Latest / Bloomberg Intelligence / Tesla Is A Busted Growth Story, Like AOL: Gordon Johnson

Transcript

Tesla Is A Busted Growth Story, Like AOL: Gordon Johnson · Bloomberg Intelligence

0:01
Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, along
0:04
Speaker 1: with my co host of Bonnie Quinn. Every business day
0:06
Speaker 1: we bring you interviews from CEO, market pros, and Bloomberg experts,
0:10
Speaker 1: along with essential market moving news. Find the Bloomberg Markets
0:13
Speaker 1: Podcast on Apple podcast or wherever you listen to podcasts,
0:17
Speaker 1: and on Bloomberg dot com. What's been quite the two
0:20
Speaker 1: days for Tesla. It had its worst one day loss
0:24
Speaker 1: ever yesterday just on the SMP five hundred snubs, so
0:28
Speaker 1: it's not in the SMP five Also GM backing Nicolo,
0:32
Speaker 1: which is a little bit of a rival in some senses.
0:35
Speaker 1: Our next guests say, is that, you know, maybe that
0:38
Speaker 1: down draft was not completely unexpected, nor was it, you know, unreasonable.
0:45
Speaker 1: We are up eight percent today, but let's bring in
0:48
Speaker 1: our next guest now to tell us exactly why he
0:51
Speaker 1: believes that Tesla may have some room to go below
0:54
Speaker 1: where it is right now. Gordon Johnson is CEO and
0:56
Speaker 1: founder of g LJ Research. So, Gordon, yesterday you know
1:00
Speaker 1: we were blaming sort of the lack of inclusion in
1:02
Speaker 1: the s and P five hundred for the sell off.
1:05
Speaker 1: There was also the Nastack sell off. More generally, would
1:07
Speaker 1: you say Tesla deserves to be valued much lower than
1:12
Speaker 1: it is right now? And there are several reasons behind that.
1:14
Speaker 1: Take us through some of them. Right, So we have
1:17
Speaker 1: a nineteen dollar price target on Tesla more than downside.
1:21
Speaker 1: That's the one year and price started right Tesla's around,
1:24
Speaker 1: you know, just under four hundred dollars. Keep in mind,
1:26
Speaker 1: till right stock went from two hundred to five first
1:29
Speaker 1: solar stock went a while ago from two hundred to twelve,
1:32
Speaker 1: so you can see moves like this. Listen, Tesla is
1:34
Speaker 1: a busted growth story. UM. Their US revenues peaked in
1:38
Speaker 1: the fourth quarter of eighteen, their global revenues peaked essentially
1:42
Speaker 1: in the fourth quarter of eighteen. Um they're global, I'm sorry,
1:46
Speaker 1: they're auto. Growth margins peaked in the third quarter of eighteen.
1:48
Speaker 1: And listen, even if Tesla hit their guidance for five
1:52
Speaker 1: five hundred thousand cars delivered this year, that's only sixty
1:56
Speaker 1: of their capacity. They're expected capacity exiting this year before
2:00
Speaker 1: they build two more plans in Germany and the United States.
2:04
Speaker 1: So they're only selling of their existing capacity. Uh, that's
2:09
Speaker 1: a very negative dynamic. It's just no one talks about.
2:12
Speaker 1: So we think that Tesla. I'm sorry, go ahead, Well,
2:15
Speaker 1: I was just going to point out that till Ray,
2:18
Speaker 1: which he referenced as a cannabis company, they make medicines
2:21
Speaker 1: and drugs and drops and so on, and for a
2:23
Speaker 1: solar is obviously a solar module company. Very different stories though,
2:27
Speaker 1: albeit you know that the same type of company in
2:30
Speaker 1: terms of what people invest in. I suppose if if
2:32
Speaker 1: you want to talk about growth companies, but but so
2:34
Speaker 1: is Amazon, and you know you wouldn't fold Amazon for
2:37
Speaker 1: having a capacity greater than what it's delivering upon, So
2:40
Speaker 1: wife all Tesla. Right, So Amazon is a very different company, right,
2:45
Speaker 1: people who often make that comparison, but we think Tesla
2:48
Speaker 1: is more like a O L or BlackBerry. Right. They're
2:50
Speaker 1: the first stout with evs and now everybody's coming with competition.
