Power Lunch - Inflation Situation 01/14/25

Episode Date: January 14, 2025

The Dow ticked higher today, as traders looked toward fresh inflation data following the release of the lighter-than-expected PPI report. We’ll tell you all you need to know. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

And welcome to Power Lunch. I'm Brian Salman along with Kelly Evans. Stock's turning a little bit higher this afternoon, but a bunch of big tech down again. Is it all high? Is it all because of borrowing costs? That is a good question because 4.8 on the 10 year again, even with softer PPI, we're watching those bond yields after this morning's inflation report. We were two tenths on the headline, half as much as expected. Core was flat and the CPI comes out tomorrow. And all of this may cost you, the taxpayer, more money as debt,

And deficits keep going up. Those higher borrowing costs could take a bite out of everyone. Absolutely, fair point. Also, we've been following this little trickle becoming more of it. What's the next step after a trickle? A flow of deal news, United Rentals, buying H&E equipment services for nearly $5 billion. Stream. A trickle to a stream.

Yes. A stream of deal news. You're welcome. H&E has doubled. It's up 105% today. We've got some breaking news out of the Federal Reserve. Let's bring in Steve Leasman. Steve, what's the story?

We have the main. minutes of the discount rate meetings of the Federal Reserve. And what we learned, Kelly, was that only eight of the 12 banks leading into that December meeting requested a cut in the discount right. That is the board of directors. They meet. This is an indication, perhaps, of where the president of the Federal Reserve Bank wanted them to go. Sometimes they direct them. Sometimes they don't. But only eight of 12 wanted it, which four did not. Kansas City, Minneapolis, as Dallas and St. Louis did not request a quarter point cut in the discount rates. That suggests that four of those presidents are a little more hawkish than, or at least their

boards are, and perhaps the presidents as well. The discount rate, men have said some directors were cautiously optimistic on the outlook. Others, however, most directors cited uncertainty about potential changes to trade, fiscal, and other government policies as affecting their outlook. Importantly here, two of the four banks that didn't request the discount rate are headed, Kansas City, headed by Jeff Schmidt, and St. Louis, headed by Alberto Musilam. Both of them have votes this year on the Federal Market Committee. So those two guys you can look at as potential staking out a kind of hawkish position or hawkish wing of the FOMC this year. Kelly? So, Steve, in other words, would the discount rate normally be news,

or is this news because you think there's something to read into about the next direction on interest rates? Yeah, the latter of that, Kelly. Usually, okay, so I'll give you an example. In September, all 12 discounts requested a cut in the discount rate. Now, not all requested 50 basis points. For the November meeting, 10 of the 12 did. Now we're down to 8 of the 12. So I think this tells you how, remember when Powell said it was a close call?

It was a close call. More banks did not really seem to be on board with that quarter point cut. And then I think it's also important that both St. Louis and Kansas City, those banks did not request the cut. And they're headed by two guys who have been a little more on the hawkish side in their rhetoric of late. Appreciate it for that guidance. Steve, thank you very much. Steve Leesman with the latest there from the Fed. In terms of the markets, our next guest says we're at an inflection point. Oh, no, we're good news is bad news.

And that recent economic data does make a January cut in about a, for two weeks time, unlikely. Ash Shah is here with us. He's the chief investment officer for public investing at Goldman Sachs Ascent Management. Sheesh, it's great to see you again. Great to be back. You know, I say, oh, no, we don't want good news to be bad news.

We want it to be good news. But even this way, it's odd. Even this morning, you got, quote, unquote, better news on the PPI. And what did bond yields do? They go up. It just nothing is what you want it to be. Everyone's always unhappy. It's not as bad as it sounds.

But what we're hearing and what those Fred presidents are telling us is that the labor market is robust. that they're seeing kind of good outlook on growth. And so the cuts that have been made, you know, probably don't need any more in the nearer term until the economy slows further. Can that be good news, though? I mean, people will go back and say we were supposed to get like seven rate cuts last year and we only got, what, two or three. And the market did incredibly well. Yeah.

So it could be good news, but it probably changes your outlook versus when we are expecting 100 or 150 basis points of cuts. And it's one of the reasons why we're really focused on in our bond strategies being dynamic, taking advantage of relative value opportunities there. But in our stock strategies being more about income and asking the question, how do you generate income from your equity portfolio? Can't you just go to treasuries? If you want an income, you can get 5% out of 10 year right now. Yeah. Well, you certainly can.

