Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside
Speaker 1: my co host Matt Miller.
Speaker 2: Every business day we bring you interviews from CEOs, market pros,
Speaker 2: and Bloomberg experts, along with essential market moving news.
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Speaker 3: There are certain sites you just never thought you'd see.
Speaker 3: Jess again.
Speaker 1: You kind of the pandemic change the world in so
Speaker 1: many different ways, and one of the ways has just
Speaker 1: been this whole work from home phenomena. And so many
Speaker 1: people have been so successful working from home that productivity
Speaker 1: is as good or better than it ever was.
Speaker 4: I know how bullish you are though about in office.
Speaker 1: No, I think it's I think this whole work from
Speaker 1: home things a scam, but it is the way of
Speaker 1: the world that I have to adapt.
Speaker 3: And Mike's listening. I'm coming back after exactly all right.
Speaker 1: Vinceignerella joins us here. He is our one of our
Speaker 1: go to voices on the market. Seed joints us here
Speaker 1: on O Bloomberg Interactive Studio and Vince, we've got the FED.
Speaker 3: Coming today here.
Speaker 1: What are you hearing in the marketplace about you know,
Speaker 1: what the market expects and kind of where we go
Speaker 1: from here.
Speaker 5: The market is looking for a skip, we don't really
Speaker 5: call it a pause, is a skip because the July
Speaker 5: meeting is still on the table. I said, July rate
Speaker 5: hikes still on the table. There's a hawkish bent or
Speaker 5: a hawkish lean is what we're expecting in the statements.
Speaker 5: But a few of the guys I talked to, and
Speaker 5: I think their rights are perhaps looking for a little
Speaker 5: bit more hawkish than I think the market's going to expect.
Speaker 5: I think, you know, for their credibility purposes, and that's
Speaker 5: been a huge thing for Powell to try to regain
Speaker 5: the credibility they lost with the transient inflation story. That
Speaker 5: even with the skip, he really needs to lay the
Speaker 5: hammer down and say, essentially, core inflation is not getting
Speaker 5: down to the two percent goal anywhere near as quickly
Speaker 5: as they'd like it to.
Speaker 4: So we have the statement at two pm, then we
Speaker 4: get the economic projections and the dot plots before we
Speaker 4: hear from the man himself, j palettes to thirty what
Speaker 4: are you looking for in the dot plots?
Speaker 5: In particular, to be perfectly honest, with you. I hate
Speaker 5: the dot plots.
Speaker 6: Dots.
Speaker 5: They are the biggest joke I have ever seen.
Speaker 4: Well, they also get altered, so obviously changed.
Speaker 5: Sotquently I was, I was out of lunch with a
Speaker 5: bullet and he basically said, why are you guys pricing
Speaker 5: this in? And I said, it's because of your.
Speaker 3: Bloody dot plots.
Speaker 7: They're telling us where it's going. And he goes, oh,
Speaker 7: don't see, that's just those are just estimates. They change
Speaker 7: all the time, and so you know, people do look
Speaker 7: at them. I guess you have to take them seriously personally,
Speaker 7: I don't.
Speaker 4: Bullard is a non voting member, but such an influential voice,
Speaker 4: and he had said in the last couple of weeks
Speaker 4: how he was expecting there to be at least two
Speaker 4: more even if they are two more great hikes, even
Speaker 4: if there was a pause at this point. Do you
Speaker 4: think that's likely with maybe just giving some of the
Speaker 4: inflation data obviously yesterday CPI coming cool with an expect.
Speaker 5: I hope not to more. Actually I hope not even
Speaker 5: one more. And you're you're absolutely right. He isn't an
Speaker 5: influential voice, but he is a non member, and I
Speaker 5: think from what I'm hearing from the voting members so far.
Speaker 5: Perhaps the most interesting thing I should say about what
Speaker 5: this decision we should see later is any dissensions. I
Speaker 5: have a full expectation that this isn't going to be
Speaker 5: something to oh, that there's going to be some dissenters
Speaker 5: in there, and those dissenters will be people who basically
Speaker 5: wanted a rate hike. There are a couple in there.
Speaker 4: So Oxford Economics actually had some great data that they
Speaker 4: crunch that a FED governor hasn't dissented since two thousand
Speaker 4: and five, so most more likely it would be a president.
Speaker 4: So they were looking at either Neil Kashkari Lori Logan
Speaker 4: as a couple of them. Members's interesting, Yeah.
Speaker 1: All right, So what are they when you talk to
Speaker 1: the traders out there, Vincent? Are they figuring price cuts
Speaker 1: later this year or this is twenty four event?
Speaker 5: Do you think I think they're liking him later this year?
Speaker 5: I don't think they're going to get them again. Going
Speaker 5: back to the Powell credibility issue, I think he needs
Speaker 5: to at least totally line keep the markets on their
Speaker 5: toes that you know, inflation would have to do something
Speaker 5: drastic moving lower before we would see any cuts this year,
Speaker 5: or if we would see a recession, It'd be really
Speaker 5: hard to believe a FED would keep rates higher for longer.
Speaker 5: If we were in some sort of a recession, it'd
Speaker 5: have to they'd have to bow to it. But I
Speaker 5: think it would be a very, very small and gradual
Speaker 5: move because I think he'd be worried more of anything
Speaker 5: for a repeat of stagflation, and so he's going to
Speaker 5: be on the tough side if he comes out in
Speaker 5: any way saying the word pause today, you're probably gonna
Speaker 5: see one of the most explosive rallies you've seen in
Speaker 5: a long time.
Speaker 4: So even if the dots suggest in twenty twenty four that,
Speaker 4: like we had seen in the past, that there should
Speaker 4: be some cuts there, it's still tricky, right, just given
Speaker 4: what you were saying, with the backdrop of how much
Speaker 4: these things can flip flow.
Speaker 5: Yeah, And I think it's more the analysts and strategists
Speaker 5: who are looking for cuts and traders looking for cuts
Speaker 5: rather than the FED officials. So I think the dot plot,
Speaker 5: if anything, is going to go against what's being priced
Speaker 5: into the swap market right now. But again, it's such
Speaker 5: it's such a waffly kind of changing environment with the
Speaker 5: dot plots that you know it could come together at
Speaker 5: any time.
Speaker 1: Do you still feel like or does a market still
Speaker 1: feel like vince that this FED is behind the curve
Speaker 1: in terms of just dealing with inflation, and it just
Speaker 1: kind of the where the market is.
Speaker 5: I mean behind the curve in the sense that they're
Speaker 5: too aggressive.
Speaker 1: Yeah, I mean that they were too late coming into
Speaker 1: it dealing with it they were, or maybe they were
Speaker 1: too late tapering, they were too late tightening, they were
Speaker 1: too late.
Speaker 5: And now kind of I think the way the market's
Speaker 5: looking at it, the way I would look at it is,
Speaker 5: you know, realistically, and this isn't a political statement, the
Speaker 5: reason why we have inflation is because of fiscal policy.
Speaker 5: Monetary policy is not very good at fixing fixed fiscal policy.
Speaker 5: I won't say errors, but abundance. We say, So, what's
Speaker 5: really neat at this time is some pullback on the
Speaker 5: fiscal front, which most likely not going to see and
Speaker 5: so the FED has to try to fix it with
Speaker 5: what tools they have, but they're they're not very effective
Speaker 5: against fiscal policy.
Speaker 4: You add a really interesting column that was on the
Speaker 4: terminal recently about how US consumer appears to be in trouble,
Speaker 4: but good news for bond bulls. Tell us more about that.
Speaker 5: You know, you're always hearing this about the consumers doing well,
Speaker 5: and it's definitely something going on in the real estate
Speaker 5: market for sure, especially in the Northeast, but in general,
Speaker 5: all of the savings that were gained from a pandemic
Speaker 5: fiscal policy are gone. Disposable income is dropping, and you're
Speaker 5: seeing revolving credits sore, and all of that speaks to
Speaker 5: a consumer that's now borrowing to spend, and there's an
Speaker 5: endgame to that. Where it is I wish I knew,
Speaker 5: but there's always an endgame to that. There's only so
Speaker 5: much they can borrow. And if you see the FED
Speaker 5: start to raise requirements on banks for loan portfolios, you're
Speaker 5: going to see the banks pull back on that credit.
Speaker 5: And when the banks pull back on credit, clearly you're
Speaker 5: going to see some impact on spending. And I just
Speaker 5: think the consumer is getting a little bit more tapped
Speaker 5: out than perhaps some of the optimistic people think, and
Speaker 5: that probably falls into where the recession potentially comes from.
Speaker 4: Where are some of those red flags and some of
Speaker 4: the loans. When it comes to the credit, you were
Speaker 4: talking about.
Speaker 5: One of the things that I would look at is
Speaker 5: the credit card companies. So we've seen very good earnings,
Speaker 5: very good profits coming from the likes of MasterCard, Visa
Speaker 5: an American Express. When that turns, I think then you're
Speaker 5: really looking at where consumers are getting in trouble, whether
Speaker 5: it be through default rates or simply just not spending,
Speaker 5: and therefore the earnings of those companies just don't show up.
Speaker 3: Unemployment.
Speaker 1: Where do you think that kind of goes over the
Speaker 1: next six to twelve months. Are we going to get
Speaker 1: to like a four percent number.
