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

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Speaker 1: Bloomberg Quick Takes Tim Stanovk. We're here every day bringing

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Speaker 1: you the latest news from the world to business and finance,

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Speaker 1: plus technology, politics, economics, all purtnising the power of Business

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Speaker 1: Week reporters and editors not to mention our journalists and

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Speaker 1: analysts in more than one twenty countries. You can download

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Speaker 1: Bloomberg Business Week and iTunes, SoundCloud, or Bloomberg dot Com.

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Speaker 1: You can also listen to our radio show at two

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Speaker 1: pm Eastern Time on the Bloomberg Radio or watch us

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Speaker 1: on YouTube search Bloomberg Global News. A lot to get through,

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Speaker 1: Tim and I just talking about Michelle A. Cortez who's

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Speaker 1: got this story about the world may never reach herd

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Speaker 1: immunity against COVID. Meantime, New York cities, museums and cultural

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Speaker 1: institutions they're going to require visitors and staff to be vaccinated.

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Speaker 1: We got that from Mayor Bill de Blasio. Uh. And

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Speaker 1: then we've got fives from BioNTech saying they have submitted

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Speaker 1: tim phase one trial data to the US FDA for

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Speaker 1: third dose of their COVID nineteen vaccine. There's a lot

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Speaker 1: still going on. Yeah, they're showing that a third dose

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Speaker 1: of the vaccine led to higher levels of protective antibodies

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Speaker 1: when given eight to nine months after the original regiment.

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Speaker 1: Let's get right to it with Dr Tom McGinn, executive

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Speaker 1: vice president at Common Spirit Health. Common Spirit Health has

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Speaker 1: a hundred forty hospitals and more than one thousand care

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Speaker 1: sites across twenty one different states. Dr McGinn, it's it's

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Speaker 1: great to have you on the show. Give us an

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Speaker 1: update about what you're seeing in Common Spirit Health hospitals

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Speaker 1: right now. What's what's what's the what's the view on

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Speaker 1: the ground. Thanks Tim, and thanks Charlos, thanks for having

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Speaker 1: us having me on. Well, the view on the ground

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Speaker 1: is that we are seeing as no actual you know,

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Speaker 1: new news to you is that we're seeing a resurgence

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Speaker 1: in our hospitals in almost every market now. Uh. You know,

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Speaker 1: it was isolated, you know, in some of our regions

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Speaker 1: in the Southeast and Texas, but now we're seeing it

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Speaker 1: in the Northwest. Our hospitals are reaching you know, some

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Speaker 1: some real critical moments, but I think we're managing it well.

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Speaker 1: But we're now seeing pockets in California, in all of

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Speaker 1: the southeast in all of the Texas area, and now

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Speaker 1: we're seeing it in the Pacific Northwest. So you know,

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Speaker 1: we are controlling it, we're managing it, we're you know,

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Speaker 1: we're a lot more nimble. We have a lot more

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Speaker 1: algorithms and treatments that we can offer folks as they

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Speaker 1: come to the hospital. This is fundamentally a hospitalization of

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Speaker 1: the unvaccinated. While about ten percent are vaccinated, many of

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Speaker 1: those folks are folks with underlying medical conditions and things

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Speaker 1: to that effect. So really, what we're seeing in the

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Speaker 1: severe cases is a resurgence across the board of the unvaccinated.

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Speaker 1: So let me make sure we have this right because

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Speaker 1: data is really important here. Of the hospitalization is roughly

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Speaker 1: that you're seeing in your hospitals across the country. Those

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Speaker 1: are people who have not been vaccinated approximately. I mean,

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Speaker 1: it could vary from seven to fifteen or seven to

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Speaker 1: twelve percent, But fundamentally, I just said, let's for simplicity sake,

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Speaker 1: let's say, are they younger, are they older? Who are they?

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Speaker 1: What are the demographics? Well, you know they are the

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Speaker 1: hospitalization rates are much higher. The numbers are a little tricky.

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Speaker 1: We're seeing an uptick from baseline of the young folks,

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Speaker 1: it's increase of those getting hospitalized who are young in children,

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Speaker 1: but however, the baseline was very low. Still, the vast

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Speaker 1: majority of folks are older. Um many of them are,

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Speaker 1: you know, with chronic illnesses, the diabetes, the hypertension, all

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Speaker 1: the things that we learned. I was in New York

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Speaker 1: for the beginning of this phase of the pandemic and

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Speaker 1: did a lot of work on the early predictors of

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Speaker 1: who would have severe COVID. So it's that story still

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Speaker 1: plays itself out. What we're seeing is an uptick of

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Speaker 1: hospitalizations among young people, no question. We spoke earlier about

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Speaker 1: the fact that vaccines still aren't available as we go

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Speaker 1: back to school around the country to people who are

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Speaker 1: under the age of twelve, what's what's the best way

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Speaker 1: for those young kids to stay safe, the best way

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Speaker 1: for parents to think about risk factors and are we

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Speaker 1: seeing different data play out with younger people under the

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Speaker 1: age of twelves. We can't be vaccinated, so you know,

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Speaker 1: this is the real challenge. I I heard you speak earlier,

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Speaker 1: and I'm in agreement that we need to get the

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Speaker 1: kids back in the schools and I'm working with several

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Speaker 1: schools across the country, and I think we need to

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Speaker 1: just good old fashion and now what we call old

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Speaker 1: fashioned methods of mask wearing, social distancing, um, you know, handwashing,

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Speaker 1: all the things that we did uh early in that pandemic.

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Speaker 1: But having kids in the classroom, I think that you know,

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Speaker 1: we can get through this if we continue to follow

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Speaker 1: the basic rules of engagement around mask wearing, that that

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Speaker 1: really is going to be the key to success as

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Speaker 1: we go back into schools. I think as you and

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Speaker 1: I talked about this, and as a primary care physician,

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Speaker 1: I can see the stress, the anxiety, and all the

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Speaker 1: issues that we're creating by not going back to school.

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Speaker 1: So I really think we all need to just face

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Speaker 1: the facts. Kids are gonna need to wear masks if

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Speaker 1: they're unvaccinated, which they are, and we're gonna have to

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Speaker 1: do a lot of the same social distancing and careful

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Speaker 1: uh you know approach to this as we move into

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Speaker 1: the fall. And I also just want to mention that

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Speaker 1: this fall and excuse me, no, no, no, sorry, Carol,

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Speaker 1: I think that one thing we have to think about,

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Speaker 1: and I'm preparing for this across Common Spirit is the sniffles. Okay,

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Speaker 1: we are coming into what will likely be a regular

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Speaker 1: cold season, whether or not the flu. Remember, the flu

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Speaker 1: and the cold are two separate things. We've seen an

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Speaker 1: uptick in RSD virus, which is a specific virus that

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Speaker 1: is a harbinger for common colds. So we're anticipating a

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Speaker 1: lot of colds and sniffles mixed in with the potential flu,

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Speaker 1: mixed in with the potential covid. So how do we

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Speaker 1: test for that? How do we carefully, you know, manage

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Speaker 1: that situation is something we are all preparing for right now.

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Speaker 1: So I just wanted to put that into think of

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Speaker 1: the child showing up at school with the runny nose,

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Speaker 1: wiping their nose in the middle of the fall. What

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Speaker 1: does that mean? How do we manage that and that

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Speaker 1: stuff we were all trying to figure out. Now you

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Speaker 1: call it a twin demic or potentially a twin demic season, correct, Yeah,

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Speaker 1: I think that, you know, we you know, we could

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Speaker 1: see if influenza comes up, we will see that will

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Speaker 1: be a stress on our hospitals. But I think even

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Speaker 1: beyond flu, I mean people very confused. I thought, oh

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Speaker 1: I had a bad flu, what they really means sometimes

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Speaker 1: I had a bad cold, and a cold can mask

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Speaker 1: and look a little bit like mild COVID. So how

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Speaker 1: are we going to distinguish that? Um, So we need

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Speaker 1: to really ramp up our testing strategies, particularly in primary

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Speaker 1: care sites, our strategies that are schools, you know, all

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Speaker 1: across the country. Do we have the equipment, Do we

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Speaker 1: have the supplies to do all that right? And that

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Speaker 1: stuff that we're all working on. Hey, sit tight for

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Speaker 1: a second, um, Dr McGain, We're going to come back

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Speaker 1: and continue the conversation. I also do wonder if we

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Speaker 1: just put masks on again to him down. Many companies

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Speaker 1: doing it right now. You have many companies saying wait

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Speaker 1: a second, even if you're fully vaccinated, if you're coming

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Speaker 1: back to work, uh, you have to wear a mask again, right,

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Speaker 1: and that'll keep hopefully maybe cold to own regular flu down,

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Speaker 1: keep it all down. Yeah. I mean, it doesn't matter

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Speaker 1: if it's a small bike shop. I was in one

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Speaker 1: yesterday where they're requiring employees to be vaccinated and wear masks,

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Speaker 1: or one of the big banks that announced in the

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Speaker 1: last couple of weeks, even if you're vaccinated, wear that mask.

