Bloomberg Businessweek Weekend-February 26, 2021

home stood a lot of people. Yeah, and and Carol, um, I was, I gotta tell you, I was thinking about how long it's been since we've been in this lockdown environment. A long time it has. It's been almost a year since I was inside a restaurant. We're going to talk about that a little bit later on in our broadcast about what's next for the restaurant industry. But Tim, listen, it was a week where so much was going on. We saw a lot of volatility and pullbacks in tech stocks,

in particular on those valuation concerns. A lot of talk of the reflation trade and market rotation to value sectors. But countered with FED Chairman Jerome Powell, you affirming his view that the U S economy needs support. Yeah, So what did it end up with? It mant the push

and pull of the equity market throughout the week. So coming up, we have several voices weighing in on the markets, including one closely watched E t F investor whose comments to us seemed to move both bitcoin and Tesla this week. I'm just gonna go ahead and say it's Cathy Wood. It is Kathy Wood, also invest go home to the giant q q Q E t F. We caught up with CEO Martin Flanagan for another edition of Business Week Talks and our recent chat with Nobel Laurie Paul Krugman.

We caught up with him. We talked about the economy, spacks, game stop and more. We'll have a little highlight of that. All that to come, but we do begin with that investor who everyone wanted to hear from this week, and we had her live on air and Tim you mentioned our investment founder CEO and c I O, Kathy Wood.

What I've been surprised by over the last really four or five months is cyclicals and value stocks have started to outperform the broad based market indusease uh And the surprise to us is that we and our innovation strategies that are outperformed as well. That's very unusual. So the way I have interpreted that is that the market is broadening out. The bowl market is broadening out, which is

a very healthy development. I think what we've seen in the last few days the correction in technology is UH, perhaps you know rotational again value there, given how many years value has underperformed, Uh, there could be a bit of rotation back into value. UH. If if you understand our portfolios, UH, you'll be very careful where you go in terms of the value space, because disruptive innovation, the likes of which we have not seen in more than a hundred years, is probably going to hurt a lot

of value sectors more than growth sectors. Are you buying I mean the NASDAC was down almost four percent to Tesla was down significantly. Did you buy? Oh yes, oh yes, And we've uh we published our trades at the end of every day, so you will see them the markets closed.

We bought a lot of Tesla today across any strategy that holds Tesla, and we will be publishing in a few weeks UH a report updating our thoughts about Tesla, our excitement about the potential of a ride hailing service as a bridge to an autonomous service and are higher and the higher odds that autonomous is going to happen for Tesla. Uh. And part of the reason for the higher odds is now that weymo is on the road autonomously,

we know it can be done. Uh. Tesla has so much more data than Google or anyone else or everyone else combined that we think it's in the pole position. Well, it's interesting to you know, it's funny Kathy people you know, expecting you to be on and they were sending us tons of questions. You know, this whole idea of the treasure trove of data that Tesla has. Specifically, you talk about it a lot, you know, do other people believe it?

Do you? Are you seeing other you know people kind of uh put that out as kind of one of the fundamental reasons that you want to own Tesla. It's not just a car company, right, It's a technology company. It's a battery company. Is that thesis of it being a data company getting a lot more recognition. We do not think many analysts or investors are giving Tesla credit for autonomous. UH. If they were, the stock would be

a lot higher. What we do think they're giving Tesla credit for increasingly is you know, it's an electric vehicle franchise, and how far ahead of the competition Tesla is when it comes to battery technology, to artificial intelligence, both in the form of a chip through the data collection. We think thirty billion plus miles compared to Google's thirty million ish miles. Uh and still over the air software updates to uh to change performance. It's it's remarkable that more

are not on board, even the last one yet. Uh. So I think it's franchise has legs here. So so how does that translate into market value for Tesla? How much more opportunity is there? How much how much more opportunity is is left for this run up to continue? Well, I'll give you a sense of uh and this is from our big ideas one. You can get that on

our site our dash invest dot com. Uh. We we believe that the autonomous market, so the ride hailing market, but autonomous, will be a seven trillion dollar revenue opportunity. That was our investment founder, CEO and ce IO Cathy Wood talking with us on Tuesday. That was a day of tech stock volatility. It was I mean the timing of that inteview, Carol, I want to say, we're brilliant enough to actually have scheduled her. Okay, yeah we are.

We'll just keep it. But no, the interview is scheduled for a long time, and there was no better day to have her on than this past Tuesday. No, it was the perfect guest to talk about what was going on in the tech trade, specifically names like Tesla Bitcoin. We all wanted to know from her because she has been one of the top performers, consistent performers on these trades and when she talks, investors listen. Yeah. Absolutely, so that interview, I've got to say her comments, they got

reed spikes throughout the week. They were among the most read, most watch, most listened to across Bloomberg platforms throughout the week. And coming up, we've got more of that interview with Kathy Wood. Were you kind of secretly rooting for a little bit of a of a pullback um to kind of get some of the performance chasing money out of the market. The answer to that question and her views on bitcoin and more. You're listening to Bloomberg Business Week.

This is Bloomberg. This is Bloomberg Business Week with Carol Messer and Bloomberg Quick Takes. Tim Spinovik from Bloomberg Radio. It was just one week ago that Bloomberg reported on our Investments Kathy would reaching sixty billion dollars in assets. Tim, you reminded me on air that that was up from just three point six billion dollars one year before. What a difference A year makes a remarkable run, and despite some pullbacks and fund outflows this week, she's sticking to

her fundamentals when it comes to her investments. Yeah, our deep dive conversation with Kathy Man it was so popular on the Bloomberg this week, so we thought we would bring you a little bit more of it, including her thoughts on how long the reflation trade might last and if it is impacting how she is investing. I don't know how long this rotation will continue. All I do know is that we have a five year time horizon and our all of our price targets are five years out.

