Speaker 1: This is Bloomberg Business Week from Bloomberg Radio. Hi, I'm
Speaker 1: Jason Kelly and I'm Carol Masser. Welcome to the weekend
Speaker 1: edition of Bloomberg Business Week. This week the last year,
Speaker 1: this is a special takeover of the issue. It is
Speaker 1: all about the coronavirus, and we look at it from
Speaker 1: multiple angles because, safe to say, Jason, this story there
Speaker 1: are so many moving parts to it. And having said that,
Speaker 1: it was a fast moving story this week, well, and
Speaker 1: I think it's worth letting people know sort of what
Speaker 1: the editorial etho says it were of this magazine was
Speaker 1: this week, and that is to go from macro literally
Speaker 1: to micro, looking at global economics, looking at companies, looking
Speaker 1: at people, all the way down to the disease itself. Well,
Speaker 1: I loved it to some of the conversations that went
Speaker 1: around in the newsroom this week and this, you know,
Speaker 1: safe to say, folks, a little inside into what was
Speaker 1: going on here at Bloomberg and Bloomberg Business Week. This
Speaker 1: was our story this week because we were looking at
Speaker 1: it from so many different ways and it obviously impact
Speaker 1: of the financial markets. But someone saying it was us
Speaker 1: about GDP revisions than being a major disturbance to our
Speaker 1: daily life, and that's what it was about. And that's
Speaker 1: what happened this week that I think is really worth
Speaker 1: mentioning and underscoring, is that it went from the abstract
Speaker 1: in many ways, something that we were thinking and talking
Speaker 1: about as it related to overseas economies and supply chains,
Speaker 1: and it got all the way down to basketball tournaments
Speaker 1: being canceled, schools being closed, a suburb of New York
Speaker 1: City effectively being shut down, quarantined and contained, and all
Speaker 1: of this happening, and as you say, all of these
Speaker 1: things going on, and from an individual basis, for you know,
Speaker 1: reporters deciding all of a sudden to work at home
Speaker 1: because that made sense. And so it wasn't this far
Speaker 1: off story that we were all reporting on. It was
Speaker 1: impacting our daily lives. And so that's how the magazine
Speaker 1: looked at it, really from all different ways. Jill Weber
Speaker 1: is the editor of Bloomberg Business Week. He was the
Speaker 1: one who made the decision from this being a partial
Speaker 1: takeover of the magazine to devoting the entire issue to
Speaker 1: the virus and really stepping back and taking a look
Speaker 1: at the macro issues all the way down to the
Speaker 1: actual virus itself. Well, and it's not an easy task because,
Speaker 1: as you say, Carol, it is so fast moving. You
Speaker 1: had world leaders stepping in, you had CEOs making pronouncements,
Speaker 1: and it fell to Joel and his team to make
Speaker 1: sense of it all. So when we thought about how
Speaker 1: to do this issue, we started actually relatively small, and
Speaker 1: then we just kept getting more ambitious as we kept
Speaker 1: seeing some of the stories come in and kept asking questions,
Speaker 1: so that the idea of asking questions is actually the
Speaker 1: way that we framed the whole book. We started from
Speaker 1: the macro what does this mean for the global economy,
Speaker 1: and worked down from there, from through governments, companies, us
Speaker 1: as individuals in society, and all the way down to
Speaker 1: the virus itself. Right, So that was our lens, and
Speaker 1: then we just asked questions again and again and again.
Speaker 1: But the overarching idea is really this idea of the
Speaker 1: last year, right of like, we don't know what this
Speaker 1: means right now or how bad it will get, but everything,
Speaker 1: and especially as this became a pandemic, officially in a pandemic,
Speaker 1: now every all project actions out the window, and no
Speaker 1: one can even know if their kid's gonna go to
Speaker 1: a summer camp, right. That's the editor of the magazine,
Speaker 1: Joel Webber and Carol Obviously a key component of all
Speaker 1: of this, certainly close to home for everyone who knows
Speaker 1: Bloomberg was the market. Yeah, absolutely, And Mike G. Reagan
Speaker 1: really follows the stock market for us here in the
Speaker 1: financial markets. He's got a story in the magazine and
Speaker 1: what happened to the bull market because as we know,
Speaker 1: things change this week. Well, what's amazing to me is
Speaker 1: how many threats were thrown at this bull market over
Speaker 1: the years. You know, I look back at two thousand
Speaker 1: eleven when the US lost its triple A credit rating
Speaker 1: at SMP to the European debt crisis, all the various
Speaker 1: jew political dust stops in the meantime, the crash and
Speaker 1: oil prices in two thousand and sixteen, on and on,
Speaker 1: and it got very close to sort of hitting that
Speaker 1: drop that would sort of signal the end of a
Speaker 1: bull market and the start of a bear market. But
Speaker 1: both times in two thousand eleven and again in two
Speaker 1: thousand and eighteen, it's stopped just short of that, like
Speaker 1: nineteen points something so close, and it really made you
Speaker 1: sort of think, well, investors had kind of put some
Speaker 1: orders into by near those levels, thinking that you know,
Speaker 1: this thing can can survive almost anything. It felt like
Speaker 1: clearly the economic damage being done from this virus is
Speaker 1: just so great. It's so unquantifiable right now, Um, we
Speaker 1: know the damage is being done, how bad it is,
Speaker 1: how bad the effect on earnings and everything is just
Speaker 1: so unquantifiable that this this appears to be what's really
Speaker 1: going to do the trick and finally end this record
Speaker 1: long bowl market when ultimately investors are betting on the
Speaker 1: future in many ways, and one of the things that
Speaker 1: they're not hearing from companies, and one of the things
Speaker 1: that seems to be really spooking everyone is instead of
Speaker 1: companies saying, well, it's gonna take earnings down or it's
Speaker 1: gonna take revenues down x percent or x much, they're saying,
Speaker 1: we don't know right right, just withdrawing guidance. So it's
Speaker 1: almost a worst scenario than saying a drop, you know,
Speaker 1: predicting a drop of x percent um. And it's understandable.
Speaker 1: I mean, how can a company possibly, uh in good
Speaker 1: faith tell you what their earnings are going to be
Speaker 1: or even a wide range when there's so much uncertainty
Speaker 1: so much unpredictability about this virus, how long it's gonna last,
Speaker 1: how long this travel band is going to be enforced,
Speaker 1: on and on and on all the way up and
Speaker 1: down the markets. It's it's just impossible to price the
Speaker 1: equity market like we obsess about levels, right and when
Speaker 1: we hit a technical correction or when we hit hit
Speaker 1: officially a bear market. How important though is it in
Speaker 1: terms of what happens next for the financial markets? Well
Speaker 1: as far as trying to find that magic technical level.
Speaker 1: People have been trying to do with the the entire
Speaker 1: stretch of this and they've just been blown through one
Speaker 1: by one. You know, you think of you know, your
Speaker 1: two in a day moving average, a lot of people
Speaker 1: were hoping would cause a pause that round number at
Speaker 1: three thousands. Nothing is really working more than say a
Speaker 1: couple of minutes in the market as as far as
Speaker 1: the support level. So it's it's such an unprecedented situation,
Speaker 1: uh that, you know, as much as Wall Street loves,
Speaker 1: you know, to say past performance doesn't guarantee future results,
Speaker 1: that's what everyone does, is they go back and try
Speaker 1: to find that historical analog to what's going on. It's
Speaker 1: just impossible to do in this case. It's just we've
Speaker 1: never quite had a threat like this to the economy
Speaker 1: and a simultaneous threat to everyone's health and well being
Speaker 1: at the same time. That's sort of or inextricutably linked.
Speaker 1: You know, you're you're stressed out about the market, and
Speaker 1: you're also stressed out about you know, am I gonna
Speaker 1: have the quarantine? Is my family? Okay? My relatives overseas.
Speaker 1: It's a it's a very unique and unprecedented situation. And
Speaker 1: that's my Greek in giving us the markets perspective. We
Speaker 1: will look back, I believe on this week certainly as
Speaker 1: the end of the record long bull market and a
Speaker 1: moment where a lot change when it comes to equities.
Speaker 1: It's official, we're in a bear market. The economic impact
Speaker 1: of the virus, man, it is on everyone's minds. The
Speaker 1: coronavirus could cost the global economy two point seven trillion
Speaker 1: according to some of the latest reporting. Wow woa as
Speaker 1: I like to say, yeah, it's a wa number for sure,
Speaker 1: and a fast moving when a fast moving story in
Speaker 1: the takeover issue all around coronavirus. This week, economics goes deep,
Speaker 1: especially into China, where the source of this or at least.