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Speaker 1: All right. We're gonna come back to Dr Tom McGain

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Speaker 1: he's executive ep a physician enterprise of at Common Spirit Health.

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Speaker 1: Will continue right here on Bloomberg Radio. Let's get right

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Speaker 1: back to it with Dr Tom McGain, executive vice president

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Speaker 1: at Common Spirit Health. He joins us on the phone

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Speaker 1: from here in New York, a dark Common Spirit Health

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Speaker 1: operates a hundred and forty hospitals and more than one

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Speaker 1: thousand care sites, this across twenty one states. Dr Dr

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Speaker 1: McGinn um. I want to have a realistic, uh idea

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Speaker 1: of how we're going to be living with COVID for

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Speaker 1: the rest of our lives. Is this is this something

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Speaker 1: that we get inoculated against each and every year, like

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Speaker 1: the flu, and it fades into the background. Yeah, well,

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Speaker 1: you know, I think obviously we will learn, but I

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Speaker 1: do feel that's where we're heading. I think that as

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Speaker 1: we increase our vaccination rates, as we look the variants

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Speaker 1: and we adjust, uh you know, these vaccines, that we

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Speaker 1: will end up learning to live with COVID, just as

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Speaker 1: we learned to live with influenza. But we we are

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Speaker 1: getting better at this, I don't you know. I think

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Speaker 1: a lot of us can get caught up in in

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Speaker 1: sort of this is never going to go away. But

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Speaker 1: we are managing it. We are learning more every day

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Speaker 1: and I think when this servige goes down, we will

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Speaker 1: continue to be prepared for it and if we need

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Speaker 1: to live with it, we will learn to live with it. Right.

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Speaker 1: As our synthir Coon wrote for Business Week last week,

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Speaker 1: we talked about it on Friday. The vaccine, folks, it works.

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Speaker 1: You know, we need to be reminded with all of

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Speaker 1: these you know worry where some headlines that the vaccine

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Speaker 1: it actually works. Having said that, um Dr McGinn. Do

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Speaker 1: we need to be smart because as you said, you

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Speaker 1: know we're going to be dealing with colds and the

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Speaker 1: regular flu and COVID come fall that by wearing a

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Speaker 1: max mask excuse me, can we mitigate much of the

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Speaker 1: risk from those three? Well? It was amazing fall last year,

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Speaker 1: wasn't it? The fact that we saw almost no flu.

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Speaker 1: I mean many of us reflect back, Wait a minute,

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Speaker 1: I didn't really have a cold lest floor. How does

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Speaker 1: that happen? Uh? You know? And I think a lot

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Speaker 1: of it came from the mask wearing, the social distancing,

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Speaker 1: and I think as we go back to school again,

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Speaker 1: I you know, I don't I'm avoiding the whole discussion

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Speaker 1: of the political mandate of a mask, But it really

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Speaker 1: will get these kids through a false season that I

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Speaker 1: guarantee will be complex, and we are preparing for it

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Speaker 1: and we'll manage it. But I do think the mask

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Speaker 1: will reduce cold costs, flues and COVID, so it will

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Speaker 1: have a multiple effects that will be positive. It's hard

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Speaker 1: to think about this as the parent of a two

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Speaker 1: and a half year old though, as I am, because

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Speaker 1: you know, he wears a mask for five minutes and

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Speaker 1: you know he's been he's been like chewing on it

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Speaker 1: versus a nine year old who could totally keep a

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Speaker 1: mask on when when inside. So how do you make

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Speaker 1: sense of that? No, Well, first of all, I have

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Speaker 1: to say, you know, ChIL John, I have you know

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Speaker 1: two girls there older now their college age, and so

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Speaker 1: that has its own inherent issues. But I I'm amazed

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Speaker 1: as I work with many schools and watch kids walk

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Speaker 1: around Manhattan with their masks on. Now as you get

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Speaker 1: below you know, three years old, it gets complicated and

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Speaker 1: you do the best you can. I mean all we're

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Speaker 1: asking people to do. Let's do the best you can.

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Speaker 1: You know, this is not you know, something where we're

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Speaker 1: going to force people to do things. You do the

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Speaker 1: best you can under the circumstances. Try to put the

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Speaker 1: mask on, try to be socially distant, try to be

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Speaker 1: smart about it. On our side, on the public health side,

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Speaker 1: on the health system side. You know, we're a common

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Speaker 1: spirit dedicated to provide care and test and treat and

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Speaker 1: vaccinate in every community throughout this very diverse country that

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Speaker 1: we live in. And that's our job to figure out,

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Speaker 1: how do we test these kids when they have the sniffles,

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Speaker 1: how do we get them easy access to vaccinations when

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Speaker 1: they're available for the young kids, which I hope will

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Speaker 1: becoming sometime late in the fall, maybe early next year.

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Speaker 1: But you know, you do the best you can with

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Speaker 1: the mask and all of those efforts mitigate every little

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Speaker 1: thing we do mitigates that's bread by a little bit. Well,

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Speaker 1: that's helpful when you edit up hey just quickly thirty seconds.

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Speaker 1: Do you anticipate that in terms of an additional booster

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Speaker 1: for the general public, Does that happen before the end

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Speaker 1: of the year. I do think we're going to see

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Speaker 1: that and come out in a process that we just

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Speaker 1: saw some folks who are mean compromise. I would assume

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Speaker 1: healthcare workers sometime soon we started hearing. Hey, they were

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Speaker 1: the first ones back then, they're on the front lines.

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Speaker 1: Do we give them the booster. I think it's going

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Speaker 1: to roll itself out gradually over time. Absolutely. Hey, listen,

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Speaker 1: thank you so much. Really appreciate it, and I hope

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Speaker 1: we can get you back real soon. Dr Tom Again,

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Speaker 1: Executive Vice President Common Spirit Health, on the phone from

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Speaker 1: New York City. Are you going back to some of

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Speaker 1: the stuff that we were doing before we got the vaccine? Um, yes,

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Speaker 1: I am. I'm wearing a mask now in source. You know,

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Speaker 1: I was to the point where I would go and

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Speaker 1: pick up food and go to the I was always

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Speaker 1: wearing the grocer in the grocery store, I was wearing

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Speaker 1: a mask. But yeah, even around here in the office.

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Speaker 1: Public transportation, oh yeah, I'm still taking public transit, but

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Speaker 1: I'm wearing a mask. You have to yeah, no, yeah,

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Speaker 1: you don't have to. I would. This is Bloomberg Business

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Speaker 1: Week with Carol Masser and Bloomberg Quick Takes Tim Stinovic

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Speaker 1: on Bloomberg Radio. So I see it, I hear about it.

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Speaker 1: We know what's happening that despite some of the slowdowns

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Speaker 1: in an office reopenings because of the delta variant. There

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Speaker 1: are still tim a lot of us back in the office,

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Speaker 1: and yet for a certain subset of the workforce, they're

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Speaker 1: clearly staying at home. Justin Fox is a columnist for

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Speaker 1: Bloomberg Opinion. He writes about it in the upcoming issue

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Speaker 1: of Bloomberg Business Week magazine. You can read it now

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Speaker 1: at Bloomberg and at bloomberg dot com slash business Week.

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Speaker 1: So Justin who as people some reluctantly go back to

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Speaker 1: the office, UM State Street employees, notwithstanding, we should know,

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Speaker 1: correct in New York, I should say, who's staying home?

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Speaker 1: What did you What does the data tell you? UMS?

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Speaker 1: The group that is most stuck at home is UM

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Speaker 1: people in computer and mathematical operations, which is basically software engineers,

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Speaker 1: data analysts, that whole world. And it's on level. We

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Speaker 1: know this because it's the Silicon Valley companies, the tech

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Speaker 1: companies that are sort of being the slowest to come back.

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Speaker 1: But these people aren't just working in tech companies. They're

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Speaker 1: at all different kinds of companies, and it just seems

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Speaker 1: like more than any else, it's it's as of July

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Speaker 1: of them reported that they were still working remotely at

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Speaker 1: least part of the time because of the pandemic. But

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Speaker 1: that doesn't reflect people who were already working remotely before

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Speaker 1: the pandemic. Or you hear a lot about, especially in tech,

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Speaker 1: people getting hired completely remotely. Now. I don't know if

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Speaker 1: they get asked by the Census Bureau whether they're working

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Speaker 1: at home because of the pandemic, they may say, no,

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Speaker 1: I'm just working at home, dude, Right, that's how I

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Speaker 1: was hired. Hey, Jill Weber's with us of course, editor

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Speaker 1: of Bloomberg business Week magazine, and Joe it is, you know,

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Speaker 1: interesting on a daily basis, we are kind of parsing

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Speaker 1: out what's going on, who's coming back to work, who is,

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Speaker 1: and who can go back to work who can't? Uh,

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Speaker 1: And love that you guys are highlighting this. Well. When

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Speaker 1: I saw um Justin's draft, it reminded me of the

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Speaker 1: ending of Point Break. Uh and if you can place that,

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Speaker 1: the quote is he's not coming back, And that was

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Speaker 1: totally how I felt about exactly. Oh, you've come out

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Speaker 1: of you and watched Point Break. You know, you're just justin.

