Speaker 1: This is Bloomberg Business Week. I'm Carol Masser and I'm
Speaker 1: Jason Kelly. We're here every day bringing you the latest
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Speaker 1: listen to our radio show weekdays at two pm Eastern
Speaker 1: only on Bloomberg Radio. We want to move to our
Speaker 1: own expert here. Brian Granuelotti is the chief executive officer
Speaker 1: of Atlantic Health System, joining us on the phone from Morristown,
Speaker 1: New Jersey. Obviously a state like here in New York
Speaker 1: that has been hit very hard. New Jersey's death rate
Speaker 1: actually eclipsing the daily death rate, eclipsing New York's, I
Speaker 1: believe for the first time today. So clearly a lot
Speaker 1: going on, and a lot going on as we think
Speaker 1: about what happens next, even in terms of reopening the economy. Brian,
Speaker 1: really good to have you with Carol and myself. Thank
Speaker 1: you so give us a sense of what you are
Speaker 1: seeing on the front lines there, what is it like,
Speaker 1: and what's maybe new and different today or this week
Speaker 1: versus in the preceding weeks. Sure, you know you you
Speaker 1: had mentioned the differences between New York and New Jersey,
Speaker 1: and I gotta tell you that, Um, you gotta follow
Speaker 1: the transit lines, because what happened in New York followed
Speaker 1: the transit down into New Jersey. And we have been
Speaker 1: really overwhelmed, as you described here, uh, in New Jersey,
Speaker 1: particularly in northern New Jersey. So today at our command
Speaker 1: center call, we had five hundred and forty four patients
Speaker 1: with COVID in our hospitals and um, about thirty five
Speaker 1: percent of those patients are still on ventilators. So we
Speaker 1: have a very sick patient population. But that's down from
Speaker 1: our peak, which was on April ninth, where we actually
Speaker 1: had eight hundred and thirty four patients. So we're down
Speaker 1: about thirty but it's still an enormous number of patients.
Speaker 1: You know. As we've gone through this process, Brian, I mean,
Speaker 1: what have we learned about being prepared next time, you know,
Speaker 1: and what we need to do in terms of really
Speaker 1: shoring up our health system. And access for everyone. You know,
Speaker 1: there's a there's a famous statement it's about the economy. Um, well,
Speaker 1: it's about the testing. I mean, our major lesson here
Speaker 1: is testing was a problem at the beginning. Testing continues
Speaker 1: to be a problem today. And if we don't get
Speaker 1: this testing right as we go into recovery, we're going
Speaker 1: to have a rebound effect and we're going to be
Speaker 1: back in the soup again, and we have to be very,
Speaker 1: very careful about that. The second thing that we've learned
Speaker 1: is that just in time delivery doesn't work in a pandemic,
Speaker 1: and our supply chain is really broken right now. Um,
Speaker 1: we went through periods of enormous panic making sure that
Speaker 1: we had the right kind of protective equipment for our
Speaker 1: team members to keep them healthy and safe. Ventilators were
Speaker 1: a big issue over a period of time. I can
Speaker 1: tell you just uh a weekend we spent scanning the
Speaker 1: nation for ventilators and and being able to have many
Speaker 1: of our colleagues in different parts of the country support those.
