Speaker 1: This is Bloomberg Business Week. I'm Carol Masser. Every day
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Speaker 1: know it's interesting here, uh, Sarah. I think the market
Speaker 1: is just really focusing on those the fiscal stimulus discussions,
Speaker 1: and again there is a deadline tomorrow. But I don't
Speaker 1: know what it's just the field doesn't look that great
Speaker 1: right here, even though the President is in fact pushing
Speaker 1: forward right you described as that it as on again,
Speaker 1: off again. We could probably add four more on agains
Speaker 1: and off against to that, but it looks like and
Speaker 1: I've gone on some emails from investors to set today
Speaker 1: saying that the packages that have presented still look to
Speaker 1: be a non starter between the Democat, demo Crats and
Speaker 1: Republicans and it's just looking a bit unlikely ahead of
Speaker 1: the election. All right, let's set the business week agenda here,
Speaker 1: let's kick it off. We can do that with Gina
Speaker 1: Martin Adams, chief equity strategist for Bloomberg Intelligence. He joined
Speaker 1: us on the phone from New Jersey, and Dave Wilson,
Speaker 1: of course, Bloomberg Stocks Editor UH, also on remote access
Speaker 1: from the great state of New Jersey. Gina, let's start
Speaker 1: with you here. You have a fascinating UH piece of
Speaker 1: research out talking about some of the underperformers and how
Speaker 1: this third quarter earning season maybe a catalyst. Yeah, I
Speaker 1: think it can be. U. First, good afternoon, everybody. Welcome
Speaker 1: to Monday, and a little bit of a slow Monday
Speaker 1: so far, but not happy Monday, Happy Monday. You know
Speaker 1: what we talked about today in our note is a
Speaker 1: basket of oversold stocks that we follow on a weekly basis.
Speaker 1: We rebalanced the most oversold stocks in the spire and
Speaker 1: any given week tend to dramatically outperform over a week's
Speaker 1: time as they bounce off at very very low levels.
Speaker 1: And what we've done in that note is highlighted that
Speaker 1: there are a few of those key oversold stocks that
Speaker 1: are due to report earnings this week, and they may
Speaker 1: have the opportunity to really change what has been a
Speaker 1: very sour tone um at least from the market response
Speaker 1: to earnings. So far, We've had tremendous reports out of
Speaker 1: the financial sector, really really strong beats, more than companies
Speaker 1: that have reported of beat expectations, and yet the price
Speaker 1: action in response to those expectations as the negative. So
Speaker 1: we're looking for these reporters to potentially change that tone.
Speaker 1: On our shortlist of Verizon A ten team Las Vegas
Speaker 1: fans to watch this week, Dave, let's bring you in
Speaker 1: here because in addition to the names that Gina just
Speaker 1: named for us, will also hear from Tesla this week. Netflix. Sure,
Speaker 1: it's been a sour tone, but we are entering the
Speaker 1: second largest week of earning season of the season. What
Speaker 1: are you keeping an eye on this week? Well, I mean,
Speaker 1: it's just a matter of how forthcoming our company is
Speaker 1: going to be when it comes to talking about their
Speaker 1: prospects for this quarter or next year. I mean, certainly
Speaker 1: one of the stories of is that the coronavirus let
Speaker 1: a lot of companies to which rather forecast. We've seen
Speaker 1: some of them come back. Others have been more reluctant
Speaker 1: to forecast even if, say their third quarter results are
Speaker 1: relatively positive. So you know that that's definitely going to
Speaker 1: be worth watching as we proceed through all these earnings
Speaker 1: reports do in the next couple of weeks. So, Gina,
Speaker 1: you mentioned the banks here. What was your takeaway from
Speaker 1: the banks here? It seems like the numbers were pretty good,
Speaker 1: but the outlook was perhaps a little bit more conservative.
Speaker 1: Are you do you expect to hear some of that
Speaker 1: going forward with some of these non bank companies. Yeah,
Speaker 1: I'm hopeful not, because I do think that that's what
Speaker 1: gotten the way of the banks is. You know, they
Speaker 1: did come out and dramatically beat expectations. At a matter
Speaker 1: of fact, at the start of earning season, financial sector
Speaker 1: was expected to produce earning and earnings drop of nearly
Speaker 1: five percent, and just because of the banks that reported
Speaker 1: last week, that earnings decline is now expected to be
Speaker 1: less than three percent, So they didn't make a very
Speaker 1: big ustment to expectations. All of the SMP five is
Speaker 1: virtually adjusting expectations higher for a third quarter. But that's
Speaker 1: where the buck stops, and that's the problem I think
Speaker 1: that the market is running into is analysts are not
Speaker 1: taking the cues from an incredible beating the second quarter
Speaker 1: and now it's looking like a very very strong beating
Speaker 1: the third quarter to raise expectations into the future. As
Speaker 1: a matter of fact, this is what we're writing about
Speaker 1: for tomorrow is expectations into future quarters have basically just
Speaker 1: been stagnant and have been for some time because analysts
Speaker 1: are not taking any sort of confidence boost out of
Speaker 1: these earnings results. Dave mentioned the guidance has been relatively limited.
Speaker 1: The guidance that we have gotten has been very strong,
Speaker 1: but it's just a handful of companies it's willing to
Speaker 1: tell us that it's very strong, and those are the
Speaker 1: companies that have been strong throughout for the most parts.
Speaker 1: So we need something to change. Um, we need a
Speaker 1: little bit more visibility to evolve. I think, Uh, if not,
Speaker 1: we're going to be sort of churning for a while
Speaker 1: waiting for that visibility to proven to one. I fear,
Speaker 1: do you know what are the underlying signals of the
Speaker 1: market really telling us? Though? At the moment, I look
Speaker 1: at the NASAC one hundred right now, down about one
Speaker 1: percent down for a fifth day that's the longest losing
Speaker 1: streaks since August. But at the same time we have
Speaker 1: to remember small caps the Russell two thousands up more
Speaker 1: than eight percent this month. We've also seen some other
Speaker 1: cyclical areas of the market performing well. Can you take
Speaker 1: that and run with it as a bullish signal. Yeah.
