Speaker 1: This is Bloomberg Business Week. I'm Karl Masser and I'm
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Speaker 1: pm Eastern Time on the Bloomberg Radio or watch us
Speaker 1: on YouTube. Searched Bloomberg clovel News. Let's get to Dr
Speaker 1: Seth Letterman, the CEO of and the co founder of
Speaker 1: Photonics Pharmaceuticals, also the chairman. He joins us once again
Speaker 1: on the phone from Massachusetts. Dr Letterman, It's great to
Speaker 1: have you back with us. How are you great to
Speaker 1: be with you again? Um, well, it's a great day
Speaker 1: to be speaking to you about COVID vaccine. Yeah, a
Speaker 1: lot of news when it comes to COVID vaccines. We
Speaker 1: just heard from President Biden encouraging everybody who has not
Speaker 1: yet gotten a vaccine to go out there and get it.
Speaker 1: Do you agree with the President that this continues to
Speaker 1: be a pandemic of the unvaccinated? Absolutely, President Biden is
Speaker 1: a tough act to follow. I thought he had a
Speaker 1: clear message and I agree with him that by and large,
Speaker 1: the particularly fueled by the delta variant, this is a
Speaker 1: epidemic or pandemic of the unvaccinated in the United States
Speaker 1: right now. And so Dr Lettiman, we heard from President
Speaker 1: Biden that FDA approval it's the gold standard. But I'm
Speaker 1: curious to hear your take that you know, now that
Speaker 1: we do have full authorization, it's finally here. Do you
Speaker 1: think this will actually lead to meaningfully more vaccinations? Well,
Speaker 1: I hope so. First of all, I think it's a
Speaker 1: sign of a great achievement for Fire in their partner
Speaker 1: by Intech to get their vaccine to this point. And
Speaker 1: I think many people believe that Madonna is not far
Speaker 1: behind or in an unusual situation where the Surgeon General
Speaker 1: all Um is kind of tipping his uh, you know,
Speaker 1: tipping his cards on some of these approvals coming up.
Speaker 1: So I think that the m and A technology that
Speaker 1: they developed and rapidly deployed has two shown great promise
Speaker 1: and it's a very exciting time. But on the other hand,
Speaker 1: you know, there is also an announcement by the CDC,
Speaker 1: FDA and a bunch of other groups, the White House,
Speaker 1: COVID Task Force, etcetera, that booster shots are going to
Speaker 1: be recommended and that they're going to be starting on September.
Speaker 1: So at the same time where this is a great
Speaker 1: advance and a recognition of what's happened so far, I
Speaker 1: think there's also been a concession that these vaccines are
Speaker 1: providing only temporary protection, not durable protection. We'll talk to you,
Speaker 1: talk to us about where you are with the type
Speaker 1: of protection that you're developing right now at Tonics Pharmaceuticals.
Speaker 1: What is the vaccine against COVID that you're working on,
Speaker 1: and what's the latest on the timeline for when it
Speaker 1: could actually be something that's used on us. Thank you.
Speaker 1: We're developing a live virus vaccine and it's based on
Speaker 1: a novel platform that we developed. But live virus vaccines
Speaker 1: are the oldest type of vaccine technology, and even an
Speaker 1: Operation Warp Speed there were four pillars of Operation Warp Speed,
Speaker 1: where you know, one of them was a highly successful
Speaker 1: Arna vaccines, but the other The fourth that they never
Speaker 1: really got to was live virus vaccines. Merke was developing
Speaker 1: two of them, but then in January of this year
Speaker 1: abandoned those programs. So we're developing a live virus vaccine
Speaker 1: against COVID nineteen. Because traditionally, live virus vaccines have provided
Speaker 1: durable immunity, meaning years, decades, even lifelong. And when President
Speaker 1: Biden mentioned some of the great successes in the history
Speaker 1: of vaccination, he specifically mentioned smallpox, measles, mumps rebella, and polio.
Speaker 1: Those are live virus vaccines. So we don't know all
Speaker 1: of the reasons why live virus vaccines provide such durable immunity,
Speaker 1: but many people believe it's because they stimulate T cell immunity,
Speaker 1: and a particular type of T cell immunity that has
Speaker 1: this long durability. So hypothetically, speaking with a live virus vaccine,
Speaker 1: would a booster shot be needed for that type of
Speaker 1: vaccine versus, you know, an m R and a based vaccine. Well,
Speaker 1: we won't know for COVID until we get into human trials,
Speaker 1: but for smallpox there is no booster required, and measles
Speaker 1: monster rebella typically is lifelong um so they do last
Speaker 1: a very long time, but again it's something that will
Speaker 1: need to figure out when when is the timeline for
Speaker 1: human trials. Thanks we expect to be in human trials
Speaker 1: from the first half of next year. The thing that's
Speaker 1: holding us back is that it's more difficult to make
Speaker 1: the high quality of live virus vaccine necessary to do
Speaker 1: human trials. And that's really the advantage of the m
Speaker 1: R and A vaccines. Since they are completely synthetic, you
Speaker 1: can rapidly manufacture them. And again, hats off to Fiser
Speaker 1: and by In Tech for what they've done. They've really
Speaker 1: delivered a solid blow to give us some breathing room
Speaker 1: with this pandemic for the vaccinated anyway. But live virus
Speaker 1: vaccines are harder to develop, but when they're developed, they
Speaker 1: can be easier to manufacture, easier to store, easier to transport,
Speaker 1: and typically are one shot vaccines. And so Dr Lettterman,
Speaker 1: I want to go back to the topic of boosters,
Speaker 1: and in the notes you sent over, you made the
Speaker 1: point that you know we would be better protected by
Speaker 1: vaccinating the unvaccinated here in the US and around the world.
