Speaker 1: This is Bloomberg Business Week. I'm Carol Masser and I'm
Speaker 1: Jason Kelly. We're here every day bringing you the latest
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Speaker 1: only on Bloomberg Radio. It's Got a gut Check with
Speaker 1: Drew Armstrong's team leader for US Healthcare for Bloomberg, leading
Speaker 1: our coverage here in the United States on this working
Speaker 1: closely with colleagues all around the world. Drew joins us
Speaker 1: on the phone from New York. So, Drew, there's so
Speaker 1: much to talk about. And I guess where I would
Speaker 1: start is what's top of mind for you? What's the
Speaker 1: most important thing you think we need to know since
Speaker 1: you have of you over all of this, you know,
Speaker 1: I think the thing that everybody is watching right now
Speaker 1: is you know what I would almost think about is
Speaker 1: kind of the second days of um, experimenting with how
Speaker 1: we control this disease. You know, we in in February
Speaker 1: and March, we went through a period of saying, Hey,
Speaker 1: we're going to put in place all of these measures,
Speaker 1: let's see if they work to stop to control the
Speaker 1: spread of this thing. And now we're entering this phase
Speaker 1: of reopening gradually now that we've learned a great deal
Speaker 1: more about the disease, and saying what's going to happen next.
Speaker 1: And I think both of these decisions were made it
Speaker 1: at the times with a great deal of uncertainty, without
Speaker 1: perfect information, UM. And you know, entering into the unknown
Speaker 1: has been sort of the theme of this entire entire outbreak. UM.
Speaker 1: And we're kind of watching a a great, a giant
Speaker 1: set of experiments, UM, public health experiments being played out
Speaker 1: in the United States right now with uncertain outcomes. Right.
Speaker 1: I feel like it's the one thing in terms of
Speaker 1: the race for a vaccine where we've actually see some
Speaker 1: global cooperation and sharing of information to try and to
Speaker 1: try and get something as soon as possible. I do wonder, though, Drew,
Speaker 1: what worries you the most the time is going to
Speaker 1: take for a vaccine. What about this internal US government
Speaker 1: projection that shows the nation's coronavirus outbreak, you know, accelerating
Speaker 1: by June to more than two thousand new cases per day.
Speaker 1: Is it the idea that you know, we get a
Speaker 1: second wave here and it's really tough. What worries you
Speaker 1: the most? You know, on this day here we are
Speaker 1: May five, We've gone through a lot, But I just
Speaker 1: would the first thing I want to do is actually
Speaker 1: touch on that projection. I think, you know, I know
Speaker 1: that was widely reported on yesterday. We you know, we
Speaker 1: wrote about it as well in the in the White
Speaker 1: House and some of the health agencies that whose names
Speaker 1: on it, and it appeared to be involved that we're
Speaker 1: not particularly helpful in creating um and providing any context
Speaker 1: around you know, what was what assumptions went into that,
Speaker 1: you know, into that projection, and what actually was going
Speaker 1: on there. Um. We have subsequently been told that, you know,
Speaker 1: those numbers were attached to you know, if there was
Speaker 1: no control at all on spread, no mitigation and so
Speaker 1: on and so forth. So I think, you know, there's
Speaker 1: some big scary numbers there. But I think some big
Speaker 1: scary numbers that probably don't reflect reality on the ground. Um.
Speaker 1: I think we are going to continue to obviously see
Speaker 1: new cases and see um thousands of additional deaths around
Speaker 1: the country. But I think in terms of the you know,
Speaker 1: two hundred thousand new cases a day figure, I think
Speaker 1: not a lot of people are currently projecting that to
Speaker 1: be to be to be totally clear, And I think
Speaker 1: it's important to to emphasize that, just because I know
Speaker 1: that did catch a lot of people's attention. UM. You know,
Speaker 1: moving on to your question about some of the some
Speaker 1: of the vaccine work, UM. You know, I think there
Speaker 1: are great, great hopes, UM, that that this effort will
Speaker 1: be successful, UM, and that some of the drug companies
Speaker 1: are working on this m on their own will be successful.
