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Speaker 1: Welcome to the Bloomberg Penl Podcast. I'm Paul swing you

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Speaker 1: along with my co host Lisa brahma Witz. Each day

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Speaker 1: we bring you the most noteworthy and useful interviews for

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Speaker 1: you and your money. Whether at the grocery store or

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Speaker 1: the trading floor. Find a Bloomberg Penl podcast on Apple

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Speaker 1: podcast or wherever you listen to podcasts, as well as

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Speaker 1: at Bloomberg dot com. Well, US pay rolls fell seven

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Speaker 1: and one thousand in March, just extraordinary. The unemployment rate

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Speaker 1: jumped to four point four percent, the highest level since

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Speaker 1: two thousand seven teen. We had those jobs claims yesterday,

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Speaker 1: six point six five millions of the jobs numbers. The

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Speaker 1: uh employment situation in this country deteriorating just extraordinarily rapidly.

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Speaker 1: To get a sense of kind of how bad it

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Speaker 1: could get, we welcome Tom gimbal CEO of Global Staff

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Speaker 1: and Company, Last Sound Network. So Tom, thanks so much

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Speaker 1: for joining us. Let's start right there. How bad do

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Speaker 1: you think this is going to get on the jobless front? Oh?

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Speaker 1: I think it's going to get bad. But the numbers

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Speaker 1: that the government reports aren't going to be that applicable

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Speaker 1: because what you're going to see if you see the

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Speaker 1: jobless claims come in at such a high number, then

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Speaker 1: the unemployment claims come in and under a million. Hard

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Speaker 1: to believe. I'm saying that's an optimistic thing. But then

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Speaker 1: with the p p P program, you're going to see

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Speaker 1: that the unemployment claims go down because these people that

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Speaker 1: filed will be back on their employer's payroll for the

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Speaker 1: companies that get that money. And then we'll see in

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Speaker 1: a higher unemployment number when traditional non restaurant, non hospitality

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Speaker 1: companies have to let people go and those people file.

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Speaker 1: So I think the May and June numbers are going

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Speaker 1: to be a lot different than than what we're seeing,

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Speaker 1: and it's really not maccurate read on what's going on. Tom.

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Speaker 1: I think that everyone agrees on that nobody kind of

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Speaker 1: put too much faith into the actual number. However, they

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Speaker 1: did try to dig in to get some signs of

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Speaker 1: how the economy was doing before the real shutdown began

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Speaker 1: in the United States. I was really looking forward to

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Speaker 1: speaking with you, in particular, because you've been particularly optimistic

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Speaker 1: about a lot of some of the dark clouds for

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Speaker 1: a long time, and I'm wondering, based on the fact

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Speaker 1: that we saw companies freeze high airing before even the

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Speaker 1: US economy shut down in Earnest and the true pain began.

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Speaker 1: Are you revising some of it optimism? Well, I mean

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Speaker 1: this is gonna go. Yes, my My whole perspective has

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Speaker 1: changed immensely based on this. And I think we're gonna

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Speaker 1: be in a in a bad place economically for probably

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Speaker 1: longer than a lot of economists are saying. Is from

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Speaker 1: what I'm seeing and and and what I believe to

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Speaker 1: have happened. Now, what I think was going on with

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Speaker 1: some companies prior to the shutdown was there's always a

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Speaker 1: little bit of paranoia of are we in the last

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Speaker 1: innings of the ballgame? And that was coming on. And

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Speaker 1: there was also the fear that while it hadn't hit

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Speaker 1: America before the shutdown, we had seen what was going

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Speaker 1: on in China, and there was some precursor to that.

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Speaker 1: So there were some bigger companies that really saw a

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Speaker 1: little bit of the writing on the wall and started

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Speaker 1: to prepare for it. But I was extremely bullish. Most

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Speaker 1: of the companies I talked to, their first quarter numbers

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Speaker 1: were really really good in going into March, and so

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Speaker 1: now but with this, we're going to see an extended period.

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Speaker 1: What's really going to happen that I'm quite certain of

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Speaker 1: is a cash crunch coming in Q three and maybe

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Speaker 1: even into Q four. So companies that are still spending

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Speaker 1: right now to an extent, they're not going to be

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Speaker 1: paying these bills for three, four or five six months,

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Speaker 1: and that's gonna hurt some small and medium sized companies.

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Speaker 1: So tom just thinking a little bit forward, where do

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Speaker 1: you think unemployment rate, the real unemployment right in this

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Speaker 1: country will will go over the next couple of quarters.

