1 00:00:02,680 --> 00:00:05,320 Speaker 1: Welcome to the Bloomberg Penl Podcast. I'm Paul swing you, 2 00:00:05,360 --> 00:00:07,720 Speaker 1: along with my co host Lisa Brahma wits. Each day 3 00:00:07,760 --> 00:00:10,280 Speaker 1: we bring you the most noteworthy and useful interviews for 4 00:00:10,320 --> 00:00:12,560 Speaker 1: you and your money. Whether at the grocery store or 5 00:00:12,600 --> 00:00:15,520 Speaker 1: the trading floor. Find a Bloomberg Penl podcast on Apple 6 00:00:15,560 --> 00:00:18,000 Speaker 1: podcast or wherever you listen to podcasts, as well as 7 00:00:18,000 --> 00:00:21,640 Speaker 1: at Bloomberg dot com. Paul, We've heard from a number 8 00:00:21,840 --> 00:00:26,080 Speaker 1: of analysts how the COVID nineteen pandemic has accelerated trends 9 00:00:26,520 --> 00:00:30,880 Speaker 1: already in effect ahead of this virus, and it's a spread. 10 00:00:31,240 --> 00:00:33,239 Speaker 1: There's a question of what things will look like and 11 00:00:33,280 --> 00:00:37,760 Speaker 1: how quickly these transformations can occur. Terry Jones the perfect 12 00:00:37,800 --> 00:00:40,720 Speaker 1: person to address this. The founder and former chief executive 13 00:00:40,760 --> 00:00:45,320 Speaker 1: officer of Travelocity dot com, founding chair of Kayak dot com, 14 00:00:45,479 --> 00:00:49,240 Speaker 1: current author of Disruption Off The Technological Disruption Coming for 15 00:00:49,320 --> 00:00:51,560 Speaker 1: Your Company and What to Do About It, a new 16 00:00:51,600 --> 00:00:56,120 Speaker 1: book that's out. I'm wondering, Terry, from your perspective, what 17 00:00:56,200 --> 00:00:59,720 Speaker 1: do you think is the main change that's being accelerated 18 00:00:59,800 --> 00:01:03,040 Speaker 1: right now that we should really keep an eye on. Well, 19 00:01:03,240 --> 00:01:07,600 Speaker 1: certainly e commerce shipment's up um and survey show people 20 00:01:07,640 --> 00:01:11,720 Speaker 1: aren't going back. Uh. Instagart hiring three thousand people, so 21 00:01:11,920 --> 00:01:15,679 Speaker 1: food delivery looks like isn't going back. A Gardner survey 22 00:01:15,720 --> 00:01:21,280 Speaker 1: showed almost companies say even after a vaccine, many workers 23 00:01:21,280 --> 00:01:24,800 Speaker 1: will still say home. So we're continually become more digital. 24 00:01:25,280 --> 00:01:28,520 Speaker 1: Tele medicine got approved right, people are doing it. I'm 25 00:01:28,560 --> 00:01:31,240 Speaker 1: on the board of a remote education program that gives 26 00:01:31,240 --> 00:01:33,960 Speaker 1: second chances to workers to train them out to be engineers. 27 00:01:34,280 --> 00:01:38,000 Speaker 1: Our business is booming, um. Other other things are tough. 28 00:01:38,319 --> 00:01:41,399 Speaker 1: I'm a public speaker. Events are gone right, So I'm 29 00:01:41,440 --> 00:01:44,440 Speaker 1: building a TV studio in my office and hopefully I 30 00:01:44,480 --> 00:01:48,160 Speaker 1: can become virtual. Um. So we're seeing I think the 31 00:01:48,200 --> 00:01:50,320 Speaker 1: digital part of this change is going to be the 32 00:01:50,360 --> 00:01:52,880 Speaker 1: biggest part of it. So, Terry, how about some of 33 00:01:52,920 --> 00:01:57,400 Speaker 1: the I don't know, more existing or traditional lines of business, 34 00:01:57,400 --> 00:02:01,640 Speaker 1: whether it's bricks and more to retail or leisure, you know, 35 00:02:01,720 --> 00:02:03,520 Speaker 1: restaurants and things like that. What are some of the 36 00:02:03,680 --> 00:02:06,200 Speaker 1: risk associated with some of those business Do you think 37 00:02:06,320 --> 00:02:08,280 Speaker 1: is it's just kind of an acceleration of maybe what 38 00:02:08,360 --> 00:02:11,520 Speaker 1: was already happening. I think so, Um, you know, I 39 00:02:11,600 --> 00:02:14,480 Speaker 1: suspect some restaurants will come back as ghost kitchens, right, 40 00:02:14,520 --> 00:02:18,359 Speaker 1: and just those those kitchens that just deliver um. Retail 41 00:02:18,400 --> 00:02:21,520 Speaker 1: obviously is taken a hard hit and we're seeing some 42 00:02:21,600 --> 00:02:26,200 Speaker 1: bankruptcies there. Um. I think other traditional businesses may we 43 00:02:26,320 --> 00:02:29,240 Speaker 1: look at their supply chains and go back to something 44 00:02:29,240 --> 00:02:33,120 Speaker 1: from the nineteenth century stockpiling, right. Instead of long supply chains, 45 00:02:33,360 --> 00:02:36,399 Speaker 1: people are moving to three D printers uh to get 46 00:02:36,440 --> 00:02:40,400 Speaker 1: around supply chain issues. Um, and we're seeing traditional businesses. 47 00:02:40,440 --> 00:02:42,919 Speaker 1: I have a friend who's getting his groceries delivered by 48 00:02:42,960 --> 00:02:45,600 Speaker 1: a little drone that drives down the street. That was 49 00:02:45,639 --> 00:02:50,000 Speaker 1: prohibited before. Now it's allowed. So regulations are changing to 50 00:02:50,080 --> 00:02:54,440 Speaker 1: allow business to change because of social distancing. I've went 51 00:02:54,480 --> 00:02:58,280 Speaker 1: a little drown delivering my grocery there. I'm wondering cool 52 00:02:59,639 --> 00:03:02,160 Speaker 1: it can by. It depends what the drone looks like 53 00:03:02,280 --> 00:03:04,000 Speaker 1: and what it does to my home. But Terry, I 54 00:03:04,040 --> 00:03:08,400 Speaker 1: am curious, um about your experience with Travels dot Com 55 00:03:08,520 --> 00:03:10,919 Speaker 1: and Kayak Kayak dot com. At a time and a 56 00:03:10,960 --> 00:03:13,720 Speaker 1: lot of people don't want to get on an airplane, 57 00:03:13,919 --> 00:03:16,840 Speaker 1: are not going very far from home. What kind of 58 00:03:16,840 --> 00:03:21,280 Speaker 1: transformation do you expect. They're at a time of possibly 59 00:03:21,320 --> 00:03:26,400 Speaker 1: the biggest disruption ever seen in the travel industry. Well, absolutely, 60 00:03:26,400 --> 00:03:29,000 Speaker 1: you know I was ran after nine eleven and that 61 00:03:29,080 --> 00:03:32,640 Speaker 1: was extremely difficult. Travel came back, people got used to security. 