Speaker 1: This is Bloomberg Business Week. I'm Carol Masser and I'm
Speaker 1: Jason Kelly. We're here every day bringing you the latest
Speaker 1: news from the world's of business and finance, plus technology, politics, economics,
Speaker 1: all harnessing the power of Bloomberg Business Week reporters and editors,
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Speaker 1: listen to our radio show weekdays at two pm Eastern
Speaker 1: only on Bloomberg Radio. Let's set the Business week agenda.
Speaker 1: We're gonna start with Dave Wilson. He is our stocks editor,
Speaker 1: of course, also the author and the chart of the day.
Speaker 1: And in a minute we're gonna hear from Gina Martin Adams,
Speaker 1: our chief equity strategist. Dave, I want to start with you,
Speaker 1: help us understand the tone in the market today. Oh,
Speaker 1: it's just a broad based advance here. You've got energy
Speaker 1: stocks at the forefront, given that oil prices are holding
Speaker 1: up at least after the clients we've seen the last
Speaker 1: few weeks. I mean, you're seeing some pretty substantial gains
Speaker 1: to it. A lot of stocks that have been beaten
Speaker 1: up over the past a few weeks. You think about
Speaker 1: Norwegian Cruise Lines or American Airlines or MGM Resorts. I mean,
Speaker 1: there are plenty of stocks like that, and if you
Speaker 1: look at what's down in the SP there aren't that
Speaker 1: many stocks, only thirty three at this point. What's notable, though,
Speaker 1: is that we're seeing weakness among real estate investment trusts
Speaker 1: and that looks like a real area of concern for investors.
Speaker 1: UH specifically when you look at mortgage reads, the ones
Speaker 1: that invest in mortgage backed securities that you know, lend
Speaker 1: money for properties. I mean, we're seeing some companies in
Speaker 1: that area, smaller ones, certainly not SMP five level, that
Speaker 1: are having trouble keeping up with all their demands for money.
Speaker 1: A couple of them, specifically invest Go Mortgage Capital ticker
Speaker 1: i DR and New York Mortgage Trust ticker n y
Speaker 1: m T, have actually come out and said we can't
Speaker 1: meet margin calls at this point, and their shares are
Speaker 1: taking a beating because of that, and it's resulted in
Speaker 1: some week this across real estate at this point. Yeah,
Speaker 1: and we've certainly seen that play out in the mortgage market,
Speaker 1: and that is one of the you know, bond markets,
Speaker 1: the mortgage bond market in particular, that has not seen
Speaker 1: the bounce back or or at least you know, ease
Speaker 1: of concerns that we've seen in other aspects of the
Speaker 1: financial markets. UM, you know. So, yeah, that makes sense
Speaker 1: that that we're seeing some of an impact. Gina, come
Speaker 1: on in. I was listening to you this morning, UM,
Speaker 1: listening to you on Bloomberg Radio. So where are we
Speaker 1: can we assume that once we get through this, that
Speaker 1: you know, everything's going to kind of get back to
Speaker 1: normal for companies and that we bounce back. What are
Speaker 1: your projections here? Well, I think that's a that's a
Speaker 1: tough question. I don't know that we get back to
Speaker 1: normal precisely, because I think we are in the process
Speaker 1: of kind of trying to figure out what normal looks like. UM,
Speaker 1: as we address the crisis, the crisis, as we address
Speaker 1: the health concerns, as we address our infrastructure and our
Speaker 1: capabilities of dealing with this, I think we will continuously
Speaker 1: kind of reassessed how businesses will fund shin over the
Speaker 1: course of the next six twelve maybe even longer that
Speaker 1: six twelve months or maybe even longer. What I will
Speaker 1: say in terms of the equity market, but I think
Speaker 1: is very relevant right now. What you do find almost
Speaker 1: every period is the equity markets from the bottom before
Speaker 1: the fundamentals bottom, we bottom on average about two fifty
Speaker 1: days two hunt five to be precise, before we reach
Speaker 1: our earnings bottom. We average in most cases about a
Speaker 1: year before we make our economics economic bottom, we find
Speaker 1: a bottom in equity prices. So when you ask the
Speaker 1: questions sort of where do we go from here, the
Speaker 1: relevant equity market question is what have we already priced in?
Speaker 1: And how much more do we really need to price?
