Speaker 1: Ye, Welcome to the Bloomberg Surveillance podcast named Tom keene Jarly.
Speaker 1: We bring you insight from the best in economics, finance, investment,
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Speaker 1: Anthony joining us now Aberty Standard Investment Senior investment Manager. James.
Speaker 1: Let's start there. The lack of treasury market action on
Speaker 1: a really whippy twenty four hours into this morning. Yeah,
Speaker 1: bit frustrating for us actually, as as duration balls. At
Speaker 1: least in part, we've been bullish because we we thought
Speaker 1: risky assets were being incredibly complacent with respect to the
Speaker 1: outlook across a broad a broad range of factors. We've
Speaker 1: been thinking about this and then trying to piece together
Speaker 1: some sort of understanding of why that might be the case.
Speaker 1: I think the story we've settled on really is that
Speaker 1: this is a position unwind. So what you had was
Speaker 1: the market was positioning for fiscal stimulus and a and
Speaker 1: a blue sweep. Let's let's be somewhat glib, and that
Speaker 1: meant being short dollars, being long risky assets, and being
Speaker 1: in treasury curve steepeners, possibly not necessarily shut outright duration,
Speaker 1: but in treasury curve steepness. So what we've seen is
Speaker 1: even though yields have gone up, the curve is actually flattened.
Speaker 1: And we've seen equities being unwound, and and and the
Speaker 1: dollar and the yen rallying, which were probably currencies where
Speaker 1: you had short positions. Certainly the dollar is definitely one
Speaker 1: way they've been short positions. So we kind of think
Speaker 1: this looks more like just a clear out of some
Speaker 1: of those positions, mainly because the virus stat has got worse.
Speaker 1: Also because I think some concerns a bit more latterly ever,
Speaker 1: have arisen that the election result might be closer, might
Speaker 1: be contested. Future is right now negative ectinas. Joe and
Speaker 1: Ferrel mentioned recovering James A. Thy Okay, so you have
Speaker 1: ownership of equities, you have no money to put to work.
Speaker 1: You have to have a framework, a view out there.
Speaker 1: Where is they're out there? Is it two twenty one
Speaker 1: or is it November four? Yeah? I mean, ideally we'd
Speaker 1: like to be long term investors, and we would like
Speaker 1: to take the long view. I think certainly, if you
Speaker 1: are an equity investor, if you're you know, my equity colleagues.
Speaker 1: These guys look at the quality of the firm, the
Speaker 1: quality of the balance sheet. They're not making an economic
Speaker 1: call um, and they will definitely be able to look
Speaker 1: through political events like this because they will be comfortable
Speaker 1: that the company they're buying is a good company at
Speaker 1: the right price. That's not the case for all types
Speaker 1: of investment, and that's certainly not the case for all
Speaker 1: types of investor. So in our asset classes a bit
Speaker 1: more difficult because that the prices themselves are very much
Speaker 1: going to be a function of the result itself and
Speaker 1: what that means for policy going forward. So depending on
Speaker 1: the type of investor, you will be able to look
Speaker 1: through this event to a greater degree. We would find
Speaker 1: it a bit more difficult to completely ignore. So we
Speaker 1: will be managing our risk levels and exposures accordingly. Alright,
Speaker 1: so managing risk levels. And yet you said that it's
Speaker 1: been a frustrating week for you as a dereach ball.
Speaker 1: What's the head here? Well again I would have said that,
Speaker 1: you know the curves direction and so aituation ball. We've
Speaker 1: been running you know, bullish duation positions and we've got
Speaker 1: some long end steatness on in the US, we're kind
Speaker 1: of both of those have gone against us this week. Now.
Speaker 1: Our FX positioning has very much been favorable to the
Speaker 1: moves this week because we've been positioned along the dollar
Speaker 1: and along the yen, and along the Swiss franc and
Speaker 1: short some of the risky currencies, and so FX has
Speaker 1: definitely been a good diverse far and a good hedge
Speaker 1: for us. But again, going into the event itself, I
Speaker 1: think the outcome is a lot closer than than you know.
