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Speaker 1: Welcome to the Bloomberg Penl podcast on Paul Swing You.

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Speaker 1: Along with my co host Lisa Brahma Waits, 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. There's been a lot of focus

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Speaker 1: on credit markets of late, due to some of the

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Speaker 1: big disruptions that we saw in pricing, and then the

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Speaker 1: Federal Reserve coming in and saying that for the first

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Speaker 1: time ever, it would buy corporate bonds through a separate

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Speaker 1: entity financed by the Treasury Department managed by black Rock,

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Speaker 1: giving a floor to a market that at one point

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Speaker 1: was in free fall. Joining us now to talk about

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Speaker 1: where the opportunities or potential future pitfalls continue to be

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Speaker 1: as Mike Buchanan, he's deputy Chief investment Officer at Western

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Speaker 1: Asset Management with more than four hundred billion dollars of

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Speaker 1: assets under management. Mike, I'm so glad we're gonna get

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Speaker 1: a chance to talk with you. Can you give us

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Speaker 1: a sense of a lay of the land, in other words,

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Speaker 1: how effective how as a federal reserve been in back

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Speaker 1: stopping the highest rated companies from facing default going forward.

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Speaker 1: Thanks LEAs and thanks for thanks for having me on UM.

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Speaker 1: You know, I think just the announcement alone UM that

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Speaker 1: they would be for the first time ever, as you said,

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Speaker 1: buying credit UM in one to five years investment grade

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Speaker 1: credit UM. The action itself that hasn't even really taken

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Speaker 1: place yet, but just the announcement of that has gone

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Speaker 1: a long way to restoring stability in the market, restoring

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Speaker 1: order in the market. You've seen a bounce from you

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Speaker 1: know where we were a couple of weeks ago, but

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Speaker 1: make you know, no, no, no confusion here that March

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Speaker 1: was a brutal, brutal month UM second worst month ever

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Speaker 1: for the high yield market UM, worst month ever for

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Speaker 1: investment grade corporate credit. So we've had a bounce UM.

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Speaker 1: But when you look at valuations where they are UM,

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Speaker 1: you know, still look at least on a history oracle

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Speaker 1: basis quite cheap UM. And I think the actions, not

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Speaker 1: only that the fed of of buying corporates, but the

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Speaker 1: Care Act, the accessibility for corporates to access two loans UM,

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Speaker 1: as well as just the the overall stimulus and relief package.

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Speaker 1: I think all those things have gone a long way

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Speaker 1: to bridging a gap to hopefully what will prove to

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Speaker 1: be a turning point in this in this horrible virus. So, Mike,

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Speaker 1: how do you guys just you know, take a look

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Speaker 1: at the market here. I mean, I know you guys

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Speaker 1: have been in a fixing come business a long time.

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Speaker 1: I mean are you do you tend to to step

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Speaker 1: back and and let the market play or you try

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Speaker 1: to go in here and try to find some opportunities. Yeah,

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Speaker 1: I mean, you know, we're we're always looking for opportunity,

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Speaker 1: and in markets like this, UM, even if you're not

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Speaker 1: outright adding risk because of all the dislocations, there's always

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Speaker 1: relative value trades that you could be doing. There's always, uh,

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Speaker 1: you know, one company issue where you could sell to

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Speaker 1: fund the purchase of another one that perhaps you have

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Speaker 1: a higher level of conviction and you think that offers

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Speaker 1: better risk adjusted returns UM. So you know these dislocations, UM,

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Speaker 1: you actually have seen volume trading volume increase UM. So

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Speaker 1: you hear a lot about illiquidity and markets have become

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Speaker 1: less liquid. However, the amount of inquiry, the amount of

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Speaker 1: desired trading is up substantially, um, and we're trying to

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Speaker 1: take advantage of that. We're you know, looking all over

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Speaker 1: both in high yield and investment grade credit and as

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Speaker 1: well as other spread sectors just to find the best opportunities. UM.

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Speaker 1: But I think all this, you know, you have to

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Speaker 1: start with that high level of you know what, what

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Speaker 1: is your view on the path of the virus, because

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Speaker 1: we know that's going to dictate how we emerge from

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Speaker 1: this this quarantine and shelter in place economy, and by association,

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Speaker 1: just how rich or cheap risk assets currently are. Let's

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Speaker 1: let's stick with the concept of market liquidity for a

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Speaker 1: second and pack a little bit of what you just say.

