January 24, 2025 • 43 mins
Watch Carol and Tim LIVE every day on YouTube: http://bit.ly/3vTiACF.
Bloomberg News Bloomberg News Technology Reporter Kurt Wagner discusses Meta planning to invest as much as $65 billion on projects related to artificial intelligence in 2025, including building a giant new data center and increasing hiring in AI teams. Bloomberg News Senior Editor Nina Trentmann and Ebm-Papst CFO Harald Klaiber talk about trade tariff concerns. Bloomberg News Health Reporter Madison Muller explains how Novo's experimental weight loss shot showed up to 22% weight loss in an early-stage trial, boosting investor hopes for the company's pipeline. Bloomberg News Equality Team Reporter Simone Foxman shares the details her story Trump’s Attack on ‘Illegal’ DEI Disorients Corporate America. And we Drive to the Close with Mark Malek, Chief Investment Officer at Muriel Siebert & Co.
Hosts: Carol Massar and Tim Stenovec. Producer: Paul Brennan.
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Episode Transcript
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Speaker 1 (00:02):
Bloomberg Audio Studios, Podcasts, radio news.
Speaker 2 (00:08):
This is Bloomberg Business Week Insight from the reporters and
editors that bring you America's most trusted business magazine, plus
global business, finance and tech news. The Bloomberg Business Week
Podcast with Carol Masser and Tim Steneveek on Bloomberg Radio.
Speaker 3 (00:26):
We are talking a lot about AI again today. Shares
of meta platforms are rallying. A few things going on.
I want to point out companies head of Instagram putting
out some posts on threads saying that it has begun
testing ads there, and then before that, here's the AI twist.
Earlier this morning, CEO of Meta, Mark Zuckerberg, in a
Facebook post, said that metaplans to invest as much as
(00:48):
sixty five billion dollars in projects related to artificial intelligence
this year, including building a giant new data center and
increasing hiring an AI team. So, Tim, we know that
they've been spending big, but this is even maybe a
lot more than folks were anticipating.
Speaker 4 (01:04):
Yeah.
Speaker 5 (01:04):
Here to unpack it all is Bloomberg News technology reporter
Kurt Wagner. Kurt also the author of a Battle for
the Bird Jack dorsy elon Musk and the forty four
billion dollar fight for Twitter. Soul Kurt joining us from Denver.
Speaker 2 (01:17):
Kurt.
Speaker 6 (01:18):
I saw this news break.
Speaker 5 (01:19):
This morning before the market opened, and my immediate thought was,
shares of meta platforms are going to fall on this
because investors are so concerned. I thought about how much
companies are spending on Capex. We saw it move other
companies when they've reported these figures.
Speaker 6 (01:37):
But no, we're seeing the opposite reaction.
Speaker 7 (01:38):
Why the optimism, Yeah, I think AI is just some
like magic elixir apparently that you can, you know, say, hey,
we're spending a ton of money, and people don't love that.
Speaker 8 (01:49):
But as long as you throw you know that that
money is going toward AI investments, people are a lot
more on board. You know. I do think that meta
more than maybe most companies already have as a running
start on the AI front, right, I mean, this is
not like a standing from zero to sixty kind of thing.
They have chatbots and all of their apps right now,
(02:09):
They already have smart glasses, they've built. You know, they're
up to almost Lama four right their fourth version of
those large language models that they've been developing for years.
So I guess if people are excited about the stuff
they've already seen from Meta. The idea of throwing even
more money onto that fire might resonate more with investors
than maybe some other companies doing it that don't have
(02:30):
the track record Meta does.
Speaker 3 (02:31):
Got to say, Kurt, it feels like this high stakes
AI poker game, because you know, here we are in
a week where we have talked a lot about AI,
and you had coming out of the White House a
bunch of big tech folks there that one hundred billion
dollar joint venture that was announced called Stargate, Open AI,
SoftBank Oracle, President Trump helping to announce that on this
(02:52):
AI and infrastructure spend a big time. It just feels like, Okay,
you did one hundred billion, I'm going to do this,
you know, like it just seems like the timing of
it is kind of interesting, And then you've got Meta
reporting next week like why didn't they do it then?
So help me understand kind of what's going on and
maybe why Meta did this right now?
Speaker 8 (03:13):
I think the timing is certainly not coincidental. My guess
is that they were planning to announce this at earnings
that they saw the other announcements you mentioned from you know,
the White House earlier this week from some of their rivals,
and thought, hey, this is getting a ton of attention.
You know, all these stories are being written about this
huge AI investment, but we're not being mentioned. Let's go
(03:34):
ahead and you know, jump jump the shark a little
bit on our own announcement from next week to make
sure we can ride this this news cycle. That's my guess.
They'll still be talking about it at earnings next week,
of course, but you never want to let you know,
all of your competitors have all the fun, you know,
talking about this stuff while you're sitting on you know,
what they consider to be a massive investment as well.
(03:55):
And so I don't think the timing, though was was
coincidental at all in terms of why they that today Kurt.
Speaker 5 (04:01):
Are analysts and any l is out there saying it
could be possible and Meta is overspending on AI or
any of these companies are overspending on AI, because that's
a sentiment that Mark Zuckerberg actually shared with Emily Chang
over the summer here on Bloomberg. So you know, what,
has something shifted or is there that possibility still there?
Speaker 8 (04:19):
Well, I was just about say I'm going to do
you one bet or not not just an analyst whos
saying maybe they're overspending, but as you point out, the
CEO himself is sort of admitting, Hey, we're probably overspending
on this thing. Look, I mean, I think the idea
here is you are willing to take the short term
loss of you know, a couple billion dollars, even ten
billion dollars. You know, maybe they don't need to spend
(04:39):
sixty five, they need to spend fifty five, and you're
willing to take that loss knowing that you know you're
going to get ten years down the road and not
be like, gosh, I really feel like we didn't invest
enough at that time, and we're now behind, right, We're
behind Google or open Ai or whoever. And so it's
easy to say that, and I do, but I do
think people are willing, you know, to bet on Mark Zuckerberg.
(05:01):
He does have a track record of you know, success,
and he can kind of get away with overspending right
now because of that. And so, you know, I very
very much agree that we could be in this maybe
a little bit of a bubble here where they're overspending,
But at the same time, what's the trade off? Right, Like,
you don't want to get down the road and feel
like you missed the boat.
Speaker 5 (05:22):
Hey, Kurt, before we let you go, you got another
story out talking about metas Threads are set to show
ads for the first time here in the US and Japan.
To remind everyone, this is sort of the ex Twitter
competitor that emerged a couple of years ago in the
wake of everything that was happening at Twitter slash x.
What do we know about the monetization of that platform,
the popularity, the staying power of that platform.
Speaker 8 (05:43):
Yeah, well, first talk about quincidentld timing. Right, so they say, hey,
we're about to spend sixty five billion on AI, which,
as you mentioned, might be a little too rich for
some people. Well then they follow that almost immediately with
but don't worry, we have this new revenue stream you
know that we're about to turn on with threads. Threads,
for those who aren't familiar, is the Twitter clone that
Meta launched about a year and a half ago. Has
(06:05):
three hundred million monthly users. And I think they're pretty
well positioned, right, I mean, the advertising, this is what
they do, is what they do with Instagram and reels
and Facebook of course, So turning it on for threads
I don't think is necessarily this huge thing for them.
It's just yet another audience for them to monetize. So
we'll see how quickly they ramp up this thing. But
again I think the timing of announcing that goes hand
(06:27):
in hand with the high spending on the infrastructure stuff,
because they're trying to make sure investors know that there
is a new revenue stream coming online even as they
spend heavily on AI.
Speaker 3 (06:36):
Always good to look at all columns of the balance sheet.
Just going to put it out there, all right, Thank
you so much. Kurt Wagner, Bloomberg News Technology reporter. He's
also author of Battle for the Bird, Jack Dorsey, Elon Musk,
and the forty four billion dollar Fight for Twitter's Soul.
Speaker 1 (06:50):
You're listening to the Bloomberg Business Week podcast. Catch us
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Speaker 5 (07:03):
Well, the euro was headed for its best week in
more than a year this as investors paired back expectations
for interest rate cuts, also betting that the US trade
tariffs won't come into force as soon as many had
previously feared. Nonetheless, companies in their C suites are trying
to game out the different scenarios.
Speaker 3 (07:21):
Yeah, that's especially too for any kind of tariffs that
might come out of the Trump administration. For more on that,
let's get to our next guest. Team of guests, I
should say, Bloomberg News senior editor Nina Trentman. She's family,
she's here in studio. And then we've also got with
us out in Germany, the chief financial Officer of EBM Papst,
Harold Kleiber. He is, by the way, featured in the
(07:41):
Bloomberg CFO Briefing newsletter that comes out on Sunday, can
be found at Bloomberg dot com slash CFO hyphen Briefing.
Welcome to both of you, Harold, I want to start
with you. How are you planning or thinking about planning
for trade tensions and possible terrorists from the Trump administration.
What are your expectations?
Speaker 9 (08:01):
Yeah, well, I think first of all, thanks thanks love
for having me this afternoon. I'm pretty happy to share
our thoughts on a couple of things with you. When
we look at the new administration and the potential and trade.
Speaker 4 (08:17):
Conflicts coming up.
Speaker 10 (08:18):
I think we need to step one one step back
actually because from a predominantly overall business strategy, we we
are running a clear.
Speaker 4 (08:30):
Local for local approach.
Speaker 9 (08:32):
That means that we for a couple of years already
build up local competence, which is true for for the
US market as well as for the China market, just
in order to have a proximity to our customers, supporting
them and also being speedy and flexible with their demands.
So that that is the predominant reason why we are
(08:55):
building up quite independent organizations in you all the and
that of course is also now now big advantage having
sufficient portion of local value creation, which makes us a
little bit more independent from overall trade flows. And that's
(09:16):
something which makes us a bit more relaxed. Nevertheless, nevertheless,
of course, if we talk about trade conflicts, that is
an area of concern overall.
Speaker 11 (09:26):
Can you talk a little bit about the local for
local strategy, Like when did that come into play? Was
it in response to Trump's first administration and will you
still see an impact if he was to impose hariffs
on on European goods?
Speaker 9 (09:39):
So so actually we've started with that already a couple
of years back. And as I said, that has nothing
to do with any administration or any kind of political
that's a that's a pure business reason coming from the
market requirements, coming from our point of view. How can
we be successful in the markets, and that needs a proximity,
that needs local value creation.
Speaker 3 (10:01):
How old I want to jump in because we have
been living in I feel like decades of globalization, right,
and that was the smart way to do things. So
when was the turn? What made it make more sense
to be kind of operating producing in the market that
you're selling. When did that switch happen?
