1 00:00:00,160 --> 00:00:03,360 Speaker 1: This is Bloomberg Wall St Week. What's the state of 2 00:00:03,400 --> 00:00:06,360 Speaker 1: corporate governance? The deficit is a real issue. The US 3 00:00:06,400 --> 00:00:09,800 Speaker 1: economy continues to send mixed signals to the financial stories 4 00:00:09,800 --> 00:00:12,680 Speaker 1: that keep our world fed, action to con concerns over 5 00:00:12,760 --> 00:00:16,240 Speaker 1: dollar liquidity, and encouraging China data the five hundred wealthiest 6 00:00:16,239 --> 00:00:18,360 Speaker 1: people in the world. Through the eyes of the most 7 00:00:18,480 --> 00:00:22,520 Speaker 1: influential voices, Larry Summers, the former Treasury Secretary, star Ward CEO, 8 00:00:22,640 --> 00:00:26,360 Speaker 1: Kevin Johnson sec Chairman J Clayton, Bloomberg wool Street Week 9 00:00:26,480 --> 00:00:30,720 Speaker 1: with David Weston from Bloomberg Radio. The long and winding 10 00:00:30,760 --> 00:00:33,720 Speaker 1: election road, but has it led us home or to 11 00:00:33,760 --> 00:00:37,600 Speaker 1: the courthouse? This is Bloomberg Wall Street Week. I'm David Weston, 12 00:00:38,120 --> 00:00:41,159 Speaker 1: with an economy trying its best to recover, but still 13 00:00:41,240 --> 00:00:44,080 Speaker 1: leaving over ten million people out of work, and with 14 00:00:44,120 --> 00:00:48,600 Speaker 1: a coronavirus that doesn't know the difference between Republicans and Democrats, 15 00:00:49,000 --> 00:00:51,560 Speaker 1: and it gets its own sort of vote in our 16 00:00:51,600 --> 00:00:55,200 Speaker 1: collective future. To help us start to make some sense 17 00:00:55,200 --> 00:00:57,080 Speaker 1: of it all, we welcome now the man who advised 18 00:00:57,080 --> 00:01:00,280 Speaker 1: President George W. Bush on the economy, Glenn Hubbard. He 19 00:01:00,400 --> 00:01:02,800 Speaker 1: served as the chairman of the Council of Economic Advisors 20 00:01:02,800 --> 00:01:04,520 Speaker 1: and the president, George W. Bush, who went on to 21 00:01:04,560 --> 00:01:06,760 Speaker 1: be dean at the Columbia Business School and is now 22 00:01:06,840 --> 00:01:09,600 Speaker 1: professor of Finance and Economics there, thank you so much. 23 00:01:09,640 --> 00:01:11,760 Speaker 1: It's great to have you as a contributed as program, 24 00:01:11,800 --> 00:01:13,720 Speaker 1: so Glenn, give us a sense. In addition, by the 25 00:01:13,720 --> 00:01:15,560 Speaker 1: way to the election, we also had some jobs numbers 26 00:01:15,600 --> 00:01:17,160 Speaker 1: that come out and the end of the week and 27 00:01:17,160 --> 00:01:20,200 Speaker 1: they were quite heartening, although there's still ten million, over 28 00:01:20,240 --> 00:01:22,280 Speaker 1: ten million Americans who don't have a job who did 29 00:01:22,280 --> 00:01:24,600 Speaker 1: before the pandemic. Give us your sense of the economy 30 00:01:24,680 --> 00:01:26,760 Speaker 1: right now and what does it need going forward, no 31 00:01:26,800 --> 00:01:29,760 Speaker 1: matter who the president is. Well did the jobs numbers 32 00:01:29,760 --> 00:01:33,920 Speaker 1: do indicate a bounce back, particularly in private sector employment, 33 00:01:33,959 --> 00:01:38,800 Speaker 1: which was higher as a government retraction. But we've got 34 00:01:38,800 --> 00:01:41,360 Speaker 1: a long way to go. We have not bounced back 35 00:01:41,400 --> 00:01:43,520 Speaker 1: anywhere close as you said it to a ten million 36 00:01:43,640 --> 00:01:47,160 Speaker 1: jobs short an economist view, I think that the level 37 00:01:47,200 --> 00:01:50,200 Speaker 1: of output won't recover until well into if not late 38 00:01:50,320 --> 00:01:53,520 Speaker 1: next year, relative to what it was this past February. 39 00:01:53,800 --> 00:01:55,520 Speaker 1: You've got a long way to go. What the economy 40 00:01:55,640 --> 00:01:58,760 Speaker 1: needs at the moment. Obviously, his first and foremost getting 41 00:01:58,800 --> 00:02:02,960 Speaker 1: the virus under control. Bold that's uh, prophylactic practices. In 42 00:02:03,040 --> 00:02:05,720 Speaker 1: the near term, it's a vaccine and the medium run, 43 00:02:06,160 --> 00:02:08,600 Speaker 1: but we also need a more fiscal support. It was 44 00:02:08,639 --> 00:02:10,720 Speaker 1: hardened to see that there is a discussion of a 45 00:02:10,760 --> 00:02:14,360 Speaker 1: package that could include things like a two states picking 46 00:02:14,440 --> 00:02:18,119 Speaker 1: up unemployment insurance compensation. And I would hope some assistance 47 00:02:18,160 --> 00:02:20,720 Speaker 1: for small and mid sized businesses as well. That's I 48 00:02:20,720 --> 00:02:23,640 Speaker 1: think what we need in the mid term. So I 49 00:02:23,680 --> 00:02:25,799 Speaker 1: think just about everybody at this point agrees we need 50 00:02:25,840 --> 00:02:28,440 Speaker 1: to get some more stimulus here, fiscal stimulus. We heard 51 00:02:28,560 --> 00:02:30,440 Speaker 1: an addition from j Pole, the Chairman of the FED, 52 00:02:30,639 --> 00:02:34,040 Speaker 1: saying just that this week. Right now, Glen, I think 53 00:02:34,080 --> 00:02:36,160 Speaker 1: it looks like the president is going to have to 54 00:02:36,200 --> 00:02:39,320 Speaker 1: govern from the middle no matter what. The one thing 55 00:02:39,360 --> 00:02:41,720 Speaker 1: that seems clear from the selection is the people basically 56 00:02:41,760 --> 00:02:43,400 Speaker 1: got together and said, we don't like the far right, 57 00:02:43,440 --> 00:02:45,760 Speaker 1: we don't like the far left. We'd like something in between. 58 00:02:46,639 --> 00:02:49,560 Speaker 1: Where could they be common cause? You mentioned infrastructure, Is 59 00:02:49,600 --> 00:02:52,919 Speaker 1: that a source of common agreement perhaps between the parties? 60 00:02:52,960 --> 00:02:56,880 Speaker 1: Are there others? Well? I think infrastructure could be common agreement. 61 00:02:56,919 --> 00:02:58,639 Speaker 1: It would be a stretch to say that it is 62 00:02:58,680 --> 00:03:02,359 Speaker 1: still at the moment, but I think focusing on problems 63 00:03:02,440 --> 00:03:07,280 Speaker 1: facing working class Americans, which go the gamut from training 64 00:03:07,320 --> 00:03:11,000 Speaker 1: to support for low wage work, to aid to some 65 00:03:11,080 --> 00:03:14,520 Speaker 1: places in the country that have been left behind in 66 00:03:14,560 --> 00:03:18,200 Speaker 1: the ship store, technological change and globalization. These are all 67 00:03:18,240 --> 00:03:19,840 Speaker 1: things that we can do and they don't to me 68 00:03:19,960 --> 00:03:23,920 Speaker 1: have a Democrat or Republican feel to it. They're good economics. 69 00:03:24,200 --> 00:03:26,799 Speaker 1: It should also be good politics, given what we're seeing 70 00:03:26,800 --> 00:03:30,519 Speaker 1: in the polls UH surrounding the race. So I would 71 00:03:30,560 --> 00:03:33,440 Speaker 1: hope that's governing the from the middle. Trying to do 72 00:03:34,080 --> 00:03:36,960 Speaker 1: more extreme programs on either the right or the left 73 00:03:37,640 --> 00:03:40,640 Speaker 1: don't seem like they would have the political support. Glenn. 