1 00:00:02,640 --> 00:00:05,360 Speaker 1: Welcome to the Bloomberg Penl podcast. I'm Paul swing you. 2 00:00:05,360 --> 00:00:07,720 Speaker 1: Along with my co host Lisa Brahma Waits. Each day 3 00:00:07,760 --> 00:00:10,280 Speaker 1: we bring you the most noteworthy and useful interviews for 4 00:00:10,320 --> 00:00:12,560 Speaker 1: you and your money, whether at the grocery store or 5 00:00:12,600 --> 00:00:15,520 Speaker 1: the trading floor. Find a Bloomberg Penl podcast on Apple 6 00:00:15,560 --> 00:00:18,000 Speaker 1: podcast or wherever you listen to podcasts, as well as 7 00:00:18,000 --> 00:00:21,799 Speaker 1: that Bloomberg dot com. Well, this pandemic has created a 8 00:00:21,840 --> 00:00:24,840 Speaker 1: whole new set of consumer behaviors as it relates to 9 00:00:25,000 --> 00:00:28,040 Speaker 1: eating meals. A lot of more people are cooking in, 10 00:00:28,080 --> 00:00:30,920 Speaker 1: but a lot more people are ordering out. To get 11 00:00:30,960 --> 00:00:33,520 Speaker 1: a sense of what that means for the pizza business, 12 00:00:33,560 --> 00:00:37,279 Speaker 1: we welcome Rob Lynch Robs the presidency of Papa John's Pizza. Rob, 13 00:00:37,280 --> 00:00:39,519 Speaker 1: thanks so much for joining us here. Give us a 14 00:00:39,560 --> 00:00:43,280 Speaker 1: sense of how your business has evolved over the past 15 00:00:43,320 --> 00:00:46,120 Speaker 1: couple of months as the pandemic has really gripped the 16 00:00:46,120 --> 00:00:50,400 Speaker 1: country and people have become more and more quarantined. Hi, Paul, 17 00:00:50,479 --> 00:00:54,200 Speaker 1: thanks for having me. You know our business is built 18 00:00:54,480 --> 00:00:57,920 Speaker 1: to help in these uncertain times. We are an off 19 00:00:57,960 --> 00:01:02,320 Speaker 1: premise delivery focused business US. We do not have very 20 00:01:02,360 --> 00:01:05,720 Speaker 1: many dining rooms to speak of, UM, so this is 21 00:01:05,800 --> 00:01:09,680 Speaker 1: kind of what we do. And we saw the challenges 22 00:01:09,880 --> 00:01:15,920 Speaker 1: that we're coming into North America. UM through our global 23 00:01:15,959 --> 00:01:19,839 Speaker 1: business we have we operating over fifty countries, including China 24 00:01:20,240 --> 00:01:23,039 Speaker 1: and South Korea some of the the countries that were 25 00:01:23,040 --> 00:01:26,040 Speaker 1: impacted first and we started, you know, we were able 26 00:01:26,080 --> 00:01:28,959 Speaker 1: to learn what it would look like and and you 27 00:01:29,000 --> 00:01:31,200 Speaker 1: know what we realized is that if we were allowed 28 00:01:31,200 --> 00:01:34,640 Speaker 1: to continue to operate, that we would have a big 29 00:01:34,680 --> 00:01:39,120 Speaker 1: responsibility and a big demand for our services. And you know, 30 00:01:39,160 --> 00:01:42,039 Speaker 1: in China we weren't able to operate as the government 31 00:01:42,319 --> 00:01:45,080 Speaker 1: shut down, but in South Korea we were. And and 32 00:01:45,120 --> 00:01:48,360 Speaker 1: so we took that model and we applied it to UH, 33 00:01:48,400 --> 00:01:52,000 Speaker 1: you know, North America, and we we focused on making 34 00:01:52,040 --> 00:01:55,520 Speaker 1: sure that we had were prepared for business continuity efforts 35 00:01:55,680 --> 00:01:58,680 Speaker 1: in our supply chain, making sure that we could UH 36 00:01:58,680 --> 00:02:01,960 Speaker 1: staff up to eat the incremental demand, and make sure 37 00:02:02,000 --> 00:02:06,720 Speaker 1: that we had the appropriate stantitization and and and procedures 38 00:02:06,720 --> 00:02:09,240 Speaker 1: in place to keep our employees safe so that we 39 00:02:09,240 --> 00:02:12,760 Speaker 1: can continue to operate. And we did that and and 40 00:02:12,840 --> 00:02:14,280 Speaker 1: that was a lot of the work that went on 41 00:02:14,360 --> 00:02:17,680 Speaker 1: in March as we started to see UM things change 42 00:02:17,720 --> 00:02:21,680 Speaker 1: and and then shortly thereafter, we implemented a new platform 43 00:02:22,040 --> 00:02:25,480 Speaker 1: UH and no contact delivery, and it has made a 44 00:02:25,480 --> 00:02:29,960 Speaker 1: world of difference. Has allowed our customers to feel confident 45 00:02:30,000 --> 00:02:32,680 Speaker 1: that when they order food from us, that we're delivering 46 00:02:32,760 --> 00:02:35,840 Speaker 1: it in a safe way, that that you know, they 47 00:02:35,840 --> 00:02:39,040 Speaker 1: can get food and everyone's doing their part. People are 48 00:02:39,080 --> 00:02:41,440 Speaker 1: staying home to try to fight this pandemic, and the 49 00:02:41,480 --> 00:02:44,280 Speaker 1: only way people can stay home is if they have food. 50 00:02:44,520 --> 00:02:47,280 Speaker 1: And you know, the frontline workers out there and the 51 00:02:47,320 --> 00:02:51,320 Speaker 1: grocery stores and our delivery drivers and inside team members 52 00:02:51,360 --> 00:02:53,919 Speaker 1: are doing a doing a great job making sure that 53 00:02:53,919 --> 00:02:56,400 Speaker 1: that we can get through this thing and fight this 54 00:02:56,560 --> 00:03:01,200 Speaker 1: terrible pandemic. So what did you to seek pre and 55 00:03:01,320 --> 00:03:03,480 Speaker 1: post the quarantine. There was a sense of kind of 56 00:03:03,480 --> 00:03:06,840 Speaker 1: how your sales changed once people really were in the 57 00:03:06,880 --> 00:03:09,560 Speaker 1: lockdown mode. That's great question. You know, we got off 58 00:03:09,600 --> 00:03:13,200 Speaker 1: to a really strong start UH in two thousand and twenty. 59 00:03:13,560 --> 00:03:16,640 Speaker 1: We were up about seven percent in in the first 60 00:03:16,720 --> 00:03:20,919 Speaker 1: quarter until mid March when we started seeing the initial 61 00:03:21,000 --> 00:03:24,920 Speaker 1: impact of COVID nineteen and people started the pantry load 62 00:03:24,960 --> 00:03:28,720 Speaker 1: a little bit, and um, you know, people really the 63 00:03:28,800 --> 00:03:32,920 Speaker 1: uncertainty created a dynamic where people didn't order out and 64 00:03:32,960 --> 00:03:37,040 Speaker 1: so we but we got through that and and UM 65 00:03:37,320 --> 00:03:40,920 Speaker 1: and then April hit. And once we got into April, 66 00:03:40,920 --> 00:03:44,160 Speaker 1: and we were about two weeks into the shelter and 67 00:03:44,240 --> 00:03:48,080 Speaker 1: place orders in most states and across the country, UM, 68 00:03:48,240 --> 00:03:50,680 Speaker 1: our business just took off. And you know, as we 69 00:03:50,720 --> 00:03:55,520 Speaker 1: reported yesterday, we saw cops store growth. That's that's the 70 00:03:55,560 --> 00:03:59,120 Speaker 1: best month in the company's history. UM. So you know, 71 00:03:59,160 --> 00:04:02,040 Speaker 1: we weren't we weren't expecting that level of growth, but 72 00:04:02,160 --> 00:04:06,440 Speaker 1: we've been able to UM manage it. And you know, 73 00:04:06,920 --> 00:04:09,960 Speaker 1: it's amazing what happens in business when you get really busy, 74 00:04:10,000 --> 00:04:13,120 Speaker 1: people get more productive, people step up to the challenge. 