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Speaker 3: Well, It's Bloomberg Business Week, Tim Stenebeck and Bailey Lipswolt's
Speaker 3: live in the Bloomberg Interactive Brokers Studio. Shares of Micron
Speaker 3: Technologies up by wow, about three point six percent as
Speaker 3: we speak right now. The shares of rallied more than
Speaker 3: sixty percent so far this year. Worth repeating some of
Speaker 3: the news. The company maintained its quarterly diven end at
Speaker 3: eleven and a half cents per share. The company is
Speaker 3: seeing second quarter earnings per share from thirty five cents
Speaker 3: to twenty one sense. The consensus was sixty two cents
Speaker 3: per share. Let's get an instant reaction from Dan Morgan.
Speaker 3: He joins us this afternoon on Skype. Dan good to
Speaker 3: have you back with us. He's senior portfolio manager of
Speaker 3: course at Sunova's trust company. Love it when you join
Speaker 3: us whenever we have the chip company's report, Micron Technology,
Speaker 3: you've had five minutes to look at the company's results
Speaker 3: as shares higher in the after hours before that call
Speaker 3: takes place.
Speaker 4: What are your immediate reactions.
Speaker 5: Well, Tim, I think overall, obviously it has to be
Speaker 5: construed as a very strong beat. I mean, the numbers
Speaker 5: were kind of moving around on the first quarter. We
Speaker 5: know they originally came in on sales at four point
Speaker 5: four billion with a plus or minus two hundred million.
Speaker 5: Then they raised their guidance to about four point seven
Speaker 5: and then they beat that number at four point seven
Speaker 5: to three billion. That was up sixteen percent on the
Speaker 5: first quarter. They also guided, as you probably mentioned, going
Speaker 5: into the second quarter five point one to five point
Speaker 5: five billion in revenues. Street was looking for four point
Speaker 5: nine to nine. And then on the bottom line, it
Speaker 5: was a beat across the board in terms of they
Speaker 5: didn't lose as much money as everybody expected. Right in
Speaker 5: the first quarter they only lost ninety five cents, and
Speaker 5: then going in the second quarter, they're looking for a
Speaker 5: range of a loss of twenty one to thirty five.
Speaker 5: The street was looking for a loss of sixty two. So,
Speaker 5: you know, just a preliminary look at these numbers, Tim
Speaker 5: and Bailey, they look very very strong, and it reiterated
Speaker 5: to give further evidence that the rebound that began in
Speaker 5: the really the February of twenty twenty three in the
Speaker 5: chip industry is definitely gaining momentum. We're starting to see
Speaker 5: that in the memory space.
Speaker 2: And with that momentum, what's going to be key in
Speaker 2: twenty twenty four just looking at the results AI obviously
Speaker 2: and the spending around that as it relates to data
Speaker 2: centers is helping, is that what's going to carry Micron
Speaker 2: in some of those chip making peers, I mean, AI.
Speaker 5: Is important for them, probably not going to see that
Speaker 5: come to fruition until sometime in the second half of
Speaker 5: next year. They have two products that they currently are
Speaker 5: working on. One is called double Data Rate DDR. The
Speaker 5: other one is called high Bandwidth Memory. Those are chips
Speaker 5: that go into some of these high end AI data
Speaker 5: servers that you would see let's say with an Nvidia
Speaker 5: chip going in there, that would be the memory that
Speaker 5: got would go in to that server. With the Nvidia products,
Speaker 5: so that's definitely a big demand cycle for them. The
Speaker 5: other thing you know we're seeing, guys, is we're seeing
Speaker 5: a rebound in PCs and we're seeing a rebound in
Speaker 5: regards to smartphones, which is about thirty one percent of
Speaker 5: the total chip market. So those were two areas that
Speaker 5: were really hurting. We had auto and industrial that were
Speaker 5: previously strong, but we're seeing a nice bounce back after
Speaker 5: we had that big blip on the upside after COVID.
Speaker 3: Hey I'm looking at FAGO on the Bloomberg terminal and
Speaker 3: it's got a great breakdown of where Micron's revenue actually
Speaker 3: comes from. So in the physical twenty three, about half
Speaker 3: came from the US, half internationally, and then when you
Speaker 3: break down dan international, this is the point Scarlett was making.
Speaker 3: You had seventeen point four percent of revenue coming from
Speaker 3: Taiwan and you had fourteen percent of that revenue or
Speaker 3: fourteen percent of the forty nine percent of revenue international
Speaker 3: revenue coming from mainland China excluding Hong Kong. What do
Speaker 3: investors need to understand when it comes to the China
Speaker 3: story and Micron.
Speaker 5: We know what's interesting is that Micron doesn't have a
Speaker 5: huge amount of exposure to China. I know that everyone's
Speaker 5: talking about the restrictions and that was a seven issue.
Speaker 4: That's been seventeen and a half percent. Is it nothing? Well,
Speaker 4: I know, but compared to fourteen percent, I should say.
Speaker 5: Yeah, Qualcom has almost sixty percent. That's what I meant
Speaker 5: when we compare with the shift companies. But yeah, I
Speaker 5: mean that's going to be the real uh, you know,
Speaker 5: gorilla in the room as we get into this conference
Speaker 5: call coming up with the man as a team, I'm
Speaker 5: sure the analysts are going to really kind of want
Speaker 5: to zero in on, you know, how much of impact
Speaker 5: is that going to have in their ability to kind
Speaker 5: of continue to replicate some of the success they had
Speaker 5: in this first quarter in terms of recovery. And you know,
Speaker 5: you're right. I mean, you take out a certain chunk
Speaker 5: of that revenue that's huge, and that's part of that
Speaker 5: recovery story. I guess what I was trying to relate
Speaker 5: it to is when you look at Micron compared to
Speaker 5: a lot of the other big chip makers, especially Qualcomm,
Speaker 5: they have a pretty low exposure of China, but you're right,
Speaker 5: it's still a pretty high amount of their business. When
Speaker 5: you're looking at you know, fifteen percent plus.
Speaker 3: So is it should should investors be worried about regulatory
Speaker 3: risk about you know, in the US cracking down on
Speaker 3: those sales.
Speaker 5: Well, I mean it seems like there's regulatory risk now
Speaker 5: guys in all of these chip companies, right and even Apple,
Speaker 5: So that's always a risk that's out there. So far,
Speaker 5: it hasn't really a dramatic impact, Like, for example, Nvidia
Speaker 5: has a couple of their chips that have been banned
Speaker 5: and they've been trying to work around it with some
Speaker 5: chips that meet the specifications. In terms of these concerns
Speaker 5: that China has raised, they're able to sell in those spaces.
Speaker 5: So far, I haven't seen dramatic impacts in terms of,
Speaker 5: you know, bringing down sales and earning vestments because of
Speaker 5: the China exposure with the chip players. But it is
Speaker 5: definitely something that could become a problem down the road,
Speaker 5: and it could be something that would kind of throw,
Speaker 5: you know, a stick in the spoke of the wheel
Speaker 5: here of this great recovery that we're getting in the
Speaker 5: chip space.
Speaker 2: And Dan, I'm just looking at the release and some
Speaker 2: of the comments from management basically talking about business fundamentals
Speaker 2: improving throughout twenty twenty four, but already talking about record
Speaker 2: industry tam for twenty twenty five. Is that an all
Speaker 2: a concern or surprised to hear and see companies already
Speaker 2: looking to twenty five when we haven't even flipped the
Speaker 2: calendar to twenty four.
