This is Bloomberg Business Wait 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.
I have to say on our planning call, when I heard that Bradstone was going to join us on Amazon, I was like, Okay, that's all I need, so let's get to it. Brad, as you know, he is Bloomberg New Senior Executive Editor of Global Technologies, the author of two books on Amazon, Jeff Bezos and The Innovation of a Global Empire, and of course The Everything Store. Brad is there on zoom in San Francisco. Brad, thank you so much. Luck going on, and I know you and
your team have been busy this week Amazon. Where should we start? What do you think is the most important in this release so far? Yeah?
I think the question that was lingering over the company was whether it had slimmed itself down enough to boost profits, whether with all the lafts nearly three thousand this year alone, it made any progress and its effort to cut costs and match this new era of slowing post pandemic growth and Carol, you can see from a twelve percent after market boost right now, investors are happy with what they're seeing on operating income, net income and the durability of AWS.
Do you see the good results today feeding through for Amazon through the end of the year, particularly as you mentioned on the piece about cutting costs through cutting back on the workforce. How does Amazon sustain that growth this year?
Yeah, I mean we don't know. I mean Amazon's performance is so tethered to the macroeconomic climate, and obviously with the growth report today, I mean, there are big questions about the health of the economy. I think you know what we're seeing with Jase's comments about machine learning making the AD business better and how the AWS business, they're really pitching it as a way to do AI deeper
and more efficiently. You know, they're trying to set this company up not just for the next year, but for kind of this next era Silicon Valley and say like this is the smart play whatever happens to the economy, this is the long term smart play on AI.
I mean, and the thing that we're highlighting on the Bloomberg brad you know, they're talking about that second quarter net sales one hundred and twenty seven two hundred and thirty three billion. The estimate out there is one thirty. I mean it's a sizeable, you know range there, but it's upbeat, And so you do wonder about what they are seeing about the outlook that gives them at least comfort in putting this out here, or how do you see it when they put out a forecast like that.
I mean, they always leave their forecasts large enough to drive an Amazon delivery truck through, you know, so I don't ever put put that much stock in it. But look, I mean, this is like a beat across the board. Even a physical store sales were a beat online store
sales or a beat, you know. So I think that you know they're they're seeing not just to kind of recover from the top line, but all the things they have been working on for so many years, shorter delivery times, more fulfillment centers closer to customers, that these things are finally beginning to make a difference for customers and are a little bit more of a differentiator for Amazon fast oncoming competitors like Walmart, dot Com, et cetera.
Talk to me about the AI piece we have in here. Some I see six on the word count for AI here. Does that feel like enough to you? Does it feel like they're leaning into AI in this earnings report?
I mean every company is right now, and I expect it on the media call at the bottom of the hour and the analyst call at the top of the hour. It's going to be you know, I AI like all these calls this week. But I mean the one explicit thing that they don't have is a consumer facing you know, arge language model that BOT help customers. You know, Alexa with a version of that, but it's a little generation old.
And so they're pitching these these services to developers, like one is called Bedrock, where you know, you can come and like tailor your own So they're really seeing it as a part right now at least of AWS and making their business and their AWS customers business more efficient. You know, we'll see how much of that is like AI washing and how much is a real difference for competitors for their customers.
I am blown away by the numbers, and I'm going to go back to physical stores. I mean, I guess, you know, because we all think about Amazon, we disorder and it just shows up, you know, miraculously on a doorstep. Four point now almost five billion dollars in sales. I mean, is this something that they continue to invest in and build out or is it just again very cautiously, but that's some real money.
I mean, if anything, Carol, it's the reverse. I mean, they've closed all the physical stores. So the number you're seeing here is whole foods, I mean, by and large, so you know they've been they've been cutting that business a little bit. They've closed some stores. I think I think that number shows like maybe some stability, like the
bookstores they've closed, the four Star stores. Amazon Go has been whittled down to like a shadow of its former self, so you know they're done cutting, and perhaps that's reflective of maybe an overall sort of revival in just the supermarket category.
Is there a anything else that you think Amazon needs to do this year to control costs? Or does this earnings outlook read to you as a company that can happily continue to pour money back into itself.