Speaker 5: I don't know where we're going to get to an
Speaker 5: in exact rate, but I'll tell you there's a trick
Speaker 5: to this employment and jobs number that I think which
Speaker 5: the FED is missing is the Joel's number.
Speaker 8: In particular.
Speaker 5: So during the pandemic, what you've saw where a lot
Speaker 5: of companies buying ads on Indeed, et cetera, those websites
Speaker 5: for job postings, and they were posting a lot more
Speaker 5: jobs that they really needed in anticipation of potentially losing
Speaker 5: staff because of the pandemic. Those are annual contracts, and
Speaker 5: those contracts are rolling off, so they're not likely to
Speaker 5: be buying the same size of ads that they did
Speaker 5: in the past, and they'll probably be just a little
Speaker 5: bit easier on posting. So I think the job posting
Speaker 5: is going to go down, the Joel state is going
Speaker 5: to go down, and with that will get a little
Speaker 5: bit more realistic employment number because when you buy these
Speaker 5: contracts to post jobs, they're not per job, they're just
Speaker 5: per year, and so you can post as many as
Speaker 5: you want and over post and that makes it look
Speaker 5: like there's a lot more I think it makes it
Speaker 5: look like there's a lot more job openings that they
Speaker 5: really are.
Speaker 3: Okay, Yeah, that's really interesting.
Speaker 1: Yeah, that's interesting because the Jolts data is something and
Speaker 1: it usually ran in between four and six million and
Speaker 1: still up around ten me and it makes you think about, geez,
Speaker 1: that's a tightly Hey, Vince, don't be a stranger.
Speaker 8: Vin.
Speaker 1: Soon you mound his way back to the Bloomberg Interactor
Speaker 1: Broker studio and.
Speaker 5: He will find his way out exactly.
Speaker 3: Little FaceTime doesn't hurt anybody.
Speaker 9: You're listening to the team Ken's our live program Bloomberg
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Speaker 1: Just met in Paul Sweeney here in our Bloomberg Interactor
Speaker 1: Broker's studio. We want to get to the story, the update,
Speaker 1: the latest reporting on former President Donald Trump and his
Speaker 1: legal challenges, and of course there's no one better to
Speaker 1: do that with than Tim O'Brien. Tim is a senior
Speaker 1: executive editor for Bloomberg Opinion, and Tim is the author
Speaker 1: of the book Trump Nation, The Art of Being the
Speaker 1: Donald in two thousand and five, the Definitive Biography of
Speaker 1: Donald Trump. So there's no one that knows this story
Speaker 1: in this individual better than Tim.
Speaker 3: Tim, thanks so much for joining us. We know you're
Speaker 3: traveling here, but I'd.
Speaker 1: Love to just get your perspective on We've had so
Speaker 1: many legal issues with this president before and during and
Speaker 1: after now his presidency. How important? How significant is this?
Speaker 1: Are these federal charges here?
Speaker 10: Well, Paul, I think they're extremely significant because it's a
Speaker 10: clarifying moment. I think that there's been this myth around
Speaker 10: former President Trump that he can't really be touched by
Speaker 10: the law, that it's target holds him accountable. But the
Speaker 10: reality is throughout his entire career before going into the
Speaker 10: White entering the White House, he's never had major federal
Speaker 10: investigations surrounding him, and now he does. And there's some
Speaker 10: very robust state investigations that are also targeting him. But
Speaker 10: as it pertains to this specific case, it is one
Speaker 10: of the I think things that are very very difficult
Speaker 10: for him to hint and with is the fact pattern.
Speaker 10: This is not a complex narrative to explain to a journey.
Speaker 10: He took documents allegedly that he was not entitled to take,
Speaker 10: and he obstructed justice when the federal government came looking
Speaker 10: for them, and his own video cameras that mar A
Speaker 10: Lago recorded this. The testimony that the federal government put
Speaker 10: in the indictment comes from Trump's own staff and from
Speaker 10: his own lawyers. So it's a very tough case and
Speaker 10: I think it's consequential, and I think that he I
Speaker 10: don't think he's prepared for it. I don't think he
Speaker 10: has the legal talent surrounding him to adequately defend him
Speaker 10: right now against the case like this, So there could
Speaker 10: be a rough ride to have for him.
Speaker 4: Tim set the scene for us after yesterday when Trump
Speaker 4: lefts a courtroom what do we need to know from
Speaker 4: this moving forward?
Speaker 10: Well, yesterday was pretty undramatic. I think, you know, from
Speaker 10: all accounts, it was pretty in and out. He sat silently,
Speaker 10: the federal government and Jack Smith didn't make much of
Speaker 10: a show of anything, and they process things and he
Speaker 10: left the courtroom. I think going forward, there's one more
Speaker 10: process hearing with a second magistrate judge, and then the
Speaker 10: trial begins with Judge Cannon, and I think there's you know,
Speaker 10: she's a Trump appoint There's been questions about whether or
Speaker 10: not she is going to run up their process in
Speaker 10: her courtroom, given the fact that she owes her job
Speaker 10: to the president. She also gets to decide even if
Speaker 10: a jury finds him guilty, she gets to decide how
Speaker 10: severe his sentence will be. I think his maximum exposure
Speaker 10: on almost all of the counts is ten years, and
Speaker 10: there's one count that it has a maximum possible prison
Speaker 10: sentence for twenty years. I doubt we'll see any sentencing,
Speaker 10: even if it wasn't a possibly friendly judge go to
Speaker 10: the full amount here. But that that dynamic, I think
Speaker 10: how the government presents its evidence, how the jury interprets it,
Speaker 10: and then how the judge decide to sentence him. Is
Speaker 10: are the next steps? And all he can do is
Speaker 10: try to mount an effective defense, which has already done
Speaker 10: a little bit publicly saying that he was entitled to
Speaker 10: roose documents and he did nothing wrong.
Speaker 1: So, tim based upon kind of your knowledge and your reporting,
Speaker 1: is this trial h is it going to happen or
Speaker 1: is there going to be a plea agreement? And if
Speaker 1: it does happen, how quickly? There's a lot of moving
Speaker 1: parts here.
Speaker 10: Well, you know, if there's gonna be a pre agreement,
Speaker 10: it's you're going to have to agree to a settlement
Speaker 10: that satisfies the federal government. And previous cases the government takes,
Speaker 10: you know, these kinds of cases seriously. He is alleged
Speaker 10: taken documents, exposed the vulnerabilities the US military had nuclear
Speaker 10: she puts in some of them, and, by the government's account,
Speaker 10: compromise national security. We have a voteload of previous cases
Speaker 10: in which the charges events of here, and the defendants
Speaker 10: have gone to jail for the equivement for doing that.
Speaker 10: So if they try to do a plea agreement, it
Speaker 10: will be very interesting to see what the components of
Speaker 10: that are. And Trump at this point might be wise
Speaker 10: to try to do that, but I just don't know.
Speaker 10: I think the second piece what you'll see here is
Speaker 10: that he will take his argument to the streets, and
Speaker 10: I'm concerned about the possibility of violence because he is
Speaker 10: not someone who goes gently into that good night. He
Speaker 10: is not going to if he has found guilty. I
Speaker 10: think he was going to be going to encourage his
Speaker 10: supporters to be heard. And that's another dynamic that I
Speaker 10: think we'll have to watch very carefully.
Speaker 4: How long could the trial.
Speaker 6: Last for.
Speaker 10: Well, Jack Smith thinks that he wants a speedy trial,
Speaker 10: and I think they're going to try to move this
Speaker 10: along as quickly as they can. I don't think they're
Speaker 10: going to try to spend months and months presenting evidence.
Speaker 10: The federal government, particularly the Justice Department, did not by
Speaker 10: clinging cases during presidential election primary season goes in the
Speaker 10: full force in January. That's new territory too. I don't
Speaker 10: think they're going to want to trying him come next spring,
Speaker 10: so I think you're going to see this move along
Speaker 10: pretty quickly. The other thing to remember is there's another
Speaker 10: investigation of the Justice Department involved January sixth, and the
Speaker 10: possibility that Trump incided and insurrection and tried to intrigue
Speaker 10: with the electoral count procedures. And that's a trickier case,
Speaker 10: I think for them to bring the course. I think
Speaker 10: from a strategic standpoint, they were smart to go first
Speaker 10: with them are allowed o case, but they still have
Speaker 10: that one left to unfurrow, and you have to see
Speaker 10: what happens with that one too.
Speaker 1: Hey, Tim, let's fast forward a little bit to the election.
Speaker 1: Any sense of how this might play during the election.
Speaker 10: Well, I mean, this just throws such a wild card up.
Speaker 10: So here we know that after Alvin Bragg in Manhattan
Speaker 10: BA and guided Trump for financial for financial fraud in
Speaker 10: an electoral fraud in New York. It helped Trump with
Speaker 10: his base, and I think more generally with Republican voters
Speaker 10: who aren't part of his base, which are the ones
Speaker 10: he needs to amount of successful national election. I think
Speaker 10: he will probably be any other Republican in the primary
Speaker 10: season right now. I don't think he can win a
Speaker 10: general election unless he gets moderate and moderate Republicans in
Speaker 10: an independent And that first case, you know, people felt
Speaker 10: that drag was being unfair to the former president, and
Speaker 10: the polls indicated that that gave him an electoral base.
