Speaker 1: This is Bloomberg Business Week. I'm Karl Masser. Every day
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Speaker 1: Global News. There is a lot going on talk about
Speaker 1: a self testing kit for home that happening in the
Speaker 1: United States. Over in Europe, though, you did see a
Speaker 1: protest over Germany strategy to quell the virus turning violent.
Speaker 1: So yeah, it's really rough out there and this is
Speaker 1: a place environment we all know far too well. Back
Speaker 1: with us to see what she is seeing and concerned
Speaker 1: about is a Lissa rap CEO of the healthcare solutions
Speaker 1: company Surgical Solutions. She is with us on the phone
Speaker 1: from Deerfield, Illinois. Um, Alissa, good to have you here.
Speaker 1: How are you And when you see these headlines, uh,
Speaker 1: you're out there in the Midwest. I mean, that's really
Speaker 1: been a tough spot. It has, Caroline, thanks for having
Speaker 1: me back being a rise and surge across the country. Candidly,
Speaker 1: are incidences of exposure or even positivity in our own
Speaker 1: company amongst our tuner and fifty employees across nine states
Speaker 1: and thirty five hospitals is pretty much even. We've seen
Speaker 1: additional you know, exposure or positivity in New York, Kinnesseed, Texas, Kentucky,
Speaker 1: and it is obviously back. I'm not an epidemiologist, as
Speaker 1: you know, so I know that the viral load of
Speaker 1: the virus changes over time and it makes it easier
Speaker 1: to transmit. So hopefully people who are getting this version
Speaker 1: of this horrible COVID nineteen flu are not gonna be
Speaker 1: as sick if they're healthy and young. But it is
Speaker 1: still it is back that the numbers are real. We're
Speaker 1: seeing it across the country well, and it's interesting. We
Speaker 1: just talked a story. We just talked about a story
Speaker 1: Charlie Pellet and I about how COVID is really, you know,
Speaker 1: ravaging those long term care centers and we know that's
Speaker 1: where the elderly population is. We understand those numbers, but
Speaker 1: I've just talking to it individual here at Bloomberg and
Speaker 1: uh talked about her nephew succumbing to the virus. So
Speaker 1: we do understand that as much as we know some
Speaker 1: of COVID nineteen is predictable, we also know that there
Speaker 1: are outliers and we don't know still a lot about
Speaker 1: this virus. Having said that, the vaccine and the developments
Speaker 1: we've had over the last week and a half from
Speaker 1: Fiser and from Maderna, what's your takeaway there? I find
Speaker 1: it incredibly encouraging. I think the vaccines are going to
Speaker 1: be game changers, needless to say. And the only real
Speaker 1: question of my mind as a health care service provider
Speaker 1: is a question around distributions. They need to be stored
Speaker 1: between UH fifty and hundred blow fahrenheit. Then obviously we
Speaker 1: need the military and FedEx and UPS working together on
Speaker 1: a on a combined distribution strategy that leverages single sites
Speaker 1: that have these massive freezers as well as mobile sites.
Speaker 1: And I think creativity and real genius in terms of
Speaker 1: logistics and planning is going to be what needs to
Speaker 1: happen between now and say April May June, when we
Speaker 1: get to true general pop relation roll out of the virus.
Speaker 1: But for frontline healthcare workers, I'm still pretty bullish and
Speaker 1: optimistic because if those vaccines can start happening in our
Speaker 1: major metropolis and major sites in December, the second shot
Speaker 1: in January, whether it's the Visor Maderna or any other vaccine,
Speaker 1: that means that if we can get first responders and
Speaker 1: frontline healthcare workers vaccinated, then the most at risk, then
Speaker 1: the then the rollout further. There should be an abatement
Speaker 1: of the spread and it should meet it provides some
Speaker 1: relief to our healthcare system. Well, and you've got to
Speaker 1: be thinking unless about your workers specifically, right and making
Speaker 1: sure that they are frontline workers. Uh, and they need
Speaker 1: to have access to this vaccine. Um. You know, I'm
Speaker 1: curious how you're approaching it. Would you make sure that
Speaker 1: they are among the first to get it? Are your
Speaker 1: workers comfortable getting it? And are you concerned about having
Speaker 1: access ultimately to the vaccine as we kind of try
Speaker 1: and figure out the distribution and logistics problems of getting
Speaker 1: the vaccine out a great Those are all great questions.
