WEBVTT - Casual Dining Chains Could Lose 75% of Sales: BI's Halen 0:00:02.680 --> 0:00:05.320 Welcome to the Bloomberg Penl podcast. I'm Paul swing you 0:00:05.360 --> 0:00:07.800 along with my co host Lisa Brahmas. Each day we 0:00:07.920 --> 0:00:10.440 bring you the most noteworthy and useful interviews for you 0:00:10.560 --> 0:00:12.639 and your money, whether at the grocery store or the 0:00:12.680 --> 0:00:15.960 trading floor. Find a Bloomberg Penl podcast on Apple podcast 0:00:16.160 --> 0:00:18.079 or wherever you listen to podcasts, as well as at 0:00:18.079 --> 0:00:21.600 Bloomberg dot com. We really need to focus our attention 0:00:21.600 --> 0:00:24.520 on restaurants which you have been uniquely hammered. They've been 0:00:24.560 --> 0:00:27.040 tourced to shut their doors, and there's a question of 0:00:27.080 --> 0:00:29.600 how quickly they will be able to get back online 0:00:29.640 --> 0:00:31.720 and how many of them will even survive throughout this. 0:00:31.800 --> 0:00:36.240 Mike Hallen joining us now, senior restaurant analyst for Bloomberg Intelligence, 0:00:36.320 --> 0:00:38.800 joining us on the phone. Mike, do you have a 0:00:38.960 --> 0:00:42.599 sense of the proportion of restaurants that have closed their 0:00:42.640 --> 0:00:45.720 doors that will easily get back up and going And 0:00:45.720 --> 0:00:47.760 I know your look specifically in a lot of the 0:00:47.840 --> 0:00:52.440 chains that have already closed their doors. Yeah, So you 0:00:52.440 --> 0:00:58.040 know it's really going to depend on on the business model, right. So, um, 0:00:58.120 --> 0:01:00.960 you know, in our in our rolled with the publicly 0:01:01.040 --> 0:01:03.360 traded chains, if you're a fast food and you're doing 0:01:03.480 --> 0:01:06.880 you know, between fifty and seventy percent of your business 0:01:06.880 --> 0:01:10.160 through the drive through and probably another fifteen to twenty 0:01:10.400 --> 0:01:13.960 via delivery, you're not going to be impacted as much. 0:01:14.000 --> 0:01:15.720 I mean, granted, you are going to be impacted the 0:01:15.880 --> 0:01:18.680 less less people commuting to work. Right, people aren't going 0:01:18.720 --> 0:01:22.080 out and um running errands and doing some shopping and 0:01:22.440 --> 0:01:25.600 stopping for a burger while they're out so much, and 0:01:25.600 --> 0:01:28.559 they're doing a lot more shopping at the grocery store 0:01:28.560 --> 0:01:31.360 and cooking at home. So sales are still gonna be down. 0:01:31.400 --> 0:01:32.840 But if you're a fast food and you have a 0:01:32.920 --> 0:01:36.240 drive through, you know, you're in pretty good shape, you know. 0:01:36.360 --> 0:01:39.600 But for casual dining, for full service restaurants, it's a 0:01:39.760 --> 0:01:44.040 very very different situation, you know. Uh, you know, for example, 0:01:44.080 --> 0:01:46.640 Texas Roadhouse, a great chain, they only do about seven 0:01:46.640 --> 0:01:48.960 percent of their sales and to go and they don't 0:01:49.000 --> 0:01:51.680 have any delivery, and obviously they don't have any drive through. 0:01:51.840 --> 0:01:54.880 So you know, on casual dining land, you know, for 0:01:54.880 --> 0:01:58.080 for restaurants that close their dining room, they could lose 0:01:58.640 --> 0:02:03.520 you know, between seventy five their sales. So, Mike, it 0:02:03.560 --> 0:02:06.080 give us a sense of kind of how these companies 0:02:06.120 --> 0:02:08.280 are trying to cope with it? Will they make it? 0:02:08.320 --> 0:02:10.720 Are they how are they trying to kind of deal 0:02:10.760 --> 0:02:14.360 with this complete lack of revenue. Yeah, so for for 0:02:14.400 --> 0:02:16.959 the casual dining chains, and now we're starting to see 0:02:17.000 --> 0:02:20.079 with with fast food chains as well. Uh they're fully 0:02:20.280 --> 0:02:24.160 drawing down on their revolving credit facilities. Uh, they're suspending 0:02:24.200 --> 0:02:27.760 by backs and and uh suspending their dividends to try 0:02:27.800 --> 0:02:31.120 to UM hold onto whatever cash flow and raise whatever 0:02:31.160 --> 0:02:34.800 cash they can. Uh, they're gonna they're closing stores