Speaker 1: We actually wrote about this in our chart book last
Speaker 1: Thursday that even though the market is churning, there are
Speaker 1: some really strong signals of rotation emerging in that churn.
Speaker 1: One of them is as you correctly identify the small
Speaker 1: cap index. We've also seen really key constituents of industrials
Speaker 1: and technology breakout are automated technical pattern recognition software recognized
Speaker 1: a breakout in Caterpillar as well as Micron last week,
Speaker 1: So those are pretty strong indications of a rotation. And
Speaker 1: then this has been our scene since late August is
Speaker 1: we think the market is going through a rotation, rotating
Speaker 1: to potentially stronger earnings growers in the year ahead as
Speaker 1: opposed to the defensive stories which has really dominated the
Speaker 1: markets games from the March lows. And that rotation can
Speaker 1: mean the market concern sideways for a while. But if
Speaker 1: we're rotating into supercyclicals, we're rotating into leading indicators or
Speaker 1: leading stocks, then it probably is a pretty good sign
Speaker 1: of things to come once we've reached the end of
Speaker 1: that charning process. Dave, real quick, what are you looking
Speaker 1: for earnings wise? What's the big one next up? IBM
Speaker 1: after the Clothes. That's gonna be the one to watch
Speaker 1: IBM after the closes. We're gonna ana Rona from Bloomberg Intelligence.
Speaker 1: He's gonna join us right after the Clothes to kind
Speaker 1: of give us his quick take of those numbers. Gina
Speaker 1: Martin Adams, thank you so much for joining us, Chief
Speaker 1: equity strategist Bloomberg Intelligence, joining us on the phone from
Speaker 1: New Jersey, and the Dave Wilson, Bloomberg Stocks Editor, also
Speaker 1: on remote from New Jersey. We've got New Jersey covered. Sarah.
Speaker 1: I'm in Jersey as well, but you are in the studio.
Speaker 1: I am in the studio. I must say that it's
Speaker 1: a little bit more lively in the office today, but
Speaker 1: still nothing like it used to be. Obviously, we miss
Speaker 1: you in here. That's right, we'll be Hopefully we'll get
Speaker 1: back there soon. This is Bloomberg Business Week with Carol
Speaker 1: Messer from Bloomberg Radio. We're really in the in that
Speaker 1: prime testing stage right now where there's a lot of
Speaker 1: tests going on around the world. Bloomberg News Adventure Capital
Speaker 1: reporter Ceremony Bride is actually taking part in one of
Speaker 1: those tests. Let's get a real sense of what we're
Speaker 1: looking at their Sarah, thanks so much for joining us. UM.
Speaker 1: Tell us about what you're doing and why you're doing
Speaker 1: it well. Um, at the beginning of the pandemic, I
Speaker 1: just felt awful about everything that was happening, and the
Speaker 1: worst thing for me was how scared everybody was because
Speaker 1: nobody really knew what COVID was, how they could catch it,
Speaker 1: where when. So I just wanted to do something to
Speaker 1: try to help the situation. So I thought I would
Speaker 1: look into vaccine childs and I did a lot of
Speaker 1: research online, figured out which child would be taking place
Speaker 1: in the San Francisco area where I live, and UM
Speaker 1: figured out how to sign up for one of those.
Speaker 1: And it was tough because even if you know the
Speaker 1: jug companies that are going to be testing vaccines, I
Speaker 1: learned a lot. I learned they outsourced those tests two
Speaker 1: different clinics, so then you have to figure out which
Speaker 1: the clinics are doing it and then you have to
Speaker 1: call them and get in their databases. That eventually I
Speaker 1: managed to sign up for the Fiser trial. So Sarah,
Speaker 1: give us some color on what it actually looks like
Speaker 1: or feels like to be in one of these trials.
Speaker 1: I mean, how long have you been in it? How
Speaker 1: often do you have to be checking in? Do you
Speaker 1: have to go in for in person visits? What does
Speaker 1: this all look like? Sure? So um. I went to
Speaker 1: this clinic in Walnut Creek, California, called the Diabolo Clinic.
Speaker 1: It was very well run um lots of distancing, uh,
Speaker 1: very kind of efficient feeling. I didn't you like I
Speaker 1: was wasting any time, but it was a substantial commitment
Speaker 1: of time. The first time that I went was probably
Speaker 1: about two hours, tons of paperwork. I met with a doctor,
Speaker 1: I met with a bottomist. They did a COVID test um,
Speaker 1: but they don't really tell you any of the results
Speaker 1: because they don't want you to know if you're getting
Speaker 1: the placebo or the real thing. And also they don't
Speaker 1: know I have a patient number. All my records are
Speaker 1: somehow separated from my name, so you know. I asked
Speaker 1: them do you know what I got? And they said no,
Speaker 1: we have it all rigged up so we can't tell.
Speaker 1: And um the actual shot for what was either the
Speaker 1: vaccine or the placebo came at the end of that
Speaker 1: first visit. It was very funny because there was this,
Speaker 1: you know, all I was being led from room to
Speaker 1: room for different tests and talks with different people, and
Speaker 1: then there was a big empty room, empty except for
Speaker 1: a huge blue chair. It almost looked regal like, look
Speaker 1: so medical at the same time, and I sat down
Speaker 1: and they gave me my shots. I felt fine that
Speaker 1: first time. UM I went back for a booster shot again,
Speaker 1: either the real thing or the placebo three weeks later.
Speaker 1: That hit me pretty hard. You know. I can't say
Speaker 1: for sure if I got the vaccine or if it
Speaker 1: was just a coincidence that maybe I got a weird
Speaker 1: about a twenty four hour flu or something around the
Speaker 1: same time, but I did not feel good after that. UM.