Speaker 6 (10:17):
What was it?
Speaker 4 (10:20):
In the end, it's a question of scale.
Speaker 9 (10:22):
Of course, you need a certain level of local business
in order to establish an on sizeable organization. And I
would say it started already almost ten years back.
Speaker 4 (10:31):
I would say, we're perfectly a local for local approach.
Speaker 5 (10:36):
So where specifically are you moving operations, because as we
heard this week from President Trump, he wants stuff made
in the United States. Where specifically are you making things now?
Speaker 9 (10:47):
So in the US we are located actually in Informington
in Connecticut and in Telford. So these are the two
places where we have currently operations in the US, and yes,
we're also continuously investing in in these plans. We've just
started a further expansion and and we're further investing in
the in the US in order to have an really
(11:11):
really sizeable organization. We're also moving our decapacity into the
markets just for speedy market uh.
Speaker 11 (11:20):
Answers had We also talked about the club decoupling and
your China business. One of the things that many companies
are doing right now thinking about whether they need to
sort of separate their China entities. How how far have
you gone with that?
Speaker 4 (11:36):
With that, we're all pretty far.
Speaker 9 (11:38):
Actually in China, we are running more or less we
would be able to run the operation really really independent.
We've we've built out a complete local supply chain.
Speaker 4 (11:51):
We have all.
Speaker 9 (11:52):
Necessary competences from R and D to treasury in the
in the Chinese organization.
Speaker 4 (11:58):
UH and and yet and this is the difference.
Speaker 12 (12:00):
The one is the business approach, the local for local
and the coupling is more from a risk management perspective
in order just to prepare ourselves in case something happens
that we could really separate.
Speaker 9 (12:13):
Yet in a normal course of business, we still try
to work pretty integrated in our global network. But yes,
for China, we're already gone pretty far to run the
operation separately.
Speaker 11 (12:26):
Does that include financing as well, if you're thinking about
domestic financing in China, can you talk.
Speaker 4 (12:31):
A little bit about that. Yes, yes, absolutely so we've just.
Speaker 9 (12:36):
Started a further expansion in our plan in Chia and
in northern China actually, and then this is where we
where we also raised the local financing. We also have
a couple of operational lines from local banks and this
is really something which we started, i would say, in
the last two to three years to also get more
(12:58):
independent or more localized.
Speaker 3 (12:59):
On a fire Harold, it's fascinating because it sounds like
you're getting local financing. You're not backing off of your
China exposure right in terms of building up your facilities there.
But you mentioned risk management. This is the reason why
you have decoupled from China specifically, what's the risks that
you're worried about and why you did that decoupling what specifically?
Speaker 4 (13:24):
So in the end, the big question is, of course, for.
Speaker 9 (13:28):
It could be that that in China, with their more
kind of internal perspective and the increasing of local independent
of the of the whole country. Actually, it might at
some stage happen that inflows from outside could be pretty difficult,
(13:49):
or at least that imports to China would be pretty
pretty difficult.
Speaker 4 (13:53):
And this is why we actually said.
Speaker 9 (13:56):
Okay, next to our operation there, we also need to
make sure that from the complete enterprise architecture, they could
run separately. And this is what we actually prepared from
a system perspective, from a financing perspective.
Speaker 4 (14:10):
And so on.
Speaker 9 (14:11):
Just yeah, in order to prepare if flows would be
highly interrupted.
Speaker 6 (14:16):
Understood, Harold.
Speaker 5 (14:18):
Just ten seconds left. We have some elections in Germany
coming up in February. Political risk, just ten seconds, no risk.
Speaker 9 (14:25):
We rather hope that we start to decrease bureaucracy and
still have kind of stable framework conditions because in the end,
stability and plannability is key for business success and for
trust in investments, and that is what we need in Germany.
Speaker 3 (14:42):
Yeah, they've had two years of shrinking output and next
to no growth in recent quarters, so certainly looking for
some changes there, folks. Thank you so much, Harold. Thank you.
Harold Kleiber, chief financial officer at EBM. Perhaps joining us
from Germany, and of course our only in a treatment.
Thank you, Thank you, senior editor at Bloomberg News. Be
sure to check out the Blue CFO Briefing newsletter. You
can find it on the Bloomberg On Sunday.
Speaker 2 (15:07):
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Just say Alexa play Bloomberg eleven thirty.
Speaker 3 (15:25):
All right, let's get to a stocking company that's on
our radarving Europe.
Speaker 5 (15:28):
Speaking of Europe, that's Novo Nordoius because shares well, I
should say a drs hire right now by eight and
a half percent, up the most since August of twenty
twenty three. This after it's experimental shot delivered as much
as a twenty two percent weight loss in an early
stage trial at Boost Investors hopes Carol for the drug
makers pipeline, the results putting Novote back into the hotly
contested race for which drug maker can deliver the most
(15:50):
weight loss from a next generation product.
Speaker 3 (15:53):
Yeah, this little race that's going on. Hey, let's get
more into why. And we have our own in house
expert and all things g P one drugs, medicine. Muller
is Bloomberg News health reporter. She is in studio. All right,
great to have you here.
Speaker 8 (16:05):
Happy New Year.
Speaker 3 (16:06):
I feel like I know, I haven't seen you in
a while, and there's stuff going on.
Speaker 13 (16:09):
It's a lot going on.
Speaker 3 (16:10):
All right, what's the news here for now?
Speaker 13 (16:12):
So this brings Novo back in the race because I
think investors were a little worried there for a minute
at the end of last year. Very closely watched trial
of Novo's drug, Kagrisemo, which is a next generation weight
loss shot, fell short of investors' hopes and some of
the I mean actually the bar that the company had
set for itself. These next generation products were looking for
(16:33):
like twenty five percent weight loss. Nova's drug fell short
of that, and that was that was an issue. The
shares were down at the end of the year. I
think investors were concerned. And now they are delivering again
with another next generation weight loss shot called amma cretan,
which works similarly to some of the other drugs that
are already out there, and so they're back back in
(16:55):
the running.
Speaker 6 (16:56):
I thought the next gen product was.
Speaker 13 (16:58):
Not a shot, So there are shots that are delivering
more weight loss with potentially less side effects, which is
I think one of the things that Novo is going
for here. And then there's also the pills, so there's
like two different things going on. And then you have
am gin, which is trying to develop a shot that
can be taken less frequently. So we're seeing with these
next generation products sort of divergence in what companies are
(17:21):
going after and prioritizing.
Speaker 3 (17:22):
Is it also about these drugs which initially we used
to treat diabetes. Are they also looking to even make
them better for treatment of diabetes or is this kind
of all like are.
Speaker 13 (17:31):
They are they're testing them in diabetes as well? And
so I think that that is an interesting point that
isn't brought up as much like a lot of I'm
not exactly sure about this drug that Novo that we're
talking about today, but yeah, these next generation products are
also being tested in diabetes because medisine.
Speaker 3 (17:46):
When we talk about the market for these drugs, it's
a combination of just people who want it for weight loss, right,
and it's also for treatment of fortiabetic.
Speaker 13 (17:54):
When we talk about the market size, as I think
the most recent estimate from goal in Sachs is one
hundred and thirty billion by twenty thirty. That's just obesity.
It's just so that doesn't even include diabetes. That's just
weight loss, which is huge. And they've kept, you know,
upping the market estimate just as these drugs have have
blown up.
Speaker 3 (18:13):
Can I just ask you so that when we think
about that market size, when we talk about the number
of diabetics in the United States, is there crisscross with
the number of obese people.
Speaker 13 (18:21):
There is some criss cross.
Speaker 4 (18:22):
Yeah.
Speaker 13 (18:23):
And it's interesting when you think about insurance coverage too
for these drugs, because some people like you can get
ozempa if you have diabetes, you can get ozempic these
pretty easily through insurance. But on the weight loss side
of it, it's almost, you know, it's extremely difficult a
lot of times, and coverage is very patchy for getting
(18:43):
covered for weight loss. So they'll cover the drugs for
diabetes but not for weight loss.
Speaker 5 (18:46):
Hey, what does the Trump administration mean for these companies?
Speaker 6 (18:50):
We you know, I'm sing.
Speaker 5 (18:53):
You wrote about the Make America Healthy against movement. There's
a whole slew of folks, especially in that movement you
don't believe that this is the right way for people
to lose weight. They think the intervention should be completely different.
They shouldn't involve shots and pharmaceuticals, especially for kids.
Speaker 6 (19:08):
What are the folks you talk.
Speaker 5 (19:09):
To the analyst saying about a Trump administration for these companies.
Speaker 13 (19:12):
It's interesting. So we've talked about Jillian Michael's on this
show before. She was at the MAHA Make America Healthy
against Ball and she's like sort of been brought into
this circle, which is really interesting. And a lot of
these MAHA people are pretty against weight loss drugs and
just pharmaceutical interventions in general. They think, you know, healthy diet, food,
exercise should be prioritized first.
Speaker 5 (19:33):
I mean some people were up in arms that Larry
Ellison mentioned a cancer vaccine. Interesting, yeah, I mean I
saw that play out on social media.
Speaker 13 (19:39):
It is, Yeah, And the social media just discussion and
around MAHA is is everywhere. I mean, that is where
a lot of this dialogue is taking place on ex ort, Instagram.
And I was at this healthcare conference last week though
with a lot of investors and people in the industry,
and there was a ton of optimism the Trump administration
(20:01):
from pharmaceutical companies, even you know, the the lobbying group
Pharma that represents Eli Lilly and all of these big massive,
they huge. Yeah, And I was asking about RFK, I
was asking about Trump, and I mean, I think that
there's optimism around there being you know, a better deal
environment under Trump. But also they were saying a lot
of them were saying that they think that there's more
(20:21):
common ground with RFK than there are differences, and that
they will be able I mean, he's not confirmed yet,
but like will be able to work with him, and
that obviously everyone at the end of the day, their
goal is to make people healthier, and so they were
less concerned than I thought that they would be. I
was a little bit surprised actually by their reaction.
Speaker 3 (20:43):
What about like NIH research and so on and so forth,
where you know, sometimes significant developments come right of that
work that is funded by the government, Like, how does
that got to that point?
Speaker 6 (20:53):
Carol.
Speaker 5 (20:53):
They're already reports of scientists being told not to share
their research outside.
Speaker 13 (20:57):
Right right because there's this communication pause which we've been
trying to figure out what's going on with that, and
it to some degree, it's normal when a new administration
comes in to sort of pause things and go through
a review process, but it seems like it is sort
of stymying some of the research, and scientists are concerned
that there's going to be ripple effects and that the
pause may last longer, certain things might not be allowed.
