WEBVTT - The Real Problem Facing Sports Is Weakened Sponsorship 0:00:01.400 --> 0:00:04.120 Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, along 0:00:04.120 --> 0:00:06.200 with my co host of Bonnie Quinn. Every business day 0:00:06.240 --> 0:00:10.320 we bring you interviews from CEOs, market pros, and Bloomberg experts, 0:00:10.400 --> 0:00:13.600 along with essential market moving news. Find the Bloomberg Markets 0:00:13.600 --> 0:00:17.000 Podcast on Apple podcast or wherever you listen to podcasts, 0:00:17.000 --> 0:00:21.560 and on Bloomberg dot com. So it's a major uncertainty 0:00:22.079 --> 0:00:25.040 whether and when sports come back, either on the field 0:00:25.160 --> 0:00:29.400 or even on TV. It's all going to depend on sponsors, advertisers, 0:00:29.440 --> 0:00:32.120 and of course consumers. Let's bring in somebody who's been 0:00:32.120 --> 0:00:33.600 thinking a lot about this now. He used to be 0:00:33.640 --> 0:00:36.839 former where he is, former president of CBS Sports. He 0:00:36.960 --> 0:00:39.880 is now founder and president of Pilson Communications. I'm talking 0:00:39.880 --> 0:00:44.320 about Neil Pilson. Neil, thanks so much for joining. Good morning. 0:00:45.440 --> 0:00:48.280 So we have You know, the NFL season supposed to 0:00:48.320 --> 0:00:51.280 be starting off, and yet there really is no NFL 0:00:51.560 --> 0:00:54.680 plan yet. For example, even though training camps are set 0:00:54.720 --> 0:00:57.280 to fully begin at the end of this month, What's 0:00:57.520 --> 0:00:59.560 what are leagues supposed to do at a time like this, 0:00:59.680 --> 0:01:04.240 Neil leaks or all the leagues are doing what what 0:01:04.280 --> 0:01:08.280 they need to do. They're assessing the data there trying 0:01:08.319 --> 0:01:14.479 to create strategies. We see different plans in effect for uh, 0:01:14.520 --> 0:01:21.680 the NBA, the NHL, UH, the NFL. UH. So the 0:01:22.080 --> 0:01:26.560 leaks are they're they're caught between the uh, you know, 0:01:26.640 --> 0:01:30.319 the interest of the American public to watch sports and 0:01:30.400 --> 0:01:34.400 the risks that they have to understand if they're going 0:01:34.440 --> 0:01:36.920 to put the sports on the air. But all of 0:01:36.959 --> 0:01:41.039 the professional leagues, including Major League Soccer, do have a plan, 0:01:41.120 --> 0:01:46.640 they have a strategy and we'll see how it works out. So, Neil, 0:01:46.720 --> 0:01:50.720 we know that sports is just a huge, huge, multi 0:01:50.840 --> 0:01:54.480 billion dollar business. There's rights fees all over the place, 0:01:54.600 --> 0:01:57.960 and it's it's a key programming component for a lot 0:01:57.960 --> 0:02:01.240 of broadcast and cable networks here. But let's start with ESPN. 0:02:01.560 --> 0:02:05.640 It is a sports network after all. You know, how 0:02:05.960 --> 0:02:08.520 how at risk are they here of just you know, 0:02:08.639 --> 0:02:13.919 a prolonged shutdown of sports. Well, the answer is in 0:02:14.000 --> 0:02:17.320 your question, Yes they are at risk. They are doing 0:02:17.360 --> 0:02:19.760 the best they can with I was watching the Eagles 0:02:19.800 --> 0:02:24.919 concert last night on the ESPN. I've been watching their boxing, 0:02:24.919 --> 0:02:28.560 I've been watching some of their other programming. UH. What 0:02:28.680 --> 0:02:32.320 they've done is they've looked to reduce their costs, keep 0:02:32.360 --> 0:02:37.720 in mind that while the networks, including ESPN, had serious 0:02:37.880 --> 0:02:42.320 revenue shortfalls due to the lack of sports, they are 0:02:42.400 --> 0:02:45.280 also I won't use the word enjoying, but they are 0:02:45.360 --> 0:02:50.960 experiencing some significant cost savings. Uh. They are not paying 0:02:51.000 --> 0:02:54.040 the rights fees that they would otherwise pay since they're 0:02:54.080 --> 0:02:58.480 not getting the games, and they're not incurring the production 0:02:58.560 --> 0:03:03.760 costs which they would otherwise have to uh spend to 0:03:03.919 --> 0:03:08.040 cover the games. So UH, while the impact is negative 0:03:08.080 --> 0:03:11.280 in the sense that it's not a h they make 0:03:11.360 --> 0:03:15.200 