Speaker 10: It will be interesting to see how Republican voters respond
Speaker 10: to this case. I think this is a much more muscular,
Speaker 10: clear cut base. I think what you know, the risure
Speaker 10: occurred is much more damning yep. And there's not a
Speaker 10: lot of nebulous nips around it. So we'll have to
Speaker 10: see how that plays outs too.
Speaker 3: All right, Tim, thank you so much for joining us.
Speaker 1: Tim O'Brien, he's a senior executive editor for Bloomberg Opinion.
Speaker 1: He's also the author of Trump Nation, The Art of
Speaker 1: Being the Donald. He published that in two thousand and five,
Speaker 1: held as a definitive biography of Donald Trump.
Speaker 3: So Tim has a.
Speaker 1: Real good insight into Donald Trump the person as well
Speaker 1: as the politician as well.
Speaker 9: You're listening to the tape. Can's our live program Bloomberg
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Speaker 1: All right, let's get right to our next guest in studio,
Speaker 1: which she gets an extra start joining Gegos joins Is.
Speaker 1: She's a co founder of Bond Blocks. She co found
Speaker 1: a bond blog in twenty twenty one, and as the
Speaker 1: name would imply, it's an ETF firm that focuses on bonds. Jinna,
Speaker 1: thanks so much for joining us. So, I mean the
Speaker 1: reality join is I can go with a two year treasure,
Speaker 1: we can get four point sixty two percent. I mean
Speaker 1: there's actually income and fixed income these days, right, Yeah.
Speaker 11: We like to say the income's back in fixed income,
Speaker 11: and we really are encouraging investors to take a look
Speaker 11: and think about repositioning in their portfolios now because of everything.
Speaker 6: That's happened over the last year.
Speaker 11: Of most areas in fixed income, yields have doubled since
Speaker 11: twenty twenty two.
Speaker 4: It's interesting because you see so much money plowing into
Speaker 4: money market funds and other corners of the market when
Speaker 4: obviously you can yield five percent or more at this point.
Speaker 4: What do you think is the dynamic changing there between say,
Speaker 4: post the housing crisis, where you couldn't yield that amount
Speaker 4: whereas now. Is it not just a defensive posturing. Is
Speaker 4: it also just because of what investors can yield at
Speaker 4: this point?
Speaker 6: Yeah?
Speaker 11: So we have to remember the fundamentals of fixed income,
Speaker 11: and that the total return of fixed income includes the
Speaker 11: yield on the income side of your coupon pay plus
Speaker 11: the return of the asset itself. And with these yields,
Speaker 11: like they're really providing a lot of cushion for volatility
Speaker 11: that's still in the market is still we view is
Speaker 11: going to persist through the rest of the year, and
Speaker 11: so you don't want to forget that. You know, it's
Speaker 11: not just about being defensive. It's about taking action in
Speaker 11: your portfolio to get great total return relative to other
Speaker 11: asset classes right now, and fixing them can provide that
Speaker 11: to you with a lot a lot less volatility relative
Speaker 11: to other asset.
Speaker 6: Types, even equity. Well, this bid for cash is.
Speaker 12: So interesting because you look at money market funds right now.
Speaker 12: Mutual funds so not quite as cool as ETFs, but
Speaker 12: still there's five point five trillion in them.
Speaker 6: Money is still growing. At the same time, you.
Speaker 12: Also have sort of the spiritual opposite going on, where
Speaker 12: people are chasing tech, they're chasing AI and those growth
Speaker 12: of your names.
Speaker 6: So it's been.
Speaker 12: Interesting to see those two opposite approaches build up at
Speaker 12: the same time.
Speaker 6: And when you think about money market funds, When you think.
Speaker 12: About cash like instruments on the ETF side, when does
Speaker 12: that money come out? What would be the catalyst to say, Okay,
Speaker 12: you know, I can sit in here and clip coupons,
Speaker 12: but maybe it's time to venture out.
Speaker 4: Yeah.
Speaker 11: I think last year's flows were just exactly that there's
Speaker 11: people sort of hiding out or on the sidelines, trying
Speaker 11: to figure out when they're going to come back into
Speaker 11: risk askets or when they're going to come back into
Speaker 11: the market. And in terms of when, I think what
Speaker 11: we've been telling folks is you probably shouldn't be waiting
Speaker 11: for everything.
Speaker 6: To settle through the end of the year.
Speaker 11: Yes, there's more volatility, Yes we have still the potential
Speaker 11: for recession coming up. But it's interesting you say that
Speaker 11: because I think there's some data that when you look
Speaker 11: at ETF flows still you're not seeing people rush back
Speaker 11: into equities, even though there's really attractive yields in I'm sorry,
Speaker 11: really attractive returns in places like technology. Actually, I think
Speaker 11: the flows are a little a little opposite of what
Speaker 11: you would intuitively think that people are running into them
Speaker 11: through through the et apps. The same is true in
Speaker 11: categories in fixed income where you have these really big
Speaker 11: yields with sort of you would think relative risk, but
Speaker 11: you know something like a triple C which is yielding
Speaker 11: over thirteen percent, or even WC even double B is
Speaker 11: that you know, almost eight percent, and people just aren't
Speaker 11: grabbing those opportunities.
Speaker 6: For their portfolios.
Speaker 11: Now, we think by bomb blocks, we try to show
Speaker 11: people the relative value amongst all this different places in
Speaker 11: the fixed income offering so that they can take action.
Speaker 11: So we really think there's a call to action to
Speaker 11: reposition your portfolios now. But you're right, I think the
Speaker 11: flows into money markets are still saying people are waiting
Speaker 11: for more information, and we just think fixing income provides
Speaker 11: more opportunity.
Speaker 4: Now, something I've been watching pretty closely is the CFTC
Speaker 4: data that we get on Fridays and looking at how
Speaker 4: much investors are shorting the treasury market, whether we're talking
Speaker 4: about the two year, the ten year. The speculative futures
Speaker 4: net positioning has been at a record when we're looking
Speaker 4: at these bonds when it's so extreme, because typically investors
Speaker 4: would do that in anticipation that bonds would or if
Speaker 4: you're looking at yields, those would move higher. Do you
Speaker 4: think there would be any sort of opposite effect there
Speaker 4: when you see positioning so extreme to where yields could
Speaker 4: potentially fall when you have those kind of bets placed
Speaker 4: on that, our.
Speaker 11: View is that yields are going to be higher for longer,
Speaker 11: like we are at. We had some good numbers last
Speaker 11: year yesterday in terms of you know, inflation and four
Speaker 11: percent number, but at the same time, like the Fed
Speaker 11: still has a two percent goal and going from four
Speaker 11: to two is going to be pretty difficult. So I
Speaker 11: don't we just don't see that pivot, even though there's
Speaker 11: a lot of interesting volume activity around all the markets.
Speaker 11: On the short side, I would say that our view is,
Speaker 11: you know, there's a there's still more to process.
Speaker 6: Can we get into the weeds here? Do you guys
Speaker 6: mind take it away straight into the weeds?
Speaker 12: Okay, let's talk specifically about ETFs, because obviously bond Blocks's
Speaker 12: business is sort of carving up the bond ETF market
Speaker 12: into you know, sectors, into duration specific funds.
Speaker 6: And if we look at, you know, what your most
Speaker 6: successful products are.
Speaker 12: We have x h l F, which is six month
Speaker 12: target duration leave that launched in September, right, and you know,
Speaker 12: you're closing in on eight hundred million dollars in a U,
Speaker 12: which is impressive. And then at the same time, I
Speaker 12: mean there's products such as t bill, which recently launched
Speaker 12: that is specifically three month treasury bills. And then Blackrock
Speaker 12: also has a suite of products they're ebond suite, which
Speaker 12: is also really narrowly focused on different duration and it's
Speaker 12: interesting to see all of this money coming into these
Speaker 12: duration specific funds. So I'm just hoping you can talk
Speaker 12: me through where that demand is coming from, who is
Speaker 12: using these ETFs, and how should these ETFs be used
Speaker 12: for the bomb blocks products.
Speaker 11: Our clients are really using them for duration management to
Speaker 11: control the interestate risk they have in their portfolios, and
Speaker 11: we have seen some really compelling use cases in this
Speaker 11: last two or three months. In this last quarter, as
Speaker 11: we entered into the debt crisis, we saw clients move
Speaker 11: out of the short short ultra short side and a
Speaker 11: little bit out of the curve one, two, three year
Speaker 11: because they were trying to avoid any of the you know,
Speaker 11: very short term settling maturities in very very short treasury products.
Speaker 11: Once the dust cleared some set we saw the clients
Speaker 11: kind of move back in so I think what's really
Speaker 11: interesting is that these are tools for interest rate risk
Speaker 11: management and duration management, and we're seeing that it's not
Speaker 11: just that I'm going to hide out in cash for
Speaker 11: a while because I'm not sure what I want to do.
Speaker 11: People are using them to add to their portfolios, to
Speaker 11: manage their viewpoint over what kind of duration they want
Speaker 11: to add.
Speaker 6: Or subtract from their portfolio.
Speaker 11: And it's great to see also some hits on the
Speaker 11: longer side too, So there's just people have the opportunity
Speaker 11: to say, like, you know what, I'm going to seven
Speaker 11: the belly of the curve.