74 00:03:40,680 --> 00:03:43,480 Speaker 1: One thing that has no partisan orientation that we're where 75 00:03:43,480 --> 00:03:46,320 Speaker 1: of as COVID nineteen is and it is the non 76 00:03:46,360 --> 00:03:50,680 Speaker 1: discriminatory afflicktor as an effect. Is there something we can 77 00:03:50,720 --> 00:03:54,200 Speaker 1: do economically to address COVID nineteen? The said, do we 78 00:03:54,240 --> 00:03:57,240 Speaker 1: need more money for testing for tracing things like that? 79 00:03:57,480 --> 00:04:00,680 Speaker 1: Certainly that COVID nineteen is affecting our economy, we do. 80 00:04:00,880 --> 00:04:03,240 Speaker 1: I mean, the quickest way we can get the economy 81 00:04:03,280 --> 00:04:05,800 Speaker 1: better is obviously get the virus under control. Not part 82 00:04:05,840 --> 00:04:08,720 Speaker 1: of that waits for a vaccine. But we do have 83 00:04:08,800 --> 00:04:12,520 Speaker 1: the need for public support for the public health care system. 84 00:04:12,920 --> 00:04:16,880 Speaker 1: For example, we need more funds for testing and tracing. 85 00:04:16,920 --> 00:04:20,000 Speaker 1: This has been around for some time. Number proposals are 86 00:04:20,000 --> 00:04:22,040 Speaker 1: out there to do that, and I would hope that 87 00:04:22,080 --> 00:04:26,560 Speaker 1: whatever package President or President elect could could agree on 88 00:04:26,760 --> 00:04:30,320 Speaker 1: with the Congress would involve that. So Glenn. In addition 89 00:04:30,360 --> 00:04:32,640 Speaker 1: to the election, in addition to the job's members, we 90 00:04:32,680 --> 00:04:36,039 Speaker 1: also had the Federal Reserve meeting and deciding and j 91 00:04:36,200 --> 00:04:39,600 Speaker 1: Pile giving a news conference this week. The Federal Reserve 92 00:04:39,640 --> 00:04:41,760 Speaker 1: has been front and center for the economy for some 93 00:04:41,839 --> 00:04:44,760 Speaker 1: time now, necessarily, so as we look forward to the 94 00:04:44,839 --> 00:04:47,120 Speaker 1: next four years, can we expect that perhaps the FED 95 00:04:47,240 --> 00:04:49,360 Speaker 1: is not quite so central, because essentially maybe the FED 96 00:04:49,400 --> 00:04:52,120 Speaker 1: has done what it can do well. I think the 97 00:04:52,160 --> 00:04:55,279 Speaker 1: FED will still be central. The conduct of monetary policy 98 00:04:55,320 --> 00:04:57,800 Speaker 1: is important, and the FED has said that it would 99 00:04:57,880 --> 00:05:00,599 Speaker 1: keep its low interest rate environment for a while. But 100 00:05:00,720 --> 00:05:03,360 Speaker 1: I continue to believe that we've asked way too much 101 00:05:03,400 --> 00:05:06,279 Speaker 1: of the FIT and I share share Powell's view that 102 00:05:06,360 --> 00:05:09,680 Speaker 1: we should be asking the Congress for more fiscal support. 103 00:05:10,080 --> 00:05:13,240 Speaker 1: It's not just that monetary policy isn't the best medicine 104 00:05:13,360 --> 00:05:16,400 Speaker 1: it's not the fiscal support would be better. It's that 105 00:05:16,480 --> 00:05:20,200 Speaker 1: it also runs the risk of overinflating asset prices. It 106 00:05:20,279 --> 00:05:24,240 Speaker 1: runs the risk of fanning income inequality and wealth inequality. 107 00:05:24,520 --> 00:05:27,600 Speaker 1: So I think we ought to let the FED fixed 108 00:05:27,640 --> 00:05:31,680 Speaker 1: crises when they occur, let the FED conductor reasonable monetary policy, 109 00:05:31,839 --> 00:05:35,320 Speaker 1: but not count on it to always be the economy. See, Glenn, 110 00:05:35,320 --> 00:05:37,640 Speaker 1: you're an economist. I'm not asking to be a political analyst. 111 00:05:37,680 --> 00:05:39,600 Speaker 1: At the same time, some people say that there are 112 00:05:39,600 --> 00:05:42,080 Speaker 1: places such as Europe, for example, where appears that fiscal 113 00:05:42,080 --> 00:05:45,120 Speaker 1: and monetary policy are more coordinated. UK as well. That 114 00:05:45,120 --> 00:05:47,160 Speaker 1: seems to be true. We saw that this week. Is 115 00:05:47,200 --> 00:05:48,880 Speaker 1: there some hope in this new world that we can 116 00:05:48,880 --> 00:05:51,560 Speaker 1: coordinate better because we've had at least three different sources Now, 117 00:05:51,720 --> 00:05:54,480 Speaker 1: we've had the Treasury with Sextuary minut in President Trump, 118 00:05:54,720 --> 00:05:57,000 Speaker 1: We've had Nancy Pelosi Speaker of the House, and then 119 00:05:57,000 --> 00:05:59,440 Speaker 1: we've had McConnell the Republicans in the Senate. It seems 120 00:05:59,440 --> 00:06:02,600 Speaker 1: like we had at least three different players here. Well, 121 00:06:03,200 --> 00:06:06,520 Speaker 1: the advantage of our kind of democracies sometimes that tension 122 00:06:06,600 --> 00:06:10,120 Speaker 1: is worthwhile. I think there will be more coordination of 123 00:06:10,160 --> 00:06:13,719 Speaker 1: fiscal and monetary policy in the sense that some of 124 00:06:13,760 --> 00:06:18,600 Speaker 1: the Fed's newer programs do involve credit risk and treasury involvement. 125 00:06:19,000 --> 00:06:21,520 Speaker 1: So in a sense that is going on. So I 126 00:06:21,560 --> 00:06:24,560 Speaker 1: think the identity of whoever the new Treasury Secretary is 127 00:06:25,080 --> 00:06:27,400 Speaker 1: to work with Cheer Powell is going to be an 128 00:06:27,400 --> 00:06:31,000 Speaker 1: extremely important one for markets in the economy. Okay, it's 129 00:06:31,000 --> 00:06:32,880 Speaker 1: always a delight to have you with us. That is 130 00:06:32,880 --> 00:06:35,760 Speaker 1: Professor Glenn Hobverard the Columbia Business School, a Wall Street 131 00:06:35,800 --> 00:06:39,400 Speaker 1: Week contributor. Coming up, the markets did an about face 132 00:06:39,480 --> 00:06:42,359 Speaker 1: on those expectations for reflation going to the election. But 133 00:06:42,440 --> 00:06:45,040 Speaker 1: have they got it right? We asked Charmie and most 134 00:06:45,080 --> 00:06:47,600 Speaker 1: of our Rochmany of Golden Sacks and Beth Acres of 135 00:06:47,640 --> 00:06:51,080 Speaker 1: the Manhattan Institute. That's next on Wall Street Week on Bloomberg. 136 00:06:59,640 --> 00:07:03,640 Speaker 1: This is Bloomberg Wall Street Week with David Weston from 137 00:07:03,760 --> 00:07:07,120 Speaker 1: Bloomberg Radio. Leading up to the election, markets seemed to 138 00:07:07,120 --> 00:07:10,240 Speaker 1: be getting ready for a Democratic victory across the board 139 00:07:10,280 --> 00:07:13,240 Speaker 1: that would bring more spending, more borrowing, and more inflation. 140 00:07:13,600 --> 00:07:16,120 Speaker 1: But by election night they were having some second thoughts. 141 00:07:16,400 --> 00:07:19,160 Speaker 1: Now it looks like we may have a divided government. 