Bloomberg Audio Studios, Podcasts, radio news. This is Bloomberg business Week Inside from the reporters and editors who bring you America's most trusted business magazine, plus global business, finance and tech news. The Bloomberg Business Week Podcast with Carol Messer and Tim Stenebeck from Bloomberg Radio.
Let's get to something else that is important on our radar, and that is the US Central Bank, which kicked off its two day meeting on monetary policy today. That FED decision, of course, comes tomorrow at two pm Wall Street time.
Well earlier today, we got two data points. US consumer confidence fell in April to the lowest since mid twenty twenty two, as Americans view of the labor market in their outlook for the economy deteriorated and a broad gauge of labor costs Carol closely watched by the FED, increase the most in a year, illustrating persistent wage pressures that are keeping inflation elevators.
It ain't easy, That's the bottom line on all of this. To put it all into perspective and how it may impact potentially how the FED is thinking about US monetary policy. Back with us is Steve Skanke he's chief economic advisor at Killpoint, former US Treasury in White House National Security Council staff member, and then also with US, of course, is Yolena Schaletchiva, senior US economist ever at BNP Pariba
Yolena in New York City and Steve in DC. Elena, I want to kick it off with you, if we may, today's data once again reminding us that it is kind of a bit of a tricky spot sometimes for the FED to be in right now in terms of mixed consumer data. That maybe makes it a little bit more difficult to find the right way forward, if you will, when it comes to monetary policy, what do you make of the data and what is your economic forecast right now?
So I think today's data really supports our call for the FED to stay on hold until December, but for the next move to be a cut. So if you look at inflation data today, wage inflation is still elevated, so that does not give it enough confidence that they can start moving anytime soon. So at the same time, you look at the Conference Board data and in particular the labor market differential, and that tells you that the
labor market is rebalancing. It's not overheating, and it's not going back out of balance, it's actually getting back into balance. And if you look at jobs are getting a little bit harder to get. They're not as plentiful as just a few months ago. So consumers are taking a signal from what they hear, what they see in the labor market,
and they're telling us that. So I think the FED is still going to cut rates, that's the next move, not a hike, but I think they will have to be patient and see how inflation subsides.
And Steve is that also your position over at kill Point is that what you think is going to happen, The Fed's next move will be a cut, but they will stay on hold until while at the end of this year December, like Jolena just spoke about.
Yeah, absolutely, Tim, I mean, the FED very much wants to start cutting rates, but starter inflation and even strong economic activity just have them in a holding pattern. The FED is sort of stuck with a couple of things. They need to have confidence that inflation is coming down,
and right now it's stall. The employment cost index is annualizing at four point four percent, and the VET has to depend on productivity growth, which has been annualizing around two and a half percent, which gets them toward their two percent inflation with wage growth, but that's a little bit hard to depend on. The Other thing is, you know, consumer competences has been up quite eight percent the last two months, which is which is record growth. But from
the Copter Board numbers today, consumers are weary. They've been they've been reducing savings to continue spending, and they continue to be overwhelmed by high prices even though the rate of inflation has been had been moving lower. And tell a sort of got stuck.
Okay, so yeah, come on in you Lena, and talk a little bit about where you think the Fed. How do you think the Fed kind of deals with this, because okay, Steve said, things are kind of stuck right now. From you know, getting that last mile of inflation under control, is it proving to be even stickier than the Fed thought it would be.
Well, I think we will see continued deceleration in inflationary pressures. We may even see some like two and a half percent on core PC by Q three, which technically would allow the IT to start easing. But then you know election comes into play, and for you know, risk management purposes. You may want to wait till December. I think we
will continue to see inflation to decelerate. Consumers as pending. Yes, but they're spending because the labor market is doing great and because their balance sheets are so healthy since they deleveraged so much. But nonetheless there are some you know, pockets of weakness here and there. So we mentioned consumer confidence data today pointing to some signs of deceleration in the labor market. We also see some pickup in delinquencies.
All these things that's pooked recessionary you know, fears last year. They're still there. It's just not we're not talking recession any but we are talking about some moderation in economic growth, and we are talking about continued progress on inflation. The FID just needs to be patient. They just need to not overreact to one data point here and there, and I think the conditions will be appropriate for them to start adjusting rates slightly by the end of the year.
