1 00:00:02,640 --> 00:00:05,360 Speaker 1: Welcome to the Bloomberg Penl podcast. I'm Paul swing you, 2 00:00:05,360 --> 00:00:07,680 Speaker 1: along with my co host Lisa Brahma wits. Each day 3 00:00:07,720 --> 00:00:10,280 Speaker 1: we bring you the most noteworthy and useful interviews for 4 00:00:10,320 --> 00:00:12,520 Speaker 1: you and your money, whether at the grocery store or 5 00:00:12,560 --> 00:00:15,480 Speaker 1: the trading floor. Find a Bloomberg Penl podcast on Apple 6 00:00:15,520 --> 00:00:17,959 Speaker 1: podcast or wherever you listen to podcasts, as well as 7 00:00:17,960 --> 00:00:21,880 Speaker 1: at Bloomberg dot com. Well, we've certainly become accustomed to 8 00:00:22,000 --> 00:00:25,400 Speaker 1: volatility and the financial markets UH and across the fixed 9 00:00:25,400 --> 00:00:28,440 Speaker 1: income markets in particular. Here to get a sense of 10 00:00:28,480 --> 00:00:30,960 Speaker 1: kind of how we should be thinking about investing in 11 00:00:31,000 --> 00:00:33,640 Speaker 1: fixed income markets over the next several quarters, we welcome 12 00:00:33,680 --> 00:00:36,800 Speaker 1: Mark Holman, CEO of twenty four Asset Management with about 13 00:00:36,800 --> 00:00:40,720 Speaker 1: twenty three billion dollars under management. We appreciate Mark joining us. Mark, 14 00:00:40,720 --> 00:00:42,879 Speaker 1: thanks so much for joining us here. So as we 15 00:00:43,000 --> 00:00:46,120 Speaker 1: think about these markets here, I want to start with 16 00:00:46,240 --> 00:00:50,519 Speaker 1: kind of what your backdrop is, what your construct is 17 00:00:50,720 --> 00:00:54,040 Speaker 1: for the economy going forward. Is this a a kind 18 00:00:54,040 --> 00:00:57,520 Speaker 1: of a a V shaped recovery here or should we 19 00:00:57,600 --> 00:01:03,960 Speaker 1: be preparing for lower for longer in terms of economic activity? Yeah, 20 00:01:03,960 --> 00:01:06,720 Speaker 1: I think undoubtedly I'd be going for lower for longer 21 00:01:06,760 --> 00:01:09,560 Speaker 1: in terms of economic activity. I think the the end 22 00:01:09,560 --> 00:01:12,040 Speaker 1: of the last cycle ending with a surprise, as they 23 00:01:12,040 --> 00:01:14,720 Speaker 1: often do, but this surprise was global. When you've got 24 00:01:14,760 --> 00:01:16,800 Speaker 1: a global surprise that h's every part of the globe 25 00:01:16,800 --> 00:01:19,440 Speaker 1: at the same time, I think it the impact is 26 00:01:19,440 --> 00:01:21,520 Speaker 1: just that much more significant, and it's going to hit 27 00:01:21,520 --> 00:01:25,399 Speaker 1: the both the supply side and the demand side, and 28 00:01:25,440 --> 00:01:27,640 Speaker 1: I think it just takes a lot longer to recover. 29 00:01:28,000 --> 00:01:30,800 Speaker 1: These incredible aid programs that we've got around the world, 30 00:01:31,520 --> 00:01:36,120 Speaker 1: whilst enormous in spise, logistically just won't reach everybody, but 31 00:01:36,200 --> 00:01:39,440 Speaker 1: there's there's some long term damage to them on which 32 00:01:39,440 --> 00:01:41,119 Speaker 1: in my view means we're going to be spending probably 33 00:01:41,200 --> 00:01:43,240 Speaker 1: the best part of two years to get ourselves back 34 00:01:43,280 --> 00:01:48,320 Speaker 1: towards a QUE for nineteen type production level. Mark I'm 35 00:01:48,360 --> 00:01:50,520 Speaker 1: struck it and saw a lot of people about the 36 00:01:50,640 --> 00:01:54,240 Speaker 1: disconnect in the slow recovery that a lot of economists 37 00:01:54,600 --> 00:01:59,080 Speaker 1: and analysts are seeing and stock markets, which seem relatively 38 00:02:00,440 --> 00:02:02,760 Speaker 1: unfazed by this whole issue, at least based on the 39 00:02:02,880 --> 00:02:05,520 Speaker 1: rally that we have seen over the past month. This 40 00:02:05,600 --> 00:02:08,120 Speaker 1: morning we have Goldman Sachs coming out and saying that 41 00:02:08,160 --> 00:02:11,440 Speaker 1: at one point these realities are going to converge and 42 00:02:11,480 --> 00:02:15,000 Speaker 1: that stocks are poised to drop about over the next 43 00:02:15,000 --> 00:02:19,240 Speaker 1: three months. Do you agree. I think when you look 44 00:02:19,240 --> 00:02:22,480 Speaker 1: at fundamental you have to agree that the market has 45 00:02:22,560 --> 00:02:25,040 Speaker 1: really really raised ahead and then it's really pricing in. 46 00:02:25,240 --> 00:02:27,840 Speaker 1: It's actually described a somewhat of a V shaped recovery. 47 00:02:28,720 --> 00:02:31,640 Speaker 1: Um So I think you're fundamentally probably quite hard to 48 00:02:31,680 --> 00:02:35,200 Speaker 1: justify where we are here. However, technically I don't think 49 00:02:35,240 --> 00:02:38,280 Speaker 1: we're getting a full picture. The full picture does include 50 00:02:38,280 --> 00:02:41,680 Speaker 1: the incredible amounts of money poured in by the FED 51 00:02:41,680 --> 00:02:44,200 Speaker 1: and other institutions around the world, and we know they 52 00:02:44,240 --> 00:02:48,079 Speaker 1: find these volumes of cash find their way into financial markets, 53 00:02:48,840 --> 00:02:51,000 Speaker 1: and that these volumes of cash are going to be 54 00:02:51,040 --> 00:02:54,280 Speaker 1: there for the foreseeable I think investors are saying, well, 55 00:02:54,639 --> 00:02:57,680 Speaker 1: the FAD behind us, or the ECBs behind us, sort 56 00:02:57,680 --> 00:03:00,160 Speaker 1: of Bank of Englands behind us, and if it's going 57 00:03:00,200 --> 00:03:02,000 Speaker 1: to be action done in the in the US has 58 00:03:02,040 --> 00:03:04,880 Speaker 1: been has been very very broad. So I think that 59 00:03:05,000 --> 00:03:06,919 Speaker 1: as I've got confidence from that, and I think that 60 00:03:07,000 --> 00:03:09,639 Speaker 1: liquidity in the market is making it a very very 61 00:03:09,760 --> 00:03:14,240 Speaker 1: painful rally. Indeed, it's it's a squeeze so market, you know, 62 00:03:14,560 --> 00:03:17,520 Speaker 1: in terms of the credit markets. Here, we're starting to 63 00:03:17,600 --> 00:03:22,680 Speaker 1: see some bankruptcies and defaults kind of start trickling in 64 00:03:22,720 --> 00:03:24,880 Speaker 1: across the tape here. How do you think this is 65 00:03:24,880 --> 00:03:26,920 Speaker 1: going to play out? As you take a look at 66 00:03:26,919 --> 00:03:29,760 Speaker 1: the credit quality out there in the markets that you 67 00:03:29,760 --> 00:03:35,000 Speaker 1: look at, I mean, credit quality is no doubt going 68 00:03:35,040 --> 00:03:38,480 Speaker 1: to deteriorate pretty much across the board. There'll be very 69 00:03:38,560 --> 00:03:41,200 Speaker 1: very few businesses that will improve their credit quality. And 70 00:03:41,320 --> 00:03:43,640 Speaker 1: while this is going on and now over the last 71 00:03:43,640 --> 00:03:47,440 Speaker 1: decade or so, we've been somewhat immunized from them deteriorating 72 00:03:47,480 --> 00:03:50,720 Speaker 1: credit quality by the by the actions from UH in 73 00:03:50,720 --> 00:03:54,120 Speaker 1: cential banks and government. This h it is just too big. 74 00:03:54,720 --> 00:03:56,720 Speaker 1: I think we're going to see a material spike in 75 00:03:56,760 --> 00:03:59,680 Speaker 1: the default rate. It's very very hard to predict exactly 76 00:03:59,720 --> 00:04:00,880 