Speaker 1: Nate Silver, for example, is calling it, and so I
Speaker 1: find it difficult to build a portfolio that I think
Speaker 1: will be truly robust to every possible outcome. So if
Speaker 1: that's the situation, I'm going to be happy running some
Speaker 1: risk in there, some short duration positions in Europe, for example,
Speaker 1: if if yields do go really high, I think, you know,
Speaker 1: European yields will get dragged to some degree we've seen
Speaker 1: it's not a huge amount, but they will get dragged
Speaker 1: a bit higher. So I can go in kind of
Speaker 1: still having a bit of a small long ration bias,
Speaker 1: some shorts in Europe, some defensive positions in effex but
Speaker 1: just taking the gross level of risk down so that
Speaker 1: it's you know, we're not seeing huge P and L songs, James,
Speaker 1: How why do you think this market is priced in
Speaker 1: the head winds to the recovery that we're seeing develop
Speaker 1: in Europe and our sware at the moment, I'm looking
Speaker 1: back across asset crewed the dollar dollar bottomed out end
Speaker 1: of August, start of September Ozzy and topped out around
Speaker 1: a similar time. Crew topped out around a similar time.
Speaker 1: Equities peaked around a similar time. That was two months ago, James,
Speaker 1: I'd argue this market was probably ahead of some of
Speaker 1: these risks. What do you say to that? Yeah, Again,
Speaker 1: broadly speaking, I think we'd gone too far, too fast
Speaker 1: quite some time ago, and it really didn't need the
Speaker 1: recurrence of the virus spread that we had seen for
Speaker 1: the market to take some of the air out of that,
Speaker 1: because again, we were just priced at the extreme of
Speaker 1: the probability distribution. We were pricing a utopian future where
Speaker 1: earnings would almost instantly recover. Policy was going to be
Speaker 1: sustainable and effective a it's the piece. Everything was going
Speaker 1: to be hunky dorry, and you know the certainty around
Speaker 1: that is somewhere close to zero. So that was that
Speaker 1: was really quite ridiculous market pricing, and we've we've seen
Speaker 1: that that you know, we've seen some pushback against that.
Speaker 1: To go to your original question, how well is the
Speaker 1: market price in the outlook, I would still say, broadly speaking, terribly.
Speaker 1: Looking at US equities doesn't give you a good picture
Speaker 1: for global equities. European equities is viewed, as you've described,
Speaker 1: have had a terrible time at horrid time. Valuations there
Speaker 1: are you look incredibly low relative to the US. There
Speaker 1: are good reasons for that. That still doesn't mean that
Speaker 1: they're cheap even at these levels. But you know a
Speaker 1: lot of assets, certainly in U S equity space, really
Speaker 1: have not taken account of the probability distribution of how
Speaker 1: this will play out, but also taken account of the
Speaker 1: damage that has been done and will continue to be
Speaker 1: done to economies and business models. James, they just looked
Speaker 1: and you can do this, folks in the Bloomberg, which
Speaker 1: is magical. You know, a large shirt of the value
Speaker 1: line geometric index, which is an old war horse, and
Speaker 1: there's some really interesting mathematics and takes out a lot
Speaker 1: of the emotion, a lot of the dynamics of the
Speaker 1: movable feast of all these big capped stacks. It is
Speaker 1: extremely well contained and it is, as you said earlier,
Speaker 1: basically a pullback. How do you know when a ballmarket ends?
Speaker 1: How do you know, as a fundamental guy, when a
Speaker 1: ballmarket ends? You absolutely don't, Tom, there is the answer,
Speaker 1: you know in the rear view mirror, I thought, I noted.
Speaker 1: I can't quite remember who one of the cell side
Speaker 1: analysts was drawing comparisons to this earning season in the
Speaker 1: US with the q on two thousand earning season where
Speaker 1: you've got actually solid looking earnings, lots of beats versus expectations,
Speaker 1: and yet equity performance on a single name and across
Speaker 1: the index basis was was absolutely diabolical. Nobody in March
Speaker 1: two thousand or April two thousand was saying that was
Speaker 1: the top of the NASDAC and it was over. It
Speaker 1: was only probably the end of the year when you
Speaker 1: could look back and go, yet that we're kind of
Speaker 1: done here. That's that's the highs that we've seen, and
Speaker 1: it takes a long time to get back to those
Speaker 1: highs when the overvaluation is so extreme, so absolutely impossible
Speaker 1: to know when it's the top, especially when you live
Speaker 1: in a world of post hoc justification for extreme valuation,
Speaker 1: just using rather glib narratives which don't stand up to
Speaker 1: a lot of scrutiny, and and that that's been the
Speaker 1: case for a lot of stock valuations in this period.