Speaker 1: But I got to ask, what about for those who
Speaker 1: don't want to get vaccinated. If you assume that there's
Speaker 1: you know, a certain percentage of the population that will
Speaker 1: never willingly take the vaccine. Uh, in that situation, what
Speaker 1: would what? What do we do? Well? It's an excellent question,
Speaker 1: and it seems to be uh hodgepodge of reasons why
Speaker 1: people are reluctant. Hopefully, the President said, Hopefully the FDA
Speaker 1: approval will allay some of their concerns. I know at
Speaker 1: least some of them feel like they don't want to
Speaker 1: be um, you know, the subject of tests or something.
Speaker 1: I think at this point, as the President said, two
Speaker 1: million Americans have been vaccinated, so I think we're beyond
Speaker 1: the test stage. But I think that brings up another
Speaker 1: potential weakness of the m R and A vaccines that
Speaker 1: we really don't know whether they block forward transmission. Forward
Speaker 1: transmission means that if someone is infected, are they able
Speaker 1: to transmit it to someone else? And for the big
Speaker 1: vaccine successes that we've had in history, smallpox, for example,
Speaker 1: it really does block forward transmission, and that was one
Speaker 1: of the reasons why this concept of herd immunity was
Speaker 1: so important. But we really don't know for the delta
Speaker 1: variant whether vaccinated people will be less infectious. Yeah, that's certainly.
Speaker 1: That's certainly what remains to be seen as Dr Seth Letterman,
Speaker 1: the co founder, a chief executive officer and chairman of
Speaker 1: Tonics Pharmaceuticals. You're listening to Bloomberg Business Week with Carol
Speaker 1: Messer and Bloomberg Quick Takes Tim Stinovic on Bloomberg Radio. Well,
Speaker 1: pregnant women with COVID nineteen, they are fifteen times more
Speaker 1: likely to die, fourteen times more likely to need to
Speaker 1: be intubated, and twenty two times more likely to have
Speaker 1: preterm birth than those who are uninfected. That's according to
Speaker 1: a study published this month by j A n A Network.
Speaker 1: Open Joinning's now is Shira Stein, healthcare reporter at Bloomberg.
Speaker 1: Lash joins us on the phone from Washington, d C. Shere.
Speaker 1: It's great to have you with us. The part that
Speaker 1: I didn't get to in your story is the fact
Speaker 1: that fewer than three quarters of pregnant people are vaccinated.
Speaker 1: If you're than one quarter, I should say seventy pregnant
Speaker 1: people are unvaccinated. Why is that so low? Yeah, it's
Speaker 1: a pretty shocking statistic. I think it's really because of
Speaker 1: the fact that none of the vaccine clinical trials, of
Speaker 1: the three vaccines in the US that are authorized and approved,
Speaker 1: none of them included pregnant people in their trials. Um.
Speaker 1: That's pretty common in clinical trials. Not to say that
Speaker 1: it's a good thing, um, but it's pretty common. And
Speaker 1: so pregnant people didn't have any data to rely on
Speaker 1: around safety or efficacy until after the vaccines were publicly
Speaker 1: available and when people who decided that it was worth
Speaker 1: it for them to try and see how until we
Speaker 1: got more data, and so for for months, we didn't
Speaker 1: have data on how this vacts, how any of these
Speaker 1: vaccines worked in pregnant people, and so where do we
Speaker 1: stand now? Because sure, pregnant people were excluded from the
Speaker 1: vaccine trials, sounds like that's pretty common, But do we
Speaker 1: actually have data now now that you know the vaccines
Speaker 1: have been available widely for months now, have they actually
Speaker 1: run trials that include pregnant people? Um. So it's not
Speaker 1: a trial so much as it is like data from
Speaker 1: what we've seen in the real world. But yes, absolutely, UM,
Speaker 1: vaccines are safe and effective for pregnant people. They do
Speaker 1: not cause miscarriages as there is, or fertility issues as
Speaker 1: there is the misinformation about that around UM, and as
Speaker 1: the as we saw and as I reported, there is
Speaker 1: there if you get COVID and you are pregnant, you
Speaker 1: are in a really really bad spot if you are unvaccinated,
Speaker 1: talk a little bit about that. Yeah, So what I
Speaker 1: found speaking to doctors across the country in places like
Speaker 1: Texas at Florida, but also places like Los Angeles and Seattle, Washington,
Speaker 1: was that they are seeing, with this latest surge in
Speaker 1: cases from Delta, a new trend of pregnant people who
Speaker 1: are getting really sick, who are needing to be intipated
Speaker 1: and put on a ventilator, who are having to deliver
Speaker 1: their babies early, and some who are dying UM and
Speaker 1: some who are having to spend months in the hospital.