profits and that's what they're for going right now. UH, 0:03:15.200 --> 0:03:19.880 it is they can weather the storm. They're Obviously ESPN 0:03:20.000 --> 0:03:24.519 is well financed with a very large company as it's 0:03:24.639 --> 0:03:29.640 as his owner, Disney. UH. The other networks Comcast owns NBC, 0:03:31.040 --> 0:03:34.240 UH CBS is with Viacom, which is not as big 0:03:34.240 --> 0:03:39.280 a company as Comcast. Fox is a little thinner in 0:03:39.400 --> 0:03:43.680 terms of their financial strength, that given the changes in 0:03:44.160 --> 0:03:47.520 their corporate structure in the past couple of years. But 0:03:47.600 --> 0:03:51.240 none of the networks really are are in danger in 0:03:51.360 --> 0:03:55.080 just in terms of the financials on sports. The real 0:03:55.240 --> 0:03:59.640 problem is what's going to happen next? UH. And let 0:03:59.640 --> 0:04:03.400 me give you quick example. Let's say the NFL comes 0:04:03.440 --> 0:04:06.760 back and they're playing their games, and the networks are 0:04:06.800 --> 0:04:12.640 now responsible to pay rights fees. However, the sponsor market 0:04:12.920 --> 0:04:17.800 may not be as strong as it normally would be 0:04:17.800 --> 0:04:21.039 because sponsors are very concerned that the American public is 0:04:21.080 --> 0:04:24.240 just not in a buying mood. I mean, how are 0:04:24.240 --> 0:04:27.120 you going to buy a car this fall? With the 0:04:27.240 --> 0:04:32.960 COVID experience threatening almost every state in the country. Uh So, 0:04:33.040 --> 0:04:36.200 it could be that the networks get caught in a 0:04:36.279 --> 0:04:40.200 situation where the games are being played and they're providing 0:04:40.240 --> 0:04:44.560 television coverage, but the advertising and sponsor market is not 0:04:44.839 --> 0:04:49.680 as strong as you would hope, even though the ratings 0:04:49.720 --> 0:04:52.480 are good. We all expect the ratings are going to 0:04:52.560 --> 0:04:54.560 be good for sports when they come back. But what 0:04:54.680 --> 0:04:57.880 we don't know at this point is whether the sponsor 0:04:57.920 --> 0:05:03.320 an advertising market will be as strong as it normally 0:05:03.440 --> 0:05:08.840 is for fall sports. So what will happen to pricing then, Neil, 0:05:08.920 --> 0:05:12.359 Will there be a big discount for those sponsors that 0:05:12.400 --> 0:05:15.640 are willing to keep spending and for those advertisers that 0:05:15.680 --> 0:05:19.159 are willing to keep spending or will you know, networks 0:05:19.160 --> 0:05:21.520 somebody say, look there are more eyeballs on these we 0:05:21.560 --> 0:05:26.240 need to up the price. Well, that's the trick of 0:05:26.839 --> 0:05:30.520 television advertising. There is no is a rate card, but 0:05:31.160 --> 0:05:35.400 that doesn't mean anything. If the networks can't sell at 0:05:35.440 --> 0:05:41.160 the number that they're asking, then they'll drop their number. Uh. 0:05:41.400 --> 0:05:46.640 Network commercials are like seats on an airplane. Once the 0:05:46.680 --> 0:05:50.960 plane takes off, you can't sell that seat. Well, once 0:05:51.040 --> 0:05:54.960 the game takes place, you can't sell that commercial. So 0:05:55.320 --> 0:05:58.640 what you have is a fluid marketplace with supply and 0:05:58.720 --> 0:06:04.640 demand being the determinator in terms of pricing. Uh. It's 0:06:04.720 --> 0:06:09.839 it's relatively simple. It's very complex in operation. But the networks, 0:06:09.880 --> 0:06:13.000 if they can't sell their their time, will drop their 0:06:13.040 --> 0:06:17.960 price to UH to the market. If they can sell 0:06:18.040 --> 0:06:23.200 their time, then the marketplace will bid for the units 0:06:23.240 --> 0:06:26.200 and the price will go up. NOL. Just real quickly here, 0:06:26.240 --> 0:06:30.560 do you think consumer behavior maybe changing? Here? We're streaming 0:06:30.560 --> 0:06:32.840 more content at home because we're stuck at home. Do 0:06:32.880 --> 0:06:35.920 you think streaming is going to come to big time 0:06:36.000 --> 0:06:38.880 sports packages like the NFL? Will you see Amazon or 0:06:39.040 --> 0:06:43.840 Facebook bid for major major sports package? Uh? Not