Speaker 1: This is Bloomberg Business Week. I'm Carol Masser and I'm
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Speaker 1: by searching Bloomberg Global News. So much to get to,
Speaker 1: but let's understand what's going on in the trade today,
Speaker 1: what we have to look forward to this week, Scarlett,
Speaker 1: we are going to set the business week agenda. We've
Speaker 1: got Gina Martin Adams with this, chief equity strategist for
Speaker 1: Bloomberg Intelligence. She joins us from New Jersey. As to
Speaker 1: Stave Wilson, stocks editor for Bloomberg. He's also in the
Speaker 1: Garden States. So Dave quickly set the stage for us. Uh,
Speaker 1: what's underneath this trade. Well, you look at the eleven
Speaker 1: main industry groups in the SMP five hundred and it
Speaker 1: it looks rather familiar technology stocks of leading the way.
Speaker 1: Uh you know, you look at the consumer discretionary category,
Speaker 1: which is basically Amazon dot Com and it's up. You know,
Speaker 1: so kind of a familiar story. Communications services, which is
Speaker 1: you know, Facebook and U Alphabet, the owner of Google
Speaker 1: also higher and you know it's really their week, those
Speaker 1: kinds of companies because you know, you you talk about
Speaker 1: the four trillion dollar companies in the SMP five hundred
Speaker 1: based on market value, you have three of them, Uh,
Speaker 1: you know, reporting on the same day coming up on Thursday.
Speaker 1: I'm calling it a triple a afternoon because you get Alphabet,
Speaker 1: you know, the owner of Google, and Amazon dot Com
Speaker 1: and Apple. It just goes to show you what kind
Speaker 1: of week it's gonna be. Uh. You know, something like
Speaker 1: a third of the SNP five companies were warning today,
Speaker 1: pretty quiet on that front, but it really does pick
Speaker 1: up tomorrow and carries through the rest of the week.
Speaker 1: So you know, it isn't just about the Fed policymakers
Speaker 1: getting together. It's about what companies are gonna have to
Speaker 1: say on their results. Absolutely. Technology is going to be
Speaker 1: front and center this week. But it's interesting because when
Speaker 1: I look at the most actively traded stocks by value
Speaker 1: and I look at foreign common stocks, nine out of
Speaker 1: the ten most actively traded stocks are all gold miners
Speaker 1: or precious metals miners, and that speaks to the rally
Speaker 1: that we've seen in gold prices Gina. Material stocks are
Speaker 1: certainly in favor right now as people continue to bid
Speaker 1: gold and silver prices higher. Do we have any sense
Speaker 1: of whether this will be reflected in their earnings? Probably not.
Speaker 1: I mean, I think it's a bit early to expect
Speaker 1: that the companies are actually going to produce earnings results
Speaker 1: as a results of the price action in gold. So
Speaker 1: I do think that the materials sector is most likely
Speaker 1: to be one of the weaker sectors within the S
Speaker 1: and P five in terms of actual output um from
Speaker 1: an earnings perspective. That said, I do think that if
Speaker 1: you start looking at value names in the SMP five hundred,
Speaker 1: you could have an opportunity for a lot of beats
Speaker 1: to expectations. So if you think about the sort of
Speaker 1: value styles in a broader set, I've got fifteen stocks
Speaker 1: on a list of stocks in our high Value Bucket
Speaker 1: as well as the SMP five hundred peer Value Index
Speaker 1: that report this week. All of them are expected to
Speaker 1: have just really really weak earnings, just kind of tremendous declines,
Speaker 1: some of them even with negative earnings, and as a group,
Speaker 1: they're starting to experience positive estimate revision, which is very
Speaker 1: different than what Dave was talking about. With the big
Speaker 1: heavyweight tech companies facing a completely alternative with higher expectations
Speaker 1: going into their earnings, it's less likely that they can
Speaker 1: sustain those expectations, where some of the value stocks actually
Speaker 1: might be able to beat um very very low forecasts.
Speaker 1: And so, Gina, I believe you told us last this
Speaker 1: is the single biggest, big, busiest, excuse me week for
Speaker 1: earnings right this quarter, this week that we're headed into it. Yeah,
Speaker 1: there's not going to be any rest for the weary
Speaker 1: this week. Yeah. So, any I mean, what's the key
Speaker 1: theme for you beyond what you were just describing and
Speaker 1: the tech importance here? Yeah, So it's a combination of things.
Speaker 1: I mean, I think one thing that happened last week
Speaker 1: that really quite frankly surprised us is for the first
Speaker 1: time in a long time, despite the fact that every
Speaker 1: tech stock that reported earnings last week beat expectations. Price
Speaker 1: performance was negative. So I think I want to watch
Speaker 1: that really carefully. Can sticks tech stocks actually live up
Speaker 1: to expectations? Are heavily gotten a little bit ahead of
Speaker 1: our skis, and investors are going to sell the news
Speaker 1: on both tech as well as healthcare and some of
Speaker 1: the grossy stocks. UM, the opposite may occur with respective value.