A few days ago, I would have told you that the returns that we're expecting now we could be wrong. These are our estimates, so consider the source. But uh, the compound annual rate of return that we were expecting for our portfolios during the next five years was fifteen percent, which is our minimum hurdle rate of return. Just given the last few days of correction, that is closer. Now, compound annual rate of return over five years is a

doubling over five years. Right, that's a healthy return. What happens very short term, I can't tell you. All I know is we are keeping our eyes on the prize, and the prize just got a little bit more interesting. But I have to ask you, were you kind of secretly rooting for a little bit of a of a pullback um to kind of get some of the performance chasing money out of the market. Well, I do believe we we love a wall of worry, and we were

seeing the wall of worry starts all. I saw it on social media, a lot of chatter, Uh, some just waiting for our funds in particular, uh to take a tumble. Uh. Some maybe to buy, and some happy to sell and short and all of that. We love the liquidity that this provides us. We think it's very healthy and very healthy shake out. But I'll give you a sense of what where I in history. I felt this way before. In nineties six, we were in a very interesting market.

Alan Greenspan was the FED chairman, and he was at the time UH warned all of us against irrational exuberant UH. And many investors were just beginning to understand how how the internet was working, and uh, you know what the interesting applications were going to be. Uh. We had another four years of move, which when you think about that time, that move was too much capital chasing, too few stocks, uh, too quickly. The technologies weren't ready, the costs were way

too high. But all the seeds for what we're investing in we're planted back then. So we've had fifteen to twenty to twenty five years of gest station of these seeds and now they're starting to flourish, and we are ready. From a technology point of view and from a cost point of view, that's so important to see that electric vehicle costs come down. UH so that by this time, maybe in a year or two, uh, the sticker price of the average electric vehicle will below be below that

of the average UH gas powered vehicle. Yeah. And and by the average electric vehicle price will be eighteen thousand, and the Toyota camera will still be a dollars no brainers. Yeah, Hey, Hey, Kathy, I gotta ask, UM, so much money is pouring into your funds? Uh? South Korean retail investors literally give you a nickname, money tree. UM, in terms of money, does

it ever become too much that's pouring into your funds? Well, what I've always said when we've been asked the capacity question is that if we are right and the five platforms that involve fourteen different technologies are are ready for prime time, if not already in the sweet spot of their s curve, then our capacity should grow exponentially with

those platforms. Now, what happened to us in the last year was not exponential, but parabolic growth in terms of the flows, and it's been very gratifying, and we're so happy that more and more investors are diversifying into innovation. They need to to hedge against all of the value traps that innovation is going to UH is going to create. UH. But we do believe that given the swish we had this year, UM, we will need a little time to have the capacity come our way. How is it coming

our way? Well, you see, because of the performance of stocks like those in our portfolios, we're seeing a significant number of I P O s UH secondaries, there's the stack revolution, there's a stack revolutionist. And if you think about what happened even last year, so our flagship fund was up around a hundred and fifty percent, that meant that our capacity went up a hundred and fifty If you look at our performance since since UH for the past five years, our performance of the Flagship fund is

up a thousand percent. So that means our capacity is up a thousand percent. And if we're right and we're still on these exponential growth trajectories, we should continue to find good capacity going forward. So I'm also curious about,

you know, some of the positions you have. And I'm sure you've been asked about this for for Cathy, but you know, I'm just looking at some of our research that you guys are already a ten percent holder and I think more than twenty companies and a holder in three And forgive me my my mouth's a little bit off, But I mean, is that do you get nervous about that level of concentration? I mean, some investment managers would say, so,

how do you feel about that? Yes, what we've put in risk controls to prevent UH again, some of that happened because of the swish right fairness. We put in risk Yes, we put in risk control so that you know, we do so that we will not be considered quote unquote an affiliate of of any of these companies. That's why I think what we want to be on the

right side of regulation. Uh, And so you will see fewer and fewer names over let's say, going forward, especially as many of our companies are issuing are are are doing secondaries importantly, and the reason they need to do them is often in the world of disruptive innovation and particularly because of artificial intelligence, the companies that invest the most aggressively today are going to have a higher probability of winning winner take most markets, like I just described

autonomous taxi network. Look Tesla as a company, as Kathy mentioned, that has a lot of cash. We've talked about this before, Carol, one point five billion dollars look to a lot of people, has a lot of money. But for Tesla, it's not that much of an investment in bitcoin, at least not right now. Yeah, she doesn't seem worried in terms of their cash position. All right, still ahead, I think we still have another six months of rough Times about Laurie.

Paul Krugman. He is back. He's talking zombies and getting the vaccine his second shot that's coming up next. This is Boober broadcasting from the financial capital of the World, Bloomberg. He Love in Frio in New York to Washington, d C. Bloomberg to Boston, Bloomberg one oh six one, to San Francisco, Bloomberg nine sixty to the country Sirius XM Chado one nineteen and around the globe the Bloomberg Business app and Bloomberg Radio dot Com. This is Bloomberg Business Week, so too.

I recently caught up with Paul Krugman. Nobel Laureate Economists, New York Times Columnists, City University of New York, Distinguished Professor of Economics. The titles go on and on. He's also editor of a lot of books. Yeah, you know, more than two dozen, so we can't list them all here. But his latest book, now out in paperback, is arguing with Zombies, economics, politics, and the fight for a better future.

And on the day we talked with him, he actually had tweeted out that he had gotten his second coronavirus vaccine, so we had to start there. I'm a little wearie. I think there's a little bit of the second day effect of the of the vaccine. But I'm fine. Okay, So you are feeling a little bit. We've heard that from a fair amount of people, So you do feel a little something. Yeah, it's it's it's fine, it's the water is fine. Jumped in and we're ready. We're ready

and eager. So let's talk about kind of this world where we are. But I do want to ask you when you look at the US economy the impact of COVID. There are some economic reports that do feel like things are certainly getting better, Labor markets still tough. How do

you see the US economy? I think we still have another six months of rough times because it is very hard to do normal business when people are rightfully still afraid of of of COVID, and so we're going to be a pandemic depressed economy for well passed in the middle of this year. But I'm actually I'm quite optimistic about after that. I think we are we don't have the same kind of overhanging of excessive debts and so

on that we had after the last crisis. We are are apparently on the verge of getting an adequate economic relief package. So I think we're going to have a probably gonna be feeling pretty optimistic by this time next year. Well that's that's some that's some good news. Um, what about when it comes to the labor market specifically, how do we get millions of Americans who lost their job during this pandemic back to work. I think that's going to be a lot easier than people imagine. Uh, the