as 0:06:43.920 --> 0:06:48.839 quickly as some people think, because the basic advantage of 0:06:49.520 --> 0:06:54.400 the networks is they guarantee the pricing when they buy 0:06:54.440 --> 0:06:57.360 a long term deal with the NFL, the NBA. They're 0:06:57.400 --> 0:07:02.680 guaranteeing billions of ours. UH. It remains to be seen 0:07:02.760 --> 0:07:07.480 whether Amazon or Google or Netflix is prepared to guarantee 0:07:08.240 --> 0:07:11.560 the kind of money that the networks have traditionally provided 0:07:11.600 --> 0:07:15.160 the leagues, And until that happens, I think you're going 0:07:15.240 --> 0:07:19.960 to see streaming as a supplementary UH delivery system and 0:07:20.080 --> 0:07:25.000 quite effective, but not the primary distribution platform. Kind of 0:07:25.040 --> 0:07:27.360 everybody's waiting for that day. I know the league's are 0:07:27.400 --> 0:07:30.840 as well to get another well healed and wealth financed 0:07:31.040 --> 0:07:33.600 bidder set of bidders in their in addition to the 0:07:33.600 --> 0:07:38.280 broadcasting cable networks. Neil Pilson, founder and president of Pilson Communications, 0:07:38.600 --> 0:07:41.560 former president of CBS Sports, getting his thoughts on kind 0:07:41.560 --> 0:07:44.400 of the lay of the land of the sports UH 0:07:44.520 --> 0:07:48.200 landscape as this economy tries to reopen, and what it 0:07:48.240 --> 0:07:51.960 means for the media companies that depends so heavily on 0:07:52.080 --> 0:07:58.400 sports programming for viewership and advertising. The state of banks 0:07:58.520 --> 0:08:02.640 earnings this mornings o JP Morgan's total revenues of seventy 0:08:03.520 --> 0:08:05.720 year over year, but we also had credit loss provisions 0:08:05.800 --> 0:08:09.160 higher and Jamie diamond saying expect double digit unemployment through 0:08:09.200 --> 0:08:13.720 the first half of one city, also talking about higher 0:08:13.800 --> 0:08:16.600 loan losses going forward, but also trying to put a 0:08:16.600 --> 0:08:19.160 brave face forward. And then Wells Fargo, of course, is 0:08:19.160 --> 0:08:21.440 a whole another subject. Let's bring in someone who knows 0:08:21.480 --> 0:08:23.560 all about it. Kenley, Owner is Litable, Director of Industry 0:08:23.560 --> 0:08:26.720 and Equity Research at ce f R. A can what 0:08:26.800 --> 0:08:31.560 are the headlines from this morning's three reports. It's really 0:08:32.000 --> 0:08:38.560 tell us two stories. Banks obviously are impacted by the 0:08:38.600 --> 0:08:43.000 COVID nineteen and the recession, and it's affecting loan volumes. 0:08:43.440 --> 0:08:48.000 It's also impacting the rate or rate. Interest rates are 0:08:48.160 --> 0:08:51.840 much lower, but off setting that was the app and 0:08:51.880 --> 0:08:55.800 that's the consumer. But on the corporate side, the strength 0:08:55.920 --> 0:08:59.479 that we saw was on paralleled in terms of investment, 0:08:59.520 --> 0:09:04.160 banking and trading, especially in fixed income, but also in 0:09:04.240 --> 0:09:09.679 equity underwriting. So that kind of buffered a significant decline 0:09:09.679 --> 0:09:14.960 in terms of performance of lending um And unfortunately, this 0:09:15.120 --> 0:09:19.000 being the first quarter, full quarter of the impact of 0:09:19.080 --> 0:09:22.440 COVID nineteen, we're likely to still see weakness in the 0:09:22.520 --> 0:09:25.679 third quarters. So the road to recovery is looking to 0:09:25.800 --> 0:09:30.480 be ar shaped into all right, ken, let's focus a 0:09:30.520 --> 0:09:32.760 little bit on Wells Fargo, because the number that really 0:09:32.840 --> 0:09:35.800 jumped out of me was the nine point five billion 0:09:35.840 --> 0:09:38.839 dollar provision for credit losses. That's more than the consensus 0:09:38.840 --> 0:09:42.360 of four point nine billions. So obviously, when you think 0:09:42.360 --> 0:09:44.960 about Wells Fargo Fargo, you think about the consumer, you 0:09:45.000 --> 0:09:48.400 think about small and mid sized businesses. So that's really 0:09:48.440 --> 0:09:52.560 an ominous tone, isn't it. It is? But I think 0:09:53.400 --> 0:09:57.880 Wells Fargo kind of undershot the mark on building credit 