Speaker 1: But you know, there is there is not a long
Speaker 1: history UM, for any history in the world of being
Speaker 1: able to move move that quickly. UM. And I think
Speaker 1: some of the hope is that we get therapeutic options.
Speaker 1: You know, drugs are effectively treating the disease and the
Speaker 1: severe patients who need it, not you know, the mild
Speaker 1: people who don't. UM. That alleviate some of that burden
Speaker 1: and reduce some of the risk to society and to
Speaker 1: the health system. So Drew, I want to go back
Speaker 1: to something you said at the beginning, because I think
Speaker 1: it's really important this this sort of new phase we're
Speaker 1: living in, which is which feels like living with this
Speaker 1: for for some amount of time. And you know, you
Speaker 1: touched on the vaccines as you look across this and
Speaker 1: the reopening and you know, the sort of staggered reopening
Speaker 1: that we see depending on where you're looking at in
Speaker 1: the country. Ultimately, ultimately we are Bloomberg. We we look
Speaker 1: at businesses in the economy. What do you see out
Speaker 1: there that that you think is most important for us
Speaker 1: to understand in terms of what we're learning about the
Speaker 1: economic aspects of this. You know, I think you know,
Speaker 1: when you talk to people and you and you read
Speaker 1: some of the reports coming in from another country, people
Speaker 1: really and I figure out a new way of doing business.
Speaker 1: I mean, you look at some of the poll numbers
Speaker 1: where people think, you know, there is public concern about
Speaker 1: lifting measures too soon. And if there's public concerned about
Speaker 1: lifting measures too soon, those same people are all the
Speaker 1: folks who are likely to say, well, you know, maybe
Speaker 1: I'm not gonna go out to a restaurant just yet,
Speaker 1: even if it's open um or maybe um, you know,
Speaker 1: even if they open the movie theaters back up, I
Speaker 1: won't be the first person in there. I think, you know,
Speaker 1: one of the ways that I've been thinking about this
Speaker 1: is that we you know that there's there's this this
Speaker 1: for a long time in advance of this, we're kind
Speaker 1: of operating on the default of duty. Really have to
Speaker 1: close everything down, you know, Really the right thing to
Speaker 1: do is this, you know. I think the default was
Speaker 1: towards not doing anything, and it was a surprise when
Speaker 1: we did. We've not switched, i think societally for a
Speaker 1: lot of people into a default mode where it's, well,
Speaker 1: we've really let you to open things back up them
Speaker 1: I really going to go back out and do all
Speaker 1: the things that I was. I think a few people
Speaker 1: anticipated that big of a shift in mindset um to
Speaker 1: happen thatically and sport to be um that in scott
Speaker 1: Now it could be that in three weeks, you know,
Speaker 1: the sun is out and shining, people want only set
Speaker 1: the house and being cooped up. I think we've all
Speaker 1: seen people wanting to get out and be social um
Speaker 1: and uh, and be out of their house and and
Speaker 1: do some of these things. People. I think it very
Speaker 1: much remains to be seeing how people behave in all
Speaker 1: of this. We are kind of in an unprecedented time
Speaker 1: and I think all of those things are are are
Speaker 1: our factory that flows through to you know, continuely demand
Speaker 1: and what people want and how they act. Well. I
Speaker 1: think it'll be day by day and I think if
Speaker 1: numbers start to go up in cases start to go up,
Speaker 1: We're all going to be like, oh okay, we can't
Speaker 1: play around with this. It's such a good point to
Speaker 1: arm Strong, team leader for US Health here for Bloomberg.
Speaker 1: Thank you. I love that framing because he's exactly right
Speaker 1: that there's this sense and we get this from the
Speaker 1: government's like people want to get out and then people
Speaker 1: are like, I'm not so sure. You know, I am
Speaker 1: such an amazing It's a really interesting way to frame
Speaker 1: it in to think about it, and I hadn't thought
Speaker 1: about it that distilled down so our thanks to drum story.
