 reaping the benefit, and a lot of the industry, and 0:49:38.840 --> 0:49:41.840 the biotech industry is based out of there. That's jobs. 0:49:42.200 --> 0:49:44.480 So look, I'm not defending prices. This is not our 0:49:44.880 --> 0:49:47.080 what I'm doing here. There are probably some prices that 0:49:47.120 --> 0:49:50.960 should be lower, absolutely, but the system has so many 0:49:51.040 --> 0:49:52.880 middle men in it that need to be sorted out. 0:49:52.920 --> 0:49:55.520 And you know that some of the of the politicians 0:49:55.520 --> 0:49:58.279 are going after the PBMs, so many this is the 0:49:58.280 --> 0:50:02.160 pharmacy benefit maledges. So many middlemen that that just death 0:50:02.239 --> 0:50:04.120 needs to be cleaned out and sort it out. But 0:50:04.239 --> 0:50:07.160 let's just remember, I think Lily's talked about this. The 0:50:07.239 --> 0:50:09.400 cost of obesity, for example, to the US is a 0:50:09.400 --> 0:50:12.920 trillion dollars a year. Their estimate. How much would you 0:50:12.960 --> 0:50:15.480 spend on an obesity reducing drug if you could cut 0:50:15.520 --> 0:50:16.160 that by half? 0:50:16.719 --> 0:50:19.440 Oh yeah, I'm all in because as soon as I 0:50:19.480 --> 0:50:21.920 get that obesie reduction drug, I'm gonna go get a 0:50:22.000 --> 0:50:22.800 root beer float. 0:50:23.440 --> 0:50:24.960 You know, we can eat. 0:50:24.840 --> 0:50:27.600 Anything we want, never exercise, and still say skinny. 0:50:28.400 --> 0:50:28.720 Yeah. 0:50:28.760 --> 0:50:31.560 Well no, thank you so much pharmacy industry. 0:50:32.520 --> 0:50:34.279 Sam's gonna push back on that, all right, Sam, thanks 0:50:34.280 --> 0:50:36.680 so much for joining us. Always appreciate checking in with you. 0:50:36.680 --> 0:50:40.000 Sam Fazzelli, Folks, he runs the research business for Bloomberg 0:50:40.000 --> 0:50:41.920 Intelligence over in Europe. He's got like, I know, one 0:50:42.000 --> 0:50:44.360 hundred people reporting to him, and he's also the top 0:50:44.480 --> 0:50:48.560 pharmaceutical analyst in the city of London, so we appreciate 0:50:48.600 --> 0:50:50.600 getting some of his time. So he's there doing all 0:50:50.600 --> 0:50:52.560 that for Bloomberg Intelligence. He's based out of London, but 0:50:52.600 --> 0:50:54.800 we never really know where he is. He's always traveling 0:50:54.800 --> 0:50:55.600 all over the place. 0:50:56.040 --> 0:50:59.160 Thanks for listening to the Bloomberg Markets podcast. You can 0:50:59.200 --> 0:51:02.960 subscribe and listen to interviews on Apple Podcasts or whatever 0:51:03.040 --> 0:51:04.560 podcast platform you prefer. 0:51:04.920 --> 0:51:05.720 I'm Matt Miller. 0:51:06.000 --> 0:51:09.400 I'm on Twitter at Matt Miller nineteen seventy three, and 0:51:09.520 --> 0:51:12.080 I'm Faull Sweeney. I'm on Twitter at pt Sweeney Before 0:51:12.160 --> 0:51:14.960 the podcast. You can always catch us worldwide at Bloomberg 0:51:15.040 --> 0:51:16.279 Radio