Speaker 1: The original outbreak was what's the state of China? Christina
Speaker 1: lend Blood. Well, everybody is watching to see how soon
Speaker 1: the world's number two economy gets back on its feet,
Speaker 1: because it's important to just about every country. They're also
Speaker 1: and it's you know, also curiosity about how companies negotiate
Speaker 1: some of these obstacles. You know, for example, there and
Speaker 1: now like rules in China about how close workers can
Speaker 1: sit at lunch time, you know, at their desk um.
Speaker 1: But so basically analysts hours and at other banks on
Speaker 1: Wall STREETA and companies have been looking at statistics in
Speaker 1: China to try to gauge how quickly industry and and
Speaker 1: factories are coming back online. Now that's a tricky thing
Speaker 1: because for a long time there have been suspicions that
Speaker 1: you know, the government fudges its numbers. Right, It's tricky
Speaker 1: in normal times, right. So but because of that, though,
Speaker 1: people have these sort of proxy you know, data sets
Speaker 1: that they track, and one of them is energy and
Speaker 1: they've been looking they've looked at those for a long time.
Speaker 1: So now people for example are looking at like thermal coal,
Speaker 1: which is used you know for electricity production, to see
Speaker 1: what is consumption of thermal code telling me about like
Speaker 1: you know what, you know, how quickly the plants are
Speaker 1: coming back to life. Even that even that hasn't been
Speaker 1: totally reliable because we have now seen from interviews with
Speaker 1: plant managers, is that in several prefectures, you know, government
Speaker 1: UM officials handed out targets for you know how for
Speaker 1: energy consumptions. So that means that in like sometimes factory
Speaker 1: owners were going in turning on all the lights, running
Speaker 1: the machinery even if they didn't have you know, all
Speaker 1: of their workers back to actually be able to you know,
Speaker 1: really be doing full production against just to meet the target.
Speaker 1: It's like the movie Home Alone, you know, where he
Speaker 1: sets it all up to make it look like they're
Speaker 1: having a party. I thought about like growing up in Mighty,
Speaker 1: like shut off the lights, like you know, throwing on
Speaker 1: all the like. Know. What's interesting too, is we don't
Speaker 1: know that as China kind of tries to get back
Speaker 1: to normal and everybody comes back after being quarantined, what happens,
Speaker 1: I mean, do you get potentially another up break like
Speaker 1: we don't know? Right? Yeah, that has been uh something
Speaker 1: that some health um authorities outside the country have been
Speaker 1: warning about that you know, we could see another wave
Speaker 1: of infection and then and now what's happening more recently,
Speaker 1: now that it's clear that this is spilling over in
Speaker 1: economic terms to other countries, what people are worrying about
Speaker 1: is that there's going to be this feedback loop in
Speaker 1: which what it was initially like a supply crunch, like
Speaker 1: these factories couldn't get well, they didn't have workers and
Speaker 1: they couldn't get you know, inputs to to produce are
Speaker 1: now going to be hit by a demand crunch because,
Speaker 1: like you know, so their customers in Europe and the
Speaker 1: US are going to be canceling orders. And that's already
Speaker 1: starting to happen to some of the business people that
Speaker 1: we talked to. One of the things you point out
Speaker 1: in this story, which is really important is the size
Speaker 1: of economy, but also the size of the downturn here
Speaker 1: and the historical perspective there. You guys say, it's the
Speaker 1: fourth first quarterly contraction in decades we're likely to see
Speaker 1: and the weakest years since the early nineteen nineties for China.
Speaker 1: That's a long time. Yeah, And not only that, but
Speaker 1: the historical comparisons. You also have to consider the fact
Speaker 1: that like a decade ago, China's contribution to the world,
Speaker 1: the contract was much smaller. So you know, all of
Speaker 1: these you know, businesses, there's like all of these networks
Speaker 1: that have built up like so this transmission like effects
Speaker 1: that are going on kind of backwards and forwards along
Speaker 1: these relate these business relationships, right, That's what That's what
Speaker 1: people are beginning to to caution about now that it's
Speaker 1: going to sort of amplify the downturns in some places,
Speaker 1: and now where people are just going to try to,
Speaker 1: you know, get a grip on that. What about the
Speaker 1: Chinese government, man, we always talk about deep pockets and
Speaker 1: that when there's problems they can certainly dip into them
Speaker 1: to kind of help out society. We're talking about stimulus packages.
Speaker 1: The magazines covering a lot about stimulus packages from different
Speaker 1: governments and around the world. What about that in China, Well,
Speaker 1: so far, what we've seen is not much from the
Speaker 1: monetary side, which is which in China doesn't have the
Speaker 1: same kind of stimulative effect that it doesn't in the
Speaker 1: US and other Western countries. So they're only like trimmed
Speaker 1: interest rates, I mean by comparison with the FED and
Speaker 1: and the Bank of England have done as much deeper cuts,
Speaker 1: but what they are doing is more targeted, you know,
Speaker 1: assistance to to firms, particularly in the areas well inside
Speaker 1: the province that's the epicenter and the surrounding areas. And
Speaker 1: we continue to think that they'll be modulating, you know,
Speaker 1: the extent of stimulus. But one thing is so far,
Speaker 1: I mean, they haven't said this out right, but that's
Speaker 1: like they do not want to do anything on the
Speaker 1: scale that we saw after the financial crisis because that
Speaker 1: was massive, um I think it was like twelve of
Speaker 1: GDP or something like that. And the indebtedness level that
Speaker 1: resulted from that, right, you know, is still the problems.
Speaker 1: So that is something that they're continued to work through.
Speaker 1: That leads to another story in the economic section, and
Speaker 1: I think this one is so front and center because
Speaker 1: it's not just I feel like the virus concerns, but
Speaker 1: the energy war that we're seeing has certainly put certain
Speaker 1: sectors interest. We're talking about corporate debt here in America.
Speaker 1: Tell us about the situation because we've seen companies, because
Speaker 1: that was so cheap, taking out a lot more debt
Speaker 1: coming off of the financial crisis. Yeah, so we've had
Speaker 1: like an eleven year expansion coupled with historically low interest rates.
Speaker 1: Um there's been a huge expansion in sort of high
Speaker 1: yield credit markets, and and and the just the corporate
Speaker 1: debtload which now for the first time since exceeds that
Speaker 1: of American households. So the I m F and other
Speaker 1: people have been warning that this is a problem for
Speaker 1: a while, like in the US and other countries. Powell
Speaker 1: and other um U S economists have all have also
Speaker 1: been quick to point out it's nothing on this scale
Speaker 1: alee of of the housing bubble, which you know, which
Speaker 1: brought down the economy. So there's been this attempt to say, like, yes,
Speaker 1: it's an issue, we're looking at it. We don't think
Speaker 1: it can on its own tip the US economy into recession,
Speaker 1: but it can amplify the effects of a downturn because
Speaker 1: if those firms that have you know, get downgraded, there's
Speaker 1: this cascading effect. The money managers who own this kind
Speaker 1: of debt have limits on what you know, on this
Speaker 1: the quality of the assets. They can hope they will
Speaker 1: have to sell down some of the stuff, and then
Speaker 1: you know, the companies get the borrowers are being cut
Speaker 1: off from credit markets, they're going to do layoffs, perhaps
Speaker 1: they're going to like pull back on investment. That has
Speaker 1: effects for GDP growth. So I think that, um, one
Speaker 1: of the things that we're going to be looking at,
Speaker 1: everyone's gonna be looking at, is pink slips. Is that
Speaker 1: people starting to get laid off. I mean, the FED
Speaker 1: has been clear that this is one of the things
Speaker 1: that you know, that's when people are going to start
Speaker 1: to get worried. That's the editor of the Economic section,
Speaker 1: Christina Lynn Blood, taking a look at the economy, the
Speaker 1: global economy. Front and center is China. We're all watching
Speaker 1: to see how quickly the Chinese economy will bounce back.
Speaker 1: It's not so clear cut well. And also the conversation
Speaker 1: about corporate debt. We talk about that a lot again
Speaker 1: in the abstract, what's going on with leverage loans, what's
Speaker 1: going on with companies borrowing. But we're going to start
Speaker 1: to see very specific examples and very specifically how this
Speaker 1: will play through to the broader economy. So we keep
Speaker 1: hearing about many ways to fend off the coronavirus. Got
Speaker 1: a really simple piece of advice, stay home. That's exactly
Speaker 1: what justin Fox Bloomberg opinion columnist is doing where he's
Speaker 1: coming to us from home from his computer thanks to NEXTI,
Speaker 1: which is our internal conferencing system. UM justin it sounds
Speaker 1: like simple advice. Yeah, I mean, and it's really simple
Speaker 1: for me. I'm an opinion columnist. All I need to
Speaker 1: do my job is phone and a laptop and an
Speaker 1: Internet connection. What's interesting is we're at this time where
Speaker 1: we're all trying to figure out, you know, how can
Speaker 1: we We can't contain it at this point, but it's
Speaker 1: all about mitigation. How do you prevent it from spreading?
