WEBVTT - Corporate Chieftains Should Talk Less, Pay More: Kaissar 0:00:01.400 --> 0:00:04.120 Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, along 0:00:04.120 --> 0:00:06.240 with my co host of Bonnie Quinn. Every business day 0:00:06.240 --> 0:00:10.400 we bring you interviews from CEOs, market pros, and Bloomberg experts, 0:00:10.440 --> 0:00:13.600 along with essential market moving news. Find the Bloomberg Markets 0:00:13.600 --> 0:00:17.000 Podcast on Apple Podcasts or wherever you listen to podcasts, 0:00:17.000 --> 0:00:21.400 and on Bloomberg dot com. It is time for Bloomberg 0:00:21.400 --> 0:00:25.560 Opinion Today. We're joined by Near Cassar, columns for Bloomberg Opinion, 0:00:25.600 --> 0:00:29.440 founder also of Union adviser's asset management firm. Uh. He's 0:00:29.480 --> 0:00:31.760 on the phone from Washington, d C. Near, Thanks so 0:00:31.800 --> 0:00:34.080 much for joining us here. You and your colleague Tim 0:00:34.120 --> 0:00:37.159 O'Brien from Bloomberg Opinion out with a really interesting column 0:00:37.159 --> 0:00:40.880 here talking about the pay disparity within corporate America. It 0:00:40.920 --> 0:00:45.640 seems like CEOs are having uh seeing you know, rising 0:00:45.760 --> 0:00:48.520 incomes year after year after year in terms of their 0:00:48.640 --> 0:00:51.560 total compensation, but reck and find employees not so much. 0:00:51.680 --> 0:00:56.160 What'd you find right, Well, I think I think CEOs 0:00:56.440 --> 0:00:59.480 um have a real problem on their hands because you 0:00:59.480 --> 0:01:01.680 know what or what we're finding out from the data 0:01:01.880 --> 0:01:04.200 is that we have millions, millions of workers in America 0:01:04.240 --> 0:01:06.280 that are just not making a living wage. You know, 0:01:06.319 --> 0:01:09.640 there are a number of reliable living wage calculators UM 0:01:09.720 --> 0:01:12.560 that are there, available to anyone with internet connection, and 0:01:12.560 --> 0:01:14.480 they all basically say the same thing, which is, in 0:01:14.520 --> 0:01:17.760 the cheapest places in America, a family requires about sixty 0:01:17.800 --> 0:01:20.200 to seventy thousand dollars a year to just pay for 0:01:20.240 --> 0:01:23.640 basic necessities, and probably double that in expensive places like 0:01:23.640 --> 0:01:26.199 San Francisco and New York. And yet millions of workers 0:01:26.240 --> 0:01:29.000 are making a fraction of that. So people are getting up, 0:01:29.040 --> 0:01:32.280 going to going to work, uh, and just not able 0:01:32.319 --> 0:01:35.080 to afford the basic necessities of life. And it just 0:01:35.080 --> 0:01:39.319 seems to me that that's just inherently sustainable situation and UM, 0:01:39.319 --> 0:01:41.560 and I think it's something that that corporate chief should 0:01:41.560 --> 0:01:44.920 be more concerned about. Yeah, even in normal times near it. 0:01:44.920 --> 0:01:47.360 It seems like that's something that would be obviously something 0:01:47.400 --> 0:01:50.760 they should be caring about, but clearly they don't. Can 0:01:50.760 --> 0:01:53.400 you tell us some metrics and why it should be 0:01:53.480 --> 0:01:56.040 very obvious to leaders at the business round table that 0:01:56.040 --> 0:02:00.160 it's not good enough for the richest country in the world. Yeah, Well, 0:02:00.200 --> 0:02:01.960 I mean, you know, there are there are a number 0:02:02.160 --> 0:02:05.200 of um, there are a number of metrics that we 0:02:05.280 --> 0:02:07.440 can point to UM. A lot of it comes from 0:02:07.480 --> 0:02:10.560 a few years ago. UH the SEC in the US 0:02:11.080 --> 0:02:16.120 basically past the regulation that required companies to disclose UM 0:02:16.160 --> 0:02:19.080 their their pay ratio, in other words, the pay of 0:02:19.120 --> 0:02:21.680 their CEO relative to their workers. And this created a 0:02:21.680 --> 0:02:24.200 trope of data around what what the median worker is 0:02:24.200 --> 0:02:26.880 actually making it many of these public companies, and what 0:02:26.919 --> 0:02:30.320 we're finding is, you know, the depending on you know who, 0:02:30.360 --> 0:02:33.239 which companies you put in the category, the media numbers 0:02:33.240 --> 0:02:35.720 can be anywhere between you know, twenty thousand dollars a 0:02:35.760 --> 0:02:37.600 year on the low end of forty thousand dollars a 0:02:37.639 --> 0:02:40.680 year on the high end, But there's somewhere in that range. 