Speaker 1: When we look at what we've priced in, we've already
Speaker 1: priced for much deeper than average recession experience in the
Speaker 1: earning satlook. So now it's a question of timing. How
Speaker 1: long does it last? How deep does it get? Does
Speaker 1: it last beyond September, because that seems to be about
Speaker 1: what we price. Does it go to December? Does it
Speaker 1: go to next March? Those are the questions investors have
Speaker 1: to ask themselves at this point. And so, Gina, what
Speaker 1: about this divergence as it were, between the health crisis
Speaker 1: and investor for lack of it, a term enthusiasm. I mean,
Speaker 1: is the market still paying attention to mortality rates and
Speaker 1: spread in all of those things? I think so, I
Speaker 1: think the market is definitely paying attention to those. You know,
Speaker 1: if you look at where we are today, we've had
Speaker 1: a tremendous bounce back all but all we've done has
Speaker 1: gone back to Friday's levels. Um, so we're, you know,
Speaker 1: back to where we were a couple of days ago.
Speaker 1: I think that the market is also trying to price
Speaker 1: in what has been an extraordinary effort on the fun
Speaker 1: the part of policymakers. You know, yesterday we've just had
Speaker 1: an absolute bazooka of fed stonelists announced in many ways,
Speaker 1: and now we're starting to price in a potential for
Speaker 1: fiscal stimulus, which that's the game changer too. So well,
Speaker 1: we're absolutely trying to plot the path of virus contagion,
Speaker 1: figure out how to slow that pace of increase. At
Speaker 1: the same time, we are getting the supports necessary to
Speaker 1: try to stabilize the equity market and certainly try to
Speaker 1: provide the economy some shelter from the inevitable fallout, right right,
Speaker 1: And I do wonder about you know, I've heard a
Speaker 1: lot of conversations about you know, getting money into the
Speaker 1: hands of people, but you know, right now, they've got
Speaker 1: to have some security that they're going to be what's
Speaker 1: really more on everybody's mind is that they're going to
Speaker 1: have a job that they certainly come back to her,
Speaker 1: that companies hold them onto and that's crucial for companies
Speaker 1: keeping going. Um, Gina, thank you so much. Gina. Martin Adams,
Speaker 1: chief equity strategist at Bloomberg Intelligence, on the phone from
Speaker 1: New Jersey. Dave Wilson also with us, our stocks editor
Speaker 1: at Bloomberg News, on the phone from New Jersey. You're
Speaker 1: listening to Bloomberg Business Week with Carol Messer and Jason
Speaker 1: Kelly on Bloomberg Radio. We have been very fortunate to
Speaker 1: talk to a number of medical experts, usually this time
Speaker 1: of our show to get an update on where we
Speaker 1: are when it comes to the outbreak. We talk a
Speaker 1: lot throughout the course of the show about the markets.
Speaker 1: Let's understand it from the perspective of Dr Penny Wheeler,
Speaker 1: she is president CEO of a Line of Health, joining
Speaker 1: us on the phone from Minnesota to give you some
Speaker 1: size and scope, as we say, at Bloomberg owns and
Speaker 1: or operates thirteen hospitals more than ninety clinics throughout Minnesota
Speaker 1: and western Wisconsin. Dr Wheeler, thank you so much for
Speaker 1: joining us. Thanks for having me on so help us
Speaker 1: understand what before we talk nationally, what does this look
Speaker 1: like for you in your backyard right now in Minnesota
Speaker 1: and Wisconsin. Yeah, in Minnesota, Wisconsin. I think what we're
Speaker 1: seeing is uh something other geographies have seen sooner than
Speaker 1: we have. We are just on the ramp phase up
Speaker 1: of seeing a more disease burden in our communities. We're
Speaker 1: hoping it's a slower ramp because of some of the
Speaker 1: hygiene and isolation UM protections that have been in but
Speaker 1: that we're at right now downsizing our elective surgery compacy
Speaker 1: so we can support care needs needed in our community.
Speaker 1: I am curious what you think about when we have
Speaker 1: conversations about kind of reopening up the US economy, Um,
Speaker 1: how do you feel about that from a healthcare perspective?
