Bloomberg Businessweek Weekend - March 13th, 2020

are so many moving parts to it. And having said that, it was a fast moving story this week, well, and I think it's worth letting people know sort of what the editorial etho says it were of this magazine was this week, and that is to go from macro literally to micro, looking at global economics, looking at companies, looking

at people, all the way down to the disease itself. Well, I loved it to some of the conversations that went around in the newsroom this week and this, you know, safe to say, folks, a little inside into what was going on here at Bloomberg and Bloomberg Business Week. This was our story this week because we were looking at it from so many different ways and it obviously impact of the financial markets. But someone saying it was us about GDP revisions than being a major disturbance to our

daily life, and that's what it was about. And that's what happened this week that I think is really worth mentioning and underscoring, is that it went from the abstract in many ways, something that we were thinking and talking about as it related to overseas economies and supply chains, and it got all the way down to basketball tournaments being canceled, schools being closed, a suburb of New York City effectively being shut down, quarantined and contained, and all

of this happening, and as you say, all of these things going on, and from an individual basis, for you know, reporters deciding all of a sudden to work at home because that made sense. And so it wasn't this far off story that we were all reporting on. It was impacting our daily lives. And so that's how the magazine looked at it, really from all different ways. Jill Weber

is the editor of Bloomberg Business Week. He was the one who made the decision from this being a partial takeover of the magazine to devoting the entire issue to the virus and really stepping back and taking a look at the macro issues all the way down to the actual virus itself. Well, and it's not an easy task because, as you say, Carol, it is so fast moving. You had world leaders stepping in, you had CEOs making pronouncements, and it fell to Joel and his team to make

sense of it all. So when we thought about how to do this issue, we started actually relatively small, and then we just kept getting more ambitious as we kept seeing some of the stories come in and kept asking questions, so that the idea of asking questions is actually the way that we framed the whole book. We started from the macro what does this mean for the global economy, and worked down from there, from through governments, companies, us as individuals in society, and all the way down to

the virus itself. Right, So that was our lens, and then we just asked questions again and again and again. But the overarching idea is really this idea of the last year, right of like, we don't know what this means right now or how bad it will get, but everything, and especially as this became a pandemic, officially in a pandemic, now every all project actions out the window, and no one can even know if their kid's gonna go to

a summer camp, right. That's the editor of the magazine, Joel Webber and Carol Obviously a key component of all of this, certainly close to home for everyone who knows Bloomberg was the market. Yeah, absolutely, And Mike G. Reagan really follows the stock market for us here in the financial markets. He's got a story in the magazine and what happened to the bull market because as we know, things change this week. Well, what's amazing to me is how many threats were thrown at this bull market over

the years. You know, I look back at two thousand eleven when the US lost its triple A credit rating at SMP to the European debt crisis, all the various jew political dust stops in the meantime, the crash and oil prices in two thousand and sixteen, on and on, and it got very close to sort of hitting that drop that would sort of signal the end of a

bull market and the start of a bear market. But both times in two thousand eleven and again in two thousand and eighteen, it's stopped just short of that, like nineteen points something so close, and it really made you sort of think, well, investors had kind of put some orders into by near those levels, thinking that you know, this thing can can survive almost anything. It felt like clearly the economic damage being done from this virus is

just so great. It's so unquantifiable right now, Um, we know the damage is being done, how bad it is, how bad the effect on earnings and everything is just so unquantifiable that this this appears to be what's really going to do the trick and finally end this record long bowl market when ultimately investors are betting on the future in many ways, and one of the things that they're not hearing from companies, and one of the things that seems to be really spooking everyone is instead of

companies saying, well, it's gonna take earnings down or it's gonna take revenues down x percent or x much, they're saying, we don't know right right, just withdrawing guidance. So it's almost a worst scenario than saying a drop, you know, predicting a drop of x percent um. And it's understandable.