Speaker 1: And it's the same thing with medications, particularly those medications
Speaker 1: that support people on ventilators. So what we've learned is
Speaker 1: we've really got to fix this supply chain, we've got
Speaker 1: to have more control over it because you know, COVID
Speaker 1: is not going to go away until we have a vaccine,
Speaker 1: and that could be a year and a half or
Speaker 1: two years away. So we have just threaded the needle
Speaker 1: here in UH, New Jersey. The governor has been a
Speaker 1: fantastic ally and advocate for us, particularly with the federal
Speaker 1: government and the stockpiles. But we've learned a lot and
Speaker 1: we've got to make sure that at UH we continue
Speaker 1: to use the tools that we have, the predominant one
Speaker 1: being social distancing. Right now, so Brian, I want to
Speaker 1: talk a little bit more about testing it if we could,
Speaker 1: because I feel like we want to go at level
Speaker 1: down and understand both testing for the disease and also
Speaker 1: the zoological, the the antibody testing. What do we know
Speaker 1: now and what is important for our listeners to know
Speaker 1: in terms of what they should be doing, what they
Speaker 1: should expect, especially you know, in and around your hospital
Speaker 1: system over the coming weeks. So the frustration that we've
Speaker 1: had with the diagnostic tests, in other words, do you
Speaker 1: have COVID or not? Is we needed to get that
Speaker 1: right at the point of care so there wouldn't be
Speaker 1: delays in providing a definitive diagnosis because many patients come
Speaker 1: into the health care system UH and they don't need
Speaker 1: to be hospitalized about so so when they go back,
Speaker 1: they need to know if they have a diagnogosis or not,
Speaker 1: they know whether to self quarantine. That diagnosis wasn't coming
Speaker 1: back for three or four days, and that was a
Speaker 1: big problem of the patients that go into the hospital.
Speaker 1: We have to treat everybody is COVID positive until we
Speaker 1: have a definitive diagnosis. And in that instance, about of
Speaker 1: the patients that would go into the hospital and be
Speaker 1: tested UM would be under UH. We wouldn't have a
Speaker 1: test result on them. So we were burning through all
Speaker 1: that scarce protective equipment because we had to treat everybody
Speaker 1: the same. So again we have to have a point
Speaker 1: of care test on that. And then going forward as
Speaker 1: we open up healthcare and start doing some of the
Speaker 1: care that's been tent up, and you've seen articles written
Speaker 1: recently about that UM where people are just staying home
Speaker 1: instead of engaging in the health system, which they need
Speaker 1: to do. We're gonna need to provide that test at
Speaker 1: that preoperative time or pre procedure time in order to
Speaker 1: make sure that we know those patients do not have COVID,
Speaker 1: so that diagnostic tests are going to have to be
Speaker 1: at the spot you're doing the care and they need
Speaker 1: to be able to be determined right away. And when
Speaker 1: you say point of care, I just want to make
Speaker 1: sure that I understand when you say point of care
Speaker 1: that that could also include a pharmacy or someplace like that,
Speaker 1: right or am I misunderstanding, Well, if you're coming in
Speaker 1: for a diagnostic test, or if you're coming in for
Speaker 1: a surgery, it would be in a facility a lot
Speaker 1: of that where you do your preoperative testing. Um. The
Speaker 1: second piece that you talked about antibody testing. That's going
Speaker 1: to be important as it provides some clarification on whether
Speaker 1: or not you have had the disease previously. Now, over
Speaker 1: the last week you've seen U two things happen in
Speaker 1: that space which are concerning. One is that we are
Speaker 1: getting an incredible variation of results on the different tests
Speaker 1: that are being done, the types of tests that are
Speaker 1: being done, and it's really caused some pause and some concern.
Speaker 1: But but clearly we've got to run that down because
Speaker 1: what we don't want to do is give somebody an
Speaker 1: impression that they have built up the immunities. And then
Speaker 1: the second piece that's been of concern was the was
Speaker 1: the feedback we got from the World Health Organization over
Speaker 1: the weekend that perhaps having those antibodies does not necessarily
Speaker 1: protect you again from getting this virus. I think more
Speaker 1: work needs to be done in that space, because the
Speaker 1: consequence of thinking your bulletproof on this and you're not
Speaker 1: going to get it again, uh, is a problem. So Okay,
Speaker 1: I don't want to get all dystopian on everybody, but
Speaker 1: Brian described to me, then what our world is like
Speaker 1: going forward, is it we all just have to get
Speaker 1: used to a lot more testing, wearing masks and potentially
Speaker 1: I mean, you got you oversee a massive hospital system,
Speaker 1: seven hospitals in New Jersey, I think roughly sev men
Speaker 1: ers um almost five thousand physicians, eleven counties. You know,
Speaker 1: five million people you know have access to your system.
