Speaker 1: This is Bloomberg Business Week. I'm Karl Masser and I'm
Speaker 1: Bloomberg Quick Takes Tim Stanovk. We're here every day bringing
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Speaker 1: You can also listen to our radio show at two
Speaker 1: pm Eastern Time on the Bloomberg Radio or watch us
Speaker 1: on YouTube search Bloomberg Global News. A lot to get through,
Speaker 1: Tim and I just talking about Michelle A. Cortez who's
Speaker 1: got this story about the world may never reach herd
Speaker 1: immunity against COVID. Meantime, New York cities, museums and cultural
Speaker 1: institutions they're going to require visitors and staff to be vaccinated.
Speaker 1: We got that from Mayor Bill de Blasio. Uh. And
Speaker 1: then we've got fives from BioNTech saying they have submitted
Speaker 1: tim phase one trial data to the US FDA for
Speaker 1: third dose of their COVID nineteen vaccine. There's a lot
Speaker 1: still going on. Yeah, they're showing that a third dose
Speaker 1: of the vaccine led to higher levels of protective antibodies
Speaker 1: when given eight to nine months after the original regiment.
Speaker 1: Let's get right to it with Dr Tom McGinn, executive
Speaker 1: vice president at Common Spirit Health. Common Spirit Health has
Speaker 1: a hundred forty hospitals and more than one thousand care
Speaker 1: sites across twenty one different states. Dr McGinn, it's it's
Speaker 1: great to have you on the show. Give us an
Speaker 1: update about what you're seeing in Common Spirit Health hospitals
Speaker 1: right now. What's what's what's the what's the view on
Speaker 1: the ground. Thanks Tim, and thanks Charlos, thanks for having
Speaker 1: us having me on. Well, the view on the ground
Speaker 1: is that we are seeing as no actual you know,
Speaker 1: new news to you is that we're seeing a resurgence
Speaker 1: in our hospitals in almost every market now. Uh. You know,
Speaker 1: it was isolated, you know, in some of our regions
Speaker 1: in the Southeast and Texas, but now we're seeing it
Speaker 1: in the Northwest. Our hospitals are reaching you know, some
Speaker 1: some real critical moments, but I think we're managing it well.
Speaker 1: But we're now seeing pockets in California, in all of
Speaker 1: the southeast in all of the Texas area, and now
Speaker 1: we're seeing it in the Pacific Northwest. So you know,
Speaker 1: we are controlling it, we're managing it, we're you know,
Speaker 1: we're a lot more nimble. We have a lot more
Speaker 1: algorithms and treatments that we can offer folks as they
Speaker 1: come to the hospital. This is fundamentally a hospitalization of
Speaker 1: the unvaccinated. While about ten percent are vaccinated, many of
Speaker 1: those folks are folks with underlying medical conditions and things
Speaker 1: to that effect. So really, what we're seeing in the
Speaker 1: severe cases is a resurgence across the board of the unvaccinated.
Speaker 1: So let me make sure we have this right because
Speaker 1: data is really important here. Of the hospitalization is roughly
Speaker 1: that you're seeing in your hospitals across the country. Those
Speaker 1: are people who have not been vaccinated approximately. I mean,
Speaker 1: it could vary from seven to fifteen or seven to
Speaker 1: twelve percent, But fundamentally, I just said, let's for simplicity sake,
Speaker 1: let's say, are they younger, are they older? Who are they?
Speaker 1: What are the demographics? Well, you know they are the
Speaker 1: hospitalization rates are much higher. The numbers are a little tricky.
Speaker 1: We're seeing an uptick from baseline of the young folks,
Speaker 1: it's increase of those getting hospitalized who are young in children,
Speaker 1: but however, the baseline was very low. Still, the vast
Speaker 1: majority of folks are older. Um many of them are,
Speaker 1: you know, with chronic illnesses, the diabetes, the hypertension, all
Speaker 1: the things that we learned. I was in New York
Speaker 1: for the beginning of this phase of the pandemic and
Speaker 1: did a lot of work on the early predictors of
Speaker 1: who would have severe COVID. So it's that story still
Speaker 1: plays itself out. What we're seeing is an uptick of
Speaker 1: hospitalizations among young people, no question. We spoke earlier about
Speaker 1: the fact that vaccines still aren't available as we go
Speaker 1: back to school around the country to people who are
Speaker 1: under the age of twelve, what's what's the best way
Speaker 1: for those young kids to stay safe, the best way
Speaker 1: for parents to think about risk factors and are we
Speaker 1: seeing different data play out with younger people under the
Speaker 1: age of twelves. We can't be vaccinated, so you know,
Speaker 1: this is the real challenge. I I heard you speak earlier,
Speaker 1: and I'm in agreement that we need to get the
Speaker 1: kids back in the schools and I'm working with several
Speaker 1: schools across the country, and I think we need to
Speaker 1: just good old fashion and now what we call old
Speaker 1: fashioned methods of mask wearing, social distancing, um, you know, handwashing,
Speaker 1: all the things that we did uh early in that pandemic.
Speaker 1: But having kids in the classroom, I think that you know,
Speaker 1: we can get through this if we continue to follow
Speaker 1: the basic rules of engagement around mask wearing, that that
Speaker 1: really is going to be the key to success as
Speaker 1: we go back into schools. I think as you and
Speaker 1: I talked about this, and as a primary care physician,
Speaker 1: I can see the stress, the anxiety, and all the
Speaker 1: issues that we're creating by not going back to school.
Speaker 1: So I really think we all need to just face
Speaker 1: the facts. Kids are gonna need to wear masks if
Speaker 1: they're unvaccinated, which they are, and we're gonna have to
Speaker 1: do a lot of the same social distancing and careful
Speaker 1: uh you know approach to this as we move into
Speaker 1: the fall. And I also just want to mention that
Speaker 1: this fall and excuse me, no, no, no, sorry, Carol,
Speaker 1: I think that one thing we have to think about,
Speaker 1: and I'm preparing for this across Common Spirit is the sniffles. Okay,
Speaker 1: we are coming into what will likely be a regular
Speaker 1: cold season, whether or not the flu. Remember, the flu
Speaker 1: and the cold are two separate things. We've seen an
Speaker 1: uptick in RSD virus, which is a specific virus that
Speaker 1: is a harbinger for common colds. So we're anticipating a
Speaker 1: lot of colds and sniffles mixed in with the potential flu,
Speaker 1: mixed in with the potential covid. So how do we
Speaker 1: test for that? How do we carefully, you know, manage
Speaker 1: that situation is something we are all preparing for right now.