Speaker 1: I mean, it's just really awful. These are largely unvaccinated
Speaker 1: pregnant individuals, and um they're largely young and healthy age
Speaker 1: like eighteen to thirty. So it's pretty shocking to hear this.
Speaker 1: You know, we've been hearing a lot about kids and
Speaker 1: and COVID in hospitals right now, but this is another problem,
Speaker 1: is pregnant people and getting COVID. So, I mean, those
Speaker 1: are terrifying stories, and I'm curious, I mean, is there
Speaker 1: is that because pregnant people are more at risk than
Speaker 1: a normal unvaccinated person, or is there any reason to
Speaker 1: believe that you're more at risk to become more seriously
Speaker 1: ill if you are also pregnant. Yeah, so pregnant. Being
Speaker 1: pregnant tends to suppress one's immune system, so that could
Speaker 1: be part of it. Um, what I the doctors I
Speaker 1: spoke to, you think that it's not so much a
Speaker 1: fact that you are more likely to get COVID if
Speaker 1: you're pregnant, more so that it's a compounding of factors.
Speaker 1: You know, your immune system is not as good, you're around, um,
Speaker 1: a number of people having to go to the doctor. Um,
Speaker 1: you know, there's there's a number of factors that could
Speaker 1: lead to it. And if you do get get COVID,
Speaker 1: then you're more likely to have severe illness. Based on
Speaker 1: your reporting, I know you spoke to a lot of
Speaker 1: people who were vaccinated and weren't vaccinated. What did they
Speaker 1: give you for the reasons they ultimately did decide to
Speaker 1: get best vaccinated who are pregnant and those holdouts who
Speaker 1: who decided not to. Yeah, I mean I actually had
Speaker 1: a really hard time talking to some of the people
Speaker 1: who have remained unvaccinated. UM. But what I what I
Speaker 1: can say is people are just really nervous because of
Speaker 1: the lack of information that there was. They're also, the
Speaker 1: CDC did not wreck men that pregnant people get the
Speaker 1: vaccine until a few weeks ago. UM. Two of the
Speaker 1: major medical societies for pregnan individuals, the Market College of
Speaker 1: Obstetrician and Gynecologists and the Society for Maternal and Fetal Medicine,
Speaker 1: they recommended it about a month ago. So it's just
Speaker 1: this is just a really recent thing. Some doctors still
Speaker 1: aren't sure about recommending it to their patients. You know,
Speaker 1: I'm beating stories about people saying, well, I talked to
Speaker 1: one doctor and my doctor said it was good for
Speaker 1: me to get but my sister's doctor said she shouldn't.
Speaker 1: And so I think there's just a lot of confusion
Speaker 1: out there. I don't think it's you know, people being
Speaker 1: quote unquote anti vaxers so much as it is that
Speaker 1: they are just genuinely nervous because of the lack of
Speaker 1: information because their doctors aren't sure what to tell them. Yeah,
Speaker 1: I think the confusion will continue to persist. When it
Speaker 1: comes to boosters and to what extent, Like, you know,
Speaker 1: somebody got a shot before they got pregnant, you've got
Speaker 1: fully vaccinated, do they get a booster? Right? That's that's
Speaker 1: the question, and I think a question that many people
Speaker 1: will have moving forward. It is a fantastic piece. It's
Speaker 1: the reason that it's a the most read in the
Speaker 1: Bloomberg terminal right now, it's called Pregnant, unvaccinated and intubated
Speaker 1: Doctors alarmed by rise that Shira Stein, healthcare reporter for
Speaker 1: Bloomberg Law, joining us on the phone from Washington. D
Speaker 1: c Uh, Katie. I think the question remains that, you know,
Speaker 1: the science continues to change. So the CDC coming out
Speaker 1: and actually saying that this is helpful, uh, that women
Speaker 1: need to do this, then that's a very important move there.
Speaker 1: This is Bloomberg Business Week with Carol Messer and Bloomberg
Speaker 1: Quick Takes Tim Stinovic on Bloomberg Radio. Well, the bidding
Speaker 1: war over a maker of airplane wheels and fire detection
Speaker 1: systems may herald a fresh wave of consolidation in the
Speaker 1: aerospace sector, so writes Brooke Sutherland, deals in Industrials columnists
Speaker 1: for Bloomberg opinion. Brooke story will be featured in the
Speaker 1: upcoming issue of Bloomberg Business Week magazine. You can read
Speaker 1: it now on the Bloomberg and at bloomberg dot com
Speaker 1: slash business Week. Also joining us is Joel Webber, editor
Speaker 1: at Bloomberg Business Week. He's on the remote from Massachusetts.