One thing I wanted to bring up, and I've been thinking about this a lot, is you know, we keep saying, oh, no, we need pressures. Oh my god, people are being paid more money. How terrible that is because of the impact on inflation. Isn't there some balance and Steve, let's bring you back into the conversation. Isn't there some balance of like, no, this is a good thing, and maybe we're moving more towards a livable wages, especially for some hourly workers where
this isn't just a job for a teenager. They're supporting their families and that ability then they can spend on things. So what is that balance economically that you think about or maybe you don't think about it, but I do in terms of we're paying maybe workers maybe what they at least should pay or are long overdue that they haven't had the ability to have higher wages, and then that translates into economic activity. That's a good thing.
Well that you're absolutely right, Carol, And Jerome Powell actually thinks about that a lot. If you sort of go back a couple of years, maybe three or four years, even before the pandemic, he was talking about wage growth being more broadly distributed throughout the labor force, and that only sort of happens at as you come to at the end of the economic cymcle. So for wages on average to be up almost four and a half percent,
that is a good thing. And if we can rely on productivity growth to continue in the neighborhood at two and a half percent, that's how you actually raise standards of living, particularly for some of the lower income groups. But the FED is is flummixed by what's happening with
the metric for housing inflation for shelter. You know, if you look at course course CPI inflation three point eight percent twelve months ending in March, you can take out shelter, it's two point four core PCEE inflation saying two point eight percent twelve months ending in March. You take out
housing it was two point two percent. And not that they can ignore housing inflation or shelter inflation, but we all know that there's just some funniness about how that gets calculated and how that factors in and the and while the FED would like to cut rates to get that economic benefit broadly distributed, they're sort of stuck with the number that they've got.
I want to say thirty seconds for you, Elena, in terms of this concept of higher wages, and you know, some of that's good that people are finally maybe making more money.
More money is good for sure, but you know you need to have productivity growth and this is I totally agree, uh that that's an essential part. So if you have productivity, growing wage is not a problem. Unfortunately, I think productivity growth is not going to accelerate here and not until we get some AI enhancements. We have to rely on label roles for now, and that's the issue at this point.
Well, the White has correspondence. They made a joke and just said he journalists, get ready to your place.
I wasn't going to make that joke. I was just gonna ask for the AI enhancement for doing the dishes.
That would about the product innovation and disruptions. Steve Skanky and ITVA, thank you so much.
You're listening to the Bloomberg Business Week podcast. Catch us live weekday afternoons from two to five pm Eastern. Listen on Apple car Play and then Broud Auto with a Bloomberg Business app, or watch us live on YouTube.
So let's get to ONSTOT. That is definitely a standout performer in today's overall lower trade equity trade ELI Lilly's share soaring up the most in more than nine months, hitting an intry day record high. This as a brighter outlook for twenty twenty four raise the potential ceiling for new weight loss drugs even further in the eyes of Allison investors. It's just on a tear.
It really is back with more on the company and this investment play that continues to just dominate this year. We got Bloomberg News health reporter Madison Muller here in the studio. Madison, I'm wondering, what was the surprise here when it came to Uh, it's a good question weight loss drugs, because this doesn't surprise me, and I'm not following this company as closely as.
These investors are. Yeah, we knew these things were gangbusters.
Yeah.
I think it's what's interesting is like I wasn't really surprised by this either, given how much demand there is for these products.
But I guess there was some investor and.
Analyst concern going into earnings because the shortages have been so bad, and so they needed some reassurance that even though there are widespread shortages, I mean people are driving like three four hours to go to a pharmacy that has zeb bound in stock, that Lily is still able to sell enough of it, and to also see supply getting better in the second half of the year and into next year, you know, enough so that they can raise their revenue guidance for the full year, raise their
profit guidance for the full year as well.
So there was I.
Think at first a little bit of relief and then continue to optimism, Like any good news for Lily is like great news automatically, So I think it it automatically just pushed.
What do you say that more? Any good news is great news for Lily.
The margin for error is so slim with them, like if there is bad news, it really could affect them. But I think it goes the opposite way too. There's just there come everything the company does is so closely watched and the smallest news is like ends up being a big deal, especially when it comes to these weight loss drugs, because so much is riding on them. So it's just this is seen as you know, a great thing.
What's the risk there?
And I know that's where your head was going, Carol, because if this is we're talking about.
Scale of zepbound on one side and all the other drugs on the other, does.
A lot more than just GLP ones.
Here, Yeah, And that and that was the other really interesting thing is even though they missed estimates in most of their other key drugs, including Manduro, which is the diabetes drug, diabetes version of zep bound, Trulicity, a diabetes drug that's been a bestseller for several years now, for Xenio, which is a breast cancer drug. They still raise their revenue guidance, and you know, it was still seen as like a very good result because the story is just zet bound.
How much of their revenue comes from this class of drugs.