Speaker 6: You know, there's a little bit of a.
Speaker 11: I'll get myself out a bit, not all the way
Speaker 11: out to ten and twenty, but yeah, I think they're
Speaker 11: really being precise with their viewpoints week to week.
Speaker 4: Yeah.
Speaker 12: And if I you know, if I'm worried about I'm
Speaker 12: trying to manage my duration risk, my interest rate risk,
Speaker 12: I mean, why do that through one of these products,
Speaker 12: through an ETF versus just going into the actual.
Speaker 11: Securities, you know, buying a portfolio of securities actually, for
Speaker 11: any investor or any investment management firm is a lot
Speaker 11: of work. You have to have the teams that you
Speaker 11: know either on the credit side, you have analysts, you
Speaker 11: have research even back office in middle office operations to
Speaker 11: make sure things are settling into your accounts correctly. And
Speaker 11: we were just talking about this in a different form
Speaker 11: actually here at Bloomberg.
Speaker 6: It's hard to do.
Speaker 11: ETFs give you that exact exposure with one trade, one click,
Speaker 11: settles in your account. It's very simple for asset managers
Speaker 11: and investment managers to use them for these precise exposures.
Speaker 11: Our premise is there isn't enough of them in fixed income.
Speaker 11: You could do a lot in equities. You can get
Speaker 11: any kind of brick factor you want in a ETF
Speaker 11: in equities, and there just isn't enough in fixed income.
Speaker 6: So you buy an ETF for it.
Speaker 11: It's convenience, it's simplicity, they're low costs. They're great management
Speaker 11: tools for investors.
Speaker 4: We only have about a minute left, but I was
Speaker 4: curious about in the ETF space, where would you shy
Speaker 4: away from. We talked about the opportunities there were whatevers.
Speaker 4: Do you not like.
Speaker 11: That's a I guess that's a very personal question.
Speaker 4: Forever I use more client specific.
Speaker 11: It's very client specific because with the way you should view.
Speaker 11: ETFs are tools, tools to build portfolios, tools.
Speaker 6: To express your view.
Speaker 11: And the important thing about the ETF offering is that
Speaker 11: there is enough tools for you.
Speaker 6: To do that with.
Speaker 11: There's new types of products you can get access to
Speaker 11: managers inactive and so I wouldn't shy away from anything
Speaker 11: in ETFs because it's it's the premise of the ETF
Speaker 11: offering is to help investors action their ideas and take
Speaker 11: action in these markets. So there probably isn't an area
Speaker 11: to to to avoid. I mean, we do see obviously
Speaker 11: the dangers of increased altility, and we don't we don't
Speaker 11: know exactly what kind of liquidity is coming out of
Speaker 11: the system, but you know, again, to be able to
Speaker 11: make those trades week over week with ETFs, that's what
Speaker 11: investors are coming.
Speaker 13: To them for.
Speaker 3: Hey, Joanna, thank you so much for joining us.
Speaker 1: Really appreciate it as always having you here in a
Speaker 1: Bloomberg Interactive Broker studio.
Speaker 3: Joining Diego's co founder of bond Blocks.
Speaker 4: I think that was a good business decision, great round table.
Speaker 1: Well I just stepped back toront of him. I can
Speaker 1: step back and let the smart people have the floor.
Speaker 1: So that was great appreciate Katie Greifeld sitting in with us.
Speaker 8: You're listening to the team.
Speaker 9: Ken's a our live program, Bloomberg Markets weekdays at ten
Speaker 9: am Eastern.
Speaker 8: On Bloomberg dot Com, the iHeartRadio.
Speaker 9: App and the Bloomberg Business App, or listen on demand
Speaker 9: wherever you get your podcasts.
Speaker 1: Just meant in and Paul Sweene here in the Bloomberg
Speaker 1: Interactive Broker Studio.
Speaker 3: We've had some smart guests here.
Speaker 4: Today, we have and they're going to continue coming with
Speaker 4: especially with our next guests.
Speaker 1: Exactly all right. He's a pretty smart dude. That's why
Speaker 1: we kind of have him back. I usually can follow
Speaker 1: what he's saying. Sometimes I have to google some things.
Speaker 1: But Jay Haffield joins us. He's a CEO, founder and
Speaker 1: portfolio manager for Infrastructure Capital Advisors. Jay, I know you
Speaker 1: guys at Infrastructure Capital Advisors.
Speaker 3: You fall inflation. You track this thing, right, and so
Speaker 3: does the FED.
Speaker 1: What do you tell us about how you track inflation
Speaker 1: and kind of what your work is telling you guys?
Speaker 14: Thanks Paul. So, the key element is to think of
Speaker 14: three separate buckets of inflation, so you have leading indicators.
Speaker 14: The key one there is oil prices, which we know well,
Speaker 14: and housing prices, okay, and that if you just looked
Speaker 14: at those two and tried to explain the seventies, that
Speaker 14: would explain over one hundred percent of the inflation during
Speaker 14: the seventies.
Speaker 3: So that was the real problem, which was a good decade.
Speaker 14: Right, this is a real problem. The FED has learned
Speaker 14: a lot of lessons that we don't think are accurate
Speaker 14: about why that occurred, like stopping and starting entrenched. We
Speaker 14: don't believe in any of that. In fact, we believe
Speaker 14: Volker made a big mistake raising rates too high. So
Speaker 14: those are leading indicators. Current indicators are today's a good
Speaker 14: day to talk about it. PPI Real Time and CPI
Speaker 14: desh r is are index. Other people have either arguably
Speaker 14: copied it or we copy them. There's no We're not
Speaker 14: an index company center tracked that. But so all that
Speaker 14: is is just looking at that leading indicator housing and
Speaker 14: then stickating into the index and then the deeply unfortunately,
Speaker 14: the deeply lagging indicators are what the FED follows. So
Speaker 14: in fact, the worst is core PCE because Core, what
Speaker 14: the FED doesn't really focus on is that high headline
Speaker 14: bleeds into core. In fact, you can see this during
Speaker 14: the seventies, so they are going to probably be very
Speaker 14: hawkish today, or at least somewhat hawkish. They're going to
Speaker 14: keep talking about raising rates because they're focused on that
Speaker 14: core measure, even though it's highly lagged and it's going
Speaker 14: to drop. It's just going to take a little while.
Speaker 14: So we've and we've had this view almost since July
Speaker 14: last year when inflation peaked, and we've been looking forward
Speaker 14: to this time of the year because this is the
Speaker 14: Fed's almost always a year behind. So they're starting to
Speaker 14: figure out by pausing, and we think they'll pause next
Speaker 14: in July as well. But so those are the those
Speaker 14: three buckets are critical, and that's why we think the
Speaker 14: FED is fundamentally flawed, because they're looking at the wrong bucket.
Speaker 4: What is your expectations this afternoon from FED chair Jerom Powell.
Speaker 14: Thanks, Jess, Well, you know he has a stellar track
Speaker 14: record of tanking the market during press conferences, so i'd
Speaker 14: hate to bet against that. The only mitigating factor you
Speaker 14: mentioned Mike Wilson, who just reiterated his target. We just
Speaker 14: we raised our target. It's kind of a little bit
Speaker 14: of a bogus target. It's forty five hundred to five thousand.
Speaker 14: But the reason for that is we have data that
Speaker 14: supports forty five hundred. The five thousand is just we've observed,
Speaker 14: you know, partly or I've observed being an investment banker,
Speaker 14: there's a tendency for hot markets to get overvalued. Like
Speaker 14: right now, we think that AI companies are probably undervalued,
Speaker 14: but they're going to get overvalued, so we don't know
Speaker 14: how much. It seems like five thousands of a pretty good
Speaker 14: target or limit to that. But so we're quite bullish
Speaker 14: about the market, whether we pull back today, maybe even
Speaker 14: pull back through mid July, but we're bullish in mid
Speaker 14: July because you have earnings. Most companies are doing well,
Speaker 14: not just tech companies. We think the market will broaden
Speaker 14: out some of the things that we traffic in more heavily,
Speaker 14: like preferred stocks and dividend stocks will do better. So
Speaker 14: we're bullish for the year. Whether I would say, if
Speaker 14: I had to bet, it's for sixty forty that you know,
Speaker 14: the market will be lower today just because of the
Speaker 14: Powell having to placate the hawks.
Speaker 4: To Jay's point, the S and P five hundred has
Speaker 4: dropped on FED Day five of the last six meetings.
Speaker 3: Is that right?
Speaker 8: Here we go?
Speaker 3: All right, we got it. That's a track record.
Speaker 8: Jay, if you ever.
Speaker 1: Had this discussion about inflation and policy with anybody from
Speaker 1: the FED, because we're going.
Speaker 14: To set it up, Okay, No, I'd be happy to
Speaker 14: debate them, but I will say that we're I think
Speaker 14: we have a leading market share of criticizing the FED
Speaker 14: over the last two years.
Speaker 8: We have a pretty good pr firmt.