I mean, we're you know, we're right in the middle of the layoffs. I think this week was when they started the aw A AWS layoffs, and the head of AWS described it as one of the worst days for the company. So I think they've probably announced most of the cost cutting they're going to do. It's ongoing, it'll it'll take place throughout the quarter, and at this at this point, you know, and also yesterday, by the way, they canceled another product, the Halo wristband, so one of
their health initiatives. So I think at this point, most of the blood's probably on the floor. And you're right that from from here on out it's going to be a you know, maybe a more careful and curated set of bets, you.
Know, or Ed Ludlow pointing out, and this caught my uh caught me too when I was reading through the press release. In terms of advertising, their advertising services business sales coming in at twenty three percent year over year, a thirty five and a half percent help performance relative to consensus. You know, we keep worried about anything AD related,
AD connected. What is it that they are doing just so writers it just because they are so huge, there's such a big part of everybody's world, and they reach so many individuals, if you will, that that makes sense that they're really outperforming there.
Well, what they have said and what they want us to believe is that their investments in machine learning help match better matchup ads with customers when they're searching in the Amazon search box. You know, my view as an Amazon customer is that they're simply just flooding the zone. I just think that they have thrown open the search results to you know, to paid results to the highest bidder.
And maybe there's a little machine learning there, but it's the increasing willingness in the post Jeff Bezos era to really self search to the highest bidder that is mainly powering that line.
Brad fast forward for me, which is a bummer for us, then, yes, but anyway, but good for them, sorry, Maddie, No, no, no, no, no, it's.
It's an excellent point, Brad, fast forward to me for me to the end of this earning season. Here when we look at these Amazon earnings, is this going to be the quote unquote bell weather for big tech fueling continued gains in the S and P, you know, as we wrap up this earning season.
I think it's consistent, Maddie, with what we've seen from Meta, with what we've seen from ALPHAVT. Maybe I haven't been paying attention. I'm curious about Snap earnings today. But you know that we've been through a brutal period of you know, regression in big tech stocks and a lot of cost cutting, high unemployment now in Silicon Valley, or at least increasing unemployment,
and you know, a readjustment. Then maybe this this quarter is going to mark kind of the turning point here where where as I said, you know, most of the pain has been endured, and these companies now with their big bets on AI, are beginning to rekindle some They were a momentum.
Brad, you mentioned Snap down twenty two percent in the aftermarket, reported its first ever decline in quarterly revenue after making some major changes to its advertising tools. So quarter first quarter revenue fell seven percent to nine eighty eight point six million, So it missed the average at analyst estimate of about a billion. So yeah, not not good at all.
Very different, perhaps not consistent with the overall team.
Then it makes me wonder what Snap and Pinterest are doing differently because they did not perform well, but Amazon, Microsoft Meta all performed great about twenty second spread Any thoughts on that, Well, it's.
A good question. There might it's probably the lack of kind of topline user growth, I mean meta at Facebook and Instagram added user. Snap has struggled with that and you know, perhaps a little less global exposure than some of their competitors.
Yeah, Snap had three hundred and eighty three million users daily in the first quarter, in line with analyst estimates. Bradstone, your gem I know you're busy, I know your team is. We love it when you can join us. Bradstone there in San Francisco or San Francisco bureau, joining us via Zoom. Jeff Bezos and the Invention of a Global Empire and the Everything stort. He knows so much about this company. Those are two books he's written. Check it out Amazon's app nine percent.
You're listening to the Bloomberg Business Week podcast. Catch us live weekday afternoons from three to six Eastern Listen on Bloomberg dot com, the iHeartRadio app and the Bloomberg Business app, or watch us live on YouTube.
He did also mentioned Snap, which is getting hammered. It's off its lows in the aftermarket, but still down about nineteen percent. Let's get to it because some disappointments, certainly, as you can see by the share trade here. Let's get to it with Bloomberg News Technology Report to Alex Birinka. She's on zoom in our La bureau covers his space. Alex, A lot of disappointment. Want to walk us through the quarter and why investors are so disappointed here?
Definitely a lot of disappointment, and I think that disappointment really is kind of floating around this top line revenue line for the first time ever for this company that's always been seen kind of as a growth company. And you know, there's a little bit of surprise here too, because even though the company had guided for a revenue decrease, they guided for a decrease in the first quarter. The forecastle're giving for the second quarter is another consecutive quarter
of sales declines. Some of this is self inflicted too. Snap told us three months ago that they're making a lot of changes to their advertising tools and that would impact revenue for the quarter. They didn't say that it was going to kind of drag on for a while, which seems like is what's happening here, And when you kind of dig into layers deeper on the results I'm seeing here, another really important number for investors is users.