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Speaker 1: It's a fantastic one. Oh man, I just want to

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Speaker 1: slap you from here. So you need to be in

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Speaker 1: the office, dude, the virtual slap. I think that the

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Speaker 1: story revealed to me again, but there are certain workers

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Speaker 1: and certain career paths that have ended up kind of

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Speaker 1: being able to rise above the fraight. So to me,

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Speaker 1: as much as anything, this is a story about this

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Speaker 1: wealth inequality and wealth disparity because obviously these are high

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Speaker 1: paying jobs right justin yeah, I mean that's part of it.

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Speaker 1: And more broadly, you know, white collar workers have been

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Speaker 1: more able to work remotely than everybody else. But it

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Speaker 1: seems like with this p particular group, yes, they're highly paid,

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Speaker 1: but it's also just kind of the way they do

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Speaker 1: their work has even before the pandemic, been getting increasingly

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Speaker 1: sort of distributed, and lots of times when there's any

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Speaker 1: big sort of software related project, there are teams all

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Speaker 1: over the world working on it. There's already been a

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Speaker 1: lot of outsourcing to freelance workers all over the place.

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Speaker 1: So it just sort of feels like this is a

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Speaker 1: particular area where you know, the default going forward maybe

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Speaker 1: doing it remotely. Well, we were talking with the CEO

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Speaker 1: of Mozilla to who said, we've been doing this for years,

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Speaker 1: like this isn't new to us, but increasingly as every

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Speaker 1: company we're a high tech company, where a media company,

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Speaker 1: but where a lot more than that obviously, But each company,

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Speaker 1: UM justin often has a huge tech component to it.

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Speaker 1: They've got a lot of software engineers, people who are

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Speaker 1: writing code for one reason or another. Pick your industry,

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Speaker 1: pick your company. Yeah, No, it's spread all over the place.

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Speaker 1: I mean, the BLS does this annual sort of accounting

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Speaker 1: of where people in every pretty arrow occupation, UM, what

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Speaker 1: industries they work in. And so I was going through

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Speaker 1: the list for computer and mathematical operations and I think

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Speaker 1: I found like a Mason reconstruction doesn't have any UM,

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Speaker 1: but bars. There were fifty of them listed as working

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Speaker 1: in the bar industry can conclude, you know, like a

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Speaker 1: chain of bars or something. Aren't many of those shipping

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Speaker 1: liquor to all of us at home exactly? So it's yeah,

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Speaker 1: it's all over the place. And you know, obviously that

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Speaker 1: will differ by industry. Some industries, you know, another oil

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Speaker 1: and gas industry has tons of UM computer and mathematical occupations.

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Speaker 1: It's going to vary by industry how much they stay

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Speaker 1: at home. But I just feel like that particular kind

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Speaker 1: of work is going beyond where a lot of the

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Speaker 1: other things that what color people do are going. Okay,

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Speaker 1: justin help us think through some implications of this. Does

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Speaker 1: it Does it mean that companies will save money by

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Speaker 1: having to pay employees who don't live in the Bay

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Speaker 1: Area or in Los Angeles or New York as much money?

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Speaker 1: Does it mean that, you know, so called in putting

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Speaker 1: this in quotes and air quotes, the second tier, third

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Speaker 1: tier cities are going to see some sort of resurgence

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Speaker 1: because you're gonna have people moving there because the quality

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Speaker 1: of life is higher. I mean, I think what we've

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Speaker 1: seen so far in terms of where people are moving,

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Speaker 1: it's like, yes, more people are moving to Austin, then

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Speaker 1: also Phoenix. They're not moving to Cleveland or other They're

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Speaker 1: not moving to the second tier cities where you actually

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Speaker 1: get a really big jump up in the kind of

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Speaker 1: house you can buy and the quality of life. So

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Speaker 1: it is. I don't think it's going to be some

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Speaker 1: great equalizer. It's just gonna shift the inequality sort of.

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Speaker 1: You know, it's gonna make things a lot worse in

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Speaker 1: a few towns in Montana um and then in the

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Speaker 1: rest of the country. It's not going to change things

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Speaker 1: that much. But I think in again, in the computer

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Speaker 1: and mathematical um occupations, it's also just gonna be and

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Speaker 1: this was again already happening, but it's just gonna increase

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Speaker 1: the tendency to think globally. And you're trying to staff

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Speaker 1: up something and and you know, even if companies aren't

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Speaker 1: able to push through that, hey you have to take

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Speaker 1: less pay. If you lived in Bend, Oregon, then if

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Speaker 1: you live in Silicon Valley, they can probably get away

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Speaker 1: with it saying yes, you take less pay. If you

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Speaker 1: live in Ukraine, then if you live in the US,

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Speaker 1: you know Bend Oregon long ago, justin at the early

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Speaker 1: days of the pandemic, as an Oregon I woke up

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Speaker 1: one morning and in that like little hazy spot before

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Speaker 1: your brain is fully awake, I was like, where in

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Speaker 1: the world would I work if I could work anywhere?

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Speaker 1: And Bend Oregan was the spot that popped into my

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Speaker 1: brain in that hazy hour. But uh, I also just

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Speaker 1: want to bring up another point that you raised in

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Speaker 1: your story here, which is like, you know, one other

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Speaker 1: element of this work from home conversation with this particular

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Speaker 1: category of jobs is like jobs here are really scarce

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Speaker 1: in this field. Right even before the pandemic, this has

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Speaker 1: been some of the most desirable workers in career path.

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Speaker 1: The workers are scarce, the jobs are not scarce. The

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Speaker 1: workers are exactly right. And and so I'm wondering as

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Speaker 1: as the pandemic actually exacerbated that, because it's not like

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Speaker 1: the pipeline has been robust and growing right right, and

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Speaker 1: and there hasn't been any you know, like overall employment

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Speaker 1: is still down something like four percent in the computer

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Speaker 1: and mathematical occupations, it's it's up, but not by a

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Speaker 1: huge amount. But they're they're basically other than really temporarily

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Speaker 1: right at the in the middle of the lockdowns, there

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Speaker 1: was no real decline and employment in the in that area,

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Speaker 1: and no definitely no decline overall in demand for people

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Speaker 1: to do those kinds of jobs. Yeah, and these guys

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Speaker 1: are getting paid well. The meeting hourly wage for all

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Speaker 1: computer and mathematical occupations of almost forty four dollars. Computer

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Speaker 1: and information research scientists had the highest meeting wage at

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Speaker 1: almost sixty hour perhaps in surprising why you saw a

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Speaker 1: lot of this workout source early for the pandemic. Exactly

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Speaker 1: good stuff, Thank you so much, justin really appreciate it. Yeah,

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Speaker 1: you bet. Check out this. It's a column on the

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Speaker 1: back page of the upcoming issue of Bloomberg Business Week magazine.

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Speaker 1: Jil Webber and Bloomberg opinion columnist Justin Fox in our studio.

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Speaker 1: This is Bloomberg. This is the Big Take, the best

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Speaker 1: of Bloomberg's in depth, original reporting from around the globe. Well,

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Speaker 1: we have to make sure we do as the economy.

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Speaker 1: What covers is what cut. The data kind of broken

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Speaker 1: down a bit. It's fun to becoming more and more

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Speaker 1: expensive to be looking at for shipping billion dollars for

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Speaker 1: the red entry levels. There's been ways of immigration that

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Speaker 1: have taced a lot of resistance, a lot of color

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Speaker 1: behind the scenes in a great untold story. How did

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Speaker 1: Bezos really come out on top? It's the cover, says

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Speaker 1: Jeff Wins. He always seems to win the Big Take

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Speaker 1: on Bloomberg Radio. All right, this time for the Bloomberg

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Speaker 1: Big Take. Happens to be one of our most read

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Speaker 1: stories too on the Bloomberg because you put anything about

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Speaker 1: taxes and the headline in the Bloomberg story and it's

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Speaker 1: among the most red tips, and for good reason, because

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Speaker 1: it is a fantastic deep dive into taxing the rich,

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Speaker 1: winning at poles, but falter us to fix global housing.

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Speaker 1: Joining us now is Natalie Obiquo Pearson, Vancouver bureau chief

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Speaker 1: for Bloomberg News, joining us on the phone from our

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Speaker 1: Vancouver bureau. Natalie, take us through globally what's happening with

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Speaker 1: governments trying to disincentivize people from leaving apartments empty? Sure,

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Speaker 1: so what do What we tried to do in the

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Speaker 1: story was we did a deep dive into a couple

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Speaker 1: of cities, Vancouver and Melbourne, that imposed empty homes taxes

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Speaker 1: quite early on, so if if property owners left their

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Speaker 1: places empty, they had to pay an annual tax. And uh.

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Speaker 1: The reason this is important is because a few of

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Speaker 1: other cities around the world who are similarly facing affordable

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Speaker 1: housing crunches, are looked to be potentially following in their footsteps.