Speaker 5: Well, I think everyone's looking forward to this recovery coming
Speaker 5: to fruition. And you know, as you start to move
Speaker 5: out of the hole that we had in the probably
Speaker 5: about the first quarter of twenty three. You know, how
Speaker 5: long is the typical chip cycle. Typically they don't last
Speaker 5: that long. So I think you're seeing already people kind
Speaker 5: of building in that will continue to see the recovery
Speaker 5: through this year as it continues to work into some
Speaker 5: of these other spaces I mentioned before, like industrial and auto,
Speaker 5: And then the question is when does this peak out
Speaker 5: and we start to go the other way, and you know,
Speaker 5: how can we forecast that and how much carry through
Speaker 5: will we have and will China be a catalyst that
Speaker 5: leads up to this this turn again in the cycle.
Speaker 5: So again everyone kind of looking ahead, right, Everybody trades
Speaker 5: these stocks on what's going to happen six months to
Speaker 5: twelve months down the road.
Speaker 3: As if we could know what's going to happen six
Speaker 3: to twelve months down the road, right, I guess.
Speaker 4: That's what Tim knows. He's not going to tell us
Speaker 4: what's that?
Speaker 5: I said, Tim knows, but.
Speaker 4: He's just yeah, exactly, that's what.
Speaker 3: That's why I'm doing this because I can see the
Speaker 3: BacT like, hey, hey, Dan, you know to that end
Speaker 3: talking about the AI impact here. It's something that the
Speaker 3: company CEO calls out quite a bit in the press
Speaker 3: release this afternoon, and I'm wondering where you think we
Speaker 3: are in terms of value capture from the AI rush,
Speaker 3: specifically for Micron, Like how much more room is there
Speaker 3: to run when it comes to AI.
Speaker 5: I think that's a great opportunity for them going forward.
Speaker 5: I mean, there's been a lot of studies out that
Speaker 5: have kind of thrown some numbers around. For example, in
Speaker 5: twenty three they expect total d RAM revenues from AI
Speaker 5: to be about sixteen percent, and then by twenty twenty
Speaker 5: seven to expand to fifty six percent, and then along
Speaker 5: the way, obviously you're creeping up in terms of overall
Speaker 5: revenues being generated from AI. But to me, that's probably
Speaker 5: the biggest opportunity I talked about earlier in the conversation
Speaker 5: about how these chips are paired up with a lot
Speaker 5: of these Nvidia AI chips, and you know, Nvidia continues
Speaker 5: to do extremely well. AMD's got some new AI products
Speaker 5: coming out, So I think that's going to be the
Speaker 5: greatest opportunity going forward, just because you guys know that
Speaker 5: the memory market is extremely cyclical. It's a very commoditized industry.
Speaker 5: They have to compete against Samsung and at Mail and
Speaker 5: all these other players in the space, so it's it's
Speaker 5: a tough, tough sled. So how do you carve out
Speaker 5: an opportunity for growth for yourself, and that is to
Speaker 5: align yourself with some of these AI chip makers and
Speaker 5: continue to garner a larger share of that overall AI
Speaker 5: memory space. And it's obviously going to be a huge
Speaker 5: growth component within memory, which is huge, right, takes away
Speaker 5: some of the cyclicality that we typically have in PCs
Speaker 5: and servers and smartphones and the other things that are
Speaker 5: out there that obviously create this this up and down
Speaker 5: cycle in memory.
Speaker 2: Yeah, and we only have about thirty seconds left, but
Speaker 2: looking at the charts in Nvidia, more than two hundred percent,
Speaker 2: AMD one to ten. Broadcom had doubled so far here
Speaker 2: today before pulling back a bit. What stocks do you
Speaker 2: like with in the semispace.
Speaker 5: Well, you mentioned a lot of them. I mean, obviously
Speaker 5: in Vidio is a holding of ours. Qualcomm they have
Speaker 5: the A one hundred chip that should go into smartphones.
Speaker 5: We like Broadcom. They reported a couple of weeks ago
Speaker 5: they had a pretty good report. They mentioned some of
Speaker 5: the strengths of getting in their Jericho three, which is
Speaker 5: their AI offering in terms of growth. So those would
Speaker 5: be some of the names you know that We've been
Speaker 5: kind of focusing on TIS in there too, but they've
Speaker 5: been a little bit underwater with the auto industrial space
Speaker 5: being so weak. But though would be some top names
Speaker 5: that you just mentioned that we're currently on our buy list.
Speaker 4: Dan, We love it when you join us.
Speaker 3: Usually it's on days when chip companies report earnings, and
Speaker 3: that's been quite a bit recently.
Speaker 4: Really appreciate it.
Speaker 3: Dan Morgan, senior portfolio manager at so Novus Trust Company,
Speaker 3: joining us on the phone from Atlanta.
Speaker 4: This is Bloomberg Business Week.
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Speaker 4: Well, you saw the alercs last night.
Speaker 3: Donald Trump ineligible to serve as US president because of
Speaker 3: his actions inciting the January sixth, twenty twenty one attack
Speaker 3: on the US Capitol. That's Colorada's highest court's finding. This
Speaker 3: is an unprecedented ruling that's headed for the US Supreme Court,
Speaker 3: no doubt.
Speaker 4: Here's what happened.
Speaker 3: Colorada Supreme Court issued this ruling late Tuesday, which barred
Speaker 3: Trump from the states March fifth primary ballot, but stayed
Speaker 3: the decision to allow the former president to appeal, which
Speaker 3: his campaign said he plans to do. He has until
Speaker 3: January fourth, By the way, under the state's court ruling.
Speaker 3: It's a legal story, but it's also a political story
Speaker 3: with wide ranging implications for both politics and legal stuff.
Speaker 3: For the legal side, we turned to June Grosso. She's
Speaker 3: Bloomberg News, a legal analyst and host of Bloomberg Law
Speaker 3: weeknights at ten pm Wall Street Time on Bloomberg Radio.
Speaker 4: To find out all the legal stuff.
Speaker 3: You just listened to June for the political side, we
Speaker 3: turned to Jody Schneider, political news director at Bloomberg Television
Speaker 3: and Radio. She joins us from our Washington, DC bureau. Jody,
Speaker 3: I want to start with you to get the politics
Speaker 3: side of this. What did we you know, what's the
Speaker 3: sort of day two here with the other Republicans and
Speaker 3: with what Trump is saying about this ruling.
Speaker 6: Yeah, it's not a terrible surprise from the former president
Speaker 6: is basically saying that this is something that has been
Speaker 6: concocted to try to keep him out of the race
Speaker 6: and blames Democrats. What's more interesting to me is that
Speaker 6: the other candidates in the race, people who are running
Speaker 6: against him for the Republican nomination, they're singing that same tune,
Speaker 6: and they're saying they would rather win at the ballot
Speaker 6: box than via the courts. So the Republicans, including Republicans
Speaker 6: in the House, have really been standing with Trump in this.
Speaker 2: And Jody, I'm just looking through Bloomberg News Morning Console
Speaker 2: poll from last week had Trump leading Biden by five
Speaker 2: percentage points among registered voters and had to head match
Speaker 2: across seven swing states. Colorado had voted for Hillary Clinton
Speaker 2: and Joe Biden the last two elections. But when you
Speaker 2: look at this decision, what can it mean for the
Speaker 2: presidential election given those polls.