User growth came in right an analyss essment, so there's no kind of upside to offset that downside that you're seeing on the top line.
Talk to us about the ad space and specifically Snap kind of tweaking the design of its direct response ads. You mentioned the impact of that. To what extent are these earnings and the market reaction about the ad space in particular for Snap.
For Snap, it's all about that ad space. They are a smaller player in the ad world. They have much less share than say Alphabet or Meta, but the vast majority of their dollars come from advertising revenue, and historically Snap has been stronger in something called brand advertising, which is kind of telling the big picture story of your brand, and less on what you mentioned, which is direct response ads, those ads where you see something, you click on it,
and you buy it right there. In the current economic environment, marketers are really preferring those direct response ads because they can directly tie return on investment. They can prove out saying somebody clicked on this dress video and bought this dress versus you know, someone likes the brands better because of the brand advertisement. So to have Snap kind of playing around with those direct response ads, a lot of marketers have backed away, and it's clear that they're not
spending on the platform now. The company will say they have to make these changes, this will improve their business in the long run. But it does seem like there is quite a bit at least twenty percent downward pressure on the stock of Impatients from investors in terms of the story that they're telling today.
All right, So, as you note in your story, and I'm looking at this was a stock that back in September of twenty twenty one was above eighty three dollars a share. We're now just under eleven dollars. Okay, so a very different world and certainly in terms of market value. You write a new story, though, Alex. You talk about how they have also been looking for new streams of revenue, and there's things about you know, trying and close virtually
and other things. Is this something that could ultimately move that revenue needle and be a big driver of growth going forward?
It potentially could. I actually chatted to Snap CEO about a year a week ago, talking at his product conference, you know, saying, hey, Snap looks like a very different company.
Now.
They're doing things like selling subscription, and they're doing things like selling software to businesses. It's a really interesting moment for them. So there's potential there. But these things are so early days that they're not upsetting the losses they're seeing from the ad business.
I want to talk about the Meta piece because they had a big win yesterday, and they also had a big win when it came to their ads and their AD revenue, which was critical to watch as it was with Snap today. Does the win for Meta yesterday make the results today from Snap even worse for investors?
Sort of? So Meta story is a little bit different because of how big they are. They have certainly been challenged by kind of the general dismalness of the ad business, by marketers pulling back spending, But their business is so much bigger, and Snap is so much more of a kind of real true growth company that that's all Snap kind of has the ability to rely on. Snap has also cut costs, They've done a lot of the things
we've seen from the bigger players. But because folks really kind of bet on them for that kind of all in growth one hundred percent quarter over quarter in past years, to see that number fall makes it a little bit challenging With Meta, you know, the big question for them has been Okay, you have this big core ad business, are you spending enough time there to make sure it's still going well in this challenge ad environment? And also
what else are you spending on? This whole metaverse thing is not something that we will realize in the next decade or so, And are those dollars actually going to things that are going to increase the value of the business. So kind of similar kind of wins affecting both of those companies, But I think they're just kind of size and status in the ad market makes it a little bit of a different tale.
Well, you know, alex, I always think about, you know, more broadly, what's going on in social media and just all the things, whether it's apps, whether it's streaming services, everything competing for our attention. At some point there's got to be a little bit of a bust I think of this. I caught up with Alexis Ohanian this week, right, the co founder of Reddit, you know, and he too said, you know, social media, you know, culturally made be going to go through a rethink, if you will, how do
you look at it? And so is it a case of some of the smaller guys are going to fall to the wayside, or I don't know, how do you think of a big picture and then how do investors need to think about it? Maybe for some shifts that might be to come.
It's a really interesting moment, and I'll actually use metas Earnings to kind of illustrate this. For you know, as long as we've had social it's really been about who follows you and kind of developing that following and choosing the people you follow. When TikTok kind of smashed on the scene, they changed the game. They made it about what content is best and what content's going to resonate with the user's interests instead of with the people that
that user will follow. Meta YouTube they've all copied kind of that TikTok idea, where now your feed is full of things they think you might be interested in that's selected for you by an algorithm less so your friends and family, and so Meta and alphabet have been trying to kind of figure out how to match ads with those interest groups on this new kind of world where a snap has taken a little bit of a different approach.