Tax free in some cases. Well, you're still paying taxes on your treasuries. Tax minimized, but, you know, there's some. benefits. But then you're going to take the volatility of the bond market and a lot of investors, if you're investing in for the long term, that's not what do you want to do. Besides, you already have stocks. And so the question is, how do you make sure that the stock allocation of your portfolio is generating income? You're not as exposed to this volatility we've seen over the course of the last two weeks where stocks are up, stocks are down. But you can take advantage of things like

high dividends in Europe or like selling calls against your positions, which you can do in ETF form now in a tax-efficient way. Here's the dirty reality of Wall Street the last year or so, which is that if you just bought like Amazon, if you bought like the QQQ, ETF, you outperformed about 95% of hedge funds. And strategy. All right. Multi-billion dollar hedge funds with gigantic homes in Greenwich, Connecticut, you've done better than them.

That, I think, will change. higher rates will hurt that. So how do we look smart and make money in the stock market? And please don't tell me it's just buying the triple Q again, Ashish. No. So I think you're exactly right. I'm going to add another one to you. The valuations are higher. And guess what? This is the highest level of optimization that you've ever seen when it comes to retail and investing in equity. So what we're really talking about is that the story about last year, we know this happens all the time where people look back to last year and they try to rinse and repeat. We don't think that that's going to be the case, but we do think you want to be invested. And we think that the

places you're going to go, right, you go to bond to be dynamic and generate income. Wait, you say bond and dynamic in the same sentence? I did because maybe James Bond. I was going to say, well, how in the world are bonds dynamic all this? I mean, you're a dynamic guy, but how are bonds dynamic? Well, if you're actively managing a bond portfolio, which most people, when they invest in their bond portfolios, they're investing in active strategies. You know, things like the heavy deficit you highlighted, create opportunities in steepening curves, in rising risk premium in the bond market, and you can actually make money without having to pick the direction or time the Fed. On the complete opposite side, if the Fed started cutting tomorrow, right, the place you're going to benefit the most is small caps.

And we've talked about small caps, but there's an additional reason to love small caps in this environment is suddenly the deal environment is changed. And you just highlighted it. I know, but the problem is, by the way, she's obsessed with this. When they did rate cuts, rates went, the long rates went up and the small caps have not been able to keep up. That's right. And that's why you have a diversified portfolio because the small caps, this is their time. because as you highlighted, Brian, last year the NASDAQ went to the moon. The MAG 7 has driven this.

This year, it's going to be if the Fed actually does pivot, small caps are going to be the place the money flows. If that doesn't happen, generating income out of your large caps is going to be what you want to do. And by the way, the U.S. is unique, right? U.S. is beachfront property. I said it the last time I was here, you know, we are exceptional in that we have technology and we have commodities in energy, which is in shortage.

And so when you think about the world in investing, you can look outside the world for bonds that are not U.S. bonds, and that's where the big rate cuts have been happening. All I'm going to say, if you had owned the triple Q's in 2015, they were trading at 100. They're at 500 today. So I'm not even sure this is a story of the last couple of years. It's like it's exactly what you said,

the exceptionalism, the innovation. You know, we just had new announcements from chat, GPT. Now they're going to let you go. ChatGPT will now roll out a beta feature where you can schedule your own tasks to be performed at a future time. I think I still, I think the secret is maybe you should stick with

that just the triple cues or that area of technology, whatever the valuation may be, versus trying all these strategies where you're bending over backwards to make sure that the timing and the conditions are right. So I think you're highlighting a really, really important point, which is chat GPT is not an open AI are not actually in the NASDAQ today.

I know, but a lot of the beneficiaries of their rise are. No, but you're highlighting the important point, which is now it's about the applications of AI, not the infrastructure, right? It's not just about Nvidia chips. It's now what do you do without that processing that's happened? How do we actually generate revenue out of it, which we all know that revenue is the endgame? We saw this in the dot-com bubble. Like, we're not saying it's a bubble, but you do see this migration from infrastructure to application, and we think you're going to start to see it. Remember global crossing?

I do remember. I'm updating my... Global Crossing spent tens of billions of dollars building fiber optic cables on the seafloor. We couldn't operate today without those fiber optic cables. Global Crossing bankrupted itself, effectively building those cables that we still use today. And I do worry that AI is at that same point, that a lot of these companies are going to bankrupt themselves.

