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Speaker 1: Yeah, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene

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Speaker 1: Jay Lee. We bring you insight from the best in economics, finance, investment,

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Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud,

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Speaker 1: Bloomberg dot Com, and of course on the Bloomberg. Why

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Speaker 1: don't you get to free of beamish right now? On China, well,

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Speaker 1: let's do that. She joins us from Pantheon and Economics. Freya,

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Speaker 1: the Apple story looks like a China story. Is that

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Speaker 1: the read across? Can I read across from Apple into

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Speaker 1: China sort of consumer weakness or is it? Or is

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Speaker 1: the Apple story just idiot syn critic it's got the

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Speaker 1: wrong product or the wrong price point or whatever it is. No,

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Speaker 1: I think this is a pretty kind of macroeconomic story here,

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Speaker 1: although apples, so you can sort of you can read

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Speaker 1: across in the opposite direction as well. But in this case, actually,

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Speaker 1: all through last year, the headline retail sales um year

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Speaker 1: over year prints were coming in a little bit quite

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Speaker 1: significantly stronger than what the underlying data was telling us.

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Speaker 1: And even those headline prints were deteriorating the way they

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Speaker 1: have the way they published the data in China, you

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Speaker 1: get the the underlying levels data, and that doesn't always

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Speaker 1: match up with what you see flashing up with the

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Speaker 1: year of a year kind of headline prints because supposedly

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Speaker 1: those headlines are are adjusted for stampling distortions which occur

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Speaker 1: because firms fall in and out of the of the sample.

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Speaker 1: So if you have UM a lot of kind of

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Speaker 1: smaller firms because it only includes the larger farms, if

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Speaker 1: you have a lot of firms transitioning towards smaller firms

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Speaker 1: because their revenue is is falling, then you get this

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Speaker 1: big drop in the underlying value that the level of

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Speaker 1: retail sales values. But you can extrapolate from that UM

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Speaker 1: if you have that quantity of firms that are that

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Speaker 1: are falling out of the sample, that there is a

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Speaker 1: great deal of underlying weakness that wasn't really being reported

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Speaker 1: in the in their headline figures there. So that's certainly

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Speaker 1: from from the kind of the sales data was was there.

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Speaker 1: When did the Chinese authorities respond? We saw a little

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Speaker 1: step forward today increasing the number of banks that are

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Speaker 1: eligible for the reserve requirements cuts. They can lend a

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Speaker 1: little bit more money into the real economy. Do we

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Speaker 1: get a bazooker from the Chinese authorities. I don't think

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Speaker 1: we get a bazooker, because they still are very much

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Speaker 1: up against um a new constraints that they haven't had previously.

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Speaker 1: I'm one of those being the environmental constraints. So the

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Speaker 1: kind of the industrial the old guard polluting industrial companies,

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Speaker 1: they can't really they can't just ratchet up production there

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Speaker 1: anymore because it's such a political issue to have to

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Speaker 1: have clean air with these new environmental targets in place

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Speaker 1: as well. UM, and those old guard firms that are

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Speaker 1: the kind of the way in which that the authorities

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Speaker 1: have been used to driving the economy. UM. They're also

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Speaker 1: the over indebted firms as well, so they're they're cognizant

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Speaker 1: of the kind of the the longer term outlook UM.

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Speaker 1: And on top of that, we also have the to

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Speaker 1: realize that China's current account surpluses has dissolved into into

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Speaker 1: nothingness UM as a percentage of GDP it was it

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Speaker 1: was kind of nowhere UM. And that means that they

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Speaker 1: have limited space for for a fiscal kind of just

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Speaker 1: at the limited timing. Guy, let me bring up this chart.

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Speaker 1: I love this chart, folks. This is log China growth,

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Speaker 1: and all you gotta know is a volatility of years

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Speaker 1: ago the crisis obviously in the smoothness in the rollover

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Speaker 1: in their GDP growth that we've seen in the last

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Speaker 1: two or three even four years as well. What is

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Speaker 1: the mood like on the ground in China away from

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Speaker 1: the macro babble, away from the apple babble, what's the

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Speaker 1: domestic economy and mood like right now? Freya Well, I

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Speaker 1: think actually these kind of the lack of volatility that

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Speaker 1: is quite kind of perplexing in the context of Chinese

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Speaker 1: UM Chinese the listed data and also the kind of

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Speaker 1: the price movements that we've seen PPI over the last

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Speaker 1: few years that doesn't really reflect things that are going

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Speaker 1: on on the ground. And actually you can tell that

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Speaker 1: even from the from the data that the authorities published.

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Speaker 1: If you look at the nominal GDP growth and then

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Speaker 1: you kind of extrapolate what real GDP growth would be

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Speaker 1: by compiling your own deflated then you do get a

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Speaker 1: lot more volatility than than what is showing up in

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Speaker 1: in the in the the kind of official headlines there.

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Speaker 1: So I think actually that it's it's a lot weaker

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Speaker 1: than we're saying wonderful for beams and short orders. Thank

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Speaker 1: you so much for joining us some p I want

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Speaker 1: to focus on Apple in the here and now I'm

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Speaker 1: bringing wonderful wile lists and communications equipment analyst Walter, how

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Speaker 1: didn't they see this coming? I mean, this is a

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Speaker 1: huge miss in China. You know, Tim Cook did make

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Speaker 1: reference to subsidies and upgrade rates and things like that

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Speaker 1: and developed markets, and and that's certainly been an issue

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Speaker 1: for a number of years, but there's really no evidence

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Speaker 1: in the market about a this type of change in

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Speaker 1: terms of subsidies and upgrade rates. So this is really,

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Speaker 1: I think, primarily on the back of China, and it's

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Speaker 1: a massive mess. So you're talking about consumers that just

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Speaker 1: either can afford the phones. I mean, there could be

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Speaker 1: some market share losses that are going on there, but

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Speaker 1: really I think it's it's a it's a clear sign

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Speaker 1: that there's major economic issues going on in China right now, Walter.

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Speaker 1: Are our economists are saying it's much more a China

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Speaker 1: economic issue? Are John Butler Blumberg Intelligence? I asked him

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Speaker 1: the question. Let me ask you the same question as

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Speaker 1: you mentioned the price of the phone in America, vast

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Speaker 1: majority of people buy a monthly plan iPhone. Do they

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Speaker 1: do that in China? Or do they have to come

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Speaker 1: up with X number seven, eight hundred nine hundred dollars

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Speaker 1: to buy the toy? I mean, I think it's unique

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Speaker 1: in the US in terms of the payment plans and

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Speaker 1: how long we've haund. There's some other developed markets that

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Speaker 1: that have have adjusted to that. But in in in

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Speaker 1: some of these other prepaid markets, you're expected to come

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Speaker 1: up with um with a lot of money, right, But

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Speaker 1: there's also trade ins right. And Cook talked about trade

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Speaker 1: ins um yesterday as a way to offset this in

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Speaker 1: his in his note to investors. But again that is

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Speaker 1: not a new thing. Operators have offered trade in so

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Speaker 1: that's not like that's going to change the market. The

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Speaker 1: issue is, you know, people in China, I just don't

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Speaker 1: have the money to pay for it for these phones,

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Speaker 1: and to a much greater extent this year than any

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Speaker 1: prior year. John Templeton, Sir John would say, shares are

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Speaker 1: on sale today. Does Walter pisk load the boat here

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Speaker 1: on a some of the parts analysis? Are you gonna

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Speaker 1: wait for the debris to clear? At a hundred forty

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Speaker 1: three dollars? The free cash flow yield is now ten percent,

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Speaker 1: So and it's not like you have a company that's

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Speaker 1: not gonna do anything without money. They're gonna use that

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Speaker 1: free cash flow and the existing hundred and thirty billion

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Speaker 1: of net cash that they have to buy the stock back.

