Latest / Bloomberg Intelligence / The Fed Isn’t Crazy, Trump’s Trade War Is: David Kotok

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The Fed Isn’t Crazy, Trump’s Trade War Is: David Kotok · Bloomberg Intelligence

0:05
Speaker 1: Welcome to the Bloomberg p m L Podcast. I'm pim Fox.
0:08
Speaker 1: Along with my co host Lisa Bramowitz. Each day we
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Speaker 1: bring you the most important, noteworthy, and useful interviews for
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Speaker 1: or the trading floor. Find the Bloomberg p m L
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Speaker 1: Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot com. Perhaps
0:31
Speaker 1: the Fed is going loco. That is what President Trump
0:35
Speaker 1: has said, so that it is a mistake for the
0:38
Speaker 1: Central Bank to raise rates as much as it has.
0:41
Speaker 1: I also said that they are being too aggressive and
0:45
Speaker 1: uh yeah, going loco, going crazy. These are the words
0:49
Speaker 1: David Ko Talk joining us now chairman and chief investment
0:51
Speaker 1: officer at Cumberland Advisors. David, how much do you care
0:54
Speaker 1: about these comments that President Trump is making about the Fed? Hey, Lisa,
0:58
Speaker 1: it's always a pleasure to be with you, to know.
1:00
Speaker 1: There's a real question here. So who's loco? And I
1:04
Speaker 1: think the markets are telling you who's loco? The tape
1:08
Speaker 1: is read, the markets are telling you who has been
1:13
Speaker 1: loco over a trade war fight? Well, hold on a second, Wait,
1:17
Speaker 1: hold on a second. So you're basically saying that the
1:20
Speaker 1: tape is read because of the trade war fight and
1:22
Speaker 1: not because the FED raising rates. Is that correct? I
1:24
Speaker 1: think the FED has been on a gradualist broadcast path,
1:29
Speaker 1: taking a step at the time telling everybody who wants
1:33
Speaker 1: to pay attention what they're gonna do, when they're going
1:36
Speaker 1: to do it, and trying to communicate it clearly. So
1:41
Speaker 1: to say they're crazy means I can't read, I don't
1:44
Speaker 1: look at anything, and I get all my news at
1:47
Speaker 1: late at night in a circular fashion from three journalists
1:51
Speaker 1: whose names we know all right, well, But David, just
1:54
Speaker 1: just to sort of push back a little bit here,
1:56
Speaker 1: I mean, we've known about the trade war for a while.
1:58
Speaker 1: We've known about the increasing trade tensions between China and
2:01
Speaker 1: the US. We've also known about the tell of the
2:03
Speaker 1: forecast four FED rate hikes. So we've known both of
2:06
Speaker 1: these things for a while. How can you pin the
2:09
Speaker 1: recent sell off on one or the other. I mean,
2:11
Speaker 1: it seems like somewhat it it's a factor of both
2:14
Speaker 1: of them joining up right, I mean, if nothing else,
2:17
Speaker 1: But how do you tease this out? Well, you can
2:19
Speaker 1: say the following trade war rhetoric, which started at the
2:23
Speaker 1: beginning of this year, said we're going to become bellicos,
2:28
Speaker 1: and the market said, Okay, this is a style of confrontation,
2:33
Speaker 1: it's a style of negotiation. But in the end it'll
2:37
Speaker 1: all work out and we'll get to the middle and compromise.
2:40
Speaker 1: And that was a progression. Meanwhile, the rhetoric intensified. Then
2:45
Speaker 1: we had some settlements. So we've seen Mexico, Canada, Korea,
2:50
Speaker 1: we're seeing settlements. When you examine the result of all
2:54
Speaker 1: the belligerency, there's not much in the way of change.
2:58
Speaker 1: The big one is China, the second largest economy in
3:01
Speaker 1: the world, four times our population, and a very active
3:06
Speaker 1: participant in Asia, and that has been digging in deeper
3:10
Speaker 1: and deeper and deeper. And now we're in a position
3:13
Speaker 1: where if there's no truce, there's a tariff that's announced,
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Speaker 1: the US must follow through under Trump or Trump will
3:22
Speaker 1: have said something and have to bring it back. That's
3:25
Speaker 1: not his way. So that's where we are today. Noticed
3:29
Speaker 1: today the market rallied four seconds on this meeting was
3:34
Speaker 1: g and it's turning red again for good reason. When
3:38
Speaker 1: you pick a fight as a bully in the schoolyard,
3:41
Speaker 1: pick on somebody small, don't take on the guy who's
3:45
Speaker 1: your size. All right, Well, you know, let's let's just
3:48
Speaker 1: dig a little bit deeper though, because right now we're
3:50
Speaker 1: still seeing fundamental strong we're still seeing profits rising at
3:55
Speaker 1: US companies, So you know, would this be a buying
3:58
Speaker 1: opportunity even given some of the outstanding concerns about trade tensions, uh,
4:04
Speaker 1: let alone rate rises or anything else. Well, that's an
4:07
Speaker 1: interesting question to evolve. I can't say what it is.