0:02:40.720 --> 0:02:42.800 The median pay for full time workers, for example, on 0:02:42.800 --> 0:02:46.720 Amazon is roughly thirty six thousand. At Walmart, which also 0:02:46.800 --> 0:02:49.720 includes part time workers, is roughly twenty two thousand. So 0:02:49.800 --> 0:02:51.880 you know, in in many of these cases, what you're 0:02:51.919 --> 0:02:54.760 seeing is the salary are are wholly inadequate to what 0:02:55.120 --> 0:02:57.800 actual Americans actually need to put food on the table. 0:02:58.480 --> 0:03:02.079 So near worst, you know, where's organized labor in all 0:03:02.120 --> 0:03:03.840 of this, I mean, this has been an issue we've 0:03:03.880 --> 0:03:08.640 seen you know, employee UH incomes, earnings take home earnings 0:03:08.680 --> 0:03:12.639 kind of flat to declining on a real basis for decades. 0:03:12.680 --> 0:03:16.560 Here is this reflective of the decline of unions in America? 0:03:17.680 --> 0:03:19.440 You know, that's a good question because a lot of 0:03:19.440 --> 0:03:21.880 people want to know why this is happening, and the 0:03:21.880 --> 0:03:24.280 truth is, we don't really know. We don't know exactly why. 0:03:24.360 --> 0:03:27.720 There are some popular theories, all of which have some merits. 0:03:27.800 --> 0:03:31.640 One is the weakening of labor unions. That's clearly something 0:03:31.680 --> 0:03:35.520 that's driving this. Some people point to lower productivity growth 0:03:35.560 --> 0:03:37.600 in the US over the decades and that that is 0:03:37.680 --> 0:03:41.000 keeping wages down. Some people point to shareholder primacy, the 0:03:41.080 --> 0:03:43.880 idea that companies should really exist for the benefit of 0:03:43.920 --> 0:03:48.240 shareholders and not necessarily their customers, employee suppliers and the like. 0:03:48.760 --> 0:03:50.640 And the last one is automation. A lot of some 0:03:50.680 --> 0:03:53.080 people are pointing to audition and saying, you know, there's 0:03:53.080 --> 0:03:55.400 been a bifurcation of jobs. High skilled jobs are getting 0:03:55.480 --> 0:03:57.960 higher wages. Low skilled jobs are just falling off a 0:03:57.960 --> 0:04:00.520 cliff in terms of wages, and that that's driving this. 0:04:00.800 --> 0:04:02.600 But you know, one thing that I would note is 0:04:02.720 --> 0:04:05.680 I don't know that the why really matters so much 0:04:05.720 --> 0:04:09.600 as the identifying the problem and finding a way to 0:04:09.640 --> 0:04:12.960 fix it, because ultimately it's hard to imagine a scenario 0:04:13.040 --> 0:04:15.800 where healthy economy can sustain itself. Like I said, when 0:04:15.840 --> 0:04:17.479 you have millions of people who aren't just not making 0:04:17.520 --> 0:04:22.320 a living, so obviously, you know, you would hope near 0:04:22.440 --> 0:04:25.160 that the round table will read this opinion beast by 0:04:25.160 --> 0:04:27.599 yourself and Timothy O'Brien. But if they were too busy, 0:04:27.720 --> 0:04:29.559 let's say, or if they said they were too busy, 0:04:29.560 --> 0:04:31.640 and you had to distill it into a point or 0:04:31.680 --> 0:04:36.599 two for them, what would that be. Well, you know, 0:04:36.680 --> 0:04:39.680 I would say to them that that many of the 0:04:39.720 --> 0:04:42.120 things that they're worried about, and they if you appear 0:04:42.160 --> 0:04:45.000 to be worried about a host of social and political issues, 0:04:45.360 --> 0:04:46.839 what I would say to them is a lot of 0:04:46.880 --> 0:04:49.640 those issues are informed, are set, and in some cases 0:04:49.680 --> 0:04:52.440 triggered by the fact that you have so many people 0:04:52.440 --> 0:04:54.920 in this country that aren't making a living, and that 0:04:55.040 --> 0:04:57.479 you know they are sitting on record profitability. It's not 0:04:57.520 --> 0:05:00.080 as if they can't afford to raise wages, and that 0:05:00.160 --> 0:05:02.200 that would be a good investment not only in their 0:05:02.240 --> 0:05:04.799 own workers, but also in the health of the country. 