Speaker 1: Is it a case that you know, how we go
Speaker 1: about getting procedures, It's going to be very different and
Speaker 1: we have to just get used to it. That's going
Speaker 1: to become the new norm. And we also will have
Speaker 1: health facilities that are separated into virus where people have
Speaker 1: the virus and those places that do not. Yeah, the first,
Speaker 1: the first thing I want to say is that our
Speaker 1: hospitals are safe. UM. I would I would argue our
Speaker 1: hospitals are very safe compared to some of the other
Speaker 1: things we engage in um UH in our communities as
Speaker 1: we UM seek our activities of daily living UM so
Speaker 1: we're we're safe to begin with. But as we think
Speaker 1: about needing to continue to care for this virus UM
Speaker 1: we will as our volumes go down in our hospitals,
Speaker 1: these patients will be contained in very specific areas where
Speaker 1: they won't be interact with other patients. The team members
Speaker 1: that will care for them will care for those patients
Speaker 1: and not care for other patients during their shifts. And
Speaker 1: we need to make sure that UM we have safe
Speaker 1: pathways through our organizations so that we don't have people
Speaker 1: intersecting UH inadvertently, and all those steps are being put
Speaker 1: in place literally as we speak. We also UM have
Speaker 1: when we do turn a unit over and have it
Speaker 1: become an on COVID unit, we do a terminal cleaning
Speaker 1: in there and make sure that everything is safe, so
Speaker 1: so patients shouldn't be safe or shouldn't be scared, and
Speaker 1: there are safe. The thing that we need to think
Speaker 1: about though, to your question, is this will be a
Speaker 1: period of wearing masks. This will be a period of
Speaker 1: maintaining social distance. This will be a period where you
Speaker 1: can't bring your entire family in on your office visit. Um. Uh.
Speaker 1: Those are the kinds of things that we're doing. We're
Speaker 1: going to continue to really use telehealth in a big way, um.
Speaker 1: But we're also in the process of opening our offices.
Speaker 1: You mentioned we have a lot of physician practices, and
Speaker 1: we're doing that also. And so I guess just to
Speaker 1: to drill down at a further level, how long does
Speaker 1: the sort of era of social distance and masking and
Speaker 1: all of that last. In your estimation, Brian, is it
Speaker 1: till we have a vaccine or is what do we
Speaker 1: need to see in order for you know, life to
Speaker 1: even optically look something like close to normal, you know,
Speaker 1: in a perfect world, that's the answer. It's a vaccine.
Speaker 1: But the but the reality is that that's going to
Speaker 1: take a while. So we've got to continue to pursue
Speaker 1: a couple of things. One is we've got to pursue
Speaker 1: effective treatments for this disease, because that will go a
Speaker 1: long way in itself to taking the scare out of
Speaker 1: this UM. The second thing that we've got to work
Speaker 1: on is just contin enuing to educate the public about
Speaker 1: the importance of washing your hands and using a lot
Speaker 1: of common sense, you know, the kinds of things that
Speaker 1: you you learned when you were a kid, UM, and
Speaker 1: make sure that we're adhering to those things. But we
Speaker 1: also are going to be in a position where our
Speaker 1: lives are going to be a lot different. You know,
Speaker 1: I think about restaurants, you know, um, paper disposable menus, um.
Speaker 1: Instead of something that seats a hundred, it'll seat fifty
Speaker 1: and those all have huge uh impacts on those various industries.