Speaker 1: Or what are you seeing? Because um, you know, certainly
Speaker 1: there are hot spots unfortunately on the coasts, certainly in
Speaker 1: New York City where you know, the New York metro
Speaker 1: area where Jason and I are coming from, and our team, Um,
Speaker 1: but how do you see that? Yeah, Well, first and foremost,
Speaker 1: we think that our ability to actually have the capacity
Speaker 1: and the resources and the protective equipment for our staff
Speaker 1: relies on the social distancing necessary to reduce the burden
Speaker 1: in the community over time so we can actually have
Speaker 1: the resources to care. So priority number one is do
Speaker 1: we we have the right capacity and resources to care
Speaker 1: and can we care well for those who are deal
Speaker 1: So we would say and promote at this time that
Speaker 1: that social distancing is actually vehicle to help out being
Speaker 1: able to be there for our community. So we feel
Speaker 1: strongly about that at this point. Um. We totally understand
Speaker 1: that the economic consequences even right now our significant for people,
Speaker 1: including healthcare organizations, and we have to look at the
Speaker 1: long term consequences of that as well, um, and to
Speaker 1: that balancing act. But right now that is so needed
Speaker 1: for us to make sure that we have the adequate
Speaker 1: resources to care, prayer our communities and for our herosis
Speaker 1: occurring for them. And Dr Wheeler, just briefly, you know,
Speaker 1: what do you think happens next in terms of the
Speaker 1: national outbreak. I'm guessing you're talking to your counterparts across
Speaker 1: the country in terms of the numbers, the predictions, the modeling,
Speaker 1: what's your best guess or your best information at this point.
Speaker 1: I think the challenge has been that that because of
Speaker 1: our um the scarcity of resources around testing, either getting
Speaker 1: adequate testing vehicles, for the ingredients to do testing that
Speaker 1: we haven't had white testing, we need to do very
Speaker 1: detailed monitoring from an epidemiological standpoint, that's not quite difficult.
Speaker 1: So that's why I think our modeling is kind of
Speaker 1: probably the map right now, and we're not really sure.
Speaker 1: We're getting an update from our states but later today
Speaker 1: on what that modeling shows. But it's been very challenging
Speaker 1: because of the pousity of testing resources available at the frontier. Yeah, no,
Speaker 1: I know, right exactly, and in terms of getting access
Speaker 1: to the necessary equipment that is needed. You know, what
Speaker 1: is you know, it's interesting we are obviously covering the
Speaker 1: story so closely, but I'm just curious from your perspective,
Speaker 1: you know, what is it that maybe we are we
Speaker 1: are not telling in the clearest way that maybe we
Speaker 1: need to be. I think that, first of all, I
Speaker 1: really appreciate the news media and getting out that for
Speaker 1: us to be able to talk about how this it
Speaker 1: seem really helps us as healthcare workers do our job
Speaker 1: invest in service of the community really important. I think
Speaker 1: that sometimes things that get lost is like you know, uh,
Speaker 1: we still don't know what the trajectory of this curve
Speaker 1: is and many of our community and until we know,
Speaker 1: we're at a place where its plateaung somewhat to actually
Speaker 1: release restrictions uh um, done in a perilous way, even
Speaker 1: though even though totally understand the economics of this have
Speaker 1: to be balanced of the long economics that the short
Speaker 1: term resource needs. So understand that, and I would say that,
Speaker 1: you know, gosh, in some base I just heard one
Speaker 1: cleaning products were down to a day of supply. I
Speaker 1: protected equipment. Many are down stays of supply to testing
Speaker 1: has been a challenge for for everybody. So those things
Speaker 1: are real. Well, there's more release that is proposedly on
Speaker 1: the way. I'd say that at the front here, those
Speaker 1: are still real constraints. All right, Well, we really appreciate
Speaker 1: the time in some great perspective of Dr Penny Wheeler,
Speaker 1: president CEO of a Line of Health, joining us on
Speaker 1: the phone from Minnesota. You're listening to Bloomberg Business Week
Speaker 1: with Carol Masser and Jason Kelly on Bloomberg Radio, Carol,
Speaker 1: You'll probably remember, uh, last year, more than a year ago,
Speaker 1: I think John, the president of Blackstone, was talking with
Speaker 1: us about where they were making big bets and one
Speaker 1: of those places was warehouses. And man, is that bet
Speaker 1: looking like it's going to pay off? John Gray, of course,
Speaker 1: president of black Stone. Blackstone is one of the subjects
Speaker 1: of the story that is in the upcoming issue of
Speaker 1: Bloomberg business Week. It's on the terminal and online today.
Speaker 1: Noah bou Hire wrote it finance reporter for Bloomberg. He
Speaker 1: joins us on the phone from Seattle along with Joel Webber,
Speaker 1: the editor of Bloomberg business Week. He's on the phone
Speaker 1: from Brooklyn. Noah got us say, great, great story, and man,
Speaker 1: these guys are right in the midst of it. Give
Speaker 1: us the size and scope here. Yeah, so, um, I
Speaker 1: mean you put your finger on it. They made it.
Speaker 1: They've been making an enormous set on warehouses. Last year alone,
Speaker 1: they bought more than um twenty billion dollars worth of
Speaker 1: industrial properties and that that includes warehouses, logistics facilities. Um.
