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US Consumer Confidence Rises, Super Micro Slips · Bloomberg Intelligence

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Speaker 1: Bloomberg eleven thirty.
0:28
Speaker 2: Let's get back to that consumer confidence number, super strong
0:31
Speaker 2: coming in one of three point three. The estmate was
0:32
Speaker 2: for one hundred point seven. It's a better view of
0:35
Speaker 2: the economy and inflation, it looks like. So we wanted
0:37
Speaker 2: to go right to the source. Here, Stephanie Guchard, a
0:40
Speaker 2: senior economistic Global Indicators at the Conference board, joining us. Stephanie,
0:44
Speaker 2: what led the optimism?
0:47
Speaker 3: Well, so let me get this trait. It's an improvement,
0:53
Speaker 3: but I wouldn't qualify it as a strong improvement. The
0:57
Speaker 3: index is still in this narrow range, right, it has
1:00
Speaker 3: been for the past two years. So that's the first
1:03
Speaker 3: thing I wanted to say. But if we go into
1:06
Speaker 3: the improvement, so what has been driving the improvement is
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Speaker 3: more positive views by consumers about business conditions right now
1:18
Speaker 3: and business conditions in the future. So this is really
1:21
Speaker 3: what us driving has driven the improvement in August.
1:25
Speaker 4: And looking at the measure of expectations for the next
1:28
Speaker 4: six months, it looks like the increase, so that's an
1:30
Speaker 4: eighty two point five from an eighty one point one
1:33
Speaker 4: similar increased relative to present conditions. Kind Of, how do
1:36
Speaker 4: you view the consumer right now, given you know, six
1:39
Speaker 4: months from now we could have three, four, five six
1:43
Speaker 4: interest rate cuts and on election in the rearview mirror.
1:47
Speaker 3: So consumer feelings about the economy are really mixed. So yes,
1:53
Speaker 3: they views about business condition improved, but at the same time,
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Speaker 3: if you look into the details, they are getting more
2:00
Speaker 3: dicerned about employment both currently and in the future. So
2:05
Speaker 3: this is kind of it's really a mixed view about
2:08
Speaker 3: the economy. There are still concerned about high prices. At
2:12
Speaker 3: the same time, the inflation expectations have declined, the more
2:19
Speaker 3: they're expecting rate cuts more than they were a month ago.
2:22
Speaker 3: So some things are moving on the positive size and
2:25
Speaker 3: something are moving on the less positive sides, especially regarding employment.
2:30
Speaker 2: All right, we really appreciate you breaking that down and
2:32
Speaker 2: you know, putting it all into perspective for us, particularly
2:34
Speaker 2: the job's part, it feels like that's very much what
2:36
Speaker 2: the Fed's also worried about. Stephanie Gushard, senior economist Global
2:39
Speaker 2: in Caters at the conference board. It's interesting. It's like
2:42
Speaker 2: the FED seems to be pivoting to be worried about jobs,
2:44
Speaker 2: and it looks like that is very similar now to
2:46
Speaker 2: how consumers are feeling.
2:47
Speaker 4: Yeah, and it does make sense as she put it,
2:50
Speaker 4: that it's kind of mixed read and that's why the
2:52
Speaker 4: S and P is still down one to one percent.
2:54
Speaker 4: I mean, sure, it's summer Friday vibes on a Tuesday,
2:57
Speaker 4: but we're taking it Instriday.
2:58
Speaker 2: It is my Friday, so it definitely Friday vibes for me.
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3:19
Speaker 2: Let's get to some of the market moves here. Super
3:21
Speaker 2: micro computer shares just just humbling like crazy today. This
3:25
Speaker 2: is after Hindenberg Research said it's short the maker of
3:28
Speaker 2: service or of server equipment. We want to get more
3:32
Speaker 2: on this with Woujin Hoo Bloomberg Intelligence, a senior technology analyst,
3:36
Speaker 2: did you read, Like, what did you make of the report?
3:38
Speaker 2: It said it was glaring accounting red flags, evidence of
3:41
Speaker 2: undisclosed related party transactions, sanctions and export control failures, and
3:46
Speaker 2: customer issues.
3:47
Speaker 5: Yikes, there was a lot in there. I'm actually glad
3:50
Speaker 5: they sided our report than Jay.
3:53
Speaker 2: I didn't know that one.
3:54
Speaker 5: Okay, look a lot of the stuff that we've what
3:57
Speaker 5: I've read, they're non issues, right. They've been in the
4:00
Speaker 5: ten K and the ten Q filings as part of
4:02
Speaker 5: the risk and disclosures. They sided the delisting back in
4:07
Speaker 5: twenty nineteen. They also cited a related party issues as well,
4:11
Speaker 5: and these are all all known. I almost get a
4:14
Speaker 5: sense that they're trying to kick a dog while the
4:16
Speaker 5: dog is down. A short report because they had gross
4:20
Speaker 5: margin issues because of some aggressive pricing and supply chain issues.
4:25
Speaker 5: So you know, I do question the timing of this report.
4:29
Speaker 4: Yeah, just keeping in mind super Micro from July twelfth
4:32
Speaker 4: down more than forty percent. But my question automatically goes
4:36
Speaker 4: to there's a difference between known issues and issues that
4:40
Speaker 4: people actually factor into their valuation or their expectations, Like,
4:44
Speaker 4: does Hindenberg releasing this report in your view make analysts
4:48
Speaker 4: maybe revisit the Bear case.
4:50
Speaker 5: And that's a great question, Bailey, and I do think so, right,
4:53
Speaker 5: because there were some I guess questions in terms of
4:58
Speaker 5: who they were selling to in terms of sanction related
5:00
Speaker 5: uh parties, Uh, the Russia in particular, and that's going
5:05
Speaker 5: to raise yellow flags or red flags of the US government, right,
5:08
Speaker 5: And and if that's going to draw a greater scrutiny,
5:11
Speaker 5: you never know what might behind that be behind that closet.