They have always had kind of the core feature of Snapchat being person to person communication, that kind.
Of closed loop.
But I will say it's really interesting. In the last few weeks here, Snap has announced that more people can now post content publicly, so you're seeing some kind of changes, And I think there's this really interesting tension right now between folks wanting to stay connected with friends and family and a lot of the platforms starting to move away from that in favor of showing you things that are maybe more entertaining, maybe more in the taking screen time
from the Netflixes and Hulas of the world. But it's less about you know, your your aunts in Texas or your friend who's living in New York City.
Yeah that's really funny. Yeah, no, it's so true, and spending a little bit like for the first time, I'm finally like checking out TikTok. I know I'm a little bit slow to the game, but kind of playing around with that more than like sitting down for hours, you know, binging on a series.
Yeah no, I do it sometimes when I don't have the energy to pick a show. Alex, I want to end on your story about big tech being obsessed with cost cutting, except for when it comes to AI, tell me what's going on there?
Yeah.
I kind of made the argument in our newsletter today that AAI is coming for your jobs, just not the way you thought. Meta, Alphabet, Microsoft, They've all come out kind of promising.
These big cost cuts while.
Also kind of emphatically reminding investors that they're spending tons of money on AI. So where is that money coming from? You can look back to the forty thousand positions that they've eliminated over the past few months to kind of keep those savings and reinvest those funds into artificial intelligence.
So in this kind of big AI arms race that we're in right now, a lot of that's being interestingly funded by big tech from the dollars that are not going to headcount, that are not going to offices, that are only going to kind of the products that are getting folks really excited and leaving a lot of former employees kind of out to drive.
Good to be a programmer right now? Really, you know, hey, really quickly fifteen seconds, what would you ask Snap on the earnings call?
I want to know at what point revenue turns around the changes that they're making, when do those kick in, and when do they start luring advertisers to keep that top line from continuing to slip?
All right, great stuff, as oways our Alex Birinka, Bloomberg News Technology reporter there in La and check out her newsletter. You can find it Bloomberg Tech Daily Newsletter. Just sign up at Bloomberg dot com Slash Technology.
You're listening to the Bloomberg Business Week podcast. Catch us live weekday afternoons from three to six Easter on Bloomberg Radio, the Bloomberg Business app, and YouTube. You can also listen live on Amazon Alexa from our flagship New York station. Just say Alexa play Bloomberg eleven thirty.
Pressure is building on President Buying to respond after House Republicans unified on a set of demands to vert a contest a catastrophic US debt default in the coming weeks. So there's pressure on the President to really sit down with Speaker Kevin McCarthy. Well, Bloomberg watched correspondent Amory Hordern did sit down at the Speaker of the House to talk about where we are. Check it out, everybody.
Many people doubted you were going to be able to get this bill passed through the floor. You prove them wrong. You successfully got it through the floor two hundred and seventeen voting in favor of you. Parsident Biden, though, says he's only going to meet with you if you separate the fiscal spending, cuts the budget with the debt ceiling. So what comes next.
Well, I don't know, because it was eighty five days ago.
I sat down with the President February first, talking about finding a sensible, responsible way to raise the debt limit and make us less dependent on China, curve inflation, and bring growth to this economy. And that's exactly what we just did. The President then said he wasn't going to meet with me until we showed him a plan. So then I showed him a plan, and then we passed it.
You know, the way government works is the House passes the bill, the Senate passes a bill, and then you conference together and the President can sign decide whether he signs it or not. The challenge here is the Senate's nothing.
But I shouldn't be rude.
They did name March Maine maple syrup, but they did get that done, but they haven't done anything on the debt sitting, and the President has ignored this problem. He's actually putting the economy of America in jeopardy by not doing anything because only the House has raised the debt limit. Passed the bill to do that and at the same.
Time grow the economy.
And we did it with ideas that he has voted.
For work requirements. He voted for that as a Senator.
But more importantly, just a couple months ago in Wisconsin it passed with eighty two percent of the vote to limit our growth in the future so government doesn't get out of control. Well, that's an idea from Joe Manchin. We help the supply chain, We repel eighty seven thousand IRS agents, We make America energy independent. We cut the red tape so we could build things again in America.
I don't think that's radical.
