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.
Tesla's going to keep cutting prices to stoke demand, even after markdowns early this year took a significant toll of profitability. We'll get into their operating margin. You know you've been hearing about that a lot. That news was last night and then this morning, SpaceX attempting to send its starship system into space and then it exploded.
We have some.
Details on that, so let's get into it with our Bloomberg News EV reporter Sean o'caine with us on zoom into Austin, Texas. And then also with us is Bloomberg News Space reporter Lauren Greshe's on site in Texas near where the rocket exploded earlier today. So our thanks to both of you.
Sean. I do want to start with.
You, though, because the news out of Tesla last night, what we got in the earnings release and then what Elon had to say on the call with analysts, definitely move the stock price. What do you think here we are what twenty four hours in? Really is the key takeaway from what Tesla had to say.
Well, I mean, the bottom line is that the automotive gross margins when you pull out leases and you pull out regulatory credits, were under the target that Tesla's CFO Zach Kirkhorn, had forecasted on the last call back in January. He basically said, hey, you know, because that was right
around they had started making the really drastic cuts. They had already implemented price cuts at the end of last year in anticipation of, you know, all the questions about who was going to qualify for IRA credits and whatnot, and so he had said, hey, you know, we have industry leading margins. We're going to be able to take a bite out of those with some of these cuts to keep demand up, and we don't think it's going
to go under twenty percent. But after they released the numbers last night, it seems like most analysts were able to work out that automotive gross margin margins excluding those items were closer to eighteen percent. So even he was willing to admit on the call that that was lower than they expected. And that was the result of continuing to make cuts from the time of the last call to now, and also some other issues like some changes to the warranty on older vehicles and things like that.
So I think that's the biggest thing. I think the other biggest thing is that it doesn't sound like they're done. Elon Musk seems like he's eager to take advantage of the fact that they still have more margin to go that they could eat into if they wanted to continue to drop prices.
So, Sean, can you talk to me about that automotive gross margin number because it typically is just included in the earnings report, but analysts had to crunch the numbers this time around. Was that notable to you?
Yeah, that was the first thing that jumped out of me because it was the first thing I was looking for, like many other.
People searching for it, right Yeah.
Yeah, it's usually right up top and that first entry of the earnings report, and so it was very obvious right away that it wasn't going to be there and that it was going to take a little bit of math. I'm not terribly surprised at that. I mean, one of the things that Tesla's c said last quarter was that. You know, he gave those predictions about a twenty percent automotive gross margin and a forty seven thousand average selling price across all their models, and he was sort of
forecasting that. But he also said right after that, Hey, just so you know, we care more internally about the operating margin. We hope that's something that you'll consider as you go forward. So that they deemphasized automotive gross margin, I guess, to put it nicely, didn't really come as a surprise, although his favorite metric, operating gross margin was down pretty pretty severely, down to eleven point four percent, when a year ago it was in the nineteen So
they call that a manageable decline. I think a lot of other people were sort of trying to factor that in today as we saw the stock drop.
A little bit.
Yeah absolutely, I mean still up thirty two percent this year, but definitely a big haircut. Hey, Lauren, come on in on the story of all things elon Starlink.
What exactly happened?
Right? So it's the starship spacecraft.
The starships.
It's sorry, yeah, yeah, no, no, it's it's actually quite confusing because they put the word star in front of everything, I think. But yes, it's Starship and it's their deep based rocket that they're hoping to use to send humans to deep space like the Moon in Mars, and they are They tried to launch it on its first test launch today. Unfortunately, you know, it did it did achieve some air but ultimately, uh had it did explode at
about four minutes into the flight. So you know, they definitely got a lot of data from it, but you know, didn't in the way they.
Expected exploded or they exploded it.
So they exploded it. So we just learned recently. We were we were questioning for a minute whether or not it exploded on its own, maybe from aerodynamics, you know, pressures or forces on the vehicle. But it turns out that once the Starship rocket was going off course, it was if you looked on the live stream, you could see that it was kind of twirling off for tumbling
wildly in the sky. And then eventually SpaceX revealed that they activated the flight termination system, which is used to blow up the rocket so that it doesn't it ensures that it does not harm any uninvolved public or property.
Well, Lauren, I want to stick on some of the good news that we got for SpaceX today, and you have an amazing piece on this Everyone should go read it. I was blown away that you were able to change the intro so quickly based on the news because it's such a great piece on the terminal and online. Talk to me about the winds for SpaceX today.
Absolutely, and you know what that is just what space entails, right, there's always winds that you have to always be flexible because you never know how these things are going to turn out. But yes, some great wins today. I mean, this was the first test flight of the fully stacked Starship rocket. So Starship consists of two main parts of the Starship vehicle which carries the cargo, the satellite, the people.