Speaker 1: I feel confident in our frontline healthcare workers ability to
Speaker 1: get access to the vaccine because we follow each hospital's
Speaker 1: protocol for all things clinical. When we work with our
Speaker 1: hospital partners, and if their frontline teams are going to
Speaker 1: be asked to vaccinate, ours will too. And so if
Speaker 1: it's being provided to hospitals across the country for their
Speaker 1: frontline workers, I am hopeful and confident we will get
Speaker 1: that access. And I think that the first twenty million
Speaker 1: UH doses of the vaccine seemed pretty locked and loaded
Speaker 1: for December. So again, if we can make sure that
Speaker 1: that happens and nothing stops it, I think the frontline
Speaker 1: and first responder should be in good, good shape. It's
Speaker 1: really that next wave of rollout, Carol, that I personally
Speaker 1: am curious about. Once our frontline healthcare workers are taken
Speaker 1: care of, and the countries, after the prioritization for the
Speaker 1: for the elderly and the most at risk, how then
Speaker 1: do we ensure that mass distribution happens. I'm confident by
Speaker 1: the spring will have mass production of vaccine. Mass distribution
Speaker 1: becomes a bigger challenge. Yeah, listen, I think about that too,
Speaker 1: in terms of it getting out, and you know, we've
Speaker 1: been done a lot of reporting about that's kind of
Speaker 1: our next big headache. And because you know, countries have
Speaker 1: relationships and deals with various UM drug makers and so
Speaker 1: so you really do wonder, you know, what kind of
Speaker 1: horse trading might ultimately be going, you know, going on.
Speaker 1: And that kind of terrifies me, especially when I think
Speaker 1: about people who really need it. When I think about
Speaker 1: developing markets, I mean, it's really going to be, I think,
Speaker 1: a logistics nightmare. Globally, it's going to be challenging. And remember,
Speaker 1: the regular food vaccine can be stored at thirty seven
Speaker 1: degrees terrified and below, and and even that sometimes poses challenges,
Speaker 1: and this hundred degree below is a real thing. But
Speaker 1: I know that the biggest sites of points of distribution
Speaker 1: are already shoring up for those capabilities. I'm confident that
Speaker 1: in our country specifically, the ingenuity around distributional logistics means
Speaker 1: that we should be able to come up with a
Speaker 1: mobile UM mechanism for distributing even this very unusually cold vaccine.
Speaker 1: So I'm hopeful. I think that we'll see a lot
Speaker 1: of opening up come next summer. So listen, I know
Speaker 1: we've talked about schools. I know last time around we
Speaker 1: talked about UM and I think you you said that
Speaker 1: you don't think children are super spreaders. Because we were
Speaker 1: talking about schools reopening. I have to say, you know,
Speaker 1: it's interesting, I'm getting a lot of emails from around
Speaker 1: the newsroom about city looks New York City schools are closing.
Speaker 1: I actually think cities are being smart that as soon
Speaker 1: as they start to see numbers go up, UH in
Speaker 1: certainly just around the country. As soon as they start
Speaker 1: to see those numbers go up, I mean, New York
Speaker 1: remembers how bad it was, and I think they quickly
Speaker 1: moved to say we gotta we gotta pull back, and
Speaker 1: that's how we hopefully can maybe prevent this from becoming
Speaker 1: New York City back in March, April and May. Yeah. There.
Speaker 1: You know, there are two different questions, right Carol. One
Speaker 1: is our children super spreaders, and there's an abundance of data,
Speaker 1: and you've had many people on your show that have
Speaker 1: talked about how they may or may not be and right,
Speaker 1: we aren't. But there are other stakeholders. And stakeholders are
Speaker 1: teachers and the elderly family members of UH children in
Speaker 1: schools who are living in multigenerational, generational households. So I
Speaker 1: think it's the answer to whether to keep them open
Speaker 1: or closes is a function from whose stakeholders eyes you're looking,
Speaker 1: And I think that it's likely, um and probable that
Speaker 1: many public schools will end up closing post Thanksgiving, pre
Speaker 1: winter break quote unquote, or even right after winter break, because,
Speaker 1: as we discussed earlier, this vaccine access is likely going
Speaker 1: to be healthcare workers and first responders first, and then
Speaker 1: hopefully in the second wave as soon as January, even
Speaker 1: teachers and others who we consider a central workers. So
Speaker 1: I'm hopeful that once teachers are have access more broadly
Speaker 1: to the vaccine, then they'll be even greater comfort with
Speaker 1: keeping the schools open. But I think it's likely that
Speaker 1: to continue to quote flatten the curve. You can agree
Speaker 1: or disagree, but I think it's likely that schools will
Speaker 1: close for some portion of winter. Yeah, And I guess
Speaker 1: what I was kind of saying is right. I think
Speaker 1: I agree with you because just my own experience with
Speaker 1: my daughter in school, like the schools have been. I feel,
Speaker 1: like knock on wood, we're not necesarily talking about colleges
Speaker 1: and universities. They have had their own strug as um,
Speaker 1: but I think at large things have actually gone gone
Speaker 1: fairly well. And I guess what I'm is interesting, is
Speaker 1: that you're seeing, whether it's the West coast, whether it's here,
Speaker 1: major cities who saw it so badly in the springtime,
Speaker 1: Like we remember this, It wasn't that long ago, right,
Speaker 1: and we don't want to go back to it, so
Speaker 1: that you start to as soon as you start to
Speaker 1: see those numbers go up, you kind of rain things
Speaker 1: in just as hopefully slow it down and more importantly
Speaker 1: hopefully to stop it from spiking once again into that
Speaker 1: kind of out of control area. Yeah, and I think
Speaker 1: that it's also a function of how things have been managed. Right,
Speaker 1: If we're in a hybrid learning environment in our public
Speaker 1: school district here in the suburbs of Chicago, and you know,
Speaker 1: all the children have plexiglass shields, everyone's mass or classrooms
Speaker 1: eight students or less. We we certainly may end up
Speaker 1: in a virtual learning mode for a portion of winter,
Speaker 1: just like most public schools. But none of the transmission
Speaker 1: in our our suburban school district has happened within the schools.