0:05:05.320 --> 0:05:07.359 Um and in many and indeed in many of the 0:05:07.400 --> 0:05:09.960 issues that they care about. This is something they can 0:05:10.000 --> 0:05:13.239 do something about. This isn't almost entirely within their control. 0:05:13.560 --> 0:05:17.520 It would have enormous positive knock on effects. And uh, 0:05:17.520 --> 0:05:19.200 and it's a good place for them to start, is 0:05:19.240 --> 0:05:20.840 what I would say. Well, near on the other side 0:05:20.880 --> 0:05:23.640 of the equation is CEO pay And we've heard about 0:05:23.720 --> 0:05:27.880 this for years about CEO pay is just you know, going, uh, 0:05:28.040 --> 0:05:31.160 it's just out of control. Is there any way to 0:05:31.200 --> 0:05:33.480 get a rain on that? Or is it just not 0:05:33.560 --> 0:05:37.320 really that much? You know, I guess political will for that. 0:05:39.400 --> 0:05:41.760 You know, it's it's sort of it's an interesting question, 0:05:41.839 --> 0:05:44.760 and it's sort of strange because, um, you know, on 0:05:44.839 --> 0:05:47.080 the one hand, it's not a good look for ceo 0:05:47.240 --> 0:05:50.040 s to make you know, in some cases a thousand 0:05:50.040 --> 0:05:52.960 times with their median worker makes you know, in any 0:05:53.200 --> 0:05:55.840 the averages are roughly two to three two three four 0:05:55.960 --> 0:05:58.680 under time, um, but in some cases there are more 0:05:58.720 --> 0:06:01.560 than that. On the other hand, that alone is not 0:06:01.600 --> 0:06:03.560 going to fix the problem because if you just take 0:06:03.600 --> 0:06:05.800 the CEO pay and distributed it to all the workers 0:06:05.800 --> 0:06:07.520 in the company, it's probably not going to bring them 0:06:07.560 --> 0:06:10.080 up to a living wage. So, you know, I would 0:06:10.120 --> 0:06:11.840 say I would say that we first have to start 0:06:11.839 --> 0:06:14.159 with a substantive problem, which is, I think companies have 0:06:14.200 --> 0:06:16.200 to say, we're gonna use some of our profits. We 0:06:16.279 --> 0:06:18.719 invest in many things as company, we should invest in 0:06:18.760 --> 0:06:20.440 our workers. We have the profits to do it, and 0:06:20.480 --> 0:06:23.240 we should do it. But I think also CEO should 0:06:23.279 --> 0:06:27.279 think about the optics of what they're um. Their paycheck 0:06:27.400 --> 0:06:29.159 looks like in you know, in the tens of millions 0:06:29.160 --> 0:06:32.479 of dollars relative to what their workers make, and I think, 0:06:32.560 --> 0:06:35.160 just as a matter of good let's just call it 0:06:35.360 --> 0:06:37.680 public relations, I think that they ought to be more 0:06:37.720 --> 0:06:41.559 careful about having a pay ratio that is a little 0:06:41.600 --> 0:06:44.359 bit more reasonable. It used to be a lot lower 0:06:44.400 --> 0:06:46.880 in the nineteen fifties and nineteen sixties, and it's just 0:06:47.040 --> 0:06:51.599 skyrocket in the interweeding decade near Do you see inequality 0:06:52.560 --> 0:06:55.919 changing in any way in terms of you know, percentages 0:06:55.960 --> 0:06:58.160 and so on in the coming years, And if not, 0:06:58.720 --> 0:07:03.320 when is breaking point? Well, you know, I'm worry that 0:07:03.360 --> 0:07:06.320 we're seeing breaking point now. And you know, if I 0:07:06.400 --> 0:07:09.720 might say this, this I think is really this should 0:07:09.800 --> 0:07:13.400 really come to everyone's attention. Based on these conversations that 0:07:13.480 --> 0:07:18.080 policymakers about are having about bailout. We're having these conversations 0:07:18.120 --> 0:07:21.119 about whether you know workers are getting the the the 0:07:21.320 --> 0:07:24.680 relief uh that that Congress is putting together is so 0:07:24.760 --> 0:07:27.880 much that it's disincentivizing people to work. And what that 0:07:27.920 --> 0:07:30.960 really should be telling people is that the relase is 0:07:31.040 --> 0:07:33.480 meant to put food on the table while COVID is 0:07:33.520 --> 0:07:36.600 going on UM and if that number is higher than 0:07:36.640 --> 0:07:39.320 what people are making on their job, then we have 0:07:39.400 --> 0:07:42.960 a fundamental problem. And and I and that coupled with 0:07:42.960 --> 0:07:44.840 a lot of the protests that you're seeing, like I said, 0:07:44.880 --> 0:07:47.760 many of them fed by UM, by these low wages, 0:07:47.800 --> 0:07:50.600 and in some cases instigated by the low wages, I 0:07:50.640 --> 0:07:52.280 think that should be a signal to us that we 0:07:52.320 --> 0:07:54.800 are pretty close and that we should do something about 0:07:54.800 --> 0:07:58.560 this before before you know, the fire gets higher. Yeah. Near, 0:07:58.800 --> 0:08:03.080 It's a point well taken and spoken about often these days. 0:08:03.520 --> 0:08:07.960 Near Casar and Timothy O'Brien have written a wonderful Bloomberg 0:08:07.960 --> 0:08:11.559 opinion piece today. It's called Corporate Chieftains Can Talk Less, 0:08:11.760 --> 0:08:14.360 pay More. Sure those a lot of people, especially in 0:08:14.400 --> 0:08:16.520 the work of ranks, that would hardly agree without even 0:08:16.520 --> 0:08:18.480 reading it, But I do urge everybody to read it. 0:08:18.760 --> 0:08:24.320 Our thanks to Near Casar of Bloomberg Opinion. Fascinating story 0:08:24.400 --> 0:08:27.520 I found on the terminal this morning, UH, with the 0:08:27.560 --> 0:08:32.199 headline busted retailers used bankruptcy to break leases by the thousands. 0:08:32.480 --> 0:08:34.839 The authors with us right now. Cat Doherty, high yield, 0:08:34.880 --> 0:08:38.240 distressed debt and bankruptcy reporter for Bloomberg News. Cat, thanks 0:08:38.280 --> 0:08:40.040 so much for joining us here. You know, I'm in 0:08:40.080 --> 0:08:42.680 the city today as first, one of the first times 0:08:42.679 --> 0:08:45.000 I've been here since March, and I'm just shocked by 0:08:45.040 --> 0:08:48.680 the number of empty stores and stores for rent where 0:08:48.679 --> 0:08:50.600 I know back in March, the last time I was here, 0:08:50.640 --> 0:08:54.080 they were thriving retailers there, at least I thought they 0:08:54.120 --> 0:08:57.320 were thriving. But your story is just amazing. They're using 0:08:57.360 --> 0:09:00.280 bankruptcy in certain cases to break the leases. Tell us 0:09:00.280 --> 0:09:03.440 about that. Yeah, that's right, um. And a lot of 0:09:03.440 --> 0:09:07.480 these retailers that have filed, we should note that they 0:09:07.760 --> 0:09:12.559 were experiencing troubles even before the pandemic. Um, So companies 0:09:12.800 --> 0:09:17.160 like Jay Crew, Neiman Marcus, they were already on a 0:09:17.200 --> 0:09:20.360 lot of investors watch list, Um, But the pandemic was 0:09:20.440 --> 0:09:24.920 really the point that pushed them towards the bankruptcy court 0:09:25.360 --> 0:09:29.760 and they've used the bankruptcy court and all of the 0:09:29.760 --> 0:09:35.080 the laws and the negotiation power that they have with 0:09:35.240 --> 0:09:38.800 the judges permission to get out of these leases. UM. 0:09:38.920 --> 0:09:43.400 But we've seen major retailers UM at least twenty five 0:09:43.600 --> 0:09:48.960 of note UM, including Men's Warehouse, UM, the parent tailored 0:09:48.960 --> 0:09:53.240 brands which filed recently UM, and also J. C. Penny. 0:09:53.360 --> 0:09:58.000 So what we're seeing is these companies that were experiencing 0:09:58.559 --> 0:10:03.880 financial strains UM and also seen their brick and mortar 0:10:04.840 --> 0:10:09.760 stores UH Clothes UM and and trying to figure out 0:10:09.760 --> 0:10:13.600 how to get out of these leases. So bankruptcy basically 0:10:13.640 --> 0:10:18.320 gives them a quicker option UM, and it allows them 0:10:18.400 --> 0:10:22.520 to cut these leases or renegotiate with their landlords if 0:10:22.520 --> 0:10:25.480 they're able to get a lower rent. It seems like 0:10:25.600 --> 0:10:30.200 everything about this pandemic has been set up for creditors benefits, 0:10:30.520 --> 0:10:34.319 because if you look at these retailers, they