Speaker 1: I think beyond earning season, there's more than just earnings.
Speaker 1: Even though this is the heaviest week of earnings and
Speaker 1: next week is the second heaviest week, we're obviously also
Speaker 1: contending with the FED policy meeting this week, and we're
Speaker 1: contending with the fiscal package, which we keep bumping around
Speaker 1: UM as a possibility or not a possibility, And you know,
Speaker 1: I think that that has the prospect of creating a
Speaker 1: little bit of turmoil for stocks as well. So, Dave,
Speaker 1: when we talk about the FED meeting this week, do
Speaker 1: you sense a change in tone or in sentiment when
Speaker 1: it comes to what the Fed will likely say? Obviously,
Speaker 1: the environment around US has worsened with the increase of
Speaker 1: cases across much of the United States. UM. How much
Speaker 1: of that is reflected in people's expectations of what they
Speaker 1: expect to hear from J. Powell. You know, I haven't
Speaker 1: really run across a whole lot on that score at
Speaker 1: this point, you know, I mean, given that there's sort
Speaker 1: of a policy direction that's been set, you know, near
Speaker 1: zero interest rates and and and some bond bind though
Speaker 1: they backed off lately in terms of actual purchases, you know,
Speaker 1: trying to throw money at the economy where they can.
Speaker 1: I And it does seem like, if anything, they'll try
Speaker 1: and redouble those efforts. But at least the policy direction
Speaker 1: has been set, and what we may get Wednesday just
Speaker 1: were sort of reinforced where we are when it comes
Speaker 1: to what the Fed's up to. Right, all right, Well,
Speaker 1: thank you both so much. You know, Martin Adam's chief
Speaker 1: equity strategist for Bloomberg Intelligence. She joined us from New Jersey,
Speaker 1: as did Dave Wilson, stocks editor. This is Bloomberg Business Week.
Speaker 1: We are keeping an eye obviously on the virus, those
Speaker 1: cases continuing to rise across the country, and testing Scarlett
Speaker 1: certainly front of mind, and we need to understand how
Speaker 1: it works, where it works, when it works, and how
Speaker 1: it's all going to be executed. We got the perfect
Speaker 1: person to talk about that, Neil D. Crescenzo Crescenso, did
Speaker 1: I say that right now? All right, thank you, I
Speaker 1: appreciate it. Uh you're the CEO of Change Health here
Speaker 1: joining us on the phone from San Francisco. Uh, so
Speaker 1: tell us about testing here, like, where are we? How
Speaker 1: should we be thinking about it? Especially when it comes
Speaker 1: to a typical local community. How's it happening? Well, Jason,
Speaker 1: I think you made a very important point is that
Speaker 1: there really is maybe not a typical community. There's a
Speaker 1: lot of different types of communities in this country. And
Speaker 1: what you know, people didn't really perhaps realized prior to
Speaker 1: the pandemic that only about of lab orders are actually
Speaker 1: submitted electronically today, and as you can imagine, that's particularly
Speaker 1: challenging in a rural or per community. So, um, what
Speaker 1: we really focus on with our network, where you know,
Speaker 1: we move around about fifteen billion healthcare transactions per year,
Speaker 1: were the largest clinical, financial administrative networks in the country,
Speaker 1: is really helping the doctors ordered these lab tests and
Speaker 1: making sure that people can get them in the most
Speaker 1: convenient and fast fast process possible. In order of course, critically,
Speaker 1: as we've heard, particularly recently to get their results back,
Speaker 1: and so we've made access to our nationwide lab network
Speaker 1: free for all positions, and we have over fourteen hundred
Speaker 1: labs and over a hundred providing COVID testing on the
Speaker 1: net work. Neil, is there a difference between people going
Speaker 1: to their primary doctor or to an urgent care center
Speaker 1: or to the hospital to get COVID tests, because I
Speaker 1: remember reading that ultimately they all get process at the
Speaker 1: same couple of labs. Well, I think Scott don's a
Speaker 1: great question, because whe does that really come down to.
Speaker 1: It comes down to convenience and people's comfort level with
Speaker 1: either maybe their primary care physician or an urgent care
Speaker 1: center they're familiar with, where some other site, whether it's
Speaker 1: a Walgreens of CBS, etcetera. UM, And you know, right
Speaker 1: now we've got about thirty six states that are testing
Speaker 1: less than the recommended level with the c d C.