I mean, how can a company possibly, uh in good faith tell you what their earnings are going to be or even a wide range when there's so much uncertainty so much unpredictability about this virus, how long it's gonna last, how long this travel band is going to be enforced, on and on and on all the way up and down the markets. It's it's just impossible to price the equity market like we obsess about levels, right and when we hit a technical correction or when we hit hit

officially a bear market. How important though is it in terms of what happens next for the financial markets? Well as far as trying to find that magic technical level. People have been trying to do with the the entire stretch of this and they've just been blown through one by one. You know, you think of you know, your two in a day moving average, a lot of people were hoping would cause a pause that round number at

three thousands. Nothing is really working more than say a couple of minutes in the market as as far as the support level. So it's it's such an unprecedented situation, uh that, you know, as much as Wall Street loves, you know, to say past performance doesn't guarantee future results, that's what everyone does, is they go back and try to find that historical analog to what's going on. It's

just impossible to do in this case. It's just we've never quite had a threat like this to the economy and a simultaneous threat to everyone's health and well being at the same time. That's sort of or inextricutably linked. You know, you're you're stressed out about the market, and you're also stressed out about you know, am I gonna have the quarantine? Is my family? Okay? My relatives overseas. It's a it's a very unique and unprecedented situation. And

that's my Greek in giving us the markets perspective. We will look back, I believe on this week certainly as the end of the record long bull market and a moment where a lot change when it comes to equities. It's official, we're in a bear market. The economic impact of the virus, man, it is on everyone's minds. The coronavirus could cost the global economy two point seven trillion

according to some of the latest reporting. Wow woa as I like to say, yeah, it's a wa number for sure, and a fast moving when a fast moving story in the takeover issue all around coronavirus. This week, economics goes deep, especially into China, where the source of this or at least. The original outbreak was what's the state of China? Christina lend Blood. Well, everybody is watching to see how soon the world's number two economy gets back on its feet,

because it's important to just about every country. They're also and it's you know, also curiosity about how companies negotiate some of these obstacles. You know, for example, there and now like rules in China about how close workers can sit at lunch time, you know, at their desk um. But so basically analysts hours and at other banks on Wall STREETA and companies have been looking at statistics in China to try to gauge how quickly industry and and

factories are coming back online. Now that's a tricky thing because for a long time there have been suspicions that you know, the government fudges its numbers. Right, It's tricky in normal times, right. So but because of that, though, people have these sort of proxy you know, data sets that they track, and one of them is energy and they've been looking they've looked at those for a long time.

So now people for example are looking at like thermal coal, which is used you know for electricity production, to see what is consumption of thermal code telling me about like you know what, you know, how quickly the plants are coming back to life. Even that even that hasn't been totally reliable because we have now seen from interviews with plant managers, is that in several prefectures, you know, government UM officials handed out targets for you know how for

energy consumptions. So that means that in like sometimes factory owners were going in turning on all the lights, running the machinery even if they didn't have you know, all of their workers back to actually be able to you know, really be doing full production against just to meet the target. It's like the movie Home Alone, you know, where he sets it all up to make it look like they're

having a party. I thought about like growing up in Mighty, like shut off the lights, like you know, throwing on all the like. Know. What's interesting too, is we don't know that as China kind of tries to get back to normal and everybody comes back after being quarantined, what happens, I mean, do you get potentially another up break like

we don't know? Right? Yeah, that has been uh something that some health um authorities outside the country have been warning about that you know, we could see another wave of infection and then and now what's happening more recently, now that it's clear that this is spilling over in economic terms to other countries, what people are worrying about is that there's going to be this feedback loop in which what it was initially like a supply crunch, like

these factories couldn't get well, they didn't have workers and they couldn't get you know, inputs to to produce are now going to be hit by a demand crunch because, like you know, so their customers in Europe and the US are going to be canceling orders. And that's already starting to happen to some of the business people that we talked to. One of the things you point out in this story, which is really important is the size of economy, but also the size of the downturn here

and the historical perspective there. You guys say, it's the fourth first quarterly contraction in decades we're likely to see and the weakest years since the early nineteen nineties for China. That's a long time. Yeah, And not only that, but the historical comparisons. You also have to consider the fact that like a decade ago, China's contribution to the world,

the contract was much smaller. So you know, all of these you know, businesses, there's like all of these networks that have built up like so this transmission like effects that are going on kind of backwards and forwards along these relate these business relationships, right, That's what That's what people are beginning to to caution about now that it's going to sort of amplify the downturns in some places, and now where people are just going to try to,

you know, get a grip on that. What about the Chinese government, man, we always talk about deep pockets and that when there's problems they can certainly dip into them to kind of help out society. We're talking about stimulus packages. The magazines covering a lot about stimulus packages from different

governments and around the world. What about that in China, Well, so far, what we've seen is not much from the monetary side, which is which in China doesn't have the same kind of stimulative effect that it doesn't in the

US and other Western countries. So they're only like trimmed interest rates, I mean by comparison with the FED and and the Bank of England have done as much deeper cuts, but what they are doing is more targeted, you know, assistance to to firms, particularly in the areas well inside the province that's the epicenter and the surrounding areas. And we continue to think that they'll be modulating, you know,

the extent of stimulus. But one thing is so far, I mean, they haven't said this out right, but that's like they do not want to do anything on the scale that we saw after the financial crisis because that was massive, um I think it was like twelve of GDP or something like that. And the indebtedness level that resulted from that, right, you know, is still the problems. So that is something that they're continued to work through.