Speaker 6: Well, the polls are it's still early, and a lot
Speaker 6: of people are focused on the polls about the primaries.
Speaker 6: The general is still eleven months away. So there's two
Speaker 6: ways to look at this. If Trump wins, and he
Speaker 6: may well at the Supreme Court, he nominated and got
Speaker 6: several of those people on the Supreme Court who are
Speaker 6: now serving, that he will get some credence with Republican voters.
Speaker 6: But where he really needs to win is in those
Speaker 6: seven swing states, and it will be hard for him
Speaker 6: to win with just the Republican base. And how does
Speaker 6: this look to some of those independent voters.
Speaker 3: Grosso come on in here, legal analyst for Bloomberg and
Speaker 3: he's host to Bloomberg Law weeknights at ten pm Wall
Speaker 3: Street Time on Bloomberg Radio. What did the Colorado Supreme
Speaker 3: Court decide?
Speaker 4: Here?
Speaker 7: So, the Colorado Supreme Court decided that and this has
Speaker 7: been sort of a legal debate that was started by
Speaker 7: some conservative scholars actually whether or not under Section three
Speaker 7: of the Fourteenth Amendment, which was passed around after the
Speaker 7: Confederacy to prevent Confederates from getting into taking office. Whether
Speaker 7: the language in it, there's a couple of problems, always
Speaker 7: a couple of problems. First of all, it doesn't talk
Speaker 7: about what an insurrection is. It doesn't say what it
Speaker 7: means to engage in an insurrection, so that's a question
Speaker 7: that's open. And also what it says the language is
Speaker 7: that officers of the United States who'd take an oath
Speaker 7: to support the constitution. It mentioned some officers. It doesn't
Speaker 7: mention the president, so that's another question. Does it apply
Speaker 7: to the president. So in this case, the lower court
Speaker 7: found that, yes, there was an insurrection, Yes Donald Trump
Speaker 7: incided that insurrection, but found that Donald Trump was not
Speaker 7: that the presidency was not one of the offices that
Speaker 7: you could that take place, or that one of the
Speaker 7: officers that section three of the Fourteenth Amendment applies to.
Speaker 7: The Colorado Supreme Court said, yes, there was an insurrection,
Speaker 7: Yes Donald Trump incited it. But the Fourteenth Amendment, Section
Speaker 7: three does apply to presidents, and if you look at
Speaker 7: the history, it makes sense that it would apply to presidents.
Speaker 7: Because someone said to me, well, you know, Jefferson Davis,
Speaker 7: does that mean that he could have run for president?
Speaker 7: Because the Fourteenth Amendment didn't apply to him, so it
Speaker 7: sort of makes sense historically.
Speaker 3: So what's the legal route that President Trump could take
Speaker 3: now in order to get back on the ballot.
Speaker 8: The Supreme Court is the only route. I mean, this
Speaker 8: can't appeal.
Speaker 3: The Colorado Supreme Court decision. Well, he could appeal it
Speaker 3: the colorad of Supreme Court.
Speaker 8: No, that's that's the high court in Colorado.
Speaker 7: So the next it's not like New York where we
Speaker 7: have the Supreme Court is the middle court.
Speaker 8: So he has to go to the Supreme Court.
Speaker 7: And you know, the justices here on the Colorado Supreme
Speaker 7: Court knew what was going to happen because they gave
Speaker 7: him enough time to appeal to the Supreme Court. And
Speaker 7: also the language in this more than two hundred page
Speaker 7: opinion was full of terms about how they know how
Speaker 7: significant this is. They know it's unprecedented, and you know
Speaker 7: it's going to be in the Supreme Court's hands whether
Speaker 7: or not to take the case, which most people I've
Speaker 7: spoken to say, there's really almost no choice. The Supreme
Speaker 7: Court has to take the case because you know otherwise
Speaker 7: what will happen in different states across the country are
Speaker 7: going to have some states like Minnesota. The Supreme Court
Speaker 7: there said, no, this doesn't apply any any party member.
Speaker 7: Any party can put whoever they want on the primary ballot.
Speaker 7: So what's going to happen with the primary is what's
Speaker 7: going to happen with the election itself. So I think
Speaker 7: that all bets are the Screenport will take the case.
Speaker 2: And Jody, you mentioned this about the GOP and candidates
Speaker 2: that Trump is running against standing with him. Is there
Speaker 2: a route that this would play into his hands in
Speaker 2: any way?
Speaker 6: Well, I think certainly. The former president is very good
Speaker 6: at taking things that happen outside the political arena, for
Speaker 6: instance in the courts and with his indictments and charges,
Speaker 6: and turning it into part of his narrative. And the
Speaker 6: narrative is the Democrats are afraid of him, and they
Speaker 6: don't want him to be the candidate, and some in
Speaker 6: his own party don't want it to be the candidate
Speaker 6: because he could win and they know that that is
Speaker 6: and he will certainly make this case or try to
Speaker 6: make this case with this as well, again, because this
Speaker 6: is the narrative that they are against me, they're victimizing me,
Speaker 6: they are using the judicial system where they control it
Speaker 6: to try to get at me, and in this case,
Speaker 6: he will probably you know, he has working with him
Speaker 6: in terms of trying to make that argument. The fact
Speaker 6: that all of the members of the Colorado Supreme Court
Speaker 6: were appointed by democratic governors, So he will make it
Speaker 6: political even if it is not entirely political. He will
Speaker 6: not make it about January sixth entirely. And that is something, interestingly,
Speaker 6: we haven't heard a lot from and those supporting him
Speaker 6: on this, the Republicans who were supporting him saying this
Speaker 6: is about not using the courts to decide who gets
Speaker 6: on the ballot. They haven't said a whole lot about
Speaker 6: the insurrectionist claims.
Speaker 7: And just to follow following up on that point, yes,
Speaker 7: he will say that it's all political, and yes, the
Speaker 7: justices were all democratic appointed, but it was a four
Speaker 7: to three decision. So three of those justices, including the
Speaker 7: chief Justice of the Colorado Supreme Court, voted against using
Speaker 7: the fourteenth Amendment.
Speaker 2: And jine, we only have about forty seconds here, stakehourts
Speaker 2: correct me if I'm wrong. Minnesota and Michigan ruled against
Speaker 2: similar lawsuits. What could this mean for other lawsuits from
Speaker 2: different states wanting to remove Trump from the ballot?
Speaker 7: So they would each go their own way, but the
Speaker 7: Supreme Court will decide whether the Fourteenth Amendment applies. But
Speaker 7: this is under Colorado law, So that's sort of a
Speaker 7: question of law that I cannot answer in forty seconds.
Speaker 3: All right, Well, we appreciate you trying. Thank you so much.
Speaker 3: A big thank you to June Grasso. She is Bloomberg
Speaker 3: News Legal analyst and host of Bloomberg Law weeknights at
Speaker 3: ten pm Wall Street Time on Bloomberg Radio. And also
Speaker 3: huge thank you to Jody Schneider, Political News director at
Speaker 3: Bloomberg Television and Radio. She's now based in our Washington,
Speaker 3: DC bureau, where she joined us. From this afternoon.
Speaker 1: You're listening to the Bloomberg Business Week Podcast. Catch us
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Speaker 1: Jo Say Alexa, play Bloomberg eleven thirty and tim.
Speaker 2: As worries around the pandemic faded, consumers took to the skies,
Speaker 2: with airline traffic more than doubling its COVID era bottom
Speaker 2: as the travel industry for business storms back while the
Speaker 2: Jump and travel to see Taylor Swift or Beyonce dominated headlines.