5:14
Speaker 2: So you said that they cided your research. What what
5:16
Speaker 2: else did you guys pick out from like the ten
5:18
Speaker 2: K and stuff in terms of their risks for super Micro.
5:20
Speaker 1: Yeah.
5:21
Speaker 5: Look, one of one of the things that that I
5:23
Speaker 5: picked out was the the related parties.
5:27
Speaker 1: Right.
5:27
Speaker 5: Two of their suppliers, Uh, the CEOs of two of
5:30
Speaker 5: the suppliers are the CEO brothers of the super Micro CEO, right,
5:37
Speaker 5: And that's something that I'm not thrilled about quite frankly.
5:39
Speaker 5: You would like a little bit of diversity in terms
5:42
Speaker 5: of the supply chain versus some of an episistic relationship.
5:46
Speaker 5: And you know, uh, that's the big glurring one. But
5:50
Speaker 5: also they've had accounting issues in the past which prompted
5:52
Speaker 5: the uh, the delisting the hope is is that with
5:55
Speaker 5: the CFO that they have currently, they've cleaned all of
5:58
Speaker 5: that mess up.
5:59
Speaker 4: Well, because if it feels like in super Micro obviously
6:02
Speaker 4: everyone knows in video, but this is a stock that
6:05
Speaker 4: from over three years is up fifteen hundred percent, went
6:08
Speaker 4: from you know, one point six billion to a peak
6:11
Speaker 4: at fifty eight billion. Like when these companies go from
6:14
Speaker 4: small cap to large cap, it feels like incorrect me
6:18
Speaker 4: if I'm wrong. It feels like investors sometimes gloss over
6:22
Speaker 4: diving in Dick's disclosures and just kind of take them
6:25
Speaker 4: as a component, yes and B five hundred and let
6:27
Speaker 4: that be their investment.
6:28
Speaker 5: Well, well, let me take that a stuff further. When
6:31
Speaker 5: when you go for a management team from a small
6:34
Speaker 5: cap management team to and SAP five hundred listed company,
6:39
Speaker 5: you know, you're you're still in your preteen years, and
6:41
Speaker 5: all of a sudden you have to act like a
6:43
Speaker 5: grown up.
6:44
Speaker 2: Right, that's so brilliant analogy.
6:45
Speaker 5: Right, So when you have that like a grown up,
6:47
Speaker 5: the management team have to act like a grown up,
6:49
Speaker 5: the irt IR has to act a little bit more professionally,
6:53
Speaker 5: would sense. And then look, you you have a broader
6:55
Speaker 5: range of investors that are looking at the company right now.
6:58
Speaker 5: I'm not saying that they didn't do the work right,
7:02
Speaker 5: but there probably was some momentum in there, because.
7:06
Speaker 4: I do want to call out. So super micro nine
7:07
Speaker 4: buys nine holds one cell. That's nineteen analysts with the
7:11
Speaker 4: biggest shops on the street covering it. You look back
7:14
Speaker 4: in twenty twenty one, five buys, it was Northland, Loop Capital,
7:17
Speaker 4: SUSQUEHANNASCJS and vertical groups. So to your point, your management
7:23
Speaker 4: growing up, and also I imagine the street following has
7:26
Speaker 4: to get caught up to speed on a stock very quickly. Yes, right,
7:31
Speaker 4: does that enable some of these things to maybe be
7:34
Speaker 4: glossed over?
7:35
Speaker 5: And I will tell you if I see if I
7:38
Speaker 5: saw some of the research reports for this past earning
7:40
Speaker 5: season after they had that gross morgin, let's just say hiccup.
7:43
Speaker 5: Theoretically right, the commentary behind that was a lot more
7:47
Speaker 5: critical than somebody who may have been let's just say,
7:51
Speaker 5: an avid supporter of super micro over prior to the
7:55
Speaker 5: big AI boom.
7:56
Speaker 2: I think the preteen adult thing is like perfect analogy,
7:58
Speaker 2: and I think that that just sums it all up.
8:01
Speaker 2: And for a question, because I know you can't actually
8:02
Speaker 2: answer it. But how much more downside do you think
8:04
Speaker 2: that there is? Based on the fundamentals? Like, where's a
8:07
Speaker 2: good way to think about it?
8:09
Speaker 5: So I'll answer it in this way. Yes, if I
8:13
Speaker 5: look at the valuation of the stock right now, right,
8:17
Speaker 5: we're talking about zero point three times forward sales, I
8:22
Speaker 5: you know, give given the AI momentum. Typically I like
8:25
Speaker 5: one time's forward sales. But historically they've traded at points
8:29
Speaker 5: seventy five forward sales, so they're playing their their value
8:34
Speaker 5: at a discount to the historic evaluation.
8:36
Speaker 2: That's a great answer to that question. I love that.
8:38
Speaker 2: All right, Booge, thanks a lot. Also, good to see
8:39
Speaker 2: you in studio. I think it's been a minute, all right.
8:41
Speaker 2: Ujinho joining us from Bloomberg Intelligence. He is a senior
8:46
Speaker 2: technology analyst over there talking about Hindenburg research report that
8:49
Speaker 2: quoted Wu Jinho's research in Bloomberg Intelligence. Let's not forget that,
8:53
Speaker 2: so get your information there first.
8:56
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9:14
Speaker 2: You got the equity market doing a whole lot of nothing.
9:17
Speaker 2: Volume also quite light as well. What do you do
9:20
Speaker 2: when you wind up having Nvidia and you also have
9:22
Speaker 2: the jobs at a next Friday and liquidity is going
9:25
Speaker 2: to be super late at the same time. All right,
9:26
Speaker 2: let's get a professional view Kathy and Whistle Managing director
9:29
Speaker 2: Morgan Stanley Private Wealth Management joins us. Now, Kathy your
9:33
Speaker 2: private wealth management right, like, you're looking for the longer term.
9:35
Speaker 2: You're not a trader yet. How are you looking at
9:38
Speaker 2: the results on four to twenty on Wednesday afternoon when
9:41
Speaker 2: Nvidia comes out.