142 00:07:19,280 --> 00:07:21,880 Speaker 1: How much change in direction are they likely to have 143 00:07:22,320 --> 00:07:24,600 Speaker 1: for for their perspectives. We welcome now Charmian most of 144 00:07:24,600 --> 00:07:27,360 Speaker 1: our Rachmani she's chief investment officer for Wealth Management of 145 00:07:27,400 --> 00:07:30,920 Speaker 1: Golden Sachs and Beth Acres, senior fellow at the Manhattan Institute. 146 00:07:30,920 --> 00:07:32,440 Speaker 1: So welcome to both of you. Shure, I mean great 147 00:07:32,440 --> 00:07:34,760 Speaker 1: to have you back with us. So start with that question, 148 00:07:34,840 --> 00:07:37,000 Speaker 1: how did the market because I'm gonna say election night stuff, 149 00:07:37,040 --> 00:07:39,240 Speaker 1: there were violent reactions, including in the thirty year for 150 00:07:39,280 --> 00:07:42,000 Speaker 1: the treasuries and equities futures, and then they settled down. 151 00:07:42,160 --> 00:07:44,360 Speaker 1: Actually the equities kind of liked it overall over the 152 00:07:44,400 --> 00:07:47,120 Speaker 1: course of the week. We think that there are two 153 00:07:47,280 --> 00:07:50,520 Speaker 1: drivers that have driven the market this week. One election 154 00:07:50,560 --> 00:07:53,760 Speaker 1: related the mere fact that we don't have uncertainty anymore, 155 00:07:53,800 --> 00:07:57,200 Speaker 1: that the election actually occurred in the process was generally smooth. 156 00:07:57,720 --> 00:08:00,560 Speaker 1: It was important. Second night thinking in terms of the 157 00:08:00,600 --> 00:08:03,160 Speaker 1: fact that you have mentioned this as well, that it 158 00:08:03,200 --> 00:08:06,400 Speaker 1: was fifty fifty split, very close everywhere. So there's a 159 00:08:06,440 --> 00:08:10,160 Speaker 1: strong signal that policy makers should not go too far 160 00:08:10,240 --> 00:08:12,559 Speaker 1: to the left or too far to the right, that 161 00:08:12,720 --> 00:08:15,960 Speaker 1: the markets won't like that, and the electorate with such 162 00:08:16,240 --> 00:08:20,840 Speaker 1: incredible participation, confirms that they don't want extreme policies and 163 00:08:20,960 --> 00:08:26,160 Speaker 1: most importantly, divided government. If we go back to night 164 00:08:26,360 --> 00:08:28,679 Speaker 1: or we just look at the post World War two period, 165 00:08:29,200 --> 00:08:34,319 Speaker 1: returns both for equities and bonds during periods of divided 166 00:08:34,360 --> 00:08:38,320 Speaker 1: government are close to double that of single party government. 167 00:08:38,640 --> 00:08:41,520 Speaker 1: So the markets, the financial markets do not also like 168 00:08:41,640 --> 00:08:45,800 Speaker 1: extreme policies. So that's a perspective in terms of looking 169 00:08:45,840 --> 00:08:49,480 Speaker 1: at the election results. And then from a fundamental perspective, 170 00:08:49,840 --> 00:08:53,120 Speaker 1: we've had three a few as UH stocks at the 171 00:08:53,200 --> 00:08:59,560 Speaker 1: sp reporting earnings exceeding expectations both on revenues and on earnings, 172 00:08:59,640 --> 00:09:03,240 Speaker 1: so very solid fundamentals. We had the third quarter GDP 173 00:09:03,440 --> 00:09:07,520 Speaker 1: number at thirty three plus percent, so very strong momentum 174 00:09:07,520 --> 00:09:10,520 Speaker 1: going into the fourth quarter, helping offset some of the 175 00:09:10,640 --> 00:09:13,040 Speaker 1: risks that we're going to have with the surgeon infections, 176 00:09:13,280 --> 00:09:16,760 Speaker 1: so that's very important. And then in addition, we just 177 00:09:16,800 --> 00:09:19,520 Speaker 1: had the non farm payroll numbers and claims, so very 178 00:09:19,520 --> 00:09:24,000 Speaker 1: good support there and incredible decline in the unemployment rate 179 00:09:24,040 --> 00:09:27,600 Speaker 1: with an increase in participation, so very good generally, So, Beth, 180 00:09:27,640 --> 00:09:30,080 Speaker 1: you follow labor economics in particular, in addition to the 181 00:09:30,080 --> 00:09:32,560 Speaker 1: election this week and the federal reserve, we also had 182 00:09:32,600 --> 00:09:35,360 Speaker 1: some jobs numbers where they were pretty encouraging, actually better 183 00:09:35,400 --> 00:09:38,240 Speaker 1: than had been expected. How much help does the labor 184 00:09:38,320 --> 00:09:41,640 Speaker 1: market really need from either the Congress or the administration 185 00:09:41,640 --> 00:09:45,960 Speaker 1: at this point, I'd say as much as it can get. 186 00:09:46,880 --> 00:09:49,680 Speaker 1: I saw a lot of people starting to celebrate the 187 00:09:50,000 --> 00:09:53,240 Speaker 1: good report that we had, and we're quickly mobbed by 188 00:09:53,240 --> 00:09:56,280 Speaker 1: economists who wanted to remind them that while this was 189 00:09:56,480 --> 00:09:59,920 Speaker 1: good news, today, we are not in a good labor market. 190 00:10:00,000 --> 00:10:02,960 Speaker 1: It so, as UM Professor Hubbard pointed out in the 191 00:10:03,040 --> 00:10:07,080 Speaker 1: earlier segment, we lost twenty million jobs at the onset 192 00:10:07,120 --> 00:10:09,920 Speaker 1: of the pandemic, and then we have begun to crawl 193 00:10:09,960 --> 00:10:12,960 Speaker 1: out of that hole. We've gotten about halfway out. Ten 194 00:10:13,000 --> 00:10:16,280 Speaker 1: million more jobs is a long way to go, and 195 00:10:16,320 --> 00:10:18,480 Speaker 1: it's especially a long way to go when you realize 196 00:10:18,520 --> 00:10:20,559 Speaker 1: that a lot of the people who have come back 197 00:10:20,600 --> 00:10:23,640 Speaker 1: into employment at the early stages of I guess what 198 00:10:23,679 --> 00:10:26,040 Speaker 1: we could call a recovery are people who returned to 199 00:10:26,080 --> 00:10:29,000 Speaker 1: the same job that they were temporately temporarily laid off. 200 00:10:29,040 --> 00:10:31,040 Speaker 1: From a lot of the people that we're seeing who 201 00:10:31,040 --> 00:10:34,679 Speaker 1: remain unemployed today, we're completely separated from a job and 202 00:10:34,720 --> 00:10:36,840 Speaker 1: so as you can imagine it's going to be harder 203 00:10:36,880 --> 00:10:40,120 Speaker 1: to get this population back to work. So I think 204 00:10:40,160 --> 00:10:42,480 Speaker 1: a lot of support is needed, and I'm advocating for 205 00:10:42,679 --> 00:10:45,400 Speaker 1: legislation myself. So we need a lot of support on 206 00:10:45,440 --> 00:10:47,679 Speaker 1: the labor market, But Charmine, do we need a lot 207 00:10:47,679 --> 00:10:50,000 Speaker 1: of support for the other markets, because it's a practical matter. 208 00:10:50,000 --> 00:10:52,360 Speaker 1: It looks like if we don't have too many taxes, 209 00:10:52,400 --> 00:10:55,160 Speaker 1: it's not too disruptive. It's sort of goldilocks, sort of 210 00:10:55,200 --> 00:10:57,800 Speaker 1: just right in the middle. Particularly have low interest rates, 211 00:10:57,840 --> 00:11:00,760 Speaker 1: it makes equities worth a lot. I think there's no 212 00:11:00,800 --> 00:11:03,400 Speaker 1: doubt that we need some support as we get through 213 00:11:03,440 --> 00:11:06,800 Speaker 1: the continued acute phase of the pandemic, and we know 214 00:11:06,920 --> 00:11:09,320 Speaker 1: what the surge that we've seen in numbers, not just 215 00:11:09,400 --> 00:11:11,400 Speaker 1: in the US but in other parts of the world. 