Speaker 2: I don't know if you made a trip out we
Speaker 2: see some of those cities, but those cities benefited vastly
Speaker 2: from those concerts. Calendar for conferences, though, and conventions are
Speaker 2: now packed. Next month we have cees in Las Vegas,
Speaker 2: JP Morgan Healthcare Conference at San Francisco. Flick ahead to March,
Speaker 2: you have south By Southwest taking over Austin. As meetings
Speaker 2: and exhibitions bring in millions for host cities, better diversity
Speaker 2: and equality at these events is something that's critical for them.
Speaker 2: That's why we're talking with Jason Dunn. He's the CEO
Speaker 2: at the AT National Coalition for Black National Coalition of
Speaker 2: Black Meeting Professionals. Joining us now on zoom from Cincinnati. Jason,
Speaker 2: your organization is an advocacy group that promotes the positive
Speaker 2: financial impact of travelers of color. How does your organization
Speaker 2: work to prove the diversity of these meetings and what
Speaker 2: can that do for the events as well as the
Speaker 2: cities hosting them.
Speaker 9: Well, I appreciate that and thanks for having me. What
Speaker 9: two days one is? Our organization was created forty years
Speaker 9: ago this year, and the focus was always to empower, educate,
Speaker 9: and influence policy of black professionals over hospitality and black travelers.
Speaker 9: And what that means is that we have gave the
Speaker 9: value of what conventions and black leisure travelers give internationally
Speaker 9: and domestic and that number is one hundred and twenty
Speaker 9: nine billion dollars. And so our founders were frankly around
Speaker 9: the table and said, how do we benefit this and
Speaker 9: how what we do to make sure that cities who
Speaker 9: are the very cities who are progressive cities, who are
Speaker 9: in tune with the changes of the demographics, gain or
Speaker 9: earn these dollars. And we understand that the one hundred
Speaker 9: and twenty nine billion dollars that we bring to to
Speaker 9: destinations also are recycled and also influence jobs and influenced
Speaker 9: policy in addition to the quality of life and retaining
Speaker 9: talent and bringing corporations to destinations who believe in diversity.
Speaker 9: And that's what we've been talking about. That's what we've
Speaker 9: been doing for forty years and we've been successful this far.
Speaker 3: Jason, where are some of the target cities that your
Speaker 3: organization has its eyes on? I mean, where are the
Speaker 3: cities that are doing a good job of this, and
Speaker 3: maybe the targets aren't necessarily cities that are doing a
Speaker 3: good job, but they could be doing a better job.
Speaker 1: Well.
Speaker 9: I think it's a couple of things. One is, there
Speaker 9: are cities who have done a great great over the
Speaker 9: past years, as your irregular metropolitan cities like New Orleans, Detroit, Washington,
Speaker 9: d C, Atlanta, Cincinnati to some extent, and Cleveland and
Speaker 9: places like that. But also there are there are are
Speaker 9: cities who are evolving who understand that in order to
Speaker 9: retain diverse talent, in order to retain or gain corporations,
Speaker 9: and in order to help with the commerce of a destination,
Speaker 9: that they have to be more reverse. And we're seeing
Speaker 9: people up cities like Austin, Texas who are or who
Speaker 9: is welcome Black Tech Week and black organizations who are
Speaker 9: in technology have went there as well in cities like
Speaker 9: Orlando and or Miami who are recognizing the international flair
Speaker 9: that our organizations bring in our leisure travels bring as well.
Speaker 2: And Jason, you joined ncb MP in November last year
Speaker 2: from visit Cincinnati. What changes have you been able to
Speaker 2: implement in that thirteen month stretch and what does twenty
Speaker 2: twenty four, look.
Speaker 9: Like, yeah, I appreciate that. So I think for us,
Speaker 9: we have been more excited about wide in our base.
Speaker 9: So it's not just conventions and meetings, but also sports.
Speaker 9: Many of our members are in sports and have in fact,
Speaker 9: when our members are have the largest kickball tournament in
Speaker 9: the country. And yeah, I laughed too when I really
Speaker 9: got the data about that too. So wow, really, I
Speaker 9: know you've been doing.
Speaker 4: Now I want to be part of that.
Speaker 3: I thought you were going to find Jason. I thought
Speaker 3: you were going to talk about Cincinnati FC. I mean, no,
Speaker 3: I what a season, What a season you guys had.
Speaker 9: Hey listen, go hey, I'm with them as well. But
Speaker 9: we're talking about the members. The members are vast and wide,
Speaker 9: and many of our associations and organizations are in every
Speaker 9: single market. Again not just suck convictions, but also the
Speaker 9: sports and entertainment. And you reference Beyonce, So Beyonce would
Speaker 9: not go to destinations whom are not welcoming. And so
Speaker 9: those are the things that we kind of in the
Speaker 9: background have advocated for and saying that if you want
Speaker 9: these dollars, you have to show diversity one and two, Yeah,
Speaker 9: who you welcome and being a progressive site, and so
Speaker 9: we've done that and doing that consistently. In twenty twenty four,
Speaker 9: we're focused on building that bridge internationally. We know that
Speaker 9: that Asia and Africa specifically our destinations for our members
Speaker 9: who want to create that international flair. And we know
Speaker 9: that as the country in the world is more global,
Speaker 9: we have to be in those discussions and meeting and
Speaker 9: understanding what's around the world. And that's what we're doing now.
Speaker 9: On twenty twenty four.
Speaker 2: And Jason, you mentioned black US leisure travelers spent nearly
Speaker 2: one hundred and thirty billion dollars on domestic and international travel.
Speaker 2: That was back in twenty nineteen. How is that evolving
Speaker 2: since the pandemic and what factors are playing into how
Speaker 2: travelers are selecting their destinations.
Speaker 9: Yeah, so I thank for that. So again welcoming policies
Speaker 9: one two. People are frankly being more stingy with their
Speaker 9: time and more strategic in where they're going, and so
Speaker 9: I believe that. And also travel has eased up as
Speaker 9: relates to to prices, so it's more it's not as
Speaker 9: expensive to travel as it was before. So people are
Speaker 9: taking purposeful destination trips and conventions are going to places
Speaker 9: where they want to grow. And so as again to
Speaker 9: be relevant, you have to have a global kind of conversation,
Speaker 9: a global interest and then many of our associations are
Speaker 9: looking at the world, not just the nation. And so
Speaker 9: I think as we begin to broaden our scope, we
Speaker 9: talk about what those interests are. We talk about how
Speaker 9: tourism it ties to development, how tourism ties to jobs,
Speaker 9: and how tourism ties to economic sustainability for destinations. Everybody's
Speaker 9: aligned with that, and so people are being stingy with
Speaker 9: what they're talking about. They're being stingy with where they're
Speaker 9: spending their money, and they're purposeful on where they're going
Speaker 9: and how to aligns for their personal values. And so
Speaker 9: that that's what we've seen in the past couple of years,
Speaker 9: since twenty nineteen, since the study was dead.
Speaker 3: We'll have to have conferences completely recovered since the pandemic,
Speaker 3: because there was this big concern for airlines that you know,
Speaker 3: business travelers who pay more because they buy tickets at
Speaker 3: the front of the plane, and they buy tickets during
Speaker 3: the week, and they buy tickets, you know, only only
Speaker 3: a few days ahead of time. So they spend more
Speaker 3: money with airlines there was a concern that people are
Speaker 3: going to be using zoom and Google meet and teams
Speaker 3: or whatever for meetings instead of going to these conferences.