Speaker 1: And you know, as as as we all know, uh,
Speaker 1: you know, I'm the only way you can get stuff
Speaker 1: these days safely is to have it delivered. And um,
Speaker 1: the um just demand for these properties had already been
Speaker 1: extremely high before before the coronavirus came around. Vacancies were
Speaker 1: below five in a lot of places. UM, you know,
Speaker 1: getting those sort of close to city in sale properties
Speaker 1: that that enable last mile delivery and and and for
Speaker 1: people to do online ordering. Uh, it was just really hard.
Speaker 1: So the fundamentals were there, and and now we're seeing
Speaker 1: in a pretty dramatic way, um uh, just the need
Speaker 1: for these properties. So so Noah side and scope, this
Speaker 1: is what we love right here at Bloomberg. UM talk
Speaker 1: to us about Blackstone, and I think there's another firm
Speaker 1: that you mentioned in your story. How much have they
Speaker 1: bought into or invested in a lot a lot? So
Speaker 1: the other firm is a is a real estate read
Speaker 1: called for logists. They're actually the biggest in the US.
Speaker 1: Between the two of them, they have about a billion
Speaker 1: square feet, which is more UM than their next ten
Speaker 1: largest competitors combined. So you're really um, it's it's an
Speaker 1: industry that it's rapidly consolidating and has these two enormous
Speaker 1: players um and uh and and and you know I
Speaker 1: think the important thing to note here, um is that, uh,
Speaker 1: the um sort of the scale has been important in
Speaker 1: in in consolidation in this industry. It's the bigger just
Speaker 1: getting bigger. So Joel, come on in here, because this
Speaker 1: echoes back to a story, a series of stories that
Speaker 1: you and I and a number of people worked on,
Speaker 1: uh towards the end of last year. I think it
Speaker 1: was I don't know, it's all blending together here man
Speaker 1: um related to private equity put it in some context
Speaker 1: for us, well, I think it just shows, um, one
Speaker 1: of the ways that private equity has been able to
Speaker 1: work into all these different hidden facets of our lives,
Speaker 1: and like, this is a really present bet to say, look,
Speaker 1: we know that delivery services above all, are are going
Speaker 1: to be a thing that only increases in demand, and
Speaker 1: that you know proves especially true right right now during
Speaker 1: the coronavirus. UM. So so I think it's just another
Speaker 1: example when when you have as much capital as these
Speaker 1: guys can deploy and you sort of look through um
Speaker 1: America's sort of supply chain, Um, where can they insert
Speaker 1: themselves and add value? And that's clearly what's coming to
Speaker 1: bear here. UM. No, my question for you is sort
Speaker 1: of you know, how lucrative is if it's like you know,
Speaker 1: you think about warehouse and these are just big empty
Speaker 1: spaces you probably don't even need to heat them in
Speaker 1: a lot of different places. What how how lucrative is this? Well,
Speaker 1: I think a lot of it's gonna come down to
Speaker 1: the exact property mix and the financing that was deployed
Speaker 1: um to to get these places that you know, one
Speaker 1: of the dynamics that that has been at playing in
Speaker 1: this this part of the real estate world is it's
Speaker 1: just complete scarcity of properties. The landlords have had a
Speaker 1: lot of pricing power over the last stretch. UM. One
Speaker 1: of the big risks and and and the clouds hanging
Speaker 1: over this real estate and all other real estate right
Speaker 1: now is is just what's demand gonna be. Um. There
Speaker 1: is a lot of industrial wear industrial space across the
Speaker 1: US that's that's not used by e commerce, that's you know,
Speaker 1: helping like auto manufacturers for parts. UM, it's used by
Speaker 1: the oil and gas industry. There are a lot of
Speaker 1: sectors of the economy that are really going to get
Speaker 1: hurt and may not have as much need for this space.
Speaker 1: So one of the big question marks right now is
Speaker 1: what the demand picture is going to look like for um,
Speaker 1: for these properties. Uh, the one thing they do have
Speaker 1: going for them in a big way is just that
Speaker 1: e commerce is is a big piece of the pie,
Speaker 1: and it's a growing piece of the pie, and it's
Speaker 1: an in demand piece of the pie. So I am curious,
Speaker 1: you know, so in terms of you know, Amazon and
Speaker 1: how they fit into this whole picture, I mean, are
Speaker 1: they beholden to them at all or they're a competitor
Speaker 1: when it comes to this space. Um, Amazon leases a
Speaker 1: lot of space, they're want, They're one of lodges this
Speaker 1: big tenants. Um. So uh, it's it's uh, They're They're
Speaker 1: definitely part of the equation here. But you need to
Speaker 1: we need to think more broadly than that. I mean,
Speaker 1: you know grocery stores, you know, Walmart has big hiring
Speaker 1: plans around this. I mean, these are facilities that help
Speaker 1: facilitate um delivery of goods to stores and to people's doorsteps.