2:54
Speaker 1: Um So, I think there's big misconceptions out there. Tesla
2:57
Speaker 1: does not make their own batteries. I think a lot
2:59
Speaker 1: of your listeners think they do. They buy batteries from Panasonic,
3:03
Speaker 1: C A, T L and LG Kim. LG Kim just
3:06
Speaker 1: signed a deal with GM. Anybody can buy those batteries
3:08
Speaker 1: that Tesla buys Panasonic. Anybody can buy the batteries that
3:11
Speaker 1: Tesla buys, and the same with with C A t
3:13
Speaker 1: L and T A p L has a million mile battery. Listen,
3:16
Speaker 1: people talk about, you know, evs being disruptive, electric vehicles
3:19
Speaker 1: being disruptive. Here's the reality. In the United States twenty
3:23
Speaker 1: eleven and nine uh total evs, not just Tesla's. Here,
3:26
Speaker 1: Tesla total electric vehicles have went from point three percent
3:31
Speaker 1: of the market to one point four percent, right, you know,
3:35
Speaker 1: that's not disruption. And globally e vs twenty nineteen have
3:39
Speaker 1: went from point three percent of the market to one
3:41
Speaker 1: point seven percent one point seven percent. So both in
3:44
Speaker 1: the in the world and the US, despite billions of
3:47
Speaker 1: dollars of government and centims you know, basically handed out
3:51
Speaker 1: to people buying vise, people just don't want to buy them,
3:53
Speaker 1: so they're not disruptive. And with respect to Tesla, listen,
3:57
Speaker 1: Tesla is not a technology leader. Right. People talk about
3:59
Speaker 1: full self drive. They have this thing called full self drive.
4:02
Speaker 1: If they sell for eight thousand dollars a pop. We
4:03
Speaker 1: think it's vapor ware. We think it doesn't exist. Consumer
4:06
Speaker 1: Reports just did a review of it. It was a
4:08
Speaker 1: scathingly negative review, and Elon Musk is on record in
4:11
Speaker 1: teams and consumer report reports. Is always um always fair,
4:15
Speaker 1: they said, it's not when it's cracked up to being
4:17
Speaker 1: it's dangerous for the driver and other people on the road.
4:20
Speaker 1: And Navigant ranks Tesla dead last and full self drive.
4:24
Speaker 1: My point is, I think that a lot of your
4:25
Speaker 1: listeners will probably think their ranked first, given where the
4:28
Speaker 1: stock price did and how people say they're a tech
4:30
Speaker 1: leader and disruptive. But the reality is just so much
4:33
Speaker 1: different um than um. You know what people think and
4:36
Speaker 1: we think. As numbers come out, you know things are
4:38
Speaker 1: gonna look bad. One other thing, if you take away
4:40
Speaker 1: the one time credit revenues, right, Tesla basically gets taxpayer
4:44
Speaker 1: and sentiff to sell credits to other automakers who previously
4:47
Speaker 1: weren't selling, weren't making evs. Now every automaker's a making evy.
4:51
Speaker 1: But if you take away those one time credit sells
4:53
Speaker 1: over the past twenty four quarters and only four of
4:56
Speaker 1: those quarters has has has Tesla been profitable? The most
4:59
Speaker 1: recent which was Reach You nine three Q three Q nineteen.
5:02
Speaker 1: The point is, um even in two cute this most
5:05
Speaker 1: recent quarter, taking away those one time sales, they lost
5:08
Speaker 1: three hundred million on the night income line. This company
5:10
Speaker 1: is a perpetual loss making company excluding those excluding those
5:14
Speaker 1: credit cells. And those credit cells they're guiding down in
5:17
Speaker 1: the back half and they're gonna basically go away next year.
5:20
Speaker 1: So it sounds like you have secular arguments based on
5:23
Speaker 1: you know, people's preferences free easse and do you have
5:26
Speaker 1: sort of individual problems with Tesla itself? Almost out of time,
5:29
Speaker 1: but I do want to ask you what you think
5:31
Speaker 1: of Nicola. Do you think Nikola is also you know,
5:33
Speaker 1: smoking mirrors as you seem to think Tessa is. Well,
5:37
Speaker 1: one other thing I want to highlight on Tessa. Right,
5:39
Speaker 1: if you go to one La must said they were
5:41
Speaker 1: gonna be profitable going forward forever and they never need
5:44
Speaker 1: to raise money again. A month later, they lost seven
5:47
Speaker 1: hundred million dollars, and since then they've raised ten billion dollars.
5:51
Speaker 1: Right when he said they're never gonna need to raise
5:52
Speaker 1: money again. Just last year, right, they said they were
5:54
Speaker 1: gonna have a million robo taxes on the road. This
5:56
Speaker 1: year they use that promise to raise a billion dollars.