Speaker 3: Are you seeing that or has have conferences overall completely
Speaker 3: recovered and then some since the pandemic.
Speaker 9: Yeah, So I would say different different segments we see recovery.
Speaker 9: Our particular markets are recession proof, and so what that
Speaker 9: means is that we're going to meet because our organizations
Speaker 9: are steeped in in tie to social justice, tie to economic.
Speaker 3: Recession proof, but not necessarily pandemic proof.
Speaker 4: You're correct, because I'm not talking about recession.
Speaker 3: I'm talking about, you know, just a change in habits
Speaker 3: post pandemic with people not traveling much.
Speaker 4: Yeah.
Speaker 9: No, you're correct. So what I was getting to is
Speaker 9: that there's a balance. So each organization had to shift
Speaker 9: and so yes, there is the virtual peace for this
Speaker 9: more more convenient for people to move back and forth.
Speaker 9: But also it forces conventions to be more purposeful on
Speaker 9: why they meet and what they're offering people when they come.
Speaker 9: And so the numbers, yes, have come back, but we've
Speaker 9: seen growth in several categories as relates to larger conventions
Speaker 9: versus international nationals versus domestic and so those things have
Speaker 9: balanced out over over time. But yes, we see a
Speaker 9: positive trend that conventions are coming back. Yes, the people
Speaker 9: are the hybrid meetings have been more welcome, meaning than
Speaker 9: they were before. And then there's a balance on content
Speaker 9: that brings people to conventions versus why they've been in
Speaker 9: the past. So I think it's very purposeful and that
Speaker 9: people are intentional about why they travel, where they're going
Speaker 9: and who they're going to meet.
Speaker 4: Jason, we got to leave it there.
Speaker 3: Jason Dunn is executive chief executive Officer at the National
Speaker 3: Coalition of Black Meeting Professionals. Joining us on zoom from Cincinnati, Ohio.
Speaker 1: You're listening to the Bloomberg Business Week podcast. Catch us
Speaker 1: live weekday afternoons from three to six Eastern Listen on
Speaker 1: Bloomberg dot com, the iHeartRadio app, and the Bloomberg Business App,
Speaker 1: or watch us live on YouTube.
Speaker 4: Nice music choice. Paul Brennan.
Speaker 3: Well, as we mentioned the forthcoming issue of Bloomberg Business Week,
Speaker 3: it's on news stands tomorrow. It's the Longevity Issue. It
Speaker 3: tells some of the stories of the billions of dollars
Speaker 3: that are being spent to live longer or age slower
Speaker 3: in the never ending Quest for the Fountain of Youth
Speaker 3: or to be Forever Young. Stories in there also delve
Speaker 3: into the science behind the concept and how researchers are
Speaker 3: making headway when it comes to longevity. And that's where
Speaker 3: the cover story comes in. It's by Kristin V. Brown,
Speaker 3: healthcare reporter for Bloomberg News. She writes about how the
Speaker 3: biggest breakthrough in longevity may start with metapo. As I mentioned,
Speaker 3: this story is in the upcoming new issue of Bloomberg
Speaker 3: Business Week. You can pick it up on news stands tomorrow.
Speaker 3: It's already online at Bloomberg dot com, Slash business Week
Speaker 3: and on the Bloomberg terminal. With more, we are joined
Speaker 3: by Kristin B. Brown, healthcare reporter for Bloomberg News here
Speaker 3: in our Bloomberg Interactive Broker's Studio. The story starts with mice.
Speaker 3: With mice, yes, how do they play into this?
Speaker 10: Well, So, mice, as many people may know, are a
Speaker 10: very common model animal in scientific research, and this scientist
Speaker 10: in particular was giving mice ovarian tumors to try and
Speaker 10: figure out whether a hormone called AMH that both men
Speaker 10: and women produce lots of, whether that hormone could treat
Speaker 10: the ovarian tumors, and when he did that, he gave
Speaker 10: them this AMH gene therapy. And when he did that,
Speaker 10: he realized something incredible was happening. Whether they actually treated
Speaker 10: the tumors or not, I don't know, But one thing
Speaker 10: they did do is make the ovaries of the mice shrink.
Speaker 10: He said they looked like the ovaries of newborn mice.
Speaker 10: And what that suggested to him was that it was
Speaker 10: almost like a reverse aging process, that this hormone reversed
Speaker 10: the aging of the mice's ovaries. And as any one
Speaker 10: with ovaries, nos, as your ovaries age, they age much
Speaker 10: faster than the rest of your body, and eventually that
Speaker 10: means you can't have a baby, eventually go through menopause,
Speaker 10: which is horrible for many women. So this indicated that
Speaker 10: he might be onto something huge, something that could really
Speaker 10: solve a lot of problems that women face as the
Speaker 10: reproductive system ages.
Speaker 2: And are we seeing this AMH or other types of
Speaker 2: science being used in more advanced animals, like more similar
Speaker 2: animals cats, dogs.
Speaker 10: Cats, Yeah, you must have read the story. I was
Speaker 10: very excited to get a cat reference into the story.
Speaker 10: As a crazy cat lady. Yeah, so AMAH could have
Speaker 10: a lot of potential uses because it does have this
Speaker 10: really powerful sway over the whole reproductive system. And so
Speaker 10: his first thought was, actually, well, maybe I could make
Speaker 10: a better birth control with less side effects, and so
Speaker 10: he decided to test that in cats and cats it's
Speaker 10: a permanent birth control instead of removing their reproductive organs.
Speaker 10: They worked with the Cincinnati Zoo and they gave cats
Speaker 10: this AIMH gene therapies similar to what he gave the mice,
Speaker 10: and the cats were no longer able to get pregnant
Speaker 10: without having to lose their reproductive organs, which is not
Speaker 10: a pleasant experience.
Speaker 3: So how can scientists and researchers extrapolate what's happening in
Speaker 3: the ovaries and apply that across a broad spectrum for longevity?
Speaker 10: Right, So what's really interesting about the ovaries beyond just
Speaker 10: the idea that you might be able to slow menopause
Speaker 10: or extend a woman's number of fertile years. Incredible on
Speaker 10: their own, Incredible on their own. Yeah, But so it's
Speaker 10: really hard to study aging in general because there's not
Speaker 10: a great you know, we can study it in mice,
Speaker 10: but how similar ourvice really to humans. Right, we can
Speaker 10: only learn so much about aging in humans by studying
Speaker 10: animals that age much faster. Right, A mouse has a
Speaker 10: much faster life cycle. So it's better to study these things.
Speaker 10: But it's not similar enough to humans to really know
Speaker 10: how it would do in humans, how these therapies would
Speaker 10: do in humans. But the ovaries, they are a human
Speaker 10: organ and they happen to be a human organ that
Speaker 10: ages at twice the rate of the rest of the body.
Speaker 10: But it also ages in a very short period of time.
Speaker 10: When women hits her thirties, her reproductive system starts all
Speaker 10: of a sudden. Her ovaries in particular, start aging very quickly.
Speaker 10: So you could test these therapies, these longevity therapies that
Speaker 10: people think might intervene in aging broadly, more broadly, right,
Speaker 10: not just in one organ system. Like wrapamycin. You could
Speaker 10: see if it has an impact on the ovaries, and
Speaker 10: that's a much better indication in some ways of whether
Speaker 10: it might have an indication in humans for longevity than
Speaker 10: by studying my So it could be a really great
Speaker 10: sort of testing proving ground for other therapies.