were they 0:10:34.320 --> 0:10:37.160 were headed for the exits, right they were. I mean 0:10:37.160 --> 0:10:39.199 it was it was going to be a difficult, protracted, 0:10:39.520 --> 0:10:42.439 you know, maybe effort, but many of them are going 0:10:42.480 --> 0:10:45.200 to go away under this scenario. Some of them have 0:10:45.280 --> 0:10:47.200 even got P P P loans in order to help 0:10:47.240 --> 0:10:51.240 them through the bankruptcy process, and their creditors also don't 0:10:51.360 --> 0:10:53.320 end up with the you know, the rest of the 0:10:53.360 --> 0:10:56.080 lease to pay up or whatever that that would add 0:10:56.080 --> 0:10:59.040 to the discussions or the negotiations. Am I reading that right? 0:11:00.160 --> 0:11:03.560 So it really depends on the situation UM. These A 0:11:03.600 --> 0:11:06.520 lot of the main retailers UM that we've been focused 0:11:06.520 --> 0:11:10.320 on did not actually receive PPP loans UM. Some of 0:11:10.320 --> 0:11:14.200 the smaller ones have. But UM as you as you note, 0:11:14.520 --> 0:11:18.920 these retailers were already kind of UM on a on 0:11:18.960 --> 0:11:21.920 a fine line UM and and could have filed for 0:11:21.960 --> 0:11:28.400 bankruptcy even without the pandemic. Uh So, the the closures 0:11:28.480 --> 0:11:31.439 UM that are tied to these bankruptcy is a lot 0:11:31.440 --> 0:11:34.960 of it is because we're just seeing less folks shopping 0:11:35.040 --> 0:11:38.480 in store, and that was happening even before you had 0:11:38.720 --> 0:11:42.080 UM stay at home orders. So now that companies have 0:11:42.280 --> 0:11:47.680 filed a big part of their plans for reorganizing is 0:11:47.880 --> 0:11:52.439 which stores UM can we close down, which leases can 0:11:52.480 --> 0:11:55.120 we get out of? And on the note of what 0:11:55.200 --> 0:11:58.679 the creditors are getting, a lot of them are becoming 0:11:58.720 --> 0:12:00.880 the owners of these companies. A lot of them are 0:12:00.920 --> 0:12:05.560 able to negotiate so that they can get an equity 0:12:05.640 --> 0:12:11.800 stake where they will eventually take over and can in 0:12:11.840 --> 0:12:17.160 some cases also UH dictate who in management is staying, 0:12:17.480 --> 0:12:20.679 who in management leave is leaving. Uh. They basically get 0:12:20.760 --> 0:12:23.320 a larger seat at the table. So kind we got 0:12:23.320 --> 0:12:26.760 about thirty seconds here. It seems like the landlords are 0:12:26.800 --> 0:12:30.920 holding the bag here. What's their recourse? It's a it's 0:12:30.920 --> 0:12:33.640 a good question. Often they don't have as big of 0:12:33.679 --> 0:12:37.480 a recourse or or any recourse in bankruptcy. UM. But 0:12:37.960 --> 0:12:41.160 I've also seen situations where retailers will go to their 0:12:41.200 --> 0:12:44.520 landlords and say, hey, look, we need to renegotiate. If 0:12:44.559 --> 0:12:46.840 we can't get a lower rent, or if we can't 0:12:46.880 --> 0:12:49.160 get out of these costly leases, we're going to be 0:12:49.360 --> 0:12:52.120 forced to file, or we're going to choose to file. 0:12:52.440 --> 0:12:54.760 So it's up to you what you want to do 0:12:54.920 --> 0:12:58.240 with that information. That is a strategy that I think 0:12:58.280 --> 0:13:02.400 will will continue, um, even when the stores start to reopen. 0:13:02.760 --> 0:13:04.440 There's a bit of a test case in the course 0:13:04.480 --> 0:13:08.040 as well. Isn't there a pull between Starbucks and some 0:13:08.120 --> 0:13:10.400 other retailers, And I think it's yet to be decided. 0:13:10.559 --> 0:13:12.920 He really is going to be left holding the bat 0:13:14.040 --> 0:13:17.880 absolutely all right, Katherine, Thank you Katherine Dougherty covers all 0:13:17.960 --> 0:13:22.880 things really credit related, bankruptcy related, retail related these days, 0:13:23.000 --> 0:13:25.720 all the fun stuff, and boy has she been busy. 0:13:26.080 --> 0:13:29.000 Katherine Dougherty with a K on your Bloomberg or at 0:13:29.000 --> 0:13:32.720 Bloomberg dot com. Paul, you know, there's going to be many, 0:13:32.760 --> 0:13:35.480 many years of stories that will emerge from this pandemic. 