But ultimately, we do use their technology. As long as not my money getting wiped out. So here's the thing. Yeah. You know, you, the hyperscalers today are actually doing the investment out of free cash flow, right? And that's a difference is people, like the large companies that are investing in this space, you know, Microsoft is investing $80 billion in 2025 in AI infrastructure. And that is coming out of cash flow.

It's not the startup. There are startups in the space. Some will come, some will go. But we see a broadening in the space. And by the way, a lot of those companies are going to start off in the small, that universe. All right. Aish, appreciate it. Thanks for having to have you with us today. Ashish Shah with Goldman Sachs. Thank you. All right. So let's stay on this borrowing cost and debt and interest rate story. Maybe talk more about bonds and bond yields, which by way,

bond yields so much higher than they were just a couple of months ago. And almost everybody thought they were going to go down. Apparently the bond market did not get the memo. Let's get right now to Rick Centelli out in Chicago with more on where bonds and what bonds are doing today. Rick. You know, I find it so fascinating. If you look at the data where all of this started this morning at 8.30 Eastern, if you took the month-over-month numbers, we made some progress. Now, let's look at month-over-month X-food, X-energy, X-trade, the true core.

And you see the chart there. That chart goes back a couple of years, and we're down. It was one-tenth today, and that's good news. But if you look at the year-over-year numbers, and this is the year-over-year-x-food-ex-E. Energy X-trade the true core you can see that even though came down and that was a late revision from 3.5 to 3.3 It's still elevated as a matter of fact all the year over-year numbers are over 3%. What did the markets do and this is really fascinating? Look at twos and tens on the same chart basically the 10 year is higher in yield after it had volatility

But if you look at where they were at 830 Eastern and I was there, we're at 437 plus or about a basis point lower in twos. We're exactly at the same place in tens at 479. Now granted, it made a play for 480 and surpassed that briefly. So there's some clues here. Even though the market's largely unaffected by the cooler than expected PPI, the curve steepen on this. The curve steepens when you get better growth or you're a little nervous about inflation generally. So you could take your pick or you could take both. Tomorrow's CPI is going to obviously probably have a much larger effect on the Treasury complex,

but I think it is noteworthy that we are coexisting at this level of year-over-year inflation with positive equities, all in the green for the most part, and interest rates that continue to make progress to the upside, almost on a daily basis. Remember, the low yields of the year, Brian, were made on the first. trading day of 2025. Back to you. Rick, thank you very much. All right, folks, we have got one block down, a lot more show to go. Facing down the government's debt problem. We're going to speak with former House Financial Services Committee at Patrick McHenry about just that coming up. Plus,

Starbucks making a big change saying, do this or get out. Welcome back. Got a lot of breaking news of the last couple of minutes. First off, let's hit some breaking news out of Black Rock. Leslie Picker joining us now with that. Hi, yeah. So I just got off the phone with a source who confirmed some reporting from other outlets that Mark Weidman is leaving Black Rock. He was widely seen as one of the top successor candidates to Larry Fink upon Fink's ultimate potential departure at some point down the road. That's not something that has a specific date yet. However, Weidman was head of the global client business there.

He's done kind of the whole circuit at Black Rock. He led I shares. He was the global head, as I mentioned, of client businesses. He helped stand up their FMA advisory business as well. I'm told this was his choice. He has been a long-term veteran of the company, but it's not clear where he is going, what he is doing, but it was his choice to ultimately leave the firm.

And, you know, in these stories, you never know exactly what to read into it. Obviously, in the case of J.P. Morgan, where this morning, Daniel Pinto also said he will, will be stepping down at some point at the firm. What is this, is this the end of an era? Is it just, you know, hey, we have some earnings coming up. Let's get this news out of the way.

Is there anything to read into strategically? I mean, both companies report earnings tomorrow. So I would say that it's not necessarily a coincidence that both of these news items are coming out today. Although I do believe that the Weidman news was expected a little bit later. You know, it's not like there was a memo that circulated or anything like that. I haven't gotten a hold of any specific details internally from the kind of. company. That said, you know, you've got this kind of inflection point where you've got these leaders and you've got the kind of bench of people, bench of candidates who could ultimately

take their job. Both Lerie Fink and Jamie Diamond are very well-respected, very eloquent leaders that have just driven tremendous change within their respective areas. And so kind of the parlor games of who will fill that seat, if you're looking around and saying, well, this may not happened for a while, it's just going to be time for me to go and or if you, you know, at some point you kind of get to that age where it just doesn't make sense to be the successor anymore. Right. If you're in your 60s.

