Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside
Speaker 1: my co host Matt Miller. Every business day, we bring
Speaker 1: you interviews from CEOs, market pros, and Bloomberg experts, along
Speaker 1: with essential market moving news. Find the Bloomberg Markets Podcast
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Speaker 1: at Bloomberg dot com slash podcast. Let's go Switch Gears
Speaker 1: to Big Farm. Another deal. There's a lot of things
Speaker 1: I want to talk about here, but this deal came
Speaker 1: out today. Fiser potentially looking at a company by the
Speaker 1: name of Segan. I have no idea what's going on
Speaker 1: here other than bankers are going to get paid. Lawyers
Speaker 1: are going to get paid. So I want to break
Speaker 1: in with Sam Fizzelli, he said, of the European research
Speaker 1: and farmer analyst for Bloomberg Intelligence. So Sam talk to
Speaker 1: us about what is it Segan and Fiser and what's
Speaker 1: going on there? Yeah, Hi, Paul, So I think this is,
Speaker 1: you know, not a surprise that Fiser's looking at companies,
Speaker 1: because you know they in their four QUE results they
Speaker 1: had a slide which showed twenty five billion dollars of
Speaker 1: risk adjusted sales from deals to be done in twenty
Speaker 1: twenty twenty twenty thirty, got that right, ye? So you know,
Speaker 1: and that's a lot of money risk adjusted, which means
Speaker 1: that when you look at a company company, their pipeline
Speaker 1: drugs will have to be taking a notch down. And
Speaker 1: to get twenty five billion dollars with risk adjusted sales,
Speaker 1: you need something like, I don't know, thirty billion, thirty
Speaker 1: five billion of sales. So the point is they need
Speaker 1: to do big deals. And here, although Season is not
Speaker 1: necessarily a big company, today they say two or three
Speaker 1: billion dollars of sales. Expectations on consensus have it going
Speaker 1: up to about nine in twenty thirty. So you know,
Speaker 1: does Fiser need to do this? Yes, something like this anyway,
Speaker 1: does fi Fiser need to do some of the several
Speaker 1: of these years bill fits in? You know, Sam, I'm
Speaker 1: looking at the FA function for Fiser and it just
Speaker 1: blows me away away. And this is obviously a complete
Speaker 1: COVID call. Here. You know, this company had forty billion
Speaker 1: in sales and then in twenty twenty one it doubled
Speaker 1: to eighty billion, and then you know they had one
Speaker 1: hundred billion in twenty twenty two, and then I'm looking
Speaker 1: at the forecast on the FA function, consensus is back
Speaker 1: down to like seventy billion. Run right here. How does
Speaker 1: this company pivot from three year surge in sales and
Speaker 1: profitability from COVID and again, thank them and Moderna very
Speaker 1: very much for the work they did. How does this
Speaker 1: company kind of reset itself in a post COVID world? Yeah,
Speaker 1: with difficulty pulled. If you look at the share price chart,
Speaker 1: you'll see that it's come back all the way down.
Speaker 1: So basically they're not getting a huge amount of credit
Speaker 1: for the cash they generated, because it's very difficult to
Speaker 1: know what is the value of cash. At the end
Speaker 1: of the day, it's all going to be down to
Speaker 1: how good are they going to be in terms of
Speaker 1: the deals they do, And I think a lot of
Speaker 1: people worry that they might overpay and do deals that
Speaker 1: perhaps look optically nice today but they don't actually deliver
Speaker 1: in the long term. So you know, it's much easier
Speaker 1: to value and be interested and have an investment positive
Speaker 1: investment view on a company where top line is growing
Speaker 1: organically and then anything they do is in addition to
Speaker 1: that um But so that that's difficult. I don't know
Speaker 1: how you how people get around this subject. You can
Speaker 1: put certain you know numbers in your model that suggests
Speaker 1: sure if they use the cash right, they can have
Speaker 1: a great story going forward. Well, Sam, you know, it's
Speaker 1: it's interesting. I mean, I know you've been covering these
Speaker 1: farmer companies for decades. You know how much of the
Speaker 1: new drugs that come onto market are Fiser's scientists discovering
Speaker 1: something in their lab versus buying it? Good question? Yeah,
Speaker 1: so it is a good question. And you know what
Speaker 1: they all farmer companies have pretty much a state to
Speaker 1: daim You know, I have very big business development teams
Speaker 1: of trying to get thirty to forty percent of their
Speaker 1: pipelines out sourced externally because they've realized this is a
Speaker 1: huge amount of innovation that goes on externally. And here's
Speaker 1: a little statistic. I'm preparing for a presentation in about
Speaker 1: ten days time. I looked at the biggest drugs in
Speaker 1: twenty twenty two. Seven out of top ten we're from
Speaker 1: where biotech companies. They were unlicensed Bionte. You know, the
Speaker 1: Fiser COVID vaccine came from Bionte. Moderna's vaccine key Truda
Speaker 1: that America's got twenty two billion of sales potentially this year,
Speaker 1: or twenty four billion that came from an acquisition of
Speaker 1: a small biotechy farmer biofarma company in Europe called organ On.
Speaker 1: Which one is that key Truda y Truda, Yeah, twenty
Speaker 1: four billion. Says it is a magic drug for cancer.
Speaker 1: So hopefully you never need it, but if you do
Speaker 1: and it works in you, it works like magic that
Speaker 1: it turns your immune system onto the cancers. Yeah, so
Speaker 1: that's why it's doing twenty four point So that that's interesting.