job losses are concentrated. Uh, there are a lot of it's not all there, but a lot of the job losses are concentrated in sectors that are basically shut down because of pandemic risks. And once we have widespread vaccination. You know, this is all assuming that the variants don't get ahead of us and we lose control of the pandemic again. But once we have widespread vaccination effective herd immunity, people will start eating in restaurants again, people will start

to travel again. There'll be some dislocations because we won't go back to exactly the same economy we had before. But you know, after the after the last crisis, there were many people were saying, oh, just those jobs are not coming back. Workers don't have the right skills. They were totally wrong. Turned out that we were quite capable of getting back to full employment, and there's no ways

to think that is true. Again, do you think that when we get on the other side of this that we do you you're optimistic obviously, as you said that we do have potentially a run in the economy, a run perhaps in the financial markets, just like we had after the financial crisis, which was kind of low and slow but kept on going for a long time. Well, this one looks to me like a lot faster. And there were reasons that there was a combination of reasons

why it was so slow last time. One of it was that this there was this legacy of excess household debt, which is not the situation now. Another wise, that we had a lot of destructive disclosterity that was holding back the recovery. And uh, you know, those by elections in Georgia made all the difference. It means that the time and Democrats have learned a lesson. So now that they have, even if it's a razor for the majority, they're they're not going to make that mistake again. They're gonna go

for a big package. And so I actually think this is gonna be a very different story if you believe some of the projections out there about growth. Uh, it's gonna be. It really is Morning in America style growth that we may be looking at. We may be looking at something like you know, over a fourth quarter on fourth quarter six seven percent. This is this is looking at very very different, not at all the story. You know, don't don't fight the last war on this one. Well,

you know it's interesting. So with that optimism, do you think we still need a stimulus package? And I think I know the answer to it because I know you've been supportive of it. Do you still think we need more help? Yeah, So it's not a stimulus package. It's mostly just not what it's about. It's a it's an economic rescue package. It is we have a miserable time. We won't be back to anything like full employment even

with all of this stuff, until early next year. And in the meantime, mass unemployment, Uh, lots of disruption, many businesses and great and under terrible stress. The state, local governments, it's very uneven, but many of them are still in deep trouble. It's almost certainly it's funny thing, the simitly I hate calling it the stimulus package, the relief package. It's enormously popular, has gigantic public approval, relatively little disapproval.

Even Republicans approve of it, and it will probably not get a single Republican vote in Congress. All right, Tim, So it sounds like politics as usual. That was Nobel Laureate, an author of Arguing with Zombies, Economics, Politics, and the Fight for a Better Future. Of course, that was Paul Krugman. Check out his book. It's now out in paperback, and also check out that full conversation. It's on our podcast

feed at Bloomberg dot com. Because Tim, he talked game Stop, he talked Bitcoin, he talked about a lot of things. You got him talk Robin Hood a little bit as well. We did. You're listening to Bloomberg Business Week. Up next, our exclusive Business Week Talks interview with Investco CEO Marty Flannagan on whether SPACs are in bubble Territory. This is Bloomberg. You're listening to Bloomberg Business Week with Carol Messer and Bloomberg Quick Takes. Tim Stinovich from Bloomberg Radio. All right,

so Investco, you know who they are. They are the independent investment management firm running more than one point three trillion dollars and tim that includes the giant q q q E t F tracking the nastack one d It's massive, it is and CEO Marty Flanagan has run the Atlanta based fund company since two thousand five and during his tenure has acquired the power shares in Guggenheim et F businesses, as well as Oppenheimer funds and Van Kampen fund families. And we caught up with him at the end of

January for another edition of Bloomberg Business Week Talks. We gave your teaser that conversation you might recall just a few weeks ago. So here's the complete conversation that began by talking about the year like no other that we've all had, something that none of us have ever imagined living. And uh, I will say a lot of the work that was done in sets up a very interesting environment

going in one. I think everybody's looking for strong economic growth in the United States in particular and those countries around the world, driven by the optimism and the ability to start to get back to work with the vaccine coming and all us frankly learning how to work in different ways. Yeah. Absolutely. Well, what's interesting is our Peter Koy,

Bloomberg Economics editor, uh, Bloomberg Business Week Economics editor. He's got a story out there about whether or not we're setting up to be like the roaring nineteen twenties, the what we saw after another time period in our history where we had a pandemic, we had a tough economy. Um, and whether or not we see we you know, we

come roaring back. How do you see it? Do you think that we might be creating bubbles right now and that we're going to pay the piper at some point, or do you see us setting up for maybe a really positive type of market environment, some economic momentum that feels much more normal and maybe even up beat. Yeah, so, uh,

lots of good thoughts there. Let's go to the more immediate outlook, and I think you could really have, as your connects are saying, a really strong economy right with all the fiscal stimulus has been put in there, with all the monetary policy of changes that have been put in monetary support. But frankly, all businesses really put the head down and did everything they can to be operating more efficiently, you know, really is a protection last year. When you look into this year, you can see some

real urgent surprises. We're going to need that because of some of the valuations. But you know, the momentum that we're seeing in our business is as strong as it's been in two and a half years. So I do think that as part of the optimism that's coming out of it, and really people seeking greater returns as think, you know, with heels being so low and you know so much of the markets. So Marty, what will the pandemic?

What's been the impact on your business and running uh a money management business in what has been kind of the lasting impact here? Yeah, so I would, uh, you have to put in perspective. Yeah, I would say it was harder for money managers. I'd say us, I will say specifically than the finacial crisis, just because the steepness of that and so quickly the market pullback. And whoever would imagine having of your global workforce working from home.

We didn't. Everybody else did. But how we're interacting the clients around the world is forever changed. Um. Yeah, every you know that we can bring uh, you know, the whole organization to our clients in a moment's notice. Now, we could have done it before, just wasn't the cultural thing to do. H We will end up seeing clients in person going forward. But these digital engagements have just really changed the game. I think that's a really positive thing. Um.