75 00:04:13,160 --> 00:04:16,240 Speaker 1: And our team has just risen to that challenge and 76 00:04:16,640 --> 00:04:19,920 Speaker 1: through their efforts out in the steel, out in our restaurants. 77 00:04:20,320 --> 00:04:22,800 Speaker 1: You know, our customer service scores for a thousand bases 78 00:04:22,839 --> 00:04:26,760 Speaker 1: point over the last six weeks. UM. People really appreciate 79 00:04:26,800 --> 00:04:29,520 Speaker 1: the fact and the extra care that we're taking and 80 00:04:29,520 --> 00:04:33,279 Speaker 1: the extra efforts were making to bring them you know, pizza, 81 00:04:33,760 --> 00:04:38,120 Speaker 1: and you know pizza. It's not just sustenance. It's actually 82 00:04:38,120 --> 00:04:40,599 Speaker 1: a little bit of a return to normalcy. You know, 83 00:04:40,720 --> 00:04:43,599 Speaker 1: it's a little bit of of of that joy that 84 00:04:43,960 --> 00:04:46,960 Speaker 1: they you know that they're looking for as they um 85 00:04:47,080 --> 00:04:49,920 Speaker 1: stay home for for weeks on end. So it's been 86 00:04:49,960 --> 00:04:54,240 Speaker 1: a really rewarding thing. Our company morale, especially the folks 87 00:04:54,240 --> 00:04:57,080 Speaker 1: out in the restaurants, has never been higher. And UM, 88 00:04:57,120 --> 00:04:59,200 Speaker 1: it's really been a privilege and an honor to help 89 00:04:59,240 --> 00:05:01,640 Speaker 1: outdoor and these show engine time. All right, So talk 90 00:05:01,680 --> 00:05:04,640 Speaker 1: about to us about your employees, your your team members 91 00:05:04,680 --> 00:05:07,200 Speaker 1: here as I'm guessing as you ramped up, you mean 92 00:05:07,279 --> 00:05:12,040 Speaker 1: I talked about same store sales growth and uh in April, 93 00:05:12,279 --> 00:05:15,840 Speaker 1: you need some more folks on the ground delivering the pizzas, 94 00:05:15,880 --> 00:05:17,960 Speaker 1: making the pizzas delivering them. Give us a sense of 95 00:05:18,000 --> 00:05:19,719 Speaker 1: how you're kind of ramping up and taking care of 96 00:05:19,760 --> 00:05:22,800 Speaker 1: those folks on the ground. Yeah, you know, it's it's 97 00:05:22,839 --> 00:05:26,560 Speaker 1: it's a really unfortunate outcome of this whole situation as 98 00:05:26,640 --> 00:05:30,560 Speaker 1: these UM high levels of unemployment and and the way 99 00:05:30,560 --> 00:05:34,960 Speaker 1: it's impacting our communities and impacting our country. And you know, 100 00:05:35,120 --> 00:05:37,719 Speaker 1: we've we've tried to do our part. We've actually hired 101 00:05:37,760 --> 00:05:40,920 Speaker 1: over twelve thousand people in the last six weeks, UM 102 00:05:41,160 --> 00:05:44,120 Speaker 1: to try to make sure that we have the staff 103 00:05:44,160 --> 00:05:48,599 Speaker 1: in place to UM take care of our communities and Frankly, 104 00:05:48,640 --> 00:05:52,240 Speaker 1: it's it's been it's been an interesting situation. We have 105 00:05:52,400 --> 00:05:56,560 Speaker 1: people who, um, you know, we're we're in other jobs 106 00:05:56,600 --> 00:05:59,600 Speaker 1: that had nothing to do with food service that are 107 00:05:59,680 --> 00:06:02,839 Speaker 1: now all coming in and working in our restaurants. And 108 00:06:02,880 --> 00:06:06,240 Speaker 1: it's been a great dynamic, uh, them coming in and 109 00:06:06,279 --> 00:06:09,280 Speaker 1: bringing their talents and their passion and and like I said, 110 00:06:09,360 --> 00:06:12,359 Speaker 1: morale has never been higher. These folks are are coming 111 00:06:12,400 --> 00:06:14,320 Speaker 1: in not just because they think, you know, I need 112 00:06:14,360 --> 00:06:17,120 Speaker 1: a paycheck and deliver in pizza. I mean, we try 113 00:06:17,240 --> 00:06:20,000 Speaker 1: really try to reinforce and I think it's really resonated 114 00:06:20,040 --> 00:06:23,440 Speaker 1: that these are essential services. These are and you know, 115 00:06:23,680 --> 00:06:26,719 Speaker 1: this work is important. This work is making a difference, 116 00:06:26,760 --> 00:06:29,560 Speaker 1: is allowing the folks to stay home that need to 117 00:06:29,600 --> 00:06:32,600 Speaker 1: stay home. And so, um, the twelve thousand people we've 118 00:06:32,680 --> 00:06:34,720 Speaker 1: hired over the last six weeks have come in. Our 119 00:06:34,720 --> 00:06:39,080 Speaker 1: retention has been great, and we're we're we're looking for more. 120 00:06:39,240 --> 00:06:42,240 Speaker 1: I mean, we need, we need more people because the 121 00:06:42,240 --> 00:06:45,520 Speaker 1: business continues to thrive and and we want to continue 122 00:06:45,520 --> 00:06:48,120 Speaker 1: to get through these times and help out as much 123 00:06:48,120 --> 00:06:50,159 Speaker 1: as we can. Rob talked to us a little about 124 00:06:50,200 --> 00:06:52,440 Speaker 1: the supply chain. Are you be able to get all 125 00:06:52,480 --> 00:06:55,520 Speaker 1: the ingredients you need to keep your process going. We've 126 00:06:55,520 --> 00:06:59,120 Speaker 1: heard some reports out that you know, maybe dairy there 127 00:06:59,160 --> 00:07:01,839 Speaker 1: might be some sup light chain issues me to pork 128 00:07:01,839 --> 00:07:05,200 Speaker 1: things like that. You know, one of the great things 129 00:07:05,240 --> 00:07:10,120 Speaker 1: about this company is UM it is a vertically integrated company. 130 00:07:10,240 --> 00:07:13,240 Speaker 1: We we own and operate our own supply chain, and 131 00:07:13,280 --> 00:07:17,720 Speaker 1: so we have really great relationships with our raw material 132 00:07:17,800 --> 00:07:21,400 Speaker 1: supplier and our ingredients suppliers. And so once again we 133 00:07:21,440 --> 00:07:24,560 Speaker 1: saw how things were transpiring in Asia and then in Europe, 134 00:07:24,560 --> 00:07:25,880 Speaker 1: and so we got out in front of it. What 135 00:07:26,000 --> 00:07:28,200 Speaker 1: we have great leadership in our supply chain and they 136 00:07:28,600 --> 00:07:31,640 Speaker 1: went out to our suppliers and procured a lot of 137 00:07:31,720 --> 00:07:36,760 Speaker 1: inventory heading into UM the pandemic. So we we significantly 138 00:07:36,840 --> 00:07:39,160 Speaker 1: increased our inventories. We had to go out and get 139 00:07:39,320 --> 00:07:42,320 Speaker 1: incremental storage space to make sure we could get enough 140 00:07:42,400 --> 00:07:45,360 Speaker 1: that that if we did see a disruption to our 141 00:07:45,360 --> 00:07:49,040 Speaker 1: supply chain, UM we were going to be able to 142 00:07:48,720 --> 00:07:52,520 Speaker 1: to persevere through those disruptions. We also went out and 143 00:07:52,520 --> 00:07:56,160 Speaker 1: and worked with new suppliers to try and create redundancies 144 00:07:56,160 --> 00:07:59,280 Speaker 1: in our