Tesla’s Removal From S&P Index Sparks Debate

You can also listen to our radio show at two pm Eastern Time on Bloomberg Radio or watch us on YouTube search Bloomberg Clobal News. Well, fifty seven percent that's the increase in new COVID cases here in the United States in the last two weeks. That's according to data from the New York Times. More than one hundred thousand new cases per day. Hospitalizations are also up during the same period of time twenty nine percent, again according to

the Times. Let's get into it with Dr Andy Pekosh, Professor of molecular microbiology and Immunology at the Johns Hopkins University Bloomberg School of Public Health. The Bloomberg School of Public Health that is supported by Michael R. Bloomberg, founder of Bloomberg LP and Bloomberg Philanthropy. Dr Pekosh. It's been a while since we've spoken, but I think it's a good time. Not just anecdotally, A lot of people in my circle are are getting COVID. Katie's just recovered. I

hope you don't mind me saying that. You've talked about it, You've tweeted about it. A lot of our colleagues are out, why are we seeing this latest spike even among the

vaccinated the boosted. Yeah, well, I think we're saying the main thing here because you know, it's been sometimes since we've sort of let up all of our public health interventions, so we've now been an extended period of time where people have been going about there, they're somewhat normal business and you know, putting getting put into situations where they could potentially be exposed to the virus. So I think that's one aspect of it that's contributing. And then the

other aspect is UM. You know, you're getting further and further from your last boost if you've taken one UM, and immunity is going to wane over time. And the first thing that you'll see when your immunity wanes, is an increase in the number of cases. Um, what we're hoping is that that increased number in cases is going to lead to a lower amount of hospitalizations and severe cases. But that's really wherever the monitoring is happening right now.

And is that what we're seeing so far that even with this surge in cases, it seems like hospitalizations, we haven't heard as much about them. Yeah, you know, I don't want to say that a surgeon cases is good to see, but when you see it with a correspondingly smaller surgeon hospitalizations, and when you look at who's getting hospitalized, it still tends to be people who are who have not been boosted or have not had a COVID infection

in recent times. So the signs are there that says vaccination with a boosting or if you were vaccinated and infected, you have at least protection from severe disease and are probably seeing some protection from infection as well. And Dr Pekosh, I also want to ask about the pill because I've been making the joke. You know, I got COVID at

the beginning of April. I got boosted the hard way, but I could not get my hands on any sort of treatment, on any sort of pilla exactly tried to, could not get there, didn't have an underlying condition, and I found that somewhat frustrating. Um, I do want to jump in because I wonder if it's a state by

stately and that's what I wanted to to highlight here. Yeah, you know, one of the things that I think people should really do right now is be a little proactive, particularly if you're in one of the groups that's highly vulnerable to severe COVID. You know, go out and find the pharmacies that do this test as treat program, because not all pharmacies do the program, UM, and not all pharmacies have a lot of doses of these drugs in stock.

So now it's a good time if you if you want to pa prepare in some way, go out and find those pharmacies so that you know where to go in case you get infected. Okay, I'm so frustrated because is if we know this is effective, and we knew there would be more spikes in cases, why do some pharmacies not have sufficient supply. You know, there's a little bit of a problem here in terms of being able to have the right accreditations to be able to do the test and UM and make the prescription at the

same time. So not all pharmacies are capable or have the right accreditation to be able to do that. So more and more are doing this, more and more are available. I think the flow of the drug into the pharmacies is increasing, but I think people still have to do a little bit of work to make sure they know where to go UM, particularly because the timing of the drug is so important. You've got to take it within five days or so of symptom onset for it to

be effective. And dr I mean, like Tim mentioned, we've run in a lot of the same circles and in those circles at a lot of people in that circle UM have gotten COVID just in the last couple of weeks. Definitely a wave going on. And I mean in my own personal conversations, I've heard a lot of frustration, you know, I've been triple vacs, like what what even is the point of getting the booster? And I mean, what would you say to that if it almost feels inevitable? Again,

how important is that? Uh? You know, initial booster, that second booster yeah, the the second the well at least the first booster, so our third mr and A dose is very very critical to make sure that your immune response recognizes variants like delta and all macron um with with a good enough efficacy so that you can stay out of the hospital. I think one of the things that we have to realize here is is the virus has changed an incredible amount since the early days of