where 0:02:34.840 --> 0:02:39.280 it makes sense, um, you know, and they're trying to 0:02:39.360 --> 0:02:43.880 push delivery and to go as as much as possible, 0:02:43.919 --> 0:02:46.360 try to grow grow that business as quickly as possible 0:02:46.400 --> 0:02:49.080 so that they can continue to employ some of their employees, 0:02:49.680 --> 0:02:52.000 uh stay in front of the customers for whenever this 0:02:52.200 --> 0:02:57.320 does end. Um. You know. So you know, chains are 0:02:57.440 --> 0:03:00.800 kind of doing whatever they can, but we expect a 0:03:00.800 --> 0:03:04.240 lot of UM store closures. We also saw a note 0:03:04.320 --> 0:03:09.200 yesterday out that that said Chiefecake Factory is saying that 0:03:09.280 --> 0:03:11.880 they're not going to pay rent until they can reopen. So, 0:03:12.600 --> 0:03:14.960 you know, rents are a pretty big expense even if 0:03:14.960 --> 0:03:17.919 you're shut you know, the rent bill continues to keep coming, 0:03:18.560 --> 0:03:20.840 so we expect to hear a lot more of this 0:03:20.919 --> 0:03:25.160 as well, where the the restaurant chains are gonna maybe 0:03:25.160 --> 0:03:27.600 hold off on paying rent until they can open their 0:03:27.639 --> 0:03:30.440 doors again. Mike, I wonder how much this just accelerates 0:03:30.440 --> 0:03:32.760 a trend that already was in place, because we saw 0:03:32.760 --> 0:03:35.680 a restaurant traffic go down some of these casual dining 0:03:35.720 --> 0:03:39.880 places even before the coronavirus, and even amid a really 0:03:39.880 --> 0:03:43.120 good consumer confidence. I mean, how many of these bankruptcies 0:03:43.120 --> 0:03:48.119 would have happened anyway. Yeah. Well, and also there's been 0:03:48.520 --> 0:03:52.560 you know, low interest rates helping to keep zombie chains 0:03:52.600 --> 0:03:56.040 alive for quite some time, right, So yeah, I agree, 0:03:56.120 --> 0:03:59.080 I think this is definitely going to speed up the process. 0:03:59.120 --> 0:04:01.600 You're gonna see some of the casual dining chains that 0:04:01.640 --> 0:04:05.280 do do not have a loyal customer base any longer 0:04:05.400 --> 0:04:08.360 start to close even more stores. I mean, we've seen 0:04:08.400 --> 0:04:12.120 a lot, We've seen chains like Applebee's, you know, close 0:04:12.160 --> 0:04:14.640 a lot of stores over the last couple of years. 0:04:14.640 --> 0:04:18.960 We expect uh store closures to to accelerate. So yeah, 0:04:19.000 --> 0:04:22.120 it is kind of accelerating a trend. But you know, 0:04:22.600 --> 0:04:25.400 some of these you know, you know, I'm going to 0:04:25.480 --> 0:04:28.440 say the FED and and UM kind of the Wall 0:04:28.440 --> 0:04:32.880 Street echo chamber and the management teams altogether, uh, kind 0:04:32.880 --> 0:04:34.960 of put themselves in in a tough position. You know, 0:04:35.000 --> 0:04:37.839 half of the companies we cover have levered up to 0:04:38.040 --> 0:04:42.400 buy buy back stock. Uh, you know at thirty times earnings, 0:04:42.960 --> 0:04:44.760 you know, and now that these stocks are down six 0:04:45.680 --> 0:04:49.240 off their highs, they're suspending their buy back programs, right, 0:04:49.279 --> 0:04:52.680 so you know, their balance sheets on in a in 0:04:52.720 --> 0:04:55.479 a great spot heading into this which we think is 0:04:55.480 --> 0:04:58.839 going to exacerbate the problem. Hey, mikew about the mom 0:04:58.839 --> 0:05:01.880 and pop restaurants, the local restaurants that are shut down, 0:05:02.600 --> 0:05:07.440 just typically how much how long can they last like that? Yeah, 0:05:07.560 --> 0:05:09.360 it's the same type of thing. It's going to depend 0:05:09.440 --> 0:05:12.120 on their bound sheet. But it's hard. You know, in 0:05:12.200 --> 0:05:16.919 the restaurant business, you're basically you know, making money, you know, 0:05:17.040 --> 0:05:19.280 one month out of the year, right, one month out 0:05:19.279 --> 0:05:22.000 of the year is all your profits. The other eleven 0:05:22.000 --> 0:05:25.840 months goes towards paying your labor, you know, paying your 0:05:25.880 --> 0:05:29.000 food costs, paying the rent. It's a very low margin business. 