Speaker 1: And we talk about you know, fist bumping and elbow
Speaker 1: bumping and all these different ways. There's no more handshakes,
Speaker 1: and we're all keeping kind of social distance. But as
Speaker 1: you point out, it's very simple because it's kind of
Speaker 1: an equation. And I think there's a word that I
Speaker 1: think we should teach to everybody, are not, because it's
Speaker 1: all about lowering the are not explain that I mean,
Speaker 1: are not is basically the infectiousness of a disease. It's
Speaker 1: how many people each person with a disease can be
Speaker 1: expected to infect. So if it's above one, the disease spreads.
Speaker 1: If it's below one, it doesn't spread. And every disease
Speaker 1: sort of had they estimate. What they are not is
Speaker 1: if nobody changes their behavior. And for the coronavirus it's
Speaker 1: pretty high. It seems to be between two and three,
Speaker 1: whereas for influenza moost estimates are usually down in the
Speaker 1: ones um. And and so the issue is it's different
Speaker 1: for different kinds of diseases. But kind of the basic
Speaker 1: elements of what makeup the are not are how long
Speaker 1: does the infection last, um, how infectious is the disease
Speaker 1: when you have contact with a person, and how many
Speaker 1: people do you have contact with? And we can affect
Speaker 1: that how infectious when we have contact with a lot
Speaker 1: of the things like washing our hands and not touching
Speaker 1: our faces and things like that. But then a lot
Speaker 1: of it is just if you reduce the number of
Speaker 1: people having contact with each other, if your society has
Speaker 1: social distancing, then the are not goes down. And you know,
Speaker 1: in China they reduced people's contact with each other till
Speaker 1: almost nothing and are not of the disease went below one.
Speaker 1: It may go back up again now that there are
Speaker 1: people out and about. And I mean the other thing
Speaker 1: I would say is we're still not there that it's
Speaker 1: completely uncontrollable, and South Korea has shown that you can
Speaker 1: get a lot of cases and if you have enough
Speaker 1: testing and people sort in the public health authorities are
Speaker 1: very aggressive, you can sort of bring it back in check.
Speaker 1: But that that goes hand in hand with measures to
Speaker 1: keep are not down well. And it's interesting. I do
Speaker 1: think about this. You know, this is our version of
Speaker 1: the Chinese quarantine. You know, if you stay at home,
Speaker 1: you're kind of self quarantining yourself, um and keeping yourself
Speaker 1: out of the public. It's not just about protecting yourself,
Speaker 1: but if you're not I think about this when I
Speaker 1: look at the subways, I feel like the traffic is
Speaker 1: way down, but you're protecting others who you might come
Speaker 1: into contact, especially when you're dealing with something like Yeah,
Speaker 1: if if people aren't as squeezed, squeezed as close together
Speaker 1: in the subway or in the office or in the
Speaker 1: like the soup line at Bloomberg headquarters, then there's a
Speaker 1: little bit lass risk. I mean, it's not like I'm
Speaker 1: doing some heroic thing here, but it does everybody's risk
Speaker 1: a tiny bit, right. I do think about our Business
Speaker 1: Week audience, and there's a lot of folks that probably
Speaker 1: read the MAGA scene are in that position where they
Speaker 1: can work from home. The other thing, and I don't
Speaker 1: know if you thought about this. I mean, increasingly what
Speaker 1: we're seeing companies are realizing that their systems, their technology systems,
Speaker 1: are being taxed as a result of this. Yeah, I
Speaker 1: mean if everybody, if every single interviewer you were doing
Speaker 1: was this way, and everybody was remote, and you guys
Speaker 1: were remote too, we might be struggling a lot more.
Speaker 1: It's sort of easier and like an early adopter here
Speaker 1: to um to do it. It might get harder later
Speaker 1: if more of us have to do this. You write
Speaker 1: about a lot of things, and I do wonder if
Speaker 1: you think about one of the things I think we're
Speaker 1: trying to assess, whether it's global supply chains or other factors,
Speaker 1: have something like the coronavirus might impact the workplace going forward.
Speaker 1: And I do wonder if you think that in the
Speaker 1: future we'll see more folks doing things online staying homes.
Speaker 1: I mean, we talked about this in the past when
Speaker 1: we've gone through other crises, but I wonder if you
Speaker 1: think something might be different this time around. And I
Speaker 1: you know, there's a steady trend in the direction of
Speaker 1: more people working remotely, and then there occasional things like
Speaker 1: when Melissa Meyer took over at Yahoo ordering everybody to
Speaker 1: come back to the office. So there's a back and forth,
Speaker 1: but it's pretty clear the trend over the past twenty
Speaker 1: years for obvious reasons, because it's more and more possible
Speaker 1: to do, and more and more companies are starting up
Speaker 1: that basically structure themselves that way from the beginning um
Speaker 1: and so you know, it's harder for big established companies
Speaker 1: to to change to that, and a lot of them
Speaker 1: wouldn't want to because you get a lot out of
Speaker 1: the in person interaction. So I mean, this will cause
Speaker 1: a lot more people to try it and will cause
Speaker 1: companies to figure out better ways to do it. So
Speaker 1: maybe it'll accelerate it a little, but I don't think
Speaker 1: it's gonna be some huge tipping point. And that's justin
Speaker 1: Fox or Bloomberg opinion columnists speaking appropriately from home. This
Speaker 1: has been the story of this entire virus in many ways,
Speaker 1: and when you think about it hitting close to home
Speaker 1: here in New York City and here in the United States,
Speaker 1: this is what we're seeing, company by company, our own
Speaker 1: and many others. Right, it's all about social distance. Seeing
Speaker 1: in the Business section this week several stories including what
Speaker 1: companies are doing to get ready for the virus. I mean,
Speaker 1: this is a huge global story. It's a big corporate story, absolutely,
Speaker 1: and CEO is having to make a lot of tough decisions.
Speaker 1: Workers having to make decisions obviously as well. Jim Ellis
Speaker 1: is the man in charge of all of our business
Speaker 1: covership Bloomberg Business Week. How do you take this on?
Speaker 1: This was this was difficult because what we've discovered over
Speaker 1: the last couple of weeks is that this is something
Speaker 1: that affects every business and everything in business. And so
Speaker 1: when we thought about what could we do, we sort
Speaker 1: of divided up and decided we were going to look
Speaker 1: at some companies that were actually dealing with this, some
Speaker 1: industries that found themselves in a position where they couldn't
Speaker 1: stop and they have to go on with business as
Speaker 1: usual even though this is not usual. And then you know,
Speaker 1: sort of what can we what can we learn about
Speaker 1: you know, about shortages and how companies are dealing with those.
Speaker 1: So those are the three big things we want to
Speaker 1: concentrate on, well doing business are going on with busin
Speaker 1: as usual. It's not so easy if you're in the
Speaker 1: auto industry. You've got cars that have what four thousand
Speaker 1: and counting parts in it. That's one of the problems.
Speaker 1: So that business it's um you know. One of the
Speaker 1: things about globalism is that it's allowed you to have
Speaker 1: supply chains that stretched across borders and allow you to
Speaker 1: do millions of things with people who were making things
Speaker 1: for you a world i should say, twelve time zones away.
Speaker 1: And so we looked at Peugeot, which is building cars
Speaker 1: with you know, and it's got four thousand parts, but
Speaker 1: it also has you know, six thousand you know sort
Speaker 1: of companies that it buys from. Many of those are
Speaker 1: in China. And so what it discovered is since Wuhan,
Speaker 1: where the virus started, is also the center of sort
Speaker 1: of autoparts manufacturing from much of Asia, UM, they discovered,
Speaker 1: you know, they have to identify the people who in
Speaker 1: their supply chain who might not be able to um,
Speaker 1: you know, continue to supply on time, and they had
Speaker 1: to scramble looking for ways to you know, sort of
Speaker 1: have substitutes for those. What that meant was that um,
Speaker 1: a lot of things are just made in China. What
Speaker 1: they found was they went back and found the old
Speaker 1: stamps or making some of the machinery that went to China,
Speaker 1: and then they are actually making machinery, making making parts
Speaker 1: much slower than at a Chinese plant, but making parts
Speaker 1: with some of those old stamps just to make up
Speaker 1: for things. Now they're also taking other plants across Europe
Speaker 1: where you know, Pea is based in France and other
Speaker 1: parts of Europe to make things that the Chinese made. Now,
Speaker 1: this is gonna be slower and it's probably gonna be
Speaker 1: more expensive, but what it means is that they are
Speaker 1: able to continue production even though important parts of the
Speaker 1: supply chain and stopped for the moment in the And
Speaker 1: one of the things that they discovered in one particular
Speaker 1: case was the backup to China was Milan, right, And
Speaker 1: that is a problem because for a lot of European makers,
Speaker 1: Northern Italy is a big place for making um, you
Speaker 1: know parts, and now that we've had you know, disruptions
Speaker 1: there and particularly the lockdown in the next couple of
Speaker 1: days are the last couple of days people are having
Speaker 1: to scramble then to look for other ways to do this.