Speaker 5 (21:19):
There's this tension here though, because I saw today that
the Trump administration withdrew this proposed ban on mental cigarettes
and flavored cigars. This was something that public health officials
really wanted, anti smoking groups really wanted. You have tobacco
stocks hired today as a result.
Speaker 6 (21:34):
That doesn't sort of align with the America Healthy Again movement.
Speaker 13 (21:37):
That was something we were talking about this morning. Is
like there is some misalignment with I guess, and that's
something that we're curious about, right is like, at the
end of the day, it's we don't really know what
Trump is going to do when it comes to healthcare policy,
and so there's a lot of guessing. And the MAHA
movement obviously has been very big and very influential leading
(21:59):
up to, you know, leading up to the election, and
so sort of how that plays out now is a
question mark. And we are already seeing these divisions with
Elon Musk going back to weight loss drugs, loves ozembic.
He thinks everyone should be on a cheap GLP one,
and then you have people in the RFK camp who
have the opposite opinion. So there's like a little bit
(22:21):
of disagreements happening. And where these things sort of fall
when it comes to policy, we don't know yet. We
don't know who has more influence.
Speaker 3 (22:28):
And some might say that that debate might be good
in terms of smarter policy, but for those who want
to either invest or kind of figure out the significant trends,
it's really tough. Thirty seconds left here. Is it going
to be another big drug year for GLP one drugs?
Speaker 13 (22:39):
Likely? Yes, I think the biggest thing this year is
the oral drugs. Lily's drug or for glip ron has
a big late stage readout mid year, and that's huge
thing that investors are watching for this year.
Speaker 3 (22:51):
She would not have a problem with Moku. I was
just saying the way you say drugs, well what every
time there's a drug a name in a drug story,
you know, we're like, you do it, no, you do it,
well done. And it's a sector that we've been talking
about so much for the last two years. But get
ready for year number three, Madison Mauler. As I've said
a million times, I must read on the Bloomberg at
(23:12):
Bloomberg dot com and also on social when it comes
to all things GLP one.
Speaker 2 (23:16):
You are listening to the Bloomberg Business Week podcast. Catch
us live weekday afternoons from two to five pm Eastern.
Listen on Applecarplay and Android Auto with the Bloomberg Business app,
or watch us live on YouTube.
Speaker 3 (23:30):
As you know, it's been a very very busy week
for President Trump. A lot of executive actions coming down,
and this week the President signed a flurry of executive
orders against illegal diversity, equity and inclusion policies, and they
have left corporations and their lawyers struggling to grasp exactly
what it all means. The President on Tuesday ordered federal
contractors to affirm that they don't quote engage in illegal discrimination,
(23:53):
including illegal DEI. He also directed government agencies to drop
a list of publicly ra corporations, large nonprofits, and others
in the private sector for potential investigations into compliance violations. Well,
Simone Foxman has been following it all. She's Bloomberg News
Equality Team Report and she joins us here in our
Bloomberg Interactive broker studio, Simone. Good to have you here.
(24:16):
It's been a busy week of news coming out of
the White House and President Trump in particular, you and
Jeff Green and Emily Flitter. You put out a store.
You know that the order lacked some specific so that's
made it really tough for corporate America. Let's go back,
what did we exactly get from President Trump? What exactly
does it denote?
Speaker 14 (24:35):
Well, we've gotten a couple different orders that relate to
equality related issues and two specifically that relate to DEI.
In the beginning, we got an order essentially that really
had to do with the government, but companies, corporate executives
and nonprofit leaders, business leaders of all sorts. We're really
(24:56):
looking for how exactly Trump would handle private sector. Now,
private sector. Trump can tell the private sector to do
what it wants. But the only way it really he
really has teeth to be able to force them to
change policy is by federal contractors. Federal contractors include some
of the country's largest companies, a lot of them out, yes, exactly,
(25:19):
because they bid for you know, service contracts, Bank of America, Amazon,
We just talked about Boeing, Boing, Lockheed Martin, and the
employed tons of different people. So if you are a
federal contractor, you have to in your contracts with the government,
agreed to certain things. This has been a tool that
the government has long used in order to change diversity policies.
(25:41):
Going back to JFK. Lyndon B. Johnson, this was how
they called on companies to make hiring more equitable for
women and minorities, but also you know, people, veterans, people
with disabilities, et cetera. Now, however, Trump, in one swoop
of a pen, essentially undid Lyndon B. Johnson's rule from
(26:05):
nineteen sixty five, talking about taking affirmative action to create
equal opportunities for minorities and women, and then also really
task the government with going after companies and organizate large
organizations that it thinks may be violating some rules about
illegal DEI, well.
Speaker 3 (26:25):
What is illegal? Like, as I was reading it again,
I'm like, what exactly is illegal?
Speaker 14 (26:29):
DEI, Well, that that's the issue here, right. It's worth
noting that employers have not been able to hire or
fire based people based on characteristics like race, like their religion,
like their gender. For quite a long time because those
are parts of the Civil Rights Act. So most companies
(26:53):
have spent a lot of time thinking about how they're
to make sure that their programs comply with law, even
when they say want to expand the number of black
people in their workforce, especially have done that. A lot
has spent a lot more time thinking about that since
June twenty twenty three, when we saw the Supreme Court
overrule affirmative action in college admissions. That didn't have to
(27:15):
do with companies, but companies said, hey, we got to
think about make sure we're compliant with the legal thinking
behind that. So now we have no definition of what
the Trump administration really believes is different about illegal DEI
than had been before. We just know their anti DEI
and now now agencies have to go out and drop
a list of up to nine large organizations that they
(27:36):
believe potentially in violation of that with their DEI policies.
It's a big head scratcher. And that's frankly, the impact
that both critics and supporters of this order think. You know,
it's a chilling effect.
Speaker 3 (27:49):
One of the things that we always talk about for companies,
it's when there isn't a clear way forward.
Speaker 11 (27:53):
Right.
Speaker 3 (27:53):
They may not like an answer, but at least they
understand kind of what the rules are. And it sounds
like there's a lot of confusion. I'm assuming, what did
you guys hear from the corporate community or those folks
that you got in touch with about, you know, reaching
out to lawyers the legal community. What are you hearing?
Are they getting tons of phone calls to say, I'm
not quite sure what this means?
Speaker 6 (28:11):
Absolutely off the hook.
Speaker 14 (28:12):
And when we were reporting this story, we spoke to
plenty of lawyers who were like, we're still digesting this.
We're not really sure what this means. In part because
the the the agreements that some of these companies have
had for violations in the past, the government found they were,
you know, not they were discriminating against Hispanic workers, saying
(28:35):
so some of the remediations to that involved plans to
hire more Hispanic workers. A lot of those plans are
under question now because of the way that this executive
order was written, especially.
Speaker 3 (28:49):
So companies actually putting things on hold.
Speaker 14 (28:51):
I mean, they're they're they're allowed a certain timeframe to
kind of figure things out. But I think everyone's trying
to figure things out and you know, I think it's
worth just impressing upon you that companies don't believe their
in violation of the law with their DEI programs as
they they've existed. When someone tells them that this piece
(29:13):
or another might now trigger some kind of legal action,
they change it. But as yet there's nothing really in
here that says, well, this part of DEI we now
consider this more legal than it was two days ago.
Speaker 3 (29:29):
Because this is what I'm thinking, What if a company
just says, you know, it's so funny, because we have
spent years, even decades perhaps or at least a decade
talking about mckensey studies and other studies, that's saying diversity
at a company, diversity on a board is actually good
for a company. It's good for the bottom line, it's
good financially. It just makes sense. I can't tell you
how many venture capitalists we have to come on and say,
(29:50):
when you ignore you know, you know, a black population,
a Spanish population, a female population, LGBTQ, you're ignoring a
part of a market that, you know, let's be who
the Bloomberg audience is a market that you can make
money off of. So it's kind of interesting. So if
a company chooses to be diverse, might they be breaking
(30:10):
a law under what we're hearing.
Speaker 14 (30:12):
It's really unclear at this point. The thing is, you know,
I say to DEI policies are not defined in here.
It's really very different. Di I policies are very different
from institution to institution, and in many places, things that
are just good governance, good cultural things have been brought
(30:33):
under the aegis of DEI in the last couple of years.
Is as this has become a thing, and as companies
have really you know, pushed a DEI department have maybe
appointed someone to oversee these programs. So things like all mentors,
broader mentorship within a firm that might be open to
everybody will now live under a DEI department, as may
(30:55):
recruiting efforts from disadvantaged communities of all sorts.
Speaker 3 (30:58):
One thing I want to ask you, this is something
that I know you and Jeff and the team have
really reported on big time here at Bloomberg, is that
it feels like, you know, coming off of the murder
of George Floyd, we talked a lot about racism in
America and equality once again, and I felt like DEI
inclusive efforts were really ramped up. But I do feel
like in the last year and a half or so,
we increasingly are seeing employers let go of maybe their
(31:22):
head of DEI efforts. Even before Donald Trump was back
in the White House, and we've seen this rollback on
DEI initiatives. We've seen it. I feel like every week
or two or for a while, you know, you've had
JP Morgan Goldman CEO. You know they're maybe resisting some
of the calls to roll back. But I do feel
like you are seeing companies pull back maybe on their
(31:44):
ESG efforts. Like there just feels like there's a change
of changing.
Speaker 14 (31:49):
Yeah, vibe shift completely and a vibe shift that's shifted
even within the last seventy two hours, you know, to
your point. Just earlier this afternoon, Target said it would
roll back it's DEI initiative, said it would conclude a
three year DEI goals, not set them publicly going forward again,
conclude the racial Equity action and change a five year
(32:09):
initiative about bolstering black employees' career development. I mean, I
think the question is now how many executives come out
and say, actually DEI or something like that, Yeah, inclusion
and belonging programs. Those have been good for business because
(32:30):
they allow us to retain talent and that's really valuable.
They allow us to see new market opportunities. And how
many more companies do you say, see say okay, we're
actually going to eliminate that department entirely, say goodbye to
these number of employees. I think it's a little unclear.
We just haven't seen that many people follow the lead
of JP Morgan's Jamie Dunne and David Solomon and Goldman Sachs.
(32:53):
Chuck Robbins had also at Cisco, had also defended his
programs at Davos. It really clear to me exactly how
that the division comes.
