WEBVTT - The Pandemic Could End Shareholder Supremacy For Good: Joe Nocera 0:00:02.640 --> 0:00:05.360 Welcome to the Bloomberg Penl Podcast. I'm Paul Swinge. You, 0:00:05.360 --> 0:00:07.680 along with my co host Lisa Brahma wus. Each day 0:00:07.720 --> 0:00:10.240 we bring you the most noteworthy and useful interviews for 0:00:10.320 --> 0:00:12.520 you and your money. Whether at the grocery store or 0:00:12.560 --> 0:00:15.480 the trading floor, find a Bloomberg Penl podcast on Apple 0:00:15.520 --> 0:00:17.959 podcast or wherever you listen to podcasts, as well as 0:00:17.960 --> 0:00:21.000 at Bloomberg dot com. There's a question of some of 0:00:21.040 --> 0:00:25.480 the permanent market shifts that will occur following this pandemic. 0:00:25.520 --> 0:00:28.280 A lot of people have been trying to understand how 0:00:28.320 --> 0:00:31.120 the world as we know it will change. Joe No Sarah, 0:00:31.480 --> 0:00:34.320 longtime columnists at The New York Times, a columnist now 0:00:34.320 --> 0:00:38.080 for Bloomberg Opinion who I deeply respect and always appreciate, 0:00:38.479 --> 0:00:41.920 wrote a fantastic column a highly recommended pandemic could end 0:00:42.000 --> 0:00:46.559 shareholders supremacy for good, talking about how a shift in 0:00:46.880 --> 0:00:51.879 the priorities of executives could change the way companies are 0:00:51.960 --> 0:00:55.160 viewed in the world to come. Jonah Sarah joins us. Now, Joe, 0:00:55.160 --> 0:00:57.600 can you talk a little bit about what the main 0:00:57.680 --> 0:01:02.720 idea here is behind your column? Yeah? I UM, My 0:01:02.800 --> 0:01:08.440 basic view is that just as we people in isolation 0:01:08.480 --> 0:01:11.120 or wherever have become nicer to each other, more generous 0:01:11.160 --> 0:01:13.959 to each other. Much the same thing is happening in 0:01:14.000 --> 0:01:18.800 corporate America UM, where executives and top executives are caring 0:01:18.840 --> 0:01:21.640 a lot more for their employees than they have in 0:01:21.680 --> 0:01:25.240 the past. UM. You know, furloughs instead of layoffs, where 0:01:25.280 --> 0:01:29.160 people get to keep healthcare UH, really trying to keep 0:01:29.200 --> 0:01:31.200 people on the payroll even though they don't have that 0:01:31.280 --> 0:01:36.440 much work to do the you know, free coronavirus testing UM, 0:01:36.520 --> 0:01:38.560 and and on and on and on and and you 0:01:38.600 --> 0:01:40.640 see this over and over and over. You you see 0:01:40.640 --> 0:01:43.520 it in in the quarterly conference calls. Now you see 0:01:43.520 --> 0:01:46.679 it in so many companies trying to do something to 0:01:47.120 --> 0:01:49.120 h to stem this virus, even if even if their 0:01:49.160 --> 0:01:52.400 business has nothing to do with medicine or health care UM. 0:01:52.480 --> 0:01:56.080 And it just made me think, boy, you know, this 0:01:56.200 --> 0:02:02.000 could signal a shift that would be good for the 0:02:02.080 --> 0:02:05.480 country and good for employees and and and you know, 0:02:05.520 --> 0:02:09.000 maybe even good for the stock ultimately. It's interesting, Joe, 0:02:09.000 --> 0:02:12.639 I guess one of the key questions is can this 0:02:12.919 --> 0:02:15.080 blast or is this just simply a function of the 0:02:15.160 --> 0:02:18.200 time we're in Well, that's what we don't know. And 0:02:18.240 --> 0:02:23.240 I certainly didn't um uh suggest that this is automatically 0:02:23.280 --> 0:02:25.520 going to happen, or this was a guarantee. It's obviously 0:02:25.560 --> 0:02:28.600 not a guarantee. UM, it's it's a little wishful thinking 0:02:28.600 --> 0:02:31.360 on my part. I'm hopeful that this could happen. You know. 0:02:31.400 --> 0:02:34.799 One of the things you've seen in America over time 0:02:34.919 --> 0:02:37.800 is that you have seen these shifts in corporate values 0:02:37.840 --> 0:02:40.120 over time. And the column that I wrote, I talked 0:02:40.120 --> 0:02:43.480 a lot about, um, the post World War two era 0:02:43.960 --> 0:02:49.600 where companies consciously hired more workers than they needed, knowing 0:02:49.919 --> 0:02:53.200 that that was important