Speaker 1: But we will be in a different place. But the
Speaker 1: key thing, again, just to go back to it, is
Speaker 1: we've got to we've got to be able to have
Speaker 1: the testing available so that when we do get an outbreak,
Speaker 1: we are on that in doing the tracing we need
Speaker 1: to do. And that is kind of the blocking and
Speaker 1: tackling of public health system. Ryan just just got about
Speaker 1: thirty seconds here are you bracing your team and preparing
Speaker 1: your team though potentially for another second wave here and
Speaker 1: just gotta be quick. Yes, we are we are absolutely
Speaker 1: preparing for that wave and we will pray that it
Speaker 1: doesn't happen, but we will be there as we always
Speaker 1: are to serve our communities safely, and that's really what
Speaker 1: we're all about. All Thank you so much. We really
Speaker 1: appreciate it. Thank you so much, Brian granielatia really thoughtful conversation,
Speaker 1: realistic conversation about where we are on the medical front
Speaker 1: as it comes to the health system. Carol, he is
Speaker 1: the CEO of Atlantic Health System, joining us on the
Speaker 1: phone from Morristown, and you're a great state of New
Speaker 1: Jersey and my great state of New Jersey and just
Speaker 1: understanding a little bit more of what life is like
Speaker 1: on the other side. And I think, you know, the
Speaker 1: more information we know, the more secure we will feel
Speaker 1: about kind of re entering um. And so it's really
Speaker 1: great to get some time with him. All right, coming up,
Speaker 1: we're going to check in on an interesting story that's
Speaker 1: in Bloomberg Business Week magazine this week, and it all
Speaker 1: has to do with that active passive management kind of
Speaker 1: at it again. I gotta say, I'm just not sure
Speaker 1: how this is going to go today. It's just it's
Speaker 1: just one of those days. It's one of those limits Tuesday,
Speaker 1: and we're going with it as much as we can.
Speaker 1: Joel Weber is joining us, as he does most days
Speaker 1: at this time. He, of course is the editor Bloomberg
Speaker 1: Business Week, as is Justine, the lead markets and quant
Speaker 1: reporter quantz reporter for Bloomberg, joining us on the phone
Speaker 1: from London and Joel, I feel like this is almost
Speaker 1: like a little throwback to your time as editor of
Speaker 1: Bloomberg Markets. Like I started, I'm digging this, I'm digging
Speaker 1: in it. Tell us, tell us about this story. So
Speaker 1: there was a kind of a Bloomberg News Call regular
Speaker 1: call about a week ago, and Justina kind of piped
Speaker 1: in with this idea that she was kind of noodling,
Speaker 1: and as she was describing it, I was just like, Wow,
Speaker 1: just sounds so perfect for Bloomberg Markets. I want it
Speaker 1: for Bloomberg Business and I want it for Bloomberg Business Week. Um,
Speaker 1: and it's really about small versus big companies, which is
Speaker 1: one that I think, you know, we're we're gonna obviously
Speaker 1: spend a couple of minutes talking about here. It's also
Speaker 1: going to be I think I've seen that will resonate
Speaker 1: um for the coming year for investors particular um, if
Speaker 1: not years. And it really what really caught my ear though,
Speaker 1: was the word quantz um. So just you know, you
Speaker 1: want to figure out how to make sense of this
Speaker 1: for for us? Yeah? Sure, because essentially what quantitative investors
Speaker 1: do is that, you know, they don't rely on human judgment.
Speaker 1: They use their computer models to try to find a
Speaker 1: couple of trading fingales that they then apply across thousands
Speaker 1: of securities. And so I initially got this idea talking
Speaker 1: to a quant fund and what they were telling me
Speaker 1: is that the dominance of all these megacap stocked you know,
Speaker 1: like Netflix or Facebook was really not good for their
Speaker 1: kind of strategies because they're essentially underweight megacaps given doubt,
Speaker 1: they're so diversified. And I thought that was a really
Speaker 1: interesting kind of intersection and of this nerdy realm of
Speaker 1: quantz and also a phone phenomenon that I'm sure all
Speaker 1: of us are noticing in the market. So what does
Speaker 1: it tell us about kind of what what they're seeing?
Speaker 1: And because it's it's interesting, you know, justine it because
Speaker 1: we talked so much about active versus passive, right, uh,
Speaker 1: and we know the passive play has been you know,
Speaker 1: done so well for so long coming off of the
Speaker 1: financial crisis and until recently, Um, kind of what did
Speaker 1: you take away from kind of doing this story and
Speaker 1: about that argument in that debate that's been going on, right,
Speaker 1: I mean, essentially one trend that has been making it
Speaker 1: even harder for the active stock pickers is that, you know,
Speaker 1: since the crisis, we have seen big companies get even bigger.
Speaker 1: Now a lot of people think this is you know,
Speaker 1: a structural trend in this sense that a lot of
Speaker 1: the tech companies are taking an advantage of essentially a
Speaker 1: winner took all economy. Because as an active stock picker,
Speaker 1: you want to be different from the benchmark. So you
Speaker 1: want to feel like you have your own original ideas.