And the words that are coming out of the White House that we are going to melt children's bones, we're going to create asthma, there's nothing in the build that does that. It actually text veterans protects our military, makes his a stronger case for the future.
All right, That, of course, was the US Speaker of the House, Kevin McCarthy catching up with our Bloomberg Washington correspondent and Marie Horden. If you want to hear more of the interview, just get to Bloomberg dot Com or check it out on the Bloomberg Terminal. This is Bloomberg Radio. Well things can maybe get for the over one hundred million obesion overweight individuals in the United States. Uh, there
is a story in the new issue Bloomberg BusinessWeek. It's out on newsstands, online at Bloomberg dot com, slash BusinessWeek, and on the Bloomberg Terminal. And many of these individuals would love to lose a bunch of weight to improve their health situation. And you know what, there's a bunch of drugs out there that can do that. The big problem though, is the cost and having to use the
drug for the rest of your life. All right, let's get into it with our Bloomberg News healthcare reporting team who wrote the story of Emma Court and Bob Langreth. They are both here in our Interactive Broker studio. So excited to have both of you with us. Emma, why don't you kick it off with us and tell us about this class of drugs which they were mentioned at the Oscars. Comedians talk about them. I think Elon Musk has talked about them. Tell us what we're talking about.
Yeah, Well, first of all, thank you so much for having us on. We're really excited about the story. It's the cover story this week, so we're thrilled. These new drugs are called effectively glp ones. They're named after a hormone they mimic that essentially helps people feel fuller, they have less appetite, they eat less, and they lose weight. What's interesting about these drugs is they're not all that new.
This class has been around for diabetes for many years, but more recently pharma companies have been developing them specifically for obesity. There's a couple of different names for them. People are very familiar by now with ozembic, which is a diabetes drug. That's the one that Jimmy Kimmel joked about at the oscars. But they're are also drugs called.
If everybody laughed or whether it was like deadpan, because it was like hitting too.
Go ahead, they're well. There are a number of perhaps less well known drugs, including a new one called Munjaro that hasn't been formally approved for obesity but likely will in the next year. There's also a drug called Wigovi, which was the first sort of highly effective obesity drug approved in the US. And what's really interesting about them is, you know, these are drugs that are helping people lose
up to fifty pounds in some cases. So they're way more effective than anything that had been available for weight loss before, and it's getting a lot of doctors and patients excited about it.
So Bob, come in here, because we've all, i think, heard in our lifetimes about a variety of different diet pills and ways to lose weight. Certainly as a woman growing up in the nineties heard about plenty of them. How is ozemba weegov, how is it different? And what are the risks and the some of the benefits I'm.
Talking to Yeah, one of the really interesting things for me as I've been covering drug industry for decades and you know, a b City weight loss that was kind of always like a graveyard for drugs. Drugnacity had been trying for a long time to come up with drugs. There was the kind of there are a whole bunch of safety v calls. One of the most famous ones or infamous ones was fen fen back in the late nineties,
where one of the components caused heart problems. Uh so BC drugs for a long time at a bad reputation, and these ones, you know, sort of came a little bit almost out of left field. As MS said, they were developed for diabetes, and drug companies increasingly started you know,
noting noticing the weight loss effects they were seeing. And as I started testing the drugs uh in people that didn't have diabetes there that were uh suffered from a b CD but didn't have diabetes, they started seeing even larger.
Amounts of weight loss.
Uh So, the safety track record and diabetes is pretty good. Like all drugs are not without risks, you know, but they do have a number of side effects, including non in vomiting and diarrhea potentially, so do you have a bunch of gi side effects and you actually have to tightrate them up slowly. These are injectable drugs. It's not a simple pill. You have to inject them, most.
Of them weekly.
Most of that.
Yeah, the new ones are weekly. And what's happened is as they've gone to sort of more potent, long acting ones, they've seen the anti obesity effect increase, and that's when they've started to get some of these dramatic weight loss. And the Eli Lilomanjaro drug, which is like the newest one. It's only approved for diabetes, but Eli Lilly is very
soon going to seek approval for obesity. That's the one that's showing some of the most dramatic weight loss effects so far, and they just had another positive study out today.
Why is it so expensive?
It's the billion dollar question.
I feel like we asked this so often about drugs, and I know we do, but why is it especially it's been around for a while, right, I'm just curious, why is it so expensive?