So I think it was kind of a case of that for both instances. Leslie Picker, thank you very much. Got some more breaking news. This time out of Washington, the monthly look at how much the federal government is spending. Megan Kisela has the details. Megan. Kelly, this time it is more than ever the government spending $1.8 trillion so far. in fiscal year 2025. That's about 6% more than the first quarter of last year and setting an

all-time record in spending for the first three months of the fiscal year. Treasury has taken in just about $1.1 trillion in the same time frame. So the government has also set a record for the size of the deficit at this point in the fiscal year running at $681 billion. That's 26% higher than the first quarter of fiscal 2024. Now, as for what's causing this record, spending a big chunk of it is interest on the public debt. The U.S. spending $3.8. $308 billion in interest the first three months of this year. That's a 7% increase from the same quarter a year ago. And then looking across the agencies, they're spending a bit more, too.

A couple highlights here, spending was up 41%, $9 billion at the Department of Homeland Security. Most of that due to FEMA, spending more on hurricane and disaster relief. Spending at the Department of Veterans Affairs up 13% or 11 billion. That's a response to Congress's move to expand benefits for veterans, Social Security, also up 6% so far this year. And EPA also spent an extra $21 billion so far this year to put towards its greenhouse gas reduction fund. Guys. All right, Megan, thank you.

So let's talk more now about that along with debt and deficits because as interest rates rise, you, the American taxpayer, may have to pay more, maybe a lot more, to fund our growing debt. The U.S. national debt now with $36 trillion. And maybe here's an RBI for you. That is $323,000. per taxpayer. That's what all you taxpayers owe in the national debt. That just one of the big topics at the frontiers of Digital Finance Conference, sponsored by Biz2 Credit, along with how digital currencies and AI may impact things like how you get paid, spend money, and maybe

even are taxed by the government. Let's talk about all of it, former Congressman and former chair of the House Financial Services Committee. Patrick McHenry is the keynote speaker at the conference joining us now from it at the University of Miami. Congressman McKinnery's great to have you on because we just had the breaking news from Megan Kassel. There's a lot of numbers there, but the bottom line is this. We are debts and deficits are going up. The deficit, CnBC.com story from Jeff Cox just broke minutes ago. The deficit went up 40, 40, 40 percent spending is out of control. So it's clear that we have a federal government's too large. for our capacity to pay for it. We're a great economy, growing economy, and yet we have record

debt and deficits. This is unacceptable. We have, you know, just a year and a half ago, we negotiated the raising of the debt ceiling. Speaker McCarthy had me and Congressman Garrett Graves negotiate with the White House and bring them stubbornly along with spending reductions. Unfortunately, this same Congress has gone beyond what we were spending before that debt but what we negotiated in that debt ceiling agreement. We had key changes to environmental regulatory policy and welfare reform connected with those debt ceiling increase. But we also got year-over-year spending reductions.

And that was successful in the first year, and unfortunately not successful in the second year of delivery on that debt ceiling agreement. We need to have a structural change in how we fund our government. And we need a structural change in what our government does and how we spend money. It is high time we do this. Yeah, fair or no. I'm going to tell you something you know, which is that politicians get elected by promising to give people stuff.

They don't get elected by promising to take stuff away. I say this dearly as a lot of friends that work for the government. I'm a hope Virginia Tech Hokies. I've got a lot of friends that whole area. All you need to do is go to D.C. And realize how rich it is. The money, my hometown in Winchester, Virginia is now basically a suburb of Washington, D.C. the money goes six of the ten richest counties in America are now around D.C.

I don't bring this up to knock the area. I bring it up as the point that I don't see, do you see spending ever going down? Yes. Because all that money is funding now lifestyles, which are not going away. Okay, so let's rewind. The debt ceiling agreement I'm talking about from May of 2023, we got spending reductions without help from anyone. Speaker McCarthy was the only game in town.