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Speaker 1: So even so, we had this before tom where where

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Speaker 1: the company wasn't generating growth and net income, but they

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Speaker 1: create they created the appearance of earnings growth by buying

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Speaker 1: the stock back, And that's exactly what's gonna happen this

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Speaker 1: year net income. You're not gonna have revenue growth this year.

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Speaker 1: Your net income might be down because there's gonna be

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Speaker 1: some margin pressure. There has to be when you have

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Speaker 1: this much of a revenue um you know, offload. But

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Speaker 1: you're gonna show some earnings growth, you know, relative to

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Speaker 1: the market. And at a ten percent yield and discount

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Speaker 1: to the overall market, I think it's a good value

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Speaker 1: idea still at this level. So what's the multiple that

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Speaker 1: this is going to try it out? Well, so what's

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Speaker 1: the basic assumption for you? So right now is trading

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Speaker 1: at this kind of in the market's like fourteen and

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Speaker 1: a half time something like that. I mean, I think

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Speaker 1: if they can return to growth. Even if you ripped

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Speaker 1: China out of your numbers, it's still a company that

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Speaker 1: could return to top line growth in the second half

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Speaker 1: of the year, generating decent earnings growth. So if you're

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Speaker 1: at parody with the market, that that can get you

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Speaker 1: to two hundred bucks a share or one, which is

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Speaker 1: our target. This is a cash machine. We always talk

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Speaker 1: about the gross margins over Apple, but at thirty percent,

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Speaker 1: I think that's the low end of the guidance range

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Speaker 1: as well. Walter, have you got any basic assumptions and

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Speaker 1: how have they changed in the last twenty four hours?

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Speaker 1: Just on the margins. I mean, whenever you pull in

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Speaker 1: revenue from a high margin product like that and you

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Speaker 1: can't transfer your expenses, that's a company that spent a

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Speaker 1: ton on has spent a ton on R and D

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Speaker 1: with a lot of not many new products to show

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Speaker 1: for it. You have to take your margins in. You

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Speaker 1: just have to do in. Thirty percent is still a

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Speaker 1: great number relative to other consumer electronic companies, but you

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Speaker 1: have to pull in the gross margin. I think going forward,

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Speaker 1: until you see some signs of stabilization and iPhone revenue,

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Speaker 1: there's going to be some big complaints about the communication

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Speaker 1: from this company over the last couple of months. World,

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Speaker 1: So first it was a change of the communication of

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Speaker 1: the guidance, and now it's the change of the items overrule.

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Speaker 1: They told us they wouldn't give us the unit numbers

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Speaker 1: and not to worry about that because things would still

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Speaker 1: be okay. Are you scratching your head somewhat about what

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Speaker 1: you've heard from this company over the last couple of

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Speaker 1: months to something not add up to you? I mean, look,

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Speaker 1: I think it's just a lack of experience of never

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Speaker 1: having to deal with this type of a revenue missed before. Right,

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Speaker 1: they haven't been through this and and you know whatever,

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Speaker 1: more than a decade. Uh. It just doesn't also look

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Speaker 1: good though, that sixty days or so ago you told

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Speaker 1: people you're not going to report iPhone units and then surprise, surprise,

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Speaker 1: it comes out that you're gonna miss your iPhone unit

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Speaker 1: number by like more than ten million people. It just

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Speaker 1: it doesn't look good. How do you respond then, is

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Speaker 1: you know, a frontline cell side analyst to the idea

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Speaker 1: that Tim Cook is reacting to President Trump's trade war?

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Speaker 1: I mean that's not even your strategic three five or

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Speaker 1: one week business plan. I mean the fact is Mr

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Speaker 1: Trump has upset the trade in revenue generating Apple cart

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Speaker 1: with American China, right It's possible to view it that way.

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Speaker 1: I would look at it the opposite way, which is

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Speaker 1: Apple is showing you the tough position that China is

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Speaker 1: in right now, so that gives our president a tremendous

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Speaker 1: amount of power in any trade war negotiation that he's

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Speaker 1: going to have going forward. I'm not sure that Apple's

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Speaker 1: miss is a result of the trade ward's reflective of

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Speaker 1: what's going on. It may have been enhanced more, you know,

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Speaker 1: in the recent weeks, but if anything, that's just showing

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Speaker 1: you the position that child in right now. Do you

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Speaker 1: have a meeting with Tim Cook at three pm this afternoon?

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Speaker 1: Are you going to be in that meeting? Walter Um?

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Speaker 1: They have ruined our abilities to situate at Manchester City

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Speaker 1: Liverpool match today unfortunately, maybe they'll use Liverpool billion from

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Speaker 1: Mr Head. What's the bt I G analyst and of

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Speaker 1: course Liverpool fan as well. Well. It's it great to

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Speaker 1: catch you, how with the business right now are Michael

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Speaker 1: McKee with Robert Chaplan of Dallas. Thank you very much

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Speaker 1: and good morning to our audience worldwide. On Bloomberg television

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Speaker 1: and radio. Thank you for joining us. Happy, I'm not

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Speaker 1: sure you look at the red on the screen there,

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Speaker 1: I'm not sure how happy it is for investors. So

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Speaker 1: I gotta start. There's only one question that matters to

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Speaker 1: the markets. Has the correction but long enough, deep enough,

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Speaker 1: severe enough that the FED has to react? Well? Uh,

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Speaker 1: let me let me answer it this way. There's three

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Speaker 1: big issues that I see reflected in the markets and

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Speaker 1: are consistent with what I'm seeing in the economy and

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Speaker 1: discussion of the context. Global growth decelerating um, interest sensitive

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Speaker 1: and economically sensitive industries are showing weakness, and financial conditions

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Speaker 1: have tightened. Uh, I mean credit spreads of widen. And

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Speaker 1: I think those three issues, I'm sure affecting the markets,

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Speaker 1: but they're also affecting my thinking about monetary policy. And uh,

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Speaker 1: it's gonna take some time to see the depth and

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Speaker 1: breadth of those three issues. But do you think the

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Speaker 1: FED should go on hold for now? My own view

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Speaker 1: is we should not take any further action on interest

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Speaker 1: rates until these issues are resolved, for better or for worse.

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Speaker 1: So I would be an advocate of taking no action.

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Speaker 1: And you know, for example, in the first couple of

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Speaker 1: quarters of this year. If you ask me my base case,

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Speaker 1: my base case would be take no action at all.

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Speaker 1: That could change if things improve. But my own view

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Speaker 1: right now is we should be patient and give some

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Speaker 1: time to this for the economy and to watch how

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Speaker 1: this situation unfolds. What do you think the markets know

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Speaker 1: something the Fed hasn't seen in terms of what's going

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Speaker 1: to unfold this year? Uh, I don't know about that.