Speaker 1: So unless people go in to get tested, they're clearly
Speaker 1: not going to get the results, and we're not gonna
Speaker 1: be able to impact not only the testing rates, but
Speaker 1: the positivity rates through treatment and contact tracing afterwards. That
Speaker 1: spend such a challenge in many states, and so if
Speaker 1: people have a choice of where to go. Where should
Speaker 1: they go? Well, I think it really comes down to
Speaker 1: the individual. Uh, you know, I think that the testing
Speaker 1: is getting obviously continued to have different sites, additional types
Speaker 1: of sites, and it's going to come down to, you know,
Speaker 1: what people are able to do in terms of the
Speaker 1: convenience for them what they're dealing with in their personal lives,
Speaker 1: but making sure that it's done in a way that
Speaker 1: the results are provided back to them as fast as possible,
Speaker 1: and utilizing the lab network that we and others have
Speaker 1: had in place, you know, frankly for decades, but it
Speaker 1: just wasn't really of course, operating at this level and
Speaker 1: with this degree of focus. You know, one of the
Speaker 1: things that's important for people to realize is one are
Speaker 1: the key priorities over the next few months is also
Speaker 1: going to be trying to figure out how to get
Speaker 1: at home testing. One of the things we focused on
Speaker 1: is connecting our network to be sort of fast growing
Speaker 1: companies like you do tests that provide home tests. But
Speaker 1: we're now seeing the industry leaders like Mayo, Clinical Labs,
Speaker 1: Lab Core Quests, the big lab companies as they're often
Speaker 1: thought of, beginning to develop these tests. You can imagine
Speaker 1: the paradigm shift will have if we're able to get
Speaker 1: at home testing that's reliable, that will really facilitate people,
Speaker 1: particularly trying to get back to work or kids going
Speaker 1: to school. Well, speaking of kids going back to school,
Speaker 1: um for students who are going back to university of campuses.
Speaker 1: Jason and I were talking earlier about how some schools
Speaker 1: will say that they will be testing students what fairly
Speaker 1: frequently twice a week for instance, What kind of what
Speaker 1: kind of problems or challenges do you foresee in being
Speaker 1: able to execute that not just on one campus but
Speaker 1: across the nation. Yeah, it's really a lot of the
Speaker 1: challenges we've seen Scarlett throughout the pandemic, which is really
Speaker 1: one of infrastructure. I think all of these universities will
Speaker 1: point out that they weren't really set up or contemplating
Speaker 1: doing this ever in the past, and so you know,
Speaker 1: what we really look at is how can we take
Speaker 1: infrastructure we've had in place for the traditional settings and
Speaker 1: expand them these sorts of settings, including universities. You know,
Speaker 1: down in Florida and the pandemic started, they have sixty
Speaker 1: seven counties with clinics that wanted to obviously leverage is
Speaker 1: part of the testing, and just in a few days
Speaker 1: we connected them with the commercial labs because we had
Speaker 1: most of the infrastructure in place to help with the
Speaker 1: challenges that they continue to have, like many of these
Speaker 1: hotspots states in Florida, and I think you know, universities
Speaker 1: very unusually as you can imagine, are now having to
Speaker 1: contemplate how they do that as well prior to school starting.
Speaker 1: And so last question for you and Neil, what's the
Speaker 1: sort of technology solution that sort of sticks with us
Speaker 1: here now that all of this tech has been thrown
Speaker 1: I mean your background was having a big job over
Speaker 1: the health sector at Oracle. I do wonder how how
Speaker 1: our lives going to be different even beyond COVID testing
Speaker 1: when it comes to tech. Only got about a minute
Speaker 1: left here. Well, there's gonna be a lot more digital data, Jason,
Speaker 1: that's going to be used for variety of purposes. So
Speaker 1: I'd say it's really three things. More data, more connectivity,
Speaker 1: and the interoperability around that data and connectivity to enable
Speaker 1: people to basically better maintain or improve health or in
Speaker 1: this case, deal with a crisis situation like the pandemic. Right,
Speaker 1: A lot to learn, We're going to be dealing with
Speaker 1: this a lot. I have a feeling, especially in this
Speaker 1: race to a vaccine, we've got to get tested to
Speaker 1: get back to work, as you point out, and back
Speaker 1: to school. Neil D. Crescenso is the CEO of Change Healthcare,
Speaker 1: joiningus on the phone from San Francisco. This is Bloomberg
Speaker 1: Business Week. But let's get into the world of sports.
Speaker 1: John Stashower joins us Bloomberg sports reporter on the remote
Speaker 1: line from Connecticut. Alright, so, John, we saw some baseball
Speaker 1: over the weekend. We're gonna see less baseball tonight. How
Speaker 1: in danger is the baseball season given these positive tests
Speaker 1: with the Miami Marlins. Yeah, we don't never really know.
Speaker 1: I think we have to wait for more test results.
Speaker 1: I think we're at eleven Miami Marlins players right now.
Speaker 1: There was I think the report of twelve. Least I
Speaker 1: heard was eleven plus a couple of coaches. One player.