Speaker 3 (33:02):
So, like, how do you guys think about it in
terms of reporting? I guess it's kind of a little
bit of a wait and see, because I thought what
was interesting in your story today, your story and Jeff
and Emily's story is that there is some thinking about
Donald Trump in the White House. Some would say, you know,
this is part of what he does, like kind of
upends everybody a little bit of confusion and then the
(33:23):
dust settle. So I just do wonder if some folks
are thinking that's the same thing for DEI initiatives.
Speaker 14 (33:28):
Absolutely, And you know, I think a big question is
now is will the stuff still be called DEI in
six months? Because if the way of keeping programs to
retain employees simply becomes not having them live under the
aegis of DEI, right, then that seems like an easy
one for corporate America. It seems very easy to reabir.
Speaker 3 (33:49):
Just don't call it that, right, Just don't call it that.
And I do feel like we're hearing that from consultants
who say, listen, we're not necessarily anticipating from the companies
that we work with that they're going to stop these efforts.
Speaker 11 (33:59):
Yeah, but you do.
Speaker 14 (34:00):
Really wonder how many companies and how many corporate executives
really stand up there and say, this is where I
put my foot down, this is what I'm gonna defend,
even if you assume me, even if you file a
shareholder action. And admittedly some of the companies that have
been under fire deer In Company, which made some pullbacks
to its DEI program, there were a slew of shareholder proposals.
(34:23):
This time, they're recommending that their shareholders vote for neither
the pro ESG pro d e I ones or the
Anti esg Anti die i ones. So we'll see how
they fall.
Speaker 3 (34:32):
All right, So they're gonna we're gonna be fit finding
our way through this. It ain't over safe to say, Simone,
thank you so much. I really appreciate it. Simone Foxman
Equality Team reporter at Bloomberg News, joining us in our
Bloomberg Interactive Brokers studio. Find her on x at Simone
fox Meeting. You can read more on her story. Just
head to the Bloomberg and at Bloomberg dot Com.
Speaker 12 (34:54):
I'll bet you let me drive.
Speaker 4 (34:55):
Oh no, no, no no, this is not a.
Speaker 8 (34:57):
Toy, honey, please gravels.
Speaker 2 (35:02):
Let's wait.
Speaker 3 (35:03):
I want to try it.
Speaker 8 (35:06):
It's a good question.
Speaker 2 (35:11):
This is the drive to the clothes plums to me
a thing. Well, John and Don on Bloomberg Radio.
Speaker 3 (35:18):
All right, everybody, we've just about twenty minutes, just under
twenty minutes to go until we wrap up the trade
on this Friday and for the week overall. You just
heard from Charlie and Bill Maloney. We've got stocks just
hovering near their lows of this session. Earlier we were
talking about that this was kind of the best start
I think for our presidential year going all the way
back to Ronald Reagan. We've seen certainly a bounce in
(35:39):
stocks overall in this shortened trading week.
Speaker 5 (35:42):
Interestingly, he was the person to say make America great
again back during his campaign as.
Speaker 3 (35:47):
Well, way back when.
Speaker 5 (35:48):
Yeah, all right, so we're gonna see how the weekends up.
Speaker 3 (35:51):
We're almost there.
Speaker 6 (35:52):
We're almost there.
Speaker 3 (35:53):
Let's get to it with our drive to the closed.
Speaker 6 (35:56):
Guest.
Speaker 3 (35:56):
Mark Mallick is here, chief investment officer at mural Seberton
Company US, in our Bloomberg Interactive Broker's studio.
Speaker 5 (36:03):
I just want to dive right into it. Because you
walked in here, you start talking. I'm like, the microphones
aren't on. You save it for when the red light
goes on, because you're saying the VIC should be higher.
There's stuff there out there that's not priced in right now.
What do you see or do you see warning signs
flashing ahead of us?
Speaker 15 (36:19):
I'm not so sure there are warning signs as much
as you know when you're watching the markets all day long,
you're you know, you're watching the tape. You're seeing all
kinds of crazy stuff. You're hearing all kinds of things.
You're hearing about menthol cigarettes and you're seeing things go
up they shouldn't be going up. You see things that
are going down they shouldn't.
Speaker 6 (36:36):
Be going down.
Speaker 15 (36:37):
And then you glance over to your screen and you
look at the VIS and it's at fourteen, and you're
thinking yourself, Wow, you know, I would suspect, given this
market right now, given that there's so much noise out
there on the tape, that this would be trading a
little bit, you know, higher, certainly the VIX. And so
the concerting thing is is with the VIX is that
when it moves, it moves aggressively, and when it sort
(37:00):
of spends a long time where you perceive it shouldn't
be like low, it tends to be like a coiled snake. So,
you know, it's sort of what happens is is, you know,
the smallest little thing can cause it to cause an agitation.
And so you could find yourself at twenty eight very
very quickly, and everyone's scratching their heads you know what
to do?
Speaker 3 (37:20):
Isn't it fair to say, though, Mark that you know, certainly,
when it comes to policies out of the Trump administration,
a lot came at us this week, but we're still
waiting for what really are the particulars when it comes
to tariffs, What are the particulars when it comes to
tax strategy, what are the particulars when it comes to
regulatory easing or not. So it's kind of maybe, you know,
(37:43):
we're in this wait and see mode that even though
there are a fair amount of questions out there, we're
kind of waiting and maybe that's where markets are.
Speaker 15 (37:51):
Yeah.
Speaker 6 (37:51):
I agree.
Speaker 15 (37:52):
You know, I spend a lot of time, you know,
going over that age old Wall Street adage of signal
and noise, right, so you know, we're just in all
the noise right now and waiting for some real signals
and they're just they're just not there yet, and in
a vacuum. It's why I believe you see the market
making these interesting moves.
Speaker 3 (38:11):
What about earnings, I mean, if you look at the
S and P. Five hundred, we're up one point six
percent for the week. That's pretty strong.
Speaker 15 (38:17):
Yeah, well, earnings have been coming out pretty well, right,
pretty strongly. I mean we're really at the early days
at this point. But if you look at if you
look at earnings, if you look at earnings growth so
far through today, you're talking about like, what is it
like sixteen percent earnings growth and eight percent on average beats.
Speaker 6 (38:36):
That's pretty solid.
Speaker 15 (38:37):
I mean, financials came out really really strong. All the
banks are done, they look great, and every time that happens,
well generally speaking, those set a good base.
Speaker 4 (38:45):
Right.
Speaker 15 (38:45):
Of course, it helped that Netflix knock one out of
the park this week.
Speaker 6 (38:49):
That was amazing.
Speaker 15 (38:50):
Yeah, an interesting one.
Speaker 6 (38:52):
What do you think is our tariff's signal or noise.
Speaker 15 (38:56):
At this point?
Speaker 4 (38:57):
Their noise? Right?
Speaker 15 (38:58):
It's a lot of discussion. I mean, you know, the
big question is is you know, we all I think
agree that tariffs are inflationary, but what kind of tariffs
are we talking about? We know what might happen, but
until we see what happens and how long they're in effect.
If we're talking about a large tariff, but it's put
on only for two weeks for a negotiation, then it
comes off, it's not inflationary. But if you're suddenly going
(39:20):
to levy a sixty percent tariff on all goods coming
from China and it's long term, you can bet that
that is certainly going to be inflationary. I believe the
market has really sort of factored a lot of that
in already, though you wouldn't know it based on the
way it's moving up and down, even though you have
the slightly slightest hint moving the market. But I think
most of the big players at this point are assuming
(39:41):
the worst.
Speaker 3 (39:42):
I feel like next week is a big one, right,
We've got the first four of the Magnificent Seven reporting earnings,
so we're talking about Microsoft, Meta, and Apple among them.
I mean, these are big earnings, always are every quarter.
You've also got a FED meeting on Wednesday. And while
we don't really expect anything necessarily, when j Palli says something,
we also kind of sit up and take notice.
Speaker 2 (40:03):
So how might.
Speaker 3 (40:04):
Next week be an important week in terms of the
trade and maybe sentiment and maybe some action.
Speaker 11 (40:10):
On the vix.
Speaker 15 (40:11):
Yeah, you know, you certainly hit it on the head.
Next week we got those big earnings. I think we
have four of the Magnificent seven next week, all very different,
one of which is Tesla, which is its own indicator
that I'm not really sure what it indicates at this point.
Maybe it's another sort of sentiment indicator on how the
president's doing. But you know, certainly, you know, we get one,
(40:33):
we get our first hyperscaler. Next week, we get Microsoft,
which plays on both sides of the AI ecosystem. So
I think that's going to sort of set a lot
of tone for what we can expect in that group
of stocks, for sure.
Speaker 6 (40:47):
You know, it's interesting.
Speaker 5 (40:47):
I was listening to Paul Sweeney and Alex Steele on
the Surveyllance a little earlier todayor Bloomberg Intelligence excuse me,
and they were talking about the investment that Mark Zuckerberg
announced today, the increase in CAPEX. Mark Zuckerberg even said
over the summer, we might be over investing in AI.
Paul Sweeney was like, I don't know. I think we
might look back in a year and say this was
(41:08):
kind of silly, silly spending at this point. Are these
companies overdoing it?
Speaker 6 (41:14):
I don't believe so.
Speaker 15 (41:15):
I think that the market has been a little rough
on some of these some of these hyper scalers. But
the truth of the matter is is this infrastructure is
necessary for all AI that's going to happen in the future,
and this is the investment that has to happen, and
those that make the investment are going to reap the rewards.
On the side of a meta that you brought up,
that's an interesting one. Because they're not necessarily hyperscaler. But
(41:39):
Meta was really the first company that came out and said, hey,
we're using this AI to make more money in our
core business, and they were rewarded for that. So you know,
we're going to be listening to them next week and
see if there's a follow on story. But that type
of investment, I feel like you would actually be punished
if you weren't talking about those types of investment at
this point.
Speaker 3 (41:59):
Just get about forty five fifty seconds left here, Mark,
So where would you suggest investors think about allocating money
in this environment?
Speaker 15 (42:06):
Yes, So, until we hear any new signals, you know,
we have been talking about we've been looking at a
continuation of what we saw last year. Essentially tech is
leading the way, not.
Speaker 6 (42:18):
A lot of breadth.
Speaker 15 (42:19):
There are a lot of you know, there are a
lot of value opportunities out there, but there are no
signals that suggest that those that those sectors are going
to have great returns. So you're going to see continuation
of financials even though they're a little rich at this point.
And I think tech has the biggest potential upside of
the broader tech.
Speaker 3 (42:35):
So the drum that everybody keeps beating about small caps
in mid caps, not necessarily for you.
Speaker 4 (42:41):
Listen.
