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Right now, we're going down to Houston, Texas. Our good friend Alextel from Bloomberg Television. She's speaking with Dow CEO Jim Fiddling. Let's go to that net right now.
Paul, good to hear you. I'm glad you're back from vacation. That's right, and here with Jim Fitterling. It's such a pleasure to have you. Thank you so much for joining.
Thank you for having me.
Is this an economy, a US economy that needs bed cuts?
What's your take on a global scale?
Yeah, it's starting to feel like the economy is gaining a little bit of strength at the beginning of the year.
It's not. It's not robust.
Maybe a little bit early to tell if this is a long term trend, but it's been a decent start to the year. Electronics has been a bit stronger than last year. Last year was a kind of a weak spot, so our outlook is good. Automotive had a good year last year, and I think despite the discussion around electric vehicles and some of the flat to negative sentiment that's in the news, the reality is I think it's going
to be another good year in the automotive sector. Housing has been the slowest start, but there's been an uptick and single family home starts, which is good. That usually has a ripple effect through a lot of other durable goods manufacturing. We haven't seen that yet, So a modest good start to the year and we just see how things develop.
So we're getting there.
So that begs the question that if we do, say get two to three cuts this year, for example, from the FED, is your expectation that we see accelerated growth higher infletion. Does that actually start more growth?
Well, I think in the commodity space and in our industry in particular, we tend to lead into a slow down, and so we started to lead into this eighteen months middle of this year will be twenty four months ago, and we typically tend to lead out, and so it's too early to say we're coming out, but you can start to see shoots that are like when we see.
A recovery and of course that demand.
You know, what's missing from the economy right now is the durable goods demand. And when that construction demand and when that comes back, those are high volume applications, and that demand pool is going to mean that prices are going to move up a bit. I don't know if I would call that necessarily inflationary, but that's just the cycle.
What do you think it's waiting for.
I think it's waiting for rate reductions, for the mortgage rates to come down. I think that's the next big thing that typically triggers kind of a shoot up in the housing market, and then that triggers a lot of other services and durable goods demand that comes behind it.
So we may see a second half recovery. I'm hopeful, sort of what I'm hearing from you that hopeful. Is it a similar picture over in Europe? So the chemical sector in Europe is under a lot of pressure. I mean, INPO, costs are high. The economy there is weaker in many sense compared to the US.
What's your take.
European consumer demand is not nearly as strong as it is here in the States, and of course the weight of a higher energy costs has hit the consumer a lot of different ways. Now we're seeing an improvement year over year. Obviously, energies come down, but natural gas is below ten dollars a million BTU landed in Europe, but we sit here today at a dollar sixty and maybe the long term trend is two fifty to three Fiftyference still.
A big difference.
And electricity, you know which most consumers purchase electricity costs are double maybe a little bit more than what they are here in the US. So I think, you know, there's a big question when I look at my downstream customers in Europe, I'm always questioning.
How long will they be there?
And if you don't have a domestic market to service in Europe, you really can't afford to export from Europe. So if you don't have a domestic market to service, you have to say, you know, what does my footprint need to be? How long can I be there in order to be part of that economy.
That's a big deal.
You're talking about the automotive industry, construction industry, like, is that going to move?
What's your best sense?
A lot of technology comes out of there too, I mean beyond just the industry.
A lot of the technology that we use around.
The world starts in Europe, and so you know, exporting technology obviously is a little bit easier than exporting product. But we're already starting to see imports of electric vehicles from China into Europe. We're seeing China has become a lower cost competitor than Europe in petrochemical, so you're starting to see product move into Europe. The Middle East obviously has been a big supplier because of their cost position
into Europe. Europe's getting a bit of a reprieve right now because of the Suez Canal situation, so operating rates are up a little bit, but I think that'll once that Israel Gaza conflict is resolved, then we'll see things go back to normal.
Is it fair to say that you wouldn't build a new chemical plant in.
Europe right now?
Be very tough.