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Speaker 1: Los Angeles is planning to put a vacant homes tax

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Speaker 1: on the ballot. For Hong Kong officials are considering taxing

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Speaker 1: condo developers to deter them from hoarding new You and

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Speaker 1: It's Ireland is looking at a couple options, and Barcelona

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Speaker 1: has even gone so far as to threaten to seize

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Speaker 1: landlord's empty apartments. So it's very sort of you know,

429
00:22:10,200 --> 00:22:12,399
Speaker 1: of the day, all right, So of the day, does

430
00:22:12,440 --> 00:22:14,359
Speaker 1: it really make a difference? I mean, if we start

431
00:22:14,400 --> 00:22:16,040
Speaker 1: doing this, are you telling me that we could knock

432
00:22:16,080 --> 00:22:17,879
Speaker 1: down those really wealthy homes and then all of a

433
00:22:17,880 --> 00:22:20,520
Speaker 1: sudden you'd put in lower income housing there. I mean,

434
00:22:20,840 --> 00:22:24,280
Speaker 1: is that really? Is this? Are we really getting at

435
00:22:24,320 --> 00:22:26,760
Speaker 1: the root of the problem, I guess is what I'm asking. Yeah,

436
00:22:26,800 --> 00:22:29,159
Speaker 1: it's a great question, and I think a really tricky

437
00:22:29,200 --> 00:22:32,359
Speaker 1: one because some degree you can understand why municipalities do this,

438
00:22:32,480 --> 00:22:35,960
Speaker 1: and when you have an affordable housing crunch, to see

439
00:22:36,040 --> 00:22:39,040
Speaker 1: empty homes just not being used as of course you know,

440
00:22:39,040 --> 00:22:41,560
Speaker 1: it's it's very difficult for residents to see. But on

441
00:22:41,600 --> 00:22:44,720
Speaker 1: the other hand, I think, you know, Melvern and Vancouver

442
00:22:44,840 --> 00:22:48,520
Speaker 1: provide some early lessons and I think the takeaway might

443
00:22:48,560 --> 00:22:52,480
Speaker 1: be they deal with the symptoms of a housing crisis,

444
00:22:52,520 --> 00:22:54,679
Speaker 1: but they're not gonna there and there are no panacea.

445
00:22:54,720 --> 00:22:57,520
Speaker 1: They are not going to fix it. And um by that,

446
00:22:57,720 --> 00:23:01,119
Speaker 1: I mean, uh, you know, I'll take is free. What Vancouver,

447
00:23:01,240 --> 00:23:04,640
Speaker 1: which was the first municipality in North America to implement

448
00:23:04,680 --> 00:23:08,639
Speaker 1: attacks like this, has seen so to some degree, the

449
00:23:08,760 --> 00:23:13,560
Speaker 1: tax did seem to encourage condo owners, for example, to

450
00:23:13,680 --> 00:23:16,639
Speaker 1: put their units into the long term rental supply. So,

451
00:23:16,800 --> 00:23:19,560
Speaker 1: for example, units that might have been on the airbnb

452
00:23:19,760 --> 00:23:23,240
Speaker 1: market before had been placed back into long term rentals.

453
00:23:23,880 --> 00:23:27,600
Speaker 1: Um and uh. You know, the city has also managed

454
00:23:27,640 --> 00:23:30,560
Speaker 1: to raise a lot more money than it originally expected.

455
00:23:30,880 --> 00:23:34,720
Speaker 1: And that's partially because the homes that were less empty

456
00:23:34,880 --> 00:23:37,960
Speaker 1: were the most expensive homes. Um And I suppose to

457
00:23:37,960 --> 00:23:39,919
Speaker 1: some degree that doesn't surprise because somebody who can live

458
00:23:40,000 --> 00:23:42,320
Speaker 1: forward to leave their house empty probably is wealthy to

459
00:23:42,320 --> 00:23:46,240
Speaker 1: begin with. Those aren't exactly hitting the rental market right exactly,

460
00:23:46,359 --> 00:23:50,280
Speaker 1: Like a thirteen million dollar mansion is probably not something

461
00:23:49,880 --> 00:23:58,359
Speaker 1: that we have more than that like so um so yeah,

462
00:23:58,440 --> 00:24:01,560
Speaker 1: so you do manage to raise is Vancouver did manage

463
00:24:01,640 --> 00:24:05,120
Speaker 1: to actually raise a lot more money than it ever expected,

464
00:24:05,520 --> 00:24:09,000
Speaker 1: and that has gone towards affordable housing initiatives like building

465
00:24:09,480 --> 00:24:14,720
Speaker 1: rental housing for lower income families. But the vacancy rate

466
00:24:14,800 --> 00:24:17,080
Speaker 1: in the city is still below one percent. It's been

467
00:24:17,119 --> 00:24:22,240
Speaker 1: stuck there for years and rents have continued to rise. Well,

468
00:24:22,240 --> 00:24:25,000
Speaker 1: you do think about that the wealthier are able to

469
00:24:25,080 --> 00:24:28,760
Speaker 1: invest in real estate, right and there are tax, you know,

470
00:24:29,480 --> 00:24:32,880
Speaker 1: positive tax implications or benefits to them by being able

471
00:24:32,880 --> 00:24:34,400
Speaker 1: to do so that a lot of other people aren't

472
00:24:34,440 --> 00:24:37,640
Speaker 1: able to tap into. So you do wonder about We'll

473
00:24:37,680 --> 00:24:39,639
Speaker 1: wait a minute, are we are we really using our

474
00:24:39,760 --> 00:24:42,159
Speaker 1: land and property in the right way, especially when there

475
00:24:42,200 --> 00:24:44,760
Speaker 1: are so many people who need it. Having said that,

476
00:24:44,960 --> 00:24:50,359
Speaker 1: things like interest rates, um policy, housing policies, um bank

477
00:24:50,440 --> 00:24:52,639
Speaker 1: access from more, I mean, there's other things that really

478
00:24:53,000 --> 00:24:54,880
Speaker 1: are at play here that could really move the needle

479
00:24:54,880 --> 00:24:58,320
Speaker 1: when it comes to fixing some of our global housing problems, right,

480
00:24:58,680 --> 00:25:01,919
Speaker 1: and I think that's essentially lee it. I mean, both

481
00:25:02,000 --> 00:25:06,800
Speaker 1: Melbourne and Vancouver have been seeing an almost unbroken run

482
00:25:06,880 --> 00:25:10,040
Speaker 1: up in housing prices for two decades and that's very

483
00:25:10,119 --> 00:25:14,040
Speaker 1: much been tied to things like interest rates, uh, you know,

484
00:25:14,280 --> 00:25:17,920
Speaker 1: strict zoning laws and restrictions that keep the supply from

485
00:25:17,960 --> 00:25:21,760
Speaker 1: being built as quickly as it should be. And so

486
00:25:22,000 --> 00:25:25,159
Speaker 1: those are the real levels that are that are that

487
00:25:25,240 --> 00:25:28,040
Speaker 1: you need to sort of work with to to to

488
00:25:28,320 --> 00:25:31,720
Speaker 1: cure the housing crisis, or at least to alleviate it significantly.

489
00:25:32,080 --> 00:25:35,080
Speaker 1: I mean, just to put this in perspective, right, Vancouver

490
00:25:35,280 --> 00:25:39,600
Speaker 1: expected ten thousand properties to be empty in the city

491
00:25:39,680 --> 00:25:42,000
Speaker 1: in the first three years of the tax, I think

492
00:25:42,040 --> 00:25:45,320
Speaker 1: about two hundred and some were moved back into the

493
00:25:45,480 --> 00:25:49,480
Speaker 1: rental supply. I mean that's that's you know, that's a

494
00:25:49,560 --> 00:25:51,800
Speaker 1: drop in the bucket in a housing market of two

495
00:25:51,840 --> 00:25:56,240
Speaker 1: hundred thousand properties. So, Natalie, just in the last fifteen

496
00:25:56,240 --> 00:25:58,679
Speaker 1: seconds that we have do based on your reporting, do

497
00:25:58,680 --> 00:26:01,919
Speaker 1: you anticipate that this type of policy will continue to spread?

498
00:26:01,920 --> 00:26:04,239
Speaker 1: As you point out Lela's planning to put vacant home

499
00:26:04,280 --> 00:26:07,840
Speaker 1: tax on the ballot for even though the data show

500
00:26:07,880 --> 00:26:10,520
Speaker 1: that it's not necessarily working. I think one thing we

501
00:26:10,640 --> 00:26:12,439
Speaker 1: think it's one thing we can stay safely is that

502
00:26:12,560 --> 00:26:17,480
Speaker 1: for policy makers, if it's politically popular, then it probably

503
00:26:17,520 --> 00:26:19,600
Speaker 1: will come in. And it just there is a lot

504
00:26:19,640 --> 00:26:22,800
Speaker 1: of public support for these types of taxes. So probably yes,

505
00:26:23,359 --> 00:26:25,000
Speaker 1: all right, we're gonna run. Hey, thank you so much.