9:44
Speaker 6: Thanks for having me, Bailey, great to be with you both.
9:47
Speaker 7: I would say, look at anytime you've got a company
9:50
Speaker 7: that has or you know, any sort of companies that
9:54
Speaker 7: have an edge in their industry, you have to consider
9:57
Speaker 7: that for the long term as well. So I would
10:00
Speaker 7: say in terms of you know, people who are holding
10:02
Speaker 7: the types of stocks are coming out with earnings today
10:05
Speaker 7: that might have you know, special access to parts of
10:09
Speaker 7: the market, or you know, you know, like a technology
10:14
Speaker 7: that other companies do not.
10:15
Speaker 6: You have to that's.
10:16
Speaker 7: Important and listen if you own it or any company
10:19
Speaker 7: in an IRA or returnment account, it's easy to sell
10:22
Speaker 7: it and take your games off the table because you
10:24
Speaker 7: don't have any tax consequences.
10:26
Speaker 6: You really have to think about that when you.
10:28
Speaker 7: Own it in an individual account. So that's something that
10:32
Speaker 7: we think about when we're thinking about our clients with
10:33
Speaker 7: their long term view and also how to leg out
10:36
Speaker 7: of positions as well as leg into positions.
10:39
Speaker 4: Well, how are you positioning for an advising clients to
10:42
Speaker 4: position for this AI wave When we look at obviously
10:46
Speaker 4: Nvidia the most important company in the US market, if
10:49
Speaker 4: not the global market. But we have super Micro, we
10:52
Speaker 4: have arm we have Broadcom, you name it that are
10:56
Speaker 4: either beneficiaries or have some exposure to a print that
11:01
Speaker 4: not only will move the stock in the market, but
11:03
Speaker 4: all of these peers.
11:05
Speaker 6: Yeah.
11:05
Speaker 7: So for companies that I think are going to, you know,
11:08
Speaker 7: do well for the long term and have a competitive edge,
11:11
Speaker 7: I would say holding it in retirement accounts is probably
11:14
Speaker 7: a better way to go at the moment because of
11:17
Speaker 7: the large tax implications when and if you need to take.
11:20
Speaker 6: It out, you shouldn't be a trader. You shouldn't be
11:22
Speaker 6: going in and out.
11:23
Speaker 7: People don't realize what that does in terms of the
11:25
Speaker 7: tax impact and how it affects your overla over all
11:29
Speaker 7: profit margins. So in terms of that, yeah, I want
11:32
Speaker 7: clients to have access to AI, and it's not just
11:35
Speaker 7: the companies that are providing AI, but it's the companies
11:38
Speaker 7: that are using AI as well. Right now, the market
11:41
Speaker 7: has you know, had quite a run up, and we
11:43
Speaker 7: want to be more cautious. We're a little bit more
11:45
Speaker 7: underweight on equities as a whole, and we're also you know,
11:48
Speaker 7: trying to keep people away from the quote unquote over
11:52
Speaker 7: indulging in you know, the top seven or ten stocks
11:55
Speaker 7: that are out there. But at the same time, it's
11:57
Speaker 7: very hard to do when we see some of these
12:00
Speaker 7: companies running up. So it's a balancing act and it's
12:03
Speaker 7: important to really think about how that affects, you know,
12:05
Speaker 7: your full portfolio and not just one part of it.
12:08
Speaker 7: I always say never put more than five percent of
12:10
Speaker 7: your assets into one holding anyway, So you want to
12:13
Speaker 7: really be that you're not overextended in any one stock.
12:16
Speaker 2: So you mentioned that it's not like you were crazy
12:19
Speaker 2: invested in the equity market. What is your allocation right now?
12:23
Speaker 7: Well, you know, I don't take clients out of their
12:25
Speaker 7: equities that are in there for the long term unless
12:28
Speaker 7: there's a specific reason why we're doing so. So I'm
12:31
Speaker 7: typically looking for clients to have fifty to sixty percent
12:35
Speaker 7: in equities, to have twenty percent to twenty five percent
12:39
Speaker 7: in you know, taxble accounts, municial bonds typically, and the
12:44
Speaker 7: balance in some sort of alternative investment. There's a lot
12:47
Speaker 7: of liquid investments alternative investments available now to clients, and
12:51
Speaker 7: I've you know, heard a few times today people talking
12:53
Speaker 7: about the bank stocks and you know banks in general,
12:56
Speaker 7: and basically with all of the regulations that are out there,
12:59
Speaker 7: we're seeing a lot in the private market come in
13:02
Speaker 7: and take over for some of that credit access.
13:04
Speaker 6: So it's interesting too.
13:06
Speaker 4: And when you talk about some of those alternative investments
13:10
Speaker 4: a little bit more detail on that. Are you talking
13:11
Speaker 4: about like you know, privately funded companies investing in hedge funds?
13:16
Speaker 4: Like what are those opportunities?
13:17
Speaker 8: Like?
13:18
Speaker 7: No, different opportunities for different different people, different you know,
13:21
Speaker 7: levels of sophistication and also of wealth. So you want
13:25
Speaker 7: to make sure that you're targeting your asset allocation and
13:28
Speaker 7: the actual implementation according to that client's particular situation. But
13:32
Speaker 7: generally speaking, I would say, I'm talking about private equity,
13:36
Speaker 7: private markets, you know, different types of private credit, and
13:42
Speaker 7: there's ways for clients. They've democratized it in a sense
13:46
Speaker 7: alternative investments, and they've brought the industry has created investments
13:50
Speaker 7: that are now accessible to clients that were not accessible
13:53
Speaker 7: to three four years ago. So that's very interesting and
13:57
Speaker 7: it's a great way for individuals to add differentiation into
14:01
Speaker 7: their portfolio non correlated assets. And I'm a big fan
14:04
Speaker 7: of that.