Speaker 1: So I think we will only know in the rear
Speaker 1: view mirror when it was that, when it was the top. Hey,
Speaker 1: James Grazer, catch ump as always, James Anthony. There of
Speaker 1: amity standard investments, Thank you, sir. Apples Yes Falling After
Speaker 1: the company reported iPhone sales the missed estimates, the CEO
Speaker 1: Tim Kirk cautioning that the latest iPhones who have has
Speaker 1: been well received, but the company is facing some strains
Speaker 1: due to the coronavirus. If you look at iPhone, we
Speaker 1: are constrained today. How long we will be supply constrained,
Speaker 1: it's hard to predict. We're supply constrained on Mark, we're
Speaker 1: supplied constrained on and we're supply constrained on some Apple
Speaker 1: watches as well. We're working really really hard, uh to
Speaker 1: remedy those as quickly as we can, but at this
Speaker 1: point I can't estimate when when we'll be out of that.
Speaker 1: And that was the problem, and not just for Apple
Speaker 1: but for many other companies that we put it after
Speaker 1: the close. Tom it was about the outlook, the lack
Speaker 1: of his ability that so many of these companies have.
Speaker 1: I just call it all American uncertainty here around very
Speaker 1: good financials as well. Danielize as an uber bull and
Speaker 1: all this he has been across all of media talking
Speaker 1: up out one year out, two years out, five years
Speaker 1: Daniel lives. Can you write today for wed Bush with
Speaker 1: a two and five year model or is the uncertainty
Speaker 1: so great you've got to pull in your timeline? The
Speaker 1: answer a great question me. I continue to sort of
Speaker 1: view it as near term uncertainty. But let's say, in
Speaker 1: the case of Apple, install base hasn't upgrade their phone
Speaker 1: three and a half years, so I think the hand
Speaker 1: up demand when I look out, I even think over
Speaker 1: the next twelve, eighteen, twenty four months, there's a would
Speaker 1: have more visibility when you look at Apple from an
Speaker 1: install based perspective. But no doubt I mean that you
Speaker 1: guys see farest through the trees here. Intact, we continue
Speaker 1: to be bullish. You know, I looked down at the
Speaker 1: people looking at ninety days out or even a year
Speaker 1: out and if you take any of these juggernauts and
Speaker 1: model them two years or particularly five years, it's shocking
Speaker 1: the growth. Is that growthiness still there represented by revenue growth,
Speaker 1: But can it come down the income statement and persist
Speaker 1: out five years. Yeah. I think it's a golden age
Speaker 1: for technology, which speaks to our bullish it's over the
Speaker 1: last few years. I think we're only the middle innings.
Speaker 1: You look at some of these names, the profitability profile
Speaker 1: is dramatically higher. Look at Apple in terms of services,
Speaker 1: I mean that gross margins about double the hardware business,
Speaker 1: And I think what you're seeing is it's very easy,
Speaker 1: especially in the jittery tape, to get my open and
Speaker 1: nervous on some of these prints and guides. But for Apple,
Speaker 1: the supercycle hasn't even started. And in terms of our
Speaker 1: Asia checks, we think pre order activity is more than
Speaker 1: two xs iPhone eleven. So I think that's why I
Speaker 1: when I look at Apple and sort a knee jerk reaction.
Speaker 1: You look at them next year or two and I
Speaker 1: think this is ultimate A hundred fifty stock six and
Speaker 1: nine months from now. So down what you think of
Speaker 1: stocks down about from the September Hind, I think part
Speaker 1: of it is just general nervousness going into the supercycle.