Speaker 1: This is not going to work out. Well. The only thing,
Speaker 1: and it's not a positive, but at least one thing
Speaker 1: that's going to happen is probably demand is going to drop.
Speaker 1: In parts of Europe where things are locked down, a
Speaker 1: lot of people are not going to be going out
Speaker 1: to buy cars, and so in some ways it's it's
Speaker 1: this mixed blessing. It's gonna slow down the demand for cars,
Speaker 1: and so therefore the lower production numbers that you're having
Speaker 1: because of the disruptive supply chain are not going to
Speaker 1: hurt you as bad as if everyone was going out shopping.
Speaker 1: What's going on at Prugio and so many different companies
Speaker 1: is we are closely looking at the global supply chain,
Speaker 1: and we were doing that already coming off the US
Speaker 1: China trade war. But I do wonder what's the long
Speaker 1: term impact. Can companies really just not play in that
Speaker 1: world and arena anymore? Probably not. The thing is that
Speaker 1: there's a lot of talk with you in a lot
Speaker 1: of ways. Uh, China is a pretty good place to
Speaker 1: manufact acture. I mean it has a lot of manufacturing
Speaker 1: plant infrastructure. It also has great transportation links to the
Speaker 1: rest of the world. Those are established, we know how
Speaker 1: they work, and it's not like starting in a brand
Speaker 1: new country where it's maybe it'll work, maybe it won't
Speaker 1: make to work now, but it can't really scale up.
Speaker 1: So therefore people are going to wait for China to
Speaker 1: get it back together. The other thing is that China
Speaker 1: is farther along in dealing with the epidemic, and so
Speaker 1: therefore they may come out of this earlier than other places.
Speaker 1: So I don't think anybody is willing to say long term,
Speaker 1: I'm dropping China. I'm moving to Vietnam, I'm moving to Thailand.
Speaker 1: I mean, right now, those places are benefiting, but that's
Speaker 1: a big question about whether those that that manufacturing will
Speaker 1: shift back to China later. Alright, One thing that is
Speaker 1: very front of mine for just about every business person
Speaker 1: is business travel conferences, big gatherings of people. We're seeing
Speaker 1: them canceled left and right, and yet we send a reporter.
Speaker 1: You send a reporter to Las Vegas to a show
Speaker 1: that went on. Yes, I mean that was the one
Speaker 1: of the things I wanted to capture, was what happens
Speaker 1: when the show must go on. And so it turns
Speaker 1: out that this week in Las Vegas, Connexpo, which is
Speaker 1: the largest construction industry show, usually about a hundred and
Speaker 1: twenty thousand people. So it's a very large show. It's
Speaker 1: only held every three years. And because of that, um,
Speaker 1: you know, it's something that's difficult to postpone. If you
Speaker 1: postpone the strow it's every three years, what are you
Speaker 1: gonna wait until? No, they decided to go ahead and
Speaker 1: do it, and what that means is that it has
Speaker 1: to be done the different way than the typical you know,
Speaker 1: sort of backslapping, glad handing, um sort of trade show
Speaker 1: that you expect, lots of people crowded on top of
Speaker 1: each other, and so there are a lot of things
Speaker 1: that are different, but surprisingly there's a lot of things
Speaker 1: that are the same. What we discovered was obviously there's
Speaker 1: lots of pure rale everywhere and um, they've even instituted
Speaker 1: a no handshake policy. Now that's very different than what
Speaker 1: you're expecting in a business content like that. But they
Speaker 1: have yeah, that's it. They but they have little buttons
Speaker 1: that showing the handshaking across the currents them none of
Speaker 1: that handshaking. And what was interesting is different people are
Speaker 1: doing in different ways. The CEO of Caterpillar, which is
Speaker 1: the largest machinery manufacturer, in the world. He's there and
Speaker 1: he is doing um an elbow bump when he greets people.
Speaker 1: There's another um person who's there. The head of Bobcat
Speaker 1: is doing the shoulder wiggle, and um, there's all sorts
Speaker 1: of There are people who are knocking knees or people
Speaker 1: who are shaking their feet. I mean it sounds a
Speaker 1: little crazy, but it's just, you know, it's one of
Speaker 1: those things that not to touch, but people are still there.
Speaker 1: One of the people um um that we talked to
Speaker 1: yesterday was he had a mask and he says, yeah,
Speaker 1: I brought some masks, but they're hanging from his uh
Speaker 1: you know, his idea is yeah, and so he's not
Speaker 1: wearing them. People aren't wearing them, and people are kind
Speaker 1: of going about their business and they're being careful about
Speaker 1: washing hands, but they're still doing business in a somewhat
Speaker 1: old ash and way. Thinking about the lucky reporter who
Speaker 1: got to go there, Yeah, I'm just gonna say speaking
Speaker 1: about going about their business. Um, those companies that produce
Speaker 1: things like Chlorox wipes and purel Anti back. Jason has
Speaker 1: been really into the anti back in our studios. I mean,
Speaker 1: they're doing a lot of business right now. And this
Speaker 1: leads to another story in the business section that talks
Speaker 1: about price gouging. Yeah, one of the problems is that
Speaker 1: most companies, UM love when business goes up, you know,
Speaker 1: and there's more demand. What they don't like, and they're
Speaker 1: usually not prepared for, is when business spikes. In other words,
Speaker 1: what we've been seeing for things like masks and wipes,
Speaker 1: um you know, the increases in thousands of percent. It's
Speaker 1: not as if all I have a ten percent increase,
Speaker 1: I can maybe add three people to my line. This
Speaker 1: this is up and so how do you deal with that?
Speaker 1: So a lot of companies are in the up with trouble,
Speaker 1: you know, being able to stock their regular customers, and
Speaker 1: a lot of people, particularly in the on on world,
Speaker 1: are taking advantage of that by raising prices and but
Speaker 1: not raising prices in a small way, but sort of
Speaker 1: doubling tripling prices. I think a lot of people have
Speaker 1: seen that things like on Amazon where you see three
Speaker 1: hundred dollar pureile four hundred dollar pureil when it should
Speaker 1: cost and so that sort of we think of that
Speaker 1: as price gallaging. But price gauging, it turns out, is
Speaker 1: a a lot difficult. It's difficult to figure out exactly
Speaker 1: what it is, and it's really hard to stop right,
Speaker 1: and regulators and lawmakers are really wrestling with this a
Speaker 1: sort of getting out ahead of it, but be also
Speaker 1: figuring out, well, what do we go after, what we
Speaker 1: not go after, what does the market need to take
Speaker 1: care of, and what do we need to take Yeah,
Speaker 1: we figured out that most likely the regulators aren't going
Speaker 1: to be able to stop this for a lot of reasons. Um,
Speaker 1: you know, consumer laws in most states are pretty weak
Speaker 1: when it comes to this, and even laws that snap
Speaker 1: in and say, oh, you you shouldn't have this kind
Speaker 1: of predatory pricing, they do it after an emergency has
Speaker 1: been declared and usually by that time the prices are
Speaker 1: already up and so you say, okay, you can't raise it,
Speaker 1: but it's already a three dollars, so so what. But
Speaker 1: it also turns out that a lot of times the
Speaker 1: pricing that we see online that we think of as
Speaker 1: predatory pricing or price gal jing, is sometimes driven by, um,
Speaker 1: the pricing models that you have to have in the
Speaker 1: online world. I find this fascinating. It turns out that
Speaker 1: it Amazon for a person who is sell a seller
Speaker 1: there there they are penalized in Amazon's um world by
Speaker 1: being out of stock, and so you never want to
Speaker 1: be out of stock. So what they've done is their
Speaker 1: own pricing models around you know, software, So it says
Speaker 1: the less stock, I have raised the prices, so they
Speaker 1: will slow down sales so that I won't go out
Speaker 1: of stock, and then I'll be penalized for Amazon. So
Speaker 1: what happens is those last few items suddenly become a
Speaker 1: lot more expensive. And they consciously didn't try to do that,
Speaker 1: but they're trying desperately not to run of file of
Speaker 1: the algorithms that at at at Amazon. That's Jim Ellis.