14:05
Speaker 2: When you take a look at what the Fed Willer
14:07
Speaker 2: won't do, do you care in your investor allocation whether
14:12
Speaker 2: it's twenty five or fifty in September, and whether it's
14:14
Speaker 2: seventy five or one hundred this year, or is the
14:16
Speaker 2: moment for you just when they start doing it.
14:19
Speaker 6: No, I care ahead of the game.
14:21
Speaker 7: I think that perception is really baked into the numbers,
14:25
Speaker 7: and if you don't start making some moves ahead of
14:27
Speaker 7: the decisions, you'll probably miss out on a big opportunity.
14:32
Speaker 7: And for example, municipal bonds still look really attractive right here.
14:36
Speaker 6: At some point they're.
14:37
Speaker 7: Going to become less and less attractive as those rate
14:40
Speaker 7: cuts start to happen. So for clients with cash, I
14:46
Speaker 7: am putting them in municipal bonds, not legging in, and
14:49
Speaker 7: trying to get them in as thoughtfully and as quickly
14:53
Speaker 7: as possible, because I think that's a great opportunity for
14:55
Speaker 7: clients right now.
14:57
Speaker 4: Do you think the market's ahead of its skis when
14:58
Speaker 4: we're looking at six cuts being priced in between now
15:01
Speaker 4: in March?
15:03
Speaker 6: It's possible, it will be interesting. I think that.
15:07
Speaker 7: I think we're definitely getting cuts. You know, this year
15:09
Speaker 7: we're getting we are expecting cuts this year. We're expecting
15:12
Speaker 7: about three.
15:13
Speaker 6: Cuts this year.
15:14
Speaker 7: And then I would say I would just take a
15:17
Speaker 7: pause and see what's going on in the reaction, you
15:19
Speaker 7: know what the Fed is saying. But it is likely
15:22
Speaker 7: that we could have those cuts as well. And again
15:26
Speaker 7: with the economic environment, political environment, everything that's going on,
15:30
Speaker 7: there's a lot of stake in terms of your personal
15:32
Speaker 7: portfolio and your individual wealth, and we really want to
15:35
Speaker 7: be mindful and thoughtful about that for clients and make
15:38
Speaker 7: sure we're addressing it and we're discussing it.
15:41
Speaker 2: When you're talking to clients right now, what are they
15:43
Speaker 2: asking in relation to the election?
15:47
Speaker 7: Just basically, is there a way to position the portfolio
15:50
Speaker 7: one way or another based on like what the potential
15:53
Speaker 7: outcome would be. And I think you know, certainly overall
15:59
Speaker 7: clients are invested like clients are invested, and we don't
16:02
Speaker 7: want to make any huge moves ahead of the election.
16:05
Speaker 6: We can make some thoughtful moves.
16:08
Speaker 7: I think minimizing tax impact for clients at any time,
16:12
Speaker 7: regardless of who's running the country or what the economic
16:15
Speaker 7: position is is a great idea. So menis are a
16:18
Speaker 7: great idea right now using you know, direct indexing, where
16:22
Speaker 7: you have portfolios that are trying to minimize tax impact
16:27
Speaker 7: by you know, sort of buying and selling and matching
16:29
Speaker 7: those off throughout the year in order to minimize gains
16:33
Speaker 7: going forward. I think that's also a great way to
16:35
Speaker 7: help clients get a little bit more alpha in their portfolio.
16:39
Speaker 7: And the last thing I would say too is there's
16:41
Speaker 7: you know, there's going to potentially be some tax changes
16:46
Speaker 7: sunsetting of some tax laws that.
16:48
Speaker 6: Occurred a few years ago.
16:50
Speaker 7: And if you have an estate or you know net
16:53
Speaker 7: worth over you know, five six seven million dollars, you
16:56
Speaker 7: want to you might want to start thinking about some
16:59
Speaker 7: speaking your estate planning attorney about some trust you know,
17:03
Speaker 7: sort of implementation.
17:05
Speaker 4: And to bring it back to the equity market. Since
17:07
Speaker 4: I'm a I'm a big stocks guy, that's what I do.
17:10
Speaker 2: I'm like talking about tax and trust and you're like equities, man, Like.
17:14
Speaker 4: What about the lines that go up and down? You
17:18
Speaker 4: talk about taking a measured approach. Are there industries sectors
17:21
Speaker 4: that you see more kind of fairly valued or at
17:25
Speaker 4: least more of a better buying opportunity instead of chasing
17:28
Speaker 4: some of those growth e tech names.
17:30
Speaker 6: Yeah, I do.
17:31
Speaker 7: I think basically, anytime you look at different companies, you know,
17:35
Speaker 7: growth at a reasonable price.
17:37
Speaker 6: So you want to look at.
17:38
Speaker 7: The valuations of a company and see whether or not,
17:41
Speaker 7: you know, it's overpriced for what they're earning at the moment.
17:44
Speaker 7: But we like healthcare, we like financials, we like you know,
17:49
Speaker 7: consumer So there's other areas that you can look at,
17:52
Speaker 7: I would say, dividend paying growth a reasonable price, and
17:58
Speaker 7: income producing.
17:59
Speaker 6: It's interesting.
18:00
Speaker 7: I know you like stocks and we all do. We
18:02
Speaker 7: love equities. We're owners, right, not owners. But at the
18:05
Speaker 7: end of the day, there could be some really interesting
18:08
Speaker 7: opportunities in the fixed in code market as well.
18:11
Speaker 6: Don't dismiss that.
18:12
Speaker 2: Don't discount that, all right, Kathy, thanks a lot. We
18:14
Speaker 2: really appreciate it Kathy and Whistle, Managing director at Morgan
18:17
Speaker 2: Stanley Private Wealth Management, with her outlook on the market.
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Speaker 2: percent discount to the shots. Michael Shatz, Bloomberg Intelligence Senior
18:46
Speaker 2: Pharma biotech analysts, can we just make help me understand
18:49
Speaker 2: why this is easier for Eli Lilly to produce than
18:52
Speaker 2: the actual shots?