Speaker 14: So you can go check that good because we literally
Speaker 14: we were talking about it coming in. We were trying
Speaker 14: to contact reporters in March of twenty one because again
Speaker 14: we follow oil prices they were skyrocketing. We follow housing
Speaker 14: prices skyrocketing. We didn't have CPI dash are, but PPI
Speaker 14: printed at ten percent in January of twenty one, and
Speaker 14: the FED a year over a year later was saying
Speaker 14: is transitory. PPI is again a real time indicator, Like
Speaker 14: if PPI is going up, you're almost certain that CPI
Speaker 14: will follow, So I think that it would. It's just
Speaker 14: useful this conversation is going on. There was a Wall
Speaker 14: Street Journal editorial this morning that the Fed's methodology is
Speaker 14: just fundamentally flawed, including the two percent target. Two percent
Speaker 14: targets way too low, huge enemy of the middle class.
Speaker 14: There's strong evidence that it made the financial crisis way worse.
Speaker 14: And so these issues need to be drawn out because
Speaker 14: everybody treats the FED like they're sort of, you know,
Speaker 14: some sort of god, and you can't. I mean, politicians
Speaker 14: aren't allegedly not supposed to talk about it, and they
Speaker 14: have like four hundred PhDs, but they can make bad mistakes.
Speaker 14: Having a PhD means you're an expert in writing, you know,
Speaker 14: research papers, not running the FED.
Speaker 1: All right, So give all that you mentioned preferred stocks.
Speaker 1: I don't hear that nearly enough in this duty studio.
Speaker 1: Why do you guys are why are you favoring some
Speaker 1: preferred stocks right these days? And why should investors consider preferreds?
Speaker 14: Well, we are kind of evangelical about preferreds because what's
Speaker 14: great about them they are good credits. They have load
Speaker 14: default rates abou zero point three percent on average for
Speaker 14: listed we do the twenty five dollars listed preferreds. They're
Speaker 14: issued by good public companies who care about their credit,
Speaker 14: but they're owned by retail and they tend to get
Speaker 14: sold off way too hard during downturns. So, for instance,
Speaker 14: right now, you look at any credit quality of preferreds,
Speaker 14: they're cheap to high yield by about twenty five to
Speaker 14: thirty basis points. And right now, like the answer to
Speaker 14: your prior conversation about why, because you might ask, well,
Speaker 14: why when just buy the short term ETFs that the
Speaker 14: other the firm before me was here, Well, the reason
Speaker 14: is you can right now with preferred you can get
Speaker 14: equity type upside with fixed income risk. So they're trading
Speaker 14: roughly our funds at nineteen, which is roughly par value
Speaker 14: par values twenty five, so you get potential for appreciation
Speaker 14: at twenty five. But meanwhile, and our fund yields a
Speaker 14: lot because we look for more like double B crossover credits,
Speaker 14: so yields about ten, so you get ten to weight.
Speaker 14: It's not super volatile right now. It can become volatile
Speaker 14: and then you get upside, and it's a good hedge
Speaker 14: because we're pretty bullish on tech stocks, but most retail
Speaker 14: investors have way too many tech stocks and no income
Speaker 14: and fix this is going to be less volatile, certainly
Speaker 14: less volatile than Nvidia and high beta stocks, so we
Speaker 14: think it's a good alternative. The answer why, maybe you
Speaker 14: don't want to go in and get five right now
Speaker 14: for sure, because you can get ten and then maybe
Speaker 14: you know twenty or thirty of upside potential, So preferreds
Speaker 14: you should also sell them at par by the way,
Speaker 14: which hopefully you don't have me on, you know, in
Speaker 14: the year and they're all part and I have to say,
Speaker 14: oh yeah, I said you should sell them all but
Speaker 14: you know, to get ready for like the next crisis,
Speaker 14: next freak out. And during seven oh eight they went
Speaker 14: to like ridiculously low levels and we made a ton
Speaker 14: of money buying cheap referreds back then.
Speaker 4: And to your point when you're talking about PPI, we
Speaker 4: watched the CPI PPI spread very closely, so you would
Speaker 4: have seen that obviously improving dramatically when it comes to
Speaker 4: the input prices before obviously consumer prices. I mean, how
Speaker 4: does that do you think bode well when it comes
Speaker 4: to corporate margins when that obviously is a key component
Speaker 4: of that and obviously in turn stock prices.
Speaker 8: Yeah.
Speaker 14: So I mean we tend to and I think this
Speaker 14: is why we differ a fair amount from Morgan Stanley,
Speaker 14: is that we don't focus as much on margins because really,
Speaker 14: if you analyze and I learned this doing utilities. Almost
Speaker 14: all earnings growth comes from reinvestment and utilities. It's just
Speaker 14: a tautology because it's regulated. But so a utility with
Speaker 14: a fifty percent payout ratio always grows at five because
Speaker 14: they only grow from retaining earnings. So most companies, like McDonald's,
Speaker 14: wherever they grow because they return earnings and actually open
Speaker 14: new McDonald's, like an existing McDonald's, margins is going to
Speaker 14: be relatively flat. So I do think that that's a
Speaker 14: bit of a challenge, but I think that Morgan Stilling's
Speaker 14: overstated it and we're more open. This year's has been
Speaker 14: pressured and we're about two twenty on the S ANDP.
Speaker 14: But actually next year's earnings, which is what our targets
Speaker 14: based on, has been holding up well, in fact even
Speaker 14: going up, so now it's two forty two. So we
Speaker 14: to your point to be this year, we think is
Speaker 14: going to be challenging and next year will be more normal.
Speaker 14: And then also you just get the growth from AI
Speaker 14: and from retained earnings. So I think it's easy to
Speaker 14: be too bearishit about the stock market because people don't
Speaker 14: realize that arithmetic of the reinvestment producing kind of automatic growth.
Speaker 4: Wow, great stuff.
Speaker 1: As always, a body continues to come in here. He
Speaker 1: hasn't figured it out yet. Jay Hatfield. He's the CEO,
Speaker 1: founder and portfolio manager at Infrastructure Capital Management Lots. I
Speaker 1: learn new stuff every time he comes in here, and
Speaker 1: we love having him in here on days when there's
Speaker 1: going to be some big news in.
Speaker 3: Today's one of those.
Speaker 4: Yeah, it's flag day exactly. Price target that he has
Speaker 4: forty five hundred.
Speaker 6: Ye'll take that five hundred.
Speaker 3: Yeah, like the five thousand and one. I'll stick with that.
Speaker 1: Jay Haffield, CEO, founder and portfolio manager for Infrastructure Capital Advisors.
Speaker 9: You're listening to the tape cansur live program Bloomberg Markets
Speaker 9: weekdays at ten am Eastern on Bloomberg Radio, the tune
Speaker 9: in app, Bloomberg dot Com, and the.
Speaker 8: Bloomberg Business App.
Speaker 9: You can also listen live on Amazon Alexa from our
Speaker 9: flagship New York station, just say Alexa playing Bloomberg eleven thirty.
Speaker 1: All right, let's switch giers and talk about the pharma space,
Speaker 1: biotech and really with a focus on anti obesity drugs,
Speaker 1: and you just think about the opportunity there in terms
Speaker 1: of market size, just extraordinate. There are a lot of
Speaker 1: big players in there, so we want to get to
Speaker 1: the latest and see what's happening there. So we go
Speaker 1: to one Mikey Shaw, senior industry analyst at Bloomberg Intelligence.
Speaker 1: He is live at his desk, I can tell you,
Speaker 1: at the Bloomberg headquarters in Queen Victoria Street, in the
Speaker 1: center of the city of London.
Speaker 3: No better place to be in Mikey Shaw. Now he's
Speaker 3: in the office.
Speaker 1: Unlike like Sam Fazeldi, who just mails it in from France,
Speaker 1: Mike's there every day, grinding it. We appreciate it. Mikey,
Speaker 1: thanks so much for joining us here. Talk to us
Speaker 1: about the market for anti obesity drugs. Give us a
Speaker 1: sense of how big this market is and the kind
Speaker 1: of the growth profile.
Speaker 15: Sure, I mean, just a reminder, when we look at
Speaker 15: the market in terms of patient population, it could be
Speaker 15: three times larger than diabetes. So when we look at
Speaker 15: the target population in the US one hundred and forty
Speaker 15: million sufferers in the US six hundred and fifty million globally,
Speaker 15: and if left untreated, we think that could go to
Speaker 15: you know, that could double by twenty thirty to about
Speaker 15: one point two billion. And what's you know, when we
Speaker 15: look at the number of patients that are medically treated,
Speaker 15: the proportion is load, so there's kind of a significant runway,
Speaker 15: you know, for these drug makers which are active in
Speaker 15: the space. And then you know, we published an update
Speaker 15: to our market model a couple of days ago, and
Speaker 15: we think that you know, looking at marketed drugs and
Speaker 15: drugs in phase three at the moment, we think that
Speaker 15: that market could go to forty four billion dollars in
Speaker 15: twenty thirty. That's an eighteen fold increase on the twenty
Speaker 15: twenty two levels. And then we see two dominant players,
Speaker 15: so Novo Nordisk Eli Lilie with the fifty four percent
Speaker 15: share and a forty six percent share respectively in twenty thirty,
Speaker 15: and then pipeline drugs well drugs in the early to
Speaker 15: midsday pipeline could represent upside to that potential view you.
Speaker 4: Talked about the big players in the space with Lily
Speaker 4: Novo break it down on both sides of the spectrum.