the vaccination roll out. UM, we had incredibly high efficacy numbers early for the vaccine. The vaccine hasn't changed. The virus has gotten better at infecting us, it's gotten better at evading some of immunity. So what we're now seeing is that the vaccine it doesn't have that beautifully perfect protection that we saw initially. So the vaccines are still good. We have to work on getting the right strategy of vaccination to maintain protection. But it's really the virus that

has become so much better at infecting us. Dr Pekosh, we only have thirty seconds left. I do want to briefly ask you about monkey pox, which is spreading in a handful of areas in the UK and in the US. What do we need to know, um, monkey pox is only transmitted after very close contact with someone who's infected UM. It's not very easy to pick up UM. The cases in the US are still very low, so for the vast majority of people, it's not a concern right now. Okay,

good to hear. Dr Andy Pecosh, professor of molecular microbiology and Immunology at the Johns Hopkins University Bloomberg School of Public Health. He joins us on the phone from Baltimore, the Bloomberg School of Public Health. It is supported by Michael R. Bloomberg, the founder of Bloomberg LP and Bloomberg phom Anthropies. You're listening to Bloomberg Business Week with Carol Masser and Bloomberg Quick Takes Tim Stinovic on Bloomberg Radio.

A benchmark s G index has removed Tesla, sparked a debate about which companies do and don't pass muster with socially aware investors. We're talking about SMP. Dow Jones Indseeason removed Tesla from its SMP five hundred s G index because the company scawn environmental, social and government standards. Has remained quote fairly stable over the past year, but it's

slipped down the ranks against improving global peers. Let's get into it with Shin contractor e SG analysts for Bloomberg Intelligence. She's with us in the Bloomberg Interactive broker's studio. Shaheen. What's what's not s G about Tesla? So, Tim sim great question. First, I honestly I shake Katy's excitement has

been waiting to aboutin this morning. So when it comes to Tesla, it's really that S and that G that it that is the social and the government, sorry that it that it is challenged on SMP even cited it's relating to some things like racial discrimination, poor working conditions, and even on Bloomberg governance scores, for example, our executive compensation scores, they're not so great for Tesla. Okay, Shahan, you are such a nice person, but I know you

have a spice to take here. So in the notes sent over, you wrote that we believe Tesla's removal from the SMP five s G index perhaps overdue. Why overdo the million dollar question? Is Tesla e s G um? I think that's highly sort of debated. Tesla is a very unique company where it's focused on the e UH seems to be sort of cater towards this impact theme. But when it comes to the S and the G,

it's it faces challenges. And that's where I think that when it comes to a broody as she found E s she is at least to us all about risk mitigations. So when it comes to a company managing sort of the recent opportunities within its regulatory environment or within its operating environment, that's why we cannot ignore the S, M, the G. And that's where I think, Um, if we

have to unpack ees she e perhaps fits Tesla. Tesla can be in an back found, it can be in an environmental fund, but in a broody as she found Artaic is perhaps not, and that is debatable. I will say that, well, so so what does fit into the category B S G if if Tesla doesn't, So it's really about companies that are managing their recent opportunities that are material I see sort of Tesla is one that people confuse the as she with sort of impact, right, what is doing good on the world versus E S?

She is sure within that framework, but more about what are the as an opportunities that impact my bottom line and how am I managing that? So it's it's it's all about fitting within that framework. And there are multiple companies that sort of cater to this, but we have to separate E S SHE from an impact theme, if that makes sense. And so this is the specifically talking about the S and P five hundred s G index that Tesla was removed from. Do you think that other

index providers could follow suit? Uh, that's that's a hard one. Like I said, you know, Tesla still today is the most debated or one of the most debated UH stocks out there. So it's this SMP removal I think fuels this debate. But according to our analysis, many are the E S SHE funds whard it. In fact, it is highly included stock in E S SHE funds. And this we'll just it's just going to continue that debate. What we're investing in audience, What does it need to know

about investing in E S G companies? I think the main thing to understand is labels and what you see king. If you're impacting in the SC fund and you're seeking some kind of impact investing, that is a little sort of divided. So it's understanding what you want and then understanding the kind of fund that meets that I call it sort of looking under the hood. That makes sense. And when I hear you say impact, I mean I think disruption. I think disruptive companies. Is that sort of

the definition that you're using as well? I think if it is additionality, what is the additionality in terms of either mission reductions, diversity, social governance issues that you're creating or is hes? She is more risk mitigation, like are you managing the risk that are in front of you relating to non financial indicators. At the end of the day, does this matter just in the last thirty seconds we have for Tesla. Uh, that's a good question. Um, I

don't know. It's going to continue to fuel this debate. That's I think what we've what we sort of settled on. Whether you know, the MSCI indices are the broad shared with the passive funds and they still hold TESLA so in the in the grand scheme things. We just think it's going to feel this debate. We know what's going to annoy Elon Musk at least tweet. He's tweeted about it quite a bit. She can contractor E s G analyst for Bloomberg Intelligence within the Bloomberg Interactive Broker Studio.