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Speaker 1: There is a lot of concern around the trillions of

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Speaker 1: dollars of triple B rated debts investment grade rated debt,

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Speaker 1: but at the lowest here the potential for it to

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Speaker 1: get downgraded to junk, thus igniting forced selling on the

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Speaker 1: part of investment grade bond managers. We have seen some

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Speaker 1: fallied angels, pretty sizable ones recently. How concerned are you

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Speaker 1: about that pressure creating some fire sales, creating a lot

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Speaker 1: of downward pressure on prices in the investment grade space,

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Speaker 1: and frankly also in the high yield spaces, those names

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Speaker 1: try to get absorbed into the pool of debt that's existent. Yeah,

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Speaker 1: I mean, it's it's a great question. And UM, you know,

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Speaker 1: we we we're seeing firsthand the early phases of that

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Speaker 1: with UM. You know, with certain issuers that are very

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Speaker 1: you know, almost a hundred billion that's going from investment

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Speaker 1: grade credit into high yield credit UH in April alone,

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Speaker 1: UM and what UM you typically see and this isn't

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Speaker 1: always the case, and I think this time, you know,

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Speaker 1: could certainly play out different it, but investment grade holders

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Speaker 1: are are proactive. They don't just simply wait for the

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Speaker 1: event of the downgrade or index inclusion. They are always

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Speaker 1: looking at UM, Okay, what do we need to do

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Speaker 1: over the next two weeks, what do we need to

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Speaker 1: do over the next month. So oftentimes you see UH

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Speaker 1: selling that actually occurs prior to these issuers going into

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Speaker 1: the benchmark. So with what we saw over the past

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Speaker 1: couple of weeks is some of those fallen angels that

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Speaker 1: we're going in this month actually hit their loads a

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Speaker 1: couple of weeks ago, and you started to see some

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Speaker 1: high yield buying UM I think it's really important for UH,

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Speaker 1: for investors to be looking at relative value. So, you know,

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Speaker 1: Western asset, we have two different teams, investment grade credit

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Speaker 1: and high yield credit, but they're very cohesive. They work together.

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Speaker 1: And the idea of comparing relative value for a fallen

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Speaker 1: angel and looking at it relative to what we see

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Speaker 1: perhaps in the high yield market, that could give us

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Speaker 1: a good UH template to work with in terms of Okay,

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Speaker 1: do we want to buy now do we want to

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Speaker 1: wait until it goes into the index? UM. So there's

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Speaker 1: there's a lot of dynamics that work there. But again,

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Speaker 1: I think that risk that you highlighted is very real,

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Speaker 1: and it's not just for corporate credit. UM. The longer

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Speaker 1: we're in this type of shutdown economy, UM, you know,

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Speaker 1: that has real ramifications for for municipal credit, UM, for

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Speaker 1: sovereign credit. So there's a lot of ways to look

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Speaker 1: at this. There's a lot of things to think about.

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Speaker 1: And again it goes back to what we talked about earlier.

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Speaker 1: It's how long are we going to be in this

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Speaker 1: type of economy and when will we start to see

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Speaker 1: some improvement in the path of the virus. So, Mike,

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Speaker 1: let's just kind of go there to that backdrop. A

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Speaker 1: lot of Wall Street firms out with some very dire

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Speaker 1: GDP numbers quarterly this year, with the second quarter being

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Speaker 1: particularly ugly, but then some have kind of bouncing back

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Speaker 1: in what might be called a v shape recovery in

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Speaker 1: three and four. What's kind of the backdrop that's the

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Speaker 1: of pends your out look there at Western Yeah, I

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Speaker 1: think we would agree. I mean it's you're seeing everyone

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Speaker 1: trip over themselves to downgrade growth forecast for you know,

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Speaker 1: for the for the second quarter. UM, it's going to

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Speaker 1: be ugly. We all know that. UM. You've you've seen

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Speaker 1: a virtual uh you know, halter drop in demand almost

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Speaker 1: nothing in certain industries. So the second quarter numbers, you know,

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Speaker 1: early third quarter, um, you know, are going to look

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Speaker 1: pretty brutal, and first quarters as well. UM. I think

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Speaker 1: the Fed and the Treasury have gone a long ways

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Speaker 1: to bridging the gap. I think they've bought time, UM,

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Speaker 1: and that's really important. I think the way that the

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Speaker 1: markets priced right now, UM, there is probably I would

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Speaker 1: say it's hard to really gauge, you know, what consensus

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Speaker 1: view is, but I think it's generally that um, you know,

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Speaker 1: the virus is brought under control by late second quarter,

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Speaker 1: perhaps early third quarter, UM called third quarter maybe a

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Speaker 1: transition and quarters people start going back to work. And

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Speaker 1: then by the fourth quarter, UM, you're you're starting to

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Speaker 1: get some of that bounce from pent up demand. So

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Speaker 1: we know that the time between now and then is

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Speaker 1: going to be pretty ugly. And I think you know, again,

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Speaker 1: the Fed and the Treasury, they they've done policy in general,

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Speaker 1: has done a great job of bridging that gap, right,

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Speaker 1: Mike Bichannan, thanks so much for joining us. We appreciate

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Speaker 1: your thoughts as always. Mike Bichannon's a deputy Chief investment

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Speaker 1: officer for Western Asset Management, a four and sixty billion

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Speaker 1: dollars under management, mostly in the fixed income side. They're

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Speaker 1: based in Pasadena, so I think, but Mike was suggesting

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Speaker 1: least a little bit more of a U type recovery,

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Speaker 1: and I think that's kind of maybe where the markets

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Speaker 1: evolving from a V to you hopefully not to an L. I.

