WEBVTT - Healthcare Stocks Beyond The Covid Boom 0:00:00.800 --> 0:00:04.040 Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside 0:00:04.040 --> 0:00:06.920 my co host Matt Miller. Every business day, we bring 0:00:06.960 --> 0:00:11.520 you interviews from CEOs, market pros, and Bloomberg experts, along 0:00:11.560 --> 0:00:15.600 with essential market moving news. Find the Bloomberg Markets Podcast 0:00:15.640 --> 0:00:18.479 on Apple Podcasts or wherever you listen to podcasts, and 0:00:18.480 --> 0:00:22.319 at Bloomberg dot com slash podcast. Taylor, I've been saying, 0:00:22.360 --> 0:00:25.800 you know, you know, during this pandemic, thank goodness for 0:00:25.880 --> 0:00:29.520 the smart and hard working people in the biotechnology industry 0:00:29.520 --> 0:00:33.600 and the pharmaceutical industry that delivered these vaccines so quickly 0:00:33.640 --> 0:00:35.959 to the world. I mean, boy, they really did their job. 0:00:36.000 --> 0:00:38.800 And then of course the global supply train trying trying 0:00:38.800 --> 0:00:42.319 to get those vaccinations out across the globe. The one 0:00:42.400 --> 0:00:45.640 of the questions is, Okay, how about the biotech and 0:00:45.720 --> 0:00:49.159 farming industry post pandemic. How do we think about that? Well, 0:00:49.240 --> 0:00:51.919 Nina Decca, she joins us. She's the senior research channels 0:00:52.159 --> 0:00:56.600 for Robo Global. Ninia, thanks so much for joining us here. Again, Boy, 0:00:56.640 --> 0:00:58.480 the biotech and the farming industry they get a lot 0:00:58.480 --> 0:01:00.480 of heat from some people. Generally spe you can hide 0:01:00.520 --> 0:01:03.240 drug prices, things like that. But boy, they really delivered 0:01:03.280 --> 0:01:06.000 during the pandemic. As an investor, how do you think 0:01:06.040 --> 0:01:11.119 about that space in a post pandemic world. Hi, Yeah, 0:01:11.160 --> 0:01:13.319 and thanks for having me on the show today. Um 0:01:14.120 --> 0:01:16.280 you I mean you bring up some great points with Maderna. 0:01:16.319 --> 0:01:19.240 The fact that they were able to so quickly bring 0:01:19.280 --> 0:01:24.039 a therapy through UM the clinical trial process and into 0:01:24.120 --> 0:01:28.960 human beings within a year is really unprecedented. And one 0:01:29.000 --> 0:01:31.479 thing I will say upfront is that when you look 0:01:31.520 --> 0:01:35.200 at the investment opportunities, uh, it's not what Maderna did 0:01:35.280 --> 0:01:37.840 last year that makes them a strong investment. It's what 0:01:37.880 --> 0:01:41.040 they've been doing for the last decade. They built a 0:01:41.160 --> 0:01:46.840 platform ready to go. They accumulated massive amounts of data 0:01:47.120 --> 0:01:51.800 through their technology and AI capabilities over the last decade 0:01:52.280 --> 0:01:55.960 that really enabled them to put together this therapy so quickly. 0:01:56.560 --> 0:02:00.720 What they did with the COVID vaccine is of that 0:02:00.840 --> 0:02:05.840 their technology platform works. And by by building up front 0:02:05.920 --> 0:02:10.080 this this platform, they're really creating UM something that can 0:02:10.120 --> 0:02:13.919 be used at scale to make many other therapeutics. So 0:02:14.000 --> 0:02:17.240 several really cool things have happened. One, they proved mRNA 0:02:17.360 --> 0:02:19.640 can work in human beings and it's very safe and 0:02:19.639 --> 0:02:23.680 effective and now that the world accepts m RNA is 0:02:23.720 --> 0:02:28.200 a viable course of treatment, there are many other therapies 0:02:28.280 --> 0:02:32.440 at least fixteen other drugs that Maderna alone has in 0:02:32.480 --> 0:02:36.119 the pipeline in clinical trials as we speak. But they've 0:02:36.120 --> 0:02:38.399 been working on for a while. So now that we've 0:02:38.440 --> 0:02:40.880 got one m RNA through, it's only a matter of 0:02:40.880 --> 0:02:43.080 time before a lot of the other ones come, and 0:02:43.160 --> 0:02:46.440 Maderna very well positioned for that trend. I want to 0:02:46.480 --> 0:02:48.480 shift here is a little bit here and think about 0:02:49.080 --> 0:02:53.839 virtual doctor visits in the post pandemic