216 00:11:11,640 --> 00:11:14,600 Speaker 1: We're going to have a very difficult November and December 217 00:11:15,080 --> 00:11:17,840 Speaker 1: uh in terms of infections and what that means for 218 00:11:17,880 --> 00:11:21,800 Speaker 1: the economy. If you look at high frequency data, whether 219 00:11:21,840 --> 00:11:25,360 Speaker 1: you're looking at goog, Google mobility data, Apple mobility data, 220 00:11:25,480 --> 00:11:28,800 Speaker 1: t s A Travel open table data, you are seeing 221 00:11:28,840 --> 00:11:32,400 Speaker 1: a flattening of that improvement. So the next several months 222 00:11:32,400 --> 00:11:35,160 Speaker 1: will be tough. But the assumption is that if we 223 00:11:35,200 --> 00:11:38,240 Speaker 1: get a vaccine and these therapeutics sometime in the first 224 00:11:38,360 --> 00:11:41,760 Speaker 1: quarter of the year that have some level of efficacy. 225 00:11:41,840 --> 00:11:43,480 Speaker 1: No doubt that none of these are going to be 226 00:11:43,520 --> 00:11:46,360 Speaker 1: magic bullets, but if you have something that's going to help, 227 00:11:46,760 --> 00:11:50,800 Speaker 1: then you'll need some support. But gradually the unemployment rate 228 00:11:50,840 --> 00:11:53,600 Speaker 1: will improve. If you think of our forecast for seven 229 00:11:53,679 --> 00:11:56,280 Speaker 1: percent by the end of the year, we already got it. 230 00:11:56,600 --> 00:11:58,760 Speaker 1: So the glass is more than half full than it 231 00:11:58,920 --> 00:12:01,480 Speaker 1: is empty. So briefly, he'll give you the last word. 232 00:12:01,679 --> 00:12:03,280 Speaker 1: Is it gonna be even rougher in the labor market 233 00:12:03,320 --> 00:12:05,240 Speaker 1: because we didn't bring all those ten million people back, 234 00:12:05,280 --> 00:12:06,760 Speaker 1: and if, in fact we have to shut down some more, 235 00:12:06,760 --> 00:12:10,960 Speaker 1: it's gonna be worse. Well, the good news is that 236 00:12:11,000 --> 00:12:12,960 Speaker 1: we had a good bump this month with such as, 237 00:12:13,040 --> 00:12:15,720 Speaker 1: which sets us at a higher level for any potential 238 00:12:15,800 --> 00:12:21,080 Speaker 1: deterioration in the coming months as the pandemic potentially gets worse. Um, yeah, 239 00:12:21,080 --> 00:12:23,760 Speaker 1: I would say we're in for a long winter, both 240 00:12:23,800 --> 00:12:27,640 Speaker 1: with the pandemic and the labor market quite unfortunately. Yeah, exactly, 241 00:12:27,679 --> 00:12:29,760 Speaker 1: So we have a lot to look forward to. We 242 00:12:29,840 --> 00:12:32,319 Speaker 1: hope it's better than we expect. Many thanks now to 243 00:12:32,440 --> 00:12:35,680 Speaker 1: Charmine most of our Rachmani of Goldman Saxon, Beth Acres 244 00:12:35,720 --> 00:12:38,480 Speaker 1: of the Manhattan Institute for giving us a rundown on 245 00:12:38,520 --> 00:12:41,119 Speaker 1: the job market, as well as what's going with equities 246 00:12:41,160 --> 00:12:43,920 Speaker 1: and debt an eventful four years ahead of us without 247 00:12:44,040 --> 00:12:47,480 Speaker 1: a doubt coming up. How badly is the pandemic hitting 248 00:12:47,520 --> 00:12:50,760 Speaker 1: the real estate industry and what is the long term 249 00:12:50,880 --> 00:12:54,360 Speaker 1: damage likely to be? We ask Sam Zell, founder and 250 00:12:54,400 --> 00:12:57,720 Speaker 1: chairman of Equity Group Investments. Just like a lot of 251 00:12:57,920 --> 00:13:03,040 Speaker 1: small businesses UH and small restaurants that open will reopen, 252 00:13:04,280 --> 00:13:07,280 Speaker 1: I think in the same way, UM, we're gonna see 253 00:13:07,320 --> 00:13:11,560 Speaker 1: a real attrition in the number of hotels UH that 254 00:13:11,640 --> 00:13:15,600 Speaker 1: are functioning going forward. Hotels are very unique forms of 255 00:13:15,640 --> 00:13:20,760 Speaker 1: real estate. UM. They have very very high, um, you know, 256 00:13:20,880 --> 00:13:25,640 Speaker 1: kind of minimum operating cost levels, and therefore leaving the 257 00:13:25,720 --> 00:13:31,480 Speaker 1: door open at say seventh percent accuracy, UH is really 258 00:13:31,520 --> 00:13:35,880 Speaker 1: really pretty awful. UM. At the same time, you know, 259 00:13:36,480 --> 00:13:39,559 Speaker 1: we're not we're not suffering. The country is not doing 260 00:13:39,600 --> 00:13:44,680 Speaker 1: anywhere near as badly as the newspapers are headlining. That's 261 00:13:44,720 --> 00:13:54,560 Speaker 1: next the wall. Three week on Bloomberg sweet Strawberry Icing, 262 00:13:55,000 --> 00:13:58,000 Speaker 1: you were strolling along in Goodwill When just past that 263 00:13:58,080 --> 00:14:01,120 Speaker 1: mid century side table and denim jackie, you spotted them 264 00:14:01,160 --> 00:14:08,520 Speaker 1: nestled in their display case, miniature doughnut ear rings. Oh yes, yes, 265 00:14:09,160 --> 00:14:12,319 Speaker 1: your favorite half breakfast pastry, half all day desert food 266 00:14:12,600 --> 00:14:15,800 Speaker 1: made into your favorite form of ear candy. Oh my, 267 00:14:16,840 --> 00:14:20,480 Speaker 1: those bejeweled sprinkles have satisfied some unknown hunger within you. 268 00:14:22,160 --> 00:14:27,800 Speaker 1: Do you smell that? That's the sugary center of shopping success. 269 00:14:28,480 --> 00:14:32,720 Speaker 1: For this is Goodwill, And with every item you buy, 270 00:14:32,880 --> 00:14:37,560 Speaker 1: you fund local job training and more so, go forth, 271 00:14:38,320 --> 00:14:41,760 Speaker 1: bring home those doughnut ear rings and bring home so 272 00:14:41,920 --> 00:14:49,600 Speaker 1: much good to your community. Goodwill, bring good home, brought 273 00:14:49,600 --> 00:14:53,000 Speaker 1: to you by Goodwill and the ad Council. This is 274 00:14:53,080 --> 00:14:57,440 Speaker 1: Bloomberg Wall Street Week with David Western from Bloomberg Radio. 