Speaker 1: So basically seventy percent of the big home runs were
Speaker 1: made by third parties, not the big giant pharma conglomerates, no,
Speaker 1: but but Matt, they did do a lot of the
Speaker 1: work that got them to market. Of course, that's why
Speaker 1: that's why biotech investing sam, I mean, it really is
Speaker 1: not for the faint of heart, right, I mean it
Speaker 1: this drug works and the stock goes crazy, or it
Speaker 1: doesn't work and it does the act exact opposite. Yeah,
Speaker 1: So you need to be able to withstand that that
Speaker 1: risk and also have a proper correct portfolio approach and
Speaker 1: be disciplined, you know, have your rules about what it
Speaker 1: is you like to invest in and why you invest
Speaker 1: in them, stick with them, and then stick with them.
Speaker 1: You know, when you look at the long term, the
Speaker 1: best returns come from companies which perhaps wasn't their first
Speaker 1: drug that got to market. Maybe it was the second
Speaker 1: or third that really made the difference. By the way, Sam,
Speaker 1: in terms of M and A, how much of that
Speaker 1: are we seeing in this high and rising interestate environment?
Speaker 1: I would imagine less. On the other hand, these big
Speaker 1: companies surely have huge war chests of cash and maybe
Speaker 1: don't need to finance everything. Yeah. I mean, remember farma
Speaker 1: is massively cash generative, and you know they can pay
Speaker 1: They can pay equity if needed, right, so their equity
Speaker 1: is pretty much not that different to paying by cash.
Speaker 1: But of course it depends on the target shareholder. So yes,
Speaker 1: you're right, there is there is. The calculation is a
Speaker 1: bit different now, but there's a lot of need. There's
Speaker 1: about two hundred billion dollars of drug sales that are
Speaker 1: coming off patent by twenty thirty. Wow, Sam, what's the
Speaker 1: next biggest i mean post pandemic role. What's the next
Speaker 1: big area for biotech? Do you think to really make
Speaker 1: a difference. Oh, I think it has to be to
Speaker 1: really make a difference. It would be great if they
Speaker 1: can get the more and more of the immune system
Speaker 1: tuned into treating your disease and obviously manages side effects.
Speaker 1: And there's a lot of that going on, and of
Speaker 1: course there's this gene editing going on, so there's a
Speaker 1: lot of work there that could help us. So long
Speaker 1: as we can get the side effects and their safety
Speaker 1: risk under control, that could really revolutionize medicine. See Sam
Speaker 1: goes to these conferences. They're not like the conferences I
Speaker 1: go in the desert or Data Miami where wire we
Speaker 1: plague off and stuff. He goes to these conferences where
Speaker 1: you actually have to work during the weekend. What's the
Speaker 1: next conference coming up? Sam, Well, there's one that I'm sad,
Speaker 1: not sad not to go to on the one hand,
Speaker 1: and that's the American Association for Cancer Research. I think
Speaker 1: that's where I'm guessing here. MODERNA will show us the
Speaker 1: RANNA merc their mRNA vaccine for cancer, which has headlined
Speaker 1: positive data. So let's look at the detail. And the
Speaker 1: next big one would be asking in one of my
Speaker 1: favorite cities. Cha go there, you go? I mean, and
Speaker 1: these guys they actually go work the entire weekend. I mean,
Speaker 1: who does that? Sam Fazzelli held He's head of European
Speaker 1: research for Bloomberg Intelligence. He's our senior farmer analyst who's
Speaker 1: been doing it in the city of London for decades.
Speaker 1: One of the absolute best in the business for Bloomberg Intelligence.
Speaker 1: We're gonna have more coming up. This is Bloomberg, right.
Speaker 1: This is a little awkward. And Matt, you're a CEO
Speaker 1: of a company announced that you're going to step down.
Speaker 1: Your stock goes up ten percent. It happens quite often.
Speaker 1: It is awkward, and yeah, I always feel for the
Speaker 1: incumbent when that happens. But it's a part of market
Speaker 1: life because it does happen all the time. You know.
Speaker 1: Early in my career, I was a star I mean
Speaker 1: star research assistant covering the railroad and trucking industries. And
Speaker 1: I worked for a guy by the name of Tony Hatch.
Speaker 1: He's a consultant and analysts at ABH Consulting. Tony, I know,
Speaker 1: you know these railroad companies inside and out. Tell us
Speaker 1: what's going on Union Pacific. Why would the stock surge
Speaker 1: ten percent when the CEO says he's going to step down? Well,
Speaker 1: first of all, I want to confirm the Yeah, you
Speaker 1: were a star assistant, but what does that mean by
Speaker 1: the way, to being a star research assistant? Means he
Speaker 1: was good to bring on golf forsoms or what. Well,
Speaker 1: since I don't golf, I'm assuming he took my place
Speaker 1: and I was really I would say his number one
Speaker 1: skill exactly there, you figured, I'm kidding Union Pacific, you know,
Speaker 1: on a Sunday, right. The company tried to say this
Speaker 1: was part of a regularly planned issue they've been discussing
Speaker 1: going back in the early last year. So that if
Speaker 1: it's regularly planned, and you have a task force assigned,
Speaker 1: and you've hired and outside, you know, a recruiting firm,
Speaker 1: why would you release this on Sunday. The answer is
Speaker 1: because one of their largest shareholders demanded that they do
Speaker 1: and put out an incredibly sharp letter that talked about
Speaker 1: how Union Pacific, despite having what's well known to be
Speaker 1: the best franchise in the industry, has underperformed all of
Speaker 1: his peers in just about every category. Echo to mention,
Speaker 1: um UP has had a long history of allowing great
Speaker 1: patience for its leadership. Paul. You can remember back to
Speaker 1: the UPSP merger when when that you know, there was
Speaker 1: a disaster, but the management team stayed intact. This time,
Speaker 1: I guess they've made it, made a decision to change.