That's the top of the rocket, and then the bottom of the rocket is the super heavy booster and that's what's needed. It has thirty three raptor engines on a space and it's used to break free of Earth's gravity and propel Starship to space. And this was the first time both of those pieces flew together, stacked on top of each other, on top of each other, so that
is a major win for SpaceX. They were able to actually clear the launch pad, achieve the highest helt seat I think they've ever done with this vehicle, and they were actually able to show that super heavy can fly. So unfortunately they had some engine out issues. You know, not all thirty three engines actually ignited, and some of them flamed out during the flight. And then obviously there are some cold control issues in the sky. But definitely a major win and SpaceX is thinking it a major win.
I don't know if you can hear behind me, but I'm out at a party where everyone is celebrating right now because they are so happy that this thing actually left the launch pad. So it's actually SpaceX is definitely seeing it as a win. For sure. They can use the data to incorporate it into future flight for sure.
All I could think of is like, what did that cost?
I'm going to go back to the business side of the story, Sean, come on back in here. What other color can you give us in terms of what we heard and what kind of elon we got on the analyst call?
Uh?
Well, you know it was.
Uh.
I think it's funny that we get him every time now, despite him saying a couple a couple of years ago that he was going to stop doing these things, But you know, he still seems pretty obviously involved in the day to there, day to day there, despite having a lot on his plate this week, whether that's the business of Twitter and trying to keep that afloat, and also launching a piece of technology into this guy that had never launched before in the super Heavy Booster. So you know,
it was it was interesting to hear him talk. I think the thing that really stuck out to me the most on the call and from Elon himself, was that in talking about the ability to eat into those margins as far as keeping competitive pressure up, he's talking about he thinks Too could actually go to zero profit on its cars, which is an outrageous thing to say because he so fully believes in the ability of his company to deliver on this promise that they've been promising for
years of being able to make its cars fully autonomous, that he thinks they could actually sell these things at a wash in the near term and recoup any of that lost profit down the road if they were able to roll out full self driving as an actual feature that people want to pay for and that is so revolutionary.
That it would see self driving.
Like, come on, I.
Mean a lot of people. A lot of people take that same approach. You know, I think we want to know for sure that it's possible. And he even explained last night he used it as a two step forward, one step back. Problems at the state we got to run.
Sean and Lauren, thank you so much. This is Bloomberg Radio.
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.
So another decision coming tomorrow on abortion pill limits as the Supreme Court extended a temporary hold on new restrictions on those pills, those restrictions imposed by a federal judge in Texas.
And now justices have until tomorrow to decide what to do with this case. This comes after the Biden administration and dan Co Laboratories, which is the maker of the drug, requested that any restrictions get put on hold. While this
legal battle continues a lot of moving parts. So here to discuss the impact of that battle is doctor Suzanne Bell, Assistant professor in Population, Family and Reproductive Health at Johns Hopkins Bloomberg School of Public Health, which I should mention as supported by Michael R. Bloomberg, founder of Bloomberg LP and Bloomberg Philanthropies. She's on zoom with us from Baltimore.
Doctor Bell.
Great to speak with you, and thanks for being here. I know we've been back and forth on this case for a couple of weeks, but what do we know right now about the impact that it's already had in terms of access to this pill?
Yeah, so right now, I'm just introduce using a lot of uncertainty in the states where abortion is still legal and providers are of just in an awaiting game right now for this decision, with a lot of potential clinical implications around the provision of medication abortion, which is currently more than half of abortions in the US, What does.
It mean if women don't have access to this pill going forward?
Ultimately?
Yeah, I mean, I think, much to the chagrin of the people who brought this cases, will not stop medication abortions from occurring. It is just really another attempt to interfere with the delivery of evidence based health care and control pregnant people's bodies. Providers will instead be forced to use a misoprostal only regimen instead of the more effective combined regimen with me for pristone, which simply means that pregnant people are going to be exposed to more uncomfortable
and potentially severe side effects that are very uncomfortable. But ultimately, this is an incredibly safe and effective regimen. It's really just a matter of interfering with the science when in fact, we have evidence for more than one hundred peer reviewed, rigorous studies showing that this medicine in combination with me so prostal is highly effective and safe for terminating pregnancies.
Okay, talk to me about the evidence here. I'm so glad you bring this up because one of the nuances of this case for those of us who are not doctors is this question about FDA approval that the judge in Texas brought up. Can you explain that to me? Is there any reason from your perspective to be concerned about the FDA approval of the abortion pill?
Absolutely not.