You'd have to be in a very specialized downstream market that you knew could handle the higher input costs. But I would say, in general, be very tough.
So for you, then let's take a look at inmpleation for a second. Where are costs still rising and where are they falling.
You're starting to see some costs I mean cost and commodities came off pretty dramatically. I think one of the reasons we announced our final investment decision on our project in Canada at the end of last year was because we were able to lock in a lot of bulk material costs like steel, concrete, cement, all the things we need to build a plan.
So I think that's been good now.
Obviously, as some of this construction demand and things come back, that'll tend to rise with the cycle. But I think if you looked at the commodity portion, a lot of inflation came out of there. If you look at the concer like going to the grocery store, some of that hasn't come out yet, and so I think we're starting to see that.
With the de stalking that happened.
Last year, no signs of really restocking in the value chain, I think you're going to start to see some of that consumer inflation come out to and I think that's a little bit what the Fed's looking at.
Are you worried about tariffs come I don't know November January from either President.
Yeah. You make a great point, both.
As a global company and as a company that's been part of global trade for many, many years. Tariffs don't stimulate demand anywhere, So I think what would happen under a teriff regime is we might not be happy with the demand result. Global free trade has been a better platform for growth. It's been better for growth, not just for the US, and we're advantaged, of course because of energy among other things, but it's been great for other countries.
It's lifted so many people out of poverty, it's created a middle class, it's allowed technology to trans transfer around the world.
So I would also just mean that you would have to produce and use the products in country, right, You have to produce and do in country be totally separate from each other.
Right When we have a supply chain today that is not US centric and hasn't had time to reshore, so that would become inflationary in and of itself. So I think, you know, the thing we're trying to fight and the tool we're using, they both could end up being inflationary.
I don't know that tariffs is the answer.
Let's turn to if you're building a new plant today, what are you going to power it with in the next ten to fifteen years, Like, what's going to.
Be that thing?
Well, we're all building a new plant in Canada, and the purpose for going up there was to build the world's first zero scope on and two emissions ethylene complex.
We will power it with hydrogen.
It's a pretty elegant solution because we actually take ethane and natural gas liquid, we crack it to make ethylene and we make two byproducts methane and hydrogen. Lindy will come in and build an auto thermal reformer that'll convert that to pure hydrogen, and that pure hydrogen will fire the furnace. So it's a very closed loop system that will allow us to capture all the CO two off the auto thermal reformer and sequester that and make Zeroscope one and two ethylene and plastics there.
It'll be the biggest.
Hydrogen carbon capture project of its kind in the world, and it'll be the first one. First phase will be up in twenty twenty seven.
One more question on that, when are you going to make money off of it? And that's why way of understanding is it to put together as soon.
As we started up.
It'll be as competitive as our project that we did here in Texas and started up in twenty seventeen has got a Price on Carbon, so we were able to recover some of the higher costs of scrubbing out the CO two from the price on carbon. And the Alberta government and the federal government in Canada have investment tax credits and incentives for us to put in the hydrogen technology in.
The first place.
So both of those things mean we'll be able to make a return like the project we build down here in Texas.
And I think if you look.
At what we did with IRA, we also made a big step forward one with the tax credits and the support for new technologies, but I think more importantly the breadth of the IRA. So we as opposed to say the EU, which is very focused on a transition but very specific you can only make green hydrogen a certain way. We said, look, all forms of low carbon energy are part of the equation, and we're going to make it
accessible for everybody to be part of the equation. So that could be small modular nuclear, which we've signed up with the DOE and the Advanced Reactor Demonstration program with x Energy. We're looking at one of our sites here in Texas, seed Drift near Victoria, Texas, and we're looking at that site to basically replace all of our combined cycle gas COGEN with a small modular reactor for eighty megawatt units that would take all the power and steam.
At the site to zero carbon. Wow.
That's a big project, but we think we can do that and help Xynergy bring that cost competitive with hydrogen carbon capture or combined cycle gas with CO two scrubbing.
We think we can be competitive with both of those.