And I will say the other thing. Our industry has been, as you know, you know, going under tremendous change. And that was happened before the crisis. But the bigger gonna be bigger and their only stronger. It's gonna happen faster posts this pandemic. Well, and it's interesting. We've seen a fair amount of consolidation too in your industry. What's your expectation. Do you think that there'll be further consolidation within the

asset money management and money management industry this year? I do? You know, Look, I've been saying that for a period of time, but I will say, uh, yes, ever since I've gotten the industry, there's calls for consolidation. Very little happened. It's very different though. Now clients are working fewer money managers and that's happening around the world. Uh, there's a

greater expectation what clients want from money managers. That's told me a very good thing for clients and consumers, but it is putting a lot of pressure on money managers, and that is really where you absolutely need scale within your business at multiple levels, UM, and that's how you're going to serve your clients. They want depth and breadth and capabilities beyond just managing money. So I think you're

going to continue to see combinations. But the other thing, YEA, the growth, it's not all going to be through M and A. I mean there will be just firms that are disadvantaged to leave no good of the stronger firms. Nelson Pelts is on your board, who's try On fund Management has a nearly ten percent holding in the company, I think the third largest in invest go. What's the end game? I mean we're just talking about consolidation. UM. What are you hearing from him or what do you

expect in terms of how this relationship might impact the company? Yes, so, uh Nelson joined the board as it ed Garden his partner and Tom Fink, who was the CEO of Bearings at the end of last year. As you know, both all three really talented people that they know that's center extremely well. UM and uh, Nelson and Ed and UM consists of our board view the industry in a very same way, UM that it can just be a large, growing industry, but it's going through dramatic change and that UM.

You know, this this sort of movement to stronger and stronger, larger and more capable firms is really you know, top of mind with them, and UM, you know, it's just very helpful to have you know, people have been through uh all sorts of change in development and other industries to and bring in that perspective. So it's been uh early days for all three of them, but it's been great additions to what is already a very strong board.

Is it's I have to say, you have to you have to be bigger to go after the likes of black Rock and Vanguard. Uh yeah, So I look at a different way. Really, it's really to serve our clients, right, and you know what we're seeing from our clients all around the world is they want everything for passive portfolios to factor portfolios, to high conviction active alternatives, and they want, you know, a bunch of analytical tools and support to help them do their job. And you really have to

have skill to do that. And so not just you know, investment uh skills, but also the operational skills and the ability to invest in things like technology as their clients. And if you do that very well, UM, you know you're going to continue to grow. Hey listen, you know you just said you know, yeah, no, you talk about all the options that your clients want. That that's really what you know what you guys stay focused on what

your clients want, what investors want. But I do wonder to UM, We've had so many conversations here at Bloomberg about you know, actively managed e t f s. You know, what do you think is the future of that? So we just lunched uh for nonparents parent ETFs in December. UM, it's actually very interesting. So obviously the growth has been you know, just spectacular. It's largely been in capulating INDEXUS as you know, but where we have been very successful

is in the factor area. So it creates another alternative where you can have no transparent ets for active management within a different vehicle. There is a preference towards that vehicle. UM. That said, we're really excited with the launches, but I suspect this kind of take some time before you're going to see a lot of momentum in the area. But again, very few money managers have that capability. Were one of them,

and we're happy to have it. Hey, listen, one place that you guys are seeing a lot of momentum in and you continue to focus on it, Marty, is obviously what you're doing in China. And I know you guys are looking for growth. I think you put this out last year of more than your China assets in three years. Um, how is that going? And I know you've been looking to boost your ownership to I think in the joint

venture that you have there. How is it going? And are you at all a little nervous about a new administration and what the relationship will be between the US and China. So, um, you know, right now we manage seventy six billion dollars of assets in China for Chinese, whether it be through our joint venture you're referring to directly with institutions. The growth has been unbelievable. It was a record year again for UM our China business. In the last half of the year they had something like

seventeen billion dollars in net inflows. So it is uh, you know, an overnight success after twenty plus years in the marketplace. Um, I think frankly, uh uh, the relations between US and China is important. Uh. It was definitely creating complications for all of us that were operating there. Um, you know, not in the material way, but I'd say it was uneasy as you were looking into the future.

And I think it's really important for two world powers to um, you know, be on the same page, and it's good for each country, is good for the world. So I'm hopeful that that's what's going happen. Uh. So we look forward here. Okay, it does feel like a little bit of a new day, safe to say early days,

but it sure does. Yes. Well, let me also ask you, um, just some of the things you just have about a minute or so, a minute and a half left here, some of the things that we are talking about increasingly, whether it's bitcoin, whether it's Robin Hood, what have kind of some of the newer trends that are out there that you find interesting that you think investors overall, folks in the financial community, in the investment management world need to pay attention to right now. Yeah, So it's it's

a good question. It all depends on who you are, right, But I think you have the reality still gets back to basics. Truly understand what you're trying to accomplish, what returns you're trying to get, what risk really to take in, you know, the basic of time horizons. Uh, developments such as bitcoin in the like, I think it's still early days. It's obviously very very topical. You're seeing a lot of energy behind it right now. Uh, I'd say it's not

not for everybody. And my basic view is that very interesting. But you know you're going to see central branks in the game, you know, at some point too, and I think that puts the value of it at risk. Quite frankly, is that two years after? So I don't know. Yeah, Hey, let's one last thing. Um, spocks is another thing that they're just kind of exploding. Um. Does it make you at least a little bit nervous in terms of what that might mean for the investment world? Does that look

like a bubble to you? And just got about thirty seconds here, Yeah, So anytime something grows that fast and it's so wonderful, it's probably a good to question how long it's gonna last. So I would warn the bubble camp quite frankly all right. If you want to hear that again, check out the full conversation online at Bloomberg

dot com, on our podcast feed. Highlights too in Bloomberg Business Week Magazine, now on newsstands, online and on the Bloomberg That of course, was Marty Flanagan, the CEO of Investco. And that wraps up the first hour of the weekend edition of Bloomberg Business Week from Bloomberg Radio. I'm Carol Masser and I'm Tim Stanaback. More ahead in our next hour,

including Sneakers anew They're a new asset class. That's our cover story, plus the new CEO of Marriott International on leading during uncertain times, and we talk crypto regulation with the CEO of Oasis Pro Markets. And a shocker in a really tough story this week, Tiger We' talking of course about Tiger Woods, the car crash right heard around the world. And we check in with the editor of bon Apetide on the state of the restaurant industry. This

