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Speaker 1: This is Bloomberg Business Week. I'm Carol Masser and I'm

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Speaker 1: Jason Kelly. We're right here every day bringing you the

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Speaker 1: latest news from the world's of business and finance, plus technology, politics, economics,

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Speaker 1: all harnessing the power of Business Week reporters and editors.

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Speaker 1: And of course Carol that's part of a team of

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Speaker 1: twenty seven hundred journalists and analysts more than a hundred

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Speaker 1: and twenty countries and Jason. You can download Bloomberg Business

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Speaker 1: Week on iTunes, SoundCloud, bl Bloomberg dot com. You can

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Speaker 1: also listen to our radio show at two pm Eastern

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Speaker 1: on Bloomberg Radio every weekday, or watch us on YouTube

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Speaker 1: by searching Bloomberg Global News. So much to get to,

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Speaker 1: but let's understand what's going on in the trade today,

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Speaker 1: what we have to look forward to this week, Scarlett,

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Speaker 1: we are going to set the business week agenda. We've

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Speaker 1: got Gina Martin Adams with this, chief equity strategist for

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Speaker 1: Bloomberg Intelligence. She joins us from New Jersey. As to

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Speaker 1: Stave Wilson, stocks editor for Bloomberg. He's also in the

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Speaker 1: Garden States. So Dave quickly set the stage for us. Uh,

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Speaker 1: what's underneath this trade. Well, you look at the eleven

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Speaker 1: main industry groups in the SMP five hundred and it

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Speaker 1: it looks rather familiar technology stocks of leading the way.

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Speaker 1: Uh you know, you look at the consumer discretionary category,

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Speaker 1: which is basically Amazon dot Com and it's up. You know,

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Speaker 1: so kind of a familiar story. Communications services, which is

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Speaker 1: you know, Facebook and U Alphabet, the owner of Google

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Speaker 1: also higher and you know it's really their week, those

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Speaker 1: kinds of companies because you know, you you talk about

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Speaker 1: the four trillion dollar companies in the SMP five hundred

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Speaker 1: based on market value, you have three of them, Uh,

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Speaker 1: you know, reporting on the same day coming up on Thursday.

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Speaker 1: I'm calling it a triple a afternoon because you get Alphabet,

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Speaker 1: you know, the owner of Google, and Amazon dot Com

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Speaker 1: and Apple. It just goes to show you what kind

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Speaker 1: of week it's gonna be. Uh. You know, something like

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Speaker 1: a third of the SNP five companies were warning today,

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Speaker 1: pretty quiet on that front, but it really does pick

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Speaker 1: up tomorrow and carries through the rest of the week.

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Speaker 1: So you know, it isn't just about the Fed policymakers

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Speaker 1: getting together. It's about what companies are gonna have to

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Speaker 1: say on their results. Absolutely. Technology is going to be

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Speaker 1: front and center this week. But it's interesting because when

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Speaker 1: I look at the most actively traded stocks by value

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Speaker 1: and I look at foreign common stocks, nine out of

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Speaker 1: the ten most actively traded stocks are all gold miners

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Speaker 1: or precious metals miners, and that speaks to the rally

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Speaker 1: that we've seen in gold prices Gina. Material stocks are

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Speaker 1: certainly in favor right now as people continue to bid

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Speaker 1: gold and silver prices higher. Do we have any sense

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Speaker 1: of whether this will be reflected in their earnings? Probably not.

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Speaker 1: I mean, I think it's a bit early to expect

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Speaker 1: that the companies are actually going to produce earnings results

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Speaker 1: as a results of the price action in gold. So

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Speaker 1: I do think that the materials sector is most likely

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Speaker 1: to be one of the weaker sectors within the S

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Speaker 1: and P five in terms of actual output um from

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Speaker 1: an earnings perspective. That said, I do think that if

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Speaker 1: you start looking at value names in the SMP five hundred,

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Speaker 1: you could have an opportunity for a lot of beats

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Speaker 1: to expectations. So if you think about the sort of

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Speaker 1: value styles in a broader set, I've got fifteen stocks

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Speaker 1: on a list of stocks in our high Value Bucket

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Speaker 1: as well as the SMP five hundred peer Value Index

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Speaker 1: that report this week. All of them are expected to

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Speaker 1: have just really really weak earnings, just kind of tremendous declines,

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Speaker 1: some of them even with negative earnings, and as a group,

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Speaker 1: they're starting to experience positive estimate revision, which is very

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Speaker 1: different than what Dave was talking about. With the big

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Speaker 1: heavyweight tech companies facing a completely alternative with higher expectations

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Speaker 1: going into their earnings, it's less likely that they can

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Speaker 1: sustain those expectations, where some of the value stocks actually

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Speaker 1: might be able to beat um very very low forecasts.

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Speaker 1: And so, Gina, I believe you told us last this

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Speaker 1: is the single biggest, big, busiest, excuse me week for

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Speaker 1: earnings right this quarter, this week that we're headed into it. Yeah,

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Speaker 1: there's not going to be any rest for the weary

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Speaker 1: this week. Yeah. So, any I mean, what's the key

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Speaker 1: theme for you beyond what you were just describing and

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Speaker 1: the tech importance here? Yeah, So it's a combination of things.

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Speaker 1: I mean, I think one thing that happened last week

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Speaker 1: that really quite frankly surprised us is for the first

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Speaker 1: time in a long time, despite the fact that every

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Speaker 1: tech stock that reported earnings last week beat expectations. Price

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Speaker 1: performance was negative. So I think I want to watch

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Speaker 1: that really carefully. Can sticks tech stocks actually live up

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Speaker 1: to expectations? Are heavily gotten a little bit ahead of

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Speaker 1: our skis, and investors are going to sell the news

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Speaker 1: on both tech as well as healthcare and some of

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Speaker 1: the grossy stocks. UM, the opposite may occur with respective value.

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Speaker 1: I think beyond earning season, there's more than just earnings.