4:10
Speaker 1: I can tell you what we're doing. We are focused
4:12
Speaker 1: on the E t F portfolios, domestic centric as long
4:16
Speaker 1: as we see risk in the international structure. The US
4:20
Speaker 1: oriented portfolio is going to look at mid cap small cap.
4:24
Speaker 1: Even though they've corrected domestic businesses and selected sectors like defense,
4:31
Speaker 1: that one is not going to be touched. It's going
4:33
Speaker 1: to do well. So that's the stock area. On the
4:37
Speaker 1: bond area, we're doing a barbell. Interest rates are definitely
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Speaker 1: on a higher trajectory. How far when, what the influences are.
4:46
Speaker 1: You're an expert that has followed the bond market for
4:50
Speaker 1: years and look at credit spreads and suddenly they explode.
4:54
Speaker 1: Italy is the latest example. They don't give you warning, Lisa.
5:00
Speaker 1: You wake up on a Tuesday, turn on Bloomberg and
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Speaker 1: Lisa is saying, look what happened, and I'll last twenty
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Speaker 1: four hours. Well, one thing that I've been noticing, David,
5:07
Speaker 1: is that there have been some bretty subsidantial outflows from
5:10
Speaker 1: a number of credit ETFs. And thinking about h y
5:13
Speaker 1: G for example, which is the biggest highle bondy TF
5:17
Speaker 1: in the US, and it has seen nearly three billion
5:20
Speaker 1: dollars of withdrawals in the past week alone. Investment grade
5:23
Speaker 1: BONDI tfs also seeing some pretty substantial, unprecedented outflows. I'm
5:27
Speaker 1: just wondering, I mean, do you think that this is
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Speaker 1: a harbinger of what's to come or do you think
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Speaker 1: that this is just sort of knee jerk positioning by
5:33
Speaker 1: a number of big institutions. Well, I think it's a
5:36
Speaker 1: harbinger of rising risk. When we had this discussion a
5:40
Speaker 1: couple of years ago, the short term interest rate was
5:43
Speaker 1: near zero. Now it's too. When we had this discussion
5:47
Speaker 1: a couple of years ago, the tax free interest rate
5:49
Speaker 1: was three high grade tax free trade today above four.
5:54
Speaker 1: When we had this discussion, taxable mortgage backed securities were lower,
5:58
Speaker 1: now they're above live. There is a competition coming off
6:02
Speaker 1: the coupon for the first time in ten years, and
6:06
Speaker 1: that's a big deal. And the direction of the competition
6:10
Speaker 1: looks to be even more upwardly sloped in terms of yield.
6:15
Speaker 1: Certainly the short term rate it will be a quarter
6:16
Speaker 1: point higher before the end of this year. Yeah, David,
6:20
Speaker 1: Before I let you go, we just have about thirty
6:22
Speaker 1: seconds here. But where's your views on on the municipal
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Speaker 1: bond landscape, because I know you wrote Adventures in Muni
6:27
Speaker 1: Land and we've seen some pretty big outflows from the
6:29
Speaker 1: muni bond space as well. The intermediate section of the
6:32
Speaker 1: curve in the muni space is dangerous. The long end,
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Speaker 1: where the highest grade yield um is above the thirty
6:42
Speaker 1: year treasury yield by a wide margin, is desirable and
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Speaker 1: dry powder in the front end. That's why Barbell beats
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Speaker 1: a ladder hands down in this climate. You heard it here,
6:55
Speaker 1: David Kottak always a pleasure. We love having you on
6:57
Speaker 1: David ko talk as Chairman and Chief Investment off Sir
7:00
Speaker 1: from Cumberland Advisors based in sarah Sota, Florida. I hope
7:03
Speaker 1: you avoided some of the bad weather we've been getting
7:06
Speaker 1: and their curricane. David Kotuk is also co author of
7:09
Speaker 1: the book Adventures in Muni Land, advising a barbell approach,
7:13
Speaker 1: keeping some dry powder in the short end in case
7:16
Speaker 1: things really do blow up. More from where we are,
7:30
Speaker 1: the price of oil has been very interesting to watch.