world. Am I 0:02:53.960 --> 0:02:56.520 used to seeing my doctor over zoom? Or do I 0:02:56.600 --> 0:03:00.640 want a physical checkout? I mean, the really up to 0:03:00.680 --> 0:03:02.760 the consumer. I think we're seeing more and more that 0:03:02.919 --> 0:03:07.120 the millennials and younger are open to continuing to stay 0:03:07.160 --> 0:03:09.560 at the office or or stay at home wherever they are, 0:03:09.639 --> 0:03:12.440 and just have that doctor visit online or on the 0:03:12.480 --> 0:03:15.400 phone wherever possible. Um You're still going to have some 0:03:15.520 --> 0:03:17.200 meeds where you're going to need to go in person, 0:03:17.560 --> 0:03:22.040 but by and large, a lot of other um UH 0:03:22.320 --> 0:03:27.160 indications and specialties in the healthcare world have taken place virtually, 0:03:27.200 --> 0:03:28.799 and I think that that's here to stay and it's 0:03:28.840 --> 0:03:31.920 only going to grow, for example, or the pedic um 0:03:32.080 --> 0:03:35.840 physical therapy remote O b d Y and appointments can 0:03:35.880 --> 0:03:40.280 even be remote. So Nina, is there any concern in 0:03:40.400 --> 0:03:44.240 the biotech or farming industry that you know, this big 0:03:44.280 --> 0:03:46.600 focus we've had over the last eighteen months on COVID 0:03:46.680 --> 0:03:50.400 has maybe taken resources away from some other areas that 0:03:50.440 --> 0:03:53.240 maybe now have been under invested or lagging a little bit. 0:03:53.280 --> 0:03:57.200 How how do investors think about that? It's it's not 0:03:57.240 --> 0:04:00.200 necessarily a concern. It's well, all right, if you think 0:04:00.240 --> 0:04:02.280 about healthcare in general, let's a concern. Think about the 0:04:02.360 --> 0:04:04.320 number of people who didn't go in for a cancer 0:04:04.360 --> 0:04:08.440 screen like colonoscopy last year because of the pandemic. So 0:04:08.760 --> 0:04:14.200 there's definitely a backlog of um undetected illnesses if you will, 0:04:14.440 --> 0:04:17.760 that are are sort of waiting to be discovered and 0:04:17.800 --> 0:04:21.520 then treated. So it's it is a medical concern for 0:04:21.640 --> 0:04:25.400 society in the world. But in terms of investors, if 0:04:25.400 --> 0:04:27.600 you think about the number of purchases that didn't take 0:04:27.640 --> 0:04:31.560 place last year because resources were reallocated towards dealing with 0:04:31.600 --> 0:04:35.120 the pandemic, those budgets are back and now a well 0:04:35.160 --> 0:04:38.839 positioned to buy things like the robotics, if you will, 0:04:38.960 --> 0:04:43.640 or the the lab automation instrumentation UM that people were 0:04:43.680 --> 0:04:46.560 waiting to buy before the pandemic. So those budgets are 0:04:46.600 --> 0:04:48.919 coming back and you're seeing that UM A lot of 0:04:48.960 --> 0:04:52.800 these companies and surgical robotics and lab automation UM are 0:04:53.080 --> 0:04:56.040 are are at numbers or above and we're going to 0:04:56.120 --> 0:04:58.120 see now in Q two earnings, we're waiting to see 0:04:58.160 --> 0:05:02.760 how utilization is climbing back up to pre pandemic levels 0:05:03.279 --> 0:05:05.480 and we should expect to see some of those non 0:05:05.560 --> 0:05:09.840 COVID related capital purchases back. Interesting. Interesting, Nina Decca, thank 0:05:09.839 --> 0:05:12.360 you so much for joining us senior research analysts at 0:05:12.400 --> 0:05:16.000 robo Global getting a sense of kind of these healthcare stocks, 0:05:16.080 --> 0:05:19.160 healthcare and biotech stocks investing. Again, the focus has been 0:05:19.520 --> 0:05:22.279 so much on this pandemic over the last eighteen months, 0:05:22.279 --> 0:05:24.520 and uh, it'll be interesting to see with these you know, 0:05:24.600 --> 0:05:27.120 quarters earnings, how these companies, to the extent that they 0:05:27.160 --> 0:05:30.760 were really involved with the COVID vaccines kind of pivot 0:05:30.800 --> 0:05:33.200 a little bit back to perhaps some of the other 0:05:33.440 --> 0:05:39.320 business lines as well. In terms of investment. I want 0:05:39.400 --> 0:05:43.599 to talk about SPACs right now. Tom Keane's favorite topic. 