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Speaker 1: I think we've been watching this very very carefully. I

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Speaker 1: watched the markets very careful. Others that the FED watched

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Speaker 1: this carefully. I think we've been trying to balance very

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Speaker 1: tight labor market, strong consumer UH and trying to meet

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Speaker 1: our dual mandate. But I think uh, I think it's

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Speaker 1: critical in the job I'm in that you will pay

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Speaker 1: very close attention to what the markets are saying. But

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Speaker 1: it's important in that in what they tell us about

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Speaker 1: what's going on in the economy. And also some of

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Speaker 1: these market forces, including financial conditions, can spill over and

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Speaker 1: tighten UH the economy and cause growth to slow, and

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Speaker 1: it's critical that we are very attuned to it. Well,

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Speaker 1: do you see that happening now? I think I think

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Speaker 1: it may be happening now. Yes, I mean, credit spreads

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Speaker 1: since October have widened pretty substantially. Haven't had a high

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Speaker 1: yield issue UH for the last number of weeks, very

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Speaker 1: little issuance, And I think it's suggests lack of access.

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Speaker 1: I think his history has showing us and shows me

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Speaker 1: that when you see that kind of action, it tends

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Speaker 1: to if it's prolonged, could lead to is slowing in

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Speaker 1: the economy. At the Dallas Fed, we've we've got an

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Speaker 1: estimate for GDP growth for two thousand nineteen that is

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Speaker 1: a little below two percent. You've been hearing me say

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Speaker 1: old during two thousand eighteen, while eighteen would be strong.

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Speaker 1: We think fiscal stimulus, the effect of it will wane

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Speaker 1: into two thousand nineteen, the impact of the FEDS rate

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Speaker 1: increases will take hold. UH. And so we expected some

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Speaker 1: slowing in the nineteen I think that's slowing is even

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Speaker 1: a little greater than we had expected. So I'm watching

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Speaker 1: this very very carefully. We changed your forecast at all.

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Speaker 1: Our GDP forecast for next year's come down a little bit.

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Speaker 1: We were still close to two and you've heard me

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Speaker 1: say before, it's been our view that by we'd be

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Speaker 1: trending back down to potential about one in three quarters.

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Speaker 1: But our nineteen forecast is has come down a little bit,

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Speaker 1: and it's been affected by some of these issues. I

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Speaker 1: just talked about global growth decelerating economically sensitive industries and

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Speaker 1: what we see going on with credits for ads and

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Speaker 1: the shape of the yield curve is another thing I

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Speaker 1: watched very very carefully, and all those things are affecting

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Speaker 1: our forecast. Is Apple telling you anything about the state

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Speaker 1: of the US, Chinese or global economy? You know, we've

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Speaker 1: talked for some time, We've been seen and I hear

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Speaker 1: from context for the last number of months that Chinese

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Speaker 1: growth has been somewhat weaker. It's masked by the fact

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Speaker 1: that they tend to use leverage, investment in state owned enterprises,

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Speaker 1: investment in infrastructure to meet their six and a half

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Speaker 1: percent goal. That but a lot of the indicators I'm

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Speaker 1: hearing from businesses tell me that Chinese growth has been weaker.

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Speaker 1: So it doesn't surprise me that we're seeing more indications

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Speaker 1: about weaker Chinese growth, and the trade tensions probably have

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Speaker 1: exacerbated that. Was Apple the tip of the spirit, the

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Speaker 1: beginning of the iceberg above the water. Are we going

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Speaker 1: to see more CEOs coming out with warnings like this. Uh.

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Speaker 1: I'm not going to comment on any specific company, but

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Speaker 1: but what I hear from I talked about thirty c

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Speaker 1: e O s a month, and what I'm hearing from

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Speaker 1: them is there and some weakness in China. So it

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Speaker 1: doesn't surprise me, uh that you're gonna see some further weakness.

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Speaker 1: And I've been saying for some time, I don't think

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Speaker 1: China can indefinitely keep using leverage to grow GDP. And

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Speaker 1: also they're very dependent on trade. Uh, and I'm sure

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Speaker 1: these trade tensions have had some effect. And the one

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Speaker 1: comment I'd make, why does it matter to us? And

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Speaker 1: the reason I watch it so carefully about of SMP

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Speaker 1: five revenues come from outside the United States, So China

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Speaker 1: growth slowing, We're unlikely to be immune for that. We

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Speaker 1: might be immune to it for a time, but not indefinitely.

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Speaker 1: It's likely to spill over into US growth. And that's

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Speaker 1: what I'm watching very carefully. Okay, here college calling for

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Speaker 1: a pause in a monetary policy action? What about the

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Speaker 1: balance sheet? J Paul was pretty firm and saying it

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Speaker 1: is news conference that that's going to keep running in

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Speaker 1: the background. So there's a process for the balance sheet,

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Speaker 1: which we it up and started in the fall of

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Speaker 1: two thousand and seventeen. It's a it's a specific process

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Speaker 1: where we let maturities laps. We're not selling securities, We're

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Speaker 1: just not replacing maturities as they expire. My own view,

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Speaker 1: and I've said this also to you several times, this

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Speaker 1: is unprecedented. There's no textbook for exiting quantitative easing, UH

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Speaker 1: and my own views. While there's a process in place,

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Speaker 1: we should be very vigilant. I'm watching it very carefully

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Speaker 1: and be very open if necessary to making adjustments in

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Speaker 1: this balance sheet runoff if we need to. I'm not

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Speaker 1: at that point yet, but I'm watching it very very carefully,

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Speaker 1: and I think we should be very open minded about

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Speaker 1: about making adjustments to that process if we need to,

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Speaker 1: a lot of traders have been complaining in recent weeks

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Speaker 1: that the balance sheet has caused the drying up of liquidity.

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Speaker 1: Do you think that's fair or is it just a

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Speaker 1: repricing of credit. There's a number of factors. I've spent

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Speaker 1: about thirty years in the markets, as you know, UH,

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Speaker 1: and and I watched very carefully, and we tracked trading

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Speaker 1: volumes trading volumes today are lower than they were ten

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Speaker 1: years ago. That's a part that was true even before

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Speaker 1: the FEDS started to run off its balance sheet, and

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Speaker 1: so um UH, the UH with a somewhat lack of

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Speaker 1: liquidity in two way flows. My guess is the market's

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Speaker 1: more sensitive to any reduction of central bank liquidity, and

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Speaker 1: so it's just something we have to be aware of.

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Speaker 1: But the point of there is I'm watching it very

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Speaker 1: very carefully, and we ought to be very vigilant about

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Speaker 1: monitoring this process. It's not been done before, and we

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Speaker 1: should be learning from this process as unfolds. Well, how

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Speaker 1: could you adjust the balance sheet runoff? I don't really

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Speaker 1: want to speculate right now. We have we have a

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Speaker 1: runoff rate between treasuries and mortgage backed securities about fifty

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Speaker 1: billion dollars a month. UH. There are a number of

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Speaker 1: things we could do in terms of caps or the pacing,

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Speaker 1: but I don't I'm not there yet, and I don't

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Speaker 1: even want to speculate on it other than to say

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Speaker 1: we're watching it very very carefully, and I'm watching it

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Speaker 1: very very carefully, and I think we ought to be

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Speaker 1: You said we would go down to trend growth, maybe

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Speaker 1: by the end of the year. But you also mentioned

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Speaker 1: yield curve in version. Things you're watching. Have your recession

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Speaker 1: fears risen at all? Uh, I've I've note a number

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Speaker 1: of things. First of all, the weakness and what I'm

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Speaker 1: talking about tightening and credit conditions, I think I'm very

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Speaker 1: I note in particular that the two year yield is

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Speaker 1: is now below the one year yield, which tells me

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Speaker 1: at least the market is saying that they expect some

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Speaker 1: sluggishness in nineteen, but even more sluggishness in UH and UM,

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Speaker 1: and obviously the ten year rate in the two sixties

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Speaker 1: tells me the outlook for growth is very sluggish. So

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Speaker 1: I think the main thing I take from all that

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Speaker 1: is it's critical that we take the right action at

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Speaker 1: the FED during this period. There's a very critical time.