Speaker 1: So Joel, the big question is bigger is better back
Speaker 1: when it comes to aerospace and navy ation. Well, I'm
Speaker 1: gonna be honest, this isn't a space that I watched
Speaker 1: that closely. I'm glad you picked up on it. Um
Speaker 1: the uh, but that was what kind of jumped out
Speaker 1: at me from from brookes story, is like, you know,
Speaker 1: this isn't a place that we have seen a whole
Speaker 1: lot of action, and then all of a sudden we
Speaker 1: have and and it's not everyday companies, right Brooke? Who
Speaker 1: are what kind of players are we talking about here? Sure?
Speaker 1: So Megga makes um they're they're well known for their wheels, breaks,
Speaker 1: fire detection systems, things like that. Um, this is sort
Speaker 1: of a perennial takeover target. It often comes up in
Speaker 1: m and A speculation, but we've never really seen any
Speaker 1: deal get this far, and now it has not one
Speaker 1: but two suitors. The first is Parker Hanisons, which has
Speaker 1: been aggressively expanding its aerospace business over the past couple
Speaker 1: of years, trying to get out of some of its
Speaker 1: more traditional heavy duty industrial markets that tend to be
Speaker 1: a little bit more economically volatile um. And the other
Speaker 1: is trans Time, which is also an aerospace supplier and
Speaker 1: has a reputation for being particularly aggressive on pricing when
Speaker 1: it comes to the parts that itsels and parts and
Speaker 1: services to airplane makers. And so it's going to be
Speaker 1: a really interesting bidding war too to watch how it
Speaker 1: plays out, which you're right, I mean, just the fact
Speaker 1: that we have a bidding war at all is notable
Speaker 1: for a sector that's been particularly beaten down by COVID. Yeah,
Speaker 1: pro I want to talk about that the timing of
Speaker 1: this bidding war, because it feels like the industry at
Speaker 1: large is in a really weird place as we try
Speaker 1: to emerge from this pandemic. It is, and it's certainly
Speaker 1: trying to look at it right now when you have
Speaker 1: the headlines of it, the airlines warning about, you know,
Speaker 1: not quite seeing the demand they were hoping to see
Speaker 1: in August, the people canceling bookings, or you know, maybe
Speaker 1: just not making bookings at all. But um. At the
Speaker 1: same time, you know, those in the aerospace sector that
Speaker 1: weren't in the same position as Boeing, which you know,
Speaker 1: was dealing with the seven thirty seven Max crisis, actually
Speaker 1: their balance sheep looked pretty good. Um. You know, they
Speaker 1: were able to at the debt markets when they needed it.
Speaker 1: But you know, they're really coming out of this in
Speaker 1: a pretty strong position financially, and I think they're preparing
Speaker 1: for the next leg. And you know, one of the
Speaker 1: things that's been really interesting is this bad as this
Speaker 1: downturn had been for the aerostas sector, we're already starting
Speaker 1: to talk about getting back to a moment in time
Speaker 1: where we're not worried about not having enough passengers but
Speaker 1: worried about having enough planes. Um. And that's really where
Speaker 1: the industry was before the pandemic hit. I mean, there
Speaker 1: was a mad rushed by all of the airlines to
Speaker 1: try to get planes, trying to get the capacity so
Speaker 1: that they could fly passengers where they wanted to go. UM.
Speaker 1: And you know, against that that job, it does make
Speaker 1: sense to consolidate. You have you know a number of
Speaker 1: sort of midsized players but you also have a lot
Speaker 1: of very large players that have been doing a lot
Speaker 1: of deals, perhaps in this notable being Raytheon which acquired
Speaker 1: Rockwell collins Um also merged with raytheon the defense contractor,
Speaker 1: and so as you have other suppliers getting bigger um
Speaker 1: obviously as a duopoly as well, but in your airbus
Speaker 1: it makes sense to try to be as big as
Speaker 1: you possibly can beat yourself, Hey, Brooke, When it comes
Speaker 1: to this industry, the thing is is these companies, the
Speaker 1: airplane the airlines have to make these orders years and
Speaker 1: years in advance of when they expect to actually have
Speaker 1: that need, that capacity, they actually expect to have delivery
Speaker 1: of those aircraft. What are they? What are we hearing
Speaker 1: from the from Airbus and from Boeing right now about
Speaker 1: the way that airlines are canceling or actually ordering new
Speaker 1: planes and when are those going to be delivered? And
Speaker 1: are they all E three twenties and seven thirty seven maxes?
Speaker 1: What about alternative fuels take us into it. Yeah, no,
Speaker 1: So it's uh, we're starting to see you know, more
Speaker 1: actual orders men ancelations, which is a nice positive trend um,
Speaker 1: particularly for Boeing. They've really seen a ton of order
Speaker 1: activities from the US airlines that's really been the driver
Speaker 1: of their purchases. Today, there was a massive order from
Speaker 1: United Airlines for Boeing Jets Southwest also topped up at
Speaker 1: seven seven max order. And then Airbus had not seen
Speaker 1: as many cancelations as Bulling because they were in the
Speaker 1: um beneficial position of not having one of their planes
Speaker 1: grounded for nearly two years, which meant that the airlines
Speaker 1: have less selexibility to cancel their orders, and so they're
Speaker 1: being a lot more aggressive and looking at their production
Speaker 1: schedule and they think they can get back above their
Speaker 1: pre COVID pace by three. So that gets to that
Speaker 1: point you know, I was talking about, we're moving door
Speaker 1: to future where the airlines. Airlines are gonna be wanting
Speaker 1: these airplanes um that maybe they thought they didn't need
Speaker 1: a couple of months ago, but they will see find
Speaker 1: themselves in the position where they do it, and the
Speaker 1: planemakers and their suppliers are really going to have to
Speaker 1: ramp up capacity relatively quickly to meet that neat um.