Speaker 1: It's the second time we've seen the board step in
Speaker 1: over the actions of the CEO of Lance Fritz. They
Speaker 1: did this when they announced they were going PSR. He
Speaker 1: did not make that announcement, really, the board did. And
Speaker 1: then they brought in Jim Venna from Canadian National Fame
Speaker 1: to be the COO to basically supervise their transition to
Speaker 1: this new operating philosophy. It was expected that Venna might
Speaker 1: be making a play for the top job then then,
Speaker 1: being twenty nineteen, he did. He then left and Lance stayed,
Speaker 1: making me think Lance was a pretty good political infighter.
Speaker 1: Now a major shareholder, sor Avna is saying that Jim
Speaker 1: Venas should take the job after all. So it's a
Speaker 1: little of a replay, only this time with a Sunday
Speaker 1: morning surprise that the board has agreed that if not
Speaker 1: coming not taking the advice of their their shareholder too
Speaker 1: with the person they picked, but to make a change.
Speaker 1: It's it's unusual. If you looked at the track record,
Speaker 1: maybe you wouldn't be surprised if you looked at Union
Speaker 1: Pacific's performance. But given the history of this company and
Speaker 1: their longstanding patients and unwillingness to listen outside advice, this
Speaker 1: is highly unusual. So what what can be done at
Speaker 1: a Union Pacific? What are some of these shareholders want
Speaker 1: this company to change and perhaps improvement performance and shareholder returns.
Speaker 1: We well, that's a really interesting thing that you ask
Speaker 1: right now. You know, the the this PSR that that
Speaker 1: precision scheduled railroading has has become a nasty phrase after
Speaker 1: all the labor negotiations. It's even been related to the
Speaker 1: accident in Ohio, though it has of course nothing to
Speaker 1: do with that. But but the idea of bringing in
Speaker 1: an operating guide to solve problems here at Union Pacific,
Speaker 1: and all the railroads had service issues over the last
Speaker 1: eighteen months, although they were almost entirely labor related. That
Speaker 1: is not having enough cruise. This is a gesture where
Speaker 1: Union Pacific is sort of ignoring the wishes of its regulator,
Speaker 1: the Service Transportation Board, which has painted the target of
Speaker 1: all railroad badness, if you will, on Up's back. And
Speaker 1: so if you were to bring in a c OO
Speaker 1: as CEO, you would in essence be saying we are
Speaker 1: a inefficiency driven way to get to share all the
Speaker 1: value rather than a growth driven lance didn't represent really
Speaker 1: either side of this ongoing philosophical debate, and jim Na
Speaker 1: as a person might not want to say he represents
Speaker 1: the operations side, but his resume suggested that. And then
Speaker 1: when he was brought up as the attack guy coming
Speaker 1: at Canadian National a year ago, when Children's Investment Fund
Speaker 1: highlighted him as the successor, they got a lot of
Speaker 1: what they wanted. TCI did, but they did not get
Speaker 1: Jim Venna. One of the thing the TCI allowed to happen,
Speaker 1: as have analysts say, this was a move to pivot
Speaker 1: from growth to back to margin and that is really
Speaker 1: not what shippers want to hear, certainly not what the
Speaker 1: regulators want to hear. What Union Pacific needs to do
Speaker 1: is really take advantage of the many gifts it has.
Speaker 1: It's incredible franchise. It's seemingly never put it all together.
Speaker 1: There isn't a single you know, silver bullet. Oh, if
Speaker 1: they just fix this, they're back. But as you may remember, Paul,
Speaker 1: they you know they have the biggest franchise. You know
Speaker 1: that the connections to Mexico, widely diverse, all of the
Speaker 1: great chemical franchise. Not not that that's a great topic
Speaker 1: for these days, but they really control Texas. I want
Speaker 1: to ask about that, not Texas obviously, but Ohio. First
Speaker 1: of all, for those of us who don't cover the
Speaker 1: railroads for a living, how many big railroad companies are there?
Speaker 1: I mean, it seems to me that there are only
Speaker 1: a handful of them anyway, that operating all of North America,
Speaker 1: so that you are correct, they are essentially you could
Speaker 1: say seven or maybe eight. But in the US there
Speaker 1: are the Big four War in the west, B and
Speaker 1: SAFT that's Berkshire's company, Union Pacific in the east, and
Speaker 1: Norfolk Southern and the Canadians go Transcon up in the
Speaker 1: top and they both drop down through the center. CP
Speaker 1: soon to acquire Kansas City. Southern will go all the
Speaker 1: way to Mexico City. CN goes all the way to
Speaker 1: New Orleans. You have another railroad of some size in Mexico.
Speaker 1: That's really it. But keep in mind you have a
Speaker 1: highly developed highway system. So the rails are often thought
Speaker 1: to be they're called duopolies, and the STBs often used
Speaker 1: the monopoly word, but this is a duopoly that is
Speaker 1: losing share at present in a rising freight market, you know,
Speaker 1: forgetting today's economy, but over the last five years, and
Speaker 1: that shows you the importance of the highway. So yes,
Speaker 1: there are many fewer railroads, but there's the competition for
Speaker 1: freight is stronger rather than weaker. So what needs to
Speaker 1: happen from a regulatory perspective to make sure something that
Speaker 1: we saw in East Palestine, Ohio doesn't happen again? I mean,
Speaker 1: if it's possible or was there lax regulation that led
Speaker 1: to the Norfolk Southern derailment that now seems to have
Speaker 1: poisoned an entire region. So it appears highly and usually
Speaker 1: the National Safety Board and TSB released a preliminary report
Speaker 1: that's unusual, but there was so much heightened demand for
Speaker 1: some kind of answer. That report says that although this
Speaker 1: was a you know, a completely solvable problem, they didn't
Speaker 1: exactly say how. And it appears in Norfolk Southern you
Speaker 1: did all. You played by all of the rules that
Speaker 1: they're supposed to have, including stopping the train when they
Speaker 1: heard there. There will be some changes, most of which
Speaker 1: will not have had any impact had they occurred before
Speaker 1: this accident. In other words, ECB breaks. I'm getting into
Speaker 1: the weeds here, but a new kind of breaking system
Speaker 1: is one of the things some have proposed that has
Speaker 1: no impact. That would have had no impact on this.