62 00:03:33,040 --> 00:03:35,840 Speaker 1: I think they're going to need trust, and airlines and 63 00:03:35,920 --> 00:03:39,040 Speaker 1: hotels are working hard on that in terms of cleaning, 64 00:03:39,080 --> 00:03:42,960 Speaker 1: in terms of social distancing, contacting masks. It's all a 65 00:03:42,960 --> 00:03:46,560 Speaker 1: big hassle. But I think as the airline's build trust 66 00:03:46,600 --> 00:03:50,000 Speaker 1: and just announced Delta's putting on more flights, people will 67 00:03:50,000 --> 00:03:52,840 Speaker 1: come back. We're already seeing that in China. It's gonna 68 00:03:52,880 --> 00:03:55,600 Speaker 1: take time. I think we'll see more road travel this year, 69 00:03:55,720 --> 00:03:59,960 Speaker 1: much more r V Reynolds are up because it's your 70 00:04:00,000 --> 00:04:03,080 Speaker 1: own hotel, in your own restaurant. Um. So I think 71 00:04:03,200 --> 00:04:06,240 Speaker 1: we'll see close to home travel first. And plus a 72 00:04:06,280 --> 00:04:09,000 Speaker 1: lot of countries are still closed to uh to US. 73 00:04:09,360 --> 00:04:11,840 Speaker 1: You know, Canada, we can't go to Europe. He was 74 00:04:11,880 --> 00:04:15,760 Speaker 1: closed right now. So until those countries open and they 75 00:04:15,800 --> 00:04:19,520 Speaker 1: open convinced that you know, America is safe to travel, 76 00:04:19,720 --> 00:04:21,799 Speaker 1: we're going to see some restrictions we didn't see before. 77 00:04:21,839 --> 00:04:25,520 Speaker 1: It's going to be very difficult for some hotels and 78 00:04:25,600 --> 00:04:28,880 Speaker 1: certainly for cruise lines. So terry about just in terms 79 00:04:28,960 --> 00:04:32,600 Speaker 1: of consumer behavior, do you expect consumers to be, you know, 80 00:04:33,080 --> 00:04:36,000 Speaker 1: similar to maybe what was experienced after the depression. I 81 00:04:36,040 --> 00:04:38,560 Speaker 1: know my parents generation their children of the depression, and 82 00:04:38,600 --> 00:04:41,920 Speaker 1: I think they that infused with them for their entire lives, 83 00:04:42,040 --> 00:04:45,159 Speaker 1: a real sense of fiscal conservatism. Do you think we 84 00:04:45,240 --> 00:04:48,279 Speaker 1: might see something like that in terms of consumer behavior 85 00:04:48,279 --> 00:04:51,920 Speaker 1: and consumer spending going forward. Well, I ran a survey 86 00:04:51,960 --> 00:04:54,120 Speaker 1: recently that said we might. That people are saying they 87 00:04:54,160 --> 00:04:57,839 Speaker 1: would save more UM, which which would be difficult for 88 00:04:57,920 --> 00:05:00,200 Speaker 1: us as a as a consumer nation. We don't to 89 00:05:00,240 --> 00:05:03,360 Speaker 1: become a nation of savers necessarily like Japan, because our 90 00:05:03,480 --> 00:05:07,039 Speaker 1: economy isn't set up that way. Um. However, we're seeing 91 00:05:07,080 --> 00:05:10,280 Speaker 1: in in Singapore and China, you know, shopping is coming back, 92 00:05:10,400 --> 00:05:14,280 Speaker 1: albeit slowly. So I think businesses have to take this 93 00:05:14,360 --> 00:05:16,520 Speaker 1: time to look at their business model and say, you know, 94 00:05:16,560 --> 00:05:18,599 Speaker 1: those changes I've been putting off, maybe I need to 95 00:05:18,600 --> 00:05:21,080 Speaker 1: make them. Maybe I need to go online more, Maybe 96 00:05:21,160 --> 00:05:23,320 Speaker 1: I need to look at some of these new technologies. 97 00:05:24,000 --> 00:05:26,880 Speaker 1: Principally need to experiment in this new world and see 98 00:05:26,880 --> 00:05:30,520 Speaker 1: what works, because what worked before won't necessarily work now. 99 00:05:30,560 --> 00:05:32,120 Speaker 1: And this is a very good time to look at 100 00:05:32,120 --> 00:05:35,240 Speaker 1: your business model, look at new technology and say what 101 00:05:35,440 --> 00:05:38,800 Speaker 1: might change and how should I change. One change that 102 00:05:38,839 --> 00:05:40,880 Speaker 1: a lot of people have been talking about is the 103 00:05:40,880 --> 00:05:44,120 Speaker 1: shift away from the office. Everyone's working from home. There 104 00:05:44,120 --> 00:05:47,080 Speaker 1: has been a lot of discussion about commercial real estate 105 00:05:47,080 --> 00:05:50,200 Speaker 1: and what that means there, as well as a shift 106 00:05:50,279 --> 00:05:54,679 Speaker 1: away from urban centers. As a former chief executive officer, 107 00:05:55,000 --> 00:05:58,279 Speaker 1: how much credence do you give these proclamations that the 108 00:05:58,360 --> 00:06:02,960 Speaker 1: office is going to be substantially smaller and possibly outside 109 00:06:02,960 --> 00:06:06,320 Speaker 1: of cities. Well, I think it really depends on the industry. 110 00:06:06,680 --> 00:06:08,880 Speaker 1: My son is in the video game business. There are 111 00:06:08,960 --> 00:06:11,800 Speaker 1: five thousand people. They had a prohibition against working from home. 112 00:06:12,320 --> 00:06:15,440 Speaker 1: Now they're all working from home and say they're more productive. Um, 113 00:06:15,560 --> 00:06:20,080 Speaker 1: call centers are shifting home permanently. Other creative businesses, I 114 00:06:20,120 --> 00:06:24,000 Speaker 1: don't think it will happen. Plus, remember, even if you 115 00:06:24,080 --> 00:06:26,760 Speaker 1: keep some of the workers home, you're gonna need twice 116 00:06:26,760 --> 00:06:29,400 Speaker 1: as much space to go into the office for the 117 00:06:29,400 --> 00:06:32,240 Speaker 1: workers you have because of distancing. So at least in 118 00:06:32,240 --> 00:06:34,240 Speaker 1: the near term, I don't think we're going to see 119 00:06:34,320 --> 00:06:38,320 Speaker 1: hit to real estate because people need the space and 120 00:06:38,400 --> 00:06:40,560 Speaker 1: some businesses are doing well because of this. I'm on 121 00:06:40,560 --> 00:06:44,480 Speaker 1: the board of Sonic Wall which sells firewalls and internet security. 122 00:06:44,960 --> 00:06:48,400 Speaker 1: Our business doing very well because people at home need security, 123 00:06:48,520 --> 00:06:52,680 Speaker 1: so they're buying more products. Uh So those kind of 124 00:06:52,720 --> 00:06:57,320 Speaker 1: businesses telemedicine, remote education are doing well. I think it's 125 00:06:57,320 --> 00:06:59,480 Speaker 1: a trend though. I think many people are saying, hey, 126 00:06:59,600 --> 00:07:03,040 Speaker 1: this works for many of my employees. I may not 127 00:07:03,080 --> 00:07:05,840 Speaker 1: go back to the office over time. Terry, thanks so 128 00:07:05,920 --> 00:07:08,320 Speaker 1: much for joining us. Fascinating discussion here as we think 129 00:07:08,320 --> 00:07:11,800 Speaker 1: about how the world may change as on the back 130 00:07:11,880 --> 00:07:14,480 Speaker 1: end of this pandemic, including the consumer. Lots to talk 131 00:07:14,520 --> 00:07:17,720 Speaker 1: about there, Terry Jones. He's a founder and former CEO 132 00:07:17,760 --> 00:07:21,560 Speaker 1: of travelocity dot com, also the founding chairman of Kayak, 133 00:07:21,880 --> 00:07:25,600 Speaker 1: and also the author of the latest book Disruption off 134 