5:59
Speaker 1: There's not one robot taxi on the road. So again people,
6:03
Speaker 1: you know, people talk about these promises that Elon musk
6:05
Speaker 1: makes and I you know, I highlight this. You know,
6:07
Speaker 1: given the battery days coming up. Keep in mind it's
6:09
Speaker 1: fifteen Elon must sit in a year to two years,
6:12
Speaker 1: your testa will be able to do over SIS on
6:14
Speaker 1: one charge. They're still not They're still not there. So
6:17
Speaker 1: he makes these promises he doesn't meet. With respect to Nicola,
6:20
Speaker 1: listen the GM investment yesterday, no cash was changed the
6:23
Speaker 1: hands right. GM took an ownership interest in Nicola, and
6:26
Speaker 1: Nicola gave GM shares um. With respect to Nicolas technology,
6:30
Speaker 1: you know, we're going to actually have to get that
6:32
Speaker 1: Nicola thought from you another time. We are out of time. Gordon,
6:35
Speaker 1: thank you so much for joining us today, though much
6:37
Speaker 1: appreciated from g l J researcher at Gordon Johnson. The
6:43
Speaker 1: ten year yield at sixty seven basis points, the two
6:45
Speaker 1: stands spread at nearly fifty four basis points. What exactly
6:50
Speaker 1: is the focus for the treasury market liston right now? Well,
6:52
Speaker 1: let's bring in Jim Vogel of f h N Financial.
6:55
Speaker 1: Following all of the data and interest rates and rates
6:59
Speaker 1: mark it's for the last X number of years. Jim.
7:02
Speaker 1: It is great to have you on. It's been a
7:04
Speaker 1: really interesting right, and equities, but rates have been sort
7:09
Speaker 1: of like the cows watching equities passed by quite happily.
7:13
Speaker 1: Oh yes, And what they're really focused on right now
7:17
Speaker 1: is the supply this week, uh CPI on Friday, and
7:21
Speaker 1: then the Fed next week. You're absolutely right, equities for
7:25
Speaker 1: the moment as far as rates are concerned, or aside
7:27
Speaker 1: to right. So what is this calm in the treasury market?
7:32
Speaker 1: Is it just the absolute conviction that central banks are
7:36
Speaker 1: going to you know, keep underpinning the fundamentals of the
7:40
Speaker 1: economy and that central banks will also save us should
7:44
Speaker 1: inflation get out of control, like stan Rock and Miller
7:47
Speaker 1: is telling c NBC, or should we see deflation, which
7:50
Speaker 1: sand Rock and Miller is also telling CNBC. Well, Um,
7:54
Speaker 1: the couple of things. The main one is that right
7:58
Speaker 1: now the bond market is more uncertain than many of
8:03
Speaker 1: the pundits and the people that appear on the media
8:06
Speaker 1: on a regular basis, and so they're waiting to see
8:08
Speaker 1: what happens and develops. Because we do have the election,
8:11
Speaker 1: we've got the what the Congress is going to consider
8:14
Speaker 1: with fiscal stimulus, and then we have the next steps
8:17
Speaker 1: that the Fed is going to employ Meanwhile, many of
8:20
Speaker 1: the people that sat on liquidity during the early part
8:25
Speaker 1: of the third quarter are continuing to put that money
8:28
Speaker 1: to work. So you have the tension of uncertainty against
8:31
Speaker 1: the need for people to continue to spend cash. That's
8:35
Speaker 1: so interesting. So there's an underlying tension there that may
8:38
Speaker 1: not be obvious if you just look at the actual levels.
8:41
Speaker 1: So when do we get a change in that gym?
8:43
Speaker 1: Does does something happen? You know, does does the dam break?
8:46
Speaker 1: At some point? It does? There are two things to watch.
8:51
Speaker 1: One is the actual credit experience that will start to
8:54
Speaker 1: see from households and small businesses in terms of delinquencies
8:57
Speaker 1: and unfortunately the possibility of defaults and charge offs in
9:01
Speaker 1: the fourth quarter. And then the second is the progress
9:04
Speaker 1: that we make on the twin of vaccine development and
9:09
Speaker 1: then how the US continues to try to adapt to
9:14
Speaker 1: the pandemic without a vaccine today. Yeah, do you have
9:18
Speaker 1: a base case at f H engine or just yourself,
9:20
Speaker 1: what is your base case for how the economy reacts?