Speaker 1: He's responsible, of course for the business section of the magazine,
Speaker 1: and business folks are trying to figure out how to
Speaker 1: keep the business running. They're looking at supply chains. There's
Speaker 1: so many different angles to this part of the story, absolutely,
Speaker 1: and all the way down to all that price gouging
Speaker 1: you're seeing online. Also, the idea of people getting together
Speaker 1: in mass gatherings right certainly took a turn this week,
Speaker 1: and yet you have folks still getting together, clearly under
Speaker 1: different rules. Let's get back to the special issue of
Speaker 1: the magazine. It is devoted to the coronavirus and the
Speaker 1: architect of it all our editor Pat mcneer. That's right.
Speaker 1: He oversaw sort of putting all the pieces together. It
Speaker 1: wasn't easy. Lucky for him, he had the global empire
Speaker 1: of Bloomberg News at his disposal, whether it was picking
Speaker 1: the right stories, writing the stories, even putting all the
Speaker 1: right images together. So, Pat, there was so much for
Speaker 1: you guys to get into and what was a fast
Speaker 1: and rapidly moving story. How did you structure it? Well,
Speaker 1: we started by just thinking of it in terms of scale,
Speaker 1: So we started with kind of the big picture literally macroeconomics,
Speaker 1: and we moved on to government, uh, and then we
Speaker 1: started to look at how is this affecting individual businesses,
Speaker 1: and then we really get to the heart of the story,
Speaker 1: which is the people that it's affecting, and then all
Speaker 1: the way down to the microbe and looking at the
Speaker 1: virus and what we know about it, which is in
Speaker 1: many ways the most challenging part because there's still so
Speaker 1: much we don't know about it and how it's working
Speaker 1: epidemiologically and sort of what's going to happen well and
Speaker 1: what was interesting too for us to sort of watch
Speaker 1: pretty close and man and we're talking to you guys
Speaker 1: all throughout the week on our daily show as well.
Speaker 1: Is this was I mean beyond a team effort in
Speaker 1: many ways, really leveraging the entire Bloomberg Empire in many
Speaker 1: ways because this is a global pandemic, emphasis on global,
Speaker 1: This is a global story, and we we we really
Speaker 1: felt strongly that one of the things that we could
Speaker 1: do was to get people to look, you know, outside
Speaker 1: to the United States and to see where this is
Speaker 1: already happening. You know, I think a lot of us
Speaker 1: feel like, you know, this is a fast moving public
Speaker 1: health story. Uh, this is a time when people are
Speaker 1: going to have to work together, and I think a
Speaker 1: part of that is to actually see what's happening, both
Speaker 1: to maybe get a sense of what's coming um but
Speaker 1: also to get a sense of some of the human
Speaker 1: experiences that people are having there. Some of some of
Speaker 1: the stories we have in the magazine are truly heartbreaking. Now,
Speaker 1: I was gonna say, what's trucking about the coverage this week?
Speaker 1: You know, one of the stories that a lot of
Speaker 1: the editors have talked the most about a story about
Speaker 1: a family in China and where they've really just sort
Speaker 1: of seen the family decimated. We talked to a woman
Speaker 1: she lost both her mother and her grandmother UM as
Speaker 1: they were facing UM you know, shortages of hospitals. They
Speaker 1: simply couldn't kept beds UM. And you know, the last
Speaker 1: time she spoke to her mother, her mother was very
Speaker 1: sick and wasn't able to talk to her and they
Speaker 1: weren't able to get her the care she needed. And
Speaker 1: she spoke to her mother in anger because she was
Speaker 1: so frustrated at what happened. And that was the last
Speaker 1: conversation she had had and it was it was a
Speaker 1: very dramatic story. And we're beginning to see that unfold
Speaker 1: and Italy as well, and we're all kind of thinking
Speaker 1: about um. Is this system here in the United States
Speaker 1: and in other parts of the world prepared for the
Speaker 1: strain that's to come. And that's one of the reasons
Speaker 1: why it's so important to understand what we know about
Speaker 1: the courts of the virus and how it spreads. Well,
Speaker 1: let's talk about that a little bit, because you guys
Speaker 1: do go down all the way to the microbial level
Speaker 1: in in some ways to understand some of the science
Speaker 1: to help us understand and viewers and listeners and readers
Speaker 1: understand the science. What struck you about that? So one
Speaker 1: of the things that really struck us was you do
Speaker 1: have to think about, you know, as we're all washing
Speaker 1: our hands and social distancing from one another, why are
Speaker 1: we doing that? Um? Some people take reassurance, and maybe
Speaker 1: too much reassurance from the fact that, you know, if
Speaker 1: you're relatively young, if you're healthy, Uh, it's unlikely that
Speaker 1: you'll get very sick. Um. But a part of a
Speaker 1: part of what we're doing as we're all washing our hands,
Speaker 1: is not taking care of ourselves, but taking care of
Speaker 1: the other people around us, trying to slow the spread.
Speaker 1: And that's again, that's what gets back to this thing
Speaker 1: about the health care system. The more you can slow
Speaker 1: the spread, even if ultimately the raw numbers of people
Speaker 1: who get it are very high, what really matter is
Speaker 1: the timing. Um, are there, you know, are their beds,
Speaker 1: are their ventilators? Um? You know, my wife happens to
Speaker 1: be a nurse, and uh, we're we're seeing this firsthand.
Speaker 1: We're already beginning to see some of the strains in
Speaker 1: the system. Jason and I've been looking enough to actually
Speaker 1: spend some time with one of the doctors out on
Speaker 1: the West coast. That's part of that Seattle hospital system,
Speaker 1: which has been kind of ground zero and where the
Speaker 1: first patient happened. You know, one of the things that
Speaker 1: we've heard is the inability to get test kits and
Speaker 1: and there is everybody's working on a vaccination, but it
Speaker 1: takes time and you guys get into this, which I
Speaker 1: think is so crucial to understanding this story. It's so
Speaker 1: it's so important to have the tests bolt so that
Speaker 1: we have a sense of like what is the actual
Speaker 1: case fatality of this. I mean, you don't really know
Speaker 1: what the fatality rate is until you actually know how
Speaker 1: many people have it, how many people get it. But
Speaker 1: also again so that you can direct care to people,
Speaker 1: so that you can, um know what to do with
Speaker 1: people who are the worried. Well, um, you know, uh
Speaker 1: is if you have cold, should you come to work?
Speaker 1: It would help to know if you only have a cold, right,
Speaker 1: you know. Well, And one of the things you talked about,
Speaker 1: which was a surprising story and an eye opening one
Speaker 1: for for me at least, is the availability of a
Speaker 1: specific type of mice in order to test for a vaccine. Right,
Speaker 1: So we have a story about sort of the struggle to,
Speaker 1: you know, find this specific sort of mouse in order
Speaker 1: in order to do this testing. You know, other places
Speaker 1: in Bloomberg are looking at you know, they're doing some testing,
Speaker 1: you know in baboons Um. You know, Carol, I know
Speaker 1: that you've recently talked to people at healthcare companies who
Speaker 1: were talking about, we need the re agents right, uh,
Speaker 1: to to run these tests. The whole system is straining
Speaker 1: to find this. We had in more than one place
Speaker 1: in the magazine people talking about how like we're working
Speaker 1: fourteen eighteen hour days. You know, Ordinarily, when we're doing
Speaker 1: a magazine, we would find things that are repeating and
Speaker 1: we would take it out and we would only have
Speaker 1: it in one place. In this in this thing, we
Speaker 1: were looking at something so unique. Over Here people are
Speaker 1: working fourteen and eighteen hour days. Over Here, people are
Speaker 1: working fourteen and eighteen hour days. Every time someone told
Speaker 1: us wash your hands, cover your cough, we left that
Speaker 1: in the magazine. You'll read it about a hundred times
Speaker 1: in our magazine this week, and we think it really matters.
Speaker 1: And that's pat reag Near. What a nice overview of
Speaker 1: what they were trying to do. Also, the seriousness of
Speaker 1: all of this a reminder the human toll here. We
Speaker 1: talk so much about the macro effects here at Bloomberg,
Speaker 1: we talk about markets numbers, but there's a real human
Speaker 1: toll here, and I have to say, Jason, I do
Speaker 1: love that. Obviously, this is a science story and understanding
Speaker 1: the virus is really crucial to us figuring out how
Speaker 1: to contain it control it in the future. Uh And
Speaker 1: the magazine and Pat's coverage of the team here at
Speaker 1: Business Week really got into that as well, very very important,
Speaker 1: and I must read no doubt about it. This is
Speaker 1: going to be the business story of twenty twenty summer,
Speaker 1: calling it the Lost year, Jason Kelly, Well, and certainly
Speaker 1: when that comes to the economy, it's a massive question,
Speaker 1: especially given this full run that we have been in.