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Speaker 1: Even though this is the heaviest week of earnings and

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Speaker 1: next week is the second heaviest week, we're obviously also

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Speaker 1: contending with the FED policy meeting this week, and we're

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Speaker 1: contending with the fiscal package, which we keep bumping around

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Speaker 1: UM as a possibility or not a possibility, And you know,

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Speaker 1: I think that that has the prospect of creating a

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Speaker 1: little bit of turmoil for stocks as well. So, Dave,

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Speaker 1: when we talk about the FED meeting this week, do

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Speaker 1: you sense a change in tone or in sentiment when

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Speaker 1: it comes to what the Fed will likely say? Obviously,

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Speaker 1: the environment around US has worsened with the increase of

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Speaker 1: cases across much of the United States. UM. How much

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Speaker 1: of that is reflected in people's expectations of what they

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Speaker 1: expect to hear from J. Powell. You know, I haven't

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Speaker 1: really run across a whole lot on that score at

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Speaker 1: this point, you know, I mean, given that there's sort

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Speaker 1: of a policy direction that's been set, you know, near

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Speaker 1: zero interest rates and and and some bond bind though

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Speaker 1: they backed off lately in terms of actual purchases, you know,

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Speaker 1: trying to throw money at the economy where they can.

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Speaker 1: I And it does seem like, if anything, they'll try

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Speaker 1: and redouble those efforts. But at least the policy direction

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Speaker 1: has been set, and what we may get Wednesday just

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Speaker 1: were sort of reinforced where we are when it comes

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Speaker 1: to what the Fed's up to. Right, all right, Well,

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Speaker 1: thank you both so much. You know, Martin Adam's chief

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Speaker 1: equity strategist for Bloomberg Intelligence. She joined us from New Jersey,

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Speaker 1: as did Dave Wilson, stocks editor. This is Bloomberg Business Week.

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Speaker 1: We are keeping an eye obviously on the virus, those

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Speaker 1: cases continuing to rise across the country, and testing Scarlett

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Speaker 1: certainly front of mind, and we need to understand how

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Speaker 1: it works, where it works, when it works, and how

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Speaker 1: it's all going to be executed. We got the perfect

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Speaker 1: person to talk about that, Neil D. Crescenzo Crescenso, did

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Speaker 1: I say that right now? All right, thank you, I

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Speaker 1: appreciate it. Uh you're the CEO of Change Health here

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Speaker 1: joining us on the phone from San Francisco. Uh, so

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Speaker 1: tell us about testing here, like, where are we? How

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Speaker 1: should we be thinking about it? Especially when it comes

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Speaker 1: to a typical local community. How's it happening? Well, Jason,

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Speaker 1: I think you made a very important point is that

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Speaker 1: there really is maybe not a typical community. There's a

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Speaker 1: lot of different types of communities in this country. And

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Speaker 1: what you know, people didn't really perhaps realized prior to

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Speaker 1: the pandemic that only about of lab orders are actually

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Speaker 1: submitted electronically today, and as you can imagine, that's particularly

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Speaker 1: challenging in a rural or per community. So, um, what

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Speaker 1: we really focus on with our network, where you know,

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Speaker 1: we move around about fifteen billion healthcare transactions per year,

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Speaker 1: were the largest clinical, financial administrative networks in the country,

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Speaker 1: is really helping the doctors ordered these lab tests and

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Speaker 1: making sure that people can get them in the most

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Speaker 1: convenient and fast fast process possible. In order of course, critically,

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Speaker 1: as we've heard, particularly recently to get their results back,

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Speaker 1: and so we've made access to our nationwide lab network

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Speaker 1: free for all positions, and we have over fourteen hundred

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Speaker 1: labs and over a hundred providing COVID testing on the

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Speaker 1: net work. Neil, is there a difference between people going

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Speaker 1: to their primary doctor or to an urgent care center

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Speaker 1: or to the hospital to get COVID tests, because I

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Speaker 1: remember reading that ultimately they all get process at the

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Speaker 1: same couple of labs. Well, I think Scott don's a

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Speaker 1: great question, because whe does that really come down to.

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Speaker 1: It comes down to convenience and people's comfort level with

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Speaker 1: either maybe their primary care physician or an urgent care

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Speaker 1: center they're familiar with, where some other site, whether it's

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Speaker 1: a Walgreens of CBS, etcetera. UM, And you know, right

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Speaker 1: now we've got about thirty six states that are testing

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Speaker 1: less than the recommended level with the c d C.

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Speaker 1: So unless people go in to get tested, they're clearly

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Speaker 1: not going to get the results, and we're not gonna

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Speaker 1: be able to impact not only the testing rates, but

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Speaker 1: the positivity rates through treatment and contact tracing afterwards. That

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Speaker 1: spend such a challenge in many states, and so if

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Speaker 1: people have a choice of where to go. Where should

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Speaker 1: they go? Well, I think it really comes down to

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Speaker 1: the individual. Uh, you know, I think that the testing

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Speaker 1: is getting obviously continued to have different sites, additional types

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Speaker 1: of sites, and it's going to come down to, you know,

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Speaker 1: what people are able to do in terms of the

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Speaker 1: convenience for them what they're dealing with in their personal lives,

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Speaker 1: but making sure that it's done in a way that

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Speaker 1: the results are provided back to them as fast as possible,

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Speaker 1: and utilizing the lab network that we and others have

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Speaker 1: had in place, you know, frankly for decades, but it

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Speaker 1: just wasn't really of course, operating at this level and

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Speaker 1: with this degree of focus. You know, one of the

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Speaker 1: things that's important for people to realize is one are

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Speaker 1: the key priorities over the next few months is also

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Speaker 1: going to be trying to figure out how to get

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Speaker 1: at home testing. One of the things we focused on

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Speaker 1: is connecting our network to be sort of fast growing

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Speaker 1: companies like you do tests that provide home tests. But

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Speaker 1: we're now seeing the industry leaders like Mayo, Clinical Labs,

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Speaker 1: Lab Core Quests, the big lab companies as they're often

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Speaker 1: thought of, beginning to develop these tests. You can imagine

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Speaker 1: the paradigm shift will have if we're able to get

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Speaker 1: at home testing that's reliable, that will really facilitate people,

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Speaker 1: particularly trying to get back to work or kids going

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Speaker 1: to school. Well, speaking of kids going back to school,

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Speaker 1: um for students who are going back to university of campuses.