Speaker 1: First positive tests I guess last Friday, and it's spread
Speaker 1: through the team and they are still in Philadelphi. Few
Speaker 1: of the Marlins were supposed to come home last night
Speaker 1: or then this morning. They still haven't done it. They're
Speaker 1: winning on these test results. I mean, if it stays
Speaker 1: right there at eleven Miami Marlins. You know that these
Speaker 1: teams have extra players at an alternate campsite, they can
Speaker 1: bring them up. But who knows. You know, they played
Speaker 1: the Braves last week in Atlanta, and the Braves were
Speaker 1: in New York they played the Mets. Now the Mets
Speaker 1: are in Boston to play the Red Socks. So who
Speaker 1: knows how one long this how much this thing can
Speaker 1: spread around. So John, eleven out of a squad of
Speaker 1: how many and therefore doesn't mean that the Braves need
Speaker 1: to get tested as well, and the Phillies need to
Speaker 1: get tested too, Yeah, I would think absolutely. And you know,
Speaker 1: as we just talked about, there's thirty. Normally our team
Speaker 1: in Pastors has had twenty five. They were gonna expand
Speaker 1: it to twenty six. Anyway, they're starting with thirty players, uh,
Speaker 1: and then they have like another thirty, Like there's no
Speaker 1: minor leagues this year, but they have like a reserves
Speaker 1: of about thirty players. So yeah, they can replace these
Speaker 1: eleven players with with other players. But yeah, we have
Speaker 1: to wait on the test results. Are they more Marlins,
Speaker 1: like you said, the Braves, the Phillies, the Phillies was
Speaker 1: supposed to host the Yankees tonight. That game has been
Speaker 1: postponed because the Yankees would have been going into the
Speaker 1: locker room that the Marlins had just used this past weekend.
Speaker 1: So they didn't want that to happen, obviously, and obviously
Speaker 1: there's a ton of money on the line. I mean,
Speaker 1: not to be too cross about it here, John, I mean,
Speaker 1: baseball basically sort of limped over the finish line to
Speaker 1: get these sixty games. They opted not to bubble themselves
Speaker 1: as some of the other leagues have done, and a
Speaker 1: lot of folks have a lot to lose players and
Speaker 1: owners alike here if we if this season doesn't go on,
Speaker 1: Oh there's no question about it, and a lot of surprise.
Speaker 1: We haven't heard yet from the commissioner around Manford, but
Speaker 1: I assume we will at some point today that you know,
Speaker 1: maybe he's waiting on these these test results. But it's
Speaker 1: a good point you make about the bubble because the
Speaker 1: other sports are doing that. The hockey players have arrived
Speaker 1: in Canada, they're getting ready to have playoff games this weekend. Um.
Speaker 1: The NBA players are in this bubble in Orlando. The
Speaker 1: latest test results from NBA players were no positive tests,
Speaker 1: so Baseball talked about doing the bubble changed their mind.
Speaker 1: Some people thought maybe they were thought they were smart
Speaker 1: because they were going to go to Florida and Arizona,
Speaker 1: two places you don't want to be right now. But
Speaker 1: no bubble, a lot of travel and you know, that's
Speaker 1: why the Toronto the Canadian government didn't let the Blue
Speaker 1: Jays play in Toronto because they didn't want players traveling
Speaker 1: in and out of the country. And my understanding John
Speaker 1: as well, is that these Marlin's players got tested before
Speaker 1: they played their game against the Phillies, right and then
Speaker 1: they got their results after the game. So they went
Speaker 1: into that game presumably eleven of them um testing positive.
Speaker 1: And right now, in terms of context, the league is
Speaker 1: trying to play when the case number in the country
Speaker 1: is higher than when sports overall shut down in March.
Speaker 1: It's pretty stunning when you think about the broader picture. Well,
Speaker 1: I mean, if you think back to when this all started,
Speaker 1: they remember those one NBA player who tested positive, and
Speaker 1: it was all like, oh my god, you know, and
Speaker 1: now yeah, they're they're playing with with all kinds of
Speaker 1: players having the virus testing positive. Um, you know, they
Speaker 1: were the report. Originally, as of this morning, there was
Speaker 1: that four Marlins had tested positive, and you could argue
Speaker 1: maybe they shouldn't have played a game yesterday, actually won
Speaker 1: the game yesterday in Philadelphia, But then they got more
Speaker 1: test results and now we're up to eleven. And I
Speaker 1: have to think Roger Goodella and others in the National
Speaker 1: Football League or watching this in a very very worried way, John, Oh, yeah, absolutely,
Speaker 1: football is a big question mark. They can't have a bubble,
Speaker 1: you know. I mean, there's just too man two large
Speaker 1: a roster, so many coaches and all that, so you know,
Speaker 1: it's such a contact sport and some of the college
Speaker 1: players where we're having workouts and we were hearing about,
Speaker 1: you know, dozens of positive tests as a result of that.