Speaker 1: So so when you think about sort of all the
Speaker 1: other companies that are sort of in this space or
Speaker 1: partnering to service sort of the warehouse business, like how
Speaker 1: big an economy does this start to look like? Oh?
Speaker 1: I don't I don't know if I have exact debts
Speaker 1: on that, but um, but you know, there's there's a
Speaker 1: lot of this UM property out there. Um the uh
Speaker 1: you know, to to the point I was saying earlier,
Speaker 1: you know, a lot of this is going to come
Speaker 1: down to how prescient this stuff looks. It's it's really
Speaker 1: going to come down to like the prices that investors paid.
Speaker 1: I mean, I think there's a case to be made
Speaker 1: that you know, black Stone and and prologists that have
Speaker 1: been expanding a lot recently. I mean they they they
Speaker 1: bought these at a time when these assets were extremely
Speaker 1: high priced and um, certainly in the short term amid
Speaker 1: all this uncertainty. It's it's it's hard to see how
Speaker 1: those valuations are going to hold up. UM. And then
Speaker 1: the question becomes is this is this an opportunity for
Speaker 1: the big guys to get even bigger and pick up
Speaker 1: you know, take up you know, buy more of these
Speaker 1: warehouses at lower prices. Right, Yeah, what's the what's the
Speaker 1: calculus like to buy to buying a place? Is it
Speaker 1: like procrimular freeway and population density or what like, what's
Speaker 1: the what's the spreadsheet looks like when they're when they're
Speaker 1: dreaming about these exquisitions only about thirty seconds here. Now, Yeah,
Speaker 1: all of those things, all of those things matter, um.
Speaker 1: But at the end of the day, what they're looking
Speaker 1: at is what sort of rent increases that they're going
Speaker 1: to get over time. That's that's the key, um uh
Speaker 1: for sure. And so all of this uncertainty about the
Speaker 1: economy is is throws those calculations uh into disarray. Alright,
Speaker 1: great stuff, really really nice stories in the upcoming edition
Speaker 1: of Bloomberg bis Week online and on the terminal. Now,
Speaker 1: Noah bu Higher wrote it about private eculeist Big Bet
Speaker 1: on logistics. He joins us from seattlele Webber, Theater of
Speaker 1: this sweet joining us from Brooklyn. You're listening to Bloomberg
Speaker 1: Business Week with Carol Masser and Jason Kelly on Bloomberg Radio.
Speaker 1: And a story that just crossed the Bloomberg talks about
Speaker 1: banks here in New York being blindsided. Uh. And it
Speaker 1: all has to do with um New York virus relief,
Speaker 1: specifically some an executive order that was signed by New
Speaker 1: York Governor Andrew Cuomo. Let's get the details from our
Speaker 1: own Eric Shatsker. He's joining us on the phone from Brooklyn. So, Eric,
Speaker 1: what's going on here? Well, Carol, I don't think anybody
Speaker 1: would accuse Andrew Cuomo of not moving quickly and trying
Speaker 1: to do as much as possible to provide relief to
Speaker 1: his constituents here in New York surrounding. The danger is
Speaker 1: posed by the coronavirus and the economic shutdown it has caused.
Speaker 1: But sometimes when you move quickly, uh, you end up,
Speaker 1: you know, running into some unintended consequences. And that's what
Speaker 1: happened with this executive order that Cuomo signed on Saturday.
Speaker 1: The order is intended to provide relief to New York
Speaker 1: State homeowners into small businesses, many of which are struggling
Speaker 1: because their incomes and the revenues have vanished, UM. And
Speaker 1: they know that they are gonna be able to make
Speaker 1: mortgage payments or loan payments. And so the executive order
Speaker 1: UM requires directs, if you will, New York State supervised
Speaker 1: banks to give ninety days of forbearance to anybody who's
Speaker 1: running into trouble financial trouble because of the coronavirus. But
Speaker 1: there's the unintended consequence that I refer to has to
Speaker 1: do with the scope of the order. The Department of
Speaker 1: Financials um UH Services, which is the regulatory body for
Speaker 1: banks here in New York State, also supervises a bunch
Speaker 1: of foreign banks, and it also has regulatory authority for
Speaker 1: many contracts that are important and elemental to the way
Speaker 1: Wall Street functions, and this order appears to apply to
Speaker 1: those banks into those contracts as well. So while it
Speaker 1: gives ninety days of forbearance on mortgage payments, it also
Speaker 1: gives let's a a hedge fund, you know, that's in
Speaker 1: the midst of a trade surrounding some commercial mortgage backed securities,
Speaker 1: the right to say to say it's the right to
Speaker 1: say to a bank that maybe the counterparty in that trade, sorry,
Speaker 1: I'm not paying for ninety days, even though the value
Speaker 1: of that trade may have collapsed, and and by all
Speaker 1: rights the banks should be able to close out that
Speaker 1: trade or demand collateral. It's it's really quite a crazy situation. Well,
Speaker 1: and it is something and you play this out nicely
Speaker 1: in your story and you talk to some folks, you
Speaker 1: sort of play it out logically that, I mean, this
Speaker 1: is the sort of thing that could have the I mean,
Speaker 1: the huge unintended consequence of really like locking up at
Speaker 1: least parts of the system right here. Yes, that's right.