Speaker 1: They can build it, they can open it, but will
Speaker 1: they come exactly exactly. This is Bloomberg Business Week with
Speaker 1: Carol Masser and Jason Kelly on Bloomberg Radio. Well, as
Speaker 1: we alluded to just a few minutes ago, even amid
Speaker 1: all of this, we could have a new Stock Exchange.
Speaker 1: New Exchange put together by some names that you've heard of.
Speaker 1: They've gotten the okay, but there is this whole matter
Speaker 1: of trying to start a new business and a tech
Speaker 1: heavy business and a people intensive business amid all of this.
Speaker 1: Lenand Win has the story she's finding supporter for Bloomberg
Speaker 1: Johinius on the phone from New York City. So, Lenan,
Speaker 1: this is something that's been in the works for a while.
Speaker 1: M E m X. I believe it's called or do
Speaker 1: they say, is there something cool that mems okay? I
Speaker 1: figured that was probably um so tell us if that's cool. Well, Jason,
Speaker 1: one of the challenges of writing this story was that
Speaker 1: there are so many household names that I can't include
Speaker 1: all of them in in the actual story. But you know,
Speaker 1: your Bank of America, Golden Sex, JP, Morgan on the
Speaker 1: banking side, and then you've got Fidelity Trade on on
Speaker 1: the kind of a retail side. So we've got a
Speaker 1: lot of huge financial market players that are invested in
Speaker 1: this firm, Virtue Citadel Securities as well. So we've got
Speaker 1: a really big spectrum of different types of players and
Speaker 1: they're all kind of getting in on this new exchange
Speaker 1: and it seems that the exchange has been able to
Speaker 1: do a lot of work from home. A lot of
Speaker 1: what they do is cloud based, and so they've been
Speaker 1: able to write a lot of the code even though
Speaker 1: they haven't really been able to go physically to the
Speaker 1: servers during the coronavirus pandemic. So there's been some delay,
Speaker 1: but it seems like things are starting to pick up again.
Speaker 1: Remind us why they want their own exchange. So a
Speaker 1: lot of these players have been complaining for a long
Speaker 1: time about the high fees that are charged by the
Speaker 1: incoming exchanges. We're talking the New York Stock Exchange and NASDAC,
Speaker 1: and they've been particularly angry about the high price of
Speaker 1: market data um and that sounds like a very sort
Speaker 1: of routine thing, but we're you're talking about firms that
Speaker 1: trade at increasingly high speeds, you know, at the blink
Speaker 1: of an eye. The amount of data that they need
Speaker 1: is very very high, and they get charged high fees
Speaker 1: for that. So they've been very very upset about that,
Speaker 1: and so upset that they decided to start their own exchange.
Speaker 1: And so, what's a realistic timeline for this to get
Speaker 1: up and running given everything that's happening in the world.
Speaker 1: N So, Jonathan Keill know the CEO, and I spoke
Speaker 1: this morning and he says they're still very aggressively trying
Speaker 1: to meet that three Q on target that they've reset
Speaker 1: for themselves, which means hopefully starting to test the systems
Speaker 1: this quarter with their participants, you know, doing some of
Speaker 1: the technology testing and platforms and connecting to the system
Speaker 1: and then eventually going for a third quarter launch. So
Speaker 1: that sounds aggressive, but again they're working super hard and
Speaker 1: they've got the backing of some very big investors making
Speaker 1: this Who wins who loses? How does this change kind
Speaker 1: of the investment world, the trading world as we know
Speaker 1: it or I have known it for a long time
Speaker 1: lean in so this is a big question. But I
Speaker 1: think what the exchange Memics is trying to do is
Speaker 1: to put pressure on the incumbents to reduce their fees. UM.