to prevent a new depression. Uh, 0:02:53.240 --> 0:02:56.360 and also to create kind of a virtuous cycle where 0:02:56.480 --> 0:02:59.960 you know, workers made products, other workers bought them, you know, 0:03:00.120 --> 0:03:03.320 and you expanded the economy. Then you got into the 0:03:04.080 --> 0:03:07.519 era of shareholder value, which really started with the bullmarket 0:03:07.520 --> 0:03:11.200 of the nineteen eighties, and you had a very different UM. 0:03:12.200 --> 0:03:15.720 You had people like Chainsaw Al Dunlap bragged about all 0:03:15.760 --> 0:03:21.720 the people he fired, you know, and UM, we are ready. 0:03:21.800 --> 0:03:23.560 I think we're as a culture. I think we're ready 0:03:23.600 --> 0:03:26.200 for something different. People are tired of the shareholder value 0:03:26.240 --> 0:03:29.080 stuff and and the damage it does to employees and 0:03:29.200 --> 0:03:32.600 consumers and and and in the country at large. Yeah, Joe, 0:03:32.639 --> 0:03:35.480 that sounds wonderful. And uh, and I would I would 0:03:35.720 --> 0:03:38.920 think that probably people would feel very happy if that 0:03:38.960 --> 0:03:41.120 were the case. I'm looking right now Bank of America's shares, 0:03:41.120 --> 0:03:43.480 they've gotten killed. And Bank of America is come one 0:03:43.480 --> 0:03:45.920 company you highlighted as is trying to do the right 0:03:45.920 --> 0:03:48.720 thing and promising no layoffs and and doing a host 0:03:48.760 --> 0:03:53.040 of other issues to try to forestall some of the uh, 0:03:53.200 --> 0:03:56.760 some of the pain throughout corporate and main street America. 0:03:57.280 --> 0:03:58.960 Do you think that shareholders are going to get on 0:03:59.000 --> 0:04:04.240 board here and basically end up sort of rewarding companies 0:04:04.240 --> 0:04:06.560 that do take the angle that you're looking at, or 0:04:06.560 --> 0:04:08.360 are they going to just say, look at the bottom line, 0:04:08.400 --> 0:04:11.120 you're not gonna make as much money for me. Well, 0:04:11.320 --> 0:04:13.480 there's going to be a giant reset in the market. 0:04:13.520 --> 0:04:15.560 I mean, there's gonna be an enormous reset. And and 0:04:15.560 --> 0:04:18.440 and yeah, Bank of America shares it down in part 0:04:18.560 --> 0:04:23.680 because its revenues were down. Like, um, you know, I 0:04:23.760 --> 0:04:27.719 think that I basically think that we could get to 0:04:27.760 --> 0:04:33.680 a point where companies basically say, you know, dear Wall Street, 0:04:33.920 --> 0:04:36.080 we're doing our best, but we've got a lot other 0:04:36.120 --> 0:04:38.479 things to worry about, and we want you to have 0:04:38.480 --> 0:04:40.560 a seat at the table, but you're not the only seat, 0:04:41.360 --> 0:04:44.520 and Wall Street is going to have to If enough 0:04:44.520 --> 0:04:46.880 companies say that, Wall Street will have to accept it. 0:04:47.279 --> 0:04:50.039 If they don't, you know, then then we're back to 0:04:50.080 --> 0:04:52.440 where we were. Yeah, So it's interesting there. As you 0:04:52.480 --> 0:04:55.919 well know, there's a movement within particularly institutional investing e 0:04:56.160 --> 0:05:01.360 s G. Environmental sustainability and governance. So even institutional shareholders 0:05:01.360 --> 0:05:03.799 are you know, have been paying more and more attention 0:05:03.880 --> 0:05:07.479 to things other than the bottom line. So perhaps this 0:05:07.600 --> 0:05:10.760 just could be, you know, a further catalyst towards that, 0:05:10.800 --> 0:05:14.360 and maybe you make e s G perhaps even more vibrant. Right, 0:05:14.400 --> 0:05:15.920 and then you have the whole thing with the Business 0:05:15.960 --> 0:05:20.159 round Table last year, UM, you know, changing its uh 0:05:20.360 --> 0:05:23.440 motto or or creed or where you want to call 0:05:23.480 --> 0:05:28.560 it UM to be more employer and consumer friendly and 0:05:28.640 --> 0:05:31.839 not as as focused on shareholders. UM. You know a 0:05:31.880 --> 0:05:34.800 lot of people thought that was this PR and exercise 0:05:34.839 --> 0:05:37.640 and PR. But if you have some movement