9:23
Speaker 1: You know that we're in the W camp, so that
9:27
Speaker 1: the fourth quarters um disappoints relative to current expectations. Uh,
9:31
Speaker 1: and that creates the opportunity for people to rethink the
9:35
Speaker 1: idea that inflation is going to run out of control
9:38
Speaker 1: simply because the FED has changed uh its approach to
9:41
Speaker 1: managing um their policy for the next four to five years.
9:46
Speaker 1: What did you make of that is something that you're anticipating,
9:50
Speaker 1: and what does it change practically for traitors of rates
9:53
Speaker 1: or those trying to conserve some cash. For the most part,
9:57
Speaker 1: the FED changes reflect things that are going to happen
10:01
Speaker 1: maybe in the next two to three years. It's unlikely
10:04
Speaker 1: that they come into play at any point in in
10:09
Speaker 1: so there's time to consider what the Fit's going to do.
10:13
Speaker 1: The big reason for the change was is that the
10:15
Speaker 1: old policy just simply was not working and it needed
10:18
Speaker 1: to change. It's not a revolution, it's an education process
10:23
Speaker 1: for everyone, Jim. Outside of the obvious, you know unemployment,
10:28
Speaker 1: under employment, you know social inequality, all of the things
10:32
Speaker 1: that are troubling the US at the moment and that
10:35
Speaker 1: have potential implications for the bond market. Do you look
10:38
Speaker 1: outside the US for other challenges, obviously China being one.
10:43
Speaker 1: So you have to constantly watch the combination of the
10:47
Speaker 1: demographics of an aging population in Europe and the dependence
10:51
Speaker 1: of the European economy on emerging market growth. So there's
10:56
Speaker 1: stories that started literally five or six years ago that
11:00
Speaker 1: are still going to be with us when we come
11:02
Speaker 1: out on the other side from the pandemic. Yeah, that's
11:04
Speaker 1: for sure. You talk about Europe there, and we did
11:07
Speaker 1: see a move in yields yesterday. But essentially, as you're
11:09
Speaker 1: talking about negative yields and Europe, you know, how much
11:13
Speaker 1: does it matter whether we have a five or six
11:16
Speaker 1: basis point move and say a French bond or a
11:19
Speaker 1: German bond, Right, we need something like a thirty to
11:23
Speaker 1: forty basis point change in terms of the outlook and
11:26
Speaker 1: the landscape for European interest rates, and that is perhaps
11:31
Speaker 1: possible by two, but it's not a near term event either.
11:36
Speaker 1: Do you see inflation becoming a problem, you know, in
11:39
Speaker 1: the next decade, Jim. If it becomes a problem, it's
11:45
Speaker 1: going to be because the spending patterns and the consumption
11:50
Speaker 1: patterns of the next generation that's coming behind the Boomers
11:55
Speaker 1: fundamentally changes their attitude toward um spending and the mount
12:01
Speaker 1: they borrow. So inflation comes from uh in effect, credit
12:07
Speaker 1: fueled spending that was the hallmark of the Boomer generation
12:12
Speaker 1: so far that has not been absorbed by the cohort
12:17
Speaker 1: coming up that that has already past the boomers in
12:20
Speaker 1: terms of its total size in the US. That is
12:22
Speaker 1: so fascinating. And Jim, before we let you go out
12:26
Speaker 1: of time, really, but how is Memphis, Tennessee? These days open?
12:29
Speaker 1: Not open? Uh? Schools are virtual for public schools. We
12:34
Speaker 1: have still a good number of rules in place. But
12:38
Speaker 1: thankfully the COVID infections are falling all right. That is
12:41
Speaker 1: Jim Vogel. Always love chatting with Jim, who is of
12:44
Speaker 1: course based in Memphis, Tennessee. He's interest rate strategist for
12:47
Speaker 1: f h N Financial, FED Water, ECB Water and much
12:52
Speaker 1: much more are thanks to Jim Vogel. Well Sweeney is
12:58
Speaker 1: off today. Let's get now to our next to guess.