Speaker 1: China obviously is the key, that's the hearts and lungs
Speaker 1: of the overall cycle. And if you look, you know,
Speaker 1: and you saw this quarter, I think there's just general
Speaker 1: nervousness that you're not going to see that demand valuations
Speaker 1: had a huge re rating and you start see perfection
Speaker 1: built in, and I think you're seeing a risk off
Speaker 1: overall intech just going into the next week. But I
Speaker 1: believe it short lived. That That's why I still think
Speaker 1: it's green light to own tech. And I think I
Speaker 1: look out over next year and I think tech stocks
Speaker 1: are up another twenty plus. That's been your code through
Speaker 1: much of this year. Say, it feels like a rolling
Speaker 1: cold down, and for much of this year it's been
Speaker 1: dead on. But something happened in already September. Then some
Speaker 1: people are asking whether we've already seen the pull forward
Speaker 1: for Apple through the shutdown, and this is not about
Speaker 1: waiting for the iPhone twolve. This is the payback for
Speaker 1: a really decent quarter when the world was shut down.
Speaker 1: What's your response to that? Then, Yeah, I've seen you've
Speaker 1: seen the pull forward on Max and obviously on iPads.
Speaker 1: You've not seen the pull forward and iPhones, and I
Speaker 1: think that's really the key here. You're going into what
Speaker 1: I've used once in a decade supercycle for Apple. So
Speaker 1: that is still on the horizon, especial when it comes
Speaker 1: to China, because you got the installments, it has an
Speaker 1: upgrade their phone and the stack that gets read on services,
Speaker 1: which next year that's going to be north of sixty billion.
Speaker 1: And that continues to be the crux of the thesis
Speaker 1: here in terms of that's playing out in this quarter
Speaker 1: or doesn't change that whatsoever For me, Dan, One aspect
Speaker 1: of the big tech earnings that strikes me as odd
Speaker 1: is that they continue to trade as a monolith by
Speaker 1: large In large part people talk about big tech in
Speaker 1: tandem as though their fates are intertwined, and yet their
Speaker 1: actual business models are vastly different, whether it's an AD
Speaker 1: driven model, whether it's a Google search model, whatever it
Speaker 1: may be. And then you have Amazon, which knocked it
Speaker 1: out of the park in terms of projections, and people
Speaker 1: still are punishing them. Do you expect divergence in the
Speaker 1: fates of these shares and who will be the loser
Speaker 1: in the next year? Yeah, I think maybe you saw
Speaker 1: a little of that divergence with Google, especially over the
Speaker 1: last three or six months, and obviously they knocked it
Speaker 1: at the park last night. From an advertising perspective, now,
Speaker 1: I do think a lot of that could be on
Speaker 1: the antitrust as you start seeing more and more pressure
Speaker 1: from antrusts going to next year. Specifically, if you see
Speaker 1: a blue wave, the Googles and the facebooks, you know,
Speaker 1: could potentially trade a little different than the Apples and
Speaker 1: the Amazons and the platform play in terms of those
Speaker 1: secular trends. But for now, you know, we do view
Speaker 1: them as a group in terms of things that I
Speaker 1: also put Microsoft in there. The platform play isn't the
Speaker 1: stronger getting stronger, and I think you're seeing that in
Speaker 1: this environment. COVID's accelerated the growth rates and the consumer
Speaker 1: and the enterprise by one to two years, and I
Speaker 1: think that's playing out here. Even though you'll see some
Speaker 1: of the knee jerk reactions on well called Sandbad Guide
Speaker 1: and from the likes of Amazon well Dan, they're increasingly
Speaker 1: being treated as the haven investments because of what you
Speaker 1: talk about the stronger getting stronger, and yet the valuations,
Speaker 1: the multiples are getting higher and higher, and people are saying, well,
Speaker 1: it makes sense with such low yields. How much would
Speaker 1: you change your call if benchmark rates in the US