Speaker 1: It's happened from people bringing it in from the outside.
Speaker 1: So that is I think many parents great comfort at
Speaker 1: schools are safe, kids are safe in schools. It's the
Speaker 1: community spread is going to be what it is. But
Speaker 1: again I stand by my earlier claim that I don't
Speaker 1: personally believe from the data i've read that children under
Speaker 1: ten are super spreaders by and large themselves. But I
Speaker 1: understand when taking into account multiple stakeholder groups why schools
Speaker 1: may choose and districts public districts may choose to close
Speaker 1: for a portion of winter until these vaccines are more
Speaker 1: widely disseminated. Right, Well said, hey, listen, Um, I want
Speaker 1: to go back to something you said to listen because
Speaker 1: I think it's really important and we've only got about
Speaker 1: a minute or so left here about you said, logistically,
Speaker 1: we're gonna need military and partnership with fed X. People
Speaker 1: have been saying since March April that we are at war,
Speaker 1: it's a health war, and we need kind of a
Speaker 1: military you know, a military aspect and reaction to it,
Speaker 1: if you will, and we really kind of haven't gotten that.
Speaker 1: Do you think a new administration will move in that direction?
Speaker 1: I think that it's likely that a new administration would
Speaker 1: be willing to leverage all tools at its disposal, including
Speaker 1: the US military, to ensure the broadest dissemination of this
Speaker 1: vaccine as quickly as possible. And I also believe that
Speaker 1: our US military is probably uniquely qualified to provide support
Speaker 1: to commercial parties like that X and ups in that way.
Speaker 1: So I really hope for a public private partnership in
Speaker 1: terms of distribution of the vaccine. I think it gives
Speaker 1: us the greatest probability of the greatest dissemination the fast.
Speaker 1: If we don't get that, what what what what? Then?
Speaker 1: Just quickly, I'm not thinking about again. I'm thinking positively, Carol,
Speaker 1: We're gonna get it down so we can have more
Speaker 1: normal lives by next time. Uh hallelujah. I'm off I'm
Speaker 1: an optimist too, and I'd like to get back to
Speaker 1: a more normal life. Um, Alyssa, thank you so much
Speaker 1: for finding time once again for us. Alissa rap she
Speaker 1: is chief executive officer of Surgical Solutions, joining us on
Speaker 1: the phone from Deerfield, Illinois, and again uh, watching those
Speaker 1: virus headlines, but optimistic about the vaccine and ultimately, if
Speaker 1: we do it right in terms of how we get
Speaker 1: it out logistically and the distribution, we can move much
Speaker 1: closer and much uh faster to a more normal life.
Speaker 1: So that's what we're kind of all hoping for this
Speaker 1: is Bloomberg Business Week with Carol Messer from Bloomberg Radio.
Speaker 1: You're listening to Bloomberg Business Week and the cover story
Speaker 1: this week, And I gotta say, I don't know if
Speaker 1: I can say this, Jill Weber. Can I just say
Speaker 1: I got a peek at the cover art you did
Speaker 1: last night. I have to say it truly encapsulates the
Speaker 1: essence of this story. Yeah, it's a fun one. Um.
Speaker 1: And this is one that, um, I think we were
Speaker 1: we we've been interested in for a while because looks
Speaker 1: like the staff of Business Week has a lot of
Speaker 1: cats and dogs at home. Um, And there have been
Speaker 1: acquisitions that were made during the pandemic. And if you
Speaker 1: have a dog and go to a dog park like
Speaker 1: I do, you also recognize that there were many, many,
Speaker 1: many more dogs in this neighborhood than there were before
Speaker 1: the pandemic. And one of the big beneficiar areas of
Speaker 1: this has been Chewy, the online pet retailer that does
Speaker 1: pet deliveries. And that's what our stories about, all right.
Speaker 1: So of course, Bloomberg Business Week editor Joe Webber, sorry
Speaker 1: I jumped the gun there, but I wanted to bring
Speaker 1: you in because I love the cover. Uh, and let's
Speaker 1: also bring in Bloomberg News Wealth for Porto, Andrew's mail
Speaker 1: in reporting for Business Week and on the phone from Orlando, Florida,
Speaker 1: Joel on the phone from the remote access from Brooklyn,
Speaker 1: it is and I gotta say, Joel, it's one of
Speaker 1: those things in the shutdown that as I would walk
Speaker 1: my dog Scout around the very quiet neighborhood, I would
Speaker 1: see boxes of things and I often saw Chewy boxes
Speaker 1: on the curb. Yeah, and you know they're coming to
Speaker 1: our house. To um. It's actually in one of our
Speaker 1: story meetings that turns out that you know, there's a
Speaker 1: lot of co op apartments in New York City that
Speaker 1: aren't supposed to have pets, and Chewy Boxes are outing
Speaker 1: them because it's like, oh, look delivery exactly. UM. So
Speaker 1: the story of Chewi though, I think it's it's one
Speaker 1: of these amazing ones because you know, the company has
Speaker 1: been around for for nine years. UH started basically by
Speaker 1: a couple of guys who just realized they were going
Speaker 1: to get into the jewelry business and then realized, wait
Speaker 1: a second, there could be a bigger opportunity and pets,
Speaker 1: and they basically scrapped it out for nine years and
Speaker 1: in the process of that sort of faded from the
Speaker 1: company and the company now has a has a new CEO.