and then 0:05:37.680 --> 0:05:40.599 all of a sudden you have this coronavirus that really 0:05:40.680 --> 0:05:43.280 changes the way people think. Maybe it can last. I'm 0:05:43.320 --> 0:05:45.520 not saying it will. I'm saying I hope it does 0:05:46.720 --> 0:05:48.760 at least, and I join you in that hope, Joe. 0:05:48.760 --> 0:05:51.560 We'll see. But I agree it seems like something profound 0:05:52.080 --> 0:05:54.440 uh is happening around the world as it relates to 0:05:54.440 --> 0:05:57.840 a coronavirus and will be lots of implications longer term, 0:05:57.839 --> 0:06:00.480 and we'll see if that applies to Corporate America's Jonas 0:06:00.480 --> 0:06:03.560 Sarah Calmness for Bloomberg Opinion, joining us on the phone 0:06:03.560 --> 0:06:05.960 from Los Angeles. Joe, thanks so much for joining so 0:06:06.000 --> 0:06:09.440 you can read all of Joe's excellent opinion pieces as 0:06:09.480 --> 0:06:12.040 well as all of the other work from Bloomberg Opinion 0:06:12.040 --> 0:06:15.159 at Bloomberg dot com, slash Opinion or O P I 0:06:15.360 --> 0:06:20.919 n Go on the terminal. They do excellent work. So 0:06:20.960 --> 0:06:23.400 there's a conundrume right now, Paul, and I keep using 0:06:23.440 --> 0:06:26.279 that word because it's very hard to understand the market 0:06:26.360 --> 0:06:29.359 right now. It's hard to understand the rally that's recouped 0:06:29.839 --> 0:06:32.320 all the gains all the losses. Rather, at least when 0:06:32.320 --> 0:06:35.400 you look at the top one hundred nasdacs shares, is 0:06:35.440 --> 0:06:37.719 it time to get in and are we pricing in now? 0:06:37.760 --> 0:06:41.120 The other side of this pandemic and the related recession 0:06:41.320 --> 0:06:43.800 or people getting ahead of themselves and only there's no 0:06:43.800 --> 0:06:46.080 one better to talk to than Chris Heisi, chief investment 0:06:46.080 --> 0:06:48.719 officer for Maryland Make of America Private Bank, as he 0:06:48.800 --> 0:06:51.960 talks with clients all day long about where what they're feeling, 0:06:52.360 --> 0:06:55.080 and there are allocations. Chris come on in and when 0:06:55.080 --> 0:06:56.919 we take a look at the rally that we've seen 0:06:57.000 --> 0:06:59.760 over the past few weeks, are people viewing this as 0:06:59.800 --> 0:07:02.640 a dead cat bouncer? Are they viewing this as the 0:07:02.760 --> 0:07:06.000 true signs of of sort of a shift in mood 0:07:06.160 --> 0:07:09.000 at least on the part of equity buyers. Yeah. I 0:07:09.040 --> 0:07:13.000 think the quick answer to that is when you're seeing 0:07:13.080 --> 0:07:16.920 volatility declined by fifty from the record levels of eight 0:07:17.080 --> 0:07:19.680 plus that we saw, which was indicating at least for 0:07:19.720 --> 0:07:24.080 equities a five to six percent swing daily back you know, 0:07:24.520 --> 0:07:28.280 during the the throes of March, now get into the 0:07:28.320 --> 0:07:31.000 mid thirties, which is indicating, you know, below a two 0:07:31.440 --> 0:07:34.480 daily swing. What that does is for the long term 0:07:35.000 --> 0:07:39.720 UH investor, it provides comfort that, um, forget the fact 0:07:39.720 --> 0:07:41.800 that whether or not you're gonna retest loads. It just 0:07:41.840 --> 0:07:46.120 provides comfort that there is a little bit more a 0:07:46.240 --> 0:07:48.960 surety that we're going to get to the other side. 0:07:49.080 --> 0:07:51.120 Like in March, people didn't think we were going to 0:07:51.240 --> 0:07:53.760 get to the other side at all. So now you've 0:07:53.800 --> 0:07:56.600 got a little bit of comfort level on the long 0:07:56.720 --> 0:07:59.720 term investor, but the short term investor, and you guys 0:07:59.760 --> 0:08:02.800 have all seen this, Uh, the positioning in the marketplace 0:08:02.920 --> 0:08:06.360 is still very very barished. And and if you're if 0:08:06.360 --> 0:08:09.560 you're someone who thinks about quarter to quarter, whether you're 0:08:09.560 --> 0:08:13.200 a hedge fund or an institutional investor, what what they're 0:08:13.240 --> 0:08:17.679 still very nervous about is this proverbial quote unquote need 0:08:18.120 --> 0:08:21.000 to test the lows. And and that's a statement that 0:08:21.080 --> 0:08:24.320 most people use because that's what's happened in history. But 0:08:24.440 --> 0:08:28.400 quite frankly, this episode, this three pronged crisis, health, financial, 0:08:28.400 --> 0:08:32.560 and economic that we're still going through is unlike anything 0:08:32.559 --> 0:08:35.960 in history. The speed of the decline is being matched 0:08:35.960 --> 0:08:40.959 by what we call the speed of the exhale rebound. So, Chris, 0:08:41.040 --> 0:08:44.640 is this just a rebound within a longer bear market 0:08:44.760 --> 0:08:47.600 or do you think that once we do get to 0:08:47.640 --> 0:08:50.000 the other side of this, And quite frankly, I'm not sure. 0:08:50.040 --> 0:08:51.679 I don't have great confidence that it's going to be 0:08:52.280 --> 0:08:55.480 you know, shorter. It just feels all the information I 0:08:55.480 --> 0:08:56.960 hear from the officials is that it could be longer 0:08:57.000 --> 0:08:58.760 than people think. But do you think once we do 0:08:58.800 --> 0:09:01.040 get to the other side, that this is a market 0:09:01.160 --> 0:09:04.920 that can still work higher. Yes, yes, there's a there's 0:09:04.960 --> 0:09:07.440 a few reasons for that. In the short term, it 0:09:07.520 --> 0:09:10.200 was about liquidity. We we got through that. Now now 0:09:10.320 --> 0:09:12.960 we call the second phase the buffer or the bridge, 0:09:13.040 --> 0:09:15.680 and that is that is where the physical stimulus is 0:09:15.720 --> 0:09:18.920 simply designed to to UM stop the ABYSS or at 0:09:19.000 --> 0:09:21.080 least cover the ABYSS that we're all going through in 0:09:21.080 --> 0:09:24.040 the second quarter and potentially part of the third. So 0:09:24.440 --> 0:09:26.840 UM investors are looking at the other side is a 0:09:26.840 --> 0:09:30.320 lot longer than the ABYSS. So that was stage one, 0:09:30.400 --> 0:09:33.600 and then stage three, which is next year, is a 0:09:33.640 --> 0:09:37.400 true economic recovery. And then stage four or phase four 0:09:37.440 --> 0:09:39.920 would be at the end of where you have a 0:09:39.960 --> 0:09:43.280 pent up demand cycle. Now it's hard to see that now, 0:09:43.880 --> 0:09:46.640 but when you look at income data in terms of 0:09:46.679 --> 0:09:50.920 the number of claims, what these programs are designed to 0:09:51.000 --> 0:09:56.040 do is still that unemployment claim gap. So even though 0:09:56.240 --> 0:09:59.400 you're you're likely to see unemployment go way up. I mean, 0:09:59.440 --> 0:10:04.960 that's pretty obvious people are getting that extra payment, so 0:10:05.000 --> 0:10:07.480 when you come out on the other side, consumer spending 0:10:07.559 --> 0:10:09.960 could actually go back to where it was, even though 0:10:10.200 --> 0:10:14.160 consumers will still be tentative. Chris, when we look at 0:10:14.280 --> 0:10:16.760 what has led some of the rebound recently, it's really 0:10:16.800 --> 0:10:19.480 been big tech, and I've been really struck by the 0:10:19.559 --> 0:10:24.600 NASDAC outperformance, with the top one hundred names out performing 0:10:24.800 --> 0:10:28.439 the Dow the most in decades. I'm trying to understand 0:10:28.640 --> 0:10:31.320 whether big tech will continue to be the leadership going forward, 0:10:31.440 --> 0:10:34.360 or whether perhaps people have hidden out too much in 0:10:34.400 --> 0:10:38.480 these sort of the havens of this cycle, and these 0:10:38.480 --> 0:10:41.839 are expected to underperform in the near term. Great point, Lisa, 0:10:41.880 --> 0:10:43.720 and I think the knee jerk reaction on a lot 0:10:43.760 --> 0:10:46.640 of part of the analysts the analyst community is going 0:10:46.679 --> 0:10:49.160 to be Hey, some of these companies are getting to 0:10:49.480 --> 0:10:53.160 multiples that are simply too high. What many analysts are 0:10:53.160 --> 0:10:57.280 not factoring in on a forward twelve, even thirty six 0:10:57.320 --> 0:11:00.559 month basis is many of these companies are now being 0:11:00.600 --> 0:11:05.680 being um their value creators, their growth creators, and