Speaker 1: I think there is a potential for this exchange to
Speaker 1: win because they've got so many big backers and obviously,
Speaker 1: um they're going to be competing on price, and so
Speaker 1: they're hoping to drive down prices across the board. So
Speaker 1: it's possible that the retail investors and any other investors
Speaker 1: who are in the equity markets will will benefit if
Speaker 1: they are this exchange is successful in driving down prices
Speaker 1: because ultimately these are the sorts of fees that end
Speaker 1: up in some form of fashion with both institutional and
Speaker 1: as you say, retail investors to write that's right, and
Speaker 1: so um. You know, the the equity market is a
Speaker 1: very complex place. But one of the key sticking points
Speaker 1: has been that in order to make money in this market,
Speaker 1: in order to sort of make the maximum profit at
Speaker 1: lowest costs, you have to drive down the fees. And
Speaker 1: if your institution is being charged very high fees, then
Speaker 1: you just can't do that. So everyone is really trying to,
Speaker 1: you know, push the market to zero here right where,
Speaker 1: and and even a fraction of whether it's you know,
Speaker 1: the margins have gotten so tight, and I feel like
Speaker 1: so many of these trades, right, so it makes a difference. Potentially,
Speaker 1: It certainly does. And um, yes, margins are very tight,
Speaker 1: and that has led to a pretty fractious environment in
Speaker 1: the equity markets, and it's caused many players to say,
Speaker 1: forget it, we're going off on our own right exactly,
Speaker 1: all right, Well, it's an important story. One of the
Speaker 1: most read not surprisingly on the terminal, given who our
Speaker 1: audiences and given as you say, Lennan, all the big
Speaker 1: names involved in this. Everybody, it feels like, is trying
Speaker 1: to figure out this new world order. And it does
Speaker 1: take me back here, and I think you're alluding to this,
Speaker 1: you know, even the race to zero when you think
Speaker 1: about commissions and fees with the big brokerage houses, bit
Speaker 1: suab or uh any of the other big names. All Right,
Speaker 1: Lennon Win, thank you so much. Finding a supporter for
Speaker 1: Bloomberg jinus on the phone from New York City. Yeah,
Speaker 1: looking forward to seeing how that plays, because I know
Speaker 1: they've had some dates on the calendar for this year.
Speaker 1: I think you're trying it all out and and getting
Speaker 1: it going. So we'll see whether or not the virus
Speaker 1: somehow um prevents them from doing that, or as they said,
Speaker 1: everybody's been working at home and they've had time to
Speaker 1: kind of maybe move ahead on things. This is Bloomberg
Speaker 1: Business Week with Carol Masser and Jason Kelly on Bloomberg Radio. Well,
Speaker 1: the virus pandemic has forced the US government to certainly
Speaker 1: take on a much bigger role in the US economy.
Speaker 1: It's also kicked off conversations and debates about a new
Speaker 1: American industrial policy. Sean Donnin covers this in Bloomberg Business
Speaker 1: Week magazine. The story online at Bloomberg Dot comment on
Speaker 1: newsstands later on this week, shown of course Bloomberg New
Speaker 1: Senior Trade reporter. He's on the phone from Maryland. Also
Speaker 1: with us is Bloomberg Business Week editor Joel Weber on
Speaker 1: the phone from Brooklyn. So this is a story, right,
Speaker 1: we are at an interesting time certainly in our political history,
Speaker 1: that's right. And you know, one of the things that
Speaker 1: I think we've been talking about a lot, just at
Speaker 1: least as a staff, it's sort of like, what are
Speaker 1: the ways that this is going to start to change things?
Speaker 1: And and some of these things are like ones we
Speaker 1: you know, might not change for the best, and other
Speaker 1: ones are are I think you get to a more
Speaker 1: strategic and in some cases almost a nationalistic kind of perspective.
Speaker 1: And I think that's where Sean came in with this idea.
Speaker 1: He kind of raised his hand and said, have we
Speaker 1: have we thought about industrial policy? And like how America's
Speaker 1: the industrial policy might change out of all this, and
Speaker 1: that let him down the rabbit hole. Um, Sean where where?