We know actually not, I would have to pull that up. Zepbound is still I mean, Monduro is like in the billions. Zepbound is still I think it was half a billion this quarter. It was five hundred million, but it just launched in December, so it's ramping up really quickly. And Trulicity, which is also it's an earlier GLP one drug that
we don't really talk that much about. It's not very good for weight loss, but it's great for glycemic control and you know, helping control blood sugar for people with type two diabetes. That drug is in shortage also in the US and in Europe because there's they've been prioritizing the newer medications.
Where is the supply chain.
It's I mean, they have supply I think they were talking today on the call that there's like seven plants, eight plants, and there's a lot in the US. There's a plant in Ireland, but it is mostly in the US, actually, and it is mostly They work with some contract manufacturers, but most of the supply chain is controlled by Lily.
And are these for Eli Lilly.
I'm just looking at the FA page, the financial analysis page in the Bloomberg terminal. Are they classified into the diabetes category? Both of these even though one of them's weight loss.
Zep bound shouldn't be okay, Yeah, because it's interesting because now the diabetes category is now fifty seven point six percent of revenue, right versus a couple of years ago is forty six percent. Yeah, And Lily has always been, I mean, diabetes is their bread and butter. They've always been in diabetes. I think they were the first They were the first US company to commercialize insulin, so like this has been their story for a long time.
But I mean, insulin wasn't.
Really like a super profitable drug, and GLP ones are.
So that the two billion kickup in annual sales Madison one thing I was curious about does that mean the demand is that much more or the drug is costing more.
It's going to mostly be I think a result of increased supply. So like they are selling everything that they can make, and they set this goal of increasing like the number of sellable do by one and a half times whatever that means. But they're hoping that they can make more sellable doses in the second half of the year.
The dosage, from what I understand, like you get different dosages, I think, yes, well, individual pens, right, yeah, so in in outside of the US, they have multi dose pens, which you would think that they would roll that out in the US because it helps with the number of pens that they're making, which is holding up.
Like that's one of the reasons why they have these supply bottlenecks, because the plastic injector pens are like so complicated to make. But they're only doing these multi dose pens outside of the US, which doesn't really make a ton of sense. But yeah, so the doses those have multiple doses obviously in them in the US, you have four pens and each one contains one dose.
Who's coming for Eli Lilly at this point We talk a lot about Novo, the European sort of sort of counterpart the competitor here with Oozepic, But who in the US is coming for Eli Lily?
So we have Bohringer Englheim, which is a private company it's a little bit of a mouthful to say, but they are also outside of the US. They're private company Zeland Pharma as well. They're close behind. Then there's am Gen, which is a US company. There's been a lot of excitement about Amjin's drug because it's taken less frequently, It's
taken once a month instead of once a week. However, they are still very far behind these other companies, you know, behind Novo and Lily, and then Pfizer is still pretty far behind as well. So like they do have a really good head start on everyone else that's trying to get into this market. And you know they're also trying to develop a pill and different formulations, so like they really they have a jump on everyone.
How is the focus on these which I get why every drug company would be chasing it, right, I mean you think about market size and just oh my god, but what does it means not getting done? Or maybe the focus isn't there.
It's a good point. I mean, we were looking recently at like it's just interesting to see how the attention has switched from COVID to GLP want totally covid to weight loss. And this happens in the pharmaceutical industry. It's like you know, when one company has success in a certain area, then everyone sort of chases and follows behind. And we are actually seeing this, which this is a good thing. We're seeing this right now in heart disease
and in neurodegeneration as well. So there's been some advancements in drugs for like Alzheimer's and Parkinson's and some mental health conditions that now there's like a rush to to innovate in that field again too, and same with heart disease. So like there is actually some other advancements, but we're just not talking about that.
We only have like thirty seconds madicone And this is question, yeah that has requires a longer answer. But there has been some pushback to these drugs. Not everybody sort of on board, pointing outside effects and stuff. What's the latest there.
I think one of the biggest pushbacks recently has been price. Like the Senator Bernie Sanders. We talked to him a couple of weeks ago and he was saying that he was gonna which I guess he did. Actually end up calling the CEO of Nova Noordiskin talking to him about the price of Ozembic and Wagovi. And now he's opening a Senate committee investigation into the price. So that's been a big area of pushback recently.
All right, great stuff, Hazoways Madison. Thanks, Bloomberg News Health reporter Madison Muller a must read here at Bloomberg.
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Now, we want to shift gears a little bit because we will be shifting gears big time after the close when Amazon reports its latest earnings, and we are going to be looking for a show me moment, especially when it comes to what they are doing in AI, because we've seen a play out, whether it was Google or Microsoft, investors wanted to see and we saw some payoff.