18:55
Speaker 8: Absolutely, I mean the announcement state doesn't really come as
18:58
Speaker 8: a supply surprise on the aack of you know, the
19:00
Speaker 8: type supply. So yeah, they're providing a valve for relation.
19:04
Speaker 8: It's something that they've talked about, you know, for a
19:06
Speaker 8: while now on their calls. Now, the reason why these
19:08
Speaker 8: are easier to produce produce is you know, the fill
19:11
Speaker 8: and finished capacity, So the capacity needed to actually put
19:14
Speaker 8: the drug in the pens and the capacity needed to
19:16
Speaker 8: manufacture at the pens of the subcutaneous ejection. So overall,
19:21
Speaker 8: I think, you know, the move is you know positive
19:23
Speaker 8: for Lily clearly broaden's access or patients access you know
19:29
Speaker 8: to ze bound and also from you know, compounding pharmacy standpoint.
19:36
Speaker 8: The fact that the improved supply means that could you know,
19:39
Speaker 8: possibly combat you know, competition from you know, companies such
19:43
Speaker 8: as Hymns, Hymns and Hers.
19:45
Speaker 4: Yeah, Lily not so subtly saying that they want to
19:48
Speaker 4: aim to protect patients from quote, counterfeit, fake unsafe for
19:51
Speaker 4: untested knockoffs. So how does that impact kind of the
19:55
Speaker 4: business and demand If we're seeing a cheaper version being
19:59
Speaker 4: sold and maybe try and to court some of those
20:01
Speaker 4: Hymns and Hers g LP one users, how does that
20:05
Speaker 4: impact kind of the total addressable market and expectations for
20:08
Speaker 4: sales of zepp out.
20:10
Speaker 8: Well, I think if there's you know, if there's a
20:12
Speaker 8: branded bile formulation out there and there's obviously guarantees around
20:18
Speaker 8: kind of purity, et cetera, I think that's going to
20:20
Speaker 8: be the preferred choice. The fact that you're introducing these
20:24
Speaker 8: valves into the market would suggest that you know, some
20:27
Speaker 8: of that supply burden and supply shortage which is needed
20:32
Speaker 8: for a compounding pharmacy to produce a drug that is
20:36
Speaker 8: on pattern. You know, some of that will be alleviated there.
20:39
Speaker 8: So that's kind of why we think it's positive for Lily.
20:42
Speaker 8: As to whether you know, companies like him and hers
20:45
Speaker 8: will continue producing you know, their versions of the GEO
20:49
Speaker 8: beyond ones, I mean, that remains to be seen. But
20:52
Speaker 8: I imagine if they do, you know, Lily would you know,
20:56
Speaker 8: probably challenge it.
20:58
Speaker 2: When people then do their own shots, like administer it,
21:02
Speaker 2: like is there a risk in that? Like, well, what
21:04
Speaker 2: what kind of uptake are we expecting from that? Because
21:05
Speaker 2: I would be scared to do it. But maybe that's
21:07
Speaker 2: just me.
21:09
Speaker 8: I mean I think judging by you know, what we
21:11
Speaker 8: saw for uptake of these compounded drugs, there's clearly a
21:14
Speaker 8: appetite for injectable therapy injections. Now, you know, we looked
21:19
Speaker 8: at the diabetes market. You know, some of the incidents
21:22
Speaker 8: used to be injections, So I mean, I think it's
21:26
Speaker 8: not I mean, there's clearly kind of an increased kind
21:29
Speaker 8: of dosing burden associated within these injections, so they're probably
21:34
Speaker 8: not going to be suitable for all. But you know,
21:35
Speaker 8: I think there is going to be an appetite for it.
21:39
Speaker 4: What does this mean for the competitive landscape? So you
21:43
Speaker 4: have Lily, you have Novo. To your point, you have
21:45
Speaker 4: hymns and hers like, is this going to create a
21:48
Speaker 4: pricing war? Am I reading too much into that?
21:51
Speaker 8: I mean when we look at the I mean the
21:54
Speaker 8: headlines had fifty percent you know, discount, but we need
21:57
Speaker 8: to remember that, you know, on a net price basis,
22:01
Speaker 8: so you know, after taking account all the rebates and discounts,
22:04
Speaker 8: you know, the pricing is probably you know, fairly similar
22:07
Speaker 8: to the current net prices that we're seeing now at
22:11
Speaker 8: the moment. You know, it's an under penetrated market. You know,
22:14
Speaker 8: there's massive demand out there, there's tight supply. So I
22:19
Speaker 8: don't think it's gonna change too much in terms of
22:21
Speaker 8: the dynamics between you know, Novo and Lily. I think
22:25
Speaker 8: I think prescribing decisions are you know, less about kind
22:29
Speaker 8: of the profiles of the drug at the moment and
22:32
Speaker 8: more about you know, what is ensured, what can people
22:34
Speaker 8: get their hands on? So near term, I don't see
22:37
Speaker 8: you know that that changing from a Lily perspective. You know,
22:41
Speaker 8: as they ramp up supply over the over the midterm
22:44
Speaker 8: of their you know, their pens you know, you could
22:49
Speaker 8: potentially see you know, patients switching from the injectable onto
22:53
Speaker 8: the pen as and when that supply comes comes on board.
22:57
Speaker 2: Fair enough, all right, Michael, thanks a lot, really appreciate it.
22:59
Speaker 2: Michael Shot joining us Bloomberg Intelligence senior Pharma biotech analyst.
23:05
Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live
23:09
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23:19
Speaker 1: Just say Alexa play Bloomberg eleven thirty.
23:23
Speaker 2: So markets are definitely quiet, there are some catalyst in video.
23:26
Speaker 2: We still have some data coming out. We get retail
23:28
Speaker 2: numbers from many stores coming up the next few days.
23:31
Speaker 2: And you have the jobs at a next Friday. So
23:33
Speaker 2: we want to check in with Rubin Hovanacion, his general
23:36
Speaker 2: portfolio manager at TCW's fixed income group. Hey, Rubin, what's
23:42
Speaker 2: my position right now headed into the next week and
23:44
Speaker 2: a half.