Speaker 15 (42:41):
You could try to get cute, but I think people
who've been trying to get cute have been on the
losing side of the of the performance, gave latelies.
Speaker 3 (42:48):
I don't want to be cute. I want to just
have returns I want.
Speaker 1 (42:51):
Yeah, we're gonna leave it on that note.
Speaker 10 (42:54):
Listen.
Speaker 3 (42:54):
Thanks, fun to have you here in studio. Mark Mallock,
the chief investment officer over at Muriel Siebert and Company.
Speaker 2 (43:00):
This is the Bloomberg Business Week podcast, available on Apple, Spotify,
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Speaker 2 (00:08):
This is Bloomberg Business Week Insight from the reporters and
editors that bring you America's most trusted business magazine, plus
global business, finance and tech news. The Bloomberg Business Week
Podcast with Carol Masser and Tim Steneveek on Bloomberg Radio.
Speaker 3 (00:26):
We are talking a lot about AI again today. Shares
of meta platforms are rallying. A few things going on.
I want to point out companies head of Instagram putting
out some posts on threads saying that it has begun
testing ads there, and then before that, here's the AI twist.
Earlier this morning, CEO of Meta, Mark Zuckerberg, in a
Facebook post, said that metaplans to invest as much as
(00:48):
sixty five billion dollars in projects related to artificial intelligence
this year, including building a giant new data center and
increasing hiring an AI team. So, Tim, we know that
they've been spending big, but this is even maybe a
lot more than folks were anticipating.
Speaker 4 (01:04):
Yeah.
Speaker 5 (01:04):
Here to unpack it all is Bloomberg News technology reporter
Kurt Wagner. Kurt also the author of a Battle for
the Bird Jack dorsy elon Musk and the forty four
billion dollar fight for Twitter. Soul Kurt joining us from Denver.
Speaker 2 (01:17):
Kurt.
Speaker 6 (01:18):
I saw this news break.
Speaker 5 (01:19):
This morning before the market opened, and my immediate thought was,
shares of meta platforms are going to fall on this
because investors are so concerned. I thought about how much
companies are spending on Capex. We saw it move other
companies when they've reported these figures.
Speaker 6 (01:37):
But no, we're seeing the opposite reaction.
Speaker 7 (01:38):
Why the optimism, Yeah, I think AI is just some
like magic elixir apparently that you can, you know, say, hey,
we're spending a ton of money, and people don't love that.
Speaker 8 (01:49):
But as long as you throw you know that that
money is going toward AI investments, people are a lot
more on board. You know. I do think that meta
more than maybe most companies already have as a running
start on the AI front, right, I mean, this is
not like a standing from zero to sixty kind of thing.
They have chatbots and all of their apps right now,
(02:09):
They already have smart glasses, they've built. You know, they're
up to almost Lama four right their fourth version of
those large language models that they've been developing for years.
So I guess if people are excited about the stuff
they've already seen from Meta. The idea of throwing even
more money onto that fire might resonate more with investors
than maybe some other companies doing it that don't have
(02:30):
the track record Meta does.
Speaker 3 (02:31):
Got to say, Kurt, it feels like this high stakes
AI poker game, because you know, here we are in
a week where we have talked a lot about AI,
and you had coming out of the White House a
bunch of big tech folks there that one hundred billion
dollar joint venture that was announced called Stargate, Open AI,
SoftBank Oracle, President Trump helping to announce that on this
(02:52):
AI and infrastructure spend a big time. It just feels like, Okay,
you did one hundred billion, I'm going to do this,
you know, like it just seems like the timing of
it is kind of interesting, And then you've got Meta
reporting next week like why didn't they do it then?
So help me understand kind of what's going on and
maybe why Meta did this right now?
Speaker 8 (03:13):
I think the timing is certainly not coincidental. My guess
is that they were planning to announce this at earnings
that they saw the other announcements you mentioned from you know,
the White House earlier this week from some of their rivals,
and thought, hey, this is getting a ton of attention.
You know, all these stories are being written about this
huge AI investment, but we're not being mentioned. Let's go
(03:34):
ahead and you know, jump jump the shark a little
bit on our own announcement from next week to make
sure we can ride this this news cycle. That's my guess.
They'll still be talking about it at earnings next week,
of course, but you never want to let you know,
all of your competitors have all the fun, you know,
talking about this stuff while you're sitting on you know,
what they consider to be a massive investment as well.
(03:55):
And so I don't think the timing, though was was
coincidental at all in terms of why they that today Kurt.
Speaker 5 (04:01):
Are analysts and any l is out there saying it
could be possible and Meta is overspending on AI or
any of these companies are overspending on AI, because that's
a sentiment that Mark Zuckerberg actually shared with Emily Chang
over the summer here on Bloomberg. So you know, what,
has something shifted or is there that possibility still there?
Speaker 8 (04:19):
Well, I was just about say I'm going to do
you one bet or not not just an analyst whos
saying maybe they're overspending, but as you point out, the
CEO himself is sort of admitting, Hey, we're probably overspending
on this thing. Look, I mean, I think the idea
here is you are willing to take the short term
loss of you know, a couple billion dollars, even ten
billion dollars. You know, maybe they don't need to spend
(04:39):
sixty five, they need to spend fifty five, and you're
willing to take that loss knowing that you know you're
going to get ten years down the road and not
be like, gosh, I really feel like we didn't invest
enough at that time, and we're now behind, right, We're
behind Google or open Ai or whoever. And so it's
easy to say that, and I do, but I do
think people are willing, you know, to bet on Mark Zuckerberg.
(05:01):
He does have a track record of you know, success,
and he can kind of get away with overspending right
now because of that. And so, you know, I very
very much agree that we could be in this maybe
a little bit of a bubble here where they're overspending,
But at the same time, what's the trade off? Right, Like,
you don't want to get down the road and feel
like you missed the boat.
Speaker 5 (05:22):
Hey, Kurt, before we let you go, you got another
story out talking about metas Threads are set to show
ads for the first time here in the US and Japan.
To remind everyone, this is sort of the ex Twitter
competitor that emerged a couple of years ago in the
wake of everything that was happening at Twitter slash x.
What do we know about the monetization of that platform,
the popularity, the staying power of that platform.
Speaker 8 (05:43):
Yeah, well, first talk about quincidentld timing. Right, so they say, hey,
we're about to spend sixty five billion on AI, which,
as you mentioned, might be a little too rich for
some people. Well then they follow that almost immediately with
but don't worry, we have this new revenue stream you
know that we're about to turn on with threads. Threads,
for those who aren't familiar, is the Twitter clone that
Meta launched about a year and a half ago. Has
(06:05):
three hundred million monthly users. And I think they're pretty
well positioned, right, I mean, the advertising, this is what
they do, is what they do with Instagram and reels
and Facebook of course, So turning it on for threads
I don't think is necessarily this huge thing for them.
It's just yet another audience for them to monetize. So
we'll see how quickly they ramp up this thing. But
again I think the timing of announcing that goes hand
(06:27):
in hand with the high spending on the infrastructure stuff,
because they're trying to make sure investors know that there
is a new revenue stream coming online even as they
spend heavily on AI.
Speaker 3 (06:36):
Always good to look at all columns of the balance sheet.
Just going to put it out there, all right, Thank
you so much. Kurt Wagner, Bloomberg News Technology reporter. He's
also author of Battle for the Bird, Jack Dorsey, Elon Musk,
and the forty four billion dollar Fight for Twitter's Soul.
Speaker 1 (06:50):
You're listening to the Bloomberg Business Week podcast. Catch us
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Speaker 5 (07:03):
Well, the euro was headed for its best week in
more than a year this as investors paired back expectations
for interest rate cuts, also betting that the US trade
tariffs won't come into force as soon as many had
previously feared. Nonetheless, companies in their C suites are trying
to game out the different scenarios.
Speaker 3 (07:21):
Yeah, that's especially too for any kind of tariffs that
might come out of the Trump administration. For more on that,
let's get to our next guest. Team of guests, I
should say, Bloomberg News senior editor Nina Trentman. She's family,
she's here in studio. And then we've also got with
us out in Germany, the chief financial Officer of EBM Papst,
Harold Kleiber. He is, by the way, featured in the
(07:41):
Bloomberg CFO Briefing newsletter that comes out on Sunday, can
be found at Bloomberg dot com slash CFO hyphen Briefing.
Welcome to both of you, Harold, I want to start
with you. How are you planning or thinking about planning
for trade tensions and possible terrorists from the Trump administration.
What are your expectations?
Speaker 9 (08:01):
Yeah, well, I think first of all, thanks thanks love
for having me this afternoon. I'm pretty happy to share
our thoughts on a couple of things with you. When
we look at the new administration and the potential and trade.
Speaker 4 (08:17):
Conflicts coming up.
Speaker 10 (08:18):
I think we need to step one one step back
actually because from a predominantly overall business strategy, we we
are running a clear.
Speaker 4 (08:30):
Local for local approach.
Speaker 9 (08:32):
That means that we for a couple of years already
build up local competence, which is true for for the
US market as well as for the China market, just
in order to have a proximity to our customers, supporting
them and also being speedy and flexible with their demands.
So that that is the predominant reason why we are
(08:55):
building up quite independent organizations in you all the and
that of course is also now now big advantage having
sufficient portion of local value creation, which makes us a
little bit more independent from overall trade flows. And that's
(09:16):
something which makes us a bit more relaxed. Nevertheless, nevertheless,
of course, if we talk about trade conflicts, that is
an area of concern overall.
Speaker 11 (09:26):
Can you talk a little bit about the local for
local strategy, Like when did that come into play? Was
it in response to Trump's first administration and will you
still see an impact if he was to impose hariffs
on on European goods?
Speaker 9 (09:39):
So so actually we've started with that already a couple
of years back. And as I said, that has nothing
to do with any administration or any kind of political
that's a that's a pure business reason coming from the
market requirements, coming from our point of view. How can
we be successful in the markets, and that needs a proximity,
that needs local value creation.
Speaker 3 (10:01):
How old I want to jump in because we have
been living in I feel like decades of globalization, right,
and that was the smart way to do things. So
when was the turn? What made it make more sense
to be kind of operating producing in the market that
you're selling. When did that switch happen?
Speaker 6 (10:17):
What was it?
Speaker 4 (10:20):
In the end, it's a question of scale.
Speaker 9 (10:22):
Of course, you need a certain level of local business
in order to establish an on sizeable organization. And I
would say it started already almost ten years back.
Speaker 4 (10:31):
I would say, we're perfectly a local for local approach.
Speaker 5 (10:36):
So where specifically are you moving operations, because as we
heard this week from President Trump, he wants stuff made
in the United States. Where specifically are you making things now?