Speaker 1: went up. Yeah, I think that could change things. But
Speaker 1: I also think what's starting to happen is investors of
Speaker 1: you in them some of the parts you look at Amazon,
Speaker 1: e WUS, e commerce, you look at you know, an
Speaker 1: Apple from those services and from a hardware perspective. So
Speaker 1: I do think we'll start to happen is in terms
Speaker 1: of the breakup, talk to some of the parts, the
Speaker 1: reratings that you've seen. I think that's the key, and
Speaker 1: also they are their safety blank and names in the
Speaker 1: category five storm. But there on the other side you
Speaker 1: start to see I just start seeing more of a
Speaker 1: risk on trade. Tech continues to lead the market high
Speaker 1: and I don't see that changing here in terms of
Speaker 1: just the shifts that we're seeing, and I think it's
Speaker 1: having through earning season. Dan one of the great questions
Speaker 1: here and I just did a quick Pharaoh interpolation of
Speaker 1: the share buyback program of Apple, and folks basically out
Speaker 1: ten years, they go back to where they were in
Speaker 1: in terms of share, number of shares outstanding. Dana's other
Speaker 1: companies have tried that, Intel IBM and that story didn't
Speaker 1: work out. So good. Is Apple correct to be so
Speaker 1: aggressive of buying back shares. It's hard to argue with
Speaker 1: the strategy in terms of what you've seen on the
Speaker 1: net neutral cash policy, they're not acquisitive and the body
Speaker 1: back combined with and again the reason I think it
Speaker 1: hasn't worked for some of those companies they didn't have
Speaker 1: a golden installed base and and anything close to what
Speaker 1: the iPhone is within nineties nine embercent renewal rate. And
Speaker 1: I think just given they have more cash in some countries,
Speaker 1: they're not going to acquire Well, that's from an investor perspective,
Speaker 1: I think the right thing to do. I happen to
Speaker 1: agree with you. But what I find stunning is the
Speaker 1: margins of the growing service sector. Do they sustain those
Speaker 1: forty fifty even margins in service? Well? I do, and
Speaker 1: that's why I think the services business, which just take
Speaker 1: and we said some of the parts, I think that
Speaker 1: services business is worth nine to nine billion, and that's
Speaker 1: been a key part of the re rating in the
Speaker 1: stock over the last six and nine months as it's
Speaker 1: held up like Rocket Gibraltar. If you've looked at the
Speaker 1: services business and I think those margins teflon like and
Speaker 1: continue to I think stay where they are or potentially
Speaker 1: go higher. And that's the key part of the bull thesis.
Speaker 1: What do you make down of the fact that China
Speaker 1: sales of the iPhone and just in general dropped revenue
Speaker 1: for Apple? The idea that perhaps this has to do
Speaker 1: with the new phone coming out, but even more so
Speaker 1: perhaps the tensions that are growing between China and the
Speaker 1: US when it comes to tech. Yeah, I think tensions
Speaker 1: that's been there posed a child for US China trade war,
Speaker 1: just overall cold tech war. But I think this quarter
Speaker 1: is a throwing quarter for China because it all comes
Speaker 1: down to you see a pause ahead of iPhone twelve.
Speaker 1: I mean, we believe you could see growth in China
Speaker 1: double digits start in the summer quarter. That's why I
Speaker 1: wouldn't read into this. In other words, it's a scary headline.
Speaker 1: Stock will be down. Nietzscherk. I think three months from
Speaker 1: now we sit here, we're talking about how is China
Speaker 1: that strong in terms of iPhone twelve. That's based on
Speaker 1: what we see in terms of checks and pent up demand,
Speaker 1: and we'll see you in three months. The bull is
Speaker 1: still a bull. I have wet bush on the site,
Speaker 1: the blanket in a cap five storm right now, Lindsay
Speaker 1: pigs that joins us right now from Stapleward thrill that
Speaker 1: she could join this morning, Lindsay, I want to go
Speaker 1: right to that. Michael McKee showed the oddities of the moment.