Yeah, the world is, as it often seems, all about jen Ai and machine learning and LMS. Is that enough for you? Jenai machine learning LMS? Right, It's also its evolution and next steps. Was this theme at a recent BI event here at Bloomberg HQ that you moderated.
That was really cool.
It was a really fun panel. I learned a lot and that was thanks to our next guest and who was on the panel. We welcome Rouchie R. Puri, chief scientist at IBM Research. He's here in our Bloomberg and director Broker Studio. He's an inventor over seventy US patents, has authored over one hundred scientific publications on AI for code responsible AI, semi chip design, and so much more. He also led IBM Watson as CTO and Chief Architect. I could go on, but then we'd be done here.
I'm so glad you came in because I said to you when we finished the panel that I kind of learned a lot and I feel like I wanted to kind of pick your brain a little bit more about what are the smart conversations to be having about AI that we have every day? What are the ones you're having with your team back at IBM. What is it that clients and customers are thinking about about where jen ai takes them in the future.
So, first of all, Carol and Tim, thank you for hosting me. I think this is We had a wonderful conversation, but it's a pleasure to continue that conversation as well. I would really say we are seeing infection point in AI because we are seeing the sort of people playing with things to now show me the money.
It's where is the value?
And that's exactly the narrative you are seeing roll out and the rise of open not just open AI, but the rise of open in movement, no Meta, many others. IBM and many others are involved in it as well. But small to medium size models are where things are leading to because when you start to really scale AI out in real production use cases, cost is certainly very very important because the narrative becomes about scale and volumes, and then you also start to look at.
Where is my data?
Because AI and data are very closely integrated together, you want to bring AI to the data and the data is kind of very heavy.
Actually, Richure, well, I just want to jump in here because as Carol was introducing you, and I was reading a bit about you earlier.
Today, I gotta.
Wonder professionally what this moment means for you, because this is something that you've worked on for so many years and it's now finally something that everybody's talking about. The Wall Street is really taking seriously right now. I mean fifteen years ago you were probably like baying your head against the wall, being like, pay attention to this stuff.
We were in a winter. Actually you're all wearing parkas and really in the deep of winter.
What change was it the first and capability? What was it that changed? Like I keep saying this.
Point, Yeah, I would really say usually say it when we started Jeopardy. Yeah, that was the start of the moment. I say it honestly.
So you're talking about Watson on Jeopardy whats Poparty?
And that was the moment where I would say we caused a spring of AI. We brought it from winter to spring. We didn't result in summer. I think that summer didn't arrive until that seventeen character URL and a single tweet which had GPT that really brought this to everyone's sort of desktop phone and so on, and that to me is the summer where people really realized what
are the implications of this technology? Because we are now introducing a new abstraction level in how people can interact with miss genes, which is natural language, and that sort of the narrative becomes so ubiquitous that it intersects with every enterprise and every consumer use case.
At this point, is it all about chatch gypt? I mean, is everybody that in your sphere, whether it's the client's customers playing around with that? Is that the starting point?
I would say less so chat GPT, but definitely generative AI itself is the starting point. But very soon the conversation goes to I love it, but I need to fit it in my use case? Can you bring it in my hybrid environments? Because customers are or enterprises are in a very hybrid environment. They've got a couple of public clouds where their workloads are running, they've got their own premises where workloads are running. And then they start to worry about where do you run this stuff, how
do you on it, whether where my data is? Do you bring it to my data or do I bring data to you in the public cloud. And it's becoming clear that hybrid cloud and AI are so closely tied to each other.
Well, and I think about this for our audience. You know, it was interesting yesterday when last week excuse me, when medicine we're spending so much on AI, writ our capex and everything was more and that they got penalized for that the build out. And yet those companies that they're going to be spending money with, whether it's chip makers
or that they were benefiting. And I keep thinking about the investment landscape, like as you are working your way through this, and obviously I am IBM rather is very involved in this space. And certainly we talked about on premise building out your own AI. That's that's you know, your own offices or you know where you are working versus having it up in the cloud. But having said that, how are you thinking about it? Like who does is
it the build out? People that are really going to initially and as we've.