00:07:25,760 --> 00:07:28,400 Speaker 1: joining us here at least, I think it's fascinating here 135 00:07:28,480 --> 00:07:32,040 Speaker 1: to think about really how or if and how and 136 00:07:32,080 --> 00:07:34,440 Speaker 1: to what degree the consumer behavior is going to change 137 00:07:34,480 --> 00:07:36,440 Speaker 1: on the back end of this. Will we go to restaurants, 138 00:07:36,440 --> 00:07:38,560 Speaker 1: Will we go to movie theaters? You know, will we 139 00:07:38,600 --> 00:07:40,720 Speaker 1: get on planes? It's gonna be fascinating to see how 140 00:07:40,760 --> 00:07:44,200 Speaker 1: this evolves, you know, over the next year or two. 141 00:07:44,680 --> 00:07:48,400 Speaker 1: I would argue, just based on anecdotal experience, the working 142 00:07:48,440 --> 00:07:53,040 Speaker 1: from home experiment really breaks down into several different camps, 143 00:07:53,280 --> 00:07:56,960 Speaker 1: mainly those with children and those without children, And I 144 00:07:57,000 --> 00:08:00,200 Speaker 1: do have to wonder how much that's going to act 145 00:08:00,280 --> 00:08:03,840 Speaker 1: the conversation around whether people go back to the office 146 00:08:03,920 --> 00:08:06,160 Speaker 1: or not. Yeah, exactly, I think I know which camp 147 00:08:06,240 --> 00:08:13,960 Speaker 1: you fall in, UM, personal experience, exactly. Right At one 148 00:08:14,040 --> 00:08:17,600 Speaker 1: pm Wall Street time today, the US Treasure Department is 149 00:08:17,640 --> 00:08:21,480 Speaker 1: going to sell twenty billion dollars of twenty year bonds 150 00:08:21,520 --> 00:08:25,720 Speaker 1: for the first time since Nighties six. The question is 151 00:08:25,760 --> 00:08:28,680 Speaker 1: how much demand there will be for these securities, as 152 00:08:28,720 --> 00:08:32,280 Speaker 1: well as what trading will be like going forth in them. 153 00:08:32,480 --> 00:08:35,079 Speaker 1: RJ Gallow joining us right now, senior portfolio manager and 154 00:08:35,160 --> 00:08:37,280 Speaker 1: head of the Municipal Bond Group and head of the 155 00:08:37,360 --> 00:08:41,640 Speaker 1: Duration Committee it federated Hermes uh seeing overseeing more than 156 00:08:41,800 --> 00:08:46,240 Speaker 1: eleven billion dollars over seven funds. R J. I'd love 157 00:08:46,280 --> 00:08:49,400 Speaker 1: to just get started with how important today's twenty year 158 00:08:49,440 --> 00:08:53,000 Speaker 1: bond sale, in your opinion, is going to be. Well, 159 00:08:53,040 --> 00:08:55,319 Speaker 1: good morning, and thanks for having me, Um. I think 160 00:08:55,320 --> 00:08:57,400 Speaker 1: it's particularly important in a number of ways from a 161 00:08:57,440 --> 00:08:59,559 Speaker 1: market standpoint. You just touched on how long it's been 162 00:08:59,600 --> 00:09:02,559 Speaker 1: since the Treasury is auction to twenty year UM. So 163 00:09:02,640 --> 00:09:06,080 Speaker 1: from that novel standpoint, it's particularly interesting. I think it's 164 00:09:06,160 --> 00:09:09,800 Speaker 1: substantially much more important because this represents, in terms of 165 00:09:09,800 --> 00:09:11,760 Speaker 1: a new security, a new on the run, if you will, 166 00:09:12,800 --> 00:09:16,680 Speaker 1: the fiscal manifestation of what we're going through, a massive 167 00:09:16,760 --> 00:09:20,080 Speaker 1: deficit spend requiring the issuance of a whole new security, 168 00:09:20,160 --> 00:09:22,120 Speaker 1: not just the upsizing of all the other securities, which 169 00:09:22,160 --> 00:09:24,480 Speaker 1: is also happening as well. And I think that the 170 00:09:24,520 --> 00:09:27,600 Speaker 1: demand in the very near term is going to be 171 00:09:27,640 --> 00:09:32,720 Speaker 1: reasonably strong. I I see no reason for investors, many 172 00:09:32,760 --> 00:09:34,960 Speaker 1: of whom are confronting lower rates and other parts of 173 00:09:35,000 --> 00:09:40,520 Speaker 1: the world amid a pandemic related economic slowdown, to back 174 00:09:40,559 --> 00:09:43,439 Speaker 1: away from buying treasuries in the very near term. I 175 00:09:43,480 --> 00:09:46,640 Speaker 1: think over time you look out twelve months, he also 176 00:09:46,640 --> 00:09:48,960 Speaker 1: will probably be higher than here, but that's not without 177 00:09:49,040 --> 00:09:50,920 Speaker 1: risk and uncertainty. So I think the demand will still 178 00:09:50,960 --> 00:09:54,480 Speaker 1: be there. So r J. We've we've had the FED, uh, 179 00:09:55,120 --> 00:09:58,800 Speaker 1: you know, step in early, step in fairly aggressively. UM. 180 00:09:59,160 --> 00:10:02,200 Speaker 1: And I think that most accounts doing a very good job, 181 00:10:02,280 --> 00:10:06,240 Speaker 1: but clearly that's not going to be enough for this economy. 182 00:10:06,600 --> 00:10:09,520 Speaker 1: How important is it to get another round of fiscal 183 00:10:09,600 --> 00:10:14,600 Speaker 1: stimulus done in the near term. Well, you're talking to 184 00:10:14,640 --> 00:10:18,520 Speaker 1: somebody who's primarily most of my time is spent on 185 00:10:18,720 --> 00:10:22,760 Speaker 1: US rates and municipals, and on the latter municipals. UH, 186 00:10:22,960 --> 00:10:27,160 Speaker 1: those in the munity market overwhelmingly including issue within investors. 187 00:10:27,600 --> 00:10:32,439 Speaker 1: Look at the constraints under which state governments lives so 188 00:10:32,559 --> 00:10:35,160 Speaker 1: balanced budget amendment. They have to pass a balanced budget. 189 00:10:35,200 --> 00:10:36,760 Speaker 1: They don't always get to stick to it in terms 190 00:10:36,760 --> 00:10:39,440 Speaker 1: of actuals, but the spirit of a balance budget amendment 191 00:10:39,480 --> 00:10:44,000 Speaker 1: is very strong. UM. The federal government clearly does not. UH. 192 00:10:44,040 --> 00:10:46,880 Speaker 1: There's a strong precedent in periods of economic shock or 193 00:10:46,920 --> 00:10:49,520 Speaker 1: downturn for the federal government to take advantage of its 194 00:10:49,640 --> 00:10:53,600 Speaker 1: long fiscal and financial rope to assist within the federal 195 00:10:53,600 --> 00:10:56,560 Speaker 1: system the state governments, and they need somewhat more help. 196 00:10:57,120 --> 00:10:59,120 Speaker 1: I don't want to be alarmist. I don't believe states 197 00:10:59,160 --> 00:11:00,720 Speaker 1: are going to be fault on the debt unless we 198 00:11:00,760 --> 00:11:03,720 Speaker 1: get more fiscal relief. I like to call it relief, 199 00:11:03,760 --> 00:11:06,960 Speaker 1: not stimulus. UM, that's not going to happen. States are 200 00:11:07,360 --> 00:11:10,240 Speaker 1: good credits, but they will be cutting a lot of 201 00:11:10,280 --> 00:11:13,040 Speaker 1: expenditures to try to balance their stress budgets, and they'll 202 00:11:13,040 --> 00:11:16,720 Speaker 1: be raising taxes that doesn't help an economic recovery, and 203 00:11:16,760 --> 00:11:19,839 Speaker 1: the federal government has the wherewithal to prevent those outcomes. 