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Speaker 1: We need to be very vigilant, we need to be

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Speaker 1: on our toes, and I think patients is a critical

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Speaker 1: tool we should be using during this period. We can

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Speaker 1: get this right. But normalizing monetary policy, by the way,

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Speaker 1: it was never going to be easy. For those who

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Speaker 1: thought that the process of normalization was going to be easy,

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Speaker 1: it's not, and we were destined to go through periods

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Speaker 1: like this, but it's critical that we handle this the

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Speaker 1: right way. A lot of investors come on our shows

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Speaker 1: and say, at this point the FED has gone too far.

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Speaker 1: You've already tightened too much. Is there a possibility they're right?

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Speaker 1: You will know in hindsight. My guess is that when

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Speaker 1: we look back a year or two years from now,

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Speaker 1: we'll talk less about the fact that we're at two

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Speaker 1: and a quarter to two and a half percent today

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Speaker 1: and more about what the FED does from here. Um.

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Speaker 1: I think that I think what we do in two

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Speaker 1: thousand nineteen will turn out to be more significant than

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Speaker 1: whether two and acquarter to two and a half is

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Speaker 1: too far. And I'll remind people at a two percent

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Speaker 1: inflation rate means real interest rates or a quarter to

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Speaker 1: a half. Also, uh, my own view has been up

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Speaker 1: to a few months ago, the FED doesn't need to

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Speaker 1: be stimulating the economy. We're still, in my view, mildly

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Speaker 1: or very modestly stimulative. We're not restrictive here. So my

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Speaker 1: guess is it's gonna matter much more on what we

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Speaker 1: do from here than anything we've done up to now.

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Speaker 1: We're talking with Robert Kaplan. He's the president of the

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Speaker 1: Dallas Federal Reserve banquet joining us for a New year

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Speaker 1: interview this morning. UH. You look at the w I

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Speaker 1: r P function on the Bloomberg calculates interest rate probabilities,

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Speaker 1: and basically the markets have priced out any move for

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Speaker 1: two thousand nineteen. In fact, there's more likelihood of a

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Speaker 1: cut before the end of the year than another rate increase.

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Speaker 1: Is that fair assumption in the markets? Uh? Market market

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Speaker 1: expectations can change on a dime, Sentiment can change. I

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Speaker 1: can just tell you my own view, which is UH,

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Speaker 1: I would advocate we shouldn't be taking any further action

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Speaker 1: until some of these uncertainties resolved themselves, and I think

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Speaker 1: that could take several months. I'm open minded about what

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Speaker 1: the timetable might be UH, and will be watching very

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Speaker 1: very carefully. Has the idea of a cut even entered

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Speaker 1: your discussions or mind? Yet? It hasn't entered my mind.

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Speaker 1: I think my main UH, my main objective is just

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Speaker 1: to be vigilant and be patient UH and monitoring the

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Speaker 1: economy during during this period here for the next number

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Speaker 1: of months. Inflation, in my judgment, is not running away

410
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Speaker 1: from us. We're running about two. I think the structural

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Speaker 1: forces of technology and to some extent globalization or having

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Speaker 1: immuting effect on inflation. So we've got the luxury at

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Speaker 1: the FED. We're very fortunate. We've got the luxury to

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Speaker 1: be patient, and we ought to take advantage of that opportunity.

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Speaker 1: You're the president of the Federal Reserve Bank of the

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Speaker 1: oil patch. So with oil prices down, is this gonna

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Speaker 1: be like two thousand and sixteen where investments only drives

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Speaker 1: up and that hits the larger economy. Uh, My guess

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Speaker 1: is probably won't go to that extent. But we've got

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Speaker 1: a few things going on. Some of them are supply

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Speaker 1: related and some are demand related. So US has produced

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Speaker 1: more than people that expected. Uh. That's number one, that

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Speaker 1: the shale uh and and permium has been much more

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Speaker 1: prolific than people thought. Number Two, Saudi Arabia increase production

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Speaker 1: as you know in other opaque countries, and then the

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Speaker 1: US gave more waivers than we're expected for Iranian production.

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Speaker 1: So that's the supply side that's created some excess supply.

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Speaker 1: But the other thing that's going on in the price

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Speaker 1: is people are worried about global deceleration, growth deceleration, and

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Speaker 1: that's affecting the price. To this is as part of

431
00:23:40,840 --> 00:23:43,920
Speaker 1: this is a demand story. UH. I think you'll see

432
00:23:43,960 --> 00:23:46,639
Speaker 1: in the oil patch, because there's so many drilled and

433
00:23:46,760 --> 00:23:50,160
Speaker 1: uncomplete but uncompleted wells, you'll see production still this year

434
00:23:50,280 --> 00:23:53,159
Speaker 1: net increased by a million barrels a day plus. I

435
00:23:53,200 --> 00:23:55,800
Speaker 1: think the issue will be if this lower prices go

436
00:23:55,920 --> 00:23:57,920
Speaker 1: on for an extended period of time, you'll have some

437
00:23:58,080 --> 00:24:03,280
Speaker 1: muting effect on capex and may effect. But our survey

438
00:24:03,440 --> 00:24:06,040
Speaker 1: show and my discussions with contexts and just even at

439
00:24:06,080 --> 00:24:09,480
Speaker 1: this boil price were above break even from most areas

440
00:24:09,520 --> 00:24:13,959
Speaker 1: of the Permian basin. UH. Trump tweets government shutdown, trade wars.

441
00:24:14,440 --> 00:24:17,800
Speaker 1: Does the dysfunction in Washington have any discernible impact on

442
00:24:17,880 --> 00:24:21,560
Speaker 1: the economy yet, as far as you can see, I'm

443
00:24:21,600 --> 00:24:24,040
Speaker 1: not going to comment on any any one of those

444
00:24:24,119 --> 00:24:26,560
Speaker 1: as you as you probably won't surprise you. But I

445
00:24:26,600 --> 00:24:28,879
Speaker 1: would say the general level of and certainty out there

446
00:24:28,960 --> 00:24:31,240
Speaker 1: is very high. I talk to business people regularly, I'm

447
00:24:31,280 --> 00:24:33,960
Speaker 1: a former business person, and I would say the level

448
00:24:34,040 --> 00:24:37,640
Speaker 1: of uncertainty is very high. And UH, and I think

449
00:24:37,680 --> 00:24:39,879
Speaker 1: when business people feel uncertain, it tends to have a

450
00:24:40,000 --> 00:24:46,320
Speaker 1: chilling effect on capex, employment decisions. You know, UH, trade

451
00:24:46,400 --> 00:24:50,600
Speaker 1: tensions are are an example, and part of that uncertainty. Also,

452
00:24:50,640 --> 00:24:52,720
Speaker 1: I'm very aware of the fact that input costs for