Speaker 1: what it's going to be in the in the in 77 00:04:00,880 --> 00:04:03,720 Speaker 1: the world of rated securities, we well, we know that 78 00:04:03,760 --> 00:04:06,200 Speaker 1: the individual consumers are going to have problems because they 79 00:04:06,240 --> 00:04:08,560 Speaker 1: won't reach them. Sm evil that problems because they won't 80 00:04:08,560 --> 00:04:10,920 Speaker 1: reach them. And in the end, this does affect the 81 00:04:11,000 --> 00:04:13,880 Speaker 1: larger companies too. It's been quite remarkable how quickly some 82 00:04:13,920 --> 00:04:16,320 Speaker 1: of those companies have run out of money. I mean, 83 00:04:16,680 --> 00:04:18,240 Speaker 1: you know, I'm gonna stick my neck out and say 84 00:04:18,240 --> 00:04:20,400 Speaker 1: I wouldn't be surprised to see at global for thult 85 00:04:20,440 --> 00:04:26,080 Speaker 1: rate by the end of this year approaching ten totally 86 00:04:26,080 --> 00:04:27,360 Speaker 1: two and a half of the end of last year. 87 00:04:27,360 --> 00:04:29,320 Speaker 1: So it's a really quite a big move. Where are 88 00:04:29,360 --> 00:04:34,000 Speaker 1: you hiding mark, where are you investing? Well, it's it's 89 00:04:34,240 --> 00:04:38,560 Speaker 1: tricky in the corporate world. Really, there's a long list 90 00:04:38,600 --> 00:04:40,599 Speaker 1: of sectors I think you really need to try to avoid, 91 00:04:40,640 --> 00:04:43,080 Speaker 1: and you know, whether it be metals, mining, energy, which 92 00:04:43,080 --> 00:04:45,320 Speaker 1: are sort of late cycle names that you don't want 93 00:04:45,320 --> 00:04:49,080 Speaker 1: to on late cycle sectors um. And then there's the 94 00:04:49,080 --> 00:04:52,000 Speaker 1: ones which perhaps more impacted by the current situation, where 95 00:04:52,040 --> 00:04:56,520 Speaker 1: you travel, leisure, retail, of course, an automotive. I think 96 00:04:56,560 --> 00:04:59,400 Speaker 1: that those are the kind of areas to avoid and 97 00:04:59,720 --> 00:05:02,400 Speaker 1: where you can, I think you focus on sectors that 98 00:05:02,440 --> 00:05:05,640 Speaker 1: are more resilient obviously, but you know where the balance 99 00:05:05,640 --> 00:05:08,360 Speaker 1: sheets to the companies are more resilient or regulated, there's 100 00:05:08,400 --> 00:05:11,680 Speaker 1: more visible learning. So I would say, contrary perhaps to 101 00:05:11,680 --> 00:05:14,760 Speaker 1: the to the last recession, let's look at banking, Let's 102 00:05:14,800 --> 00:05:18,960 Speaker 1: look at financial insurance as an incredible way of repricing itself. 103 00:05:19,000 --> 00:05:22,120 Speaker 1: The banks have got very resilient balance sheets thanks to 104 00:05:22,160 --> 00:05:25,200 Speaker 1: the terrific work work done by the authorities or and 105 00:05:25,520 --> 00:05:28,599 Speaker 1: utility you generally regulated much more solid balance sheet in 106 00:05:28,640 --> 00:05:31,679 Speaker 1: each of these industries are all open for business today. 107 00:05:31,680 --> 00:05:35,039 Speaker 1: We're all still paying the bank interest, we're all still 108 00:05:35,040 --> 00:05:37,960 Speaker 1: taking our insurances that we're all still using these utilities. 109 00:05:37,960 --> 00:05:40,280 Speaker 1: So they've they've got the resilient balance sheets and then 110 00:05:40,279 --> 00:05:42,919 Speaker 1: they've got more visible learning. So I think that that 111 00:05:43,040 --> 00:05:46,719 Speaker 1: the list of sex is pretty small, but there's they're 112 00:05:46,760 --> 00:05:48,480 Speaker 1: quite broad. There's quite a few companies that you can 113 00:05:48,480 --> 00:05:51,520 Speaker 1: still invest with there with a lot of confidence. Mark Holeman, 114 00:05:51,560 --> 00:05:53,640 Speaker 1: thank you so much for being with us. Mark Coleman, 115 00:05:53,680 --> 00:05:57,720 Speaker 1: chief executive officer of twenty four Asset Management based in London, 116 00:05:57,760 --> 00:06:01,039 Speaker 1: with twenty three billion dollars of assets under management. And 117 00:06:01,040 --> 00:06:05,120 Speaker 1: I'm struck by the idea that insurance companies and banks 118 00:06:05,240 --> 00:06:07,520 Speaker 1: will be behavens this time around. It just sort of 119 00:06:07,839 --> 00:06:12,400 Speaker 1: highlights how different this particular crisis is than the last one. Paul, Yeah, exactly. 120 00:06:12,440 --> 00:06:14,000 Speaker 1: When you're thinking about the you know, the big money 121 00:06:14,040 --> 00:06:16,160 Speaker 1: center banks and being bailed out and the A I. G. 122 00:06:16,360 --> 00:06:18,960 Speaker 1: S of the world, and so as we've heard, you know, 123 00:06:19,040 --> 00:06:21,880 Speaker 1: time and time again, this is very, very different. This 124 00:06:21,960 --> 00:06:25,960 Speaker 1: is an external shock of pandemic medical issue, healthcare issue, 125 00:06:26,320 --> 00:06:32,600 Speaker 1: not something endemic to the financial system per se. We've 126 00:06:32,600 --> 00:06:35,320 Speaker 1: been talking a lot about the pain in the developing 127 00:06:35,440 --> 00:06:38,880 Speaker 1: world as that area sees a disproportionate hit from the 128 00:06:38,880 --> 00:06:42,360 Speaker 1: removal of financing from the likes of the United States 129 00:06:42,360 --> 00:06:44,320 Speaker 1: and Europe. Here to speak with us, we are so 130 00:06:44,400 --> 00:06:48,240 Speaker 1: pleased to say, is the seminal expert on this area. 131 00:06:48,320 --> 00:06:51,719 Speaker 1: Bill Rhodes, President and chief executive officer of the William 132 00:06:51,800 --> 00:06:55,680 Speaker 1: Our Rhodes Global Advisors, former City Bank chairman, also one 133 00:06:55,680 --> 00:06:58,760 Speaker 1: of the key architects of the restructuring efforts in Latin 134 00:06:58,800 --> 00:07:02,400 Speaker 1: America during the ninth nineties, and the author of the 135 00:07:02,440 --> 00:07:05,600 Speaker 1: book Banker to the World. Bill, thank you so much 136 00:07:05,640 --> 00:07:08,279 Speaker 1: for being back with us. I know that you see 137 00:07:08,600 --> 00:07:12,560 Speaker 1: potentially a crisis in emerging markets that exceeds what we 138 00:07:12,600 --> 00:07:15,600 Speaker 1: have seen in recent history. I want to sort of 139 00:07:15,640 --> 00:07:18,840 Speaker 1: focus in on some of the hotspots, starting with Argentina. 140 00:07:19,280 --> 00:07:23,640 Speaker 1: Argentina on the brink of defaulting once again. Is there 141 00:07:23,680 --> 00:07:27,360 Speaker 1: a threshold for how many times a country kind default 142 00:07:27,680 --> 00:07:31,360 Speaker 1: and what the consequences will be? Anyway, First of all, 143 00:07:31,400 --> 00:07:35,000 Speaker 1: it's great to be on with you, Lisa. Well, Uh, 144 00:07:35,080 --> 00:07:38,200 Speaker 1: I would say in a case of Argentina, they they've 145 00:07:38,240 --> 00:07:41,440 Speaker 1: defaulted eight times in their history. I was structured them 146 00:07:41,480 --> 00:07:45,000 Speaker 1: five times, and they're on the brink of our ninth default. 147 00:07:46,360 --> 00:07:49,800 Speaker 1: They were going to declare default today and they moved 148 00:07:49,800 --> 00:07:54,720 Speaker 1: it off to the two for further discussions with the creditors. 