0:09:57.920 --> 0:10:01.960 reserves in the first quarter. It was a half or 0:10:01.960 --> 0:10:06.400 even less than its appears of Bank of America or 0:10:06.559 --> 0:10:09.599 JP Morgan's. So I think part of this answer the 0:10:09.720 --> 0:10:13.840 question is patched up, but it is significant. And whilst 0:10:13.840 --> 0:10:18.000 far Ago highly relies on it's a community bank and 0:10:18.160 --> 0:10:23.120 consumer loans, Ken City Group, you know, setting aside seven 0:10:23.120 --> 0:10:26.120 point nine billion dollars more for so our loans, and 0:10:26.240 --> 0:10:28.960 David Morgan obviously setting aside more than anticipated as well. 0:10:29.200 --> 0:10:31.840 Why are loans beginning to go bad at such a 0:10:31.920 --> 0:10:33.840 rate when the FED stepped in to try and stop 0:10:33.880 --> 0:10:38.480 some of this. It's actually building reserves, So these are 0:10:38.559 --> 0:10:44.679 provisions or charges um to the bank. The actual delinquencies 0:10:44.800 --> 0:10:48.760 or loan losses are likely over the next few quarters. 0:10:49.040 --> 0:10:52.160 Think about this, this is the first full quarter yet 0:10:52.240 --> 0:10:56.319 the banks really don't have total visibility to the health 0:10:56.360 --> 0:11:00.319 of the consumers small business who have benefited into for 0:11:00.559 --> 0:11:05.160 bearans or subsidies from the federal government. So the banks 0:11:05.160 --> 0:11:09.360 are being very conservative. They have significant capital and as 0:11:11.400 --> 0:11:14.320 I think we might have lost Ken their Vanni. But 0:11:14.400 --> 0:11:16.079 I think he's saying, you know, I was interesting his 0:11:16.160 --> 0:11:18.720 comments about some of these banks, you know, don't have 0:11:18.800 --> 0:11:22.720 great visibility. So but they're still you know, taking these 0:11:22.760 --> 0:11:26.160 big low mass reserves. I think in anticipation that this 0:11:26.240 --> 0:11:29.200 is going to be an economy that is lower for longer. Yeah, 0:11:29.200 --> 0:11:31.880 I mean, I think that's very very telling because right 0:11:31.920 --> 0:11:35.040 now it seems like things are being managed pretty well. 0:11:35.160 --> 0:11:38.000 Right the consumer is still spending to a certain extent, 0:11:38.120 --> 0:11:42.360 and you know, even as we're seeing mass unemployment rules 0:11:42.360 --> 0:11:45.160 of seeing mass job creation again, you know, month over month, 0:11:45.360 --> 0:11:48.200 at the same time, if we don't have continued fiscal 0:11:48.280 --> 0:11:50.760 stimulus from the government, who knows what the situation will 0:11:50.800 --> 0:11:53.040 be like. And obviously the banks don't know any more 0:11:53.040 --> 0:11:55.160 than we do as to what's going to come out 0:11:55.160 --> 0:11:58.120 of Washington, d C. Over the next literally two weeks. Ball, 0:11:58.160 --> 0:12:01.840 I mean that funding for the six hundred dollars per 0:12:01.880 --> 0:12:04.719 week extra for each consumer who's out of work that 0:12:04.760 --> 0:12:07.800 goes away in two weeks unless Congress does something about it. Yeah, 0:12:07.800 --> 0:12:10.640 so we have Ken back. Ken Leone joins us once again, 0:12:10.640 --> 0:12:13.400 Global director of Research at cf are A. So Ken 0:12:13.440 --> 0:12:15.600 going to that point, what are the banks saying about 0:12:15.600 --> 0:12:18.800 the consumer here? Um? You know, are they Jamie Diamond's 0:12:18.800 --> 0:12:24.240 commentary seemed to be quite conservative on the margin, that's right, 0:12:24.679 --> 0:12:30.880 and the issue really relates to UM employment, particularly if 0:12:30.880 --> 0:12:35.120 we have adverse scenarios where unemployment, let's say for the 0:12:35.200 --> 0:12:39.000 U S economy is still in the mid teens UM, 0:12:39.080 --> 0:12:41.720 that will be kind of a dire outlook for the 0:12:41.760 --> 0:12:44.040 rest of this year. So that's the worst case. You 0:12:44.080 --> 0:12:47.280 gotta remember, banks hope for the best, but they prepare 0:12:47.360 --> 0:12:49.800 for the worst, and that's the build up of these 0:12:49.880 --> 0:12:54.320 credit reserves. Keep in mind, though, that what the banks 0:12:54.320 --> 0:12:58.000 are following