Speaker 1: So I just wanted to put that into think of
Speaker 1: the child showing up at school with the runny nose,
Speaker 1: wiping their nose in the middle of the fall. What
Speaker 1: does that mean? How do we manage that and that
Speaker 1: stuff we were all trying to figure out. Now you
Speaker 1: call it a twin demic or potentially a twin demic season, correct, Yeah,
Speaker 1: I think that, you know, we you know, we could
Speaker 1: see if influenza comes up, we will see that will
Speaker 1: be a stress on our hospitals. But I think even
Speaker 1: beyond flu, I mean people very confused. I thought, oh
Speaker 1: I had a bad flu, what they really means sometimes
Speaker 1: I had a bad cold, and a cold can mask
Speaker 1: and look a little bit like mild COVID. So how
Speaker 1: are we going to distinguish that? Um, So we need
Speaker 1: to really ramp up our testing strategies, particularly in primary
Speaker 1: care sites, our strategies that are schools, you know, all
Speaker 1: across the country. Do we have the equipment, Do we
Speaker 1: have the supplies to do all that right? And that
Speaker 1: stuff that we're all working on. Hey, sit tight for
Speaker 1: a second, um, Dr McGain, We're going to come back
Speaker 1: and continue the conversation. I also do wonder if we
Speaker 1: just put masks on again to him down. Many companies
Speaker 1: doing it right now. You have many companies saying wait
Speaker 1: a second, even if you're fully vaccinated, if you're coming
Speaker 1: back to work, uh, you have to wear a mask again, right,
Speaker 1: and that'll keep hopefully maybe cold to own regular flu down,
Speaker 1: keep it all down. Yeah. I mean, it doesn't matter
Speaker 1: if it's a small bike shop. I was in one
Speaker 1: yesterday where they're requiring employees to be vaccinated and wear masks,
Speaker 1: or one of the big banks that announced in the
Speaker 1: last couple of weeks, even if you're vaccinated, wear that mask.
Speaker 1: All right. We're gonna come back to Dr Tom McGain
Speaker 1: he's executive ep a physician enterprise of at Common Spirit Health.
Speaker 1: Will continue right here on Bloomberg Radio. Let's get right
Speaker 1: back to it with Dr Tom McGain, executive vice president
Speaker 1: at Common Spirit Health. He joins us on the phone
Speaker 1: from here in New York, a dark Common Spirit Health
Speaker 1: operates a hundred and forty hospitals and more than one
Speaker 1: thousand care sites, this across twenty one states. Dr Dr
Speaker 1: McGinn um. I want to have a realistic, uh idea
Speaker 1: of how we're going to be living with COVID for
Speaker 1: the rest of our lives. Is this is this something
Speaker 1: that we get inoculated against each and every year, like
Speaker 1: the flu, and it fades into the background. Yeah, well,
Speaker 1: you know, I think obviously we will learn, but I
Speaker 1: do feel that's where we're heading. I think that as
Speaker 1: we increase our vaccination rates, as we look the variants
Speaker 1: and we adjust, uh you know, these vaccines, that we
Speaker 1: will end up learning to live with COVID, just as
Speaker 1: we learned to live with influenza. But we we are
Speaker 1: getting better at this, I don't you know. I think
Speaker 1: a lot of us can get caught up in in
Speaker 1: sort of this is never going to go away. But
Speaker 1: we are managing it. We are learning more every day
Speaker 1: and I think when this servige goes down, we will
Speaker 1: continue to be prepared for it and if we need
Speaker 1: to live with it, we will learn to live with it. Right.
Speaker 1: As our synthir Coon wrote for Business Week last week,
Speaker 1: we talked about it on Friday. The vaccine, folks, it works.
Speaker 1: You know, we need to be reminded with all of
Speaker 1: these you know worry where some headlines that the vaccine
Speaker 1: it actually works. Having said that, um Dr McGinn. Do
Speaker 1: we need to be smart because as you said, you
Speaker 1: know we're going to be dealing with colds and the
Speaker 1: regular flu and COVID come fall that by wearing a
Speaker 1: max mask excuse me, can we mitigate much of the
Speaker 1: risk from those three? Well? It was amazing fall last year,
Speaker 1: wasn't it? The fact that we saw almost no flu.
Speaker 1: I mean many of us reflect back, Wait a minute,
Speaker 1: I didn't really have a cold lest floor. How does
Speaker 1: that happen? Uh? You know? And I think a lot
Speaker 1: of it came from the mask wearing, the social distancing,
Speaker 1: and I think as we go back to school again,
Speaker 1: I you know, I don't I'm avoiding the whole discussion
Speaker 1: of the political mandate of a mask, But it really
Speaker 1: will get these kids through a false season that I
Speaker 1: guarantee will be complex, and we are preparing for it
Speaker 1: and we'll manage it. But I do think the mask
Speaker 1: will reduce cold costs, flues and COVID, so it will
Speaker 1: have a multiple effects that will be positive. It's hard
Speaker 1: to think about this as the parent of a two
Speaker 1: and a half year old though, as I am, because
Speaker 1: you know, he wears a mask for five minutes and
Speaker 1: you know he's been he's been like chewing on it
Speaker 1: versus a nine year old who could totally keep a
Speaker 1: mask on when when inside. So how do you make
Speaker 1: sense of that? No, Well, first of all, I have
Speaker 1: to say, you know, ChIL John, I have you know
Speaker 1: two girls there older now their college age, and so
Speaker 1: that has its own inherent issues. But I I'm amazed
Speaker 1: as I work with many schools and watch kids walk
Speaker 1: around Manhattan with their masks on. Now as you get
Speaker 1: below you know, three years old, it gets complicated and
Speaker 1: you do the best you can. I mean all we're
Speaker 1: asking people to do. Let's do the best you can.