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Speaker 1: I think there's no doubt that it will be double digits.

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Speaker 1: The question is going to hold at fifteen percent, twelve percent,

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Speaker 1: or is it going to get to twenty I think

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Speaker 1: the estimates oft are very high and a little bit

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Speaker 1: the sky is falling. I don't see that happening from

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Speaker 1: what we've seen in China, that the rebounding of that,

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Speaker 1: and then while spending may not come back as fast

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Speaker 1: as we like, the consumer programs that we've set up

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Speaker 1: the government has with PPP and the rebate checks, I

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Speaker 1: think that it will come back and I think it

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Speaker 1: maxes out probably around thirteen to fifteen. Tommy said that

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Speaker 1: you thought that the pain would be felt for a

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Speaker 1: lot longer than many economists even think how long will

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Speaker 1: it take? Now? My guess is that we're looking I mean,

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Speaker 1: for a real ian think about this. In two thousand nineteen,

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Speaker 1: there were people saying we were still in a recovery

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Speaker 1: from two thousand and eight. So this is while it's

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Speaker 1: it's much faster and everything's happening at once, so there's

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Speaker 1: a belief that it will come back faster. My guess

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Speaker 1: is we're looking at at late early where it really

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Speaker 1: feels que quote unquote normal from from a standpoint of

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Speaker 1: hotels and travel and restaurants and and then and and

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Speaker 1: traditional corporations hiring, it's going to be a little bit

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Speaker 1: of a of a long sladre. So Tom, give us

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Speaker 1: a sense of kind of we've seen obviously from some

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Speaker 1: of the restaurant industries, some of the travel industries. Where

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Speaker 1: do you think the next industries that are going to

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Speaker 1: be at risk for significant job losses? Well, my my

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Speaker 1: take on that is is you really don't know. However,

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Speaker 1: what I think is going to start happening is and

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Speaker 1: this will be an interesting thing to see through the

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Speaker 1: big payroll companies, the a DP in the paychecks because

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Speaker 1: as companies lay people off. They're not processing payroll for

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Speaker 1: the same numbers, and the way payroll companies get paid

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Speaker 1: on their traditional lines of businesses how many checks they

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Speaker 1: processed a period. So as those numbers dip, you'll see

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Speaker 1: that it's starting to affect the technology and software companies.

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Speaker 1: And then you have software user licenses like a sales

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Speaker 1: Force or linked In, And these companies, while huge and

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Speaker 1: can withstand a setback in the economy, they get paid

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Speaker 1: on a per user license and there's contracts the companies signed.

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Speaker 1: But if you start to see that employee companies layoff employees,

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Speaker 1: anything that's build out to their vendors on a per

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Speaker 1: user basis, like software like payroll, you're gonna see those

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Speaker 1: get hit as well. So I think it's going to

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Speaker 1: come into areas that a lot of people aren't even

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Speaker 1: talking about yet. Tom Gimble, thank you so much for

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Speaker 1: being with us, and I hope you do come back

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Speaker 1: and give us a sense of the progress being made

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Speaker 1: and instr update us on your views. Tom Gimble is

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Speaker 1: chief executive officer of the global staff and company Lascell Network. Paul,

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Speaker 1: a mystery listener, made a suggestion to me recently, um

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Speaker 1: that we have a dad joke of the day and

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Speaker 1: that during this period of time, everybody needs a little

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Speaker 1: bit of levity, and he had a suggestion for one.

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Speaker 1: So we're gonna start this, and it is why can't

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Speaker 1: a nose be twelve inches long? Why? Because then it

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Speaker 1: would be a foot Okay, So if you think you

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Speaker 1: could do better, if you let's start this though, And

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Speaker 1: if anyone wants to write in suggestions, you can. You

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Speaker 1: can email me l Abramoids at Bloomberg dot net. Um,

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Speaker 1: and let's do this. Let's have a dad joke of

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Speaker 1: the day throughout this whole period because everybody kind of

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Speaker 1: needs a little bit of a break because it's only

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Speaker 1: going to get worse when we look at the numbers

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Speaker 1: and there's a lot of gloom and doom and Lisa

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Speaker 1: Bromoids along with Paul Sweeney and this is Bloomberg Markets.

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Speaker 1: While we keep hearing reports about how the hospitals are

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Speaker 1: completely over whelmed, nurses and doctors working around the clock,

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Speaker 1: having to buy all this additional equipment, having to pay

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Speaker 1: for hundreds of thousands of new patients coming through their

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Speaker 1: doors for extensive hospital stays, unventilators, all very high cost,

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Speaker 1: and there's a question who's going to pay for it? Donathan.