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Speaker 1: I can't keep track. Are we in a W exactly?

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Speaker 1: So we'll see, but interesting, but that's clearly people trying

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Speaker 1: to just get a handle kind of on the path

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Speaker 1: of the coronavirus and the timing associated with it, because

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Speaker 1: that will obviously drive where the kind of how the

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Speaker 1: economy is able to open up again. On the other side,

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Speaker 1: given all the uncertainty that we have and certainty as

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Speaker 1: it relates to timing of this virus any impact on

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Speaker 1: the global economy, we welcome Peter Kenny, founder of Strategic

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Speaker 1: Board Solutions. Peter, thanks so much for joining us. UM.

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Speaker 1: You know, give us a sense of kind of how

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Speaker 1: you're viewing markets here from a thirty foot view level. Yeah, Paul,

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Speaker 1: good morning UM. You know, first of all, interestingly, UM

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Speaker 1: first day at Q two UM smps down two UM

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Speaker 1: and it seems to be holding the level, which I

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Speaker 1: think is extremely interesting because given all of the negative

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Speaker 1: news and given the negative breath of the market, to

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Speaker 1: be holding at UH what could end up being a

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Speaker 1: very important technical level is significant. Of course, the Dow,

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Speaker 1: the NaSTA, CAN, Positi sp are all lower, and global

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Speaker 1: markets are lower, and clearly Q two is shaping up

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Speaker 1: to be a very very tough quarter at least for

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Speaker 1: April UM. But so far the markets are doing better

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Speaker 1: than frankly I was expecting this morning, Peter, I think

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Speaker 1: a lot of people are thinking that Howard marks his

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Speaker 1: latest memo kind of outlined how there's still a lot

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Speaker 1: of optimism baked into current valuations and equities if you

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Speaker 1: just look at, for example, the multiples that are baked

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Speaker 1: in here. I'm wondering there seems to be a push

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Speaker 1: pull here of the money being pumped into the system

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Speaker 1: by central banks globally and frankly by government's globally, mixed

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Speaker 1: with the idea that we have a complete global shutdown

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Speaker 1: and production and activity in an unprecedented way. Can government

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Speaker 1: money overwhelmed that and be the predominant driver here? Well,

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Speaker 1: that that at the end of the day, that that's it.

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Speaker 1: You just put your finger on on the real The

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Speaker 1: conversation is government money, government liquidity, whether it comes in

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Speaker 1: the form of fiscal or monetary policy, is it up

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Speaker 1: to the task of really addressing in an efficient manner

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Speaker 1: the risks inherent in the market that is in the

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Speaker 1: stage is early stages of a global shutdown. So I mean, investors, markets,

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Speaker 1: the global economy are all being held hostage by this

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Speaker 1: COVID nineteen pandemic, and the federal governments, not just in

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Speaker 1: the United States, and as you accurately point out, globally,

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Speaker 1: are doing everything conceivable to address this shutdown, this this

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Speaker 1: tightening up of credit. Um, there really is no other option. Um,

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Speaker 1: that's all we can do. And hope that in time

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Speaker 1: that what is being thrown at this finds traction with investors,

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Speaker 1: investors find opportunity in that and begin to once again

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Speaker 1: take that it, you know, take on that sense of

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Speaker 1: there's a risk worth taking in the market. I think

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Speaker 1: we'll find that. And oddly, and in a very counterintuitive

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Speaker 1: sense of things, this morning, the fact that the SMP

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Speaker 1: has remained at in spite of the fact that it's

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Speaker 1: trade fractionally lower on an all morning is significant because

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Speaker 1: it's saying it's telling us that there there is a

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Speaker 1: bit of a risk appetite in the market, as counterintuitive

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Speaker 1: as that may seem. Well, Peter, this is sort of

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Speaker 1: the theoretical idea I've been struggling with for a couple

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Speaker 1: of days now, this idea that you have governments around

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Speaker 1: the world printing cash, printing money as quickly as they

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Speaker 1: can through their central banks and through their government spending,

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Speaker 1: and yet inflation expectations are coming down. In the past,

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Speaker 1: this has been consistent, however, asset inflation has been real,

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Speaker 1: and I'm wondering at what point this will trickle into,

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Speaker 1: at the very least asset price inflation. Yet again, yes, right, well, frankly,

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Speaker 1: I think that policymakers on both sides of that equation,

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Speaker 1: fiscal and monetary, are looking for inflation, whether it be

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Speaker 1: an asset inflation or otherwise. Any inflation would be welcomed

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Speaker 1: frankly and expected given every form of economic modeling. This

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Speaker 1: level of cash generation and liquidity being forced through the

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Speaker 1: system should absolutely should provide for some sort of inflationary

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Speaker 1: lift two markets. That's the idea. Do we get it?