Jim, so great.
I love getting that perspective, the global perspective and the energy transition perspective.
Thanks so much. In Fiddling a CEO of doubt, Paul and Molly back to you.
All right, Thanks very much. Alex appreciate that. That's Alex Steele. She was sitting down with dal CEO Jim Fiddling in Bloomberg's Houston bureau.
There you're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at ten am Eastern on applecard Play and Android Auto with the Bloomberg Business Act. You can also listen live on Amazon Alexa from our flagship New York station, Just Say Alexa playing Bloomberg eleven thirty.
All right, let's check in with Ira Jersey. He is our go to guy on markets, the treasure markets that really prices in kind of where this FED may want to go. Here, our Jersey chief interest rate strategist for Bloomberg Intelligence, joining us from the confines of our Princeton University, our Princeton, New Jersey set down there. IIRA again, not looking for anything tomorrow, but you're the smart money. When we've heard of the smart money, we talk about the Irad Jerseys of the world.
What are you going to be listening for?
Yeah, I'm going to be looking for a couple of things, Paul. So number one is a balanceee policy.
You know, we've been.
Waiting for more information and details on how that was going to develop over time, and at the last meeting, Jay Powell said, hey, hey, the next meeting, we're going to start talking about what we're going to do. So I'll be listening in this post meeting press conference as
to what are the options maybe they're considering. There won't be any decisions and they won't make a and there won't be a lot of detail yet, but yeah, you know, what are they thinking in terms of timing and also in terms of size of how they're going to cut back their asset asset run off So that's number one, and then number two is obviously some of the nuanced
in details. How do the dots change, And in particular, I'm not going to really look at the twenty twenty four dots, you know, there's a lot of focus on that, but it's the twenty twenty five dots that are going to matter for like the long term end of the treasury market and also for the mortgage market. So look at those twenty twenty five dots. How low does the
Fed still think it's going to cut interest rates? Is it going to be lower than what they've said, or maybe are they going to you know, cut a little less than they said based on their projections of those dots.
Well, let's get into the projections also a little bit more that this is going to be the first updated summary of economic projects we're going to get this year. So the twenty twenty three dots at the end of in December that we saw had those three cuts priced in for this year. As you said, maybe to twenty twenty four dots less interesting than twenty five. But we're also going to get updated inflation projections, updated GDP projections, any movement a sense might happen in there.
Yeah, I think that the GDP projections maybe not so much, but the CPI projections and the PC core PC projections probably have to move up a little bit just based on the data and information that we've gotten so far. I would be pretty surprised if we didn't get an
uptick in what they call the central tendency. So keep in mind when you see the summary of economic projections, they come up with what's called the central tendency, which is a trimmed mean they take off some of the outliers and then say, here's the central tendency that we think that CPI and GDP are going to be in this year. So I would be pretty surprised if those didn't come up. The other one to watch, of course, is going to be there expectation of the employment situation.
So where's the unemployment rate going in their forecast, because that is obviously the second key to their dual mandate besides besides the inflation.
That besides inflation.
So right now they don't have to worry about the employment situation because things are very tight, so a three point nine percent unemployment and the like. But if their forecast suggests that maybe employment is going to remain better than what the December SEP had said. Then there's the possibility that maybe at some point in the not too distant future they might go from three cuts to two.
Cuts in the dot plot come June.
Of course, there's a lot of data we get before then, but I think that in order to prepare the market for that, one of the ways that it can it can do so without without having two or more members move their dots up, would be to say, hey, we actually think the employment situation is going to be better than we thought just three months ago.
So IRA w I r PG, the WORP function. We started the year with six the market pricing in approximately six rate cuts were now down to approximately three. Does that seem more realistic to you?