That leads to another story in the economic section, and I think this one is so front and center because it's not just I feel like the virus concerns, but the energy war that we're seeing has certainly put certain sectors interest. We're talking about corporate debt here in America. Tell us about the situation because we've seen companies, because that was so cheap, taking out a lot more debt

coming off of the financial crisis. Yeah, so we've had like an eleven year expansion coupled with historically low interest rates. Um there's been a huge expansion in sort of high yield credit markets, and and and the just the corporate debtload which now for the first time since exceeds that of American households. So the I m F and other people have been warning that this is a problem for

a while, like in the US and other countries. Powell and other um U S economists have all have also been quick to point out it's nothing on this scale alee of of the housing bubble, which you know, which brought down the economy. So there's been this attempt to say, like, yes, it's an issue, we're looking at it. We don't think it can on its own tip the US economy into recession, but it can amplify the effects of a downturn because if those firms that have you know, get downgraded, there's

this cascading effect. The money managers who own this kind of debt have limits on what you know, on this the quality of the assets. They can hope they will have to sell down some of the stuff, and then you know, the companies get the borrowers are being cut off from credit markets, they're going to do layoffs, perhaps they're going to like pull back on investment. That has effects for GDP growth. So I think that, um, one of the things that we're going to be looking at,

everyone's gonna be looking at, is pink slips. Is that people starting to get laid off. I mean, the FED has been clear that this is one of the things that you know, that's when people are going to start to get worried. That's the editor of the Economic section, Christina Lynn Blood, taking a look at the economy, the global economy. Front and center is China. We're all watching to see how quickly the Chinese economy will bounce back. It's not so clear cut well. And also the conversation

about corporate debt. We talk about that a lot again in the abstract, what's going on with leverage loans, what's going on with companies borrowing. But we're going to start to see very specific examples and very specifically how this will play through to the broader economy. So we keep hearing about many ways to fend off the coronavirus. Got

a really simple piece of advice, stay home. That's exactly what justin Fox Bloomberg opinion columnist is doing where he's coming to us from home from his computer thanks to NEXTI, which is our internal conferencing system. UM justin it sounds like simple advice. Yeah, I mean, and it's really simple for me. I'm an opinion columnist. All I need to do my job is phone and a laptop and an

Internet connection. What's interesting is we're at this time where we're all trying to figure out, you know, how can we We can't contain it at this point, but it's all about mitigation. How do you prevent it from spreading? And we talk about you know, fist bumping and elbow bumping and all these different ways. There's no more handshakes, and we're all keeping kind of social distance. But as you point out, it's very simple because it's kind of

an equation. And I think there's a word that I think we should teach to everybody, are not, because it's all about lowering the are not explain that I mean, are not is basically the infectiousness of a disease. It's how many people each person with a disease can be expected to infect. So if it's above one, the disease spreads. If it's below one, it doesn't spread. And every disease sort of had they estimate. What they are not is if nobody changes their behavior. And for the coronavirus it's

pretty high. It seems to be between two and three, whereas for influenza moost estimates are usually down in the ones um. And and so the issue is it's different for different kinds of diseases. But kind of the basic elements of what makeup the are not are how long does the infection last, um, how infectious is the disease when you have contact with a person, and how many

people do you have contact with? And we can affect that how infectious when we have contact with a lot of the things like washing our hands and not touching our faces and things like that. But then a lot of it is just if you reduce the number of people having contact with each other, if your society has social distancing, then the are not goes down. And you know, in China they reduced people's contact with each other till almost nothing and are not of the disease went below one.