Speaker 1: So a lot of the times were naturally underweight large caps,
Speaker 1: but you know, when the they gets bigger, that's not
Speaker 1: an advantage for active stock pickers. And we've kind of
Speaker 1: seen that, you know, repuls be the asset management industry
Speaker 1: with a lot of acquisitions and even more people at
Speaker 1: turning to eats each year. So so just what what
Speaker 1: about right of late? Just you know, the past few
Speaker 1: months have been so crazy and you know, in theory,
Speaker 1: I guess maybe you know, quantitative approach could take out
Speaker 1: that the emotional effect um. What's been happening with quants
Speaker 1: of late, right, I mean, obviously I'm generalizing a little,
Speaker 1: but this year hasn't been great for quantz either. And
Speaker 1: part of the reason is that, you know, they tend
Speaker 1: to have more experiensures to small caps which have been underperforming.
Speaker 1: They also have more exposure to value stocks typically, which
Speaker 1: as you know, have also suffered even more than growth stocks.
Speaker 1: And so it hasn't been a great year for on theater.
Speaker 1: But they're always saying, you know, in every market, when
Speaker 1: valuations are so stretched between the winners and losers, there
Speaker 1: could be a snap back. And it's interesting because I
Speaker 1: think the past couple of days we've seen a little
Speaker 1: bit of that, like small cups coming back a little.
Speaker 1: It's definitely far too early to say then, Yeah, I
Speaker 1: mean it's interesting too. I mean, I guess guys to
Speaker 1: to think about who the winners and losers are, at
Speaker 1: least so far in this and I feel like we're
Speaker 1: going to get a little bit of a picture of
Speaker 1: this this week, Carol, when all the companies are are
Speaker 1: starting to perform, and Joel it it does take me
Speaker 1: back to some extent and this uh, this company has
Speaker 1: mentioned in the lead of Justine's story. It takes it
Speaker 1: back to Zoom, which was the subject of a great
Speaker 1: cover story in the magazine a couple of weeks ago.
Speaker 1: I mean sort of discerning the winners and losers here
Speaker 1: even from beyond the quant perspective, but just from a
Speaker 1: stock in a business perspective, is it feels even trickier
Speaker 1: right now. Yeah, and especially as you know, if if
Speaker 1: we think about the market share the um it's sort
Speaker 1: of the situation like this pandemic kind of creates for
Speaker 1: like an Amazon where you can just see like how
Speaker 1: a big company could really really thrive here while so
Speaker 1: many small ones get hurt. But now that said, like
Speaker 1: you know, I recorded a podcast earlier with Eric ful Tunis,
Speaker 1: and one of those things that um, he was kind
Speaker 1: of thinking about on the E t F side is
Speaker 1: just like you know, small companies have been so beaten down,
Speaker 1: and he just kind of has a theory that like,
Speaker 1: you can only beat these things down so far, like
Speaker 1: over the long term, we might actually see some of these, um,
Speaker 1: the smaller companies and even the small small company value
Speaker 1: ones really outperformed over the next three to five years,
Speaker 1: so from a long term play, there might be something
Speaker 1: to that just you know, like any any reporting on
Speaker 1: that and um from from you right exactly. I mean
Speaker 1: for my story, I spoke to the head of Quantitative
Speaker 1: Strategies and Northern Trust Assets. His name is Michael hunts Deed.
Speaker 1: What he told me is that besides factor which is
Speaker 1: you know, betting on small caps, it's not dead. It's
Speaker 1: just that it's an incredibly long cycle. I think it's
Speaker 1: around eight years, and his research meaning that you could
Speaker 1: be underperforming for eight years, but if you stick it
Speaker 1: out over the long term, it actually still works out.
Speaker 1: So of course, the problem for most people, especially if
Speaker 1: you're a fun manager and then needs to get paid,
Speaker 1: is that most people don't have that kind of patience.