Speaker 2: What's the funding dynamic right now? I know it's been
Speaker 2: a long story about women's health not receiving the funding
Speaker 2: or their share of the share of funding that you
Speaker 2: would expect. How does longevity and the potential for longevity
Speaker 2: play into that?
Speaker 10: Oh my gosh, this is one of those things that
Speaker 10: any woman who reads this figure are like, what that
Speaker 10: if women were not forced to be included in clinical
Speaker 10: trials in the United States until like, very very recently.
Speaker 4: I think it's so crazy.
Speaker 10: Yeah, I think it was two thousand and nineteen ninety three,
Speaker 10: nineteen ninety three. Thank you, I don't have it in
Speaker 10: front of me. Yeah, that's so recent was I was
Speaker 10: in kindergarten then before they started including women in clinical trials,
Speaker 10: And that's because there hasn't been interest in women's health.
Speaker 10: But there's a lot of interest in longevity, and you know,
Speaker 10: lots of people in Silicon Valley wanting to live forever.
Speaker 10: And so once you cast the problem of the ovaries
Speaker 10: as a problem not just of women's health, but of
Speaker 10: health for everyone, all of the major diseases are diseases
Speaker 10: of aging, right, heart disease, dementia. They're all diseases brought
Speaker 10: on by agents. So once you cast the problem of
Speaker 10: women's health, it's one that's related to that, there's been
Speaker 10: a lot more interest in funding startups and funding scientists
Speaker 10: who are doing.
Speaker 3: This work based on your reporting and what you saw
Speaker 3: reporting out this piece. Help promising is the research that's
Speaker 3: being done.
Speaker 10: Well, it's promising enough that I have convinced myself will
Speaker 10: never have to go through menopause. I'm thirty seven. I
Speaker 10: don't know how realistic that is. I don't know how
Speaker 10: realistic that is, but I do think that there's really
Speaker 10: really promising work that is starting to enter human clinical trials.
Speaker 10: Not the mouth stuff that's not quite there yet, that's
Speaker 10: a couple of years away. But there's some researchers at
Speaker 10: Columbia who are doing something with a popular anti aging
Speaker 10: drug called rapamycin that is entering trials now. They're unrolling people.
Speaker 10: And so I think that while we may not have
Speaker 10: a way to pause menopause sorry anytime soon, I do
Speaker 10: think that we will very soon out of this research
Speaker 10: have better indications of how to treat infertility, of how
Speaker 10: to treat the symptoms of menopause when people are going
Speaker 10: through it. So I think that this work is very
Speaker 10: promising in that regard, in that for the first time
Speaker 10: in a very long time, we're having interest in just
Speaker 10: looking at the basic biology of female reproduction and understanding
Speaker 10: how it works. And I think that's going to lead
Speaker 10: to many very big breakthroughs and.
Speaker 2: Christ And this may be a dumb question in terms
Speaker 2: of a clinical trial, though, if you're treating cancer, you
Speaker 2: can at least compare a placebo versus someone who's on
Speaker 2: a drug and how much longer they live. How do
Speaker 2: you study the reproduction like that women's reproduction and whether
Speaker 2: these work or not.
Speaker 10: That's a good question. Well, so in previous studies they
Speaker 10: have looked at some of the signaling in the ovaries
Speaker 10: of women who are slightly older, right like forties thirties
Speaker 10: versus younger women, and you can see the rapid decline.
Speaker 10: So if you know what to expect at different ages,
Speaker 10: and you looked at a large group of people that
Speaker 10: I think you could see whether you're obviously there's a
Speaker 10: variation from person to person, but I think that you
Speaker 10: can see whether it's looking more like what you would
Speaker 10: expect of a younger ovary for example.
Speaker 2: And you go ahead, No, I guess coming back to
Speaker 2: the timeline, drug development's risky, it's expensive. Are there companies
Speaker 2: that are funding or a lot of these studies being
Speaker 2: done at universities.
Speaker 10: Yeah, both both. There are some companies in the space.
Speaker 10: One of the big companies that I write about that
Speaker 10: came out of the guy doing the amazing mouse work, Aviva.
Speaker 10: They say that their first therapy, which will be for infertility,
Speaker 10: is a couple of years away from clinical trials, and
Speaker 10: their second therapy is, you know, maybe a couple of
Speaker 10: years behind. Not so, I mean, which which is not
Speaker 10: a long time in the time time scale of clinical trials.
Speaker 10: So our companies that are working on bringing this stuff
Speaker 10: to the clinics soon.
Speaker 3: Christian, you made this comment that stuck with me, which
Speaker 3: is in Silicon Valley, a lot of people are interested
Speaker 3: in longevity, and that's certainly what we see. And we
Speaker 3: talked to Ashley Advance yesterday, who you know, had the
Speaker 3: chance to go and visit this lab that and startup
Speaker 3: that you know has one hundred and eighty million dollars
Speaker 3: in funding from Sam Waltman, a huge figure in Silicon Valley.
Speaker 3: Right now, do you think we're to the point where
Speaker 3: the idea of longevity, the study of longevity, the search
Speaker 3: for the fountain of youth has gone beyond you know,
Speaker 3: these tech billionaires, yes, and is now more widespread.
Speaker 10: Yeah, I definitely do. And I think that you have
Speaker 10: to separate the people who want to, you know, put
Speaker 10: their brain in some kind of freezer box, in a
Speaker 10: computer leader or something. Those guys, the sort of transhumanists,
Speaker 10: from the people who really want to understand the biological
Speaker 10: mechanisms at the root of aging, because you know, we
Speaker 10: really don't understand so much of why aging occurs.
Speaker 2: Right.
Speaker 10: Obviously, time, environment, it wears on the body. But once
Speaker 10: you begin to unpack at a molecular level what's happening,
Speaker 10: then you can certainly intervene in it in some way.
Speaker 10: How much effect we can have, who knows, But I
Speaker 10: think that we're starting to see interest in not just
Speaker 10: the sort of pie and the sky transhumanist Silicon Valley
Speaker 10: billionaire stuff, but the stuff that's doing the basic science
Speaker 10: that will one day lead to better drugs, better therapies.
Speaker 3: Well, it makes me have the question about the way
Speaker 3: that drug companies approach this, which is treating things that
Speaker 3: lead to death, things that you mentioned in your article
Speaker 3: cancer heart disease, trying to solve for those things rather
Speaker 3: than solving for preventing those things. It's like two different
Speaker 3: approaches here.
Speaker 10: Yeah, it's two different approaches, and I think a lot
Speaker 10: of that comes down to it's hard to know. Like
Speaker 10: we talked about why the ovary is such a good
Speaker 10: model for this, right, how do you know if your
Speaker 10: aging therapy is working? You have to follow people for
Speaker 10: a really long time, which doesn't mean they won't happen eventually.
Speaker 5: Right.
Speaker 10: But in drug development, a lot of what happens is
Speaker 10: we figure out something works, but we don't know why
Speaker 10: it works. With aging research, we're trying to figure out
Speaker 10: why do things stop working, and then how do we
Speaker 10: intervene in that? So it is fundamentally two different approaches,
Speaker 10: and I think that they're both valid, right, But to
Speaker 10: intervene in aging, I think we're really going to have
Speaker 10: to understand the fundamental basic biology here, which is stuff
Speaker 10: that takes a lot of time and a lot of money.