0:05:29.040 --> 0:05:31.960 We're talking about mid single digit net margin business. So 0:05:32.000 --> 0:05:35.000 a lot of these chains can't stay open for long. 0:05:35.040 --> 0:05:38.600 You know. Thankfully there's some provisions in here, uh for 0:05:38.920 --> 0:05:41.600 the independence as well as the larger change we covered 0:05:42.360 --> 0:05:45.600 two uh you know, ball some money. They're gonna get 0:05:45.600 --> 0:05:49.000 some tax breaks and hopefully hopefully be able to to 0:05:49.480 --> 0:05:51.800 you know, weather the storm for at least a few months. 0:05:51.800 --> 0:05:54.760 But just as uum, just to give you some color, 0:05:54.800 --> 0:05:57.240 you know, the one of the best run chains we 0:05:57.360 --> 0:06:00.200 cover is Darting. They were the adults in the room. 0:06:00.279 --> 0:06:02.200 They did not lever up to buy back their stock. 0:06:02.320 --> 0:06:04.880 They use their cash flow to do it. They increase 0:06:04.960 --> 0:06:08.680 their sales and their margins by providing very you know, 0:06:09.000 --> 0:06:12.919 very good service and good food and motivating the customers 0:06:12.960 --> 0:06:18.159 to return. Right. So, so you know, they they have 0:06:18.279 --> 0:06:21.560 only six months of cash basically at their current burn rate, 0:06:21.800 --> 0:06:23.160 we're gonna have to leave it there. Mike cal And, 0:06:23.240 --> 0:06:28.000 senior restaurant analyst for Bloomberg Intelligence, really highlighting what is 0:06:28.040 --> 0:06:35.440 being felt across the restaurant sector around the country. The 0:06:35.520 --> 0:06:38.159 Federal Reserve is throwing the kitchen sink at markets in 0:06:38.279 --> 0:06:42.480 large part in response to the apparent dollar shortage, increasing 0:06:42.600 --> 0:06:45.800 strains in the dollar funding market, and this has hit 0:06:45.880 --> 0:06:50.440 emerging markets particularly hard. Damian Sassour has been tracking its 0:06:50.640 --> 0:06:54.560 as chief market strategist at Bloomberg Intelligence and he joins 0:06:54.640 --> 0:06:56.800 US now. Damien, I'm wondering, we are seeing the dollar 0:06:56.800 --> 0:06:58.680 a week in a bit in the past few sessions, 0:06:58.720 --> 0:07:01.719 but still the move of it is to be stronger, 0:07:01.760 --> 0:07:05.080 and I'm wondering how bad has it been in the 0:07:05.120 --> 0:07:08.920 emerging markets complex? Yeah, you know, I've been feeling a 0:07:08.960 --> 0:07:11.240 lot of questions asking what happens if this dollar just 0:07:11.360 --> 0:07:13.920 keeps rising in em can't pay their debts and dollar 0:07:14.160 --> 0:07:16.720 and UM with the broad trade weighted US D now 0:07:16.760 --> 0:07:18.640 at a fifty year high, you're really left with two 0:07:18.680 --> 0:07:21.160 options if if you're an EM sovereign that's got you know, 0:07:21.200 --> 0:07:24.560 dollar obligations, UM, do you do not? I mean what 0:07:24.640 --> 0:07:26.720 was the U S do? Does it do nothing about them? Default? 0:07:26.800 --> 0:07:30.240 Does it offer debt forgiveness? In both scenarios, Lisa, they're 0:07:30.360 --> 0:07:34.840 very inflationary, right, so, especially as the US fiscal situation worsens. 0:07:34.880 --> 0:07:36.720 I mean, two trillion stimulus is just the tip of 0:07:36.760 --> 0:07:39.520 the iceberg. It teems and the government reluctant to offer 0:07:39.560 --> 0:07:42.920 bailouts to Boeing in big companies, I imagine they're not 0:07:42.960 --> 0:07:45.560 going to be very open to a new Brady plan either. 0:07:45.680 --> 0:07:47.800 So so EM is going to have a tough time here, 0:07:48.640 --> 0:07:50.480 So damon give us a sense of kind of where 0:07:50.520 --> 0:07:53.000 the greatest risk is that you see out there in 0:07:53.120 --> 0:07:56.600 EM world. Yeah, you know, I mean it's hard to 0:07:56.680 --> 0:07:58.400 kind of pick and choose, but you know, there are 0:07:58.480 --> 0:08:01.840 things that investors can do, uh, you know, if they 0:08:01.880 --> 0:08:03.880 are indeed willing to take that plunge and invest in 0:08:03.960 --> 0:08:07.120 emerging market. You know, local assets want us to diversify 0:08:07.160 --> 0:08:10.560 