Speaker 1: What did you find as you started to think and
Speaker 1: report this article up? Yeah, So, I mean I've been
Speaker 1: covering the trade wards for the last couple of years,
Speaker 1: and if if you think about that, that's been really
Speaker 1: about defense, putting up tariffs, trying to defend sectors in
Speaker 1: the American economy. And one of the things that we've
Speaker 1: seen U as a result of this pandemic is people
Speaker 1: really thinking about how do you encourage more production at
Speaker 1: home and how do you do that. Well, in the past,
Speaker 1: that's been through this thing industrial policy, which for a
Speaker 1: lot of Republicans and a lot of the the kind
Speaker 1: of free marketers of free marketeers uh in in in
Speaker 1: the US has been in the taboo, you know, we
Speaker 1: we don't like in the US to encourage or to
Speaker 1: think that we're picking winners and losers in the private sector.
Speaker 1: That's certainly been the rhetoric that has come out of
Speaker 1: the Republican Party for decades. Well, now when we're having
Speaker 1: this conversation about what the U. S economy should look like,
Speaker 1: how prepared it should be to respond to a pandemic,
Speaker 1: where we should be producing things like masks and other
Speaker 1: productive equipment or ventilators we're starting to get into the
Speaker 1: realm of having a real conversation about how government should
Speaker 1: direct production, industrial production, and and industrial policy. It's worth
Speaker 1: saying that, you know, America has been here before. H
Speaker 1: During the Cold War, we certainly saw ramping up of
Speaker 1: the military industrial complex. We know that the space race
Speaker 1: gave us all sorts of great private sector products. We
Speaker 1: know that the GPS uh that is in our car
Speaker 1: comes out of, in part, a need for the U. S.
Speaker 1: Military to have like runic navigation tools uh, and so on.
Speaker 1: The question now though in the selection year, is is
Speaker 1: where are we going to go next? So today, and
Speaker 1: you know, one of the one of the things that
Speaker 1: you really focused on in the article is about rare earths,
Speaker 1: which obviously has become sort of the topic of in
Speaker 1: part because of the trade war, because we realized how
Speaker 1: much of this is actually coming from China. So what
Speaker 1: did you discover when you started to talk to people
Speaker 1: in that space. Yeah, so rare earth is this? Uh,
Speaker 1: there's seventeen of them. Uh. There are these minerals that
Speaker 1: are using everything from smartphones to ballistic missiles. Uh. And
Speaker 1: there's only one mine in the United States right now
Speaker 1: that's up and running and that produces these things, and
Speaker 1: that's the Mountain Pass mine in California and the Mohaba Desert. Uh.
Speaker 1: It actually though, has to send what it produces to
Speaker 1: China to be refined into these actual usable minerals. Uh
Speaker 1: and then they're sent back to to the U. S.
Speaker 1: And UH. The owner of that mind is now saying,
Speaker 1: you know what, I need some help from the government,
Speaker 1: and I need the government to do more to encourage
Speaker 1: the use of this stuff by big domestic manufacturers and
Speaker 1: that's companies like Tesla, Apple and so on, so that
Speaker 1: we can get production here in the United States and
Speaker 1: it makes sense economically. And Seohn, I love that you
Speaker 1: name check uh, some well known names in here to
Speaker 1: frame this debate from a political perspective, because Peter Navarro
Speaker 1: obviously has come to the four in a number of
Speaker 1: issues that you were intimately familiar with of the past
Speaker 1: couple of years when it comes to trade. But we're
Speaker 1: also looking at some different generations and maybe different political
Speaker 1: philosophies within the GOP that are all sort of circling
Speaker 1: around this. Help us understand that piece of it. Yeah, Look,
Speaker 1: I mean we are all focused on how Donald Trump
Speaker 1: has changed the economic conversation on trade and uh even
Speaker 1: the role of government and its relationship it with business
Speaker 1: from a Republican Party context. But what's really interesting is
Speaker 1: is what's going to come after Donald Trump? Even if
Speaker 1: he's elected to a second term, there will be an
Speaker 1: after Donald Trump. And there is this new generation of
Speaker 1: rising stars in the Republican Party, people like Marco Rubio,
Speaker 1: Josh Holly from Missouri, Tom Cotton who's also in the Senate,
Speaker 1: who all have a more of an economic nationalist event,
Speaker 1: and they're into this thing of an industrial policy. In fact,
Speaker 1: even before the current crisis, Marco Rubio was giving speeches
Speaker 1: laying out a vision of a new American industrial policy
Speaker 1: and arguing that that is actually a kind of great
Speaker 1: American tradition and that's something that the Republican Party should embrace.