is Bloomberg. This is Bloomberg Business Week inside from the reporters and editors who bring you America's most trusted business magazine. Plus global business Finance and tech news as it happened, Bloomberg Business Week with Carol Messer and Bloomberg Quick Takes. Tim Stinovic on Bloomberg Radio, Hi on Carol Masser, and I'm Tim Stanovick. Plenty in our second hour of the weekend edition of Bloomberg Business Week, including Maryott's got a new CEO, no doubt he is having to lead during

a very difficult time. Yeah, that's right. Plus we've got the c YEO of Oasis pro Markets on crypto regulation and recent surges in bitcoin so much volatility. Also Tiger Woods in the news a lot this week. I gotta say, when the headlines crossed, we all just had to like kind of stop and take a breath. We're going to talk about though, how broadcasters and fans are facing life without their biggest star sooner than they expected. And we're

talking the restaurant industry. Bonappetite It's new editor on taking over following a tough time at the magazine and getting back to restaurants first. Though. This week's cover story in the magazine, it's a fun one shoes teenage resellers. Man, they are ringing profits out of everything. Tim from the Latest yeasies to outlets store leftovers, and they're turning sneakers into bona fide acid classes. Yep, you heard that one right.

Writing for Bloomberg business Week, Joshua Hunt joining us along with Bloomberg Business Week editor Joel Weber with more. I thought it was such a perfect time to do this one is you know, in this age of bitcoin and memestocks and all these things that feel indangible, it's like, oh, by the way, there's a hard good that's actually an incredible market. It's become amazingly uh, lucrative for for a certain um uh, you know, web savvy, entrepreneurial, spirited kind

of person. Uh. And what we've really seen just in the you know, there's it's not like sneaker reselling is new. This has been happening for years. But what we've seen just in the past couple of years and then I think it's really come too into its own during the pandemic, is how online everything really has become. In stock x a couple of years ago, really created a new e commerce platform. Um. It also helped create an even like an index that could track some of the most lucrative

shoes and the ultra rare ones. Um. The performance of that is something to behold. But I think what what Josh really found was even you know, post stock X, things have changed and the pandemic has really brought out, you know, like a supply and demand element that's feeding the market. So so, Josh, why don't you tell us about how you found a character who who's you know,

became basically the narrative for the story. Yeah, I mean speaking of turning to the young, in this case, finding the right character for the story was all about Instagram and social media, which is kind of where these you know,

teenage resellers live and die. I mean they's it's like they're they're branding and there how they how they sort of show their clouds and show their success and and communicate with um, you know, the people that are going to be not just their customers, but there their their colleagues, you know, their allies and arbitrage. As I say in the article, um, you know a lot of those initial

meetings are happening through Instagram. So you know, I spent the first half of in in Tokyo, Japan, and the pandemic in a little different way than a lot of America was and you know, once stores started opening back up there in the spring, I spent a lot of time walking through this neighborhood. This neighborhood hard Juku, which has UH for a long time, had all these stores that specialized in selling rare sneakers, which is what sort of got me um thinking about this in the first place.

And inspired by that by seeing this sort of real life version of one of these online markets in Tokyo where they've had them for you know, more than a

decade and a half. I dove in Instagram and I pretty you know, sometimes you just have a feeling about a subject, and right away I knew, based on this kid's Instagram activity that I had something special in this kid, Joe, And you're talking about so many West Coast streetwearers and in the company he's got um in his Instagram presence, and you know what you're saying, their judges like, it's it makes so much sense because you've got everyone, you

can understand that there could be like a really ultra rare sneaker that you know is a grail is the lingo, right, And you can get five figure prices on those kind of things. But what what's so interesting about Joe's story and West Coast streetwear in the pandemic is basically he realized that the other end of the spectrum, what the bricks, which are basically just inventory sneakers, could also become incredibly lucrative online. So so how did that part of the

story unfold? Once? You know, time and time again, the answer to my questions was just way different than what I thought it was going to be. I mean, stores and brands operate discount codes that might be tied to a customer's birthday or something like that, and you know,

these could be up to fifty percent off codes. And guys like just who are smart, they buy these things up and they apply them instead of you know, three or five purchase like an ordinary consumer might, they apply them to like the maximum level purchase that they hire them to, which is sometimes ends of dollars or even you know, some of these orders run into the hundreds

of thousands of dollars. And there are all these interesting ways that these kids like Joe make these bricks, these less loved shoes, these kind of everyday you know Nike and Adida sneakers and New Balance sneakers, and you know they make those very profitable. Look, we we talk a lot about meme stocks, we talk about crypto being an asset class, the booming SPACs um. Look, who would have thought that that sneakers would create this new generation asset

class speculator. I gotta tell you teenagers would have thought it's brilliant. Really, And if you think about there's a lot of websites and areas like devoted to this now where you can be buying and trading sneakers. You're listening to Bloomberg Business Week coming up. No doubt hotels have been hit hard by the pandemic. A lot of the weight of that impact has fallen on the olders of our owners and franchise. We've got the new CEO of

Marriott International on leading during an undoubtedly difficult time. This is Bloomberg. This is Bloomberg Business Week with Carol Messer and Bloomberg Quick Takes Tim Stinovik from Bloomberg Radio. A big business story this week, Tim, and it was about Married International naming Tony Capuano as chief executive officer, tapping the veteran development executive to lead the hotel giants recovery from the COVID nineteen pandemic. But it's a tough time

for the company. Oh, it's a tough time for the company. And look, cap you wanna He's fifty five years old. He's replacing Arnie Sorenson, who died at sixty two after a battle with pancreatic cancer, becoming just the fourth leader in the company's history. He also faces the daunting task of navigating a global crisis that has sap to travel demand and raised doubts about the long term prospects of traveling for business. Are we going to still do this

post pandemic? Exactly? Exactly. It's a really important question. And we began with how the Marriott team is doing though after the loss of sorts and someone who has always been generous with his time when it came to Bloomberg. I talked to our team around the world over the last few days, and the two words that I really

thought about were reflection and resolve. All of us are reflecting on the this, this terrible loss, the loss for Arnie's family, the loss for the extended Marriott family, and the loss for the business community more broadly, as as

you suggested, but I think there is a real resolve here. Um, this is a company that is approaching its anniversary, and we've been through recessions and nine eleven and the Great Financial Crisis and the pandemic, and it's a company that has the resolve to continue to build and grow and create opportunities for our folks and really help them. And he realized it's promise. But it's been a difficult week, No,