0:05:44.120 --> 0:05:46.560 Hopefully he's listening in. Uh. You know, boy, you think 0:05:46.560 --> 0:05:50.200 about the spack special purpose acquisition companies, just really the 0:05:50.320 --> 0:05:54.840 rage in terms of new issuance late one, they seem 0:05:54.880 --> 0:05:58.039 to have faded a little bit. Some folks are questioning 0:05:58.120 --> 0:05:59.599 was that kind of a mark of the top of 0:05:59.600 --> 0:06:02.520 the mark? It is a little bit passe. Where are 0:06:02.600 --> 0:06:05.360 we in this back cycle? Fortunately, we have our next 0:06:05.360 --> 0:06:08.040 guest who can help us think about that. Mark us Go. 0:06:08.160 --> 0:06:11.080 He's a chief executive officer and chief investment officer from 0:06:11.080 --> 0:06:14.160 Morgan Creek Capital Management. Uh. Mark, thanks so much for 0:06:14.240 --> 0:06:17.280 joining us. Give us a sense. Just let's step back feet. 0:06:17.600 --> 0:06:21.919 What is your view of the spack market right now? No, 0:06:22.040 --> 0:06:24.719 I appreciate you having me on. And look, I I 0:06:24.760 --> 0:06:28.200 think we are are really just getting warmed up in 0:06:28.240 --> 0:06:31.719 the sense of you know what SPACs are, And I 0:06:31.720 --> 0:06:33.800 think part of the problem is there's just a lot 0:06:33.839 --> 0:06:39.960 of confusion about SPACs. And basically SPACs are a process 0:06:40.080 --> 0:06:43.680 of going public. Uh. Spack is raised as a blank 0:06:43.760 --> 0:06:46.240 check company. It has an I p O. And then 0:06:46.400 --> 0:06:50.680 it basically sits in cash and treasuries during a period 0:06:50.760 --> 0:06:54.400 until the sponsor finds a company to merge with. The 0:06:54.440 --> 0:06:59.279 company then merges with the spack and then becomes a 0:06:59.400 --> 0:07:03.440 post your combined entity. And yet people conflate the terms. 0:07:03.480 --> 0:07:06.600 They talk about you know, Virgin Galactic or DraftKings as 0:07:06.600 --> 0:07:10.360 a SPAT. No, those are companies. They were SPACs. I 0:07:10.440 --> 0:07:14.480 POE was a spack and and diamond Eque Acquisition Corps 0:07:14.520 --> 0:07:17.360 was a SPAC. But once you merge with the company 0:07:17.440 --> 0:07:20.880 or an operating company going forward and you said somethingsing 0:07:21.080 --> 0:07:25.040 we first started about spects fading, well, they faded for 0:07:25.040 --> 0:07:28.120 about six weeks in the sense of you know, last 0:07:28.200 --> 0:07:31.480 year about fifty per cent of I p O s 0:07:31.840 --> 0:07:36.200 were spects um and if you look in terms of dollars, 0:07:36.280 --> 0:07:40.320 it was actually more than that because the average SPAC 0:07:40.680 --> 0:07:42.520 is a little bit bigger than the average I p 0:07:42.640 --> 0:07:45.239 O and there's some information content in there. The larger 0:07:45.280 --> 0:07:48.000 than is the higher the quality. If you look at 0:07:48.040 --> 0:07:51.760 the first quarter, it was kind of crazy about seventy 0:07:53.040 --> 0:07:55.760 of all I p O s or spects. That was 0:07:55.800 --> 0:07:59.240 too fast, So the SEC kind of tapped the brakes, 0:07:59.320 --> 0:08:02.360 said they were going to threatened to change the accounting 0:08:02.440 --> 0:08:05.880 rules on warrants. Actually didn't do it, but that created 0:08:05.920 --> 0:08:10.800 a six week period where spacks felt about of new 0:08:10.840 --> 0:08:13.880 issuance for I p O s. Now they're right back 0:08:13.920 --> 0:08:19.560 to I think that's where we're gonna equilibrate at about fiftyah. 0:08:20.480 --> 0:08:23.000 You know, let me ENTERGECT quickly because you mentioned the SEC, 0:08:23.120 --> 0:08:25.640 and I am curious how you respond to critics of 0:08:25.720 --> 0:08:28.640 SPACs who say, even as recently is today we're getting 0:08:28.640 --> 0:08:33.400 headlines about SEC investigations into potential conflicts of interest. Now 0:08:33.440 --> 0:08:36.560 they're looking at bank fee conflicts. How much of that 0:08:36.679 --> 0:08:42.160 is a headwind? I think, look, um, the I p 0:08:42.320 --> 0:08:46.880 O process has been i'll say broken for a long time. 0:08:47.720 --> 0:08:52.079 It's a bad process. It hurts the average investor. It's 0:08:52.120 --> 0:08:57.280 basically a walled garden for the wealthy clients of the underwriters. 