204 00:11:20,040 --> 00:11:24,040 Speaker 1: So I do think along Chairman Powell's vein of thinking 205 00:11:24,480 --> 00:11:26,760 Speaker 1: that more should be done. Although I don't think he 206 00:11:26,800 --> 00:11:29,520 Speaker 1: was particularly adamant yesterday when he testified in front of 207 00:11:29,559 --> 00:11:32,000 Speaker 1: the Senate Committee along those lines. I think he has 208 00:11:32,200 --> 00:11:35,920 Speaker 1: clearly suggested that's where he thinks the markets should go 209 00:11:36,080 --> 00:11:39,160 Speaker 1: and where the policymakers excuse me should go. R J. 210 00:11:39,240 --> 00:11:41,080 Speaker 1: Which states do you think are going to have to 211 00:11:41,120 --> 00:11:43,400 Speaker 1: raise taxes in the light of the financial burdens their 212 00:11:43,440 --> 00:11:46,600 Speaker 1: experience right now, at least if they don't get fisical support. 213 00:11:48,160 --> 00:11:50,920 Speaker 1: I can't. I wouldn't feel comfortable with giving you specific 214 00:11:50,960 --> 00:11:53,320 Speaker 1: state governments that are going to necessarily go that rat 215 00:11:53,320 --> 00:11:55,839 Speaker 1: But I'll tell you basically basically, I'm asking you, are 216 00:11:55,880 --> 00:11:59,880 Speaker 1: my taxes going on substantially? I mean, do you have 217 00:11:59,880 --> 00:12:06,880 Speaker 1: a Manhattan right? Yeah? Well, maybe I hate to say it, 218 00:12:06,960 --> 00:12:10,240 Speaker 1: but it's very true that that this COVID nineteen pandemic 219 00:12:10,280 --> 00:12:13,640 Speaker 1: and the economic challenges that we face, which are profound 220 00:12:14,120 --> 00:12:19,120 Speaker 1: um are not homogeneous across the country. Obviously, the tri 221 00:12:19,240 --> 00:12:20,640 Speaker 1: state in New York metro area and I used to 222 00:12:20,720 --> 00:12:23,120 Speaker 1: live there, so it's got a soft spot in my heart. 223 00:12:23,160 --> 00:12:25,640 Speaker 1: It's also a huge economic engine for the United States, 224 00:12:25,640 --> 00:12:29,400 Speaker 1: so it's very important. UM heavily afflicted by COVID nineteen 225 00:12:29,760 --> 00:12:33,800 Speaker 1: in so many ways, cost deaths, and the challenges of 226 00:12:33,880 --> 00:12:36,520 Speaker 1: the situation they're they're profound there. You go to many 227 00:12:36,520 --> 00:12:38,360 Speaker 1: other parts of the country and it hasn't been nearly 228 00:12:38,400 --> 00:12:41,760 Speaker 1: as bad. UM. I think every economy went through, every 229 00:12:41,760 --> 00:12:44,600 Speaker 1: state economy went through some degree of a lockdown, shutdown, 230 00:12:44,800 --> 00:12:47,120 Speaker 1: shelter in place, whatever you wanna call it, and that 231 00:12:47,240 --> 00:12:49,960 Speaker 1: is going to knock state revenues ten twenty maybe even. 232 00:12:50,960 --> 00:12:54,080 Speaker 1: But it varies across these states. And I do think 233 00:12:54,320 --> 00:12:57,760 Speaker 1: that the initial Cares Act response, which was bipartisan and 234 00:12:57,880 --> 00:13:01,320 Speaker 1: should be praised because it was the right thing to do, UM, 235 00:13:01,559 --> 00:13:05,160 Speaker 1: gave an initial significant amount of money to state government, 236 00:13:05,640 --> 00:13:08,200 Speaker 1: but more does need to be done, and it probably 237 00:13:08,200 --> 00:13:13,120 Speaker 1: should be scaled more directly to the need. Under the 238 00:13:13,160 --> 00:13:16,760 Speaker 1: Cares Act, the state of Wyoming is actually getting more 239 00:13:16,800 --> 00:13:21,079 Speaker 1: money from the Cares Act then they're ever gonna lose it. 240 00:13:21,280 --> 00:13:23,480 Speaker 1: I was almost equal to their operating budget, if I recall, 241 00:13:24,080 --> 00:13:27,000 Speaker 1: so that's not the case in New York, for example, 242 00:13:27,080 --> 00:13:30,000 Speaker 1: or New Jersey. So I do think that the policymakers 243 00:13:30,000 --> 00:13:32,280 Speaker 1: in Washington need to be particularly sensitive to where the 244 00:13:32,320 --> 00:13:35,080 Speaker 1: challenge has been felt the greatest, and to try to 245 00:13:35,200 --> 00:13:40,760 Speaker 1: tailor the next installment, if you will, of federal financial 246 00:13:40,800 --> 00:13:45,160 Speaker 1: aid to the states somewhat by those needs. R J. Gallow, 247 00:13:45,200 --> 00:13:47,679 Speaker 1: thank you so much for joining us. We appreciate your 248 00:13:47,720 --> 00:13:51,240 Speaker 1: thoughts and perspective. R J. Gallo, Senior portfolio Manager, head 249 00:13:51,240 --> 00:13:52,599 Speaker 1: of the US Bond Group in the head of the 250 00:13:52,679 --> 00:13:57,360 Speaker 1: Duration committeeet Federated Hermes joining us from Pittsburgh. So at 251 00:13:57,440 --> 00:13:59,440 Speaker 1: least I think you know, as r J was suggesting, 252 00:13:59,480 --> 00:14:02,800 Speaker 1: this next round fiscal stimulus, as we've heard really clearly 253 00:14:02,840 --> 00:14:07,040 Speaker 1: from Governor Andrew Cuomo, really needs to address state, local municipalities. Yeah, 254 00:14:07,040 --> 00:14:09,040 Speaker 1: although I don't know that I feel the urgency right now, 255 00:14:09,200 --> 00:14:13,120 Speaker 1: certainly not um among Republicans, and I'm hearing the conversation 256 00:14:13,280 --> 00:14:17,319 Speaker 1: turn much more toward tying it to employment, such as 257 00:14:17,360 --> 00:14:21,520 Speaker 1: a payroll tax cut UH in order to help support 258 00:14:21,560 --> 00:14:24,480 Speaker 1: workers on the back end of this crisis. Yeah, it's 259 00:14:24,520 --> 00:14:26,880 Speaker 1: interesting just to see how this plays out, but clearly 260 00:14:27,160 --> 00:14:30,880 Speaker 1: the expectations are that more fiscal stimulus is needed. The 261 00:14:30,960 --> 00:14:34,600 Speaker 1: question is how much goes directly to consumers and how 262 00:14:34,680 --> 00:14:37,560 Speaker 1: much goes to state and local governments to support teachers 263 00:14:37,560 --> 00:14:40,160 Speaker 1: and firefighters and the like. So that is being debated 264 00:14:40,200 --> 00:14:46,000 Speaker 1: as we speak in the halls of Congress. There's been 265 00:14:46,040 --> 00:14:48,760 Speaker 1: a lot of concern about the consumer here on the 266 00:14:48,800 --> 00:14:51,120 Speaker 1: heels of the pandemic, and we're seeing that in some 267 00:14:51,160 --> 00:14:54,080 Speaker 1: of the retail numbers coming out. Some brutal retail sales, 268 00:14:54,520 --> 00:14:57,000 Speaker 1: but certain retailers are actually doing quite well. We have 269 00:14:57,080 --> 00:14:59,400 Speaker 1: some really solid top line numbers out of Target and 270 00:14:59,440 --> 00:15:02,560 Speaker 1: Lows today. The breakdown what's going on in the world 271 00:15:02,600 --> 00:15:05,440 Speaker 1: of US retail. We welcome Sema Shaw. She's a director 272 00:15:05,440 --> 00:15:08,560 Speaker 1: of consumer and retail Trends at Credit Intel based in 273 00:15:08,600 --> 00:15:11,160 Speaker 1: New York. Seema, thanks so much for joining us again. 