Speaker 1: College football as a whole other story, you know, with
Speaker 1: the kids who are not if they may not even
Speaker 1: have classes and they really have football games. So I'm
Speaker 1: sure the NFL is gonna try. You talked before about
Speaker 1: the money involved, So the NFL is gonna give it
Speaker 1: a go, but I think there's a lot of questions
Speaker 1: about whether it'll work. All right, John stash Our, We're
Speaker 1: gonna leave it there. Thank you so much. Great context
Speaker 1: and keeping us up to date on a story scarlet
Speaker 1: that obviously all of us are watching. You and I
Speaker 1: are big sports fans, and it was great to see
Speaker 1: baseball back. But who knows, maybe short lived, or maybe
Speaker 1: they will find a way through this hard to say.
Speaker 1: You're listening to Bloomberg business Week, Well, let's dive into
Speaker 1: the magazine if we can. Bloomberg business Week, this is
Speaker 1: a story that's on the Bloomberg and at Bloomberg dot com.
Speaker 1: One of our phase him a parmer. She joins us
Speaker 1: on the phone from New York City, along with Joel Weber,
Speaker 1: the editor of Bloomberg Business Week. He joins us from Massachusetts.
Speaker 1: You know, I love talking about hedge funds and fees
Speaker 1: and money in Wall Street. Joel so te this up
Speaker 1: for us. Uh So, the moment that um Nischanch, who
Speaker 1: was one of the UH co authors on this kind
Speaker 1: of spoke up about it, I was like, oh, please
Speaker 1: tell me more. And obviously the two and twenty UH
Speaker 1: business model has been a mainstay of the hedge funds
Speaker 1: in this industry. UM, but we're we're beginning to see
Speaker 1: UH that get trimmed and um and it's not just
Speaker 1: a little trimming. It's a big trim him. And what
Speaker 1: did you guys discover as you dug into the numbers
Speaker 1: behind the story? Yeah, so UM in our story, we
Speaker 1: we're looking at the fee changes over see hedgebund sees
Speaker 1: them falling for a number of years. But what we're
Speaker 1: seeing now is not only are they continuing to fall,
Speaker 1: but you're seeing a lot of UM creative things that
Speaker 1: hedge funds are offering more concessions UM, such things as
Speaker 1: one funds offering to cover all investor losses that's almost
Speaker 1: never heard of UM. One fund is doing away with
Speaker 1: performance fees until they hit a threshold. Some firms are
Speaker 1: lowering their fees in exchange for locking up capital for
Speaker 1: more time. And what this is reflective of is UM
Speaker 1: a decline and some of the assets that we're seeing
Speaker 1: as investors have been pulling away from hedge funds a
Speaker 1: little bit and demand doing uh lower fees as performances
Speaker 1: away and just hasn't compared to the kind of returns
Speaker 1: we were seeing twenty years ago. Okay, so when we
Speaker 1: talk about two and twenty, is two percent management fees
Speaker 1: and is the cut of profits? A lot of people
Speaker 1: have said that two and twenty has been out of
Speaker 1: play for a long time. There have been modifications to that.
Speaker 1: But in your story how much you also talk about
Speaker 1: this one or thirty fee model. What does that even mean? Yeah,
Speaker 1: so one or thirty it's been champion by an L
Speaker 1: Born And basically what it means is in a good year,
Speaker 1: as a fun you could charge of the performance and
Speaker 1: no assets, no fees on the asset side. But in
Speaker 1: a bad year you would charge just one percent of assets.
Speaker 1: And what that does is it equals it equals out
Speaker 1: um the fees that you can charge and makes them
Speaker 1: more attractive to potential investors. And this has become increasingly
Speaker 1: popular with a number of hedge funds, and it's becoming
Speaker 1: um something that I think allocators are asking for too.
Speaker 1: So him UM when when you think about, you know,
Speaker 1: how long the hedge fund industry has gotten UM gotten
Speaker 1: you know away with this this has been really the
Speaker 1: normal for for decades now, UM. And obviously this has
Speaker 1: some profound impact UM, especially for investors. Uh So we're
Speaker 1: investors actually saying about this change in tactic because I
Speaker 1: mean it seems almost like it could have happened a
Speaker 1: decade ago. UM at this point, UM, you know, is
Speaker 1: it is it all happening too late? And and how
Speaker 1: sticky is this money ultimately going to be among institutional
Speaker 1: institutional investors. Well, investors I think are happy. UM, they
Speaker 1: are able to negotiate and get better sees. The bigger
Speaker 1: the allocator is, the more influence they have, the better
Speaker 1: fees they can negotiate for themselves. UM. Even the numbers
Speaker 1: that we've mentioned in our story, UM, an allocator could
Speaker 1: an investor could demand an even more preferential treatment for
Speaker 1: themselves if they have a big ticket investment investment that
Speaker 1: they're making. UM. And etaties have been declining as hedge been.