supply chain and make sure that if something 145 00:07:59,320 --> 00:08:02,680 Speaker 1: happened to our core group of suppliers, we had backups 146 00:08:02,680 --> 00:08:06,440 Speaker 1: and those two initiatives have really paid dividends. We've seen 147 00:08:06,480 --> 00:08:12,600 Speaker 1: no business impact from UM ingredients UM challenges in the 148 00:08:12,600 --> 00:08:14,720 Speaker 1: supply chain right now. A lot of a lot of 149 00:08:14,720 --> 00:08:19,200 Speaker 1: protein suppliers are are challenged. But we have been able to, 150 00:08:19,840 --> 00:08:22,080 Speaker 1: you know, make sure that we have access to all 151 00:08:22,080 --> 00:08:24,920 Speaker 1: the pepperoni and sauces that we need for those are 152 00:08:24,920 --> 00:08:27,920 Speaker 1: the biggest proteins in our business UM and and we've 153 00:08:28,000 --> 00:08:30,360 Speaker 1: We've got plenty of it and we're operating at a 154 00:08:30,440 --> 00:08:32,600 Speaker 1: high level. Rob How do you think this is going 155 00:08:32,679 --> 00:08:34,400 Speaker 1: to play once we get to the other side of 156 00:08:34,440 --> 00:08:36,760 Speaker 1: this it relates to your business. Are you Are you 157 00:08:36,800 --> 00:08:40,120 Speaker 1: guys thinking about how consumer behavior may be changing, either 158 00:08:40,520 --> 00:08:44,360 Speaker 1: positive or negative for your business? You know, this is 159 00:08:44,720 --> 00:08:49,199 Speaker 1: we We've faced UM multiple economic challenges over the last 160 00:08:49,200 --> 00:08:51,440 Speaker 1: twenty years. If you talk about the dot com bubble, 161 00:08:51,520 --> 00:08:54,240 Speaker 1: you talk about the the banking and real estate bubble 162 00:08:54,280 --> 00:08:56,920 Speaker 1: back in two thousand and eight, and you know, I 163 00:08:56,920 --> 00:09:00,520 Speaker 1: think when those happened, people said, you know, the world 164 00:09:00,559 --> 00:09:02,800 Speaker 1: is never going to be the same again, and and 165 00:09:02,840 --> 00:09:06,800 Speaker 1: then the economy were cut or recovered, and I think 166 00:09:06,840 --> 00:09:09,400 Speaker 1: we kind of went back to normal. This is a 167 00:09:09,520 --> 00:09:11,800 Speaker 1: this is a health price. I think this is this 168 00:09:11,880 --> 00:09:15,040 Speaker 1: is going to be different. I think that until we 169 00:09:15,120 --> 00:09:20,400 Speaker 1: have UH and the ability through a vaccine or you know, 170 00:09:20,720 --> 00:09:25,280 Speaker 1: even better a cure um to to give people confidence 171 00:09:25,600 --> 00:09:29,200 Speaker 1: in their personal safety and the safety of their families, 172 00:09:29,840 --> 00:09:34,080 Speaker 1: people are going to, you know, regardless of how latent 173 00:09:34,480 --> 00:09:39,000 Speaker 1: the virus becomes. And you know, we we flattened that curve, 174 00:09:39,040 --> 00:09:41,560 Speaker 1: I think people are still going to have a concern 175 00:09:41,600 --> 00:09:45,600 Speaker 1: about going out into social environments and and being in 176 00:09:45,640 --> 00:09:49,280 Speaker 1: close proximity to people that they don't know, and and 177 00:09:49,280 --> 00:09:52,040 Speaker 1: and people that could potentially present a risk to them, 178 00:09:52,080 --> 00:09:55,360 Speaker 1: and that you know, that's a sad thing. Um. You know. 179 00:09:55,960 --> 00:09:58,640 Speaker 1: I hope that we can get past that, but I 180 00:09:58,679 --> 00:10:01,120 Speaker 1: do think that until there's there's a way to give 181 00:10:01,160 --> 00:10:04,720 Speaker 1: them confidence, we're going to see that. And so I 182 00:10:04,760 --> 00:10:08,440 Speaker 1: think the dynamic that's in place right now, that's happening 183 00:10:08,559 --> 00:10:13,920 Speaker 1: right now where people are ordering almost everything um through 184 00:10:14,040 --> 00:10:17,720 Speaker 1: digital channels and it's showing up at their door and 185 00:10:17,720 --> 00:10:22,160 Speaker 1: and they are consuming either goods or services or food 186 00:10:22,920 --> 00:10:25,240 Speaker 1: at home, I think that's gonna that's gonna permeate for 187 00:10:25,240 --> 00:10:27,080 Speaker 1: a while. I think there's gonna be a tale on this, 188 00:10:28,200 --> 00:10:30,839 Speaker 1: regardless of whether or not states open back up or 189 00:10:30,880 --> 00:10:34,360 Speaker 1: countries open back up and and um, you know, I 190 00:10:34,400 --> 00:10:38,120 Speaker 1: hope that we can get past that because I love 191 00:10:38,200 --> 00:10:41,360 Speaker 1: the fact that we've got a great entrepreneurial dynamic in 192 00:10:41,400 --> 00:10:43,320 Speaker 1: the food service industry and we've got a lot of 193 00:10:43,320 --> 00:10:47,479 Speaker 1: people depending on um customers coming back to their restaurants 194 00:10:47,480 --> 00:10:49,599 Speaker 1: in their dining rooms, and so I hope that we 195 00:10:49,720 --> 00:10:52,320 Speaker 1: get past that as quickly as possible. But you know, 196 00:10:52,400 --> 00:10:55,680 Speaker 1: as long as people are are continuing to rely on 197 00:10:56,559 --> 00:10:59,520 Speaker 1: delivery and show and staying home more often, will be 198 00:10:59,559 --> 00:11:02,600 Speaker 1: there to help about That's my discussion with Papa John 199 00:11:02,679 --> 00:11:06,079 Speaker 1: CEO Rob Lynch, really talking about the business, how it's changed. 200 00:11:06,120 --> 00:11:10,280 Speaker 1: They had just a surge in delivery activity in April, 201 00:11:10,320 --> 00:11:13,079 Speaker 1: not surprisingly, but it's up the strongest month in the 202 00:11:13,600 --> 00:11:16,800 Speaker 1: company's history. So they're you know, they're hiring more workers, 203 00:11:16,800 --> 00:11:18,920 Speaker 1: more delivery folks to kind of meet the demand. But 204 00:11:19,320 --> 00:11:21,840 Speaker 1: really interesting to see how the changing dynamics in the 205 00:11:21,840 --> 00:11:25,480 Speaker 1: food services business is benefiting certain companies, particularly the ones 206 00:11:25,520 --> 00:11:28,520 Speaker 1: that really are focused on delivery, like like Papa John. 207 00:11:28,600 --> 00:11:30,800 Speaker 1: So it was a great interview. Yeah, it was really 208 00:11:30,960 --> 00:11:33,400 Speaker 1: to hear him talk about his business and trying to 209 00:11:33,440 --> 00:11:36,240 Speaker 1: balance the growth of the business was trying to protect 210 00:11:36,840 --> 00:11:42,120 Speaker 1: the workers as well. It's hard to put into perspective 211 00:11:42,679 --> 00:11:45,800 Speaker 1: data that really defies historical precedent, and that is the 212 00:11:45,880 --> 00:11:48,280 Speaker 1: position that we are charged with at this point, looking 213 00:11:48,400 --> 00:11:52,640 Speaker 1: at report after report that shows millions of Americans losing 214 00:11:52,640 --> 00:11:55,199 Speaker 1: their jobs in record speed. This morning we got more 215 00:11:55,240 --> 00:11:59,960 Speaker 