1 00:00:02,640 --> 00:00:05,320 Speaker 1: Welcome to the Bloomberg Penl podcast. I'm Paul swing you. 2 00:00:05,360 --> 00:00:07,680 Speaker 1: Along with my co host Lisa Brahma Waits. Each day 3 00:00:07,720 --> 00:00:10,240 Speaker 1: we bring you the most noteworthy and useful interviews for 4 00:00:10,280 --> 00:00:12,520 Speaker 1: you and your money. Whether at the grocery store or 5 00:00:12,560 --> 00:00:15,440 Speaker 1: the trading floor. Find a Bloomberg Penl podcast on Apple 6 00:00:15,520 --> 00:00:17,960 Speaker 1: podcast or wherever you listen to podcasts, as well as 7 00:00:17,960 --> 00:00:21,560 Speaker 1: at Bloomberg dot com. One of the hardest hit areas 8 00:00:21,760 --> 00:00:24,919 Speaker 1: of this pandemic has been the airline sector, with a 9 00:00:25,000 --> 00:00:28,000 Speaker 1: number of air companies going to the government and getting 10 00:00:28,160 --> 00:00:31,600 Speaker 1: Bailout's unclear though how much longer that will sustain them, 11 00:00:31,680 --> 00:00:35,879 Speaker 1: especially if air traffic and people taking flights does not 12 00:00:36,200 --> 00:00:38,919 Speaker 1: increase dramatically. Joining us now, I'm so glad to say, 13 00:00:39,000 --> 00:00:42,280 Speaker 1: is George Ferguson. He is senior Aerospace, Defense and Airlines 14 00:00:42,320 --> 00:00:45,559 Speaker 1: analyst for Bloomberg Intelligence. And George, you came out with 15 00:00:45,640 --> 00:00:48,600 Speaker 1: a research report saying that you don't expect the air 16 00:00:48,640 --> 00:00:53,840 Speaker 1: traffic to increase to two nineteen levels for another five years. 17 00:00:53,880 --> 00:00:57,640 Speaker 1: Can you explain? Yes? So thanks for having me. We 18 00:00:57,960 --> 00:01:01,120 Speaker 1: were we took a look at previous down turns and 19 00:01:01,240 --> 00:01:03,120 Speaker 1: just wanted to get a sense for how long it 20 00:01:03,160 --> 00:01:06,920 Speaker 1: takes to recover back to the total level of flying 21 00:01:07,840 --> 00:01:10,319 Speaker 1: before that downturn. So we looked at September eleven, and 22 00:01:10,360 --> 00:01:13,319 Speaker 1: we looked at the financial crisis, and we saw in 23 00:01:13,400 --> 00:01:16,760 Speaker 1: both cases, um, it was it was a number of 24 00:01:16,840 --> 00:01:20,520 Speaker 1: years until you recovered back to the level you had 25 00:01:20,560 --> 00:01:24,800 Speaker 1: seen again just before that, just before that downturn, and 26 00:01:24,880 --> 00:01:28,320 Speaker 1: so um, you know, we really think that this is 27 00:01:28,360 --> 00:01:31,520 Speaker 1: going to be even worse right than September eleventh or 28 00:01:32,200 --> 00:01:35,520 Speaker 1: the financial crisis. For example, the US airlines at parked 29 00:01:35,560 --> 00:01:39,919 Speaker 1: some three thousand airplanes at this point close to the fleet. 30 00:01:40,400 --> 00:01:42,479 Speaker 1: They got nowhere near there. I think we were less 31 00:01:42,480 --> 00:01:45,440 Speaker 1: than a thousand and September eleventh, um. And I think 32 00:01:45,440 --> 00:01:48,600 Speaker 1: the recovery after September eleventh and the financial crisis were 33 00:01:48,600 --> 00:01:50,960 Speaker 1: a lot easier because in one you had to pop 34 00:01:51,040 --> 00:01:53,280 Speaker 1: up banks and the others you had to just improve 35 00:01:53,320 --> 00:01:58,680 Speaker 1: security procedures. So we think you're into before we see 36 00:01:59,320 --> 00:02:02,320 Speaker 1: twenty nine teen level of flying. It doesn't mean airlines 37 00:02:02,360 --> 00:02:05,000 Speaker 1: can't make money before then they can. They'll have to 38 00:02:05,040 --> 00:02:07,480 Speaker 1: swim down to the market size. But we think it'll 39 00:02:07,480 --> 00:02:09,480 Speaker 1: take that long for us to get back to the 40 00:02:09,560 --> 00:02:12,560 Speaker 1: level of flying. We're doing well, George, I can give 41 00:02:12,600 --> 00:02:15,440 Speaker 1: you a primary research data point here. I'm writing the 42 00:02:15,440 --> 00:02:18,720 Speaker 1: flight path of Newark Airport and there's literally nothing in 43 00:02:18,720 --> 00:02:22,360 Speaker 1: the air right here, so that the planes aren't flying. 44 00:02:22,639 --> 00:02:24,799 Speaker 1: So you mentioned that we've got a lot of these 45 00:02:24,800 --> 00:02:28,480 Speaker 1: planes just parked on the ground. How quickly can the 46 00:02:28,520 --> 00:02:32,280 Speaker 1: industry ramp up to meet demand if and when or 47 00:02:32,320 --> 00:02:35,079 Speaker 1: when it does come back. So I think it's it's 48 00:02:35,080 --> 00:02:37,760 Speaker 1: all dependent. All depends on how quickly you get that 49 00:02:37,840 --> 00:02:39,880 Speaker 1: demand to come back. Right A lot of these airplanes 50 00:02:40,320 --> 00:02:43,160 Speaker 1: are sitting on the ground at airports around the world. 51 00:02:43,480 --> 00:02:46,280 Speaker 1: In a lot of cases they've shut down, uh you know, 52 00:02:46,360 --> 00:02:49,160 Speaker 1: runways and just parked them there. And so if we 53 00:02:49,240 --> 00:02:52,400 Speaker 1: got a nice rebound by the back part of the year, 54 00:02:52,919 --> 00:02:55,840 Speaker 1: and we're starting to see airlines try to get that schedule, 55 00:02:56,400 --> 00:02:58,639 Speaker 1: increase that level of schedule so they can figure out 56 00:02:58,680 --> 00:03:01,320 Speaker 1: if that rebound can come. If we get a rebound 57 00:03:01,320 --> 00:03:02,480 Speaker 1: by the end of the year, you get a lot 58 00:03:02,520 --> 00:03:05,400 Speaker 1: of those airplanes right off the tarmax and get them 59 00:03:05,400 --> 00:03:08,560 Speaker 1: back into the air as we push into one. If 60 00:03:08,600 --> 00:03:12,040 Speaker 1: we don't get a recovery, and and at Boomberg cantet 61 00:03:12,160 --> 00:03:13,799 Speaker 1: Is we're not we don't. We don't really see a 62 00:03:13,880 --> 00:03:16,480 Speaker 1: recovery until we get a vaccine, and we don't see 63 00:03:16,480 --> 00:03:18,840 Speaker 1: that into next year. If we don't get that kind 64 00:03:18,840 --> 00:03:22,679 Speaker 1: of recovery the next year and it's mediocre, a bunch 65 00:03:22,720 --> 00:03:25,280 Speaker 1: of airplanes are gonna get torn down. And as those 66 00:03:25,320 --> 00:03:29,720 Speaker 1: airplanes get torn down, it obviously takes capacity away. Um 67 00:03:29,760 --> 00:03:32,040 Speaker 1: And look with the Airbus and Bowing, we're producing at 68 00:03:32,160 --> 00:03:34,920 Speaker 1: levels a lot lower than they were producing right before 69 00:03:35,000 --> 00:03:38,040 Speaker 1: the downturn, going how the MAX problems, but sort of 70 00:03:38,080 --> 00:03:40,440 Speaker 1: ignoring the MAX problems, we think that they're not going 71 00:03:40,480 --> 00:03:42,760 Speaker 1: to be building that sixty and fifty seven a month 72 00:03:43,720 --> 00:03:47,840 Speaker 1: our body airplanes for a while, but they could spring 73 00:03:47,880 --> 00:03:50,360 Speaker 1: back pretty quickly given that they've already been to that level. 