Seen some I would really say real value will be derived clearly so far in two places, one place where one company in the world is minting money at this point and VIDIA clear and sort of money flows to the bottom because it's like you know, you're selling the shovels, as they say at that point, and the second one will be in the use cases, so it flows up in the use cases or it flows to the bottom
in infrastructure. Those two places are clear winners actly, And I would really say, from the point of view of even on the infrastructure, we are in the early innings, and I think I give this example when we sat down last as well. The accelerators for AI are a
fast evolving space. And I usually say it whenever anybody raises this word or says this word of artificial intelligence, it always occurs to me, if something is artificial, there must be something real, and that real is certainly among three room in this room, and that consumes VOTs, lives in a twelve hundred centimeter cube and runs on sandwiches versus a single Nvidia GPU or any other GPU consumes the latest one announced consumes one thousand warts, and you
need literally thousands of these. So I think just the sheer energy efficiency of acceleration should be put in perspective that we are in the early innings, and I'm extremely excited about where this technology is going to take us.
One thing that I think in the early innings that has gotten a lot of attention is how these models are trained, and I'm wondering at IBM how you train your AI models.
So for us, obviously we are closely partnered with Nvidia. From a research point of view, we are doing significant amount of research in this area in terms of as we look into accelerators that will be evolving, and I just talked about the energy efficiency. Our focus is on energy efficiency, cost of deployment, and we are starting with inferencing first because that's really the volumes game. And our
training is a lot on the Nvidia stack. But from a hardware perspective and from a software perspective, we have we have brought our own software stack. And this is where I say it's about the hybrid cloud platform, that layer that spreads across and makes the underlying hardware, if I may say, ubiquitous from a consumption perspective.
Which here we only have about a minute left. Unfortunately, I always feel like this is a topic that we could spend a lot of time on it, but as we kind of day in day out, we're talking about a lot in earning season, whether it's a tech company or not, of just how different companies are putting it to work, or at least doing their spend. What do you think is the smart kind of conversation we must be having around AI, in addition to just the headlines that keep coming at us how we look at things.
I would really say the first one should be around I'd say responsible use of it like that's to me is the most critical elements.
Does it terrify you a little bit?
I know it too well, so it terrifies me less. I would say, there's a long pause, it terrifies me less. Having said that, I think there are clear implications of this technology and its responsible use and ethical use. That's the first thing. So what I call governance of AI right is critical to enterprise use cases. And then obviously the bread and butter of productivity scale out of AI. You know, really where of deployed, wherever I want it deployed,
and so on. But I would say I would put at the top of the list the governance of AI as it percolates across enterprise use cases.
Just twenty seconds, you think we're gonna get it right considering kind of the some of the troubles we've had with social media really quickly, I.
Would say I'm an optimistic person by choice.
Okay, we would get it right. Okay, Well I'm optimistic too, so figures cross as well. Richard, thanks so much for taking the trip and coming in. Richier Priory, his chief scientist over at IBM Research.
You're listening to the Bloomberg Business Week podcast. Catch us Live weekday afternoons from two to five pm Eastern Listen on Apple car Play and then Broyt Auto with a Bloomberg Business act or warn't us live on YouTube.
A lot of headlines out of Chattanooga, Tennessee over the last few weeks.
He're just one of them, Carol.
Earlier this month, Volkswagen employees over at a Tennessee factory voted to join the UAW that's in Chattanooga, a landmark victory for the union organizing in the long hostel US South.
That vote certified today, by.
The way, interesting day and a lot happening generally in Tennessee's fourth largest city. We've got back with us. Delighted to have him, Tim Kelly, He's the Mayor of Chattanooga. Right here in our Bloomberg Interactive Broker studio. We should note last month Bloomberg Philanthropies naming Chattanooga one of twenty five cities selected for its American Sustainable Cities Program. Bloomberg Philanthropies, of course, founded and supported by Michael R. Bloomberg, founder
and majority owner of Bloomberg LP. Mayor Kelly, Nice to have you in the house once again. How are you in house?
Tele pleasure. We're We're doing great. Thank you. Yeah, things are Things are great in Chattanooga. And again we'll just.
Always start as always do thanking Bloomberg because we are. We've got a lot going on, particularly around the area of energy management with EPBR or utility, and the Sustainable Cities program is going to be hopefully really transformative for us.
All Right, we're hoping we can keep you in the city for a moment and talk about something that's going on uptown.
Yeah, you went to Columbia. You were there in the nineteen eighties. If I did my math.
Correctly, that's correct for this. Okay, Yeah, so potentially you saw.
Some of the apartheid protests that were absolutely with this. Then yeah, what do you think of what's going on right now?
Well, it's it's predictable, but we were talking about that all morning in a Strong Cities meeting and I think that, you know, the challenges for mayors.
To to bring people together right.
And I don't think you can talk about this current situation without thinking about the structural changes that have happened in society since since then, since the eighties, namely social media, right, And we've got to figure out a way to have a constructive dialogue right together. And cities have I think a very important part to play in that. But again, I think it was Oh, I can't remember which former president was that said, you know, it could be worse.