Speaker 1: So Sean, where is corporate America? Where is actually the
Speaker 1: global corporate world on all of this, Because any CEO
Speaker 1: that I talked to the plays in the global world.
Speaker 1: They are concerned about increased nationalism and focus on your
Speaker 1: local market, although they're doing more a supply chains in
Speaker 1: their local markets and more production. But I'm just curious,
Speaker 1: where does the corporate world fit into all of this. Look,
Speaker 1: I don't I don't think the business world has ever
Speaker 1: liked the idea of the government telling it what to do,
Speaker 1: and I don't think that has changed in any way.
Speaker 1: But the business world is kind of stuck right now
Speaker 1: because there is this this crisis going on, and in
Speaker 1: the crisis, people start getting back to some pretty basic
Speaker 1: instincts and they like to see things like domestic production.
Speaker 1: And I think a lot of people in America UH
Speaker 1: today would probably not have minded a stronger hand from
Speaker 1: government in encouraging more domestic production or at least more
Speaker 1: domestic stock piling of personal protective equipment, which has been
Speaker 1: so vital in dealing with this pandemic. We'll see where
Speaker 1: this all shakes out after the election. It's clear that
Speaker 1: this is gonna be a big topic of discussion between
Speaker 1: now November. Whoever wins that race UH in November, is
Speaker 1: going to come in early next year into the White House,
Speaker 1: and this is one of the big thing are gonna
Speaker 1: have to wrestle with. Well, and interesting on a day
Speaker 1: where the President is out in Arizona at Honeywell, I
Speaker 1: mean this fits the narrative in some ways, right John, Yeah,
Speaker 1: And look and That's the interesting part of this conversation
Speaker 1: that maybe we don't talk enough about where we all
Speaker 1: have had this this this fear that too much of uh,
Speaker 1: you know, that we are too reliant here in the
Speaker 1: United States on China and overseas production and and these
Speaker 1: global supply chains. But one of the really remarkable stories
Speaker 1: of the last six weeks or so has been how
Speaker 1: the US manufacturing sector has really ramped things up. You know,
Speaker 1: we know the big automakers are now producing ventilators, Ralph
Speaker 1: Lauren is doing a personal protective equipment and and and
Speaker 1: the hospital scrubs, uh, you know, in the Honeywell, which
Speaker 1: is one of the big producers of these nine masks,
Speaker 1: has been ramping up production as well. So, I mean,
Speaker 1: we have seen in the last six weeks American in
Speaker 1: street really jump on this and and take advantage and
Speaker 1: come to the fort. Would be interesting to see what
Speaker 1: we learned from that forward when it comes to draft
Speaker 1: and Pulse. I feel like it will be in the
Speaker 1: history books and the economic books going forward. It's like
Speaker 1: we're at that time, all right, Sean Donn and thank
Speaker 1: you so much. Our thanks to Joel Webber as well
Speaker 1: brom A Journal. But you let me drive. Oh no, no, no, no,
Speaker 1: who's going to drive home? Honey? Please, I'll do the
Speaker 1: riding drivels me. I want to drive, Just drive baby.
Speaker 1: The question trying this is the drive to the globe. Thanks,
Speaker 1: we'll drive us down on Bloomberg Radio or in his
Speaker 1: time for the drive to the close. Jeff Chang is
Speaker 1: with US co founder and chief operating Office. They're in
Speaker 1: charge of product development at cdo E Vest. They've got
Speaker 1: over a billion dollars in assets under management. On the
Speaker 1: phone from mcclaim, Virginia, Jeff, nice to have you here
Speaker 1: with us on this Tuesday. So tell us a little
Speaker 1: bit about your world. How you guys a bit impacted.