7:33
Speaker 1: Usually when the dollar weakens, oil strengthen just because it
7:36
Speaker 1: is priced in dollars. Uh, today not so much. You're
7:39
Speaker 1: seeing the price of oil decline even as the dollar weekends,
7:43
Speaker 1: and it's the biggest to day decline for crude going
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Speaker 1: back to July. Let's get a check on what's going
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Speaker 1: on here. Will Harris joins us now he's European energy
7:52
Speaker 1: analyst for Bloomberg Intelligence. Will let's just start with what
7:55
Speaker 1: OPEC came out with today. What do we hear from
7:59
Speaker 1: them and how much is that what's affecting oil here?
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Speaker 1: So oil prices are are off a little bit, as
8:06
Speaker 1: as you mentioned in the last couple of days, but
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Speaker 1: I don't think that's to be unexpected given the contagion
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Speaker 1: we are witnessing globally across equity markets. Um OPEC came
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Speaker 1: out um with their monthly oil market report and and
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Speaker 1: one of the headline numbers was that they had revised
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Speaker 1: their world oil demand growth forecast down marginally by fifty
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Speaker 1: thousand barrels a day. And what I think is really
8:28
Speaker 1: important to note here is putting this number in context,
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Speaker 1: fifty thousand barrels a day compares to about a hundred
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Speaker 1: million barrels per day UM in total UM for globe
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Speaker 1: world oil demand next year. In so we are still
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Speaker 1: expected to grow by over one point three million barrels
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Speaker 1: a day next year. And and just to um add
8:50
Speaker 1: on to that, just two weeks ago, OPEC published its
8:53
Speaker 1: World Oil Outlook, whereby it raised its long term oil
8:57
Speaker 1: demand growth forecast as well. So I think we can
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Speaker 1: look at at this number as as a UM as
9:05
Speaker 1: a minor revision in the context of of a actually
9:09
Speaker 1: very supportive fundamentals for the oil market UM through next
9:13
Speaker 1: year and longer term. So you said that you think
9:16
Speaker 1: that oil prices are off a little bit because of contagion.
9:19
Speaker 1: Is that because when there is a sort of jittery
9:22
Speaker 1: feeling in world equities, people expect global growth to slow
9:26
Speaker 1: and thus oil demand to drop off. Is that sort
9:28
Speaker 1: of the knee jerk response or is it something else? Yes,
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Speaker 1: that's precisely it. And the only other thing I would
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Speaker 1: add is that layering on that as oil prices do
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Speaker 1: increase um the demand for oil does begin to tail off.
9:43
Speaker 1: As you can imagine people people would like to drive
9:46
Speaker 1: a bit less um and and and more efficiency in
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Speaker 1: um in how people are using oil as it becomes
9:52
Speaker 1: more expensive. So I guess I want to take a
9:54
Speaker 1: step back, because we've been talking a lot about how
9:57
Speaker 1: if there is ongoing conflict in Libya v A well
10:00
Speaker 1: as a huge issue, if their production drops much further
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Speaker 1: it already has dropped tremendously. If we have the sanctions
10:06
Speaker 1: that go into effect soon against Iran, all of these
10:09
Speaker 1: things are going to pressure the oil supply dynamic to
10:14
Speaker 1: such a degree that it won't take anything at all
10:17
Speaker 1: or a very small disruption to really cause prices to
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Speaker 1: rise substantially. Do you adhere to that idea, Yes, precisely.
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Speaker 1: And and so just as a little side note, I
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Speaker 1: attended the Oil and Money conference in London this morning
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Speaker 1: and actually listened to Mohammed Barkindo, who is the opec
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Speaker 1: UH Secretary General speak this morning, and notably he didn't
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Speaker 1: mention this marginal decline in oil demand growth for next year.
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Speaker 1: But what he did do is he clearly laid out
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Speaker 1: the scenario that they see on the supply side, which
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Speaker 1: I view is consistent with the overwhelming consensus in the
10:46
Speaker 1: market and is one that is a tightening market through
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Speaker 1: next year. And it's attributed to four main factors, a
10:52
Speaker 1: couple of which you mentioned. Number one is these oil
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Speaker 1: Iran sanctions from from the US which are pending in November,
10:59
Speaker 1: and they are starting to fight with about one million
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Speaker 1: barrels per day of oil exports removed from the market.
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Speaker 1: We have a second, we have a Venezuelan unprecedented production decline.
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Speaker 1: This country was producing two point four million barrels a
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Speaker 1: day in early sixteen. It's down to one point two
11:16
Speaker 1: million barrels a day right now, so it's about half third.