And you've really all been on our minds, UM. And you talk about family, and you think about the Marriott family, your franchise owners. You treat them like they are family members. Tell me how they are doing in this environment and what it looks like, uh, going forward this year and then beyond. Well, the pandemic is obviously a historic and

terrible crisis from a whole host of perspectives. The travel industry has been hit particularly hard, and a lot of the weight of that that impact has fallen on the shoulders of our owners and franchises. UM. They are under tremendous financial pressure. UH. Some of the hotels at the outset of the pandemic, we had hundreds of hotels clothes on a global basis, we were running twelve percent occupancy,

and that created great distress for our owner community. As we've seen through the last number of months, we are seeing slow and steady recovery, particularly domestically in drive to destinations, interestingly China, which seems to have its arms relatively around the virus. We're seeing occupancy levels approaching pre pandemic, which is quite encouraging and maybe represents a bit of a

roadmap for the rest of the world. But at the same time, we continue to see instances where there's a spike in infection rates in a given market, and it has a pretty stark chilling impact on the pace of demand growth. Tony, you ran the hotel, the you ran the company's hygiene initiative. What should customers expect if they haven't traveled to a Marriott property in a few years or since the pandemic started. How will that experience be

different post pandemic? I think in a few ways. I think really starting during the booking process when they go to Marriott dot com to to make their reservations. There are pretty thorough and transparent disclosures about any modifications we've made to the operations of a given hotel, whether there are outlets that are closed, that have limitations on capacity or modified hours. When they arrive, they will see every one of their fellow guests and every Merritt associate in masks.

They will see electrostatic cleaners UH disinfecting the public areas. They will have optionality around whether they want daily housekeeping, but they know that when they arrive in their room for the first time that there is a hospital grade level of cleaning that's been done to that room before their arrival, and they will experience a lot of advances that we've made from a technology perspective to make it

as touchless an environment as possible. We've made some pretty significant upgrades to the Bonvoy app and the ability to check in remotely, to order room service remotely. UH, there's a chat function to talk to the hotel staff if there are service requests, and so I think those are the most significant changes. How much of it stays with us? Tony, Listen, you're someone who I know used to travel. I'm assuming a lot, and we can talk about how much traveling

you've been doing. I used to travel a lot, haven't done much in twelve months. How much of what changes in the hotel industry, the hospitality industry really stays with us longer term? Like it sounds like some of the digitization in the apps like that to me sounds like a great thing. Um, I'm hoping there's a day when I can walk into a hotel lobby and I don't have a mask on, and I don't have to be so worried, and I like housekeeping. I'm just gonna say so,

I'm just curious how much stays with us? Do you think loco term? Yeah, you know, all of these decisions are often informed by what we hear from our guests. But I think your intuition is right. When I look across all the changes we've had to make in response to the pandemic, I think the technological advance says the

optionality of touchless experiences. I think those will continue post pandemic. Uh. The nice thing will be to your point, we all aspire to get to a place where no one has a mask, there are no plexiglass barriers, and then it

will really be based upon guest preference. There are some guests that love to go to the front desk, engage with our associates, get local restaurant recommendations, and there are others that want to check in, get a mobile key, and go straight to their room, and I think we all look forward to the day where we can offer both of those options to our guests. Hey, Tony, we saw something really interesting happen at the beginning of the pandemic.

When lockdown started back in March, Airbnb really struggled, and they struggled very quickly and laid off employees, and then a few months later the company really started to recover as as people wanted to spend a long time in homes away from their primary residences. I'm wondering how you think about Airbnb and how you're thinking about competition from

Airbnb over the next few years. Well, Tim, we um, as you know, in two thousand nineteen, we launched Marryott Homes and Villas, uh not with an eye towards going

head to head with Airbnb. I don't think we'll find ourselves in the business of traditional home sharing or couch surfing or any of those areas, um, but we've really focused on the upper end of the market and whole home rentals, and we think the value proposition that that we offer is really predicated on consumer confidence around safety, a service level that our customers expect, and a linkage to the Bonvoy loyalty program in the ecosphere, as we

know is is made up of many brands and strategies. As we heard from the new Marriott International CEO. Yet yet someone who has been at the company for years, Tony Capuano. Yeah, he's someone who really knows the brand. Still to come on Bloomberg Business Week. What the SEC is thinking about when it comes to regulation of crypto

that's next with the CEO of Oasis Pro Markets. This is Bloomberg broadcasting from the financial capital of the world, Bloomberg Eleve in Frio in New York, to Washington, d C. Bloomberg to Boston, Bloomberg one oh six one, to San Francisco, Bloomberg nine sixty to the country Sirius XM Chado one nine ten, and around the globe the Bloomberg Business app and Bloomberg Radio dot Com. This is Bloomberg Business Week.

Nearly three weeks ago, Pat laveki I spoke to the Board of the SEC about developing a regulation battle plan for cryptocurrencies. Regulators are looking at this tim Yeah, and they don't necessarily know what to do. Pat keeps in touch with the SEC and regulators. As CEO at Oasis Pro markets. It's a finn run se See approved digital asset broker dealer. He's also managing partner of Lavekia Group.