13:00
Speaker 1: Gina Martin Adams is chief equity strategist for Bloomberg Intelligence
13:04
Speaker 1: and has been watching, I'm sure the last few days
13:07
Speaker 1: moves with extreme interest, so extreme in fact that she
13:12
Speaker 1: talks about momentum extremes and how they're easing and that
13:16
Speaker 1: means that new equities leadership should emerge. Gina, thanks for
13:20
Speaker 1: joining so so are we definitely saying that these are
13:23
Speaker 1: extremes or have we decided. Yet, Yeah, we definitely did
13:26
Speaker 1: get to a momentum extreme. We saw by the end
13:29
Speaker 1: of August, three of the biggest sectors in the SP
13:33
Speaker 1: tech communications as well as consumer discretionary reaching multi year
13:37
Speaker 1: extremes on momentum. At the same time, we saw index
13:41
Speaker 1: valuations rise almost exclusively due to text docs and mega
13:47
Speaker 1: cab text docs, and the gap between broad index valuations
13:51
Speaker 1: as well as UH and index valuations excluding those text
13:55
Speaker 1: docs reached the multi decade high. So we certainly did
13:58
Speaker 1: reach an extreme point in time. Now the question is
14:01
Speaker 1: where do we go from here? What does extreme really mean?
14:03
Speaker 1: Because I think that your natural reaction maybe oh quite
14:06
Speaker 1: fearful on the other side of an extreme. But what
14:09
Speaker 1: you can see and what you know, our view is
14:11
Speaker 1: we'll actually see pe s normalize, will most likely see
14:15
Speaker 1: leadership shift to other cyclical sectors um and it We
14:20
Speaker 1: could be in for a choppy period in the interim
14:22
Speaker 1: as we see that leadership shift, But there's still very
14:25
Speaker 1: little evidence that the broader ball market is coming to
14:28
Speaker 1: an end or anything like that. It's really just an
14:31
Speaker 1: adjustment from extreme levels. Sometimes those adjustments take you from
14:36
Speaker 1: you know, upside extremes to downside extremes, but so far
14:40
Speaker 1: it looks like more of a normalization from what we're
14:43
Speaker 1: pretty out of balance conditions by the end of August.
14:47
Speaker 1: So talk to us a little bit about the new
14:49
Speaker 1: leadership that you say will emerge. You give us some
14:51
Speaker 1: details there, But are we talking about a post pandemic
14:54
Speaker 1: world in which investor is just value stay at home
14:57
Speaker 1: stocks and real performer like Amazon that can just get
15:02
Speaker 1: consumers what they want to their doorsteps immediately, much richer
15:08
Speaker 1: than other companies. Yeah, I think that we'll see some
15:13
Speaker 1: normalization of that. I mean, we certainly have seen valuations
15:16
Speaker 1: expand enormously for some of the COVID nineteen winners or
15:20
Speaker 1: some of the more sort of persistent earners over the
15:23
Speaker 1: course of the last six months. What we're expecting to
15:25
Speaker 1: see into one is more normalized conditions emerge where some
15:30
Speaker 1: of the most beaten down cyclical care groups like industrials
15:33
Speaker 1: and materials, some of the consumer discretionary names outside of
15:38
Speaker 1: Amazon are expected to lead in earnings recovery, and in
15:42
Speaker 1: an environment where they lead in earnings recovery off of
15:45
Speaker 1: a very low base or not, you should see some
15:48
Speaker 1: leadership migrate to those names to take advantage of that
15:51
Speaker 1: earnings recovery. So a lot of this depends upon what
15:55
Speaker 1: the outlook looks like. How much do economies improve, how
15:57
Speaker 1: much do we see humors sort of go outside of
16:02
Speaker 1: their homes, visit restaurants, you know, resume pre COVID type
16:07
Speaker 1: of activities over the course of the next six to
16:09
Speaker 1: twelve months. But if you look at the consensus forecast
16:12
Speaker 1: very differently than the environment we've been in for the
16:15
Speaker 1: last six months, where tech and healthcare have taken a
16:19
Speaker 1: very very strong and consistent earnings lead, we should see
16:22
Speaker 1: earnings distribute, earnings growth distribute to more secular sectors and
16:26
Speaker 1: importantly too different sectors over the course of one and
16:29
Speaker 1: that should create a migration two groups outside of of
16:34
Speaker 1: tech and healthcare to some degree. So does the pe
16:38
Speaker 1: gap between tech and then by tech I suppose, I
16:40
Speaker 1: mean the biggest five tech companies and some of the
16:44
Speaker 1: rest even in tech. Will that tolls Gina? I think
16:47
Speaker 1: it should. I mean, there's some argument to be made
16:50
Speaker 1: that it doesn't necessarily need to close by valuations falling
16:54
Speaker 1: for tech stocks, who could see valuations for the rest
16:58
Speaker 1: of the market starts to catch up to tech. When
17:00
Speaker 1: we look at the broad market, and we try to
17:03
Speaker 1: determine what a fair value multiple for the index is.