House Republicans are only game in town. Now Republicans run the House, the Senate, and the White House. And we have Elon Musk on the case with Doge. This level of attention from significant leaders that want to drive change in our federal footprint, that is how you get change. When you take politicians, and look, I'm a reforming politician, served for 20 years in Congress. But when you bring attention to that, you shine a spotlight on it. You demand change and the markets demand change. politicians will follow. That level of attention, that level of import with Elon Musk running Doge is a

welcome and good thing. I want them to be successful and I hope they're successful. We desperately need it. I mean, just to kind of build on that, there are people on Wall Street kind of desperate for a signal that we're bending the curve and it's just unclear where that's coming from, what that's going to look like. I mean, certainly in any way when interest costs are this high, right, Congressman, like, what do we do? What do we do? Not, not Do you. but like the real meaningful programs. Like how do you fix that or raise revenue or what is the answer? So the largest drives are of our deficit and growing debt are health care and health care related.

Obamacare has been a disaster. We know that. I don't think, I'm not going to keep litigating that. But Medicare and Medicaid are the two largest federal government programs. That's where Congress's attention needs to be focused. And that needs to be a part of the reconciliation packages. that they're going to have to extend tax reform, to deal with a number of border issues. This is the major piece of legislation for this year in Congress,

and it needs to have significant spending cuts and reforms to these programs in order to have any credibility to extend the tax cuts. Is that on a table? I mean, it may be Medicaid, but the president, didn't he campaign on not really touching Medicare? Yes, and you can take and have substantial reforms to Medicaid, which we had in the first repeal and replace bill in 2017. This is not a new policy set. This is not something you all you have to do is dust off that old policy, and you can get significant hundreds of billions of dollars of savings over the next decade by putting in place simple reforms like

handing Medicaid over to the states with a growth rate that's significant but not gross and generous like it currently is. And so reforms like that have to be a part of this reconciliation package for us to have any credibility with the market that we're going to do important and big things. I think that's interesting that, you know, it's going to be one big bill. If all of that has to go in it, what is their majority, like a two-seat majority or something? Didn't say it was easy. Yeah. But for my cheap seats here, but for my cheap seats, I can tell you, this is, this is a part of the conversation on Capitol Hill and will be necessary for this package to pass. And if not, that digital finance conference behind you, they

They have some alternatives, I think. Well, exactly. We need small business lending, and we need new ways to do that. And that's why the world of digital finance is here to stay. Well, glad you're there, Frontiers, Digital Finance. Former Congressman Patrick McHenry, thank you very much, as always. Thanks. Very quickly, Kelly, I want to just alert our viewers.

And you know this, but a lot of our viewers may not. You often hear that the deficit is down, right? We hear that a lot from specific politicians. No names, no parties. but you hear that. Here's why it's technically true but misleading. Number one, it's not down compared to a couple years ago, except for COVID spending. If you count that year or two years of just massive trillions to COVID spending or spending around COVID, the deficit is down. Well, let's put it this way. We're running the biggest deficits outside of wartime or COVID in history. That's it. So they can say the deficit is down, but it's a trick of the words because it's only down from trillions of spending related to a once in a 50 to 75 year pay. pandemic? No, the last couple of years, which have not featured a pandemic or a war, we've run

six and a half percent budget deficits, the largest that we've had outside of those circumstances. And based on the data we just got, the first three months of this fiscal year, the incoming administration has a huge ship to turn if they don't want to continue on that trajectory. After the break, health care stocks are trying to find a footing after a tough 2024, which names might deliver some gains in Market Navigator right after this. All right, I don't have to say it because I think the animation, Dom, says it all. It's time for our market navigator. Brought to you by

Charles Schwab and you're Dominic Chu. I am and you are Brian Sullivan. Hi. That was Kelly Evans over there over there. We were just talking to. Anyway, so the health care sector is starting off 2025 with some smaller gains, but on a relative basis it's outperforming. It's got a long way to go though to make for a

tough 2024. With J.P. Morgan's Healthcare Conference kind of wrapping up this week. Our next guest is taking a look at the sector and has some thoughts on where it's headed and which names may be in for a healthier return this year. No. I did it. I went there. So joining us now, Mr. Sullivan.

Is Carter Worth, the founder and CEO of Worth Charting, Carter, thanks for being here. It was the worst performing, the single worst performing sector in the S&P 500 over the last 12 months. So is it due for a bounce? Yes, thank you. Man, good to see you both. The question here, of course, is, is it right to play this laggard? Sometimes there's weakness to stay away from, and then there's weakness to take advantage. My hunch is at the latter. Worst performer last year, but also, and we might start with the very first chart, over the past

10 years. Basically, you're talking about an aggregate, one of the parts that composes the whole being up 100 percent, orange line, that's healthcare, where the market's up 200. So it's not only been a real problem over the past 12 months, but over a long period now, which is to say that the relative performance of the sector peaked to the market in 2015. So the question is what to do. It's still the fourth largest sector at basically 10.5% weight in the S&P. And I think there are individual names that one should take advantage of.