You know, the FDA is a very conservative, independent agency full of scientists that know how to evaluate the science, and we already had almost two about fifteen fourteen years of approval in France, where the medicine was developed before the FDA even approved it in two thousand and Since then, we have approximately eighty countries around the world who have.
Also approve this medicine.
We have decades of safety and effectiveness evidence from around the globe indicating that this is an appropriate approval that the FDA provided more than twenty years ago. And you know, in the intervening years in the US, hundreds of thousands, if not millions, have used this drug as part of their termination of a pregnancy. And so there's really no legitimate claim here around safety and a lack of evidence around me for pristom.
So what are the conversations you guys have been having at Johns Hopkins around this.
I mean, I think it's really frustrating.
There's a lot of frustration among clinicians, among social scientists doing work in this area because it's going to it's really just another way in which there are increasing barriers to the ability for people to self determine and you know, actualize their reproductive goals. This is just going to be another impediment, and people will work tirelessly to reduce the
impact act of those barriers. But really, what we know from the evidence is that, you know, the more barriers you put in place, the more disadvantaged populations in particular are negatively impacted by them, and that is going to have you know, significant long term health, social, financial implications for the people who ultimately aren't able to obtain a wanted abortion, whether it be medication or procedural.
In light of the fact that this is happening in the backdrop of.
Dobs and you know, twenty six states banning or severely restricting abortion in those parts of the country.
So Zan, let me just jump in and you say that it'll it'll you know, for those who might it might be difficult for them to obtain an abortion or I'm just curious, though, if the one pill is still available to everyone, how does that then maybe appease some of.
The impact on those numbers.
It will definitely reduce the likelihood that this is going to negate one of the options for people that are seeking abortion. I think it's just to situate this in the context of the much broader abortion landscape that we're sitting in right now in the US. This is just a way in which you will further you know, eroade
access to safe, effective medication abortion. Meso prostal is the mesa prosta only regimen, like I mentioned, is still incredibly safe, slightly less effective, so you will expose people to slightly more you know, potential for an incomplete abortion, and so it's you know, I think the claim in the lawsuit brought is really a farce because they claim to be concerned about the discomfort of you know, medication abortion and the risks associated with medication abortion and not wanting to
treat people in an emergency room that are suffering from medication abortion complications when in fact, less than half of a percent of all medication abortions result in a complication requiring you know, hospital based care.
It's incredibly safe. And in addition to that, I think.
It completely negates the fact that pregnancy is incredibly risky. The risk of maternal death for a person that whose pregnancy and then alive birth is fifteen times greater than that of safe abortion.
Wow, it's such an important data point. And I also heard you mentioned earlier which I hadn't heard before, that doubling up the second dose mesa prostal We know that that's a backup plan if this does go through, But is it more painful for the patient. Does it cause other potential difficulties beyond potentially not being as effective. Does it also cause potentially more discomfort than the current regimen.
Yeah, that's exactly the case.
It's really that, you know, the MESA prosta only regimen is used actually in many parts of the world where mey for pristone is not registered and is still effective and safe. It is a who recommended means of safely terminating a pregnancy, but it causes more uncomfortable side effects nausea, vomiting,
more severe cramping. So it's really just unnecessarily exposing ignant people to more discomfort and more severe side effects diarrhea, chills, and intense nausea that could be avoided if first taking the mefa pristone tablet followed by a lower dose of missoprostle.
I'm going to steal a question that Maddie actually had in our notes, and this is if you could testify, what would you want to tell Scotus about the impact of a move to ban something like the abortion pill, Because I think it's just a smart, super smart question.
Yeah.
Yeah, well, thankfully I am not on the spot there in krond of Scotis, but you know, I think as a as a researcher, as a scientist, I think it's really important to respect and acknowledge the science. And right now the evidence is unambiguous. We have more than one hundred rigorously conducted scientific studies from countries all over the world over the past three decades plus demonstrating the safety
and effectiveness of mefa priystone for medication abortion. So this decision from Casmark in Texas was clearly ideological, ideologically motivated, and there's, like I said, rely no ambiguity around this.
I think it would be a real travesty to have the.
Courts intervene with this independent agency's ability to approve and regulate medicines from the perspective of the science here in the US and.
In like thirty seconds here, Are you concerned at all about the implications this case could have for the FDA moving forward at all?
I mean, yes, I think this is a really dangerous precedent to establish that a court and any entity could bring a case against a drug maker against a specific medicine that has gone through the rigorous vetting.
Process that the FDA already has, that.
Is genuinely effective and conservative and especially with a drug like NIFA pristone that actually has a higher standard of safety and efficacy. So I think it would be really dangerous for the courts to move in that direction.
