Live on Bloomberg TV

00:00General welcome to Bloomberg Markets. And I'm pretty good but listen a quick check on the price action here because read on the screen when it comes to the stock market those risk assets really turning around. Now part of this is simply going to be a reaction to that rally we saw yesterday. The other part is going to be what we heard from Snapchat. You did see a macroeconomic picture really show that the selling here it is conviction selling is you do see the S & P 500 down to the tune of one point eight percent. But the NASDAQ that's really taking it on the trend down over 3 percent. Another bad day for those heavyweight techniques. But take a look at what's happening outside of there. The bond market also catching a bit. That's why you know recession fears are really driving the trade today. Eleven basis points move down for the 10 year yield. And with that yield picture comes the dollar picture a weaker dollar John that we're seeing stateside. Meanwhile credit we continue to have jitters coming out of the retail sector a theme that we've been watching the last couple of weeks. Today once again you're still seeing that play out for example in a big way with Abercrombie and Fitch. What a sell off in that stock today more than 30 percent. They're dealing with a concerning outlook and inflation woes. Best Buy with a pretty good quarter but still an outlook. That was a reality check that we're seeing for a lot of retailers out there awaiting numbers from Nordstrom later. You've got Petco bucking the trend right now but arguably a more insulated business in an otherwise challenged retail environment right now. Pretty. Yes certainly a lot of factories to be keeping an eye on John. And outside of retail those Snapchat and the social media names getting hit hard in the session. Goldman's Katie Cox spoke from Davos today about the challenges faced by these stocks. Take a listen. There is a real risk to any of these social media platforms that are dependent on advertising revenues that they're going to face a near-term headwind. The other near-term headwind for tech most of it's been priced into public markets. And actually we see a lot of opportunity which I want to come back to. But the other thing that needs to play out before we get a full recovery here is private markets which have not yet discounted the bad news that public markets have. That's still a couple of quarters away. And let's talk more about SNAP. Social media plays and the overall volatility we are seeing in technology. Joining us from your perspective Mandy Singh senior technology analyst for Bloomberg Intelligence. Also joining us Matt Miller chief market strategist at Miller Tabak. And Mandy. I'll start with you. Just in terms of the reaction maybe you can just walk us through again this concern that we are seeing from investors of SNAP Inc. So now we know you know that as ad spending is highly cyclical and if there is a decline in macro growth then you're going to see that reflected that ad spending. So clearly SNAP didn't say that on their earnings call last month but today they came out and really took down their guidance. I think it also puts into question the whole social media ad spending category which wasn't there in the last big recession we had in 0 8 or 9. And if advertisers are pulling back spending I think the first one to be cut is social media and not Google search which was which is more mature. And I think advertisers get a higher our way out of that spend. Matt let's bring you in here because this isn't just a tech story or a social media story. This can be a macro economic story. As Mandy just point out the first one of the first things that goes is that ad spending. How much of this is reflective of this recession fears broadly. Yeah it's definitely is. I mean people are finally kind of coming around to the fact that that these earnings forecasts are going to start to come down. I mean we've seen across Wall Street these sort of GDP estimates a bit slashed in half since the beginning of the fourth quarter of last year. And yet earnings estimates haven't come down at all. And it's just a matter of time. In my mind was only a matter of time before this happened. And now this is starting to happen. So as people are seeing a recession more likely and as we go into the next quarter earnings reports in July that means I think is in June next month. People will start to see the slashing those earnings estimates. And and that's what I think is being reflected right now. It's like you said it's not just on the ticker. We saw John Deere last week. I mean this inflation issue is is hurting margins. Well to your point Matt I mean what if we weren't talking about SNAP today. Would this market be finding another excuse. It just feels like people have been so reluctant to buy in this jittery environment. Well it could be but one thing we do have to look at and I really think that today when I say the next day and a half is gonna be really really important for the intermediate term picture for the marketplace. I mean that's really bad news today not just a snap but of course with the Richmond said was much lower expected. How does Homestar sales sales much lower than expected. And the one thing we haven't seen in a long long time is a good reaction to bad news. And the markets are getting oversold. You look at some of these charts and the S & P and the NASDAQ. If for some reason we can guess a late day rally know we've had all these late day sell offs. But the last two days we see weekday rallies. If we can get something like that it might give us a little bit of relief. But intermediate to long term the city like you said you know people are there's too many headwinds. You could just pick one each day and it gives you a reason to be concerned. Mandy I'm so glad the map brought up this idea of things being overdone because that is a big question in terms of what actually happens for the broader economy and whether or not some of what Snapchat is saying is that overdone. I mean they're talking about perhaps missing their guidance that they had previously issued. But how much of that is purely based on fears that it's not perhaps based on actual economic data. Well so look I think anytime there is a pullback in valuations we tend to kind of go beyond what a normal expected pullback should be. And this time is going to be no different. The key question is when things come back are advertisers going to allocate their dollars to Snapchat and Facebook and Alphabet or the tide has shifted in terms of you know just two or three platforms getting more