Speaker 1: But if you do, um, you know, the academic research
Speaker 1: indicates that exposure to small caps should still out perform
Speaker 1: over the long one. I gotta say, this is the
Speaker 1: kind of story that just you know, Jill, it just
Speaker 1: makes the market even more interesting as we try to
Speaker 1: figure out kind of what happens next. Yeah, I mean,
Speaker 1: it's like to me, it's like that great buy and
Speaker 1: hold lesson Like if you if you can seriously like
Speaker 1: buy and holding. It might be might be worth thinking about. Yeah, absolutely,
Speaker 1: all right. It's a great story on the Bloomberg one
Speaker 1: of the most read, and not surprisingly, it's in the
Speaker 1: upcoming edition of Bloomberg Business Week, so find it online
Speaker 1: or pick up the magazine when it's out later this week.
Speaker 1: Justina Lee joining us from London. Joel Webber, the editor
Speaker 1: of Bloomberg Business Week, joining us from Brooklyn. I'm brooom
Speaker 1: journal now, but you let me drive. Oh no, no, no no, no, honey, please,
Speaker 1: I'll do the riding drivel. I want to drive, Just drive, baby.
Speaker 1: The question dry This is the drive to the globe.
Speaker 1: Give me thanks. We'll drying us down on Bloomberg Radio.
Speaker 1: It is time for the drive to the clothes. Just
Speaker 1: got about fifteen minutes left in today's trading day. Calm
Speaker 1: us along with Jason Kelly. Back with us is Alan Zaffron.
Speaker 1: He is founding partner in co CEO at I e
Speaker 1: Q Capital, joining us on the phone from Foster City, California. Allen,
Speaker 1: good to have you here with us. How's it all
Speaker 1: going well, I'll tell you what, it's beautiful weather out here.
Speaker 1: Home sheltering is a badly got eightygree weather in sunshine,
Speaker 1: so it isn't all bad in California. Are people still
Speaker 1: sheltering though, with that kind of weather? They are? And
Speaker 1: if you're listening to Mayor London Breed in San Francisco
Speaker 1: and you're in the six counties around surrounding San Francisco,
Speaker 1: you're sheltering at least through the end of May. So
Speaker 1: California has a, um, you know, a tighter lockdown possibly
Speaker 1: than other parts of the country. And we'll see the
Speaker 1: long run whether that was prudent or not, both from
Speaker 1: a health as well as an economic perspective. But the
Speaker 1: rules are the rules, and that's the way we're in
Speaker 1: California and Northern California currently. And so what do you
Speaker 1: make of it? I mean, as a longtime businessman, you know,
Speaker 1: someone who's watching both the markets, but obviously has watched
Speaker 1: the rise of Silicon Valley and and just the economic
Speaker 1: boom that you've seen there in Northern California. Obviously it's
Speaker 1: a balance Alan, But but I do I wonder what
Speaker 1: do you make of it? I may convit it's it's
Speaker 1: fraught with challenges. Uh, clearly, it's a negative economically, clearly
Speaker 1: it's a positive from a healthcare perspective. UM, the reality
Speaker 1: is we probably were not built to handle a massive
Speaker 1: amount of emergency UH cases heading into hospitals. We would
Speaker 1: have been overwhelmed. UM. It's easier look in retrospect and
Speaker 1: think we should have acted sooner. We didn't. In the
Speaker 1: absence of doing that, we had to take some action steps.
Speaker 1: The question will obviously be was the cure worse than
Speaker 1: the disease? Not entirely sure. It's very clear that there's
Speaker 1: been significant economic damage that's gonna last years, not weeks,
Speaker 1: not months, years, and so that's the sad part of
Speaker 1: this is you're gonna see a tremendous amount of economic damage.
Speaker 1: And the worst part of this, Jason and Carrol, the
Speaker 1: inequity between the wealthy and those that don't have has
Speaker 1: only been exacerbated by this crisis. Let's get back to
Speaker 1: Alan Zaffron founding partner a co CEO over at I
Speaker 1: e Q Capital, on the phone from Foster City, California. Ellen,
Speaker 1: what do you what do you think so far of UM?