506
00:26:25,040 --> 00:26:29,040
Speaker 1: Bloomberg News Vancouver Bureau chief Natalie Obiko joining us on

507
00:26:29,200 --> 00:26:33,720
Speaker 1: the phone in Vancouver, our Vancouver bure out. This is

508
00:26:33,760 --> 00:26:37,680
Speaker 1: Bloomberg Business Week with Carol Masser and Bloomberg Quick Takes

509
00:26:37,760 --> 00:26:42,040
Speaker 1: Tim Stinovic from Bloomberg Radio for just coming over a

510
00:26:42,080 --> 00:26:44,680
Speaker 1: peak of the day, but just off our best levels

511
00:26:44,680 --> 00:26:46,119
Speaker 1: of the day and we've got another record for the

512
00:26:46,240 --> 00:26:48,159
Speaker 1: S and P five hundred. I believe it's the forty

513
00:26:48,280 --> 00:26:50,720
Speaker 1: nine record on the S and P that we've seen

514
00:26:50,880 --> 00:26:54,840
Speaker 1: in So we continue that grind higher. Let's get to

515
00:26:54,920 --> 00:26:57,600
Speaker 1: the drive to the close. Alan Zaffron is back with us,

516
00:26:57,640 --> 00:27:00,080
Speaker 1: founding partner in co c I CEO at I e

517
00:27:00,200 --> 00:27:03,080
Speaker 1: Q Capital. He's back with us, Tim on the phone

518
00:27:03,080 --> 00:27:07,800
Speaker 1: in Foster City, California. So Alan, it seems like the markets,

519
00:27:07,800 --> 00:27:10,199
Speaker 1: just when you think they're getting a little tired, a

520
00:27:10,240 --> 00:27:15,480
Speaker 1: little weary, here we are grinding to another record. Carol

521
00:27:15,560 --> 00:27:19,679
Speaker 1: and Tim, ain't it amazing? So much capitalist flash in

522
00:27:19,720 --> 00:27:25,520
Speaker 1: the marketplace. You can throw COVID fed, tapering tax pikes, uh,

523
00:27:25,640 --> 00:27:31,560
Speaker 1: diplomatic missteps potentially or arguably in Afghanistan. The market nevertheless

524
00:27:32,119 --> 00:27:35,399
Speaker 1: looks past all that. I think it's still being driven

525
00:27:35,400 --> 00:27:38,600
Speaker 1: by Tina. There is no alternative when bonds and cash

526
00:27:38,640 --> 00:27:42,320
Speaker 1: shields so little, it's still the cult of equities that's

527
00:27:42,320 --> 00:27:44,479
Speaker 1: going to prevail. And that is what we are watching.

528
00:27:44,560 --> 00:27:48,040
Speaker 1: All risk ansts go up when conventional safe places like

529
00:27:48,119 --> 00:27:52,080
Speaker 1: cash and bonds paste a little, and capital continues to

530
00:27:52,080 --> 00:27:54,680
Speaker 1: flow into places to try and find a higher return

531
00:27:55,200 --> 00:27:57,800
Speaker 1: on that invested capital. That's the story of this year.

532
00:27:57,960 --> 00:28:01,760
Speaker 1: Alan do the high price is do earnings justify the

533
00:28:01,800 --> 00:28:08,560
Speaker 1: high prices? I actually think they do. Again. The complication

534
00:28:08,680 --> 00:28:12,000
Speaker 1: here is people will argue if we just take the

535
00:28:12,200 --> 00:28:17,880
Speaker 1: SMP five index, it's traded about sixteen times it's forward

536
00:28:17,920 --> 00:28:20,119
Speaker 1: looking learnings than the last twenty five years, and if

537
00:28:20,160 --> 00:28:23,359
Speaker 1: you look right now, depending on how much forecast you know,

538
00:28:23,400 --> 00:28:26,560
Speaker 1: we're probably trading at about twenty two times forward earnings.

539
00:28:26,560 --> 00:28:31,240
Speaker 1: That's a huge premium. The challenge is twofold one. We're

540
00:28:31,280 --> 00:28:34,879
Speaker 1: in a world much lower interest rates now than we've

541
00:28:34,920 --> 00:28:38,760
Speaker 1: historically been over the last twenty five years. And secondly,

542
00:28:39,560 --> 00:28:42,480
Speaker 1: the world today at the SMP five is comprised of

543
00:28:42,920 --> 00:28:46,640
Speaker 1: companies that are far less capital intensive and generate higher

544
00:28:46,680 --> 00:28:49,720
Speaker 1: profit margins. The X on mobiles and a T and

545
00:28:49,760 --> 00:28:51,880
Speaker 1: T s in general, motors of twenty five years and

546
00:28:51,920 --> 00:28:54,959
Speaker 1: ago are now Facebook and Apple and Amazon, and so

547
00:28:55,160 --> 00:28:59,440
Speaker 1: arguably a world of better quality, higher profitable businesses in

548
00:28:59,480 --> 00:29:03,360
Speaker 1: a world of lower interest rates. Merits are higher than

549
00:29:03,520 --> 00:29:07,080
Speaker 1: historically average p multiple. Of course, it's aren't more than science,

550
00:29:07,080 --> 00:29:09,960
Speaker 1: so we don't know exactly what that light multiple is,

551
00:29:10,000 --> 00:29:13,680
Speaker 1: but I think it's far less overvalued than what people

552
00:29:13,680 --> 00:29:16,400
Speaker 1: would try and argue when they make historical comparison. It

553
00:29:16,520 --> 00:29:18,520
Speaker 1: is a market that has a scratching our heads. I mean,

554
00:29:18,560 --> 00:29:20,160
Speaker 1: Dave Wilson just came out with this chart of the

555
00:29:20,200 --> 00:29:24,360
Speaker 1: day and he talks about how financials have you know,

556
00:29:25,280 --> 00:29:28,840
Speaker 1: turned out to be our best performing group now in

557
00:29:28,920 --> 00:29:30,840
Speaker 1: terms of our eleven main industry groups in the SMP

558
00:29:30,960 --> 00:29:34,040
Speaker 1: five hundred years a date, which has you scratching your head.

559
00:29:34,080 --> 00:29:37,040
Speaker 1: Considering the low rate environment, that is not typically what

560
00:29:37,120 --> 00:29:39,840
Speaker 1: you see. So I mean, how do you explain that.

561
00:29:40,240 --> 00:29:45,320
Speaker 1: Are there disconnects or does it all make sense to you? Uh? Well,

562
00:29:45,440 --> 00:29:48,800
Speaker 1: it makes sense and like like the world, it makes

563
00:29:48,800 --> 00:29:51,560
Speaker 1: sense for two reasons. One is you have to look

564
00:29:51,640 --> 00:29:54,040
Speaker 1: where you started from. Financials were pretty beat up in

565
00:29:54,080 --> 00:29:57,640
Speaker 1: Financials are basically a leverage bet on economic recovery. So

566
00:29:58,280 --> 00:30:01,560
Speaker 1: you went from COVID and it disaster's economy to where

567
00:30:01,640 --> 00:30:05,520
Speaker 1: leveraged businesses like financials would do better out of a recession.

568
00:30:05,600 --> 00:30:09,160
Speaker 1: And secondly, it's a bit forward looking. You're hopeful if

569
00:30:09,200 --> 00:30:11,640
Speaker 1: the economy strengthens, interest rates go up a bit, and

570
00:30:11,640 --> 00:30:16,240
Speaker 1: those financials are probably forecasting implicitly a somewhat. I don't

571
00:30:16,280 --> 00:30:19,080
Speaker 1: overstate it, but a somewhat more steep yield curve over

572
00:30:19,120 --> 00:30:22,520
Speaker 1: the next six to twelve months, and hence financial stocks

573
00:30:22,520 --> 00:30:25,200
Speaker 1: I think are going up in advance of that base

574
00:30:25,320 --> 00:30:28,560
Speaker 1: case most likely outcome for the old curve looking forward,

575
00:30:28,600 --> 00:30:34,640
Speaker 1: So an anticipation of a more favorable rate environment exactly. Hey, Alan,

576
00:30:34,720 --> 00:30:37,600
Speaker 1: you you said the acronym tina there is no alternative,

577
00:30:37,680 --> 00:30:41,040
Speaker 1: but but you do think there is some alternative right now,

578
00:30:41,200 --> 00:30:44,360
Speaker 1: right for for where you're putting money, Well, I think

579
00:30:44,360 --> 00:30:46,320
Speaker 1: there are. I mean, so as an example, I'm just

580
00:30:46,320 --> 00:30:48,920
Speaker 1: going to talk about rates. Reets are really stocked, but

581
00:30:48,960 --> 00:30:51,560
Speaker 1: they're tied to real estate, and real estate is another

582
00:30:51,640 --> 00:30:56,120
Speaker 1: form of income generation besides bond So it's not that

583
00:30:56,280 --> 00:30:59,040
Speaker 1: much of a stretch to argue if you're a long