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Speaker 1: Jason and I were talking earlier about how some schools

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Speaker 1: will say that they will be testing students what fairly

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Speaker 1: frequently twice a week for instance, What kind of what

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Speaker 1: kind of problems or challenges do you foresee in being

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Speaker 1: able to execute that not just on one campus but

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Speaker 1: across the nation. Yeah, it's really a lot of the

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Speaker 1: challenges we've seen Scarlett throughout the pandemic, which is really

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Speaker 1: one of infrastructure. I think all of these universities will

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Speaker 1: point out that they weren't really set up or contemplating

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Speaker 1: doing this ever in the past, and so you know,

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Speaker 1: what we really look at is how can we take

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Speaker 1: infrastructure we've had in place for the traditional settings and

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Speaker 1: expand them these sorts of settings, including universities. You know,

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Speaker 1: down in Florida and the pandemic started, they have sixty

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Speaker 1: seven counties with clinics that wanted to obviously leverage is

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Speaker 1: part of the testing, and just in a few days

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Speaker 1: we connected them with the commercial labs because we had

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Speaker 1: most of the infrastructure in place to help with the

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Speaker 1: challenges that they continue to have, like many of these

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Speaker 1: hotspots states in Florida, and I think you know, universities

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Speaker 1: very unusually as you can imagine, are now having to

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Speaker 1: contemplate how they do that as well prior to school starting.

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Speaker 1: And so last question for you and Neil, what's the

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Speaker 1: sort of technology solution that sort of sticks with us

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Speaker 1: here now that all of this tech has been thrown

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Speaker 1: I mean your background was having a big job over

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Speaker 1: the health sector at Oracle. I do wonder how how

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Speaker 1: our lives going to be different even beyond COVID testing

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Speaker 1: when it comes to tech. Only got about a minute

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Speaker 1: left here. Well, there's gonna be a lot more digital data, Jason,

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Speaker 1: that's going to be used for variety of purposes. So

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Speaker 1: I'd say it's really three things. More data, more connectivity,

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Speaker 1: and the interoperability around that data and connectivity to enable

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Speaker 1: people to basically better maintain or improve health or in

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Speaker 1: this case, deal with a crisis situation like the pandemic. Right,

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Speaker 1: A lot to learn, We're going to be dealing with

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Speaker 1: this a lot. I have a feeling, especially in this

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Speaker 1: race to a vaccine, we've got to get tested to

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Speaker 1: get back to work, as you point out, and back

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Speaker 1: to school. Neil D. Crescenso is the CEO of Change Healthcare,

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Speaker 1: joiningus on the phone from San Francisco. This is Bloomberg

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Speaker 1: Business Week. But let's get into the world of sports.

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Speaker 1: John Stashower joins us Bloomberg sports reporter on the remote

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Speaker 1: line from Connecticut. Alright, so, John, we saw some baseball

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Speaker 1: over the weekend. We're gonna see less baseball tonight. How

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Speaker 1: in danger is the baseball season given these positive tests

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Speaker 1: with the Miami Marlins. Yeah, we don't never really know.

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Speaker 1: I think we have to wait for more test results.

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Speaker 1: I think we're at eleven Miami Marlins players right now.

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Speaker 1: There was I think the report of twelve. Least I

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Speaker 1: heard was eleven plus a couple of coaches. One player.

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Speaker 1: First positive tests I guess last Friday, and it's spread

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Speaker 1: through the team and they are still in Philadelphi. Few

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Speaker 1: of the Marlins were supposed to come home last night

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Speaker 1: or then this morning. They still haven't done it. They're

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Speaker 1: winning on these test results. I mean, if it stays

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Speaker 1: right there at eleven Miami Marlins. You know that these

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Speaker 1: teams have extra players at an alternate campsite, they can

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Speaker 1: bring them up. But who knows. You know, they played

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Speaker 1: the Braves last week in Atlanta, and the Braves were

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Speaker 1: in New York they played the Mets. Now the Mets

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Speaker 1: are in Boston to play the Red Socks. So who

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Speaker 1: knows how one long this how much this thing can

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Speaker 1: spread around. So John, eleven out of a squad of

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Speaker 1: how many and therefore doesn't mean that the Braves need

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Speaker 1: to get tested as well, and the Phillies need to

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Speaker 1: get tested too, Yeah, I would think absolutely. And you know,

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Speaker 1: as we just talked about, there's thirty. Normally our team

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Speaker 1: in Pastors has had twenty five. They were gonna expand

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Speaker 1: it to twenty six. Anyway, they're starting with thirty players, uh,

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Speaker 1: and then they have like another thirty, Like there's no

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Speaker 1: minor leagues this year, but they have like a reserves

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Speaker 1: of about thirty players. So yeah, they can replace these

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Speaker 1: eleven players with with other players. But yeah, we have

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Speaker 1: to wait on the test results. Are they more Marlins,

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Speaker 1: like you said, the Braves, the Phillies, the Phillies was

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Speaker 1: supposed to host the Yankees tonight. That game has been

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Speaker 1: postponed because the Yankees would have been going into the

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Speaker 1: locker room that the Marlins had just used this past weekend.

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Speaker 1: So they didn't want that to happen, obviously, and obviously

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Speaker 1: there's a ton of money on the line. I mean,

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Speaker 1: not to be too cross about it here, John, I mean,

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Speaker 1: baseball basically sort of limped over the finish line to

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Speaker 1: get these sixty games. They opted not to bubble themselves

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Speaker 1: as some of the other leagues have done, and a

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Speaker 1: lot of folks have a lot to lose players and

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Speaker 1: owners alike here if we if this season doesn't go on,

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Speaker 1: Oh there's no question about it, and a lot of surprise.

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Speaker 1: We haven't heard yet from the commissioner around Manford, but

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Speaker 1: I assume we will at some point today that you know,

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Speaker 1: maybe he's waiting on these these test results. But it's

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Speaker 1: a good point you make about the bubble because the

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Speaker 1: other sports are doing that. The hockey players have arrived

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Speaker 1: in Canada, they're getting ready to have playoff games this weekend. Um.

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Speaker 1: The NBA players are in this bubble in Orlando. The

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Speaker 1: latest test results from NBA players were no positive tests,

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Speaker 1: so Baseball talked about doing the bubble changed their mind.

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Speaker 1: Some people thought maybe they were thought they were smart

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Speaker 1: because they were going to go to Florida and Arizona,

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Speaker 1: two places you don't want to be right now. But

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Speaker 1: no bubble, a lot of travel and you know, that's

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Speaker 1: why the Toronto the Canadian government didn't let the Blue

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Speaker 1: Jays play in Toronto because they didn't want players traveling

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Speaker 1: in and out of the country. And my understanding John

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Speaker 1: as well, is that these Marlin's players got tested before

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Speaker 1: they played their game against the Phillies, right and then

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Speaker 1: they got their results after the game. So they went

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Speaker 1: into that game presumably eleven of them um testing positive.