Speaker 1: And the story sort of starts with Andrews crunching some
Speaker 1: numbers and realizing that he's actually incredibly highly compensated. How
Speaker 1: how highly compensated is Andres about a hundred eight million team.
Speaker 1: That's what brought me onto to this story. I am,
Speaker 1: we ran our highest paid CEOs list this summer and
Speaker 1: sume it's sing. Made a d eight million last year.
Speaker 1: And I turned to my editor and said, who in
Speaker 1: the world assume it'sing? And it turns out to see
Speaker 1: the CEO of Chewy And that's yeah, that's where it
Speaker 1: all started, right, And it's kind of like, what is
Speaker 1: to I have to say. We have a market guest
Speaker 1: who comes on and every time she's like, by Chewy,
Speaker 1: by Chewy, by Chewi. I mean, this is a business,
Speaker 1: you know, and you put it in the story and
Speaker 1: there's that it's very much kind of akin to Amazon
Speaker 1: in its early days. Yeah, it really is. It's it's
Speaker 1: what sets it apart from Amazon. Amazon was a model
Speaker 1: for much of the the quickness, the ease, and the pricing,
Speaker 1: but will really sets to a part is the fact
Speaker 1: that you actually have a customer service number to call,
Speaker 1: and if you call it, there's a person that responds
Speaker 1: to you within six seconds and it's willing to talk
Speaker 1: to you four hours. If that's what you feel like
Speaker 1: about your pet, about pet food, about the fact that
Speaker 1: you know anything, I've heard stories of customer service agains.
Speaker 1: You have literally been on the phone for several hours
Speaker 1: with with pet owners that call in. One of the things, Carol,
Speaker 1: that I think is really interesting about the businesses. You know,
Speaker 1: Amazon when it started, it had that one area of
Speaker 1: expertise that it just nailed, which was books. It's like,
Speaker 1: how do we bring as many books as we possibly
Speaker 1: can online and do um e commerce as a as
Speaker 1: a bookstore right right? And I think we actually kind
Speaker 1: of like it's almost like they surveyed the landscape and said,
Speaker 1: what's the thing that we could have recurring payments with
Speaker 1: that Amazon hasn't thought to do yet, and how do
Speaker 1: we figure out what that is and then do it
Speaker 1: at warp speed effectively? And they recognize that pets, So
Speaker 1: this thing, it's the number in the story, nine billion
Speaker 1: dollars a year being spent by Americans on pets. If
Speaker 1: you could get one slice of that, it's a great business.
Speaker 1: And what they figured out was that there's a lot
Speaker 1: of things that you can do that are recurring payments,
Speaker 1: whether it's dog food deliveries or medications, and all of
Speaker 1: those things are just cruise controlled. That's a subscription revenue model,
Speaker 1: and it has just allowed them to go sort of
Speaker 1: warp speed. And they were on a pretty good trajectory
Speaker 1: before the pandemic, and then the pandemic really played to it.
Speaker 1: And so Andrews tell us about what they how how
Speaker 1: they've really capital capitalized on everything this year. Yeah, they've
Speaker 1: already in the first two quarters they added more customers
Speaker 1: than in all of the prior fiscal years, and they're
Speaker 1: on track to finally turned EBIT down positive this year.
Speaker 1: And they are also on track to hit roughly seven
Speaker 1: billion dollars of revenue from if I don't misremember, around
Speaker 1: four point nine. So it's it's really super charged them
Speaker 1: this year. And they were sort of kind of like Peloton,
Speaker 1: just perfectly in position to take advantage of the coronavirus.
Speaker 1: We've been buying our scout, she's a little Irish terrier man.
Speaker 1: She's been getting toys, you know, and we we've got
Speaker 1: a subscription thing that we do every month too, and
Speaker 1: it's like, yep, we just we don't even think twice
Speaker 1: about it. We're like, it's essential. It's kind of crazy.
Speaker 1: So wait a minute, though, we said they were like
Speaker 1: kind of Amazon right in many ways, and it sounds
Speaker 1: like there are two also like Amazon for a long time.
Speaker 1: They're not profitable, not yet. And you know, that's a
Speaker 1: story that is not too unfamiliar these days, that you
Speaker 1: set assign profitability and instead focus on growing very quickly.