your funding sources, right, I mean most people dollar investors think, okay, 0:08:10.640 --> 0:08:12.800 you know, I'm taking the dollars in my pocket, I'm 0:08:12.800 --> 0:08:15.440 converting them into e M currencies and investing. But what 0:08:15.520 --> 0:08:18.680 you can do is you can also spread the dollar exposure, 0:08:18.760 --> 0:08:22.400 your short dollar exposure now around other developed market companies 0:08:22.440 --> 0:08:24.480 like the Swiss frank, like the Japanese yea and the 0:08:24.480 --> 0:08:26.800 British pound, the euro, etcetera. And if you do that, 0:08:27.240 --> 0:08:30.239 you actually have a much more attractive risk adjusted return 0:08:30.320 --> 0:08:34.800 profile of historically speaking, obviously, and you can definitely protect 0:08:35.080 --> 0:08:38.400 protect if the dollar does indeed continue to decline here, 0:08:38.640 --> 0:08:40.800 So you know, there is some benefit there. There are 0:08:40.800 --> 0:08:43.600 ways that you can kind of manage around this. But yeah. 0:08:43.679 --> 0:08:45.840 I mean it's going to be very volatile, very whippy, 0:08:46.040 --> 0:08:48.880 and the structure of emerging markets really doesn't offer itself 0:08:48.960 --> 0:08:51.439 to taking short term risk, if you follow me. I 0:08:51.440 --> 0:08:53.800 mean some of these markets are very liquid. Yeah, And 0:08:53.880 --> 0:08:56.320 talking about that, there's also a question of just how 0:08:56.400 --> 0:08:59.400 much debt has been incurred by some of these developing 0:08:59.480 --> 0:09:03.080 markets companies there, and the idea that this imbalanced in 0:09:03.120 --> 0:09:06.480 dollars isn't just simply a technical problem, but just an 0:09:06.640 --> 0:09:10.600 overall imbalance where too many, too many dollars were borrowed 0:09:10.640 --> 0:09:13.560 by a lot of these countries. And I'm wondering, you know, yes, 0:09:13.600 --> 0:09:16.439 we're seeing some of the stress eased up, but how 0:09:16.520 --> 0:09:19.280 much pressure is there still that's going to cause a 0:09:19.400 --> 0:09:21.600 rash of defaults that people are expecting that may not 0:09:21.640 --> 0:09:24.560 be fully priced an't even yet. Well, I think you 0:09:24.559 --> 0:09:26.160 have to look at those that are most exposed, right 0:09:26.160 --> 0:09:28.080 at least so for me, you know, just looking at 0:09:28.120 --> 0:09:31.360 you know, you know, you know, emerging market sovereigns that 0:09:31.360 --> 0:09:34.559 are borrowed in dollars. It's the frontier sovereigns, the oil 0:09:34.640 --> 0:09:38.160 exporting frontier sovereigns like Nigeria and Gola, gabone. I mean 0:09:38.160 --> 0:09:40.080 you've seen Ecuador and now file for default. I mean, 0:09:40.080 --> 0:09:42.040 those are the ones that are obviously front and center, 0:09:42.400 --> 0:09:44.600 but you know it's all of those other sovereigns that 0:09:44.679 --> 0:09:47.120 have um you know, that are relying on tourist revenues, 0:09:47.160 --> 0:09:49.920 you know, Dominican Republic, Costa Rica. These are big issuers 0:09:49.920 --> 0:09:51.880 in e M and so you know, there's a lot 0:09:51.960 --> 0:09:53.480 of dead out there and dollars they're gonna have a 0:09:53.520 --> 0:09:55.880 lot of difficulty paying them back. But the question becomes 0:09:55.920 --> 0:09:58.440 a political one. You know, who do we you know, 0:09:58.520 --> 0:10:00.520 who do we bail out and who don't we? And 0:10:00.720 --> 0:10:03.800 you know that can potentially ignite a virtuous cycle of 0:10:03.800 --> 0:10:07.280 sovereign restructurings that really would break the buck and cause 0:10:07.520 --> 0:10:10.680 you know, hyper hyperinflationary scare in my mind, So you know, 0:10:10.720 --> 0:10:12.920 there's really no no easy way to go about it. 0:10:12.960 --> 0:10:14.679 But I don't think you can ignore it. I mean, 0:10:14.760 --> 0:10:17.240 what what the U S has done here post It's 0:10:17.240 --> 0:10:20.240 ignored a lot of the things that could potentially go wrong, 0:10:20.400 --> 0:10:23.200 you know, post Doccer, post dog Frank. Now we're just 0:10:23.280 --> 0:10:26.440 paying for it here. To ignore this would be shortsighted 