Speaker 1: Performance has been souring if we look at it as
Speaker 1: a whole. But I think investors over the past few
Speaker 1: years have been getting particularly frustrated. And as we're seeing
Speaker 1: this year, UM, this this environment has been hard of
Speaker 1: funds to trade in. Their performance hasn't been so great
Speaker 1: and if you look broadly across the space, there has
Speaker 1: been some outliers, but UM, you're seeing it's just a
Speaker 1: much much difficult fundraising environment. Is particularly for smaller managers. UM.
Speaker 1: Some of the money has gone towards the bigger funds.
Speaker 1: As you know, it's once you get to being a
Speaker 1: twenty billion dollar fund um, it's it's a lot harder
Speaker 1: to lose that stature. But for a small expense, we're
Speaker 1: just kind of working their way up and trying to
Speaker 1: gain assets. It's an incredibly difficult time. Those are the
Speaker 1: ones that especially are having to rethink about rethink their
Speaker 1: CE model and their fee structure. So, Emma, when you
Speaker 1: look at this story, that sort of really nice data
Speaker 1: driven trend story against a lot of the breaking news
Speaker 1: great scoops that you've had over the past couple of
Speaker 1: years around big investors saying, you know what big hedge
Speaker 1: and investors thing, I'm just going to do the family
Speaker 1: office thing, or I'm gonna shut it down a little bit.
Speaker 1: I mean, those have to be somehow synthesized, right, Yes,
Speaker 1: And we've seen especially that this year and last year,
Speaker 1: a number of firms pivots from being a big name
Speaker 1: hedge funds into a family offers. If we look at
Speaker 1: John Paulson just just this month, I believe um and
Speaker 1: so that is that does speak to the broader trend
Speaker 1: that we're seeing. Also, a lot of big names hedge
Speaker 1: funds like called to the Jones firm and Alan Howard,
Speaker 1: they've had to cut fees in recent years. So you
Speaker 1: are seeing UM, the old school guard, the big titans
Speaker 1: of the industry also facing this reckoning that we're seeing
Speaker 1: in the space, UM having to adjust, having to be
Speaker 1: more creative as particularly fundamental firms that haven't adapt into
Speaker 1: becoming more quantitative or included more unique trading methods, they've
Speaker 1: struggled if they have failed to do that, and that
Speaker 1: has also been part of the factors if we look
Speaker 1: at some of the firms that have closed down or
Speaker 1: only traded their own internal lasts as well. You know,
Speaker 1: the thing that reminds me of the bigger picture here
Speaker 1: is that hedge funds really never got their mojo back
Speaker 1: after the financial crisis. UM the central bank intervention increased
Speaker 1: all the correlation between the different assets, that reduced volatility.
Speaker 1: Yet we did have volatility in the first quarter of
Speaker 1: this year and it was not a good first quarter
Speaker 1: for hedge funds. Why not? Why was the volatility not
Speaker 1: the right kind of volatility? Right? So you had been
Speaker 1: focused on a specific kind of volatility, and sometimes if
Speaker 1: it's too short term and to unexpected, they don't. They
Speaker 1: find out a lot harder to trade, especially systematic funds.
Speaker 1: At a computer driven UM, they did a little bit
Speaker 1: more time to catch up with the spikes and volatility.
Speaker 1: And so if it's over a short lip and then
Speaker 1: at random spurts, that's a lot harder to trade than
Speaker 1: a longer period of vlatility over a couple of months,
Speaker 1: which then you can um to make more opportunistic trades. UM.
Speaker 1: If it's a sudden shock, as we've seen, that has
Speaker 1: been a lot harder. So that's why I think you've
Speaker 1: seen a lot of struggles in March, which most fun
Speaker 1: firms did did terribly that that month. And if you
Speaker 1: look at our chart UM and our story we take,
Speaker 1: we have a line graph that shows the SMP as
Speaker 1: it as it compares to a hedgebunt performance, and since
Speaker 1: two thousands and eight you'll see broadly that hedgegunt to
Speaker 1: have trailed the SMP increasingly with a broader spread UM
Speaker 1: compared to prior to two thousand and eight. Yeah, sort
Speaker 1: of defeats the whole purpose of all those fees if
Speaker 1: you ask me, all right, hemm a parmer, thank you
Speaker 1: so much. Great piece of reporting. Check it out on
Speaker 1: the Bloomberg and at Bloomberg dot com, not surprisingly one
Speaker 1: of the most read. Hemma headgund reporter for Bloomberg on
Speaker 1: the phone from New York City. Follow her at Parmar
Speaker 1: Hemma for all of her scoops. Our thanks as well
Speaker 1: to Joel Webber, editor of Bloomberg Business Week. He joined
Speaker 1: us from Massachusett. It's a journal, yeah, but you let
Speaker 1: me drive. Oh no, no, no, no, honey, please, I'll
Speaker 1: do the right vel et me. I want to try it.