actually 0:11:05.679 --> 0:11:08.040 they happen to dominate the index. So if you get 0:11:08.080 --> 0:11:11.880 passive investment flows coming back in, they filter down into 0:11:11.920 --> 0:11:14.920 these names. They also happened to be the names that 0:11:14.960 --> 0:11:19.040 are breaking through the COVID nineteen pressure, and they also 0:11:19.080 --> 0:11:21.520 happened to be the names that are creating the greatest 0:11:21.559 --> 0:11:24.520 free cash flow with yields where they're at in fixed 0:11:24.559 --> 0:11:29.240 income land, free cash flow yield is extremely attractive and 0:11:29.280 --> 0:11:32.839 equity land. So it's kind of a three pronged benefit 0:11:32.960 --> 0:11:36.080 for these companies, which is why we fully expect many 0:11:36.120 --> 0:11:38.960 of them, particularly in tech and healthcare, UH, should go 0:11:39.040 --> 0:11:41.800 to two multiples that they haven't experience in quite a 0:11:41.840 --> 0:11:44.400 long period of time. Okay, christ, so we've got some 0:11:44.440 --> 0:11:47.040 stability back in the marketplace. Is there enough stability in 0:11:47.040 --> 0:11:50.280 the marketplace to even think about emerging markets an area 0:11:50.320 --> 0:11:54.560 that's just been really, really crushed unfortunately. Now, we just 0:11:54.600 --> 0:11:57.160 downgraded emerging markets on that little bit of a bounce 0:11:57.160 --> 0:12:00.000 that we had a couple of weeks ago, the downgrade 0:12:00.040 --> 0:12:03.920 to underweight from neutral UH and then took those proceeds 0:12:03.760 --> 0:12:06.520 and moved into US large caps. And the whole reason 0:12:06.720 --> 0:12:10.800 was is because of the extreme dollar liabilities, and until 0:12:10.880 --> 0:12:14.440 the dollar goes through a very significant week cycle, those 0:12:14.480 --> 0:12:19.000 dollar liabilities, unfortunately can pressure emerging markets. At the same time, 0:12:19.600 --> 0:12:22.800 that many of them have less than than high quality 0:12:22.840 --> 0:12:25.440 health care systems. So if you put that out there, 0:12:25.640 --> 0:12:28.720 the risk reward is still to the is still on 0:12:28.760 --> 0:12:32.040 a relative basis, UH much less than than the developed 0:12:32.040 --> 0:12:35.520 markets UM and specifically the US. Is there any asset 0:12:36.040 --> 0:12:39.440 that you just would not own right now? Well, I 0:12:39.480 --> 0:12:42.359 think on the real estate side, it's it's very difficult 0:12:42.520 --> 0:12:45.960 to to suggest that UM coming out to the other 0:12:46.000 --> 0:12:49.200 side that things will be normal and and we're not 0:12:49.360 --> 0:12:53.800 significantly bearish on real estate commercial real estate in general, 0:12:54.080 --> 0:12:55.800 but it's on the watch list, and it's on the 0:12:55.840 --> 0:12:59.240 watch list for obvious reasons. What does corporate life look 0:12:59.320 --> 0:13:02.600 like UM for the foreseeable future even when we get 0:13:02.640 --> 0:13:05.080 to the other side and we have this this phrase 0:13:05.120 --> 0:13:08.679 we call the new frontier, and the new frontier UH 0:13:08.840 --> 0:13:11.280 is simply taking behaviors that we're all learning right now 0:13:11.320 --> 0:13:14.760 while we're we are during the shutdown. What type of 0:13:14.840 --> 0:13:18.640 behaviors that we're exhibiting now stands the test of time 0:13:18.679 --> 0:13:22.400 and continues even if there's vaccines. And that hits at 0:13:22.400 --> 0:13:25.520 the heart of what real estate may be pressured by, 0:13:25.559 --> 0:13:30.680 which is telecommunity, more telecommunity, less need for office space 0:13:30.760 --> 0:13:36.280 than before E everything E learning, E education, virtualization, digitalization, 0:13:36.400 --> 0:13:40.319 things like that, um, you know, and less urbanization quite frankly, 0:13:40.360 --> 0:13:42.880 so those are all things we're going through right now. Hey, Chris, 0:13:42.920 --> 0:13:45.319 thanks so much for joining us. We appreciate your commentary 0:13:45.400 --> 0:13:49.120 as always. Chris Hazy, chief investment officer for Meryl and 0:13:49.200 --> 0:13:56.239 Bank of America Private Bank. One of the most fascinating 0:13:56.280 --> 0:13:59.160 aspects to consider about this coronavirus is how it's going 0:13:59.240 --> 0:14:04.199 to impact consumers longer term. Will consumer trends be changing materially. 