1: initial jobless claims, another three point one seven million individ 216 00:12:00,080 --> 00:12:03,280 Speaker 1: jules filed for claims. The question is how quickly will 217 00:12:03,320 --> 00:12:07,120 Speaker 1: this recover, how much damage and for how long will 218 00:12:07,160 --> 00:12:09,560 Speaker 1: this make its mark on the economy? Joining us now 219 00:12:09,640 --> 00:12:12,319 Speaker 1: Danielle D. Martino Booth, chief executive officer and director of 220 00:12:12,400 --> 00:12:16,360 Speaker 1: Intelligence at Quill Intelligence, also former advisor at the Dallas Fed, 221 00:12:16,520 --> 00:12:20,559 Speaker 1: a Bloomberg opinion columnist, and the author of the book 222 00:12:20,679 --> 00:12:23,040 Speaker 1: fed Up at Insiders take on why the Federal Reserve 223 00:12:23,120 --> 00:12:26,200 Speaker 1: is bad for America. Danielle, I would love your sense 224 00:12:26,400 --> 00:12:29,520 Speaker 1: right now as we watch a demolition of more than 225 00:12:29,559 --> 00:12:32,520 Speaker 1: a decade of job creation in less than two months, 226 00:12:33,080 --> 00:12:35,680 Speaker 1: do you get a sense of how quickly these jobs 227 00:12:35,679 --> 00:12:39,880 Speaker 1: can be brought back on? Well, you know it's interesting, Um, 228 00:12:40,679 --> 00:12:43,480 Speaker 1: we look, we look on the outside of the country 229 00:12:43,760 --> 00:12:45,880 Speaker 1: in in this episode, I think to figure out what's 230 00:12:45,880 --> 00:12:48,280 Speaker 1: going to happen in the future. And you know what, 231 00:12:48,400 --> 00:12:51,680 Speaker 1: whether we want to dispute the data on the virus 232 00:12:51,720 --> 00:12:56,040 Speaker 1: coming out of China is one thing. But the lowness 233 00:12:56,080 --> 00:13:00,080 Speaker 1: with which the supply chain is coming back online and 234 00:13:00,280 --> 00:13:03,959 Speaker 1: the reticence on the part of consumers, bearing in mind 235 00:13:04,040 --> 00:13:07,760 Speaker 1: China is six consumption, it's kind of I think it's 236 00:13:07,920 --> 00:13:12,319 Speaker 1: a misconception that that China is this um manufacturing state. 237 00:13:12,440 --> 00:13:16,880 Speaker 1: It's not a consumptions versus our two thirds consumption um. 238 00:13:16,920 --> 00:13:20,120 Speaker 1: But the reticence that consumers are showing, I think should 239 00:13:20,160 --> 00:13:23,840 Speaker 1: teach us something about potentially what's going to happen with 240 00:13:24,000 --> 00:13:26,600 Speaker 1: our own consumers here in the United States. That's going 241 00:13:26,640 --> 00:13:29,800 Speaker 1: to determine whether or not we have a second wave, 242 00:13:30,320 --> 00:13:34,480 Speaker 1: a first derivative, if you will, of of of layoffs 243 00:13:34,480 --> 00:13:38,040 Speaker 1: in this country, not directly in leisure and hospitality and 244 00:13:38,080 --> 00:13:42,720 Speaker 1: in restaurants and in things that were impacted singularly by COVID, 245 00:13:43,080 --> 00:13:46,640 Speaker 1: but more so because of demand destruction and companies feeling 246 00:13:46,679 --> 00:13:49,760 Speaker 1: that they have to cut costs um some of those 247 00:13:49,840 --> 00:13:52,360 Speaker 1: high skilled workers that nobody wanted to let go up. 248 00:13:52,400 --> 00:13:55,640 Speaker 1: We used to talk about skill shortages three months ago. UM, 249 00:13:55,679 --> 00:13:57,520 Speaker 1: so I think that's what it's going to come down to, 250 00:13:57,679 --> 00:13:59,920 Speaker 1: is whether or not there's a sense of demand us 251 00:14:00,000 --> 00:14:04,839 Speaker 1: struction that allows for this next wave of layoffs white 252 00:14:04,840 --> 00:14:08,640 Speaker 1: collar workers, higher income to come through. So I'm literally 253 00:14:08,679 --> 00:14:12,160 Speaker 1: combing through warre notices on a state by state basis 254 00:14:12,200 --> 00:14:15,400 Speaker 1: every day. So, Danielle, that kind of goes to kind 255 00:14:15,400 --> 00:14:19,320 Speaker 1: of kind of economic forecasting here we've seen just in 256 00:14:19,320 --> 00:14:22,200 Speaker 1: the last week or so, um Morgan Stanley Goldman sashes 257 00:14:22,280 --> 00:14:24,360 Speaker 1: kind of suggesting of, you know, kind of we're experiencing 258 00:14:24,360 --> 00:14:27,320 Speaker 1: a bottom in the economy, and there even though they're 259 00:14:27,360 --> 00:14:30,920 Speaker 1: both forecasting kind of dire dire GDP numbers in the 260 00:14:30,960 --> 00:14:34,040 Speaker 1: second quarter, they're both looking for a pretty solid rebound 261 00:14:34,480 --> 00:14:37,080 Speaker 1: in the third and fourth quarter. Is that something that 262 00:14:37,200 --> 00:14:41,840 Speaker 1: might be a little prematurity think, you know, I really 263 00:14:41,920 --> 00:14:44,760 Speaker 1: think that it is premature, And I'm not saying that 264 00:14:44,760 --> 00:14:49,160 Speaker 1: they could be right. We could have this you and 265 00:14:49,200 --> 00:14:50,600 Speaker 1: I think at this point you're talking about a you. 266 00:14:51,080 --> 00:14:53,360 Speaker 1: You're just talking about you that you would see in 267 00:14:53,360 --> 00:14:57,160 Speaker 1: the regular alphabet as opposed to a long drawn out you. Um. 268 00:14:57,440 --> 00:15:00,240 Speaker 1: We we could see that it's feasible that we've a 269 00:15:00,240 --> 00:15:02,800 Speaker 1: lot of demand come back online in the third and 270 00:15:02,840 --> 00:15:04,600 Speaker 1: the fourth quarter, but I think a lot of it's 271 00:15:04,600 --> 00:15:07,440 Speaker 1: going to depend on people's attitude. I mean, I'm I'm 272 00:15:07,440 --> 00:15:10,640 Speaker 1: in Dallas, Texas, are our stay at home has been lifted. 273 00:15:11,000 --> 00:15:13,280 Speaker 1: I know that that there are people that are frequenting 274 00:15:13,640 --> 00:15:17,240 Speaker 1: restaurants and going about their business and not wearing masks 275 00:15:17,400 --> 00:15:19,880 Speaker 1: and uh. And then there are people like me who 276 00:15:19,920 --> 00:15:23,240 Speaker 1: are still sheltering in place by choice. So I think 277 00:15:23,240 --> 00:15:27,800 Speaker 1: it's going to depend on how consumers react and whether 278 00:15:27,880 --> 00:15:31,200 Speaker 1: or not their incomes are sustained. I'll be looking really 279 00:15:31,240 --> 00:15:35,360 Speaker 1: closely at hours worked tomorrow as well. Danielle. There's a 280 00:15:35,440 --> 00:15:39,520 Speaker 1: question about whether this time is different than previous episodes 281 00:15:39,640 --> 00:15:42,680 Speaker 1: of mass job losses simply because of how big the 282 00:15:42,760 --> 00:15:45,680 Speaker 1: safety net is. Because the United States has been sending 283 00:15:45,800 --> 00:15:50,200 Speaker 1: checks too American households with previous incomes below a certain amount, 284 00:15:50,480 --> 00:15:53,400 Speaker 1: and given the unemployment benefits that have been boosted, and 285 00:15:53,440 --> 