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Speaker 1: I think we do get it, Lisa, I think we

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Speaker 1: do get it. But there is a drag. There's a

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Speaker 1: lag between fiscal monetary policy and accelerated liquidity being pumped

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Speaker 1: through the system and markets and investors willing to step

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Speaker 1: out of the risk offen into the risk on and

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Speaker 1: start taking advantage of that opportunity, because it is an opportunity,

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Speaker 1: all right. So, Peter, if you are willing to look

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Speaker 1: past to the other side, where do you think investors

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Speaker 1: should tread first? Okay? So I think there are two

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Speaker 1: basic DCCs which you have to sort of get your

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Speaker 1: head around looking past this. For first of all, is

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Speaker 1: it a V shape or is it a U shape? Um.

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Speaker 1: I think it's something in between. But I don't think

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Speaker 1: that this lasts longer than three quarters in terms of

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Speaker 1: the ability of the economy to find real sustainable even

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Speaker 1: if it's marginal but sustainable economic expansion. So I'm actually optimistic.

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Speaker 1: On the other side of this, I think there's two

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Speaker 1: basic themes that you can go with. One is growth

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Speaker 1: and the other is a less growth centric and more

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Speaker 1: of a given in centric, very very low beta sort

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Speaker 1: of portfolio. I like both. I tend to be on

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Speaker 1: the on the former rather than the ladder in terms

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Speaker 1: of I tend to be a more of a growth

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Speaker 1: of investor, and I think there's huge opportunity UM in cloud,

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Speaker 1: huge opportunity in cloud, huge opportunity in in retail online,

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Speaker 1: and I have remained very, very convinced. So that's a

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Speaker 1: big part of the future for investors. Peter Kenny of

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Speaker 1: the Strategic Board Solutions founder joining us from New Jersey

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Speaker 1: really insightful. A lot of push pull cross currents at

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Speaker 1: a time, and a lot of people are flying blind.

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Speaker 1: This is bloomberg well. As the coronavirus continues to spread

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Speaker 1: and shuts down large parts of the economy. One of

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Speaker 1: the questions is what's going on in the world of

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Speaker 1: real estate. To answer that, we welcome Best Friedman Cheese

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Speaker 1: as CEO of Brown Harris Stevens, based in New York City. Best,

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Speaker 1: thanks so much for joining us. So what is going

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Speaker 1: on in the world of real estate? Has that completely

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Speaker 1: shut down as well? Yeah? Hi, good morning, Hi, Parhi Lisa,

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Speaker 1: how are you? Um, you know, it has I mean,

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Speaker 1: we we had a really we closed March, and the

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Speaker 1: numbers were very good for March, but that was business

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Speaker 1: from a different market. And now because you know, agents

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Speaker 1: cannot show properties. Um, well, you know, the market has

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Speaker 1: completely slowed, has been completely hated because we're still able

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Speaker 1: to do some closings and we're still you know, agents

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Speaker 1: are still getting calls from you know, consumers, but it

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Speaker 1: has slowed down incredibly, Yes, and we expected to slow

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Speaker 1: further into April. Bus heading into this the New York

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Speaker 1: City a real estate market was already slowing. We saw

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Speaker 1: declines and prices pretty much across the board, particularly the

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Speaker 1: luxury sector and the larger apartments. And I'm just wondering

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Speaker 1: how much this is going to just accelerate those declines. Yeah,

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Speaker 1: I think this is definitely accelerating those declines. Uh, you know,

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Speaker 1: for speaking about new developments, I mean all of those,

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Speaker 1: every project is stopped, they can't continue work, they can't

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Speaker 1: do you know, showing the sites are closed. Um. So

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Speaker 1: I think that it's going to take a little while

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Speaker 1: for it to pop back. Um. But I think that's

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Speaker 1: just being aggravated by all of this. So best given word,

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Speaker 1: I mean, interest rates are historically low. Um. But the

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Speaker 1: reality is, I mean this is are you can or

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Speaker 1: that this calls into question New York as a real

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Speaker 1: attractive place to own real estate, to live in, that

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Speaker 1: type of thing, given that we are one of the epicenters. No,

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Speaker 1: I mean, listen, this is not permanent. Remember the virus

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Speaker 1: is hopefully a temporary saying. The question is when is

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Speaker 1: the peak which people experts are saying, and I'm listening

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Speaker 1: to the experts that we have another week or two

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Speaker 1: until we hit the peak, and then once we get

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Speaker 1: this under control, the uncertainty goes away and we're back

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Speaker 1: to business. I mean, this is not forever and ever.