0:10:26.440 --> 0:10:29.000 in my view. Alright, so give us a sense of 0:10:29.000 --> 0:10:32.000 timing Damien, where are we going to see the biggest 0:10:32.000 --> 0:10:35.440 problems first, do you think? Right? So, it's definitely going 0:10:35.480 --> 0:10:38.280 to hit the oil exporters first and foremost. They definitely 0:10:38.280 --> 0:10:40.760 have some capacity to manage through it in the near term, 0:10:41.000 --> 0:10:43.520 even more so if the dollar continues to come off here. 0:10:43.760 --> 0:10:46.160 But if the dollar does another you know about face 0:10:46.240 --> 0:10:49.160 and really ripped to the upside for whatever reason. You know, 0:10:49.240 --> 0:10:51.520 Paul Um, you're really going to see a lot of 0:10:51.559 --> 0:10:53.720 them start, you know, going to the IMF, going to 0:10:53.760 --> 0:10:55.400 the World Bank. I mean, you've already seen those two 0:10:55.400 --> 0:10:57.800 big multilaterals turned to the US and say, hey, we 0:10:57.840 --> 0:11:00.760 need we need help here to sort of to sort 0:11:00.760 --> 0:11:03.080 of stem the tide. But you know, it's it's it's 0:11:03.120 --> 0:11:06.079 no real easy question to say. I mean, look, I 0:11:06.080 --> 0:11:07.719 wouldn't be sitting here talking to I'd be on a 0:11:07.760 --> 0:11:10.599 beach somewhere if I knew the timing around this, right. So, 0:11:10.600 --> 0:11:12.360 So I think that's really what it comes down to. 0:11:12.400 --> 0:11:14.199 You just have to watch all these little pockets in 0:11:14.240 --> 0:11:17.160 the market and hope for the best. I mean, you've 0:11:17.200 --> 0:11:18.959 been covering this market for decades, You've got a lot 0:11:18.960 --> 0:11:21.040 of contacts. And one reason why I always love speaking 0:11:21.040 --> 0:11:22.480 with you is you can kind of get a feel 0:11:22.920 --> 0:11:25.400 for the mood. And honestly, the people who I speak 0:11:25.440 --> 0:11:27.480 to just seem exhausted. It's just been a ping pong 0:11:27.559 --> 0:11:31.280 kind of market going in different directions, popped by uncertainty, 0:11:31.360 --> 0:11:34.320 poked by depression, and popked by isolation. And I'm wondering 0:11:34.640 --> 0:11:36.720 where are we in that cycle? I mean, are people 0:11:36.760 --> 0:11:39.800 actually starting to look for opportunities or people just sort 0:11:39.800 --> 0:11:43.319 of sitting out and saying this one I don't understand. Alright, 0:11:43.400 --> 0:11:45.760 So I mean the first and foremost, you know, i'd 0:11:45.760 --> 0:11:48.679 have to address. All right, let me my sleeves, let's go, 0:11:49.800 --> 0:11:53.280 let's do it. Um. So you know, the Japanese currency basis, 0:11:53.360 --> 0:11:55.440 which was the last one to blow, is finally narrowed, 0:11:55.440 --> 0:11:58.200 and it's narrowed by overnight, right, I mean you saw 0:11:58.600 --> 0:12:00.959 you may see that the euro in the pounds are 0:12:01.000 --> 0:12:04.080 now very very positive, which means they're flushed with dollars. 0:12:04.120 --> 0:12:06.480 So the dollar hoarding, yes, well it's still you know, 0:12:06.679 --> 0:12:09.200 persists off. Sure, a lot of dollars being brought at 0:12:09.200 --> 0:12:11.679 the issues. So I think this whole you know, thought 0:12:11.720 --> 0:12:13.560 that there are you know, the top recording not enough 0:12:13.559 --> 0:12:15.600 dollars let's put that to bed for a minute now. 0:12:15.679 --> 0:12:18.480 Where the bottlenecks coming up there? Obviously in credit land, 0:12:18.600 --> 0:12:21.120 no question about it. You've seen the moving spreads. Everyone's 0:12:21.120 --> 0:12:24.720 seen it, everyone's watching it. And it's the um. It's 0:12:24.720 --> 0:12:26.600 really the mortgage market that scares me the most. I 0:12:26.600 --> 0:12:28.640 mean that was the epicenter back in two thousand and eight. 0:12:28.640 --> 0:12:30.480 We're starting to see some of these mortgage reads roll, 0:12:30.600 --> 0:12:33.120 you know, get meet, they're unable to meet margin calls. 