00:15:57,240 Speaker 1: this has led some to predict that demand destruction won't 286 00:15:57,280 --> 00:16:00,440 Speaker 1: be as deep as people are predicting. Basically, people will 287 00:16:00,440 --> 00:16:03,240 Speaker 1: have money in their pockets to go and spend when 288 00:16:03,480 --> 00:16:06,920 Speaker 1: the social distancing restrictions are lifted. How much do you 289 00:16:06,960 --> 00:16:10,840 Speaker 1: buy into that argument, Well, I think that's you know, 290 00:16:11,160 --> 00:16:15,000 Speaker 1: there have been some great stories about UM owners of 291 00:16:15,040 --> 00:16:18,520 Speaker 1: small businesses who have received PPP loans and gotten severe 292 00:16:18,560 --> 00:16:21,600 Speaker 1: backlash from their employees because their employees are like, no, no no, no, 293 00:16:21,720 --> 00:16:24,240 Speaker 1: no no, we want those unemployment we we we we 294 00:16:24,360 --> 00:16:26,320 Speaker 1: we want to be on unemployment insurance. We're going to 295 00:16:26,360 --> 00:16:30,240 Speaker 1: make more money with that extra six dollars a week. UM. 296 00:16:30,360 --> 00:16:33,080 Speaker 1: So there's something to be said about people wanting to 297 00:16:33,120 --> 00:16:36,440 Speaker 1: stay on the sidelines because they're going to be drawing 298 00:16:36,600 --> 00:16:38,920 Speaker 1: a higher income. We saw when the first round of 299 00:16:38,920 --> 00:16:41,680 Speaker 1: stimulus checks went out that there was a spike in 300 00:16:41,680 --> 00:16:44,800 Speaker 1: in TV sales, in in in wide screen TV scale. 301 00:16:45,200 --> 00:16:47,720 Speaker 1: I mean, it's it's a fact of life that Americans 302 00:16:47,960 --> 00:16:50,960 Speaker 1: like to consume. If they have the means with which 303 00:16:51,000 --> 00:16:55,360 Speaker 1: to do this, Uh, that's great. That what I'm focused 304 00:16:55,400 --> 00:16:58,640 Speaker 1: on more is is whether or not they're going to 305 00:16:58,680 --> 00:17:01,880 Speaker 1: be able to go up the assumption ladder, if they're 306 00:17:01,880 --> 00:17:05,960 Speaker 1: going to sustain their lifestyles, or whether or not we're 307 00:17:05,960 --> 00:17:10,320 Speaker 1: going to be able to bring airbnb S work force 308 00:17:10,359 --> 00:17:12,120 Speaker 1: back online, and we're going to be able to bring 309 00:17:12,280 --> 00:17:17,600 Speaker 1: Uber's force workforce back online again, especially Silicon Valley. To 310 00:17:17,960 --> 00:17:21,399 Speaker 1: see these big employers relent, I think it's unique and 311 00:17:21,400 --> 00:17:24,840 Speaker 1: we should be following that closely. Danielle de Martino Booth, 312 00:17:24,880 --> 00:17:26,879 Speaker 1: thank you so much for being with us. Danielle de 313 00:17:26,960 --> 00:17:31,000 Speaker 1: Martino Booth, the chief executive officer and director of Intelligence 314 00:17:31,000 --> 00:17:34,280 Speaker 1: at Quill Intelligence, former advisor at the Dallas Fed in 315 00:17:34,359 --> 00:17:39,360 Speaker 1: a Bloomberg opinion columnist, really important right now to understand 316 00:17:39,480 --> 00:17:43,600 Speaker 1: the scope of job losses. We had UH deal cash 317 00:17:43,680 --> 00:17:47,600 Speaker 1: Kari speaking this morning and talking about how devastating the 318 00:17:47,680 --> 00:17:49,359 Speaker 1: job losses are going to be, saying, I'll take a 319 00:17:49,400 --> 00:17:51,760 Speaker 1: long time for the economy to recover, saying the number 320 00:17:51,800 --> 00:17:54,560 Speaker 1: tomorrow will probably be around sixteen or seventeen percent with 321 00:17:54,560 --> 00:17:57,200 Speaker 1: respect to the unemployment rate, but he said, I think 322 00:17:57,240 --> 00:18:01,560 Speaker 1: the real numbers probably around twenty three or twenty four percent. 323 00:18:02,040 --> 00:18:05,040 Speaker 1: It's devastating, and really the question is how quickly can 324 00:18:05,040 --> 00:18:10,760 Speaker 1: you get those people back into the labor force. You know, 325 00:18:10,840 --> 00:18:14,959 Speaker 1: we talk about the economic impacts, uh, you know, resonating 326 00:18:15,040 --> 00:18:17,040 Speaker 1: from the global pandemic. We talked about some of the 327 00:18:17,040 --> 00:18:20,280 Speaker 1: big public companies that have been certainly reporting over this 328 00:18:20,320 --> 00:18:22,640 Speaker 1: past earning season, but you think about it, it's really 329 00:18:22,680 --> 00:18:26,000 Speaker 1: the small and mid sized businesses that are really being impacted, 330 00:18:26,320 --> 00:18:29,720 Speaker 1: UH directly, and they have less of a cushion to 331 00:18:29,800 --> 00:18:32,280 Speaker 1: get a sense of how the small and midsized market, 332 00:18:32,280 --> 00:18:36,160 Speaker 1: the middle market, if you will, is performing. We really 333 00:18:36,200 --> 00:18:39,480 Speaker 1: fortunately speak with Randy Swimmer. He's a founder and head 334 00:18:39,480 --> 00:18:43,040 Speaker 1: of origination in capital markets at Churchill Asset Management, which 335 00:18:43,080 --> 00:18:45,840 Speaker 1: is UH an affiliate of Novin. He's also the publisher 336 00:18:45,880 --> 00:18:49,240 Speaker 1: of the Lead Left UM. So we're really happy to 337 00:18:49,240 --> 00:18:51,280 Speaker 1: have Randy with us. So, Randy, give us a sense here. 338 00:18:51,320 --> 00:18:54,200 Speaker 1: I know you guys spend a lot of time working 339 00:18:54,240 --> 00:18:57,560 Speaker 1: with kind of middle market types of companies, and i'd 340 00:18:57,600 --> 00:18:59,760 Speaker 1: love to get a sense of kind of we're you know, 341 00:18:59,760 --> 00:19:03,360 Speaker 1: we're six seven, eight weeks into this pandemic, the economic impact, 342 00:19:03,400 --> 00:19:06,520 Speaker 1: the job lost, the loss of demand. What are you 343 00:19:06,560 --> 00:19:10,240 Speaker 1: seeing in your portfolio of companies? Yeah, I'm Paula and Lisa. 344 00:19:10,280 --> 00:19:14,200 Speaker 1: Thanks for having me back. It's been a wild sixty days. Uh. 345 00:19:14,880 --> 00:19:18,200 Speaker 1: You're absolutely right, and we'd love to roll the clock back, 346 00:19:18,280 --> 00:19:20,760 Speaker 1: but look, all we can do is move forward. UM. 347 00:19:20,760 --> 00:19:24,240 Speaker 1: What we're seeing generally is that I think that the 348 00:19:24,280 --> 00:19:27,560 Speaker 1: portfolio companies and there's no better way actually of judging 349 00:19:27,560 --> 00:19:30,400 Speaker 1: the impact on these companies. Been looking at not only 350 00:19:30,400 --> 00:19:34,800 Speaker 1: our portfolio companies, but those across the middle market and 351 00:19:35,160 --> 00:19:39,080 Speaker 1: direct lenders who who serviced those businesses, and you can 352 00:19:39,160 --> 00:19:42,480 Speaker 1: kind of divide them into three groups. The first group 353 00:19:42,560 --> 00:19:45,240 Speaker 1: is sort of the front line businesses. Those are the 354 00:19:45,280 --> 00:19:48,560 Speaker 1: travel and retail, leisure, restaurants and so forth that have 355 00:19:48,680 --> 00:19:53,080 Speaker 1: been most directly hit and those, as we've seen UM 356 00:19:53,560 --> 00:19:56,880 Speaker 1: are are pretty much shut for business in many cases. UM. 357 00:19:57,080 --> 00:19:59,439 Speaker 1: You can just walk through your neighborhoods and see that 358 00:20:00,240 --> 00:20:03,320 Speaker 1: the restaurants are uh, you know, deliver only or pick 359 00:20:03,400 --> 00:20:06,920 Speaker 1: up only, and so their businesses way down. The next 360 00:20:06,920 --> 00:20:11,960 Speaker 1: would be services businesses that supplied those frontline businesses and 361 00:20:12,000 --> 00:20:15,240 Speaker 1: their impacted perhaps less so UM. And then we have 362 00:20:15,280 --> 00:20:18,520 Speaker 1: businesses that seem to be you know, uh, fairly intact. 