Speaker 1: I've been back once more, about a month after that shot,
Speaker 1: so they could take blood work and so on. I
Speaker 1: imagine they're testing me for um COVID and antibodies again,
Speaker 1: and then I will go back three more times over
Speaker 1: the course of two years total. So at the end
Speaker 1: of the two year study, I'll have been to this
Speaker 1: clinic six times, and I also have an app on
Speaker 1: my phone, so it's called child Max. I had to
Speaker 1: download it on my first visit. So after each of
Speaker 1: those shots, every single day, it would pay me and
Speaker 1: ask me are you experiencing nausea? As your temperature elevated.
Speaker 1: There were a bunch of questions, but I would have
Speaker 1: to go through an answer on that app. Since then,
Speaker 1: it now buzzes me once a week and just asks
Speaker 1: are you experiencing symptoms? And I'm not, so I said no,
Speaker 1: and then there are no more questions on the app.
Speaker 1: Thank goodness. I haven't experienced symptoms. If I ever do,
Speaker 1: I'd imagine the questions again would be more comprehensive on
Speaker 1: the app. So, Sarah, do I take from this that
Speaker 1: fiser won't know whether this is this test is effective
Speaker 1: for two years, as opposed to people talking about weeks
Speaker 1: or months trying to get some knowledge from these tests. No.
Speaker 1: My take, and this is just based on reading a
Speaker 1: lot of what my colleagues at Bloomberg has been reporting,
Speaker 1: is they'll have a pretty good idea. And let's say
Speaker 1: that I went UM and had the test or had
Speaker 1: the shot and UM I had the second one on
Speaker 1: September one, so I've already been back once they've measured
Speaker 1: my blood for antibodies. So let's say I did get
Speaker 1: the real shot and not the booster. They already know
Speaker 1: whether my blood has antibodies in it, so I think
Speaker 1: they have a good idea. And there are thousand people
Speaker 1: like me across the country that have been a part
Speaker 1: of this trial. So they are getting those early results
Speaker 1: of whether the people who got the early tests have
Speaker 1: antibodies or not. They are starting to see that right now,
Speaker 1: and so then over two years they'll be checking for
Speaker 1: the people who got the real shot. Oh do they
Speaker 1: still have antibodies six months later? Do they still have
Speaker 1: them a yearly? Earth do they still have them two
Speaker 1: years later? So it's I think that part is testing
Speaker 1: how long it might be effective, So really quick, just
Speaker 1: to wrap up, Sarah, is your sense then that the test,
Speaker 1: the study might not end for two years, but if
Speaker 1: there are signs that it works, they'll release it to
Speaker 1: the public before it's over. That's what they've said that
Speaker 1: they're planning to do. And again, they'll know whether it's
Speaker 1: working right now, and then the rest of it is
Speaker 1: just to see how long it works for. And one
Speaker 1: more thing, I'd like to say that I felt really
Speaker 1: sick after that second test, So clear your schedules that
Speaker 1: once you do get the vaccines, if that was the
Speaker 1: real thing. Seravic right, thank you so much. We appreciate that.
Speaker 1: Servic right. Jeez a Vent, your Capital reporter for Bloomberg News,
Speaker 1: joining us on the phone from San Francisco. This is
Speaker 1: Bloomberg Business Week with Carol Messer from Bloomberg Radio. Let's
Speaker 1: get to that M and A activity, Chronical Phillips buying
Speaker 1: Concho Resources for about nine point seven billion dollars in stock.
Speaker 1: That's the largest shale industry deal since a collapse in
Speaker 1: energy demand earlier this year. Let's get some details. We
Speaker 1: can do that with a good friend, Fernando Valley, oil
Speaker 1: and gas analysts for Bloomberg Intelligence. He joins us on
Speaker 1: the phone from New York City. So, Fernando, thumbs up,
Speaker 1: thumbs down? Do you like this deal? And why? All right?
Speaker 1: Paul glad to be here. Definitely like this deal for
Speaker 1: for both really, if there are two to the premier
Speaker 1: players in the shale patch, and for Chronico you're getting
Speaker 1: an entity that already generates free cash flow has a
Speaker 1: lot of locations in an area at the Permian basin
Speaker 1: where you really didn't have any locations beforehand, and if
Speaker 1: you're Conto, you're getting all stuck to you. Also, you
Speaker 1: still capture an eventual upside from an oil prester recovery
Speaker 1: in the next several years, and you're getting probably one
Speaker 1: of the few companies that's been all about generating pre
Speaker 1: cash flow from shale for the past ten years. Conico
Speaker 1: is really right sized for a lower for longer from
Speaker 1: the oil price crash. So they came into this downturn
Speaker 1: all lady prepared for an eventual prolonged weakness, and so
Speaker 1: they're in really good shape. And Chronical really also helps
Speaker 1: lower the corporate declines. Remember, shale declines really quickly at first,
Speaker 1: and so Conical because they have exposure to l en
Speaker 1: G oil sands conventional, their corporate decline rates are closer
Speaker 1: to ten percent as opposed to you you've seen shale.
Speaker 1: So thumbs up all around from you, Fernando. How does
Speaker 1: this Conjo acquisition though, change Conco's production profile and strategy,
Speaker 1: if at all? It doesn't really change their strategy, mostly
Speaker 1: because Concho is also being focused on more moderate growth
Speaker 1: and returns as opposed to some of the players that
Speaker 1: were growing at fifty to six percent for random and
Speaker 1: taking on significant leverage. The post post merger profile, they're
Speaker 1: still gonna be under one and a half times du
Speaker 1: more so as they captured a five million dollars and
Speaker 1: synergies they mentioned UM, so they're erg is really complementary.
Speaker 1: What it does change is that increases Chronicle is consolidated
Speaker 1: the climate that I mentioned UM, but it does so
Speaker 1: in the core of the Permian basin, which is the
Speaker 1: premier shale basin. When you have the profile in the
Speaker 1: other asset the Chronicle has, it can be a complementary play.