0:12:33.280 --> 0:12:35.679 And these aren't just anyone. These are invest Goo Angelo 0:12:35.720 --> 0:12:38.760 Gordon tpg UM and and their portfolio is getting taken 0:12:38.760 --> 0:12:41.400 over by banks and and and being liquidated in the market, 0:12:41.480 --> 0:12:43.320 and and you know it's it's it's just you know, 0:12:43.400 --> 0:12:45.720 to bring in people in my mind, like you know 0:12:46.200 --> 0:12:48.600 who kind of helped us in the past, like Paulson 0:12:48.679 --> 0:12:50.800 and Guysner and black Rock. I mean that's while that's 0:12:50.840 --> 0:12:53.240 all said and good. You know I've said it before, 0:12:53.240 --> 0:12:55.640 I'll say it again. I'd love to see simmer Simon 0:12:55.640 --> 0:12:58.280 Potter back at the New York Center Reserve because you know, 0:12:58.800 --> 0:13:00.640 he used to run the markets. To if there's one 0:13:00.679 --> 0:13:02.240 person to know where the land mines are and where 0:13:02.240 --> 0:13:04.200 the bodies are buried at Simon, and so you know, 0:13:04.280 --> 0:13:06.400 it's interesting how quiet things have been on that front. 0:13:06.400 --> 0:13:08.440 I'd really like to just see some more clarity as 0:13:08.480 --> 0:13:10.320 to how we're going to address some of the bottlenecks 0:13:10.360 --> 0:13:12.120 that we're seeing abroad. And you know, we see the 0:13:12.120 --> 0:13:15.240 cross Curency basis and places like Korea are still pretty 0:13:15.240 --> 0:13:17.520 wide that they still don't have enough dollars and and 0:13:17.559 --> 0:13:19.600 so you know, we just have to kind of watch 0:13:19.679 --> 0:13:21.880 all these little elements of the market on the periphery 0:13:22.120 --> 0:13:24.720 and hope everyone can kind of come out of this. Okay, 0:13:24.760 --> 0:13:30.000 I guess. I mean, yeah, so Damien thirty seconds any 0:13:30.000 --> 0:13:33.920 place to hide in emerging markets. So we definitely still 0:13:33.960 --> 0:13:36.839 like um receiving an Indonesia on these spikes. I mean, 0:13:36.880 --> 0:13:38.559 and I think the Indonesian roupie has been one of 0:13:38.600 --> 0:13:41.120 the better performers today. UM the pace has come off 0:13:41.120 --> 0:13:42.880 a long way. You've seen that come all the way back. 0:13:42.920 --> 0:13:46.839 I I like countries that have a geostrategic importance to 0:13:46.880 --> 0:13:49.840 the United States for no other reason than because the 0:13:49.920 --> 0:13:52.200 U s print dollars. So you know, there's a lot 0:13:52.240 --> 0:13:53.520 of them out there. There's a lot of them that 0:13:53.520 --> 0:13:55.400 aren't there, and you know, I think that that's where 0:13:55.440 --> 0:13:57.000 you kind of want to focus if you're looking to 0:13:57.000 --> 0:13:59.920 wait it out a bit. Damien Sasur, thanks so much 0:14:00.040 --> 0:14:03.200 for joining us. We always appreciate your perspective on emerging 0:14:03.240 --> 0:14:06.439 markets UH lots of altility, even above and bound where 0:14:06.440 --> 0:14:08.560 we're seeing in the broader market. Statement sass Our, chief 0:14:08.600 --> 0:14:16.320 Emerging markets credit strategist for Bloomberg Intelligence. As we talked 0:14:16.320 --> 0:14:19.680 about that two point two trillion dollar plan that the 0:14:19.720 --> 0:14:23.400 Congress UH is expected to pass today, there is a 0:14:23.520 --> 0:14:25.760 question of how quickly it can get money out the 0:14:25.800 --> 0:14:28.800 door and who it gives money to. A big focus 0:14:28.840 --> 0:14:32.800 has been small and medium sized businesses. Our next guest 0:14:32.840 --> 0:14:34.960 has a lot of experience with the balance sheets in 0:14:35.040 --> 0:14:39.440 all conditions of these companies. Adam Leviton, Professor of Law 0:14:39.560 --> 0:14:44.440 and of Georgetown Law in Washington, d C. Professor, thank 0:14:44.480 --> 0:14:46.520 you so much for being with us. You recently penned 0:14:46.880 --> 0:14:48.560 up ed in the New York Times how to get 0:14:48.600 --> 0:14:52.000 money to small businesses fast. Passing through the details, it 0:14:52.040 --> 0:14:55.520 seems like the three hundred and fifty billion dollars estimated 0:14:55.560 --> 0:14:58.920 to go to small and mid sized businesses grants will 0:14:58.960 --> 0:15:02.960 be administered by the Small Business Administration, which has four 0:15:03.040 --> 0:15:07.040 thousand employees. Are you concerned about the logistics getting the 0:15:07.080 --> 0:15:10.600 money out the door? Absolutely? The money is not going 0:15:10.640 --> 0:15:13.120 to move as fast as as we really need it 0:15:13.160 --> 0:15:17.120 to move. Small businesses are already laying off employees and 0:15:17.160 --> 0:15:20.600 having trouble meeting their meeting their bills, and they need 0:15:20.680 --> 0:15:23.360 they need the money not today, they needed it yesterday. 