363 00:20:19,240 --> 00:20:23,680 Speaker 1: They tend to be in the service sector areas UM 364 00:20:23,760 --> 00:20:27,720 Speaker 1: that that we focus on more defensive businesses in UM I, 365 00:20:28,280 --> 00:20:31,360 Speaker 1: for example, keeping the back offices going while we're all 366 00:20:31,359 --> 00:20:35,119 Speaker 1: working at home UM and those businesses seem to be 367 00:20:35,160 --> 00:20:37,760 Speaker 1: doing pretty well. And that's pretty much the kinds of 368 00:20:37,800 --> 00:20:42,040 Speaker 1: companies that we've been financing over the last ten years, 369 00:20:42,040 --> 00:20:45,919 Speaker 1: ten twelve years, so UM. But in general, UH, it's 370 00:20:45,960 --> 00:20:49,000 Speaker 1: it's pretty significant, and you've seen that reflected in UH 371 00:20:49,080 --> 00:20:52,280 Speaker 1: the unemployment numbers that's just come out. Randy. We've had 372 00:20:52,280 --> 00:20:55,880 Speaker 1: a lot of conversations about the dry powder that's been raised, 373 00:20:55,960 --> 00:20:59,040 Speaker 1: or some of the UH funds that have been raised 374 00:20:59,119 --> 00:21:02,280 Speaker 1: over the past few years to invest in small and 375 00:21:02,359 --> 00:21:06,440 Speaker 1: midsized companies. We've talked also about some excessive risk taking. 376 00:21:06,480 --> 00:21:09,760 Speaker 1: But I'm wondering at this point what would it take 377 00:21:10,280 --> 00:21:15,639 Speaker 1: for private debt managers to unleash that dry capital into 378 00:21:15,640 --> 00:21:18,879 Speaker 1: a market that's desperate for it, especially as we see 379 00:21:18,920 --> 00:21:23,480 Speaker 1: that about fifty of US small businesses surveyed by the 380 00:21:23,560 --> 00:21:26,639 Speaker 1: Human Resource Management Society think that they're going to be 381 00:21:26,640 --> 00:21:30,399 Speaker 1: out of business in six months if the shutdowns continue. Right, 382 00:21:30,600 --> 00:21:34,160 Speaker 1: So you've identified clearly the need, and now the question 383 00:21:34,359 --> 00:21:37,200 Speaker 1: for those of us who are on the front line 384 00:21:37,200 --> 00:21:40,959 Speaker 1: of financing is what are what can we expect in 385 00:21:41,080 --> 00:21:44,000 Speaker 1: terms of the next three to six months in terms 386 00:21:44,040 --> 00:21:47,040 Speaker 1: of performance of those businesses. Now, there's some of those 387 00:21:47,800 --> 00:21:51,120 Speaker 1: UH for example, that we know, like restaurants and fitness 388 00:21:51,160 --> 00:21:54,320 Speaker 1: centers that have been completely shoved down. It seems like 389 00:21:54,440 --> 00:21:59,720 Speaker 1: we are starting nationwide UH to see signs of those 390 00:22:00,000 --> 00:22:04,360 Speaker 1: ins of businesses state by states opening up with definite 391 00:22:04,359 --> 00:22:07,239 Speaker 1: limitations UH. And so it's not all opening up at 392 00:22:07,240 --> 00:22:09,760 Speaker 1: once and you're not seeing all the customers flooding back. 393 00:22:10,000 --> 00:22:12,719 Speaker 1: There's going to be social distancing. It's going to be 394 00:22:13,480 --> 00:22:18,040 Speaker 1: a slow open rather than a quick one. Um. And 395 00:22:18,080 --> 00:22:22,480 Speaker 1: so what's what finance folks like ourselves are looking at 396 00:22:22,720 --> 00:22:25,200 Speaker 1: is try to get some conviction around where revenues it 397 00:22:25,280 --> 00:22:27,879 Speaker 1: could be, because if you're going to extend credit to 398 00:22:27,920 --> 00:22:30,040 Speaker 1: these businesses, you want to have a fair sense of 399 00:22:30,640 --> 00:22:33,000 Speaker 1: when they are going to be opened up, when they're 400 00:22:33,040 --> 00:22:36,240 Speaker 1: going to start generating revenues, when they're going to generate 401 00:22:36,280 --> 00:22:39,119 Speaker 1: cash flows, and what level are we going to be seeing. 402 00:22:39,160 --> 00:22:41,840 Speaker 1: For example, the restaurant business, is that going to be 403 00:22:42,800 --> 00:22:44,520 Speaker 1: back up to where it was? We don't think. So 404 00:22:44,800 --> 00:22:48,480 Speaker 1: that's not a business sector that we we financed. But 405 00:22:48,560 --> 00:22:50,800 Speaker 1: I think for those who do you know, are we 406 00:22:50,840 --> 00:22:54,520 Speaker 1: going to seet of what we had in January? Is 407 00:22:55,760 --> 00:22:57,640 Speaker 1: so those numbers are very hard to tell. The other 408 00:22:57,680 --> 00:23:00,200 Speaker 1: thing that's going on is even the sectors like health care, 409 00:23:00,640 --> 00:23:02,879 Speaker 1: which you know we do a lot of some of 410 00:23:02,920 --> 00:23:06,080 Speaker 1: the physician focused practices, and you probably have seen this 411 00:23:06,119 --> 00:23:09,040 Speaker 1: in your daily lives. You can't just walk into your 412 00:23:09,080 --> 00:23:12,119 Speaker 1: doctor's officer an appointment. You have to do. There's telemedicine, 413 00:23:12,840 --> 00:23:15,040 Speaker 1: you can do a lot by phone. So what's the 414 00:23:15,080 --> 00:23:17,880 Speaker 1: impact of those businesses. They're clearly going to be coming back, 415 00:23:18,119 --> 00:23:21,280 Speaker 1: just as Jim's are gonna be coming back some restaurants. 416 00:23:21,320 --> 00:23:23,840 Speaker 1: But to answer your question, there are going to be 417 00:23:23,880 --> 00:23:26,800 Speaker 1: some businesses that, um, it's gonna be very hard to 418 00:23:26,840 --> 00:23:29,520 Speaker 1: get conviction over how they're going to be doing. But 419 00:23:29,640 --> 00:23:31,760 Speaker 1: once that starts to happen, and once we start to 420 00:23:31,800 --> 00:23:35,320 Speaker 1: see America going back to work and we get since 421 00:23:35,680 --> 00:23:38,600 Speaker 1: that these companies are coming back, then you can model 422 00:23:39,359 --> 00:23:42,320 Speaker 1: uh performance on those companies and actually figure out whether 423 00:23:42,400 --> 00:23:44,600 Speaker 1: or not they're going to pay your mom's back too short. 