That's been our call since last October, So yeah, it's like come back. You know, quite frankly that that pricing of six cuts was one of the three things that we highlighted as maybe being the biggest missed pricings in the rates market. That and also inflation expectations, because we had five year inflation expectations earlier in the year approaching two percent, and we thought that that was somewhat too low and unrealistically low and that they would probably have
to come up. So three cuts at this point seems reasonable. It's because you know, obviously the Federal Reserve could cut five, they could cut one, right, they could cut zero. So I think that that's a more reasonable midpoint of potential outcomes than is that than was the six cuts that were priced in January.
And yeah, you know, you look.
At the rest of the treasury market, like two year yields at four point four point seven percent, two year yields are exactly pricing for three cuts this year and three cuts next year. So you know, I think that that, you know, those are pretty close to fair value. When they were down at four point four percent, they were uh, you know, obviously a little bit overpriced, and now it's it's more more realistic pricing.
I think for the potential policy outcomes.
How much do you think Powell is going to get into the cadence of rate cuts. I think it was maybe Vice Chair Jefferson who had brought up recently that in I think it was in Greenspan's tenure that the Fed had cut and then you know, waited a couple of meetings cut again. So maybe the you know, the stop and go nature of coming down. If Powell might allude to how that spacing is going to play out.
Yeah, I doubt that that the chair is going to say anything completely outrageous, so he'll leave his options open.
But I wouldn't be surprised if he mentioned.
That, uh that a stop, stop go or not going every meeting, not cutting every meeting is a realistic potility. And clearly, you know, three cuts this year would require them to skip at least one meeting, if not too depending on when they started, right, So it wouldn't it wouldn't surprise me personally if the Federal Reserve did cut in June and then waited again until September to see what the economy was doing, get you wind up getting, you know, to almost three more months of data in
between June and the September meeting. So given that, you know, I think that that going in June actually gives the Fed a lot more optionality. You know, cutting in July would also give them similar optionality where maybe they cut in July and then they don't cut again until November and then wait till December. Right, And there's the possibility that if the economy continues to be pretty good, then there's no reason for the FED to necessarily cut in December.
And you only get fifty basis points of cuts this year, so that would not be a surprise, you know, going in a measured pace, right, something like that. That was the green Span hiking cycle back in the mid two thousands when he said, you know, we're going to go to measured pace, So this could be something similar. It's been hard for the FED in the past to calibrate things that way because they're always they've always been reacting to some crisis or some massive downturn in the economy
that was where they were behind the curve. So I think the FED at this point would like to get in front of the curve and start to cut. The risk is that they make the mistake of reaccelerating inflation, right, and that's something that a lot of market participants are
very worried about as well. So the FED is in a tough place right here, quite frankly, so doing nothing is actually the path of least resistance, at least until it's clear that the economy is slowing enough that they can feel comfortable cutting rates.
Yeah. Well, I mean that's there's going to be a kind of a high bar to get that amount of slowing between now and June. Now, I mean, looking at the data that we've gotten for the first two months of the year, it looks like inflation is still pretty firm, the job market's still pretty strongly seen a ton of that, like you know, slowing activity that that you know, Powell said in his congressional testimony that they're not far from
getting that level of confidence to start cutting rates. But I don't think we've really gotten much news since those comments that would make them more confident.
Yeah, I don't disagree with that. I think that that's the reason why the markets, you know, now pricing for a July cut instead of a June first cut. But you still get another three months of data. There's still there are some signs that the economy is slowing. When you look at some of the uh some of the survey data, for example, you're you're seeing some confidence levels going down a little bit. You do have some some
areas of consumption that are slowing pretty meaningfully. So so all is not great, but it's also as you note, it's it's fine, right, and and fine means that the FED doesn't necessarily need to cut interest rates. You know what what the FED would love to do is to kind of cut interest rates following how much inflation is falling. The The challenge with that is which inflation measure you're
targeting and does the market understand that? And I think that that's maybe a communications issue that Jay Powell and some other members of the FED could address, because are they happy with having with having the Fed funds rate three hundred basis points above inflation based on you know, one of the measures of inflation. That's where it is, and that would seem to be high and very restrictive.
And that's one of the reasons.