Speaker 1: You know, this is not you know, something where we're
Speaker 1: going to force people to do things. You do the
Speaker 1: best you can under the circumstances. Try to put the
Speaker 1: mask on, try to be socially distant, try to be
Speaker 1: smart about it. On our side, on the public health side,
Speaker 1: on the health system side. You know, we're a common
Speaker 1: spirit dedicated to provide care and test and treat and
Speaker 1: vaccinate in every community throughout this very diverse country that
Speaker 1: we live in. And that's our job to figure out,
Speaker 1: how do we test these kids when they have the sniffles,
Speaker 1: how do we get them easy access to vaccinations when
Speaker 1: they're available for the young kids, which I hope will
Speaker 1: becoming sometime late in the fall, maybe early next year.
Speaker 1: But you know, you do the best you can with
Speaker 1: the mask and all of those efforts mitigate every little
Speaker 1: thing we do mitigates that's bread by a little bit. Well,
Speaker 1: that's helpful when you edit up hey just quickly thirty seconds.
Speaker 1: Do you anticipate that in terms of an additional booster
Speaker 1: for the general public, Does that happen before the end
Speaker 1: of the year. I do think we're going to see
Speaker 1: that and come out in a process that we just
Speaker 1: saw some folks who are mean compromise. I would assume
Speaker 1: healthcare workers sometime soon we started hearing. Hey, they were
Speaker 1: the first ones back then, they're on the front lines.
Speaker 1: Do we give them the booster. I think it's going
Speaker 1: to roll itself out gradually over time. Absolutely. Hey, listen,
Speaker 1: thank you so much. Really appreciate it, and I hope
Speaker 1: we can get you back real soon. Dr Tom Again,
Speaker 1: Executive Vice President Common Spirit Health, on the phone from
Speaker 1: New York City. Are you going back to some of
Speaker 1: the stuff that we were doing before we got the vaccine? Um, yes,
Speaker 1: I am. I'm wearing a mask now in source. You know,
Speaker 1: I was to the point where I would go and
Speaker 1: pick up food and go to the I was always
Speaker 1: wearing the grocer in the grocery store, I was wearing
Speaker 1: a mask. But yeah, even around here in the office.
Speaker 1: Public transportation, oh yeah, I'm still taking public transit, but
Speaker 1: I'm wearing a mask. You have to yeah, no, yeah,
Speaker 1: you don't have to. I would. This is Bloomberg Business
Speaker 1: Week with Carol Masser and Bloomberg Quick Takes Tim Stinovic
Speaker 1: on Bloomberg Radio. So I see it, I hear about it.
Speaker 1: We know what's happening that despite some of the slowdowns
Speaker 1: in an office reopenings because of the delta variant. There
Speaker 1: are still tim a lot of us back in the office,
Speaker 1: and yet for a certain subset of the workforce, they're
Speaker 1: clearly staying at home. Justin Fox is a columnist for
Speaker 1: Bloomberg Opinion. He writes about it in the upcoming issue
Speaker 1: of Bloomberg Business Week magazine. You can read it now
Speaker 1: at Bloomberg and at bloomberg dot com slash business Week.
Speaker 1: So Justin who as people some reluctantly go back to
Speaker 1: the office, UM State Street employees, notwithstanding, we should know,
Speaker 1: correct in New York, I should say, who's staying home?
Speaker 1: What did you What does the data tell you? UMS?
Speaker 1: The group that is most stuck at home is UM
Speaker 1: people in computer and mathematical operations, which is basically software engineers,
Speaker 1: data analysts, that whole world. And it's on level. We
Speaker 1: know this because it's the Silicon Valley companies, the tech
Speaker 1: companies that are sort of being the slowest to come back.
Speaker 1: But these people aren't just working in tech companies. They're
Speaker 1: at all different kinds of companies, and it just seems
Speaker 1: like more than any else, it's it's as of July
Speaker 1: of them reported that they were still working remotely at
Speaker 1: least part of the time because of the pandemic. But
Speaker 1: that doesn't reflect people who were already working remotely before
Speaker 1: the pandemic. Or you hear a lot about, especially in tech,
Speaker 1: people getting hired completely remotely. Now. I don't know if
Speaker 1: they get asked by the Census Bureau whether they're working
Speaker 1: at home because of the pandemic, they may say, no,
Speaker 1: I'm just working at home, dude, Right, that's how I
Speaker 1: was hired. Hey, Jill Weber's with us of course, editor
Speaker 1: of Bloomberg business Week magazine, and Joe it is, you know,
Speaker 1: interesting on a daily basis, we are kind of parsing
Speaker 1: out what's going on, who's coming back to work, who is,
Speaker 1: and who can go back to work who can't? Uh,
Speaker 1: And love that you guys are highlighting this. Well. When
Speaker 1: I saw um Justin's draft, it reminded me of the
Speaker 1: ending of Point Break. Uh and if you can place that,
Speaker 1: the quote is he's not coming back, And that was
Speaker 1: totally how I felt about exactly. Oh, you've come out
Speaker 1: of you and watched Point Break. You know, you're just justin.
Speaker 1: It's a fantastic one. Oh man, I just want to
Speaker 1: slap you from here. So you need to be in
Speaker 1: the office, dude, the virtual slap. I think that the
Speaker 1: story revealed to me again, but there are certain workers
Speaker 1: and certain career paths that have ended up kind of
Speaker 1: being able to rise above the fraight. So to me,
Speaker 1: as much as anything, this is a story about this
Speaker 1: wealth inequality and wealth disparity because obviously these are high
Speaker 1: paying jobs right justin yeah, I mean that's part of it.
Speaker 1: And more broadly, you know, white collar workers have been
Speaker 1: more able to work remotely than everybody else. But it
Speaker 1: seems like with this p particular group, yes, they're highly paid,
Speaker 1: but it's also just kind of the way they do
Speaker 1: their work has even before the pandemic, been getting increasingly
Speaker 1: sort of distributed, and lots of times when there's any
Speaker 1: big sort of software related project, there are teams all
Speaker 1: over the world working on it. There's already been a
Speaker 1: lot of outsourcing to freelance workers all over the place.
Speaker 1: So it just sort of feels like this is a
Speaker 1: particular area where you know, the default going forward maybe
Speaker 1: doing it remotely. Well, we were talking with the CEO
Speaker 1: of Mozilla to who said, we've been doing this for years,
Speaker 1: like this isn't new to us, but increasingly as every
Speaker 1: company we're a high tech company, where a media company,
Speaker 1: but where a lot more than that obviously, But each company,
Speaker 1: UM justin often has a huge tech component to it.