ad spend dollars going forward. And I think the question lies or the assessment lies in the engagement trend. So if Snapchat is able to hold on to their user base the engagement trends while they are going through this downturn they may continue to do well in terms of you know the ad dollars being allocated to their platform. But this is an engagement driven business. If you lose engagement the ad spend will go away. Interesting. And Matt let me throw it back to you as well just in terms of trying to gauge that sentiment in the marketplace when it comes to those beaten up technology stocks. Yeah I mean things have really gone and the system has really gotten quite negative. You know it's funny I've been bearish on the stock market since the fourth quarter of last year and all year now. But we all know we saw in March we do see bear market rallies along the way. And so we need to be a little bit careful there. But I do think you know the sentiment has reached a level and as I just talked about some of the technical oversold conditions could give us one of those rallies those headaches that last for a couple of weeks. And you know you'll squeeze the shorts and really give some people some more confidence. But I do think that as we move through the summer. Well we're going to see lower lows. So people need to be very very careful. It's just that the Fed's liquid is massive liquidity programs that you know emergency level liquidity programs that lasted long past. The emergency was over pushed asset prices way above underlying fundamentals. Therefore we're gonna have to go for this through a further painful period. But in the long run it's going to create some unbelievable opportunities down the road. So you know you keep your head about you. Things are gonna work out in the long run. Mandate saying a Bloomberg Intelligence and map. Meili from Miller Tabak we thank you both for your time. As we head to break here we're looking at the S & P 500 down one point six percent. The Nasdaq taking it on the 10 year down 3 percent. SALES high beta names dragging the entire market down. And coming up we're going to stick with that theme Spark Challenges MSP Recoveries. Mega Span is facing a tough day after completing its merger with Lionheart. We'll speak with John Ruiz CEO and founder of MSP Recovery next. This former. This is Bloomberg Markets. I'm John Open with critic Gupta and that gets us to for what it's worth where European Central Bank Governing Council member Robert Holtzman says the ECB should consider kicking off its interest rate hiking cycle with a half point increase to show it's serious when it comes to the inflation flight fight. And that obviously runs counter at least to a certain extent to what we have been hearing from the head of the ECB Christine Lagarde. Here's more on what she's had to say earlier to Bloomberg. We are at a turning point. We have all the components in place for that. We are turning our back to negative interest rates. We are moving very likely into positive territory at the end of the third quarter. And then of course we will calibrate. We will establish exactly by how much we want to do that. When you talk about first no longer negative rates. Has a market quite understood that this could mean also positive rates. Well you know when you are out of negative you can be at zero. You can be slightly above zero. This is something that we will determine on the basis of of our projections on the basis of our forward guidance. I think that there are good reasons to believe that all three conditions will be satisfied in June and further on during the summer. Where are we in the third quarter. Could we be you know above zero in terms of interest rates. Is that kind of listeners actresses. What I'm saying I stick to. Yeah. We will be out of negative interest rates most likely before the end of the third quarter. How do you see inflation developing from now. I mean again there's so many unknowns because of the war. You know there are lots of forces and some of them you know counteracting against each other. You have the war which in and of itself is an absolute drama. And as massive economic impacts not just in Ukraine and eventually in Russia but for the rest of the world we have energy prices which have gone up significantly and represents a big chunk of inflation. We have food prices. I mean there's a whole series of things that are weighing on growth down and pushing inflation up. How likely is it that the eurozone goes into recession. We don't have that as a baseline. You must have heard that sentence in your time which is what we also do scenarios. And we we have the negative the adverse the various alternatives there are on the basis of hypotheticals such as boycott of oil interruption of gas supply that clearly would have a significant impact on the economy. But for the moment we are not seeing a recession in the euro area. You know John this is such a historic moment here. Christine Legarde saying we're not going to see negative rates when it comes to the ECB after such a long time. And I think it's interesting this is coming and really fueling some of the euro strength dollar weakness that we're seeing at a time when the market is laser focus on whether or not ECB and the other central bankers are behind the curve and as well as what are they going to do about closing the spread between the depot rate and the refinancing rate at a time when of course we know the famous comment from from Christine Legarde simply saying she's not here to close those spreads. So it's interesting that we're witnessing all this at once. And then just looking at the price realities they talked about the invasion of Ukraine and obviously in Europe they continue to watch what's happening in oil prices here in North America. We go well beyond what's happening with oil and say the inflationary impacts. But obviously for Christine Lagarde being able to zero in on the price pressures beyond oil is something they're going to want to keep watching. And the underlying demand as well and the concerns on that front as a reason to perhaps take more time on rate hikes. But make no mistake. Right. There's clearly a growing quickly debate among ECB officials on the pace of rate hikes going forward. And it's really fascinating that you say that of course coming as we have this cost of living crises around the world specifically in the U.K. of course we're going to stick with that theme of just actually what is something worth especially with speculative assets. Coming up we're going to speak with John Lewis CEO and founder of MSP Recovery and continue