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Speaker 1: I mean, this is a virus that needs to be uh.

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Speaker 1: We hopefully will have some sort of cure, vaccinations, something

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Speaker 1: that helps, but right now people are concerned for their lives,

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Speaker 1: and until we get that under control, you know, you're

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Speaker 1: not going to have calmness. And consumer morale is low

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Speaker 1: right now, but it should be. If people wanted to

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Speaker 1: go out there and shop, I'd be worried. You know,

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Speaker 1: it's not go ahead. I'm sorry, No, it's fine. I

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Speaker 1: mean best if you take a step back. I've talked

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Speaker 1: to a number of people who are wondering about a

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Speaker 1: flight from the City's basically saying, look, if we're gonna

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Speaker 1: get pandemics, if this is gonna happen again, why do

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Speaker 1: we want to be in a concentrated area with lots

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Speaker 1: of people who are breathing all over each other. Why

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Speaker 1: not go somewhere where there's a lot of open space.

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Speaker 1: You got a yard, you can get away from people,

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Speaker 1: social distance all you want. And I'm just wondering, I mean,

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Speaker 1: do you expect that kind of flight away from New

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Speaker 1: York City in response to this a sort of an

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Speaker 1: existential threat. I mean, listen, you were you guys lived

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Speaker 1: through nine eleven. I was here as well, and there

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Speaker 1: was for a few months after that people were afraid.

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Speaker 1: They're like, should we leave New York City. I'm afraid

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Speaker 1: there's gonna be another bombing. We're gonna you know, we're

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Speaker 1: a target. And what happened is came January, the market

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Speaker 1: went crazy. People believed in this city and they still

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Speaker 1: believe in this city today. We are the most resilient

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Speaker 1: city in the world. And I don't believe people are

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Speaker 1: going to want to just move to the suburbs because

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Speaker 1: of this. We love to be together, we need each other.

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Speaker 1: We just need to get it under control. So I

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Speaker 1: don't think that that's going to be the result of

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Speaker 1: this at all. We love to be we love to

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Speaker 1: be together. Just Paul, don't breathe on me. That's right exactly.

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Speaker 1: So that's what do we do. What do you think

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Speaker 1: is going to happen from the international buyer that's been

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Speaker 1: such a big supporter of the luxury market, particularly in

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Speaker 1: New York City, You know, I think that has that

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Speaker 1: had slowed down anyway, as Lisa had indicated, UM, but

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Speaker 1: I think, you know, I'm hoping that morale will come

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Speaker 1: back over the summer. But you know, that has been

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Speaker 1: a big question mark for everyone because we have seen

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Speaker 1: a flow down of that for over a year now,

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Speaker 1: and um, it's been more domestic that's been buying the

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Speaker 1: high end luxury stuff, and so you know, I I

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Speaker 1: don't know. I mean, that's for me, it's anybody's gas

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Speaker 1: at this point, I don't know. There's also a question

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Speaker 1: how quickly the New York City housing market will recover.

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Speaker 1: Do you have a sense of that? I mean, I

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Speaker 1: understand we have to wait and see what the virus

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Speaker 1: brings in terms of just the virology of it. But

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Speaker 1: do we have a sense of, once we have that

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Speaker 1: kind of under wraps or there's some kind of solution,

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Speaker 1: how quickly it'll take. Yeah. I mean, I think second

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Speaker 1: quarter is going to be very challenging for all of

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Speaker 1: us because all the you know, businesses slowed and people

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Speaker 1: aren't gonna be writing much new business. And then hopefully

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Speaker 1: third quarter is when we start to see I think

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Speaker 1: economists have been talking about this sort of v shaped recovery,

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Speaker 1: you know where things kind of jump, you know, drop

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Speaker 1: off a cliff and then pop back up. I'm hoping

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Speaker 1: that we're going to see something like that because we

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Speaker 1: had a lot of pent up demands and I'm hoping

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Speaker 1: that we pop back up come let's say September, after

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Speaker 1: the summer that the market gets back to its regular business.

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Speaker 1: Best give us a sense of how things are in

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Speaker 1: the mortgage market. We've seen some real stress in the

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Speaker 1: mortgage market over the last couple of weeks. Yeah, they.