Speaker 1: So think about it this way. There are potentially hundreds
Speaker 1: of billions of dollars of notional value in these trades. Now,
Speaker 1: the notional value doesn't mean that that we're talking about
Speaker 1: hundreds of billion dollars of potential losses, but it gives
Speaker 1: you a sense of the scale. And if these banks
Speaker 1: are forced to effectively stand off for ninety days, the
Speaker 1: value of these contracts changes can change dramatically. It can
Speaker 1: saddle them with losses that they're not able to collect on.
Speaker 1: It can impair their regulatory capital. It can inhibit their
Speaker 1: ability to function as counterparties in the financial system. It
Speaker 1: may allow other banks that aren't regulated by New York States,
Speaker 1: such as JP Morgan and City Group and Bank of America,
Speaker 1: which are federally chartered, to make give them an unfair
Speaker 1: advantage over these foreign banks such as Barclays or Deutsche Bank.
Speaker 1: Because of this order, it has far reaching implications. It's
Speaker 1: probably fair to assume, Jason that the Governor in his
Speaker 1: office didn't anticipate that this would happen. But already the
Speaker 1: first day of business after this order was signed, and
Speaker 1: that's yesterday. Uh. Some hedge funds and mortgage reads and
Speaker 1: credit funds had lawyers threatening the banks with litigation if
Speaker 1: they tried to foreclose. It's incredible. This it feels like Carol,
Speaker 1: feels like an episode of Billions, you know, I feel
Speaker 1: like Brian Coppleman and curl like, oh, this could be
Speaker 1: a little storyline, alright. One the one caveat here is
Speaker 1: that the Department of Financial Services has yet to issue
Speaker 1: it's rule right to the banks. And somehow, particularly because
Speaker 1: this has now been raised as an issue, as you know,
Speaker 1: it's one of the most read stories in the Bloomberg
Speaker 1: in the past couple of hours. Um, they may get
Speaker 1: a wake up call and realize that they have to
Speaker 1: change the language in in in those regulations. All right, So, Eric,
Speaker 1: only about a minute or so left, got to ask
Speaker 1: you about a big interview you did yesterday with Tom Barrick,
Speaker 1: well known financier, friend of President Trump, real estate investor.
Speaker 1: What was your big takeaway from that because he sort
Speaker 1: of put a proposal out there. Well, Tom has one
Speaker 1: of those unique abilities to connect the dots, you know,
Speaker 1: between what's going on in the financial world and the
Speaker 1: political world. And clearly the guy has met some criticism,
Speaker 1: but he knows his stuff. And and Tom Berrick is
Speaker 1: warning the commercial mortgage business, which includes both the origination
Speaker 1: of loans and the trading of those loans on Wall Street,
Speaker 1: the financing of those loans on Wall Street, is on
Speaker 1: the verge of collapse because again the same things people
Speaker 1: can't pay their debts, can't pay their commercial mortgages, that
Speaker 1: pank can't pay their home mortgages, and because there's so
Speaker 1: much leverage in the system, if that seizes up, it
Speaker 1: threatens an economic collapse that in his mindred livel out
Speaker 1: of the Great Depression, which is what we've been seeing
Speaker 1: play out in the commercial mortgage market today. And what's
Speaker 1: he proposing, Eric Briefly, Oh, he's proposing a number of
Speaker 1: things quickly. He wants that bill from Congress that would
Speaker 1: uh you know, that would give five million dollars of
Speaker 1: primate a billion excuse me in liquidity for the financial
Speaker 1: system someone which could be used for release. He wants
Speaker 1: to suspend things like market market accounting, low modification accounting,
Speaker 1: a new rule coming in on credit loss recognition. What
Speaker 1: he says is if you give the market a ninety
Speaker 1: day time out, you know, he's he's got a great way,
Speaker 1: as you know, of simplifying the language around the stuff.