274 00:15:11,240 --> 00:15:14,280 Speaker 1: Let's just start with the big box great, appreciate it. 275 00:15:14,320 --> 00:15:17,400 Speaker 1: The big box retailers, Target and Lows. What did you 276 00:15:17,440 --> 00:15:19,880 Speaker 1: take away from there? What should investors really be focusing on. 277 00:15:21,320 --> 00:15:24,200 Speaker 1: I think what we saw from Target, Lows and Walmart 278 00:15:24,200 --> 00:15:27,360 Speaker 1: and Home Depot yesterday is that the essential retailers, the 279 00:15:27,360 --> 00:15:30,200 Speaker 1: ones that were able to keep their doors open even 280 00:15:30,240 --> 00:15:32,400 Speaker 1: if they had to meet their customers in and manage 281 00:15:32,440 --> 00:15:35,120 Speaker 1: their store traffic. We saw their comps go up a 282 00:15:35,400 --> 00:15:39,720 Speaker 1: low double digits, let's say ten to twelve across those names, 283 00:15:39,760 --> 00:15:44,280 Speaker 1: and significantly, they saw a huge surge in their online tales. 284 00:15:44,360 --> 00:15:46,800 Speaker 1: So these guys tend tended to do well because they 285 00:15:46,800 --> 00:15:48,880 Speaker 1: were open and they were selling with customers needed at 286 00:15:48,880 --> 00:15:52,040 Speaker 1: that time, which was essential merchandise. And I would say 287 00:15:52,040 --> 00:15:54,840 Speaker 1: all of them commented on the fact that sending April 288 00:15:54,840 --> 00:15:57,720 Speaker 1: and going into Q two they saw an acceleration in 289 00:15:57,760 --> 00:16:00,280 Speaker 1: their sales, likely due to some of the stimulus money 290 00:16:00,680 --> 00:16:04,040 Speaker 1: hitting consumers wallets. But that trend has sort of continued 291 00:16:04,120 --> 00:16:07,040 Speaker 1: the first two weeks of May. But the retailers that 292 00:16:07,080 --> 00:16:10,080 Speaker 1: weren't essential, like Coals and Urban Outfitters, you know, the 293 00:16:10,080 --> 00:16:12,280 Speaker 1: story was much different. So there seems to be a 294 00:16:12,320 --> 00:16:16,200 Speaker 1: consolidation of power among these big retailers, and they're continuing 295 00:16:16,200 --> 00:16:19,360 Speaker 1: to branch out into an increasing number of avenues. I'm 296 00:16:19,400 --> 00:16:22,360 Speaker 1: just wondering if you can give some insight into the 297 00:16:22,440 --> 00:16:26,200 Speaker 1: costs that they are bearing in order to continue business 298 00:16:26,360 --> 00:16:29,000 Speaker 1: right now, in other words, either paying some of their 299 00:16:29,040 --> 00:16:33,040 Speaker 1: employees more, whether it's an increasing charge for deliveries, what 300 00:16:33,080 --> 00:16:36,920 Speaker 1: are we saying there, you're definitely seeing a huge investment 301 00:16:36,960 --> 00:16:40,080 Speaker 1: I would say across the board by these retailers into 302 00:16:40,120 --> 00:16:44,080 Speaker 1: their workers, their associates, and that includes you know, maybe 303 00:16:44,120 --> 00:16:47,520 Speaker 1: you know, temporary increase in health benefits, paid time off, 304 00:16:48,080 --> 00:16:51,600 Speaker 1: higher wages, so that definitely impacted the margins um I 305 00:16:51,640 --> 00:16:53,960 Speaker 1: would say of these retailers across the board. The total 306 00:16:54,080 --> 00:16:57,200 Speaker 1: value vary depending on the retailer, but I would say 307 00:16:57,200 --> 00:16:59,920 Speaker 1: a lot of the cost that you saw Que One 308 00:17:00,160 --> 00:17:03,320 Speaker 1: really had to do with making sure employees and customers 309 00:17:03,320 --> 00:17:05,760 Speaker 1: were safe and healthy. And I think going forward, as 310 00:17:05,800 --> 00:17:08,879 Speaker 1: things open up, some of those costs will remain, particularly 311 00:17:08,920 --> 00:17:12,080 Speaker 1: the cost to keep the stores clean and safe and 312 00:17:12,119 --> 00:17:14,920 Speaker 1: whatnot as people come back to the stores. So there 313 00:17:15,000 --> 00:17:16,840 Speaker 1: is that shift and there is a lot of costs. 314 00:17:16,880 --> 00:17:19,320 Speaker 1: But the other costs they face is the acceleration of 315 00:17:19,640 --> 00:17:23,560 Speaker 1: certain omni channel investment. They're certain initiatives that maybe they 316 00:17:23,560 --> 00:17:24,879 Speaker 1: were going to do in two to three years that 317 00:17:24,920 --> 00:17:28,679 Speaker 1: they had to accelerate, like curbside pick up or you know, 318 00:17:28,840 --> 00:17:33,159 Speaker 1: trying to maybe same day delivery, things like that that 319 00:17:33,240 --> 00:17:36,560 Speaker 1: they wanted to offer to their customers in order to 320 00:17:36,600 --> 00:17:39,000 Speaker 1: get that sale. And for customers who are uncomfortable about 321 00:17:39,000 --> 00:17:42,679 Speaker 1: going into the store semen, what's the status of the 322 00:17:42,680 --> 00:17:45,439 Speaker 1: supply chain here? There were some concerns that you know, 323 00:17:46,040 --> 00:17:48,119 Speaker 1: supply a product from certain parts of the world and 324 00:17:48,200 --> 00:17:51,159 Speaker 1: transportation would hamper some of the retailers. What are they 325 00:17:51,200 --> 00:17:53,399 Speaker 1: seeing or what are they telling you about their supply 326 00:17:53,480 --> 00:17:57,640 Speaker 1: chains now and going forward? So, going now, things seem 327 00:17:57,680 --> 00:18:00,600 Speaker 1: to have normalized a bit. Product and let's say like 328 00:18:00,680 --> 00:18:03,359 Speaker 1: something like electronics or products that's still coming from China. 329 00:18:03,440 --> 00:18:05,480 Speaker 1: There's still a little bit of a lag, but I 330 00:18:05,520 --> 00:18:07,320 Speaker 1: think most of the retailers have been saying that their 331 00:18:07,400 --> 00:18:10,720 Speaker 1: vendors have been working with them to increase production and 332 00:18:11,320 --> 00:18:15,640 Speaker 1: work on improving in stock levels, particularly for high demand items. 