275 00:14:57,640 --> 00:15:02,160 Speaker 1: There was most conspicuously the group of economic pessimists. I've 276 00:15:02,200 --> 00:15:05,240 Speaker 1: gotten such a fearful hearing in this election year. But 277 00:15:05,320 --> 00:15:07,160 Speaker 1: now that the election is over and it is once 278 00:15:07,200 --> 00:15:11,080 Speaker 1: again legal to talk sense about the American economy, it 279 00:15:11,200 --> 00:15:14,000 Speaker 1: is becoming increasingly clear that the country is not in 280 00:15:14,040 --> 00:15:16,640 Speaker 1: the worst shape of the current millennium, but it is 281 00:15:16,680 --> 00:15:20,680 Speaker 1: in fact showing unmistakable signs of grudging recovery from its 282 00:15:20,720 --> 00:15:23,800 Speaker 1: extended slump. That was Lewis Ruckeyser on Wall Street week 283 00:15:23,840 --> 00:15:28,880 Speaker 1: back in shortly after Bill Clinton was elected president. Now 284 00:15:29,000 --> 00:15:31,520 Speaker 1: once again it's time to assess the economy in the 285 00:15:31,520 --> 00:15:34,200 Speaker 1: wake of an election. But this time it's an economy 286 00:15:34,200 --> 00:15:37,280 Speaker 1: coming off of the steepest decline in modern times, and 287 00:15:37,360 --> 00:15:39,800 Speaker 1: one that has come to depend on huge injections of 288 00:15:39,840 --> 00:15:43,840 Speaker 1: fiscal stimulus for its recovery. Rick Reader, chief investment officer 289 00:15:43,880 --> 00:15:46,600 Speaker 1: for fixed income at black Rock, thinks that one of 290 00:15:46,640 --> 00:15:49,480 Speaker 1: the inevitable consequences of the election is that we can't 291 00:15:49,520 --> 00:15:53,280 Speaker 1: continue to expect that level of help from Congress. Listen, 292 00:15:53,320 --> 00:15:56,400 Speaker 1: I still think you're gonna get a significant stimulus package. 293 00:15:56,440 --> 00:15:59,280 Speaker 1: I do think. Let's say it is a Biden presidency. 294 00:15:59,640 --> 00:16:01,640 Speaker 1: You know that it is a more moderate, a moderate 295 00:16:01,880 --> 00:16:04,640 Speaker 1: I would argue a moderate Democrat in many ways, and 296 00:16:04,680 --> 00:16:06,760 Speaker 1: I think you will see some compromise. And by the way, 297 00:16:06,800 --> 00:16:08,560 Speaker 1: the economy and the FED has been calling for this. 298 00:16:08,640 --> 00:16:11,320 Speaker 1: The economy needs more stimulus. You know. You hear all 299 00:16:11,360 --> 00:16:13,320 Speaker 1: the time people say, I guess the system can't take 300 00:16:13,320 --> 00:16:16,440 Speaker 1: on anymore debt. There it is actually not true today 301 00:16:16,480 --> 00:16:18,320 Speaker 1: because they don't talk about in your show, the series 302 00:16:18,320 --> 00:16:21,880 Speaker 1: of dynamics around demographics, the series of dynamics around need 303 00:16:21,960 --> 00:16:24,440 Speaker 1: for income that allows the system to take on a 304 00:16:24,440 --> 00:16:26,640 Speaker 1: bit more debt and the system needs stimulus to get 305 00:16:26,680 --> 00:16:29,360 Speaker 1: employment to a better level. Talk about the equity side 306 00:16:29,360 --> 00:16:31,360 Speaker 1: of it. We heard that maybe healthcare is coming back 307 00:16:31,400 --> 00:16:33,920 Speaker 1: text coming back? Are those basically equities We figured, no 308 00:16:33,960 --> 00:16:35,680 Speaker 1: matter what happens, and those are gonna do well. We 309 00:16:35,720 --> 00:16:38,560 Speaker 1: don't have to get into speculation about other things. So 310 00:16:38,600 --> 00:16:40,840 Speaker 1: I think the big thing is, you know, I think 311 00:16:40,880 --> 00:16:43,080 Speaker 1: that you know, significant increase. I mean, one of the 312 00:16:43,160 --> 00:16:46,280 Speaker 1: major major programs is going to be raised taxes significantly, 313 00:16:46,280 --> 00:16:50,040 Speaker 1: particularly corporate taxes. Go back to the dynamic around the Senate. 314 00:16:50,080 --> 00:16:53,480 Speaker 1: Staying Republican was a really big deal, and so tech 315 00:16:53,520 --> 00:16:55,760 Speaker 1: and healthcare are two areas where taxes would have been 316 00:16:55,760 --> 00:16:58,680 Speaker 1: a significant drag. And then obviously the extent that you 317 00:16:58,800 --> 00:17:01,200 Speaker 1: have breakup of tech is taken off the table of 318 00:17:01,240 --> 00:17:03,880 Speaker 1: some extent, So my senses, they're actually gonna be in 319 00:17:03,920 --> 00:17:05,640 Speaker 1: pretty good shape for a while. On the back side 320 00:17:05,640 --> 00:17:07,080 Speaker 1: of this, I think equities are going to continue to 321 00:17:07,119 --> 00:17:09,159 Speaker 1: have a good run. So where the opportunities as you 322 00:17:09,200 --> 00:17:11,639 Speaker 1: look at there as as an investor. Where the opportunities 323 00:17:11,920 --> 00:17:14,240 Speaker 1: at this moment. Yeah, I mean I think if people 324 00:17:14,320 --> 00:17:16,280 Speaker 1: take you know, there's always you've got to invest for 325 00:17:16,320 --> 00:17:18,120 Speaker 1: the short You've got to think about the short term, 326 00:17:18,119 --> 00:17:19,639 Speaker 1: and you try and think about what your entry and 327 00:17:19,640 --> 00:17:22,520 Speaker 1: your exit point is. Relatively short term. People have to 328 00:17:22,520 --> 00:17:24,920 Speaker 1: get returns into their portfolio, have to get yielded in 329 00:17:24,960 --> 00:17:27,240 Speaker 1: their portfolio. So we like the yielding assets, and you 330 00:17:27,280 --> 00:17:31,080 Speaker 1: think about if you have some more moderate president, potentially 331 00:17:31,080 --> 00:17:33,800 Speaker 1: you'll see where that is. But if you think about 332 00:17:33,880 --> 00:17:35,880 Speaker 1: you know what it means for currency, etcetera. I think 333 00:17:35,880 --> 00:17:38,720 Speaker 1: emerging markets is an interesting place to boy. I think yields, 334 00:17:38,920 --> 00:17:40,639 Speaker 1: the bid for credit is going to continue, and then 335 00:17:40,640 --> 00:17:42,720 Speaker 1: I think equities are going higher. Not that you can't 336 00:17:43,040 --> 00:17:45,760 Speaker 1: if there's not some civil unrest or some you know, 337 00:17:45,800 --> 00:17:48,960 Speaker 1: clearly some pushbacks, some litigation on the election, but I 338 00:17:48,960 --> 00:17:51,880 Speaker 1: think equities are going higher. I mean, these earnings yields 339 00:17:52,400 --> 00:17:54,719 Speaker 1: for equities, that cash flow yields are getting from equities 340 00:17:54,720 --> 00:17:56,960 Speaker 1: are really attractive. You think about the intermediate term, that's 341 00:17:56,960 --> 00:17:58,760 Speaker 1: where the opportunity is gonna be. Even buying the tenure 342 00:17:58,800 --> 00:18:01,080 Speaker 1: note at seventy five days is points is not going 343 00:18:01,119 --> 00:18:03,640 Speaker 1: to take your return to the to the promised land. 344 00:18:04,200 --> 00:18:07,280 Speaker 1: That sounds for sure, no question about it. At the 345 00:18:07,320 --> 00:18:09,840 Speaker 1: same time, you have to have some hedge, don't you, 346 00:18:09,880 --> 00:18:12,400 Speaker 1: Because there's been a lot of volatilities, that real volatility 347 00:18:12,640 --> 00:18:15,120 Speaker 1: that just does not much liquidit in the market. You've 348 00:18:15,160 --> 00:18:18,320 Speaker 1: got to think about your portfolios, you know, when you manage, manage, 349 00:18:18,960 --> 00:18:21,320 Speaker 1: you know, any investment portfolio, you've got to think about 350 00:18:21,320 --> 00:18:23,960 Speaker 1: what's the intermediate term that you're looking at. So how 351 00:18:23,960 --> 00:18:26,520 Speaker 1: do you hedge today? Like you side, interest rates are 352 00:18:26,560 --> 00:18:29,080 Speaker 1: not a great head. The only thing that is a 353 00:18:29,080 --> 00:18:31,120 Speaker 1: great gold is not a great hedge. I would argue, 354 00:18:31,160 --> 00:18:33,560 Speaker 1: we have a piece of gold in our portfolio, So 355 00:18:33,600 --> 00:18:35,080 Speaker 1: what do we do. I just think you gotta hold 356 00:18:35,080 --> 00:18:37,520 Speaker 1: more cash than you've had than you've had before. And 357 00:18:37,560 --> 00:18:40,639 Speaker 1: so you have some beta yielding assets, some equities in 358 00:18:40,680 --> 00:18:42,600 Speaker 1: the portfolio, but I think you've got to hold a 359 00:18:42,680 --> 00:18:45,600 Speaker 1: higher level of cash in the then you have historically, 360 00:18:45,920 --> 00:18:48,720 Speaker 1: particularly to take advantage of the opportunities that present themselves. Well. 361 00:18:48,720 --> 00:18:51,400 Speaker 1: In fact, if that reinflation from trade really comes off 362 00:18:51,400 --> 00:18:53,240 Speaker 1: in used to some extent, does that mean that cash 363 00:18:53,280 --> 00:18:55,199 Speaker 1: you're holding is worth more? That is to say, the 364 00:18:55,240 --> 00:18:58,480 Speaker 1: dollars seem to be weakening going into that reflation trade. Yeah, 365 00:18:58,520 --> 00:19:01,520 Speaker 1: now it's a great call. I mean you cash, you 366 00:19:01,520 --> 00:19:03,800 Speaker 1: think about where treasuries are. Cash is not that expensive 367 00:19:04,119 --> 00:19:08,480 Speaker 1: to hold relative relative other assets. And and like you say, listen, 368 00:19:08,560 --> 00:19:11,080 Speaker 1: I still think inflation. I still think having some tips 369 00:19:11,080 --> 00:19:13,040 Speaker 1: and the break evens in the portfolio, tips and the 370 00:19:13,080 --> 00:19:16,000 Speaker 1: portfolio makes some sense. But you know, repricing it a 371 00:19:16,000 --> 00:19:18,080 Speaker 1: bit given where we could have gone, I think makes 372 00:19:18,200 --> 00:19:19,760 Speaker 1: makes some sense. But then you know, like you say, 373 00:19:20,000 --> 00:19:22,199 Speaker 1: cash is not an expensive asset, but gold. By the way, 374 00:19:22,200 --> 00:19:25,159 Speaker 1: I would argue crypto is not not about asset and 375 00:19:25,160 --> 00:19:27,760 Speaker 1: a balanced portfolio today. And I don't think those trends 376 00:19:27,800 --> 00:19:30,719 Speaker 1: have gone away. Reconstructs me. We had this wonderful conversation 377 00:19:30,960 --> 00:19:33,040 Speaker 1: and it's all been about the election and the aftermath 378 00:19:33,080 --> 00:19:35,600 Speaker 1: of the election. There is that COVID nineteen out there 379 00:19:35,640 --> 00:19:37,359 Speaker 1: that hasn't gone away the best I can remember, and 380 00:19:37,400 --> 00:19:40,200 Speaker 1: it gets a vote. And what happens with asset classes, 381 00:19:40,240 --> 00:19:42,639 Speaker 1: with our lives in fact, how do you factor in 382 00:19:42,680 --> 00:19:44,520 Speaker 1: COVID nineteen and where it's headed in Europe and in 383 00:19:44,560 --> 00:19:46,919 Speaker 1: events days? So, David, the most incredible thing I think 384 00:19:46,960 --> 00:19:48,280 Speaker 1: about people that people who work with me. I have 385 00:19:48,320 --> 00:19:50,359 Speaker 1: said this way too many times. I can only do 386 00:19:50,400 --> 00:19:51,840 Speaker 1: one thing at a time. It's like tell me, I 387 00:19:51,880 --> 00:19:53,840 Speaker 1: need to need focus an election and then I'll focus 388 00:19:53,840 --> 00:19:55,320 Speaker 1: on COVERD. They can only do one thing at a time, 389 00:19:55,359 --> 00:19:57,920 Speaker 1: which is the most remarkable thing given the world of 390 00:19:58,000 --> 00:20:02,119 Speaker 1: big data. The markets can actually only operating small data circles. 391 00:20:02,440 --> 00:20:04,760 Speaker 1: But the listen, COVID is a big deal. I mean, 392 00:20:04,760 --> 00:20:06,760 Speaker 1: look at the data in Europe. But you're right. I mean, 393 00:20:06,800 --> 00:20:09,280 Speaker 1: I think once we get through this, then that is 394 00:20:09,320 --> 00:20:12,200 Speaker 1: still a daunting dynamic can particularly imparts of Europe. They're 395 00:20:12,280 --> 00:20:15,400 Speaker 1: still locked down in some places of potential here. So 396 00:20:15,520 --> 00:20:17,520 Speaker 1: it is um, that's not going away. And I think, 397 00:20:17,560 --> 00:20:19,080 Speaker 1: you know, it's going to take a week or two 398 00:20:19,440 --> 00:20:21,480 Speaker 1: and then that's very much going to be at the forefront. 399 00:20:21,480 --> 00:20:24,120 Speaker 1: And that's why you can't get two over zealous and 400 00:20:24,320 --> 00:20:26,080 Speaker 1: about gosh, let's take a lot of risk that I 401 00:20:26,359 --> 00:20:28,440 Speaker 1: we gotta hold more cash in the portfolio. We're definitely 402 00:20:28,440 --> 00:20:29,960 Speaker 1: not out of the woods ever with regard to COVID, 403 00:20:30,240 --> 00:20:31,920 Speaker 1: and and you know, not not out of the woods 404 00:20:31,920 --> 00:20:34,480 Speaker 1: in terms of we're gonna have vaccine tomorrow either. That 405 00:20:34,600 --> 00:20:37,399 Speaker 1: was Rick reader black Rock, ce io of fixed income 406 00:20:37,480 --> 00:20:41,240 Speaker 1: and head of Global Allocation. Coming up, how badly is 407 00:20:41,280 --> 00:20:44,560 Speaker 1: the pandemic hitting the real estate industry and what is 408 00:20:44,600 --> 00:20:48,480 Speaker 1: the long term damage likely to be? We ask sam's Ll, 409 00:20:48,640 --> 00:20:52,080 Speaker 1: founder and chairman of Equity Group Investments. That's next on 410 00:20:52,200 --> 00:20:59,600 Speaker 1: Wall Street Week on Bloomberg. This is Bloomberg Wall Street 411 00:20:59,640 --> 00:21:03,120 Speaker 1: Week with David Weston from Bloomberg Radio. When it comes 412 00:21:03,160 --> 00:21:06,280 Speaker 1: to finding opportunities, whether in real estate or elsewhere, there 413 00:21:06,359 --> 00:21:09,760 Speaker 1: aren't many with the tracker of Sam Zell, founder and 414 00:21:09,840 --> 00:21:13,359 Speaker 1: chairman of Equity Group Investors. So we asked him where 415 00:21:13,400 --> 00:21:17,879 Speaker 1: he saw the opportunities today. I I'm not sure I 416 00:21:17,880 --> 00:21:22,119 Speaker 1: know the answer quite Yeah, guess to what the opportunities are? UM. 417 00:21:22,160 --> 00:21:27,920 Speaker 1: I think the result um, frankly for the country uh 418 00:21:28,119 --> 00:21:32,959 Speaker 1: to basically come out quote unquote even as opposed to 419 00:21:33,560 --> 00:21:37,760 Speaker 1: a wave going the other way. UM, it's kind of 420 00:21:37,800 --> 00:21:42,000 Speaker 1: a reflection of how lucky we somehow or always turned 421 00:21:42,040 --> 00:21:45,879 Speaker 1: out to be. UM. I think that uh, you know, 422 00:21:45,960 --> 00:21:50,240 Speaker 1: this kind of election in in perhaps a president like 423 00:21:50,440 --> 00:21:56,760 Speaker 1: Joe Biden who's focused on on quote unquote, you know, 424 00:21:56,880 --> 00:22:01,520 Speaker 1: making deals and UH and compromise UH might be a 425 