Why when when Ja Palell or Chris Waller or some of these other members of the Fed Reserve say that rates are restrictive, Yep, that's what they're talking about, right, that difference between the FED funds rate and inflation.
All right, Ira, great stuff, Really appreciate getting couple of minutes of your time before this important FED meeting tomorrow. That's our Jersey chief US interest rate strategist for Bloomberg Intelligence.
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Waiting to Fed tomorrow and not much as expected from the Fed and their statement and from jpal Steady as she goes. I guess Marcus is trying to get a sense of when the FED will begin cutting rates this year. Where's theercenaria where maybe they pushed out the next year. It certainly is impacting the markets. Let's check in with a professional on this stuff. Phil Orlando, chief equity market strategist and head of Client portfolio Management and federator at
Hermes joins us via zoom. So Phil, what are you looking for from the Fed tomorrow and do you expect it to change your outlook?
Paul, good morning, Thank you very much for having me back on. We are very much out of sync with the market. You know, as you and I talked I guests earlier this year, the consensus view on Wall Street was that there'd be six or seven rate cuts this year, with the first one starting tomorrow, you know, due to immaculate disinflation and the immaculate pivot thesis. And we just
didn't see that. We were sort of in the three cut camp, with the first one coming maybe in July, July, November, December was sort of the way we were timing this out. And what's transpired over the last couple of months is that inflation, you know, as we discussed, is a little sticky or a little more persistent than perhaps the consensus thought, and the FED recognizing that, has been trying to tamp down some of this enthusiasm for a significant number of
rate cuts. So fast forward to tomorrow, we expect the Federal Reserve to do literally nothing. We still think that first cut is coming in July, and I think the market is going to talk about what we've seen with CPI and PPI and PCE over the last four or five months, in that the rapid decline that we saw from the middle of twenty two two into the end
of twenty three has now gotten chopping. Well. We've actually seen an increase in inflation a little bit over the last couple of months due to energy and food prices, and housing and labor cost pressures and all the things that you and I talked about earlier this year.
What's the trade that you're preparing for Phil in terms of tomorrow, maybe you and your team, if you've played, you know, run out a few scenarios. Obviously the you know, interest rate move being expected to be zero, but looking at more in terms of what might happen with the dots, what might happen with the economic projections? Have you guys come up with a game plan of how to move in either direction depending on what those materials show.
Fabulous question, Molly, And there are two parts to this. I want to focus on the dot part of your question first. And the one thing that sort of confounded us at the last SEP a week or so before Christmas was the fed's forecast that core PCEE inflation would get to their two percent target. But by the end of calendar twenty six, literally three years from now, and we're at two point eight percent now, down from like five point six percent, you know, a year and a
half ago, two years ago. So in our minds we're saying, Okay, is the FED being too conservative because they screwed up that whole transitory thing a couple of years ago and they don't want to make the same mistake twice, or are they trying to tell us something that they recognize, you know, taking a really deep dive into the data that achieving this last mile, getting core PC down to two percent is going to be really hard, and we need to adjust expectations within the market. So that that's
sort of one issue. What does the FED do with that dot? That two percent core PCE by the end of calendar twenty six dot? Did that stay exactly where it is or do they move that? Upon point? Is the market question, how do we invest for this? And over the last say, three or four months, there's been
a significant divergence in the marketplace. Benchmark ten year treasury yields, which were three point eight percent you know, in the fourth quarter of last year, are now sitting at four thirty all right, so we've backed up fifty basis points and treasury yields over the last couple of months. The S and P five hundred is up nine percent year to date, it's up twenty seven percent since it's low the end of October. That's incongruous that there needs to
be more in synct. Frankly, I think the bond market's got it right. The backup in rates over the course of the last couple of months because of the disappointment with inflation, in our view, is the right move. Equity markets seem to be overly optimistic, and perhaps that's because of the performance of what now turns out to be the you know, the mag one. In Vidia is nearly a ten bagger over the last eighteen months. Now in Video is down about thirteen percent over the last couple
of weeks. So maybe from that oversold position and video is going to start to ratchet back to more reasonable valuation levels, and maybe the equity market, reflecting what's going on in the bond market, but begins to come back to more reasonable levels as well.