Speaker 1: Changing how you label trains likely would have had no
Speaker 1: impact on this. It's not clear the solution of this
Speaker 1: highly unlucky set of circumstances is either letting railroads not
Speaker 1: carry this. Remember they're not allowed to carry these goods,
Speaker 1: they're compelled to carry these goods. So allowing railroads the
Speaker 1: opportunity to say no, to change how the supply chains
Speaker 1: for vinyl chlorider move to, that's some possibility. You know,
Speaker 1: it's not necessarily on the railroad here, since they appeared
Speaker 1: to have played by the regular rules. There is technology
Speaker 1: coming that will have a better system for understanding when
Speaker 1: bearings failed. This was a bearing in a single wheel
Speaker 1: set in one hundred and forty nine car train that failed.
Speaker 1: They were aware it failed just before the accident. New
Speaker 1: technology could come that may allow them to have an
Speaker 1: earlier look at this. But in many cases, I think
Speaker 1: we're going to find this is just a set of
Speaker 1: completely unlucky circumstances, and the crew did the right thing. Afterwards,
Speaker 1: the responders did the right thing. We had no injuries,
Speaker 1: no fatalities, and I think, actually, what will ultimately be
Speaker 1: a solvable although reasonably expensive cleanup process Tony thirty seconds. Here,
Speaker 1: I'm looking at Norfolk Southern. They spend a couple billion
Speaker 1: dollars a year in capital expenditures. There is there a
Speaker 1: credible argument that they don't as an industry spend enough
Speaker 1: on safety. No, the idea here that they they never
Speaker 1: spend enough for people talk about their buybacks and their
Speaker 1: dividends is really kind of it's like it's a populist
Speaker 1: propaganda here. The rail system in the United States got
Speaker 1: a B plus, the freight rail system a B plus
Speaker 1: grade from the American Society Civil Engineers. Highways got a D.
Speaker 1: The alternative of moving these goods you take them off
Speaker 1: the railroad, will they go on the highway? On that
Speaker 1: D rated system by by engineers? Where the railroad spend
Speaker 1: you know, massive amounts on a consistent basis on their network.
Speaker 1: The cars in this case are owned by shippers, but
Speaker 1: they were mostly the newer type of cars. You know,
Speaker 1: there really isn't a case that this was a greed
Speaker 1: over people right issue that's just populism. I just wouldn't
Speaker 1: carry it. Yeah, well, you know, not a choice. Plastics
Speaker 1: is not the key to the It's an option right there.
Speaker 1: All right, Tony, thank you so much. Tony Hatchi is
Speaker 1: a consultant analyst for the transportation industry at ABH Consulting.
Speaker 1: He's been doing it for decades, covering the railroad stocks,
Speaker 1: at trucking stocks, the shipping stocks. Good to get that
Speaker 1: voice on, Jill. Thanks much for joining us here talk
Speaker 1: to us about the why wca's Women's Empowerment ETF sounds fascinating. Sure, sure,
Speaker 1: thanks for having me. Yeah. I was formerly the chief
Speaker 1: Innovation Officer for WYDBCA Metropolitan Chicago and now I'm working
Speaker 1: as an advisor with WYDBC A USA to continue to
Speaker 1: work on the exchange traded fund that we launched in
Speaker 1: twenty eighteen with partnership with Impact Shares, which is a
Speaker 1: nonprofit investment manager. The goal here was to create so
Speaker 1: hang on, Jill, just to be clear, the YWCA itself
Speaker 1: released this ETF. We're the Impact partner, so we eat
Speaker 1: Impact Shares released the ETF. There, the investment manager WYDBCA
Speaker 1: is sort of the consultant on the criteria that are
Speaker 1: used to evaluate the companies m that are focused on
Speaker 1: women's empowerment, policies and practices that companies can can impose
Speaker 1: in their workplace. UM and you know, with with over
Speaker 1: one hundred and sixty years of experience and women's issues,
Speaker 1: the y to BCA lends their leadership, voice, data, knowledge,
Speaker 1: our networks, you know, to really make this an impactful
Speaker 1: investing product. While we use this as an opportunity to
Speaker 1: engage corporations on you know, what policies and practices they
Speaker 1: can implement that will really impact women in the workplace,
Speaker 1: and as a tool to educate UM investors in the
Speaker 1: general public just you know, people in general on the
Speaker 1: importance of these different criteria and how you can make
Speaker 1: an impact with your money. I would guess that number one,
Speaker 1: by a long shot, is having decent maternity leave policies,
Speaker 1: and then I would guess that number two is on
Speaker 1: site daycare and that everything else is way far behind that.
Speaker 1: A am I onto something here? Those are definitely things
Speaker 1: we would like to see corporations and all businesses implement
Speaker 1: in their workforce. But we look at the product itself,
Speaker 1: uses equip research and Equilipe is a gender equity research
Speaker 1: company in the Netherlands and they look at over four
Speaker 1: thousand publicly traded companies. They look at nineteen different criteria
Speaker 1: that empower women in the workplace, and then that information
Speaker 1: is used by morning Star to create the Women's Empowerment Index,
Speaker 1: which is used by Impact Shares for the product itself.