0:08:57.320 --> 0:08:59.560 And the fact that you know, one out of every 0:08:59.600 --> 0:09:03.439 two high growth innovative companies now is migrating to a 0:09:03.559 --> 0:09:06.640 SPAC mergers as opposed to an I p O that 0:09:06.840 --> 0:09:10.960 clearly potentially hurts the incumbents. And so those incumbents have 0:09:11.160 --> 0:09:15.000 very strong lobbying groups and perhaps they put some pressure 0:09:15.080 --> 0:09:18.800 on the SEC too, try to tap the brakes. I 0:09:18.800 --> 0:09:20.920 think I think it's a lot of bluster, you know, 0:09:21.040 --> 0:09:24.880 the threat on changing the accounting rules on warrants was 0:09:25.080 --> 0:09:28.559 a distinction without a difference. It had no cash impact. 0:09:29.240 --> 0:09:35.520 And you know, incumbents always fear disruption, and they will 0:09:35.559 --> 0:09:38.400 always use fund fear, uncertainty and doubt to try to 0:09:38.480 --> 0:09:40.480 slow that disruption. But the end of the day, if 0:09:40.480 --> 0:09:43.880 it's a better technology, uh. And Bill Gurley writes about 0:09:43.880 --> 0:09:46.040 this in his blog about why it is a better 0:09:46.240 --> 0:09:49.000 way of going public for a high growth innovative company. 0:09:49.040 --> 0:09:52.800 And I think the data shows that, so mark, you 0:09:52.840 --> 0:09:54.840 know what, when I grew up with spects, it was 0:09:55.200 --> 0:09:59.280 typically backed by a really well known and seasoned investor, 0:09:59.520 --> 0:10:02.400 John mull Own for example, someone like that who has 0:10:02.440 --> 0:10:05.600 a track record. But now SPACs are with you know, 0:10:05.720 --> 0:10:08.400 a rod and celebrities and things like that. Is that 0:10:08.520 --> 0:10:11.080 not the mark of hey, we've gone too far with 0:10:11.160 --> 0:10:14.800 this thing. Such a great point, Such a great point. Now, 0:10:14.800 --> 0:10:17.000 if you go back to the early days of spacks, 0:10:17.000 --> 0:10:19.480 you know, the spack industry was like the n I 0:10:19.559 --> 0:10:22.640 T Tournament of fundraising. Nobody wants to go to the 0:10:22.679 --> 0:10:23.880 n I T Tournament. They all want to be the 0:10:23.960 --> 0:10:27.200 n C Double A. And so for twenty plus years 0:10:27.679 --> 0:10:29.800 it was a horrible place to try to raise money. 0:10:29.880 --> 0:10:33.439 And the returns showed. So up until two thousand and fifteen, 0:10:33.440 --> 0:10:37.120 the returns and SPACs were terrible. About seventy per cent 0:10:37.920 --> 0:10:41.520 of SPACs raised that your had to liquid eight. They 0:10:41.600 --> 0:10:45.679 changed the rules and by we were down to know 0:10:46.800 --> 0:10:50.559 SPACs actually had to liquidate. They actually found real businesses 0:10:50.559 --> 0:10:53.200 to buy. Well, why is that? Well to your point, 0:10:53.200 --> 0:10:57.560 we started to see real operators and real businesses uh 0:10:57.880 --> 0:11:00.960 be be involved in the spack market. Now. I did 0:11:00.960 --> 0:11:04.000 a presentation called What's so Special about Special Purpose Acquisition 0:11:04.000 --> 0:11:07.560 Companies late last year, and in it I had a picture. 0:11:07.640 --> 0:11:11.920 On the left hand side was Chama and Richard Branson, 0:11:12.280 --> 0:11:19.200 and on the right was a former athlete, former UM writer, author, 0:11:19.559 --> 0:11:22.280 and a former Goldman Sacks operating executive. And they said, 0:11:22.360 --> 0:11:25.040 I'll back the guys on the left right exactly right. Hey, Mark, 0:11:25.040 --> 0:11:26.480 We're gonna have to We're gonna have to leave it 0:11:26.520 --> 0:11:28.400 there just because of the time, but we'll have you back. 0:11:28.440 --> 0:11:31.240 We'll talk more spacks. Mark, you chief executive officer of 0:11:31.280 --> 0:11:36.600 Morgan Creek Capital Management. Looking at Goldman Sachs JP Morgan, 0:11:36.640 --> 0:11:40.679 they both both reported some pretty solid results uh this quarter. 0:11:40.679 --> 0:11:42.599 Both stocks are down a little bit today about the 0:11:42.679 --> 0:11:44.520 one and a half to two and a half percent. 