Speaker 1: And then as you play that out further down the road,
Speaker 1: everybody is very concerned about the carbon footprint um of
Speaker 1: all aspects of the economy of a particularly air travel,
Speaker 1: and there's a lot of discussion about you know, using
Speaker 1: UM sustainable aviation fuels or even moving into sort of
Speaker 1: next generation engine technology. I don't know if we're there
Speaker 1: yet UM in terms of you know, hydro gender batteries
Speaker 1: or anything like that for for large airplane, but certainly
Speaker 1: they want to make as many changes as they can
Speaker 1: that are realistic right now. And you need money to
Speaker 1: do that. You need a bigger balance sheet, you need
Speaker 1: research and development dollars, and so that's another key driver
Speaker 1: for the consolidation thing. So what standing between this Megat
Speaker 1: deal in a finish line broke because it's uh, it's
Speaker 1: not clear if it's actually going to be a slam
Speaker 1: dunk or not, right I mean, And it's not price
Speaker 1: because both the buyers are offering very attractive valuations. They're
Speaker 1: above MEGASU pre pandemic high UM, We're talking about you know,
Speaker 1: pretty meat evaluations here. So price is not going to
Speaker 1: be the issue. But it's going to be more down
Speaker 1: to the UK government UM, which has been particularly prickly
Speaker 1: lately about takeovers, especially when they involved key domestic assets
Speaker 1: that have a link to national security. So Mega is
Speaker 1: also a defense supplier UM and this is happening in
Speaker 1: concert with another takeover of the UK defense supplier, Ultra Electronics,
Speaker 1: and so it's a difficult backdrop right now to try
Speaker 1: to do a aerospace and defense takeover in the UK.
Speaker 1: And so Parker Hannafon has made some pretty strong commitments
Speaker 1: to the UK government in terms of keeping the headquarters,
Speaker 1: keeping head count in engineering and manufacturing flat. They pledged
Speaker 1: to ramp up R and D spending pretty significantly over
Speaker 1: the next five years, which you know, those are meaningful commitments,
Speaker 1: and we haven't heard yet from trans Dynast it's willing
Speaker 1: to match that or perhaps go a little bit further.
Speaker 1: But I think that that is the biggest issue in
Speaker 1: this deal and probably what will determine who ultimately wins
Speaker 1: this sitting more well, there you have at brook Sutherland,
Speaker 1: Deals and industrials columnist for Bloomberg Opinion, joining us on
Speaker 1: the phone from New York City. Also with us Joel Weber,
Speaker 1: editor at Bloomberg Business Week, on the remote from Massachusetts.
Speaker 1: You can read brooks story. It's featured in the upcoming
Speaker 1: issue of Bloomberg Business Week magazine. You can read it
Speaker 1: at Bloomberg dot Com and of course, at the Bloomberg terminal.
Speaker 1: Also go to Bloomberg dot com slash of Business Week.
Speaker 1: This is the Big Day, the best of Bloomberg's in
Speaker 1: depth original reporting from around the globe. Well, we actually
Speaker 1: make sure we do as the economy. What covers is
Speaker 1: look at the data kind of broken down a bit.
Speaker 1: It's fun to becoming more and more expensively to be
Speaker 1: looking at the shifting billion dollars for the red entry levels.
Speaker 1: There's been ways of immigration that have taste a lot
Speaker 1: of resistance, a lot of color behind the scenes in
Speaker 1: a great untold story. How did Bezos really come out
Speaker 1: on top? It's the cover, says Jeff Wins. He always
Speaker 1: seems to win the Big Take on Bloomberg Radio. Today's
Speaker 1: Big Take, the very best of Bloomberg's in depth original
Speaker 1: reporting front around the globe every day, is by Rich Miller,
Speaker 1: economics reporter for Bloomberg News. He joins us on the
Speaker 1: phone from Washington, d C. It's all about FED Chair
Speaker 1: Jerome Powell's policy revolution and how it was blindsided by
Speaker 1: the COVID nineteen crisis. Rich Miller writes that when FED
Speaker 1: chair chair Jerome Powell rolled out a new motus up
Speaker 1: Rundy for running military policy at Jackson Hole. A year ago,
Speaker 1: the economy was just coming out of a pandemic driven
Speaker 1: nose dive. That was after a decade of disappointingly slow
Speaker 1: growth with inflation stubbornly below target. Well, times have changed,
Speaker 1: rich What was the mL he rolled out a year ago?
Speaker 1: And where are we now? Well, I mean it's as
Speaker 1: you say, times change. Where where at an inflation rate
Speaker 1: at least by the Fed's measure, which is two times
Speaker 1: higher than than than they liked it four percent instead
Speaker 1: of two We're at an economy that's growing at at
Speaker 1: at rates that we haven't seen for decades. And um
Speaker 1: uh we've got um, we've still got a monetary policy
Speaker 1: setting that's the same as it was a year ago.