Speaker 1: They've got a lot of software engineers, people who are
Speaker 1: writing code for one reason or another. Pick your industry,
Speaker 1: pick your company. Yeah, No, it's spread all over the place.
Speaker 1: I mean, the BLS does this annual sort of accounting
Speaker 1: of where people in every pretty arrow occupation, UM, what
Speaker 1: industries they work in. And so I was going through
Speaker 1: the list for computer and mathematical operations and I think
Speaker 1: I found like a Mason reconstruction doesn't have any UM,
Speaker 1: but bars. There were fifty of them listed as working
Speaker 1: in the bar industry can conclude, you know, like a
Speaker 1: chain of bars or something. Aren't many of those shipping
Speaker 1: liquor to all of us at home exactly? So it's yeah,
Speaker 1: it's all over the place. And you know, obviously that
Speaker 1: will differ by industry. Some industries, you know, another oil
Speaker 1: and gas industry has tons of UM computer and mathematical occupations.
Speaker 1: It's going to vary by industry how much they stay
Speaker 1: at home. But I just feel like that particular kind
Speaker 1: of work is going beyond where a lot of the
Speaker 1: other things that what color people do are going. Okay,
Speaker 1: justin help us think through some implications of this. Does
Speaker 1: it Does it mean that companies will save money by
Speaker 1: having to pay employees who don't live in the Bay
Speaker 1: Area or in Los Angeles or New York as much money?
Speaker 1: Does it mean that, you know, so called in putting
Speaker 1: this in quotes and air quotes, the second tier, third
Speaker 1: tier cities are going to see some sort of resurgence
Speaker 1: because you're gonna have people moving there because the quality
Speaker 1: of life is higher. I mean, I think what we've
Speaker 1: seen so far in terms of where people are moving,
Speaker 1: it's like, yes, more people are moving to Austin, then
Speaker 1: also Phoenix. They're not moving to Cleveland or other They're
Speaker 1: not moving to the second tier cities where you actually
Speaker 1: get a really big jump up in the kind of
Speaker 1: house you can buy and the quality of life. So
Speaker 1: it is. I don't think it's going to be some
Speaker 1: great equalizer. It's just gonna shift the inequality sort of.
Speaker 1: You know, it's gonna make things a lot worse in
Speaker 1: a few towns in Montana um and then in the
Speaker 1: rest of the country. It's not going to change things
Speaker 1: that much. But I think in again, in the computer
Speaker 1: and mathematical um occupations, it's also just gonna be and
Speaker 1: this was again already happening, but it's just gonna increase
Speaker 1: the tendency to think globally. And you're trying to staff
Speaker 1: up something and and you know, even if companies aren't
Speaker 1: able to push through that, hey you have to take
Speaker 1: less pay. If you lived in Bend, Oregon, then if
Speaker 1: you live in Silicon Valley, they can probably get away
Speaker 1: with it saying yes, you take less pay. If you
Speaker 1: live in Ukraine, then if you live in the US,
Speaker 1: you know Bend Oregon long ago, justin at the early
Speaker 1: days of the pandemic, as an Oregon I woke up
Speaker 1: one morning and in that like little hazy spot before
Speaker 1: your brain is fully awake, I was like, where in
Speaker 1: the world would I work if I could work anywhere?
Speaker 1: And Bend Oregan was the spot that popped into my
Speaker 1: brain in that hazy hour. But uh, I also just
Speaker 1: want to bring up another point that you raised in
Speaker 1: your story here, which is like, you know, one other
Speaker 1: element of this work from home conversation with this particular
Speaker 1: category of jobs is like jobs here are really scarce
Speaker 1: in this field. Right even before the pandemic, this has
Speaker 1: been some of the most desirable workers in career path.
Speaker 1: The workers are scarce, the jobs are not scarce. The
Speaker 1: workers are exactly right. And and so I'm wondering as
Speaker 1: as the pandemic actually exacerbated that, because it's not like
Speaker 1: the pipeline has been robust and growing right right, and
Speaker 1: and there hasn't been any you know, like overall employment
Speaker 1: is still down something like four percent in the computer
Speaker 1: and mathematical occupations, it's it's up, but not by a
Speaker 1: huge amount. But they're they're basically other than really temporarily
Speaker 1: right at the in the middle of the lockdowns, there
Speaker 1: was no real decline and employment in the in that area,
Speaker 1: and no definitely no decline overall in demand for people
Speaker 1: to do those kinds of jobs. Yeah, and these guys
Speaker 1: are getting paid well. The meeting hourly wage for all
Speaker 1: computer and mathematical occupations of almost forty four dollars. Computer
Speaker 1: and information research scientists had the highest meeting wage at
Speaker 1: almost sixty hour perhaps in surprising why you saw a
Speaker 1: lot of this workout source early for the pandemic. Exactly
Speaker 1: good stuff, Thank you so much, justin really appreciate it. Yeah,
Speaker 1: you bet. Check out this. It's a column on the
Speaker 1: back page of the upcoming issue of Bloomberg Business Week magazine.
Speaker 1: Jil Webber and Bloomberg opinion columnist Justin Fox in our studio.
Speaker 1: This is Bloomberg. This is the Big Take, the best
Speaker 1: of Bloomberg's in depth, original reporting from around the globe. Well,
Speaker 1: we have to make sure we do as the economy.
Speaker 1: What covers is what cut. The data kind of broken
Speaker 1: down a bit. It's fun to becoming more and more
Speaker 1: expensive to be looking at for shipping billion dollars for
Speaker 1: the red entry levels. There's been ways of immigration that
Speaker 1: have taced a lot of resistance, a lot of color
Speaker 1: behind the scenes in a great untold story. How did
Speaker 1: Bezos really come out on top? It's the cover, says
Speaker 1: Jeff Wins. He always seems to win the Big Take
Speaker 1: on Bloomberg Radio. All right, this time for the Bloomberg
Speaker 1: Big Take. Happens to be one of our most read
Speaker 1: stories too on the Bloomberg because you put anything about
Speaker 1: taxes and the headline in the Bloomberg story and it's
Speaker 1: among the most red tips, and for good reason, because
Speaker 1: it is a fantastic deep dive into taxing the rich,
Speaker 1: winning at poles, but falter us to fix global housing.