Speaker 1: Just give people a time out for ninety days and
Speaker 1: then you can take the accrude interest, tack it out
Speaker 1: of the back of the loan, and everything's gonna be okay.
Speaker 1: But without that ninety day time out, things are going
Speaker 1: to continue snowballing as they have these past few days
Speaker 1: with an end. Very few of us can predict, very
Speaker 1: very familiar with timeouts these days, living at home and
Speaker 1: working at home with a two year old as you
Speaker 1: can imagine. All right, Eric Shatsker, thank you very much.
Speaker 1: Great work is always great reporting both today on this
Speaker 1: Cuoma law as well as a great interview with Tom Barrett.
Speaker 1: I'm roam a journal Yeah, but you let me drive.
Speaker 1: Oh no, no, no, non please, I'll do the right
Speaker 1: revalle me. I want to dry ball, just drive baby
Speaker 1: the questions trying Drive to the Globe. Thanks well, try
Speaker 1: us Bloomberg Radio. It is time for the Drive to
Speaker 1: the close back with us as John Augustine, he's chief
Speaker 1: investment officer at Huntington's private bank. They've got roughly eighteen
Speaker 1: billion in assets under management, joining us on the phone
Speaker 1: from Columbus Ohio. John, good to have you back with us.
Speaker 1: Hope you are doing okay, your family okay in this
Speaker 1: crazy time. Yes, shelter in place. But everybody's doing okay.
Speaker 1: We're calling our customers, were doing virtual meetings and and
Speaker 1: everybody's doing okay. So what do you go? Ahead? Go ahead, Jason, Well,
Speaker 1: I think we were probably gonna ask the same question.
Speaker 1: What are you hearing you know, as you talk to
Speaker 1: your customers as they call in, what's the tone? What's
Speaker 1: the tenor if you can generalize, well, the tone is
Speaker 1: number one? That how am I positioned? We've We've tried
Speaker 1: as best we could to be balanced and diversified. That's
Speaker 1: how we went into this. We've rebalanced one. We were
Speaker 1: actually going to look to do it again this week,
Speaker 1: but markets, of course reversed upwards today. But the first
Speaker 1: and foremost is how is my portfolio structured? Then the
Speaker 1: second thing we we have to then be proactive to
Speaker 1: make sure with our clients a couple of things, that
Speaker 1: they have enough cash for six to twelve month cash
Speaker 1: needs and if they don't, we need to raise that.
Speaker 1: And then secondly, we need to confirm time horizons. Because
Speaker 1: time horizons and all the holdings around the portfolios. Now
Speaker 1: we need to do a good job of making sure
Speaker 1: we're meeting the client's investment intent. So those are those
Speaker 1: are really most of the college zation. So what Yeah,
Speaker 1: what's changed in terms of your approach when you look
Speaker 1: at time horizons at this point on? Well, two things. So,
Speaker 1: first off, there's a time horizon around stocks in the
Speaker 1: stock market volatility. We're learning today that stock can obviously
Speaker 1: go up up as violently as they can go down.
Speaker 1: The second thing we are actually coning in on a
Speaker 1: little bit more is income with these now much lower
Speaker 1: bond yields, protecting the income that clients may be looking for.
Speaker 1: And that's a little bit deeper discussion now because rates
Speaker 1: and yields are probably gonna be lower longer. So there's
Speaker 1: two different sets, one for growth, one for income. And
Speaker 1: so let's talk about some of the growth names. Especially, uh,
Speaker 1: you know, we've I know you've got some tech that
Speaker 1: you look at. We were just talking tech with our
Speaker 1: Dave Wilson, and you know we have seen the NASDAC
Speaker 1: with a little bit of resilience over the past few days.
