WEBVTT - China Mostly Views Trump's Latest Salvo As Empty Rhetoric 0:00:02.640 --> 0:00:05.320 Welcome to the Bloomberg Penl Podcast. I'm Paul swing you. 0:00:05.360 --> 0:00:07.760 Along with my co host Lisa Brahmas. Each day we 0:00:07.880 --> 0:00:10.399 bring you the most noteworthy and useful interviews for you 0:00:10.520 --> 0:00:12.600 and your money. Whether at the grocery store or the 0:00:12.640 --> 0:00:15.920 trading floor. Find a Bloomberg Penl podcast on Apple podcast 0:00:16.120 --> 0:00:18.040 or wherever you listen to podcasts, as well as at 0:00:18.040 --> 0:00:22.600 Bloomberg dot com. Contentions just keep rising between the US 0:00:22.720 --> 0:00:25.840 and China. The latest the US is moving to curtail 0:00:25.920 --> 0:00:29.080 Huahwei Technologies chips supply. This is part of what's been 0:00:29.560 --> 0:00:33.080 driving down semiconductors shares. But this just builds on a 0:00:33.120 --> 0:00:35.720 whole host of rhetoric coming out of Washington as well 0:00:35.760 --> 0:00:39.000 as Beijing back and forth, raising the question what's the 0:00:39.120 --> 0:00:41.800 end game? Here? Are we entering a new Cold War? 0:00:42.000 --> 0:00:45.520 Leland Miller joining US now chief executive officer of China 0:00:45.600 --> 0:00:49.400 beige Book International. Leland, what do you make of this 0:00:49.520 --> 0:00:54.160 back and forth in the latest move against Huahwei. Well, 0:00:54.200 --> 0:00:57.280 I think the move itself is quite misunderstood, and for 0:00:57.320 --> 0:00:59.920 good reason. I mean, almost nobody can figure out what's happening. 0:01:00.400 --> 0:01:01.760 But I think the best way to look at it 0:01:01.760 --> 0:01:05.280 is the United States has extraordinary leverage over the Taiwan 0:01:05.280 --> 0:01:09.000 semi conductor because it provides inputs that are important for production, 0:01:09.080 --> 0:01:13.640 and it is the largest UH purchaser of of semi conductors, 0:01:13.640 --> 0:01:18.280 and so it's extraordinarily important UH customer. And what the 0:01:18.319 --> 0:01:22.440 United States government has said it will do, starting supposedly 0:01:22.560 --> 0:01:28.840 today is require any UH any relationships with Huawei to 0:01:29.160 --> 0:01:31.119 get a license. So in order you can't just sell 0:01:31.120 --> 0:01:34.280 them to Huawei, if you're using US technology in your 0:01:34.520 --> 0:01:36.600 in your product, you have to actually apply for a 0:01:36.640 --> 0:01:39.040 license with the Department of Commerce. Now, if this is 0:01:39.080 --> 0:01:41.200 held to that standard and they don't grant the license, 0:01:41.440 --> 0:01:44.480 then this is an enormously powerful mood. If they do 0:01:44.560 --> 0:01:47.080 grant the licenses, then this is an empty moot. So 0:01:47.480 --> 0:01:50.360 it's less about what this has done and how it's 0:01:50.600 --> 0:01:52.160 how they're going to treat this in the future. And 0:01:52.200 --> 0:01:54.720 I think that's why this has led to an extraordinary 0:01:54.760 --> 0:01:59.680 amount of confusion. So Leland, how does China view I 0:01:59.720 --> 0:02:03.240 guess we'll call them renewed trade tensions here? What's kind 0:02:03.280 --> 0:02:06.440 of their perspective? Do you think? I think that they're 0:02:06.440 --> 0:02:08.960 looking at them on several several different levels. Now you 0:02:09.000 --> 0:02:11.720 have some things that are happening. Uh, you know, the 0:02:12.120 --> 0:02:14.600 Phase one trade deal is in real trouble. It's it'll 0:02:14.639 --> 0:02:17.760 be toast by this by September. I think I think 0:02:17.840 --> 0:02:19.720 we were were at the very end of the trade 0:02:19.720 --> 0:02:22.280 deal talk. On the other hand, you have some very big, 0:02:22.440 --> 0:02:26.160 very aggressive moves being talked about, like abrogating US debt obligations, 0:02:26.560 --> 0:02:29.959 ripping away sovereign immunities from the Chinese. These aren't serious moves, 0:02:30.639 --> 0:02:32.760 but if they move, you know, if the White House 0:02:32.760 --> 0:02:35.080 moved in this direction, that there would be severe repercussions. 