11:20
Speaker 1: We have a permian pipeline bottlenecks in the US. Given
11:23
Speaker 1: the rapid growth in oil shale from the US, there's
11:26
Speaker 1: been some infrastructure constraints which which are expected to be
11:29
Speaker 1: resolved in the back half of next year, so so
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Speaker 1: this will cap US growth. And fourth, on top of that,
11:36
Speaker 1: maybe the most important is that OPEC has declining spare capacity,
11:40
Speaker 1: which is estimated at about one million barrels per day.
11:43
Speaker 1: So I think these are the four key factors that
11:45
Speaker 1: we're seeing on the supply side. So when you were
11:46
Speaker 1: talking to people this morning, was the consensus that oil
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Speaker 1: prices are poised to rise substantially from here? Yes? Overwhelmingly, UM.
11:54
Speaker 1: The executives from across the upstream downstreams sectors expect sustained
12:00
Speaker 1: UH at stable oil prices UM eighty to ninety with
12:05
Speaker 1: with maybe a couple of dissenters who UM, who were
12:08
Speaker 1: outliers thinking that it would come back lower to sixty
12:12
Speaker 1: or so. What's the concern that the demand side of
12:16
Speaker 1: this equation would be permanently dampened if prices did remain
12:19
Speaker 1: at that level. Well, I'm I'm not so sure about that.
12:23
Speaker 1: I I think that that on the demand side, uh,
12:27
Speaker 1: overwhelmingly we are seeing a continuing strong demand, although it's
12:32
Speaker 1: slowing slightly UM. But I do think that there that
12:36
Speaker 1: on the demand risk side, the UM we we we
12:40
Speaker 1: do see potential black swan events which which we obviously
12:45
Speaker 1: we can't UM can't forecast, but but they are like um,
12:49
Speaker 1: massive economic contagion in the oil markets, UM, A credit crunch,
12:55
Speaker 1: things like that. But but barring those, the demand side
12:59
Speaker 1: still look relatively strong. Well, Harris, thank you so much,
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Speaker 1: really wonderful insights from this morning and opex announcement uh
13:06
Speaker 1: there from London. Will Harris is European energy analyst for
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Speaker 1: Bloomberg Intelligence. Oil prices off a little bit after gaining
13:14
Speaker 1: quite a bit there now currently if you look at
13:17
Speaker 1: w t I trading at seventy one seventy one dollars
13:21
Speaker 1: and ninety one cents uh and if you take a
13:23
Speaker 1: look at Brent crude you can see that it is
13:26
Speaker 1: also trading lower. It is actually now at eighty one
13:30
Speaker 1: dollars and forty cents, so you are seeing a little
13:32
Speaker 1: bit of a sell off, but still within that eighty
13:35
Speaker 1: to nine dollar range that Will Harris was talking about
13:38
Speaker 1: as a likely stable place that we're going to see
13:41
Speaker 1: for a while. We have been talking about the sell
13:54
Speaker 1: off that has been deepening today. Although off the earlier lows,
13:57
Speaker 1: now the down Jones and decks just down by seven
13:59
Speaker 1: tents of percents one naztac actually not losing as much,
14:04
Speaker 1: which is kind of interesting. Let's bring Nickolas into the
14:07
Speaker 1: conversation to find out why, just why our markets having
14:11
Speaker 1: such a difficult time right now. Nicholas is co founder
14:14
Speaker 1: of data Check Research in New York City. Nick, thank
14:17
Speaker 1: you so much for being with us. You're also a
14:19
Speaker 1: Bloomberg opinion columnist. Do you think that there are legs
14:22
Speaker 1: to the recent sell off? You know, I think for
14:26
Speaker 1: the moment we have to be pretty cautious. These kind
14:29
Speaker 1: of high volatility days like what we got yesterday, they
14:33
Speaker 1: come along once or twice a year, so not that unusual.
14:36
Speaker 1: But over the next month they tend to show a
14:40
Speaker 1: market that's basically unchanged. So as tempting as it is
14:43
Speaker 1: trying to buy the dip, you have to be very careful.
14:46
Speaker 1: It's going to have a little ways to go. For sure.
14:49
Speaker 1: Of Altility doesn't just turn off like a light switch.