Speaker 1: We can debate a lot about how long it took
Speaker 1: and you know whether the you know, the shutdown will
Speaker 1: hurt us more in the long term. Um, there's lots
Speaker 1: to be said, lots of criticism about what we did wrong,
Speaker 1: and there are things certainly that folks have h done right. UM,
Speaker 1: But I do wonder about the AID that's coming because
Speaker 1: that's really important, and that's the kind of forward looking
Speaker 1: story about how we get through this and how do
Speaker 1: we look on the other side of the virus. So far,
Speaker 1: so good. Um, so far, so good. But if you
Speaker 1: think of it this way, AID can only do so much.
Speaker 1: It's almost like there's four things that have to get
Speaker 1: done because you really have a medical crisis. So you
Speaker 1: can you can lower rate to zero like the said did,
Speaker 1: and that helps. That doesn't solve a virus problem. You
Speaker 1: can have the subtle government throw money the individuals who
Speaker 1: are unemployed, and that doesn't stop a virus problem. So
Speaker 1: ultimately it's helpful fills the whole from some of the
Speaker 1: unemployment gaps and lack of economic activity when of small
Speaker 1: businesses are shut down in America. But the until we
Speaker 1: get a solution for the problem, you're still going to
Speaker 1: end up in a world of volatility and uncertain and
Speaker 1: until someone has a clear cut vaccine with being widely distributable,
Speaker 1: it's a fools errand to think that the volatility has
Speaker 1: suddenly gone away. Don't be fooled by the last week.
Speaker 1: We're not out of the water yet. It's still gonna
Speaker 1: be tough, right and and that's clearly true, Alan, for
Speaker 1: anyone who's looking this with a clear eye. And yet
Speaker 1: I take a look at the actually want to bring
Speaker 1: you one headline related to your state, California reporting one thousand,
Speaker 1: seventy six new COVID cases fifty four deaths uh in
Speaker 1: the last twenty four hours. I believe that's a tick
Speaker 1: up maybe from yesterday. So we'll bring you more details
Speaker 1: on that. That of course coming uh from California Governor
Speaker 1: Gavin Newsom. He's giving his daily update over the last hour.
Speaker 1: So what I was gonna say, Alan, is in terms
Speaker 1: of valuations, and we've been talking about this over the
Speaker 1: last couple days, especially because it's a to a a big
Speaker 1: tech week. Uh, You've got the NASDAC that I'm looking at.
Speaker 1: My Bloomberg termament right now is down less than four
Speaker 1: percent for the entire year, So things aren't necessarily cheap
Speaker 1: right now. Yeah, you've hit the nail on the head.
Speaker 1: I haven't. I can't tell how many questions the last
Speaker 1: week I've had about I can't believe how come this
Speaker 1: market's going up? Um. The indexes are hiding the weakness.
Speaker 1: The NASDAC is reasonably flat for the year. UM, the
Speaker 1: SMP is down a ten percent for there but small
Speaker 1: caps are down. It's because defense is what used to
Speaker 1: be high BATA to no longer bid a large cap
Speaker 1: growth businesses that aren't as reliant on basic economic activity.
Speaker 1: You don't need people visiting you with the low contact sports,
Speaker 1: so to speak. Those are the businesses that have been
Speaker 1: working in this economy and probably will continue to in
Speaker 1: the low growth environment. So the sp and the NASDAC
Speaker 1: are in a way hiding the broader main street economic weakness,
Speaker 1: and that is where the any is rotating. And until
Speaker 1: there's greater symbolance of a reflationary economy, which could be
Speaker 1: several years away. Large camp us centric large camp growth
Speaker 1: seems to be the place where there's more steady growth,
Speaker 1: and all things equal, ironically, it's a safer place to
Speaker 1: put your equity camp, right, and the companies that we
Speaker 1: can probably bank on and get through all of this.
Speaker 1: Ultimately on the other side of it, are you putting
Speaker 1: would you suggest Alan, that's still it's a time to
Speaker 1: kind of pick up um some names, certainly in the
Speaker 1: equity universe. Um, there are some opportunities out there. Or
Speaker 1: do you feel like those easy gains, the bounces off
Speaker 1: the low that's already been been done. Yeah, I think
Speaker 1: the trains left the station on the easy games. Um.