333 00:18:15,640 --> 00:18:19,040 Speaker 1: So it is slowly getting better as things have sort 334 00:18:19,040 --> 00:18:22,359 Speaker 1: of calmed down and stores are reopening. There's definitely less 335 00:18:22,400 --> 00:18:26,359 Speaker 1: out of stocks you're seeing across the board. But going forward, 336 00:18:26,359 --> 00:18:29,320 Speaker 1: it might have implications as to where these companies source 337 00:18:29,359 --> 00:18:31,520 Speaker 1: some of their products, even their vendors. Right, maybe you 338 00:18:31,560 --> 00:18:34,320 Speaker 1: don't want to have everything international. There might be more 339 00:18:35,160 --> 00:18:37,320 Speaker 1: thought to have some domestic production. So I think we 340 00:18:37,400 --> 00:18:40,119 Speaker 1: might see changes over the long terms how people think 341 00:18:40,160 --> 00:18:43,119 Speaker 1: about their supply chain. So moving away from the big 342 00:18:43,520 --> 00:18:47,119 Speaker 1: mainstay retailers that sell what everybody needs. Let's go to 343 00:18:47,200 --> 00:18:49,480 Speaker 1: some of those that have really been struggling, the brick 344 00:18:49,520 --> 00:18:52,360 Speaker 1: and mortar that are filing for bankruptcy. And even Marcus 345 00:18:52,400 --> 00:18:55,760 Speaker 1: perhaps exemplifies it the best. We were talking last year 346 00:18:55,800 --> 00:18:59,000 Speaker 1: about how they were investing in the experience of shopping. 347 00:18:59,280 --> 00:19:02,160 Speaker 1: They are now bank crapt. I'm wondering whether the experience 348 00:19:02,320 --> 00:19:06,600 Speaker 1: is dead. Um, it's not. I don't know that the 349 00:19:06,640 --> 00:19:09,080 Speaker 1: experience is dead as such, but I think some of 350 00:19:09,119 --> 00:19:12,479 Speaker 1: these guys got into the experienced business too late, and 351 00:19:12,520 --> 00:19:15,120 Speaker 1: many of them were already sort of on very fragile 352 00:19:15,160 --> 00:19:18,119 Speaker 1: ground before COVID hit, and they's just accelerated that. J. C. 353 00:19:18,240 --> 00:19:21,840 Speaker 1: Penny is another example of one which had been sort 354 00:19:21,880 --> 00:19:24,439 Speaker 1: of hanging out hanging out and then just couldn't go 355 00:19:24,520 --> 00:19:27,040 Speaker 1: any longer when they finally had to shut down their 356 00:19:27,040 --> 00:19:28,840 Speaker 1: stores for an extended period of time. And I think 357 00:19:28,920 --> 00:19:31,919 Speaker 1: that's what you saw across the department store space, and 358 00:19:31,960 --> 00:19:34,880 Speaker 1: even with some specialty guys um Pure One did file 359 00:19:34,920 --> 00:19:36,840 Speaker 1: for bankruptcy, but it's now closing a bunch of their 360 00:19:36,840 --> 00:19:39,760 Speaker 1: stores and liquidating because it's not likely that they'll be 361 00:19:39,840 --> 00:19:42,560 Speaker 1: able to come out so I think there's situations like 362 00:19:42,720 --> 00:19:46,280 Speaker 1: this that were companies specific because they were too slow 363 00:19:46,840 --> 00:19:50,000 Speaker 1: to catch onto what consumers wanted ahead of time. I 364 00:19:50,000 --> 00:19:54,240 Speaker 1: think they're slip demand for luxury product and specialty merchandise. 365 00:19:54,640 --> 00:19:56,840 Speaker 1: But the experience has to be good, and I think 366 00:19:56,840 --> 00:19:58,359 Speaker 1: now you have to be top of You had to 367 00:19:58,400 --> 00:20:01,000 Speaker 1: have been top of mind before this hit in order 368 00:20:01,000 --> 00:20:03,800 Speaker 1: to not end up for Name and Marcus and some 369 00:20:03,840 --> 00:20:07,000 Speaker 1: of these other guys did just twenty seconds. Who's getting 370 00:20:07,000 --> 00:20:10,360 Speaker 1: experience right right now? Uh, well, it's most stores open. 371 00:20:10,440 --> 00:20:12,920 Speaker 1: I'm not sure that anybody has a good experience right now, 372 00:20:12,960 --> 00:20:15,600 Speaker 1: but I would think that some of them math guys 373 00:20:15,640 --> 00:20:18,920 Speaker 1: and you know, who have already worked on their stores 374 00:20:19,280 --> 00:20:23,399 Speaker 1: um and have added different kinds of features and different 375 00:20:23,440 --> 00:20:26,600 Speaker 1: fulfillment options, are probably providing the best experience for customers. 376 00:20:26,600 --> 00:20:28,240 Speaker 1: But I think as a whole it is a different 377 00:20:28,280 --> 00:20:31,919 Speaker 1: experience because of limiting of how many consumers are in 378 00:20:31,920 --> 00:20:35,760 Speaker 1: the store, want different closure time, so the whole thing 379 00:20:35,840 --> 00:20:38,320 Speaker 1: is different. But I think those retailers that have already 380 00:20:38,320 --> 00:20:41,200 Speaker 1: been investing over the long term on fulfillment trying to 381 00:20:41,240 --> 00:20:44,119 Speaker 1: understand what their consumers wanted an omnichannel, they're providing the 382 00:20:44,119 --> 00:20:48,480 Speaker 1: best experience as we speak right now, Director Consumer and 383 00:20:48,520 --> 00:20:51,720 Speaker 1: Retail Trends at Credit Intel, Thank you so much for 384 00:20:51,840 --> 00:20:55,639 Speaker 1: being with us. The experience is currently walking from the 385 00:20:55,680 --> 00:20:58,760 Speaker 1: bathroom to the bedroom to the kitchen at least Abrahm 386 00:20:58,800 --> 00:21:01,679 Speaker 1: wad looked my coast and like Paul, sweetie, this is 387 00:21:01,680 --> 00:21:07,879 Speaker 1: Bloomberg Markets. In this pandemic era, there has been a 388 00:21:07,880 --> 00:21:12,040 Speaker 1: growing focus on private equities involvement in the healthcare and 389 00:21:12,160 --> 00:21:16,639 Speaker 1: hospital sector in terms of its normal business model and 390 00:21:16,680 --> 00:21:20,560 Speaker 1: how that affects the delivery of care. Joining us now 391 00:21:20,640 --> 00:21:24,000 Speaker 1: is Heather Pearlberg, private equity reporter for Bloomberg, who wrote 392 00:21:24,000 --> 00:21:27,200 Speaker 1: a story about some of the consequences of that. Heather, 393 00:21:27,320 --> 00:21:29,359 Speaker 1: can you just start off by giving us a sense 394 00:21:29,960 --> 00:21:33,840 Speaker 1: of how significantly private equity has invested in the healthcare 395 00:21:33,920 --> 00:21:38,080 Speaker 1: space over the past few years. Hi, Yeah, I mean 396 00:21:38,119 --> 00:21:43,359 Speaker 1: private equity is poured billions and billions of dollars into healthcare. 