14:52
Speaker 1: Nick Cholas, can you put this to some kind of
14:54
Speaker 1: context for us. Sure. Let me just give you a
14:59
Speaker 1: couple of his storical stats to frame the discussion. You know,
15:02
Speaker 1: let's look at down four percent days on the SMP, which,
15:05
Speaker 1: including after hours yesterday, we certainly hit. And if you
15:09
Speaker 1: look at the history over time, a couple of things
15:11
Speaker 1: are pretty clear. The first is that and traders know
15:15
Speaker 1: all this math, so this is the playbook for what's
15:17
Speaker 1: happening right now. The odd average of the day after
15:20
Speaker 1: a big meltdown day is actually up about one point seven,
15:24
Speaker 1: and then over the next month it's roughly flat, but
15:27
Speaker 1: over the next year the average return is so the
15:30
Speaker 1: short take on this is periods of stress and volatility
15:34
Speaker 1: like this do create buying opportunities, but they don't immediately
15:38
Speaker 1: pay off. You might have a bounce the next day,
15:40
Speaker 1: but then you've been had to eat through some churn
15:42
Speaker 1: and await a year, and you're generally better off. That's
15:45
Speaker 1: the playbook traders understand, but it is kind of anchored
15:47
Speaker 1: on the notion that we get an update to day
15:49
Speaker 1: and so far that's not looking very good. Although it's
15:51
Speaker 1: interesting the NASAC actually actually just turned slightly positive. It's
15:55
Speaker 1: just kind of interesting to see the NASDAC text shares
15:58
Speaker 1: leading the way down yesterday and today they're showing much
16:01
Speaker 1: more resilience. Does this mean anything to you in terms
16:04
Speaker 1: of a lot of investors still seeing value in the
16:07
Speaker 1: apples and the Amazons and the facebooks of the world,
16:11
Speaker 1: regardless of interest rate rises or even trade tensions. Yeah,
16:16
Speaker 1: I know. It's a really important point because there is
16:19
Speaker 1: a lot of talk about rotation into value and tech
16:22
Speaker 1: being kind of yesterday's flavor and not tomorrow's. But we
16:25
Speaker 1: do need tech to rally in order for this market
16:27
Speaker 1: to rally, tech is still the SMP, the defensive sectors
16:32
Speaker 1: or ten percent or less. There's just not enough juice
16:35
Speaker 1: there in a rotation to get this market to turn.
16:37
Speaker 1: You do need technically the way back up, Nick, I
16:41
Speaker 1: know that you used to cover the automobile industry. If
16:44
Speaker 1: you're looking to buy a car and it goes on
16:46
Speaker 1: sale and it's three less expensive, is that considered a bargain.
16:52
Speaker 1: It is not considered a bargain. What tends to happen
16:55
Speaker 1: is one of two things. Either you were going to
16:56
Speaker 1: buy anyway in the three percent of the gift, or
16:59
Speaker 1: you think, wow, that dealer really is stressed. Let me
17:02
Speaker 1: wait a week and see if that car goes down
17:04
Speaker 1: ten percent in price, and then I'll step in. And
17:07
Speaker 1: it's a wonderful analogy to what's going on in markets.
17:09
Speaker 1: The people who are buying are going to buy, but
17:11
Speaker 1: the people who are really value oriented they want to
17:14
Speaker 1: see this market shake out, and that's a multi day process.
17:17
Speaker 1: So let's talk about the why here, why markets are
17:20
Speaker 1: feeling so jittery these days. Do you think this is
17:23
Speaker 1: a trade story, do you think this is an interest
17:25
Speaker 1: rate story, or do you think this is just a
17:27
Speaker 1: natural people looking for data, not finding it and deciding
17:32
Speaker 1: not to do anything and sit on their hands, and
17:34
Speaker 1: a couple of sellers move the whole market. I think
17:37
Speaker 1: it's three things. I think the first thing is rates absolutely.
17:40
Speaker 1: I think Chair Pale's comments about not being anywhere near
17:42
Speaker 1: close to neutral last week had spillover effects in the
17:45
Speaker 1: long tremendo the bond market, and I think stocks took
17:48
Speaker 1: their queue off of that. I think the second thing
17:51
Speaker 1: is China trade that's not getting resolved and it's beginning
17:55
Speaker 1: to be a kind of headwind to markets they realize
17:58
Speaker 1: is going to get fixed easily as the new and
18:00
Speaker 1: after deal got fixed. So that's the second thing. The
18:02
Speaker 1: third thing is bond and stock correlations have flipped from
18:05
Speaker 1: being wildly negative to modestly positive. And if you can't
18:09
Speaker 1: hedge up a stock portfolio with bonds, you have to
18:11
Speaker 1: lighten up on everything. And so investors are saying, okay,
18:15
Speaker 1: at the very least, that can't be as exposed long
18:17
Speaker 1: as I have been for the last many years, because
18:19
Speaker 1: bonds aren't going to hedge me out the way it
18:21
Speaker 1: used to be. So those are the three things I
18:23
Speaker 1: think are driving it right now. All right, Nick, let
18:25
Speaker 1: me try to play Devil's advocate here. Do you know
18:28
Speaker 1: anybody that's selling shares of Apple, Microsoft, Alphabet, Facebook, even Adobe, PayPal.