74 00:03:51,080 --> 00:03:54,120 Speaker 1: Um and supply the industry with airplanes. I don't think 75 00:03:54,120 --> 00:03:56,920 Speaker 1: that's going to be the problem. Okay, George, you're saying 76 00:03:56,960 --> 00:03:59,920 Speaker 1: that you've got airlines that are going to be tearing 77 00:04:00,080 --> 00:04:05,760 Speaker 1: down airplanes. You have Boeing, etcetera. Not producing airplanes. Meanwhile, 78 00:04:05,800 --> 00:04:08,680 Speaker 1: you've got the big air companies cutting capacity in the 79 00:04:08,720 --> 00:04:14,520 Speaker 1: United States by seventy four percent going forward. I'm just wondering, 80 00:04:14,520 --> 00:04:16,040 Speaker 1: are we're gonna be paying a lot more if we 81 00:04:16,080 --> 00:04:18,120 Speaker 1: want to fly, and many fewer people are trying to 82 00:04:18,120 --> 00:04:21,880 Speaker 1: be flying just for the foreseeable future. Yeah, so we 83 00:04:22,000 --> 00:04:25,560 Speaker 1: see some of that speculation in the marketplace, and I 84 00:04:25,600 --> 00:04:28,920 Speaker 1: find it interesting. I think if you have to increase 85 00:04:29,120 --> 00:04:32,720 Speaker 1: the distance that people sit from each other on an airplane, 86 00:04:33,360 --> 00:04:35,400 Speaker 1: you're going to have to see an increase in fares 87 00:04:35,400 --> 00:04:37,800 Speaker 1: in order for airlines to make money at that level. 88 00:04:38,320 --> 00:04:40,520 Speaker 1: But before I think you get to that level, the 89 00:04:40,520 --> 00:04:42,479 Speaker 1: problem you have in the interim is there's a lot 90 00:04:42,480 --> 00:04:46,479 Speaker 1: of capacity, and so usually when there's a lot of capacity, 91 00:04:46,800 --> 00:04:49,240 Speaker 1: there's a bit of a market share battle, and so 92 00:04:49,279 --> 00:04:52,120 Speaker 1: I think airlines would not be able to command the 93 00:04:52,160 --> 00:04:55,680 Speaker 1: prices they need, probably even a break even with more 94 00:04:55,760 --> 00:04:59,400 Speaker 1: social distancing on airplanes. Longer term, I think if there's 95 00:04:59,440 --> 00:05:02,599 Speaker 1: no cure for coronavirus, if we're in this for a 96 00:05:02,640 --> 00:05:05,960 Speaker 1: longer haul, I think you could see that increased costs 97 00:05:06,000 --> 00:05:10,080 Speaker 1: as as the industry slimmed down, cut the numbers seats available, 98 00:05:10,360 --> 00:05:13,239 Speaker 1: and then went out and charged the appropriate fare given 99 00:05:13,240 --> 00:05:15,800 Speaker 1: the distance you occupied on the airplane. You know, Georgia, 100 00:05:15,839 --> 00:05:18,200 Speaker 1: I'm glad that you went to the competition standpoint. I'm 101 00:05:18,200 --> 00:05:21,040 Speaker 1: struck by United Air, which is trying to raise money 102 00:05:21,120 --> 00:05:23,200 Speaker 1: right now in the high bond market and struggling to 103 00:05:23,200 --> 00:05:27,040 Speaker 1: do so. It's offering eleven percent yields for short term 104 00:05:27,080 --> 00:05:31,040 Speaker 1: financing three to five year financing, and nobody is buying. 105 00:05:31,040 --> 00:05:33,440 Speaker 1: Are a very few people are buying because they're saying, 106 00:05:33,680 --> 00:05:35,440 Speaker 1: what are you gonna look like on the other side 107 00:05:35,440 --> 00:05:37,839 Speaker 1: of this? I mean, how much are we going to 108 00:05:37,920 --> 00:05:41,159 Speaker 1: see bankruptcies or companies just go out of business if 109 00:05:41,200 --> 00:05:46,719 Speaker 1: they can't compete at a time of such strained finances? Yeah, So, 110 00:05:47,640 --> 00:05:51,279 Speaker 1: you know, we think, we think that most of the 111 00:05:51,400 --> 00:05:54,480 Speaker 1: US carriers, I think all the carriers, actually the big ones, 112 00:05:54,520 --> 00:05:58,320 Speaker 1: are fine until the end of this government's support program. 113 00:05:58,400 --> 00:06:01,240 Speaker 1: And so I think if United else in this financing, 114 00:06:01,960 --> 00:06:05,880 Speaker 1: they always have treasury financing that they can go after UM, 115 00:06:05,920 --> 00:06:07,479 Speaker 1: and I think that they just want to avoid it 116 00:06:07,560 --> 00:06:09,480 Speaker 1: right now because they don't want to have that limitation 117 00:06:09,520 --> 00:06:15,680 Speaker 1: on share buybacks and dividends and probably even UM executive compensation. 118 00:06:15,720 --> 00:06:18,320 Speaker 1: But they're not going to probably say that to US UM. 119 00:06:18,360 --> 00:06:20,560 Speaker 1: And you know, so what we're seeing in the marketplaces, 120 00:06:20,560 --> 00:06:22,760 Speaker 1: I'm trying to get this bond deal done, and the 121 00:06:22,839 --> 00:06:26,120 Speaker 1: noises we've heard from the marketplaces. At the collateral package 122 00:06:26,120 --> 00:06:28,920 Speaker 1: inside that is some is older airplanes that just aren't 123 00:06:28,960 --> 00:06:33,160 Speaker 1: that desirable, right, And so I really think it's an 124 00:06:33,160 --> 00:06:37,480 Speaker 1: indicator for some of the airlines, and the big ones. 125 00:06:37,520 --> 00:06:41,960 Speaker 1: I think Delta, American United are in that package. They're 126 00:06:42,000 --> 00:06:44,960 Speaker 1: coming to the end of what they have that they 127 00:06:44,960 --> 00:06:49,279 Speaker 1: can collateralize to get more, to take down more debt 128 00:06:49,360 --> 00:06:51,880 Speaker 1: and get more cash. And so again, if we get 129 00:06:51,920 --> 00:06:57,080 Speaker 1: to the end of the year, demand has it proved dramatically, Um, 130 00:06:57,160 --> 00:06:59,320 Speaker 1: they're going to need more money to survive. I think 131 00:06:59,320 --> 00:07:01,040 Speaker 1: the US government gonna have to think about whether or 132 00:07:01,080 --> 00:07:05,080 Speaker 1: not they want to continue to support these airlines if 133 00:07:05,120 --> 00:07:07,000 Speaker 1: there's no demand in the marketplace, because they just can't 134 00:07:07,080 --> 00:07:09,800 Speaker 1: keep burning this level of cash and even going out 135 00:07:09,800 --> 00:07:12,400 Speaker 1: and issuing debt to get more cash. That's not a 136 00:07:12,520 --> 00:07:16,320 Speaker 1: viable a serve option, you know, over a course of 137 00:07:16,320 --> 00:07:18,240 Speaker 1: a year or something like that. So I think that's 138 00:07:18,240 --> 00:07:20,040 Speaker 1: gonna be a it's going to be a big question 139 00:07:20,080 --> 00:07:23,080 Speaker 1: we're gonna have come fourth quarter, George, Are we learning 140 00:07:23,080 --> 00:07:27,320 Speaker 1: anything from China as that economy begins to open up 141 00:07:27,360 --> 00:07:29,640 Speaker 1: in terms of kind of how consumers are coming back 142 00:07:29,640 --> 00:07:35,000 Speaker 1: in air traffic. Yeah, so we're watching China closely and 143 00:07:35,680 --> 00:07:38,360 Speaker 1: in the report we put out today, Yeah, you know, 144 00:07:38,600 --> 00:07:42,360 Speaker 1: their schedules are down. There's so actually a little bit 145 00:07:42,440 --> 00:07:45,600 Speaker 1: less than that. This one compared to last year, significantly 146 00:07:45,640 --> 00:07:49,160 Speaker 1: better than we've seen out of Europe and the US. 147 00:07:49,200 --> 00:07:53,280 Speaker 1: Europe is still down some almost nine schedules are actually 148 00:07:53,320 --> 00:08:00,000 Speaker 1: seats in the marketplace are and US seventy plus we're approaches. Um. 149 00:08:00,080 --> 00:08:03,520 Speaker 1: The Chinese bounce back looked a lot better than the 150 00:08:03,680 --> 00:08:07,000 Speaker 1: bounce back we're getting out of Europe and the US. 151 00:08:07,600 --> 00:08:09,560 Speaker 1: And one of the challenges we have is we're measuring 152 00:08:09,600 --> 00:08:12,680 Speaker 1: seats in the marketplace and we don't know load factors 153 00:08:12,880 --> 00:08:16,200 Speaker 1: and so so we suspect a lot of these Chinese 154 00:08:16,200 --> 00:08:18,560 Speaker 1: carriers are stayed on entities and they're going to survive 155 00:08:18,680 --> 00:08:22,240 