Speaker 1: So the Equilipe criteria look at gender balance in leadership
Speaker 1: in the workplace, equal compensation and work life balance, and
Speaker 1: policies promoting gender equality, as well as an overall commitment
Speaker 1: to women's empowerment and their transparency in that area and
Speaker 1: their accountability in that area. Be nice to see, I mean,
Speaker 1: it will be nice to see the performance because I
Speaker 1: imagine companies that pay closure attention, that do a better
Speaker 1: job of UM, you know, keeping talented and experienced women
Speaker 1: on staff, do better at business. Absolutely. I mean what
Speaker 1: we see through the data is that, you know, companies
Speaker 1: that are inclusive and they incorporate these different criteria, UM
Speaker 1: have great you know, they're they're more they're much more successful. UM,
Speaker 1: they have lower turnover, they have the higher employee satisfaction. UM.
Speaker 1: You know, it's just all the way around. UM and
Speaker 1: and things like, um, you know, we look at paid sickly,
Speaker 1: the gender pay gap, the living wage. I mean, these
Speaker 1: are all things that not only strengthen the women in
Speaker 1: the workforce, but then also have the knock on effect
Speaker 1: to strengthening the companies. Hey, Joe, give us an example
Speaker 1: of one of your holdings and why from your perspective,
Speaker 1: it's in the ETF UM. Well, okay, we have uh,
Speaker 1: let's say, um Ndidia Uh is one of the top
Speaker 1: holdings right now. UM. And you know, if they they
Speaker 1: go out of their way. UM, well, we don't think
Speaker 1: it should be out of their way, but we uh,
Speaker 1: you know, to to really implement um, to be very
Speaker 1: transparent about their pay. Um, their pay Uh, they pay
Speaker 1: a living wage, UM, they have great um uh leaves
Speaker 1: and work options. UM. So these are things that we
Speaker 1: would like to see more companies adopting and employees being
Speaker 1: more informed about so they can you know, ask their
Speaker 1: companies to provide these um these things. We see these
Speaker 1: criteria as sort of a roadmap for both corporate America
Speaker 1: and employees. People. You know, if you're looking for a job,
Speaker 1: these are the things you might want to think about
Speaker 1: a company having in place. It's I mean, it's so
Speaker 1: interesting because I come from I've been in Berlin for
Speaker 1: the last six writers, right, and there they have what
Speaker 1: seems to me um to be good maternity leave policy
Speaker 1: and paternity leave and how long is that? Uh, it's
Speaker 1: thirteen or fourteen months? Really, and then you know at
Speaker 1: that age m a kid is allowed to go to
Speaker 1: daycare what they call quita. Right. But here in America,
Speaker 1: where we have the worst maternity leave policies, it's like
Speaker 1: one or two weeks, and then then then you still
Speaker 1: can't send a kid to daycare or any kind of
Speaker 1: free education or or babysitting for like five years. It's
Speaker 1: like the worst of both worlds in this country. And
Speaker 1: I just imagine that big companies could take advantage of
Speaker 1: that and outperform others. I see. Second among your holdings
Speaker 1: is Amazon, which is interesting because they've had this kind
Speaker 1: of anti unionist slant. Um, why do you include them
Speaker 1: so highly? Well, there, it's it's based on their score
Speaker 1: that they received from a relief on the specific criteria.
Speaker 1: And you know, we we know they're there shoes with
Speaker 1: all companies, and not all of them are doing the
Speaker 1: most that they can do. In some situations. You know,
Speaker 1: I hate to say they're the best of the worst
Speaker 1: because they have the highest score among their peers in
Speaker 1: their particular sector for these issues. And that doesn't mean that,
Speaker 1: you know, we let up on those companies that we
Speaker 1: don't want to see them do more. But the way
Speaker 1: the index is or the way the products is constructed, now,
Speaker 1: if they're in the top of their sector based on
Speaker 1: these different criteria, they become a holding. All right, great stuff,
Speaker 1: really appreciated. Jill O'Donovan, chief Innovation Officer the YWCA, I
Speaker 1: think USA now she's advising on that. And they've got
Speaker 1: the name of the name of the ETF is the
Speaker 1: Impact Shares YWC Women's Empowerment ETF and the ticker is
Speaker 1: WOMN wo MN, so it's pretty easy to remember. And
Speaker 1: if you go on the Bloomberg you can find out
Speaker 1: a lot about it as well. Just type d E
Speaker 1: S and then you can click on the hold things
Speaker 1: tab to see which companies they are involved in and
Speaker 1: you can see how they've done against other ETFs. I
Speaker 1: think it's a really important tool, you know, in the end,
Speaker 1: to see how companies do that treat workers better. Yeah, exactly,
Speaker 1: And I'll be interesting to see post pandemic, when people
Speaker 1: have had a chance to work from home for multiple
Speaker 1: years and maybe a hybrid type of arrangement or maybe
Speaker 1: just working from home period. Will that put additional pressure
Speaker 1: on companies to up their game in terms of fraternity care,
Speaker 1: healthcare and you know just that type of thing right well,
Speaker 1: and hopefully at the end of the day, companies that
Speaker 1: do a better job of employing women do a better
Speaker 1: job of making money, yes, and that puts incentive into
Speaker 1: the others, right, So I'll have to see how that
Speaker 1: plays out. But certainly getting a lot of interest here,
Speaker 1: maybe even more so post pandemic. Everybody who's interested in
Speaker 1: the investment banking business, and you can count me at
Speaker 1: the top of that list. It's going to be paying
Speaker 1: close attention to what we hear from our good friends
Speaker 1: at Goldman sax To Markets are having one of their
Speaker 1: rare investor days where they trot their management teams out
Speaker 1: in front of investors in analyst and our very on
Speaker 1: Alison Williams will be there. She's a senior global banks manager,
Speaker 1: asset manager analyst at Bloomberg Intelligence. Alison, you've been covering
Speaker 1: these big investment banks for decades, you know, you know
Speaker 1: Goldman Sachs first as a competitor to them when you
Speaker 1: were at Morgan Stanley, now as an analyst at Bloomberg Intelligence.