584
00:30:59,160 --> 00:31:01,880
Speaker 1: term investor, and if you're willing to look aside from

585
00:31:02,080 --> 00:31:05,720
Speaker 1: short term price volatility, which I define as months and years,

586
00:31:05,800 --> 00:31:09,920
Speaker 1: not days or weeks, as one example, freaks, whether it's

587
00:31:09,920 --> 00:31:13,320
Speaker 1: in a public or a private format, or another form

588
00:31:13,360 --> 00:31:15,400
Speaker 1: of tax efficient income that I think if you have

589
00:31:15,520 --> 00:31:19,200
Speaker 1: enough long enough time frame, the likelihogens will generate higher

590
00:31:19,280 --> 00:31:22,080
Speaker 1: rates return to conventional bonds. You can make the same

591
00:31:22,120 --> 00:31:25,520
Speaker 1: analysis for individuals who are willing to go far enough

592
00:31:25,560 --> 00:31:30,680
Speaker 1: to look at privately issued senior floating rate debt. Sounds

593
00:31:30,760 --> 00:31:34,280
Speaker 1: very complicated, but basically, if you're the senior lender to

594
00:31:34,400 --> 00:31:38,120
Speaker 1: a company and you have a floating rate debt, surprisingly

595
00:31:38,200 --> 00:31:41,280
Speaker 1: you can earn without leverage around a six percent return

596
00:31:41,880 --> 00:31:44,880
Speaker 1: tied to lie Bold typically, and with some leverage you

597
00:31:44,920 --> 00:31:46,360
Speaker 1: might even get as much as an eight or nine

598
00:31:46,360 --> 00:31:49,960
Speaker 1: percent return. Leaves room, although historically have not been allot

599
00:31:50,000 --> 00:31:52,360
Speaker 1: of defaults, and even leaves room for some handfuls of

600
00:31:52,400 --> 00:31:55,160
Speaker 1: businesses to default on their debt payments and still earn

601
00:31:55,200 --> 00:31:57,880
Speaker 1: more than what a conventional bond does. When an investment

602
00:31:57,920 --> 00:32:00,840
Speaker 1: grade bond is paying you two percent the bars load

603
00:32:01,280 --> 00:32:04,520
Speaker 1: den why money scoring strategy? Well, I'm looking at two

604
00:32:04,840 --> 00:32:08,160
Speaker 1: uh dad John's equity Total Return Index. It's up almost

605
00:32:09,120 --> 00:32:12,680
Speaker 1: year to date, up about th uh in the past

606
00:32:12,720 --> 00:32:15,960
Speaker 1: fifty two weeks. I that's the one area the commercial

607
00:32:15,960 --> 00:32:18,400
Speaker 1: real estate or real estate generally. I am surprised that

608
00:32:18,480 --> 00:32:23,520
Speaker 1: there hasn't been Alan Moore fallout. Why hasn't there been? Well?

609
00:32:23,680 --> 00:32:27,320
Speaker 1: Twofold again, what one is? I would argue that you

610
00:32:27,720 --> 00:32:30,640
Speaker 1: certainly do need to be selective about what kinds of

611
00:32:30,720 --> 00:32:34,120
Speaker 1: real estate you're investing. Is a big difference between industrial

612
00:32:34,160 --> 00:32:37,760
Speaker 1: warehouse is servicing Amazon and ups and set X versus

613
00:32:37,960 --> 00:32:40,560
Speaker 1: your urban office building where half the building is now

614
00:32:40,640 --> 00:32:42,520
Speaker 1: vacated or we're going to be less occupied. So I

615
00:32:42,600 --> 00:32:45,840
Speaker 1: get that, but but i'd also argue again, when you

616
00:32:45,920 --> 00:32:50,360
Speaker 1: on one, you're back those those those rates were really

617
00:32:50,480 --> 00:32:53,160
Speaker 1: beaten up, and so some of that is bounced back.

618
00:32:53,160 --> 00:32:55,720
Speaker 1: And then the other issue is I think the demise

619
00:32:55,800 --> 00:33:00,520
Speaker 1: of real estate is actually overstated. I think i'd rid world,

620
00:33:00,560 --> 00:33:02,400
Speaker 1: you're gonna be a hybrid world, but you're still going

621
00:33:02,480 --> 00:33:06,000
Speaker 1: to have even people occupying businesses, occupying offices, They're still

622
00:33:06,000 --> 00:33:07,480
Speaker 1: gonna need to pay for the rent, even if they're

623
00:33:07,480 --> 00:33:09,200
Speaker 1: only in there three days a week. I don't think

624
00:33:09,200 --> 00:33:11,760
Speaker 1: it's an all or non proposition. It's interesting that you

625
00:33:11,760 --> 00:33:13,720
Speaker 1: say that because just today and among the most read

626
00:33:13,920 --> 00:33:15,600
Speaker 1: on the Bloomberg terminal, and we were talking about this

627
00:33:15,640 --> 00:33:18,800
Speaker 1: earlier with State Street closing, it's abandoning its New York

628
00:33:18,800 --> 00:33:20,800
Speaker 1: City offices, and look, it's not based in New York.

629
00:33:20,880 --> 00:33:22,880
Speaker 1: But do you think that's an exception rather than the

630
00:33:22,920 --> 00:33:26,720
Speaker 1: norm moving forward? I think it is an exception because

631
00:33:26,720 --> 00:33:29,400
Speaker 1: I don't think everybody has the capacity to with state

632
00:33:29,440 --> 00:33:33,400
Speaker 1: streets has done. I definitely think there's diminished demand to

633
00:33:33,520 --> 00:33:36,320
Speaker 1: a degree for office space, but to a degree to

634
00:33:36,360 --> 00:33:40,200
Speaker 1: which prices fell overstates the degree on a on a

635
00:33:40,320 --> 00:33:43,200
Speaker 1: national basis. Just with that demise and the diminishment of

636
00:33:43,280 --> 00:33:46,080
Speaker 1: cash flows will be so again, when I'm buying GEFs,

637
00:33:46,080 --> 00:33:50,480
Speaker 1: I'm looking for sustainable dividends, and I suspect even when

638
00:33:50,480 --> 00:33:53,080
Speaker 1: I have reduced office demand, because that's really where the

639
00:33:53,080 --> 00:33:56,520
Speaker 1: pressure is hotels in office, there's going to be enough

640
00:33:56,600 --> 00:33:59,320
Speaker 1: cash flows still remaining to more than offset them out

641
00:33:59,360 --> 00:34:01,960
Speaker 1: bo which prices have fallen. I wouldn't put all my

642
00:34:02,000 --> 00:34:04,440
Speaker 1: money in there. But when my again my investment great

643
00:34:04,440 --> 00:34:06,640
Speaker 1: bond has given me a two percent return and attack

644
00:34:06,720 --> 00:34:09,160
Speaker 1: eve them bonds is less than one percent, I can

645
00:34:09,280 --> 00:34:12,239
Speaker 1: afford handfuls of defaults or missteps and still beat those

646
00:34:12,800 --> 00:34:15,560
Speaker 1: via comfortable margins. That's why the capital is flowing there.

647
00:34:15,840 --> 00:34:18,160
Speaker 1: That's an interesting way to think about it in terms

648
00:34:18,200 --> 00:34:20,640
Speaker 1: of the equity market. What do you like within the

649
00:34:20,680 --> 00:34:24,960
Speaker 1: equity space right now? Well, I do actually still think

650
00:34:25,360 --> 00:34:30,280
Speaker 1: we are in a slower than average grinding economic economy,

651
00:34:30,440 --> 00:34:32,200
Speaker 1: which we're going to get up right where we were

652
00:34:32,320 --> 00:34:35,600
Speaker 1: before COVID. In fact, COVID may even persist this. You

653
00:34:35,680 --> 00:34:37,920
Speaker 1: have to look at growth. You have to stick with

654
00:34:37,960 --> 00:34:41,520
Speaker 1: the businesses that have high quality earnings generation. They can

655
00:34:41,520 --> 00:34:46,040
Speaker 1: grow in a low economic growth environment. So the cult

656
00:34:46,080 --> 00:34:50,640
Speaker 1: of growth equities outperforming value stocks that is likely to persist.