is in line with the Settle reserve UM 0:12:58.240 --> 0:13:02.440 stress tests and the new scenarios on COVID back in 0:13:02.760 --> 0:13:06.559 late June, where when you look at those thirty three 0:13:06.559 --> 0:13:11.040 banks that participated in these stress tests, uh, the historical 0:13:11.160 --> 0:13:14.360 framework was a worst case of a four hundred thirty 0:13:14.400 --> 0:13:18.040 three billion with COVID. With the unemployment levels that you've 0:13:18.080 --> 0:13:23.400 mentioned before, um possibly mid teens, eight hundred billion. So 0:13:23.440 --> 0:13:25.840 what the banks have to do is before the reality, 0:13:25.960 --> 0:13:28.560 they have to build reserves. The flip side if we 0:13:28.640 --> 0:13:33.800 have this conversation later this year, is if the economic 0:13:33.880 --> 0:13:37.880 scenario is better, then you get a reserve reverse of 0:13:37.920 --> 0:13:42.000 these credit reserves, which would boost profitability absolutely. So we'll 0:13:42.080 --> 0:13:44.560 keep an eye on those. We've got still more banks 0:13:44.559 --> 0:13:47.800 to go uh tomorrow and Thursday as well. Ken le Own, 0:13:47.800 --> 0:13:50.599 Global Director of Industry and Equity Research at c f 0:13:50.840 --> 0:13:54.120 r A Research. We appreciate his commentary on the banks 0:13:54.120 --> 0:13:56.200 and again kind of a mixed bag coming out here 0:13:56.200 --> 0:13:59.199 about the consistent theme across the three banks that we 0:13:59.240 --> 0:14:02.080 saw today is very high single digit in terms of 0:14:02.320 --> 0:14:06.800 a billion dollar low loss reserves as they prepare for 0:14:06.880 --> 0:14:09.880 a weaker economy for some time to come. We'll see 0:14:09.920 --> 0:14:14.760 what we get from the big investment banks tomorrow. Well, 0:14:14.800 --> 0:14:17.040 when you have Max Niss and there's so many ways 0:14:17.200 --> 0:14:21.960 you can go when discussing this coronavirus on a global scale, Maxinis, 0:14:22.080 --> 0:14:25.560 it's a biotech farm at healthcare calumnist for Bloomberg Opinion Uh, 0:14:25.760 --> 0:14:29.040 but Max, today, I want to start with containment or 0:14:29.120 --> 0:14:32.800 lack thereof. It's it's it's something that's come back to 0:14:32.880 --> 0:14:36.520 the forefront of discussion of this virus containment and such 0:14:37.040 --> 0:14:41.600 key states as California, Texas, Florida. Where are we in 0:14:41.720 --> 0:14:45.000 some of those hotspots states? Are they bending the curve 0:14:45.240 --> 0:14:52.840 at all? Uh? Too early to say definitively, but probably not. 0:14:53.120 --> 0:14:55.720 And the reason is that, um, you know, with the 0:14:55.800 --> 0:14:59.680 exception of of California, as of you know this week, uh, 0:14:59.760 --> 0:15:04.960 no of them have really taken especially aggressive steps, you know, 0:15:05.080 --> 0:15:08.840 really big steps back in terms of, um, you know, 0:15:08.880 --> 0:15:11.480 the sorts of businesses that are open when you have 0:15:11.840 --> 0:15:15.520 community spread at a certain level. UM, you know, anything 0:15:15.520 --> 0:15:19.960 other than that either isn't going to contain the virus 0:15:20.000 --> 0:15:22.600 at all or is going to take a really long 0:15:22.720 --> 0:15:25.920 time over which um, you'll have a lot of infections 0:15:25.920 --> 0:15:28.960 and death to do so. So UM, I'll be curious 0:15:29.000 --> 0:15:32.400 to see if if California's move, which I will note 0:15:32.520 --> 0:15:35.960 comes on the back of data that that on kind 0:15:35.960 --> 0:15:38.600 of a statewide for capital level, is actually not as 0:15:38.640 --> 0:15:41.760 concerning as what you see out of Florida Arizona. If 0:15:41.800 --> 0:15:44.240 that will um, you know, pressure some other states to 0:15:44.320 --> 0:15:47.920 take some more aggressive action given to the sort of 0:15:48.080 --> 0:15:51.160 rates of new infection that they're seeing. Max, what's the 0:15:51.240 --> 0:15:57.360 latest thinking on herd immunity? Um? The latest I mean, 0:15:57.640 --> 0:15:59.400 I can give you my opinion on her immunity, but 0:15:59.440 --> 0:16:02.600 they're they're sort of two factors. One is whether you 0:16:02.640 --> 