0:02:35.120 --> 0:02:36.720 And then there's certain things where they're just trying to 0:02:36.800 --> 0:02:39.840 digest these moves piece by piece. What's happening to Huawei, 0:02:39.880 --> 0:02:42.240 what's happening with the government pension fund cutting off flows 0:02:42.240 --> 0:02:44.880 to China. So there's so much going on that I 0:02:44.919 --> 0:02:46.960 think that the Chinese government is forced to look at 0:02:46.960 --> 0:02:49.760 this as what's important, what can we live with and 0:02:49.800 --> 0:02:52.000 what is an absolute deal breaker in the relationship where 0:02:52.040 --> 0:02:56.600 we're gonna start having real serious retribution. What's the end goal? 0:02:56.919 --> 0:03:00.000 I mean, I'm just extrapolating forward. Is there a red line? 0:03:00.000 --> 0:03:04.000 And then once we cross that, we move to Phase X, 0:03:04.240 --> 0:03:06.639 where why happens is there something like that that you're 0:03:06.680 --> 0:03:11.160 sort of foreseeing, not yet, because everybody understands it's so 0:03:11.240 --> 0:03:12.640 much of what's going on in the U. S side 0:03:12.680 --> 0:03:15.920 is about the election. So President Trump realizes that there 0:03:15.960 --> 0:03:19.160 are domestic difficulties with COVID and and the state of 0:03:19.200 --> 0:03:22.440 the economy right now, and the safest the platform is 0:03:22.480 --> 0:03:24.720 it to go tough, tough, tough on China. So the 0:03:24.800 --> 0:03:28.440 Chinese understand that what they want to see is how 0:03:28.520 --> 0:03:29.920 much of this is going to be more than a 0:03:29.919 --> 0:03:31.840 couple of months, how much of this is actually a 0:03:31.840 --> 0:03:35.560 game changer in the relationship. If Phase one is suspended 0:03:35.680 --> 0:03:39.000 by September, which is our expectation, then that doesn't mean 0:03:39.000 --> 0:03:40.880 they can't pick it up in January. If if President 0:03:40.880 --> 0:03:43.640 Trump's reelected, that's not going to ruffle the waters too much. 0:03:43.640 --> 0:03:45.920 Although you get some loud talk if you ever saw 0:03:46.040 --> 0:03:50.000 serious movement towards ripping sovereign immunity away from from from 0:03:50.040 --> 0:03:53.000 Beijing for for COVID related lawsuits, I mean that would 0:03:53.120 --> 0:03:55.440 that would that would create financial warfare on a scale 0:03:55.440 --> 0:03:57.880 we've never seen. So they're just taking their time to 0:03:57.960 --> 0:04:01.400 understand if they get most of this is empty rhetoric 0:04:01.440 --> 0:04:03.119 and they're just trying to make sure that they don't 0:04:03.120 --> 0:04:05.680 overreact as as this stuff just played out before the election. 0:04:06.520 --> 0:04:09.920 How is President Trump's relationship with presidency of China. I 0:04:09.920 --> 0:04:13.240 mean President Trump has touted it as very strong and 0:04:13.280 --> 0:04:17.839 a you know, really strong relationship. But how how would 0:04:17.839 --> 0:04:19.560 you engage that right now? How important is it to 0:04:19.600 --> 0:04:25.960 have a good relationship? I mean they're best friend. Uh look, look, 0:04:25.960 --> 0:04:28.160 if if President Trump is being nice to China, I 0:04:28.200 --> 0:04:30.040 think they get along quite well. If he's not, then 0:04:30.080 --> 0:04:33.640 and you know, the relationships allergic. You know, for she 0:04:33.880 --> 0:04:36.480 it's it's the same same for Trump. So you know, 0:04:36.720 --> 0:04:38.440 it's an extent that they can get on the phone 0:04:38.440 --> 0:04:41.120 and they do have a some semblance of a personal 0:04:41.160 --> 0:04:44.760 relationship to diffuse tensions if they want to pull that 0:04:44.920 --> 0:04:47.520 escape patch. I think there's something to that. But look, 0:04:47.680 --> 0:04:50.640 this is just politics. It's domestic politics right now, where 0:04:50.640 --> 0:04:54.720 the party tries to uh, you know, confuse people about 0:04:55.120 --> 0:04:57.960 their initial reaction to to COVID and and claim that 0:04:57.960 --> 0:04:59.640 they've been doing a good job all around that the 0:04:59.680 --> 0:05:02.040 admitt austration in the United States has the same sort 0:05:02.040 --> 0:05:03.960 of issue. How can we distract from COVID and go 0:05:04.040 --> 0:05:06.799 tough on the Chinese. So a lot of this again 0:05:07.240 --> 0:05:10.560 politics empty writer, We still need to see what it's 0:05:10.560 --> 0:05:14.039 going to be durable past the election, regardless of whose president. 