Speaker 1: no matter what. We suspect. The load factors might be 156 00:08:22,440 --> 00:08:25,720 Speaker 1: very very low on some of those flights. But the 157 00:08:25,760 --> 00:08:29,679 Speaker 1: bounce back does look a bit better um than the 158 00:08:29,680 --> 00:08:31,800 Speaker 1: the US and Europe. And look at this could be 159 00:08:31,800 --> 00:08:35,560 Speaker 1: because um, you know, they're quarantining was better and they're 160 00:08:35,559 --> 00:08:38,400 Speaker 1: starting to spring back. We've seen some stuff in Hong 161 00:08:38,520 --> 00:08:42,520 Speaker 1: Kong that makes us believe they're quarantining and social distancing 162 00:08:42,600 --> 00:08:45,000 Speaker 1: was better, and they're measuring of people in contact with 163 00:08:45,040 --> 00:08:48,240 Speaker 1: other people was better. So you might see in economies 164 00:08:48,240 --> 00:08:51,320 Speaker 1: where you can really lock them down harder, you might 165 00:08:51,320 --> 00:08:54,960 Speaker 1: see spring back sooner. George Ferguson, who are speaking to 166 00:08:55,080 --> 00:08:57,720 Speaker 1: right now, is senior Aerospace, Defense and Airlines analyst for 167 00:08:57,760 --> 00:09:00,480 Speaker 1: Bloomberg Intelligence. George, I want to go back to something 168 00:09:00,520 --> 00:09:02,920 Speaker 1: that you're talking about, and it goes to corporate governance. 169 00:09:03,040 --> 00:09:05,680 Speaker 1: There has been a lot of questions about corporate governance 170 00:09:05,840 --> 00:09:09,760 Speaker 1: some of the US airlines after the massive stock repurchases 171 00:09:09,960 --> 00:09:13,040 Speaker 1: and dividends paid out with the money borrowed over the 172 00:09:13,080 --> 00:09:16,040 Speaker 1: recent years. And you're saying, if I heard you correctly, 173 00:09:16,840 --> 00:09:20,640 Speaker 1: that United Airlines does not want to tap the federal 174 00:09:20,640 --> 00:09:24,520 Speaker 1: reserve program because it doesn't want to be limited by 175 00:09:24,520 --> 00:09:27,960 Speaker 1: buying back stocks or limited in how much it can 176 00:09:28,000 --> 00:09:30,960 Speaker 1: compensate its executives going forward. So it's willing to pile 177 00:09:31,000 --> 00:09:34,320 Speaker 1: on more leverage with eleven percent yields in order to 178 00:09:34,360 --> 00:09:38,079 Speaker 1: avoid that. Is that correct? So that, I mean, that's 179 00:09:38,080 --> 00:09:40,160 Speaker 1: our take in the situation right now is they would 180 00:09:40,200 --> 00:09:44,080 Speaker 1: prefer not to take the government loan. And look, actually, 181 00:09:44,480 --> 00:09:47,120 Speaker 1: you know I shouldn't be you know, maybe I shouldn't 182 00:09:47,120 --> 00:09:50,440 Speaker 1: be just so aggressive because the terms of it's okay, 183 00:09:50,480 --> 00:09:52,920 Speaker 1: it's just shocking to me. Go ahead, be as aggressive 184 00:09:52,920 --> 00:09:56,040 Speaker 1: as he's like. The Remember that the terms of the 185 00:09:56,080 --> 00:09:59,760 Speaker 1: government loan programs say that they can't have money, if 186 00:10:00,000 --> 00:10:02,440 Speaker 1: eliable in the marketplace for them to take the money 187 00:10:02,440 --> 00:10:04,920 Speaker 1: from the government, and like I take at nine or 188 00:10:04,920 --> 00:10:08,520 Speaker 1: ten percent with a collateral package behind it. I think 189 00:10:08,600 --> 00:10:10,880 Speaker 1: that that means that there's not that money available to 190 00:10:10,920 --> 00:10:13,400 Speaker 1: them in the marketplace. But yes, I think they would 191 00:10:13,480 --> 00:10:16,760 Speaker 1: prefer to have much more flexibility coming out of US. 192 00:10:16,800 --> 00:10:19,160 Speaker 1: I think that's one of the reasons Boeing passed on 193 00:10:19,640 --> 00:10:23,720 Speaker 1: the on the loan program initially. Georgie, I guess the 194 00:10:23,760 --> 00:10:25,839 Speaker 1: question is one of the questions obviously right now is 195 00:10:25,840 --> 00:10:27,880 Speaker 1: is there are there any major airlines that are really 196 00:10:27,960 --> 00:10:30,560 Speaker 1: at risk that there might need to be a government bailout? 197 00:10:32,320 --> 00:10:34,679 Speaker 1: UH in the US, I don't think so. I think 198 00:10:34,720 --> 00:10:38,480 Speaker 1: for the next couple of quarters, I think they're they're okay, 199 00:10:38,520 --> 00:10:41,000 Speaker 1: and they're they're all trying to sort of bridge finances 200 00:10:41,240 --> 00:10:45,760 Speaker 1: well into twenty one. So I think for right now 201 00:10:45,760 --> 00:10:47,920 Speaker 1: we're okay in the US. We haven't seen the same 202 00:10:47,960 --> 00:10:51,240 Speaker 1: response globally and We've seen some failures. Virginal Australia is 203 00:10:51,320 --> 00:10:53,920 Speaker 1: one UM and so I think in those countries we 204 00:10:53,960 --> 00:10:55,560 Speaker 1: are not getting that response. You're going to see those 205 00:10:55,559 --> 00:11:01,160 Speaker 1: failures first. This is a trade information on time. We 206 00:11:01,160 --> 00:11:04,319 Speaker 1: were just talking about the transformational nature of the work 207 00:11:04,400 --> 00:11:07,680 Speaker 1: from home experiment. There is a question, as Paul raised, 208 00:11:08,080 --> 00:11:11,439 Speaker 1: about the nature of big cities going forward, the popularity 209 00:11:11,480 --> 00:11:15,880 Speaker 1: they're in, as well as the risk reward dynamic of 210 00:11:15,960 --> 00:11:18,599 Speaker 1: owning a home. Joining us now Logan Motor Shop, a 211 00:11:18,720 --> 00:11:22,120 Speaker 1: senior loan officer at a MC lending, and a contributed 212 00:11:22,160 --> 00:11:25,800 Speaker 1: to housing wire Logan. A real question here, especially as 213 00:11:25,840 --> 00:11:30,640 Speaker 1: mortgage rates drop on the average but increase for larger 214 00:11:30,720 --> 00:11:34,720 Speaker 1: loan amounts based on concerns that banks have. Are you 215 00:11:34,880 --> 00:11:38,960 Speaker 1: seeing demand drop drop off precipitously in the most densely 216 00:11:39,280 --> 00:11:45,880 Speaker 1: concentrated urban areas well. We had about five straight weeks 217 00:11:45,920 --> 00:11:50,160 Speaker 1: of decline you purchase application UH and the last two 218 00:11:50,200 --> 00:11:56,520 Speaker 1: weeks increase. So and credit the initial typing of credit 219 00:11:56,559 --> 00:11:59,160 Speaker 1: that we saw with higher mortgage rates and nonqu and 220 00:11:59,240 --> 00:12:02,080 Speaker 1: loans going out of business, we're starting to see just 221 00:12:02,200 --> 00:12:05,280 Speaker 1: a little bit of light in terms of their bringing 222 00:12:05,360 --> 00:12:09,360 Speaker 1: some of the credit standards down. So again, if you 223 00:12:09,400 --> 00:12:11,360 Speaker 1: have a job, if you make money, if you have 224 00:12:11,400 --> 00:12:13,960 Speaker 1: a down payment, you can get alone. Because Spreading and 225 00:12:13,960 --> 00:12:17,280 Speaker 1: Fannie are still working. They they were never taking public 226 00:12:17,679 --> 00:12:20,600 Speaker 1: So the system is there. It's just that credit is 227 00:12:20,720 --> 00:12:23,800 Speaker 1: tightening as it should. We have had thirty three and 228 00:12:23,840 --> 00:12:26,160 Speaker 1: a half million jobless claims, you know, that's how the 229 00:12:26,200 --> 00:12:30,400 Speaker 1: game works. When you have risk out there for defaults, 230 00:12:30,559 --> 00:12:36,360 Speaker 1: credits should get tighter. But reasonably speaking, it's not. It's 231 00:12:36,360 --> 00:12:38,600 Speaker 1: not like two thousand and eight where we have got 232 00:12:38,640 --> 00:12:43,960 Speaker 1: all these uh credit bubbles of over leverage homeowners and 233 00:12:44,000 --> 00:12:46,960 Speaker 1: then home prices crashing. If home prices were falling would 234 00:12:46,960 --> 00:12:50,240 Speaker 1: be much different. So I think as as tight as 235 00:12:50,240 --> 00:12:53,640 Speaker 1: the credit standards have gotten, it's very reasonable in a 236 00:12:53,880 --> 00:12:58,080 Speaker 1: in a cycle where lending standards were very reasonable. So logan, 237 00:12:58,200 --> 00:13:00,920 Speaker 1: has there been in any of the fiscal stimulant provisions 238 00:13:01,000 --> 00:13:03,800 Speaker 1: for residential mortgage market or do you expect any in 239 00:13:03,840 --> 00:13:07,240 Speaker 1: the future. Well, they're trying to deal with this forbearance issue, 240 00:13:07,280 --> 00:13:10,120 Speaker 1: and the first estimates, you know, some people are thinking 241 00:13:10,160 --> 00:13:12,200 Speaker 1: it's only gonna be a million loans that are forbearance. 