Speaker 1: And that's what they did, and founder Ryan Cohen and
Speaker 1: his team they actually ripped the page out of Amazon's
Speaker 1: playbook and said, we're going to plow every dollar or
Speaker 1: free cash flow that we get into marketing and customer acquisition.
Speaker 1: And but he points out in the story that at
Speaker 1: any point they could have turned off that marketings pigots,
Speaker 1: and the company would have been profitable even back in
Speaker 1: So it's really about you know, running and getting scale
Speaker 1: um as long as you can, as long as your
Speaker 1: careful ways allows you to do that. And that's what
Speaker 1: they that's what they've done, and that's why they're so
Speaker 1: big today. And and actually I love it because the
Speaker 1: CEO brought this up when when you guys kind of
Speaker 1: put it to him, is this this fly wheel? Um,
Speaker 1: this this idea that it's a vaunted when that Amazon's
Speaker 1: really excelled is sort of like, once you can start
Speaker 1: spinning off cash, it feeds all the other aspirations that
Speaker 1: you that you have. What did he have to say
Speaker 1: about his flywheel, Well, they essentially saying that it's I mean,
Speaker 1: it's a very surty model. As long as you have
Speaker 1: as long as you're not burning too much cash, then
Speaker 1: then that's something that you can keep up. And as
Speaker 1: long as you keep acquiring customers at a fast enough clip,
Speaker 1: then then that fly will keeps up. And thanks to shoot,
Speaker 1: Chewi's focused on autoship and the fact that people have
Speaker 1: to return to them every once in a while to
Speaker 1: buy cat litter and food and and so on, and
Speaker 1: and you can put that on automation. Um, that really
Speaker 1: helps to underwrite this whole model and it works anders
Speaker 1: really quickly. So Smit saying, the CEO of chewies up
Speaker 1: there with Elon Musk Apples, Tim Cook, some other well
Speaker 1: known CEOs as among the highest paid. Does he deserve
Speaker 1: to be there considering what he's done at the company
Speaker 1: and just got about thirty seconds. Well, I think if
Speaker 1: you're if you bought you right after the I p oh,
Speaker 1: and you still hold it now, I'm sure you're very
Speaker 1: happy regardless of how much he got paid. Um. We
Speaker 1: spoke to some former employees who pointed out that the
Speaker 1: company with an excellent shape already when he took over.
Speaker 1: Interesting kind of feel kind of feel bummed out for
Speaker 1: the two founders though. Man Um, it's a great, great read,
Speaker 1: And I told you you've got to check out the
Speaker 1: cover because I think I'm gonna go home and frame
Speaker 1: it because it's just adorable. You're listening to Bloomberg Business
Speaker 1: Week with Carol Messer on Bloomberg Radio. All right, so
Speaker 1: this story definitely caught my attention. I was reading in
Speaker 1: pretty early this morning on my way into one Lexington
Speaker 1: here at Bloomberg headquarters. It's a top story in my
Speaker 1: view at this hour, since as we watch closely COVID
Speaker 1: nineteens impact on our economy and its recovery, which has
Speaker 1: been so well described I think by Peter atwater over
Speaker 1: at William Mary as the K shaped recovery, which illustrates
Speaker 1: some Americans, they have been largely untouched by the pandemic.
Speaker 1: For others, the lower leg of the k it has
Speaker 1: been catastrophic. And maybe there's some folks in between that
Speaker 1: as some of the relief efforts start to come undone
Speaker 1: and stop, they're going to be in a tough way.
Speaker 1: This story is among the most read on the Bloomberg.
Speaker 1: It is about the year end fis school clifs that
Speaker 1: are approaching for millions of Americans. Let's get into a
Speaker 1: three picker. She's US economy reporter at Bloomberg and she
Speaker 1: is joining us on the phone in New York City. Read. Um,
Speaker 1: this is an important story. I really do think everybody
Speaker 1: has to stop listen because if we're worried about kind
Speaker 1: of where we are because of COVID, if we're worried
Speaker 1: about what's going to happen in the economy, especially with
Speaker 1: a lack of stimulus, you really lay it out what's
Speaker 1: at risk. So first of all, give us the big picture. Yeah,
Speaker 1: of course, and thank you for so much for having
Speaker 1: me on to talk about this story. Sure, um, so
Speaker 1: I guess the big The big picture of this is
Speaker 1: that there is a wide range of programs that are
Speaker 1: scheduled to expire at the end of the year, and
Speaker 1: they range everything from UM to federal Unemployment Insurance Plan programs,
Speaker 1: to a national addiction moratorium to a freeze on student loans.
Speaker 1: And you know, as you were talking about this case
Speaker 1: shaped recovery, that the people that are really going to
Speaker 1: feel the brunt of the pain from these acts rations
Speaker 1: are really those who are currently still out of work.