0:16:06.440 know it's even possible to achieve via natural infection, This 0:16:06.640 --> 0:16:09.520 being the form of the argument you here sometimes that 0:16:09.600 --> 0:16:11.560 you know it's going to take so long to get 0:16:11.560 --> 0:16:15.040 a vaccine and be so economically damaging to mitigate the virus, 0:16:15.040 --> 0:16:18.080 that we should just sort of let it run comparatively 0:16:18.240 --> 0:16:20.520 free in order thin. But the thing that we don't 0:16:20.560 --> 0:16:22.960 know and and still don't know is the degree to 0:16:23.040 --> 0:16:26.880 which UM natural immunity is conferred by infection or whether 0:16:26.920 --> 0:16:30.120 it lasts. And there's mixed evidence on this. UM. You know, 0:16:30.240 --> 0:16:34.400 some data that antibody levels fall over time. This doesn't 0:16:34.440 --> 0:16:38.800 confirm that that people probably can get reinfected UM, but 0:16:39.000 --> 0:16:41.920 it does suggest that that there isn't sort of rock 0:16:42.000 --> 0:16:45.400 solid evidence that that there is definitely gonna be durable 0:16:45.440 --> 0:16:48.400 immunity for everybody, So UM, you know that that's one 0:16:48.440 --> 0:16:51.120 reason to doubt that strategy. The second is just the 0:16:51.240 --> 0:16:54.640 numbers required to get there. Even if you do have 0:16:55.200 --> 0:16:57.640 you know, durable and consistent immunity, which we're not true 0:16:57.640 --> 0:17:02.520 about our enormous you know, it's it's fift and to 0:17:02.640 --> 0:17:05.120 get there. Um, if you just through the really simple math, 0:17:05.160 --> 0:17:08.840 even an you know, a relatively low implied fatality rate 0:17:08.960 --> 0:17:11.880 under one percent, UM, you know that that's a lot 0:17:11.920 --> 0:17:14.600 of deaths. And on top of that, UM, we also 0:17:14.680 --> 0:17:18.199 don't know the percentage of people that have lasting significant 0:17:18.240 --> 0:17:22.840 punseqluences from infection. So UM, it's a wildly irresponsible and 0:17:22.960 --> 0:17:26.320 dangerous strategy, all right. So if herd immunity is not 0:17:26.480 --> 0:17:30.920 a valid strategy, then obviously the focus turns back uh 0:17:31.040 --> 0:17:35.080 MAX to treatments and then ultimately to uh A or 0:17:35.200 --> 0:17:39.040 multiple vaccines. Anything new on that front that we should 0:17:39.040 --> 0:17:42.920 be paying attention to. UM, you know, the we're overall, 0:17:43.080 --> 0:17:45.480 I'd say the situation is is pretty close to what 0:17:45.560 --> 0:17:48.480 it's been in recent weeks, where we're we're sort of 0:17:48.520 --> 0:17:51.159 still waiting for the beginning of of these sort of 0:17:51.200 --> 0:17:54.200 big infirmatory trials. The news today that UM we're during 0:17:54.200 --> 0:17:57.800 an age to start its trial on July, So that 0:17:57.800 --> 0:18:00.240 would be the first really big trial in the US 0:18:00.320 --> 0:18:04.240 and a significant step on the path to seeing whether 0:18:04.280 --> 0:18:07.000 that the vaccine works. But how the thing I always 0:18:07.040 --> 0:18:09.720 like to highlight is, you know, it's impossible to say 0:18:09.720 --> 0:18:12.680 how long that that trial will take. You know, it's 0:18:12.680 --> 0:18:16.280 a big endeavor people. And on top of that, it's 0:18:16.320 --> 0:18:21.000 really difficult to handicap the possibility of success. Um, both 0:18:21.040 --> 0:18:24.440 because you know, the metrics of possible success we're using 0:18:24.520 --> 0:18:27.840 right now are there was antibody levels, um. You know, 0:18:27.880 --> 0:18:30.720 the comparison for people that have made it through the virus. 0:18:30.840 --> 0:18:33.560 That that's a metric that we don't necessarily know is valid. 