0:13:35.480 --> 0:13:36.920 It's going to be a bit like the financial crisis, 0:13:36.960 --> 0:13:40.520 where in you know, five years later, you're still discovering things. Yeah, 0:13:40.559 --> 0:13:42.360 I think the economic impact here, what we're hearing from 0:13:42.400 --> 0:13:44.400 a lot of economists, it's it's certainly not a v 0:13:44.520 --> 0:13:47.040 and it's going to be a very long recovery here 0:13:47.480 --> 0:13:49.960 on the back end of this. Yeah, we should suggest 0:13:50.040 --> 0:13:53.240 not just financially, but also personally as well. The toll 0:13:53.320 --> 0:13:58.360 will be a long time coming. Well, as we know now, 0:13:58.360 --> 0:14:01.840 ammonium nitrate equivalent to eight hundred tons of T and 0:14:02.000 --> 0:14:04.959 T was unloaded from a cargo ship back in two 0:14:04.960 --> 0:14:09.200 thousand and fourteen out of port just on the side 0:14:09.240 --> 0:14:15.599 of Lebanon. The major city in Lebanon now in devastation, 0:14:15.880 --> 0:14:18.360 and we want to bring in I'm in camel to 0:14:18.400 --> 0:14:20.360 talk to us a little bit about what happens next. 0:14:20.720 --> 0:14:25.960 Obviously you know deaths and injuries and serious loads on 0:14:26.080 --> 0:14:30.160 the emergency departments in the entire country. But I'm in now. 0:14:30.200 --> 0:14:32.200 We have the French president, you know, on his way 0:14:32.200 --> 0:14:36.120 to Beirute, and it's just really interesting because is he 0:14:36.440 --> 0:14:42.120 welcome there? I think so. I think it's a humanitarian 0:14:42.560 --> 0:14:47.240 catastrophy that the world hasn't seen for very for for 0:14:47.320 --> 0:14:51.480 many years, and it's I think for the Lebanese people, 0:14:51.680 --> 0:14:54.840 it's good to see that France is interested in supporting 0:14:54.880 --> 0:14:58.640 the people. I think to visit UH is symbolic in 0:14:58.960 --> 0:15:02.720 many ways, but the destruction, I think anyone that has 0:15:02.800 --> 0:15:06.240 seen the picture, I think across the world will will 0:15:06.280 --> 0:15:10.000 feel some level of sympathy here, even though there are 0:15:10.040 --> 0:15:15.800 many incompetent government officials that have basically been the reason 0:15:15.800 --> 0:15:20.280 why we have this crisis in the first place. Just clarify, though, 0:15:20.760 --> 0:15:25.240 what is the point in the former colonists visiting Lebanon 0:15:25.320 --> 0:15:28.080 if it's not to come with aid and even unconditional 0:15:28.120 --> 0:15:32.520 aid about no, I think I would divide it up 0:15:32.560 --> 0:15:35.200 into two. I think the human human here and aid 0:15:35.320 --> 0:15:38.640 is coming, that that will happen, that is happening for 0:15:38.800 --> 0:15:43.680 many nations in the international community at large, regional countries 0:15:43.720 --> 0:15:47.280 as well. Everyone is supporting that aid effort. But I 0:15:47.360 --> 0:15:50.760 think here France is willing to do its part in 0:15:50.840 --> 0:15:53.480 terms of eight but it will be conditional of on 0:15:53.600 --> 0:15:57.400 the Lebanese government doing reforms. That is really when we're 0:15:57.440 --> 0:16:02.600 talking about a non humanitarian aid, financial support, long term support, 0:16:03.080 --> 0:16:05.240 and I think each country will have to decide up 0:16:05.600 --> 0:16:08.840 decide on its own what what what its policy will be. 0:16:09.160 --> 0:16:11.920 Diams has its own view of Francis or has its 0:16:11.920 --> 0:16:15.680 own view in many Arab countries have their own requirements. 0:16:15.680 --> 0:16:19.920 But the key thing is that there is a consensus 0:16:20.040 --> 0:16:23.960 within the international community that they do not want to 0:16:24.040 --> 0:16:30.000 see any form of financial support over the long term 0:16:30.160 --> 0:16:33.560 go into corruption, into corrupt network. They would like to 0:16:33.600 --> 0:16:36.520 see some of this money end up in really use 0:16:36.800 --> 0:16:41.080 constructing the reconstructing actually at this stage the Lebanese economy. 