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Speaker 1: Dr Jonathan Grouper as a professor of economics at the

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Speaker 1: Massachusetts Institute of Technology. He was one of the key

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Speaker 1: architects of Obamacare and Romney Care, and he joins us

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Speaker 1: now from Cambridge, Massachusetts. Dr Grouper, thank you so much

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Speaker 1: for being with us. How big of a cost do

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Speaker 1: you expect this to be for the health care system?

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Speaker 1: Do we have any ballpark figures at all? Yeah, it's

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Speaker 1: it's a great question. So there's sort of two ways

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Speaker 1: to think about it. One way is how big is

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Speaker 1: the cost of COVID nineteen And here I've seen estimates

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Speaker 1: ranging from a hundred billion to five hundred billion. Uh,

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Speaker 1: A hundred billion would be fairly manageably absorbed, five billion

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Speaker 1: would not um But that's not really the right number.

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Speaker 1: The right number is what is the net effect, which

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Speaker 1: accounts the factor losing a lot of other business. So

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Speaker 1: there's a lot of of places that are a lot

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Speaker 1: of services aren't being delivered, in particular elective surgery. So

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Speaker 1: figuring out the effect and healthcare sector has actually been

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Speaker 1: complicated because on the there's being scissored. On the one hand,

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Speaker 1: there to increased demand for this COVID nineteen services. That's

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Speaker 1: gonna cost a lot of money. On the other hand,

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Speaker 1: they are being um, they're losing all their sort of

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Speaker 1: elective surgery business. So professor Okay, So a hundred billions

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Speaker 1: to who at the end of the day pays for that,

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Speaker 1: is that part of some federal fiscal stimulus that goes

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Speaker 1: to the healthcare system directly? Uh No, A lot of

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Speaker 1: it's gonna be private insurers. Um So, basically, once again,

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Speaker 1: the scissors is exactly the opposite for private insurers. So

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Speaker 1: to the extent that um, the elective surgery that doesn't

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Speaker 1: happen never happens, then that hurts providers, but help private insurers.

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Speaker 1: To the extent that there's more COVID nineteen cases, most

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Speaker 1: of those people will have private insurance, and so that

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Speaker 1: hurts private insurers. That helps the writers because they're not

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Speaker 1: getting paid for that. Um So, I think really a

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Speaker 1: lot of the costs are going to come from government

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Speaker 1: and government through the Medicare and Medicaid program, but really

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Speaker 1: private insurers with the primary payer. And then finally we

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Speaker 1: have the uninsured rapidly increasing number with the huge job

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Speaker 1: lost numbers we've seen and they're the questions who's gonna

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Speaker 1: pay for them? And we haven't resolved that yet. Well,

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Speaker 1: and I'm wondering, do we have a sense of how

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Speaker 1: organized the effort is to try to coordinate payments and

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Speaker 1: not necessarily create a complete mess of bills and and

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Speaker 1: and bankruptcies personal bankruptcies is people try to grapple with

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Speaker 1: the new reality after a visit to the hospital here,

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Speaker 1: you know, I I think there's a huge issue, and

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Speaker 1: there's a huge coordination issue, because remember a lot of

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Speaker 1: our private health insurance is built around restricted networks, and

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Speaker 1: the last thing you want to do is restrict where

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Speaker 1: someone can go. You at them to go to the

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Speaker 1: hospital has a space for him. Then you've got the

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Speaker 1: fact that many people have high cost sharing deductibles and

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Speaker 1: things where they haven't spent much health care yet this year,

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Speaker 1: so they're gonna hit with their full deductibles. And then

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Speaker 1: you've got the fact that many americ twenty million Americans

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Speaker 1: and growing are uninsured. So I I think we have

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Speaker 1: a big problem. I think the federal government hasn't taken

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Speaker 1: very seriously as far as I can tell um, when

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Speaker 1: they've been pushed on it, they've just said, well, we'll

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Speaker 1: just divert. The latest is President Trump's announceds can divert

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Speaker 1: some of the hundred billion dollar fund for hospitals into

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Speaker 1: helping care for the uninsured, which is the last thing

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Speaker 1: we need because the hospitals need that money. So I

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Speaker 1: I think we need, we we urgently need much more

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Speaker 1: action on dealing with these uncovered healthcare costs. So does

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Speaker 1: that bring back some type of Afformable Care Act? Do

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Speaker 1: you believe you think there's political will there for that? Well?