17:06
Speaker 1: We find the result of extremely low interest rates in
17:10
Speaker 1: combination with a likely double digit earnings recovery into supports
17:15
Speaker 1: the fair value pe for the broad market of well
17:18
Speaker 1: north of twenty times earnings. Currently, the market is trading
17:22
Speaker 1: at about twenty times earnings, even including those big Tex docs,
17:27
Speaker 1: so there is room for some reratings still in the
17:29
Speaker 1: non tech areas of the market. It's difficult to argue
17:33
Speaker 1: that you would need to see tech valuations move higher
17:37
Speaker 1: in an environment where their earnings dominance is starting to
17:40
Speaker 1: fade a little bit, So it's unlikely that tech multiples
17:44
Speaker 1: continue to expand they may even normalize by coming down
17:47
Speaker 1: a little bit, meeting somewhere in the middle the rest
17:50
Speaker 1: of the market as the rest of the market starts
17:52
Speaker 1: to catch up. Fascinating and give us a time frame
17:56
Speaker 1: for this, You know, when when is the latest that
17:58
Speaker 1: this might happen? Yeah, So our sector scorecard actually started
18:02
Speaker 1: to signal as of September one, we put out the
18:04
Speaker 1: scorecard and it's the first time that we saw tech
18:07
Speaker 1: fall out of the top three sectors on the scorecard
18:10
Speaker 1: since um we saw materials, industrials and discretionary stocks already
18:15
Speaker 1: starting to rise. There is some evidence even as of
18:19
Speaker 1: August that value um, the value factor in the SMP
18:24
Speaker 1: five hundred anyway, was starting to outperform. If you look
18:27
Speaker 1: at the long short value factor, uh, it performed better
18:30
Speaker 1: than quality or volatility or momentum in the month of
18:35
Speaker 1: August for the first time and sometimes. So we're already
18:38
Speaker 1: starting to see some evidence of this rotation. If you
18:41
Speaker 1: look at the last five days, even material stocks are
18:44
Speaker 1: up while the rest of the index is down. Industrial
18:47
Speaker 1: stocks have fallen half as much as the index. So
18:50
Speaker 1: I think we're starting to see a little bit of
18:52
Speaker 1: this rotation. Now will it continue really depends on some
18:56
Speaker 1: solidification of that earnings outlook. I do think we need
18:59
Speaker 1: to go into third quarter earning season and see companies
19:04
Speaker 1: start to confirm that they do see a better environment
19:07
Speaker 1: emerging into one. They do see order flow improving, they
19:11
Speaker 1: do see manufacturing activity starting to pick up around the world. Um,
19:16
Speaker 1: maybe even some references to the week dollar as a
19:19
Speaker 1: support to their multinational operations, and multinational economic activity starting
19:25
Speaker 1: to improve. So I do think, well, we'll go through
19:29
Speaker 1: a period of of you know, really assessing, reassessing. You know,
19:32
Speaker 1: probably see a chopping market as we go through this transition,
19:36
Speaker 1: but ultimately it will depend upon earnings really proving the
19:39
Speaker 1: case to broaden out exposure in the SMP five beyond
19:43
Speaker 1: these COVID winners. Yeah, it really is fascinating if you
19:46
Speaker 1: look at the value index versus the growth index and
19:49
Speaker 1: how they've performed. The value index is down twelve sance
19:51
Speaker 1: the beginning of the year. The growth index is up
19:53
Speaker 1: twenty since the beginning of the year. Very briefly, we're
19:56
Speaker 1: out of time, but I did want to ask you,
19:59
Speaker 1: you know, doesn't matter who are the players here, whether
20:03
Speaker 1: they're you know, big hedge funds or big pension funds
20:06
Speaker 1: or robin Hood investors. Yeah, I think it matters to
20:10
Speaker 1: some degree. Um, you're certainly seeing a heightened amount of
20:15
Speaker 1: interest in specialty packaged products like epf UM. You know,
20:20
Speaker 1: obviously the Triple Q products have driven a lot of
20:23
Speaker 1: slow over the course of the last couple of months.
20:26
Speaker 1: That does indicate that this sort of um presence of
20:29
Speaker 1: the retail investor is significant. Our work says the retail
20:33
Speaker 1: investor flows the market. They've historically averaged about fift for
20:37
Speaker 1: the last five years, so there is more retail participation
20:41
Speaker 1: in this to the extent that some of that gets
20:44
Speaker 1: washed out through this um this tech sort of adjustment.