Speaker 2: Well, one of the numbers that stood out to me
Speaker 2: was in the story you have, the market for longevity
Speaker 2: drugs could reach more than forty four billion dollars within
Speaker 2: the next decade.
Speaker 11: I look at that.
Speaker 2: Everyone wants to talk about GLP ones and that's one
Speaker 2: hundred billion dollar market value. So I'm surprised that there's
Speaker 2: not more funding and more of an advance miant from
Speaker 2: private equity venture capital. Given that, I mean, it's more
Speaker 2: than double. But that's not a small pool of money, right.
Speaker 5: Yeah, it's not.
Speaker 10: It's not a small pool of money. But I think
Speaker 10: that the time scale and how hard it is to
Speaker 10: know whether it's working does make it a riskier intervention
Speaker 10: versus weight loss. You know, you either lose the weight
Speaker 10: or you don't, so it's easier.
Speaker 2: Everyone's on it.
Speaker 4: Everyone's on it, so we're told, so I hear. Uh, Okay.
Speaker 3: We only have a couple of minutes left, but I
Speaker 3: wanted to make sure to get to other stories that
Speaker 3: you've written recently, because you've been very busy. It's not
Speaker 3: just the cover story of Bloomberg Business. You also have
Speaker 3: a story out about sick shaming, pushing Americans to take
Speaker 3: too much cold medicine. We're talking about this during the break,
Speaker 3: and it's like, what's going on here, Because when we're
Speaker 3: in you know, quote unquote lockdowns, when we're all working
Speaker 3: from home, we were never sick. Now everyone's coming back
Speaker 3: to the office, kids are back in school, in daycare.
Speaker 3: I'm sick all the time. And we're just like mainlining
Speaker 3: suit of then is that what's going on?
Speaker 6: Yeah?
Speaker 10: Okay, so this story actually came out of a personal
Speaker 10: experience of my own. I've started just carrying around cough drops,
Speaker 10: and I take them all the time, even if the
Speaker 10: reason I have a cough is because I swallowed something
Speaker 10: weird or you know, it's wintertime. It's very dry in
Speaker 10: the Bloomberg offices right now, so my makes my throat
Speaker 10: always dry. So I just pop cough drops even when
Speaker 10: I'm not sick.
Speaker 4: You can know that I can to you for coffee.
Speaker 10: Yeah, yeah, I have. I have a huge stash in
Speaker 10: my desk, so come on by. And I started to
Speaker 10: wonder are other people doing this?
Speaker 8: Is it good for you?
Speaker 10: It can't be good for you to take this main
Speaker 10: cough drops. I mean the calories alone, right, got to
Speaker 10: add up. That's why you need the GLP ones. Anyways,
Speaker 10: So so we looked into it. I looked into it
Speaker 10: with a great reporter, Kaye Lapara, and we found that absolutely,
Speaker 10: you can take too much cough and cold medicine. It
Speaker 10: is not a good idea, and that this is a
Speaker 10: thing that is happening. People feel pressure to go to
Speaker 10: work to go to Thanksgiving dinner, to go to happy
Speaker 10: hours even though they're not feeling great, but they don't
Speaker 10: want to have people looking at them giving them that
Speaker 10: look like why are you here even though you're six?
Speaker 10: So people are just doing what I'm doing and taking
Speaker 10: tons of cough medicine.
Speaker 2: And just looking at some of the numbers. I mean,
Speaker 2: US sales of upper respiratory over the counter medications of
Speaker 2: twenty three percent to almost twelve billion dollars in the
Speaker 2: fifty two weeks through early December.
Speaker 10: Great for them, bad for us. It's bad for us.
Speaker 4: Yeah, totally. I mean, I feel like I'm coming down
Speaker 4: to something just talking about this.
Speaker 10: Probably got up from me. Yeah, just kidding.
Speaker 4: Well, I'll get some cough drops from me. Okay. Hey.
Speaker 4: Check out all of Christian's stories, available on the.
Speaker 3: Bloomberg Terminal and at Bloomberg dot com, and pick up
Speaker 3: the new issue of Bloomberg BusinessWeek. It's the Longevity issue,
Speaker 3: on newstands tomorrow. It's already online at Bloomberg dot com,
Speaker 3: slash business Week and on the Bloomberg Terminal. Kristin B.
Speaker 3: Brown is healthcare reporter for Bloomberg News. Joining us this
Speaker 3: afternoon and the Bloomberg Interactive broke your studio.
Speaker 4: This is BusinessWeek.
Speaker 5: A journal.
Speaker 2: Yeah, I bet you let me drive.
Speaker 9: Oh no, no, no, no, holright please, I'll do the gravel.
Speaker 4: Excuse me, I want to drive.
Speaker 11: It's good question.
Speaker 2: Chan.
Speaker 4: This is the Drive to the Clothes.
Speaker 1: Comm thing well by around Hulda Dawn on Bluebird Radio.
Speaker 3: I've seen a little bit of a sell off, as
Speaker 3: you just heard from Charlie Pellett.
Speaker 4: Down one point one percent.
Speaker 3: On the S and P five hundred, the nasdack down
Speaker 3: one point two percent, of doubt down nine tenths of
Speaker 3: one percent late day sell off. Here we are just
Speaker 3: under eighteen minutes from the close of trading on this
Speaker 3: Wednesday afternoon. Let's get to Alan Zaffron. He's the founding
Speaker 3: partner in co CEO at I e Q Capital. He
Speaker 3: joins us on Zoom from Foster City, California for our
Speaker 3: Drive to the Clothes. Alan, it's been a bit of
Speaker 3: time since we spoke to you.
Speaker 4: How are you.
Speaker 11: I'm doing just great And Bailey, thanks for having me
Speaker 11: on your show today.
Speaker 4: Well, thanks so much for joining us.
Speaker 3: Hey, I know a lot of your focus is I'll
Speaker 3: turn Native's privates real estate, but I do want to
Speaker 3: get your thoughts on the equity rally that we've seen
Speaker 3: since October twenty seven. Look today, notwithstanding we're still up
Speaker 3: about fifteen percent since then.
Speaker 4: Is this warranted, Well.
Speaker 11: It's warranted if you think we're going to get this
Speaker 11: proverbial soft landing, I would tell you we remain a
Speaker 11: bit guarded or cautious if you look. The entirety of
Speaker 11: the move is based on the fact that the FED
Speaker 11: is going to be cutting rates next year.
Speaker 9: And what's difference.
Speaker 11: The FED is totally going to cut rates three times
Speaker 11: twenty five basis points each. The market's built in an
Speaker 11: expectation they're going to cut rates six times by one
Speaker 11: and a half percent. That might be a little bit
Speaker 11: too ahead of itself. So our view is it's difficult
Speaker 11: to grow profits at twelve percent for two consecutive years
Speaker 11: in an environment where there's still a lot of challenges
Speaker 11: in the economy. We are a bit skeptical that earnings
Speaker 11: will go quite as much as the markets have forecasts.
Speaker 11: So I think this overbought roty is a bit ahead
Speaker 11: of itself.
Speaker 4: How much ahead of itself, you know, from a.
Speaker 11: Let's talk about valuations, you get to somewhere around maybe
Speaker 11: five to ten percent ahead of itself, not twenty or thirty.