657
00:34:50,719 --> 00:34:55,479
Speaker 1: And so that's sort of a coded way of saying technology, biotechnology,

658
00:34:56,160 --> 00:35:00,600
Speaker 1: other businesses that have persistent competitive barriers of entry and

659
00:35:00,760 --> 00:35:03,480
Speaker 1: real mean business models that are really able to sustained

660
00:35:03,520 --> 00:35:06,480
Speaker 1: earnings growth, How capital will continue to be there? How

661
00:35:06,520 --> 00:35:09,759
Speaker 1: long does that persist for? Probably until we get through

662
00:35:09,800 --> 00:35:12,160
Speaker 1: the next recession, because I just don't see how we're

663
00:35:12,160 --> 00:35:14,600
Speaker 1: going to grow our economy quickly. If anything said is

664
00:35:14,600 --> 00:35:16,960
Speaker 1: going to be taking the set on the sort off

665
00:35:17,040 --> 00:35:19,520
Speaker 1: the pedal economic growth will again slowed down again the

666
00:35:19,560 --> 00:35:21,240
Speaker 1: seat of not going to ramp it up again until

667
00:35:21,239 --> 00:35:23,440
Speaker 1: you go through another recession cycle. And I don't think

668
00:35:23,560 --> 00:35:26,920
Speaker 1: there's at seven A recession cycles coming anytime since. But

669
00:35:26,960 --> 00:35:30,000
Speaker 1: I think growth stocks will persist out performance probably for

670
00:35:30,000 --> 00:35:32,720
Speaker 1: the next couple of years. How much are you starting

671
00:35:32,760 --> 00:35:35,239
Speaker 1: to think about what comes out of Jackson Hole? And

672
00:35:35,280 --> 00:35:38,239
Speaker 1: I bring that up because we did see uh Dad

673
00:35:38,320 --> 00:35:41,840
Speaker 1: Jones reporting about how FET officials are nearing agreement to

674
00:35:41,880 --> 00:35:44,759
Speaker 1: begin scaling back their easy money policies in about three

675
00:35:44,800 --> 00:35:47,719
Speaker 1: months if the economy recovery continues. It doesn't feel like

676
00:35:47,760 --> 00:35:49,560
Speaker 1: to me that that's a lot of new messaging, because

677
00:35:49,600 --> 00:35:51,879
Speaker 1: that's I feel like it's safe to say that that's

678
00:35:51,880 --> 00:35:53,960
Speaker 1: what the FETE has been saying all along. J. Powell

679
00:35:54,000 --> 00:35:56,640
Speaker 1: and others. They're watching the data points in particular, and

680
00:35:56,640 --> 00:36:01,279
Speaker 1: if things you know, significantly and substantial really improve on

681
00:36:01,320 --> 00:36:06,440
Speaker 1: an economic basis, well yeah, they're gonna pull off, right. Yeah. No,

682
00:36:06,520 --> 00:36:08,360
Speaker 1: I think about it a lot. And the reason I

683
00:36:08,360 --> 00:36:11,279
Speaker 1: think about a lot is I work with a lot

684
00:36:11,320 --> 00:36:13,520
Speaker 1: of human beings as clients, and no matter how much

685
00:36:13,560 --> 00:36:16,080
Speaker 1: I argue be long term investors don't time the market.

686
00:36:16,120 --> 00:36:19,600
Speaker 1: Inevitably everybody wants an entry point, so inevitably everybody wants

687
00:36:19,600 --> 00:36:21,280
Speaker 1: to hold back from cash and wait for the pullback

688
00:36:21,360 --> 00:36:24,759
Speaker 1: that just does not happen. And so I'm kind of

689
00:36:25,200 --> 00:36:27,120
Speaker 1: this is sound ironic in a way. I'm hoping the

690
00:36:27,200 --> 00:36:29,480
Speaker 1: said comes out and surprises people and says they're gonna

691
00:36:29,760 --> 00:36:32,680
Speaker 1: paper bond purchases and raise rates more quickly the inspect

692
00:36:32,719 --> 00:36:36,080
Speaker 1: and create this ten percent hope for pullback, which will

693
00:36:36,120 --> 00:36:38,600
Speaker 1: let all of my clients cash magically flow into the

694
00:36:38,640 --> 00:36:41,360
Speaker 1: stock market at the perfect time. Of course, probably won't happen,

695
00:36:41,760 --> 00:36:44,040
Speaker 1: but I think about it constantly because I sit and

696
00:36:44,120 --> 00:36:46,080
Speaker 1: think about what's going to cause the correction. And the

697
00:36:46,120 --> 00:36:48,279
Speaker 1: problem is, you and I both know the things that

698
00:36:48,600 --> 00:36:53,640
Speaker 1: can cause a correction and higher tax rates, Afghanistan, fed papering, COVID.

699
00:36:54,239 --> 00:36:56,080
Speaker 1: But you and I both know it's what we don't

700
00:36:56,080 --> 00:37:00,200
Speaker 1: know that actually happens that will cause the correction. So

701
00:37:00,840 --> 00:37:03,200
Speaker 1: I worry about it. I can't control it, and I

702
00:37:03,239 --> 00:37:04,719
Speaker 1: don't know what it's going to do. I think the

703
00:37:04,760 --> 00:37:07,640
Speaker 1: FEDS and everything they can to signal their intentions, and

704
00:37:07,680 --> 00:37:10,000
Speaker 1: now the market will have to digest it as best

705
00:37:10,000 --> 00:37:12,640
Speaker 1: it can. Alan Why do you think the market, at

706
00:37:12,719 --> 00:37:17,000
Speaker 1: least the equity market hasn't has ignored the spread of

707
00:37:17,000 --> 00:37:22,799
Speaker 1: the delta variant because I was a twofold one. As

708
00:37:22,880 --> 00:37:25,000
Speaker 1: I believe everyone's looking at the charts and thinks our

709
00:37:25,080 --> 00:37:28,600
Speaker 1: pattern of experience on the delta variant is gonna parallel

710
00:37:28,640 --> 00:37:30,719
Speaker 1: things that happened like in the UK, where it looks

711
00:37:30,719 --> 00:37:33,279
Speaker 1: like if you match what's happened in caseloads here in

712
00:37:33,320 --> 00:37:35,520
Speaker 1: the UK, we've already peaked right about now, the market

713
00:37:35,600 --> 00:37:38,920
Speaker 1: already looking path what's already the peak of this variant.

714
00:37:39,040 --> 00:37:41,799
Speaker 1: There might be another variant to follow. That's part of it.

715
00:37:41,840 --> 00:37:43,759
Speaker 1: The second thing is, I think there's a belief we're

716
00:37:43,760 --> 00:37:47,240
Speaker 1: not going to shut down the economy again barring something extraordinary,

717
00:37:47,400 --> 00:37:50,399
Speaker 1: and so the actual economic impact is a lot less

718
00:37:50,400 --> 00:37:53,160
Speaker 1: significant than what we experienced back in February March of

719
00:37:53,239 --> 00:37:57,480
Speaker 1: two thousand twenty. People are adapting, we have better information today,

720
00:37:57,560 --> 00:38:00,400
Speaker 1: more people are vaccinated, and so I think the belief

721
00:38:00,480 --> 00:38:04,080
Speaker 1: is there's a much lesser economic hit so the U.

722
00:38:04,120 --> 00:38:07,400
Speaker 1: S economy in particular, than we witnessed a year and

723
00:38:07,400 --> 00:38:09,160
Speaker 1: a half ago. And so I just don't think, I

724
00:38:09,200 --> 00:38:11,400
Speaker 1: hate to say it this way, from a pure stock

725
00:38:11,480 --> 00:38:14,479
Speaker 1: market perspective, it's not a big enough event to matter,

726
00:38:15,360 --> 00:38:19,000
Speaker 1: right unless we see a retrenchment in the economy, like

727
00:38:19,040 --> 00:38:21,840
Speaker 1: I do think about this alan. You know, people can't

728
00:38:21,880 --> 00:38:24,480
Speaker 1: travel again just as we were starting to reopen. That's

729
00:38:24,480 --> 00:38:27,880
Speaker 1: going to have an economic impact. Disney right their second quarter,

730
00:38:28,160 --> 00:38:30,400
Speaker 1: it was streaming, but it was also the theme parks

731
00:38:30,400 --> 00:38:32,560
Speaker 1: which came roaring back in a big way, and that

732
00:38:32,640 --> 00:38:35,920
Speaker 1: stock just took off on a tear. So if we

733
00:38:35,960 --> 00:38:38,680
Speaker 1: start to see a retrenchment again where people aren't traveling

734
00:38:38,719 --> 00:38:42,560
Speaker 1: so much. Southwest warned about travel they I think, are

735
00:38:42,600 --> 00:38:44,799
Speaker 1: the biggest carrier that goes into Orlando. So there are

736
00:38:45,080 --> 00:38:48,040
Speaker 1: there are little pieces out there. The Chinese ports shutdown,

737
00:38:48,080 --> 00:38:51,160
Speaker 1: They're just little pockets that remind us that, yes, we

738
00:38:51,239 --> 00:38:52,960
Speaker 1: know how to deal with this, right, we have the

739
00:38:53,000 --> 00:38:55,279
Speaker 1: playbook that we didn't have a year year and a

740
00:38:55,320 --> 00:38:58,960
Speaker 1: half ago. But nonetheless, if I'm not out there going

741
00:38:58,960 --> 00:39:01,520
Speaker 1: back to store, shop being, my husband will be happy.

742
00:39:01,560 --> 00:39:04,640
Speaker 1: But you know, it means that's economic momentum that's not happening.

743
00:39:04,880 --> 00:39:07,480
Speaker 1: If we're not getting on planes, we're not doing business traveling,

744
00:39:07,719 --> 00:39:10,800
Speaker 1: we're seeing you know, the New York Auto Show got canceled.