It's a privately held merchant bank and he spent some thirty years on Wall Street working in investment banking and capital markets. He knows a thing or two about the industry, he really does. We're in discussions with our regulators all the time. Um but this is really you know, we've been spending time over the last several weeks with um uh, the innovation groups at the regulators and coming up with ideas,

sharing ideas, getting their feedback, etcetera. This whole blockchain area and what we focus on the digital securities and you can talk a bit about that later, is completely new. I'd like to say that, um well, actually I don't like it, but it's reality. We're a bicycle with training whales with Ferrari brakes, which are the regulators. You know, it's a great way of explaining it. Actually that's where

we are today. Eventually, the Ferrari, the bicycle will become a Ferrari, but you know that's that's several years away. And um so we have a lot of ideas and the regulators know this tsunami is coming. Um. You know, they're very focused on cryptos right now and defy or decentralized finance. We're taking a step further and focused on digital securities, and we view ourselves as the bridge between traditional finance and defy. That's that's the direction, that's our

mission statement, that's where we're heading. But they know this is coming. You know. We call it a tsunami of of opportunities and it's a tidal wave regarding what's happening in the crypto space, and they're trying to stay ahead of it. A lot of smart people there trying their best. You know, they're the guardians of our financial system at the finer and they want to make sure that they get it right. So talked a little bit more about digital security is exactly what they are, what it what

it presents, uh, in terms of opportunities for investors. Unpack a little bit more for me, if you would pack. Sure, digital securities are very similar to traditional securities. So what we were a proof for we're equity broadly defined and fixed income for corporates, both public non national market securities as well as privates and by privates. I mean all

exempt securities so reg D, reggas one, etcetera. And they represent a proof of ownership of some type on the balance sheet and are an underlying asset of a company. But unlike traditional securities, they can be programmed through smart contracts to comply with regulatory requirements and standards as well, and they can be purchased and traded just like any other security. But it involves the blockchains, so it's very bespoke.

It can be very tailored, um, but all the back office um So I'll give you an example with Game Stop in the halting of trading a couple of weeks. So one of the issues that have come up is it's trade plus two days, right, and it you know, in the nineteen sixties it was you know, it's transaction day plus five days. Uh. And then in ninety three and then let's jump all the way became trade plus three days. They took another twenty four years for it

to get the trade plus two days. And while the UI has has improved, like on any trading app you might have the trade Charles Schwab Robin Hood, the back end is has been improved over the years, but it's still based on the infrastructure from the nineteen seventies. Now what blockchain does with digital securities, it really it's not a revolution, but an evolution of the trading system. So it's just taking it. It's just taking it to the technology level. So I feel like pat and are talking

to you. And also just some of the research I did coming into this, I know enough. I know enough to be dangerous. So in terms of digital securities, I mean you you basically you know you own an underlying asset, right, what are the advantages? Is it the liquidity aspects? Is it the security aspects? Is it that you can have fractional ownership of something that you might not have been

able to own otherwise. Yeah, absolutely all the above. Um, there's also uh the advantages we were approved for digital cash payments for digital securities, you own uh stable coins for instance, or um you know eventually C B, D C S And I heard the comment you had mentioned about yelling he actually, while she is not a fan of bitcoin, she actually came out and also said that the Central Bank should be looking at sovereign debt currencies

issued on the blockchain. So, um, she's not a big fan of bitcoin, but she in a sense was endorsing c CBDCs to a certain extent, and that was a Rasis pro market CEO of Patlovecia. You're listening to Bloomberg Business Week. One of the big story is of the week that's coming up next, we're going to talk about Tiger Woods that crash. We're certainly wishing for his quick recovery, but I gotta say the incident also echoing across the

golf industry. That's next. This is Bloomberg. You're listening to Bloomberg Business Week with Carol Messer and Bloomberg Quick Takes. Tim Stinovik from Bloomberg Radio. A big story this week, the car crash that severely injured Tiger Wood, shocking the sports world and Tim really the world at large. Yeah, we're all wishing him the best. The accident, though, is also forcing golf broadcasters and brands to face life without the biggest star sooner than they expected, and that was

addressed by Bloomberg News media reporter Jerry Smith. He is someone who loves golf and Avid Watcher and he reports on it and he wrote about how the industry may have to move on without him. Obviously, everyone's hoping that he is able to you know, recover from the injurvies, um from this this what looks like a really devastating car crash. Yeah, and and you know, I do wonder though, from someone who grew up watching golf, my dad played

at my brother's play it. I mean, Jack Nicholas Annie Parmer, like all these people like the Tiger Wood, is somebody who really kind of reinvigorated the game, that's right. I mean, if you think back, he turned pro in n and um, you know, he won the Master's UM and winning that tournament, I mean didn't really changed the game. That brought so many, so many people into the game who had never um, you know, really followed the sport. And over the next

decade or so, I mean, he really dominated. Um. You know, he was by far the best player. Um. There really wasn't anyone who was close to competing with him. And you know, there was a lot of talk, at least in the early days of his career where you know, his his personal story and his father, uh was African American, his mother was of Asian descent. I mean it was you know a lot of people would hoped that it would bring people up different races into the game. UM,

and that has not really proven to be true. But he is still you know, he was such a bit draw and he and he really still was a big draw of the game. UM. But he just really dealt with a lot over the last decade, a lot of injuries with his back and a lot of surgeries, um. Obviously as well publicized, um, you know, marital infidelities. And he really wasn't the player in the last couple of

years that he uh that he had been. But I think there was a lot of people who were hoping he could still find his game, and certainly his sponsors and the TV networks were hoping for that as well. Right, And there's a lot of them, and I want to get into it. I have to say that my co host Tim Sanovic, who has worked with you before, reminded me how much you love golf and have closely followed it. I think he said, um that even mentioned that I guess when you guys worked together before that you kind

of would watch golf at work. So I hope, I hope. I'm not like calling you out on anything, um, but now you you love the game, you know it. You know when you heard about Tiger you know, and the accident, what was the first thing that came to mind. I mean obviously um, you know, concerns or whether he would survive the crash. Um. And also as a fan of

the sport, I mean I was um disappointed. I think a lot of people and Tiger himself just said last weekend he was still holding out hope that he was going to compete in the Masters um in April, and um, you know, his back had been bothering him, but he

thought he might play. And that one has been um, you know, the TV viewership, CBS podcast the weekend of the Masters, and the viewership if Tiger had played in the Masters and potentially um competed in one again like he did in I mean, the ratings for that would be through the roof. Um. So I think just you know, as a favorite game, I was disappointed that he um is going to be sidelined for quite a while, if if not his entire career. And and you mentioned, you know, listen,

we are Bloomberg. There's a business aspect to it. I mean, just get Discovery was working with Woods, right, they recently bought Golf Digest magazine and they were working on content together I mean this really has to be restructured. Just got about forty five seconds left. Yeah, that's right. Discovery has a streaming service called Golf TV where he was

giving lessons um as part of that. Um, you know, he has sponsors like Nike, Taylor Made, Bridge Stone that are not going to be able to capitalize on him, um, you know, competing in tournaments for the foreseeable future. So you know, his sponsors are expected to stick with him, but it's really a big question mark whether he ever plays tournament golf again. And even though there's like some younger, you know, great stars out there, there's no one who's

quite stepped up to the plate like Tiger has. Has it just quickly. Yeah, I mean there's you know, Brooks kef Bryson, the Shamboon, and there's a lot of um young stars that are getting more attention now. But um, you know, I don't think anybody is going to um get the same kind of um star power that Tiger Woods did. And that was Bloomberg News Media reporter Jerry Smith.