149 00:07:54,760 --> 00:07:57,840 Speaker 1: But they need to make a five million dollar payment 150 00:07:58,480 --> 00:08:03,120 Speaker 1: on their eight six million billion dollars of debt that 151 00:08:03,240 --> 00:08:05,760 Speaker 1: they have in addition to the eighties six billion dollars 152 00:08:05,840 --> 00:08:08,480 Speaker 1: of of of of normal debt in the sense of 153 00:08:08,760 --> 00:08:14,440 Speaker 1: sovereign debt UH two creditors. They also have an outstanding 154 00:08:15,400 --> 00:08:19,280 Speaker 1: of somewhere depending on how you look at the disbursements 155 00:08:19,320 --> 00:08:23,960 Speaker 1: between forty seven and fifty billion with the International Monetary Fund. 156 00:08:24,600 --> 00:08:28,920 Speaker 1: So they are they are basically UH the case that's UH, 157 00:08:28,960 --> 00:08:32,880 Speaker 1: I think right at the lands point of what's going 158 00:08:32,920 --> 00:08:36,240 Speaker 1: on in the American emerging markets. So, Bill, I know 159 00:08:36,320 --> 00:08:38,960 Speaker 1: you've you've educated us UH in the past about how 160 00:08:39,000 --> 00:08:41,120 Speaker 1: this is a little bit different this time in that 161 00:08:41,640 --> 00:08:45,480 Speaker 1: the private sector owns a lot of this debt. Here 162 00:08:46,120 --> 00:08:50,280 Speaker 1: is there any indication that the private sector that I 163 00:08:50,320 --> 00:08:52,560 Speaker 1: mean the public sector will hold off on debt collection. 164 00:08:52,640 --> 00:08:55,439 Speaker 1: Here some of these hedge funds and and and investors, 165 00:08:56,480 --> 00:08:59,320 Speaker 1: I think the only ones who've agreed to hold off 166 00:08:59,360 --> 00:09:03,800 Speaker 1: of a sovereign which in the in the Group of 167 00:09:03,840 --> 00:09:06,439 Speaker 1: twenties said they would hold off to the poorest countries 168 00:09:07,120 --> 00:09:09,839 Speaker 1: until the end of the year, but of course it's 169 00:09:09,880 --> 00:09:14,000 Speaker 1: not even clear uh what that'll be after the end 170 00:09:14,040 --> 00:09:15,760 Speaker 1: of the year. They haven't come up with a plan. 171 00:09:16,360 --> 00:09:18,320 Speaker 1: And on the private sector, there are all sorts of 172 00:09:18,320 --> 00:09:21,120 Speaker 1: discussions going on how the private sector and the public 173 00:09:21,120 --> 00:09:24,760 Speaker 1: sector can work together, but at the up up to now, 174 00:09:24,960 --> 00:09:27,800 Speaker 1: there's been nothing on the on the private sector. And 175 00:09:27,920 --> 00:09:30,760 Speaker 1: as you point out, there's a lot of private sector 176 00:09:30,840 --> 00:09:34,440 Speaker 1: debt out there, uh, not only to the sovereign, but 177 00:09:34,640 --> 00:09:39,000 Speaker 1: two companies uh in uh in these various countries. So 178 00:09:39,120 --> 00:09:44,280 Speaker 1: it's it's sort of a perfect storm type situation. It's 179 00:09:44,280 --> 00:09:49,160 Speaker 1: the worst, I would say that situation I've ever seen 180 00:09:49,200 --> 00:09:52,800 Speaker 1: in my lifetime. And everyone's grappling with how to handle 181 00:09:52,840 --> 00:09:58,040 Speaker 1: it because you have this COVID nineteen problem which even 182 00:09:58,080 --> 00:10:01,400 Speaker 1: the experts are not sure how to resolve it other 183 00:10:01,440 --> 00:10:03,439 Speaker 1: than getting a vaccine, which it doesn't look like we're 184 00:10:03,440 --> 00:10:06,360 Speaker 1: going to have until next year. Just to give you 185 00:10:06,400 --> 00:10:08,760 Speaker 1: some perspective as to how deep the pain is. Just 186 00:10:08,800 --> 00:10:11,040 Speaker 1: to give you a sense of the nations that have 187 00:10:11,120 --> 00:10:15,560 Speaker 1: dollar bonds UH that are trading at distress levels. It 188 00:10:15,559 --> 00:10:20,920 Speaker 1: includes Venezuela, Argentina, Lebanon, Ecuador, Zambia, Zambia, Surinam, going all 189 00:10:20,920 --> 00:10:25,160 Speaker 1: the way through it to Nigeria and El Salvador and 190 00:10:25,160 --> 00:10:28,800 Speaker 1: and a host of others. I'm just wondering what you think, bill, 191 00:10:28,880 --> 00:10:32,319 Speaker 1: based on your experience, should be done for this at 192 00:10:32,320 --> 00:10:34,760 Speaker 1: a time when some of these emerging markets are actually 193 00:10:34,800 --> 00:10:38,160 Speaker 1: trying what developed markets are doing and printing money, they're 194 00:10:38,160 --> 00:10:43,240 Speaker 1: just doing quewie, risking more inflation and further capital flight. Right, 195 00:10:43,280 --> 00:10:46,200 Speaker 1: and you're talking about just dollar denominated debt, because you 196 00:10:46,280 --> 00:10:49,480 Speaker 1: have two other phenomena out there. None of these countries, 197 00:10:49,520 --> 00:10:52,760 Speaker 1: particularly Eastern Europe and elsewhere, and some in Africa have 198 00:10:52,880 --> 00:10:56,800 Speaker 1: your dead also so um and a lot of people 199 00:10:56,840 --> 00:10:59,640 Speaker 1: tend not to factor that in. And then of course 200 00:10:59,679 --> 00:11:03,840 Speaker 1: you have a one belt, one road UH Chinese lending 201 00:11:04,360 --> 00:11:08,840 Speaker 1: policies that are outstandings of anywhere, because they're you know, 202 00:11:08,880 --> 00:11:12,840 Speaker 1: it's very obscure as to how the outstanding, what the 203 00:11:12,840 --> 00:11:16,880 Speaker 1: outstandings are, and what the collection arrangements are the credit 204 00:11:16,960 --> 00:11:20,240 Speaker 1: arrangements any the estimate there is anywhere from two hundred 205 00:11:20,320 --> 00:11:25,120 Speaker 1: and forty billion to to five billion. And so I 206 00:11:25,160 --> 00:11:27,559 Speaker 1: think what needs to be done here is the I 207 00:11:27,679 --> 00:11:30,240 Speaker 1: m F and the World Bank have to sit down 208 00:11:30,760 --> 00:11:33,800 Speaker 1: with a group of twenty and try and work out 209 00:11:34,080 --> 00:11:38,400 Speaker 1: some sort of a plan UH, starting on the sovereign side, 210 00:11:38,720 --> 00:11:41,679 Speaker 1: but also try and see if you can get an 211 00:11:41,679 --> 00:11:45,079 Speaker 1: inner link with the private sector, as we did with 212 00:11:45,160 --> 00:11:49,640 Speaker 1: the Brady bonds in the late nineteen eighties in the 213 00:11:49,720 --> 00:11:53,480 Speaker 1: early nineties UH. And the situation here is much much 214 00:11:53,520 --> 00:11:58,200 Speaker 1: worse because there it was an economic debt crisis, but 215 00:11:58,320 --> 00:12:01,200 Speaker 1: you didn't have a health crisis, and so many of 216 00:12:01,200 --> 00:12:04,360 Speaker 1: these countries in the emerging markets don't have decent health systems. 