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Speaker 1: I spoke to a colleague at Wells recently and he

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Speaker 1: told me that that environment is also very challenged. He's

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Speaker 1: not really originating many loans. You know, people are slowed

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Speaker 1: down incredibly. Um he's giving advice to people because rates

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Speaker 1: are really low and people are doing some refives. I mean,

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Speaker 1: now it's a good time to do a refinance if

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Speaker 1: you'd like, but to originate a new loan for a

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Speaker 1: new purchase has really slowed down, and I think that's

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Speaker 1: going to be challenging for a lot of people in

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Speaker 1: the mortgage industry. Definitely. The one plus is that the

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Speaker 1: Hampton's um at least I had mentioned. I mean, because

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Speaker 1: people do want to get out of the city because

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Speaker 1: of the density and they don't want to be close

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Speaker 1: to each other. You know. That rental market, Our environment

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Speaker 1: there has been crazy. We can't keep anything on the

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Speaker 1: market there. People. Everything has been rented. So that's one plus,

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Speaker 1: I guess in this environment. Yeah, Actually, I've been hearing

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Speaker 1: anecdotes of people who try to rent a house out there,

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Speaker 1: and it's just the rates are absolutely outrageous and I'm

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Speaker 1: just trying to figure out is that going to have

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Speaker 1: lasting power? Is this also just sort of a temporary,

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Speaker 1: da jerk, get me out of here for the moment

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Speaker 1: kind of thing that will fade as time goes on. Yeah,

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Speaker 1: I think it's you're seeing a knee jerk, Like everybody

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Speaker 1: is trying to get out of the city, and if

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Speaker 1: they don't have a place, you know, upstate, they want

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Speaker 1: to go to the Hampton's or if they have a

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Speaker 1: house there, they're going there. So I think people are

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Speaker 1: trying to take a little bit advantage of the fact

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Speaker 1: that there's a real demand to have like a house,

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Speaker 1: especially if you have children. Um, if you're stuck in

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Speaker 1: a very small space, we all know that that could

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Speaker 1: be challenging. Wheelbarrows if you if you do wheelbarrows up

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Speaker 1: and down the hallway, it's really effective. And I'm also

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Speaker 1: forcing them to run up and down the stairs. Amazing

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Speaker 1: that as well. Yeah, dumping jags, alexas Uh, you work

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00:22:29,800 --> 00:22:36,160
Speaker 1: out seven minute workouts, highly recommend best freedomen to every day. Yeah,

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Speaker 1: I do them with my kids best. Fred Ben, chief

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Speaker 1: executive officer of Brown Harris Stevens in New York, join

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Speaker 1: you guys to talk about the real estate market. It

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Speaker 1: is amazing that creative ways that uh that you have

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Speaker 1: to you have to try to make sure that they

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Speaker 1: get out their energy. I'm telling you wheelbarrows are great

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Speaker 1: because they also don't create noise for the neighbors downstairs,

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Speaker 1: so it's it's great. It's for the upper body, really good,

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Speaker 1: hold their legs, make walk up and out until they

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Speaker 1: cantymore is great. One of the themes of this entire

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Speaker 1: coronavirus induced shutdown that we're experiencing globally has been the

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Speaker 1: shift and the acceleration in the shift to the cloud

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Speaker 1: to online business transactions and delivery, and the question of

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Speaker 1: Amazon's role very much front and center, is They've become

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Speaker 1: a lifeline for so many households to just get basic

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Speaker 1: food and other staples. Joining us now Alex Webb of

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Speaker 1: Bloomberg opinion columnist in London, and Alex, there's a question

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Speaker 1: here as we look at Amazon's role, which they have

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Speaker 1: made sure to maintain and said they were going to

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Speaker 1: hire a many more employees, of whether they continue on

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Speaker 1: their premise of delivering cheaply and quickly at a time

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Speaker 1: when they are actually the main way that people are

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Speaker 1: getting supplies that they need. Yeah, the issue is to

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Speaker 1: here that there have been a significant number of complaints

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Speaker 1: from their employees about the working conditions in that fulfillment sentence.

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Speaker 1: We've seen a strike badist more one um in Catn Island.

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00:24:02,760 --> 00:24:05,159
Speaker 1: We've got Whole Foods employees, Whole Foods of course a

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00:24:05,240 --> 00:24:10,160
Speaker 1: unit of Amazon. Sorry, um, you know, essentially striking as well.

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00:24:10,160 --> 00:24:12,320
Speaker 1: They're actually claiming the six days, but it is a

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00:24:12,480 --> 00:24:17,679
Speaker 1: is a protest and they've been strikes in Italy, not

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Speaker 1: restricted to those countries, they have been a plaintuff where

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00:24:20,280 --> 00:24:23,160
Speaker 1: and their argument is that we we're filling a crucial

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00:24:23,200 --> 00:24:25,800
Speaker 1: service right now, but actually we're not being protected as

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00:24:25,800 --> 00:24:29,480
Speaker 1: well as we think we should be. And what it

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00:24:29,480 --> 00:24:31,560
Speaker 1: means to us is that we often don't really question

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Speaker 1: how we're getting these deliveries. You know, we we've heard

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00:24:34,160 --> 00:24:38,600
Speaker 1: we click something on Amazon, Amazon's website and next day, um,

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00:24:38,640 --> 00:24:42,160
Speaker 1: it arrives on our doorstep, and often that has human cost,