But you know he tweets about a lot of stuff. He certainly does. He does. This is Bloomberg Business Week with Carol Messer and Bloomberg Quick Takes Tim Stinovic on Bloomberg Radio. Well, if you've been listening to our program over the past ten days or so, you've you've heard quite a bit about the collapse of Luna and the algorithmic stable coin Terra USD. Terra's coins were supposed to be the future of money, but they relied on confidence,

which can vanish in an instant. Zeke Fox and Shan right about the sixty billion dollar collapse in the new issue of Business Week magazine. It's available on newsstands, on the Bloomberg terminal and at Bloomberg dot com Slash business Week. Zeke Fox's financial investigations reporter at Bloomberg News. He's with us in the studio in New York. Joe Webber is the editor of Bloomberg Business Week. He joins us on

the access line from Brooklyn. What I really like about Zeke and Muya's story is that it focuses not just on what happened and what went wrong, but it also includes uh, personal stories of people who lost a lot of money betting big on crypto in this space. Yeah, it's it was kind of shocking because for all of the kind of the headlines and all the stories and the the stuff of UM of what had gone wrong with Tera, which UM you know, taras usd was UM a stable coin UM and Luna was attached to it.

Like for all of that, we had not really got to hear from story of stories of like real people who had money attached to this stuff and UM. Once all of that was vaporized, you know, people were left looking at holding paper bags basically UM. And and it's sort of an interesting space in general because of UM, you know, stable coins being a thing that we've asked to write about on on multiple times, uh on multiple occasions.

And he had an amazing tether odyssey last year, and so immediately we're just like, Zeke, can you tell us more about the space? So, so, Zeke, would you discover as you as you dove into your reporting and some of the stories that you found along the way. Yes, So if you are not a crypto person, this coin that collapsed it would just sound insane. I mean it got up to this is a sixty billion dollar collapse, which in like traditional finance would be like big news.

And basically, this was a coin that was supposed to always be worth one dollar because you could trade it for one dollar worth of a second coin, and you might say like, well, why do I want the second coin, and to that they would say, don't think about that too much. We're gonna pay you interest, and like it seems kind of like if it sounds kind of flimsy to you, it sounded kind of flimsy to a lot of people in crypto, but that didn't stop it from

amassing like huge amounts of assets. And then last week it all like came crashing down. And I spent a while trying to talk to regular investors who had sunk their savings into this and found that, I mean, people really believed in it to the they sunk like their whole net worth into this. I know Katie's dying to come in on this because you know so much about this space, but I do have to ask thank you. I do have to ask Zeke, because you mentioned that, um,

it would sound insane to a lot of people. I think one thing that perhaps gave people confidence was some of the backers. Right, you had Galaxy Digital Holdings, you had Jumped Trading, you had the venture investment arms of coin Based Global and Finance. Those are those are real names? Yeah,

I mean this guy seemed legit. This was one of the biggest cryptocurrencies and it's uh creator, Doe Kwan, was like a major figure in the crypto world, and he was saying that this system he developed was going to be the future of finance. And in crypto there are a lot of projects that are sort of based on this idea of like, I don't know fake it until

you make it. And there was this idea that if somehow, if it got going big enough and it really did become the future of finance, then whatever flaws there were in the business model could be kind of papered over, and that if we could just get it going, then the things that seemed maybe a bit ponzi ish about

the plan would not be catastrophic. And tell us about what was happening as this went wrong, because as you lay out in your piece, this death spiral that it entered into this is something we see in money market funds that we see we can see in banks, this sort of run that just these these institutions that can't meet. Yeah, I mean. The idea was if Terra, the stable coin, dropped below a dollar, that arbitrageurs would come in and they'd buy Tara because they could trade one Terra for