Speaker 1: It can be something where they don't they don't need
Speaker 1: to grow it at thirties, and they can grow more
Speaker 1: slowly and and really get that cash return on capital
Speaker 1: that they've been targeting for a really long time and
Speaker 1: they needed because their boxing position is dwindling. Their eagle
Speaker 1: fourth position is also slowing down considerably, so they needed
Speaker 1: to grow and the place to grow in the US
Speaker 1: at the current oil priced outlook is really the Permium basis.
Speaker 1: All right, Fernando, as a former investment banker, this is
Speaker 1: my next question, are we gonna do more deals in
Speaker 1: the shale patch? Are we gonna this just just the beginning.
Speaker 1: I mean the beginning really was Chevanovo and and this
Speaker 1: is why, uh, certainly not the last one. We don't think. Uh.
Speaker 1: There is a need for the industry to right size
Speaker 1: for a lower for longer or a lower forever oil
Speaker 1: price scenario, and a lot of the companies were really
Speaker 1: preparing for sixty five seventy dollars and we just don't
Speaker 1: see that happening anytime soon. UM. You're either looking to
Speaker 1: improve your overall drilling locations, you may have produced too
Speaker 1: much and run out of the really good stuff UM
Speaker 1: in in your portfolio, or you could have an issue
Speaker 1: with your balance sheet. So for Carnico, they were looking
Speaker 1: for more locations. For Concio, they were looking for a
Speaker 1: really strong balance sheet. UM. And that that makes sense
Speaker 1: where we see an issue or the players that have
Speaker 1: both run through most of its portfolio and also have
Speaker 1: significant leverage. So we think we'll see mergers in the
Speaker 1: high quality names, but the lower quality, highly leveraged names
Speaker 1: they'll struggle to catch a bid. In this scenario. There's
Speaker 1: a lot of resources out there, not necessarily a lot
Speaker 1: of cap So it's really the high quality names that
Speaker 1: we're going to be looked at. So quick one to
Speaker 1: wrap it up. Yeah, good, it's a quick one to
Speaker 1: wrap it up. So if we have forty dollars a
Speaker 1: barrel lot, we're really lodged here for some time. Are
Speaker 1: there any other companies out there you see his potential targets? Uh,
Speaker 1: there are certainly companies that will look to merge. Whether
Speaker 1: they are the targets or they are the consolidators, it
Speaker 1: remains to be seen. Because you could see high quality
Speaker 1: names like an E O G and Pioneer or Diamond
Speaker 1: Back Parsley Energy look to merge together with small or
Speaker 1: no premiums to reduce costs and improved locations. So interesting.
Speaker 1: All right, now we're gonna have to leave it there,
Speaker 1: but we're gonna have some more deal activity from you.
Speaker 1: I am sure. This is Bloomberg Business Week with Carol
Speaker 1: Messer from Bloomberg Radio. Fascinating story in the magazine here,
Speaker 1: Uh coming up. It's um. You know, just as we thought,
Speaker 1: you're getting back to a little bit of normal in
Speaker 1: terms of the restaurants and going out to eat cases,
Speaker 1: particularly in Europe, surging putting the restaurant industry on its
Speaker 1: back foot again. Joel Webert joins us. He's editor Bloomberg
Speaker 1: business Week. He joins us from the remote line from Brooklyn.
Speaker 1: And Robert Vines, chief food critic for Bloomberg News, he
Speaker 1: joins us on the phone from London. So, Joel, just
Speaker 1: when the you know that our friends over in Europe,
Speaker 1: I'm seeing stories in Paris and London and other cities
Speaker 1: in Italy as well, just trying to get on their
Speaker 1: feet again. Then the infections go back up. It's not
Speaker 1: good for their business, is it. It's a story UM everywhere,
Speaker 1: you know, and it's like just when you think you're
Speaker 1: like rounding a corner, Uh, you know, cases sneak back
Speaker 1: up and or surge. And you know, restaurants in particular
Speaker 1: are the ones that have been you know, they were
Speaker 1: really been just like on the front lines of this UM.
Speaker 1: And you know, Richard Vines is the one who who
Speaker 1: came to us from UM London to say, let's let's
Speaker 1: talk about restaurants here. So so Richard give us a
Speaker 1: sneak peak of kind of what's been happening in the
Speaker 1: UK and and London as uh, infections go up and
Speaker 1: and restaurants are are caught in the in in the vice. Yes,
Speaker 1: good evenings for none and well death has doubled in
Speaker 1: the UK in the past twelve days, so obviously the
Speaker 1: government's filely concerned. The last month he introduced the ten
Speaker 1: pm closing time for restaurants. It's quite serious. It's imagining
Speaker 1: sense want to eat and drink and ten o'quarck have
Speaker 1: to be out on the streets and that's been bad enough,
Speaker 1: but now they just need to use further instrictions. You
Speaker 1: can't eat at restaurants with people who not in your
Speaker 1: household or in your group. So I'm single, for example, beings,
Speaker 1: basically I can't go to restaurants, so quite a serious situation.
Speaker 1: Just I'm myself at home because where am I going
Speaker 1: to go? I'm not going down to the pub on
Speaker 1: my own. So Richard, I get the sense that last
Speaker 1: time around the subsidies really helped these restaurants, but obviously
Speaker 1: subsidies can't be too helpful if there are curfews in play,
Speaker 1: or if you just can't go out and eat at
Speaker 1: a restaurant, or there are higher restrictions when you speak
Speaker 1: with restaurateurs with restaurant owners, especially those that are more
Speaker 1: so local and mom and pop owned. What's their tone
Speaker 1: like right now? What's the feel? The tone is of
Speaker 1: total desolation and depression. I'm afraid Corbyn and King which
Speaker 1: one of the big restaurant groups in London. They own
Speaker 1: a place called the wolves Ley which is known internationally.