Speaker 1: And UM these programs, you know, they have a wide
Speaker 1: range of youth, but I would say the biggest impact
Speaker 1: is definitely going to be from the expiration of those
Speaker 1: two unemployment insurance programs. Twelve million people, you say, right,
Speaker 1: we'd roughly twelve million, yes. So the Century Foundation UM
Speaker 1: put out a report this morning where they estimated it
Speaker 1: would be about twelve million people that would be cut
Speaker 1: off from their unemployment insurance on December twenty six. And
Speaker 1: for these people, this has been an extraordinary lifeline during
Speaker 1: the pandemic. And it's it's two parts. There's the folks
Speaker 1: that you know, prior to now wouldn't typically be eligible
Speaker 1: for PEN for jobless benefits, and those are the people
Speaker 1: who are on a program called Pandemic Unemployment Assistant PUA,
Speaker 1: so that's your gig workers, your self employed workers. UM.
Speaker 1: And and they have gotten these programs at these you know,
Speaker 1: a check each week that has helped support them during
Speaker 1: this this time where you know a lot of people
Speaker 1: aren't taking ubers and a lot of these jobs don't
Speaker 1: have the same kind of demand UM that they normally
Speaker 1: would UM. And then the other program is very similar
Speaker 1: to what we've seen in past recessions. UM. It's called
Speaker 1: p e u C for short, but essentially it's an
Speaker 1: extension of jobless benefits for those who have exhausted their
Speaker 1: regular state benefits. So we saw this in the two
Speaker 1: thousand and seven to two thousand and nine recession as well. UM.
Speaker 1: But whether people have used up the full number of
Speaker 1: weeks that they have or not, unless Congress acts it's
Speaker 1: it's set to expire at the end of December as well.
Speaker 1: Read and I want to go to some of the
Speaker 1: other UM. You know, specific programs that you say you
Speaker 1: know will come to an end and that really put
Speaker 1: a lot of Americans at risk. But the one thing
Speaker 1: I like about your story is, Yep, you go through
Speaker 1: these you lay at the numbers, you lay at the research,
Speaker 1: but you also talked to America and what it means. Like,
Speaker 1: tell me about Larry Long of Willow Grow, Pennsylvania. Yeah,
Speaker 1: of course, And and I'd like to say that there
Speaker 1: were more people that UM first space purposes me couldn't
Speaker 1: fit them into the story, but Larry was someone that
Speaker 1: really stuck out to me. UM. I I tried with him,
Speaker 1: and he's one of UM. He's receiving the t U
Speaker 1: A that UM that unemployment assistance for for those aren't
Speaker 1: who aren't typically eligible. But UM he is a sixty
Speaker 1: three year old black man UM in a town that's
Speaker 1: a little bit outside of Philadelphia. And before the pandemic
Speaker 1: he made his income by basically hoping to plan charity
Speaker 1: events and UM corporate parties. And as you can imagine,
Speaker 1: as soon as pan as the pandemic hit, he said
Speaker 1: that for a couple of weeks he was just receiving
Speaker 1: cancelation email after cancelation email and UM, so since then
Speaker 1: he has been getting these pandemic unemployment assistance payments. And
Speaker 1: for the summer it worked out okay because UM the
Speaker 1: Cares Act, which was the main fiscal relief bill that
Speaker 1: was passed back in March, UM provided this extra six
Speaker 1: dollars a week and unemployment assistance, and when he had
Speaker 1: that extra six hundred dollars, he was able to make
Speaker 1: it work. Um. But as soon as those six hundred
Speaker 1: dollar payments ended and expired at the end of July,
Speaker 1: the bills have just been piling up. Um. So when
Speaker 1: I was talking to him about what I mean, what
Speaker 1: day to day looks like him for right now, he
Speaker 1: you know, said that with the amount that he's getting,
Speaker 1: he's really just trying to put food on the table. Um.
Speaker 1: And he's has negotiated with his his landlord to try
Speaker 1: to make an agreement payment. But um, he's he's really
Speaker 1: nervous about this, the culmination of running out of anyway,
Speaker 1: but also of the eviction more national eviction moratorium expiring
Speaker 1: at the end of the year as well. Right, you said,
Speaker 1: he's he's worried about losing his home and he's also
Speaker 1: worried he's you know, as you write in your story,
Speaker 1: he's an older black man with a touch of diabetes.
Speaker 1: So he's scared to death just about survival. Hey just
Speaker 1: quickly just got about thirty or forty seconds here on
Speaker 1: the tenant evictions. What do we need to know about that? Yes,
Speaker 1: so on the evictions front UM. This is basically it
Speaker 1: has been a national um, a national policy to keep
Speaker 1: people in their homes and prevent landlords from evicting their
Speaker 1: tenants when they couldn't fully pay UM. And that has
Speaker 1: been a saving grace for a lot of people. UM.