Speaker 1: Just drive, baby, good questions trying. This is the Drive
Speaker 1: to the Globe. Thanks. We'll try us on Bluebird Radio.
Speaker 1: And it is time for the Drive to the Clothes
Speaker 1: on this Monday afternoon. Jason Kelley and Scarlet Food here
Speaker 1: with you, and we're joined by Bert White, chief investment
Speaker 1: officer of LPL Financial, on the phone from Charlotte. Burt,
Speaker 1: really nice to have you with us. First of all,
Speaker 1: what's going on down in Charlotte. I'm guessing it is
Speaker 1: probably about as hot as it is here in the
Speaker 1: New York City area. But how's everything going with virus
Speaker 1: cases and all that has it field there? Well, it
Speaker 1: is hot, and the good news is that air conditioning
Speaker 1: is helping when you're staying at home. But no doubt
Speaker 1: about it, there is, uh, you know, an upward trend
Speaker 1: of of nervousness around some of the cases that are
Speaker 1: coming through in this regional area of the South in
Speaker 1: general has been a little bit quick to to reopen. Um.
Speaker 1: It's all that quick reopening and now we're beginning to
Speaker 1: start to see an increase in cases, and so being careful,
Speaker 1: is is really what's happening here? Then down here in Charlotte, Well,
Speaker 1: it sounds like you're doing well, and I'm glad to
Speaker 1: hear that that's the case. Um. When you look at
Speaker 1: what's happening around you and then you look at the
Speaker 1: stock market, is it is there disconnect or does it
Speaker 1: make sense to you? Well, I've never seen the market,
Speaker 1: the stock market and the economy be as disparate um
Speaker 1: in their absolute results. Um. I do think that's the
Speaker 1: real watch out for investors though. I think investors want
Speaker 1: to look at things and determine whether or not it's
Speaker 1: good or it's bad. You know, like so far earnings
Speaker 1: is down year every year? Is that good or is
Speaker 1: that bad? And so the reality is that's not the
Speaker 1: metric the market nor the economy sort of looks at
Speaker 1: it's really is it better or worse? And I think
Speaker 1: by and large from the market, dow and the economic view,
Speaker 1: things are getting better both and so to some degree
Speaker 1: the metric that matters most is actually in harmony between
Speaker 1: the market and UM and the economy. It's just the
Speaker 1: absolute levels that are so disparate that's really got things
Speaker 1: pretty uh pretty confusing. And so Bert, how big of
Speaker 1: a role does the FED play here? That don't fight
Speaker 1: the FED mantra? The market by all accounts, at least
Speaker 1: partially was up today. Given a sentiment around what we
Speaker 1: may hear may not hear candidly from j. Pale and
Speaker 1: his colleagues on Wednesday, where does the FED fit into
Speaker 1: this equation? I think the FED, frankly is the is
Speaker 1: the most important, uh way, and the most important words
Speaker 1: right now, that's the backstop right now. That is the
Speaker 1: first relay runner. You know, oftentimes try to talk about
Speaker 1: these recoveries as being relay races um and what you
Speaker 1: need is you actually need to have a strong runner,
Speaker 1: and then they got to pass the baton to somebody else.
Speaker 1: And the FED is always the first runner in these recoveries,
Speaker 1: always the first runner, and They've run hard and they've
Speaker 1: run long. And what I think you're going to hear
Speaker 1: the FED stay, which they have been saying the last
Speaker 1: few meetings, is it's time for someone else to take
Speaker 1: this baton, and they're trying. They've been trying to give
Speaker 1: this baton really the fiscal policy, and by and large
Speaker 1: they've run pretty well, and we'll probably see some more
Speaker 1: running there. My guess is you will hear pal and
Speaker 1: you will hear the FED say that they are going
Speaker 1: to continue to be very dubbish. They're going to continue
Speaker 1: to support this. I think they're gonna hint to low rates,
Speaker 1: uh for longer. I don't know what you know. We've
Speaker 1: been saying that the FED is lower for longer. I
Speaker 1: don't know what longer than longer is whatever that is,
Speaker 1: that is what they're lower. And so I think you're
Speaker 1: gonna hear more of that news. Yeah, people have interpreted
Speaker 1: that to mean lower forever or at least in our lifetime. UM.
Speaker 1: I like the analogy of passing the baton to fiscal policy,
Speaker 1: and we've seen how fiscal policymakers are are kind of
Speaker 1: stumbling getting out of the gate. They can't quite get there.