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Speaker 1: I think you know, the Affordable Care Act was actually

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Speaker 1: designed for situations like this. Remember the whole idea is

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Speaker 1: that are you know, our reliance and employer sponsored insurance

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Speaker 1: is a little fragile to situations like this. Unfortunately, the

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Speaker 1: Affordable Careacter set up exchanges that people will be able

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Speaker 1: to go to if they lose their jobs. And so

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Speaker 1: I I think we're well prepared for that. UM in

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Speaker 1: terms of having this exchange, that should make people appreciate

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Speaker 1: the fact Affordable Care Act is there. Uh. That said, um,

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Speaker 1: many people uh still can't afford insurance on the exchanges,

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Speaker 1: so we're gonna have to think what we're gonna do

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Speaker 1: for them. UM. And many people also if they have

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Speaker 1: UM private insurance. UM, they might not want to go

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Speaker 1: in exchange insurance. They wan't want to keep their employer insurance.

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Speaker 1: They can do so buying buying COBRA, but that's quite expensive.

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Speaker 1: Dr Gruber, if if you would, can we walk through

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Speaker 1: a scenario in which the exchanges aren't reopened and Obamacare

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Speaker 1: is not expanded, and there is no sort of redux

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Speaker 1: in with respect to widening of the of the healthcare

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Speaker 1: safety net. What happens, especially to the hospitals. If you

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Speaker 1: have an increase in uninsured of newly laid off people

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Speaker 1: without their their corporate insurance coming to emergency rooms for

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Speaker 1: prime care, what is that due to the hospitals. Okay,

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Speaker 1: so so let's let's let's be clear about this. So

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Speaker 1: when we talk about the a c A did, there's

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Speaker 1: two pieces. There's the Medicaid expansions, which means that everyone

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Speaker 1: losing their job in thirty and thirty five states, everyone

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Speaker 1: losing their job who's falling to be very poor will

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Speaker 1: have free public coverage, and the other states they're totally

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Speaker 1: out of luck, unfortunately. So one thing we can do

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Speaker 1: is we can try to get those or calciern states

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Speaker 1: to actually serve the interests of their residents rather than

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Speaker 1: nasty politics, and actually span their Medicaid programs. In terms

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Speaker 1: of the exchanges, there's no issue of reopening the exchanges.

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Speaker 1: The exchanges actually have a provision that if you lose

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Speaker 1: your job, you can sign up, So this is there's

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Speaker 1: a bit of this kind of idea of a special

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Speaker 1: Roman peer is a bit of a red herring. Um

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Speaker 1: for people who lose their job, that's called the qualifying event,

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Speaker 1: they can always sign up for the exchanges. So the

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Speaker 1: exchanges are there for people. Um that said, um, you

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Speaker 1: know states that haven't expanded Medicaid and people who don't

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Speaker 1: go on the exchanges will be insured. And we're going

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Speaker 1: to have to deal with the fact that hospitals are

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Speaker 1: going to have to are going to be unable to

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Speaker 1: eat those bills, and so part of part of the

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Speaker 1: Hospital Bailout Fund is designing to help with that. But

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Speaker 1: it's not enough money, and we're going to have to

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Speaker 1: really have a new initiative either expanding access to these

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Speaker 1: exchanges for people, or you could all think about a

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Speaker 1: federal uncompensated care pool of the nature of the type

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Speaker 1: that other states that some states have, where we basically

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Speaker 1: absorb the uncompensated care costs of hospitals for COVID nineteen patients.

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Speaker 1: We're gonna need some kind of initiative of that type.

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Speaker 1: Jonathan Gruber, thank you so much for joining us and

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Speaker 1: giving us that color on the health care system is

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Speaker 1: that it grapples with the coronavirus. Jonathan Gruber, Professor of

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Speaker 1: Economics at m I T just really interesting stuff. Least,

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Speaker 1: it's a big issue, I gotta say, Paul. I mean,

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Speaker 1: I'm struck by all of these needs, and they're all

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Speaker 1: so important, and they're all so expensive, and really my

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Speaker 1: question is just going forward, how all of these different

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Speaker 1: needs are going to be prioritized at a time of

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Speaker 1: crisis and when there isn't necessarily the economic growth to

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Speaker 1: back it. Yep, and the states are dealing with at

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Speaker 1: the federal government's dealing with it, and individuals are dealing