And we have two of them here to focus on. So the first to look at would be ISRG. By my work, this is a steady, orderly uptrend. You can see it there. It is bounced off the trend line to the penny, to the penny, to the penny. And, you know, the relative strength, momentum very much intact, and it's a case of stay long, be long by my work. Now, another smaller stock, but still they're both very large cap, is Stryker.

ISRG is almost 200 billion, strikers, more like 130. But the same circumstance here, it's the importance of respecting trend and then trying to take advantage of weakness that leaves a stock or currency, commodity index, back at a trend line. So both stocks playing for a bounce here within a sector that is very, depressed. All right. Carter worked with the moves there. Carter, thank you very much for being here, right? And we'll see whether healthcare makes that turnaround. But again, I mean, it is an important sector. As he points out, the fourth biggest sector in the entire S&P. And how many times have we talked about Eli Lilly and GLP ones and all of these other big trends that were happening right in here? So

maybe there are at least names that you have to look at outside of just the ones that are doing weight loss. I'm going to make up. I'm going to make up, but being a TV anchor, it's going to sound like I didn't make it up. Okay. So if I'm going to say with the Thoris, I'm going to say it with authority, but Kelly's got a computer. I think 22% of the American economy is now directly or indirectly related to health care. Some would say that health care is not part of the economy. You could say the health care is the economy. Well, you can say over the next 10 to 20 years, it could be approaching half of American economic output is going to be tied in some way towards spending around health care and pharmaceuticals.

17% of the economy, according to Kaiser, Brian. Typical TV hyperbole. That's direct. That's direct. So you add an indirect, and I think you're, there you go. And by the way, what's the projection for the next 20 or 30 years, right? If we keep spending on this kind of trend, what's it going to be like? Well, if direct is 17, I feel confident that 22% number.

But someone out there. You're correct. There you go. According to this TV acre. Okay, as we head to break, check out shares of bridge bio. Speaking of health care, it's up 30% in a month. They're seeing strong demand for their heart disease medication. The CEO next.

Welcome back to Power Lunch. I'm Bertha Coombs with your CNBC News Update. More than 88,000 people in the Los Angeles area are under evacuation orders today as firefighters battle the large palisades and eaten fires. The region is braced, bracing for extremely critical fire conditions right now, brought on by the return of the dry Santa Ana winds. It has prompted the National Weather Service to issue. a rare warning of a particularly dangerous situation.

President Biden will reportedly remove Cuba's state sponsor of terror designation just days before he leaves office, according to the Associated Press. The State Department reinstated the designation in 2021, as then-President Trump was in the final days of his first term. The Trump administration said Cuba repeatedly provided support. for acts of international terrorism and granted safe harbor to terrorists. A new FDA proposal could change how we get nutrition information on our food. It would require food manufacturers to display levels of saturated fat, sodium, and added sugar

on the front of the packaging rather than the back. If approved, shoppers could see that change as early as 2028. You know, Kelly, when I was in Mexico, I noticed that if you had a soda or something, it would say this is a very high sugar product right on the front of the label. I think we're going to start catching up to a lot of those other standards, rest of world, Bertha Banks. Shares of the biotech company Bridge Bio, surging 20% this week, up nearly 7% today as the company announces strong demand for a medication used to treat a type of heart disease. That news coming out of the JP Morgan Healthcare Conference in San Francisco. the company's CEO, Neil Kumar, is standing by with our health and pharma reporter, Angelica Peoples. Angelica?

Hey, Kelly, that's right. We're here with Neil. Thanks so much for joining us. Really appreciate it. So, like Kelly mentioned, you just got this drug approved, a truby for ATTR cardiomyopathy. You know, talk us through that opportunity and how that launch is going so far. Sure. Thanks for having me on.

ATTR cardiomyopathy affects some 300,000 Americans. It's one of the most common causes of cardiovascular disease, which, as you know, is the leading cause of death in the United States. States, and it uniformly arises from the destabilization of a protein called transdiretin, and all we're doing is gluing that protein back together. So the opportunity here is to really stave off death in cardiovascular hospitalization, and that's what our product's been shown to do. And you're also, though, you're competing with Pfizer and also potentially on Nilem if they get their drug approved.