20:49
Speaker 1: I would suggest that somewhat healthy. We want to have
20:51
Speaker 1: less speculation and more investing. Gina Martin Adams, always eliminating
20:56
Speaker 1: speaking with you, Sank huge if equity strategist for Bloomberg Intelligence.
20:59
Speaker 1: Gina Martin Adams, there alright. Astros Zeneca in the news today.
21:05
Speaker 1: One of the candidates for a vaccine, of course, is
21:09
Speaker 1: astro zenecas, and we got to report yesterday that there
21:12
Speaker 1: was some adverse reaction in one patient or perhaps more.
21:17
Speaker 1: Today the ft is saying that trials may resume next week.
21:19
Speaker 1: To make sense of it all, let's bring in Sam Fazally,
21:22
Speaker 1: senior pharmaceutical analyst and head of E M e A
21:24
Speaker 1: Research for Bloomberg Intelligence. Sam, what exactly is going on
21:28
Speaker 1: at astro Zeneca h Q? On Twitter yesterday, for example,
21:32
Speaker 1: there was a lot of discussion about the difference between
21:36
Speaker 1: saying the word adverse effect and side effect and so on.
21:40
Speaker 1: Just bring us up to speed with the story. Yeah, Hi, BONI,
21:43
Speaker 1: So I mean advertifact, side effect, toxicity, safety signal, They're
21:48
Speaker 1: all the same kind of things. So um I would
21:51
Speaker 1: just see this as obviously sufficiently big enough safety signal
21:54
Speaker 1: for the company to have decided to voluntarily hold the trial.
21:58
Speaker 1: Once they've done that, though it's necessarily up to them
22:01
Speaker 1: to restart it. They would have to satisfy their data
22:04
Speaker 1: safety monitoring board, which every trial has, and the regulators
22:10
Speaker 1: that it is safe to restart the trial and continue
22:14
Speaker 1: dosing patients. So whether the company thinks that it would
22:18
Speaker 1: be over or not must be something to do with
22:21
Speaker 1: what they're talking about with regulators. But at the end
22:24
Speaker 1: of the day, it is them who are going to
22:26
Speaker 1: decide to allow the trial to restart. Yes, the f
22:30
Speaker 1: T I should explain is reporting that sources to the
22:33
Speaker 1: FT are saying that the trial could resume early next week.
22:37
Speaker 1: And this is a trial, of course in conjunction with
22:39
Speaker 1: Oxford University. Now, is this a large trial? Explained to us?
22:44
Speaker 1: Where it sits in the universe of trials right now? Yes.
22:48
Speaker 1: So the biggest trial which hasn't or maybe just has
22:52
Speaker 1: started recruiting, is one from Johnson and Johnson, which would
22:55
Speaker 1: be sixty individuals, and that's international arranges from Philippe Means
23:00
Speaker 1: to Brazil to Chile to many centers in the United
23:04
Speaker 1: States sixty. Then you have the thirty thousand trials in
23:08
Speaker 1: the US, mostly by moderna finds a rayontic and astro
23:13
Speaker 1: itself that was just beginning to start dosing. And then
23:17
Speaker 1: you've got asterro itself, which has got the biggest trial
23:19
Speaker 1: that's already been running is the UK trial where this
23:23
Speaker 1: adverse event was recorded, which is twelve thousands, three and
23:25
Speaker 1: thirty four as of the latest update in terms of subjects.
23:28
Speaker 1: So there's are big trials. You know, if you had
23:31
Speaker 1: that that that you you you surpass hundred fifty thousand subjects.
23:36
Speaker 1: So j J leads on that one exactly. Now we
23:39
Speaker 1: should mention that obviously placebos are involved here as well,
23:42
Speaker 1: and that's what makes it a trial and and and
23:45
Speaker 1: that's how we get vaccines eventually. So not all hundred
23:49
Speaker 1: and fifty thousand or doosed with the drug that the
23:51
Speaker 1: drug maker is making. Explain to us whether the astro
23:55
Speaker 1: Zenica trial in the UK is the same as the
23:57
Speaker 1: Astrosonica trial in the United States. You know, so at
24:01
Speaker 1: the after trial in the United States when it starts
24:03
Speaker 1: is a standard one dose and then a booster. The
24:08
Speaker 1: one in SA booster being twenty, say, about four weeks
24:13
Speaker 1: after the first dose. The one in the UK started
24:16
Speaker 1: off as a single dose vaccine trial, and then at
24:20
Speaker 1: some point and I think the first injection I can't
24:23
Speaker 1: remember exactly, was sometime in early June, for the first
24:26
Speaker 1: half of June um and then at some point the
24:30
Speaker 1: company decided to move this to a to dose trial.