0:18:33.680 --> 0:18:36.119 So again, just highlights that it's going to be a 0:18:36.160 --> 0:18:40.040 weight and they're they're significant and certain, especially given how 0:18:40.119 --> 0:18:43.520 rapidly these programs have progressed a relative to the norm 0:18:43.640 --> 0:18:46.960 for vaccine development. A lot of talk about children with 0:18:47.080 --> 0:18:49.800 you know, back to school sort of insights and and 0:18:49.880 --> 0:18:54.000 not in sits in other places. What about children? What 0:18:54.080 --> 0:18:57.719 do we know about how much they transmit this disease 0:18:57.760 --> 0:19:01.879 these days? Um? You know, again still something where where 0:19:01.920 --> 0:19:06.040 the evidence is evolving and and not conclusive. Um. I 0:19:06.359 --> 0:19:09.440 think it's it's broadly correct to say that the children 0:19:09.480 --> 0:19:15.240 are at substantially lower risk of of severe consequences of infection. UM. 0:19:15.280 --> 0:19:19.080 That's been a pretty consistent finding. Whether it's no risk 0:19:19.359 --> 0:19:22.440 UM is still is probably not the case. And then 0:19:22.440 --> 0:19:26.119 the broader question about beyond you know, the level of 0:19:26.240 --> 0:19:29.800 risk UM is the fact that you know, in starting 0:19:29.840 --> 0:19:33.399 up school you're encouraging a lot more travel, you have 0:19:33.440 --> 0:19:37.479 to think about teachers UM. So overall, even if children 0:19:37.480 --> 0:19:40.760 are are relatively less vulnerable, UM, if you don't have 0:19:40.840 --> 0:19:44.800 the virus contained, it's still going to be in one 0:19:44.840 --> 0:19:50.120 way or another, UM, pretty seriously unsafe to open schools broadly. Max, 0:19:50.200 --> 0:19:52.280 it's always a pleasure to have you on. I really 0:19:52.280 --> 0:19:54.080 don't know how you find the time to read everything 0:19:54.119 --> 0:19:56.639 and keep up with everything. It's just constant and a 0:19:56.840 --> 0:19:59.600 very difficult job these days. Well, Max Mason is biotech, 0:19:59.600 --> 0:20:03.479 pharmac and healthcare columnist for Bloomberg Opinion, and he's up 0:20:03.480 --> 0:20:06.719 with all the latest news surrounding the coronavirus and you know, 0:20:06.800 --> 0:20:10.080 every single drug trial that's underway, and and really you 0:20:10.160 --> 0:20:12.800 have the whole world on the case of this, Paul, 0:20:12.920 --> 0:20:16.359 and it's you know, it's I don't know when we 0:20:16.480 --> 0:20:21.600 last saw a global effort as you know, uh hefty 0:20:21.760 --> 0:20:24.080 as the one we're seeing right now. It's just a 0:20:24.119 --> 0:20:26.400 matter of when we'll get something that will break through. 0:20:28.359 --> 0:20:31.240 When you think about the industries that have been hardest 0:20:31.359 --> 0:20:36.000 hit by the coronavirus, the airline industry is certainly front 0:20:36.040 --> 0:20:37.920 and center among them. And we had some earnings out 0:20:37.960 --> 0:20:41.120 this morning from Delta Airlines. It just confirmed how difficult 0:20:41.119 --> 0:20:43.720 things are. Delta shares are off two point five percent 0:20:43.800 --> 0:20:46.560 today and off fifty year to date. To dig into 0:20:46.600 --> 0:20:49.840 that and all things aerospace and airlines, we welcome George Ferguson, 0:20:49.920 --> 0:20:54.159 senior Aerospace, defense and airlines analysts for Bloomberg Intelligence. So George, 0:20:54.200 --> 0:20:59.359 let's start off with Delta Boy, what's the takeaway here? Yeah, Paul, thanks, 0:20:59.720 --> 0:21:03.200 I think the big takeaway from Delta was, uh, they're 0:21:03.240 --> 0:21:06.600 burning about twenty seven million dollars a day as they 0:21:06.640 --> 0:21:09.879 closed the quarter. They still they want to push that 0:21:10.040 --> 0:21:13.600 to break even by year end um, but that's going 0:21:13.640 --> 0:21:16.399 to require more demand. They explicitly said, you know, the 0:21:16.880 --> 0:21:19.159 components going into sort of driving at the zero is 0:21:19.640 --> 0:21:22.719 more demand, and demand is petering out. They confirmed. For US, 0:21:22.760 --> 0:21:26.359 we've kind of been watching schedules and load factors and 0:21:26.400 --> 0:21:28.679 it looks like the US airlines have had a lot 0:21:28.680 --> 0:21:32.600 of capacity in the last sort of a couple of weeks. Uh, 0:21:32.640 --> 0:21:34.919 you know, as we started to see this nascent recovery 0:21:35.119 --> 0:21:38.800 and uh and travel. But look, with the cropping up 0:21:38.840 --> 0:21:43.560 of outbreaks in the south and the west and quarantine 0:21:43.680 --> 0:21:46.840 still in effect overseas, you know, we're concerned that it's 0:21:46.840 --> 0:21:49.240 going to start to peter out. And Delta kind of 0:21:49.280 --> 0:21:52.520 confirmed that. And so it's going to be a long road. 0:21:52.560 --> 0:21:55.560 Delta even said that, right, it's a long road. They 0:21:55.640 --> 0:21:58.840 talked in eighteen months to get to sort of you know, 0:21:59.000 --> 0:22:03.920 think reasonable travel levels. Are not talking talking reasonable travel levels. 