23:46
Speaker 9: Well, good morning, and thanks for having me on. Well
23:50
Speaker 9: our position is that, well, I guess it's it's probably
23:54
Speaker 9: worth mentioning that we've seen a significant reprising in the
23:57
Speaker 9: rates markets over the last month month and a half.
24:01
Speaker 9: So we've basically gone from pricing in only two cuts
24:05
Speaker 9: this year and a terminal rate of three point seven
24:08
Speaker 9: percent in mid twenty twenty six, to pricing in about
24:12
Speaker 9: four cuts this year and a terminal rate of about
24:15
Speaker 9: three percent again in mid twenty twenty six in the
24:18
Speaker 9: second quard of twenty twenty six. That's a sixty seventy
24:22
Speaker 9: basis points repricing in the forward rate curve. And what
24:26
Speaker 9: we find interesting is that when you look at the
24:28
Speaker 9: credit markets and equity markets, there was some weakness in
24:32
Speaker 9: the first week of August in those markets as well,
24:35
Speaker 9: which would be consistent with that reprising, but by now
24:38
Speaker 9: all of that weakness has been retraced. So if you
24:41
Speaker 9: look at the credit markets, for example, credit sprates both
24:43
Speaker 9: IG and high yield have retraced all the widening and
24:47
Speaker 9: they're back to their mid July levels or end of
24:50
Speaker 9: July levels. And if you look at equity markets, equities
24:52
Speaker 9: are retesting the old time highs reached in mid July.
24:55
Speaker 9: So we look at that and we think there's a
24:58
Speaker 9: little bit of a disconnect, a little bit of discontent inconsistency,
25:01
Speaker 9: because if you believe that the rates market has reprised
25:05
Speaker 9: because the investment community thinks the economy is weaker now
25:09
Speaker 9: and it's going to be weaker on a go forward basis,
25:11
Speaker 9: in fact, so much weaker that would require the FED
25:14
Speaker 9: to intervene, intervene sooner and cut more. Then you would
25:18
Speaker 9: think that some of that weakness should also be reflected
25:20
Speaker 9: in equity markets and credit markets. But we don't see
25:23
Speaker 9: that currently, so that I guess one reasonable one explanation
25:29
Speaker 9: for that would be that the market or one takeaway
25:31
Speaker 9: from that, is that the market has gone from price
25:33
Speaker 9: pricing in no lending to pricing in some sort of
25:36
Speaker 9: a perfect soft lending. In other words, this notion that
25:40
Speaker 9: the FED has a lot of room to cut, the
25:41
Speaker 9: FED will be able to navigate the cycle, the slate
25:43
Speaker 9: cycle perfectly and calibrate the rate just right to the
25:47
Speaker 9: right level to forestall the slowing economy and not not
25:51
Speaker 9: and at the same time not cause reacceleration of inflation.
25:55
Speaker 9: Excuse me, and obviously, yes, were.
25:58
Speaker 4: We surprised at all when we hear jaypow Will say
26:01
Speaker 4: the time has come. I mean it seemed like maybe
26:04
Speaker 4: with the expectations around Jackson Hall would be keeping kind
26:08
Speaker 4: of giving the all clear, but maybe not necessarily signaling
26:11
Speaker 4: that we're going to have at least as the rate
26:13
Speaker 4: market is implying what five or six straight cuts.
26:18
Speaker 9: We at t CW were not surprised because we have
26:21
Speaker 9: been of the opinion for a long time that the
26:23
Speaker 9: economy has been slowing, although the headline numbers sometimes may
26:27
Speaker 9: not lead you to that conclusion. But when you peel
26:29
Speaker 9: off a few layers and you look under the hoot,
26:31
Speaker 9: you would you would see slowing, you know, labor market
26:35
Speaker 9: for example, based on the forward looking indicators, you know,
26:39
Speaker 9: starting from the from for a year now, I guess
26:43
Speaker 9: we have been seeing slowing off consumption. For six months now,
26:46
Speaker 9: we've been seeing we've been seeing the slowing of the
26:49
Speaker 9: credit creation in the economy, and all of those were
26:53
Speaker 9: indicative of slowing economy for some time. Yet I think
26:57
Speaker 9: I tend to agree with you that declaring victory over
27:00
Speaker 9: inflation and telling that the time has come to shift
27:03
Speaker 9: to the second mandate of the Fed at the time
27:06
Speaker 9: when core CPI is a three point two percent and
27:09
Speaker 9: core PCE as a two point six percent indicates that
27:12
Speaker 9: they get it. They do understand that the downside risks
27:15
Speaker 9: are now real and they have to shift and they
27:17
Speaker 9: have to act to try to arrest the declining economic growth.
27:22
Speaker 2: All right, Rubin, we're gonna leave it there, Thank you
27:24
Speaker 2: so much. Rubin Hovnacian a general portfolio manager with TCW's
27:28
Speaker 2: Fixed Income group. And just to point out, we get
27:30
Speaker 2: the two year auction today coming at sixty eight billion dollars,
27:33
Speaker 2: then we get a five year for seventy billion, seven
27:35
Speaker 2: year and forty four billion, So lots of ways to
27:37
Speaker 2: kind of wager on the FED and supply over the
27:40
Speaker 2: next couple of days as well.
27:43
Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live
27:46
Speaker 1: weekdays at ten am Eastern on applecard Play and royd
27:50
Speaker 1: Outo with the Bloomberg Business. You can also listen live
27:53
Speaker 1: on Amazon Alexa from our flagship New York station, Just
27:57
Speaker 1: Say Alexa, playing Bloomberg eleven thirty.
28:01
Speaker 2: Dlex Steel here alongside the Ellipshalaltz. Paul Sweeney is off today.
28:05
Speaker 2: This is Moving Intelligence Radio. We are broadcasting to live
28:07
Speaker 2: from an interactive broker studio right here in Midtown Manhattan,
28:11
Speaker 2: so Paul's not here so we can talk about shopping.