242 00:13:12,520 --> 00:13:15,880 Speaker 1: It could get up seven eight, you know, twelve fifty million, 243 00:13:16,320 --> 00:13:20,520 Speaker 1: so the market has to deal with that, but pretty 244 00:13:20,600 --> 00:13:24,200 Speaker 1: much outside of that, it's traditional thirty year fixed loan 245 00:13:24,320 --> 00:13:26,679 Speaker 1: if you have if you're working and you have a 246 00:13:26,720 --> 00:13:28,440 Speaker 1: down payment, you can get a loan. I think that 247 00:13:28,640 --> 00:13:31,800 Speaker 1: is part of the aspect of purchased applications ran in 248 00:13:31,840 --> 00:13:35,760 Speaker 1: the last two weeks. Uh So I think it's not 249 00:13:35,920 --> 00:13:38,240 Speaker 1: as bad as it seems. What we've seen is lower 250 00:13:38,280 --> 00:13:40,520 Speaker 1: FICO score fh A loans are kind of out of 251 00:13:40,559 --> 00:13:43,000 Speaker 1: the mix that they weren't that big of the marketplace anyway. 252 00:13:43,400 --> 00:13:46,480 Speaker 1: These high jumbo loans you know, for these homes over 253 00:13:46,520 --> 00:13:48,359 Speaker 1: a million, which is not that big of a marketplace, 254 00:13:48,720 --> 00:13:51,440 Speaker 1: that's been hit. Cash out loans of pricing has been hit, 255 00:13:51,520 --> 00:13:54,920 Speaker 1: so that loan, that product is as not as popular anymore, 256 00:13:55,360 --> 00:13:57,840 Speaker 1: and then the home equity lines some lenders are taking 257 00:13:57,880 --> 00:14:01,120 Speaker 1: that up. I think that's all fine in this kind 258 00:14:01,120 --> 00:14:03,280 Speaker 1: of environment. That's what you should see. We had the 259 00:14:03,280 --> 00:14:06,480 Speaker 1: best loan profile, you know, in the longest job expansion ever, 260 00:14:06,520 --> 00:14:09,920 Speaker 1: and we're doing what should be done to mitigate risk. 261 00:14:10,200 --> 00:14:14,240 Speaker 1: And as long as home prices don't fall in this force, 262 00:14:14,280 --> 00:14:17,920 Speaker 1: of which they shouldn't, then uh, this is as tight 263 00:14:17,920 --> 00:14:20,680 Speaker 1: as you're going to see and then if economy reopens 264 00:14:20,720 --> 00:14:24,160 Speaker 1: again and jobless claims start to fall, credit will loosen 265 00:14:24,240 --> 00:14:26,320 Speaker 1: up a little bit. And but we we we've had 266 00:14:26,560 --> 00:14:30,120 Speaker 1: really vanilla standards for ten years, so we should just 267 00:14:30,160 --> 00:14:33,360 Speaker 1: be going back to that once jobless claims fall and 268 00:14:33,440 --> 00:14:35,320 Speaker 1: you know, you see some of economic data get better, 269 00:14:35,320 --> 00:14:37,840 Speaker 1: because then the risk starts to go away. Look, and 270 00:14:37,960 --> 00:14:41,840 Speaker 1: you say, the only thing is if housing prices fall precipitously, 271 00:14:42,680 --> 00:14:46,160 Speaker 1: that doesn't seem to be happening on average around the country, 272 00:14:46,160 --> 00:14:50,280 Speaker 1: with actually home prices increasing reflecting the lack of supply 273 00:14:50,440 --> 00:14:53,480 Speaker 1: that people aren't putting their homes on the market during 274 00:14:53,480 --> 00:14:56,680 Speaker 1: this period. Again, though I go back and I sound 275 00:14:56,720 --> 00:14:58,960 Speaker 1: like a broken record, I know, But in some of 276 00:14:59,000 --> 00:15:02,840 Speaker 1: the urban area is I'm talking about coastal cities that's 277 00:15:03,200 --> 00:15:05,480 Speaker 1: huge run ups and prices of some of the real 278 00:15:05,640 --> 00:15:08,880 Speaker 1: estate and great building booms. Are we going to see 279 00:15:08,880 --> 00:15:12,360 Speaker 1: precipitous price declines there, not only because of people losing 280 00:15:12,400 --> 00:15:15,760 Speaker 1: their jobs, but because of a shift away from urban centers. 281 00:15:17,560 --> 00:15:22,400 Speaker 1: When we look at the unemployment rate today is people 282 00:15:22,440 --> 00:15:25,560 Speaker 1: without a high school education, It's like eight point four 283 00:15:25,600 --> 00:15:29,200 Speaker 1: percent for college educated Americans. People that own homes in 284 00:15:29,280 --> 00:15:33,000 Speaker 1: that bracket typically have a lot of leverster pull. This 285 00:15:33,040 --> 00:15:35,280 Speaker 1: isn't like they don't have a credible vants, fixed slow 286 00:15:35,360 --> 00:15:39,320 Speaker 1: death products and next of equities. So uh, we should 287 00:15:39,320 --> 00:15:43,720 Speaker 1: be worrying about renters more than than coastal high end areas. Now, 288 00:15:44,040 --> 00:15:46,040 Speaker 1: of course, it's going to take a lot longer to 289 00:15:46,080 --> 00:15:48,440 Speaker 1: sell those homes. That's I think that's the thing is 290 00:15:48,480 --> 00:15:50,320 Speaker 1: that it's not like it used to be. These homes 291 00:15:50,360 --> 00:15:54,440 Speaker 1: always took longer to sell over time. If things don't 292 00:15:54,480 --> 00:15:57,880 Speaker 1: get better, prices will come down. Because I refer right now, 293 00:15:58,120 --> 00:16:00,680 Speaker 1: what we're seeing is we're seeing decline in sales and 294 00:16:00,680 --> 00:16:04,760 Speaker 1: we're seeing declining listings, and and that could only go 295 00:16:04,880 --> 00:16:07,520 Speaker 1: for so much longer because once you reopen the economy, 296 00:16:07,880 --> 00:16:09,520 Speaker 1: more people are going to put their homes on the 297 00:16:09,520 --> 00:16:12,360 Speaker 1: market to sell. I don't know how much we're gonna 298 00:16:12,440 --> 00:16:15,760 Speaker 1: see the higher end homes, but if if it continues 299 00:16:15,840 --> 00:16:17,920 Speaker 1: with what the middle and lower end homes are gonna be, 300 00:16:18,000 --> 00:16:20,560 Speaker 1: you're gonna see more listings come out. And there's where 301 00:16:20,600 --> 00:16:24,400 Speaker 1: you're gonna see your UH price decreases out there. But 302 00:16:24,480 --> 00:16:28,320 Speaker 1: for right now, UH, listings are down, sales are down 303 00:16:28,520 --> 00:16:30,680 Speaker 1: because nobody why would you put your home in the 304 00:16:30,760 --> 00:16:33,080 Speaker 1: market in this kind of viruent. You want to wait 305 00:16:33,120 --> 00:16:35,960 Speaker 1: till lockdown protocols are taken off, then we'll then we'll see. 306 00:16:36,320 --> 00:16:40,160 Speaker 1: I'm kind of telling everybody wait until July see the 307 00:16:40,240 --> 00:16:44,000 Speaker 1: June existing home sales market, because right now sellers are 308 00:16:44,000 --> 00:16:46,880 Speaker 1: preventing any kind of natural flow of supply in a 309 00:16:47,240 --> 00:16:50,320 Speaker 1: in a recessionary environment. Maybe they do that for the 310 00:16:50,360 --> 00:16:53,040 Speaker 1: rest of the year, but at some point people do 311 00:16:53,160 --> 00:16:54,600 Speaker 1: need to sell their homes. So I think we need 312 00:16:54,640 --> 00:16:56,920 Speaker 1: to be a little bit patient on the housing data 313 00:16:57,000 --> 00:16:59,240 Speaker 1: to make kind of any assumptions on the higher end 314 00:16:59,680 --> 00:17:02,240 Speaker 1: home out there, because it's it's one of these things 315 00:17:02,240 --> 00:17:06,919 Speaker 1: where the homeowner, unlike two thousand eight, doesn't need to 316 00:17:06,920 --> 00:17:09,320 Speaker 1: sell their homes, and I think that's the thing that 317 00:17:09,359 --> 00:17:11,920 Speaker 1: people are missing out on the housing market. Just real 318 00:17:12,000 --> 00:17:15,040 Speaker 1: quick here, Logan, I'm wondering you said renters are the 319 00:17:15,080 --> 00:17:18,800 Speaker 1: real point of concern JP Morgan's asset management arm. Today 320 00:17:18,920 --> 00:17:22,040 Speaker 1: it released a statement that they were increasing it's bet 321 00:17:22,080 --> 00:17:25,080 Speaker 1: on single family rental homes more than doubling the size 322 00:17:25,080 --> 00:17:27,480 Speaker 1: of a joint venture with Landlord American Homes for Rent. 323 00:17:27,520 --> 00:17:31,000 Speaker 1: I'm just wondering what is the fate of rental properties 324 00:17:31,080 --> 00:17:33,720 Speaker 1: at a time when so many people are in uncertain 325 00:17:33,760 --> 00:17:36,879 Speaker 1: circumstances with respect to their wages. You know what, I 326 00:17:37,280 --> 00:17:42,480 Speaker 1: think that type of UH investment UH JP Morgan is 327 00:17:42,520 --> 00:17:47,000 Speaker 1: doing is still predicated to college educated or skilled wages. 328 00:17:47,280 --> 00:17:49,600 Speaker 1: When I talk about the rental deflation, I'm talking people 329 00:17:49,600 --> 00:17:52,119 Speaker 1: that were struggling with rents all the way through the 330 00:17:52,200 --> 00:17:55,280 Speaker 1: expansion and all of a sudden this happened. And you know, 331 00:17:55,400 --> 00:17:59,800 Speaker 1: whatever the number is or not paying rent, those people 332 00:17:59,800 --> 00:18:02,200 Speaker 1: are not the single family renters. They're never going to 333 00:18:02,280 --> 00:18:06,360 Speaker 1: be home buyers. That's the stress market because typically those 334 00:18:06,400 --> 00:18:08,080 Speaker 1: are low wage jobs and a lot of these are 335 00:18:08,160 --> 00:18:12,440 Speaker 1: dual renters and even one household. So UH, that investment 336 00:18:12,440 --> 00:18:14,960 Speaker 1: I think will keep on going for time and time 337 00:18:15,000 --> 00:18:18,440 Speaker 1: again just because there's certain people that can afford bigger homes, 338 00:18:18,440 --> 00:18:21,479 Speaker 1: so they rent. And I think that investment is prudent 339 00:18:21,600 --> 00:18:24,439 Speaker 1: for JP Morgan going out for decades because in some 340 00:18:24,520 --> 00:18:27,399 Speaker 1: of these areas, you really have to make money. You 341 00:18:27,640 --> 00:18:30,399 Speaker 1: to three hundred thousand dollars at least to be owning 342 00:18:30,400 --> 00:18:33,040 Speaker 1: homes in some of these areas. So if you make 343 00:18:33,080 --> 00:18:36,320 Speaker 1: a hundred or hundred twenty thousand renting might not be 344 00:18:36,359 --> 00:18:39,000 Speaker 1: a bad choice to you. I understand that investment that 345 00:18:39,080 --> 00:18:41,440 Speaker 1: JP Morgan is making. I just think that we need 346 00:18:41,480 --> 00:18:44,760 Speaker 1: to separate the distress renters from the kind of the 347 00:18:44,840 --> 00:18:48,280 Speaker 1: hug midileval too higher wage rental housseles. Logan, thanks so 348 00:18:48,359 --> 00:18:50,880 Speaker 1: much for joining us. We appreciate it as always. Logan 349 00:18:50,960 --> 00:18:54,200 Speaker 1: Multi Shami, senior loan officer for a MC lending group, 350 00:18:54,240 --> 00:18:56,600 Speaker 1: also a columnist for The Housing Wire, getting an update 351 00:18:57,200 --> 00:19:00,359 Speaker 1: on the housing market and the mortgage mark get in 352 00:19:00,400 --> 00:19:05,399 Speaker 1: the US facing unprecedented UH pressure here as thirty million 353 00:19:05,440 --> 00:19:09,040 Speaker 1: Americans since the beginning of pandemic have lost their jobs. 354 00:19:09,240 --> 00:19:15,000 Speaker 1: We'll have more. This is Bloomberg. You're listening to Bloomberg 355 00:19:15,080 --> 00:19:20,040 Speaker 1: Markets with Lisa Ramo, Eds and Paul Sweeney on Bloomberg Radio. Well, 356 00:19:20,080 --> 00:19:23,240 Speaker 1: with more and more people working from home and making 357 00:19:23,400 --> 00:19:27,040 Speaker 1: all the necessary accommodations, a question starting to pop up 358 00:19:27,040 --> 00:19:29,359 Speaker 1: with what does it mean for the traditional office, the 359 00:19:29,400 --> 00:19:33,520 Speaker 1: traditional office space and will people make changes going forward. 360 00:19:33,720 --> 00:19:35,400 Speaker 1: To get a sense of kind of where that how 361 00:19:35,440 --> 00:19:38,199 Speaker 1: that might play out, we welcome Tom Stringer. Tom's corporate 362 00:19:38,240 --> 00:19:42,560 Speaker 1: real Estate Advisory Managing director Site selection and incentives for 363 00:19:42,600 --> 00:19:45,359 Speaker 1: the firm b DO located in New York City. Tom, 364 00:19:45,359 --> 00:19:47,800 Speaker 1: thanks so much for joining us here. You know, are 365 00:19:47,840 --> 00:19:51,280 Speaker 1: we Is this going to change how the workplace of 366 00:19:51,320 --> 00:19:53,160 Speaker 1: the future looks. Am I going to ever get back 367 00:19:53,160 --> 00:19:55,679 Speaker 1: on a train, come into the city, hike up to 368 00:19:55,720 --> 00:19:58,480 Speaker 1: my skyscraper or is work from home kind of going 369 00:19:58,560 --> 00:20:02,080 Speaker 1: to be something for the future. Well, good morning of 370 00:20:02,160 --> 00:20:05,440 Speaker 1: both of you, and thanks for having me and and unfortunately, 371 00:20:05,520 --> 00:20:08,320 Speaker 1: if you're a commuter in the New York City like myself, yes, 372 00:20:08,359 --> 00:20:10,400 Speaker 1: I think we will both be slugging it out through 373 00:20:10,440 --> 00:20:14,680 Speaker 1: Penn Station. Again. I don't think the corporate office environment 374 00:20:14,800 --> 00:20:17,960 Speaker 1: is is going away entirely, but I certainly think that 375 00:20:18,000 --> 00:20:20,520 Speaker 1: there's some changes that are being discussed. You know, in 376 00:20:20,560 --> 00:20:23,840 Speaker 1: the last couple of years, we've certainly seen the matriculation 377 00:20:23,880 --> 00:20:28,320 Speaker 1: to the open office concept, you know, lower depth collaborative areas, 378 00:20:28,760 --> 00:20:33,000 Speaker 1: um a lot of cafeterian conference room space. Well, we're 379 00:20:33,440 --> 00:20:37,040 Speaker 1: seeing right now are discussions towards really kind of backing 380 00:20:37,119 --> 00:20:39,320 Speaker 1: up a little bit towards more office space that might 381 00:20:39,359 --> 00:20:41,879 Speaker 1: be a little more familiar to to those who started 382 00:20:41,920 --> 00:20:44,639 Speaker 1: working in the eighties or nineties, where you're seeing maybe 383 00:20:45,119 --> 00:20:50,520 Speaker 1: higher cubicles kind of taking hold again, that's being discussed 384 00:20:50,560 --> 00:20:54,600 Speaker 1: more private offices, smaller than than previously, but more private offices. 