424 00:23:44,680 --> 00:23:47,040 Speaker 1: Randy Swimmer, thank you so much for being with us. 425 00:23:47,080 --> 00:23:49,520 Speaker 1: We'll have to have you back to discuss this as 426 00:23:49,560 --> 00:23:51,600 Speaker 1: time goes on and we get a clear sense of 427 00:23:51,640 --> 00:23:53,719 Speaker 1: some of those future revenue of flows as you were 428 00:23:53,760 --> 00:23:56,440 Speaker 1: talking about. Randy Swimmer, founder and a head of origination 429 00:23:56,480 --> 00:23:59,399 Speaker 1: and capital markets at Churchill Asset Management and affiliate of 430 00:23:59,440 --> 00:24:02,159 Speaker 1: New Vine, also so publisher of the Lead Left. If 431 00:24:02,200 --> 00:24:04,320 Speaker 1: you don't receive it, you should. It is a great 432 00:24:04,359 --> 00:24:06,640 Speaker 1: compilation of all things having to do with the middle 433 00:24:06,640 --> 00:24:10,879 Speaker 1: market lending space. Uh the absolute authority when it comes 434 00:24:10,960 --> 00:24:16,280 Speaker 1: to that. Well, the discussion here is it relates to 435 00:24:16,359 --> 00:24:19,960 Speaker 1: the pandemic seems to be switching over or migrating and 436 00:24:20,040 --> 00:24:23,359 Speaker 1: revolving over to when the US economy can open up, 437 00:24:23,400 --> 00:24:25,679 Speaker 1: how should we open up? And a lot of that 438 00:24:25,760 --> 00:24:29,639 Speaker 1: is predicated upon the virus itself and as our second wave, 439 00:24:29,720 --> 00:24:31,920 Speaker 1: and and so on and so forth, and those are 440 00:24:31,960 --> 00:24:36,840 Speaker 1: relying upon a lot of models from healthcare, from scientists. 441 00:24:37,160 --> 00:24:40,000 Speaker 1: The real sense, though, is a lot of uncertainty. Barry 442 00:24:40,040 --> 00:24:43,240 Speaker 1: rid Holts Bloomberg opinion columnists and host of Masters in 443 00:24:43,359 --> 00:24:45,600 Speaker 1: Business on Bloomberg. Rady is also the chairman and chief 444 00:24:45,640 --> 00:24:48,639 Speaker 1: investment officer Ridholts Wealth Management. He joins us on the 445 00:24:48,680 --> 00:24:51,600 Speaker 1: phone here, Barry, So, Barry, thanks so much for joining us. 446 00:24:51,600 --> 00:24:55,040 Speaker 1: But as we think about this reopening, we're really kind 447 00:24:55,040 --> 00:24:57,560 Speaker 1: of flying blind army because we've never experienced this before. 448 00:24:58,320 --> 00:25:01,840 Speaker 1: To say the very least, the closest thing we had 449 00:25:02,040 --> 00:25:06,560 Speaker 1: was the pandemic um just about a century ago, the 450 00:25:06,800 --> 00:25:11,480 Speaker 1: so called Spanish flu, and the technology, the medical technology 451 00:25:11,520 --> 00:25:15,360 Speaker 1: that existed then was so different than today. They had 452 00:25:15,359 --> 00:25:19,520 Speaker 1: a lockdown and you could see in the history books 453 00:25:19,520 --> 00:25:24,320 Speaker 1: the cities and states that followed the lockdown suffered a 454 00:25:24,520 --> 00:25:30,000 Speaker 1: much less substantial second wave. And so we're gonna run 455 00:25:30,640 --> 00:25:34,600 Speaker 1: another rerun experiment that was done a century ago to 456 00:25:34,760 --> 00:25:38,480 Speaker 1: see which states um really get hit by a second wave, 457 00:25:38,560 --> 00:25:42,280 Speaker 1: which states flattened the curve, and which don't it. It's 458 00:25:42,359 --> 00:25:48,240 Speaker 1: unfortunately going to be a experiment with real life consequences. Barry, 459 00:25:48,359 --> 00:25:51,280 Speaker 1: you recently wrote a column about how models can never 460 00:25:51,359 --> 00:25:54,320 Speaker 1: get things quite right. And when I talked to economists, 461 00:25:54,560 --> 00:25:57,879 Speaker 1: we've spoken with a number of thinkers and investors who 462 00:25:57,960 --> 00:26:01,640 Speaker 1: basically say, we're flying blind. We don't know what to expect. 463 00:26:01,760 --> 00:26:04,399 Speaker 1: And yet by X, y and z, how can people 464 00:26:04,440 --> 00:26:08,080 Speaker 1: be investing with any conviction right now based on the 465 00:26:08,160 --> 00:26:12,359 Speaker 1: level of unknowables right now out there. So that's a 466 00:26:12,440 --> 00:26:16,000 Speaker 1: deeply philosophical question. And I'll try and you can count 467 00:26:16,000 --> 00:26:19,159 Speaker 1: on me, Perry any time, all right, I'll let me 468 00:26:19,280 --> 00:26:23,159 Speaker 1: let me walk out on you a bit. So we 469 00:26:23,280 --> 00:26:26,679 Speaker 1: use models constantly. You use models all the time. And 470 00:26:26,800 --> 00:26:30,919 Speaker 1: the underlying premise of all these mathematical depictions of the 471 00:26:30,960 --> 00:26:35,520 Speaker 1: world are simply that, hey, the future is likely to 472 00:26:35,560 --> 00:26:38,640 Speaker 1: look very similar to the past, and as long as 473 00:26:38,840 --> 00:26:42,480 Speaker 1: there aren't any radical changes going forward, we can rely 474 00:26:42,560 --> 00:26:45,679 Speaker 1: on our models. Uh, some models, And I use the 475 00:26:45,680 --> 00:26:49,879 Speaker 1: example of Netflix. Hey, when when Netflix uses its model 476 00:26:49,920 --> 00:26:53,679 Speaker 1: to say, based on your viewing habits against what's the 477 00:26:53,720 --> 00:26:56,680 Speaker 1: rest of our hundred and sixty seven million subscribers, like 478 00:26:57,359 --> 00:26:59,399 Speaker 1: we're going to predict you're gonna like this. If that 479 00:26:59,440 --> 00:27:02,639 Speaker 1: model goes wrong, well who cares? You wasted ninety minutes. 480 00:27:03,200 --> 00:27:06,439 Speaker 1: But in other circumstances, when things that have never happened 481 00:27:06,480 --> 00:27:10,480 Speaker 1: before happened, the models just effectively lose their mind and 482 00:27:10,520 --> 00:27:14,960 Speaker 1: you end up with things like negative oil prices or hey, 483 00:27:14,960 --> 00:27:20,080 Speaker 1: tomorrow is the BLS BLS um Employment Situation Report. There 484 00:27:20,080 --> 00:27:22,960 Speaker 1: has never been a period in history where thirty million 485 00:27:23,000 --> 00:27:27,080 Speaker 1: people filed first time unemployment claims in a month. So 486 00:27:27,200 --> 00:27:30,119 Speaker 1: whatever comes out of that BLS model I suspect is 487 00:27:30,119 --> 00:27:36,240 Speaker 1: going to be not exactly precisely depicting reality, because that's 488 00:27:36,320 --> 00:27:41,400 Speaker 1: the sort of input that breaks models. Alright, So barry 489 00:27:41,680 --> 00:27:48,280 Speaker 1: the models. Okay, limited applicability here in this these unprecedented times. 