Speaker 9 (10:47):
So in the US we are located actually in Informington
in Connecticut and in Telford. So these are the two
places where we have currently operations in the US, and yes,
we're also continuously investing in in these plans. We've just
started a further expansion and and we're further investing in
the in the US in order to have an really
(11:11):
really sizeable organization. We're also moving our decapacity into the
markets just for speedy market uh.
Speaker 11 (11:20):
Answers had We also talked about the club decoupling and
your China business. One of the things that many companies
are doing right now thinking about whether they need to
sort of separate their China entities. How how far have
you gone with that?
Speaker 4 (11:36):
With that, we're all pretty far.
Speaker 9 (11:38):
Actually in China, we are running more or less we
would be able to run the operation really really independent.
We've we've built out a complete local supply chain.
Speaker 4 (11:51):
We have all.
Speaker 9 (11:52):
Necessary competences from R and D to treasury in the
in the Chinese organization.
Speaker 4 (11:58):
UH and and yet and this is the difference.
Speaker 12 (12:00):
The one is the business approach, the local for local
and the coupling is more from a risk management perspective
in order just to prepare ourselves in case something happens
that we could really separate.
Speaker 9 (12:13):
Yet in a normal course of business, we still try
to work pretty integrated in our global network. But yes,
for China, we're already gone pretty far to run the
operation separately.
Speaker 11 (12:26):
Does that include financing as well, if you're thinking about
domestic financing in China, can you talk.
Speaker 4 (12:31):
A little bit about that. Yes, yes, absolutely so we've just.
Speaker 9 (12:36):
Started a further expansion in our plan in Chia and
in northern China actually, and then this is where we
where we also raised the local financing. We also have
a couple of operational lines from local banks and this
is really something which we started, i would say, in
the last two to three years to also get more
(12:58):
independent or more localized.
Speaker 3 (12:59):
On a fire Harold, it's fascinating because it sounds like
you're getting local financing. You're not backing off of your
China exposure right in terms of building up your facilities there.
But you mentioned risk management. This is the reason why
you have decoupled from China specifically, what's the risks that
you're worried about and why you did that decoupling what specifically?
Speaker 4 (13:24):
So in the end, the big question is, of course, for.
Speaker 9 (13:28):
It could be that that in China, with their more
kind of internal perspective and the increasing of local independent
of the of the whole country. Actually, it might at
some stage happen that inflows from outside could be pretty difficult,
(13:49):
or at least that imports to China would be pretty
pretty difficult.
Speaker 4 (13:53):
And this is why we actually said.
Speaker 9 (13:56):
Okay, next to our operation there, we also need to
make sure that from the complete enterprise architecture, they could
run separately. And this is what we actually prepared from
a system perspective, from a financing perspective.
Speaker 4 (14:10):
And so on.
Speaker 9 (14:11):
Just yeah, in order to prepare if flows would be
highly interrupted.
Speaker 6 (14:16):
Understood, Harold.
Speaker 5 (14:18):
Just ten seconds left. We have some elections in Germany
coming up in February. Political risk, just ten seconds, no risk.
Speaker 9 (14:25):
We rather hope that we start to decrease bureaucracy and
still have kind of stable framework conditions because in the end,
stability and plannability is key for business success and for
trust in investments, and that is what we need in Germany.
Speaker 3 (14:42):
Yeah, they've had two years of shrinking output and next
to no growth in recent quarters, so certainly looking for
some changes there, folks. Thank you so much, Harold. Thank you.
Harold Kleiber, chief financial officer at EBM. Perhaps joining us
from Germany, and of course our only in a treatment.
Thank you, Thank you, senior editor at Bloomberg News. Be
sure to check out the Blue CFO Briefing newsletter. You
can find it on the Bloomberg On Sunday.
Speaker 2 (15:07):
This is the Bloomberg Business Week Podcast. Listen live each
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Speaker 3 (15:25):
All right, let's get to a stocking company that's on
our radarving Europe.
Speaker 5 (15:28):
Speaking of Europe, that's Novo Nordoius because shares well, I
should say a drs hire right now by eight and
a half percent, up the most since August of twenty
twenty three. This after it's experimental shot delivered as much
as a twenty two percent weight loss in an early
stage trial at Boost Investors hopes Carol for the drug
makers pipeline, the results putting Novote back into the hotly
contested race for which drug maker can deliver the most
(15:50):
weight loss from a next generation product.
Speaker 3 (15:53):
Yeah, this little race that's going on. Hey, let's get
more into why. And we have our own in house
expert and all things g P one drugs, medicine. Muller
is Bloomberg News health reporter. She is in studio. All right,
great to have you here.
Speaker 8 (16:05):
Happy New Year.
Speaker 3 (16:06):
I feel like I know, I haven't seen you in
a while, and there's stuff going on.
Speaker 13 (16:09):
It's a lot going on.
Speaker 3 (16:10):
All right, what's the news here for now?
Speaker 13 (16:12):
So this brings Novo back in the race because I
think investors were a little worried there for a minute
at the end of last year. Very closely watched trial
of Novo's drug, Kagrisemo, which is a next generation weight
loss shot, fell short of investors' hopes and some of
the I mean actually the bar that the company had
set for itself. These next generation products were looking for
(16:33):
like twenty five percent weight loss. Nova's drug fell short
of that, and that was that was an issue. The
shares were down at the end of the year. I
think investors were concerned. And now they are delivering again
with another next generation weight loss shot called amma cretan,
which works similarly to some of the other drugs that
are already out there, and so they're back back in
(16:55):
the running.
Speaker 6 (16:56):
I thought the next gen product was.
Speaker 13 (16:58):
Not a shot, So there are shots that are delivering
more weight loss with potentially less side effects, which is
I think one of the things that Novo is going
for here. And then there's also the pills, so there's
like two different things going on. And then you have
am gin, which is trying to develop a shot that
can be taken less frequently. So we're seeing with these
next generation products sort of divergence in what companies are
(17:21):
going after and prioritizing.
Speaker 3 (17:22):
Is it also about these drugs which initially we used
to treat diabetes. Are they also looking to even make
them better for treatment of diabetes or is this kind
of all like are.
Speaker 13 (17:31):
They are they're testing them in diabetes as well? And
so I think that that is an interesting point that
isn't brought up as much like a lot of I'm
not exactly sure about this drug that Novo that we're
talking about today, but yeah, these next generation products are
also being tested in diabetes because medisine.
Speaker 3 (17:46):
When we talk about the market for these drugs, it's
a combination of just people who want it for weight loss, right,
and it's also for treatment of fortiabetic.
Speaker 13 (17:54):
When we talk about the market size, as I think
the most recent estimate from goal in Sachs is one
hundred and thirty billion by twenty thirty. That's just obesity.
It's just so that doesn't even include diabetes. That's just
weight loss, which is huge. And they've kept, you know,
upping the market estimate just as these drugs have have
blown up.
Speaker 3 (18:13):
Can I just ask you so that when we think
about that market size, when we talk about the number
of diabetics in the United States, is there crisscross with
the number of obese people.
Speaker 13 (18:21):
There is some criss cross.
Speaker 4 (18:22):
Yeah.
Speaker 13 (18:23):
And it's interesting when you think about insurance coverage too
for these drugs, because some people like you can get
ozempa if you have diabetes, you can get ozempic these
pretty easily through insurance. But on the weight loss side
of it, it's almost, you know, it's extremely difficult a
lot of times, and coverage is very patchy for getting
(18:43):
covered for weight loss. So they'll cover the drugs for
diabetes but not for weight loss.
Speaker 5 (18:46):
Hey, what does the Trump administration mean for these companies?
Speaker 6 (18:50):
We you know, I'm sing.
Speaker 5 (18:53):
You wrote about the Make America Healthy against movement. There's
a whole slew of folks, especially in that movement you
don't believe that this is the right way for people
to lose weight. They think the intervention should be completely different.
They shouldn't involve shots and pharmaceuticals, especially for kids.
Speaker 6 (19:08):
What are the folks you talk.
Speaker 5 (19:09):
To the analyst saying about a Trump administration for these companies.
Speaker 13 (19:12):
It's interesting. So we've talked about Jillian Michael's on this
show before. She was at the MAHA Make America Healthy
against Ball and she's like sort of been brought into
this circle, which is really interesting. And a lot of
these MAHA people are pretty against weight loss drugs and
just pharmaceutical interventions in general. They think, you know, healthy diet, food,
exercise should be prioritized first.
Speaker 5 (19:33):
I mean some people were up in arms that Larry
Ellison mentioned a cancer vaccine. Interesting, yeah, I mean I
saw that play out on social media.
Speaker 13 (19:39):
It is, Yeah, And the social media just discussion and
around MAHA is is everywhere. I mean, that is where
a lot of this dialogue is taking place on ex ort, Instagram.
And I was at this healthcare conference last week though
with a lot of investors and people in the industry,
and there was a ton of optimism the Trump administration
(20:01):
from pharmaceutical companies, even you know, the the lobbying group
Pharma that represents Eli Lilly and all of these big massive,
they huge. Yeah, And I was asking about RFK, I
was asking about Trump, and I mean, I think that
there's optimism around there being you know, a better deal
environment under Trump. But also they were saying a lot
of them were saying that they think that there's more
(20:21):
common ground with RFK than there are differences, and that
they will be able I mean, he's not confirmed yet,
but like will be able to work with him, and
that obviously everyone at the end of the day, their
goal is to make people healthier, and so they were
less concerned than I thought that they would be. I
was a little bit surprised actually by their reaction.
Speaker 3 (20:43):
What about like NIH research and so on and so forth,
where you know, sometimes significant developments come right of that
work that is funded by the government, Like, how does
that got to that point?
Speaker 6 (20:53):
Carol.
Speaker 5 (20:53):
They're already reports of scientists being told not to share
their research outside.
Speaker 13 (20:57):
Right right because there's this communication pause which we've been
trying to figure out what's going on with that, and
it to some degree, it's normal when a new administration
comes in to sort of pause things and go through
a review process, but it seems like it is sort
of stymying some of the research, and scientists are concerned
that there's going to be ripple effects and that the
pause may last longer, certain things might not be allowed.
Speaker 5 (21:19):
There's this tension here though, because I saw today that
the Trump administration withdrew this proposed ban on mental cigarettes
and flavored cigars. This was something that public health officials
really wanted, anti smoking groups really wanted. You have tobacco
stocks hired today as a result.
Speaker 6 (21:34):
That doesn't sort of align with the America Healthy Again movement.