Speaker 1: When the latest restrictions came in, they had two thousand
Speaker 1: cancelations in twenty four hours. And the British government has
Speaker 1: actually even very help and supportives to restaurants or to
Speaker 1: businesses in general, paying for wage for SAPO further and
Speaker 1: so on. But those that subsidies easing down now and
Speaker 1: it looks like restrictions are coming back on more seriously.
Speaker 1: Whales just that it's on Friday's introducing total lockdown. Scotland
Speaker 1: introduced match strict measures and London, as I say, has
Speaker 1: come in the strict to measures. So I'd say the
Speaker 1: movie is quite depressed. And a group of restaurants, chefs
Speaker 1: and restaurants were demonstrating outside Parliament's day banging their pots
Speaker 1: and pans. But I don't think anyone really thinks that's
Speaker 1: going to help. And Richard, what about the pub scene
Speaker 1: which has been. You know, it's obviously like a staple
Speaker 1: of English life in a way that that Americans envy
Speaker 1: and probably normal times. Um, what's what's that seem like?
Speaker 1: Now that um, you know the restaurants are are closed,
Speaker 1: what's the pub situation? Well, the pep situation is very
Speaker 1: bad because perhaps usually can stay open late. And now
Speaker 1: that again the ten first first ten o'clock closing is depressing.
Speaker 1: The thing is in U K's you can stand out
Speaker 1: and drink on the street, which you can't to New York. Right,
Speaker 1: so that's something super go outside, whether drinks still have
Speaker 1: a good time, but generally businesses down seriously and pups
Speaker 1: of closing all the time. Alright, So Richard, give us
Speaker 1: a sense as to the um the density issue, like
Speaker 1: in art can can a restaurant be open and seed acent?
Speaker 1: Or is it because it's we have some limitations here
Speaker 1: in the States, Yeah, people, they are a limitation. It
Speaker 1: depends on the place and so. But the main thing
Speaker 1: is the distancing between in the UK's distancing between different tables.
Speaker 1: So in in Copenhagen, for example, it's another since you've
Speaker 1: been looking at they've got maximum people fifty in the
Speaker 1: restaurant here, it's more requestioning distancing between tables, which means
Speaker 1: places can't generally can't operate much beyond sixty seven cent
Speaker 1: of capacity, which you know, when people are spending this
Speaker 1: and then just a fewer customers and then going home. Eva,
Speaker 1: of course the numbers don't really add up. And Richard,
Speaker 1: what about delivery since that's become such you know, like
Speaker 1: at least here in the US, restaurants have just gone
Speaker 1: all in on it. It is, or take out for
Speaker 1: that matter, it's just sort of the new the new normal.
Speaker 1: Um howur is how our restaurants managing to pivot? And
Speaker 1: is it a permanent shift or or have they found
Speaker 1: their footing in a in a short term kind of way.
Speaker 1: I think it's a permanent shift. It's really surprising some
Speaker 1: of the restaurants that are doing it. Daniel Hamm, the
Speaker 1: chef Madson Park, is doing home delivery from Marriages Hotel
Speaker 1: in month, which is something that would have been completely
Speaker 1: unthinkable before the virus, right down to Maple Japanese restaurants.
Speaker 1: So I've been hearing of one. He said they were
Speaker 1: a bit precious about their food, wasn't super put home delivery.
Speaker 1: But now everyone's got to do it because people are
Speaker 1: eating at home, and this is restaurants have to get
Speaker 1: all the business they can. I think this is going
Speaker 1: to be a partnershift, but certainly in the short term
Speaker 1: it's a very extreme shift. It really is amazing to
Speaker 1: see how some of these restaurants have reacted. I know
Speaker 1: in New York City, just seeing the dining on the sidewalks,
Speaker 1: which is more so relevant in Europe in normal times.
Speaker 1: But it's just amazing to watch. But I want to
Speaker 1: get your sense if these restrictions last or if they
Speaker 1: get worse over in Europe, do you have any sense
Speaker 1: of how long the average restaurant can last they can
Speaker 1: wait this out. I think a lot of restaurants will
Speaker 1: announced closure in the next month or two. Actually, I
Speaker 1: think it's it's going to be a fairly short term thing.
Speaker 1: Restaurants in the UK had a holiday on their their
Speaker 1: rents during a lot down this on. Those bills are
Speaker 1: coming to you now, so rests are trying to operate
Speaker 1: with bow reduced income, new reserves and then facing huge bills.
Speaker 1: So I'm personally very pessimistic restroom past to say, even
Speaker 1: though I want everyone to do well, I think only
Speaker 1: the very best sort of people. The biggest pockets are
Speaker 1: going to survive deepest pockets Richard Vines, thank you so
Speaker 1: much for joining us. Just a fascinating piece there and uh,
Speaker 1: you know our Hearts Guide. We really feel for the
Speaker 1: folks uh in Europe that are experiencing this surge and
Speaker 1: how it's impact in their lives, including on the restaurant business.
Speaker 1: Richard Vines, chief food critic for Bloomberg News, joining us
Speaker 1: on the phone from London, and of course Joel Webber,
Speaker 1: editor of Bloomberg Business Week on the remote access line
Speaker 1: from Brooklyn, thank you so much for joining us. And Sarah,
Speaker 1: that's a big issues we head into these colder months.
Speaker 1: You know, I'm not sure, I mean people canna be
Speaker 1: standing outside the pub. Um, So it's really important for
Speaker 1: these businesses to try to get you know, some to
Speaker 1: kind of continue their business but in a safe way.
Speaker 1: Right It's a very big question, Mark one, what your
Speaker 1: restrictions look like. Also just the weather itself. As you said,
Speaker 1: I think about dining in the city right now, these
Speaker 1: restaurants are doing absolutely everything they can and people seem
Speaker 1: to be grasping onto it and enjoying it. But if
Speaker 1: it is sub forty degrees outside and you have a heater.