453
00:24:52,800 --> 00:24:55,760
Speaker 1: companies have gone up, pricing power is lower than it's

454
00:24:55,800 --> 00:24:58,320
Speaker 1: been in my lifetime, and so there's tends to be

455
00:24:58,400 --> 00:25:01,600
Speaker 1: a margin squeeze going on. All the creates uncertainty, which

456
00:25:01,720 --> 00:25:05,240
Speaker 1: tends to cause businesses to be more careful about making

457
00:25:05,320 --> 00:25:08,520
Speaker 1: investment decisions. Where the President's tweets about the FED disgusted

458
00:25:08,560 --> 00:25:11,880
Speaker 1: in any way overtly or indirectly at the December nineteenth meeting, yeah,

459
00:25:11,920 --> 00:25:14,359
Speaker 1: I won't. I won't comment on that other than to say,

460
00:25:15,000 --> 00:25:18,520
Speaker 1: which won't surprise you. The standard for the FED, which

461
00:25:18,920 --> 00:25:22,240
Speaker 1: I'm confident will adhere to, is will will make decisions

462
00:25:22,800 --> 00:25:26,960
Speaker 1: without regard to political influence or political considerations. And I'm

463
00:25:27,080 --> 00:25:31,239
Speaker 1: very confident around the table that's the standard we're gonna uphold. Well,

464
00:25:31,280 --> 00:25:33,800
Speaker 1: the President did tweet that if the impass over the

465
00:25:34,040 --> 00:25:37,679
Speaker 1: government shutdown continues, he might close the southern border. As

466
00:25:37,760 --> 00:25:40,480
Speaker 1: the FED official responsible for much of that southern border,

467
00:25:40,720 --> 00:25:45,159
Speaker 1: what impact would that have? Well, Uh, the fact of

468
00:25:45,200 --> 00:25:48,920
Speaker 1: the matter is our trade flows with Mexico are critical

469
00:25:49,080 --> 00:25:52,560
Speaker 1: to US competitiveness or critical the US GDP Texas by

470
00:25:52,600 --> 00:25:54,919
Speaker 1: the Way that is the largest exporting state in the country,

471
00:25:55,200 --> 00:25:57,919
Speaker 1: but there's a whole swath of industries in the United

472
00:25:57,960 --> 00:26:02,720
Speaker 1: States that use logistic sense supply chains across that border

473
00:26:03,160 --> 00:26:06,320
Speaker 1: to improve their global competitiveness. It's critical the jobs and

474
00:26:06,440 --> 00:26:08,800
Speaker 1: growth in the United States when you look ahead to

475
00:26:08,920 --> 00:26:13,280
Speaker 1: two thousand nineteen. Uh, has your outlook changed in terms

476
00:26:13,480 --> 00:26:17,440
Speaker 1: of whether you're worried about where we are? Uh? Do

477
00:26:17,520 --> 00:26:20,520
Speaker 1: you think it can be managed? Can the FED bring

478
00:26:20,640 --> 00:26:24,760
Speaker 1: us in for a soft landing. I'm hopeful that we can,

479
00:26:25,160 --> 00:26:28,479
Speaker 1: but I think it's critical what we do now. Uh.

480
00:26:28,920 --> 00:26:31,240
Speaker 1: You know, people ask me about the probability of recession

481
00:26:31,400 --> 00:26:33,479
Speaker 1: and what I tell them, there'll be a recession someday.

482
00:26:33,920 --> 00:26:37,920
Speaker 1: Our job at the FED is is maximum employment with

483
00:26:38,000 --> 00:26:41,280
Speaker 1: price stability and to try to extend this expansion. And

484
00:26:41,400 --> 00:26:44,240
Speaker 1: I think we have an opportunity, depend on what we

485
00:26:44,400 --> 00:26:47,040
Speaker 1: do here in the next months, that we can handle

486
00:26:47,160 --> 00:26:51,520
Speaker 1: this right where we can, we can achieve that dual mandate.

487
00:26:51,640 --> 00:26:54,040
Speaker 1: But it's critical I think what we do here over

488
00:26:54,080 --> 00:26:57,000
Speaker 1: the next several months. Robert Caplan, President of the Dallas FED,

489
00:26:57,080 --> 00:27:00,560
Speaker 1: joining us on Bloomberg Television and Radio worldwide this morning.

490
00:27:00,840 --> 00:27:04,399
Speaker 1: Thank you very much With Michael McKie, thank you so much,

491
00:27:04,400 --> 00:27:06,840
Speaker 1: of course, Mr McKee, and the press conferences of Chairman

492
00:27:06,880 --> 00:27:10,000
Speaker 1: Powell and here with the Dallas Ft President. Right at

493
00:27:10,040 --> 00:27:13,480
Speaker 1: the end of that interview, John Farrell was really classic caplan.

494
00:27:13,720 --> 00:27:17,960
Speaker 1: It's critical what we do now, and by we, I

495
00:27:18,080 --> 00:27:21,320
Speaker 1: think it's fascinating. I know with Capinet's an openly what

496
00:27:21,440 --> 00:27:24,680
Speaker 1: does President Trump do? What does Secretary of Minution do?

497
00:27:25,240 --> 00:27:27,919
Speaker 1: What does Chairman Powell do in the set of decisions?

498
00:27:28,200 --> 00:27:30,840
Speaker 1: And John what I really are there within his devilishness

499
00:27:31,119 --> 00:27:47,240
Speaker 1: was a more data dependent fet to international relations in

500
00:27:47,320 --> 00:27:51,119
Speaker 1: our first conversation this year. But James Stavrida is he

501
00:27:51,280 --> 00:27:54,560
Speaker 1: is as a TuS Fletcher school uh, a former admal

502
00:27:54,680 --> 00:27:57,040
Speaker 1: of the Navy with a nod An acquaintance to being

503
00:27:57,280 --> 00:28:00,800
Speaker 1: on the boat, on the ship and also working with

504
00:28:00,960 --> 00:28:03,920
Speaker 1: NATO as well. J Sevita's Happy New Year to you.

505
00:28:04,800 --> 00:28:08,320
Speaker 1: As usual, you start strong with looking at the reading

506
00:28:08,400 --> 00:28:11,159
Speaker 1: that needs to be done, and I love how you

507
00:28:11,320 --> 00:28:15,240
Speaker 1: go to one of my favorite authors, Nathaniel Philbrick talking

508
00:28:15,320 --> 00:28:18,840
Speaker 1: about the Battle of York Town and the value of allies.