217 00:12:04,520 --> 00:12:08,480 Speaker 1: And then in Latin America exacerbated, you have five million 218 00:12:09,120 --> 00:12:13,439 Speaker 1: Venezuelan refugees UH in Latin America, and that puts at 219 00:12:13,520 --> 00:12:19,280 Speaker 1: risk countries like Colombia, Ecuador, through some of the islands 220 00:12:19,320 --> 00:12:23,760 Speaker 1: in the Caribbean and UH and also northern Brazil UH. 221 00:12:23,800 --> 00:12:26,000 Speaker 1: And I would just say on Brazil is going through 222 00:12:26,400 --> 00:12:29,679 Speaker 1: probably one of the worst periods it's had because they 223 00:12:29,720 --> 00:12:31,959 Speaker 1: just got out of recession. And now they're going to 224 00:12:32,040 --> 00:12:36,040 Speaker 1: go back into recession with five percent negative growth this 225 00:12:36,120 --> 00:12:38,800 Speaker 1: year with the president who doesn't want to recognize that 226 00:12:38,880 --> 00:12:42,480 Speaker 1: COVID nineteen is a problem. So, Bill, you mentioned that 227 00:12:42,600 --> 00:12:44,480 Speaker 1: China a little bit. In China, I know that during 228 00:12:44,520 --> 00:12:46,959 Speaker 1: the last financial crisis two thousand eight, two thousand nine, 229 00:12:47,080 --> 00:12:50,439 Speaker 1: China was there, uh pumped a bunch of money into 230 00:12:50,520 --> 00:12:54,040 Speaker 1: the world economy. Is that still the case now? Can 231 00:12:54,080 --> 00:12:58,280 Speaker 1: some of these emerging markets depend upon liquidity coming from China? Well, 232 00:12:58,280 --> 00:13:01,240 Speaker 1: the reason I mentioned China was you have a phenomenon 233 00:13:01,280 --> 00:13:03,280 Speaker 1: that didn't exist in OH eight and O nine, which 234 00:13:03,320 --> 00:13:06,240 Speaker 1: is one Belt, one road, and all of those outstandings 235 00:13:06,240 --> 00:13:09,439 Speaker 1: are already there. So uh, I think China is in 236 00:13:09,440 --> 00:13:12,280 Speaker 1: a much more difficult position. Plus, their debt has been 237 00:13:12,320 --> 00:13:16,320 Speaker 1: allowed as a starting with their bailout, I would say 238 00:13:16,400 --> 00:13:18,720 Speaker 1: of the world in two thousand and eight two thousand nine, 239 00:13:18,720 --> 00:13:22,679 Speaker 1: where they put into infrastructure and brought commodities from a 240 00:13:22,720 --> 00:13:26,280 Speaker 1: lot of these developing countries to the tune of eight 241 00:13:26,320 --> 00:13:30,400 Speaker 1: hundred billion dollars almost a trillion dollars. And they are 242 00:13:30,400 --> 00:13:32,960 Speaker 1: not going to be a factor today because their own 243 00:13:33,440 --> 00:13:35,880 Speaker 1: as they were then, because of their own Uh. You 244 00:13:35,920 --> 00:13:38,360 Speaker 1: know debt load that they have, and they're going to 245 00:13:38,440 --> 00:13:41,320 Speaker 1: be fighting just to keep the Chinese economy in a 246 00:13:41,360 --> 00:13:45,160 Speaker 1: positive growth mode this year. So the answer to your 247 00:13:45,240 --> 00:13:48,200 Speaker 1: question is they will be important, but they are not 248 00:13:48,240 --> 00:13:50,000 Speaker 1: going to bail us out this time, and they have 249 00:13:50,280 --> 00:13:53,120 Speaker 1: their own problems with the emerging markets, which raises a 250 00:13:53,240 --> 00:13:56,640 Speaker 1: question who's going to take leadership in helping the developing 251 00:13:56,720 --> 00:14:00,480 Speaker 1: world get out of this mess? Well, suppose of league 252 00:14:01,280 --> 00:14:03,960 Speaker 1: people think that the G twenty will get their act together, 253 00:14:04,000 --> 00:14:06,520 Speaker 1: But as you know, they're very fractured. And one of 254 00:14:06,520 --> 00:14:09,360 Speaker 1: the things I give credit to my old friend Gordon 255 00:14:09,400 --> 00:14:13,240 Speaker 1: Brown was when he put everyone together at the London 256 00:14:13,559 --> 00:14:16,960 Speaker 1: conference at the time in two thousand nine, at the 257 00:14:17,000 --> 00:14:20,640 Speaker 1: time of the Great Financial Crisis, everyone agreed to work together. 258 00:14:21,160 --> 00:14:24,000 Speaker 1: We don't even have an arrangement where these G twenty 259 00:14:24,040 --> 00:14:26,520 Speaker 1: countries have agreed to work together on trying to find 260 00:14:26,840 --> 00:14:30,840 Speaker 1: anti virals in a vaccine. So, unfortunately, we're going into 261 00:14:30,840 --> 00:14:34,560 Speaker 1: a period with a very fractured leadership situation in the 262 00:14:34,600 --> 00:14:38,160 Speaker 1: so called developed world and real problems with leadership in 263 00:14:38,160 --> 00:14:41,480 Speaker 1: the developing world. We're speaking with Bill Rhodes, President and 264 00:14:41,520 --> 00:14:44,960 Speaker 1: CEO of William R. Rhodes Global Advisors, former City Bank 265 00:14:45,040 --> 00:14:47,960 Speaker 1: chairman Bill. You know, as we think about you know 266 00:14:48,520 --> 00:14:51,400 Speaker 1: kind of how the the arc of how this virus 267 00:14:51,480 --> 00:14:54,960 Speaker 1: has spread from China to Europe to the US. Um 268 00:14:55,080 --> 00:14:58,640 Speaker 1: you know, there's varying levels of healthcare systems there. But 269 00:14:58,760 --> 00:15:02,280 Speaker 1: me think about in American emerging markets in general, the 270 00:15:02,320 --> 00:15:06,560 Speaker 1: health care systems in most places are just not as 271 00:15:06,680 --> 00:15:09,000 Speaker 1: robust as we've seen in kind of some of the 272 00:15:09,000 --> 00:15:12,000 Speaker 1: Western economies. How bad do you think it's really going 273 00:15:12,040 --> 00:15:15,240 Speaker 1: to get in and just just take Latin America for example, 274 00:15:16,080 --> 00:15:18,480 Speaker 1: I think it could get very bad. I think Brazil 275 00:15:18,560 --> 00:15:21,360 Speaker 1: is an example because they haven't put the money in 276 00:15:21,360 --> 00:15:24,840 Speaker 1: the health system. Argentina is better off in that sense. 277 00:15:24,840 --> 00:15:29,640 Speaker 1: In Chile, Prue is all right to a certain point. 278 00:15:29,680 --> 00:15:33,120 Speaker 1: But what's added to all of this is he's Venezuelan 279 00:15:33,200 --> 00:15:36,840 Speaker 1: refugees that have been forced out of their country. So 280 00:15:36,960 --> 00:15:40,360 Speaker 1: it's it's really the perfect storm that we're looking at here, 281 00:15:40,920 --> 00:15:43,640 Speaker 1: and I think it's going to be very, very difficult. 282 00:15:44,080 --> 00:15:46,640 Speaker 1: And then when you want to look at the COVID situation, 283 00:15:46,680 --> 00:15:49,680 Speaker 1: as you already have mentioned, I think on a prior 284 00:15:50,440 --> 00:15:53,720 Speaker 1: segment here is that you're starting to see new cases 285 00:15:53,760 --> 00:15:56,280 Speaker 1: again in places like South Korea, which thought they had 286 00:15:56,280 --> 00:16:00,160 Speaker 1: gotten rid of it, Singapore. Uh, even some case is 287 00:16:00,200 --> 00:16:03,960 Speaker 1: now reappearing in China. And this is not even taking 288 00:16:04,000 --> 00:16:06,840 Speaker 1: to account the so called famous second wave, which is 289 00:16:06,840 --> 00:16:09,760 Speaker 1: supposed to hit us in the fall, because we won't 290 00:16:09,800 --> 00:16:11,560 Speaker 1: have a vaccine by then, and it will be it's 291 00:16:11,560 --> 00:16:15,240 Speaker 1: not clear if we'll have an anti viral either by then. 292 00:16:15,920 --> 00:16:18,560 Speaker 1: Uh and so uh. If you want to pattern this 293 00:16:18,680 --> 00:16:21,400 Speaker 1: somewhat on the Spanish flu, it was the second wave 294 00:16:21,480 --> 00:16:24,800 Speaker 1: that was the most destructive, more so than the first wave. 295 00:16:25,360 --> 00:16:28,760 Speaker 1: And I think that's part of the problem, the fractured leadership, 296 00:16:29,560 --> 00:16:34,200 Speaker 1: even on an issue like COVID nineteen bill. We've talked 297 00:16:34,240 --> 00:16:37,960 Speaker 1: a lot about how the amount of emerging market debt 298 00:16:38,560 --> 00:16:42,760 Speaker 1: has