I could be a mayor. Well, it could be worse. I could be a college president.
So there's always something right, there's always some.
Well, how do we create a better a world where we can all have a conversation? You know, It's interesting. One of the things I've loved about newsrooms, and maybe I've been lucky to be in some really great newsrooms where there's lots of smart people. Not everybody has the same perspective, And as journalists, we coome on air and we just listened to everybody else's perspectives, but we have conversations. How do we get that again back?
Well again, I think we have We're up against.
It because you do in your city well building community. I mean, I know it sounds very coomb by a and I mean, but every city, the cities that are doing a good job are i think, being more and more intentional about bringing people together and counteracting that device of narrative.
And again, what we've.
Seen is the cities were the strongest senses of place are the places where you know, college campus is notwithstanding, are the places that are most immune to this. Right, So we do a lot of work, you know, on parks and outdoors, stuff that used to seem trivial, but I mean our social media channel for parks and outdoors has the second biggest following of any parks and outdoors
department in the country. And you know, we do we try to get people to think of Chattanooga's first and foremost and think of them, you know, their neighbors and what they have in common, not what divides them. And again sounds very prosaic, but I think it's really really important. And you know, the mayors I talk to spend more and more time thinking about, you know, the things that bring residents together and really doubling down on those things.
We talked to yesterday about crime, here in New York coming down on the subways, Yeah, which is finally a little bit of good news. But one thing we have seen post pandemic, not just in New York but in cities around the country is a rise in crime. Give us an update on Chattanooga how it's looking, because that goes hand in hand with the economic.
Development that you're trying to do. And absolutely well.
The statistics are all moving in the right direction. But what we've seen, unfortunately, is this very strange disconnect where people feel less safe in cities and that the feelings are that crimes getting worse, and the stats are are
demonstrably that they're getting better. Right, And so I think some of that goes back to the media environment, right, because fear does sell better, and you know, certain I don't think Bloomberg is particularly guilty of it, but certain media outlets have leaned into that more than others, and so we have to combat that. I mean, I will say we have a we've had a rash of shootings
in Chattanooga. You know, again, I'm a member of Mayors Against Illegal Guns and stolen guns account for a tremendous disproportionate percentage of shootings in Chattanooga, and we still haven't done anything meaningful at the state level.
About that, and we continue to have dialogue about how we might change it.
You know, I was thinking about that conversation we had with Joseph Stieglitz last week of Columbia. Of course no Bel Lauria, but this concept of freedom, and he kind of brought up Mayor Kelly, this idea that maybe we have to broaden out how we think about freedom because right now freedom folks who want to own guns say, well, it's my right, it's my freedom, or you know, I
have the right to own guns. But at the same time, potentially by using that gun, you take away somebody's freedom, you take away their life.
Maybe kids don't have the freedom to go to school without being fearful of guns.
And schools well exactly, you know what I mean. And so you know, we've got to kind of figure out how to do.
We have to figure we have to navigate it. I mean, the you know, second moment, the second moment that you know we're it.
Could be guns, it could be something else I think we can.
Carry, but we are we're still trying to navigate that. But you know, gun ownership comes with comes with a heavy responsibility, and frankly where I'm focused is on more practical ways that we can secure guns to keep them out of the hands of because look, a stolen gun is going to be used in a crime almost certainly, right, So you know we're still working on but I will
emphasize Chattooga is a safe city. Again, if you look at any measure that you want to look at homicide, it's per per thousand or you know we are.
We're our a safe city.
But we do battle that the perception and we continue to do that by again focusing on community and making sure that we have a vibrant downtown.
Hey, I want to talk economic more on economic development because Chattooga, Tennessee one of those places that you want to make attractive to for remote workers. Yes, at the same time, we've seen companies crack down on remote work. Are you seeing that show up in your numbers at all?
No?
Are people having to leave because they get called back to the office twice a week and they're like, I can't live here anymore.
I have to go back to a different city.
We have not seen that yet. I do think, you know, labor has a lot more power as you started the segment, then we may realize And so even our big anchor employers are really either two on three off, three on two off, something like that.
So we're not they weren't before a pandemic, which they.
Were not before the pandemic, and so we're still trying to again find the balance. Mean, look from the stampone of downtown vitality. I'd love to see all the major employers.
Call everybody back in selfishly.
But at the same time, as you say, we have a lot of remote workers because of our super fast fiber in Chattanooga. So we're finding the equilibrium. But I have not seen a dramatic shift in that regard.