Speaker 1: So that's raising questions about whether the Fed is it's
Speaker 1: going to be uh too slow to try to rain
Speaker 1: things in and then we're going to either get you know,
Speaker 1: housing bubble or some sort of financial bubble or or
Speaker 1: you know, a return of something like we saw in
Speaker 1: the nineteen sixties with inflation starting to creep higher. So
Speaker 1: Richard feels like the FEED is in a tricky spot
Speaker 1: because you know, if they wait too long and stick
Speaker 1: to the framework, you know, they could risk what you
Speaker 1: just mentioned that we could enter a multitude of different bubbles.
Speaker 1: But it feels like it would be difficult to back
Speaker 1: away from the framework without losing some sort of credibility. So,
Speaker 1: I mean, what don't you expect the Fed to do here?
Speaker 1: Do you think that they'll stick it out or do
Speaker 1: you think that they'll lift probably earlier than they might
Speaker 1: have wanted to. It's a tough question, but it is
Speaker 1: a key question. Um. I think for the first part,
Speaker 1: they're gonna they're starting and we're starting to hear that already,
Speaker 1: is that their rhetoric is going to start to turn
Speaker 1: a little more hawk is I mean, and the aim
Speaker 1: of that is to keep inflation expectations in check. Um.
Speaker 1: They seem to be well and check in the treasury market,
Speaker 1: because we have yields well down from where they were
Speaker 1: earlier in the year, but consumers seem a little bit
Speaker 1: more worried and uh um, so they want to keep
Speaker 1: those So you're starting to see the rhetoric shift, and
Speaker 1: I would expect that Chair Powell will give us a
Speaker 1: little bit of more insight, um, not too much but
Speaker 1: a little more insight into their plans for beginning the
Speaker 1: taper when he speaks at the end of this week
Speaker 1: at the Virtue. It's a virtual Jackson Hole again this
Speaker 1: year clause of COVID. I think that's an entirely news
Speaker 1: story on its own that we learned about late last week,
Speaker 1: that the fact that the delta varian is running so
Speaker 1: rampant that this thing that they thought would be virtual
Speaker 1: or wouldn't be virtual, would be for a second year
Speaker 1: in a row, rich would be virtual. I wonder about
Speaker 1: the feds dual mandate here and to what extent the
Speaker 1: Fed is willing to let the economy run hot in
Speaker 1: order to satisfy its other mandate, which is to get
Speaker 1: maximum employment. Like how hot is the FED gonna gonna
Speaker 1: let the economy run hot? Uh? Well, right now, you know,
Speaker 1: uh uh, they're focusing not so much on how high
Speaker 1: the inflation rate is, but for how long it's gonna last,
Speaker 1: you know, stay there? Right. So their their story that
Speaker 1: this is our story and we're sticking to it, is
Speaker 1: that you know, uh uh, the inflation we're seeing is transitory.
Speaker 1: So um. I think though that argument may get a
Speaker 1: little stale as we get into next year, and so
Speaker 1: that you know that maybe the time when when you
Speaker 1: might see them getting a little more worried, or they
Speaker 1: may turn out to be right and you know, inflation
Speaker 1: will settle back down. You know, we've already seen you
Speaker 1: know some you know, subsiding and inflation on some of
Speaker 1: the areas like rental car prices that have proven most troublesome.
Speaker 1: So but I would think if if you're still seeing
Speaker 1: pretty uh inflation, like three percent or more at the
Speaker 1: end of this year, uh, they might get start getting
Speaker 1: more worried and so rich. This is something I think
Speaker 1: about a lot, and it's kind of impossible to answer.
Speaker 1: But if the FED had known this pandemic was coming,
Speaker 1: if they had known the trillions of dollars of fiscal
Speaker 1: stimulus were on the way, do you think they would
Speaker 1: have committed to this new average inflation targeting framework. I think, well,
Speaker 1: they were going off what they saw of a history
Speaker 1: of decades right of of you know, this whole secular
Speaker 1: stagnation story of of Larry Summers that you know, we
Speaker 1: we we for decades we've seen um uh low inflation,
Speaker 1: low interest rates, and slow growth. And you know, ever
Speaker 1: since they introduced their inflation target in two thousand twelve,
Speaker 1: they've basically been short. So they were going on that.
Speaker 1: I think, you know, you could argue that maybe they
Speaker 1: went a bridge too far in the forward guidance they gave.
Speaker 1: And when you know, not only did they have the framework,
Speaker 1: but they have the forward guidance, and they say, well,
Speaker 1: we don't expect the raised rates until we hit two
Speaker 1: percent inflation. Rich Rich Miller, We're gonna have to leave it.
Speaker 1: Their economics reporter at Bloomberg News running us on the
Speaker 1: phone from a Watchington d C. You can read riches
Speaker 1: story and more like it from Bloomberg's The Big Take
Speaker 1: at Bloomberg dot com and of course on the Bloomberg terminal.