Speaker 1: A key week for sure, and king ahead for us
Speaker 1: as always is Peter Koy, economics editor for Blueberg Business Week.
Speaker 1: Tell us what you set out to do here, because
Speaker 1: this is a big assignment in some ways. Joel Webber
Speaker 1: decided he wanted to devote brilliant entire issue to this coronavirus,
Speaker 1: and so I wrote economic story. But it's not just
Speaker 1: the numbers. I try to be getting the concepts here,
Speaker 1: and to me, the fascinating analogy between the way the
Speaker 1: coronavirus attacks the body and what happens is that it
Speaker 1: provokes an overreaction of the immune system. You get what's
Speaker 1: called a cytokine storm, which unleashes uh the bodies amuses
Speaker 1: them to attack like the lungs, which causes pneumonia, and
Speaker 1: its conversation is death. So there's an analogy. What's the
Speaker 1: damage to the economy that we've suffered so far, it's
Speaker 1: primarily from the attempts to fight the virus rather than
Speaker 1: the ravages of the virus itself, which includes kind of
Speaker 1: shutting down a lot of things. Warrantines, plant shutdowns, you know,
Speaker 1: businesses closing transportation and so on. All those things are
Speaker 1: devastating global GDP. And so the question is, and you said,
Speaker 1: the question of how are we collectively meeting the human
Speaker 1: race going to manage to fight off the virus as
Speaker 1: we must without destroying everything else we care about, the economy,
Speaker 1: our family lives and so on. And one of the
Speaker 1: interesting things about this economic moment, and you quote Mark Xandy,
Speaker 1: well known guy over at Moody's Chief Economists, he says,
Speaker 1: we could be moving from a self reinforcing positive cycle
Speaker 1: to a self reinforcing negative cycle. And that seems to
Speaker 1: be such a key insight here because what is a recession.
Speaker 1: Recession is when you lose faith in the future and
Speaker 1: you don't invest for the future. If you're a business,
Speaker 1: you don't buy. If you're a consumer, you hunker down.
Speaker 1: And that very act of honkering down, which is trying
Speaker 1: to protect you from the recession itself, can trigger the
Speaker 1: recession because what works for one family or one company
Speaker 1: doesn't work collectively when everybody tries to do it at once.
Speaker 1: This is what John Maynard and Kane's called the paradox
Speaker 1: of thrift. That is fascinating the theory of it. I
Speaker 1: do wonder, Peter, can we use How do we look
Speaker 1: at China in terms of they're what they have been doing.
Speaker 1: Is it a cautionary tale? I don't know how to
Speaker 1: judge China because on the one hand, the number of
Speaker 1: cases they're reporting is way way down, and you have
Speaker 1: to think that's good news. It's good news for the Chinese,
Speaker 1: potentially very good news for the rest of the world
Speaker 1: if indeed it's replicable. So two things, One is will
Speaker 1: China's have a rebound of cases as they gear up,
Speaker 1: go back to normal life, reopen factories and businesses and
Speaker 1: people start communicating again. And you know, that's a huge
Speaker 1: unknowne and we really haven't talked about that, but is
Speaker 1: And I don't know the answer either, but I'm extremely curious.
Speaker 1: I think the world should be intensely watching China's experience
Speaker 1: whether to get new flare ups. The second thing is
Speaker 1: a little more predictable, which is that the rest of
Speaker 1: the world is probably not going to be able to
Speaker 1: do what China has done. I mean, China is a
Speaker 1: authoritarian police state with high tech surveillance capabilities. They can
Speaker 1: shut things down in a way that other countries can.
Speaker 1: I look at the case of Italy. The Prime ministers
Speaker 1: wants to shut down the entire country I mean and
Speaker 1: effectively has ye well that's on illegally has Whether it's
Speaker 1: going to work in practice is to me great unknown.
Speaker 1: I just don't think Italy has either the technology or
Speaker 1: the culture to do what the Chinese did in Hubei Province.
Speaker 1: We'll go back to China because we know that their
Speaker 1: economic output right their GDP is going to be cut
Speaker 1: dramatically in the first quarter in the first quarter, So
Speaker 1: we don't ultimately know that by doing and they can
Speaker 1: easily kind of shut down the Chinese society. Whether or
Speaker 1: not that ultimately makes a difference or whether it make
Speaker 1: you know what I mean in terms of because the
Speaker 1: other point is it's spread, right, the virus move beyond China,
Speaker 1: so it's not like it was shut down. Because so
Speaker 1: it continues to be a debate over whether China did
Speaker 1: the right thing. I mean, But the one good thing
Speaker 1: about what China did is that by holding down the
Speaker 1: number of cases, they call it shaving off the top
Speaker 1: of the spike. If you can spread out the incidence
Speaker 1: of a disease over a longer period of time without
Speaker 1: reducing the number of cases, that itself is a good
Speaker 1: thing because it means you can handle your emergency rooms,
Speaker 1: can handle the cases as they come in, whereas if
Speaker 1: they're all concentrated at once, there give a lot of
Speaker 1: people who just be untreated. So where does the US
Speaker 1: go from here? This has been quite a decade plus
Speaker 1: for US economic growth. Something was going to get in
Speaker 1: the way of this bullmarket, something was going to stop it,
Speaker 1: and there was a lot of speculation you and we
Speaker 1: and everybody else in twenty nineteen said it's going to
Speaker 1: be likely an exogenous event. Well, here we are. This
Speaker 1: is a classic exogenists event. It's not something that was
Speaker 1: internal to the economy, like growing, a deadness or something,
Speaker 1: the way the last financial crisis occurred. It's like it's
Speaker 1: something there's a weird little piece of RNA virus that's
Speaker 1: suddenly spreading like wildfire. And we have been in the
Speaker 1: longest economic expansion in US history, going back to eighteen
Speaker 1: fifty four. It's been remarkable. Ever since the end of
Speaker 1: the financial crisis in June two thousand nine, the US
Speaker 1: economy has been growing and and sometime there are more
Speaker 1: and more reconnoissers saying that it just could be the year.
Speaker 1: And I wrote something that said that we may already
Speaker 1: be in a recession. I e. February may have been
Speaker 1: the peak of economic activity. Right, you put that out
Speaker 1: about a week ago last week. Well, what's interesting is
Speaker 1: the stock market. They'll just throw that in, just one
Speaker 1: more thing is not the economy. And yet the stock
Speaker 1: markets certainly can impact spending behaviors. Right, So we've had
Speaker 1: big decline, a lot of turmoil out of volatility in
Speaker 1: the stock market, and so that again, is both a
Speaker 1: symptom of the trouble and possibly a cause of more trouble,
Speaker 1: because what happens when when the stocks go down people
Speaker 1: feel poorer r This is the wealth effect. The wealth effect.
Speaker 1: You know, I don't want to go out and buy
Speaker 1: that new refrigerator because my portfolio as smaller than it was.
Speaker 1: You know, that's one one way businesses look at and say,
Speaker 1: um gee, my stock prices down. People are collectively expressing
Speaker 1: less confidence in my future. Maybe I'm shouldn't be overstretching,
Speaker 1: and these things feed on themselves. It gets back to
Speaker 1: the canes. Note again, that's Peter Koyer, economics editor here,
Speaker 1: and you know, just a week ago he was talking
Speaker 1: about the US already probably being in a recession. Here
Speaker 1: he talks about how as we fight the virus, we're
Speaker 1: also pretty much harming the economy at the same time. Absolutely,
Speaker 1: I mean, this is ultimately a consumer economy, especially here
Speaker 1: in the United Dates. How we take it on, how
Speaker 1: the administration takes it, on how central banks taken on,
Speaker 1: that's going to have a knock on effect. And it's
Speaker 1: possible that the way this is fought will ultimately hurt
Speaker 1: the global economy. All right, so I have a million
Speaker 1: things to ask our next guest, uh. And it's a
Speaker 1: homecoming of sorts for him Dexter Roberts. He is now
Speaker 1: Mansfield Fellow at the University of Montana, but he's former
Speaker 1: China beer chief for Bloomberg Business Week. He's got a
Speaker 1: book out, The Myth of Chinese Capitalism, The Work of
Speaker 1: the Factory and the Future of the World. No big deal,
Speaker 1: just taken on a huge topic here he's here with
Speaker 1: me in our Bloomberg Getteractor Broker studio. Welcome back, Well,
Speaker 1: thank you, Uh, so I gotta I don't. I've been
Speaker 1: debating with myself where to start. Let's start with the book,
Speaker 1: just because it's so timely in a lot of ways.