Well, so appreciate getting some time with you and just laying it out from a scientific and medical perspective and understanding potentially the impact on Suzanne. Thank you so much, doctor Suzanne Bell. She's assistant professor in Population, Family and Reproductive Health at Johns Hopkins Bloomberg School of Public Health. As you know, supported by Michael R. Bloomberg, founder of Bloomberg LP and Bloomberg Philanthropies. Doctor Bell joining us via zoom from Baltimore.
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 playing Bloomberg eleven thirty.
Remember when every day it felt like we were talking about another slew of companies going in public.
I mean it's a really different environment.
Yeah, it feels like those days are feeling foggier and foggier, both on the IPO side and the SPACs side.
Yeah, absolutely right, and a lot of it is to do with, you know, what's gone on in rates and just a market that's a little bit more nervous. So let's get to it. And I was looking at actually the Renaissance IPO Index. It's up about fourteen percent year to date, so that was kind of interesting despite some of the hesitation.
So you want to get to the IPO market, let's get to it.
We've got Rachel Garing Ey, America's IPO leader, joining us on Zoom from Nashville, Tennessee. Rachel, thank you so much for joining us. I know that EY recently released it's Global IPO Trends Report for the first quarter of twenty twenty three. Broad Picture here. What's the headline from the report?
Well, you know, happy to be here and thank you for having me. And just as the two of you are commenting a moment ago, definitely it's subdued out there, to say the least. We ended the quarter with thirty three IPOs in the US, raising roughly two and a half billion in proceeds. Another eleven companies have since come to market since the end of the quarter. So generally we're in line with this time last year, but well below levels we've seen in comparable periods over the past decade.
I feel like there's a lot of enthusiasm.
I feel like there I haven't I can't remember the last time there was anything in a conversation about, oh, we're looking forward to these companies going public. What's the outlook rachel or what kind of visibility do you have about maybe what's coming, you know, in the later half of the year and maybe into twenty twenty four.
Yeah, you know, there, I would say there's definitely continued strong interest from companies, so that the pipeline, the shadow pipeline that is building, there's you know, points of optimism there. But in terms of the immediate you know, coming into Q two, I'm not predicting a whole lot of additional activity just given the macroeconomic factors that is impacting all
companies out there, and it's going to continue. You mentioned nervousness that's certainly still their lack of stability and so forth. So companies are definitely in that wait and see waiting on the sidelines, waiting for the markets to reopen, but certainly several companies out there who are readily preparing for that opportunity.
So where where do you see the biggest, you know, factor for optimism when it comes to the I p O market? And when do you anticipate that optimism kicking back in.
Yeah, great question, And I wouldn't say there's one single factor. There's there's several factors that we are keeping a close look and following closely. You know, inflation readings definitely one. Interest rate hikes is as you previously mentioned, and where the FED stands on interest rates. Market volatility, you know that that's you know, been working in our favor. Frankly, you know in Q one we had three days in
the quarter where the VIX was over twenty five. You know that's in that kind of no go zone, if you will, Whereas you know, thirty days this time last year with the VIX over twenty five. So there's promising signs relative to volatility. But we still need, you know, continued stability, their growth, stock performance needs to continue to improve so that it starts attracting investors back to the IPO product.
Yeah, it's interesting. I wonder in terms of breaking it down a little bit more, Either geographically or bisector. How does that break out?
You know, right now, it's a lot of small numbers to be frank, I mean the you know, in terms of volumes and then proceeds raised, you know, with those numbers I was sharing earlier, eight of those deals were IPOs raising over fifty million, So that just gives you a context of the size of the deals happening right now, very small. Fifteen of the deals were companies based in the US, so large majority coming in from outside of
the US. So the deals right now are small. They are led by, you know, continued to be led by tech and life science sectors, but they're just not the large deals that we're used to seeing. Seeing some optimism and some uptick in the energy sector, industrials, consumer products. So it's you know, it's kind of across various sectors that we're seeing the activity right now.
Yeah, well, Rachel, I was going to stick on the global question for a second because I'm just back from Dubai, where every day there was a big story about IPOs because you don't pay tax.
Is there.
It's big on oil and there's a lot of opportunity and the interest rate environment is completely different. Are you seeing, big picture and longer term that the IPO market turns two countries like that, two cities like that, and out of the US, where it's just a little bit more volatile and there are more headwinds to deal with.
You know, despite the headwinds we're facing here in the US, it's still very much an attractive market. So the quietness that we're seeing in the experiencing rates now, hopefully we start to you know, see some of that unlocking and more activity here in the US late this year is our hope, certainly into twenty twenty four. In the meantime, are we going to see some you know, promising deals
outside of the US and some major markets. Absolutely, But I don't think that's necessarily indicative of vout you know, activity largely going away from the US long term.