Speaker 1: A savings rate that is double digit, that's not normal
Speaker 1: for America. What are the ramifications of that high savings rate. No,
Speaker 1: it's certainly not normal. And when we see American squirreling
Speaker 1: away that type of cash, that that amount of wealth,
Speaker 1: it really speaks to the uncertainty that the average American
Speaker 1: is feeling about their financial footing going forward. A fourteen
Speaker 1: percent savings rate translates into over two trillion in accumulated
Speaker 1: wealth and accumulated savings that can be deployed out into
Speaker 1: the marketplace. But right now, consumers are looking out at
Speaker 1: the recovery, they're looking out at the prospect of a
Speaker 1: resurgence of the virus and potential further restrictions or shutdowns,
Speaker 1: and the consumer is very nervous, and in fact, rather
Speaker 1: than immediately spending that wealth, they're deploying that to their
Speaker 1: savings account and sitting on that additional savings. Lizzie just quickly,
Speaker 1: of course, the distribution for those savings not equal. Where
Speaker 1: in society is that money sitting right now and how
Speaker 1: likely is it that it will be spent? Well, I
Speaker 1: do think there's a disproportionate amount of the savings that
Speaker 1: is being held at the top wrong of the income ladder,
Speaker 1: But with forbearance, with generous unemployment benefits, there is a
Speaker 1: sizeable amount of wealth that has been captured even in
Speaker 1: the middle or bottom wrongs of the income ladder. So yes,
Speaker 1: there is a little bit of a skew towards the top.
Speaker 1: But I do think that when we look at overall,
Speaker 1: the average American may be better off than they were
Speaker 1: pre pandemic, or at least on somewhat stronger financial footing. So,
Speaker 1: going back to a point you made earlier, I do
Speaker 1: think that this looming fiscal cliff that many are concerned
Speaker 1: about may not be quite as ominous as previously assessed
Speaker 1: because of that additional savings or that additional wealth that
Speaker 1: the average American is facing right now. That's where I
Speaker 1: wanted to go if we could game out how long
Speaker 1: long households have to maintain spending or even just reduce
Speaker 1: it a little bit, perhaps to edify these these forecasts
Speaker 1: for a blockbuster holiday season, how long do we have
Speaker 1: before we sort of hit the wall where we either
Speaker 1: need more fiscal support or we actually see the slowdown
Speaker 1: that so many people have predicted would already have happened
Speaker 1: and yet hasn't. Well, if we assume that the economy
Speaker 1: continues at this pace, the consumer does have several months
Speaker 1: to eat through that accumulated wealth that should carry us
Speaker 1: well into the first quarter, even independent of a fifth
Speaker 1: round stimulus package. But we also have to recognize that
Speaker 1: the virus is far from contained and that remains the
Speaker 1: number one risk of the economy, or should I say,
Speaker 1: the policies aimed at stemming the spread of the virus
Speaker 1: remain the number one risk. And if in fact, we
Speaker 1: do see a resurgence towards the end of the year
Speaker 1: leading to further restrictions, further lockdowns, resulting in further business closures,
Speaker 1: job losses, lost income, revenue opportunities, well, we could see
Speaker 1: growth regardless of the savings or that wealth accumulation. We
Speaker 1: could see growth slow significantly or even fall into net
Speaker 1: negative territory depending on the depth and duration of that
Speaker 1: rebound or that resurgence of the virus. Lizzie find a
Speaker 1: question for me. I think it's the biggest question for
Speaker 1: any economist in the United Stace right now. Does this
Speaker 1: U S economy in this recovery go the way of
Speaker 1: China or go the way Europe? By your end, I
Speaker 1: think right now, the risk is that we see a
Speaker 1: similar scenario that was playing out in Europe right now again,
Speaker 1: that second round resurgence of the virus really undermining the
Speaker 1: improvement that we've seen July the September, that was a
Speaker 1: welcome step in the right direction, a record bounds, but
Speaker 1: again reflecting the fact that we're simply reopening the economy,
Speaker 1: so really emphasizing the power of reopening the economy bouncing
Speaker 1: off of those low, low levels that we saw in
Speaker 1: the second quarter when businesses were forced to close and
Speaker 1: individuals were forced to to stay within the confines of
Speaker 1: their home, and it really highlights the ongoing detrimental impact
Speaker 1: of keeping the economy closed. Should we see new policies
Speaker 1: forced the same scenario as we head towards the end
Speaker 1: of the year, And that's the issue right there, Lindsay
Speaker 1: right to catch out with you, gets ahead from you Lindsay.