0:15:23.400 --> 0:15:26.480 And it's going to take weeks, if not longer, for 0:15:26.640 --> 0:15:30.400 um these new small business loans, and they're for their 0:15:30.440 --> 0:15:33.920 forgivable loans, but the interest, the interest is not forgivable 0:15:33.920 --> 0:15:37.680 on them. Um, it's going to take weeks, if not longer, 0:15:37.720 --> 0:15:39.880 for that money to get too small businesses. There's gonna 0:15:39.880 --> 0:15:42.520 have to be a process whereby small businesses apply for 0:15:42.560 --> 0:15:45.640 the loan, the loans get processed, and then finally the 0:15:46.480 --> 0:15:51.440 checks will be dispersed. It is not going to happen instantaneously. So, Professor, 0:15:51.520 --> 0:15:54.640 is there any mechanism that would be preferable to that? 0:15:54.680 --> 0:15:58.080 I mean, in reality, can you in fact get cash 0:15:58.080 --> 0:16:02.280 as small businesses any quicker? Um, there's one way to 0:16:02.320 --> 0:16:05.640 get cash into small businesses pretty much. Actually, there are 0:16:05.640 --> 0:16:08.280 two ways to get it into small businesses immediately. One 0:16:08.400 --> 0:16:11.800 is in the bill, Um, it's a delay in um 0:16:11.960 --> 0:16:15.120 payroll taxes because some of the some of the payroll 0:16:15.160 --> 0:16:18.920 taxes are paid by the business basically your tax withholding, 0:16:19.480 --> 0:16:23.680 and the bill is allowing businesses to dip into the 0:16:23.720 --> 0:16:26.840 funds they withhold from your payroll and just pay it 0:16:27.240 --> 0:16:29.120 to Treasury later. That is one thing to get some 0:16:29.240 --> 0:16:32.400 cash immediately. And another thing that could get them cash 0:16:32.440 --> 0:16:36.400 immediately is a debt moratorium or a debt collection moratorium. 0:16:36.840 --> 0:16:38.840 And what that does is it if it would affect 0:16:38.960 --> 0:16:40.200 and that's not in the bill, and I want to 0:16:40.200 --> 0:16:44.680 be clear, but that would effectively force um UH float 0:16:44.760 --> 0:16:47.400 in a sort of an extension of payment terms from 0:16:48.000 --> 0:16:52.400 things like landlords and and lenders to small businesses. That 0:16:52.440 --> 0:16:55.560 would allow small businesses to prioritize their cash to con 0:16:55.600 --> 0:16:59.880 maintaining payroll. And then Congress could in theory at least 0:17:00.360 --> 0:17:03.440 UH compensate lenders and landlords on the back end with something, 0:17:03.520 --> 0:17:06.600 you say, attacks credit for their UH in the future. 0:17:07.640 --> 0:17:10.359 So You've had a lot of experience in this, both 0:17:10.440 --> 0:17:14.400 in bankruptcy commercial law, but also as former special counsel 0:17:14.520 --> 0:17:18.439 to the Congressional Oversight Panel for TARP, the Troubled Asset 0:17:18.480 --> 0:17:21.400 Relief Program back in two thousand eight and two thousand nine. 0:17:21.480 --> 0:17:25.040 I'm wondering what you think of the process of this bill. 0:17:25.119 --> 0:17:27.800 If you talk to representatives, they say, this has moved 0:17:27.840 --> 0:17:30.000 as fast as anything can move in Washington, d C. 0:17:30.440 --> 0:17:32.600 If you speak to the businesses, they say, what you say, 0:17:32.880 --> 0:17:35.080 We needed the checks last week and we've already laid 0:17:35.119 --> 0:17:39.080 people off. What's your sense those are both true? Um, 0:17:39.320 --> 0:17:44.520 there's no contradiction there. This This bill moved remark remarkably fast. 0:17:44.920 --> 0:17:47.440 You know, this is the largest federal spending bill we've 0:17:47.480 --> 0:17:52.720 ever seen, and it went as Congress goes, at lightning speed. 