397 00:21:43,480 --> 00:21:48,680 Speaker 1: Broadly mean they're buying up position staffing companies, hospitals. There's 398 00:21:48,720 --> 00:21:51,800 Speaker 1: been lots of reporting about that. As far as medical 399 00:21:51,880 --> 00:21:56,160 Speaker 1: practices go, that's been a little quieter, but an estimates 400 00:21:56,200 --> 00:22:00,400 Speaker 1: are around ten billion dollars just in that space. So Heather, 401 00:22:00,840 --> 00:22:02,880 Speaker 1: you know, I just when I first saw this, I said, 402 00:22:02,920 --> 00:22:04,680 Speaker 1: there's gotta be a lot of conflicts of industryre the 403 00:22:04,720 --> 00:22:08,239 Speaker 1: private equity companies really looking to maximize returns. Often they 404 00:22:08,240 --> 00:22:12,640 Speaker 1: do that by really pressuring revenues, cutting costs, that type 405 00:22:12,640 --> 00:22:14,840 Speaker 1: of thing, but that necessarily isn't in the best interests 406 00:22:14,840 --> 00:22:17,320 Speaker 1: of patient care. Is this a good idea or not? 407 00:22:19,960 --> 00:22:22,240 Speaker 1: A lot of doctors would tell you it's probably not 408 00:22:22,400 --> 00:22:25,000 Speaker 1: a good marriage. It's not a good fit for the 409 00:22:25,040 --> 00:22:28,080 Speaker 1: most hard t does what they do in other industries, 410 00:22:28,080 --> 00:22:32,760 Speaker 1: and that can work spectacularly in medicine, you know, there's 411 00:22:32,840 --> 00:22:36,760 Speaker 1: something particularly problematic when you're dealing with people's health and lives. 412 00:22:37,920 --> 00:22:40,119 Speaker 1: Although when you take a look at some of the investments, 413 00:22:40,119 --> 00:22:43,119 Speaker 1: it's in very specialized areas that have been highly profitable, 414 00:22:43,160 --> 00:22:47,280 Speaker 1: including dermatology, with a lot of cosmetically driven types of 415 00:22:47,280 --> 00:22:50,600 Speaker 1: procedures driving profits. So you could say it's a business 416 00:22:50,640 --> 00:22:54,000 Speaker 1: like any other. And I'm wondering how they have operated 417 00:22:54,040 --> 00:22:57,840 Speaker 1: through this period of time as selective or sort of uh, 418 00:22:58,040 --> 00:23:02,080 Speaker 1: selective surgeries have been prevent it, as people are prioritized 419 00:23:02,119 --> 00:23:06,360 Speaker 1: for their COVID symptoms. Yeah, that's that's a great question. 420 00:23:06,520 --> 00:23:12,159 Speaker 1: And these guys are hurting. UM revenue is down as 421 00:23:12,200 --> 00:23:16,200 Speaker 1: some of these practices offices have been shut down. I mean, 422 00:23:16,240 --> 00:23:20,480 Speaker 1: in some cases people stay open, but they're seemed not 423 00:23:20,680 --> 00:23:25,360 Speaker 1: essential by a lot of government officials and doctors individually 424 00:23:25,480 --> 00:23:28,800 Speaker 1: or just making decisions not to stay open, and that 425 00:23:28,880 --> 00:23:33,640 Speaker 1: will that will pressure them. All right, So what's it when? 426 00:23:33,960 --> 00:23:35,639 Speaker 1: And I think private equity, I think debt are the 427 00:23:35,680 --> 00:23:38,720 Speaker 1: are the private equity companies loading these companies up with 428 00:23:38,840 --> 00:23:41,840 Speaker 1: debt and now they may face some challenges here given 429 00:23:41,880 --> 00:23:45,840 Speaker 1: what's going on in the market right now. Absolutely they're 430 00:23:45,880 --> 00:23:49,320 Speaker 1: sattled with pretty big debt loads a lot of them. 431 00:23:49,359 --> 00:23:51,720 Speaker 1: You know, we'll get money from b dcs or other 432 00:23:51,960 --> 00:23:57,000 Speaker 1: private lenders, and that's going to be trickier to pay 433 00:23:57,000 --> 00:24:00,600 Speaker 1: off if money is not coming in, So they're gonna 434 00:24:00,600 --> 00:24:03,359 Speaker 1: have to figure out different ways out of this. Some 435 00:24:03,480 --> 00:24:06,920 Speaker 1: of them are getting money from the Cares act Um, 436 00:24:07,000 --> 00:24:10,040 Speaker 1: but we'll probably see some more of these companies really 437 00:24:10,080 --> 00:24:12,840 Speaker 1: struggle or go under. I guess. On the other hand, 438 00:24:12,920 --> 00:24:18,119 Speaker 1: there is um a big opportunity for private equity and 439 00:24:18,160 --> 00:24:19,919 Speaker 1: other investors who have been just kind of sitting on 440 00:24:19,960 --> 00:24:24,680 Speaker 1: the sidelines waiting to invest. When you know, there's distress 441 00:24:24,680 --> 00:24:27,720 Speaker 1: in the market, and you could say doctors will be 442 00:24:27,960 --> 00:24:31,760 Speaker 1: more financially strained than they've ever been. Uh, And that's 443 00:24:31,760 --> 00:24:34,800 Speaker 1: a buying opportunity doctors who have turned private equity down 444 00:24:34,880 --> 00:24:38,000 Speaker 1: six months ago or coming back and saying, hey, wait, 445 00:24:38,160 --> 00:24:40,960 Speaker 1: you know, can we talk about that again. But that's 446 00:24:40,960 --> 00:24:43,200 Speaker 1: actually surprising to me given the fact that we've seen 447 00:24:43,240 --> 00:24:47,000 Speaker 1: an increasing amount of regulatory pushback, or at least political pushback. 448 00:24:47,040 --> 00:24:49,800 Speaker 1: I believe Senator Warren has come out and talked about 449 00:24:49,840 --> 00:24:53,720 Speaker 1: private equity investments in particular and hospitals that have received 450 00:24:53,800 --> 00:24:57,480 Speaker 1: money to stay afloat during the pandemic. I know Carlisle 451 00:24:57,520 --> 00:25:01,800 Speaker 1: had an investment that became uh what controversial, But I'm 452 00:25:01,800 --> 00:25:05,080 Speaker 1: trying to figure out how that plays into the calculus 453 00:25:05,160 --> 00:25:07,159 Speaker 1: of whether private equity is willing to swoop in and 454 00:25:07,200 --> 00:25:10,720 Speaker 1: try to pick up bargains when the equation may change 455 00:25:10,760 --> 00:25:15,720 Speaker 1: significantly due to political pressure. Yeah. I think that's definitely 456 00:25:15,880 --> 00:25:18,760 Speaker 1: in the backdrop. Um. I mean a lot of the money, 457 00:25:18,880 --> 00:25:21,600 Speaker 1: the money coming from Health and Human Services was really 458 00:25:21,600 --> 00:25:26,640 Speaker 1: intended for healthcare workers directly, So I think that's that's 459 00:25:26,640 --> 00:25:29,600 Speaker 1: a little bit different than the payroll protection program with 460 00:25:29,680 --> 00:25:34,040 Speaker 1: some of the others. But um, there's a lot of criticism. 