Speaker 1: But the problem now now, of course, is that eviction
Speaker 1: moratorium is UM set to expire at the end of
Speaker 1: the year. So people are heading into January, perhaps with
Speaker 1: several months behind of of not having fully paid their
Speaker 1: rent or not have paid their rent at all UM
Speaker 1: and could very much base eviction because the fact that yeah,
Speaker 1: their bills to pay as well. Yeah. Yeah, We've talked
Speaker 1: about that with a lot of folks in the real
Speaker 1: estate industry. The problem is, you know, you know, I
Speaker 1: think about December thirty one, right, people are often like, oh,
Speaker 1: a new year, you know, thinking about what's to come promising,
Speaker 1: and then for many that's a deadline that could be
Speaker 1: really really tough. UM. I'm gonna put your story out
Speaker 1: on Twitter because you go into all the programs and
Speaker 1: all the specifics. So thank you so much. Read really
Speaker 1: appreciate you bringing it to us. Read pick it. She's
Speaker 1: US Economy reporter Epploomberg News on the phone from New
Speaker 1: York broad mac Journal. But you let me drive, no, no, no,
Speaker 1: d please l I want to drive. Strive the questions,
Speaker 1: yeahs the drive of the globes well dry us down radios.
Speaker 1: It is time for the drive to the close back
Speaker 1: with us as Craig Hodges, CEO and portfolio manager of
Speaker 1: the Hodges Funds one point five billion dollars in assets
Speaker 1: under management, based in Dallas, and joining us on the
Speaker 1: phone from there on a day Wednesday where we've got
Speaker 1: stocks pretty much hovering out their loads of the sessions
Speaker 1: who are down about, as Charlie mentioned, down about nine
Speaker 1: tens of a percent on the Dow Jones Industrial Average
Speaker 1: down two hundred seventy nine points, SMP five also down
Speaker 1: almost nine tenths of a percent at thirty five seventy eight,
Speaker 1: and the NASAC just down about half percent, down sixty
Speaker 1: five points. So, Craig Hodges, nice to have you here.
Speaker 1: How are you doing? I know there's been some rough
Speaker 1: COVID numbers out in Dallas. I've got a bunch of
Speaker 1: family out in Texas. How are you doing? Yeah? Doing well.
Speaker 1: We we know we've been pretty fortunate not to get
Speaker 1: hit too hard, and I think I think it's you know,
Speaker 1: fairly under control here. But but the numbers you see
Speaker 1: do scare you. So you you have to continue to
Speaker 1: take to take heed if you will, Yeah, exactly, Well
Speaker 1: how do you have to What does it mean for
Speaker 1: investors or they have to take heed as well? You know,
Speaker 1: I think that they do. Um, we've we've had an
Speaker 1: interesting situation. You know, we manage money, and we had
Speaker 1: a lot of individual accounts, probably over six hundred and
Speaker 1: I think throughout the industry what you saw around the
Speaker 1: election time, starting at about uh September, as people raise
Speaker 1: a pretty good cash position in their accounts, not to
Speaker 1: predict what would happen, but just because of the volatility
Speaker 1: and the uncertainty. Other well, there wasn't hardly any volatility,
Speaker 1: and the market has continued to move up. So I
Speaker 1: believe what's happened since the election, even though it's even
Speaker 1: though it's uh, you know, hasn't been finalized, although everyone
Speaker 1: knows what will happen, um, is that people are putting
Speaker 1: that money back to work. So I think that's what's
Speaker 1: driven the market here in the last you know, month
Speaker 1: or so. That being said, I think it's probably a
Speaker 1: little ahead of itself. Um. I did a I did
Speaker 1: a conference call with a bunch of great money managers
Speaker 1: last night, and the optimism was flowing. And anytime you
Speaker 1: see that makes me want to run for the exactly exactly,
Speaker 1: So I don't look for anything, you know, terrible, but
Speaker 1: I think the market could be a little ahead of itself.
Speaker 1: Why are money managers so enthusiastic? What were they saying
Speaker 1: on that call? Well, there's been so much disruption in
Speaker 1: there in the marketplace, and there's been the stocks that
Speaker 1: have done fantastic this last year and a half, and
Speaker 1: there's been stocks that have done horribly, and you're starting
Speaker 1: to see the wall. Yeah, and and the and the
Speaker 1: ones that have lagged that still have good, good business
Speaker 1: opportunities are really starting to perform. So I think, and
Speaker 1: and and that's what a lot of these people, and
Speaker 1: not everyone is in the you know, the fang and
Speaker 1: the top you know six stocks that have driven everything. Um,
Speaker 1: there's another market out there that's kind of been the
Speaker 1: have knots if you will, and so um, and that's
Speaker 1: what that's what we're doing here at Hodes Funds and
Speaker 1: Hodges Capital because there's a just a bevy of stocks
Speaker 1: that have not participated that you're starting to see all
Speaker 1: of a sudden get some breath and start to move.