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Speaker 1: with it. We've been listening to Governor Andrew Cuomo of

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Speaker 1: New York talking about the latest from New York State,

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Speaker 1: which is the epicenter with the number of cases crossing

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Speaker 1: the one hundred thousand level. He talked about the dire

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Speaker 1: shortage of equipment and the need for it and the

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Speaker 1: idea that the state will take ventilators and other gear

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Speaker 1: from businesses that do not need it right now, they

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Speaker 1: will either return it or compensate those businesses for those

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Speaker 1: items later. Also, he was talking about the apex coming

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Speaker 1: very quickly and how all the hospitals here are now

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Speaker 1: essentially COVID nineteen hospitals and that the jab At Center

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Speaker 1: was going to be entirely a COVID nineteen facility. As

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Speaker 1: the US tries to battle the epicenter of the crisis,

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Speaker 1: which is at the moment in New York, saying that

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Speaker 1: people are getting together volunteering, that there are hundreds of

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Speaker 1: healthcare professionals coming to the city to volunteer their efforts

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Speaker 1: in the city. New York City is uh the predominant

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Speaker 1: majority of the cases currently. Paul really really dire situation

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Speaker 1: that he talks about four healthcare workers in the hospitals

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Speaker 1: and UH and laying it out is he becomes sort

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Speaker 1: of the spokesman for the crisis right now in the

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Speaker 1: United States. He really has been his UH these daily

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Speaker 1: briefings that we can kind of must listen to, must watch,

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Speaker 1: uh kind of to get information to get a sense

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Speaker 1: of how this is really playing out uh down on

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Speaker 1: the front lines and talking about an interesting concept Lisa

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Speaker 1: about you know, we need the equipment. We being New

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Speaker 1: York State, need the equipment now when we're done with it,

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Speaker 1: and we will be done with it, but probably first

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Speaker 1: uh then we will deploy redeploy the resources, including personnel

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Speaker 1: to other parts of the country. So interesting concept about

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Speaker 1: a national response. Yeah, and a real focus on equipment

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Speaker 1: and making equipment. Telling even small businesses, if you could

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Speaker 1: have cloth and put the strings on the sides, you

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Speaker 1: can make a mask, you can make some medical gear.

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Speaker 1: Do it. We will compensate you for it is a

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Speaker 1: business opportunity, and you would think it was a business

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Speaker 1: opportunity for three M, one of the biggest manufacturers of

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Speaker 1: a lot of items, including things like face masks, and

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Speaker 1: yet there has been controversy over their efforts. I want

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Speaker 1: to bring in Karen evil Heart, who covers all things

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Speaker 1: industrials for us at Bloomberg Intelligence. Karen, can you just

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Speaker 1: lay out what the controversy is around this company? Uh?

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Speaker 1: You know, um the president is saying that a they

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Speaker 1: didn't UM, they dragged defeat in ramping up production. Number two,

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Speaker 1: they're sending UM product to other countries and three that

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Speaker 1: they're not doing enough to fight the price gouging that's

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Speaker 1: going on in the in the personal youth market market. UM.

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Speaker 1: And UH number one, they've doubled production in UM since

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Speaker 1: since January. In the US UM production they're doubling it

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Speaker 1: again UM over the next several months. UM. One of

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Speaker 1: the problems is a lot of this production doesn't The

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Speaker 1: masks aren't not that many are made here. UM. A

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Speaker 1: lot of them are made overseas, and a lot of

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Speaker 1: the countries have been holding the masks for themselves. UM.

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Speaker 1: You know, honney Well barely makes any masks in the US.

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Speaker 1: They largely import everything. Um G three M makes about

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Speaker 1: a third of their masks here, but it's not enough.

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Speaker 1: So it's uh, you know, it's hard to say. And

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Speaker 1: on the price gouging, they have stepped in front of

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Speaker 1: that and they've been, UM, you know, trying to fight that.

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Speaker 1: Who knows if they did it quickly enough, It's hard

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Speaker 1: to know. So, Karen, I mean, is there an opportunity,

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Speaker 1: Is there an ability from some of these companies, these

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Speaker 1: manufacturers like three M to significantly ramp up production and

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Speaker 1: really make a difference in the near terms. Governor Cuomo

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Speaker 1: so earnestly, you know, asked for I think collectively, Um,

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Speaker 1: it could matter like um, honeywell, just now repurpose the

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Speaker 1: plant in Phoenix to make some masks in the US,

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Speaker 1: because most of them don't come from here. But it

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Speaker 1: cannot happen overnight. And there's a supply chain impact as well.