I were speaking, Phil Orlando, chief equity market strategist or federator Hermes coming up in just moments, we're gonna bring you a TV simulcast Bloomberg's Alex Steele. She's speaking with dal CEO Jim Fiddling in Houston. So we'll bring that to you.
In just moments.
Hey, Phil, So, given that backdrop on rates, am I buying them or am I selling them?
Here?
What are we doing?
Rates? Or stocks?
Stocks?
All right?
So our view going into this year is that we would have a barbell shaped year in terms of S and P five hundred performance. We thought we'd get out of the gate in great shape, and clearly we have. Frankly, we've gotten out of the gate in two grade a shape. Our full year target for the S and P five hundred and fifty two hundred, and we're essentially there now. We thought there'd be a lot of chopping volatility in the summer associated with the Fed's first rate cut, which
we thought would start in July. Typically stocks go down when the stock when the FED starts cutting, and we think there's gonna be a lot of volatility in the summer and fall going into the election, and then we think there's going to be a powerful sort of post election sigh of relief rally that takes us back to
fifty two hundred. So the equity trade here over say the next six months is going to be one where I think the froth comes off of a lot of the growth and the technology names that have done phenomenally well, you know, over the last eighteen months, and I think a lot of the sectors that frankly have been left for dead, domestic large cap value, domestic small camp growth, international, I think you're going to see sort of a reversion of the mean changing of the guard, if you will,
and those stocks, I think we'll have a better next couple of quarters than the growth and tech stocks have had over the last eighteen months.
So if your call is for the first rate cut coming in July, and you've been hanging with that call for several months now, you must be feeling pretty good right now these days. How about that? I mean, how many people not too long ago we're thinking tomorrow is when you know the recuts really start rolling.
Well, it's there's good and bad to that. We were feeling a little nervous at the end of last year in the beginning of this year because we were completely out of sync with the market and we're sort of scratching our heads, sitting around the table saying we've got to be missing something. And it turns out that we got this one right, or at least it appears so at this point, tomorrow's another day or inflation data, more labor market data, more economic data generally, and this is
a game that continues to play out. We come back every day and evaluate, you know, what's going to happen from this point forward.
So, Phil, how about the energy space here, I'm just looking at WTA crude oil moving higher yet again today at over eighty three dollars for barrel. How do you guys think about the energy space?
Well, Paul, again, this is one of the things we talked about at the beginning of the year. Energy is an overweight for us, with WTI sitting at sixty five dollars at the beginning of the year. Our view is that it was mispriced, yep, particularly given the volatility in the Middle East and the fact that our strategic petroleum reserve is sitting at half We felt that CREWD would get into that eighty to ninety dollars a barrel neighborhood
by the end of this year. And you said, we're now in the low eighties three months in, so crude is actually is absolutely moving in the right direction, right all.
Right, Phil, thanks so much for joining us. Always appreciate getting your thoughts there. Phil Orlando, Chief faculty market strategist and head of Client portfolio Management at Federated Hermes.
You're listening to the Bloomberg Intelligence Podcast. Catch us live week days at ten am Eastern Apple car Play and Android Auto with a Bloomberg Business app. You can also listen live on Amazon Alexa from our flagship New York station. Just say Alexa playing Bloomberg eleven thirty.
One of the most read stories on the terminal today, Molly Oprah. If you put that in the headline, that's going to get.
That's a good way to get some hits going on.
Oprah hypes Zepp it bound and we go vy, but keeps her choice secret. So apparently she's out there. She's become kind of the unofficial spokesperson for his GLP one drugs that are all the rage here, just to.
Catch all of them, because we don't know which one she's on right now.
That's right, Well, they're all great.
I guess that.
Whatever she's doing, it's working.