the conversation on IBEX. This is Bloomberg. This is Bloomberg Markets. I'm John Open with critic Gupta critic. We were talking earlier about the weakness we've seen in technology stocks growth obviously not getting much market attention these days. Same goes for ones hot sparks. And when you look at the performance over the last year let's say compared to the S & P 500 we know the weakness we've already seen in that broader index. But it is even much more pronounced when you look at the so-called D.C. back index this year alone on average down about 50 percent. So an avenue that was seen as a new opportunity for companies to come to the public market for the most part has really just been public pain so far. You know let's dive into that more on a micro basis. Once back related name trading today is MSP recovery trading under the Ticker M SPDR. It's actually tumbling over 60 percent after its trading debut. And that's after completing its tie up with blank check company Lionheart acquisition. Its headline valuation sits at about thirty two point six billion dollars making it the largest such combination ever in the United States as measured by enterprise value. So what does this company actually do. Well this is a health care payments recovery firm like you said thirty two point six billion dollars. And this is important when it comes to kind of what the players are in insurance. And we're actually to dig into what the company actually does John. And in just a moment. Well look I think this SPARC window that we saw opened the door for a lot of interesting business discussions in this case you're right. A business all about acquiring medical claims and targeting a flaw in the system. But obviously the general tone of the markets now for sparks has changed quite quickly forced back and for the broader market to spending even if you're looking at equity capital markets or debt issuance as well. Let's say with that back story though and actually talk to the founder and CEO of MSP Recovery John Ruiz joins us by phone John. Thank you as always and congratulations by the way on going public. Let's start off with simple question. What explain to our audience what your company actually does. Thank you. And I appreciate the invitation. So what MSP really is is that it started as a company that discovered a very huge flaw in the way that medical claims were paid as it relates to the actual payer primarily where the federal government was paying claims that it didn't owe. These were claims of people that were involved in auto accidents slip and fall workers compensation claims. A lot of pharmaceutical medications that went bad or medical devices and government loses billions and billions of dollars as a result of this because Medicare and Medicaid are supposed to be the pair's of last resort. But something very interesting happened while we were doing that and that is that we found a huge flaw and very fragmented data systems in the entire medical processing of claims the entire health care expenditure. Year after year is bordering four trillion dollars. And out of those four trillion dollars our data tells us that only about 30 percent of those claims are actually properly documented meaning that they don't they have the correct diagnosis code and TPP codes. And then the remainder of them have issues as it relates to who the proper payer was supposed to be. So we design a very sophisticated I.T. system. And you know currently when we announced our merger back in July of last year we had about 15 billion and recoverable claims and we predicted that five years starting after January 1st 2022 we would ingest an additional 5 billion. So what happened is between July and the end of last year which is December 30 first 2021 we actually ingested about 70 billion before we even started the timeframe. So we've seen substantial growth in new business. We currently have a number of settlements in progress with a lot of the big primary payer. So you know when we talk about facts you know Stack is just a way to get to the public markets. I think at the end of the day you really got to look at the company itself. And I think sometimes you almost get joined in with a concept as opposed to looking at the actual content company itself. Right. And obviously you made a reference to the analytical tools that you have used to find those medical records that obviously could be worthwhile to pursue. Just in terms of this environment though John every day seems more uncertain in terms of your own revenue projections. What can you tell us about what you're gonna have to watch very closely in the days and weeks ahead. So we're in a business. It's actually very good. And maybe people don't really understand. We're not correlated to anything that has to do with interest rates or inflation or anything like that. Medical bills are paid day in and day out. It doesn't really matter what the economy is. We're talking about the federal government Medicare the state governments Medicaid. So there's really no upside down for us when it comes to that. It could be a great market in terms of you know low interest rates and no inflation. And we still projected to do the same. So we really don't don't vacillate with that kind of activity in the marketplace. And I think more important than that we have a very sophisticated technology to it's called Lifeline which we designed launched in January this year. And we first thought it was us based only. We've now expanded into Mexico. We signed a very big contract with Mexico with a company called Security. So we see that you know our business by way of where we've predicted is still right on point. Right. And we don't expect anything to change. In fact we've seen a lot more John Tucker. I'm sorry that we have to leave it there. We are short on time but we want to thank you so much for taking the time atmosphere recovery founder and CEO John Ruiz. Which on earth meant Toronto. I'm Craig left in New York. This is Bloomberg.

No schedule data available.

Bloomberg Markets: Americas Full Show (05/24/2022)

Stocks pared losses amid gains in defensive companies while a profit warning from Snap Inc. weighed on technology shares. "Bloomberg Markets" hosted by Kriti Gupta and Jon Erlichman speak with John Ruiz, MSP Recovery CEO and Matt Maley, Chief Market Strategist with Miller Tabak + Co. (Source: Bloomberg)

More From Bloomberg Markets
All episodes and clips

Bloomberg Technology
The only daily news program focused exclusively on technology, innovation and the future of business from San Francisco. Hosted by Emily Chang.
More episodes and clips