24:33
Speaker 1: So there are individuals in there who had a second dose,
24:36
Speaker 1: not necessarily four weeks after, but six weeks after or
24:39
Speaker 1: eight weeks after, which, of course, in a trial that
24:42
Speaker 1: already has many arms in it if you count it,
24:45
Speaker 1: depending on how you county, it could be up more
24:47
Speaker 1: than ten arms, ten different groups of tests being conducted.
24:52
Speaker 1: Is it really makes it difficult to figure out what
24:56
Speaker 1: kind of days that you're going to get out of that,
24:57
Speaker 1: especially when you've kind of to all up a little
25:00
Speaker 1: bit with deciding in the middle of the trial to
25:03
Speaker 1: give two doses. Yeah, exactly. I also want to just
25:07
Speaker 1: clarify that the suspected serious adverse reaction was suffered by
25:12
Speaker 1: one participant in the UK as far as we know,
25:15
Speaker 1: and that participant fell ill with a rare inflammatory condition
25:18
Speaker 1: called transverse myelitis. According to two people familiar with the
25:22
Speaker 1: trial who spoke to the f T. So we really
25:25
Speaker 1: don't know exactly what this individual came down with. We
25:29
Speaker 1: don't know if it was one individual, and we really
25:30
Speaker 1: don't know if it was because of the astrosenega injection, right,
25:34
Speaker 1: but we can sort of assume that it had something
25:37
Speaker 1: to do with it. But we also don't know if
25:38
Speaker 1: that individual was given a real injection or a placebo.
25:41
Speaker 1: So there are many questions to be asked and answered.
25:43
Speaker 1: What's the normal, you know, adverse reaction that's allowable for
25:49
Speaker 1: a vaccine. Presumably some people in every trial have some
25:52
Speaker 1: kind of an adverse reaction. Sure, sure, And I would suspect,
25:57
Speaker 1: just to a point that you made, that the Data
26:00
Speaker 1: Safety Monitoring Committee knew that this is a vaccinated individual
26:05
Speaker 1: because they are unblinded to the data that comes through.
26:08
Speaker 1: They can see everything that's coming through, and I suspect
26:11
Speaker 1: they wouldn't have stopped it if it was just a placebo.
26:15
Speaker 1: But the sorts of um adverse events. Remember, in these trials,
26:20
Speaker 1: people are told anything that goes wrong or anything that's
26:23
Speaker 1: out of the ordinary recorded, So even if they have
26:25
Speaker 1: food poisoning, they have to record it, which is then
26:28
Speaker 1: afterwards when you do the data triage, you try and
26:31
Speaker 1: figure out what's related to the vaccine and what's not.
26:33
Speaker 1: UM but you know, high temperatures, UM, chills and eggs
26:37
Speaker 1: and fever and fever has as just said, UM some
26:41
Speaker 1: perhaps fatigue. Those are the sorts of things that are
26:44
Speaker 1: very normal with their vaccination and and similar to what
26:47
Speaker 1: you yet when you're when you've got a virus that's
26:51
Speaker 1: infected you because you're basically activating the immune system, and
26:55
Speaker 1: those are related to the activation of the immune system.
26:58
Speaker 1: So it's always so fascinating taking with you very clear
27:01
Speaker 1: explanations for what's going on and what most of us
27:04
Speaker 1: don't typically know, even though these trials go on all
27:07
Speaker 1: the time for all sorts of drugs and treatments are
27:10
Speaker 1: Thanks to you, Sam Fazali, Senior pharmaceutical analyst and head
27:12
Speaker 1: of e MU Research for Bloomberg Intelligence. Thanks for listening
27:18
Speaker 1: to Bloomberg Markets podcast. You can subscribe and listen to
27:21
Speaker 1: interviews at Apple Podcasts or whatever podcast platform you prefer.
27:25
Speaker 1: I'm Bonnie Quinn. I'm on Twitter at Bonny Quinn, and
27:28
Speaker 1: I'm Paul Sweeney. I'm on Twitter at pt Sweeney. Before
27:31
Speaker 1: the podcast You can always catch us worldwide at Bloomberg Radio.