00:22:01,680 --> 00:22:06,800 Speaker 1: very positive outcome for the country going forward, which would 426 00:22:06,840 --> 00:22:12,600 Speaker 1: translate into a commercial environment activity. UH that would need 427 00:22:12,760 --> 00:22:16,760 Speaker 1: you know, much better than uh what might have been 428 00:22:17,080 --> 00:22:20,960 Speaker 1: UH that people could have been afraid of UH had 429 00:22:21,000 --> 00:22:24,720 Speaker 1: you know, some of them more vociferous UH left parts 430 00:22:24,720 --> 00:22:27,959 Speaker 1: of the American Party gained more power. Were you concerned 431 00:22:27,960 --> 00:22:32,119 Speaker 1: about deregulation? Are you concerned about for the tax cuts? Well, UM, 432 00:22:32,160 --> 00:22:37,119 Speaker 1: I think that UM. You know, the Obama administration was 433 00:22:37,200 --> 00:22:43,479 Speaker 1: probably the most regulated uh administration that we've ever had. UM. 434 00:22:43,520 --> 00:22:46,920 Speaker 1: I think that uh the first four years of Trump 435 00:22:47,520 --> 00:22:51,920 Speaker 1: UH probably brought brought a lot of those regulations back 436 00:22:52,119 --> 00:22:57,560 Speaker 1: to let's say equilibrium. UM. I would expect that if 437 00:22:57,560 --> 00:23:02,919 Speaker 1: that a Biden administration would be more pro regulation, but 438 00:23:03,119 --> 00:23:09,760 Speaker 1: perhaps less so uh than what occurred during the bottom years. Sam. 439 00:23:10,000 --> 00:23:11,720 Speaker 1: We've had a rough year, I think it's fair to say, 440 00:23:12,400 --> 00:23:15,760 Speaker 1: and we've had a pandemic, the biggest one by far 441 00:23:15,920 --> 00:23:19,399 Speaker 1: for a hundred years. We've had the severe economic down term. 442 00:23:19,440 --> 00:23:22,680 Speaker 1: In the course of that, we've had disturbances, civil disturbances 443 00:23:22,720 --> 00:23:25,120 Speaker 1: in some cities around the country. What has this done 444 00:23:25,119 --> 00:23:27,679 Speaker 1: specifically in the real estate area. You've really known for 445 00:23:27,720 --> 00:23:30,200 Speaker 1: your success and how a student you are in real estate. 446 00:23:30,320 --> 00:23:35,280 Speaker 1: What has it done specifically for real estate as an investment. Well, UM, 447 00:23:35,320 --> 00:23:40,320 Speaker 1: I mean obviously, uh, um you know you've seen, uh, 448 00:23:40,440 --> 00:23:45,480 Speaker 1: you know, a tremendous increase in the interests in suburban locations. 449 00:23:46,119 --> 00:23:49,240 Speaker 1: Uh you've seen uh I mean you know, we're we're 450 00:23:49,359 --> 00:23:54,760 Speaker 1: probably you know, among the largest central business district uh 451 00:23:55,240 --> 00:23:59,400 Speaker 1: owners of residential in the country. UH. And we've seen, 452 00:23:59,480 --> 00:24:02,840 Speaker 1: particularly in New York and San Francisco. UM, you know, 453 00:24:02,960 --> 00:24:09,280 Speaker 1: significant reduction in demand. UH. In New York, it's more 454 00:24:09,280 --> 00:24:12,920 Speaker 1: a question of price. So as prices have come down, 455 00:24:13,359 --> 00:24:18,200 Speaker 1: demand has increased. In San Francisco, UM, you have an 456 00:24:18,320 --> 00:24:22,840 Speaker 1: environment that's more difficult and UH and I think that's 457 00:24:22,920 --> 00:24:27,800 Speaker 1: you know, in effect putting uh people who previously fought 458 00:24:27,880 --> 00:24:30,720 Speaker 1: for a place to live in San Francisco being able 459 00:24:30,800 --> 00:24:35,919 Speaker 1: to work from a more remote location. UM. Perhaps you 460 00:24:35,960 --> 00:24:40,040 Speaker 1: could argue that, UH this has certainly done a lot 461 00:24:40,160 --> 00:24:46,160 Speaker 1: to increase the pace of conversion UH to detail and 462 00:24:46,320 --> 00:24:50,080 Speaker 1: UH in retail and the net. And I think it's 463 00:24:50,119 --> 00:24:55,440 Speaker 1: fair to say that uh uh probably January one, one 464 00:24:56,119 --> 00:25:01,159 Speaker 1: in one UH is probably going to be equal to 465 00:25:01,200 --> 00:25:05,080 Speaker 1: where we thought we were going to be in so 466 00:25:05,640 --> 00:25:11,040 Speaker 1: UH lockdown and then the pandemic has certainly accelerated the 467 00:25:11,119 --> 00:25:16,959 Speaker 1: movement UH an increase in UH in retail online. UM. 468 00:25:17,119 --> 00:25:20,879 Speaker 1: There's a lot of discussions about you know, change and 469 00:25:21,200 --> 00:25:26,560 Speaker 1: in office activity going forward, and higher and higher percentage 470 00:25:26,560 --> 00:25:34,480 Speaker 1: of offices operating remotely. I'm pretty skeptical of that. I 471 00:25:34,560 --> 00:25:37,520 Speaker 1: tend to believe that we're social animals and that we 472 00:25:38,080 --> 00:25:44,360 Speaker 1: performed best when we're stimulated by other human beings. UH. 473 00:25:44,440 --> 00:25:47,320 Speaker 1: I think that uh, you know, you can be remote 474 00:25:47,400 --> 00:25:52,399 Speaker 1: in uh in nowhere, Iowa, but at five o'clock, UH, 475 00:25:52,440 --> 00:25:55,760 Speaker 1: there's no place to go uh as opposed to be 476 00:25:55,880 --> 00:26:00,160 Speaker 1: living in New York or Chicago or San Francisco. UM. 477 00:26:00,200 --> 00:26:03,400 Speaker 1: At the same time, we've seen an explosion and distribution 478 00:26:03,720 --> 00:26:11,040 Speaker 1: real estate UH probably the most uh best performing part 479 00:26:11,040 --> 00:26:15,320 Speaker 1: of real estate today, although I would be a little 480 00:26:15,880 --> 00:26:20,520 Speaker 1: much warning and say that, uh, you know, this is 481 00:26:20,600 --> 00:26:26,600 Speaker 1: probably the least sophisticated form of real estate creation. Therefore 482 00:26:26,680 --> 00:26:31,199 Speaker 1: the barrier to access is by far the least in 483 00:26:31,280 --> 00:26:35,800 Speaker 1: that area. UM. Then you can look at hospitality and 484 00:26:35,960 --> 00:26:40,280 Speaker 1: UH and you know, hospitality is looking at the catastrophe 485 00:26:40,640 --> 00:26:43,240 Speaker 1: the likes of which it's never seen. It lives through 486 00:26:43,359 --> 00:26:46,359 Speaker 1: nine and eleven. Uh, you know, it lived through the 487 00:26:46,359 --> 00:26:50,840 Speaker 1: Great recession. UM, but it's never lived through a period 488 00:26:50,960 --> 00:26:54,879 Speaker 1: where demand is literally shut down at the level that 489 00:26:55,000 --> 00:26:58,959 Speaker 1: it's currently shut down. UM. Just like a lot of 490 00:26:59,119 --> 00:27:05,200 Speaker 1: small business is uh, and small restaurants that open will reopen. UH. 491 00:27:05,480 --> 00:27:08,480 Speaker 1: I think in the same way, UM, we're gonna see 492 00:27:08,520 --> 00:27:12,760 Speaker 1: a real attrition in the number of hotels UH that 493 00:27:12,840 --> 00:27:16,800 Speaker 1: are functioning going forward. Hotels are very unique forms of 494 00:27:16,840 --> 00:27:21,960 Speaker 1: real estate. UH. They have very very high, um, you know, 495 00:27:22,080 --> 00:27:26,719 Speaker 1: kind of minimum operating cost levels, and therefore the leaving 496 00:27:26,760 --> 00:27:32,080 Speaker 1: the door open at say seventh percent occutacy UH is 497 00:27:32,200 --> 00:27:37,080 Speaker 1: really really pretty awful. UM. At the same time, you know, 498 00:27:37,640 --> 00:27:40,760 Speaker 1: we're not we're not suffering. The country is not doing 499 00:27:40,800 --> 00:27:46,760 Speaker 1: anywhere near as badly as the newspapers are headlining. And consequently, 500 00:27:47,160 --> 00:27:53,200 Speaker 1: I think that uh, that the overall demand factors are 501 00:27:53,240 --> 00:27:57,800 Speaker 1: gonna make are gonna help the country and move forward accordingly. 