490 00:27:48,320 --> 00:27:52,320 Speaker 1: So our investors just simply supposed to just kind of 491 00:27:52,600 --> 00:27:56,040 Speaker 1: look past this quarter's earnings, look past the second quarter 492 00:27:56,119 --> 00:27:59,560 Speaker 1: GDP number, look past the unemployment data, and just kind 493 00:27:59,560 --> 00:28:07,800 Speaker 1: of focus on put a multiple amount. There are lots 494 00:28:08,000 --> 00:28:11,159 Speaker 1: of variables, the biggest being how soon do we have 495 00:28:11,200 --> 00:28:13,679 Speaker 1: a treatment and beyond that, how soon do we have 496 00:28:13,720 --> 00:28:17,480 Speaker 1: a vaccine if you live with a high risk person, 497 00:28:17,600 --> 00:28:24,000 Speaker 1: an older person, someone with immunosuppression, or any other co morbidities. Um, 498 00:28:24,119 --> 00:28:27,160 Speaker 1: And there is a treatment that comes out, and we're 499 00:28:27,200 --> 00:28:31,320 Speaker 1: starting to see lots and lots of promising research. Well, 500 00:28:31,359 --> 00:28:34,320 Speaker 1: as soon as that comes out, this is pretty much 501 00:28:34,359 --> 00:28:37,560 Speaker 1: behind us, or or the process of putting this behind 502 00:28:37,640 --> 00:28:41,360 Speaker 1: us really ramps really ramps up. And there was just 503 00:28:41,480 --> 00:28:45,200 Speaker 1: a piece in the Washington Post yesterday about the antibodies 504 00:28:45,200 --> 00:28:49,160 Speaker 1: found in Lama blood seemed to be smaller than human 505 00:28:49,200 --> 00:28:53,360 Speaker 1: antibodies and effectively stopping the virus. So who knows what 506 00:28:53,360 --> 00:28:56,920 Speaker 1: what will finally be the magic bullet Once that happens, 507 00:28:56,920 --> 00:29:02,960 Speaker 1: we could start looking at two and philosophically, to to 508 00:29:03,040 --> 00:29:08,440 Speaker 1: go back to Lisa's question, the uncertainty issue is always 509 00:29:08,480 --> 00:29:12,960 Speaker 1: a misnomer because the future is always uncertain, and during 510 00:29:13,040 --> 00:29:15,720 Speaker 1: normal times we do a nice job of lying to 511 00:29:15,760 --> 00:29:20,280 Speaker 1: ourselves that we think we have some visibility, we think 512 00:29:20,320 --> 00:29:23,280 Speaker 1: we know, um, what the future holds. Go back and 513 00:29:23,320 --> 00:29:25,760 Speaker 1: look at any of the corporate guides from any year 514 00:29:25,800 --> 00:29:29,680 Speaker 1: over the past one. They are always wrong. They are 515 00:29:29,720 --> 00:29:33,520 Speaker 1: always incrementally readjusting as they get closer and closer to 516 00:29:33,680 --> 00:29:37,200 Speaker 1: that date. It's just when a period like this happens, 517 00:29:37,680 --> 00:29:40,400 Speaker 1: we find it harder to liar to ourselves and we 518 00:29:40,440 --> 00:29:42,760 Speaker 1: have to admit we have no idea what the future 519 00:29:42,800 --> 00:29:45,760 Speaker 1: looks like. All right, Barry Barry rit Holds, founder of 520 00:29:45,840 --> 00:29:48,880 Speaker 1: rit Holt's Wealth Management. We've moved from the philosophical, let's 521 00:29:48,880 --> 00:29:51,120 Speaker 1: go to the practical, and when we see right now 522 00:29:51,720 --> 00:29:54,760 Speaker 1: is clearly a profound shift or perhaps an acceleration in 523 00:29:54,800 --> 00:29:58,960 Speaker 1: the trend away from old business, the old economy. It's 524 00:29:59,000 --> 00:30:03,440 Speaker 1: the new economy, which is much more reliant to online activity. 525 00:30:03,600 --> 00:30:07,520 Speaker 1: I'm just wondering how you're advising your clients to invest 526 00:30:07,560 --> 00:30:10,680 Speaker 1: around that, given the fact that that's being priced in 527 00:30:10,680 --> 00:30:15,480 Speaker 1: in spades right now. So we don't think that these 528 00:30:15,520 --> 00:30:19,920 Speaker 1: sort of external events should cause people to fully um 529 00:30:20,120 --> 00:30:24,120 Speaker 1: rejigger their portfolio. You should have a financial plan. It 530 00:30:24,160 --> 00:30:27,280 Speaker 1: should assume a certain amount of risk and a certain target, 531 00:30:27,640 --> 00:30:30,760 Speaker 1: and you want to stay with that. If you look 532 00:30:30,800 --> 00:30:34,640 Speaker 1: at the changes in valuation between the US and and overseas, 533 00:30:35,200 --> 00:30:38,720 Speaker 1: all right, if you've been very overexposed to overseas and 534 00:30:38,760 --> 00:30:41,160 Speaker 1: you want to throw all that back, you can do that. 535 00:30:41,400 --> 00:30:46,240 Speaker 1: If you've been under exposed to the growth sector, to technology, 536 00:30:46,440 --> 00:30:49,840 Speaker 1: you can make a change in that direction. I don't 537 00:30:49,920 --> 00:30:53,480 Speaker 1: see any sort of inflation on the horizon, but a 538 00:30:53,560 --> 00:30:58,440 Speaker 1: number of people have been making that claim. And just 539 00:30:58,600 --> 00:31:00,840 Speaker 1: as a little bit of an insurance policy, if you 540 00:31:00,840 --> 00:31:06,160 Speaker 1: want to buy the Treasury inflation protected securities, the tip 541 00:31:06,200 --> 00:31:11,120 Speaker 1: spawns uh that that certainly could make sense to a portfolio. 542 00:31:11,400 --> 00:31:14,200 Speaker 1: I think we're more likely to see deflation than inflation. 543 00:31:14,680 --> 00:31:16,920 Speaker 1: But hey, you know you don't complain every year when 544 00:31:16,920 --> 00:31:19,080 Speaker 1: your house doesn't burn down and you already paid for 545 00:31:19,120 --> 00:31:21,720 Speaker 1: fire insurance. So those are the sort of things a 546 00:31:21,760 --> 00:31:25,080 Speaker 1: little trimming you could do around your portfolio. But think 547 00:31:25,120 --> 00:31:28,520 Speaker 1: back to events like September eleventh or the eighty seven crash. 548 00:31:29,080 --> 00:31:32,600 Speaker 1: Those aren't the sort of things that weren't a wholesale 549 00:31:33,000 --> 00:31:37,240 Speaker 1: um redo of a portfolio. They should just make you think, hey, 550 00:31:37,280 --> 00:31:40,800 Speaker 1: am I properly positioned for when we get past this 551 00:31:41,000 --> 00:31:44,320 Speaker 1: externality And and a lot of people are discovering that 552 00:31:44,440 --> 00:31:47,280 Speaker 1: they weren't properly positioned heading into it, and this is 553 00:31:47,320 --> 00:31:50,040 Speaker 1: as good a time as any to Readjust Hey Verry, 554 00:31:50,040 --> 00:31:52,920 Speaker 1: thanks so much for joining us as always. Barry ridd Holts, 555 00:31:52,920 --> 00:31:56,360 Speaker 1: Bloomberg Opinion columnists and host of Masters in Business on 556 00:31:56,440 --> 00:31:59,640 Speaker 1: Bloomberg Radio. Also founder, chairman and chief investment Officer Rid 557 00:31:59,720 --> 00:32:04,080 Speaker 1: Holts Wealth Management, joining us on the phone. Thanks for 558 00:32:04,080 --> 00:32:06,320 Speaker 1: listening to the Bloomberg P and L podcast. You can 559 00:32:06,320 --> 00:32:09,160 Speaker 1: subscribe and listen to interviews at Apple Podcasts or whatever 560 00:32:09,200 --> 00:32:12,400 Speaker 1: podcast platform you prefer. Paul Sweeney, I'm on Twitter at 561 00:32:12,400 --> 00:32:15,080 Speaker 1: pt Sweeney. I'm Lisa abram Woyit's I'm on Twitter at 562 00:32:15,120 --> 00:32:17,920 Speaker 1: Lisa abram woits one before the podcast. You can always 563 00:32:17,960 --> 00:32:20,000 Speaker 1: catch us worldwide. I'm Bloomberg Radio.