So some of these drugs are newer, and they are the most expensive ones, so they they are new, they can't say they've been around for many years.
You know.
It's a difficult question, and we certainly asked the companies about it, and we didn't get a super straight answer on it. I would say, I'm curious what Bob thinks about those.
Well, I've been asking drug companies about their pricing.
Forever, druggies, forever.
You know that that is one question when you ask, it's very very difficult to get. Like my senses, they don't really tell you the real answer, like what happened in the back room when they decided.
I have a brother who was in pharmacuticals for over twenty years, and he was always like, listen, we do so much R and D, and I'm like, did I ever come on? You also make a ton of money on stuff.
So but basically in the US, you know, it's a free market. Drug companies and price their drugs at kind of whatever price they want. And these when they came on the market as diabetes drugs, they were priced, you know, fairly high. And they and some of the pricing. There's one that will Govi drug, which is a higher dose version of a zempic that Nova Nordi sells her obesity.
They priced out it even higher price than nozempic. It's exact different doses of the exact same you know, chemical compound, but one is a higher price.
The abcity one is a higher price.
The second interesting aspect of this is like when you look at the sheer number of people who would be eligible for these drugs in the US, it's more than one hundred million people, right, So it's like it's massive. Why are the prices so high given that the market opportunity is huge? And we actually talked to one of the sort of foundational scientists in this field. His name is Dan Drucker, and he was one of the guys who helped discover these hormones in the body many many
years ago. And he said, you know, he's asked companies over the years, why don't you just do, you know, be the McDonald's in the space, Which is kind of an ironic comparison if you think about it, But you know, why don't you come out with really cheaper versions of these drugs and lots of people take them and you'll still make a bunch of money.
And you're talking about one in three how many was our population.
Of adults in the US of obesity.
Yeah, so what's interesting too, And I feel like there's a bigger, broader conversation when it comes to healthcare, right, I mean being overweight so in COVID like that could make you more susceptible to not having a great outcome. I mean, being overweight for most people causes all these other problems. We know, it's a big reason why there's so much diabetes. Where is the medical community, where's the
insurance community. I'm thinking about if we can get people to be not so overweight that it's just better for their health, come, their their healthcare, their outcomes and also their health care costs.
Well. One really important and interesting aspect of this is we often blame weight for a lot of things in our society, and it's interesting to look at this idea of BMI and realize it's kind of imprecise.
Right, it was.
Supposed to be kind of a population level measure, and instead it's been applied to individuals, So like, if someone has a certain weight, regardless of what their health looks like in other aspects, they are obese just because of their BMI.
Right.
If you think about that, it's kind of an interesting aspect, Like you could be totally healthy, have no diabetes, have no high cholesterol, whatever, and you're still ill by some of these kind of modern standard So it is kind of a nuanced, complicated topic. While higher weights have been really highly associated with lots of different diseases, it's important to note that there are a lot of shades of gray here. Another interesting aspect of this is like, how.
Does that mean not as many people would really kind of be eligible for these.
Well, that's the kind million, right, So if you think about it, maybe not everyone who qualifies as overweight or obese is necessarily going to be the best candidate for these drugs. There's a big kind of murky middle of people who where it's not totally clear how big a danger than they are we impose it.
This is a really important question here. So like the risks of of you know, suffering from obesity, you know, as opposed to someone's normal way. A lot of that comes from epidemiological studies. You know, what's not been proven over the long terms. If you take the weight off with one of these drugs, you know, do you eliminate all these like actual like risks like the risk of heart disease and strokes and other like concrete you know,
does it makenal downsides? They haven't actually proven that in trials right now. It's not necessarily the case that you know, you'll get all that benefit because these are epidemiology studies and your communit you're comparing risk factors and there might be other things that are different, you know, when they when they do these complicated comparisons. So the companies, that's the that's what I'm sure that's what they say. This is not proven. There's only really proven to take off
a lot of way. You haven't proven that it prevents a heart attack or a stroke five years from now, and you have.
To take it forever, seemingly to prevent the heart disease.
So what the That's what the pharma companies are saying, that's what the doctors are saying. There have been studies of this new drug, WIGOVI that show when people quit the drug after a year the way it comes back for most people. So that is a big issue about such an expensive drug like this is possibly a lifelong thing, and it does raise questions about, well, what is the side effect profile here? We're not talking about taking something for a few months or years.