385 00:20:54,680 --> 00:20:59,080 Speaker 1: So you're certainly seeing those discussions around how do we 386 00:20:59,200 --> 00:21:02,920 Speaker 1: change the actual physical environment the workflow in the office 387 00:21:03,359 --> 00:21:06,080 Speaker 1: such that we can get people back. Um. But you know, 388 00:21:06,080 --> 00:21:08,160 Speaker 1: the one thing I would also mention is that will 389 00:21:08,200 --> 00:21:13,280 Speaker 1: probably have smaller offices meaning total square footage, because the 390 00:21:13,600 --> 00:21:16,560 Speaker 1: work from home experiment that's taken place over the last 391 00:21:16,840 --> 00:21:20,440 Speaker 1: six to eight weeks quite frankly been amazing I think 392 00:21:20,440 --> 00:21:22,919 Speaker 1: in corporate America and for for governmental workers that have 393 00:21:23,000 --> 00:21:25,439 Speaker 1: done it, and it's been pretty seamless. Also, I mean 394 00:21:25,480 --> 00:21:28,680 Speaker 1: we've all gotten used to you know, uh, family members 395 00:21:28,760 --> 00:21:31,840 Speaker 1: or pats walking in a zoom conference calls and it's uh, 396 00:21:32,000 --> 00:21:34,359 Speaker 1: it's kind of acceptable now, which is nice and fun. 397 00:21:34,480 --> 00:21:36,840 Speaker 1: But if you look at the cost savings right from 398 00:21:36,840 --> 00:21:39,320 Speaker 1: a corporate real estate standpoint on the back side of this, 399 00:21:40,200 --> 00:21:42,239 Speaker 1: that's gonna be substantial, and that's going to be a 400 00:21:42,240 --> 00:21:44,760 Speaker 1: factor that really takes takes hold as well. How do 401 00:21:44,800 --> 00:21:48,520 Speaker 1: we reduce our footprinted to accommodate for this incredible transformation 402 00:21:48,560 --> 00:21:51,960 Speaker 1: that we've seen. Tom, I will just say, uh, saying 403 00:21:51,960 --> 00:21:54,760 Speaker 1: that it's been pretty seamless. I think feels a little 404 00:21:54,760 --> 00:21:57,199 Speaker 1: bit dissonant for anyone who's homeschooling their children at home 405 00:21:57,240 --> 00:22:01,040 Speaker 1: will also trying to manage a job. Just saying theoretically 406 00:22:01,160 --> 00:22:04,800 Speaker 1: that that that's me maybe isn't exactly the description that 407 00:22:04,840 --> 00:22:08,520 Speaker 1: I would say, but I'll leave it there. I will say, Tom, 408 00:22:08,560 --> 00:22:11,720 Speaker 1: there is a question going forward of the calculations by 409 00:22:11,800 --> 00:22:18,160 Speaker 1: businesses with the cost savings of office space with productivity concerns, 410 00:22:18,200 --> 00:22:21,720 Speaker 1: the idea that having people together generates ideas, and that 411 00:22:21,800 --> 00:22:25,199 Speaker 1: there's a certain motivation that comes from the camaraderie of 412 00:22:25,400 --> 00:22:28,359 Speaker 1: a workplace. How do you sort of square that. Are 413 00:22:28,400 --> 00:22:32,280 Speaker 1: there studies or anything scientific to look at to make 414 00:22:32,320 --> 00:22:37,240 Speaker 1: that determination? Well, I see your first point about homeschooling children, 415 00:22:37,240 --> 00:22:39,080 Speaker 1: and I certainly feel your pain on that, But I 416 00:22:39,200 --> 00:22:44,359 Speaker 1: won't say I have the greatest VC of I in 417 00:22:44,520 --> 00:22:47,520 Speaker 1: history helping me through this process, which is my thirteen 418 00:22:47,600 --> 00:22:50,480 Speaker 1: year old daughter. She seems to have gotten zoom and 419 00:22:50,800 --> 00:22:54,400 Speaker 1: connectivity repeatedly for me during the course of the last 420 00:22:54,440 --> 00:22:58,800 Speaker 1: few weeks. You're asking are you paying her? The allowance 421 00:22:58,840 --> 00:23:01,639 Speaker 1: has gone up? Yeah? Significant? All right, there you go. 422 00:23:02,960 --> 00:23:05,639 Speaker 1: Benefits are there? There is Yeah, there is a cost 423 00:23:05,680 --> 00:23:09,440 Speaker 1: associated with it. I guess, uh, but you're asking a 424 00:23:09,520 --> 00:23:11,760 Speaker 1: really good question, are there any kind of tangible hard 425 00:23:11,840 --> 00:23:14,320 Speaker 1: data studies right now? And And the answer to that 426 00:23:14,440 --> 00:23:16,639 Speaker 1: is no, we're looking at this all. Really, this is 427 00:23:16,680 --> 00:23:18,960 Speaker 1: a live lab experiment that we're all looking at in 428 00:23:19,040 --> 00:23:23,720 Speaker 1: real time. But you can tell quite frankly in terms 429 00:23:23,760 --> 00:23:27,120 Speaker 1: of you know, office closures that have taken place and shutdowns. 430 00:23:27,200 --> 00:23:29,760 Speaker 1: You know, you can forecast out well what really is 431 00:23:29,840 --> 00:23:33,040 Speaker 1: necessary maybe on a corporate headquarters campus versus what is 432 00:23:33,119 --> 00:23:37,840 Speaker 1: not so so those kind of arithmetic and discussions are 433 00:23:37,840 --> 00:23:40,320 Speaker 1: really going on right now in in in real time. 434 00:23:41,600 --> 00:23:44,040 Speaker 1: So Tom, just quickly here. I mean, are we going 435 00:23:44,080 --> 00:23:47,879 Speaker 1: to see a migration of corporations from densely populated urban 436 00:23:47,920 --> 00:23:52,399 Speaker 1: areas to perhaps less densely populated, uh, suburban areas as 437 00:23:52,400 --> 00:23:55,560 Speaker 1: a result of this pandemic? That's the quest of the 438 00:23:55,560 --> 00:23:58,199 Speaker 1: burden question in economic development right now. You know, for 439 00:23:58,359 --> 00:24:00,720 Speaker 1: years you've had this kind of we'll call suburban or 440 00:24:00,800 --> 00:24:03,679 Speaker 1: rural and urbans by where the city's really had had 441 00:24:03,720 --> 00:24:05,960 Speaker 1: attracted so much in terms of young talent, in terms 442 00:24:05,960 --> 00:24:10,159 Speaker 1: of corporate focus and headquarters really going back downtown. You know, 443 00:24:10,760 --> 00:24:12,840 Speaker 1: folks on the sidelines of that. For the last cent 444 00:24:12,880 --> 00:24:15,240 Speaker 1: of fifteen years have been looking at this thing. You know, 445 00:24:15,320 --> 00:24:18,320 Speaker 1: is this our opportunity to to recast the argument to 446 00:24:18,440 --> 00:24:21,880 Speaker 1: some extent, And that may be the case. Um, will 447 00:24:21,920 --> 00:24:24,919 Speaker 1: it be entirely No. I think cities offer really some 448 00:24:25,080 --> 00:24:30,280 Speaker 1: unique value combinations, some unique returns on investment. But may 449 00:24:30,359 --> 00:24:33,120 Speaker 1: the presence that they have in those cities be as 450 00:24:33,240 --> 00:24:35,600 Speaker 1: debt be as intense. Are we gonna have a hundred 451 00:24:35,640 --> 00:24:38,680 Speaker 1: thousand square feet or maybe can we have some back 452 00:24:38,760 --> 00:24:43,600 Speaker 1: office just for some you know, emergency related issues. Um, 453 00:24:43,680 --> 00:24:46,439 Speaker 1: it's also provide some cost related savings. You know, this 454 00:24:46,560 --> 00:24:49,400 Speaker 1: was kicked around a lot after nine eleven and never 455 00:24:49,480 --> 00:24:53,199 Speaker 1: really came to fruition. I mean effectively the pandemic from 456 00:24:53,200 --> 00:24:56,600 Speaker 1: an economic standpoint nine eleven everywhere in the corporate real 457 00:24:56,720 --> 00:24:59,040 Speaker 1: estate world. So I think it will have a more 458 00:24:59,080 --> 00:25:01,600 Speaker 1: profound impact where they start to look at do we 459 00:25:01,640 --> 00:25:04,520 Speaker 1: need that type of concentration if do we need it 460 00:25:04,560 --> 00:25:07,760 Speaker 1: at a hundred ten dollars a square foot versus being 461 00:25:07,840 --> 00:25:11,040 Speaker 1: able to kind of separate our offices a little bit, 462 00:25:11,040 --> 00:25:14,560 Speaker 1: and maybe also at a layer of security for employees. 