0:11:44.640 --> 0:11:47.760 Let's get the skinny on those names, plus what to 0:11:47.840 --> 0:11:49.920 expect later on in the week as these big banks 0:11:49.920 --> 0:11:53.560 report earnings. As it was returned to our in house expert, 0:11:53.640 --> 0:11:57.120 Alison Williams, senior industry analysts covering all things in the 0:11:57.160 --> 0:12:02.040 banks for Bloomberg Intelligence, Bloomberg Intelligence, Bloomberg's in house investment 0:12:02.080 --> 0:12:07.240 research department. Over analysts are stocks, thirty industries, just all 0:12:07.240 --> 0:12:10.360 over the place. UM. Alison, thanks so much for joining 0:12:10.400 --> 0:12:13.959 us here. What are your key takeaways from JP Morgan Goldman? 0:12:14.000 --> 0:12:16.080 To me, it seems like the bankers really came through. 0:12:17.200 --> 0:12:21.080 The bankers did really come through, and especially M and A, 0:12:21.280 --> 0:12:24.560 which is something that we expected to be strong. UM 0:12:24.600 --> 0:12:27.360 exceeded the consensus estimates, and we really think that there's 0:12:28.080 --> 0:12:31.200 legs to that revenue stream in the second half as 0:12:31.280 --> 0:12:35.559 well as UM the adjacent stream of sort of financing 0:12:35.720 --> 0:12:38.800 businesses and the like UM, but that's a smaller part 0:12:38.840 --> 0:12:42.680 of the business, especially for someone like JP Morgan. And 0:12:42.720 --> 0:12:45.120 then I guess the negative is which is which is 0:12:45.120 --> 0:12:47.160 something that's been building for a while, is just sort 0:12:47.160 --> 0:12:50.800 of the disappointing net interest income trends and that's really 0:12:50.840 --> 0:12:54.080 tied to loan growth. I would say that for JP 0:12:54.200 --> 0:12:58.920 Morgan today, the the newer I guess negative is the 0:12:58.960 --> 0:13:03.080 fact that they up there guidance again. So see billion. 0:13:03.160 --> 0:13:06.640 We started off the year about sixty eight billion in January. 0:13:06.679 --> 0:13:09.680 That's been kicking up now. Part of that is due 0:13:09.720 --> 0:13:13.920 to better business related volumes. So it takes money to 0:13:13.920 --> 0:13:15.520 to make money. We view that a little bit more 0:13:15.559 --> 0:13:19.199 favorably than than perhaps what we're seeing a city group. Um, 0:13:19.200 --> 0:13:22.719 but still, you know, everyone would like to say more 0:13:22.800 --> 0:13:26.400 revenue and less cost. You know what's interesting as we 0:13:26.440 --> 0:13:29.439 think about the bankers coming through, it was just Daniel Pinto, 0:13:29.760 --> 0:13:32.400 I believe within the last two weeks, seeing that the 0:13:32.440 --> 0:13:36.160 trading slump is over. Do you buy that or are 0:13:36.160 --> 0:13:40.040 we thinking that a trading slump could be here to stay? Well? 0:13:40.080 --> 0:13:43.360 I think that I think, Um, the key point that 0:13:43.840 --> 0:13:46.880 Pinto is referring to, which we agree with, is the 0:13:46.920 --> 0:13:50.560 fact that, um, we're not necessarily going to go back 0:13:50.600 --> 0:13:54.200 to the lows. So thick revenue is down, you know 0:13:54.320 --> 0:14:00.000 over it was down like forty about the two banks, 0:14:00.080 --> 0:14:06.079 but still higher than it was in So we're off, 0:14:06.240 --> 0:14:08.600 you know, sort of the really robust quarter from a 0:14:08.640 --> 0:14:13.319 year ago but still stronger. So, UM, what what makes 0:14:13.440 --> 0:14:16.160 us sort of agree with the fact that, you know, 0:14:16.240 --> 0:14:20.120 revenue might not go back to some of those lower 0:14:20.200 --> 0:14:25.240 levels that we saw in UM. You know, I guess, 0:14:25.320 --> 0:14:27.640 I guess there's there's a few things. But you know, 0:14:27.680 --> 0:14:29.880 one of the key things that that we're seeing right 0:14:29.880 --> 0:14:34.120 now is obviously the huge monetary support support for the moment, 0:14:34.200 --> 0:14:36.840 policy support for the moment. The longer term trend is 0:14:36.880 --> 0:14:41.400 obviously GDP and capital markets development. And one of the 0:14:41.400 --> 0:14:43.520 things that we've seen at the banks and asset managers 0:14:43.520 --> 0:14:46.920 alike in recent quarters is the build out in China. 