Speaker 1: Joining us now is Natalie Obiquo Pearson, Vancouver bureau chief
Speaker 1: for Bloomberg News, joining us on the phone from our
Speaker 1: Vancouver bureau. Natalie, take us through globally what's happening with
Speaker 1: governments trying to disincentivize people from leaving apartments empty? Sure,
Speaker 1: so what do What we tried to do in the
Speaker 1: story was we did a deep dive into a couple
Speaker 1: of cities, Vancouver and Melbourne, that imposed empty homes taxes
Speaker 1: quite early on, so if if property owners left their
Speaker 1: places empty, they had to pay an annual tax. And uh.
Speaker 1: The reason this is important is because a few of
Speaker 1: other cities around the world who are similarly facing affordable
Speaker 1: housing crunches, are looked to be potentially following in their footsteps.
Speaker 1: Los Angeles is planning to put a vacant homes tax
Speaker 1: on the ballot. For Hong Kong officials are considering taxing
Speaker 1: condo developers to deter them from hoarding new You and
Speaker 1: It's Ireland is looking at a couple options, and Barcelona
Speaker 1: has even gone so far as to threaten to seize
Speaker 1: landlord's empty apartments. So it's very sort of you know,
Speaker 1: of the day, all right, So of the day, does
Speaker 1: it really make a difference? I mean, if we start
Speaker 1: doing this, are you telling me that we could knock
Speaker 1: down those really wealthy homes and then all of a
Speaker 1: sudden you'd put in lower income housing there. I mean,
Speaker 1: is that really? Is this? Are we really getting at
Speaker 1: the root of the problem, I guess is what I'm asking. Yeah,
Speaker 1: it's a great question, and I think a really tricky
Speaker 1: one because some degree you can understand why municipalities do this,
Speaker 1: and when you have an affordable housing crunch, to see
Speaker 1: empty homes just not being used as of course you know,
Speaker 1: it's it's very difficult for residents to see. But on
Speaker 1: the other hand, I think, you know, Melvern and Vancouver
Speaker 1: provide some early lessons and I think the takeaway might
Speaker 1: be they deal with the symptoms of a housing crisis,
Speaker 1: but they're not gonna there and there are no panacea.
Speaker 1: They are not going to fix it. And um by that,
Speaker 1: I mean, uh, you know, I'll take is free. What Vancouver,
Speaker 1: which was the first municipality in North America to implement
Speaker 1: attacks like this, has seen so to some degree, the
Speaker 1: tax did seem to encourage condo owners, for example, to
Speaker 1: put their units into the long term rental supply. So,
Speaker 1: for example, units that might have been on the airbnb
Speaker 1: market before had been placed back into long term rentals.
Speaker 1: Um and uh. You know, the city has also managed
Speaker 1: to raise a lot more money than it originally expected.
Speaker 1: And that's partially because the homes that were less empty
Speaker 1: were the most expensive homes. Um And I suppose to
Speaker 1: some degree that doesn't surprise because somebody who can live
Speaker 1: forward to leave their house empty probably is wealthy to
Speaker 1: begin with. Those aren't exactly hitting the rental market right exactly,
Speaker 1: Like a thirteen million dollar mansion is probably not something
Speaker 1: that we have more than that like so um so yeah,
Speaker 1: so you do manage to raise is Vancouver did manage
Speaker 1: to actually raise a lot more money than it ever expected,
Speaker 1: and that has gone towards affordable housing initiatives like building
Speaker 1: rental housing for lower income families. But the vacancy rate
Speaker 1: in the city is still below one percent. It's been
Speaker 1: stuck there for years and rents have continued to rise. Well,
Speaker 1: you do think about that the wealthier are able to
Speaker 1: invest in real estate, right and there are tax, you know,
Speaker 1: positive tax implications or benefits to them by being able
Speaker 1: to do so that a lot of other people aren't
Speaker 1: able to tap into. So you do wonder about We'll
Speaker 1: wait a minute, are we are we really using our
Speaker 1: land and property in the right way, especially when there
Speaker 1: are so many people who need it. Having said that,
Speaker 1: things like interest rates, um policy, housing policies, um bank
Speaker 1: access from more, I mean, there's other things that really
Speaker 1: are at play here that could really move the needle
Speaker 1: when it comes to fixing some of our global housing problems, right,
Speaker 1: and I think that's essentially lee it. I mean, both
Speaker 1: Melbourne and Vancouver have been seeing an almost unbroken run
Speaker 1: up in housing prices for two decades and that's very
Speaker 1: much been tied to things like interest rates, uh, you know,
Speaker 1: strict zoning laws and restrictions that keep the supply from
Speaker 1: being built as quickly as it should be. And so
Speaker 1: those are the real levels that are that are that
Speaker 1: you need to sort of work with to to to
Speaker 1: cure the housing crisis, or at least to alleviate it significantly.
Speaker 1: I mean, just to put this in perspective, right, Vancouver
Speaker 1: expected ten thousand properties to be empty in the city
Speaker 1: in the first three years of the tax, I think
Speaker 1: about two hundred and some were moved back into the
Speaker 1: rental supply. I mean that's that's you know, that's a
Speaker 1: drop in the bucket in a housing market of two
Speaker 1: hundred thousand properties. So, Natalie, just in the last fifteen
Speaker 1: seconds that we have do based on your reporting, do
Speaker 1: you anticipate that this type of policy will continue to spread?
Speaker 1: As you point out Lela's planning to put vacant home
Speaker 1: tax on the ballot for even though the data show
Speaker 1: that it's not necessarily working. I think one thing we
Speaker 1: think it's one thing we can stay safely is that
Speaker 1: for policy makers, if it's politically popular, then it probably
Speaker 1: will come in. And it just there is a lot
Speaker 1: of public support for these types of taxes. So probably yes,
Speaker 1: all right, we're gonna run. Hey, thank you so much.