Forever potentially does does it insurance tend to cover it? If you are at that BMI, then what's the spread?
It's all over the place right now. We do a lot of reporting this. It's all over the place right now, and you know, whether you have access to one of these drugs may kind of just depend on the luck of the drawer and what your particular insurance company you have to you end up at. But like basically three quarters of state we surveyed all fifty states state medicaid programs, three quarters the states have very little coverage for obesity drugs,
and you're roughly approx. Give or take a few three quarters of private insurance generally don't cover obesity drugs either. Now the coverage we've found signs that the coverage is starting to increase. For example, in Medicaid, eight different states told us they're considering it. But this is like, this is like the big battle that's going to be going on the next year between the drug companies and the doctors that favor more coverage and insurance companies.
That's like, that's like the big battle.
It was amazing to see how much coverage ranged in this fifty state survey of Medicaid plans, which met kitas covers low income folks for health insurance. I mean, there was one state that literally told us we will pay for you know, some obesity drugs for people under the age of twenty one, for young people, but not adults. We're like, what, Like, there's so much.
That, I mean, what would make it much more clear? I just got about thirty seconds. Is it some study that needs to be like, what is it? That would be like health insurans would be like, yeah, we got to be in on this or not.
The big studies, The most important studies that are coming is that both Eli Lilly and Nova Noordis, which they are the two makers. They're studying their drugs in people with a BC to show they can prevent heart attacks and strokes. And you know, if they do that, if those studies succeed, it's going to be much much harder for insurance to deny coverage.
Yeah, and that's going to be a big, big thing that's going to come in the next couple of months. Heart disease is the leading killer of Americans. So this is something with really high stakes.
All right, great story, guys. It is the cover of Bloomberg Business Week. As we said, it is out on newsstands. It's already on the Bloomberg terminal and online at Bloomberg dot com Slash BusinessWeek, The Court and Bob Langreth, both healthcare reporters here at Bloomberg News, joining us here in our interactive broker story. Be sure to check it out. It's also going to be in our weekend show on
Bloomberg Radio. This is Bloomberg Business Week. I'm brother Marco, a journal How about you let me drive?
No, no, no, no, honey, please, how do the riding gravel?
Let's mate, I.
Want to try it.
It's a good question.
Try This is the Drive to the Clothes dot Com tm me think we'll buy around to other on I'm on Bloomberg Radio. All right, everybody, we have just under eighteen minutes left in today's trading session, getting ready to wrap up the Thursday trade. We've got big earnings coming, as Charlie mentioned, Amazon, Intel, a few others after the Clothes holding out to gain sell on the equity side of things. So let's get to it. Our Drive to the Close guest on this Thursday is Shanil Ramsey, Senior
investment Manager. You're at Picta Asset Management here in our Bloomberg Interactive Broker studio with Maddie and myself. Nice to have you here.
How are you Yeah, very good, Thanks for having me. Nice to be in New York?
Yeah, oh good. Where are you typically based in London? In London? All right, so tell me mood difference between London and here.
Well, firstly, the weather is not as good in London, let me tell you that much. But now it's like it's lovely to be back in New York. Haven't been back for several years and the buzz is great.
It does feel like the energy when you're in London, though, is what is the conversation you think most that you guys talk about at work versus like when you come over to the US and you're talking to different clients. Is it a little bit different? Is it the same stuff?
Yeah? In the US it's typically quite US focused. You know, we have a much global, much more global view in London, and it's always the US versus the rest. Right Where when are we going to see performance come through from the rest of the world. And we do see that coming to the for this year and in some ways with European innses doing quite well this year, uh and the reopening of China really starting to drive some investment decisions.
So coming coming to YES this week, I think this is what people have been asking about.
Are you monitoring every single potential data point that could impact the fed's moves as much as we are here, you'd.
Be surprised that in Europe we care a lot about that too, right, So we we are, you know, watching each and every statement also, but we try and trying to have that more applicable to what's going on elsewhere. What is the ECB, what is the BOE, what is the bo J what is the Chinese?
Uh people?
Yeah, so how how are they responding to what the FED is doing? But you know, the FED is still the big the big guy in the room, and we really need to know what Jay, Paul and co. Are going to do well.
So, having said that, you do to take a global perspective, and lucky for us, you've shared something else with our producers. So we know that you do like non US equities more than you like US equities from what I understand, make that case.