I although, you know, it's you know, it's interesting. I was just doing kind of an an i IPO search on the Bloomberg and it looks like there's a fair amount you know, of.
Activity over in China.
I am curious, are we seeing you know, China certainly pick up their momentum and is it possible that IPOs we're going to see a lot more activity that aren't you know, United States or US based.
Yeah, we will continue to see some promising deals outside the US with ongoing kind of geopolitical tensions and regulatory moves so forth. I think we will see more deals in China. But again I expect our volume here in the US to hopefully pick back up again. I think it's late this year, though I don't know that it'll be Q two, hopefully later in Q three into Q four, and then certainly hopeful and optimistic about twenty twenty four.
All right, going to leave it on that note, Hey, Rachel, thank you. Rachel Garing, IPO leader at EY Americas on zoom from Nashville, Tennessee, and Madame just looking at the terminal Ali Baba's grocery arm gearing up for a Hong Kong ipo. You have a Chinese chip maker seeking an IPO with a value of over fourteen and a half billion that was earlier, that was overnight from Asia and group IPO likely this year. One venture capital firm saying, so,
that's a lot of activity out of Asia. Yeah, and I think it feels like it.
Well, it's such an important point that maybe investors and companies and entrepreneurs are just leaning more global and seeing more opportunity in places like China where you know, the environment is just different.
Yeah, yeah, exactly. So we'll see, we'll see whether or not stuff starts to pick up in the US later on. All right, you are listening and watching Bloomberg BusinessWeek right here on Bloomberg Radio.
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.
So we're gonna talk a little bit about those born old savings accounts.
We're gonna slow it down a little bit, everybody.
The new way show Bloomberg Business Week is out on newsstands.
This will all make sense in a moment. Be patient.
It's on newstands, online at Bloomberg dot com, slash BusinessWeek, and of course on the Bloomberg And we're talking about this week's domestic covery, which is something that the big bank CEOs over the past week or so have been asked about paying up more on bank savings accounts, which are increasingly looking pretty interesting. As a surgeon, interest rates has weiged on some of the more speculative core owners
of financial markets. Let's get more on those stories. The remarks in a new issue, and we get to of course, and it is the domestic cover. As I said earlier. Uh, the editor of Bloomberg BusinessWeek magazine, Joel Weber and Bloomberg Markets senior editor Mike Reigan both.
Actually Joe is at our studio.
Mike is there on zoom from New Jersey. Joel, We're you know, we constantly say we're living in there.
You're saving all your love forming us. It's a whit the Houston favorite of mine. Yes, so we've been perhaps you've noticed some offers from all over the place about how you can get four percent savings and Apple had that news betterments out with four point three five. Mike, do you remember when I could like invest in uh, you know, like a MC or pictures of digital apes and get rich really quickly. And it seems like the exact opposite is the cell now.
Yeah, absolutely, And you know the fascinating thing is in that sort of twelve thirteen years of rock bottom interest rates after the financial crisis, the banks kind of trained us all to forget about the whole notion of you know, they're supposed to be paying us money to give them our savings. It's really a fascinating, i think period in history, really a historical because you know, never have interest rates
stayed that low for that long. And even when the Federal Reserve started raising interest rates in twenty seventeen and twenty and eighteen, it was a very gradual, slow rise, and the banks didn't exactly react quickly to it by raising their own deposit rates, even though they were now able to make a little bit more money, you know, in the credit.
Markets and whatnot.
This time, it's a whole different scenario because that rise from the Federal Reserve has been so aggressive, so rapid that a.
Lot of banks have really reacted quickly to it.
And you know, as you pointed out, Apple, sort of that news landed right as we were polishing off this story, so it was good timing on that.
But the other fascinating thing is that not all banks have yet to do it.
You know, you look at your basic savings account at Chase or Bank of America, they're still at literally zero point zero one percent on a savings account and there's a variety of reasons for that. You know, they have a lot of much more diverse business other sources of
funding than bank deposits. But that disparity is really fascinating, you know, zero point zero one percent to some banks, UFB Direct, a small online bank, offering above five percent, and now Apple and Goldman getting into the business, offering over four percent. So it's it's a very dramatic and sort of newly competitive environment for banks to compete for these deposits, like like they haven't really had to do since before the global financial CRIS system in two thousand and eight.
Mike, should they be?
And I guess I ask because, as you say, you know, it's not the old fashioned bank of you know, taking deposits and loan out to the neighborhood, you know, to buy homes, to buy things, and so on and so forth. The big banks today are much more complicated financial entities and they have a lot of different ways to make money. Do they care, maybe this is a naive question, do they care whether or not they have those individual customer deposits?