28:13
Speaker 2: I love shopping. I love shopping on sales. I will
28:15
Speaker 2: only shop on sales. I will only pay full price
28:18
Speaker 2: for face care, birkenstocks and bionics because I have to.
28:22
Speaker 2: I have bad feet, so I like I don't have
28:24
Speaker 2: a choice discretionary spending. Not I can wear heels or
28:28
Speaker 2: birkenstocks are bionics? That's it, John Twners details. You don't
28:32
Speaker 2: really have to tell everybody about do you want? I'm no,
28:36
Speaker 2: come on, I love it. Didn't you talk about the
28:38
Speaker 2: whole fan and ice thing or was that in commercial break?
28:40
Speaker 1: I think there's a commercial excellent.
28:42
Speaker 2: Okay, that's a different story. I've had a cool year
28:44
Speaker 2: home without air conditioner. Anyway, I wanted to get an
28:46
Speaker 2: expert on this because I'm personally interested in what the
28:49
Speaker 2: sales are going to be like for the summer, which
28:51
Speaker 2: just begs the question how much our luxury and other
28:54
Speaker 2: goods and other stores have to cut prices to get
28:56
Speaker 2: consumers in there in the store when they really are
28:58
Speaker 2: trying to splice and dice where they're spending is Sarani
29:01
Speaker 2: I said Home is managing partner at said Home Law Group.
29:05
Speaker 2: She joins us now. The law group provides the ability
29:07
Speaker 2: to immediately access counsel to provide practical solutions on critical
29:11
Speaker 2: issues for all kinds of kinds of companies, particularly though
29:16
Speaker 2: most of their clients tend to be in fashion, luxury goods, technology,
29:19
Speaker 2: and food and beverage. It's good to have you in
29:21
Speaker 2: the studio. Thank you so much for joining us.
29:23
Speaker 1: Thank you.
29:24
Speaker 2: So, what's the common question you're getting right now?
29:28
Speaker 10: Everyone is asking when is the economy going to improve?
29:30
Speaker 10: And how can I mitigate any risks because people are
29:34
Speaker 10: afraid they're going to have to file for bankruptcy.
29:36
Speaker 2: Wow, okay, so it's that bad for some of these
29:38
Speaker 2: guys that bankruptcy is on it is.
29:40
Speaker 10: I mean, retail is hurting. If you just walk down
29:43
Speaker 10: the street. Most people are walking around without bags. There's
29:46
Speaker 10: a lot of window shopping or whatever it's called when
29:49
Speaker 10: you enter and don't buy other kinds of shopping. But
29:52
Speaker 10: buying is on hold. And I think consumers are being
29:56
Speaker 10: pickier because they don't have as much disposable income.
30:00
Speaker 4: And we've been tracking and talking to economists about the
30:03
Speaker 4: k shape recovery post pandemic, So people who are affluent
30:06
Speaker 4: can still buy whatever they want, and others are having
30:09
Speaker 4: to seek deals how does that impact potential clients or
30:13
Speaker 4: companies that could be going bankrupt? Is that kind of
30:16
Speaker 4: skewing more towards the middle of the road, those are
30:18
Speaker 4: the companies that are worse off.
30:20
Speaker 10: I think so, yes, you know, it's it's very dangerous
30:23
Speaker 10: in the middle. Those who are catering to the one
30:25
Speaker 10: percent or the point one percent generally or fine like
30:29
Speaker 10: Ermez and Chanel and those brands, and those who are
30:33
Speaker 10: catering to people with no disposable income that sell food
30:37
Speaker 10: or things like that are generally okay because you have
30:40
Speaker 10: to eat. But when you're going into the mid market
30:42
Speaker 10: and trying to get Henry's or you know, middle class,
30:45
Speaker 10: whether it's middle middle class or upper middle class, it's
30:48
Speaker 10: very very difficult.
30:49
Speaker 2: So what's the strategy before we get to bankruptcy here?
30:52
Speaker 2: Because that's where the price cuts come into play.
30:54
Speaker 8: Right?
30:54
Speaker 2: Can they cut enough to get enough consumers in the
30:57
Speaker 2: stores to buy enough to make up for the revenue
30:59
Speaker 2: lot from the margin cut.
31:01
Speaker 10: Well, it's been working for Target. You know, Target cut
31:04
Speaker 10: about fifteen hundred of their goods buy substantial amounts, you know,
31:11
Speaker 10: over twenty percent, and I think they just reported earlier
31:14
Speaker 10: this week or maybe last week, last week. Yeah, because
31:17
Speaker 10: it's only a lens. Yeah, it's only Tuesday. Yes, that
31:21
Speaker 10: they're up finally, and they have a better forecast for
31:25
Speaker 10: the remainder of the year. So it does seem to
31:27
Speaker 10: be working for them. Whether it's working for luxury brands,
31:31
Speaker 10: it's too soon to say, but you know Burbery and
31:33
Speaker 10: YSL for example, Saint Laurent, they've cut their prices I
31:37
Speaker 10: would say by at least ten percent on many products,
31:41
Speaker 10: and I don't know yet whether it's going to help them.
31:45
Speaker 4: I'm just gonna ask the dumb question to someone who
31:47
Speaker 4: is not buy a lot of nice goods. Does ten
31:50
Speaker 4: percent really move the kind of people who would be
31:54
Speaker 4: buying a four hundred dollars belt off the sidelines to
31:57
Speaker 4: buy one?
31:58
Speaker 10: It certainly can be because the ten percent also reduces
32:02
Speaker 10: your tax in New York, right, so we're spending what eight,
32:05
Speaker 10: eight or nine percent, So ten percent reduction is more
32:07
Speaker 10: than a ten percent reduction in a way. So yeah,
32:11
Speaker 10: it can move the needle.
32:12
Speaker 2: It wouldn't move my needle, But I guess I'm just
32:14
Speaker 2: thinking from my put. I'm not their customer like to
32:17
Speaker 2: begin with, but you know, I like sales like you know,
32:21
Speaker 2: fifty percent like ten percent, ain't gonna cut it.