0:17:52.800 --> 0:17:55.720 The problem is that Congress is not set up to 0:17:56.880 --> 0:18:00.320 deal Uh, it's it's meant to be a deliberative in 0:18:00.400 --> 0:18:02.720 some sense, and it's not set up for dealing with 0:18:02.800 --> 0:18:06.200 emergencies with speed. It's there's just an attention between the 0:18:06.240 --> 0:18:10.640 design of our institutions and the needs of the moment. So, professor, 0:18:10.680 --> 0:18:15.400 how do you think this stimulus will in fact impact 0:18:15.480 --> 0:18:20.760 small and midsize businesses over the next coming weeks and months. Well, 0:18:20.800 --> 0:18:23.119 there are some small, small and medium sized businesses for 0:18:23.160 --> 0:18:24.720 which this money is just going to be too late. 0:18:25.000 --> 0:18:27.920 And um, we don't have a sense of how many 0:18:27.960 --> 0:18:31.359 of them there are that fall in that category that 0:18:31.400 --> 0:18:34.600 the there's surprised that the limited data we have on 0:18:34.640 --> 0:18:38.840 small businesses, and it's it's all kind of problematic because 0:18:38.840 --> 0:18:43.560 small businesses are don't don't fit one profile. You know, 0:18:43.600 --> 0:18:47.520 the the dry cleaner, the restaurant looks very different than 0:18:47.600 --> 0:18:51.440 the than the small manufacturer, let's say. But in general, 0:18:51.600 --> 0:18:56.200 small businesses don't have enormous cash reserves. That probably the 0:18:56.240 --> 0:18:59.480 best guesses that they may maybe have a few weeks 0:18:59.560 --> 0:19:03.200 or a month cash reserves on hand and and on average, 0:19:03.280 --> 0:19:05.600 and that means that there are plenty that have less, 0:19:05.640 --> 0:19:07.480 and those that have less are going to be in 0:19:07.520 --> 0:19:09.159 real trouble and may not be able to make it 0:19:09.240 --> 0:19:15.960 until they until government assistance arrives. The one the ones 0:19:16.000 --> 0:19:19.040 that can last until they get the assistance. This will keep. 0:19:19.680 --> 0:19:22.080 What what this will do, it will keep. It will 0:19:22.080 --> 0:19:24.640 basically put them on life support. The government will take 0:19:25.119 --> 0:19:31.280 effectively take over payroll and utilities and rent and mortgages 0:19:31.320 --> 0:19:35.879 and other debt service um for for for quite a while. 0:19:37.000 --> 0:19:40.960 The real question is how long does the crisis last? Absolutely, 0:19:40.960 --> 0:19:43.480 that's kind of been the key question. Adam Levitton, thank 0:19:43.520 --> 0:19:45.440 you so much for joining US and giving us your 0:19:45.480 --> 0:19:49.280 thoughts at perspective. Adam Leviton is at Georgetown Law professor 0:19:49.320 --> 0:19:52.720 and former Special counsel to the Congressional Oversight Panel of TARK. 0:19:55.080 --> 0:19:57.959 We are seeing gains, as Charlie was saying, in equity markets, 0:19:57.960 --> 0:20:01.359 which is interesting when you contrast it with the unbelievable number, 0:20:01.680 --> 0:20:05.840 a record number of unemployment initial jobless claims filed three 0:20:05.880 --> 0:20:09.520 point three million. It raises a question here. We knew 0:20:09.560 --> 0:20:12.440 it was bad, we don't know how bad. This indicates 0:20:12.520 --> 0:20:16.159 it's very, very bad. And yet is the indication in 0:20:16.240 --> 0:20:20.199 markets right now that the U. S. Congress can save it, 0:20:20.400 --> 0:20:23.240 or that the Fed and the Congress and Congress together 0:20:24.040 --> 0:20:26.680 can somehow cushion the blow and that we've priced in 0:20:26.760 --> 0:20:28.720 most of the pain. Navals Sym Bloomberg stocks that are 0:20:28.800 --> 0:20:32.840 joining us now. Carra Kadonna, chief US economist with Bloomberg Economics. Dave, 0:20:33.040 --> 0:20:35.160 I want to start with you, is that the implication 0:20:35.280 --> 0:20:37.600 from the two point seven percent rally we're seeing right 0:20:37.640 --> 0:20:40.359 now on the SMP. Boy, it sure looks that way, Lisa, 0:20:40.600 --> 0:20:44.320 especially when you consider what's leading the advance in the 0:20:44.520 --> 0:20:48.480 S and P five hundred. We're talking synchrony financial capital 0:20:48.520 --> 0:20:51.600