0:14:47.000 --> 0:14:49.760 That's something where UM Goldman has been really focusing and 0:14:49.800 --> 0:14:54.800 sort of that revenue stream coming on board helping the banks. Alison, 0:14:54.920 --> 0:14:57.080 and this is just a question based upon my I 0:14:57.160 --> 0:14:59.160 used to spend a long time working at these investment 0:14:59.160 --> 0:15:03.040 banks like you did. Did they say anything about coming 0:15:03.040 --> 0:15:06.000 back to work? What's going on there? Because it's it's 0:15:06.000 --> 0:15:11.000 a big issue. There's definitely a focus on having client 0:15:11.200 --> 0:15:16.560 facing UM bankers and traders back in the office UM. 0:15:16.600 --> 0:15:19.240 And so that's something that we've been seeing UM over 0:15:19.280 --> 0:15:22.160 the last several weeks in terms of getting people back 0:15:22.160 --> 0:15:25.000 in the office, and you know, we hear a lot 0:15:25.040 --> 0:15:29.200 about certain banks using that as a differentiator UM in 0:15:29.320 --> 0:15:33.160 terms of giving more flexibility. UM. Obviously, at the end 0:15:33.200 --> 0:15:36.120 of the day, you know that competition is tough in 0:15:36.160 --> 0:15:38.680 the in these businesses, especially if you're going to see 0:15:38.880 --> 0:15:42.520 normalizing revenue. And so I think it's you know, it's 0:15:42.520 --> 0:15:44.880 all fine until you know someone loses out on a 0:15:45.000 --> 0:15:47.880 deal UM. And so I think that UM to the 0:15:47.920 --> 0:15:52.120 extent that people are in the offices and are outseeing clients, UM, 0:15:52.240 --> 0:15:54.720 they want to be doing their their best for market share. 0:15:54.800 --> 0:15:56.400 And by the way, that's that's the other thing that 0:15:56.440 --> 0:15:59.480 will be interesting as the full quarter shakes out. We 0:15:59.560 --> 0:16:03.440 did see equities trading better than expected by both competitors 0:16:03.480 --> 0:16:09.920 today UM Prime brokerage record balances we heard from both companies. 0:16:09.960 --> 0:16:13.640 Now hedge funds we expect as an industry have record balances. 0:16:13.680 --> 0:16:16.520 But we're also curious to see how things are shaking 0:16:16.520 --> 0:16:19.960 out in the wake of Credit Sweezes pullback. Um Arcos 0:16:20.080 --> 0:16:22.760 was the story last quarter. UM Credit Sweeze has had 0:16:22.760 --> 0:16:26.160 sort of a more dramatic pullback in their business, whereas 0:16:26.480 --> 0:16:29.280 you know Morgan Stanley and us UBS, which also took 0:16:29.360 --> 0:16:32.240 hits Um you know, have also made changes, but a 0:16:32.280 --> 0:16:36.400 little bit more at the margin. Just about forty seconds 0:16:36.440 --> 0:16:39.880 to a minute here, Allison, what does this mean for 0:16:39.920 --> 0:16:42.480 any indication of what we can get for tomorrow as 0:16:42.520 --> 0:16:47.200 we get further bank earnings reporting. So two things for tomorrow, 0:16:47.280 --> 0:16:51.280 well three, One is will not interest income guidance come down, 0:16:51.520 --> 0:16:55.520 especially for Bank America and while Spargo UM also City 0:16:55.520 --> 0:16:58.680 Group that they have sort of already taken their expectations 0:16:58.720 --> 0:17:02.560 down a bit um. The second UH is costs. As 0:17:02.560 --> 0:17:07.080 I said, we saw a higher business related costs for UM, JP, Morgan, 0:17:07.680 --> 0:17:09.920 City Groups. Full your guidance is going to be key 0:17:09.960 --> 0:17:12.920 to watch there. And then third, what's happening in equities? 0:17:12.960 --> 0:17:15.600 Are these banks gaining some share in the prime business? 0:17:16.040 --> 0:17:18.359 All right, Allison as always great follow up there and 0:17:18.359 --> 0:17:19.919 we'll be chatting with you, I'm sure later in the 0:17:19.920 --> 0:17:22.720 week as these banks continue to roll out their numbers. 0:17:22.760 --> 0:17:27.000 Alison Williams, she's a senior banks analysts for Bloomberg Intelligence, 0:17:27.119 --> 0:17:29.439 joining us on the phone from the swamps of Jersey. 