Speaker 1: What do you think this management team needs to get
Speaker 1: across to investors tomorrow. What's their strategy for having this
Speaker 1: investor day. I think a big part of the investor
Speaker 1: day will be trying to put some detail behind how
Speaker 1: they're going to achieve their medium term targets. So Goldman Sachs,
Speaker 1: along with some other banks, last year, after a very
Speaker 1: strong twenty twenty one, raised their profitability targets. Obviously, it
Speaker 1: was a much different landscape last year, many challenging areas.
Speaker 1: Fixed in trading was an area of strength, especially for Goldman,
Speaker 1: and I would say that the cost ratio is really
Speaker 1: I think where there's going to be a lot of focus.
Speaker 1: That's that's an area they said they were going to
Speaker 1: miss last year. There's a lot of concerns about what
Speaker 1: they're spending on comp what they're spending to invest, and
Speaker 1: so I think from a metrics standpoint, we're going to
Speaker 1: want to hear, you know more about is the sixty
Speaker 1: percent still a goal and what does that look like
Speaker 1: for this year? And this unit, the AWM unit, which
Speaker 1: is I guess their asset and wealth management unit. Is
Speaker 1: it so awesome? I mean, is it totally better than
Speaker 1: everybody else's asset and wealth management units. I think it's
Speaker 1: it's very different, and I think that is an area
Speaker 1: where they've executed well, sort of against their plan and
Speaker 1: obviously in the context of the environment. So you know,
Speaker 1: the last investor Day they focused on a few big opportunities,
Speaker 1: or the last investor day was the first investor day, right,
Speaker 1: the last investor day was the first investor day. It's
Speaker 1: only the second ever investment day that Goldman Sachs has
Speaker 1: been too good previously to have an investor day. If
Speaker 1: you want to buy the stock, you don't have them
Speaker 1: tell you why. You figure out why you should buy
Speaker 1: the stock. But now they're doing the work for you.
Speaker 1: That should be a sign enough. Well, I think they're
Speaker 1: trying to give a little bit more detail and to
Speaker 1: your point, like when when things are going well and
Speaker 1: steady state, there's less of a need to sort of
Speaker 1: put yourself out there in front of investors. I think
Speaker 1: when they wanted to talk about some of these pivots
Speaker 1: and give some detail around their strategy. I think that's
Speaker 1: that's what sort of led to the first Investor Day.
Speaker 1: So ironic, Alison, you and Paul Shirley. Remember in Liar's Poker,
Speaker 1: there's a trader at Goldman Sachs who's doing so well
Speaker 1: that he can come to work without wearing a suit
Speaker 1: and tie. He comes in with jeans and cowboy boots
Speaker 1: and he's allowed because he's doing so well. But at
Speaker 1: some point he stops making money for the firm and
Speaker 1: they're like, dude, put on a tire. You're out of here.
Speaker 1: This is like the investor Day. So so, Alison, And
Speaker 1: that's by the way, So I mean, I think that
Speaker 1: happens across Wall Street when people go towards more as
Speaker 1: casual when things are going well, and then everybody's got
Speaker 1: to get the suit and tie. Everybody's going to come
Speaker 1: into the office. And you know, when performance is good,
Speaker 1: a lot of things can can be ignored. Right, So, Alison,
Speaker 1: how about Marcus their consumer banking effort. I'm not sure
Speaker 1: if it's deemed a failure, but it's defertainly underperformed. Where
Speaker 1: are they completely pulled the plug on that? If not,
Speaker 1: how do they position it? So I think there are
Speaker 1: elements of the you know, consumer strategy there. I think
Speaker 1: that they're going to continue the main product which was
Speaker 1: always sort of a head scratcher that you know, what
Speaker 1: what what why why they thought it was so special?
Speaker 1: I don't think anyone else thought it was a unique strategy.
Speaker 1: I mean it was basically you know, rolling up bounds transfer.
Speaker 1: This is something that a lot of it UM card
Speaker 1: companies did in the nineties, and so it seemed like
Speaker 1: not really um, you know, it was a little puzzling
Speaker 1: how they thought that was going to be sort of
Speaker 1: a differentiator or give them any kind of competitive advantage.