18:34
Speaker 1: These are the companies that are moving the NASDAC higher
18:37
Speaker 1: right now? Do you know anybody selling those shares so
18:39
Speaker 1: that they can run out and buy a two year
18:41
Speaker 1: treasury at two point now? But you know, as you know,
18:46
Speaker 1: the markets don't work you point to point. They work.
18:48
Speaker 1: In the aggregate, you have what clearly was the margins
18:52
Speaker 1: selling in the first say, ninety minutes of the trading day,
18:56
Speaker 1: left over from the cell off yesterday. And on the
18:58
Speaker 1: flip side, you have keep Well that had been shortening
19:01
Speaker 1: duration and bond portfolios pretty consistently for the over the
19:04
Speaker 1: course of the last three months, and we see that
19:06
Speaker 1: very clearly in the t F flows. So in aggregate
19:09
Speaker 1: the story hangs together, but the point to point obviously
19:11
Speaker 1: never will. So I'd love to get your thoughts Nick
19:14
Speaker 1: on earnings. We're going to get the big banks reporting tomorrow,
19:18
Speaker 1: then we're going to get a whole host of others
19:21
Speaker 1: following suit. What are you expecting and how important is
19:23
Speaker 1: this earning season? Yeah, it's it's important because at the
19:27
Speaker 1: very least will take market attention away from the macro
19:30
Speaker 1: and kind of shift it back to micro and earnings,
19:32
Speaker 1: which is a decent story. On the negative side, we
19:36
Speaker 1: already saw peak earnings, you know for this year that
19:38
Speaker 1: was in Q one and Q two. Earnings growth this quarter,
19:43
Speaker 1: by estimates only be on the low end on the
19:47
Speaker 1: high end, but not not as good as the first half.
19:50
Speaker 1: And you have I think a lot of investor concerned
19:53
Speaker 1: about what a company is going to say, particularly about
19:55
Speaker 1: margin and about revenue growth going into the back half
19:58
Speaker 1: of the year. And it's the next year, because it's
20:01
Speaker 1: okay to have some declining on are still good. The
20:03
Speaker 1: real worry now is what is next you're going to
20:06
Speaker 1: look like? And can we really post ten percent revenue
20:08
Speaker 1: growth on the back of a slower US economy, more
20:11
Speaker 1: trade tensions, and can we really get operating margins to
20:14
Speaker 1: show some leverage if labor costs arise? And that is
20:18
Speaker 1: a big swirl of of of potential negatives that investors
20:22
Speaker 1: will want to hear answers too before they step back in.
20:26
Speaker 1: Nick taking a look at the trade in the energy
20:28
Speaker 1: complex today, Crude oil on the NIMEX is down more
20:31
Speaker 1: than two and a quarter percent. Gasoline traded on the
20:34
Speaker 1: NIMEX down more than three and a quarter percent. Same
20:37
Speaker 1: story for heating oil, same story for natural gas down
20:40
Speaker 1: more than three and a half percent. If we get
20:42
Speaker 1: lower energy prices, is that gonna be good for the economy? Um, yes,
20:48
Speaker 1: it absolutely is. And you've seen you've seen the effect
20:50
Speaker 1: of higher gas prices on even simple things like miles driven,
20:54
Speaker 1: which are an important proxy for economic growth. They really
20:57
Speaker 1: slowed over the course of the past couple of months
20:59
Speaker 1: of energy his gas prices rose, So it definitely would
21:02
Speaker 1: be a nice tail. When I'm reluctant to say that
21:05
Speaker 1: energy prices have peaked only because we're still walking into
21:09
Speaker 1: the November deadlines for the Iranian sanctions and that was
21:13
Speaker 1: pushing oil prices up earlier, I'm not sure that it
21:16
Speaker 1: is the oil move in the last couple of days.
21:18
Speaker 1: Isn't just the leveraging of portfolios generally, and that we
21:21
Speaker 1: don't have one last leg up on oil prices. I'm
21:24
Speaker 1: not willing willing to declare victory there yet. I think
21:27
Speaker 1: there's still some new term catalysts we have to focus on.
21:29
Speaker 1: I want to thank you very much for being with us.