So how do you see that competitive landscape looking? Yeah, so Pfizer's a wonderful job of building this market out over the last five years, but what they have is sort of a semi-potent glue, if you will, gluing that tetramer back together. or protein back together. We have a super glue, if you will, the only compound with near-complete stabilization on its label. And what we're seeing as a product of that is impact of the drug as early as three months. We've never seen that before in this space. And a 42% reduction in cardiovascular hospitalization and death at 30 months. Again, something we haven't seen before in this space. So we like what this drug can do for the patients that we serve. And it's, you know,

a really interesting story because just a few years ago, you know, you had some, you know, data that looked like this drug wasn't going to work out. It was almost a near-death experience for the company. So what did you learn from that? And just, you know, we haven't seen a whole lot of optimism in biotech. So what's your outlook for the sector? Yeah, it's funny because this company was really designed to get through those types of setbacks. But even then, it was a very difficult time period, as you and I were discussing. And I think what we learned was we'll always be able to find capital if our ideas are pragmatic and they can really serve patients. So actually, the battle testing that occurred then gives me a lot of promise today that we, you know,

able to help tens of thousands of patients, not only with this program, but the other three programs we've got in our late stage pipeline. Yeah, and tell us about those programs and the readouts that you have coming this year. Sure, three phase threes in multi-billion dollar markets, more importantly affecting tens of thousands of mostly children, a rare renal disease, the most common form of dwarfism and acondroplasia, as well as a muscular dystrophy that affects mostly children. So all three of those phase threes reading out this year, we're excited to hopefully have the opportunity to serve even more patients with this pipeline.

Well, thanks so much for joining us. Appreciate you making the time for us today. Brian, I'm going to send it back over to you. That was Neil Kumar of Bridge Bio. Thank you. Angelica, Neil, thank you very much. All right, quick program. No, do them not miss a special Mad Monday tonight.

Jim will have more exclusive interviews for the biggest names that are at the JPM Healthcare Conference. That all, of course, kicks off at 6 p.m. Eastern Time. Do not miss that. Meantime, on deck on power lunch. A live report for the ground in California with an update on the devastating wildfires in Los Angeles. Contessa Brewer is up with that. We're back at two minutes. All right, welcome back. Strong winds returning to Los Angeles, potentially creating another dangerous situation amid these wildfires, many of which are still burning.

Contessa Brewer, taking a look at a fire crews or handling the situation where it changes not just day to day, I would imagine, Contessa, but hour by hour. Yeah, in some cases, minute by minute, Brian, I'm in Upper Brentwood now along a fire line where firefighters are actively working. And you can see what an amazing shot they have. What a beautiful view of the Pacific Ocean here. This neighborhood was spared, but it is like the line that of interface with the wildland. Turn over this way, and you can see Mandeville Canyon and how it looks like a moonscape now. It is completely charred. The fire coming down here. And I talked with one of the residents who said, look, I was here. I was watching it, hosing down the neighbor's houses, hosing down this one.

but you can see it was actually the fire retardant. You can see the line right here. And then over here, can you see the large defensible space that has been cleared out of this hillside? Firefighters tell me that likely saved not only these homes, but then all of the homes below, because there was nothing for the embers to catch onto at that point. In order to get here, I had to do a ride-along.

I got to do a ride-along with Cal Fire. And here's a little bit of what we saw driving up to the site. So these are all the engines that are staging for this community here in case a fire were to reignite or ignite somewhere here along this fire line. There's a lot of houses in this area and we don't want to have that reaction time that it takes for these engines to come from base camp. And those winds were something like I had never seen. They were catching houses on fire that were many blocks over from where the firefight even was. What we've been seeing out here is the firefighters going through and looking for hot spots using pickaxes and shovels. They use infrared to go and detect this, but they're telling me right now, guys, no active fire situation, no flames actively burning either in the Palisades fire or the Eaton fire.

It's just that in order to get to 100% containment, they've got to go through and make sure that every hot spot is put out. And you can see the wind is picking up a little bit, but this is wind off of the ocean. not the Santa Ana wins, which gives them a sigh of relief because this is not the one that they're worried about. And also for the time being, because so much has burned here, it gives this particular neighborhood some respite from the worry. It's just unbelievable the level of the damage of a lot of friends that have lost homes out there, Contessa. And yet, as I understand it, we still don't know what caused the Palisade fire. They're NBC News reported last night. You're investigating human activity.