tripled by some counts in the past decade or so, 299 00:16:42,840 --> 00:16:45,200 Speaker 1: and I'm just wondering who's going to bear the brunt 300 00:16:45,200 --> 00:16:48,720 Speaker 1: of the losses if there is a mass for structuring 301 00:16:49,520 --> 00:16:51,600 Speaker 1: like the one that you're calling for an order to 302 00:16:51,640 --> 00:16:56,800 Speaker 1: remedy the situation. Well, I think for governments who have lent, uh, 303 00:16:56,880 --> 00:16:59,720 Speaker 1: it's much easier to a SOB, But for the private sectors, 304 00:16:59,760 --> 00:17:02,120 Speaker 1: lent is going to be very, very difficult. You're gonna 305 00:17:02,160 --> 00:17:04,560 Speaker 1: have a lot of bankruptcies. I think there would be 306 00:17:04,640 --> 00:17:09,760 Speaker 1: some real hits uh to various institutions that have taken 307 00:17:09,760 --> 00:17:13,000 Speaker 1: on all this that and you too remember, well, I've 308 00:17:13,000 --> 00:17:16,880 Speaker 1: been on your show for years wondering, you know, wondering 309 00:17:16,920 --> 00:17:18,840 Speaker 1: when this was going to hit because of the reach 310 00:17:18,920 --> 00:17:22,520 Speaker 1: and search for yield that we've seen, and so there's 311 00:17:22,520 --> 00:17:25,879 Speaker 1: so much exposure out there, uh, and a lot of 312 00:17:25,880 --> 00:17:27,560 Speaker 1: this is going to come home to roots. So I 313 00:17:27,560 --> 00:17:29,600 Speaker 1: think it's we're in a very difficult period. So my 314 00:17:29,720 --> 00:17:32,679 Speaker 1: hope is that the G twenty can get its act together, 315 00:17:33,280 --> 00:17:37,120 Speaker 1: both on a financial basis and on a health basis. Uh. 316 00:17:37,160 --> 00:17:39,440 Speaker 1: And that's what I think we desperately need, or we're 317 00:17:39,440 --> 00:17:41,960 Speaker 1: going to go through a very very difficult period over 318 00:17:42,000 --> 00:17:44,840 Speaker 1: the next two years. Bill, thanks so much for joining us. 319 00:17:44,840 --> 00:17:47,560 Speaker 1: We really appreciate your perspective. As always, when we talk 320 00:17:47,640 --> 00:17:51,680 Speaker 1: about the emerging markets and some of the credit challenges arising, 321 00:17:51,680 --> 00:17:53,840 Speaker 1: there's no one better to speak to than Bill Rhodes, 322 00:17:53,880 --> 00:17:57,680 Speaker 1: President CE of William R. Rhodes Global Advisors, former chairman 323 00:17:57,800 --> 00:18:00,680 Speaker 1: of City Bank, with tons of X variance years of 324 00:18:00,720 --> 00:18:04,679 Speaker 1: experience dealing with emerging markets Latin America in particular and 325 00:18:04,800 --> 00:18:08,320 Speaker 1: some of their fiscal challenges over the years. So at leasta, 326 00:18:08,320 --> 00:18:11,960 Speaker 1: it just sounds like there's much more pain for the 327 00:18:12,040 --> 00:18:15,760 Speaker 1: emerging markets, the company, the countries themselves, the people as 328 00:18:15,800 --> 00:18:18,679 Speaker 1: well as the investors in those markets. Yeah, and just 329 00:18:18,760 --> 00:18:22,800 Speaker 1: to sort of highlight how much debt these companies, companies 330 00:18:22,800 --> 00:18:26,000 Speaker 1: and countries have, you know, hundreds of billions of dollars 331 00:18:26,040 --> 00:18:29,000 Speaker 1: that they have incurred over recent years, and there's a 332 00:18:29,080 --> 00:18:32,320 Speaker 1: question who's going to bear the losses? And some people saying, well, 333 00:18:32,359 --> 00:18:34,880 Speaker 1: you know, it's time to reinvest in some of these 334 00:18:34,920 --> 00:18:37,919 Speaker 1: areas because of the yields being offered. Yet you have 335 00:18:38,000 --> 00:18:40,280 Speaker 1: to wonder what the capital flight will be like as 336 00:18:40,280 --> 00:18:46,160 Speaker 1: the defaults really pick up lesa. You know, I grew 337 00:18:46,240 --> 00:18:49,879 Speaker 1: up within a household where my parents were children of 338 00:18:50,080 --> 00:18:52,919 Speaker 1: the depression, and it really impacted even you know, all 339 00:18:52,920 --> 00:18:55,800 Speaker 1: through my childhood kind of how they viewed life in 340 00:18:55,920 --> 00:19:00,119 Speaker 1: terms of money and you know, food security and all 341 00:19:00,160 --> 00:19:01,840 Speaker 1: these things. And I think, you know, it was such 342 00:19:01,840 --> 00:19:05,440 Speaker 1: a such a significant impact on their lives that really, 343 00:19:05,440 --> 00:19:07,879 Speaker 1: I think impact of them their entire lives. And some 344 00:19:07,920 --> 00:19:12,440 Speaker 1: folks are questioning whether this pandemic will have a similar 345 00:19:12,520 --> 00:19:14,760 Speaker 1: effect on some of the young folks today and what 346 00:19:14,800 --> 00:19:18,400 Speaker 1: it means for consumer behavior and will the consumer actually 347 00:19:18,480 --> 00:19:22,040 Speaker 1: come back and and spend an act uh, coming out 348 00:19:22,040 --> 00:19:24,240 Speaker 1: of the pandemic as they did going into the pandemic. 349 00:19:24,280 --> 00:19:27,080 Speaker 1: Christopher Condent, he's a Federal Reserve reporter for Bloomberg News 350 00:19:27,560 --> 00:19:30,320 Speaker 1: joining US Washington, d C. Christopher, thanks so much. I 351 00:19:30,359 --> 00:19:33,520 Speaker 1: know you kind of had a really interesting story Scarred 352 00:19:33,560 --> 00:19:37,639 Speaker 1: and Scared the reshaping of American consumer begins. This is really, uh, 353 00:19:37,800 --> 00:19:42,520 Speaker 1: I think fascinating story. What did you find out? Thank you, Paul. Yeah, 354 00:19:42,520 --> 00:19:47,520 Speaker 1: you know, um, I think we're compared to any expectations 355 00:19:47,560 --> 00:19:52,080 Speaker 1: for a quick return of the American consumer, there's not 356 00:19:52,200 --> 00:19:54,480 Speaker 1: a lot of evidence to support that that would be 357 00:19:54,520 --> 00:19:58,040 Speaker 1: the case, simply because the consumer is getting hit on 358 00:19:58,160 --> 00:20:02,800 Speaker 1: really multiple levels. This story that I wrote about addresses 359 00:20:03,400 --> 00:20:06,520 Speaker 1: three levels, where first of all, the most obvious is 360 00:20:06,560 --> 00:20:10,000 Speaker 1: that a lot of people are losing their income, so 361 00:20:10,080 --> 00:20:13,080 Speaker 1: it's not about their willingness to spend, but their ability 362 00:20:13,119 --> 00:20:15,879 Speaker 1: to spend, and that's going to be severely damaged and 363 00:20:16,000 --> 00:20:19,960 Speaker 1: probably in many cases for quite a while. But then 364 00:20:20,040 --> 00:20:22,960 Speaker 1: moving even beyond that, we know from past experience, and 365 00:20:23,000 --> 00:20:26,560 Speaker 1: you brought up the great depression, which I also talked 366 00:20:26,600 --> 00:20:30,680 Speaker 1: about in that story. Um, there is a knock on effect. 