Speaker 4: As far as what it comes to whether there are
Speaker 4: free here when it comes to those entire obesity drugs
Speaker 4: that they have in the pipeline.
Speaker 15: I mean, ultimately, what we've seen in terms of you know,
Speaker 15: obese medications is you know, prior to the launch of WEGOV,
Speaker 15: the effectiveness of these treatments was relatively I want to
Speaker 15: say low, but sub ten percent weight loss. WE'REGOV across
Speaker 15: its PASE three trials showed eighteen percent up to eighteen
Speaker 15: percent weight loss, and then Lily's to zeppetide, which should
Speaker 15: get approved by the end of the year, showed more
Speaker 15: than twenty percent weight loss. So what these two drugs
Speaker 15: have done the second generation of medicines, They've really raised
Speaker 15: the facy bar in this in this treatment space. And
Speaker 15: then we see that tussle in terms of innovation continuing
Speaker 15: with Novos. Basically, it's got a drug called Kagari Semma
Speaker 15: in its FACE three pipeline and it's targeting twenty five
Speaker 15: percent weight loss with that particular product.
Speaker 1: Now that I mean, those are I was going to
Speaker 1: ask you kind of what is the efficacy of these drugs,
Speaker 1: I mean, and what are these you know, farmer comings,
Speaker 1: what are they kind of promising their patients?
Speaker 15: I mean in terms of I mean most of the
Speaker 15: patients when we look at the trials, they're going off
Speaker 15: baseline weight of you know, ninety five kilograms to one
Speaker 15: hundred kilograms and.
Speaker 3: What we pounds for the rest of the world.
Speaker 15: The pounds conversion I'm not sure about.
Speaker 3: All right, go ahead, let's google.
Speaker 15: So I mean, you know, as I said earlier, Lily
Speaker 15: showed Lily's basically shown the best efficacy to date with
Speaker 15: the zepptide, and that showed upwards of twenty percent weight loss,
Speaker 15: so it's kind of a significant it's a significant fac
Speaker 15: And when we look at bariatric surgery, which is obviously invasive, costly,
Speaker 15: you know, that's associated with twenty five percent weight loss plus.
Speaker 15: So you know, with this new innovation, you're really narrowing
Speaker 15: that gap between you know, therapeutics and surgery. And what's
Speaker 15: going to be key for this market is going to be,
Speaker 15: you know, getting pairs on site. Traditionally, you know, probably
Speaker 15: because of the ficacy or they of prior treatments, it's
Speaker 15: been an out of pocket market. So we hope that's
Speaker 15: going to change. And what's key to making that change
Speaker 15: is going to be outcomes data. So the effects that
Speaker 15: weight loss have on kind of cardiovasclet en points such
Speaker 15: as cardiovasca death, heart attacks, et cetera. And we should
Speaker 15: see the first outcomes data midyear for Novo and noticeable
Speaker 15: go VI. We think that's gonna read out positive and
Speaker 15: hopefully that should kind of.
Speaker 13: Break down the access hurdles faced by some.
Speaker 4: Patients when it comes to companies like Ela Lilly trying
Speaker 4: to move toward this fast track approval. What kind of
Speaker 4: dangerous could be there?
Speaker 13: I think in terms of, you know, the fast track
Speaker 13: approval In terms of clinically, I think, you.
Speaker 15: Know, they've done they still needed two trials to file.
Speaker 15: What they did was they you know, they've had a
Speaker 15: rolling submission, so the first phase three data set came out,
Speaker 15: they then had their discussions with the sk FDA. The
Speaker 15: second Phase three data set came out, and that enables
Speaker 15: them to kind of complete the filing in sorry, it
Speaker 15: should enable them to complete filing by mid mid year,
Speaker 15: mid year, which would enable them approval by the end
Speaker 15: of the year. So in terms of kind of data sets,
Speaker 15: they're still submitting the same amount of data to support
Speaker 15: to support approval. It's just that they've kind of done
Speaker 15: it in they've just done it in a quicker manner, right.
Speaker 13: They haven't had to.
Speaker 15: Wait for the second trial trial to report before being
Speaker 15: able to file, So.
Speaker 1: You know, obviously they've invested a lot of money in
Speaker 1: but these companies in coming up with these therapeutics, what's
Speaker 1: the I guess the risk of the generics coming in
Speaker 1: and kind of impacting the profitability.
Speaker 15: I mean, we don't see generics coming in until you know,
Speaker 15: you know, twenty thirty post twenty third See, so I
Speaker 15: believe you know that these drugs are.
Speaker 13: Protected by patents.
Speaker 15: We've got a litigation analysis that's done a deep dive
Speaker 15: into all these passives called Tish Walker, and I believe
Speaker 15: she's you know, she thinks that WEGOV could remain unpatent
Speaker 15: until twenty thirty eight.
Speaker 13: I believe the Lily.
Speaker 15: To zeppatide pattern is you know, somewhere somewhere around that
Speaker 15: time point as well. So there's significant you know, these
Speaker 15: drugs should remain free of generic competition for a significant time.
Speaker 4: As far as when it comes to the timetable, what's
Speaker 4: next in the immediate future that you're keeping your eye.
Speaker 15: On with this, So in terms of catalysts, use players approvals,
Speaker 15: you know, as I mentioned earlier, Goovy outcomes data that's
Speaker 15: due mid year. To Zeppetite approval should happen by year end,
Speaker 15: and then we should see oral seg side which there's
Speaker 15: an oral GLP one, so an oral product that should
Speaker 15: get approved in twenty twenty four and that could really
Speaker 15: open up the market. So we did a survey of
Speaker 15: one hundred prescribers, and there's a clear need for oral therapies,
Speaker 15: especially in the primary care setting where you know, doctors
Speaker 15: are often short on time they may want to avoid
Speaker 15: the complex titration strategies of some of the injectable.
Speaker 13: Treatments on market at the moment, such as We'll.
Speaker 1: Go be So, Mike, you're just looking at your research
Speaker 1: report here, which is awesome. By the way, Novo Nordesk
Speaker 1: and Eli Lilly vuying for leadership. You say, is this
Speaker 1: kind of a dwopoly here or more farmer companies going
Speaker 1: to come here? More providers are going to come in
Speaker 1: here and try to compete for this space.
Speaker 15: I mean in terms of how the market's going to
Speaker 15: play out, I mean we think it's going to be
Speaker 15: similar to the JLP one class in diabetes. So Novo
Speaker 15: Lily dominating, They're going to drive the innovation in the
Speaker 15: space and continue on that tussle. But you know, given
Speaker 15: the size of the indication, there's room for other entrants
Speaker 15: these might include pfizor Zealand and and I'll say also
Speaker 15: and all of them have got drugs in mid ear
Speaker 15: least amid stage sevelopment.
Speaker 6: It's interesting.
Speaker 4: I'm looking at how Bank of America recently actually boosted
Speaker 4: their price target on Eli li Lad of five hundred
Speaker 4: dollars is actually trading around four hundred and forty four
Speaker 4: dollars right now. But this is based on the obesity
Speaker 4: drug demand.
Speaker 8: Yeah.
Speaker 3: And I mean, and Mikey, this is I mean, the US.
Speaker 1: Is really from you know, unfortunately leading the way in
Speaker 1: terms of cases, aren't aren't we?
Speaker 15: Yeah, I think the presidence in the US is high.
Speaker 15: China is obviously a big market as well, but when
Speaker 15: we look at you know, numbers in general, I think
Speaker 15: the presidence of the disease is on the on the
Speaker 15: rise everywhere.
Speaker 3: Yep, all right, all right, Mikey Shaw, folks.
Speaker 1: He I'm gonna say, Mikey, you were like one of
Speaker 1: our first analysts we ever hired to be I like
Speaker 1: fourteen or fifteen years ago, and I see him on zoom, Folks.
Speaker 3: He's actually got some gray hair.
Speaker 1: I mean, he was a kid when we hired him,
Speaker 1: and now he works along with san Fazelli, and they
Speaker 1: just do outstanding work covering the farmer space in the
Speaker 1: biotech space.
Speaker 3: Mikey is well known in the city of London.
Speaker 1: For with institutional investors and with the companies he owned,
Speaker 1: so we appreciate getting a few minutes of his time.
Speaker 1: Mike Schai is his senior Industry and also at Bloomberg Intelligence,
Speaker 1: based in our London office.
Speaker 3: So good stuff there. It's a great report, very detailed.
Speaker 3: Check it out on the Bloomberg terminal.
Speaker 1: Bigo gets you to all the Bloomberg Intelligence research and
Speaker 1: some top notch stuff there coming from a healthcare team.
Speaker 9: You're listening to the tape Cat's are live program Bloomberg
Speaker 9: Markets weekdays at ten am Eastern on Bloomberg Radio, the
Speaker 9: tune in app, Bloomberg dot Com, and.
Speaker 8: The Bloomberg Business App.
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Speaker 1: Just met and Paul Sweene here in the Bloomberg Interactive
Speaker 1: Brokers studio.
Speaker 6: Really excited for our next guest.
Speaker 3: I'm always excited to chat with Gina Martin Adams.
Speaker 1: He's a chief equity strategist for Bloomberg Intelligence. Gina, thanks much,
Speaker 1: thanks for joining us here. I'm just looking at my
Speaker 1: Russell What is it two thousand chart? Man, it's how
Speaker 1: to move over the last couple of days and this
Speaker 1: month and this month.