Speaker 1: Sure Still, how willing are people going to be to
Speaker 1: actually go venture outside in a coat and eat outside? Yeah?
Speaker 1: Exactly right. And for starting to get to that point
Speaker 1: in the year where the heaters are good? Um, but
Speaker 1: are they enough here? And you know, when we're standing
Speaker 1: out there and there's a ten inches so I don't
Speaker 1: think we're gonna be sitting outside on the street, but
Speaker 1: maybe some intrepid diners will see. You're listening to Bloomberg
Speaker 1: Business Week with Carol Messer on Bloomberg Radio Hi and
Speaker 1: Paul Sweeney alongside Sarah Panza. Carol will be back later
Speaker 1: this hour. I mean, Sarah, it's really interesting here. First
Speaker 1: Jack Ma brought us Ali Baba, the huge Amazon like
Speaker 1: type of company. Uh. Now he brings us another company
Speaker 1: called Aunt Financial. It is winding its way through the
Speaker 1: regulatory process on its way to an initial public offering.
Speaker 1: A lot of people don't know that much about Ant Financial,
Speaker 1: but one person does is Andy Brown. He's editorial director
Speaker 1: for Bloomberg's New Economy. He joins us on the phone
Speaker 1: from New York City and he thinks, so much for
Speaker 1: joining us here. It looks like this I PO might
Speaker 1: happen relatively soon. What if you could just tell us
Speaker 1: what is and financial and how big is this thing?
Speaker 1: So and financial is huge? Um, you can think about
Speaker 1: and financial as The Economist put it in its latest vision,
Speaker 1: as a combination of Apple Pay, PayPal, Venmo, Mastica, JP
Speaker 1: Morgan I shares with an insurance brokerage thrown in. So
Speaker 1: it's it's it's it's really it's a blog and it's all,
Speaker 1: by the way, in one single app. So and is
Speaker 1: going public at the end of this month, and it's
Speaker 1: going to be the biggest I p O in history,
Speaker 1: way big of in Saudi Aramsa last year billion dollars
Speaker 1: or more, which would value the company about two eight
Speaker 1: billion dollars, bigger than any single US bank except JP Morgan.
Speaker 1: So Andy, as you wrote recently, data wars are the
Speaker 1: new trade wars clearly as you just described, and has
Speaker 1: so much consumer information. Do we expect or already have
Speaker 1: we seen the US administration want to go after the
Speaker 1: likes of Aunt, just as we saw earlier this year,
Speaker 1: which I think we can call it the TikTok saga. Yeah,
Speaker 1: this is really a battle for the digital future of
Speaker 1: the world. Chinese companies are scooping up massive amounts of
Speaker 1: data personal data everywhere. So you think about this and
Speaker 1: financial in China. Has it grew out of the payments
Speaker 1: system Ali pay this you bihooitous payments app that has
Speaker 1: seven hundred million or more Chinese uses, so basically and
Speaker 1: knows everything about the spending habits of pretty much everybody
Speaker 1: in China. And they're now doing these joint ventures with
Speaker 1: companies around Asia, India, Thailand, Philippines, um sort of retrofitting
Speaker 1: that buying into companies, retrofitting them with and technologies, and
Speaker 1: so they have a lot of insight into into the
Speaker 1: data of about a billion or more people now around
Speaker 1: the world, and could easily double that number inside five years.
Speaker 1: And what's the relationship between the US government and and
Speaker 1: financial I mean, that's got to be a lot of
Speaker 1: concern there. Yeah. So SO essentially has put into the
Speaker 1: category of national security risk. So Royters has reported that
Speaker 1: the US State Department under Mike Pompeo is trying its
Speaker 1: best to derail this this listing UH and um SO.
Speaker 1: It has proposed, according to Royter's that um and should
Speaker 1: go onto a blacklist. This entities list have only some
Speaker 1: it would have only symbolic importance. Is not like Huawei,
Speaker 1: which is rarely dependent completely dependent actually on US technology
Speaker 1: in this case on and it would be largely symbolic.
Speaker 1: But it would make the listing. Would it would definitely
Speaker 1: complicate this listing. It would put a cloud of uncertainty
Speaker 1: around its global expansion. Don't forget, the US is not
Speaker 1: the holy country in the world that's worried about China
Speaker 1: getting control over data. Europe has concerned. India, by the way,
Speaker 1: also banned TikTok uh not just the US, and as
Speaker 1: I said earlier, this really is a race for digital
Speaker 1: dominance around the world. I wonder though not even just
Speaker 1: the US, as you said, but other countries, how much sway,
Speaker 1: how much teeth do they actually have? I know Bloomberg
Speaker 1: Opinion described the TikTok deal as a quote empty threat.
Speaker 1: Once we saw it finally finished and through and President
Speaker 1: Trump had approved it. How much can other companies or
Speaker 1: other countries, I should say, actually do? I think? I
Speaker 1: think it really does depend on on the company one
Speaker 1: and number two, it depends on uh their level of
Speaker 1: dependency on US technology UM. But also I think it's
Speaker 1: a lot of it really depends on an overall assessment
Speaker 1: of Chinese risk. The problem that the private sector in
Speaker 1: China face is that they are seen as essentially um
Speaker 1: handmaidens of, or in throll to the Chinese state. I mean,
Speaker 1: private companies have an explicit mandate to serve the state.
Speaker 1: That's fine domestically insofar as it gives access to privileged capital,
Speaker 1: to protected markets. When they go overseas, they're they're they're
Speaker 1: trusted about as much as the they're as good as
Speaker 1: the Chinese state. And as we've seen from PW serve
Speaker 1: As just in the last week, levels of trust around
Speaker 1: the world towards China plunging. So andy, what I mean
Speaker 1: this this could be a big issue because I know
Speaker 1: aunts big and obviously China looking at India. What are
Speaker 1: the US plans strategy given TikTok, given everything that's going on. Yeah,
Speaker 1: well see, so this is this is a big difference
Speaker 1: where you have TikTok, which really took the US by storm.