463 00:25:15,320 --> 00:25:17,199 Speaker 1: Tom Stringer, thank you so much for being with us. 464 00:25:17,240 --> 00:25:20,879 Speaker 1: Tom Stringer, Corporate real Estate Advisory Managing Director and Site 465 00:25:20,960 --> 00:25:24,680 Speaker 1: Selection and Incentives at b d O, helping companies decide 466 00:25:25,000 --> 00:25:28,920 Speaker 1: whether or not to invest in that office. The question 467 00:25:29,080 --> 00:25:31,880 Speaker 1: getting that much harder now that the work from home 468 00:25:31,880 --> 00:25:35,720 Speaker 1: experiment has come back with some positive results for certain companies. 469 00:25:37,240 --> 00:25:40,760 Speaker 1: This is Bloomberg Markets with Lisa Ramo, Weeds and Paul's 470 00:25:40,760 --> 00:25:45,520 Speaker 1: Wheeney on Bloomberg Radio. A decade of jobs lost in 471 00:25:45,680 --> 00:25:49,639 Speaker 1: one month. The question now is, after the worst economic 472 00:25:49,720 --> 00:25:52,560 Speaker 1: report in history having to do with the US jobs, 473 00:25:52,560 --> 00:25:54,439 Speaker 1: how do we move forward and joining us now to 474 00:25:54,480 --> 00:25:58,520 Speaker 1: talk about that? As Lindsay Pigs, chief economist at Stephle Lindsay, 475 00:25:58,760 --> 00:26:01,840 Speaker 1: this was a horrible, horrid It was expected to be bad. 476 00:26:01,920 --> 00:26:04,760 Speaker 1: It was perhaps not quite as horrible as people expected, 477 00:26:04,840 --> 00:26:09,479 Speaker 1: yet still confirmed a catastrophic loss in the jobs market. 478 00:26:09,680 --> 00:26:12,240 Speaker 1: What caught try when you looked under the hood of 479 00:26:12,280 --> 00:26:15,600 Speaker 1: the headline numbers here, Well, you're exactly right. The headline 480 00:26:15,640 --> 00:26:18,119 Speaker 1: was pretty much expected. The market was bracing for a 481 00:26:18,200 --> 00:26:22,480 Speaker 1: very devastating report, but nevertheless it's still is a reminder 482 00:26:22,560 --> 00:26:24,959 Speaker 1: of the devastating impact of the policies that have been 483 00:26:25,000 --> 00:26:28,760 Speaker 1: put in place to contain COVID nineteen essentially shutting down 484 00:26:29,000 --> 00:26:32,080 Speaker 1: entire sectors of the economy, and that really is the 485 00:26:32,160 --> 00:26:35,960 Speaker 1: most startling part of this report. You're seeing widespread losses 486 00:26:36,320 --> 00:26:39,280 Speaker 1: across a number of different categories. Now, early on, we 487 00:26:39,320 --> 00:26:43,399 Speaker 1: saw these job losses hit predominantly the hospitality sector. We 488 00:26:43,480 --> 00:26:47,240 Speaker 1: saw restaurants being closed, hotels being closed. But what we've 489 00:26:47,240 --> 00:26:50,040 Speaker 1: seen now is the second wave of layoffs coming through 490 00:26:50,040 --> 00:26:53,320 Speaker 1: the economy, hitting those that we thought were were effectively 491 00:26:53,359 --> 00:26:57,440 Speaker 1: able to work from home, so lawyers, government employees, even 492 00:26:57,480 --> 00:26:59,920 Speaker 1: healthcare workers, at least those not on the front line. 493 00:27:00,160 --> 00:27:02,800 Speaker 1: So what we're seeing is that the impacts of these 494 00:27:02,800 --> 00:27:06,800 Speaker 1: policies shutting down the economy, forcing businesses to close, workers 495 00:27:06,800 --> 00:27:10,080 Speaker 1: to stay at home, have really hit every corner of 496 00:27:10,119 --> 00:27:13,280 Speaker 1: the economy. So lindsay, I'm thinking about some of the 497 00:27:13,280 --> 00:27:16,440 Speaker 1: small and mid sized businesses getting hit here. I mean, 498 00:27:16,960 --> 00:27:18,720 Speaker 1: as you think about it, and a lot of those 499 00:27:18,720 --> 00:27:22,240 Speaker 1: companies are not laying off people, they're literally closing. And 500 00:27:22,240 --> 00:27:25,600 Speaker 1: so try to gauge what percentage of these You know, 501 00:27:25,600 --> 00:27:27,760 Speaker 1: more than twenty million people that lost their jobs in 502 00:27:27,920 --> 00:27:31,199 Speaker 1: April will actually come back on the other side of 503 00:27:31,200 --> 00:27:33,520 Speaker 1: this year. How do you think about that? It's a 504 00:27:33,560 --> 00:27:35,520 Speaker 1: good question. We saw that the Chamber of Commerce come 505 00:27:35,520 --> 00:27:37,879 Speaker 1: out and say about twenty five businesses have closed their 506 00:27:37,920 --> 00:27:40,639 Speaker 1: doors at least temporarily. But that report came out in 507 00:27:40,680 --> 00:27:43,000 Speaker 1: early April, and it was based on the expectation that 508 00:27:43,080 --> 00:27:47,119 Speaker 1: the economy would be back open within the coming days, 509 00:27:47,480 --> 00:27:50,399 Speaker 1: if not weeks. And so what we see now is 510 00:27:50,440 --> 00:27:53,160 Speaker 1: with many states still with those at home or stay 511 00:27:53,160 --> 00:27:55,320 Speaker 1: at home orders in place through the end of the month, 512 00:27:55,800 --> 00:27:58,440 Speaker 1: many of these businesses who thought they were just temporarily 513 00:27:58,520 --> 00:28:02,280 Speaker 1: closing are going to be as to permanently close their doors. 514 00:28:02,320 --> 00:28:05,040 Speaker 1: So there still is a lot of optimism that jobs 515 00:28:05,080 --> 00:28:08,280 Speaker 1: will come back in some absolutely will, but even the 516 00:28:08,320 --> 00:28:10,919 Speaker 1: businesses that are able to reopen are going to be 517 00:28:10,960 --> 00:28:15,000 Speaker 1: facing a very different environment. Restaurants that reopen may only 518 00:28:15,040 --> 00:28:17,879 Speaker 1: open with twenty tables instead of forty tables, so they 519 00:28:17,920 --> 00:28:22,000 Speaker 1: need fewer wait staff. Boutiques limiting the number of people 520 00:28:22,040 --> 00:28:25,800 Speaker 1: coming in at one time may need fewer sales clerks. 