It's working for her Madison Ulla Joints, and she's a healthcare reporter for Bloomberg near she's a reporter on this story. What's Oprah's role here with these drugs.
Well, we're used to seeing Oprah as the face of weight Watchers obviously for the last almost a decade. And she said recently that she was exiting the board of Weight Watchers, and then she said that it was to avoid potential perceptions of conflict of interest, and then she's doing this special now, which was all about weight loss.
She did special on ABC Television, Yeah, on Abc. Was it a paid promotion or it was not.
Novo Nordisks said that they didn't have any you know, financial anything to do with Oprah really, and she's not, you know, to our knowledge, doesn't have a partnership with either of the drug manufacturers. But you know, people that were watching the show and were on Twitter last night sort of reacting to it, said that it watched and seemed sort of like an infomercial for the drugs.
Yeah, tell us a little bit more about who was on it. You were telling us before we got on the air here that there were some doctors, but maybe they kind of glanced over the side effects a bit and that this was really just a big, you know, hype up moment for these weight loss drugs.
Yeah, so they heard from patients, there were doctors. There were executives from Nova Nordisk and Eli Lilly on the program as well. The majority of the program was sort of centered on patient experiences with these drugs, but it really didn't get into details about the side effects, sort of glossed over them, and the doctor that they had on talking about them said that the side effects were overhyped.
Really, so again that kind of goes to the editorial integrity of it. I mean I'm not a journalist, but.
Really, yeah, I mean are we all journalists?
Yes, there was definitely I think that it served a purpose. And Oprah is on these drugs. She's had a great experience with them, so she says, and that's sort of what the program was centered around, and really spoke to that positive experience on the drugs.
So what are Oprah's feelings toward Weight Watchers right now? I mean, this is, like you said, she has been the face of that company for so many years and now just like really seems to be doing like, you know, a total one to eighty and that weight Watchers would probably be on the losing end of the success of these drugs.
Yeah.
Yeah, And she asked, I mean, weight Watchers CEO was on this program, and she asked a very pointed question, you know, what is the role and what's the point of weight Watchers now that we have these medications, which I think is sort of the question that the whole industry has been asking, and the diet industry and analysts and everyone and you know, weight Watchers. CEO said that there is still a role for them to play in
supporting the community spporting people's weight loss journeys. But I guess that still sort of remains to be seen because their sock's not doing due all right now.
I really hesitate to ask this question, but since you reported on it, what is ozembic face.
Yes, so, ozempic face is another sort of trend that we're seeing happen right now, especially here in New York. People who have rapid weight loss from the weight loss drugs are getting this hollowed out look in their cheeks, which I mean it happens with weight loss. It's not just from the drugs, but it's the rapid weight loss that sort of makes it more noticeable. So then they're seeking out plastic surgery clinics medspots to get botox or facelifts and sort of help offset those effects.
Add that to the list all the winners and losers off what comes out of ozetic I mean we've I mean the original kind of knock on effect was like, oh, you know, all the potato chip companies, maybe not so good for them, and now plastic surgery coming up. So it's just like the hollowing out of your face. You've got the saggy skin there.
And yeah, yeah, like the extra loose skin ab view, which is makes botox has said that this could be a potential you know, boon for Botox sales going forward and said that at earnings last quarter.
So it's like I can't keep up.
Yeah, So on these GLP drugs, where are we in terms of uh, I know someone who has a prescription, but this person cannot get it filled because there's not enough supply where and it is not me? Where are they not insured?
Right?
So that two questions, Yeah, where are we on ramping up supply to meet demand? And then secondarily who pays for this stuff?
Yeah? I mean the supply problem has been a huge issue and Nova Noorda, Skinnyla Lily are investing billions of dollars to ramp up supply to try to meet demand. But you know, I've seen an analyst notes there like the demand for these products just seems like it's insatiable and at this point they're already coming from behind. So and all of these investments in production capacity like take a couple of years to come online. So we're sort
of just still racing to keep up with it. It's you know, probably Lily said it is probably going to be you know, not this year that they're able to meet supply, maybe next year. So we're still still trying to ramp up the supply there. And then in terms of paying for it, we have like I think fifty percent of commercial plans cover the drugs for obesity, A third of state health plans through Medicaid cover the drugs.