Speaker 13 (21:37):
That was something we were talking about this morning. Is
like there is some misalignment with I guess, and that's
something that we're curious about, right is like, at the
end of the day, it's we don't really know what
Trump is going to do when it comes to healthcare policy,
and so there's a lot of guessing. And the MAHA
movement obviously has been very big and very influential leading
(21:59):
up to, you know, leading up to the election, and
so sort of how that plays out now is a
question mark. And we are already seeing these divisions with
Elon Musk going back to weight loss drugs, loves ozembic.
He thinks everyone should be on a cheap GLP one,
and then you have people in the RFK camp who
have the opposite opinion. So there's like a little bit
(22:21):
of disagreements happening. And where these things sort of fall
when it comes to policy, we don't know yet. We
don't know who has more influence.
Speaker 3 (22:28):
And some might say that that debate might be good
in terms of smarter policy, but for those who want
to either invest or kind of figure out the significant trends,
it's really tough. Thirty seconds left here. Is it going
to be another big drug year for GLP one drugs?
Speaker 13 (22:39):
Likely? Yes, I think the biggest thing this year is
the oral drugs. Lily's drug or for glip ron has
a big late stage readout mid year, and that's huge
thing that investors are watching for this year.
Speaker 3 (22:51):
She would not have a problem with Moku. I was
just saying the way you say drugs, well what every
time there's a drug a name in a drug story,
you know, we're like, you do it, no, you do it,
well done. And it's a sector that we've been talking
about so much for the last two years. But get
ready for year number three, Madison Mauler. As I've said
a million times, I must read on the Bloomberg at
(23:12):
Bloomberg dot com and also on social when it comes
to all things GLP one.
Speaker 2 (23:16):
You are listening to the Bloomberg Business Week podcast. Catch
us live weekday afternoons from two to five pm Eastern.
Listen on Applecarplay and Android Auto with the Bloomberg Business app,
or watch us live on YouTube.
Speaker 3 (23:30):
As you know, it's been a very very busy week
for President Trump. A lot of executive actions coming down,
and this week the President signed a flurry of executive
orders against illegal diversity, equity and inclusion policies, and they
have left corporations and their lawyers struggling to grasp exactly
what it all means. The President on Tuesday ordered federal
contractors to affirm that they don't quote engage in illegal discrimination,
(23:53):
including illegal DEI. He also directed government agencies to drop
a list of publicly ra corporations, large nonprofits, and others
in the private sector for potential investigations into compliance violations. Well,
Simone Foxman has been following it all. She's Bloomberg News
Equality Team Report and she joins us here in our
Bloomberg Interactive broker studio, Simone. Good to have you here.
(24:16):
It's been a busy week of news coming out of
the White House and President Trump in particular, you and
Jeff Green and Emily Flitter. You put out a store.
You know that the order lacked some specific so that's
made it really tough for corporate America. Let's go back,
what did we exactly get from President Trump? What exactly
does it denote?
Speaker 14 (24:35):
Well, we've gotten a couple different orders that relate to
equality related issues and two specifically that relate to DEI.
In the beginning, we got an order essentially that really
had to do with the government, but companies, corporate executives
and nonprofit leaders, business leaders of all sorts. We're really
(24:56):
looking for how exactly Trump would handle private sector. Now,
private sector. Trump can tell the private sector to do
what it wants. But the only way it really he
really has teeth to be able to force them to
change policy is by federal contractors. Federal contractors include some
of the country's largest companies, a lot of them out, yes, exactly,
(25:19):
because they bid for you know, service contracts, Bank of America, Amazon,
We just talked about Boeing, Boing, Lockheed Martin, and the
employed tons of different people. So if you are a
federal contractor, you have to in your contracts with the government,
agreed to certain things. This has been a tool that
the government has long used in order to change diversity policies.
(25:41):
Going back to JFK. Lyndon B. Johnson, this was how
they called on companies to make hiring more equitable for
women and minorities, but also you know, people, veterans, people
with disabilities, et cetera. Now, however, Trump, in one swoop
of a pen, essentially undid Lyndon B. Johnson's rule from
(26:05):
nineteen sixty five, talking about taking affirmative action to create
equal opportunities for minorities and women, and then also really
task the government with going after companies and organizate large
organizations that it thinks may be violating some rules about
illegal DEI, well.
Speaker 3 (26:25):
What is illegal? Like, as I was reading it again,
I'm like, what exactly is illegal?
Speaker 14 (26:29):
DEI, Well, that that's the issue here, right. It's worth
noting that employers have not been able to hire or
fire based people based on characteristics like race, like their religion,
like their gender. For quite a long time because those
are parts of the Civil Rights Act. So most companies
(26:53):
have spent a lot of time thinking about how they're
to make sure that their programs comply with law, even
when they say want to expand the number of black
people in their workforce, especially have done that. A lot
has spent a lot more time thinking about that since
June twenty twenty three, when we saw the Supreme Court
overrule affirmative action in college admissions. That didn't have to
(27:15):
do with companies, but companies said, hey, we got to
think about make sure we're compliant with the legal thinking
behind that. So now we have no definition of what
the Trump administration really believes is different about illegal DEI
than had been before. We just know their anti DEI
and now now agencies have to go out and drop
a list of up to nine large organizations that they
(27:36):
believe potentially in violation of that with their DEI policies.
It's a big head scratcher. And that's frankly, the impact
that both critics and supporters of this order think. You know,
it's a chilling effect.
Speaker 3 (27:49):
One of the things that we always talk about for companies,
it's when there isn't a clear way forward.
Speaker 11 (27:53):
Right.
Speaker 3 (27:53):
They may not like an answer, but at least they
understand kind of what the rules are. And it sounds
like there's a lot of confusion. I'm assuming, what did
you guys hear from the corporate community or those folks
that you got in touch with about, you know, reaching
out to lawyers the legal community. What are you hearing?
Are they getting tons of phone calls to say, I'm
not quite sure what this means?
Speaker 6 (28:11):
Absolutely off the hook.
Speaker 14 (28:12):
And when we were reporting this story, we spoke to
plenty of lawyers who were like, we're still digesting this.
We're not really sure what this means. In part because
the the the agreements that some of these companies have
had for violations in the past, the government found they were,
you know, not they were discriminating against Hispanic workers, saying
(28:35):
so some of the remediations to that involved plans to
hire more Hispanic workers. A lot of those plans are
under question now because of the way that this executive
order was written, especially.
Speaker 3 (28:49):
So companies actually putting things on hold.
Speaker 14 (28:51):
I mean, they're they're they're allowed a certain timeframe to
kind of figure things out. But I think everyone's trying
to figure things out and you know, I think it's
worth just impressing upon you that companies don't believe their
in violation of the law with their DEI programs as
they they've existed. When someone tells them that this piece
(29:13):
or another might now trigger some kind of legal action,
they change it. But as yet there's nothing really in
here that says, well, this part of DEI we now
consider this more legal than it was two days ago.
Speaker 3 (29:29):
Because this is what I'm thinking, What if a company
just says, you know, it's so funny, because we have
spent years, even decades perhaps or at least a decade
talking about mckensey studies and other studies, that's saying diversity
at a company, diversity on a board is actually good
for a company. It's good for the bottom line, it's
good financially. It just makes sense. I can't tell you
how many venture capitalists we have to come on and say,
(29:50):
when you ignore you know, you know, a black population,
a Spanish population, a female population, LGBTQ, you're ignoring a
part of a market that, you know, let's be who
the Bloomberg audience is a market that you can make
money off of. So it's kind of interesting. So if
a company chooses to be diverse, might they be breaking
(30:10):
a law under what we're hearing.
Speaker 14 (30:12):
It's really unclear at this point. The thing is, you know,
I say to DEI policies are not defined in here.
It's really very different. Di I policies are very different
from institution to institution, and in many places, things that
are just good governance, good cultural things have been brought
(30:33):
under the aegis of DEI in the last couple of years.
Is as this has become a thing, and as companies
have really you know, pushed a DEI department have maybe
appointed someone to oversee these programs. So things like all mentors,
broader mentorship within a firm that might be open to
everybody will now live under a DEI department, as may
(30:55):
recruiting efforts from disadvantaged communities of all sorts.
Speaker 3 (30:58):
One thing I want to ask you, this is something
that I know you and Jeff and the team have
really reported on big time here at Bloomberg, is that
it feels like, you know, coming off of the murder
of George Floyd, we talked a lot about racism in
America and equality once again, and I felt like DEI
inclusive efforts were really ramped up. But I do feel
like in the last year and a half or so,
we increasingly are seeing employers let go of maybe their
(31:22):
head of DEI efforts. Even before Donald Trump was back
in the White House, and we've seen this rollback on
DEI initiatives. We've seen it. I feel like every week
or two or for a while, you know, you've had
JP Morgan Goldman CEO. You know they're maybe resisting some
of the calls to roll back. But I do feel
like you are seeing companies pull back maybe on their
(31:44):
ESG efforts. Like there just feels like there's a change
of changing.
Speaker 14 (31:49):
Yeah, vibe shift completely and a vibe shift that's shifted
even within the last seventy two hours, you know, to
your point. Just earlier this afternoon, Target said it would
roll back it's DEI initiative, said it would conclude a
three year DEI goals, not set them publicly going forward again,
conclude the racial Equity action and change a five year
(32:09):
initiative about bolstering black employees' career development. I mean, I
think the question is now how many executives come out
and say, actually DEI or something like that, Yeah, inclusion
and belonging programs. Those have been good for business because
(32:30):
they allow us to retain talent and that's really valuable.
They allow us to see new market opportunities. And how
many more companies do you say, see say okay, we're
actually going to eliminate that department entirely, say goodbye to
these number of employees. I think it's a little unclear.
We just haven't seen that many people follow the lead
of JP Morgan's Jamie Dunne and David Solomon and Goldman Sachs.
(32:53):
Chuck Robbins had also at Cisco, had also defended his
programs at Davos. It really clear to me exactly how
that the division comes.
Speaker 3 (33:02):
So, like, how do you guys think about it in
terms of reporting? I guess it's kind of a little
bit of a wait and see, because I thought what
was interesting in your story today, your story and Jeff
and Emily's story is that there is some thinking about
Donald Trump in the White House. Some would say, you know,
this is part of what he does, like kind of
upends everybody a little bit of confusion and then the
(33:23):
dust settle. So I just do wonder if some folks
are thinking that's the same thing for DEI initiatives.
Speaker 14 (33:28):
Absolutely, And you know, I think a big question is
now is will the stuff still be called DEI in
six months? Because if the way of keeping programs to
retain employees simply becomes not having them live under the
aegis of DEI, right, then that seems like an easy
one for corporate America. It seems very easy to reabir.