0:22:03.920 --> 0:22:07.280 And we haven't seen business come back, business flying demand 0:22:07.320 --> 0:22:11.000 come back, and that's really important. Delta they said, revenues 0:22:11.080 --> 0:22:13.159 is business. You know, we kind of thought something around there. 0:22:13.200 --> 0:22:16.479 So I think those are the big takeaways from today. 0:22:16.560 --> 0:22:19.040 It's still a lot more a lot more distance to 0:22:19.080 --> 0:22:24.200 travel for recovery for this industry. George Delta saying seventeen 0:22:24.359 --> 0:22:27.120 thousand workers have now signed up to leave the airline 0:22:27.119 --> 0:22:30.359 at it's parked more than seven hundred aircraft. How much 0:22:30.440 --> 0:22:35.120 smaller will the future Delta be? I think again, again, 0:22:35.160 --> 0:22:37.720 that's a really hard question. Right, It's a function of 0:22:38.240 --> 0:22:41.840 the bounce back in demand. UM. And and right now, 0:22:41.880 --> 0:22:44.840 you know, we still have sort of an industry that's 0:22:44.880 --> 0:22:49.800 that's flying the passengers that they flew last year at 0:22:49.840 --> 0:22:52.520 this time. UM, I do think people will get more 0:22:52.560 --> 0:22:55.360 comfortable flying here in time, even if we don't have 0:22:55.440 --> 0:22:59.240 a vaccine or an effective treatment. The question is how 0:22:59.320 --> 0:23:01.720 much I know, you may have to strip some of 0:23:01.760 --> 0:23:06.560 these airlines, um for a couple of years here while 0:23:06.680 --> 0:23:10.320 you you know, fifty or while you wait for uh 0:23:10.760 --> 0:23:13.600 demand come back. So they've come a long way, but 0:23:13.600 --> 0:23:15.480 there's more distance to travel, and we think book four 0:23:15.560 --> 0:23:18.600 queues when you're really going to start to see adjustments 0:23:18.640 --> 0:23:20.840 to the workforce, because that's when the cares act money 0:23:21.520 --> 0:23:25.480 that's basically subsidizing all their labor goes away. All right, George, 0:23:25.520 --> 0:23:28.160 I guess it's time to go to the balance sheet 0:23:28.160 --> 0:23:30.719 discussion here is if this demand is going to uh 0:23:31.040 --> 0:23:34.280 perhaps come back slower than expected, we have to start 0:23:34.280 --> 0:23:36.879 looking at which airlines can can really weather the storm. 0:23:36.960 --> 0:23:40.640 So kind of how are you looking at that right now? Yeah? 0:23:40.640 --> 0:23:42.639 I look, they've all put on a lot of cash 0:23:42.720 --> 0:23:45.560 over the last bunch of months. UM. I've actually been 0:23:45.680 --> 0:23:48.359 pretty impressed with how receptive credit markets have been for 0:23:48.400 --> 0:23:52.840 these airlines. Many of them, you know, are in the 0:23:53.080 --> 0:23:57.320 tens between ten and twenty billion worth of liquidity, and 0:23:57.400 --> 0:24:03.160 so Delta said today they at eighteen for the liquidity. UM. Obviously, 0:24:03.200 --> 0:24:06.040 I think it probably puts them in in pretty good order. 0:24:06.320 --> 0:24:08.639 Will looks very closely as we go through earning season 0:24:08.720 --> 0:24:11.800 for cash burn and how long they can last. Delta 0:24:11.920 --> 0:24:14.639 entered the downturn with the better balance sheet and therefore 0:24:14.640 --> 0:24:18.000 more ability to get um, you know, to bring more 0:24:18.280 --> 0:24:20.239 cash out of their balance sheet. As pretty oppressed. They 0:24:20.280 --> 0:24:23.359 talked about adjusting even their credit lines so that some 0:24:23.400 --> 0:24:26.720 of those covenants don't trip them up. UM. I think again, 0:24:26.760 --> 0:24:29.000 being an investigated company going into the downturn helps you 0:24:29.000 --> 0:24:31.560 a lot. Leisure is going to perform better than business too, 0:24:31.600 --> 0:24:32.919