0:14:04.520 --> 0:14:06.839 To get some thoughts on that, we're really fortunate to 0:14:06.880 --> 0:14:09.680 welcome Mark Douglas. He's the chief executive officer of marketing 0:14:09.720 --> 0:14:12.920 firm Steelhouse based in Los Angeles. Mark, thanks much for 0:14:13.000 --> 0:14:15.880 joining us. Again, it just seems like everybody's lives has 0:14:15.920 --> 0:14:19.480 been turned upside down with quarantining, and you just can't 0:14:19.480 --> 0:14:21.880 do any of the things that you used to do 0:14:22.040 --> 0:14:25.920 back pre crisis. What what have you observed about consumer 0:14:25.960 --> 0:14:29.840 behavior over the last you know, call it four weeks, Yes, um, 0:14:29.880 --> 0:14:33.120 good morning, So things have actually changed quite a bit. 0:14:33.200 --> 0:14:35.920 There's kind of what we think of as a consumer 0:14:36.000 --> 0:14:39.160 journey that's going on, and the wayward thing that is 0:14:39.520 --> 0:14:42.880 my company Stillhouse. We're collecting data on about a billion 0:14:42.880 --> 0:14:46.320 dollars a week in consumer spending. So the first week 0:14:46.440 --> 0:14:50.280 is what you would expect. Everyone stocked up and so 0:14:50.560 --> 0:14:54.960 you know, groceries, UM, all those kinds of things really skyrocketed. 0:14:55.000 --> 0:14:58.960 Probably the most interesting thing is UM about fourteen percent 0:14:59.040 --> 0:15:02.880 more consumers two hundred and two percent more UM alcohol 0:15:02.960 --> 0:15:04.640 and wine the first week, So it kind of shows 0:15:04.680 --> 0:15:11.680 you how people are coping exactly at exactly. But the 0:15:11.720 --> 0:15:14.920 second week, UM, what sort of happened is everyone UM 0:15:14.960 --> 0:15:20.240 fitness grew by a dent week over weeks, so you know, 0:15:20.280 --> 0:15:24.840 almost tripling a money spent on fitness equipment, UM, fitness 0:15:24.920 --> 0:15:28.320 at home, UM, those kind of trends. UM. The other 0:15:28.360 --> 0:15:30.920 thing that started to happen in the second week is 0:15:30.960 --> 0:15:33.280 that other UM kind of what you would think of, 0:15:33.320 --> 0:15:36.400 like business service people started building out their home offices 0:15:37.000 --> 0:15:40.200 those kinds of things by the third in the fourth week, 0:15:40.280 --> 0:15:43.080 what has happened is there's kind of a new consumer 0:15:43.120 --> 0:15:46.160 to develop, what we're calling calling this COVID super consumer, 0:15:46.560 --> 0:15:51.200 and they are buying anything on sale furniture, UM, luxury 0:15:51.280 --> 0:15:56.160 goods UM just just like UM home. They're buying fishing equipment, 0:15:56.240 --> 0:16:00.920 golf clubs, just anything that's on sale, and and you know, 0:16:01.000 --> 0:16:04.480 so this body of consumers that feel very secure financially 0:16:04.480 --> 0:16:07.920 apparently are are like shopping like we've never seen before. 0:16:07.960 --> 0:16:09.880 We kind of stay now like every day is Black 0:16:09.920 --> 0:16:12.720 Friday for the consumers that can afford it. Wow, I 0:16:12.720 --> 0:16:16.200 didn't expect that. Um. So is there any sense, Tim, 0:16:16.400 --> 0:16:20.280 I mean, Mark, as you look forward here, um that 0:16:20.320 --> 0:16:23.520 you think some of these behavior changes might be more permanent? 0:16:23.560 --> 0:16:27.120 I'm thinking restaurants, Will people go out to restaurants as 0:16:27.200 --> 0:16:29.320 much as they used to? And I'm sure the cruise 0:16:29.360 --> 0:16:31.440 industry is trying to figure out will people ever come 0:16:31.480 --> 0:16:34.040 back on our cruise ships? And will people get into 0:16:34.560 --> 0:16:38.800 airplanes again? Is there any thought on that? Um? Yeah? 0:16:38.960 --> 0:16:41.720 Bit So, We've worked with a lot of travel industry 0:16:41.760 --> 0:16:45.120 customers and that all of them, literally one hundred percent, 0:16:45.360 --> 0:16:48.680 are now spending zero dollars