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Speaker 1: And right now, in terms of context, the league is

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Speaker 1: trying to play when the case number in the country

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Speaker 1: is higher than when sports overall shut down in March.

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Speaker 1: It's pretty stunning when you think about the broader picture. Well,

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Speaker 1: I mean, if you think back to when this all started,

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Speaker 1: they remember those one NBA player who tested positive, and

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Speaker 1: it was all like, oh my god, you know, and

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Speaker 1: now yeah, they're they're playing with with all kinds of

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Speaker 1: players having the virus testing positive. Um, you know, they

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Speaker 1: were the report. Originally, as of this morning, there was

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Speaker 1: that four Marlins had tested positive, and you could argue

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Speaker 1: maybe they shouldn't have played a game yesterday, actually won

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Speaker 1: the game yesterday in Philadelphia, But then they got more

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Speaker 1: test results and now we're up to eleven. And I

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Speaker 1: have to think Roger Goodella and others in the National

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Speaker 1: Football League or watching this in a very very worried way, John, Oh, yeah, absolutely,

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Speaker 1: football is a big question mark. They can't have a bubble,

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Speaker 1: you know. I mean, there's just too man two large

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Speaker 1: a roster, so many coaches and all that, so you know,

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Speaker 1: it's such a contact sport and some of the college

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Speaker 1: players where we're having workouts and we were hearing about,

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Speaker 1: you know, dozens of positive tests as a result of that.

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Speaker 1: College football as a whole other story, you know, with

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Speaker 1: the kids who are not if they may not even

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Speaker 1: have classes and they really have football games. So I'm

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Speaker 1: sure the NFL is gonna try. You talked before about

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Speaker 1: the money involved, So the NFL is gonna give it

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Speaker 1: a go, but I think there's a lot of questions

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Speaker 1: about whether it'll work. All right, John stash Our, We're

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Speaker 1: gonna leave it there. Thank you so much. Great context

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Speaker 1: and keeping us up to date on a story scarlet

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Speaker 1: that obviously all of us are watching. You and I

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Speaker 1: are big sports fans, and it was great to see

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Speaker 1: baseball back. But who knows, maybe short lived, or maybe

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Speaker 1: they will find a way through this hard to say.

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Speaker 1: You're listening to Bloomberg business Week, Well, let's dive into

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Speaker 1: the magazine if we can. Bloomberg business Week, this is

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Speaker 1: a story that's on the Bloomberg and at Bloomberg dot com.

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Speaker 1: One of our phase him a parmer. She joins us

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Speaker 1: on the phone from New York City, along with Joel Weber,

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Speaker 1: the editor of Bloomberg Business Week. He joins us from Massachusetts.

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Speaker 1: You know, I love talking about hedge funds and fees

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Speaker 1: and money in Wall Street. Joel so te this up

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Speaker 1: for us. Uh So, the moment that um Nischanch, who

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Speaker 1: was one of the UH co authors on this kind

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Speaker 1: of spoke up about it, I was like, oh, please

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Speaker 1: tell me more. And obviously the two and twenty UH

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Speaker 1: business model has been a mainstay of the hedge funds

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Speaker 1: in this industry. UM, but we're we're beginning to see

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Speaker 1: UH that get trimmed and um and it's not just

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Speaker 1: a little trimming. It's a big trim him. And what

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Speaker 1: did you guys discover as you dug into the numbers

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Speaker 1: behind the story? Yeah, so UM in our story, we

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Speaker 1: we're looking at the fee changes over see hedgebund sees

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Speaker 1: them falling for a number of years. But what we're

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Speaker 1: seeing now is not only are they continuing to fall,

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Speaker 1: but you're seeing a lot of UM creative things that

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Speaker 1: hedge funds are offering more concessions UM, such things as

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Speaker 1: one funds offering to cover all investor losses that's almost

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Speaker 1: never heard of UM. One fund is doing away with

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Speaker 1: performance fees until they hit a threshold. Some firms are

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Speaker 1: lowering their fees in exchange for locking up capital for

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Speaker 1: more time. And what this is reflective of is UM

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Speaker 1: a decline and some of the assets that we're seeing

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Speaker 1: as investors have been pulling away from hedge funds a

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Speaker 1: little bit and demand doing uh lower fees as performances

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Speaker 1: away and just hasn't compared to the kind of returns

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Speaker 1: we were seeing twenty years ago. Okay, so when we

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Speaker 1: talk about two and twenty, is two percent management fees

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Speaker 1: and is the cut of profits? A lot of people

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Speaker 1: have said that two and twenty has been out of

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Speaker 1: play for a long time. There have been modifications to that.

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Speaker 1: But in your story how much you also talk about

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Speaker 1: this one or thirty fee model. What does that even mean? Yeah,

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Speaker 1: so one or thirty it's been champion by an L

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Speaker 1: Born And basically what it means is in a good year,

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Speaker 1: as a fun you could charge of the performance and

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Speaker 1: no assets, no fees on the asset side. But in

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Speaker 1: a bad year you would charge just one percent of assets.

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Speaker 1: And what that does is it equals it equals out

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Speaker 1: um the fees that you can charge and makes them

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Speaker 1: more attractive to potential investors. And this has become increasingly

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Speaker 1: popular with a number of hedge funds, and it's becoming

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Speaker 1: um something that I think allocators are asking for too.

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Speaker 1: So him UM when when you think about, you know,

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Speaker 1: how long the hedge fund industry has gotten UM gotten

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Speaker 1: you know away with this this has been really the

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Speaker 1: normal for for decades now, UM. And obviously this has

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Speaker 1: some profound impact UM, especially for investors. Uh So we're

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Speaker 1: investors actually saying about this change in tactic because I

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Speaker 1: mean it seems almost like it could have happened a

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Speaker 1: decade ago. UM at this point, UM, you know, is

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Speaker 1: it is it all happening too late? And and how

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Speaker 1: sticky is this money ultimately going to be among institutional

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Speaker 1: institutional investors. Well, investors I think are happy. UM, they

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Speaker 1: are able to negotiate and get better sees. The bigger

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Speaker 1: the allocator is, the more influence they have, the better

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Speaker 1: fees they can negotiate for themselves. UM. Even the numbers

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Speaker 1: that we've mentioned in our story, UM, an allocator could

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Speaker 1: an investor could demand an even more preferential treatment for

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Speaker 1: themselves if they have a big ticket investment investment that

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Speaker 1: they're making. UM. And etaties have been declining as hedge been.