Speaker 1: Bloomberg News Vancouver Bureau chief Natalie Obiko joining us on
Speaker 1: the phone in Vancouver, our Vancouver bure out. This is
Speaker 1: Bloomberg Business Week with Carol Masser and Bloomberg Quick Takes
Speaker 1: Tim Stinovic from Bloomberg Radio for just coming over a
Speaker 1: peak of the day, but just off our best levels
Speaker 1: of the day and we've got another record for the
Speaker 1: S and P five hundred. I believe it's the forty
Speaker 1: nine record on the S and P that we've seen
Speaker 1: in So we continue that grind higher. Let's get to
Speaker 1: the drive to the close. Alan Zaffron is back with us,
Speaker 1: founding partner in co c I CEO at I e
Speaker 1: Q Capital. He's back with us, Tim on the phone
Speaker 1: in Foster City, California. So Alan, it seems like the markets,
Speaker 1: just when you think they're getting a little tired, a
Speaker 1: little weary, here we are grinding to another record. Carol
Speaker 1: and Tim, ain't it amazing? So much capitalist flash in
Speaker 1: the marketplace. You can throw COVID fed, tapering tax pikes, uh,
Speaker 1: diplomatic missteps potentially or arguably in Afghanistan. The market nevertheless
Speaker 1: looks past all that. I think it's still being driven
Speaker 1: by Tina. There is no alternative when bonds and cash
Speaker 1: shields so little, it's still the cult of equities that's
Speaker 1: going to prevail. And that is what we are watching.
Speaker 1: All risk ansts go up when conventional safe places like
Speaker 1: cash and bonds paste a little, and capital continues to
Speaker 1: flow into places to try and find a higher return
Speaker 1: on that invested capital. That's the story of this year.
Speaker 1: Alan do the high price is do earnings justify the
Speaker 1: high prices? I actually think they do. Again. The complication
Speaker 1: here is people will argue if we just take the
Speaker 1: SMP five index, it's traded about sixteen times it's forward
Speaker 1: looking learnings than the last twenty five years, and if
Speaker 1: you look right now, depending on how much forecast you know,
Speaker 1: we're probably trading at about twenty two times forward earnings.
Speaker 1: That's a huge premium. The challenge is twofold one. We're
Speaker 1: in a world much lower interest rates now than we've
Speaker 1: historically been over the last twenty five years. And secondly,
Speaker 1: the world today at the SMP five is comprised of
Speaker 1: companies that are far less capital intensive and generate higher
Speaker 1: profit margins. The X on mobiles and a T and
Speaker 1: T s in general, motors of twenty five years and
Speaker 1: ago are now Facebook and Apple and Amazon, and so
Speaker 1: arguably a world of better quality, higher profitable businesses in
Speaker 1: a world of lower interest rates. Merits are higher than
Speaker 1: historically average p multiple. Of course, it's aren't more than science,
Speaker 1: so we don't know exactly what that light multiple is,
Speaker 1: but I think it's far less overvalued than what people
Speaker 1: would try and argue when they make historical comparison. It
Speaker 1: is a market that has a scratching our heads. I mean,
Speaker 1: Dave Wilson just came out with this chart of the
Speaker 1: day and he talks about how financials have you know,
Speaker 1: turned out to be our best performing group now in
Speaker 1: terms of our eleven main industry groups in the SMP
Speaker 1: five hundred years a date, which has you scratching your head.
Speaker 1: Considering the low rate environment, that is not typically what
Speaker 1: you see. So I mean, how do you explain that.
Speaker 1: Are there disconnects or does it all make sense to you? Uh? Well,
Speaker 1: it makes sense and like like the world, it makes
Speaker 1: sense for two reasons. One is you have to look
Speaker 1: where you started from. Financials were pretty beat up in
Speaker 1: Financials are basically a leverage bet on economic recovery. So
Speaker 1: you went from COVID and it disaster's economy to where
Speaker 1: leveraged businesses like financials would do better out of a recession.
Speaker 1: And secondly, it's a bit forward looking. You're hopeful if
Speaker 1: the economy strengthens, interest rates go up a bit, and
Speaker 1: those financials are probably forecasting implicitly a somewhat. I don't
Speaker 1: overstate it, but a somewhat more steep yield curve over
Speaker 1: the next six to twelve months, and hence financial stocks
Speaker 1: I think are going up in advance of that base
Speaker 1: case most likely outcome for the old curve looking forward,
Speaker 1: So an anticipation of a more favorable rate environment exactly. Hey, Alan,
Speaker 1: you you said the acronym tina there is no alternative,
Speaker 1: but but you do think there is some alternative right now,
Speaker 1: right for for where you're putting money, Well, I think
Speaker 1: there are. I mean, so as an example, I'm just
Speaker 1: going to talk about rates. Reets are really stocked, but
Speaker 1: they're tied to real estate, and real estate is another
Speaker 1: form of income generation besides bond So it's not that
Speaker 1: much of a stretch to argue if you're a long
Speaker 1: term investor, and if you're willing to look aside from
Speaker 1: short term price volatility, which I define as months and years,
Speaker 1: not days or weeks, as one example, freaks, whether it's
Speaker 1: in a public or a private format, or another form
Speaker 1: of tax efficient income that I think if you have
Speaker 1: enough long enough time frame, the likelihogens will generate higher
Speaker 1: rates return to conventional bonds. You can make the same
Speaker 1: analysis for individuals who are willing to go far enough
Speaker 1: to look at privately issued senior floating rate debt. Sounds
Speaker 1: very complicated, but basically, if you're the senior lender to
Speaker 1: a company and you have a floating rate debt, surprisingly
Speaker 1: you can earn without leverage around a six percent return
Speaker 1: tied to lie Bold typically, and with some leverage you
Speaker 1: might even get as much as an eight or nine
Speaker 1: percent return. Leaves room, although historically have not been allot
Speaker 1: of defaults, and even leaves room for some handfuls of
Speaker 1: businesses to default on their debt payments and still earn
Speaker 1: more than what a conventional bond does. When an investment
Speaker 1: grade bond is paying you two percent the bars load
Speaker 1: den why money scoring strategy? Well, I'm looking at two
Speaker 1: uh dad John's equity Total Return Index. It's up almost
Speaker 1: year to date, up about th uh in the past
Speaker 1: fifty two weeks. I that's the one area the commercial
Speaker 1: real estate or real estate generally. I am surprised that
Speaker 1: there hasn't been Alan Moore fallout. Why hasn't there been? Well?
Speaker 1: Twofold again, what one is? I would argue that you
Speaker 1: certainly do need to be selective about what kinds of
Speaker 1: real estate you're investing. Is a big difference between industrial
Speaker 1: warehouse is servicing Amazon and ups and set X versus
Speaker 1: your urban office building where half the building is now
Speaker 1: vacated or we're going to be less occupied. So I
Speaker 1: get that, but but i'd also argue again, when you
Speaker 1: on one, you're back those those those rates were really
Speaker 1: beaten up, and so some of that is bounced back.