So at the moment, we know that the valuations in the US are quite high with this thing s and people have one hundred is about eighteen times. When we look elsewhere around the world, we think looking at much lower valuations twelve times in Europe, ten times in the UK, much lower in parts of Asia. So we can say, for on a valuation case that this is interesting. But we know that the rest of the world's always been cheaper in general. So why now? Why do we think now?
So firstly, we think there's a desynchronization in the global economy. We see the US economy is slowing. We saw today's GDP number a bit slower, bit more inflation, And when we look at the rest of the world. Having had the big energy scare that we saw at the end of the last year in Europe and thinking that we were going to have a big recession in Europe first quarter this year, that didn't materialize, and we're getting a
cyclical upswing in Europe. But that's also aided by the fact that China reopened, right, So the China reopening has helped look at non US growth being a little bit better than US growth, and that's turning into some positives for earnings, not just in China but elsewhere.
There's Europe. In Europe's a pretty big area region. What specifically are there certain markets, are there certain types of industries, certain companies.
Absolutely so in Europe, we really like the consumer sectors, the consumer cyclicals. But really in a world where we know that there's this inflation pressure, we think the high end consumer is doing the best right. The affluent consumer has the ability to spend more. So when we look at those premium brands, when we look at those luxury companies,
they continue to grow their revenue base. They are interesting companies in the sense that so like you'r lvmators, Absolutely LVMH is the the LVMH, for example, encompasses all those luxury brands, and we think there are many of them in Europe, and that's what Europe does best. You know, we know that those are some of the best companies in Europe. Those those luxury.
Cots are US luxury brands. We love you, even if I'm just kidding. Yeah, no, I mean it's but I know what you're saying. And we've talked about that. We've done a lot of reporting that as these results come in, the luxury names have really been out performing, and we are talking about the China reopening as one of the reasons. But US shoppers are buying too, certainly US high end shoppers.
Yeah, why do you think that US high end shoppers are more susceptible to headwinds than European high end shoppers.
I think the high the US high end, the consumer is also going to be quite resilient. We've seen the numbers today on the consumption being still quite strong, right, so we know that the consumer in the US has been good.
And those are January numbers, as are Mike McKee reminded us, and we'll get March I think tomorrow. So it was kind of before the banking, you know, kind of meltdown of a few names, So it'll be interesting to see if it continues to hold up.
But even if we look at travel, for example, travel in leisure, when we look at the hotel hotel chain numbers, when we look at the airline numbers, these numbers have been pretty good. So we know that the consumers are spending on what they hold deer and right now what they hold dear is some of those luxury brands and also the travel and leisure that they that they care about most.
So you know, how much would you suggest for an investor to have of their portfolio with non US exposure at this point at.
The moment, just in that luxury consumer discretion era, the portfolio that we built for clients has about five percent in those areas, and we think that that's just because the consumer is the driver right now in the global economy. We do think, however, that that will slow over time. And what we see in that desynchronization that I mentioned is also desynchronization in the sectors of the economy that
are working. And one of those sectors that we think could have some better performance in the second half of the year now is the more manufacturing or industrial sector, and we are seeing some of those numbers.
Come out for over Europe or more broadly.
More more broadly, more globally, and I think the European story in terms of the industrials, we see earning revisions pick up, and that's partly due to some of the fiscal stimus that we see around some of the environmental spend that's going on. Look at the either the IRA or what this similar policies in Europe. These are spending that governments are doing that are going to benefit some of these industrial companies and their auder books are already showing that.
But a lot of consumer discretionary companies in the US are having amazing earnings. I'm thinking about McDonald's, PEPSI, so maybe.
Not just the high drum their global names. Yeah, absolutely, So we got about thirty seconds left.
When we look at those those global US companies, they have been having good numbers. And for example, I think Clad said some of their coffee shops in China were rarely showing positive earnings, so you know, you know it's open when people are going out to coffee shops, So you know, these are some of the data that we look at so it's not just European companies, right, you are right, it is also American companies. But we think the consumer generally is the place for you, all.
Right, that we're certain to see that and as you said, higher end in particular. Nil, thank you so much, really appreciate it. Shamiel Ramchi, He's senior investment manager at Picta Asset Management, joining us here in our Bloomberg in Directive Brokers studio.
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