21:31
Speaker 1: Nick cholis Is the co founder of Data Trek Research,
21:35
Speaker 1: and he is a Bloomberg opinion columnist. Right now, I
21:48
Speaker 1: want to turn our attention to something that we don't
21:51
Speaker 1: talk that much about, and that is fertility. And joining
21:53
Speaker 1: us now is Ernest Lumay, Doctor Ernest Loum, a co
21:56
Speaker 1: founder and chief executive officer of obs Eva and that's
21:59
Speaker 1: based in Neva, Switzerland, and it focuses on finding remedies
22:04
Speaker 1: for fertility problems for women. Dr Luma, thank you so
22:08
Speaker 1: much for being here. This is such a fascinating issue
22:11
Speaker 1: at a time when so many women are waiting so
22:14
Speaker 1: much longer to have children and that are having more
22:16
Speaker 1: fertility problems. How does that factor into your business model? Yes,
22:21
Speaker 1: that's very important because we are indeed focusing on condition
22:25
Speaker 1: which are being more and more common, and as you mentioned, fertility,
22:30
Speaker 1: it's really a condition where more and more patient have
22:33
Speaker 1: to address. You know, the reason why is that women
22:37
Speaker 1: have this desire of doing studies, going professionally and being active,
22:43
Speaker 1: and as soon as you pass your thirty years old,
22:47
Speaker 1: you start to have your fertility declining and there is
22:49
Speaker 1: a conflict between maternity, having your baby and being very
22:54
Speaker 1: active professionally. So we need to address that. So how
22:57
Speaker 1: much have you seen fertility treatments increase is among the
23:00
Speaker 1: developed world, it's keep growing every year and the main
23:05
Speaker 1: treatment now is in vitral fertilization and embryo transfer, and
23:09
Speaker 1: we see a number of cycles being increased every year.
23:13
Speaker 1: About two hundred thousand cycles perform currently in United States,
23:17
Speaker 1: but there are a limit in the United States, which
23:19
Speaker 1: is the economical aspect, because it's expensive between twelve thousand
23:23
Speaker 1: and twenty thousand for an IVF U S dollar for
23:25
Speaker 1: an IVF cycle. In areas where it's reimbursed, for example,
23:29
Speaker 1: in Europe we have eight hundred thousand cycles, and in
23:32
Speaker 1: Japan for a third of the US population, we have
23:35
Speaker 1: four hundred thou IVF cycle and now in China after
23:38
Speaker 1: the relaxed to one child policy, it's eight hundred tho cycles.
23:43
Speaker 1: So we will see that growing and continue to grow
23:45
Speaker 1: in the future. Okay, so your company, what are you
23:48
Speaker 1: working on in terms of new research to help women
23:52
Speaker 1: have babies whatever their issues? Maybe I mean the IVF
23:55
Speaker 1: field improved a lot in the laboratory and improved the
24:00
Speaker 1: outcome the success, but there have been no drug really
24:03
Speaker 1: to contribute to improving success for the last twenty thirty years,
24:07
Speaker 1: and we have been focusing on embryo transfer because that's
24:11
Speaker 1: the step where you have the highest fellowhead. That means
24:15
Speaker 1: you put back an apparently healthy embryo in the futurus,
24:19
Speaker 1: but only about one third of the woman will go
24:23
Speaker 1: home with a baby following that. So we have been
24:25
Speaker 1: focusing on this step. And the drug we are developing
24:28
Speaker 1: is a drug which is preparing the futurus for being
24:33
Speaker 1: quiescent and properly vascularized to help the embryo implanting. And
24:38
Speaker 1: we recently report the outcome of a PHAST three trial,
24:42
Speaker 1: which is a large trial where we see that our
24:45
Speaker 1: treatment administered orally prior to embryo transfer increased take home
24:51
Speaker 1: baby read compared to placible by thirty five percent. Wow.
24:55
Speaker 1: And does it also means that you don't have to
24:57
Speaker 1: implant as many fertilized eggs exactly. That's a very important
25:01
Speaker 1: point because c DC is telling us the United States
25:05
Speaker 1: that up to fifty percent of embryo transfer are done
25:08
Speaker 1: with two embryos or more. Why to increase success rate?