Speaker 1: And then the other issue is I think the demise
Speaker 1: of real estate is actually overstated. I think i'd rid world,
Speaker 1: you're gonna be a hybrid world, but you're still going
Speaker 1: to have even people occupying businesses, occupying offices, They're still
Speaker 1: gonna need to pay for the rent, even if they're
Speaker 1: only in there three days a week. I don't think
Speaker 1: it's an all or non proposition. It's interesting that you
Speaker 1: say that because just today and among the most read
Speaker 1: on the Bloomberg terminal, and we were talking about this
Speaker 1: earlier with State Street closing, it's abandoning its New York
Speaker 1: City offices, and look, it's not based in New York.
Speaker 1: But do you think that's an exception rather than the
Speaker 1: norm moving forward? I think it is an exception because
Speaker 1: I don't think everybody has the capacity to with state
Speaker 1: streets has done. I definitely think there's diminished demand to
Speaker 1: a degree for office space, but to a degree to
Speaker 1: which prices fell overstates the degree on a on a
Speaker 1: national basis. Just with that demise and the diminishment of
Speaker 1: cash flows will be so again, when I'm buying GEFs,
Speaker 1: I'm looking for sustainable dividends, and I suspect even when
Speaker 1: I have reduced office demand, because that's really where the
Speaker 1: pressure is hotels in office, there's going to be enough
Speaker 1: cash flows still remaining to more than offset them out
Speaker 1: bo which prices have fallen. I wouldn't put all my
Speaker 1: money in there. But when my again my investment great
Speaker 1: bond has given me a two percent return and attack
Speaker 1: eve them bonds is less than one percent, I can
Speaker 1: afford handfuls of defaults or missteps and still beat those
Speaker 1: via comfortable margins. That's why the capital is flowing there.
Speaker 1: That's an interesting way to think about it in terms
Speaker 1: of the equity market. What do you like within the
Speaker 1: equity space right now? Well, I do actually still think
Speaker 1: we are in a slower than average grinding economic economy,
Speaker 1: which we're going to get up right where we were
Speaker 1: before COVID. In fact, COVID may even persist this. You
Speaker 1: have to look at growth. You have to stick with
Speaker 1: the businesses that have high quality earnings generation. They can
Speaker 1: grow in a low economic growth environment. So the cult
Speaker 1: of growth equities outperforming value stocks that is likely to persist.
Speaker 1: And so that's sort of a coded way of saying technology, biotechnology,
Speaker 1: other businesses that have persistent competitive barriers of entry and
Speaker 1: real mean business models that are really able to sustained
Speaker 1: earnings growth, How capital will continue to be there? How
Speaker 1: long does that persist for? Probably until we get through
Speaker 1: the next recession, because I just don't see how we're
Speaker 1: going to grow our economy quickly. If anything said is
Speaker 1: going to be taking the set on the sort off
Speaker 1: the pedal economic growth will again slowed down again the
Speaker 1: seat of not going to ramp it up again until
Speaker 1: you go through another recession cycle. And I don't think
Speaker 1: there's at seven A recession cycles coming anytime since. But
Speaker 1: I think growth stocks will persist out performance probably for
Speaker 1: the next couple of years. How much are you starting
Speaker 1: to think about what comes out of Jackson Hole? And
Speaker 1: I bring that up because we did see uh Dad
Speaker 1: Jones reporting about how FET officials are nearing agreement to
Speaker 1: begin scaling back their easy money policies in about three
Speaker 1: months if the economy recovery continues. It doesn't feel like
Speaker 1: to me that that's a lot of new messaging, because
Speaker 1: that's I feel like it's safe to say that that's
Speaker 1: what the FETE has been saying all along. J. Powell
Speaker 1: and others. They're watching the data points in particular, and
Speaker 1: if things you know, significantly and substantial really improve on
Speaker 1: an economic basis, well yeah, they're gonna pull off, right. Yeah. No,
Speaker 1: I think about it a lot. And the reason I
Speaker 1: think about a lot is I work with a lot
Speaker 1: of human beings as clients, and no matter how much
Speaker 1: I argue be long term investors don't time the market.
Speaker 1: Inevitably everybody wants an entry point, so inevitably everybody wants
Speaker 1: to hold back from cash and wait for the pullback
Speaker 1: that just does not happen. And so I'm kind of
Speaker 1: this is sound ironic in a way. I'm hoping the
Speaker 1: said comes out and surprises people and says they're gonna
Speaker 1: paper bond purchases and raise rates more quickly the inspect
Speaker 1: and create this ten percent hope for pullback, which will
Speaker 1: let all of my clients cash magically flow into the
Speaker 1: stock market at the perfect time. Of course, probably won't happen,
Speaker 1: but I think about it constantly because I sit and
Speaker 1: think about what's going to cause the correction. And the
Speaker 1: problem is, you and I both know the things that
Speaker 1: can cause a correction and higher tax rates, Afghanistan, fed papering, COVID.
Speaker 1: But you and I both know it's what we don't
Speaker 1: know that actually happens that will cause the correction. So
Speaker 1: I worry about it. I can't control it, and I
Speaker 1: don't know what it's going to do. I think the
Speaker 1: FEDS and everything they can to signal their intentions, and
Speaker 1: now the market will have to digest it as best
Speaker 1: it can. Alan Why do you think the market, at
Speaker 1: least the equity market hasn't has ignored the spread of
Speaker 1: the delta variant because I was a twofold one. As
Speaker 1: I believe everyone's looking at the charts and thinks our
Speaker 1: pattern of experience on the delta variant is gonna parallel
Speaker 1: things that happened like in the UK, where it looks
Speaker 1: like if you match what's happened in caseloads here in
Speaker 1: the UK, we've already peaked right about now, the market
Speaker 1: already looking path what's already the peak of this variant.
Speaker 1: There might be another variant to follow. That's part of it.
Speaker 1: The second thing is, I think there's a belief we're
Speaker 1: not going to shut down the economy again barring something extraordinary,
Speaker 1: and so the actual economic impact is a lot less
Speaker 1: significant than what we experienced back in February March of
Speaker 1: two thousand twenty. People are adapting, we have better information today,
Speaker 1: more people are vaccinated, and so I think the belief
Speaker 1: is there's a much lesser economic hit so the U.