How important is that to a bank?
Well, you know, I think the bigger you get the more diversified your businesses, the less pressure you're feeling, you know, especially when you look at a bank like JP Morgan Chase that saw I actually saw a flood of deposits in the first quarter because of the concern about the smaller regional banks. But the smaller you get, the more you are closer to that standard banking model of you know, borrowing low and lending high. I think the more pressure
you're feeling because the average consumer and businesses. Even more importantly, I've woken up to this idea that there's a better rate out there. Now it's finally worth my time and effort to sort of break up with my.
Bank, switch banks.
And the less I think many banks want to confront right now is a drop in deposits.
I mean that ultimately.
Didn't go over well.
It didn't go over well. It didn't go over well with Silicon Valley back.
Now that's obviously an exaggerated situation, but bank deposits in aggregate all US commercial banks dropped last year for the first time since like the nineteen forties, so that the competition is real and not all banks have raised their rates, but I think there's more to come. You know, there's this competition. It isn't over. There will be more banks reacting raising rates, you know, if not to four or
five percent. Certainly the era of rock bottom interest rates on savings deposits, I think is really coming to a pretty swift end.
You know.
The thing they have going for the though, is is a inertia.
Mike.
It's like really hard to pull out, you know, out of a bank where you've been banking forever and maybe you've got all those auto payments set up and auto checks and to like actually, you know, move from one institution to another, even going after you know, bank rates five point oh two percent. As great as that sound, that's sheer thing. Like man, inertia is a hard thing to overcome. So like, you know, what incentive do the banks really have to do this?
I believe they call it stickiness?
Yeah, stickiness right, yeah, you know, and that's we're kind of in that phase now where the inertia I think is still a big thing. You know, say you have ten thousand dollars in savings, if you're if you get a five percent rate on that, you're talking about five hundred bucks. So is it worth it for you for five hundred bucks to really, uh, as you point out, go through and take the effort and and possibly have
to rejigger all your automatic payments and stuff. But you know, the higher that savings goes up, if you have, you know, one hundred thousand dollars and all of a sudden you're talking about five thousand dollars a year, well you know, it might.
Be worth it. It's probably worth it.
And I think that's a calculation that a lot of just average mom and pops are doing around the country right now, and businesses as well well.
Also that five hundred dollars, as an investor would tell you, if you put that back into your Schwab brokerage, that could be a lot more in the decades to come. But I want to ask you about how to suss out these high old savings accounts. I get fed constant ads about a variety of different high old savings accounts. My friends and I are always having this discussion of what to do with our savings.
Do they look like the cover of Bloomberg Business Week, which is the number four flexing with a six pack? Very weird?
They look way less cool and way more sketchy, which is why I'm concerned about me and my friends getting scammed by non FDIC and SED high yield savings account. Do you have any advice for us?
Yeah, I mean I think you know, that's a great point. Obviously, you make sure you're dealing with a FDIC insured bank, which yeah, they all all the banks are more or less FDIIC insured now. But you know, I'm sure if you start hard enough on the internet you'll find some sketchy operators that aren't actually insured, you know, especially if you're you know, dipping a tone of the crypto market
and that sort of thing. But you know, the other important thing is, well, what is you know that FDIC limit is two hundred and fifty thousand dollars, So if you're talking about moving an amount of money greater than that, you have to think about it a little bit harder, and you know, perhaps split it up over a couple banks, or go to a money market mutual fund, which isn't fdi C in short, but they have a very strong
history of being pretty reliable. You know, I don't think I could be wrong about this, but I don't think a money market fund is I've actually failed in the US, you know, the reserve on in the financial crisis, uh broke the book reading you know, your assets dropped a little bit, but you know, so, yeah, you got to do your research.
And you know, some accounts require minimum balance, some don't.
If you're talking about a CD or what they call time deposit, you might have to lock up your money for a year or two years something like that.
So you know, it's it's a good time to read the fine print for once.
Yeah.
It also just makes me think, like, I mean that fine print, like is there is there some fine print that we haven't thought about for a while even, you know, and I'm like, there's there's basis points with some of this stuff, Like so is there you know when the when the Reagan family sits down and assesses their options, you know what, what are you just going straight for the north of five percent, Mike, or are you somewhere north south of that?
Well?
I think what's fascinating to me is that there is this skepticism and this you know, it's too good to be true mentality towards towards a four percent savings rate. When you know, I'm dating myself here a little bit, but you know, I remember back in the eighties. I mean, you know, you expected to get paid on your deposits, you know, and you shocked around.
And found that best that best yield.
I remember taking my nickels and dimes from the paper route and put them in the bank, knowing I, you know, I'd get a nice yield on it. So a little skepticism is healthy. But I think in the sort of spectrum of investments bank savings account, you know, I would.