Speaker 3 (33:49):
Just don't call it that, right, Just don't call it that.
And I do feel like we're hearing that from consultants
who say, listen, we're not necessarily anticipating from the companies
that we work with that they're going to stop these efforts.
Speaker 11 (33:59):
Yeah, but you do.
Speaker 14 (34:00):
Really wonder how many companies and how many corporate executives
really stand up there and say, this is where I
put my foot down, this is what I'm gonna defend,
even if you assume me, even if you file a
shareholder action. And admittedly some of the companies that have
been under fire deer In Company, which made some pullbacks
to its DEI program, there were a slew of shareholder proposals.
(34:23):
This time, they're recommending that their shareholders vote for neither
the pro ESG pro d e I ones or the
Anti esg Anti die i ones. So we'll see how
they fall.
Speaker 3 (34:32):
All right, So they're gonna we're gonna be fit finding
our way through this. It ain't over safe to say, Simone,
thank you so much. I really appreciate it. Simone Foxman
Equality Team reporter at Bloomberg News, joining us in our
Bloomberg Interactive Brokers studio. Find her on x at Simone
fox Meeting. You can read more on her story. Just
head to the Bloomberg and at Bloomberg dot Com.
Speaker 12 (34:54):
I'll bet you let me drive.
Speaker 4 (34:55):
Oh no, no, no no, this is not a.
Speaker 8 (34:57):
Toy, honey, please gravels.
Speaker 2 (35:02):
Let's wait.
Speaker 3 (35:03):
I want to try it.
Speaker 8 (35:06):
It's a good question.
Speaker 2 (35:11):
This is the drive to the clothes plums to me
a thing. Well, John and Don on Bloomberg Radio.
Speaker 3 (35:18):
All right, everybody, we've just about twenty minutes, just under
twenty minutes to go until we wrap up the trade
on this Friday and for the week overall. You just
heard from Charlie and Bill Maloney. We've got stocks just
hovering near their lows of this session. Earlier we were
talking about that this was kind of the best start
I think for our presidential year going all the way
back to Ronald Reagan. We've seen certainly a bounce in
(35:39):
stocks overall in this shortened trading week.
Speaker 5 (35:42):
Interestingly, he was the person to say make America great
again back during his campaign as.
Speaker 3 (35:47):
Well, way back when.
Speaker 5 (35:48):
Yeah, all right, so we're gonna see how the weekends up.
Speaker 3 (35:51):
We're almost there.
Speaker 6 (35:52):
We're almost there.
Speaker 3 (35:53):
Let's get to it with our drive to the closed.
Speaker 6 (35:56):
Guest.
Speaker 3 (35:56):
Mark Mallick is here, chief investment officer at mural Seberton
Company US, in our Bloomberg Interactive Broker's studio.
Speaker 5 (36:03):
I just want to dive right into it. Because you
walked in here, you start talking. I'm like, the microphones
aren't on. You save it for when the red light
goes on, because you're saying the VIC should be higher.
There's stuff there out there that's not priced in right now.
What do you see or do you see warning signs
flashing ahead of us?
Speaker 15 (36:19):
I'm not so sure there are warning signs as much
as you know when you're watching the markets all day long,
you're you know, you're watching the tape. You're seeing all
kinds of crazy stuff. You're hearing all kinds of things.
You're hearing about menthol cigarettes and you're seeing things go
up they shouldn't be going up. You see things that
are going down they shouldn't.
Speaker 6 (36:36):
Be going down.
Speaker 15 (36:37):
And then you glance over to your screen and you
look at the VIS and it's at fourteen, and you're
thinking yourself, Wow, you know, I would suspect, given this
market right now, given that there's so much noise out
there on the tape, that this would be trading a
little bit, you know, higher, certainly the VIX. And so
the concerting thing is is with the VIX is that
when it moves, it moves aggressively, and when it sort
(37:00):
of spends a long time where you perceive it shouldn't
be like low, it tends to be like a coiled snake. So,
you know, it's sort of what happens is is, you know,
the smallest little thing can cause it to cause an agitation.
And so you could find yourself at twenty eight very
very quickly, and everyone's scratching their heads you know what
to do?
Speaker 3 (37:20):
Isn't it fair to say, though, Mark that you know, certainly,
when it comes to policies out of the Trump administration,
a lot came at us this week, but we're still
waiting for what really are the particulars when it comes
to tariffs, What are the particulars when it comes to
tax strategy, what are the particulars when it comes to
regulatory easing or not. So it's kind of maybe, you know,
(37:43):
we're in this wait and see mode that even though
there are a fair amount of questions out there, we're
kind of waiting and maybe that's where markets are.
Speaker 15 (37:51):
Yeah.
Speaker 6 (37:51):
I agree.
Speaker 15 (37:52):
You know, I spend a lot of time, you know,
going over that age old Wall Street adage of signal
and noise, right, so you know, we're just in all
the noise right now and waiting for some real signals
and they're just they're just not there yet, and in
a vacuum. It's why I believe you see the market
making these interesting moves.
Speaker 3 (38:11):
What about earnings, I mean, if you look at the
S and P. Five hundred, we're up one point six
percent for the week. That's pretty strong.
Speaker 15 (38:17):
Yeah, well, earnings have been coming out pretty well, right,
pretty strongly. I mean we're really at the early days
at this point. But if you look at if you
look at earnings, if you look at earnings growth so
far through today, you're talking about like, what is it
like sixteen percent earnings growth and eight percent on average beats.
Speaker 6 (38:36):
That's pretty solid.
Speaker 15 (38:37):
I mean, financials came out really really strong. All the
banks are done, they look great, and every time that happens,
well generally speaking, those set a good base.
Speaker 4 (38:45):
Right.
Speaker 15 (38:45):
Of course, it helped that Netflix knock one out of
the park this week.
Speaker 6 (38:49):
That was amazing.
Speaker 15 (38:50):
Yeah, an interesting one.
Speaker 6 (38:52):
What do you think is our tariff's signal or noise.
Speaker 15 (38:56):
At this point?
Speaker 4 (38:57):
Their noise? Right?
Speaker 15 (38:58):
It's a lot of discussion. I mean, you know, the
big question is is you know, we all I think
agree that tariffs are inflationary, but what kind of tariffs
are we talking about? We know what might happen, but
until we see what happens and how long they're in effect.
If we're talking about a large tariff, but it's put
on only for two weeks for a negotiation, then it
comes off, it's not inflationary. But if you're suddenly going
(39:20):
to levy a sixty percent tariff on all goods coming
from China and it's long term, you can bet that
that is certainly going to be inflationary. I believe the
market has really sort of factored a lot of that
in already, though you wouldn't know it based on the
way it's moving up and down, even though you have
the slightly slightest hint moving the market. But I think
most of the big players at this point are assuming
(39:41):
the worst.
Speaker 3 (39:42):
I feel like next week is a big one, right,
We've got the first four of the Magnificent Seven reporting earnings,
so we're talking about Microsoft, Meta, and Apple among them.
I mean, these are big earnings, always are every quarter.
You've also got a FED meeting on Wednesday. And while
we don't really expect anything necessarily, when j Palli says something,
we also kind of sit up and take notice.
Speaker 2 (40:03):
So how might.
Speaker 3 (40:04):
Next week be an important week in terms of the
trade and maybe sentiment and maybe some action.
Speaker 11 (40:10):
On the vix.
Speaker 15 (40:11):
Yeah, you know, you certainly hit it on the head.
Next week we got those big earnings. I think we
have four of the Magnificent seven next week, all very different,
one of which is Tesla, which is its own indicator
that I'm not really sure what it indicates at this point.
Maybe it's another sort of sentiment indicator on how the
president's doing. But you know, certainly, you know, we get one,
(40:33):
we get our first hyperscaler. Next week, we get Microsoft,
which plays on both sides of the AI ecosystem. So
I think that's going to sort of set a lot
of tone for what we can expect in that group
of stocks, for sure.
Speaker 6 (40:47):
You know, it's interesting.
Speaker 5 (40:47):
I was listening to Paul Sweeney and Alex Steele on
the Surveyllance a little earlier todayor Bloomberg Intelligence excuse me,
and they were talking about the investment that Mark Zuckerberg
announced today, the increase in CAPEX. Mark Zuckerberg even said
over the summer, we might be over investing in AI.
Paul Sweeney was like, I don't know. I think we
might look back in a year and say this was
(41:08):
kind of silly, silly spending at this point. Are these
companies overdoing it?
Speaker 6 (41:14):
I don't believe so.
Speaker 15 (41:15):
I think that the market has been a little rough
on some of these some of these hyper scalers. But
the truth of the matter is is this infrastructure is
necessary for all AI that's going to happen in the future,
and this is the investment that has to happen, and
those that make the investment are going to reap the rewards.
On the side of a meta that you brought up,
that's an interesting one. Because they're not necessarily hyperscaler. But
(41:39):
Meta was really the first company that came out and said, hey,
we're using this AI to make more money in our
core business, and they were rewarded for that. So you know,
we're going to be listening to them next week and
see if there's a follow on story. But that type
of investment, I feel like you would actually be punished
if you weren't talking about those types of investment at
this point.
Speaker 3 (41:59):
Just get about forty five fifty seconds left here, Mark,
So where would you suggest investors think about allocating money
in this environment?
Speaker 15 (42:06):
Yes, So, until we hear any new signals, you know,
we have been talking about we've been looking at a
continuation of what we saw last year. Essentially tech is
leading the way, not.
Speaker 6 (42:18):
A lot of breadth.
Speaker 15 (42:19):
There are a lot of you know, there are a
lot of value opportunities out there, but there are no
signals that suggest that those that those sectors are going
to have great returns. So you're going to see continuation
of financials even though they're a little rich at this point.
And I think tech has the biggest potential upside of
the broader tech.
Speaker 3 (42:35):
So the drum that everybody keeps beating about small caps
in mid caps, not necessarily for you.
Speaker 4 (42:41):
Listen.
Speaker 15 (42:41):
You could try to get cute, but I think people
who've been trying to get cute have been on the
losing side of the of the performance, gave latelies.
Speaker 3 (42:48):
I don't want to be cute. I want to just
have returns I want.
Speaker 1 (42:51):
Yeah, we're gonna leave it on that note.
Speaker 10 (42:54):
Listen.
Speaker 3 (42:54):
Thanks, fun to have you here in studio. Mark Mallock,
the chief investment officer over at Muriel Siebert and Company.
Speaker 2 (43:00):
This is the Bloomberg Business Week podcast, available on Apple, Spotify,
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