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Speaker 1: Performance has been souring if we look at it as

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Speaker 1: a whole. But I think investors over the past few

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Speaker 1: years have been getting particularly frustrated. And as we're seeing

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Speaker 1: this year, UM, this this environment has been hard of

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Speaker 1: funds to trade in. Their performance hasn't been so great

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Speaker 1: and if you look broadly across the space, there has

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Speaker 1: been some outliers, but UM, you're seeing it's just a

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Speaker 1: much much difficult fundraising environment. Is particularly for smaller managers. UM.

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Speaker 1: Some of the money has gone towards the bigger funds.

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Speaker 1: As you know, it's once you get to being a

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Speaker 1: twenty billion dollar fund um, it's it's a lot harder

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Speaker 1: to lose that stature. But for a small expense, we're

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Speaker 1: just kind of working their way up and trying to

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Speaker 1: gain assets. It's an incredibly difficult time. Those are the

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Speaker 1: ones that especially are having to rethink about rethink their

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Speaker 1: CE model and their fee structure. So, Emma, when you

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Speaker 1: look at this story, that sort of really nice data

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Speaker 1: driven trend story against a lot of the breaking news

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Speaker 1: great scoops that you've had over the past couple of

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Speaker 1: years around big investors saying, you know what big hedge

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Speaker 1: and investors thing, I'm just going to do the family

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Speaker 1: office thing, or I'm gonna shut it down a little bit.

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Speaker 1: I mean, those have to be somehow synthesized, right, Yes,

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Speaker 1: And we've seen especially that this year and last year,

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Speaker 1: a number of firms pivots from being a big name

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Speaker 1: hedge funds into a family offers. If we look at

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Speaker 1: John Paulson just just this month, I believe um and

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Speaker 1: so that is that does speak to the broader trend

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Speaker 1: that we're seeing. Also, a lot of big names hedge

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Speaker 1: funds like called to the Jones firm and Alan Howard,

431
00:22:42,680 --> 00:22:45,000
Speaker 1: they've had to cut fees in recent years. So you

432
00:22:45,080 --> 00:22:50,080
Speaker 1: are seeing UM, the old school guard, the big titans

433
00:22:50,119 --> 00:22:53,240
Speaker 1: of the industry also facing this reckoning that we're seeing

434
00:22:53,280 --> 00:22:55,800
Speaker 1: in the space, UM having to adjust, having to be

435
00:22:55,920 --> 00:23:00,200
Speaker 1: more creative as particularly fundamental firms that haven't adapt into

436
00:23:00,240 --> 00:23:04,440
Speaker 1: becoming more quantitative or included more unique trading methods, they've

437
00:23:04,440 --> 00:23:06,840
Speaker 1: struggled if they have failed to do that, and that

438
00:23:06,960 --> 00:23:08,760
Speaker 1: has also been part of the factors if we look

439
00:23:08,800 --> 00:23:11,240
Speaker 1: at some of the firms that have closed down or

440
00:23:11,320 --> 00:23:13,920
Speaker 1: only traded their own internal lasts as well. You know,

441
00:23:14,040 --> 00:23:17,919
Speaker 1: the thing that reminds me of the bigger picture here

442
00:23:18,040 --> 00:23:20,000
Speaker 1: is that hedge funds really never got their mojo back

443
00:23:20,040 --> 00:23:23,800
Speaker 1: after the financial crisis. UM the central bank intervention increased

444
00:23:23,840 --> 00:23:26,760
Speaker 1: all the correlation between the different assets, that reduced volatility.

445
00:23:27,000 --> 00:23:29,639
Speaker 1: Yet we did have volatility in the first quarter of

446
00:23:29,720 --> 00:23:32,120
Speaker 1: this year and it was not a good first quarter

447
00:23:32,200 --> 00:23:34,760
Speaker 1: for hedge funds. Why not? Why was the volatility not

448
00:23:34,840 --> 00:23:38,080
Speaker 1: the right kind of volatility? Right? So you had been

449
00:23:38,119 --> 00:23:40,959
Speaker 1: focused on a specific kind of volatility, and sometimes if

450
00:23:41,000 --> 00:23:45,679
Speaker 1: it's too short term and to unexpected, they don't. They

451
00:23:45,760 --> 00:23:49,000
Speaker 1: find out a lot harder to trade, especially systematic funds.

452
00:23:49,000 --> 00:23:51,159
Speaker 1: At a computer driven UM, they did a little bit

453
00:23:51,240 --> 00:23:53,719
Speaker 1: more time to catch up with the spikes and volatility.

454
00:23:53,760 --> 00:23:56,040
Speaker 1: And so if it's over a short lip and then

455
00:23:56,119 --> 00:23:58,919
Speaker 1: at random spurts, that's a lot harder to trade than

456
00:23:59,000 --> 00:24:01,480
Speaker 1: a longer period of vlatility over a couple of months,

457
00:24:01,800 --> 00:24:07,040
Speaker 1: which then you can um to make more opportunistic trades. UM.

458
00:24:07,280 --> 00:24:09,840
Speaker 1: If it's a sudden shock, as we've seen, that has

459
00:24:09,880 --> 00:24:11,840
Speaker 1: been a lot harder. So that's why I think you've

460
00:24:11,840 --> 00:24:15,360
Speaker 1: seen a lot of struggles in March, which most fun

461
00:24:15,560 --> 00:24:18,320
Speaker 1: firms did did terribly that that month. And if you

462
00:24:18,359 --> 00:24:21,880
Speaker 1: look at our chart UM and our story we take,

463
00:24:22,000 --> 00:24:25,600
Speaker 1: we have a line graph that shows the SMP as

464
00:24:25,640 --> 00:24:29,040
Speaker 1: it as it compares to a hedgebunt performance, and since

465
00:24:29,080 --> 00:24:31,879
Speaker 1: two thousands and eight you'll see broadly that hedgegunt to

466
00:24:31,880 --> 00:24:35,439
Speaker 1: have trailed the SMP increasingly with a broader spread UM

467
00:24:35,640 --> 00:24:38,680
Speaker 1: compared to prior to two thousand and eight. Yeah, sort

468
00:24:38,720 --> 00:24:40,800
Speaker 1: of defeats the whole purpose of all those fees if

469
00:24:40,840 --> 00:24:42,920
Speaker 1: you ask me, all right, hemm a parmer, thank you