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00:24:42,240 --> 00:24:45,879
Speaker 1: and that cost has probably been potentially been accentuated in

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00:24:45,920 --> 00:24:49,520
Speaker 1: the current situation. So Alex do we have a sense

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00:24:49,520 --> 00:24:52,639
Speaker 1: of how Amazon is performing just in terms of the

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00:24:52,680 --> 00:24:56,240
Speaker 1: basic functions of delivery right now, they have sort of

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00:24:56,280 --> 00:25:02,679
Speaker 1: restricted their warehouses too, only particularly in crisis countries like Italy,

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00:25:02,920 --> 00:25:06,000
Speaker 1: the only taking essential goods. Now, that doesn't necessarily mean

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00:25:06,000 --> 00:25:08,520
Speaker 1: they're not delivering essential goods, but it means they're not

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00:25:08,560 --> 00:25:11,399
Speaker 1: replenishing them in their warehouses, so it might be harder

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Speaker 1: to get hold of some of those things. And ultimately,

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Speaker 1: you know, there is a lot of expectation from the

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00:25:17,240 --> 00:25:19,320
Speaker 1: anis community covering the company that there will be a

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Speaker 1: significant uplift in um in demand for e commerce offering,

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00:25:25,119 --> 00:25:29,560
Speaker 1: and that seems to be reflected in the statements in

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00:25:29,600 --> 00:25:31,800
Speaker 1: the company, which you know, Jeff Bezos CEO has said

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Speaker 1: they're going to hire hundred thousands more employees in this

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00:25:35,400 --> 00:25:38,359
Speaker 1: period to try to meet demand. You know, I was

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00:25:38,359 --> 00:25:41,159
Speaker 1: struck by a Well Street Journal story yesterday talking about

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Speaker 1: how the employees at Amazon have so much more leverage

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Speaker 1: than ever before, and not just Amazon, but EPs and

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00:25:47,280 --> 00:25:48,919
Speaker 1: a lot of the other businesses that are on the

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00:25:48,920 --> 00:25:51,320
Speaker 1: front lines, and we're employees actually still have to go

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00:25:51,359 --> 00:25:54,879
Speaker 1: to work and face off with the potential of getting

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00:25:54,880 --> 00:25:58,040
Speaker 1: the virus, and it talked about how Amazon now gives

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00:25:58,080 --> 00:26:01,040
Speaker 1: its employees in the US and Canada two dollars more

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00:26:01,080 --> 00:26:04,199
Speaker 1: per hour. Now there are more sickly benefits. There's a

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00:26:04,240 --> 00:26:09,000
Speaker 1: feeling that the shift toward better employee treatment will lead

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00:26:09,200 --> 00:26:12,080
Speaker 1: to consumers having to pay more. How much more are

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00:26:12,119 --> 00:26:15,760
Speaker 1: we expecting to look at? So I actually I am sorry,

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00:26:15,800 --> 00:26:19,800
Speaker 1: but I just fundamentally disagree with that premise. Uh. If anything,

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00:26:19,840 --> 00:26:23,840
Speaker 1: Amazon is in a far stronger position than right now

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00:26:24,280 --> 00:26:27,719
Speaker 1: than it was a month ago, because there are so

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00:26:27,760 --> 00:26:30,400
Speaker 1: many more unemployed people and that means they are far

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00:26:30,480 --> 00:26:33,800
Speaker 1: greater scope. As we saw with the guy who kicked

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00:26:33,880 --> 00:26:39,080
Speaker 1: up the the fast with Amazon insat n you know,

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00:26:39,440 --> 00:26:42,880
Speaker 1: it's responseful kind of rallying the protest lost his job

483
00:26:42,920 --> 00:26:47,000
Speaker 1: because Amazon, We'll hire something else. There is three million

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00:26:47,000 --> 00:26:48,520
Speaker 1: people out of a job in the US right now.

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00:26:48,600 --> 00:26:51,400
Speaker 1: You know what, Alex, I'm really glad that you're saying that,

486
00:26:51,480 --> 00:26:54,320
Speaker 1: because that is one side of the equation there the employee,

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00:26:54,640 --> 00:26:58,440
Speaker 1: uh that actually still is the employer that's having actually

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00:26:58,920 --> 00:27:01,880
Speaker 1: um higher in spray. At the same time, you are

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00:27:01,960 --> 00:27:04,840
Speaker 1: seeing them make more concessions to their workers to keep

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00:27:04,840 --> 00:27:07,680
Speaker 1: people coming in, and you're seeing absentee rates climb, So

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00:27:08,040 --> 00:27:11,800
Speaker 1: at what point does that power shift back to the employees.