0:05:14.600 --> 0:05:16.680 When you talk about Jim Ping, I wonder how much 0:05:16.760 --> 0:05:19.839 his power is being challenged, especially given the data that 0:05:19.880 --> 0:05:23.160 we got overnight. Yes, we got factory output surging more 0:05:23.200 --> 0:05:27.000 than people expected in China, but the services data real bleak, 0:05:27.160 --> 0:05:30.240 not coming back that quickly. What do you foresee economically 0:05:30.360 --> 0:05:33.600 for the China for the foreseeable future? Yeah, I mean 0:05:33.680 --> 0:05:35.640 that that doesn't surprise us at all that the Chinese 0:05:35.680 --> 0:05:38.200 want to turn these factories on and start cranking things out. 0:05:38.440 --> 0:05:41.080 The problem is their order books are collapsing because there's 0:05:41.120 --> 0:05:43.720 not a lot of strength. And domestic economy it's recovering, 0:05:43.760 --> 0:05:46.120 but but at a slow pace. And you know, the 0:05:46.160 --> 0:05:48.880 external environments falling apart because of the slowdowns. Are the 0:05:48.920 --> 0:05:53.080 shutdowns in your US and Europe and elsewhere. So there's 0:05:53.120 --> 0:05:54.480 a lot of problems. You know, this is what we 0:05:54.520 --> 0:05:56.279 saw on our April survey. We've got our we've got 0:05:56.320 --> 0:05:58.599 our new May flash YETA coming out and you know 0:05:59.320 --> 0:06:01.919 about a two weeks Uh, these are the dynamics that 0:06:01.960 --> 0:06:04.960 we've seen too, and it is putting she under severe pressure. 0:06:05.200 --> 0:06:07.160 It's one of the reasons why China sort of you 0:06:07.279 --> 0:06:10.520 turn from this, let's go out and be global leaders 0:06:10.680 --> 0:06:16.240 and and really just backtracked to convincing their domestic population 0:06:16.720 --> 0:06:19.080 that everyone's getting up on China and you have to 0:06:19.080 --> 0:06:21.480 defend the party. And this is why she's support and 0:06:21.520 --> 0:06:24.160 the party's support is relatively high at home. But why 0:06:24.200 --> 0:06:26.520 everyone around the world right now is mad at China, 0:06:27.000 --> 0:06:31.000 uh for for very aggressive diplomatic behavior. Leland, thanks so 0:06:31.040 --> 0:06:33.479 much for joining us. We always appreciate your perspective and 0:06:33.600 --> 0:06:37.239 all things China. Leland Miller, chief executive Officer of China 0:06:37.279 --> 0:06:40.640 Beije Book International. At least it's uh, you know, it's 0:06:40.680 --> 0:06:43.520 really interesting. I always appreciate Lenian's perspective here suggesting here 0:06:43.560 --> 0:06:45.719 that a lot of this is just rhetoric from I 0:06:45.720 --> 0:06:48.599 guess both sides that it certainly it relates to the U. 0:06:48.680 --> 0:06:51.479 S side as it relates to a presidential election coming up, 0:06:51.520 --> 0:06:53.880 and here's a topic that has proven to be very 0:06:53.920 --> 0:06:56.920 beneficial to President Trump and his base at a time 0:06:56.960 --> 0:06:59.200 when there's a lot of grim news out there relates 0:06:59.240 --> 0:07:01.960 to the economy and then the pandemic, the interesting thing 0:07:02.120 --> 0:07:05.360 I think is that the Democrats and Democratic candidate Joe 0:07:05.400 --> 0:07:08.120 Biden is also taking a very hard line. I mean, 0:07:08.160 --> 0:07:12.520 it's bipartisan, this anger towards China. My question is, at 0:07:12.520 --> 0:07:15.320 what point does the rhetoric go to a place where 0:07:15.320 --> 0:07:18.000 it cannot return? Right? I mean, at what point do 0:07:18.080 --> 0:07:21.400 we cross some line where we do enter some sort 0:07:21.440 --> 0:07:24.600 of escalating spiral to both of Jim Ping and Donald 0:07:24.640 --> 0:07:27.440 Trump have a hard time backing down from Yeah, exactly right. 