502 00:27:57,840 --> 00:28:01,159 Speaker 1: I mean, look at single family hall UH. You know, 503 00:28:01,240 --> 00:28:04,520 Speaker 1: it's a form of real estate where literally we've gone 504 00:28:04,600 --> 00:28:09,760 Speaker 1: from you know, slow market to very rapid market. And UH. 505 00:28:09,840 --> 00:28:13,720 Speaker 1: And obviously in the fact that we're dealing with interest 506 00:28:13,800 --> 00:28:17,560 Speaker 1: rates as low as they've ever been are pretty significant. 507 00:28:17,800 --> 00:28:20,440 Speaker 1: Sam's l of Equity Group investments is still with us 508 00:28:20,560 --> 00:28:23,000 Speaker 1: and we're joining out by my colleague Michael McKee, Bloomberg 509 00:28:23,000 --> 00:28:26,040 Speaker 1: International Economics and Policy correspondent. So you mentioned the low 510 00:28:26,080 --> 00:28:28,000 Speaker 1: interest rates. Let's talk about what that's done to you 511 00:28:28,040 --> 00:28:30,119 Speaker 1: as an investor. And do you expect the FED to 512 00:28:30,160 --> 00:28:32,399 Speaker 1: just keep it down? If not at zero, then just 513 00:28:32,440 --> 00:28:35,920 Speaker 1: above zero. It's very hard for me to imagine that 514 00:28:36,000 --> 00:28:40,000 Speaker 1: the FED has a choice. UM. At the rate of 515 00:28:40,080 --> 00:28:44,840 Speaker 1: which we're creating debt, UH, servicing the debt is becoming 516 00:28:45,200 --> 00:28:48,520 Speaker 1: a bigger and bigger future risk. You know, for many, 517 00:28:48,600 --> 00:28:52,840 Speaker 1: many years, the average indust rate UH was five point 518 00:28:52,920 --> 00:28:57,360 Speaker 1: six percent. UH. If the government had to pay five 519 00:28:57,360 --> 00:29:00,720 Speaker 1: point six percent on the debt I was standing today, UH, 520 00:29:00,800 --> 00:29:03,440 Speaker 1: from a cash flow point of view, we wouldn't have 521 00:29:03,480 --> 00:29:07,640 Speaker 1: a chance. So I think that the Fed has no choice, 522 00:29:08,280 --> 00:29:11,960 Speaker 1: although I would tell you, in my opinion, the overall 523 00:29:12,040 --> 00:29:15,760 Speaker 1: activity level in the in the economy is better than 524 00:29:15,840 --> 00:29:20,160 Speaker 1: people are are expecting, and people are giving credit to it. UH. 525 00:29:20,360 --> 00:29:24,640 Speaker 1: Just like this past week, the numbers on manufacturing, you know, 526 00:29:24,800 --> 00:29:31,280 Speaker 1: show to significant recovery. I think generally speaking, UH, business 527 00:29:31,440 --> 00:29:36,720 Speaker 1: activity is better than you guess by reading the newspapers. Well, 528 00:29:36,760 --> 00:29:39,160 Speaker 1: Sam as an investor, What do you see in terms 529 00:29:39,160 --> 00:29:42,600 Speaker 1: of demand for credit? The FED can lower the cost 530 00:29:42,800 --> 00:29:46,200 Speaker 1: of credit not significantly at this point, but is there 531 00:29:46,240 --> 00:29:48,400 Speaker 1: any real demand. We're not seeing much take up for 532 00:29:48,440 --> 00:29:53,600 Speaker 1: their lending programs like main Street. Well, I think that uh, 533 00:29:53,640 --> 00:29:57,360 Speaker 1: you know, everybody's got uh you know, all kinds of 534 00:29:57,600 --> 00:30:02,920 Speaker 1: uh a shortage of patients. Uh. I promise you that 535 00:30:03,000 --> 00:30:07,360 Speaker 1: if the FED had a policy for uh providing cash 536 00:30:07,360 --> 00:30:12,480 Speaker 1: flow to close hotels, there would be unlimited demand. Uh. 537 00:30:12,520 --> 00:30:14,240 Speaker 1: You know, I think we have a kind of a 538 00:30:14,360 --> 00:30:18,200 Speaker 1: binary economy at the moment where parts of it, like 539 00:30:18,280 --> 00:30:23,480 Speaker 1: airlines or tourists or travel is suffering extraordinive restaurants to 540 00:30:23,640 --> 00:30:27,920 Speaker 1: suffering very significantly, that the rest of the economy is 541 00:30:27,960 --> 00:30:31,680 Speaker 1: not suffering. So are you at a point where you 542 00:30:31,760 --> 00:30:35,880 Speaker 1: have to offer uh incentives to people, uh in order 543 00:30:35,920 --> 00:30:38,480 Speaker 1: to to fill up some office space that you own, 544 00:30:38,600 --> 00:30:41,560 Speaker 1: or are you negotiating with people. There's a lot of 545 00:30:41,560 --> 00:30:43,479 Speaker 1: concern about what's gonna happen we get to the end 546 00:30:43,480 --> 00:30:48,480 Speaker 1: of the year when rates usually reset. Well, I guess 547 00:30:48,560 --> 00:30:50,880 Speaker 1: you know, and and you know you know, we are 548 00:30:50,960 --> 00:30:55,440 Speaker 1: no longer in the office business, thank god, but we 549 00:30:55,520 --> 00:30:58,760 Speaker 1: are still very much in the in the residential side. 550 00:30:59,160 --> 00:31:03,479 Speaker 1: There's no question, particularly in that what I would call 551 00:31:03,520 --> 00:31:07,840 Speaker 1: our too softest markets New York and San Francisco. UM, 552 00:31:07,880 --> 00:31:12,719 Speaker 1: you know, whether it be concessions or least extensions with uh, 553 00:31:13,080 --> 00:31:17,040 Speaker 1: you know, other considerations the net effective which is that 554 00:31:17,960 --> 00:31:22,600 Speaker 1: the downside has been a reduction in the net rent generated. 555 00:31:23,360 --> 00:31:26,000 Speaker 1: The good news in the New York market is that 556 00:31:26,400 --> 00:31:29,760 Speaker 1: as prices have come down, the number of showings has 557 00:31:29,800 --> 00:31:34,719 Speaker 1: gone up, and the leasing pace and occupancy have increased accordingly. 558 00:31:35,120 --> 00:31:37,440 Speaker 1: So that's a function of the fact that you know, 559 00:31:37,760 --> 00:31:41,760 Speaker 1: demand is forcing a repricing to a certain extent, I 560 00:31:41,800 --> 00:31:46,960 Speaker 1: think a lot of that repricing and demand change. UM 561 00:31:47,200 --> 00:31:51,120 Speaker 1: is all very convenient when everybody can work remote. I 562 00:31:51,160 --> 00:31:54,520 Speaker 1: don't see that occurring about for much longer. That was 563 00:31:54,560 --> 00:31:58,120 Speaker 1: Sam's l founder and chairman of Equity Group Investments, and 564 00:31:58,200 --> 00:32:00,680 Speaker 1: that does it for this edition of Waltering Week. I'm 565 00:32:00,760 --> 00:32:08,160 Speaker 1: David Weston. This is Bloomberg. See you next week. M HM.