Speaker 1: And so I think, you know, moving away from that
Speaker 1: and um and then there are some environmental factors. I
Speaker 1: get it, by the way, Allison, because at the time
Speaker 1: I thought, wow, Goldman Sacks. If I bank with Goldman Sacks,
Speaker 1: then I must be the very best. Like if I
Speaker 1: pull out a Goldman Sacks card when we're all vying
Speaker 1: over who pays for dinner, then I'm the man. You've
Speaker 1: made it right and and and that and that's that
Speaker 1: was the idea behind the Apple card as well, Like
Speaker 1: it's just the cache of having it correct, and that
Speaker 1: I think is that's something that I think they're going
Speaker 1: to hold on to, right because in the credit card business,
Speaker 1: as we said, as I just said, balance transfer is
Speaker 1: one strategy. Another strategy is to offer, you know, to
Speaker 1: provide some sort of cache behind the card. You know,
Speaker 1: when we look at things like the Platinum card or
Speaker 1: the staff Are card, there's a lot of benefits, but
Speaker 1: it's also sort of the cachet of having those types
Speaker 1: of cards or other types of affinity cards, which kind
Speaker 1: of I think goes to Apple, where banks will try
Speaker 1: to leverage off of a strong name or something that
Speaker 1: you know, the consumers have a strong affinity towards. Hey, Alison,
Speaker 1: David Solomon, the chairman and CEO of Goldman SAX. How
Speaker 1: secure is his position, would you say these days? I
Speaker 1: think that he has to instill some confidence again in
Speaker 1: some of the strategy he can't. There are certain things,
Speaker 1: you know, the investment banking business you can't. You certainly
Speaker 1: can't blame him for you know the fact that the
Speaker 1: industry had a significant slide of fees. There were almost
Speaker 1: no IPOs last year. But I do think that you know,
Speaker 1: you can manage to the cost side of things, You
Speaker 1: can manage terms of your investments, and keep in mind
Speaker 1: that the consumer business was not hit. You know, that's
Speaker 1: something that he inherited as a CEO. So um, even
Speaker 1: though that you know, a lot of fingers point to
Speaker 1: him that that wasn't necessarily sort of his um, you know,
Speaker 1: that wasn't that wasn't necessarily his initiative. He sort of
Speaker 1: came into that. But I do think that, you know,
Speaker 1: in terms of managing the cost, managing the investments going forward,
Speaker 1: he does need to have a bit a little bit
Speaker 1: more credible path and you know, they do have to
Speaker 1: think about what they're going to say. Most people, I
Speaker 1: don't think expect a change in our return targets. It
Speaker 1: would be a little silly a one year later to
Speaker 1: reduce those. But I think he does need to provide
Speaker 1: a credible path. Um, what about a change at the
Speaker 1: helm of Goldman when you meet up with all the
Speaker 1: other super bank analysts, do you guys have like a
Speaker 1: betting pool on how much longer Solomon's got? I mean,
Speaker 1: I think that's that's probably not you know, I don't
Speaker 1: think that's really the main focus at Goldman Sachs. I
Speaker 1: think that you know, he's there are very good stories
Speaker 1: going on there if you look at their trading business,
Speaker 1: I mean, they really have knocked the cover off the
Speaker 1: ball in terms of gaining revenue share there. The investment
Speaker 1: banking too, they've done a good job even though it
Speaker 1: was a bad year for the industry. The M and
Speaker 1: A franchise, which is you know, that sort of very
Speaker 1: associated with the Goldman brand. I mean, I think that's
Speaker 1: very strong. I think when people think about the leadership
Speaker 1: across the global investment banks that that's not really the
Speaker 1: one that people are, you know, necessarily betting on a change.
Speaker 1: I think people are looking more towards some of the
Speaker 1: other banks where there's been long standing leadership and wondering
Speaker 1: when there's going to be a shift at those banks.
Speaker 1: All right, Alison, good stuff. I know you'll be downtown
Speaker 1: at the Goldman Sachs headquarters tomorrow with all the other
Speaker 1: financial analysts and investors waiting to hear what we're gonna
Speaker 1: hear from Goldman Sachs with their investor day. Alison Williams.
Speaker 1: She's a senior global banks and Asset Managers analysts for
Speaker 1: Bloomberg Intelligence. She's been doing that for decades. He's got
Speaker 1: great perspective. Read her stuff on bi Go. A couple
Speaker 1: of months ago, thanks to Matt Miller's contacts at Ford,
Speaker 1: I was able to test drive a Ford F one
Speaker 1: fifty electric truck and boy was it awesome. I was
Speaker 1: really impressed. But now we've got a Big Take story
Speaker 1: here that tells you, boy, there's some big issues with
Speaker 1: where the aluminum comes in this truck, and that's the
Speaker 1: subject of a Big Take story and a Big Take podcast.
Speaker 1: So let's go to West Kasova. He's the host of
Speaker 1: Bloomberg's Big Take podcast. So West, I just kind of
Speaker 1: going through this article. It's fascinating reporting as always, fascinating photography,
Speaker 1: as always, great graphics, and it absolutely warrants being a podcast.
Speaker 1: Tell us about how Ford makes or gets the aluminum
Speaker 1: Forward's F one fifty pickup trucks. Yeah, this story is
Speaker 1: reported by Jessica Price Bryce in South Holli, Brazil and
Speaker 1: Sherd Impress in the US. And they looked at was
Speaker 1: where does the aluminum on this rock of the future,
Speaker 1: as Ford describes it, the F one fifty lightning? Where
Speaker 1: does it come from? And they were able to trace
Speaker 1: back a lot of the aluminum on the truck to
Speaker 1: a mining and a refinery in the heart of the
Speaker 1: Amazon in Brazil and down there there are thousands of
Speaker 1: people who are suing now a refinery saying that the
Speaker 1: operation is really dirty and it is making them sick,
Speaker 1: and that it is destroying the environment. And they trace
Speaker 1: the supply chain all the way from there up through
Speaker 1: Canada and then into parts suppliers and then to Ford.