367 00:20:30,760 --> 00:20:34,080 Speaker 1: It's not just for those people that lose their job 368 00:20:34,160 --> 00:20:36,920 Speaker 1: and lose income, but when you see neighbors and friends 369 00:20:36,960 --> 00:20:41,480 Speaker 1: and family members affected. It also we know from the 370 00:20:41,520 --> 00:20:46,080 Speaker 1: past experience can affect people's spending habits. They get a 371 00:20:46,080 --> 00:20:49,200 Speaker 1: little bit more cautious. Uh. And and you know what 372 00:20:49,320 --> 00:20:52,359 Speaker 1: I thought was really interesting. The economists that I spoke 373 00:20:52,440 --> 00:20:55,800 Speaker 1: to brought up again and again that this is the 374 00:20:55,840 --> 00:20:58,800 Speaker 1: second time in the space of about twelve years where 375 00:20:58,800 --> 00:21:02,240 Speaker 1: we're hearing this is the worst the session since the 376 00:21:02,280 --> 00:21:05,840 Speaker 1: Great Depression, and that really can begin We don't know. 377 00:21:05,960 --> 00:21:09,959 Speaker 1: This is a bit speculative, but that can really affect 378 00:21:10,040 --> 00:21:14,800 Speaker 1: the psyche of people as workers, as consumers for a 379 00:21:14,920 --> 00:21:18,200 Speaker 1: very long time, just as you talked about your parents. 380 00:21:18,240 --> 00:21:21,240 Speaker 1: And then finally, just the other obvious thing about this, 381 00:21:21,600 --> 00:21:25,120 Speaker 1: it's not just about economics for the consumer, it's about 382 00:21:25,160 --> 00:21:29,800 Speaker 1: their own health. This contagion can affect you. Obviously, it 383 00:21:29,880 --> 00:21:35,800 Speaker 1: can kill people, so that adds another elements of fear. Um, 384 00:21:35,840 --> 00:21:39,200 Speaker 1: again we're being speculative here. We don't know how long 385 00:21:39,240 --> 00:21:42,600 Speaker 1: it's gonna last. But when you talk about risks like this. 386 00:21:43,400 --> 00:21:48,359 Speaker 1: It brings in the emotional side of decision making for consumers, 387 00:21:48,400 --> 00:21:52,280 Speaker 1: and economists that have studied that say it's very difficult 388 00:21:52,480 --> 00:21:55,679 Speaker 1: to overcome. It doesn't mean everybody's gonna stop shopping, but 389 00:21:55,920 --> 00:21:58,960 Speaker 1: even at the margin, if many millions of people are 390 00:21:59,040 --> 00:22:01,960 Speaker 1: affected by the US for a long period of time, 391 00:22:02,000 --> 00:22:05,200 Speaker 1: that will have a great drag on our economy, Chris. 392 00:22:05,240 --> 00:22:07,600 Speaker 1: Some people say that the consumer is in much better 393 00:22:07,640 --> 00:22:10,240 Speaker 1: situation now than it was getting into the two thousand 394 00:22:10,280 --> 00:22:14,080 Speaker 1: and eight crisis, and that the US government has supplied 395 00:22:14,160 --> 00:22:17,720 Speaker 1: a big enough stimulus to offset a good deal of 396 00:22:17,760 --> 00:22:21,359 Speaker 1: the mispay for a larger proportion of the US population. 397 00:22:21,400 --> 00:22:24,520 Speaker 1: They point to that as one of the reasons why 398 00:22:24,600 --> 00:22:28,040 Speaker 1: consumer spending may be more resilient. On the other side 399 00:22:28,040 --> 00:22:30,320 Speaker 1: of this, did any of the economists you spoke with 400 00:22:30,400 --> 00:22:33,560 Speaker 1: address that, Yeah, well, there's a couple of things to 401 00:22:33,600 --> 00:22:36,440 Speaker 1: say there, I think, Lisa Um, it's true that on 402 00:22:36,680 --> 00:22:42,840 Speaker 1: aggregate the if you look at household debt two income, 403 00:22:43,520 --> 00:22:46,560 Speaker 1: it's in a much better place. But those numbers are 404 00:22:46,640 --> 00:22:49,720 Speaker 1: really skewed by the upper end, the top ten percent, 405 00:22:49,880 --> 00:22:54,399 Speaker 1: the top one. If you look at the middle deciles 406 00:22:54,440 --> 00:22:57,879 Speaker 1: across the you know, the distribution of this data. People 407 00:22:57,960 --> 00:23:01,159 Speaker 1: in the middle and even the upper to middle range. 408 00:23:01,480 --> 00:23:04,719 Speaker 1: We're not in a very good position in terms of 409 00:23:04,880 --> 00:23:09,359 Speaker 1: debt income before this, so those numbers are slightly misleading. 410 00:23:09,359 --> 00:23:13,480 Speaker 1: I think. Second is that it's true there has been 411 00:23:13,520 --> 00:23:16,479 Speaker 1: a huge amount of support being brought up by the 412 00:23:16,480 --> 00:23:21,040 Speaker 1: federal government. Um, now the question is how long does 413 00:23:21,080 --> 00:23:24,560 Speaker 1: that is that a sufficient enough bridge. It may help 414 00:23:24,640 --> 00:23:28,560 Speaker 1: for a while, but you know, unemployment benefits even with 415 00:23:28,640 --> 00:23:30,760 Speaker 1: the extension in the care Is Act going out to 416 00:23:30,800 --> 00:23:34,240 Speaker 1: say thirty nine weeks for a lot of state that's 417 00:23:34,240 --> 00:23:36,600 Speaker 1: gonna help a lot of people, but it won't bridge 418 00:23:36,640 --> 00:23:38,560 Speaker 1: the full gap for many people who will lose their 419 00:23:38,640 --> 00:23:42,280 Speaker 1: jobs for longer than that. And the six hundred supplemental 420 00:23:42,320 --> 00:23:44,840 Speaker 1: amount per week that the federal government kicked in as well, 421 00:23:45,000 --> 00:23:50,200 Speaker 1: that's super, but it only lasts until July one, So again, 422 00:23:50,440 --> 00:23:52,920 Speaker 1: how will it really bridge the gap? And and and 423 00:23:53,040 --> 00:23:56,399 Speaker 1: even then, you know, we talk about already the psychological 424 00:23:56,600 --> 00:24:00,400 Speaker 1: scarring effect. If you are able to bridge the gap 425 00:24:00,440 --> 00:24:03,399 Speaker 1: in your income and then you have work again, you know, 426 00:24:03,680 --> 00:24:06,560 Speaker 1: we can still ask are you going to be as 427 00:24:07,320 --> 00:24:10,359 Speaker 1: aggressive in your spending as you wouldn't before? So we 428 00:24:10,400 --> 00:24:12,600 Speaker 1: don't really know the answers to all these questions, but 429 00:24:12,760 --> 00:24:15,480 Speaker 1: it is quite worrying. Chris Condon, thank you so much 430 00:24:15,480 --> 00:24:17,840 Speaker 1: for being with us. Chris Condon, us economy reporter for 431 00:24:17,880 --> 00:24:21,880 Speaker 1: Bloomberg News, joining us on the consumer confidence hit from 432 00:24:21,920 --> 00:24:24,639 Speaker 1: the coronavirus. And I will just say, Paul, it's really 433 00:24:24,680 --> 00:24:29,000 Speaker 1: interesting to see the response to articles about the spread 434 00:24:29,000 --> 00:24:32,160 Speaker 1: of the virus, with some people saying it's fear mongering 435 00:24:32,359 --> 00:24:35,280 Speaker 1: and that the virus has a pretty low fatality rate 436 00:24:35,440 --> 00:24:38,520 Speaker 1: and that the shutdowns also have a high fatality rate, 437 00:24:38,520 --> 00:24:40,639 Speaker 1: and other people saying, well, the reason why it's not 438 00:24:40,680 --> 00:24:42,960 Speaker 1: a lot higher and why we're not seeing many more 439 00:24:43,040 --> 00:24:46,119 Speaker 1: deaths is because of the shutdowns and this sort of 440 00:24:46,160 --> 00:24:50,000 Speaker 1: push pull in public sentiment ongoing as the US and 441 00:24:50,000 --> 00:24:52,760 Speaker 1: the rest of the world considers how to reopen. Yeah. Absolutely, 442 00:24:52,800 --> 00:24:53,879 Speaker 1: and I think it has a little bit to do 443 00:24:53,920 --> 00:24:56,359 Speaker 1: with the kind of where in the country you reside. 