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Speaker 1: There's there's shortages of certain products, parts that go into

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Speaker 1: the production of these masks and the productions of the ventilators.

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Speaker 1: I mean I I read an article where Phillips that

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Speaker 1: it's six hundred and fifty parts go in components go

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Speaker 1: into ventilators, which is more sophisticated than the respiraries. But nonetheless,

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Speaker 1: that's a lot of parts to round up and round

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Speaker 1: up overnight. You know, companies typically take time to ramp

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Speaker 1: up um and everybody scrambling to get up as quickly

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Speaker 1: as possible. But it cannot happen over and that's the issue.

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Speaker 1: I would think though that with the masks it would

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Speaker 1: be a lot easier or why can't there be a

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Speaker 1: more domestic supply chain if there is an issue of

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Speaker 1: importing some of the parts, Well, they do have to

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Speaker 1: they do have to reprioritize a lot, but a lot

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Speaker 1: of you know a lot of componentry for a lot

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Speaker 1: of things like I cover h VAC, A lot of

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Speaker 1: the componentry comes from someplace else. Um, we have really

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Speaker 1: I don't want to say decimated are our domestic supply chain,

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Speaker 1: but we certainly shrunk it. And I think people started

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Speaker 1: with the tariffs. We've seen companies, um change, you know,

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Speaker 1: make alterations in their supply chaine to have more products locally.

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Speaker 1: But that is a structural change that takes time. Um.

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Speaker 1: You know, Um they three and the other thing is

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Speaker 1: three M said of their masks. So went to industrial

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Speaker 1: and the reason is that, you know, they have all

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Speaker 1: these requirements, health requirements and social requirements. You could not

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Speaker 1: use industrial mass, which was the US production for health

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Speaker 1: care use now you can. They there was a monthorization

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Speaker 1: that allowed them to do that, but only ten percent

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Speaker 1: on what they made here went into healthcare. So you

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Speaker 1: ten percent of sixteen million is not even enough for

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Speaker 1: you know, two weeks in New York. So, um, it

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Speaker 1: will happen. It is happening. It can't happen overnight. And

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Speaker 1: now that they will have all the supply chain prior

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Speaker 1: ties towards them. And you know, um, which is another

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Speaker 1: step that the government is taking that anything in the

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Speaker 1: supply chain is also going to be under the d

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Speaker 1: p A so that all the need so that more

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Speaker 1: of the needed componentry, etcetera. UM, and a lot of

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Speaker 1: it's like chemical you know, like polypropyline stuff like that

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Speaker 1: can get to the manufacturers of these masks very quickly.

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Speaker 1: I kind of note that hunt Well isn't getting that

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Speaker 1: banged at all and honeywell does we produced many here? So? UM,

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Speaker 1: just so, how how is how is three M responded

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Speaker 1: to some of the attacks from the administration. Well, you know,

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Speaker 1: I know this management micro Roman is a pretty you know,

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Speaker 1: even level headed guy, much more low key than the

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Speaker 1: prior CEO. But he's come out as well as he

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Speaker 1: can swinging and you know, if you hear some of

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Speaker 1: his commentary, you know it's worded very diplomatically in the releases,

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Speaker 1: but you know, on on TV today said the claims

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Speaker 1: are completely false. Um, that we're not doing enough. We're

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Speaker 1: killing ourselves to get this production up and the ray

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Speaker 1: scouching thing. We've been very vocal on how we're trying

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Speaker 1: to fight that. UM. But a lot of the distribution.

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Speaker 1: A lot of the masks go through distribution, particularly industrial

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Speaker 1: masks go to distribution and then they can go anywhere.

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Speaker 1: So they have to take control of that so that

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Speaker 1: everything that comes from them, they know where it's going.

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Speaker 1: You can't just go to a distributor at this point,

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Speaker 1: and all of it's being reallocated to healthcare. Anyway, the

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Speaker 1: distribution was largely the distribution part was through the industrial chain,

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Speaker 1: and a lot of that's being re jittered to go

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Speaker 1: to healthcare. So, I mean, he's pushing back, and you

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Speaker 1: know there are costs and benefits of doing that, you know,

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Speaker 1: So maybe because Honeywell is laying low, you know, they're

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Speaker 1: being left alone. I don't know. Count ubal Heart, thanks

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Speaker 1: so much for joining us. We appreciate that, Count ubal Heart.