Medicare does not cover weight loss drugs, so it's very patchy still, and a lot of people are paying out of pocket.
I want to come back to Oper's role in all of this, because I really find it interesting that, like we've been saying, this is still like, you know, these drugs are relatively in their infancy, and we don't really know a ton of the side effects at least over
the longer term yet. And I just find it kind of amazing that somebody with a reputation like Oprah is I mean, obviously I would think, you know, she's done her research on this to the extent that it's available, but it's kind of amazing to you know, just be putting herself so behind all of this when like I mean, so many people really trust her and I don't.
I don't know.
I think maybe the skeptic in me is just thinking, like there's got to be some risk to that from her reputational perspective, this could backfire.
Yeah, I mean I think that's like that's a risk that the companies are it's in the back of their minds too. I mean, it's so important, and there is such a long history of safety issues with weight loss drugs. I mean, Fenn Fenn in the nineties was shown to cause heart problems. There was a weight loss drug in the EU that was pulled from the market after it was shown to cause suicide, and you know, neurological problems.
So there's just I think that the bar for safety with these drugs is really high, and that's something to just be really cognizant of.
I mean, let's not forget too most of these drugs, weren't they also originated to treat diabetes, right, not weight loss, right.
And so we know from like twenty years of the you know, diabetes drugs being around that they are safe and they're definitely safer than older drugs, but they're being used so widely now by people who don't necessarily have diabetes or obesity, and so that's sort of the risk is like we don't know what the risks are in patients who you know, they haven't really been studied or weren't the target population.
What do the companies say about getting these drugs in a pill format or all for format because that a movie, it'd be another driver in usage.
Yeah, that's the next big thing and that's both of you know, Novo Nordiskannilai, Lilly are working on pills. That's sort of the next exciting thing that people are watching for. And it also could help with supply because pills are a little bit easier to manufacture than the weight loss shots. Could help with you know, the active ingredients as well because it's a little bit different, So that might help from the supply standpoint. It also might make them more
accessible potentially cheaper. So it's it's a big deal.
How do people decide, you know, if you're looking to, you know, be taking one of these drugs, whether it's zet bound with govy ozempic, Like, how do people differentiate between all of these or they kind of like roughly looked at fairly equally from a consumer perspective.
I mean, so ozempic and manduro which is Lily's sort of version of ozempic, those are four diabetes and then with gov and zet bound are the weight loss drugs. Those are for obesity. And so it really depends on insurance coverage most of the time, and the doctors are the ones that are prescribing it. So they've told me, you know, doctors have told me they tend to prescribe the one that insurance will cover, and so it's sort of dependent on that.
But interesting, okay, in otherwise, what could this be?
Like?
A thousand a month?
Right?
Right?
A thousand a month or more?
Is that what it is?
Really? And you have to do it for the rest of your life if.
You want to, really, if you want to keep the weight off.
Right and that hollow face, yes, and then.
At exactly round and round it goes all right, Madison, thanks so much for joining us. Great reporting there.
Manis Muller.
She's a Bloomberg News health reporter and talking about her, she's got a couple of great stories out there, one on the Oprah and the other one on o zepic face.
I mean, boy, I'm I'm just floored still at like the you know ripple effect of.
All of this, right, I mean, having you know, these consumer propits companies CEOs come on and talk about ozepic and impact on their business. Yeah, that was incredibly silly but maybe not.
Yeah, and now that you've got this new problem to deal with that, like, you know, you look great, you're slim down, but now your faces all all hold out And I mean, just man, how do you explain that to your friends?
You know?
Right, I don't know, but yeah I am seeing people.
Boy, you lost a lot of weight.
Oh yeah, yeah, I mean it's it's out there, even with the regular folk.
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