470
00:24:42,960 --> 00:24:45,000
Speaker 1: so much. Great piece of reporting. Check it out on

471
00:24:45,040 --> 00:24:48,239
Speaker 1: the Bloomberg and at Bloomberg dot com, not surprisingly one

472
00:24:48,280 --> 00:24:50,760
Speaker 1: of the most read. Hemma headgund reporter for Bloomberg on

473
00:24:50,840 --> 00:24:53,240
Speaker 1: the phone from New York City. Follow her at Parmar

474
00:24:53,520 --> 00:24:56,280
Speaker 1: Hemma for all of her scoops. Our thanks as well

475
00:24:56,359 --> 00:24:58,680
Speaker 1: to Joel Webber, editor of Bloomberg Business Week. He joined

476
00:24:58,760 --> 00:25:06,639
Speaker 1: us from Massachusett. It's a journal, yeah, but you let

477
00:25:06,680 --> 00:25:11,520
Speaker 1: me drive. Oh no, no, no, no, honey, please, I'll

478
00:25:11,560 --> 00:25:14,800
Speaker 1: do the right vel et me. I want to try it.

479
00:25:17,480 --> 00:25:30,560
Speaker 1: Just drive, baby, good questions trying. This is the Drive

480
00:25:30,680 --> 00:25:35,600
Speaker 1: to the Globe. Thanks. We'll try us on Bluebird Radio.

481
00:25:36,200 --> 00:25:38,200
Speaker 1: And it is time for the Drive to the Clothes

482
00:25:38,280 --> 00:25:41,000
Speaker 1: on this Monday afternoon. Jason Kelley and Scarlet Food here

483
00:25:41,119 --> 00:25:43,760
Speaker 1: with you, and we're joined by Bert White, chief investment

484
00:25:43,800 --> 00:25:47,400
Speaker 1: officer of LPL Financial, on the phone from Charlotte. Burt,

485
00:25:47,480 --> 00:25:49,600
Speaker 1: really nice to have you with us. First of all,

486
00:25:50,000 --> 00:25:52,639
Speaker 1: what's going on down in Charlotte. I'm guessing it is

487
00:25:52,840 --> 00:25:54,639
Speaker 1: probably about as hot as it is here in the

488
00:25:54,720 --> 00:25:58,159
Speaker 1: New York City area. But how's everything going with virus

489
00:25:58,280 --> 00:26:01,879
Speaker 1: cases and all that has it field there? Well, it

490
00:26:02,200 --> 00:26:05,480
Speaker 1: is hot, and the good news is that air conditioning

491
00:26:05,680 --> 00:26:08,640
Speaker 1: is helping when you're staying at home. But no doubt

492
00:26:08,680 --> 00:26:11,639
Speaker 1: about it, there is, uh, you know, an upward trend

493
00:26:11,800 --> 00:26:14,760
Speaker 1: of of nervousness around some of the cases that are

494
00:26:14,800 --> 00:26:17,200
Speaker 1: coming through in this regional area of the South in

495
00:26:17,440 --> 00:26:21,719
Speaker 1: general has been a little bit quick to to reopen. Um.

496
00:26:21,880 --> 00:26:24,200
Speaker 1: It's all that quick reopening and now we're beginning to

497
00:26:24,240 --> 00:26:27,520
Speaker 1: start to see an increase in cases, and so being careful,

498
00:26:27,680 --> 00:26:31,320
Speaker 1: is is really what's happening here? Then down here in Charlotte, Well,

499
00:26:31,400 --> 00:26:33,040
Speaker 1: it sounds like you're doing well, and I'm glad to

500
00:26:33,119 --> 00:26:36,080
Speaker 1: hear that that's the case. Um. When you look at

501
00:26:36,119 --> 00:26:38,280
Speaker 1: what's happening around you and then you look at the

502
00:26:38,320 --> 00:26:40,960
Speaker 1: stock market, is it is there disconnect or does it

503
00:26:41,040 --> 00:26:45,119
Speaker 1: make sense to you? Well, I've never seen the market,

504
00:26:45,520 --> 00:26:49,159
Speaker 1: the stock market and the economy be as disparate um

505
00:26:49,280 --> 00:26:52,560
Speaker 1: in their absolute results. Um. I do think that's the

506
00:26:52,600 --> 00:26:55,920
Speaker 1: real watch out for investors though. I think investors want

507
00:26:55,960 --> 00:26:58,160
Speaker 1: to look at things and determine whether or not it's

508
00:26:58,240 --> 00:27:01,320
Speaker 1: good or it's bad. You know, like so far earnings

509
00:27:01,440 --> 00:27:05,040
Speaker 1: is down year every year? Is that good or is

510
00:27:05,080 --> 00:27:07,480
Speaker 1: that bad? And so the reality is that's not the

511
00:27:07,560 --> 00:27:10,080
Speaker 1: metric the market nor the economy sort of looks at

512
00:27:10,280 --> 00:27:13,280
Speaker 1: it's really is it better or worse? And I think

513
00:27:13,400 --> 00:27:16,680
Speaker 1: by and large from the market, dow and the economic view,

514
00:27:16,840 --> 00:27:20,240
Speaker 1: things are getting better both and so to some degree

515
00:27:20,280 --> 00:27:23,920
Speaker 1: the metric that matters most is actually in harmony between

516
00:27:24,000 --> 00:27:27,240
Speaker 1: the market and UM and the economy. It's just the

517
00:27:27,320 --> 00:27:30,600
Speaker 1: absolute levels that are so disparate that's really got things

518
00:27:30,720 --> 00:27:34,119
Speaker 1: pretty uh pretty confusing. And so Bert, how big of

519
00:27:34,160 --> 00:27:37,480
Speaker 1: a role does the FED play here? That don't fight

520
00:27:37,560 --> 00:27:41,640
Speaker 1: the FED mantra? The market by all accounts, at least

521
00:27:41,680 --> 00:27:46,280
Speaker 1: partially was up today. Given a sentiment around what we

522
00:27:46,960 --> 00:27:49,800
Speaker 1: may hear may not hear candidly from j. Pale and

523
00:27:49,880 --> 00:27:53,840
Speaker 1: his colleagues on Wednesday, where does the FED fit into

524
00:27:53,920 --> 00:27:58,119
Speaker 1: this equation? I think the FED, frankly is the is

525
00:27:58,200 --> 00:28:01,439
Speaker 1: the most important, uh way, and the most important words

526
00:28:02,080 --> 00:28:04,560
Speaker 1: right now, that's the backstop right now. That is the

527
00:28:04,640 --> 00:28:08,040
Speaker 1: first relay runner. You know, oftentimes try to talk about

528
00:28:08,080 --> 00:28:11,359
Speaker 1: these recoveries as being relay races um and what you

529
00:28:11,440 --> 00:28:14,040
Speaker 1: need is you actually need to have a strong runner,

530
00:28:14,080 --> 00:28:16,120
Speaker 1: and then they got to pass the baton to somebody else.