Speaker 11: The market's trading right now just under nineteen and a
Speaker 11: half times forecasted earnings. If you look in the last
Speaker 11: twenty years, the market is traded a little less than
Speaker 11: nineteen times forward earnings. If you look over twenty five years,
Speaker 11: the market's traded about seventeen times forward earnings. So the
Speaker 11: market's probably a little bit ahead of itself with full
Speaker 11: anticipation if rate hikes are over, cuts are coming, but
Speaker 11: there's probably a bit too much near term enthusiasm. Albeit
Speaker 11: the long term constructive view on the American economy means
Speaker 11: the same equities are part of a well diversified portfolio,
Speaker 11: and you can't deny that you still need to have
Speaker 11: some equity exposure.
Speaker 2: And alan with that in mind, how what derails this?
Speaker 2: Is it the fact that the Fed may not provide
Speaker 2: double the cuts? Is it a recession? Is it inflation
Speaker 2: being more stubborn than people were expecting? What drives that.
Speaker 11: Drives it? Is both directions if the Fed is trying
Speaker 11: to needle, so on the one hand, you want inflation
Speaker 11: a work its way softly down without mitigating complete denial
Speaker 11: of economic growth. On the other hand, you just don't
Speaker 11: want a recession. So what we need to see in
Speaker 11: particular is that wage costs as well as input costs
Speaker 11: come down enough that companies can actually generate profit margins.
Speaker 11: And yet the same token, the speed of wets consumer
Speaker 11: consumers spend needs to still maintain some constancy. What we're
Speaker 11: seeing is credit card defaults are starting to creep up
Speaker 11: a bit. There's a concern that of unemployment rates begin
Speaker 11: to move up, that will in fact takeaway from consumer spending,
Speaker 11: which is seventy percent of the economy, and therefore earnings
Speaker 11: won't be quite as robust as one might imagine. The
Speaker 11: art of threading the needle is can companies still grow
Speaker 11: earnings something next year in multiple state these levels of
Speaker 11: rates are coming down, They probably can, But looking for
Speaker 11: another twenty five percent up here in the s and
Speaker 11: P five hundred is probably outlandishly optimistic.
Speaker 2: Yeah, and looking at that diversification away you mentioned equen
Speaker 2: he's being a part of a portfolio. High quality debt
Speaker 2: seems to be something that's very much in vogu. Where
Speaker 2: are you looking and what do you see opportunities for
Speaker 2: twenty twenty four. If we aren't going to see a
Speaker 2: continued move higher for equities.
Speaker 11: I think it's barbeled. On the one hand, you absolutely
Speaker 11: want exposure to very high quality bonds, whether it's treasuries
Speaker 11: or investment grade municipal bonds. Yields are still very high
Speaker 11: relative to ten year time frame, and they're a nice
Speaker 11: diversifier under most conditions relative to risk on assets like equities. Conversely,
Speaker 11: given that short rates are so high, you can still
Speaker 11: access floating rate private credit type structures even in the
Speaker 11: public markets through things like interval funds, which are just
Speaker 11: basically mutual funds that don't give you daily liquidity but
Speaker 11: still allow investors to get access to floating rate debt
Speaker 11: across a wide arranged companies that is yielding over ten
Speaker 11: percent currently. So Barbell the middle we're less excited about
Speaker 11: publicly traded day on, day off high yield bonds aren't
Speaker 11: quite as compelling because if the economy softens, typically prices
Speaker 11: of high yield bar drop a bit, spreads widen, and
Speaker 11: right now is probably not the right time to be
Speaker 11: in that component of the bond market. But the Barbell
Speaker 11: is very high quality bond to offset risk from equities
Speaker 11: and floating rate loans, particularly more issued to private companies
Speaker 11: right now, seems to be a nice barbell around a
Speaker 11: stock portfolio.
Speaker 3: Allan, do you think we saw the top of the
Speaker 3: ten year when yields hit about five percent.
Speaker 11: Yes, we in fact believe we have found that to
Speaker 11: be the case. The reason we believe that to be
Speaker 11: the case is with the economy is in fact going
Speaker 11: to slow from here. We do think inflation has peaked.
Speaker 11: We do believe the Fed will inevitably have to make
Speaker 11: some rate cuts. And the easiest way to think about
Speaker 11: it is when you buy a tenure treasury bond, it's
Speaker 11: the same as buying a three month treasure bill forty
Speaker 11: consecutive three month periods of time, and a three month
Speaker 11: treasure bill is more or less tied to the Fed
Speaker 11: funds rate. So if you think the Fed is going
Speaker 11: to lower its rates for the next year or so,
Speaker 11: and you think about where it's sustainable rate is, it
Speaker 11: tells you that a tenure yield is probably too high,
Speaker 11: or it was too high when it was at five percent. So,
Speaker 11: in fact, we think now is an opportune time to
Speaker 11: have some of that exposure to longer term bonds because
Speaker 11: we think those long term yields have peaked or peaked
Speaker 11: back in October when the tenure hit five percent.
Speaker 2: Well, Allen, you mentioned stability. What does a stable tenure
Speaker 2: look like?
Speaker 11: What does a stable tenure yield look like? A stable
Speaker 11: tenure yield is a FED is basically what a three
Speaker 11: month treasury bill gives you, plus a modest premium for
Speaker 11: the factor you're locking up your money for ten years,
Speaker 11: So you have to work backwards. Where should a three
Speaker 11: month treasury bill be? It should probably be somewhere a
Speaker 11: little bit around where the long term new Fed funds
Speaker 11: neutral rate is. A FED fund's neutral rate is effectively
Speaker 11: the short term rate that enables for two percent inflation
Speaker 11: and modest economic growth without a recession. So the Fed
Speaker 11: believes that rate is somewhere around two to two and
Speaker 11: a half percent. So maybe a three month treasury bill
Speaker 11: of some around two and a half to two and
Speaker 11: three quarters percent. You add on your premium for time,
Speaker 11: and maybe you're at a three and a half percent
Speaker 11: long term tenure treasure yield as an aspirational place to be.
Speaker 11: We're still in an elevated inflation level, so with a
Speaker 11: tenure trading at around four percent today, it's actually three
Speaker 11: point eighty six today. We're working our way down slowly
Speaker 11: towards that three and a half percent. And of course,
Speaker 11: when you buy a long term bond, you're also getting
Speaker 11: more income historically than you do with short rates, So
Speaker 11: we would argue we're working our way towards a stable
Speaker 11: ten year yield. We're not quite there yet.
Speaker 3: Alan, just about twenty seconds left. Just give us some
Speaker 3: details of what you think of recession in twenty twenty
Speaker 3: four could look like.
Speaker 11: Well, a recession in twenty twenty four comes from the
Speaker 11: fact that it turns out consumers have overspent all their
Speaker 11: savings and a post COVID high, they don't spend a
Speaker 11: lot of money. When we get past the holiday season,
Speaker 11: it turns out retailers and other service providers over anticipate
Speaker 11: how much consumption would come. They end up haf to
Speaker 11: cutting jobs, which in turn further cuts consumption. That leads
Speaker 11: to an unfortunate spiral and a recession.
Speaker 4: Alan Zaffron, Happy holidays.
Speaker 3: If we don't connect between now and the end of
Speaker 3: the year, really appreciate you joining us and joining us
Speaker 3: throughout the years here on Bloomberg Business Week. Alan Zaffron
Speaker 3: is founder and founding partner and co CEO at Iq Capital.
Speaker 3: Joining us on zoom from Foster City, California. You're listening
Speaker 3: to Bloomberg BusinessWeek, and this is Bloomberg.
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