509
00:28:19,359 --> 00:28:24,159
Speaker 1: Does the Pentagon have any allies left? Yeah, they've been

510
00:28:24,240 --> 00:28:27,720
Speaker 1: dropping like flies lately, Tom, but so far we do

511
00:28:27,920 --> 00:28:30,879
Speaker 1: have allies, and we ought to remember that. And as

512
00:28:30,960 --> 00:28:34,000
Speaker 1: we look back on that brilliant book by Nat Philbrick,

513
00:28:34,040 --> 00:28:36,560
Speaker 1: good friend of mine, Um, we ought to recall that

514
00:28:37,200 --> 00:28:39,960
Speaker 1: it was France, our ally, who stood with us and

515
00:28:40,040 --> 00:28:43,840
Speaker 1: delivered our independence. And today the NATO Alliance is strong,

516
00:28:44,000 --> 00:28:47,480
Speaker 1: Japan is strong, South Korea is strong. Ure a little

517
00:28:47,560 --> 00:28:51,720
Speaker 1: pressure from this administration, but still a basic part of

518
00:28:51,760 --> 00:28:55,680
Speaker 1: our foreign policy. Within the conversations you have, and it

519
00:28:55,720 --> 00:28:57,360
Speaker 1: would be rude of me to say, have you spoken

520
00:28:57,360 --> 00:29:00,960
Speaker 1: to Gentle Madison all that blogny, But the way that

521
00:29:01,080 --> 00:29:04,320
Speaker 1: the General has been treated by the President, how does

522
00:29:04,520 --> 00:29:11,360
Speaker 1: your Pentagon respond to that? As an institution? Um? Informally,

523
00:29:11,720 --> 00:29:16,120
Speaker 1: there is enormous dismay in the Pentagon that somebody of

524
00:29:16,240 --> 00:29:20,600
Speaker 1: the stature and the intellect and the quality of General

525
00:29:20,680 --> 00:29:25,320
Speaker 1: Jim Mattis, whom I've known for decades, was summarily dismissed

526
00:29:25,920 --> 00:29:30,480
Speaker 1: or quit, depending on whose version of events you follow. Officially, Tom,

527
00:29:31,200 --> 00:29:33,480
Speaker 1: the Pentagon will continue to do what it always does.

528
00:29:33,560 --> 00:29:35,800
Speaker 1: It will stand on a law and defend this country

529
00:29:35,840 --> 00:29:38,800
Speaker 1: to the end. Ad mustefritis. And what if you could

530
00:29:38,880 --> 00:29:42,720
Speaker 1: just sort of use your naval and strategic background in

531
00:29:42,800 --> 00:29:45,120
Speaker 1: the context of China and a book that you have

532
00:29:45,240 --> 00:29:48,800
Speaker 1: recommended called On Desperate Ground and what we should take

533
00:29:48,840 --> 00:29:52,920
Speaker 1: away from reading this book by Hampton Sides about China

534
00:29:53,080 --> 00:29:57,600
Speaker 1: and understanding them not only from a military and trade perspective,

535
00:29:57,720 --> 00:30:01,800
Speaker 1: but from a political and cultural perspective. Yeah, terrific question.

536
00:30:01,880 --> 00:30:04,440
Speaker 1: The book is about the Korean War, and it's a

537
00:30:04,560 --> 00:30:07,800
Speaker 1: cautionary tale for modern times. Right. In other words, we

538
00:30:08,000 --> 00:30:10,480
Speaker 1: know what a war on the Korean Peninsula would look like,

539
00:30:11,240 --> 00:30:15,160
Speaker 1: hundreds of thousands, if not millions dead. That was before

540
00:30:15,560 --> 00:30:19,000
Speaker 1: there were nuclear weapons involved. So a we ought to

541
00:30:19,080 --> 00:30:22,400
Speaker 1: take the cautionary message and be we are to remember

542
00:30:22,960 --> 00:30:26,280
Speaker 1: when China's back was pushed to the wall by MacArthur

543
00:30:26,480 --> 00:30:30,800
Speaker 1: with U. S troops surging north. They responded, They responded hard,

544
00:30:30,840 --> 00:30:33,560
Speaker 1: and they pushed us all the way back down that peninsula.

545
00:30:33,880 --> 00:30:37,600
Speaker 1: We should not underestimate China's will in a military conflict.

546
00:30:38,120 --> 00:30:41,200
Speaker 1: So I wouldn't say we're quite on desperate ground yet

547
00:30:41,440 --> 00:30:45,480
Speaker 1: between the US and China, but skirmishes lead to wars.

548
00:30:45,800 --> 00:30:47,959
Speaker 1: We need to be very cautious and careful and how

549
00:30:48,000 --> 00:30:50,360
Speaker 1: we deal with China. So what is the scuttle but

550
00:30:50,640 --> 00:30:55,680
Speaker 1: among your colleagues and other officials in an outside of

551
00:30:55,760 --> 00:30:59,160
Speaker 1: the military about the future of the United States role

552
00:30:59,200 --> 00:31:03,640
Speaker 1: in the Pacific. We need to remain engaged. To walk

553
00:31:03,720 --> 00:31:06,960
Speaker 1: away from the Pacific takes us away from the economic

554
00:31:07,080 --> 00:31:10,120
Speaker 1: engine of the Earth. On the other hand, we have

555
00:31:10,320 --> 00:31:13,600
Speaker 1: got to find a modus vivendi with China. And I'm

556
00:31:13,720 --> 00:31:17,720
Speaker 1: particularly concerned this week with the exchange of messages, if

557
00:31:17,760 --> 00:31:21,680
Speaker 1: you will, between President G of China and President PSI

558
00:31:22,240 --> 00:31:25,960
Speaker 1: of Taiwan in their New Year's messages, they went back

559
00:31:26,000 --> 00:31:29,840
Speaker 1: and forth about unification. Uh, that could be a real

560
00:31:29,920 --> 00:31:34,480
Speaker 1: flashpoint in that's been relatively quiet over the last decade.

561
00:31:35,840 --> 00:31:38,320
Speaker 1: I of course identified you with Fletcher School, and of

562
00:31:38,400 --> 00:31:41,520
Speaker 1: course you exited Tufson Fletcher School here after five years

563
00:31:41,880 --> 00:31:45,840
Speaker 1: hurting cats known as a faculty, and I would love

564
00:31:45,960 --> 00:31:50,560
Speaker 1: to know within the vogue of international relations, what was

565
00:31:50,640 --> 00:31:55,840
Speaker 1: your biggest surprise for students within the international relations after

566
00:31:56,000 --> 00:32:00,320
Speaker 1: five years? It Fletcher, it is so in now to

567
00:32:00,560 --> 00:32:06,280
Speaker 1: do international relations. What's your message to students, undergraduates, graduates

568
00:32:06,560 --> 00:32:11,240
Speaker 1: and their parents who want to pursue I are number

569
00:32:11,320 --> 00:32:15,920
Speaker 1: one by far, is that international relations gives you an

570
00:32:15,960 --> 00:32:20,600
Speaker 1: opportunity to serve to serve your country, uh conventionally in

571
00:32:20,680 --> 00:32:24,520
Speaker 1: the military, but in the diplomatic corps, at the Central

572
00:32:24,560 --> 00:32:30,560
Speaker 1: Intelligence Agency, UM in international business is a form of service,

573
00:32:30,760 --> 00:32:34,959
Speaker 1: engaging globally provide service to the world. And I'll close

574
00:32:35,080 --> 00:32:39,440
Speaker 1: by saying our students focused, in particular Tom on issues

575
00:32:39,680 --> 00:32:44,680
Speaker 1: of equality globally in the environment. And it's very idealistic

576
00:32:44,760 --> 00:32:47,600
Speaker 1: space for students to be in, and I think is

577
00:32:47,920 --> 00:32:50,640
Speaker 1: a very powerful one in today's world. Jametro Vidas, thank

578
00:32:50,680 --> 00:32:53,400
Speaker 1: you so much, greatly appreciate it. Writing for Bloomberg Opinion

579
00:32:54,080 --> 00:32:58,560
Speaker 1: as well in the former UH NATO UH Supreme Allied Commander.