Speaker 1: What's the tech play here? What are some names you like? Well,
Speaker 1: our team has been coming into some of the names
Speaker 1: they couldn't get into before. So quite frankly, the equity
Speaker 1: teams come into Apple, they've come into a video, Um,
Speaker 1: the growth team has come in excuse me, the growth
Speaker 1: team has come into advance advanced Micro. Then we've also
Speaker 1: come into into it, and a lots of different approaches
Speaker 1: for areas that were arguably much more expensive than now
Speaker 1: we're obviously much more attractive to us. So there's been
Speaker 1: a lot of our our equity team has been doing
Speaker 1: a lot of upgrading to areas they couldn't get into
Speaker 1: now obviously they're much cheaper like what, well, don't know,
Speaker 1: it's we were talking about. They're coming into the tech
Speaker 1: names has mentioned they're coming into the advanced micro and video,
Speaker 1: the Apple, the into it. So there's different sets that
Speaker 1: we're scaling into, not jumping into, but scaling into. Well, John,
Speaker 1: I do wonder if we're going to look back at
Speaker 1: this time and say, Jason and I've had these conversations before,
Speaker 1: and I think you know, if you had the guts
Speaker 1: during the crisis and had the cash that enabled you
Speaker 1: to do it, there were certainly some names that were
Speaker 1: you know, at firesale prices um. And I do think
Speaker 1: when you look at it now too, in terms of
Speaker 1: how much some some name in particular, not just the
Speaker 1: overall market have been beaten up. Um, there has to
Speaker 1: be opportunities there. And I do wonder if we're going
Speaker 1: to look back at this time once we get through it, um,
Speaker 1: and just from a stock market basis, that this was
Speaker 1: a great buying opportunity. Yeah. The first thing, obviously we
Speaker 1: have to get through, Carol, was obviously the number of
Speaker 1: cases exact, the number of cases under control and contained,
Speaker 1: and then obviously get to treatment. But the second part
Speaker 1: of this is then we're going to come into some
Speaker 1: eye popping economic numbers here over the next couple of weeks.
Speaker 1: It's going to start Thursday with the weekly unemployment claims
Speaker 1: as you have been talking about, and how how will
Speaker 1: the market be able to navigate those? We think the
Speaker 1: market has a lot of bad priced into it. It
Speaker 1: was interesting that it all opened higher in Asia overnight,
Speaker 1: kept pace up in Europe and we did not sell
Speaker 1: off into the clothes, which we've often been doing after
Speaker 1: Europe closes. So there's how much more bad news can
Speaker 1: there be? Now that the Olympics are postponed for a year,
Speaker 1: and the number of cases, unfortunately in Europe and the US,
Speaker 1: continues to rise. So we're starting to think of it
Speaker 1: in those terms, the bad news effect, which often makes
Speaker 1: markets turn when it's least expected, as you know, and
Speaker 1: so what worries you at this point, John, Well, the
Speaker 1: case is number one. Getting the cases contained, that's number one.
Speaker 1: We agree that, you know, we hope on the other
Speaker 1: side of this, there's a timetable for getting back to
Speaker 1: work that may be arguably a little bit more difficult
Speaker 1: in Europe. China seems to already be starting to do it.
Speaker 1: It looks like the administration at least is starting a
Speaker 1: plan here, So getting just the actual logistics of getting
Speaker 1: back to work once the virus has been contained. So
Speaker 1: that's first and foremost on our mind. Then the second
Speaker 1: thing on our mind would be what will we all
Speaker 1: come back in the economy? Will the consumer come back
Speaker 1: in the economy in June, July, August is one would suspect,
Speaker 1: are we still going to hold back? We think those
Speaker 1: are the three key months for the share June, July,
Speaker 1: August and so and just only abouts left. I mean,
Speaker 1: how much do you worry? I feel like this is
Speaker 1: going to become a very relevant question. It feels like,
Speaker 1: over the next few days, how much do you worry
Speaker 1: about going back to work too soon? No, that's that
Speaker 1: there's gonna be a balancing act there, right, There's gonna
Speaker 1: be very much a balancing act there. From from really
Speaker 1: a global perspective, there's gonna be a balancing act there.
Speaker 1: And so that's what we don't know. We just are.
Speaker 1: Our point is we're hoping there is a plan at
Speaker 1: least or a thought. We started talking about it with
Speaker 1: some of our business customers. That you gotta remember on
Speaker 1: the other side of this is getting back to work, right,
Speaker 1: So it's going to be debated probably for years, whether
Speaker 1: it was too soon or whether it was too late.
Speaker 1: Will it be the perfect you know, low in the
Speaker 1: market that we always try to to find and never do.
Speaker 1: It might be, but it's something that's going to be
Speaker 1: very important economy. Well, this is certainly something that you know,
Speaker 1: none of us have had to deal with on a
Speaker 1: personal and professional basis, and certainly on an investment basis.
Speaker 1: John Augustine, thank you so much, Chief investment officer at
Speaker 1: Huntington's private bank, roughly eighteen billion in assets under management
Speaker 1: on the phone from Columbus, Ohio. So great to check
Speaker 1: in with him. Jason really appreciate that you're listening to
Speaker 1: Bloomberg Business Week with Carol Masser and Jason Kelly on
Speaker 1: Bloomberg Radio. Thanks for listening to Bloomberg Business Week. You
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