0:07:27.480 --> 0:07:32.920 We will certainly be paying close attention to that. You know, 0:07:32.920 --> 0:07:34.920 we've seen just in a past couple of days, some 0:07:35.080 --> 0:07:38.680 really brutal data as it relates to the consumer, whether 0:07:38.760 --> 0:07:43.080 it's a jobless claims yesterday or retail sales today. And 0:07:43.120 --> 0:07:45.280 the question is what does that mean for the real 0:07:45.440 --> 0:07:48.440 estate market here? I mean, if consumers are out of jobs, 0:07:48.440 --> 0:07:50.360 if they're really word, they're not spending, what are they 0:07:50.440 --> 0:07:53.440 doing in terms of real estate? That get some good answers, 0:07:53.720 --> 0:07:56.720 We welcome Jonathan Millard, President and chief executive officer of 0:07:56.880 --> 0:07:59.480 Miller Samuel based in New York City. Jonathan, thanks so 0:07:59.560 --> 0:08:02.360 much for winning is here interest rates you know at 0:08:02.440 --> 0:08:05.480 or near all time loads, that's generally really good for 0:08:06.160 --> 0:08:07.880 the real estate market give us a sense of how 0:08:08.200 --> 0:08:11.680 consumers are behaving here as it leads to real estate. Well, 0:08:11.880 --> 0:08:13.880 you know, so much about what happens in the real 0:08:13.960 --> 0:08:18.520 estate market is pragmatic. In the context of real estate 0:08:18.840 --> 0:08:23.360 agents and brokers can't show properties yet, uh, and virtual 0:08:23.840 --> 0:08:26.680 is certainly uh you know out there, and you know, 0:08:27.120 --> 0:08:29.400 you know, people are doing zoo calls and and all 0:08:29.440 --> 0:08:32.680 that sort of thing. The problem is that most people 0:08:32.720 --> 0:08:35.360 aren't going to pull the trigger, so to speak, on 0:08:35.440 --> 0:08:38.800 a home purchase if they can't physically see it. A 0:08:38.840 --> 0:08:41.880 lot of the contracts that we're seeing now have linkage 0:08:41.920 --> 0:08:44.920 to sort of pre COVID periods or somebody had looked 0:08:44.920 --> 0:08:47.959 at a property and then you know, lost interest and 0:08:48.000 --> 0:08:52.240 now they're coming back. Um. Alternatively, on the rental market, 0:08:52.880 --> 0:08:56.319 we're also seeing a sharp drop in new leasing activity 0:08:56.559 --> 0:09:01.599 as most of the transactions where rents are being negotiated 0:09:01.679 --> 0:09:04.880 lower occurring on the renewal side and not public facing. 0:09:05.320 --> 0:09:07.400 So we're really in a moment where there's just not 0:09:07.480 --> 0:09:10.160 a lot of data, um, you know, at the moment. 0:09:10.200 --> 0:09:13.440 I think that will change pretty quickly as shelter and 0:09:13.480 --> 0:09:16.400 place rolls start to ease and we're starting to hear 0:09:16.440 --> 0:09:19.880 about areas outside of the major metropolitan areas and the 0:09:19.920 --> 0:09:24.280 coasts picking up traction quickly, even site unseen people trying 0:09:24.280 --> 0:09:27.520 to just buy houses that are outside of the most 0:09:27.559 --> 0:09:31.079 densely populated areas. Does that give you a hint about 0:09:31.080 --> 0:09:35.079 a possible exodus from New York City, San Francisco or 0:09:35.160 --> 0:09:38.600 some of these other areas that have been harder hit. Well, 0:09:38.679 --> 0:09:42.240 you know, we're already seeing uh, you know, an outbound 0:09:42.240 --> 0:09:47.080 migration at least in inquiries, but the initial wave is 0:09:47.360 --> 0:09:53.040 more is predominantly rental inquiries, you know, as urban dwellers 0:09:53.080 --> 0:09:57.199 are sort of testing the waters for you know, suburban life. 0:09:58.000 --> 0:10:01.319 We've actually seen this before this right after not eleven 0:10:01.440 --> 0:10:05.560 and within two to three years that outbound migration reversed. 0:10:06.160 --> 0:10:09.400 Um also too, I have a high competence level in 0:10:09.440 --> 0:10:13.120 the ability of human beings to forget the recent past 0:10:13.760 --> 0:10:18.600 and uh and so uh so I'm totally in agreement 0:10:18.679 --> 0:10:21.960 that we are going to and are already seeing this 0:10:22.520 --> 0:10:27.040 suburban or even second home uh search. But I'm not 0:10:27.240 --> 0:10:31.520 confident about being a permanent structural change in the way 0:10:31.559 --> 0:10:34.600 people view cities. Jonathan. There is a question, though, is 0:10:34.640 --> 0:10:38.880 this time different given the remote work type situation. The 0:10:38.920 --> 0:10:41.720 idea that working from home is gaining traction in a 0:10:41.760 --> 0:10:44.760 way that it never has before. Does that change the equation? 