0:17:29.480 --> 0:17:32.679 I guess um so again Goldman sacks, JP Morgan's some 0:17:32.880 --> 0:17:35.720 solid numbers here today. One of the issues that I 0:17:36.080 --> 0:17:38.560 found interesting from Allison's comments was the lack of loan 0:17:38.680 --> 0:17:41.280 or disappointing or lower than expected loan growth. And that's 0:17:41.280 --> 0:17:43.679 a theme that we've heard from some of the banks, 0:17:43.680 --> 0:17:46.320 and perhaps that's a reflection of there's so much cash 0:17:46.400 --> 0:17:51.760 in the marketplace, fiscal stimulus, easy monetary policy, that the 0:17:51.800 --> 0:17:55.520 overall demand for some of these loan products not quite 0:17:55.800 --> 0:17:57.479 where they'd like to see it. Well, I'm more coming up. 0:17:57.520 --> 0:18:03.520 This is Bloomberg. Wolfgang Coaster joins us. He's a senior 0:18:03.520 --> 0:18:07.040 strategist for Kyrieba'll get us thoughts on the currency business. 0:18:07.040 --> 0:18:09.360 You know, during the pandemic, the currencies, the US dollar 0:18:09.400 --> 0:18:11.359 has been fairly steady, but not so much with some 0:18:11.400 --> 0:18:13.919 other currencies. Wolfgang, thanks so much for joining us here. 0:18:13.960 --> 0:18:16.800 I know you guys are out with a currency impact report. 0:18:17.600 --> 0:18:20.639 What are the big takeaways from this report as to 0:18:20.960 --> 0:18:25.840 what currency volatility has cost companies? Yeah? Sure, well, thank 0:18:25.840 --> 0:18:28.280 you for having me first of all, um, So, this 0:18:28.400 --> 0:18:32.600 Currency Impact Report looks at twelve companies around the world's 0:18:32.640 --> 0:18:35.560 focused four hundred in Europe and eight hundred in North America. 0:18:36.040 --> 0:18:38.960 And what we accumulate there is the fact, so the 0:18:39.119 --> 0:18:43.520 quantitative facts of who has been hurt or who has 0:18:43.600 --> 0:18:47.919 gained from currency impacts, and then we actually validate that 0:18:48.040 --> 0:18:52.119 against what the standards in the industry are, what is 0:18:52.200 --> 0:18:56.400 acceptable as a currency impact and what is not acceptable. 0:18:56.720 --> 0:19:00.560 And what we've seen this quarter is is that we've 0:19:00.600 --> 0:19:04.879 got just under ten billion dollars of losses that have 0:19:05.000 --> 0:19:09.200 been pointed out by the corporations. If you accumulate them 0:19:09.200 --> 0:19:14.840 all around the world. This really is a significant increase 0:19:14.920 --> 0:19:17.439 even over last quarter, and we expect that to actually 0:19:17.480 --> 0:19:21.080 continue for a couple of reasons. One obviously seeing UH 0:19:21.400 --> 0:19:25.280 the economy not only in the United States but elsewhere 0:19:25.320 --> 0:19:28.399 heating up, and so you're gonna start seeing more flow 0:19:29.119 --> 0:19:33.440 of supply chains of products going across. The other thing 0:19:33.600 --> 0:19:37.800 is with that, you're actually seeing a material increase in 0:19:38.000 --> 0:19:44.440 volatility um impacting corporations that do not manage currency risk 0:19:44.880 --> 0:19:48.920 properly and to the fact have a continue get hurt. 0:19:49.320 --> 0:19:54.880 And those are typically surprises that the UH investor community punishes. 0:19:55.720 --> 0:19:59.440 You know, it's been interesting coming into this year. The 0:19:59.640 --> 0:20:03.120 over welming call was for further dollar weakness, and yet 0:20:03.160 --> 0:20:06.480 since June you've actually seen some dollar strength as of late. 0:20:06.960 --> 0:20:09.359 What does that mean for hedging as it relates to 0:20:09.400 --> 0:20:13.400 the dollar. Yeah, it's great point. And the one never 0:20:13.440 --> 0:20:15.920 knows where the dollar is going. Only one thing is sure. 0:20:16.359 --> 0:20:19.040 When there's no volatility, there will be volatility or whatever 0:20:19.080 --> 0:20:22.199 the direction is. Now, when you're thinking about this, and 0:20:22.240 --> 0:20:25.920 this is a little bit counterintuitive from most, is when 0:20:25.960 --> 0:20:30.159 the dollar goes up, that means that whatever revenues you 0:20:30.280 --> 0:20:34.359 have abroad are actually worthless to you. And unless you've 0:20:34.400 --> 0:20:39.040 manage that risk by hedging it or managing in