Speaker 3: Yeah, exactly what what's going on? Well?
Speaker 16: I think part of it is the FED. Part of
Speaker 16: it is finally regting to the point where the FED
Speaker 16: is looking likely to pause. Maybe it's just a skip,
Speaker 16: but it is pretty close to a pause, and FED
Speaker 16: tightening packages of the past have certainly dampened the outlook
Speaker 16: for small cap stocks. Part of it is also the
Speaker 16: earning cycle. You know, we do appear to be in
Speaker 16: the worst of the worst of the earning cycle right now.
Speaker 16: With an improvement going forward into twenty twenty four, small
Speaker 16: caps revenues are finally expected to recover into twenty twenty four.
Speaker 16: So to the degree that investors are getting some visibility
Speaker 16: into a recovery process emerging for small caps, that may
Speaker 16: be driving some of it, and certainly we see that
Speaker 16: with some of the more suppressed areas of small caps.
Speaker 16: Part of it is in the banking crisis, which really
Speaker 16: weighs on small cap stocks, does appear to be increasingly
Speaker 16: in the past. So certainly there's a lot of hesitancy
Speaker 16: with respect to that call. It's not as profound a
Speaker 16: drag on sentiment for small caps as it was in March.
Speaker 16: And then generally, I think it's just large caps have
Speaker 16: performed so well they're dragging the overall market a bit higher.
Speaker 16: Sort of investors are starting to capitulate to the idea
Speaker 16: that maybe the worst for equity performance is in the past.
Speaker 4: And as you know, Gina, investors watch small caps very
Speaker 4: closely because typically they'll bottom before larger caps, do you.
Speaker 4: I know, various points last year they were holding up
Speaker 4: better than their larger counterparts. But to your point, we
Speaker 4: saw some of that, especially in the smaller cap spiece
Speaker 4: pressured which was going on with the banking stresses. What
Speaker 4: do you think small caps are telling us moving forward
Speaker 4: as far as the direction of the stock market.
Speaker 16: Yeah, and they're confirming large cap gains. Finally, I mean,
Speaker 16: it's very intriguing when you look at the small caps charts.
Speaker 16: Small caps actually bottomed all the way back in June
Speaker 16: of last year. They never made low lows, but they've
Speaker 16: sort of failed to spring higher even though they did
Speaker 16: create a bottom and sort of traded sideways at large
Speaker 16: they really weren't springing higher until more recently when they
Speaker 16: finally appear to be breaking out. I mean they sprung
Speaker 16: a little bit from October to January, then got overbought.
Speaker 16: You know, some big sentiment swing happened in small caps.
Speaker 16: Now we're starting to see a little bit of recovery again.
Speaker 16: I think those January peaks are pretty consequential to watch
Speaker 16: for the small cap index. But you know, I look
Speaker 16: at small caps as a confirming signal. Usually when all
Speaker 16: stocks are rising, small caps are confirming large caps, you've
Speaker 16: got a much healthier market than when, you know, just
Speaker 16: large caps are a rising alone. So what we're seeing
Speaker 16: is a confirmation of the breakout in large caps that
Speaker 16: occurred in the latter part of May now occurring in
Speaker 16: small caps as well.
Speaker 1: You know, it's Fed day When the likes the surveillance
Speaker 1: stars like Tom Yes, you know, and and Lisa Brommins
Speaker 1: sticking around in the afternoon. You know it's Fed day
Speaker 1: because they have got to come up on one thirty
Speaker 1: with a big show.
Speaker 3: And guess who darkens the door here? We're excited about it.
Speaker 17: I mean, Gina Martin Adams knows.
Speaker 3: It'll move the mark I know, and it's.
Speaker 17: All there is to it, and it's going to be interesting.
Speaker 17: We've got a great set of guests today. Randall Krasner
Speaker 17: will lead us off to the former governor, without question,
Speaker 17: the nation's lead financial analyst. But but there'll be more
Speaker 17: And is you and I talked about earlier, Paul, there's
Speaker 17: a huge mystery here, and particularly first, I mean Gina.
Speaker 17: Martin Adams told me Apple's trading at a pe of
Speaker 17: thirty and it's like a pink sheet stock.
Speaker 1: So I mean, Gina, I mean, you know Tom's here,
Speaker 1: he's working hard, he's working late, same with Lisa Bromins.
Speaker 3: We don't no idea where John Pharaoh is. But what
Speaker 3: are you looking for, Gina? On on this FED day?
Speaker 16: I think everyone's kind of looking for the same. Is
Speaker 16: it a pause or is going to confirm a pause?
Speaker 16: Or are they going to talk about a skip? I
Speaker 16: think is the first thing that everyone's looking for. If
Speaker 16: they confirm a pause, do they then start to address
Speaker 16: the balance sheet? Is the second thing to look for.
Speaker 16: I do think we want to watch for their language
Speaker 16: around inflation and their comfort level with respect to the
Speaker 16: inflation trajectory. You know, the difference between a pause and
Speaker 16: the skip. We could be underestimating how meaningful that is.
Speaker 16: The skip this late in a rate high cycle. It
Speaker 16: is very rare. There have only been two times in
Speaker 16: which the FED since nineteen seventy has embarked upon a
Speaker 16: rate hike cycle, then skipped at the very end of
Speaker 16: it for just one month, then hiked again, and then
Speaker 16: was done. And the market performance following those two instances
Speaker 16: has been very different. So in nineteen eighty nine the
Speaker 16: market greeted that sort of FED hike trajectory pretty kindly.
Speaker 16: In two thousand they tried it again, and the stock
Speaker 16: market obviously did very poorly following that. But typically pauses
Speaker 16: are very good for stocks. I mean, the average gain
Speaker 16: following a pause as long as that pause lasts at
Speaker 16: least three months after or a rate hike cycle is
Speaker 16: about eight percent over three months. So if we get
Speaker 16: the confirmation of a pause, we could have a continuation
Speaker 16: of the momentum that has emerged in stocks. But I'm
Speaker 16: a little worried about this idea of a skip.
Speaker 10: A skip is.
Speaker 16: Unusual, as I said, and also creates pretty variable results
Speaker 16: for the equity market. So That's what I'm watching most carefully, Gina.
Speaker 4: This argument about breadth in the market. Obviously we had
Speaker 4: just talked about the strength and small caps. We're seeing
Speaker 4: it broaden out this month. When you're looking in the
Speaker 4: S and P five hundred with materials, industrials, other more
Speaker 4: sickle corners of the market. What do you need to
Speaker 4: see to give you more conviction that this breath is
Speaker 4: growing and not narrowing to these obviously more coherent when
Speaker 4: you're talking about these kind of big growth and technology.
Speaker 16: Stocks, yeah, we have seen them in the market broaden.
Speaker 16: I mean, frankly, I think that much of the commentary
Speaker 16: around the narrow breath of the market is just way
Speaker 16: over emphasizing narrow breath as a factor. What we find
Speaker 16: is narrow breaths more than often actually is a signal
Speaker 16: that will broaden to the rest of the market. It's
Speaker 16: not a word some sign that stocks are overdone or
Speaker 16: we're going to get some sort of crash following narrow breath.
Speaker 16: It's not a particular profound signal that said, I do
Speaker 16: like a market that has broad participation. You now got
Speaker 16: about sixty percent of S and P five hundred stocks
Speaker 16: trading above their two internay moving average. We love to
Speaker 16: see that above fifty percent to confirm that the market
Speaker 16: has entered a new bull phase. I think the more
Speaker 16: participation you have from sectors and the leadership of cyclicals
Speaker 16: relative to defensives is very consistently a strong signal for
Speaker 16: the durability of a rally. The fact that consumer discretionary stocks,
Speaker 16: for instance, are outperforming staples and have been all year.
Speaker 16: The fact that utilities are underperforming the rest of the
Speaker 16: market and have been all year. Those are consistent signals
Speaker 16: of longer term performance or a longer term, more durableble
Speaker 16: trend emerging in the equity market. And so the broader
Speaker 16: the market games are, the more comfortable I think the
Speaker 16: investor base gets with sort of dipping in the water.
Speaker 16: I think we do need to get passed a lot
Speaker 16: of this recession chatter before we can get too excited
Speaker 16: about it. But nonetheless it's a positive sign.
Speaker 3: Yes, that sound you hear, Gina, is Tom Keane dipping
Speaker 3: his toe in.
Speaker 17: I got the paper ticket out. I think I'm going
Speaker 17: to do an odd lot. I don't think I could
Speaker 17: stretch you up a hundred shares, you know, I'm thinking
Speaker 17: something safe, like you know Bank of New York or
Speaker 17: remember the safe dominion Mityell. I'll go on, give me
Speaker 17: the d e as at first purchase.
Speaker 3: So Gina tell us about earning's risk in this market.
Speaker 1: We talked to some guests earlier who you know, called
Speaker 1: that out is still a potential risk out there.
Speaker 16: Look, I think that we've been talking about earnings risk
Speaker 16: for so long that eve analysts haven't embedded an expectation
Speaker 16: for recession into their estimates, and we should really be
Speaker 16: ashamed of ourselves. I mean, I think that's really been
Speaker 16: the story all year. Is we got to a point
Speaker 16: in twenty twenty two where we were pricing in the
Speaker 16: equity market just really terrible conditions emerging on the earning stream.