521 00:28:26,080 --> 00:28:28,439 Speaker 1: So even if we are able to salvage some of 522 00:28:28,480 --> 00:28:31,760 Speaker 1: these small businesses around the country, it's likely that they're 523 00:28:31,800 --> 00:28:36,840 Speaker 1: going to reduce staff, reduce hours or both for their employees. Lindsay, 524 00:28:36,880 --> 00:28:41,280 Speaker 1: I'm struck by the widening disparity between the haves and 525 00:28:41,280 --> 00:28:45,200 Speaker 1: the have nots, with people who have lower wage jobs 526 00:28:45,280 --> 00:28:49,560 Speaker 1: suffering disproportionately, with job losses, people who do not have 527 00:28:49,680 --> 00:28:54,000 Speaker 1: college degrees suffering disproportionately. How much does this set the 528 00:28:54,120 --> 00:28:57,400 Speaker 1: nation back when it comes to those segments of the 529 00:28:57,520 --> 00:29:01,040 Speaker 1: labor force that frankly have lagged behind and in any 530 00:29:01,080 --> 00:29:06,200 Speaker 1: recent recovery from from economic downturns. Absolutely, any time you 531 00:29:06,320 --> 00:29:09,360 Speaker 1: see any type of legislation or any type of natural 532 00:29:09,560 --> 00:29:12,520 Speaker 1: scenario play out in the markets where it widens that 533 00:29:12,600 --> 00:29:16,680 Speaker 1: divide can have very negative ramifications and make it increasingly 534 00:29:16,760 --> 00:29:19,720 Speaker 1: more difficult for those at the bottom wrongs of the 535 00:29:19,800 --> 00:29:23,120 Speaker 1: labor market to claw their way back. And as we 536 00:29:23,200 --> 00:29:26,560 Speaker 1: are seeing, as I mentioned, the hospitality industry, predominantly led 537 00:29:26,600 --> 00:29:31,200 Speaker 1: by individuals with lower level paychecks, are being the hardest hit. 538 00:29:31,600 --> 00:29:34,160 Speaker 1: And of course we know that many Americans live paycheck 539 00:29:34,240 --> 00:29:37,320 Speaker 1: to paychecks, so even a loss of one or two 540 00:29:37,360 --> 00:29:43,040 Speaker 1: weeks can have very devastating financial ramifications for people in 541 00:29:43,040 --> 00:29:46,400 Speaker 1: this country. So lindsay, I mean the government in terms 542 00:29:46,400 --> 00:29:51,080 Speaker 1: of the FED easing access to capital, the fiscal stimulus 543 00:29:51,120 --> 00:29:55,160 Speaker 1: coming from Congress very very aggressive to try to fight 544 00:29:55,200 --> 00:29:57,240 Speaker 1: this thing, but it's coming out of cost. Our national 545 00:29:57,280 --> 00:30:00,280 Speaker 1: debt is near twenty five trillion dollars right now. What 546 00:30:00,320 --> 00:30:04,480 Speaker 1: the economic ramifications of our balance sheet. Oh, it's it's 547 00:30:04,600 --> 00:30:07,320 Speaker 1: very concerning. And I think on the one hand, when 548 00:30:07,360 --> 00:30:09,360 Speaker 1: we look at the pain that's happening out in the 549 00:30:09,440 --> 00:30:12,440 Speaker 1: labor market, this morning's report confirming that we do know 550 00:30:12,520 --> 00:30:14,680 Speaker 1: that the FED and the federal government had to do something. 551 00:30:14,720 --> 00:30:17,800 Speaker 1: They had to step in and take unprecedented action to 552 00:30:17,880 --> 00:30:21,600 Speaker 1: help stem the fallout from these policies. But on the 553 00:30:21,600 --> 00:30:23,640 Speaker 1: flip side, what we don't want to do is try 554 00:30:23,680 --> 00:30:27,000 Speaker 1: and bridge the near term gap but leave the economy permanently, 555 00:30:27,520 --> 00:30:32,360 Speaker 1: uh structurally impeded in terms of our productive potential going forward. 556 00:30:32,760 --> 00:30:35,200 Speaker 1: And right now, what we're seeing is very valuable savings 557 00:30:35,240 --> 00:30:38,040 Speaker 1: and resources being depleted. And it's not just at the 558 00:30:38,080 --> 00:30:42,560 Speaker 1: federal government. We're seeing that the balance sheet at individual business, 559 00:30:43,080 --> 00:30:45,840 Speaker 1: local municipalities. This is really going to leave us in 560 00:30:45,840 --> 00:30:50,840 Speaker 1: a crippled position and could actually retard growth for the 561 00:30:50,920 --> 00:30:54,960 Speaker 1: next several years. So while we're helping to stem the 562 00:30:55,000 --> 00:30:58,520 Speaker 1: pain from this short term pandemic, we could actually be 563 00:30:58,600 --> 00:31:01,240 Speaker 1: limiting the upside for the economy When we look out 564 00:31:01,280 --> 00:31:05,600 Speaker 1: to and beyond. I mean, these are massive levels of debt. 565 00:31:05,680 --> 00:31:08,280 Speaker 1: As you mentioned, we're expected to be around twenty five 566 00:31:08,360 --> 00:31:12,960 Speaker 1: trillion dollars in debt. Uh. This, this is on precedented levels. 567 00:31:12,960 --> 00:31:15,680 Speaker 1: It's hard for the average American to even digest that 568 00:31:15,840 --> 00:31:19,360 Speaker 1: level of debt. But it says essentially that for the 569 00:31:19,360 --> 00:31:22,120 Speaker 1: first time since World War Two, the US would not 570 00:31:22,160 --> 00:31:25,120 Speaker 1: be able to pay off its debt based on the 571 00:31:25,160 --> 00:31:27,840 Speaker 1: amount of production that we have in a given year. Now, 572 00:31:27,880 --> 00:31:30,360 Speaker 1: back during World War Two time, we were actually able 573 00:31:30,360 --> 00:31:33,000 Speaker 1: to grow ourselves out of this set level because as 574 00:31:33,000 --> 00:31:35,400 Speaker 1: we swapped for more time production, we were embarking on 575 00:31:35,440 --> 00:31:39,120 Speaker 1: a four and a half percent decade long expansion. This 576 00:31:39,200 --> 00:31:41,400 Speaker 1: time around, will be lucky if we even get back 577 00:31:41,440 --> 00:31:44,360 Speaker 1: to that pre Corona trend page of sub two percent. 578 00:31:44,840 --> 00:31:49,120 Speaker 1: So we're already starting from a much lower level of activity. Again, 579 00:31:49,240 --> 00:31:53,360 Speaker 1: if we see the consumer persistently constrained by financial constraints, 580 00:31:53,400 --> 00:31:56,280 Speaker 1: are concerned about their health, we could actually see the 581 00:31:56,320 --> 00:31:59,160 Speaker 1: economy stuck in around a one one and a half 582 00:31:59,160 --> 00:32:03,080 Speaker 1: percent growth rate age for the next several years. Lindsay, 583 00:32:03,080 --> 00:32:05,880 Speaker 1: thanks so much for joining us. We appreciate it. As always, 584 00:32:05,920 --> 00:32:09,240 Speaker 1: Lindsay piigsa chief econers for Steeple Financial, joining us on 585 00:32:09,280 --> 00:32:12,479 Speaker 1: the phone here. So, Lisa, there's certainly some some cost, 586 00:32:12,720 --> 00:32:17,600 Speaker 1: significant costs here to try to combat the economic effects 587 00:32:17,640 --> 00:32:20,120 Speaker 1: of the pandemic, but again they come at a pretty 588 00:32:20,120 --> 00:32:22,680 Speaker 1: significant price as well, so that it's a balancing act. 589 00:32:22,880 --> 00:32:25,520 Speaker 1: Although the interesting thing is that as the US to 590 00:32:25,520 --> 00:32:29,560 Speaker 1: devisit climbs into near record territory, it hasn't mattered at 591 00:32:29,560 --> 00:32:32,360 Speaker 1: all when it comes to the actual cost of financing 592 00:32:32,400 --> 00:32:34,320 Speaker 1: with yields at record lows in the short and the 593 00:32:34,440 --> 00:32:37,760 Speaker 1: question does it matter if the Federal Reserve basically monetize 594 00:32:37,760 --> 00:32:40,200 Speaker 1: it by buying it all? Yeah, exactly right. And we're 595 00:32:40,240 --> 00:32:42,560 Speaker 1: seeing again we've seen from the beginning of this to 596 00:32:42,640 --> 00:32:45,440 Speaker 1: FED very very aggressive here in pulling out all the 597 00:32:45,440 --> 00:32:47,560 Speaker 1: stops and trying to support the liquidity in the market. 598 00:32:47,720 --> 00:32:51,080 Speaker 1: We've had some meaningful fiscal stimulus. More to come as 599 00:32:51,120 --> 00:32:54,880 Speaker 1: the expectation over the next couple of weeks. This is Bloomberg. 600 00:32:57,040 --> 00:32:59,480 Speaker 1: Thanks for listening to the Bloomberg pan l podcast. You 601 00:32:59,480 --> 00:33:02,040 Speaker 1: can subscribe. I've been listening to interviews at Apple Podcasts 602 00:33:02,120 --> 00:33:05,080 Speaker 1: or whatever podcast platform you prefer. M Paul Sweeney, I'm 603 00:33:05,120 --> 00:33:07,840 Speaker 1: on Twitter at pt Sweeney, I'm Lisa abram Woyits I'm 604 00:33:07,840 --> 00:33:10,720 Speaker 1: on Twitter at Lisa abram Woits One. Before the podcast, 605 00:33:10,720 --> 00:33:13,360 Speaker 1: you can always catch us worldwide on'm Bloomberg Radio