one dollar worth of the second coin, Luna. And so like if Luna went down to you know, ten cents, you would get ten lunas for your Terra and you would still be happy. So that would the arbitragures buying Terra would push the price of Terra back up to

a dollar. But the problem was that as people started to worry the they bought, they were issued huge amounts of Luna, more and more Luna, and even though these giant piles of Luna were in theory worth the dollar, the selling of the Luna pushed on the price of Luna. More and more lunas issued. By the end of the week there were like trillions of Lunas out there, and

basically you couldn't sell Luna at at any price. So like this initial problem that the value of the dollar coin was based on the second made up coin, like it worked great for like a year. In the end it was an issue. There was no like fundamental support for the value of the second coin, Luna, which led to this death spiral. Okay, markets have just been on pins and needles of late, and this one really rocked

sort of the crypto space. And I'm curious how how it's reverberating, uh, since since you know, so much of uh interest in this space is sort of you know, speculative, is there a risk that um, you know, other other houses in the crypto space get rocked? Um Still, you know, it seems like during the panic that wiped like ten or more off the market value of all cryptocurrencies. But

things seem to have stabilized. And one thing that was surprising about talking to people that invested in Terra is that most of them weren't like, oh, no, I've been I've been had, I'd better, I better stop with this plan. They were saying, let me find the next coin that is going to be worth you know, gonna go up a hundred times, so I can make back whatever. Some of them stayed in Terra in Luna because Do Kwan, the founder, he was kind of teasing that there was

going to be some sort of rescue. That hasn't really happened. Yes, for during the week, he kept teasing there was a rescue. Now he's talking about a plan to revive the whole system, which seems really unlikely. But just before I came on here, I was looking on Twitter and people were talking about Luna going to the moon again. Because in the crypto world, you've got a coin that's really close to zero, instead of saying wow, that that's yeah, yeah, how far can

it fall? Yeah, because a lot of rooms to rise. Zeke, what does all this mean for for actual stable coins like Tether that you've done a lot of reporting on. We about thirty seconds left. So Tether is supposedly backed by hard assets in the bank, and for a while it was getting during this crisis, it got a lot of redemption requests. So far it's been able to meet them.

But definitely like people in Washington and are renewing their calls to regulate stable coins because of this collapse, So I look like even more likely that's going to happen all right, could potentially see regulation around the corner. Zeke Fox's financial investigations reporter for Bloomberg News. Zeke story is featured in the new issue of Bloomberg Business Week magazine. It's available now on news stands, on the Bloomberg terminal and at Bloomberg dot com slash business Week. Joe Weber

is the editor of Bloomberg Business Week. He joined us this afternoon on the access line from Brooklyn. You're listening to business Week on Bloomberg Radio. I'm room journal. Yeah, but you let me drive? Oh no, no, no no, no, honey, please, I'll do the bride revels. I want to drive. It's good question. This is the drive to the globe. Communing don on Bloomberg Radio. Well, it's hard to believe. We are already there, just ten minutes a way from the

close of trading here in New York City. The Dow lower by six tenths of one percent, the S four tenths of one percent. The NASDAC. We can go ahead and call that flatboat is down to point seven five points, just three percent. Let's get into it. Cathy ends Whistle is a managing director at Morgan Stanley. She joins us on the phone from Miami. Kathy, Uh, how are things beings far? Volatile? They are uncertain. It's giving everybody a little bit of uneasiness and a lot of people asking

what to do in these markets. Finally, uh, and an honest answer when I ask how you're doing? Because I ask people all the time, and I'm like, are you kidding you? Look at these markets? How are you feeling? Okay? Thank you? You ended on a great question. I want to ask you that what do you do in these markets? Do you hide out or are you looking for opportunities amid some of the sell off here, I would say

a little bit of both. So for the last six months or so, our firm has been cautioning against you know exactly what's happening now. So we've been helping clients move out of growth and into value and trying to like reset portfolios where we can take advantage of UM volatility and take things that are painful and turn them into potential opportunities by like booking losses for things that we don't think will recover as well and putting that

money into areas that we like. One area that, surprisingly UM I've been putting money in for clients over the last six or eight weeks is municipal bonds, which very like seems very like straightforward, very boring. I think they're interesting, I think are interesting. Needs have not been interesting for what two or three years, we have not put it like new money into muni is in years, and now there's an opportunity. There was a dislocation, and they're more attractive.