444 00:24:56,400 --> 00:24:58,359 Speaker 1: If you're kind of in that New York metro area, 445 00:24:58,600 --> 00:25:00,400 Speaker 1: you probably have a different view than if in Middle 446 00:25:00,440 --> 00:25:03,760 Speaker 1: America where you really haven't been that impacted by it. 447 00:25:06,480 --> 00:25:09,560 Speaker 1: Let's gift to another one that's suffering dramatically, and that 448 00:25:09,760 --> 00:25:14,080 Speaker 1: is the hospitality and lodging sector. We're looking at Marriott International, 449 00:25:14,160 --> 00:25:18,560 Speaker 1: which saw its REVENU revenue per available room plunge ninety 450 00:25:18,920 --> 00:25:22,520 Speaker 1: percent in April. The question is how do you batten 451 00:25:22,560 --> 00:25:24,880 Speaker 1: down the hatches and gird for the future. There, Brian 452 00:25:24,960 --> 00:25:27,399 Speaker 1: Ecker joining us now senior Gaming and Lodging analyst for 453 00:25:27,400 --> 00:25:30,320 Speaker 1: Bloombrick Intelligence. Can you give us a sense, Brian, of 454 00:25:30,440 --> 00:25:33,119 Speaker 1: just how bad the carnage is and has been this 455 00:25:33,160 --> 00:25:39,080 Speaker 1: earning season versus expectations in this sector, the lodging sector. Sure, 456 00:25:39,119 --> 00:25:41,560 Speaker 1: so we entered a situation where most of the major 457 00:25:41,640 --> 00:25:45,439 Speaker 1: lodging companies are already effectively pre announced results and you 458 00:25:45,480 --> 00:25:48,560 Speaker 1: know declines are certainly severe. If you look at revenue 459 00:25:48,560 --> 00:25:52,840 Speaker 1: prevailable room, the key metric that was down about uh 460 00:25:53,000 --> 00:25:55,800 Speaker 1: in the first quarter for both March, for both Mary 461 00:25:55,840 --> 00:25:59,600 Speaker 1: and Hilton, but more notably in April that metric was 462 00:25:59,680 --> 00:26:02,879 Speaker 1: down percent. So you still have a lot of hotels 463 00:26:02,920 --> 00:26:06,199 Speaker 1: that are currently closed. There is some pace of reopening, 464 00:26:06,560 --> 00:26:08,800 Speaker 1: but it's going to be gradual and mixed and phased 465 00:26:08,800 --> 00:26:13,320 Speaker 1: across the world, depending upon the type of hotel. So, Brian, there, 466 00:26:13,800 --> 00:26:16,520 Speaker 1: I guess the question for a lot of industries, a 467 00:26:16,520 --> 00:26:19,200 Speaker 1: lot of companies is kind of consumer behavior. How is 468 00:26:19,240 --> 00:26:21,440 Speaker 1: it going to be affected as we come out on 469 00:26:21,480 --> 00:26:24,199 Speaker 1: the other side of this, what we see material and 470 00:26:24,200 --> 00:26:27,439 Speaker 1: maybe even permanent changes in consumer behavior. I know, you 471 00:26:27,520 --> 00:26:30,480 Speaker 1: do some a lot of work following them, the casinos 472 00:26:30,480 --> 00:26:33,240 Speaker 1: and Macau and as Asia it starts to open up. 473 00:26:33,640 --> 00:26:36,680 Speaker 1: What are some of the early feedback from the hotel's 474 00:26:36,720 --> 00:26:39,960 Speaker 1: and the casino and the other consumer facing businesses there 475 00:26:39,960 --> 00:26:43,159 Speaker 1: in Asia? So it's coming back slowly. I mean early 476 00:26:43,160 --> 00:26:46,160 Speaker 1: indications are is the most recent monthster and we've had 477 00:26:46,200 --> 00:26:49,760 Speaker 1: eighty nine to clients and at least gaming revenue in Asia. 478 00:26:49,880 --> 00:26:52,479 Speaker 1: You know, the hotels also coming back slowly, but because 479 00:26:52,480 --> 00:26:56,320 Speaker 1: they entered this pandemic earlier, arguably they have the potential 480 00:26:56,800 --> 00:27:00,040 Speaker 1: to start to recover um somewhat sooner. I think what 481 00:27:00,080 --> 00:27:02,399 Speaker 1: you're seeing within the US is again it's going to 482 00:27:02,480 --> 00:27:06,639 Speaker 1: be mixed by region, where drive to limited service hotels 483 00:27:07,320 --> 00:27:10,320 Speaker 1: UH in local locations probably can come back a little 484 00:27:10,320 --> 00:27:14,680 Speaker 1: bit quicker, but group hotels that depend on conventions, large resorts, 485 00:27:15,280 --> 00:27:18,520 Speaker 1: major gateway cities are likely to come back somewhat slower, 486 00:27:18,640 --> 00:27:21,480 Speaker 1: and likewise it will be very you know, across the 487 00:27:21,480 --> 00:27:25,879 Speaker 1: world in terms of US versus Europe, etcetera. So we 488 00:27:25,880 --> 00:27:29,800 Speaker 1: were just talking Brian to George about the airline companies 489 00:27:29,840 --> 00:27:32,840 Speaker 1: and saying he was saying that without another government bailout, 490 00:27:32,920 --> 00:27:36,000 Speaker 1: it's unlikely that all of the companies will survive in 491 00:27:36,080 --> 00:27:39,520 Speaker 1: the way that they are currently. What's the consolidation wave 492 00:27:39,680 --> 00:27:42,560 Speaker 1: going to look like in the lodging space if things 493 00:27:42,560 --> 00:27:46,280 Speaker 1: continue the way that they're expected to. Sure, so we've 494 00:27:46,280 --> 00:27:49,560 Speaker 1: already had a tremendous amount of consolidation the lodging sector, 495 00:27:49,680 --> 00:27:52,480 Speaker 1: just to point that out. Um, you know, there are 496 00:27:53,560 --> 00:27:56,840 Speaker 1: many small independent hotels, but certainly the large chains like 497 00:27:56,960 --> 00:28:00,840 Speaker 1: Marriott Hilton benefited from ample consolidation. And then you look 498 00:28:00,840 --> 00:28:03,679 Speaker 1: at companies like Marriott. They just report today, you know, 499 00:28:03,720 --> 00:28:07,960 Speaker 1: they do have four point three billion dollars in liquidity. 500 00:28:08,000 --> 00:28:10,760 Speaker 1: So given the amount of the cash burn rate, if 501 00:28:10,760 --> 00:28:14,200 Speaker 1: you will, that they face during this period of downturn, 502 00:28:14,480 --> 00:28:16,959 Speaker 1: that provides them with quite a long runway for them 503 00:28:17,040 --> 00:28:21,160 Speaker 1: to be able to sustain even very draconian red partic 504 00:28:21,160 --> 00:28:23,960 Speaker 1: clients as large as doesn't mean there could have made 505 00:28:24,000 --> 00:28:28,320 Speaker 1: some combination consolidation or even independent hotels that might try 506 00:28:28,359 --> 00:28:31,000 Speaker 1: to convert their brand flag and convert to uh let's 507 00:28:31,000 --> 00:28:33,480 Speaker 1: say a Marryott brand or something else. But you know, 508 00:28:33,560 --> 00:28:36,399 Speaker 1: it's certainly in terms of consolidation because we've seen so 509 00:28:36,480 --> 00:28:40,080 Speaker 1: much of it already. I think in terms of major chains, uh, 510 00:28:40,160 --> 00:28:43,160 Speaker 1: they are at least for their part, fairly well positioned 511 00:28:43,520 --> 00:28:48,400 Speaker 1: to kind of weather this downturn and come back slowly. Brian, 512 00:28:48,440 --> 00:28:51,200 Speaker 1: where are we in terms of supply of rooms in 513 00:28:51,240 --> 00:28:53,800 Speaker 1: the marketplace? It just feels like there's been a lot 514 00:28:53,840 --> 00:28:55,920 Speaker 1: of hotels, a lot of new construction, a lot of 515 00:28:55,920 --> 00:28:59,680 Speaker 1: supply added to the market. Is that are we oversupplied here? 516 00:28:59,800 --> 00:29:03,360 Speaker 1: Or you think you know, given the pullbacks and demand, 517 00:29:03,560 --> 00:29:06,880 Speaker 1: that the supply and demand er in decent shape. So 518 00:29:06,920 --> 00:29:08,720 Speaker 1: we had seen kind of a low, single legit pace 519 00:29:08,760 --> 00:29:10,840 Speaker 1: of new