on marketing at least um 0:16:48.800 --> 0:16:50.640 the ones we work with, and we work with a 0:16:50.680 --> 0:16:53.800 bunch of big ones, but we're also in conversations with them, 0:16:53.800 --> 0:16:56.800 and they are very eager to store marketing again as 0:16:56.880 --> 0:16:58.960 we start to come out that as crisis. So I 0:16:59.000 --> 0:17:02.040 think the avel industry is going to be pretty aggressive 0:17:02.080 --> 0:17:05.680 and trying to get those early consumers to start um 0:17:05.680 --> 0:17:08.920 traveling again. I think restaurants and this is a bit 0:17:08.960 --> 0:17:11.239 more of my personal opinion, not so much based on 0:17:11.280 --> 0:17:13.480 the data. Um, there was a trend at least in 0:17:13.640 --> 0:17:15.600 l A and New York to the concept of those 0:17:15.720 --> 0:17:20.600 kitchens where restaurants don't have a storefront anymore. And um, 0:17:20.840 --> 0:17:24.199 and there's a startup founded by the founder of Bouber 0:17:24.600 --> 0:17:27.520 who's got one of leading those kitchen companies. I think 0:17:27.560 --> 0:17:30.880 that is I'm betting, actually talking to someone yesterday, that 0:17:30.880 --> 0:17:34.040 that is going to take off. And restaurants are a 0:17:34.080 --> 0:17:39.640 lot of restaurants gonna become at home only, delivery only. Yeah. Yeah, 0:17:39.640 --> 0:17:41.840 I think people are getting you know, maybe getting good 0:17:42.000 --> 0:17:43.679 you know. The result of this may be getting more 0:17:43.680 --> 0:17:47.639 comfortable you know, ordering uh, from getting it delivered. How 0:17:47.640 --> 0:17:50.120 about retailers, I mean that's another industry that had been 0:17:50.200 --> 0:17:53.679 challenged going into the crisis. We know that stores have 0:17:53.720 --> 0:17:56.040 been closing and more and more shoppings going online. And 0:17:56.200 --> 0:17:59.359 I guess it seems reasonable to assume that that trend 0:17:59.400 --> 0:18:02.280 towards a line shopping will just accelerate, I guess to 0:18:02.359 --> 0:18:06.320 the benefit of Jeff Bezos. Yeah. Absolutely, the and and 0:18:06.359 --> 0:18:09.359 we're seeing in our data. So you know, the first week, 0:18:09.560 --> 0:18:12.280 you know, you had all of these categories that decline, 0:18:13.040 --> 0:18:16.720 and we're seeing that the FLNE lesson each week. So 0:18:16.720 --> 0:18:21.280 so consumers who who are in good shape financially UM 0:18:21.359 --> 0:18:24.520 are buying in the retailers are you know, they're just 0:18:24.640 --> 0:18:28.760 shifting their their their focus there. We have one customer 0:18:29.240 --> 0:18:32.119 that has nine hundred stores, none of them are open, 0:18:32.320 --> 0:18:35.639 and they are now spending pretty aggressively UM towards e 0:18:35.680 --> 0:18:39.000 commerce results UM e commerce sALS and getting good results 0:18:39.000 --> 0:18:42.160 from that. I think consumers UM are there Probably one 0:18:42.200 --> 0:18:46.679 category that suffered the most is apparel, basically clothing. I 0:18:46.680 --> 0:18:49.520 mean there's not much no one's really going out, there's 0:18:49.560 --> 0:18:52.120 not much reason by appower. But we even seeing UM 0:18:52.160 --> 0:18:54.640 an increase in the apparel category in the fourth week 0:18:55.080 --> 0:18:57.640 since that we we consider the crisis started March. Their 0:18:57.680 --> 0:19:00.560 team the day after the NBA stops to travel from Europe. 0:19:00.760 --> 0:19:02.080 And so you know, we're at the end of the 0:19:02.080 --> 0:19:04.840 fourth week right now we're seeing even apparel has picked 0:19:04.960 --> 0:19:08.160 up UM and and clothing things that are a little 0:19:08.160 --> 0:19:10.600 harder to buy online, but consumers are still starting to 0:19:10.600 --> 0:19:14.000 get active in that category. Interesting very interesting. I'd be 0:19:14.040 --> 0:19:15.919 interesting to see Mark, how this plays out longer term. 0:19:15.960 --> 0:19:17.640 We'll have you back to kind of as we get 0:19:17.680 --> 0:19:19.720 through this pandemic, to kind of see how the consumer 0:19:19.800 --> 0:19:22.320 is reacting. Uh, and uh, you know, we'll get