580
00:33:11,800 --> 00:33:15,880
Speaker 1: Where is asking a good water with Bloomberg Intelligence? And

581
00:33:16,000 --> 00:33:20,440
Speaker 1: this has to do with the processing of biotechnology. It's

582
00:33:20,520 --> 00:33:24,680
Speaker 1: not about Leononager's bio camera, Morrison and Boyd for those

583
00:33:24,680 --> 00:33:27,800
Speaker 1: of you have a certain vintage in organic chemistry. It's

584
00:33:27,800 --> 00:33:33,880
Speaker 1: about the technology folding. It leads to Bristol Myers Celgene.

585
00:33:34,080 --> 00:33:38,560
Speaker 1: Were you surprised at this acquisition of is it dinosaurs mating?

586
00:33:38,800 --> 00:33:42,760
Speaker 1: Can you get get more sophisticated than that? I think

587
00:33:42,920 --> 00:33:45,520
Speaker 1: a couple of investor friends of us putting very eloquently.

588
00:33:45,600 --> 00:33:49,360
Speaker 1: Tomas is blind leading the blind Okay. I mean, look,

589
00:33:49,560 --> 00:33:54,680
Speaker 1: this is this is um celgene was built on protein homeostasis,

590
00:33:54,760 --> 00:33:56,520
Speaker 1: as you know UM but I think this is a

591
00:33:56,640 --> 00:33:59,160
Speaker 1: very still You got to tell people what is protein

592
00:33:59,400 --> 00:34:03,360
Speaker 1: HomeOS basically regulating the levels of different types of protein

593
00:34:03,480 --> 00:34:08,279
Speaker 1: your body. And they found that that has a immunomodalityary response.

594
00:34:08,360 --> 00:34:11,920
Speaker 1: He to stimulates or tones it down. So Selgian drugs

595
00:34:11,960 --> 00:34:14,520
Speaker 1: and it's it's lifeblood has been built around this, but

596
00:34:14,960 --> 00:34:16,680
Speaker 1: it was something that I think they kind of stumble

597
00:34:16,760 --> 00:34:19,760
Speaker 1: upon um and we're still understanding about how this actually

598
00:34:19,880 --> 00:34:23,440
Speaker 1: really works. And you know, recent literature that has come

599
00:34:23,480 --> 00:34:25,960
Speaker 1: out of the last decade or so, it's interesting, but

600
00:34:26,120 --> 00:34:29,359
Speaker 1: still hasn't led to the next There's no blockbuster there.

601
00:34:29,400 --> 00:34:31,400
Speaker 1: I mean revelm it is, it's a massive drugs, but

602
00:34:31,480 --> 00:34:33,719
Speaker 1: Revelment is already on the market right right with the

603
00:34:33,960 --> 00:34:37,480
Speaker 1: follow ones. We've not seen a good following yet. You know,

604
00:34:37,560 --> 00:34:39,800
Speaker 1: you're work in Western New York at are at Rochester

605
00:34:39,920 --> 00:34:42,360
Speaker 1: Institute of Technology, and that of course means the University

606
00:34:42,360 --> 00:34:45,640
Speaker 1: of Rochester next door in Strong Memorial Hospital. There's a

607
00:34:45,680 --> 00:34:49,040
Speaker 1: million Strong Memorial hospitals out there. We're in the old days.

608
00:34:49,239 --> 00:34:52,319
Speaker 1: You did research for big farmer companies to go right

609
00:34:52,400 --> 00:34:56,120
Speaker 1: where pim Fox was, which is Blockbusters. Is there a

610
00:34:56,320 --> 00:35:00,759
Speaker 1: desperation in this transaction because those nostalgic old days are over?

611
00:35:01,800 --> 00:35:04,080
Speaker 1: I mean, I don't think the nostalgic all days are

612
00:35:04,120 --> 00:35:07,920
Speaker 1: really over. There's still Blockbusters out there. But I think

613
00:35:08,040 --> 00:35:10,879
Speaker 1: what the rationale for Bristol was that they had cash

614
00:35:10,920 --> 00:35:14,400
Speaker 1: to deploy. And this is uh, you know Selgians right now,

615
00:35:14,560 --> 00:35:17,200
Speaker 1: just business, very cash generative, and I think they will

616
00:35:17,239 --> 00:35:20,719
Speaker 1: look at this is a financial They're buying a cash flow.

617
00:35:20,960 --> 00:35:23,600
Speaker 1: Absolutely from a portfolio standpoint, we don't see a lot

618
00:35:23,680 --> 00:35:26,840
Speaker 1: of actual sense of overlap. But the sensibility here. Do

619
00:35:27,000 --> 00:35:33,240
Speaker 1: you sense any relief from Celgene shareholders that oh my goodness, thanks,

620
00:35:33,280 --> 00:35:38,960
Speaker 1: Oh yeah, thank my lucky stars, someone is buying the company. Yeah.

621
00:35:39,080 --> 00:35:41,160
Speaker 1: So one of the things we've been seeing lately is

622
00:35:41,239 --> 00:35:46,520
Speaker 1: that the valuations of Celgen prior to this deal, already

623
00:35:46,880 --> 00:35:50,880
Speaker 1: um factored in a potential early reblement generic earlier than

624
00:35:50,920 --> 00:35:55,120
Speaker 1: anticipated um and assigning very little value to the pipeline investments.

625
00:35:55,160 --> 00:35:58,480
Speaker 1: Were pretty much hate selling the stock exactly. Well, then,

626
00:35:59,080 --> 00:36:02,320
Speaker 1: who affect this merger besides Morgan Stanley and m U

627
00:36:02,480 --> 00:36:05,840
Speaker 1: f G are doing the financing of seventy four billion large.

628
00:36:06,080 --> 00:36:08,880
Speaker 1: Did Bristol Myers go, we gotta do this or did

629
00:36:08,960 --> 00:36:12,160
Speaker 1: Selgin go wow? Two thousand and eighteen was harsh, Let's go.

630
00:36:12,840 --> 00:36:15,440
Speaker 1: I don't know. I mean, I think from Celgian management

631
00:36:15,640 --> 00:36:18,560
Speaker 1: management perspective, which the company I actually cover, um, they

632
00:36:18,640 --> 00:36:21,919
Speaker 1: were looking for an out and said the other well

633
00:36:22,000 --> 00:36:25,400
Speaker 1: said the other alternative was that they had to deliver

634
00:36:25,920 --> 00:36:30,160
Speaker 1: consistently on upcoming catalysts. And the last twelve eighteen months

635
00:36:30,200 --> 00:36:32,279
Speaker 1: has shown that they sucked at that. I mean, pim

636
00:36:32,360 --> 00:36:34,480
Speaker 1: you do all the fancy financial I'm just gonna point

637
00:36:34,520 --> 00:36:37,839
Speaker 1: out twenty four thousand warm bodies at Bristol Myers SQUIB

638
00:36:37,960 --> 00:36:42,040
Speaker 1: and Selgin has seventy, so just on an employee basis,

639
00:36:42,160 --> 00:36:47,160
Speaker 1: it's one third one fourth. Besize ostika. When you look

640
00:36:47,160 --> 00:36:52,279
Speaker 1: at Bristol Myers Squib, their drug up Divo, that's what

641
00:36:52,840 --> 00:36:58,120
Speaker 1: really This is the immune harvesting, heart harnessing cancer drug.