Speaker 1: We know the Republicans will be proposing something in the
Speaker 1: next hour or two. Um, what does it mean in
Speaker 1: terms of how much it's going to affect day to
Speaker 1: day trading over the next couple of weeks, Because we're
Speaker 1: probably not going to get any kind of agreement today tomorrow,
Speaker 1: but this will be something that's negotiated on. We're gonna
Speaker 1: get lots of headlines that will conflict with each other,
Speaker 1: and it's you know, we're gonna go through all the
Speaker 1: machinations before something eventually happens. Is the stock market going
Speaker 1: to be held hostage to that or do people just
Speaker 1: look past that and assume something's going to come out
Speaker 1: of it. We'll just we'll just go ahead and and
Speaker 1: and price in the fact that it will get resolved. Well,
Speaker 1: I think the stock market is going to try to
Speaker 1: bully a bit of a response. I wouldn't be surprised if, um,
Speaker 1: if the market doesn't get some of the more positive, gearing,
Speaker 1: forward looking rhetoric on this. It doesn't look good, it
Speaker 1: doesn't look positive, it doesn't look like it's going to
Speaker 1: happen in the next week or two. I think you'll
Speaker 1: see the market through a slight temper tantrum wouldn't be
Speaker 1: surprised if you see a couple of sharp down days
Speaker 1: as the market just sort of sends its message that
Speaker 1: this is really important. This is the next runner in
Speaker 1: this relay race. It's got to step up and do that.
Speaker 1: And right now I think sometimes watching them needs to
Speaker 1: be shaken just a bit. They've got to shake that
Speaker 1: sugar tree just a bit. And the market is not
Speaker 1: afraid to do that. You saw it do that in March.
Speaker 1: You saw it do it in April, you saw do
Speaker 1: it something may it will do it if it needs to.
Speaker 1: I think you'll probably see that happen. If um, if
Speaker 1: the rehed rick that comes out of Washington is the
Speaker 1: positive before looking so Bert, I think some of the
Speaker 1: research that you and your team have done, you know,
Speaker 1: talk about this swoosh, this Nike swoosh shape recovery. Um,
Speaker 1: has that sort of been your consistent view or how
Speaker 1: has that evolved over time? And what does the latest
Speaker 1: round of earnings tell you about that in terms of
Speaker 1: your confidence there? Yeah, that's that's been our view really
Speaker 1: through the outfit. You know, the reality is we've felt
Speaker 1: more confident around the direction and the slope that has
Speaker 1: been where we've been largely most confident. I think trying
Speaker 1: to trying to get levels in timing is harder, UM.
Speaker 1: But I think direction and slope has been really where
Speaker 1: we've been most confident. And we're still seeing this, uh,
Speaker 1: this Nike swoop type of move. The reality is coming
Speaker 1: off bottoms and extremes. It is relatively common to get
Speaker 1: a very fast, sharp move UM, but I think here
Speaker 1: going forward, it's going to be a lot harder for
Speaker 1: those next games, UM, both in economic games and others.
Speaker 1: And on top of that, UM, you've got a fair
Speaker 1: amount of concern around the election, and then also the
Speaker 1: increase in some of the cases we've seen here um
Speaker 1: after some of these early reopenings, and so all that
Speaker 1: mixed together, I think the next part of this recovery
Speaker 1: is going to be the harder part of this recovery UM,
Speaker 1: and therefore sort of lends itself to slower growth but
Speaker 1: still an upward trajectory. Okay, slower growth but still an
Speaker 1: upper trajectory. Is that better or worse than what we
Speaker 1: can expect from Europe? Because there's been a lot more
Speaker 1: talk about how Europe might provide better opportunities right now,
Speaker 1: especially after all those countries managed to come together and
Speaker 1: unanimously agree on the seven hundred fifty billion euro rescue package.
Speaker 1: The Republicans can't figure out what they want to do,
Speaker 1: but you have twenty countries in Europe coming up with
Speaker 1: a solution in thirty seconds or less. Fert Well, I
Speaker 1: think in thirty seconds or less. The reality is that
Speaker 1: that Europe's got some other issues. They've got deficit, They've
Speaker 1: got a ton of populism that's going to continue to
Speaker 1: drive that, and so we think that's going to continue
Speaker 1: to weigh on growth there. Um, we think the United
Speaker 1: States and to some degree China are really the two
Speaker 1: places that you're going to see the quickest bounce back
Speaker 1: here economically. All Right, you nailed it. Great job. Thank
Speaker 1: you so much for White, chief investment officer for LPL Financial.
Speaker 1: Joinus on the phone from Charlotte. Stay safe down there,
Speaker 1: Stay safe and cool. Uh. The same can be said
Speaker 1: for those of us here in the Northeast right now.
Speaker 1: Record temperatures sweeping through New York and Boston as we
Speaker 1: heard for days to come to Jason, I know, no,
Speaker 1: it's it's unrelenting. It's unrelenting. Thanks so much for listening
Speaker 1: to Bloomberg. Business Week, Download the podcast on iTunes, SoundCloud,
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