Is as boring as it gets, is as boring and.
Probably as safe as it gets.
Granted, you know, if you're under that fd i C limit, especially that two hundred and fifty thousand dollars limit, now there is there there was sort of this paranoia that erupted when SVB and the other two went under that you.
Know, the the fd i C might.
Not have enough money in its own accounts to cover to ensure the deposits. If if the dominoes keep falling and enough banks go under.
I think that's subsided.
A little bit just because of the programs that have been put in place, and.
Also to me, I think, you know, the FDIC.
Is such an important institution to this country that even though we have this you know, pro wrestling version of politics going on right now, where you know, anything could happen. We might default on tragedies in a few months. I think that FDIC is so important that it would, you know, if it were to not live up to its obligations, that the damage on both sides of the political aisle would be so great that they actually would, you know, do.
What it takes to keep it afloat. So I think, you know, we.
Talk about a crisis of confidence if that.
Happened, absolutely absolutely yeah, And I you know, knock on wood, and I you know, I hope I'm not proved wrong about that, but I think, you know, it is such a you know, important bedrock of the entire US financial system that even in the toxic political environment we're in right now, I think they'd find a way to to to keep it going.
Okay, So if it's point zero one percent on basic savings deposits at Bank, Bank of America or or Chase, you know, like Mike Wake, what what's it gonna be? Is it gonna go point zero five or are they going to go to you know, zero point one?
I you know, I think right now the CEOs that those banks are kind of sussing out exactly what they're gonna have to do, because you.
Know, for one thing that the one big.
Competition for banks is money market mutual funds, right, because they're they invest in short term securities, they're able to be much more nimbler in raising and lowering rates.
As need be. You know, uh, JP Morgan's got money market funds.
Most of your big banks have these, So if they're leaving deposits on one side of the business, but they're going into the the other side, it's not as acute of an issue as you're smaller, more traditional that really needs that traditional savings deposit. So you know, I think I think the pressure is going to be much greater on the more simpler, uh you know, right, borrow, borrow low, and lend high type of banks then the more diversified sort of financial supermarket banks.
Although you know, we did see that headline on the Blueberg money market funds have the biggest weekly outflow since twenty twenty from the Investment Company Institute. So yeah, no, but I mean banks maybe getting squeezed. You know what I really want to know, Mike, did you pose for the cover story that stroll?
I think you didn't recognize the apps not mine us.
Going through a men's health phase cover design.
There there were many versions of that cover that existed before we got to that one, and I'm just so glad that it became weirder than where we were, because it was pretty weird, and then it got.
Even Weirderam like, what is it?
Text?
You just don't Sometimes there's just questions that you don't want to know the answer to you.
But he skipped right from a ment health inspiration to Crack magazine in.
The Business Week After Dark podcast. Catch it on your podcast.
You look too closely at the apps, it just gets your life gets really weird really quickly.
Oh my god.
All right, all right, guys, thank you so much. It is the domestic cover story Bloomberg Business Week, which is add on newsstands, online at Bloomberg dot com, slash BusinessWeek and of course on the Bloomberg Mike Reagan, thank you so much, Senior editor, lead blogger for the Bloomberg Markets Live blog.
I zoom from New Jersey.
Joe Webber, of course, the editor Bloomberg Business Week.
Are you really on some kind of health wellness.
Fixs Uh sure, sure, I mean I work out. I'm intermittent fasting sometimes, you know, it's.
All true, a little fasting. All right, you are listening and watching Bloomberg Business.
Week, brom.
Journal.
How about you let me drive?
Oh no, no, no, please, Grave, I want to try.
It's a good question, good time.
This is the drive to the clothes for me. Think well By on Bloomberg Radio.
Kind of see it feels like we're watching the markets a little bit in slow.
Motion today, right, Like what is happening? I don't know, it's really kind of a weird.
Maybe it's just that marking time, you know, marking time until we get the next fad decision.
Here's what our next guest has to say.
We are folks just about seventeen minutes away from the closing bell.
Stocks just off their loads.
Of the session, as you heard from Charlie, but tech really thanks to Tesla probably taking the biggest hit time for the drive to the close. Marion Bartel's is back with us, chief investment strategist and managing director at Sanctuary Wealth, a financial platform for investment advisors. She joins us once again on Zoom and Nayak, New York.
Marion, good to.
Have you back with us. It is an interesting market environment, and we've seen some tight ranges, certainly on the equity side of things.
You know, what to use seems to kind of have it right, is it?
What the equity market is maybe showing some debate about what comes next or the treasury trade. I'm curious how you see it.