They think humans cause most fires. They still don't know the exact cause of at least the Palisades fire, correct? Yeah, they don't know. And that's something that's ongoing. That could depend, you know, for insurers, that's important because they got to know where the, where to put the blame. Contessa, look at that. Oh, contesta. Thank you.

All right, we're going to go. Three Stock Lunch is next. All right, welcome back. It's time for Three Stock Lunch, hitting three different stock stories and why they might matter here with trades is a new guest. A first time a Rebecca Walzer, president of Walzer wealth management. Rebecca, first off, welcome. We're going to be very nice. Thank you for you for you for you. All right. Well, great to have you on. Kelly's much nicer than I am, by the way. Let's start with JP Morgan Chase. Earnings tomorrow. Big shakeup. What do you think about JPM? Yeah, I think it's a whole, Brian.

I mean, we have long-term stability here with JP, obviously, a leading. But, you know, we are expecting M&A activity to pick up to their investment. banking revenue for 2024 is going to really increase our 2025 over 2024. And we have headweds with Fed policy and those things, but we're really looking for a big M&A. So we're a hold on J.P. Morgan. All right. Punchy answer. It's a hold.

All right. Let's move on to Robin Hood then because they actually agreed to pay this $45 million fine with the SEC to settle investigations into a 21 data breach and some other issues. The shares are up 8%. And they've now, they're still almost quadrupled over the past year. Rebecca, do you buy it here? Yeah, no. We are a sell actually on Robin Hood because, you know, we are expecting volatility and liquidity

constraints in 2025. And that is with the payment for order flow process that Robin Hood uses, we're expecting volatility concerns. And really, if you look at their own projections, they are, you're talking about 45% growth on the last, you know, a little bit here. And we're expecting that to go all the way down to 12% for 2025. So on this one, also their valuations are two-stretched. We're almost at a 67 PE, Ford PE.

So we're a sell on Robin Hood. All right, finally, KB. Home. I think you're in Tampa, Rebecca. They're all the way out in California's where they're headquartered. They're a home builder, big fourth quarter beat last night. 17% jump at home sold from last year. We call them deliveries, but does that mean we need to own the stock? Yeah, we're actually a hold for this one as well. You know, 17% home delivery growth, 19% year-over-year home orders. We are, because they just bought 2.8 billion of land acquisitions for 2025. They're projecting themselves to actually have higher. And we know that systemic housing is a shortage problem. And America said these large builders that can really buy the land and create the neighborhoods are going to be in demand.

So we're a hold on KB as well. How great was that? She hates everything. No, not because she hit Rebecca. That was phenomenal. First time ever? I don't believe it. Maybe on this program.

I don't think first time ever on TV, first time for the power lunch maybe. Rebecca, come to set. You can sit around the table. It would be fun. I'd love to have you here. Awesome. Thank you. Rebecca Wals.

I think there's a direct flight from Tampa to Newark. Somebody told me that once. All right, by the way, have some serious news here. And everybody, stay calm. Don't run out and fill up with gas. But the colonial pipeline right now has shut down its main pipeline. Colonial pipeline is the main pipeline from Houston, Texas to New York and New Jersey. Almost every drop of gas you put in your car in New Jersey probably comes from the colonial pipeline or something carried on it.

They're looking for potential leak in Georgia. We have confirmed that to see NBC, probably back on tomorrow. Remember, this was the pipeline that was hacked in 2021. That's why the name is. Calm down. We're not going to see a spike in gas prices because there's plenty of gas in storage. But right now, line one down in Georgia, shutdown, just something to watch. How many lines are there?

Well, there's the main line, which is like the torso, and there's all these things that spring off at line one's what we care about. So this is the main line, basically. Yeah, they call line one because there's so many other little sprigs, streams. Possibly only trickles. 12-hour shutdown. That's what they're saying. How does this compare with what happened in 2021? I remember,

Amen Javis is all over that story. They shut it down, hackers. That was a big deal. That's when you take the minivan out and do the... By the way, when is New Jersey going to get rid of this full service thing? No, never. It's got to get over it. Now I think every other state should bring it on because...

It was only Oregon and I think they killed it. They did. Oregonians, let me know. Just us now. Thanks for watching Power Lunch, everybody. And closing bell starts right now.