some 0:19:22.359 --> 0:19:25.359 more details, Mark Douglas, CEO of Steelhouse. It's a media 0:19:25.400 --> 0:19:28.080 consulting firm and spending a lot of time with consumer 0:19:28.119 --> 0:19:31.680 products companies and consumer facing companies getting a sense of, h, 0:19:32.040 --> 0:19:36.440 you know, how the consumer is changing, and clearly consumer 0:19:36.480 --> 0:19:40.160 behavior is changing dramatically. Uh during this lockdown. The question 0:19:40.200 --> 0:19:43.200 is how permanent will it be? Looking at the markets 0:19:43.280 --> 0:19:45.240 right here, just get you a quick data check, we 0:19:45.320 --> 0:19:48.199 still have green on the screen, still holding on to 0:19:48.440 --> 0:19:51.080 those gains although they are giving there. We are off 0:19:51.080 --> 0:19:53.320 the highs in the markets. Looking at the SMP right here, 0:19:53.640 --> 0:19:56.480 up thirty eight points thirty seven on the SMP that 0:19:56.520 --> 0:19:59.760 dows up it's called even three fifty points. That puts 0:19:59.760 --> 0:20:02.640 it at twenty three thousand, eight eighty right there on 0:20:02.840 --> 0:20:05.520 the Dow. And then n AS DAK up thirty nine 0:20:05.520 --> 0:20:10.400 points eight seventy one on the Dow. Oil still negative, 0:20:10.480 --> 0:20:14.760 still under twenty dollars a barrel. Just incredible supply demand 0:20:14.840 --> 0:20:18.960 dynamics are pushing oil to just tremendous lows. We'll bring 0:20:19.000 --> 0:20:25.080 it all more coming up. This is Bloomberg. Joe my 0:20:25.200 --> 0:20:28.919 seco covers all things municipal bonds for Bloomberg News. Joins 0:20:28.960 --> 0:20:30.760 us job. I'm so glad you hear because I saw 0:20:30.800 --> 0:20:34.680 an interesting article on the Bloomberg about mass transit. I 0:20:34.720 --> 0:20:37.040 don't know, but I'm sure I'm like most people here 0:20:37.040 --> 0:20:38.800 in the metro area. I haven't been on in New 0:20:38.880 --> 0:20:40.879 Jersey transit train in a month. I haven't been on 0:20:40.920 --> 0:20:44.000 a subway in a month. That's got to be a big, 0:20:44.040 --> 0:20:47.800 big revenue issue for some of these issuers. Talk to 0:20:47.880 --> 0:20:50.399 us about what's going on in mass transit and musical 0:20:50.520 --> 0:20:56.120 bond market. Mr Slaney, nice to speak to you again. Well, 0:20:56.480 --> 0:21:00.960 as you point out, with the lockdown, when they're shutdowns 0:21:00.960 --> 0:21:05.960 and so many of the large cities across the US, 0:21:05.520 --> 0:21:11.440 and the ridership has evaporated, So you know, it depends 0:21:11.920 --> 0:21:15.320 you know which city you're looking at, but you could 0:21:15.359 --> 0:21:21.440 see ridership off fifty six because uh, so many people 0:21:21.480 --> 0:21:24.679 are just not using any more. Schools are shushed, a 0:21:24.680 --> 0:21:28.000 lot of businesses are closed, or as you and I 0:21:28.040 --> 0:21:32.640 are doing, people working from home. Um, so it's that 0:21:32.720 --> 0:21:36.679 has a real impact on the fair box. Now most 0:21:36.720 --> 0:21:41.280 places don't make uh, you know, their entire amount they 0:21:41.320 --> 0:21:44.720 need from the fair box because it's you know, always 0:21:44.760 --> 0:21:48.359 in mass transit there's so much dead time. Um. But 0:21:48.600 --> 0:21:52.360 that's having a real impact. And certainly we've heard from 0:21:52.359 --> 0:21:55.320 Pat Foy on several occasions, you know, head of the 0:21:55.440 --> 0:21:59.240 mt A in New York here and uh he's made 0:21:59.320 --> 0:22:04.600 his uh you know, dissatisfaction or um, you know, a 0:22:04.680 --> 0:22:09.800 feeling of of of lacking money in the federal government 0:22:09.960 --> 0:22:13.240 several occasions. Yeah, so Joel, you know one of the 0:22:13.480 --> 0:22:16.200 you think about transportation. Initially we thought about the airlines. 0:22:16.320 --> 0:22:19.840 Of course they're got getting crushed. They're getting some significant 0:22:19.880 --> 0:22:22.960 aid from the government. But you know, the airlines before 0:22:23.000 --> 0:22:25.600 the crisis, we had a great run here, a great 0:22:25.640 --> 0:22:29.439