745
00:39:10,800 --> 00:39:12,759
Speaker 1: Like there are big events that would normally attract a

746
00:39:12,840 --> 00:39:17,680
Speaker 1: lot of people that creates an economic momentum that's not happening. Um,

747
00:39:17,760 --> 00:39:20,600
Speaker 1: that's got to be something though that could start to

748
00:39:20,640 --> 00:39:23,560
Speaker 1: weigh on companies again and impact some of the top

749
00:39:23,560 --> 00:39:27,480
Speaker 1: and bottom lines and certainly impact some of the economic growth.

750
00:39:28,400 --> 00:39:30,560
Speaker 1: So I agree with to jazz Fest in New Orleans,

751
00:39:30,640 --> 00:39:33,040
Speaker 1: one of my scarest events has been canceled as well.

752
00:39:33,440 --> 00:39:35,840
Speaker 1: What I'll tell you this though, the things you're talking

753
00:39:35,840 --> 00:39:40,200
Speaker 1: about travel, uh, leisure, they comprise it actually a somewhat

754
00:39:40,280 --> 00:39:44,680
Speaker 1: smaller portion of the stock market than technology companies and

755
00:39:44,719 --> 00:39:48,200
Speaker 1: companies that actually can thrive in an environment that's modestly

756
00:39:48,320 --> 00:39:52,239
Speaker 1: shut down. What COVID has done is it accelerated the

757
00:39:52,360 --> 00:39:56,719
Speaker 1: use of technology and productivity in years, in many years

758
00:39:56,760 --> 00:39:59,880
Speaker 1: of not decades, and that's part of what we're witnessing. This.

759
00:40:00,520 --> 00:40:02,799
Speaker 1: We are in the midst of some industrial revolution which

760
00:40:02,800 --> 00:40:06,120
Speaker 1: probably started with the Internet way back when, or even

761
00:40:06,160 --> 00:40:08,680
Speaker 1: the creation of the semiconductors, depending how far back you

762
00:40:08,680 --> 00:40:12,080
Speaker 1: want to measure this. COVID has just re accelerated this

763
00:40:12,120 --> 00:40:16,160
Speaker 1: process and what you're seeing is durable, sustainable and accelerated

764
00:40:16,200 --> 00:40:19,399
Speaker 1: earnings growth. As a consequence, what you're describing tarol can

765
00:40:19,400 --> 00:40:23,240
Speaker 1: in fact sadly happen. It's going to marginalize again restaurant owners.

766
00:40:23,239 --> 00:40:27,160
Speaker 1: It's going to marginalize travel agents. It's gonna marginalized resort hotels.

767
00:40:27,200 --> 00:40:29,960
Speaker 1: But they don't make up the SMP five under an index.

768
00:40:30,600 --> 00:40:34,200
Speaker 1: But it isn't. It is. It's going to hurt spending

769
00:40:34,280 --> 00:40:38,680
Speaker 1: in the short run. But like other waves, I hate

770
00:40:38,680 --> 00:40:41,600
Speaker 1: to say it this way because it's truly a humanitarian crisis,

771
00:40:41,680 --> 00:40:45,800
Speaker 1: but from a pure financial economic perspective, it's a bump

772
00:40:45,880 --> 00:40:48,480
Speaker 1: in the road, and the road has just accelerated the

773
00:40:48,520 --> 00:40:50,160
Speaker 1: speed of which the cars can move because of all

774
00:40:50,200 --> 00:40:52,200
Speaker 1: the productivity enhancements. So, if you're going to take a

775
00:40:52,280 --> 00:40:55,759
Speaker 1: long enough point of view, whatever happens won't be good.

776
00:40:55,760 --> 00:40:59,360
Speaker 1: But we've actually set ourselves up for faster, more productive, better,

777
00:40:59,440 --> 00:41:04,239
Speaker 1: more robust and sustainable economic growth going forward. It's a

778
00:41:04,360 --> 00:41:08,799
Speaker 1: terrible humanitarian crisis in between. But to get to the end,

779
00:41:08,920 --> 00:41:11,120
Speaker 1: get to the end game economically, we're going to be

780
00:41:11,160 --> 00:41:14,560
Speaker 1: in better shape. Ironically, to state this way, five year

781
00:41:14,600 --> 00:41:18,080
Speaker 1: swords like Darwinianism, we forced ourselves to be a more

782
00:41:18,120 --> 00:41:22,360
Speaker 1: productive economy, right we listen. We've had tons of conversations

783
00:41:22,360 --> 00:41:26,920
Speaker 1: with CEOs and other individuals about how the pandemic accelerated

784
00:41:26,920 --> 00:41:30,120
Speaker 1: trends that you know, institutions, companies were gonna put in

785
00:41:30,120 --> 00:41:31,520
Speaker 1: place maybe over the next three to five years, and

786
00:41:31,520 --> 00:41:32,800
Speaker 1: all of a sudden they're like, bam, we got to

787
00:41:32,840 --> 00:41:35,799
Speaker 1: do it now, and so you don't go back. There's

788
00:41:35,800 --> 00:41:39,240
Speaker 1: no going back, and that certainly has a lasting impact

789
00:41:39,280 --> 00:41:41,200
Speaker 1: on our world. So what worries, what what what keeps

790
00:41:41,239 --> 00:41:43,680
Speaker 1: you up at night when it comes to investing and

791
00:41:43,760 --> 00:41:48,840
Speaker 1: investors portfolios. Well, I actually think the past events of

792
00:41:48,880 --> 00:41:51,760
Speaker 1: the past week have kind of humiliated humiliated the United

793
00:41:51,800 --> 00:41:54,479
Speaker 1: States in the country a bit, and we're perceived maybe

794
00:41:54,680 --> 00:41:56,680
Speaker 1: the world's a little less safe for a number of reasons.

795
00:41:57,080 --> 00:41:59,880
Speaker 1: What's going on in Afghanistan. I actually think candid some

796
00:42:00,080 --> 00:42:04,080
Speaker 1: degree impact the legislative agenda of the current administration. It

797
00:42:04,200 --> 00:42:06,600
Speaker 1: might change the dynamics of the political election new year

798
00:42:06,680 --> 00:42:09,000
Speaker 1: from now. But I also think you could end up

799
00:42:09,000 --> 00:42:12,440
Speaker 1: with unintended consequences geo politically, and things like that have

800
00:42:12,520 --> 00:42:15,600
Speaker 1: a funny way of creating sentiment overhangs on the stock market.

801
00:42:16,040 --> 00:42:19,400
Speaker 1: I think we actually are in somewhat of a implicit

802
00:42:19,600 --> 00:42:23,040
Speaker 1: tacit club war with China in a ran with all

803
00:42:23,040 --> 00:42:26,640
Speaker 1: the cyber securities wars back and forth, things like this

804
00:42:26,680 --> 00:42:28,479
Speaker 1: are going to come up. I can't tell you when

805
00:42:28,640 --> 00:42:30,560
Speaker 1: or what or how or why, but that's how you

806
00:42:30,600 --> 00:42:34,160
Speaker 1: get these intermittent ten percent corrections, which are usually just

807
00:42:34,239 --> 00:42:37,200
Speaker 1: corrections that keeps me up at night. That keeps me

808
00:42:37,280 --> 00:42:39,040
Speaker 1: up at night, right, But we haven't had a five

809
00:42:39,040 --> 00:42:42,400
Speaker 1: percent correction since late last year, so it's been a

810
00:42:42,400 --> 00:42:45,560
Speaker 1: long time. Allan, thank you so much. We always are

811
00:42:45,600 --> 00:42:47,400
Speaker 1: grateful when we get some time with you. Alan Safran,

812
00:42:47,600 --> 00:42:50,400
Speaker 1: he's founding partner in co CEO at I e Q Capital,

813
00:42:50,440 --> 00:42:54,719
Speaker 1: on the phone from Foster City, California. A great conversation,

814
00:42:55,080 --> 00:42:57,960
Speaker 1: always great when Alan joins us. And and look, Carol,

815
00:42:58,280 --> 00:43:00,400
Speaker 1: going into today, I thought, hey, this is going to

816
00:43:00,440 --> 00:43:03,440
Speaker 1: be a day that's actually not a record day. And

817
00:43:03,520 --> 00:43:05,640
Speaker 1: we look at the SMP five hundred and then down

818
00:43:05,680 --> 00:43:10,680
Speaker 1: they're eating out games late day rallies exactly. Thanks for

819
00:43:10,719 --> 00:43:14,440
Speaker 1: listening to Bloomberg Business Week. Download the podcast on iTunes, SoundCloud,

820
00:43:14,600 --> 00:43:16,719
Speaker 1: or Bloomberg dot com, and you can also listen to

821
00:43:16,760 --> 00:43:19,359
Speaker 1: our radio show at two pm Eastern on Bloomberg Radio

822
00:43:19,480 --> 00:43:22,240
Speaker 1: or watch us on YouTube. Search to Bloomberg Global News