0:16:41.640 --> 0:16:43.600 So I um, I've just over the last couple of days, 0:16:43.600 --> 0:16:45.480 like many people, I've read a lot of social media 0:16:45.520 --> 0:16:49.480 posts from Lebanese folks in Beirut and it's just the 0:16:49.640 --> 0:16:54.040 rage they feel towards the corruption of the government is 0:16:54.080 --> 0:16:58.160 just palatable. Is this an agent of change for in 0:16:58.200 --> 0:17:03.080 the political structure of Lebanandi thing. Well, I think anger 0:17:03.240 --> 0:17:06.760 is very legitimate the station most people are angry. I 0:17:06.800 --> 0:17:10.000 think it is different this time. It will create the 0:17:10.119 --> 0:17:13.359 seeds of some change in the political system. But really 0:17:13.400 --> 0:17:17.280 the country in essence is still divided. Here. It is 0:17:17.320 --> 0:17:21.760 divided amongst different religious groups. And although there is anger, 0:17:21.960 --> 0:17:26.000 at the end, what really happens is each sectarian leader 0:17:26.080 --> 0:17:30.000 blames another one from a different religious group and we 0:17:30.119 --> 0:17:34.600 get into it an endless cycle of of blame. Really 0:17:34.680 --> 0:17:39.119 not not a constructive approach. Real change in lebon And 0:17:39.160 --> 0:17:41.760 I think we'll have to come through a new process 0:17:41.840 --> 0:17:45.720 elections or or some real change in in in government, 0:17:46.320 --> 0:17:50.080 something in much more institutional The real opportunity will not 0:17:50.160 --> 0:17:52.480 be will not happen now. I think it will have 0:17:52.640 --> 0:17:56.159 to be a new team of parliamentarians that are able 0:17:56.240 --> 0:18:00.680 to equities, new voices in the Lebanese community. But society 0:18:00.720 --> 0:18:04.119 at large, I think even today is very divided. I 0:18:04.160 --> 0:18:07.840 am who is Lebanon aligned with in the so called 0:18:07.840 --> 0:18:10.280 Middle East these days? And and and and for real, 0:18:10.320 --> 0:18:13.120 I mean obviously there are so many you know, different 0:18:14.040 --> 0:18:17.480 coalitions within you know government and in the country. But 0:18:17.560 --> 0:18:21.560 in the main who is Lebanon alined with well, I 0:18:21.560 --> 0:18:24.719 think that's part of the problem. Lebanon isn't aligned with 0:18:24.760 --> 0:18:27.600 anyone is aligned. There are parties in Lebanon that are 0:18:27.640 --> 0:18:30.359 aligned with different countries in the Middle East, so the 0:18:30.560 --> 0:18:34.440 state in many respects is not independent. Soon these are 0:18:34.480 --> 0:18:37.560 allied with Saudi Arabia, she has are allied with. You 0:18:37.640 --> 0:18:41.640 want some Christians allied with France, and of course that's 0:18:41.640 --> 0:18:45.200 that's to a certain extent and oversimplification of the reality. 0:18:45.880 --> 0:18:49.760 But Lebanon as a state does not have a firm 0:18:49.880 --> 0:18:54.720 policy of who it is allied with. The major problem 0:18:54.720 --> 0:18:57.679 in the last few years has been that his Bollah 0:18:58.600 --> 0:19:03.719 Lebanese Shia group has been indirectly involved in conflict in 0:19:03.760 --> 0:19:08.480 many Middle Eastern countries. That has made Arab aids to Lebanon, 0:19:08.600 --> 0:19:12.920 which which was always forthcoming, much more difficult. Uh. That's 0:19:13.040 --> 0:19:16.400 part of the problem that we see today. Unless Lebanon 0:19:16.960 --> 0:19:21.040 or his Balla becomes in some way more constrained, very 0:19:21.080 --> 0:19:25.480 difficult to see international polities and regional towers as well 0:19:26.040 --> 0:19:29.600 give robust support over the long term. I thank you 0:19:29.640 --> 0:19:31.959 so much for that. We appreciate your perspective and your 0:19:32.000 --> 0:19:35.080 experience on that very dangerous and unsettled part of the 0:19:35.080 --> 0:19:38.440 war world, which is obviously still reeling from that explosion. 