Speaker 1: I hope you're safe, your family is safe, your employees
Speaker 1: are doing it. Okay, thanks for having me. Yeah, I
Speaker 1: mean we've seen as far as our world. You know,
Speaker 1: in this market, advisors are still nervous, so they're they're
Speaker 1: looking for for downside protection. Uh. So as far as
Speaker 1: we've seen, um, you know, they're they're looking for for hedges.
Speaker 1: So we've seen record flows into our buffer protect strategy.
Speaker 1: So um, like you mentioned before, over a billion dollars
Speaker 1: a year to date. So these target outcomes. Strategies really
Speaker 1: allow investors to invest in the market but with built
Speaker 1: in buffers to protect against downside losses. UM. So, as
Speaker 1: an example, our strategy seek to buffer let's say the
Speaker 1: first ten percent of downside loss of the smp UH
Speaker 1: and and as an example, if they have some was
Speaker 1: download it's UH, the strategy will only seek to be
Speaker 1: down five percent. But the thing is what it was
Speaker 1: critical for us UH in this market is that with
Speaker 1: these types of strategies investors were still able to have
Speaker 1: upside growth potential up to a cap UH. And we
Speaker 1: have seen, you know how devastating it is in the
Speaker 1: past for investors to go to cash during downturns like
Speaker 1: this and miss the upside recoveries and days like this,
Speaker 1: And so how does it work? I mean, it helps
Speaker 1: us understand the logistics of you know, how you end
Speaker 1: up sort of picking this and choosing a strategy and
Speaker 1: choosing elements of this strategy, especially in the market as
Speaker 1: volatile as this, Jeff Sure, so investors have a lot
Speaker 1: of choices as far as you know down type risk
Speaker 1: management UM And I think how investors actually choose our
Speaker 1: types of strategies because if you really look at the
Speaker 1: world of risk management, they really have kind of really
Speaker 1: largely three kind of options. One is, you know, diversification
Speaker 1: what we saw in Q one, which was really challenged
Speaker 1: or largely didn't work because broad equity markets suffered. You know,
Speaker 1: we had huge drops across all indexes and we even
Speaker 1: saw investment grade bonds start to lose value even uh
Speaker 1: you know, it wasn't until the Federal Reserve that came
Speaker 1: in and started buying bonds did we see uh the
Speaker 1: seor recovery. So um, that's the first way, um, and
Speaker 1: that's dependent upon uh the idea that you know, as
Speaker 1: the a falls as it be goes up. And what
Speaker 1: we've seen during times of crisis is that you know,
Speaker 1: those correlations tend to approach one. Well, let me just
Speaker 1: jump in for a second because I know you're explaining
Speaker 1: your strategy, but I do wonder, you know, right, you've
Speaker 1: got a target outcome, right, so you you've got a
Speaker 1: return profile, and that's what investors bank on um and
Speaker 1: risk is you know, there's a certain level of risk
Speaker 1: into all of this. But I do wonder in a
Speaker 1: market like we've seen, you know, how are those investments
Speaker 1: in those targets impacted by the extreme volatility that we've
Speaker 1: seen in the market specifically this year, and I think
Speaker 1: safe to say that many folks think we're not out
Speaker 1: of the woods yet. When it comes to that, how
Speaker 1: do how do these types of funds, these target funds
Speaker 1: that you guys have, specifically Jeff um do in extreme volatility?
Speaker 1: That's great questions. So it actually, uh, in the case
Speaker 1: of extreme volatility, the strategies can tend to benefit um
Speaker 1: given that we actually get our downside protection uh through
Speaker 1: exchange traded options. So as volatility starts to rise, it
Speaker 1: does provide enough an opportunity to for for more upside potential. UM.
Speaker 1: So in this case, uh, you know, during times of crisis,
Speaker 1: we actually for for the purpose of getting upside Actually
Speaker 1: in some in some cases welcome that volatility. Interesting, did
Speaker 1: explain that part to me? You you welcome the volatility?