0:10:45.800 --> 0:10:51.040 I think it helps expand the time frame of the 0:10:51.200 --> 0:10:56.280 suburban uh you know, the move to suburban but commute times. 0:10:56.559 --> 0:10:59.439 You know. I think it's a little premature to declare 0:11:00.160 --> 0:11:04.560 that people are going to be buying houses, uh, the mainstream, 0:11:04.600 --> 0:11:07.640 not on the margin because they don't have to go 0:11:07.679 --> 0:11:10.600 into the office. I don't right now when you talk 0:11:10.679 --> 0:11:14.880 to Corporate America and they're talking about expanding, um, you know, 0:11:14.960 --> 0:11:18.360 they're thinking on going you know, we're having remote workers. 0:11:18.640 --> 0:11:20.680 You have to remember that many of these companies are 0:11:20.720 --> 0:11:24.400 hemorrhaging right now, and they're anxious and desperate for cost 0:11:24.480 --> 0:11:27.160 saving measures. And so I don't know if that mindset 0:11:27.280 --> 0:11:29.560 is going to remain in place two or three years 0:11:29.600 --> 0:11:33.280 from now, but it certainly helps expand the time frame 0:11:33.400 --> 0:11:36.839 that you know this potentially can happen. So, Jonathan, Yes, 0:11:36.880 --> 0:11:38.959 we look to the other side of this pandemic, and 0:11:39.240 --> 0:11:41.360 let's assume there is a vaccine out there in some 0:11:41.400 --> 0:11:44.560 reasonable period of time. How do you expect and given 0:11:44.559 --> 0:11:46.480 where rates are and a lot of people expect rates 0:11:46.520 --> 0:11:49.600 to be lower for longer, even before the pandemic. How 0:11:49.600 --> 0:11:52.439 do you expect the US kind of real estate market 0:11:52.440 --> 0:11:57.319 to play out? Well, what we're already seeing in markets 0:11:57.360 --> 0:12:02.160 that have UH allowed the showing of real estate by 0:12:02.200 --> 0:12:06.360 the brokerage community, we're already seeing a real uptick is 0:12:06.400 --> 0:12:11.199 still far below normal, but we're seeing a rapid UH 0:12:11.400 --> 0:12:15.720 increase in pending sales. Now, it's not clear whether this 0:12:15.840 --> 0:12:18.240 is a function of just a release of pent up 0:12:18.280 --> 0:12:21.120 demand over the last couple of months, or this is 0:12:21.160 --> 0:12:24.400 just a market racing to get back to normal. Um. 0:12:24.440 --> 0:12:27.240 You know, we certainly have extensive job loss, and you 0:12:27.280 --> 0:12:31.560 know that weighs heavy on how this looks a post 0:12:31.840 --> 0:12:34.800 post crisis. But at least from what I'm seeing in 0:12:34.840 --> 0:12:40.240 other areas of the country, I'm encouraged by the sort 0:12:40.240 --> 0:12:46.520 of return to transactional type activity. UM, and I think 0:12:46.559 --> 0:12:48.680 that bodes well for New York as well. I just 0:12:48.720 --> 0:12:51.080 think it's we're going to be sort of late to 0:12:51.120 --> 0:12:54.679 the party on that, given the extent of the crisis 0:12:54.679 --> 0:12:59.560 in our region. Jonathan Miller, thank you so much. It 0:12:59.679 --> 0:13:02.959 is full to have you on. It's really wonderful perspective 0:13:03.000 --> 0:13:07.920 from your decades of experience Jonathan Miller of Miller and Samuel, 0:13:08.000 --> 0:13:11.720 just really highlighting the nuance here as we look to 0:13:11.760 --> 0:13:18.760 a post pandemic world of real estate. It was possibly 0:13:18.760 --> 0:13:22.280 the most intriguing column that I read this week by 0:13:22.360 --> 0:13:26.319 Andrea's Cloth of Bloomberg opinion, Your kids may never return 0:13:26.400 --> 0:13:30.040 to normal schooling, And honestly, it was a fascinating column. 