Speaker 1: It always makes sense if you're a long term investor,
Speaker 1: be dollar cost averaging. However, it's it's a world of
Speaker 1: low growth. You want to stick with franchises, strong balance sheets,
Speaker 1: and the ability to grow earnings regardless of a very
Speaker 1: slow economic environment. So don't get caught in a value trap.
Speaker 1: Just because there's a high dividend doesn't mean it's going
Speaker 1: to stay at high dividend, nor does it mean that
Speaker 1: businesses will be able to generate the cash flows to
Speaker 1: pay that dividend. Focus on quality, quality, quality right now.
Speaker 1: Make sure you know the franchises and sectors you're buying into.
Speaker 1: There's a reason healthcare and tech for the best performing
Speaker 1: sectors here, because that's where the secular growth is now
Speaker 1: and going forward. I feel like that's I was just
Speaker 1: gonna say, I feel like that's going to be our
Speaker 1: new world order. Healthcare and tech. Yeah, yeah, secular growth. Um.
Speaker 1: So Alan talked to us about real estate. I feel
Speaker 1: like this is going to be one of the big
Speaker 1: questions that we are talking about for some time to come,
Speaker 1: not just from an investment perspective, but from the perspective
Speaker 1: of how do we consume real estate, how do we
Speaker 1: use it both residentially and commercially. We had Kent Swigg
Speaker 1: on our program last week. He obviously has invested heavily,
Speaker 1: especially on the coast in San Francisco near you, and
Speaker 1: in New York City here near us. We also have
Speaker 1: these big questions around our big company is going to
Speaker 1: take less realist state more real estate, What does social
Speaker 1: distancing look like? What is the new workplace look like?
Speaker 1: And I do wonder, especially given your history of advising
Speaker 1: a number of wealthy families over the years, real estate
Speaker 1: has always been a pretty comfortable place for folks, right, Yeah,
Speaker 1: it really has because it's got, you know, very tacticfficient
Speaker 1: mechanism to deliver income. And I think it's very clear, Um,
Speaker 1: there have been some secular changes, and the secular changes
Speaker 1: are first and foremost. There is going to be a
Speaker 1: shift in work behavior going forward. It's clear not everybody's
Speaker 1: going to jump back to the office as frequently. On
Speaker 1: the one that, I kind of like that because will
Speaker 1: be less traffic driving to and from the office. On
Speaker 1: the other hand, so I'm an owner of an office building, um,
Speaker 1: I think my buyers now my renters are going to
Speaker 1: have more buying powers, does need less demand for office
Speaker 1: So there's definitely going to be some valuation discount, probably
Speaker 1: other than an exceptionally high quality office in that major
Speaker 1: metropolitan cities. Secondarily, I would argue that industrial properties, core
Speaker 1: industrial probably has actually gone in value the notion of
Speaker 1: delivering with more goods and services to more consumers going forward.
Speaker 1: If you're a warehouse provided for a target Walmart, you know, Amazon,
Speaker 1: it's gonna be a good thing. So there's winners and losers.
Speaker 1: I think the place that's really complicated not retail. It's
Speaker 1: pretty clear that that's an over retailed environment. Will have
Speaker 1: to refigure it out. But its apartments, which has traditionally
Speaker 1: been a very safe environment. You know, if we're in
Speaker 1: a world where renters are given a free pass to
Speaker 1: pay rent, possibly for very good reason, I don't know
Speaker 1: if that makes the landlord feel very good, and I
Speaker 1: don't know who's culpable in the back end, and so
Speaker 1: there is going to be, at least in the short run,
Speaker 1: some discount evaluations on basic conventional apartment buildings because what
Speaker 1: was once perceived to be an exceptionally low risk income
Speaker 1: stry and you know, is arguably a little more risk.
Speaker 1: It depends on what kind of apartment property and what location.
Speaker 1: All Right, we're gonna leave it. They're great to catch
Speaker 1: up with you. Thanks for be impatient with us as
Speaker 1: we jumped around. We really appreciate Alan's affron founding partner
Speaker 1: co c of I e Q Capital on the phone
Speaker 1: from northern California. Thanks for listening to Bloomberg Business Week.
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