Speaker 1: Why the ideas because we're buying let's say, UM, let's
Speaker 1: say take our example of our our strategy. We we
Speaker 1: we have let's say, at ten percent protection, uh. In
Speaker 1: a lot of our strategies, we fund that protection by selling,
Speaker 1: say upside potential in this case by selling a cover call.
Speaker 1: Now with increase in volatility, that that premium starts to
Speaker 1: generate more as potential generate more premium as volatility increases.
Speaker 1: That means that we could actually have more upside potentials
Speaker 1: by selling a higher strike call, uh in cases of
Speaker 1: you know, during periods of higher ball. But does that
Speaker 1: but does that also mean to the downside you're hurt
Speaker 1: even more as a result to it in this case
Speaker 1: as we're also we we get our protection by buying
Speaker 1: a put as well as selling a put. So it
Speaker 1: can impact, but there's somewhat mitigation because we're both long
Speaker 1: and short options on on the downside protection piece and
Speaker 1: so so that's a no. So that's a no. It
Speaker 1: is um but there's obviously more than just i'd say
Speaker 1: the level of volatility that can affect the price of options.
Speaker 1: That can also you know, more complex thoughts such such
Speaker 1: as skew. So I today you know, not not a
Speaker 1: die hard uh no, because there it's a little bit
Speaker 1: more complex than that. So let me change gears a
Speaker 1: little bit. As you look across what we've heard from
Speaker 1: companies and this earning season it's been and we started
Speaker 1: the show on this note, it's been one of the
Speaker 1: strangest earning seasons to date in part because there's this
Speaker 1: effectively no guidance at least beyond UH the next quarter,
Speaker 1: certainly for the year. How does that affect your outlook?
Speaker 1: And what do you make of that? Yeah, I mean
Speaker 1: if you looked at UH because that we have this
Speaker 1: unprecedented economic and corporate UM, you know, earning impacts from
Speaker 1: these from these lockdowns, you'll start to see you know,
Speaker 1: your traditional UM I'd say, you know names that UH
Speaker 1: that you would expect to have lower volatility, not be
Speaker 1: insulated from you know, UH from the impacts of let's
Speaker 1: say that the lockdown and instructions of supply chain. So
Speaker 1: what does that mean? That means that buying actual UH
Speaker 1: insurance are actually hedging UH on your positions, can actually
Speaker 1: you know, help as far as like you know, in
Speaker 1: our earning cues. Because the idea is that in this
Speaker 1: earning season, I think a lot of investors are actually
Speaker 1: more focused maybe not so much on the earnings, but
Speaker 1: focusing on financial strength and the stability as opposed to earnings.
Speaker 1: Because I think investors looking at for for companies with
Speaker 1: strong balance sheets, positive cash flows. What are some of
Speaker 1: the firms that may be able to take advantage of
Speaker 1: the recovery and are more sensitive to the reopening as
Speaker 1: opposed to looking at you know, looking at earnings, because
Speaker 1: because we're really trying to consider the survivability at this
Speaker 1: point right right right, and that you know, you get
Speaker 1: into the kind of what these target outcome investments are
Speaker 1: all about. Hey, listen, um, Jeff, nice to catch some
Speaker 1: time with you. Jeff Chang, he's co founder managing director
Speaker 1: at cbo E vest on the phone from McLean Virginia.
Speaker 1: But you know, Jason just got less than five minutes
Speaker 1: to go, and you know, we start taking a leg down.
Speaker 1: I don't know if you saw that. I mean, the
Speaker 1: headline just spiked on the balloom, the market side blog
Speaker 1: picking up that, you know, these tensions with China. We
Speaker 1: talked about this yesterday with with Indy Brown. I should
Speaker 1: point out that, you know, this was a situation between
Speaker 1: these two countries. The rhetoric has a real effect on
Speaker 1: market sentiment and it really Yeah, and listen, there's a
Speaker 1: lot of stuff going on. We continue to see headlines
Speaker 1: about companies Airbnb cutting its staff. Um, they just continue
Speaker 1: to cross and that is going to make that economic
Speaker 1: recovery on this On the other side of this, much tougher.
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