Speaker 1: This is Bloomberg Business Week, and this is Bloomberg Radio.
Speaker 1: I'm Broom the journal. Yeah, but you let me drive.
Speaker 1: Oh no, no, no, no, honey, please, I'll do the
Speaker 1: riding rivals. I want to drive. Just drive, baby, good
Speaker 1: questions driving the drive to the close community. Thanks, we'll
Speaker 1: drive us dawn on Bloomberg Radio, and we're driving to
Speaker 1: the closed with it just over ten minutes away from
Speaker 1: the market close on this Monday, August Stocks in the Green,
Speaker 1: the dal higher by more than seven tenths of one percent,
Speaker 1: d higher by more than nine tenths of one percent,
Speaker 1: the NASDAC higher by one point six three percent. Let's
Speaker 1: get right into it with Mitch Rubin, chief investment officer
Speaker 1: and a managing partner at River Park is joining us
Speaker 1: on the phone from New York City, matche It's great
Speaker 1: to have you on the show today. UH shares of
Speaker 1: US equities are rallying today on the news that the
Speaker 1: fiser by on Tech has been approved by US regulators,
Speaker 1: fully approved. Are you surprised to see an equity market
Speaker 1: reactions such as this considering that this was this was expected?
Speaker 1: You know, it's We're in this strange time where I
Speaker 1: think people have this large perspective of risk on versus
Speaker 1: risk off. August is a light trading month, so small
Speaker 1: amounts of move of news can move the market. I
Speaker 1: think right now, the biggest thing on people's head, you know, headlines,
Speaker 1: is are we going to have another shutdown? And I
Speaker 1: think the more people think the vaccine is becoming more
Speaker 1: accepted than uh, we're more likely to fight back against delta,
Speaker 1: and that's positive for the market and for equities and optimism.
Speaker 1: So it's not surprising to see a decent sized move.
Speaker 1: Do you think we're gonna have another shutdown? Yeah? I
Speaker 1: certainly don't think we're gonna have a full backdown. Could
Speaker 1: we have another spike a COVID that causes people to
Speaker 1: be worried? Uh, certainly. I mean, I think the difference
Speaker 1: now with where we were back in April when we
Speaker 1: were seeing shutdowns is we know so much more about
Speaker 1: the virus in the way it's spread, and about vaccines,
Speaker 1: and we also know how to work in an environment
Speaker 1: that's that's hybrid, right, an environment that the virus is
Speaker 1: running rampant, but also one that still requires us too
Speaker 1: and many people actually physically be in the office. Yeah.
Speaker 1: I mean, I think there's a society conversation and there's
Speaker 1: a markets and economy conversation. I think the markets and
Speaker 1: economy conversation is the virus isn't a particularly important economic event.
Speaker 1: It's been our reaction to uh, the virus in in
Speaker 1: shutting down certain businesses and what is going to be
Speaker 1: our change in day to day life? And I think
Speaker 1: I think what the market is as a forward looking
Speaker 1: mechanism is saying, Okay, we're beginning to think beyond the
Speaker 1: virus as disrupting corporate or nings, and how do we
Speaker 1: think about, you know, what we're willing to pay for
Speaker 1: stock or for equities for the next few years. I
Speaker 1: think in the near term, we're all hyper focused on
Speaker 1: what does life look like for the next few months
Speaker 1: and years, and when do we go back to work
Speaker 1: and when do we feel safe? And I think that
Speaker 1: disconnect is troubling a lot of people because the markets
Speaker 1: seem quite forward looking and optimistic, and we're we're all
Speaker 1: still anxious and nervous and not quite sure what the
Speaker 1: new normal looks like for day to day life. And
Speaker 1: so if we think about, you know, where we are.
Speaker 1: August is supposed to be a pretty volatile month. You're
Speaker 1: supposed to see, you know, over the past five years
Speaker 1: about a one point six per cent gain for the
Speaker 1: SMP five hundred. But if we think about the August
Speaker 1: that we've had so far, we've actually seen the VIX
Speaker 1: move lower, We've seen the SMP outperform, uh you know,
Speaker 1: it's five year average. I mean, where does that leave
Speaker 1: us as we head into September? Are we have we
Speaker 1: just stored up volatility or can we continue to grind
Speaker 1: higher here and can that disconnect you're talking about persist. Yeah,
Speaker 1: I mean I think I think what people may be
Speaker 1: using a slightly broader lens um. I think most people
Speaker 1: are surprised when you tell them, hey, hey, open your
Speaker 1: eyes for a second. The S and P fives up
Speaker 1: twenty this year. And despite all the conversation about growth
Speaker 1: and value in different things. You know, growth stocks are
Speaker 1: up eighteen and a half percent. Value stocks are up.