Speaker 1: How frustrated though, are you guys to be in the
Speaker 1: small cap space and I know they're starting to have
Speaker 1: their day a little bit, but I'm looking at your
Speaker 1: Hodges small cap. Fine, you're up about three and a
Speaker 1: half percent. Uh, it's been a struggle. It has been
Speaker 1: a struggle for you know, going on three years. And
Speaker 1: although I will say this, um I noticed that the
Speaker 1: small cap performance the Russell two thousand, one of their
Speaker 1: of the stocks in the Russell two thousand are above
Speaker 1: their two day moving average on the chart and being
Speaker 1: very technically you know, a positive. That's the most since
Speaker 1: two thousand and thirteen. So it really looks like things
Speaker 1: are starting to turn. And you know, these things go
Speaker 1: in cycles, and it's very it's very understandable why the
Speaker 1: large cap you know, stocks have moved so well. It's
Speaker 1: been basically the E T F craze that's driven a
Speaker 1: lot of that. But there will be a time and
Speaker 1: place for small caps and we really and and they've
Speaker 1: had really nice help performance for i'd say about the
Speaker 1: past two months or so. All right, interesting, um, so
Speaker 1: talk to us about some of the names, because my
Speaker 1: underest in is among the major themes that you are
Speaker 1: interested in. It's kind of de urbanization and business is
Speaker 1: related to that. What specifically are you talking about. You're
Speaker 1: talking about the exodus from from cities. Yeah, you're seeing
Speaker 1: because you believe that's really gonna stick. Oh my gosh, Well,
Speaker 1: you saw this in the seventies happen and it lasted
Speaker 1: for for you know, anywhere from five day years depending
Speaker 1: on the dad. But it was miserable in the cities.
Speaker 1: There was economic there was crises, and so and so forth.
Speaker 1: I mean, well, there's it's not just the the unrest
Speaker 1: and the COVID that's driving people out. It's the fact
Speaker 1: that all of a sudden, you don't have to have
Speaker 1: an hour and a half commute to get to work.
Speaker 1: You can work from home, or you can you can
Speaker 1: live two states away and live wherever you want and
Speaker 1: still work at whatever firm. I've seen where thirty percent
Speaker 1: of the companies out there are saying they'll never bring
Speaker 1: these people back into the office, they'll let them work remotely.
Speaker 1: So that's going to drive people to the suburbs. And
Speaker 1: you add on the fact that you have historically low
Speaker 1: interest rates. The millennials, which is the biggest demographic in
Speaker 1: the history of the world. You know, there's there now
Speaker 1: at that age they're they're you know now at that
Speaker 1: age where they're moving out, they're getting married, they're buying homes.
Speaker 1: And it's also economic and that it's better, it's much
Speaker 1: much better financially to own than to rent, especially with
Speaker 1: these low rates. And then we've got this shortage of housing.
Speaker 1: So it's not just the housing stocks that we like,
Speaker 1: it's everything related to those. And you're talking about your
Speaker 1: retailers like home Depot and Lows and and you know
Speaker 1: companies that that do lawn and guarding and remodeling and
Speaker 1: you know, things like that. Even like the home gym
Speaker 1: business is a phenomenal thing that's happened. Pet pets and
Speaker 1: pets supplies and and all these things. The mattress business
Speaker 1: is really booming right now. Um. And so there's many
Speaker 1: ways to play this thing. And like I said, I
Speaker 1: think this, I think this will last for years and
Speaker 1: not just not just be a you know, a flash
Speaker 1: in the pand if you will, all right, so if
Speaker 1: you had to commit new money. One of the new
Speaker 1: names or one of the names you like is Taylor Morrison.
Speaker 1: You would be committing to money there, Yes, we would.
Speaker 1: They're in great markets. Um. They it's one of the
Speaker 1: least expensive trading a right around book value. And you've
Speaker 1: seen most of these homeowners have made tremendous moves, and
Speaker 1: it's made a good move. It's so far this year
Speaker 1: we've seen. You're right, the homebuilders have really been on
Speaker 1: a rise. Low mortgage rate and as you said, some
Speaker 1: of the trends of people uh moving out, and also
Speaker 1: the supply has been down. Yeah, and and historically these
Speaker 1: things are feast or famine, But like I said, I
Speaker 1: think there's because of the shortage and because of about
Speaker 1: three months supply of housing. I think this is a
Speaker 1: trend that's gonna last for for a considerable time. So,
Speaker 1: and they're still very inexpensive. These stocks are some of
Speaker 1: the most inexpensive the entire market. Yeah. Teller Morrison's got
Speaker 1: a forward looking peve about not quite eleven, just under
Speaker 1: it in a current peve about six point six um interesting, interesting,
Speaker 1: just quickly thirty seconds. Rocket Mortgage, same story. Yeah, we
Speaker 1: believe Rocket will will be the dominant you know brand
Speaker 1: in mortgage and refinancing, and they have laevable scale opportunities
Speaker 1: in that company. And um, you know they're not just
Speaker 1: a refinance firm. They're actually because of young people being
Speaker 1: more comfortable with different thing on their phones, there's more
Speaker 1: and more people going this route they think they're Their
Speaker 1: market share will go from ten where it is now
Speaker 1: by two thousand thirty, and that will be a juggernaut
Speaker 1: of a company. Forty two billion dollar market cap company.
Speaker 1: That's pretty remarkable. I'm gonna leave it there. UM, really
Speaker 1: appreciate it. Craig Hodges, CEO, portfolio manager of the Hodges Phones,
Speaker 1: on the phone from Dallas. Thanks so much for listening
Speaker 1: to Bloomberg Business Week. Download the podcast on iTunes, SoundCloud,
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