Speaker 1: S economy in particular, than we witnessed a year and
Speaker 1: a half ago. And so I just don't think, I
Speaker 1: hate to say it this way, from a pure stock
Speaker 1: market perspective, it's not a big enough event to matter,
Speaker 1: right unless we see a retrenchment in the economy, like
Speaker 1: I do think about this alan. You know, people can't
Speaker 1: travel again just as we were starting to reopen. That's
Speaker 1: going to have an economic impact. Disney right their second quarter,
Speaker 1: it was streaming, but it was also the theme parks
Speaker 1: which came roaring back in a big way, and that
Speaker 1: stock just took off on a tear. So if we
Speaker 1: start to see a retrenchment again where people aren't traveling
Speaker 1: so much. Southwest warned about travel they I think, are
Speaker 1: the biggest carrier that goes into Orlando. So there are
Speaker 1: there are little pieces out there. The Chinese ports shutdown,
Speaker 1: They're just little pockets that remind us that, yes, we
Speaker 1: know how to deal with this, right, we have the
Speaker 1: playbook that we didn't have a year year and a
Speaker 1: half ago. But nonetheless, if I'm not out there going
Speaker 1: back to store, shop being, my husband will be happy.
Speaker 1: But you know, it means that's economic momentum that's not happening.
Speaker 1: If we're not getting on planes, we're not doing business traveling,
Speaker 1: we're seeing you know, the New York Auto Show got canceled.
Speaker 1: Like there are big events that would normally attract a
Speaker 1: lot of people that creates an economic momentum that's not happening. Um,
Speaker 1: that's got to be something though that could start to
Speaker 1: weigh on companies again and impact some of the top
Speaker 1: and bottom lines and certainly impact some of the economic growth.
Speaker 1: So I agree with to jazz Fest in New Orleans,
Speaker 1: one of my scarest events has been canceled as well.
Speaker 1: What I'll tell you this though, the things you're talking
Speaker 1: about travel, uh, leisure, they comprise it actually a somewhat
Speaker 1: smaller portion of the stock market than technology companies and
Speaker 1: companies that actually can thrive in an environment that's modestly
Speaker 1: shut down. What COVID has done is it accelerated the
Speaker 1: use of technology and productivity in years, in many years
Speaker 1: of not decades, and that's part of what we're witnessing. This.
Speaker 1: We are in the midst of some industrial revolution which
Speaker 1: probably started with the Internet way back when, or even
Speaker 1: the creation of the semiconductors, depending how far back you
Speaker 1: want to measure this. COVID has just re accelerated this
Speaker 1: process and what you're seeing is durable, sustainable and accelerated
Speaker 1: earnings growth. As a consequence, what you're describing tarol can
Speaker 1: in fact sadly happen. It's going to marginalize again restaurant owners.
Speaker 1: It's going to marginalize travel agents. It's gonna marginalized resort hotels.
Speaker 1: But they don't make up the SMP five under an index.
Speaker 1: But it isn't. It is. It's going to hurt spending
Speaker 1: in the short run. But like other waves, I hate
Speaker 1: to say it this way because it's truly a humanitarian crisis,
Speaker 1: but from a pure financial economic perspective, it's a bump
Speaker 1: in the road, and the road has just accelerated the
Speaker 1: speed of which the cars can move because of all
Speaker 1: the productivity enhancements. So, if you're going to take a
Speaker 1: long enough point of view, whatever happens won't be good.
Speaker 1: But we've actually set ourselves up for faster, more productive, better,
Speaker 1: more robust and sustainable economic growth going forward. It's a
Speaker 1: terrible humanitarian crisis in between. But to get to the end,
Speaker 1: get to the end game economically, we're going to be
Speaker 1: in better shape. Ironically, to state this way, five year
Speaker 1: swords like Darwinianism, we forced ourselves to be a more
Speaker 1: productive economy, right we listen. We've had tons of conversations
Speaker 1: with CEOs and other individuals about how the pandemic accelerated
Speaker 1: trends that you know, institutions, companies were gonna put in
Speaker 1: place maybe over the next three to five years, and
Speaker 1: all of a sudden they're like, bam, we got to
Speaker 1: do it now, and so you don't go back. There's
Speaker 1: no going back, and that certainly has a lasting impact
Speaker 1: on our world. So what worries, what what what keeps
Speaker 1: you up at night when it comes to investing and
Speaker 1: investors portfolios. Well, I actually think the past events of
Speaker 1: the past week have kind of humiliated humiliated the United
Speaker 1: States in the country a bit, and we're perceived maybe
Speaker 1: the world's a little less safe for a number of reasons.
Speaker 1: What's going on in Afghanistan. I actually think candid some
Speaker 1: degree impact the legislative agenda of the current administration. It
Speaker 1: might change the dynamics of the political election new year
Speaker 1: from now. But I also think you could end up
Speaker 1: with unintended consequences geo politically, and things like that have
Speaker 1: a funny way of creating sentiment overhangs on the stock market.
Speaker 1: I think we actually are in somewhat of a implicit
Speaker 1: tacit club war with China in a ran with all
Speaker 1: the cyber securities wars back and forth, things like this
Speaker 1: are going to come up. I can't tell you when
Speaker 1: or what or how or why, but that's how you
Speaker 1: get these intermittent ten percent corrections, which are usually just
Speaker 1: corrections that keeps me up at night. That keeps me
Speaker 1: up at night, right, But we haven't had a five
Speaker 1: percent correction since late last year, so it's been a
Speaker 1: long time. Allan, thank you so much. We always are
Speaker 1: grateful when we get some time with you. Alan Safran,
Speaker 1: he's founding partner in co CEO at I e Q Capital,
Speaker 1: on the phone from Foster City, California. A great conversation,
Speaker 1: always great when Alan joins us. And and look, Carol,
Speaker 1: going into today, I thought, hey, this is going to
Speaker 1: be a day that's actually not a record day. And
Speaker 1: we look at the SMP five hundred and then down
Speaker 1: they're eating out games late day rallies exactly. Thanks for
Speaker 1: listening to Bloomberg Business Week. Download the podcast on iTunes, SoundCloud,
Speaker 1: or Bloomberg dot com, and you can also listen to
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Speaker 1: or watch us on YouTube. Search to Bloomberg Global News