0:19:38.480 --> 0:19:41.560 I have Kamal Practice head Middle East and North Africa 0:19:41.640 --> 0:19:45.560 for the Eurasia Group, giving us his perspective there and Van. 0:19:45.760 --> 0:19:47.800 You know, having read a lot just over the last 0:19:47.840 --> 0:19:51.040 couple of days about this explosion, you just get that 0:19:51.080 --> 0:19:54.640 background information about how difficult things are in that country 0:19:54.680 --> 0:19:58.480 even before this catastrophe and this it's just, as I 0:19:58.560 --> 0:20:01.600 am suggested, very fool to see some change there. It's 0:20:01.680 --> 0:20:04.040 just heartbreaking. I mean, we don't concentrate on that part 0:20:04.040 --> 0:20:07.199 of the world enough. But the financial impact of this, 0:20:07.400 --> 0:20:11.000 beyond the devastation that Lebanon was already feeling economic and financially, 0:20:11.560 --> 0:20:13.920 is just going to be decades in the undoing. Yeah, 0:20:14.000 --> 0:20:16.960 absolutely so, we'll certainly fall up on this important story. 0:20:18.200 --> 0:20:22.000 But discussion we've had pretty often over the last several 0:20:22.040 --> 0:20:25.000 months is why is the stock market going up when 0:20:25.000 --> 0:20:28.520 the economy is in such peril? And Barry rid Holtz 0:20:29.000 --> 0:20:31.760 had a great column on this and it really opened 0:20:31.800 --> 0:20:33.639 my eyes to a lot of the math behind that. 0:20:33.720 --> 0:20:36.879 Barry Ridholts Bloomberg opinion columnists and host of Masters in 0:20:36.920 --> 0:20:40.879 Business on Bloomberg Radio, also chairman and chief investment officer 0:20:41.000 --> 0:20:44.280 of Ridholtz Wealth Management, Barry, your column was fascinating. Give 0:20:44.320 --> 0:20:46.480 us kind of your key takeaways here As we try 0:20:46.520 --> 0:20:52.280 to reconcile a strong risk on risky asset markets, including 0:20:52.280 --> 0:20:55.840 the stock market, and an economy that's anything but sure, 0:20:56.359 --> 0:20:59.920 this is the one single question that bubbles up from 0:21:00.080 --> 0:21:04.480 clients more than anything else. We don't understand the economy 0:21:04.600 --> 0:21:08.119 is so terrible, how is the stock market continuing to 0:21:08.160 --> 0:21:11.760 go up? So based on that constant question, we had 0:21:11.800 --> 0:21:14.680 to come up with a good answer. And so first 0:21:14.720 --> 0:21:18.000 place you go to is dive into the data, and 0:21:18.080 --> 0:21:22.360 the data is pretty compelling. Some of the worst sectors 0:21:22.400 --> 0:21:26.240 in the economy turn out to be really tiny as 0:21:26.240 --> 0:21:30.159 a component of major indices like the SMP five hundred 0:21:30.240 --> 0:21:32.400 or the NASDAQ one hundred. I'll give you a couple 0:21:32.440 --> 0:21:36.240 of quick examples. Everybody knows department stores have been under 0:21:36.280 --> 0:21:39.840 a lot of pressure before the pandemic. The lockdown just 0:21:39.920 --> 0:21:43.160 made it worse. They're down sixty something percent for the year. 0:21:43.680 --> 0:21:46.880 They're turn out to be one one of a percent 0:21:47.920 --> 0:21:52.720 of the SMPI index. Airlines barely any bigger. They're a 0:21:52.800 --> 0:21:57.400 quarter of a percent of the SMP five hundred, and 0:21:57.920 --> 0:22:00.840 you work your way down some of the word performing 0:22:00.920 --> 0:22:05.800 industry sectors hotels and casinos, travel services, oil and gas. 0:22:06.440 --> 0:22:09.400 Just work your way down. If you take the thirty 0:22:09.520 --> 0:22:14.280 worst sectors um subsectors of the SMP five hundred, if 0:22:14.320 --> 0:22:18.000 we were to delist all of them tonight tomorrow morning, 0:22:18.119 --> 0:22:24.840 it would barely shave two off the entire index. That's fascinating, 0:22:24.880 --> 0:22:27.520 but very you know, that's one explanation. But the other 0:22:27.560 --> 0:22:32.000 explanation is that this pandemic is not hurting the people 0:22:32.359 --> 0:22:38.920 that that companies need, if you like, for the most part. 0:22:39.080 --> 0:22:42.440 So yes, consumer companies, of course, But you know those 0:22:42.600 --> 0:22:45.720 with wealth will continue to have wealth post pandemic, and 0:22:46.400 --> 0:22:49.359 that's great for the stock market. Well yes, and no, 0:22:49.560 --> 0:22:51.920 if if you look at the savings rate, it's gone up. 0:22:51.960 --> 0:22:55.280