Speaker 1: I mean it's tens of millions of active users, and
Speaker 1: financial actually has almost no business in the US unless
Speaker 1: you count Chinese travelers that are coming over to the
Speaker 1: US and and using and UH to access financial services
Speaker 1: back home. So you know, they made a big play
Speaker 1: in two thousand and eighteen to get to the Chinese market.
Speaker 1: They wanted to buy money Gram and Syphius. The agency
Speaker 1: that you know, UH that's foreign acquisitions in the US
Speaker 1: turned that down. So that was a big US play
Speaker 1: which was completely derailed by the by by by the
Speaker 1: US government. Andy Brown, thank you so much for joining us.
Speaker 1: We appreciate it. Andy Brown, he's the editorial director for
Speaker 1: Bloomberg New Economy, joining us on the phone from New
Speaker 1: York City. And Sarah, this is gonna be interesting. This
Speaker 1: is gonna be as Andy was just reporting, is going
Speaker 1: to be potentially the big is IPO on record? Um
Speaker 1: and this company is just extraordinary. You know it was
Speaker 1: once a part of Ali Baba. Just to give you
Speaker 1: a sense of just how big Ali Baba was before
Speaker 1: they spun this and financial off right, and Ali Baba
Speaker 1: does still own a third of and after spinning it out.
Speaker 1: But like you said, we think about the hype that
Speaker 1: was really surrounding Saudio Rampco when we saw that IPO.
Speaker 1: Imagine once this does go public, how much attention this
Speaker 1: is going to get across financial markets. Not just in
Speaker 1: Hong Kong. Yeah, and it's gonna be interesting the again,
Speaker 1: as we're talking to Andy Brown about this, the relationship,
Speaker 1: the trade relationship, the tensions between China and the US.
Speaker 1: UH it played out we saw play out in TikTok
Speaker 1: on that racial where we ended up there. But this
Speaker 1: is a company that is even more strategic from both
Speaker 1: Chinese perspective and perhaps from the US perspective that might
Speaker 1: warrant UH some you know, closer um oversight by regulators
Speaker 1: around the world. We have to see my coel journal now.
Speaker 1: But you let me drive. No, no, no, he's going
Speaker 1: to drug home. Please, I'll do the riding drivel lets me.
Speaker 1: I want to drive, Just drive, baby, question trying. This
Speaker 1: is the drive to the globe, Timmu. Thanks, we'll drying
Speaker 1: us down on Bloomberg Radio. All right, So I just
Speaker 1: got about eleven minutes Paul Sweeney left in today's trading session,
Speaker 1: and I feel like almost from the get go, it's
Speaker 1: just been like a rock slowly falling right going down
Speaker 1: the hill. We're just off our lows, but nonetheless we're
Speaker 1: pretty much near it down about one and a half
Speaker 1: percent about the SMP and Nastack down about one in
Speaker 1: a third percent on the Dow Jones Industrial average. Let's
Speaker 1: bring in Michael Cougino. He is president and part the
Speaker 1: manager at the Permanent Portfolio family of funds approximately two
Speaker 1: point two billion in assets under management, and he joins
Speaker 1: us on the phone from San Francisco. Michael, it's good
Speaker 1: to have you back with us. How are you not bad? Carl?
Speaker 1: How are you How are you doing? It's been a
Speaker 1: while in person, so it's great to be on. I
Speaker 1: had a thought listening to the montage on driving songs
Speaker 1: before this segment started. You guys gotta add Gary Newman
Speaker 1: here in my car. I will let early eighties my
Speaker 1: age demographic. I will definitely let our producer Paul Brennan
Speaker 1: know that. Um, you guys are doing well. You're a
Speaker 1: Permanent Portfolio fund in the nine percentile for funds in
Speaker 1: this category of the past five years, and you're up
Speaker 1: I guess around seven percent on average annually in each
Speaker 1: of the past five years. What's working right now in
Speaker 1: this environment? I mean, we know big tech has worked
Speaker 1: really well, those fang stocks. What are you finding is
Speaker 1: working well for you guys? Well? Broadly speaking, we tend
Speaker 1: to do better when markets are mixed an environment US
Speaker 1: are mixed, and you know, the last couple of years
Speaker 1: it's begun to be a more mixed picture than maybe
Speaker 1: the better part of the last ten years, which was
Speaker 1: you know, by S and P five hundred and by
Speaker 1: long bond funds and buying index and you did great, UM,
Speaker 1: and so you know, I think the next ten years
Speaker 1: are probably gonna look different. And as a result, I
Speaker 1: think the markets have started to reflect that. What's worked
Speaker 1: for US so far this year has been i would
Speaker 1: say the growth stocks UM, you know, have come back
Speaker 1: very strongly in a variety of industries. For US. We
Speaker 1: were buyers UM in February and March. We were also
Speaker 1: buyers recently in September, although not as great. We were
Speaker 1: nibbling in a lot of areas that we felt cut
Speaker 1: over sold and in the in the sell off as
Speaker 1: well as some you know, structurally sell off the areas
Speaker 1: like energy and materials and and some of the cyclical
Speaker 1: growth that that really is has lagged. UM. We'll also
Speaker 1: continue to hold some of our tech UM, and so
Speaker 1: that's worked well. I mean natural resources of you know,
Speaker 1: the begun to show some improvement, but they have a
Speaker 1: long way to go reats. You know, similar all the
Speaker 1: issues on the economy coming out of COVID and what's
Speaker 1: going to happen with UH entities that own assets that
Speaker 1: need to rent space, whether it's residential or industrial, or
Speaker 1: office or retail. UM and bonds have been a slight
Speaker 1: contributor for us UM. We've been you know, low duration,
Speaker 1: high quality. We've found some opportunities in the short term
Speaker 1: investment grade credit markets, so we've also gotten some contribution
Speaker 1: from bonds there. Hey, Michael, how about on the precious
Speaker 1: metal side, gold silver, I'm looking at gold here back
Speaker 1: up above nine announced. How are you doing that right now?