531
00:28:16,640 --> 00:28:19,840
Speaker 1: And the FED is always the first runner in these recoveries,

532
00:28:19,920 --> 00:28:22,359
Speaker 1: always the first runner, and They've run hard and they've

533
00:28:22,440 --> 00:28:24,800
Speaker 1: run long. And what I think you're going to hear

534
00:28:24,840 --> 00:28:26,800
Speaker 1: the FED stay, which they have been saying the last

535
00:28:26,840 --> 00:28:29,440
Speaker 1: few meetings, is it's time for someone else to take

536
00:28:29,520 --> 00:28:31,920
Speaker 1: this baton, and they're trying. They've been trying to give

537
00:28:31,960 --> 00:28:35,080
Speaker 1: this baton really the fiscal policy, and by and large

538
00:28:35,240 --> 00:28:38,000
Speaker 1: they've run pretty well, and we'll probably see some more

539
00:28:38,080 --> 00:28:40,720
Speaker 1: running there. My guess is you will hear pal and

540
00:28:40,800 --> 00:28:43,480
Speaker 1: you will hear the FED say that they are going

541
00:28:43,560 --> 00:28:45,640
Speaker 1: to continue to be very dubbish. They're going to continue

542
00:28:45,680 --> 00:28:49,040
Speaker 1: to support this. I think they're gonna hint to low rates,

543
00:28:49,560 --> 00:28:52,320
Speaker 1: uh for longer. I don't know what you know. We've

544
00:28:52,360 --> 00:28:54,280
Speaker 1: been saying that the FED is lower for longer. I

545
00:28:54,280 --> 00:28:56,680
Speaker 1: don't know what longer than longer is whatever that is,

546
00:28:56,800 --> 00:28:59,240
Speaker 1: that is what they're lower. And so I think you're

547
00:28:59,240 --> 00:29:01,800
Speaker 1: gonna hear more of that news. Yeah, people have interpreted

548
00:29:01,840 --> 00:29:05,240
Speaker 1: that to mean lower forever or at least in our lifetime. UM.

549
00:29:05,600 --> 00:29:08,440
Speaker 1: I like the analogy of passing the baton to fiscal policy,

550
00:29:08,680 --> 00:29:12,080
Speaker 1: and we've seen how fiscal policymakers are are kind of

551
00:29:12,120 --> 00:29:14,239
Speaker 1: stumbling getting out of the gate. They can't quite get there.

552
00:29:14,520 --> 00:29:17,240
Speaker 1: We know the Republicans will be proposing something in the

553
00:29:17,320 --> 00:29:20,280
Speaker 1: next hour or two. Um, what does it mean in

554
00:29:20,480 --> 00:29:23,960
Speaker 1: terms of how much it's going to affect day to

555
00:29:24,040 --> 00:29:26,160
Speaker 1: day trading over the next couple of weeks, Because we're

556
00:29:26,160 --> 00:29:28,920
Speaker 1: probably not going to get any kind of agreement today tomorrow,

557
00:29:29,000 --> 00:29:31,200
Speaker 1: but this will be something that's negotiated on. We're gonna

558
00:29:31,240 --> 00:29:33,320
Speaker 1: get lots of headlines that will conflict with each other,

559
00:29:33,760 --> 00:29:35,520
Speaker 1: and it's you know, we're gonna go through all the

560
00:29:35,560 --> 00:29:38,880
Speaker 1: machinations before something eventually happens. Is the stock market going

561
00:29:38,920 --> 00:29:40,560
Speaker 1: to be held hostage to that or do people just

562
00:29:40,680 --> 00:29:42,880
Speaker 1: look past that and assume something's going to come out

563
00:29:42,920 --> 00:29:45,360
Speaker 1: of it. We'll just we'll just go ahead and and

564
00:29:45,880 --> 00:29:49,240
Speaker 1: and price in the fact that it will get resolved. Well,

565
00:29:49,400 --> 00:29:51,160
Speaker 1: I think the stock market is going to try to

566
00:29:51,400 --> 00:29:54,959
Speaker 1: bully a bit of a response. I wouldn't be surprised if, um,

567
00:29:55,200 --> 00:29:58,560
Speaker 1: if the market doesn't get some of the more positive, gearing,

568
00:29:58,760 --> 00:30:01,880
Speaker 1: forward looking rhetoric on this. It doesn't look good, it

569
00:30:02,000 --> 00:30:03,960
Speaker 1: doesn't look positive, it doesn't look like it's going to

570
00:30:04,000 --> 00:30:06,080
Speaker 1: happen in the next week or two. I think you'll

571
00:30:06,080 --> 00:30:08,840
Speaker 1: see the market through a slight temper tantrum wouldn't be

572
00:30:08,880 --> 00:30:12,280
Speaker 1: surprised if you see a couple of sharp down days

573
00:30:12,680 --> 00:30:15,240
Speaker 1: as the market just sort of sends its message that

574
00:30:15,400 --> 00:30:17,680
Speaker 1: this is really important. This is the next runner in

575
00:30:17,720 --> 00:30:19,680
Speaker 1: this relay race. It's got to step up and do that.

576
00:30:20,360 --> 00:30:22,880
Speaker 1: And right now I think sometimes watching them needs to

577
00:30:22,920 --> 00:30:25,600
Speaker 1: be shaken just a bit. They've got to shake that

578
00:30:25,680 --> 00:30:27,920
Speaker 1: sugar tree just a bit. And the market is not

579
00:30:28,000 --> 00:30:30,080
Speaker 1: afraid to do that. You saw it do that in March.

580
00:30:30,160 --> 00:30:31,960
Speaker 1: You saw it do it in April, you saw do

581
00:30:32,040 --> 00:30:34,240
Speaker 1: it something may it will do it if it needs to.