Speaker 1: Using just some of the large cap indices, most stocks
Speaker 1: have done quite well. Uh And and the economy in
Speaker 1: general is strong. Interest rates are low, earnings have come
Speaker 1: in very strong. I think if it continues to be
Speaker 1: the case that that businesses do well, uh and interest
Speaker 1: rates stay low, stocks are reasonably priced, fonds are not
Speaker 1: offering much yield. It certainly is our opinion that the
Speaker 1: market still has an upward bias to it. I think
Speaker 1: the bigger question as we get it later into the
Speaker 1: year and the next year, is will the markets begin
Speaker 1: to have more dispersion and it won't be just risk on,
Speaker 1: risk off, but which businesses are prepared for a host
Speaker 1: COVID kind of digital first future and which aren't. And
Speaker 1: as you get into and twenty three not every company
Speaker 1: is going to have an earnings growth compared to a
Speaker 1: shutdown yere in. And it's our perspective that stock picking
Speaker 1: and which businesses you own is going to matter a
Speaker 1: lot more than do you own equities or are you
Speaker 1: in cash or box? Yeah, well, I'd love to get
Speaker 1: into positioning a little bit more. And how uh you
Speaker 1: know you are you know, orienting your portfolio in this environment,
Speaker 1: because if I look at the river Park Long Short
Speaker 1: Opportunity Fund, you know, I've seen tech names like Amazon
Speaker 1: and Microsoft. I also see the I Shares Russell two
Speaker 1: thousand e t F, a small caps e t F.
Speaker 1: Can you walk me through some of your top holdings. Yeah, so,
Speaker 1: so we run both a large growth fund which is
Speaker 1: fully invested in equities all the time, and then we
Speaker 1: also run a long short fund, which is really a
Speaker 1: traditional hedge fund but offered in a mutual fund wrapper.
Speaker 1: I think what you're referring to in the long short
Speaker 1: fund is that some of our bigger longs, which definitely
Speaker 1: in some of those high growth TEX stocks, but but
Speaker 1: a good um diversified book of of other growth businesses
Speaker 1: and other industries. Some of the industries you're pointing to
Speaker 1: or some of our short positions. So we we hedge
Speaker 1: out our longs, sometimes with market indexes where we think
Speaker 1: our long book will outperform the market as a whole,
Speaker 1: but more often with just individual shorts. And so um,
Speaker 1: we are short a little bit of the small cap
Speaker 1: index just as a hedge against our long book. Um.
Speaker 1: And you know, the belief we have is that a
Speaker 1: select group of equities, even though the markets had a
Speaker 1: good run, are still incredibly well positioned and reasonably valued
Speaker 1: for the future. But there are a lot of businesses
Speaker 1: whose future is less certain as we get post COVID. Uh,
Speaker 1: And that is an really interesting time to be selective.
Speaker 1: And whether it's a select group of longs and not
Speaker 1: the whole market, we're actually owning a long short run
Speaker 1: which has the ability to protect capital on the downside. Well,
Speaker 1: let's talk a little bit about that. And some of
Speaker 1: the shorts that that you like. Peloton shares are actually
Speaker 1: lower on the day today because a price cut at Oppenheimer. Um.
Speaker 1: Why do you say that Peloton is not a sustainable
Speaker 1: volume of business post COVID and that it's too expensive? Yeah,
Speaker 1: I mean we the way we invest is what do
Speaker 1: we believe the business has the potential to earn three,
Speaker 1: four or five years from now, and how is it
Speaker 1: value today? And Peloton is a business, it's a great product.
Speaker 1: It obviously was the right in the right place at
Speaker 1: the right time. But as we look to the future,
Speaker 1: we don't believe people are regularly replacing their exercise bife.
Speaker 1: These are relatively expensive pieces of equipment generally exercise uh um,
Speaker 1: you know, stay at home exercises, going fads, and people
Speaker 1: buy one thing and then a few years later they
Speaker 1: buy another. And Peloton is being priced as if the
Speaker 1: business they did during the shutdown was going to be
Speaker 1: perpetual and growing off that base. And so we don't
Speaker 1: we don't necessarily think it's a poor business. We just
Speaker 1: think at thirty billion of market gap um, the level
Speaker 1: of business they did in two thousand twenty might be
Speaker 1: the peak level of business they ever do. And if
Speaker 1: we're right that people either won't replace their bikes regularly
Speaker 1: over time where they move away from that fat towards another,
Speaker 1: that the business is just overvalued um. Which isn't to say, again,
Speaker 1: we don't necessarily think they're going to miss the next
Speaker 1: quarter or whether today's downgrad was right. We just think
Speaker 1: relative to the things were long, Platon is more likely
Speaker 1: to be lower in market top three years from now
Speaker 1: than higher does report later this week. Yeah, it's really
Speaker 1: quickly curious to hear about your thoughts on healthcare. We
Speaker 1: have just about twenty seconds. Yeah. I think healthcare, like
Speaker 1: like a lot of other industries, is going through massive innovation.
Speaker 1: And I think those businesses that are looking to use
Speaker 1: the combination of data, um and science in the future
Speaker 1: to make us all um uh treat things earlier, whether
Speaker 1: it's detecting cancer earlier or or doing surgery with robotics
Speaker 1: and things like that, we think that's fascinating place to
Speaker 1: invest in our business. So is that are gonna be
Speaker 1: a lot? We're gonna have to leave it their Mitroub
Speaker 1: and chief investment Officer and managing partner at River Park Funds.
Speaker 1: Thanks for listening to Bloomberg Business Week. Download the podcast
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