0:13:30.160 --> 0:13:33.280 Andrea's Cloth he's a member of Bloomberg's editorial board. He 0:13:33.320 --> 0:13:36.720 also was previously editor in chief of Handel's Blood Global 0:13:36.760 --> 0:13:39.640 and a writer for The Economist. Andrea's this sucked me in. 0:13:39.800 --> 0:13:42.280 As the mother of two children who are homeschooling via 0:13:42.400 --> 0:13:45.720 computer at home, including a son who is learning coding 0:13:45.960 --> 0:13:48.960 from an eighteen year old in Singapore. I've learned who 0:13:49.000 --> 0:13:51.880 he had found because he enjoyed his codes. I'm just 0:13:51.960 --> 0:13:57.720 wondering what's the future here of education? Well, the future, hey, 0:13:57.800 --> 0:14:01.839 that's that's your mouthful. But the future is, as I 0:14:01.920 --> 0:14:05.480 said in the column, it could be very dark or 0:14:05.520 --> 0:14:08.440 it could be rather brighter so and and unfortunately could 0:14:08.440 --> 0:14:10.280 be both at the same time for different of us. 0:14:10.320 --> 0:14:15.520 Because that the worst thing about these school closures or 0:14:15.559 --> 0:14:19.400 these partial openings, because for instance, I'm in Berlin I 0:14:19.520 --> 0:14:22.360 have three kids. They've started going back to school this here, 0:14:22.600 --> 0:14:25.800 but that just means staggered shifts. They're not you know, 0:14:26.120 --> 0:14:28.640 it's not binary, and they're not totally open. We will 0:14:28.680 --> 0:14:33.360 probably have very little time in physical schools for a 0:14:33.480 --> 0:14:37.520 long time, maybe years. And so the downside is in 0:14:37.560 --> 0:14:41.840 this age of inequality, some kids, some families, digital divide, 0:14:41.840 --> 0:14:45.240 and everything will get left behind. But in this column, 0:14:45.240 --> 0:14:47.960 I wanted to focus on what I think caught your attention, 0:14:47.960 --> 0:14:53.800 which was the positive side, provided that teachers and unions, 0:14:53.840 --> 0:14:57.240 teacher unions and school boards and so forth see this 0:14:57.400 --> 0:14:59.960 as an opportunity and say what can we do different? 0:15:00.000 --> 0:15:02.640 And lee And that brought me to concepts in my 0:15:02.800 --> 0:15:08.240 conversation that I had well was something called blended or 0:15:08.400 --> 0:15:11.560 flipped classrooms, you know, and we would we would have 0:15:11.600 --> 0:15:13.480 to go into that a little bit, all right, So 0:15:13.560 --> 0:15:15.960 let's let's do go into that. What's kind of a 0:15:16.000 --> 0:15:18.560 flip classroom? I'm sensing it's a little bit of a 0:15:19.040 --> 0:15:23.680 mix of physical and virtual. Yes, And nobody, just to 0:15:23.720 --> 0:15:26.440 be clear, is is ever talking about getting rid of 0:15:26.880 --> 0:15:30.000 human connections. In fact, the goal here is to make 0:15:30.120 --> 0:15:34.600 human connections stronger and better, and both the physical even 0:15:34.640 --> 0:15:36.880 if we have less time in a physical classroom with 0:15:36.920 --> 0:15:39.400 the teacher, we want to make that better. And also 0:15:39.480 --> 0:15:42.640 the in person the classroom or one on one on 0:15:42.800 --> 0:15:46.120 zoom for instance. So it's not about replacing anybody, it's 0:15:46.160 --> 0:15:48.360 just about making them better. So what we want to 0:15:48.400 --> 0:15:54.080 do is to use tools online tools. And I happen 0:15:54.160 --> 0:15:57.600 to talk to Salcan for this column because I myself 0:15:57.640 --> 0:16:00.200 when my kids used kind Academy. But there's a out 0:16:00.200 --> 0:16:03.080 of these edge tech tools. So for instance, something like 0:16:03.320 --> 0:16:05.800 or let me get tell you what for the past 0:16:05.840 --> 0:16:08.200 two hundred years since the industrial in the since the 0:16:08.240 --> 0:16:11.040 industrial Revolution, you had a teacher at the front and 0:16:11.120 --> 0:16:14.120 a blackboard. And the innovation is that that's not a 0:16:14.160 --> 0:16:17.680 white board and he lectures to a passive class, sends 0:16:17.720 --> 0:16:20.240 the kids home their filt a worksheet. A lot of 0:16:20.240 --> 0:16:22.680 them have no clue what they're doing. They go back 0:16:22.720 --> 0:16:25.720 to class, they keep going anyway, even though some kids 0:16:25.800 --> 0:16:27.880 are left behind, and at the end they take a 0:16:27.920 --> 0:16:31.640 standardized test. Okay, so that's not ideal. So what we 0:16:31.680 --> 0:16:34.160 want