32:23
Speaker 4: That's why I asked, because like Macy's had underwhelming results.
32:26
Speaker 4: If I go to Macy's, I immediately go to the
32:28
Speaker 4: sale section, and if it's twenty percent to me, I'm
32:31
Speaker 4: like skeptical, so I think they aren't actually giving me
32:33
Speaker 4: a deal. But if you give me fifty or seventy
32:35
Speaker 4: five percent off like the last shirt in my size,
32:37
Speaker 4: that I'm gonna buy it.
32:38
Speaker 10: Yes, Well, this is the issue, right, These are the
32:41
Speaker 10: questions we're constantly discussing. At what point do the consumers
32:46
Speaker 10: think you're going to keep reducing your prices and wait
32:48
Speaker 10: and not purchase. You know, it's not holiday season yet.
32:52
Speaker 10: When holiday season comes around, people will be buying. What
32:55
Speaker 10: it is they're going to be buying. We're gonna find out.
32:58
Speaker 10: But you do have to ask yourself, how how many
33:00
Speaker 10: cuts do you need? Is it better to keep cutting
33:03
Speaker 10: a little bit at a time, you know, sort of
33:05
Speaker 10: like the FED with interest rates, a quarter point at
33:07
Speaker 10: a time, a teaser, or is it better to just
33:10
Speaker 10: cut the price. But these price cuts that we're discussing today,
33:13
Speaker 10: they're permanent, They're not on sale. These are the new
33:16
Speaker 10: prices that you will be paying, so when you walk
33:19
Speaker 10: into these stores when it's on sale, it should be
33:21
Speaker 10: even lower.
33:22
Speaker 2: Well, that's interesting to Bailey's point earlier, does any of
33:26
Speaker 2: this do you expect M and A and where?
33:30
Speaker 10: Yeah, that's a great question. I think that if you're
33:33
Speaker 10: in a niche market, your product is niche or your
33:37
Speaker 10: messaging is niche, you likely get picked up an M
33:40
Speaker 10: and A. But otherwise no, I think it's more you know,
33:44
Speaker 10: cannibalization and you know, Darwinism with.
33:48
Speaker 2: The niche guys. Aren't the niche guys doing okay because
33:52
Speaker 2: for the fact that their niche or it just still depends.
33:54
Speaker 10: No, it depends because the niche brands typically don't sell
33:58
Speaker 10: high volume, and so their cost of goods is high
34:02
Speaker 10: and they can't manipulate their pricing as much as larger
34:05
Speaker 10: corporations can.
34:06
Speaker 4: Well, you mentioned target cutting prices in that bringing consumers
34:10
Speaker 4: through the door. We spoke with Brooks Southerland about a
34:12
Speaker 4: story on commercial real estate and pointing out that fast
34:16
Speaker 4: food chains are being able to kind of weather different
34:19
Speaker 4: trends from a return to office, whereas maybe a mom
34:22
Speaker 4: and pop shop can't handle that as well. With target
34:25
Speaker 4: cutting prices and drawing and consumers and seemingly more people
34:28
Speaker 4: going to stores like Walmart or a Costco or Sam's Club.
34:31
Speaker 4: How does that impact some of these other either small
34:35
Speaker 4: businesses or even just less global retailers.
34:41
Speaker 10: I think it's tough out there, and I think it's
34:43
Speaker 10: going to get tougher. And unfortunately, where we stand right now,
34:47
Speaker 10: the economy is so uncertain because we don't know who
34:50
Speaker 10: the next president will be, and once we do know that,
34:53
Speaker 10: people can start planning. This is probably the worst time
34:56
Speaker 10: typically in any election year, because there's so much uncertain
35:00
Speaker 10: and this election in particular, we have two candidates who
35:04
Speaker 10: are on complete opposite sides of the economic spectrum, and
35:07
Speaker 10: so we are in a wait and see holding pattern,
35:11
Speaker 10: and that makes everything a lot more difficult.
35:14
Speaker 2: You mentioned Target. What other companies do you think have
35:17
Speaker 2: been doing the price cutting and managing this environment?
35:20
Speaker 10: Well, certainly Ikia. I mean they not only cut their prices.
35:24
Speaker 10: You can go online and you can see the price
35:26
Speaker 10: before and the price now, so they're really speaking to
35:30
Speaker 10: consumers and showing them, you know, you no longer have
35:32
Speaker 10: to pay. I'll make these numbers up three hundred dollars
35:35
Speaker 10: for this lamp you can pay, you know, two twenty
35:38
Speaker 10: five and this is our permanent new price. So I
35:40
Speaker 10: think they're doing a great job in showing the consumers
35:44
Speaker 10: exactly what it is they're doing to help them and
35:48
Speaker 10: drive their own sales.
35:49
Speaker 4: Of course, about ten seconds, if we're shopping, should we
35:52
Speaker 4: be going to the stores now or waiting for some
35:54
Speaker 4: of those holiday sales.
35:56
Speaker 10: That's such a tough question. I mean, I try not
35:59
Speaker 10: to buy things at full price if I can help it, so, I,
36:01
Speaker 10: you know, confession.
36:02
Speaker 2: Usually wait for sales, but if you need something.
36:06
Speaker 10: Try to go to those stores that have already reduced
36:08
Speaker 10: their prices.
36:09
Speaker 2: Yeah, she sees me, she sees me, She gets me.
36:12
Speaker 2: All right, thanks, not really appreciate a Runnias at home
36:14
Speaker 2: managing partner at set Home LG Group joining us. There
36:17
Speaker 2: are you done, Bailey with your home furnishing? I mean,
36:19
Speaker 2: it's been a year.
36:20
Speaker 4: It's never it's never never ending. Well, because we got married,
36:23
Speaker 4: so we had to plan the wedding and then we're
36:25
Speaker 4: still as JT know is trying to address a leaky
36:28
Speaker 4: roof fireplace to the living room.
36:29
Speaker 2: Still, yeah, he's not helping. He already said that.
36:32
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