We're gonna wrap up this week with restaurants and industry disproportionately impacted by the COVID nineteen pandemic and economic shutdown. We know that, tim because we've talked with many in the industry, from Danielle Blue, Eric Repair, John Taffer, bar rescue. This is an industry that is just in a tough place.

Some thousand restaurants nationwide have closed permanently or for the long term since the pandemic took hold, with more than four thousand closures in New York City alone, that's according to the New York State Restaurant Association. So for more in the restaurant scene, setback and eventual comeback, we checked in with On Davis. She's the editor of Bone Appetite. We also though had to kick it off with some of the turmoil that has been at the magazine named

in late summer. I came to Bone Appetite actually started in November, so I've been here a little bit more than three months, and honestly, there was nowhere to go but up because they had hit a low as they kind of reckon with their kind of racial cultural past. And we have a team that's committed to, you know, providing recipes and providing a service to the people who need us during the pandemic, where we're all cooking more.

I feel that the people who stayed are really committed, and I hopefully creating an environment where people feel free to, you know, talk openly about what's going on and just putting out a really good product. My first issue came out in March. I've got it in my hand, and about that, I feel like it reflects a diversity of perspective, diversity of tastes. There's something for everyone in terms of accessibility, in terms of an advanced cook, beginning cook, and different tastes.

So we are coherent as a team. Well, that is so interesting. I heard you say diversity several times in terms of how you are covering things in the magazine, like in terms of getting around racism within the corporate culture, whether it's yours anywhere, whether it's in society. We really need to approach everything with diversity. I think diversity from different perspectives, you know, even age diversity. We were better when we have different people from different generations and different

perspectives giving feedback, and so I think the product is different. Also, I did a story about essential workers. It's called the hands that feed us, and even having a trained chef, but who chooses to work at a cafeteria and at a church. You know, she's never been in a magazine like Bonappetite, So that is a diversity of perspective. And obviously we have ethnic and cultural diversity in our pages. We have a Philipinos, chef from Seattle, um who runs

a wonderful restaurant called him Staying. So we're trying to shake it up, but always keep it fresh and always about the food at the same time. That's been the challenge. People want diversity, but they also want recipes that they can use to feed their family, to comfort their family. Um and what we're zooming and everything else that are

kind of relatively accessible. Yeah, it's interesting. So I'm assuming your approach is going to continue this way of just thinking about you know, when you think about the food space, the restaurant space, all of it, it is a diverse world, right. It's people who come from other countries and open up a restaurant. They bring their culture with them, their food with them. I mean, that's that's what it's all about.

That's what makes it so exciting. You know. I had the good fortune before I was a book editor for many years and thought briefly about with friends, what maybe we should open of a restaurant one day was just a fantasy, and someone said, you know, before you do that, you have to talk to this guy named Anthony Bourdain. And I had the good fortune of of befriending him. And one of the things he loved was just how

diverse and interesting the kitchens were. And I got to work with him every Friday for a couple of months. And it's true, people from all walks of life, all different ends of you know, backgrounds, some lots of culinary experience, some none at all, different continents. It was, it was beautiful. I loved it. Well, is there something about food in particular? I always think about that. I'm from a large family.

We dinner was a big deal for us. We sat around the table when we had companied we just pulled up another chair and it was just this wonderful experience. But I do think about how food can help us maybe cross some of those divides that are so systemic in our society. Absolutely, I think it's how we get to know each other. You know, it's how we extend friendship, and you know, it's how we flirt with each other,

It's how we comfort each other. I mean, I think one of the hardest things about the whole pandemic is not, you know, when something goes wrong, not being able to walk over uh you know a dish that you're so proud of and that you know will kind of provide some comfort. So absolutely so it brings us together. Yeah, no, no doubt about it. So tell me about the restaurant industry. They have definitely come together, supported frontline workers, done so much.

It's been an industry though, as I said at the top, disproportionately impacted because of the pandemic and the shutdown. What's the way back? What are you hearing from folks in the food and restaurant space. Well, they've all had to be incredibly innovative. I'm sure you've reported one in four jobs lost in the pandemic belong in the In the food and beverage space, they've you know, created pantries where they sell olive oil or salt. They've extended their take

out and made it much more robust. And I don't know that we're ever going to go you know, we're gonna turn away from that. The outdoor dining, particularly in New York where I live, has just been really kind of electric everything from TPS intense to UH structures with lots of heat, but it's been hard for them. That was Don Davis, editor of Bonappetite, and that wraps up the weekend edition to Bloomberg Business Week from Bloomberg Radio. Thanks so much for joining us. I'm Carol Masser and

I'm Tim Stanovk. Be sure to tune into our Bloomberg Business Week daily show Monday Friday, starting at two pm Wall Street Time on Bloomberg Radio. You can also watch our daily broadcast on YouTube. Just search Bloomberg Global News and check out to our Bloomberg Business Week podcast. Find that at Bloomberg dot com, Apple, or wherever you get your podcasts, and that's where we will find our extra podcast this week. It's Kozma Ship Channel or CFO of

the cloud communication platform company Twilio. It's a stock and company Tim that has been on a tear and you can also see me on Bloomberg Quicktake, available at Bloomberg dot com, slash qt and streaming platforms like Roku, Apple TV, Samsung TV, and more. Bloomberg Business Week It's available on newsstands now at Bloomberg dot com and on the Bloomberg terminal, have a good and safe weekend. Everyone. This is Bloomberg