other ways, um, 0:20:39.119 --> 0:20:41.920 you will have negative impacts with a strong dollar. That's 0:20:42.080 --> 0:20:46.440 typically counterintuitive. Everybody thinks, well, dollars going is strong, therefore 0:20:46.480 --> 0:20:49.040 things are great, things are going well. Well for corporations, 0:20:49.040 --> 0:20:51.280 we don't manage that. That's actually typically not good news. 0:20:51.320 --> 0:20:53.879 And to put that in further uh, in kind of 0:20:54.080 --> 0:21:00.400 further context, the average SMP company has over fifty cent 0:21:00.680 --> 0:21:05.040 of its revenues from outside the United States. So that 0:21:05.080 --> 0:21:09.560 means the average spy, if they do nothing, have fifty 0:21:10.240 --> 0:21:14.639 of their revenues at risk due to currency of volatility. 0:21:14.880 --> 0:21:16.520 All right, well, kind when I see a number like 0:21:16.640 --> 0:21:19.479 nine point five billion dollars lost due to a currency 0:21:19.520 --> 0:21:22.960 of alatility, is my takeaway is that corporations are not 0:21:23.040 --> 0:21:26.800 very good at hedging. Um, some are and some aren't, 0:21:26.840 --> 0:21:29.359 but the ones that have to disclose it are not, 0:21:29.600 --> 0:21:31.080 is the fact of the matter. So the nine a 0:21:31.119 --> 0:21:33.840 half billion that disclosed it are not very good at 0:21:33.880 --> 0:21:36.840 managing their risks. So that takeaway is absolutely correct. Now, 0:21:37.000 --> 0:21:39.919 we at cariber Triped help companies actually look at that 0:21:40.000 --> 0:21:42.560 and manage that properly and really not manage it, but 0:21:42.720 --> 0:21:45.560 understand that exposure. And so we hope that less and 0:21:45.640 --> 0:21:49.440 less corporations get impacted. But when you think about one 0:21:49.520 --> 0:21:53.919 quarter nine and a half billion dollars lost in stock, 0:21:54.040 --> 0:21:56.879 in the in the revenues, etcetera, that's those are you 0:21:56.880 --> 0:21:59.359 could equate that to jobs, right, that's a lot of 0:21:59.480 --> 0:22:03.000 jobs people can't really afford to because they're not managing 0:22:03.000 --> 0:22:05.159 their currency risk to the levels they can. And to 0:22:05.240 --> 0:22:08.560 put a benchmark at this because you're asking which direction 0:22:08.600 --> 0:22:11.320 that goes to. The benchmark is if a company has 0:22:11.359 --> 0:22:15.720 more than one sent earnings per share impacted by foreign exchange, 0:22:15.920 --> 0:22:18.800 that's material and too much. There are lots of companies 0:22:18.840 --> 0:22:22.200 we saw PEPSI coming out earlier today, no impacts. There's 0:22:22.280 --> 0:22:24.880 lots of professional companies of all sizes. By the way, 0:22:25.040 --> 0:22:27.199 it isn't just the larger the company the better they 0:22:27.200 --> 0:22:29.879 are managing it. But you can have small companies like 0:22:29.920 --> 0:22:32.360 a Hubble, for example, that does a great job at 0:22:32.400 --> 0:22:34.920 managing their currency risk and have no impacts. They are 0:22:35.320 --> 0:22:40.879 would referred to as currency agnostics. They manage their financial 0:22:40.880 --> 0:22:44.199 affairs in such a way that the currencies do not 0:22:44.440 --> 0:22:48.320 really impact the results. That's very doable and by the way, 0:22:48.600 --> 0:22:52.240 not very expensive today. Wolfgan, thanks so much for joining us. 0:22:52.240 --> 0:22:55.520 A really appreciated Wolfgang Coaster Senior Strategies for Kiribe. They 0:22:55.560 --> 0:22:59.200 have their quarterly Cairibbe's Currency Impact Report that came out 0:22:59.280 --> 0:23:02.720 this morning and in the key takeaway corporations lost nine 0:23:02.760 --> 0:23:05.720 point five billion dollars due to increased currency of alatility 0:23:05.840 --> 0:23:07.960 in the past quarter. It seemed like a big number 0:23:08.000 --> 0:23:10.399 to me. Taylor, Yeah, certainly does. I was taking a 0:23:10.440 --> 0:23:12.040 look at the We have a great chart on the 0:23:12.119 --> 0:23:17.080 terminal with the bond volatility index, the equity so the 0:23:17.160 --> 0:23:19.879 move the VIX, and then the currency the G seven 0:23:20.240 --> 0:23:23.399