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Speaker 1: She covers all things industrials for Bloomberg Intelligence, the research

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Speaker 1: arm of UH Bloomberg and looking at three M right

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Speaker 1: now in the stock is down about two point two today,

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Speaker 1: down about a year to date, so uh, interesting time

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Speaker 1: for a lot of these companies. Say they try to scramble, Lisa,

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Speaker 1: and it doesn't help to get pressure from book, pressure

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Speaker 1: from the president via Twitter. So but we'll see companies

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Speaker 1: kind of revamping, rejiggering, trying to react as aggressively as

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Speaker 1: they can, and then include some of those industrial companies

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Speaker 1: like three M and Honeywell that Karent just mentioned. I'm

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Speaker 1: so pleased to say we're joined by Tim O'Brien, a

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Speaker 1: senior columnist for Bloomberg Opinion, joining us after a hiatus.

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Speaker 1: Thank you so much for being with us. Tam, you

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Speaker 1: wrote a column but I thought was fascinating looking at

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Speaker 1: the fate of small businesses following the coronavirus shutdowns, a

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Speaker 1: pretty dismal assessment. Why do you think so many small

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Speaker 1: businesses don't have a chance of coming back after this

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Speaker 1: whole thing is over. Well, you know, you know the

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Speaker 1: stimulus plan right now, Lisa essentially envisions getting them across

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Speaker 1: a bridge for the next two months or so. It's

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Speaker 1: a meaningful amount of money. You know, it's a two

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Speaker 1: trillion dollar package. Billion of it is four small businesses.

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Speaker 1: Small businesses employ the lion's share of American workers. Uh.

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Speaker 1: You know, they contribute a huge portion uh to annual GDP,

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Speaker 1: nearly half um. But the reality is as as mammoth

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Speaker 1: as this bill is and as well intentioned as this

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Speaker 1: aid is it may end up being just a gigantic

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Speaker 1: band aid. And I think the things that small businesses,

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Speaker 1: policymakers and Americans have to come to terms with is

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Speaker 1: this is probably just phase one, and you know, is

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Speaker 1: it being engineered regardless of that in a way that

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Speaker 1: actually puts small businesses on their feet for the long term.

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Speaker 1: So I think that's the first issue. The second issue

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Speaker 1: is how's it going to be administered? And there's already

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Speaker 1: a lot of signs that the Treasury Department has not

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Speaker 1: given banks clear signals for the standards around uh, lending

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Speaker 1: the money out and handling applications. The banks are complaining

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Speaker 1: about it. Small bisusinesses are already wary of it, and

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Speaker 1: it could end up being a bit of a train

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Speaker 1: wreck if it's not managed well. All right, So Timson, again,

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Speaker 1: what are the They're key issues is to get capital

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Speaker 1: into some of these small businesses. How much how much

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Speaker 1: you know reserves does a typical small business have it?

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Speaker 1: I just don't think it's that much. It is not

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Speaker 1: even Paul. You know, even in the best of times,

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Speaker 1: running a small business is a perilous endeavor. Uh they

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Speaker 1: you know, the failure rate is always high because small

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Speaker 1: business are risky. But even for established small businesses that

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Speaker 1: have been in in business for a while, they rarely

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Speaker 1: have enough cash on hand to cover more than a

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Speaker 1: few months of payroll and operating expenses. Payroll is usually

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Speaker 1: the biggest piece, which is why a large portion of

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Speaker 1: this of this three fifty billion is targeted at payroll costs. UM.

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Speaker 1: So you know, it's it's going to be extremely tricky

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Speaker 1: and uh, and we'll have to give it a little

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Speaker 1: time to roll out. But Steve Manuchin this week touted

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Speaker 1: UM the launch of the program today to help small businesses,

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Speaker 1: which is today UM. And there's again already signs that

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Speaker 1: it's hard to get this, you know, the blood flowing

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00:25:15,720 --> 00:25:17,720
Speaker 1: around this. We have to give it a little time

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Speaker 1: to wait and see. But it's you know, it's going

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Speaker 1: to be tricky and and the thing about small businesses

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Speaker 1: too is that they're very tied up in people's hopes

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Speaker 1: and dreams. Small business owners, you know, run companies in

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Speaker 1: all of our towns. They give a lot of character

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00:25:32,800 --> 00:25:35,320
Speaker 1: and flavor to the life of a town, and and

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00:25:35,359 --> 00:25:38,080
Speaker 1: they tend to very deeply personal connections to their business.