supply, and there were some concerns that maybe 520 00:29:10,840 --> 00:29:13,880 Speaker 1: supply is growing more quickly and let's say the limited 521 00:29:13,960 --> 00:29:18,960 Speaker 1: or select service segments. The reality is, because of the pandemic, 522 00:29:19,040 --> 00:29:22,360 Speaker 1: you may see some openings delayed. Uh. You know what 523 00:29:22,560 --> 00:29:24,360 Speaker 1: Mary at It said in their calls in terms of 524 00:29:24,400 --> 00:29:28,400 Speaker 1: scheduled or plan hotel openings, they don't know if that 525 00:29:28,400 --> 00:29:34,960 Speaker 1: will be down by or but it certainly will be affected. Um. 526 00:29:35,040 --> 00:29:37,000 Speaker 1: But but again I think in terms of supply, it 527 00:29:37,080 --> 00:29:41,200 Speaker 1: really um, at least some of the slower level of construction, 528 00:29:41,600 --> 00:29:43,760 Speaker 1: they actually worked at the benefit of hotels, and you've 529 00:29:43,800 --> 00:29:46,200 Speaker 1: got a decent number of hotels of construction. Those that 530 00:29:46,240 --> 00:29:51,080 Speaker 1: were fair fairly well along and being built continue to 531 00:29:51,800 --> 00:29:55,920 Speaker 1: work through that construction process. But UM, I think the biggers, 532 00:29:55,920 --> 00:29:58,160 Speaker 1: who's how how long does it take for demand itself 533 00:29:58,200 --> 00:30:01,360 Speaker 1: to recover? And then there's a question Brian, of additional 534 00:30:01,480 --> 00:30:04,840 Speaker 1: spending to try to ensure that people feel confident that 535 00:30:04,880 --> 00:30:07,560 Speaker 1: they are going to get sick or that these hotel 536 00:30:07,640 --> 00:30:10,280 Speaker 1: rooms are clean. I mean, we've heard about some types 537 00:30:10,320 --> 00:30:14,080 Speaker 1: of ventilation that are changing and different cleaning standards that 538 00:30:14,160 --> 00:30:17,600 Speaker 1: can be maintained to sort of show potential clients that 539 00:30:17,680 --> 00:30:20,120 Speaker 1: they are safe. What are you hearing in terms of 540 00:30:20,160 --> 00:30:23,640 Speaker 1: spending on that side? So, UM, I don't know if 541 00:30:23,640 --> 00:30:26,840 Speaker 1: it's a question of spending as much as protocols and practices. 542 00:30:27,000 --> 00:30:29,120 Speaker 1: You know, the way that companies have approached this as 543 00:30:29,120 --> 00:30:32,440 Speaker 1: they think about the process of reopening, is the likely 544 00:30:32,600 --> 00:30:35,960 Speaker 1: to having um some food and beverage outlets closed or 545 00:30:36,000 --> 00:30:39,080 Speaker 1: operating a limited service with a lot of pick up 546 00:30:39,080 --> 00:30:43,240 Speaker 1: and take out of having in some cases of hotels 547 00:30:43,280 --> 00:30:46,080 Speaker 1: are running in very lock and see a limited utilization 548 00:30:46,080 --> 00:30:48,480 Speaker 1: of certain floors, having a lot of safety and queaning 549 00:30:48,480 --> 00:30:52,160 Speaker 1: protocols in place for housekeeping. But the reality is because 550 00:30:52,200 --> 00:30:56,400 Speaker 1: of hotels might find it practical or lose less money 551 00:30:56,440 --> 00:30:59,840 Speaker 1: by opening a temperson often see rather than staying closed 552 00:31:00,440 --> 00:31:03,320 Speaker 1: because they're opening with such limited occupancy in some cases 553 00:31:03,360 --> 00:31:06,840 Speaker 1: in order to mitigate losses. The reality is that accommodating 554 00:31:07,320 --> 00:31:11,240 Speaker 1: UH social distancing might be somewhat easier to execute given 555 00:31:11,240 --> 00:31:14,080 Speaker 1: the fact that the level of ocupancy is so slow 556 00:31:14,120 --> 00:31:19,080 Speaker 1: to begin with, at least during the initial stages of recovery. 557 00:31:20,240 --> 00:31:22,520 Speaker 1: Brian Igger, thanks so much for joining us. We appreciate 558 00:31:22,560 --> 00:31:26,840 Speaker 1: that Brian Egger covers all things hospitality, UH, end gaming 559 00:31:26,920 --> 00:31:29,920 Speaker 1: for Bloomberg Intelligence. Marriott reporting some numbers today in the 560 00:31:29,920 --> 00:31:33,200 Speaker 1: rev bar and the occupancy levels UH you know, obviously 561 00:31:33,280 --> 00:31:36,280 Speaker 1: down significantly, Lisa, And you know, it just kind of 562 00:31:36,320 --> 00:31:38,120 Speaker 1: comes back to the question we're talking with Brian Egger 563 00:31:38,200 --> 00:31:41,680 Speaker 1: on the hospitality and George Ferguson on the airlines. It's 564 00:31:41,920 --> 00:31:44,680 Speaker 1: kind of about consumer behavior. How will consumers come out 565 00:31:44,680 --> 00:31:47,080 Speaker 1: of this on the back half of this pandemic in 566 00:31:47,160 --> 00:31:50,200 Speaker 1: terms of behavior, in terms of going on planes, going 567 00:31:50,240 --> 00:31:53,920 Speaker 1: to hotels, going to conferences and casinos and things like that. Yeah, 568 00:31:53,920 --> 00:31:56,040 Speaker 1: at the same time, we're getting to summer, and I 569 00:31:56,080 --> 00:31:58,360 Speaker 1: will say a lot of my friends and I have 570 00:31:58,440 --> 00:32:01,640 Speaker 1: been talking about the fact that our kids are not 571 00:32:01,680 --> 00:32:04,240 Speaker 1: going to be going to camp and there is no 572 00:32:04,400 --> 00:32:07,560 Speaker 1: sign of vacation on the forefront. What do you do? 573 00:32:07,560 --> 00:32:10,080 Speaker 1: Do you just stay in your home indefinitely? Do you 574 00:32:10,120 --> 00:32:12,320 Speaker 1: try to get out? How do you get out? Do 575 00:32:12,360 --> 00:32:14,080 Speaker 1: you stay at hotels? I mean, these are all the 576 00:32:14,080 --> 00:32:18,080 Speaker 1: considerations as people start to face a very bleak number 577 00:32:18,120 --> 00:32:21,280 Speaker 1: of indefinite months ahead, and it just raises a question 578 00:32:21,360 --> 00:32:25,360 Speaker 1: how can hotels entice people back and what sort of 579 00:32:25,400 --> 00:32:27,239 Speaker 1: the confidence level they have to get Yeah, I think 580 00:32:27,280 --> 00:32:29,160 Speaker 1: and and there's a sizeable part of the population, and 581 00:32:29,200 --> 00:32:32,000 Speaker 1: I think it's a growing percentage that says we need 582 00:32:32,080 --> 00:32:33,400 Speaker 1: to get back out there. We need to get this 583 00:32:33,440 --> 00:32:35,920 Speaker 1: economy going, we need to get out of the house 584 00:32:35,960 --> 00:32:38,520 Speaker 1: and start moving again. You know, we've we've bent the 585 00:32:38,560 --> 00:32:40,800 Speaker 1: curve and maybe we're at the point where it's able, 586 00:32:40,840 --> 00:32:42,200 Speaker 1: we're able to get out there. So I'll have to 587 00:32:42,240 --> 00:32:45,720 Speaker 1: see how that plays out. Thanks for listening to the 588 00:32:45,720 --> 00:32:48,320 Speaker 1: Bloomberg P and L podcast. You can subscribe and listen 589 00:32:48,360 --> 00:32:51,720 Speaker 1: to interviews at Apple Podcasts or whatever podcast platform you prefer. 590 00:32:52,120 --> 00:32:54,880 Speaker 1: Paul Sweeney, I'm on Twitter at pt Sweeney. I'm Lisa 591 00:32:54,880 --> 00:32:57,520 Speaker 1: abram Woids. I'm on Twitter at Lisa abram Woids. One 592 00:32:57,760 --> 00:33:00,240 Speaker 1: before the podcast, you can always catch us World wid 593 00:33:00,240 --> 00:33:04,880 Speaker 1: I'm Bloomberg Radio m