Speaker 1: You probably couldn't have imagined how timely it was going
Speaker 1: to be when you started it. What was the idea
Speaker 1: that you set out to capture? So the basic idea
Speaker 1: or the myth of the title is this idea that uh,
Speaker 1: China is becoming more capitalistic, that China is uh continuing
Speaker 1: on this reform path that started way back under Dung
Speaker 1: Shao ping Um and continuing. The myth is that China
Speaker 1: will continue to grow its middle class and all right,
Speaker 1: so I'm gonna stop you there only to say, what
Speaker 1: does the last three months mean for that? Well, um,
Speaker 1: the last so we were talking coronavirus exactly. Yes, So
Speaker 1: I mean I think I think that we're what what
Speaker 1: some of the things the arguments I make in the
Speaker 1: book about uh uh at the other China, the migrant
Speaker 1: workers and the farmers, their their cousins in the countryside,
Speaker 1: which by the way, is about five million people, so
Speaker 1: we're talking getting close to half the population. Um. They've
Speaker 1: been long more people live in the United States, Yes,
Speaker 1: considerably more than live in the United States. Well, for
Speaker 1: a long time, they've in effect been treated as second
Speaker 1: class citizens. Um. They don't have access to the same
Speaker 1: health care, they don't have access to the same education.
Speaker 1: On average, they're making you know, less than a or
Speaker 1: roughly a third of of of urban incomes. And there's
Speaker 1: policies that that keep them in that position, which we
Speaker 1: can get into later. Um. But that relationship between the city,
Speaker 1: the people in the city, and the second class citizens
Speaker 1: has really been brought home. I mean, the the unequal
Speaker 1: relationship has really been brought home by the coronavirus. Because
Speaker 1: these even as cities in Beijing seem to be returning
Speaker 1: to some degree, and normalcy is not the right word,
Speaker 1: but things are a little more regular there. You know,
Speaker 1: if you're a white collar worker, you're working from home,
Speaker 1: you're going into the office some sometimes things are a
Speaker 1: little more normal. Companies are reopening. That's not happening for
Speaker 1: the for these people, these vans and rural people. And
Speaker 1: so you were in Beijing for twenty three years, you
Speaker 1: were in Taiwan. But before that, how did this story change? What,
Speaker 1: how did your thesis evolve or what did you see
Speaker 1: happen over that period, because that twenty three years it
Speaker 1: just ended for you just a couple of years ago.
Speaker 1: I mean, what a period in the history of the country. Yes,
Speaker 1: I mean when I arrived in I think it was
Speaker 1: January in Beijing, and uh, you know, the economy was
Speaker 1: somewhere in the bottom of the top ten economies in
Speaker 1: the world. I think, Uh, there wasn't really a consumer economy.
Speaker 1: There really wasn't. I mean, the car sales were eighty
Speaker 1: five percent government and fleet sales for big state enterprises.
Speaker 1: There weren't people buying cars. There was no housing market. Really,
Speaker 1: there was no housing market until until later reforms happened
Speaker 1: in the late nineties, so the place was transformed. UH.
Speaker 1: W t O entry in two thousand and one, which
Speaker 1: I covered for Business Week was a you real seminal moment,
Speaker 1: obviously bringing in enormous amounts of investment UH and really
Speaker 1: trying its forming the economy and bringing up this UH
Speaker 1: factory to the world export model into its into its
Speaker 1: full full character. And so when you left, what what
Speaker 1: what sort of what were you thinking China would become?
Speaker 1: Is that sort of what's manifested in this book? And
Speaker 1: so yeah, So, I mean I first met some of
Speaker 1: the people that I talked about in the book. This,
Speaker 1: this family from our this relatives from a small town
Speaker 1: in rural Guajoe the most in the year two thousand,
Speaker 1: I was doing a cover story. I did a cover
Speaker 1: story for Business Week called the Great Migration. And at
Speaker 1: that point, um, uh, you know, we're uh a year
Speaker 1: before w t O Entry, everyone knew China was getting in.
Speaker 1: Then the agreement was signed, there was great hope, including
Speaker 1: for these villagers in this small town, this idea that
Speaker 1: foreign investment would come in. And they were glad to
Speaker 1: see me as a Business Week reporter who might somehow
Speaker 1: let the world know about their village. They wanted to
Speaker 1: processing factories for the chilies that they grew in the
Speaker 1: slopes in their in their town. So there was really
Speaker 1: great hope and this continued for years, I must say.
Speaker 1: But what I argue in the book is, uh uh,
Speaker 1: particularly in the last five years, uh that vision of
Speaker 1: a continual reform and more opportunity for people has has
Speaker 1: has really vanished. And that's Dexter. Roberts really enjoyed catching
Speaker 1: up with him because his book is really about the
Speaker 1: worker in China. But it's so timely given the rural
Speaker 1: versus city element of this virus crisis. What we've learned
Speaker 1: there and what we may need to learn as it
Speaker 1: spreads around the world. As you said, Jason, a timely conversation.
Speaker 1: He's into that walk in music. Jaston chief executive officer
Speaker 1: of Dream Hotel Group, now you get it. He's based
Speaker 1: in New York City. He's here with us in our
Speaker 1: Bloomberg Interactive Brokers studio right now. He is a veteran
Speaker 1: of this business. We're going to talk about some of
Speaker 1: his new hotels, but Jay got to start by asking
Speaker 1: coronavirus and its effect on the travel business. Feels heavy.
Speaker 1: What are you seeing out there? Yeah? So uh, internationally,
Speaker 1: certainly over in Asia, we've been here hearing and reading
Speaker 1: about this or for a number of months. Uh. China
Speaker 1: uh got hit very hard, Hong Kong hit very hard,
Speaker 1: and most of the other prime Asian markets over the
Speaker 1: last six weeks had been hit fairly hard as well.
Speaker 1: And then of course we heard about Italy, and now
Speaker 1: in the last really just in the last week or so,
Speaker 1: it's really hit hard here in the US, and most
Speaker 1: of it has been you know, precautionary. I think if
Speaker 1: you look at the numbers, the actual numbers, they're still
Speaker 1: very low, but we're not sure where they're going to ahead.
Speaker 1: And uh, in this modern era, people have been told
Speaker 1: to be cautious and less travel and less movement around
Speaker 1: and less neat for hotels. So we're really seeing an
Speaker 1: impact now. So wait, you have hotels in Nashville, hollywo A,
Speaker 1: New York City, Miami, Thailand. Tell me about Thailand, New
Speaker 1: York and New York and New York Yes, oh I
Speaker 1: thought I said New York. Okay, sorry, New York City.
Speaker 1: So Thailand, tell me about that specifically, So that hotel
Speaker 1: the business has been off probably about fifty over the
Speaker 1: last month or so. Um, and I think, you know,
Speaker 1: it's stabilized now, and I think we'll start to see
Speaker 1: things start to move. It has stabilized, stabilized, it's not
Speaker 1: dropping anymore. Are people coming in? Are you starting to
Speaker 1: give me an idea of like people saying, because one
Speaker 1: of the things we're trying to figure out is how
Speaker 1: much of this virus is lasting in terms of people saying,
Speaker 1: I don't know that I want to travel so far anymore.
Speaker 1: So I'm just curious. Most of the people come to
Speaker 1: your places in Thailand where they coming from. So it's
Speaker 1: a fair amount of domestic and Asia driven business, okay,
Speaker 1: business from other Asian countries. So any signs in terms
Speaker 1: of business people looking to book in a couple of
Speaker 1: months later this year. Yeah, So, as just said, I
Speaker 1: still think we're about fifty off from where we would
Speaker 1: normally be, Okay, but I don't see it dropping, uh,
Speaker 1: significantly more at this point. So I'm kind of leveling
Speaker 1: off at that range from about fifty of where we'd
Speaker 1: normally be. But we'll see if that holds and if
Speaker 1: it starts to move and so where and and so
Speaker 1: do you just start to see it in cancelations. Do
Speaker 1: you start to see it sort of Carroll's question, in
Speaker 1: sort of behavior where people are coming from. I mean,
Speaker 1: you guys have a lot of data at your disposed.
Speaker 1: I do wonder is you go a level down? What
Speaker 1: are you you know? So it starts with the group bookings.
Speaker 1: So those are you know, the most the furthest out,
Speaker 1: and the biggest numbers and the ones that need to
Speaker 1: be a little more questionary. So once we see the
Speaker 1: group numbers starting to to take impact, and those go
Speaker 1: quick because you know, if you drop six seven groups
Speaker 1: of thirty people a night for four or five nights each,
Speaker 1: you know you're dropping uh, you know, half a million
Speaker 1: dollars uh in an hour. And so we're even seeing
Speaker 1: a fair amount of group cancelations, particularly this week here
Speaker 1: in the States. Well continue it to that point. I mean,
Speaker 1: it does feel like we've been talking a lot about this.