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Speaker 1: And the poignant and sort of tragic piece of all this.

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00:25:41,680 --> 00:25:44,640
Speaker 1: Beyond the economic impact, is the loss of all those

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00:25:44,640 --> 00:25:47,320
Speaker 1: hopes and dreams too, Tim. I have to wonder, you know,

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Speaker 1: there is sort of the program, and we have heard

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00:25:49,800 --> 00:25:54,360
Speaker 1: about the unclarity around exactly the interest rate and how

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Speaker 1: banks are exactly going to make these eligible for a

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Speaker 1: guarantee by the government. There are all sorts of question

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00:26:00,000 --> 00:26:02,800
Speaker 1: in the rollout of this. But putting that aside, there

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Speaker 1: also is the question of the transformation in the economy

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Speaker 1: stemming from the coronavirus. Is effect move towards Amazon in particular,

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00:26:10,960 --> 00:26:14,160
Speaker 1: and I'm wondering how much that will accelerate this beyond

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Speaker 1: any kind of financial program that the that Congress could pass.

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Speaker 1: That's a fantastic question. You know. Uh. President Trump is

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Speaker 1: referring to himselves as a wartime president. There's been a

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Speaker 1: lot of talk about this whole event, the financial and

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00:26:28,880 --> 00:26:32,760
Speaker 1: public health, the epic sides of all this. That this

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Speaker 1: is a like a you know, a wartime moment, and

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Speaker 1: we know historically that that society changes immensely before and

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Speaker 1: after any wars. It happened before and after World War

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Speaker 1: One and World War Two. I think the thing you're

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Speaker 1: hitting your finger on right now is UM, I don't

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00:26:51,080 --> 00:26:57,520
Speaker 1: see how inevitably digital commerce and and distance commerce UH

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Speaker 1: don't come out of this even more triumph and than

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00:27:00,359 --> 00:27:05,200
Speaker 1: they were before the virus took off. Brick and mortar

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00:27:05,240 --> 00:27:10,800
Speaker 1: retailers were having longstanding troubles competing. You know, Macy's UH

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00:27:11,040 --> 00:27:13,919
Speaker 1: furloughed a hundred and thirty thousand, the majority of a

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00:27:13,960 --> 00:27:16,560
Speaker 1: hundred of its hundred and thirty thousand workers earlier this

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00:27:16,600 --> 00:27:21,400
Speaker 1: week because they're having had had trouble competing before the virus,

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00:27:21,520 --> 00:27:23,919
Speaker 1: and they may never really be competitive again. So I

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00:27:23,960 --> 00:27:26,639
Speaker 1: do think you're going to see this epic transformation in

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Speaker 1: the way that business is conducted and how consumers interact

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Speaker 1: with businesses. Hey, Tim, thanks so much for joining us.

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Speaker 1: We really appreciate you coming on the program. Good to

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Speaker 1: have you back. Tim O'Brien, senior columnists for Bloomberg Opinion,

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Speaker 1: in his column three fifty billion dollars won't save us

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Speaker 1: small businesses, suggesting LI so that UH it perhaps needs

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00:27:49,320 --> 00:27:52,840
Speaker 1: to be even more, needs to be more direct, but

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00:27:52,920 --> 00:27:56,760
Speaker 1: even that small businesses unfortunately are going to be in

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Speaker 1: for a very tough road ahead over the next several months.

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Speaker 1: Are that with the initial claims that we got yesterday.

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Speaker 1: I mean, we'll only see more of it, right, but

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Speaker 1: we got a sense that basically, if you can't keep

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Speaker 1: the lights on, then you fold. And there isn't much

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Speaker 1: by way of resources to keep things going or diversification.

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Speaker 1: And the question is, just from my perspective, how quickly

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Speaker 1: can things get ramped up and will they ever return?

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Speaker 1: Thanks for listening to the Bloomberg P and L podcast.

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Speaker 1: You can subscribe and listen to interviews at Apple Podcasts

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00:28:26,359 --> 00:28:29,320
Speaker 1: or whatever podcast platform you prefer. I'm Paul Sweeney. I'm

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00:28:29,359 --> 00:28:32,040
Speaker 1: on Twitter at pt Sweeney. I'm Lisa Abram Woods. I'm

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00:28:32,080 --> 00:28:34,960
Speaker 1: on Twitter at Lisa Abram woyds one. Before the podcast,

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Speaker 1: you can always catch us worldwide. I'm Bloomberg Radio