Speaker 16: And what companies have proven so far this year is
Speaker 16: those things are not as bad as the analysts had anticipated.
Speaker 16: Analysts are still marking down their expectations, believe it or not,
Speaker 16: but they're not marking them down as fast as they
Speaker 16: were six months ago, eight months ago, nine months ago,
Speaker 16: and so the result is net positive for equities. I
Speaker 16: think that we're just in this space right now where
Speaker 16: our expectations were so grim by the end of twenty
Speaker 16: twenty two that it was almost impossible for companies not
Speaker 16: to beat those expectations, and I think that that's going
Speaker 16: to be the case for at least the next quarter
Speaker 16: or two, where expectations are already very grim. We're already
Speaker 16: seeing companies start to show some margin stability. So last week,
Speaker 16: last year's really weak players that had too many employees
Speaker 16: and we're overlaiden with cost pressures. They're starting to show
Speaker 16: some improvement. And on the other hand, you've got some
Speaker 16: deteriorating companies in the S and P five hundred, but
Speaker 16: are earnings and P five hundred, but they're being overwhelmed
Speaker 16: by the improvements at large.
Speaker 1: All right, Gina, thanks as always, aways appreciate getting a
Speaker 1: fe minutes of your time. Jean Martin Adams, chief Acorty
Speaker 1: strategist at Bloomberg Intelligence, and Tom, you guys, you and
Speaker 1: Lisa are going on at one thirty Bloomberg Radio and
Speaker 1: TV going to walk us through kind of what we're
Speaker 1: gonna get from this.
Speaker 17: It's going to be interesting to see the statement, obviously
Speaker 17: in Michael McKee's interpretation of it, but I think the
Speaker 17: press conference will be really extraordinary. I had the surveillance
Speaker 17: NAP I gotta go.
Speaker 8: Back to makeup.
Speaker 3: Yeah, exam, we need to work. A little work needs me.
Speaker 9: I look a little peak it.
Speaker 3: All right, Tom Ky, thanks so much for stopping by.
Speaker 9: You're listening to the tape cans are live program Bloomberg
Speaker 9: Markets weekdays at ten am Eastern on Bloomberg Radio, the
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Speaker 8: And the Bloomberg Business App.
Speaker 9: You can also listen live on Amazon Alexa from our
Speaker 9: flagship New York station, Just say Alexa play Bloomberg eleven thirty.
Speaker 3: Let's check in with Jeff Phipps.
Speaker 1: He's a portfolio manager in trading strategists at Picton Mahoney
Speaker 1: Asset Management. Jeff, again, it's a frust down here in
Speaker 1: the United States. It's Flag Day, but for folks that
Speaker 1: also follow the markets, it's it's FED Day as well.
Speaker 3: What do you expect from the US Federal Reserve today?
Speaker 1: And how's that kind of influencing kind of how you
Speaker 1: guys are allocating capital these days.
Speaker 18: Thanks for the question and happy to be on. So
Speaker 18: I mean, short term, I think, yes, there are solid
Speaker 18: reasons here for a FED pause today. That is a
Speaker 18: fairly consensus view. I do think that you know, there
Speaker 18: was there was enough in yesterday's CPI to think that
Speaker 18: the particularly on core services, if we do think about
Speaker 18: rents and as having a leg I do think that
Speaker 18: it's you know, likely that the median dots are most
Speaker 18: likely to move up, say twenty five basis points for
Speaker 18: the end of the year from the last update back
Speaker 18: in March, probably not fifty at this point, that's a possibility.
Speaker 18: I think though that the big picture, though, is probably
Speaker 18: probably more important here, particularly as we move into the
Speaker 18: second half. So this FED meeting is probably going to
Speaker 18: be a pause, which is consensus, but I think the
Speaker 18: bigger picture is really becoming more front and center.
Speaker 4: As we head into the second half of the year.
Speaker 4: How are you positioning.
Speaker 18: Well, I think when we think about the second half,
Speaker 18: and you know, I think we have to think about
Speaker 18: how we got here as well. We have a lot
Speaker 18: of moving parts right now for the FED to try
Speaker 18: to manage. We have this economic resilience across DM economies
Speaker 18: coming from a.
Speaker 8: Number of sources.
Speaker 18: We have a pretty substantial fiscal expansion that's been going
Speaker 18: on this year and we'll continue next year in the
Speaker 18: year after, and we also do have we are entering
Speaker 18: we are about fifteen months from the beginning of the
Speaker 18: hike cycle, So we're going to be in a window
Speaker 18: in the second half where historically more of those impacts
Speaker 18: start to play out. And second, and we also have
Speaker 18: a large treasury issue in schedule to refinance the the
Speaker 18: t g A, and then that is a few analogs
Speaker 18: for what's about to happen. So you know, I I
Speaker 18: do think that as we move into that second half
Speaker 18: where where the FED is probably going to be in
Speaker 18: a in a bit of a weight and see mode.
Speaker 18: And and we can make the case that if you
Speaker 18: if you you know that one of the measures of
Speaker 18: FED likes to look at is is a real rate
Speaker 18: version of of the FED rate. So if you look
Speaker 18: at FED fund rate and you and you back out
Speaker 18: some FORWD inflation expectation, it's approaching three percent, it's two
Speaker 18: point eight two point nine percent, and that is a
Speaker 18: pretty high number historically. So I think what the FED
Speaker 18: needs to do today and they probably will try, is
Speaker 18: to maintain a a forward set of expectations towards tightness
Speaker 18: that will in theory, in their maybe be able to
Speaker 18: to mitigate how how forward expectations for inflation react.
Speaker 1: So you know, the FED has stated Jeff that obviously
Speaker 1: that they are their number one goal here is to
Speaker 1: fight inflation. It looks like they're kind of doing it.
Speaker 1: Looking at the CPI print and the PPI print seems
Speaker 1: like it's kind of working.
Speaker 3: What do you think.
Speaker 8: I don't disagree. I think there's more work to do
Speaker 8: on CORE.
Speaker 18: I mean, if CORE is annuallyzing uh, you know four
Speaker 18: and a half five percent, that that number is still
Speaker 18: too high. I think there is still the understanding that
Speaker 18: that the variable the variable legs are are indeed variable,
Speaker 18: and that will take some time to play out. The
Speaker 18: one thing I'd say though, is that the uh, the
Speaker 18: ability for them to have a high level of confidence
Speaker 18: in terms of forward expectations for inflation not becoming embedded,
Speaker 18: because historically that can create a more entrenched expectation for inflation.
Speaker 18: It can make policy makers jobs much more difficult. So overall,
Speaker 18: I think that they they are getting some work done
Speaker 18: on headline and energy has a lot to do with
Speaker 18: that and that and that has been positive from the
Speaker 18: perspective of their policy interacting with with the economy. But
Speaker 18: I I do think they are they are, you know,
Speaker 18: wary of the fact that you know what happens. If
Speaker 18: if there is some exogynoist shock in the next six
Speaker 18: to nine months that does move energy prices higher, that
Speaker 18: would that would reduce that that real rate of of
Speaker 18: of on FED funds and would be a would be
Speaker 18: a potential concern.
Speaker 4: What range of inflation do you need to see get
Speaker 4: to where you're more comfortable. Obviously we have the c
Speaker 4: p I, but then there's the Fed Preferred Measure of
Speaker 4: Inflation with PCE.
Speaker 8: Right right.
Speaker 18: I think that there's a couple of measures that that
Speaker 18: that that matters, as PC is one of them. As
Speaker 18: you mentioned, I think a real a real rate sort
Speaker 18: of sort of in the on a one year basis,
Speaker 18: if we're using the inflation swaps as a as as
Speaker 18: a tool to back out to relate, it's something something
Speaker 18: above two and a half percent is important. And then
Speaker 18: on on core, I do think we need to see,
Speaker 18: you know, if if we're at if we're annualizing at
Speaker 18: a at a four and a half percent core or
Speaker 18: somewhere thereabouts in two or three months, I don't think
Speaker 18: that's going to be acceptable for the FAT. I think
Speaker 18: we need to start UH to see core UH annualizing
Speaker 18: it at a rate that that has that has a
Speaker 18: three handle over the next few months, and that and
Speaker 18: that is something that that that you know, is also
Speaker 18: going to be highly watched by this market as well.
Speaker 3: All Right, Jeff, thanks so much for joining us there.
Speaker 1: Jeff Phipps, portfolio manager and trading strategist at Picton Mahoney
Speaker 1: Asset Management. That up there in Ontario, Yeah, yeah, in Toronto,
Speaker 1: So good stuff up there. So I mean again, we're
Speaker 1: gonna hear you know, in uh a little bit of
Speaker 1: time here, We're going to get that statement from the
Speaker 1: FED at two m Wall Street time, and then the
Speaker 1: press conference at two thirty.
Speaker 4: Dots at two o'clock.
Speaker 2: Thanks for listening to the Bloomberg Markets podcasts. You can
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Speaker 2: podcast platform you prefer. I'm Matt Miller. I'm on Twitter
Speaker 2: at Matt Miller nineteen seventy three.
Speaker 3: And I'm fall Sweeney. I'm on Twitter at pt Sweeney.
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