You could change one thing right now in your city, what would it be.
Wow, that's a great one. I would I would preserve more park space. I think our competitive advantage in Chattanooga really is our outdoors, phenomenal outdoor space, and we're growing fast, but we really only get one chance to preserve the stuff that really is our competitive advantage, and so we're in a kind of a race against the clock in that regard.
Is it the pressure to develop it and build.
Well, yes, yes, that before it gets to unaffordable right, and we are trying to set us out as much capital as we can, but we almost can't do it fast enough.
I don't know if you know this, but we're in an election year.
I've heard somebody mentioned that too.
Yeah, And I'm we're asking a lot of our guests who come on the program questions about this, because whether they're in politics or not, they're in politics, you're.
Going to run for the White House or something.
Well, I am curious, you're an independent, yes, So do you find that you still get stuck in the national politics the dialogue that happened of course.
Of course, and so my and there are a lot of other really great mayors. I was just with Ron Nurrenberg, who was one of my favorite other mayor's, the mayor of San Antonio, who has a very similar approach, and I think what he would say and what I would say is that our job is to translate back into the practical terms of what makes a policy makes sense or doesn't make sense.
I was also just with Bill Padudo.
A former mayor of Pittsburgh who famously said there are really three political parties here said this. I think on my last appearance for Republicans, Democrats and mayors. Right, So it's not that it doesn't matter.
I mean, we will.
I mean again, I'm a big fan of what the bid administration has done with then IJA and BIL. These are really important infrastructure programs that have that are going to pay dividends in terms of GDP growth for for years. I'm an OECD champion, mayor, and they just did a really interesting white paper about how the United States is behind our OECD peers in terms of infrastructure investment and Tennessee, by the way, is below the national average. Right, and
this is what drives GDP growth. So if you're worried about retiring debt, ironically right this these are the programs that we that this country needs in order to really be in good stead and in.
The long term for in terms of promoting longer term growth.
Correct.
Ultimately, yeah, many would argue or continue to argue it's way overdue. Tim Kelly, thank you so much, of course, Mayor of Chattanooga, joining us right here in studio, Marc.
A journal Now about you.
Let me drive?
No, no, no, honey, please gravel great, I want to drive.
It's a good question.
This is the drive to the clothes doing well.
By on Bloomberg Radio.
All right, everybody, just by eighteen minutes left in today's trading session, getting ready to wrap up the Tuesday trade. Bit of a corse. We have a bunch of earnings coming your way after the closing fouls.
Okay, So the one that we're all waiting for is Amazon. Yeah, sent across just after four o'clock. I think it'll happen. Yeah, I think it'll happen too. Caesar's Entertainment is going to happen. Pinterest, we get Starbucks, Mandolei's as well, among many others.
Amazon's at eighteen percent so far here in twenty twenty four.
But it'll be interesting. Certainly, cloud always important, right. They are the largest when it comes to the cloud services industry, of course, though we've seen a lot of competition from the likes of Microsoft and also Alphabet's Google, which of course we got their results last week, and safe to say that they've set the bar really high, especially when it comes to the AI spending or using jen Ai ai if you will to actually, you know, create some
business and move some of the numbers to the upside on the balance sheet.
I think also worth remembering what happened to Meta platforms, the parent company of Facebook last week. You mentioned this a couple of times already today, Carol, when it said that it was making a big investment.
We got punished. She just got punished.
Absolutely. They're like, Okay, I get it, but you know, we just want to see the payoff and what if you spend too much? So this is why it'll be interesting to see the kind of payoff, particularly when it comes to AI, specifically on Amazon.
All right.
In the meantime, we've got a down date, Charlie breaking down the numbers. We're down more than one percent across the board on all of the major equity averages. So let's get to it. Our drive to the closed guest on this Tuesday, Michael Sheldon. He's executive director over at our DM Financial Group. Michael, great to be talking with you once again. A lot of earnings. We're going to get a big one after the closing bell.
How are you?
Thank you looking at the market against the backdrop and fundamentals of earning so far.
Hi, thanks very much for having me.
So.
About fifty percent of the S and P five hundred earnings are companies in the S and P five hundred are reported so far, and a majority of actually beating estimates by more than the average beat that we've seen over the past several years. So earnings are coming through better than expected. I think the issue with the markets today, Unfortunately, the markets are under pressure because the inflation data we
got in the ECI this morning. The employee cost index once again was another indicator that inflation is a little bit hotter than expected. So I wouldn't be surprised to see a little bit of a pullback maybe or a high trading range within the market. We could go back and test maybe the forty eight hundred level for the S and P five hundred, which was the breakout level back in January, over the next few months or so. But earnings overall have come in better than expected so far.