What's attractive to you about them? Well, first of all, means are down right there down here to date, and so they're cheaper, so the yields are a little bit better, and we're looking at clients, you know, individual clients, particularly with their wealth and trying to protect it and also give them some tax free benefits, whether that's managing it from tax harvesting or giving them investments that will provide

you know, tax havens, and you needs are one of those. Okay, I remain unconvinced that metis are exciting, But what I do find exciting is, of course we're just being very very honest, and I never said very were exciting. I never said just a good option right now? Okay, okay, fair enough, But I do want to get your thoughts on the U S Treasury market because obviously, I mean, we saw the long end back yields really back up,

cooling off a little bit. Now that sell off. What are you thinking there, Well, we we think that actually treasuries are probably the most fairly priced um investments in the market today. And we also do think that there is an opportunity to buy treasuries um and hold them for a little bit and we should see a bump in them, So we we think that's a buy right now. Any part of the curve. What are you thinking on

duration risk here? So for duration risk, we're thinking more actually to go a little bit long because of the pricing of where it's that right now you can go along and we think there might be a little bit of a pull back there which would give it a boost. Interesting. Okay, so we've talked Younis, we've talked treasuries. Let's get back to equities here and and talk about potential downside and when you and the firm see the bottom here. All right,

So that's a great question. It's definitely tricky. I like to follow Mike glism in our firm and Lisa Shallotte. I think they're both brilliant. In fact, I'm down in Miami with Lisa Shallotte and they just heard her speak about her thoughts. But you know what we're trying to tell clients is this is a different It is a little bit different, right, So in the past, buy on the dip, long term hold. Like you know, there's a lot of things that used to work might not work

right now. And also I'm telling my clients to be patient. I'm also looking at opportunities to trade out of those companies that we think might not do well going forward. And and so for example, maybe there's some technology names that have run up, or there's areas of the market that have run up, the growth areas, and it might be a better opportunity to trade out where you can when the markets have a pop into things that we

think have a longer term for you. Yeah, they might include financials, healthcare, utilities, energy, um, just areas that you might expect that would do well in arising interest rate environment. And I mean, I'm curious to get your thoughts on staples in particular because I was looking at a chart earlier this week. But if you compare staples to you know, consumer discretionary stocks for example, staples have really been the shining star, uh in that in that sort of sector breakdown.

What are your thoughts on staples at this moment? Okay, so we're talking about individual company staples versus consumers staples, consumer staples. I should clarify, Oh, consumer stables. Okay, great, thank you. Um. So we have light staples much more than discretionary, and we've been very you know, very verbal about that in terms of that's an area that listen UM customers or clients, individuals. They're starting to pull back, their feeling the heat of arising you know, interest rate

market and also inflation. Things are more expensive. We're starting to see the consumer start to pull back. They still have to buy toilet paper, to paste and things like that. So staples can't go away. Discretionary can, right, right, And I mean, Kathy weren't coming off of a very dramatic

earning season. It's not over yet, I hear. I don't know, if you think about what we're hearing from the retailers in particular, it felt like for so long, margins, at least on the the SMP five hundreds or the big index level, they were just teflon. They just we're not getting dented at all. Has that narrative started to change, Yes,

it definitely has changed. We don't expect companies to be able to kick out the profits that they were kicking out previously because there's a lot of unknowns that are hitting their bottom line, which includes rising interest rates, which would mean that the cost of borrowing has gone up, um you know, supply chain issues, and it's a question of are they going to pass this off to the consumer or are they going to take the hit in

their own bottom line? And I think they have to take the hit in their own bottom line for the most part, because the consumer is not willing to pay those dollars anymore. They're worried and they're sort of closing in.

So the PE or the earnings that the companies are going to display going forwards should probably be reduced from what we were expecting, and then that brings the price of the stock down and also the PE down and so bottom line when they get to a certain point um in like the SMP five per se, we think at that point they're going to have um more like you know, sixteen seventeen um PE ratio. That seems a lot more reasonable than numbers that we've been seeing in

the twenties lately. Kathy end Whistle, Managing director at Morgan Stanley, joining us live from Miami. Kathy Sink, thanks so much for taking the time. Thanks for listening to Bloomberg Business Week, download the podcast on iTunes, SoundCloud, or Bloomberg dot com, and you can also listen to our radio show at two pm Eastern on Bloomberg Radio or watch us on YouTube search Bloomberg Global News