642
00:36:58,320 --> 00:37:01,040
Speaker 1: Right this is the one that is supposed to help

643
00:37:01,120 --> 00:37:05,480
Speaker 1: your immune system fight cancer. How much of Bristol Myers

644
00:37:05,560 --> 00:37:09,160
Speaker 1: Squib is based on that? Um? Right now? Bristol mines

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Speaker 1: my colleagues, Sam Fizzeli CAUs that stuck. It's basically optival

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00:37:12,800 --> 00:37:15,960
Speaker 1: and eloquence are the two main products, and optivos the Yeah,

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Speaker 1: it's it's a big, massive product for them. They need

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00:37:18,120 --> 00:37:19,719
Speaker 1: that to succeed and they want to do havething, but

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00:37:19,800 --> 00:37:21,840
Speaker 1: they also need Mirk not to come out with a

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00:37:21,960 --> 00:37:25,839
Speaker 1: rival drug. Well, mIRC already has right and and they

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00:37:25,880 --> 00:37:29,680
Speaker 1: lost the lead position to mark on that too. That's

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Speaker 1: all you can. I ask a dumb question. Are these

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00:37:33,440 --> 00:37:36,520
Speaker 1: seventy thousand dollars a year drugs? I mean, all these

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00:37:36,920 --> 00:37:39,120
Speaker 1: fancy drugs were talking about it? These the one that

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00:37:39,160 --> 00:37:44,000
Speaker 1: are breaking people. Financial toxicity is a real concern today.

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00:37:44,320 --> 00:37:48,400
Speaker 1: Um we we we. In cancer, everyone talks about the

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00:37:48,440 --> 00:37:52,240
Speaker 1: side effects of chemo, but financial toxicy is something basically

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00:37:52,360 --> 00:37:55,799
Speaker 1: the patients have to sell their assets, take on loans

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00:37:55,840 --> 00:37:58,520
Speaker 1: if they can't afford the drugs. The drugs are amazing,

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00:37:58,600 --> 00:38:00,600
Speaker 1: don't get me wrong. And we've covered is that nausea

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00:38:00,719 --> 00:38:04,040
Speaker 1: immunotherapy is beautiful, but it comes at a big cost.

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00:38:04,080 --> 00:38:06,360
Speaker 1: The Selgen you have those drugs as well, or Selgon

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Speaker 1: doing something that's cheaper, more accessible. Well, Revelment is a

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Speaker 1: imminomodulatory drug. Um it's I wouldn't call it necessarily immunotherapy

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Speaker 1: like the pd ones like that, like the optivo, the

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00:38:17,200 --> 00:38:21,719
Speaker 1: or the or the key Truda, but it also has

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00:38:21,840 --> 00:38:25,840
Speaker 1: other drugs that like like it's a cell therapy pipeline

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00:38:25,880 --> 00:38:28,520
Speaker 1: that it got from from Juno. That is that you're

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Speaker 1: taking a T cell out of your body engineering and

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00:38:31,320 --> 00:38:34,000
Speaker 1: slapping back in. That's called car T cells. That's imminotherapy

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00:38:34,080 --> 00:38:38,040
Speaker 1: as well, and that's competition. That is a totally different

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00:38:38,040 --> 00:38:40,239
Speaker 1: ball game. But I mean, that's the stuff that's going

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Speaker 1: for four d plus dollars for a single treatment, right,

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Speaker 1: I mean, I think key Truda is somewhere around forty

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00:38:46,880 --> 00:38:50,560
Speaker 1: or fifty dollars, and it depends where it's sold in

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00:38:50,640 --> 00:38:53,680
Speaker 1: Australia and and and also depending on on the dosing

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00:38:53,800 --> 00:38:57,239
Speaker 1: it's it's around that. Like the melanoma treatment. Did you

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00:38:57,400 --> 00:39:00,279
Speaker 1: just say one treatment was four hundred dollars? Yeah? Can

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00:39:00,360 --> 00:39:03,240
Speaker 1: I ask a dumb question who pays for that? Patients

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00:39:03,280 --> 00:39:06,640
Speaker 1: who want a chance of a cure four hundred thousand dollars.

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00:39:07,200 --> 00:39:10,239
Speaker 1: It's a slow ramp up, but a competitor to sell

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00:39:10,280 --> 00:39:12,640
Speaker 1: jan which is Gilia. They bought this company called Kite

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00:39:12,760 --> 00:39:15,040
Speaker 1: and they were one of the first companies to launch

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00:39:15,080 --> 00:39:17,160
Speaker 1: a carti cell therapy on the market. That's what it

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00:39:17,239 --> 00:39:19,000
Speaker 1: goes for just on the phone, A thou dollars. What

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00:39:19,120 --> 00:39:22,080
Speaker 1: will their competitors do today? Everyone, you know, comparing to

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00:39:22,200 --> 00:39:23,960
Speaker 1: b m Y and you know, I'm so old, I

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00:39:24,040 --> 00:39:27,279
Speaker 1: think of old pharma. But how did the competitors respond

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00:39:27,400 --> 00:39:30,719
Speaker 1: to this transaction we saw this morning. That's a great

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00:39:30,800 --> 00:39:33,480
Speaker 1: question and the only good one of the days. I

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Speaker 1: don't know. I mean because because now Bristol, this combined

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Speaker 1: entity is going to compete against guilliads and Novati is

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00:39:40,560 --> 00:39:42,720
Speaker 1: a carti cell therapy. They're going to continue to compete

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Speaker 1: against Merk on the pd ones and trying to unroash

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00:39:45,320 --> 00:39:48,000
Speaker 1: and As trying to on the pd ones and the

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00:39:48,200 --> 00:39:52,359
Speaker 1: other immino therapies like the antibodies. So this is gonna

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Speaker 1: be an interesting company once all the dust settles. I

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Speaker 1: think we did more jargon in this interview and in

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Speaker 1: four minutes with the that we did. All right, well,

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Speaker 1: I'm going to cancel out the jargon because I'm just

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Speaker 1: going to mention truda. You may recall that former President

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Speaker 1: Jimmy Carter was diagnosed with melanoma with cancer. This is

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Speaker 1: the drug. He says that he took that saved his life.

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00:40:15,000 --> 00:40:18,120
Speaker 1: That's right. This is the promise of immunotherapy, both the

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00:40:18,280 --> 00:40:21,799
Speaker 1: traditional antibodies like k truda and optivo as well as

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00:40:21,840 --> 00:40:24,800
Speaker 1: the cart cell therapy is like um like Kimria and

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Speaker 1: yes Carter uh. These drugs for the patient's way. It works.

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Speaker 1: You have amazing survival that you have. It's it's unprecedented. Yeah. Well,

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Speaker 1: I mean he was only diagnosed once the tumor had

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Speaker 1: spread to his brain. Yeah, and I need even work

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Speaker 1: then exactly say he knows everything about this is great.

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Speaker 1: I learned a huge amount here. Artica Gouda Warden, I

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Speaker 1: thank you so much. He's with Bloomberg Intelligence. Thanks for

714
00:40:57,560 --> 00:41:01,920
Speaker 1: listening to the Bloomberg Surveillance podcast. Subscribe and listen to

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00:41:02,120 --> 00:41:07,800
Speaker 1: interviews on Apple Podcasts, SoundCloud, or whichever podcast platform you prefer.

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Speaker 1: I'm on Twitter at Tom Keene before the podcast. You

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Speaker 1: can always catch us worldwide. I'm Bloomberg Radio