Speaker 1: P Exada State Fold chief economist Rod Felson with us
Speaker 1: with Prudential. I want to get right into this because
Speaker 1: this is the topic and one of the topics of
Speaker 1: thinking into the weekend around all the crowded news. He
Speaker 1: is Vice chair Prudential Financial Lisa and Rob Fells and
Speaker 1: really simply is considering getting people back to the office
Speaker 1: or is it a a permanence to this work from home? Rob,
Speaker 1: Lisa and I have heard forty two different opinions on this.
Speaker 1: What is the learning curve right now of people thinking
Speaker 1: about this? What's the thinking now versus what the thinking
Speaker 1: was in May? Yeah, so Tom, I think the thinking
Speaker 1: is that we're not at a spread and we're in
Speaker 1: a marathon. And with particularly the most recent data coming out,
Speaker 1: it looks that many companies, most I would say, are
Speaker 1: actually extending out even further the time that they think
Speaker 1: they're going to be in this remote environment. We've done
Speaker 1: that recently. We told our employees that will be in
Speaker 1: earlier than July of the next year that we're looking
Speaker 1: to have them come back in any kind of material way.
Speaker 1: And I think that's a reflection of a couple of things.
Speaker 1: One is, in a survey that we did recently, it
Speaker 1: indicates that actually remote work is working. Um. It's relieving
Speaker 1: the stress that a lot of these individuals are experiencing
Speaker 1: from the pandemic of child care. But you know, helping care,
Speaker 1: balancing work life, UH and doing it doing it in
Speaker 1: a remote environment has actually helped to ease some of
Speaker 1: the pressure associated with that. UH. And the second thing
Speaker 1: is that productivity is actually held up quite well in
Speaker 1: a remote environment. UM. Sixty percent of our survey indicated
Speaker 1: that their productivity is actually at or above where it
Speaker 1: was you at the office. What I'm hearing in folks,
Speaker 1: this goes to a great team of Bloomberg surveillance worldwide.
Speaker 1: I really can't say enough about you know, you see
Speaker 1: the three of the four of us on arrowhere, there's
Speaker 1: people behind us trying to make the sausage every day.
Speaker 1: And Rob, what I'm hearing is the the employees actually
Speaker 1: feel they're working more hours at home than they were
Speaker 1: in the office excommute. Is that what your research shows absolutely,
Speaker 1: Tom h to two things on that. One is there's
Speaker 1: three Actually there's been a blurring of the of the
Speaker 1: start in the end of the work day. Uh. And
Speaker 1: it's tending to start a little earlier and end a
Speaker 1: little later to to to um. In the survey, sixty
Speaker 1: five individuals have taken sixty less vacation year to date
Speaker 1: than they did than they did uh last year uh
Speaker 1: and three on average, they're commuting an hour less every day,
Speaker 1: but that they're reinvesting back into work, so it's not
Speaker 1: more leisure time, it's actually more work time. Yeah, I
Speaker 1: will say Rob. There was a story in the Wall
Speaker 1: Street Journal today, the lead of which was what would
Speaker 1: you do with an extra hour each day? And the
Speaker 1: answer is for many people work more. Basically, this is
Speaker 1: unsustainable going forward. A lot of people, if you talk
Speaker 1: to them, they are medicating with alcohol in the evenings.
Speaker 1: They're wondering what they're going to do with their children.
Speaker 1: They're not necessarily feeling the satisfaction that comes from working
Speaker 1: from home. When it comes to this beautiful image of
Speaker 1: not having to commute, do you see this as the
Speaker 1: new reality or do you see this as people hanging
Speaker 1: on with all that they can given the fact that
Speaker 1: they don't have options to go on vacation anyway, And
Speaker 1: it is okay for now but then they're going to
Speaker 1: go back to the office. Yeah, listen, it's a grind.
Speaker 1: There's absolutely no argument about that. And that comes through
Speaker 1: our survey as well. And you know, well remote has
Speaker 1: helped with the stress associated with the pandemic, the reality
Speaker 1: is that there's still very stressful for individuals. You know.