to do now is why not flip this so 0:16:34.400 --> 0:16:38.760 you watch the lectures at home. That's pretty active. You posit, 0:16:38.880 --> 0:16:41.760 you rewinded, you comment on it the way the kids do. 0:16:42.360 --> 0:16:45.360 And then you do some online exercises to drill it, 0:16:45.680 --> 0:16:48.040 and the teacher has already logged on and looking at 0:16:48.280 --> 0:16:53.120 who's stuck where, And then you go to class and 0:16:53.360 --> 0:16:56.760 now class is not the lecture, but now class is 0:16:56.760 --> 0:17:00.520 a one on one or small group social are active 0:17:01.240 --> 0:17:04.640 uh session where where the teacher cook post, where you 0:17:04.800 --> 0:17:07.919 where this student is, not where the class should be. 0:17:07.920 --> 0:17:10.640 Where where this student is and the other helps him 0:17:10.640 --> 0:17:12.920 in with a problem or extends the knowledge if he's 0:17:12.920 --> 0:17:16.000 doing well. And that's the that's flipping it or blending 0:17:16.040 --> 0:17:19.200 the online and the offline. Andrea is just real quick here. 0:17:19.240 --> 0:17:23.680 I'm wondering how parental involvement kind of gets amplified here 0:17:24.000 --> 0:17:27.560 in terms of the divide between people who are involved 0:17:27.840 --> 0:17:32.200 versus those who aren't. I think hugely there's no way 0:17:32.240 --> 0:17:35.639 around this um because it's a social problem. But I, 0:17:36.000 --> 0:17:39.160 my wife and I we have three kids, were incredibly involved. 0:17:39.200 --> 0:17:41.600 That's what led me to talk to Salcohn because I've 0:17:41.600 --> 0:17:45.440 been doing this for years and sadly many many other 0:17:45.480 --> 0:17:48.560 parents are not, not because necessarily they're bad parents, but 0:17:48.600 --> 0:17:51.600 because they're they're they're at working, or they don't have WiFi, 0:17:51.680 --> 0:17:54.159 and we have these problems. So the downside and I 0:17:54.280 --> 0:17:57.080 and this was the topic of my previous column, The 0:17:57.200 --> 0:17:59.679 dark side is. This was the bright side before that 0:17:59.720 --> 0:18:01.879 I wrote the dark The dark side is, as a 0:18:01.920 --> 0:18:05.720 result of this pandemic and the school closures, we will 0:18:05.800 --> 0:18:10.359 have dramatically more inequality, not just now but for years 0:18:10.359 --> 0:18:13.320 to come. As these kids go to college or in 0:18:13.359 --> 0:18:15.920 fact don't college, will go less to college and then 0:18:16.119 --> 0:18:21.480 are more unemployed and make less. This will exacerbate inequality. 0:18:21.520 --> 0:18:24.920 There's no way around that. Andreas. Thank you so much 0:18:25.160 --> 0:18:28.280 for joining us, and really appreciate your columns. Really thought provoking, 0:18:28.320 --> 0:18:31.040 particularly for those of us who do have some school 0:18:31.080 --> 0:18:34.040 age children and are kind of kind of weighing these issues. 0:18:34.080 --> 0:18:37.560 Here Andrea's Kluth, columnists for Bloomberg Opinion, joining us on 0:18:37.600 --> 0:18:42.080 the phone from Berlin. You know, I can't imagine, Lisa. 0:18:42.200 --> 0:18:44.199 I mean, you've got the two young ones kind of 0:18:44.240 --> 0:18:46.960 doing this for an extended period of time, even beyond 0:18:47.000 --> 0:18:49.240 what we've done this year. Yeah. Well, I think that 0:18:49.280 --> 0:18:51.159 we're going to get used to that idea because I 0:18:51.160 --> 0:18:53.560 don't know when they're going back. I gotta say, after 0:18:53.680 --> 0:18:57.880 listening uh to Anthony Fauci. He said, you know, who 0:18:57.920 --> 0:19:04.240 knows September might be premature, exactly waiting for the vaccine. 