Speaker 1: This notion of what people are being advised against is
Speaker 1: more around large gatherings and less around I mean, obviously
Speaker 1: people are scaling back travel in a lot of companies,
Speaker 1: including ours, are saying hey, maybe don't take that business trip.
Speaker 1: But more you're just seeing, well we're not gonna do
Speaker 1: this conference. You know, we're supposed to go to the
Speaker 1: milk In conference in l A, you know, coming up
Speaker 1: in two months. They pushed that back to July. Uh
Speaker 1: for now. So those to your point, those group bookings
Speaker 1: and did those come back, Well, they do come back.
Speaker 1: Most of those are our annual like what you were talking.
Speaker 1: I was supposed to be in Berlin for the big
Speaker 1: hotel conference first week of March every year. That got
Speaker 1: canceled two days before, so it started on a Sunday.
Speaker 1: I think on Friday they made the official announcement that
Speaker 1: it was going to cancel that. I t b the
Speaker 1: largest trade show, hotel trade show on the heels of
Speaker 1: that every year it was also got canceled. But then
Speaker 1: he get canceled, they got postponed, and I think they
Speaker 1: moved into June. We'll see how that holds. Obviously with
Speaker 1: the Olympics coming up, a huge amount of travel. Um.
Speaker 1: But as you say, you know, it's it's group stuff,
Speaker 1: so starts suggesting people not to be at those. The
Speaker 1: impact is so so I am curious about some of
Speaker 1: your properties here in the United States, whether it's New
Speaker 1: York City and we're all kind of watching very closely. Hollywood, UM, Nashville, Miami.
Speaker 1: Are you seeing, um, are you seeing any kind of
Speaker 1: pullback in terms of reservations and people canceling? Oh? Yeah,
Speaker 1: you are, Oh definitely, Yeah, we're damn probably. But it's
Speaker 1: still dropping. So and that's more for the month of March,
Speaker 1: people a little less because some people just haven't made
Speaker 1: their decisions. A lot of the groups have already made
Speaker 1: their decisions, but a lot of the transient have not.
Speaker 1: And hopefully, uh, you know, once it does start to stabilize,
Speaker 1: some of those won't drop out, and there will be
Speaker 1: some pent up demand, but the wrap up won't go
Speaker 1: back in a week. You can't get those group bookings
Speaker 1: back in a week. That'll take some time. The transition
Speaker 1: stuff moves a little quickly. Is there a lasting impact
Speaker 1: in terms of the virus? I mean in terms of
Speaker 1: I don't know, and how you guys, I don't know.
Speaker 1: Definitely not, you know, uh, you know, even as something
Speaker 1: like the cruise ships. And I'm not a cruise ship specialist,
Speaker 1: but even there, and there's been some scares over the
Speaker 1: years and that's always come back. But I can say,
Speaker 1: certainly from the hotel part, and I've been through a
Speaker 1: number of these different things over the many years I've
Speaker 1: been doing it. Um, it's it's always come back as
Speaker 1: long as that market is still a good market. Um.
Speaker 1: But I don't think it's uh, the virus that's gonna
Speaker 1: cause the industry to change. Maybe this industry for five
Speaker 1: thousand years people have traveled and needed a place to
Speaker 1: stay and get something to eat and be safe. So
Speaker 1: I don't see that changing anytime. Jay Stein So with
Speaker 1: the CEO of Dream Hotel Group based here in New
Speaker 1: York City, So I gotta ask you the New York
Speaker 1: hotel scene. I mean, I live here now, but I
Speaker 1: used to travel here a lot. It's a crazy hotel scene.
Speaker 1: But it's sort of the birth in many ways of
Speaker 1: the boutique, or at least it it feels like it.
Speaker 1: How has the New York hotel scene evolved during your career? Yes,
Speaker 1: I agree this, so it is kind of the birthplace
Speaker 1: where boutique. You know, Kimpton Ontells was doing something like
Speaker 1: it on San francistem But really, Ian Schrager, really do
Speaker 1: you put it on steroids? And uh, it's it's what
Speaker 1: we like. Jack Morgan's was more ground zero and then
Speaker 1: uh and Royalton and you know, we were pretty early
Speaker 1: on and Barry Sterling did the first w and um,
Speaker 1: you know, so I always you know, point to Ian
Speaker 1: that he realized our industry just have gotten off base.
Speaker 1: We were doing these bland hotels that were pleasing and
Speaker 1: not offensive and not highly stylized, and the food was
Speaker 1: just and it was just great to finally saying, now
Speaker 1: you could offend some people and you don't have to
Speaker 1: have everybody love it. And uh so we got involved
Speaker 1: in about nineties seven starting to do lifestyle hotels and
Speaker 1: have really uh evolved over the last twenty two years.
Speaker 1: And that's our only focus is doing lifestyle How much
Speaker 1: of the people that come to stay they come back
Speaker 1: again and again and again. You really it's sticky. Yeah,
Speaker 1: you know, it's fun. You get there and a lot
Speaker 1: of times people will say, oh, I'm going to this
Speaker 1: bar and then they find out, oh, that's the hotel
Speaker 1: I'm staying at. You know, so they really they feel
Speaker 1: like they know they've made the right decision. Well, what
Speaker 1: are the amenities? And we just got about twenty five
Speaker 1: seconds here, so that you've got to have in a
Speaker 1: New York City hotel, you know, we kind of started
Speaker 1: the whole rooftop bar situation. We really did at the
Speaker 1: Dream in Midtown back in two thousand three. But if
Speaker 1: you could do a rooftop bar with a pool, even
Speaker 1: if it's seasonal like New York you only have three months,
Speaker 1: you know, great with the pool, but it's amazing to have.
Speaker 1: We also do some other nightlife components. We have an
Speaker 1: electric room which is really cool and downstairs. And so
Speaker 1: we're here at j Stein, CEO of the New York
Speaker 1: based Dream Hotel Group, here in our Bloomberg Interactive Broker studio.
Speaker 1: You do have a lot of properties around the country
Speaker 1: also around the world. Um, what are your expansion plans.
Speaker 1: I've been signing up almost a deal of month over
Speaker 1: the last fifteen months or so. We've gotten very active.
Speaker 1: More of the deals now or with other developers. And
Speaker 1: the old days we were the We were the developer
Speaker 1: and the and the and the brand and the manager.
Speaker 1: But most of it we've morphed into a Brandon management company.
Speaker 1: So just recently we've signed up Turks and Caicos, Applied Dell, Common,
Speaker 1: uh Las Vegas, San Antonio, UM, and recently behind that
Speaker 1: was Cleveland and UM Memphis, on the hills of our
Speaker 1: national property. How do you pick? Well, you know, some
Speaker 1: of it is opportunistic. We have developers that are building hotels.
Speaker 1: They want to work with a great lifestyle company, and
Speaker 1: they'll meet a few of them and hopefully we're able
Speaker 1: to convince them we're the right when to go to.
Speaker 1: And then we also look in particular markers. We're still
Speaker 1: not in Washington in Boston, and to be based there
Speaker 1: in New York for for so many years and to
Speaker 1: not have those key cities, um, you know, that's certainly
Speaker 1: on our our radar. We need to be in San
Speaker 1: Francisco and London. So those are probably the top four
Speaker 1: that we definitely want to make happen. We've got some
Speaker 1: possible deals on all of them at the moment, but
Speaker 1: none of them are signed yet. So that's Jason on
Speaker 1: the CEO of the New York a Stream Hotel group,
Speaker 1: And as we know and as you heard, they've got
Speaker 1: hotels all across the country, but they also have them
Speaker 1: overseas in Thailand and elsewhere. And so getting a chance
Speaker 1: to talk with him and find out in real time
Speaker 1: what's going on in his business is so relevant to
Speaker 1: what the magazine's about all week well, and that institutional
Speaker 1: history of understanding the hospitality industry at various moments in
Speaker 1: time and times of crisis, and this is certainly one
Speaker 1: of those. Well. That wraps up the weekend edition of
Speaker 1: Bloomberg Business Week from Bloomberg Radio. We really appreciate you
Speaker 1: joining us. I'm Jason Kelly and I'm Carol Masser. Be
Speaker 1: sure to tune into Bloomberg Business Week Radio Live Monday
Speaker 1: through Friday, starting at two pm Wall Street Time. And
Speaker 1: you can't catch us live, get our daily podcast wherever
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Speaker 1: This week's edition of the magazine on newsstands now. We'll
Speaker 1: be back next week at the same time. This is
Speaker 1: Bloomberg