Speaker 1: You guys like gold? Michael? Right, yeah, you know what
Speaker 1: and I and I got I get into the stocks
Speaker 1: and bonds and didn't you know, neglected to mention the
Speaker 1: precious metals. The number one holding is that the number
Speaker 1: one holding in your fund gold gold is yes. So
Speaker 1: you know, I I mentioned industrial medals and and and
Speaker 1: and materials. But you know, the alternative currency side of things,
Speaker 1: the gold and silver of obviously worked for us UM.
Speaker 1: And I think there's a variety of reasons for that.
Speaker 1: I mean, you have negative really just rates across the
Speaker 1: curve starting with the third year and end and um
Speaker 1: and even worse globally. So that's us, and they look
Speaker 1: even worse when you look at you know, rates around
Speaker 1: the world. You have the uncertain environment with respect to COVID,
Speaker 1: you have the uncertain recovery, the duration, the length of
Speaker 1: the strength, the employment pictures mixed. You've got a really
Speaker 1: a lot of headline risk with respect to the election
Speaker 1: right now, um, and then what comes after that and
Speaker 1: so and and COVID really overrides it all given that
Speaker 1: we've never been through this, we've never shut down the
Speaker 1: country before and then tried to bring it back up. Um.
Speaker 1: And it's uh, you know, it's gonna be two steps
Speaker 1: forward one step back, which we're not surprised by. But
Speaker 1: that's it. That is in fact what's transpired, and we
Speaker 1: expect that to continue. Well, it should gain momentum given
Speaker 1: pent up demands, slacking labor, slacking capital, I mean, all
Speaker 1: those things argue for a continued momentum growing situation. When
Speaker 1: we get a vaccine, when we get a viral, or
Speaker 1: just if we get hurt immunity or something like that.
Speaker 1: So you know, there is an end to all this,
Speaker 1: and it's gonna be uncertain until we get there. Um.
Speaker 1: And since we've never been through it before, I really
Speaker 1: can't trust anybody's predictions about what's going to happen. And
Speaker 1: that's a big risk factor. But it's a vaccine, right ultimately,
Speaker 1: I mean, I don't think we expect her immunity to
Speaker 1: to fix this, so it's stay safe until we get
Speaker 1: a vaccine essentially, right, Well, that would be the one
Speaker 1: with the most certainty, but again we're we're dealing with
Speaker 1: a lot of unknowns here. And I know people are
Speaker 1: like to say trust the science, but from my perspective,
Speaker 1: science has been all over the place, um, and it's
Speaker 1: probably been just as useful to use common sense, social distance, UM,
Speaker 1: be smart about how you're interacting and where um, as
Speaker 1: as pure reliance and any sort of science. I mean,
Speaker 1: I've seen so many contradicting studies over the last seven months,
Speaker 1: and it's it's hard to know what works today versus
Speaker 1: a month ago. But I think when you use common
Speaker 1: sense and social distance and use your head, um, you
Speaker 1: can accomplish a lot. You're not gonna you're not gonna
Speaker 1: eliminate the risk, but you can minimize it. And uh,
Speaker 1: and I think the best way, you know it would
Speaker 1: be a vaccine. The most certain way to sort of
Speaker 1: snap your fingers and go would be a vaccine. It's
Speaker 1: an amazing pot. We didn't talk election. How did we
Speaker 1: not do that? Fifteen days? Right? Yeah? So Michael continue,
Speaker 1: could you know, does it does it matter to you
Speaker 1: who ends up in the White House. I'm not talking
Speaker 1: about your political preferences, but in terms of the financial
Speaker 1: markets understood, Um, the I think of the short term no, Um,
Speaker 1: there's there's pent up demand and the economy. So regardless
Speaker 1: of who wins in the short term, they're gonna look
Speaker 1: like a hero. In terms of economic recovery, um and
Speaker 1: both sides, uh, you know, appear to want stimulus at
Speaker 1: some level, whether it's before the election or after. And
Speaker 1: so from that standpoint, you have, you know, some alignment.
Speaker 1: What happens is after that, once that's sugar high of
Speaker 1: the initial recovery to pent up demand, all of that
Speaker 1: stuff begins to subside, then you have very different policy
Speaker 1: prescriptions that that really kind of coalesced around more government
Speaker 1: spending um and and that's going to drive economic growth
Speaker 1: on the Biden side, or more private sector spending, less regulation.
Speaker 1: You know on the Trump side of things, and then
Speaker 1: it gets into philosophical issues whether you you know which
Speaker 1: one you believe is better long term, which one do
Speaker 1: you believe is going to give you the better rate
Speaker 1: to return? Um? And you know there's there's a lot
Speaker 1: of evidence, you know, I smart people can construct cases
Speaker 1: all over the map on that one. I think the
Speaker 1: other factor, UM would be that how is Congress made up?
Speaker 1: We tend to focus a lot on the presidency, um,
Speaker 1: but the makeup of Congress, who owns which houses by
Speaker 1: what majority is also going to be issue. Uh So
Speaker 1: that matters. And I think investors generally have been so
Speaker 1: wrapped up in in the personalities, the headline, risk, etcetera,
Speaker 1: that I sense a lot of people haven't focused on
Speaker 1: policy yet and that may come to that may need
Speaker 1: need to be done or need to be better priceding
Speaker 1: going forward. All right, Michael Gugino, thank you so much,
Speaker 1: President portfolio manager at Permanent Portfolio family of funds. Say
Speaker 1: that five times fast on the phone from San Francisco.
Speaker 1: Thanks so much for listening to Bloomberg Business Week. Download
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