0:19:06.560 --> 0:19:09.680 If you ask somebody what's the outlook for our municipal 0:19:09.760 --> 0:19:13.439 finances right now, they might say not great, Bob, not 0:19:13.600 --> 0:19:16.600 so great. Right now we are facing a huge deficit 0:19:16.800 --> 0:19:19.280 in cities across the country. And joining us now with 0:19:19.359 --> 0:19:23.400 a comprehensive look is Kathleen McNamara, senior municipal bond strategist 0:19:23.440 --> 0:19:26.960 at US Wealth Management, which put out a report highlighting 0:19:27.320 --> 0:19:31.280 just how bleak the situation is. Kathleen, can you start 0:19:31.280 --> 0:19:35.160 with just an overview, a historical perspective of how bleak 0:19:35.200 --> 0:19:41.240 this is relative to previous difficult times the U. S economy? Ah? Sure, Um, 0:19:41.280 --> 0:19:43.320 I mean in our report, you know, we we do 0:19:43.440 --> 0:19:46.160 talk about the fact that this, you know, COVID nineteen 0:19:46.640 --> 0:19:49.240 is really what we look at as an exogenous shock 0:19:49.359 --> 0:19:52.520 to the system. Um. You know, certainly we've been through 0:19:52.520 --> 0:19:55.840 crises before, the financial crisis just ten years ago, but 0:19:55.960 --> 0:19:59.960 that was really triggered by you know, um, a banking crisis, 0:20:00.040 --> 0:20:03.359 and in this scenario, the banks actually were in a 0:20:03.400 --> 0:20:06.960 strong position going into this crisis. Um. So here we're 0:20:07.000 --> 0:20:09.560 dealing with something we haven't dealt with before. We're dealing 0:20:09.560 --> 0:20:12.240 with a health crisis M which has turned into a 0:20:12.240 --> 0:20:17.160 financial crisis, which in turn is weighing on almost every 0:20:17.200 --> 0:20:21.359 area of the municipal bond market. And we do go through, UM, 0:20:21.400 --> 0:20:25.000 all of the different sectors in the muni market and 0:20:25.280 --> 0:20:28.439 what we see going forward. So, Kathy, what are some 0:20:28.440 --> 0:20:30.719 of the sectors that are kind of most at risk here? 0:20:30.760 --> 0:20:33.960 I know the pain is pretty broad based, pretty deep, 0:20:34.240 --> 0:20:35.399 but what are some of the sectors that kind of 0:20:35.480 --> 0:20:39.160 jumped out of you. Yeah, the sectors that we talked 0:20:39.160 --> 0:20:41.640 about in the report that jumped out to us as 0:20:41.800 --> 0:20:44.679 UM going to experience the most stress is the private 0:20:44.720 --> 0:20:47.680 higher ed sector UM, as well as the health care 0:20:47.720 --> 0:20:52.080 sector UM. You know, by contrast, UM, you know, states, 0:20:52.200 --> 0:20:55.120 I know there's a lot of UM, you know, negative 0:20:55.119 --> 0:20:59.480 headlines with respect to states, UM, but we do think 0:20:59.600 --> 0:21:02.040 that UM, you know, states are going to benefit from 0:21:02.040 --> 0:21:06.280 this you know, municipal liquidity facility that the FED has established, 0:21:06.320 --> 0:21:10.480 and we also believe that you know, states have more flexibility, UM, 0:21:10.520 --> 0:21:13.960 you know, to manage their finances through the crisis. UM. 0:21:14.000 --> 0:21:16.600 So it's really the you know, the higher education UM 0:21:16.680 --> 0:21:19.679 sector that we do have UM the most concern about, 0:21:20.160 --> 0:21:22.600 you know, in that in that sector. You know, we 0:21:22.640 --> 0:21:25.879 believe that we're going to see some you know, substantial 0:21:25.960 --> 0:21:30.440 NEIA term student enrollment pressures. Um, we're going to see 0:21:30.800 --> 0:21:34.560 some decline in investment portfolios, you know, as well as 0:21:34.600 --> 0:21:36.359 you know the role of technology. I mean, what we're 0:21:36.400 --> 0:21:39.320 seeing now is that, um, some of these you know 0:21:39.440 --> 0:21:43.880 universities have shifted to online classes and that has meaningful 0:21:43.960 --> 0:21:47.000 implications for the sector. You know. Of course, you know, 0:21:47.080 --> 0:21:50.399 there's the institutions with large endowments and strong brands. We 0:21:50.440 --> 0:21:52.920 think those will be resilient and easily adapt to the 0:21:53.040 --> 0:21:57.199 changes and retain their market position. But by contrast, you know, 0:21:57.280 --> 0:22:01.160 some of the smaller liberal arts college is that already 0:22:01.200 --> 0:22:04.920 faced demographic and financial challenges. We do think that, um, 0:22:05.119 --> 0:22:07.119 you know, the impact from COVID nineteen is going to 0:22:07.160 --> 0:22:11.760 be meaningful. We are expecting some sort of financial bailout 0:22:11.920 --> 0:22:14.240 or perhaps that's the wrong word, rescue financing from the 0:22:14.280 --> 0:22:17.040