25:12
Speaker 1: But the price to pay is that and multiple gestation
25:17
Speaker 1: many twins, but with the risk of premature delivery, the morbidity,
25:22
Speaker 1: the mortality, and the cost of premature delivery. You get
25:25
Speaker 1: the optimum exactly. So with our drug with single embryo transfer,
25:32
Speaker 1: the data support the concept that we are doing better
25:36
Speaker 1: that with double embryo transfer in terms of the convery
25:40
Speaker 1: it and therefore not only we will reduce the number
25:43
Speaker 1: of IVF to get a baby, but I think it
25:45
Speaker 1: will support strongly single embryo transfer and therefore avoid all
25:50
Speaker 1: these complication with multiple births. I want to talk about
25:53
Speaker 1: just the broader market for this type of drug, given
25:56
Speaker 1: what we're seeing women waiting longer. Do you think that
25:59
Speaker 1: we've reached the tipping point and that where people are
26:01
Speaker 1: starting to go back and have babies younger or do
26:04
Speaker 1: you think that's will only increase as there are more
26:06
Speaker 1: women who enter the workforce and there's more equality in
26:09
Speaker 1: the workplace. Yes, I don't see there is indication that
26:12
Speaker 1: women are re addressing this aspect. We keep the seed
26:17
Speaker 1: demands keep increasing, So I don't see. We see now
26:21
Speaker 1: that women are deciding to have a baby earlier on
26:26
Speaker 1: than in the in the in the past, So now
26:30
Speaker 1: I don't see this trend actually, uh Now, obviously the
26:35
Speaker 1: many center now addressing these needs and women are aware.
26:39
Speaker 1: And one aspect is probably the fact that we start
26:42
Speaker 1: to have cryo preservation freezing off eggs at the younger age,
26:49
Speaker 1: just as an insurance by seeing maybe later on I
26:53
Speaker 1: may have to face the fertility problem. We were just
26:56
Speaker 1: talking about how there are a number of big technology
26:58
Speaker 1: companies in the US that are for their women employees
27:02
Speaker 1: to have their eggs fertilized just in case that they
27:04
Speaker 1: can keep working and not have to worry about finding
27:06
Speaker 1: somebody and going off and raising a baby. Yes, yes,
27:10
Speaker 1: it's interesting. And companies like Apple and Google have proposed
27:14
Speaker 1: to actually pay for freezing the eggs in their employees
27:18
Speaker 1: so they can be more relaxed about their future of fertility.
27:22
Speaker 1: There is a big debate around that, and there is
27:24
Speaker 1: even a technical debate just coming back from the American
27:29
Speaker 1: Society Reportive Medicine meeting, where the debate how many eggs
27:32
Speaker 1: do you need to save to have ninety chance later
27:36
Speaker 1: on to get a baby. It's about forty, so it's
27:39
Speaker 1: a lot, and there is a debate now how many
27:41
Speaker 1: eggs can you hire preserve and what would be the cost.
27:44
Speaker 1: So Dr Domy, you were previously the founder of Preglam,
27:49
Speaker 1: which was acquired for nearly a half a billion dollars.
27:52
Speaker 1: And I'm just wondering what's your plan with this company
27:55
Speaker 1: with Absiva, which trades as O B s V on
27:58
Speaker 1: a n ASDAC. Yes, well, we have a large part
28:02
Speaker 1: of folio of three drugs in lad clinical development and
28:07
Speaker 1: the first drug that we will read your market um
28:10
Speaker 1: is no LASSI band, the drug for IVF. The beauty
28:14
Speaker 1: that we have with this program is that we have
28:16
Speaker 1: no competition. We don't understand health care and we are
28:21
Speaker 1: targeting a limited number of IVF centers five hundreds in
28:25
Speaker 1: the United States for example. That means that commercialization is
28:29
Speaker 1: at rich for us. So for our objective is to
28:34
Speaker 1: bring the company to the commercial stage in the near future.
28:38
Speaker 1: Dr Ernest Lumay, thank you so much for being with us.
28:40
Speaker 1: Really a fascinating discussion. Thank you very much. Dr Ernest
28:43
Speaker 1: lay as co founder and chief executive officer of Observa,
28:46
Speaker 1: which is trades as O B s V on the
28:50
Speaker 1: NASDAC based in GENEVAUS with the Liberty Joints US here
28:53
Speaker 1: in our eleven three hour studios talking about some of
28:55
Speaker 1: the fertility issues that are increasing frankly, as women wait
28:59
Speaker 1: longer have children, and some of the remedies his company
29:02
Speaker 1: is coming up with to remedy that. Thanks for listening
29:08
Speaker 1: to the Bloomberg P and L podcast. You can subscribe
29:10
Speaker 1: and listen to interviews at Apple Podcasts, SoundCloud, or whatever
29:14
Speaker 1: podcast platform you prefer. I'm pim Fox. I'm on Twitter
29:18
Speaker 1: at pim Fox. I'm on Twitter at Lisa Abramo. It's
29:21
Speaker 1: one before the podcast. You can always catch us worldwide
29:24
Speaker 1: on Bloomberg Radio