461 00:25:34,080 --> 00:25:38,600 Speaker 1: I think the largest firms take that harder than some 462 00:25:38,800 --> 00:25:43,280 Speaker 1: folks in the middle market who you know, don't have 463 00:25:43,400 --> 00:25:48,520 Speaker 1: the same kind of communication operations and are dealing with 464 00:25:48,560 --> 00:25:52,720 Speaker 1: investors more than they're dealing with reputation risk. Frankly, so, 465 00:25:52,760 --> 00:25:56,919 Speaker 1: have we had any successful um, I guess you know, 466 00:25:57,000 --> 00:25:59,399 Speaker 1: kind of spinouts or sales here by the private equity 467 00:25:59,400 --> 00:26:01,480 Speaker 1: folcuses are the generating good returns for them? Do we 468 00:26:01,480 --> 00:26:06,080 Speaker 1: have any evidence on that? Yeah? Um, you know, Varsity 469 00:26:06,160 --> 00:26:08,520 Speaker 1: Partners is one of these middle market firms that did 470 00:26:08,560 --> 00:26:13,800 Speaker 1: an early deal. They made more than think. There was 471 00:26:14,520 --> 00:26:19,000 Speaker 1: an Audact Group presentation on the Advanced Dermatology deal saying 472 00:26:19,040 --> 00:26:23,520 Speaker 1: that they had quadruple revenue to two million dollars in 473 00:26:23,600 --> 00:26:26,439 Speaker 1: the time they were in that business. So the early 474 00:26:26,520 --> 00:26:30,520 Speaker 1: firms say that they're doing really well, it's sort of 475 00:26:30,560 --> 00:26:33,240 Speaker 1: on the second or third private equity owner comes into 476 00:26:33,240 --> 00:26:37,040 Speaker 1: the picture, it seems they're squeezing something that's already been 477 00:26:37,080 --> 00:26:41,919 Speaker 1: made as efficient as it can be at times interesting. 478 00:26:41,920 --> 00:26:44,000 Speaker 1: Heather Purp Broke, thank you so much for joining us. 479 00:26:44,000 --> 00:26:48,600 Speaker 1: We really appreciate that. Fascinating UH news coming out calm 480 00:26:48,680 --> 00:26:51,760 Speaker 1: from you a news story. Heather pearl Book, pearl Berg 481 00:26:51,840 --> 00:26:55,160 Speaker 1: Private Equity reporter for Bloomberg Private Equity. There's so much 482 00:26:55,160 --> 00:26:57,800 Speaker 1: cash on the sidelines, Lisa, that you know, I guess 483 00:26:57,840 --> 00:27:00,080 Speaker 1: it should not be surprising to see them getting to 484 00:27:00,160 --> 00:27:04,800 Speaker 1: the healthcare spaces typically, you know, pretty solid place for 485 00:27:05,400 --> 00:27:07,920 Speaker 1: revenue growth. A couple of questions that I have about 486 00:27:07,920 --> 00:27:10,600 Speaker 1: private equity right now. First comes to that cash pile. 487 00:27:10,640 --> 00:27:13,000 Speaker 1: I believe it's one point for trillion dollars. They talk 488 00:27:13,040 --> 00:27:15,840 Speaker 1: about the dry powder on the sidelines, and I do 489 00:27:15,960 --> 00:27:18,080 Speaker 1: wonder when we're gonna start to see it deployed, how 490 00:27:18,200 --> 00:27:22,199 Speaker 1: low valuations have to go before they actually say, okay, 491 00:27:22,200 --> 00:27:25,040 Speaker 1: we're getting a good deal now. And then the second 492 00:27:25,119 --> 00:27:28,320 Speaker 1: question that I have emerging from this entire era is 493 00:27:28,359 --> 00:27:32,840 Speaker 1: whether they emerge as sort of the lost child of 494 00:27:33,040 --> 00:27:35,120 Speaker 1: the financial system. Right it was the banks the last 495 00:27:35,119 --> 00:27:37,439 Speaker 1: time around that took the brunt of the heat. Our 496 00:27:37,480 --> 00:27:39,520 Speaker 1: private equity firm is going to be the bad boys 497 00:27:39,560 --> 00:27:41,399 Speaker 1: this time around? And are people going to point to 498 00:27:41,480 --> 00:27:45,040 Speaker 1: them and the excessive amounts of leverage that some of 499 00:27:45,040 --> 00:27:48,280 Speaker 1: their companies have taken on as being a part of 500 00:27:48,320 --> 00:27:50,840 Speaker 1: the problem. I don't know the answer. I know, politically, 501 00:27:50,840 --> 00:27:53,280 Speaker 1: there is a lot of push toward that level, and 502 00:27:53,320 --> 00:27:56,480 Speaker 1: we're seeing the p p P for example, was those 503 00:27:56,560 --> 00:27:59,920 Speaker 1: loans were not allowed to go to certain private equity 504 00:28:00,040 --> 00:28:03,399 Speaker 1: companies because of this type of pressure. But I wonder 505 00:28:03,480 --> 00:28:06,240 Speaker 1: what that will mean in terms of regulations, in terms 506 00:28:06,240 --> 00:28:09,120 Speaker 1: of money flows coming out on the other side of this. Yeah, 507 00:28:09,160 --> 00:28:10,800 Speaker 1: that'll be very interesting to see. I think, you know, 508 00:28:10,800 --> 00:28:12,920 Speaker 1: if you're a private equity you can certainly say, hey, 509 00:28:12,960 --> 00:28:14,639 Speaker 1: this is a once in a you know, literally a 510 00:28:14,720 --> 00:28:19,160 Speaker 1: hundred years uh issue of pandemic, government ordered shut down. 511 00:28:19,840 --> 00:28:22,600 Speaker 1: Everything was great going into the pandemic, and uh, you know, 512 00:28:22,720 --> 00:28:24,399 Speaker 1: it's you know a lot of these things are just 513 00:28:24,440 --> 00:28:27,680 Speaker 1: beyond our control. But clearly, I think we're already starting 514 00:28:27,720 --> 00:28:29,240 Speaker 1: to see at Lisa, I think really over the last 515 00:28:29,240 --> 00:28:31,600 Speaker 1: several weeks, when certainly in the retail space with Demon 516 00:28:31,640 --> 00:28:34,400 Speaker 1: Marcus and and J. C. Penney and and Jay Crew, 517 00:28:34,520 --> 00:28:39,000 Speaker 1: I mean, the the challenge businesses with challenging and leverage 518 00:28:39,000 --> 00:28:42,400 Speaker 1: balance sheets, those are the ones up most at risk here. So, um, 519 00:28:42,440 --> 00:28:45,160 Speaker 1: we'll have to really see how this goes. But a 520 00:28:45,280 --> 00:28:47,920 Speaker 1: lot of pain likely to come across a number of 521 00:28:47,960 --> 00:28:53,120 Speaker 1: industries as this economy slowly starts to open back up 522 00:28:53,160 --> 00:28:54,840 Speaker 1: after what has been a two two and a half 523 00:28:54,880 --> 00:28:58,520 Speaker 1: month lockdown. That'll be it for us. For Lisa Brahmo, 524 00:28:58,600 --> 00:29:04,120 Speaker 1: It's on Paul Sweeney. This is Bloomberg Markets. Thanks for 525 00:29:04,120 --> 00:29:06,360 Speaker 1: listening to the Bloomberg P and L podcast. You can 526 00:29:06,360 --> 00:29:09,200 Speaker 1: subscribe and listen to interviews at Apple Podcasts or whatever 527 00:29:09,240 --> 00:29:12,240 Speaker 1: podcast platform you prefer. I'm Paul Sweeney, I'm on Twitter 528 00:29:12,320 --> 00:29:14,920 Speaker 1: at pt Sweeney. I'm Lisa abram Woyit's I'm on Twitter 529 00:29:15,000 --> 00:29:17,640 Speaker 1: at Lisa abram woits one before the podcast. You can 530 00:29:17,640 --> 00:29:20,040 Speaker 1: always catch us worldwide on'm Bloomberg Radio.