Ay buying opportunity. If we do go back to that forty eight hundred level.
Yeah, I think that's likely the case. The economy overall has been very resilient over the past three months. We've generated I think about two hundred and seventy six thousand jobs per month, unless the consumer really starts to turn lower, and we haven't seen that yet. Again, remember consumer spending represents about two thirds of the economy. The economy should be okay, and the real question is what does the FED do about all this? So I think right now
the timing of future rate cuts is somewhat uncertain. I think the Fed really does want to cut rates, and the Fed shifted policy in the fall of last year, if remember, and that sort of helped the economy and the markets go on this five month winning streak. So we're sort of working off a little bit of that right now, and that could just take a little time.
Does it really matter for do you believe in equity? For investment equity investors, whether or not the Fed really ultimately cuts this year is a few basis points or a quarter of a point or a half a point, is it going to really make that much of a difference, especially if consumers continue to spend Wages are you know, workers are making more money. That that's a good thing and it'll keep some economic momentum. And as long as people stay employed, that's a good thing.
Yeah.
I think that's the most important factor. Individuals have jobs or wages rising. So wages are rising but less than they were before. But as long as the consumers have jobs for the most part. I think that should continue
to help support the economy. Ultimately, I think the issue for the market maybe if the two year is back above five percent, and I think the ten years around four seventy five or so, So I mean, if the ten year gets above five percent or starts to rise rapidly, that'll probably cause some concern, especially for over leveraged companies
or companies that have floating rate debt. But I think overall the economy can continue to do well as long as interest rates sort of stabilize or don't go up too rapidly.
Do you think I mean that is that something we could test in the next few months. Five percent on the tenure again.
I wouldn't be overly surprised. At this point. We get a couple more big economic data points this week, we get the jobs report coming out on Friday. Everybody keeps thinking the employment data is going to slow. One thing that people aren't encounter aren't thinking about is the fact that immigration numbers have really gone up a lot over the past twelve months or so, so that's helping generate
increased job growth that we haven't had before. I think overall, interest rates probably have a ceiling, because, believe it or not, everyone's people have been talking about the lagged impact of all the rate increases we've already had, and some of that really probably hasn't made it into the system yet. So inflation has come down a lot, and that ultimately should allow the Fed to gently start to lower rates.
The perfect scenario would be sort of nineteen ninety four ninety five, So we'll see if that plays out.
Yeah, it's kind of interesting that we're thinking, all right, wait a minute. You know, we were talking about the FED raising rates for so long and in this rate hiking cycle for so long that you forget that weight. It's working its way through the economy and certainly through the financial system. So it's something to kind of keep in mind.
By the way, Carol, the employment report on Friday, Yeah, two hundred and forty thousand is what economists surveyed by Bloomberg are expecting for a change in non firm payils last month three oh three.
But see, this is where I would go back to Michael and something I've been thinking a lot about in terms of wage increases. I get how that plays into the inflationary picture, but I also think good for workers who maybe haven't been working making a lot of money for a long time. But that also means that they have money to spend and kick it back into the economy. That's a good thing.
You're absolutely right. People having jobs and people having wages that are rising, that's a positive thing for you and me and everybody else's listening. Having money to spend on things. I think the worry is when wages are rising too fast. That's what causes Powell Hodjuediz, So, I think that before the COVID crisis, wages were ring at about a two or two and a half percent rate for several years,
and now they're right around four percent. So I think if those numbers could come down a little bit, I think that would provide ultimately provide Chairman Powell with the cover to gradually start to reduce rates. I think when the FED meets tomorrow. Today, Fed's meeting today and tomorrow.
I think tomorrow the Fed, I think Powell is probably going to say that he's not quite confident that inflation has returned to the levels that he's comfortable with, which will probably mean that rate cuts are probably somewhere off in the distance. But he'll also be data dependent, So if inflation does fall or we start to see some weakness in the consumer or jobs for some reason, that could provide him the cover he needs.
Now listen, I feel like it right. It all goes back to that, and the data can change if it does change dramatically, although it's I think safe to say that in terms of inflation, they want to see a sticky trend line. So we've got to get through a couple of months reports, maybe even three or four, before the Fed may may back off. Michael Sheldon, thank you, and we had some technical difficulties. Thanks for picking up
the phone so we could hear you. And of course we've been seeing you and watching you on YouTube and Bloomberg Originals. Michael Sheldon, Executive directed at our DM Financial Group, joining us from Westport, Connecticut. You are listening and watching Bloomberg Radio.
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