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00:27:13,680 --> 00:27:16,640
Speaker 1: I mean, the concessions they're making a temporary they're saying,

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00:27:16,640 --> 00:27:18,880
Speaker 1: we'll pay you two dollars an hour, um. I think

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00:27:18,920 --> 00:27:20,880
Speaker 1: at the moment it's still the under April UM. They're

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00:27:22,240 --> 00:27:25,240
Speaker 1: changing over time pay as well. You know, these are

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00:27:25,400 --> 00:27:27,399
Speaker 1: temporary measures which we don't know if they're going to

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00:27:27,400 --> 00:27:30,040
Speaker 1: carry on in the long term. Now, my personal view

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00:27:30,119 --> 00:27:33,879
Speaker 1: is that we as consumers are responsible here for actually

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00:27:33,920 --> 00:27:36,320
Speaker 1: perpetuating this. We Amazon has done quite well and sort

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00:27:36,320 --> 00:27:38,520
Speaker 1: of grooming us to expect that stuff should turn up

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00:27:38,520 --> 00:27:40,800
Speaker 1: the next day. We don't ask about the cost and

502
00:27:41,000 --> 00:27:43,600
Speaker 1: um And itself going to really afford to do that

503
00:27:43,640 --> 00:27:46,960
Speaker 1: because it has a cloud business which is hugely profitable

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00:27:47,000 --> 00:27:51,159
Speaker 1: and that subsidizes the loss making or low margins on

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00:27:51,200 --> 00:27:53,560
Speaker 1: the e commerce side. But that's very hard for anyone

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00:27:53,600 --> 00:27:55,840
Speaker 1: else to compete with. You know, other companies do not

507
00:27:55,960 --> 00:27:59,240
Speaker 1: have the benefit of that's hugely profitable cloud business. Um

508
00:27:59,320 --> 00:28:02,479
Speaker 1: and yet so yet they're trying to compete with Amazon

509
00:28:02,480 --> 00:28:04,639
Speaker 1: on the delivery front. And what we see is across

510
00:28:04,680 --> 00:28:09,320
Speaker 1: the board a reduction in the in the kind of uh,

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00:28:09,640 --> 00:28:13,560
Speaker 1: you know, rewards that their employees are able to get

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Speaker 1: the hard work Sweb. Thank you so much for joining us.

513
00:28:17,080 --> 00:28:20,680
Speaker 1: Alex is eat European Technology Calmness for Bloomberg Opinion joining

514
00:28:20,760 --> 00:28:23,560
Speaker 1: us from London and Lisa. I think that's a great

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00:28:23,680 --> 00:28:25,840
Speaker 1: discussion you and Alex we're having just kind of who

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00:28:25,880 --> 00:28:29,080
Speaker 1: has the leverage here, um in the case of Amazon,

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00:28:29,160 --> 00:28:31,840
Speaker 1: you know, the workers versus Amazon. Uh, there's certainly a

518
00:28:31,880 --> 00:28:34,360
Speaker 1: strong case to be made on both sides. Look, Amazon

519
00:28:34,400 --> 00:28:36,400
Speaker 1: has already come out and said you can expect your

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00:28:36,400 --> 00:28:39,760
Speaker 1: deliveries to be delayed, right, how many people are are

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00:28:39,800 --> 00:28:42,240
Speaker 1: protesting or how many people have for you know, Fresh

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00:28:42,280 --> 00:28:44,400
Speaker 1: Direct and other delivery service. It's come under a lot

523
00:28:44,440 --> 00:28:47,200
Speaker 1: of strain, are trying to look for other avenues because

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00:28:47,200 --> 00:28:50,080
Speaker 1: it's so overwhelmed that it can't actually deliver in any

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00:28:50,080 --> 00:28:53,080
Speaker 1: reasonable amount of time. It just raises a question, right,

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00:28:53,120 --> 00:28:55,680
Speaker 1: this leverage for the workers is a temporary or are

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00:28:55,720 --> 00:28:58,000
Speaker 1: they going to be forced to continue, especially as we

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00:28:58,000 --> 00:29:01,000
Speaker 1: see the walkouts continue to percolate throughout the country as

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00:29:01,040 --> 00:29:05,640
Speaker 1: far as workers at Amazon. Thanks for listening to the

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00:29:05,640 --> 00:29:08,280
Speaker 1: Bloomberg P and L podcast. You can subscribe and listen

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00:29:08,280 --> 00:29:11,600
Speaker 1: to interviews at Apple podcasts, or whatever podcast platform you prefer.

532
00:29:11,840 --> 00:29:14,520
Speaker 1: I'm Paul Sweeney. I'm on Twitter at pt Sweeney. I'm

533
00:29:14,560 --> 00:29:17,280
Speaker 1: Lisa abram Wits. I'm on Twitter at Lisa A. Bram Wits.

534
00:29:17,320 --> 00:29:20,120
Speaker 1: One before the podcast, you can always catch us worldwide.

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00:29:20,160 --> 00:29:21,160
Speaker 1: I'm Bloomberg Radio