Speaker 1: So are those parts suppliers only selling this aluminum to
Speaker 1: Ford or is that is that aluminum only going to
Speaker 1: Ford because other carmakers obviously use it as well and
Speaker 1: the material I mean, and is it just for the
Speaker 1: lightning because Ford's been using a lot of aluminum in
Speaker 1: the F one fifty for many years now. Yeah, A
Speaker 1: lot of the aluminium used in all kinds of products,
Speaker 1: you know, soft drink cans, other vehicles, a lot of
Speaker 1: the things we buy because you know, we use a
Speaker 1: lot of aluminium comes from the same area. And there's
Speaker 1: a lot of companies, there's a lot of refunders, so
Speaker 1: it's not just Ford. The reason they focused on Ford
Speaker 1: where it was a couple of things. One is that
Speaker 1: supply chains are often kind of black boxes, as they
Speaker 1: describe it. It's really hard to find out the origins
Speaker 1: where stuff comes from, especially when you have a really
Speaker 1: long supply chain, like all the way from Brazil to
Speaker 1: the US. And what happened was the lightning was such
Speaker 1: a big deal when they announced it. Everyone was so
Speaker 1: proud to be working on it that some of the
Speaker 1: parts suppliers said, hey, we're supplying our parts to Ford's
Speaker 1: new trout. And so they were able then to find out, Okay,
Speaker 1: if these companies were sourcing it to Ford, where did
Speaker 1: they get it? And they were able just by looking
Speaker 1: through an enormous number of records and doing interviews to
Speaker 1: trace it all the way back. And the other reason
Speaker 1: they looked at forward was that Ford described this as
Speaker 1: the truck that could possibly change everything that you have
Speaker 1: a lot of people ain't Tesla's and maybe they're really
Speaker 1: thinking about going to net zero in a carbon free future.
Speaker 1: But people will buy pickup trucks. They need utility, they
Speaker 1: want power, and maybe the environmental thing isn't the top
Speaker 1: of mind. So those people can be persuaded that an
Speaker 1: electric truck is a good thing. Then you really shift
Speaker 1: away from gasoline eventually to electric. And so this futuristic
Speaker 1: trucks seemed like a good place to really look at Okay,
Speaker 1: so how clean is it? So West who owns this
Speaker 1: aluminum refinery? It's not forward, right, It's it's another company. No,
Speaker 1: it's another company, and it's based in Europe. And the
Speaker 1: ownership of these companies is really long and involved in
Speaker 1: you don't want to rot here. But Ford is really
Speaker 1: just getting these parts from their suppliers. And I should
Speaker 1: say that the companies themselves, and this is what comes
Speaker 1: out in the story. The companies are following the laws
Speaker 1: of Brazil. That laws in Brazil over environmental regulations are
Speaker 1: pretty weak, and so the companies aren't necessarily breaking the law.
Speaker 1: They're following the law. It's just that the laws themselves
Speaker 1: don't enforce environmental regulations that protect them. The other thing
Speaker 1: that we should really say here is the reporters went
Speaker 1: to Ford and said, hey, we've found this out. What
Speaker 1: do you say? And Ford immediately said, we did not
Speaker 1: know this and we are now going to investigate this
Speaker 1: and so we're going to see what Ford Ashley does
Speaker 1: about it. They said that they had no idea that
Speaker 1: the aluminum was coming from the Amazon, and that points
Speaker 1: up to another problem is that these supply chains are
Speaker 1: so long that a lot of times your suppliers say yes,
Speaker 1: it's all certified, but you don't really look to see
Speaker 1: what about three or four suppliers down the lock right. Well,
Speaker 1: and when you buy the truck, you probably maybe if
Speaker 1: you care about the environmental impact, you look at Forward
Speaker 1: and maybe you look at a couple of their suppliers.
Speaker 1: But consumers, obviously you can't go that far either. I'm
Speaker 1: sure they'll be interested to read this piece. Where's the
Speaker 1: good aluminum come from? Like, if I don't want to
Speaker 1: poison people in the Amazon, where should I get my
Speaker 1: aluminum from? Yeah, this is a really big point, and
Speaker 1: this is something that I asked both Jessica and Sheridan,
Speaker 1: the reporters on the story, and they say, you know,
Speaker 1: like let's say Ford, really they look at this and
Speaker 1: they say, yeah, we don't want to get our aluminum
Speaker 1: from this place anymore. That's problem. There aren't all that
Speaker 1: many places you can get it. And so the conclusion
Speaker 1: that they really came to is that you're not gonna
Speaker 1: just all of a sudden fine new sources of aluminium,
Speaker 1: especially in the massive someone went Forward would need. You
Speaker 1: just have to do a better job of making sure
Speaker 1: the way you're getting a luminium is cleaner and that
Speaker 1: it's doing better by the environment and not just everybody
Speaker 1: kind of looking the other way. So what are the
Speaker 1: people down there in Brazil really looking for? Are they
Speaker 1: looking for them to stop production, to clean up production,
Speaker 1: to change the government rules. So there's all kinds of
Speaker 1: things wrapped up in this because this has been going
Speaker 1: on for decades where mining companies had polluted water had
Speaker 1: you know, of course we've all heard about the deforestation
Speaker 1: problems of the Amazon, ripping oak trees and kind of
Speaker 1: ruining an environment. Allow the water down there was just undrinkable,
Speaker 1: and some of the companies supply people who live there
Speaker 1: with bottle bobble water because they can drink the water.
Speaker 1: It's everything from people saying, you know, their skin is
Speaker 1: that she too, horrible birth effects that they claim are
Speaker 1: the result of these environmental practices, and so what they're
Speaker 1: looking for is redressed to the you know, the things
Speaker 1: they've already suffered, and also to stop it going forward.
Speaker 1: All right, West great stuff, really appreciate it. West Kosovo.
Speaker 1: He is the moderator for the host of the Bloomberg's
Speaker 1: Big Take podcasts, and you can check that out wherever
Speaker 1: you get your podcasts. In this edition talks about you know,
Speaker 1: sourcing aluminum in Brazil. Thanks for listening to the Bloomberg
Speaker 1: Markets podcast. You can subscribe and listen to interviews with
Speaker 1: Apple Podcasts or whatever podcast platform you prefer. I'm Matt Miller.
Speaker 1: I'm on Twitter at Matt Miller nineteen seventy three and
Speaker 1: on false Sweeney I'm on Twitter at pt Sweeney. Before
Speaker 1: the podcast, you can always catch us worldwide at Bloomberg
Speaker 1: Radio