Speaker 1: I think a couple of thoughts on that. One is
Speaker 1: if I think about the productivity gains that we're getting, uh,
Speaker 1: you know, and how much of that can be retained
Speaker 1: long term. I actually think there is a real productivity
Speaker 1: enhancement here. There is an acceleration and you know, what
Speaker 1: we call the future work the adoption of technology and
Speaker 1: digitization processes out of necessity, and that's going to be sustainable.
Speaker 1: But the remote and and and then secondly the remote
Speaker 1: piece of it. You know, our surveys indicate that to
Speaker 1: three quarters of the individuals that were survey indicated that
Speaker 1: they would like to continue to to have some element
Speaker 1: of remote work on a go forward basis. Now, I
Speaker 1: don't think anyone wants to be fully remote on to
Speaker 1: go forward is a most people don't want to be
Speaker 1: fully remote on to go forward basis. But both our
Speaker 1: internal company surveys and the external survey indicate that people
Speaker 1: have gotten used to this remote and think it's actually
Speaker 1: uh a an enhancement to work life balance uh and
Speaker 1: they'd like some element of that. But going forward, and
Speaker 1: I think that when we return to the workplace, therefore,
Speaker 1: it's gonna be a very different experience in a very
Speaker 1: different place for individuals because it will I think having
Speaker 1: hybrid models of remote on a go forward basis that
Speaker 1: look very different than what we have predependemic. A lot
Speaker 1: of people would agree with you, But I want to
Speaker 1: go back to something that Bruce Flatt, who is the
Speaker 1: CEO of Brookfield as Management, said, and it was what
Speaker 1: we heard earlier in this segment where he said that
Speaker 1: if you go on the street, ask nine out of
Speaker 1: ten people, they want to go back to the office.
Speaker 1: They want to have some sort of communication face to
Speaker 1: face with colleagues. Do you feel like from your conversations
Speaker 1: in your research, people want to be in urban centers,
Speaker 1: even if they're not going to be necessarily going to
Speaker 1: work every day. They want to be able to see
Speaker 1: and physically experience one another and the world at large.
Speaker 1: Or do you think that perhaps this is wishful thinking
Speaker 1: by a real estate investor, Well, it is a real
Speaker 1: estate in faster. So a good note on that to
Speaker 1: to two points one is uh, right now in the pandemic,
Speaker 1: our surveys are not indicating that people want to get
Speaker 1: back into the office place. Actually, our own internal survey
Speaker 1: eighty seven percent of our employee said we do not
Speaker 1: want to go back. Uh. And it's similarly high percentage
Speaker 1: individuals and our external surveys have indicated that they at
Speaker 1: this point in time don't want to go back. Now
Speaker 1: post the pandemic, do they want to go back into
Speaker 1: the work is absolutely, but again in a modified fashion. UM.
Speaker 1: I'll refer to our own internal survey we have before
Speaker 1: the pandemic, about one of our people worked on either
Speaker 1: in three or more days a week remote UM. When
Speaker 1: we did a survey uh during just you know, more
Speaker 1: recently post a pandemic, UM, three quarters of our employees
Speaker 1: indicated that they want to be remote three or more
Speaker 1: days a week. I be two percent of our employees
Speaker 1: said they want to be remote to or more days
Speaker 1: a week. Now there was a small percentage that wanted
Speaker 1: to be fully remote. So I think people missed the
Speaker 1: human interaction associated with being at the workplace. Absolutely, that
Speaker 1: doesn't mean they want to return to a five days.
Speaker 1: This issue is not going to go away. Rob. We
Speaker 1: would love to have you on again. Rob Fails and
Speaker 1: with decades of experience in real estate, working of course
Speaker 1: with Prudential Financial their commitment to Newark, New Jersey. He
Speaker 1: is their vice chair. Thanks for listening to the Bloomberg
Speaker 1: Surveillance podcast. Subscribe and listen to interviews on Apple Podcasts, SoundCloud,
Speaker 1: or whichever podcast platform you prefer. I'm on Twitter at
Speaker 1: Tom Keene before the podcast. You can always catch us worldwide.
Speaker 1: I'm Bloomberg Radio