Thank you so much for having me back out. Yes, you're absolutely correct. The market has really been range bound, and you know, and those are frustrating markets because it really doesn't feel like a trend. Although technically we're slightly in an upward bias. So the range has been forty two hundred on the high end. We haven't been able to break above that, and I would say there's good
support around thirty eight hundred. I would say very short term, the technical indicators are saying that we can get a pullback here, and you're seeing that happen today. But when we look at the technical indicators longer term, meaning more monthly type of price amount of indicators, we're actually getting buy signals. So we think these pullbacks a great opportunity
to buy. And what's really probably allowing the market to have a bias to the upside and why with all what seemed to be the negatives like corporate profits peaking, margins peaking, you know, interest rates up, really high risk of a recession. Although we've been talking about that a long time, is it seems that investors are positioned for that very defensive a lot of cash on the sidelines.
And when we look at fast money or you know, traders like hedge funds, they're positioned very short the market. They're already short, so which I think we have a floor here on the market, and I think that over time we're going to have a bias to the upside. But you're going to have to break above that forty two hundred to get all this negative positioning in a more positive light.
So, Mary, when you say technical indicators longer term on a monthly basis, signals to buyas it some of the things you just talked about in terms of trader shirt at the market, cash on the SILD, I'm curious the specifics of what you were seeing technically.
Yeah, so if you use one of my favorite indicators is called the stochastic, and we did a fourteen month stochastic. We've actually been watching it since December expecting a buy signal this year and sure enough, we've gotten a by signal. Now there's been other indicators that are not as well known. One is called copic and again that's a price momentum type of indicator, and one was developed by Marty Swig. Yeah, he was very famous for calling the crash in nineteen
eighty seven. Unfortunately he's not with us anymore, but he developed this indicator that's called the Swig breath or the Swig thrust breast breath indicator, and that's based on being very over sold and in a short period of time getting very overbought. And we don't get these sig very often. Now they're kind of mixed on their tactical reading. But in the last six readings that we've had from the indicator,
the market was higher twelve months later. So we really are starting to see some of the indicators go very bullish the market, although they're not getting a lot of press.
Do you think that earnings are going to support that idea moving forward?
So that's the problem.
We don't have the earnings or at least we feel that we're in a corporate profits recession. But again, as I said, everyone's positioned that way and markets get locked and especially have a floor to the downside when you have positioning so bearish. So what I think has to happen is you have to flush out the market. The only way you're going to do that is by going up, forcing everybody in, and then resetting the market, and then we'll see where we go. That's that's what I think
is the risk to the market. I think the risk is to the upside.
That's interesting. What do you make of the VIX? Do you care about it?
The volatility index it's now a little bit it's a little bit about seventeen, but it's really.
It had been moving down pretty substantially.
It has, and it kind of technically broke down.
Now.
I've heard some derivatives traders say that the VIX, the way it's calculated and how it's being used in trading is not as informative. But I still like to look at it, and it's technically broken down and it's actually signaling the opposite of what the market is doing. You would think with the VIX going down, the market would be going up, and the opposite is actually happening. It is maybe possible that the VIX continues to go down
and we're in this trading range type of environment. But I would say that there is a there's some confusion in the behavior of the vix.
Yeah, that's confusing to me that they're like dislocating, and I don't know what to make of that. And I also don't know what to make of a lot of the dislocation that we're seeing in the market right now. Really quickly, I want to ask you about something our market's reporter told us earlier, saying that markets may have already priced in, that we're past a recession that had already happened, and we're breaking out to the upside. Do you agree with that.
I don't think we've priced in a recession, although I think positioning has priced in a recession.
Okay, so that's different.
I don't think the market has, but I think investors have priced that in.
All right, What about on a technical basis? One more question, Marian, is that is there when you look at the technicals of various sectors within the broader market, what is there any that are saying here's a really good opportunity, really signaling a buye.
So there's obviously there's a lot of different ways to look at technicals. CARC Yeah, I've been very bullish semiconductors. I still have a cyclical bias. I still like aerospace and defense, but I want to balance that out with more defensive sectors like healthcare and utilities. So I think in a trading range market, you want a little bit of both.
All right, That makes sense, Kate, so great to check in with.
You have a great weekend. Marian Bartel.
She's chief investment strategist managing director over at Sanctuary Wealth. Joining us via zoom from Nyack.
New York.
This is the Bloomberg Business Week podcast of a little on Apple, Spotify, and anywhere else you get your podcasts. Listen live weekday afternoons from three to six Eastern on Bloomberg dot com, the iHeartRadio app, tune In, and the Bloomberg Business App. You can also watch us live every weekday on YouTube and always on the Bloomberg terminal.