582
00:30:34,720 --> 00:30:37,160
Speaker 1: I think you'll probably see that happen. If um, if

583
00:30:37,200 --> 00:30:39,160
Speaker 1: the rehed rick that comes out of Washington is the

584
00:30:39,240 --> 00:30:42,440
Speaker 1: positive before looking so Bert, I think some of the

585
00:30:42,480 --> 00:30:44,520
Speaker 1: research that you and your team have done, you know,

586
00:30:44,640 --> 00:30:48,880
Speaker 1: talk about this swoosh, this Nike swoosh shape recovery. Um,

587
00:30:49,280 --> 00:30:51,920
Speaker 1: has that sort of been your consistent view or how

588
00:30:52,040 --> 00:30:55,000
Speaker 1: has that evolved over time? And what does the latest

589
00:30:55,080 --> 00:30:57,920
Speaker 1: round of earnings tell you about that in terms of

590
00:30:57,960 --> 00:31:02,920
Speaker 1: your confidence there? Yeah, that's that's been our view really

591
00:31:03,120 --> 00:31:05,960
Speaker 1: through the outfit. You know, the reality is we've felt

592
00:31:06,040 --> 00:31:10,320
Speaker 1: more confident around the direction and the slope that has

593
00:31:10,360 --> 00:31:13,040
Speaker 1: been where we've been largely most confident. I think trying

594
00:31:13,080 --> 00:31:15,640
Speaker 1: to trying to get levels in timing is harder, UM.

595
00:31:15,800 --> 00:31:18,760
Speaker 1: But I think direction and slope has been really where

596
00:31:18,760 --> 00:31:21,680
Speaker 1: we've been most confident. And we're still seeing this, uh,

597
00:31:21,800 --> 00:31:25,880
Speaker 1: this Nike swoop type of move. The reality is coming

598
00:31:25,920 --> 00:31:29,960
Speaker 1: off bottoms and extremes. It is relatively common to get

599
00:31:30,040 --> 00:31:33,080
Speaker 1: a very fast, sharp move UM, but I think here

600
00:31:33,120 --> 00:31:35,000
Speaker 1: going forward, it's going to be a lot harder for

601
00:31:35,080 --> 00:31:38,480
Speaker 1: those next games, UM, both in economic games and others.

602
00:31:38,760 --> 00:31:41,400
Speaker 1: And on top of that, UM, you've got a fair

603
00:31:41,440 --> 00:31:44,400
Speaker 1: amount of concern around the election, and then also the

604
00:31:44,560 --> 00:31:46,840
Speaker 1: increase in some of the cases we've seen here um

605
00:31:47,160 --> 00:31:49,800
Speaker 1: after some of these early reopenings, and so all that

606
00:31:49,960 --> 00:31:52,360
Speaker 1: mixed together, I think the next part of this recovery

607
00:31:52,440 --> 00:31:54,880
Speaker 1: is going to be the harder part of this recovery UM,

608
00:31:55,040 --> 00:31:58,520
Speaker 1: and therefore sort of lends itself to slower growth but

609
00:31:58,640 --> 00:32:01,480
Speaker 1: still an upward trajectory. Okay, slower growth but still an

610
00:32:01,560 --> 00:32:04,120
Speaker 1: upper trajectory. Is that better or worse than what we

611
00:32:04,160 --> 00:32:06,800
Speaker 1: can expect from Europe? Because there's been a lot more

612
00:32:06,880 --> 00:32:10,000
Speaker 1: talk about how Europe might provide better opportunities right now,

613
00:32:10,120 --> 00:32:12,920
Speaker 1: especially after all those countries managed to come together and

614
00:32:13,080 --> 00:32:16,959
Speaker 1: unanimously agree on the seven hundred fifty billion euro rescue package.

615
00:32:17,160 --> 00:32:19,000
Speaker 1: The Republicans can't figure out what they want to do,

616
00:32:19,120 --> 00:32:22,000
Speaker 1: but you have twenty countries in Europe coming up with

617
00:32:22,040 --> 00:32:26,440
Speaker 1: a solution in thirty seconds or less. Fert Well, I

618
00:32:26,520 --> 00:32:29,080
Speaker 1: think in thirty seconds or less. The reality is that

619
00:32:29,240 --> 00:32:32,400
Speaker 1: that Europe's got some other issues. They've got deficit, They've

620
00:32:32,440 --> 00:32:34,640
Speaker 1: got a ton of populism that's going to continue to

621
00:32:34,720 --> 00:32:36,920
Speaker 1: drive that, and so we think that's going to continue

622
00:32:36,960 --> 00:32:39,680
Speaker 1: to weigh on growth there. Um, we think the United

623
00:32:39,760 --> 00:32:42,080
Speaker 1: States and to some degree China are really the two

624
00:32:42,120 --> 00:32:44,640
Speaker 1: places that you're going to see the quickest bounce back

625
00:32:44,680 --> 00:32:47,680
Speaker 1: here economically. All Right, you nailed it. Great job. Thank

626
00:32:47,720 --> 00:32:50,800
Speaker 1: you so much for White, chief investment officer for LPL Financial.

627
00:32:50,880 --> 00:32:54,320
Speaker 1: Joinus on the phone from Charlotte. Stay safe down there,

628
00:32:54,440 --> 00:32:57,240
Speaker 1: Stay safe and cool. Uh. The same can be said

629
00:32:57,560 --> 00:32:59,640
Speaker 1: for those of us here in the Northeast right now.

630
00:32:59,680 --> 00:33:03,480
Speaker 1: Record temperatures sweeping through New York and Boston as we

631
00:33:03,600 --> 00:33:06,160
Speaker 1: heard for days to come to Jason, I know, no,

632
00:33:06,880 --> 00:33:10,520
Speaker 1: it's it's unrelenting. It's unrelenting. Thanks so much for listening

633
00:33:10,560 --> 00:33:13,520
Speaker 1: to Bloomberg. Business Week, Download the podcast on iTunes, SoundCloud,

634
00:33:13,560 --> 00:33:16,280
Speaker 1: Bloomberg dot com, or wherever you get your podcasts. And

635
00:33:16,360 --> 00:33:18,280
Speaker 1: of course you can always listen to our radio show

636
00:33:18,320 --> 00:33:21,040
Speaker 1: at two pm Eastern on Bloomberg Radio, or watch us

637
00:33:21,040 --> 00:33:23,320
Speaker 1: on YouTube by searching Bloomberg Global News