It may go back up again now that there are people out and about. And I mean the other thing I would say is we're still not there that it's completely uncontrollable, and South Korea has shown that you can get a lot of cases and if you have enough testing and people sort in the public health authorities are very aggressive, you can sort of bring it back in check. But that that goes hand in hand with measures to keep are not down well. And it's interesting. I do

think about this. You know, this is our version of the Chinese quarantine. You know, if you stay at home, you're kind of self quarantining yourself, um and keeping yourself

out of the public. It's not just about protecting yourself, but if you're not I think about this when I look at the subways, I feel like the traffic is way down, but you're protecting others who you might come into contact, especially when you're dealing with something like Yeah, if if people aren't as squeezed, squeezed as close together in the subway or in the office or in the like the soup line at Bloomberg headquarters, then there's a

little bit lass risk. I mean, it's not like I'm doing some heroic thing here, but it does everybody's risk a tiny bit, right. I do think about our Business Week audience, and there's a lot of folks that probably read the MAGA scene are in that position where they can work from home. The other thing, and I don't know if you thought about this. I mean, increasingly what we're seeing companies are realizing that their systems, their technology systems,

are being taxed as a result of this. Yeah, I mean if everybody, if every single interviewer you were doing was this way, and everybody was remote, and you guys were remote too, we might be struggling a lot more. It's sort of easier and like an early adopter here to um to do it. It might get harder later

if more of us have to do this. You write about a lot of things, and I do wonder if you think about one of the things I think we're trying to assess, whether it's global supply chains or other factors, have something like the coronavirus might impact the workplace going forward. And I do wonder if you think that in the future we'll see more folks doing things online staying homes. I mean, we talked about this in the past when we've gone through other crises, but I wonder if you

think something might be different this time around. And I you know, there's a steady trend in the direction of more people working remotely, and then there occasional things like when Melissa Meyer took over at Yahoo ordering everybody to

come back to the office. So there's a back and forth, but it's pretty clear the trend over the past twenty years for obvious reasons, because it's more and more possible to do, and more and more companies are starting up that basically structure themselves that way from the beginning um and so you know, it's harder for big established companies to to change to that, and a lot of them wouldn't want to because you get a lot out of

the in person interaction. So I mean, this will cause a lot more people to try it and will cause companies to figure out better ways to do it. So maybe it'll accelerate it a little, but I don't think it's gonna be some huge tipping point. And that's justin

Fox or Bloomberg opinion columnists speaking appropriately from home. This has been the story of this entire virus in many ways, and when you think about it hitting close to home here in New York City and here in the United States, this is what we're seeing, company by company, our own and many others. Right, it's all about social distance. Seeing in the Business section this week several stories including what companies are doing to get ready for the virus. I mean,

this is a huge global story. It's a big corporate story, absolutely, and CEO is having to make a lot of tough decisions. Workers having to make decisions obviously as well. Jim Ellis is the man in charge of all of our business covership Bloomberg Business Week. How do you take this on? This was this was difficult because what we've discovered over the last couple of weeks is that this is something

that affects every business and everything in business. And so when we thought about what could we do, we sort of divided up and decided we were going to look at some companies that were actually dealing with this, some industries that found themselves in a position where they couldn't stop and they have to go on with business as usual even though this is not usual. And then you know, sort of what can we what can we learn about you know, about shortages and how companies are dealing with those.

So those are the three big things we want to concentrate on, well doing business are going on with busin as usual. It's not so easy if you're in the auto industry. You've got cars that have what four thousand and counting parts in it. That's one of the problems.

So that business it's um you know. One of the things about globalism is that it's allowed you to have supply chains that stretched across borders and allow you to do millions of things with people who were making things for you a world i should say, twelve time zones away. And so we looked at Peugeot, which is building cars with you know, and it's got four thousand parts, but it also has you know, six thousand you know sort of companies that it buys from. Many of those are

in China. And so what it discovered is since Wuhan, where the virus started, is also the center of sort of autoparts manufacturing from much of Asia, UM, they discovered, you know, they have to identify the people who in their supply chain who might not be able to um, you know, continue to supply on time, and they had to scramble looking for ways to you know, sort of have substitutes for those. What that meant was that um,

a lot of things are just made in China. What they found was they went back and found the old stamps or making some of the machinery that went to China, and then they are actually making machinery, making making parts much slower than at a Chinese plant, but making parts with some of those old stamps just to make up for things. Now they're also taking other plants across Europe where you know, Pea is based in France and other

parts of Europe to make things that the Chinese made. Now, this is gonna be slower and it's probably gonna be more expensive, but what it means is that they are able to continue production even though important parts of the supply chain and stopped for the moment in the And one of the things that they discovered in one particular case was the backup to China was Milan, right, And that is a problem because for a lot of European makers, Northern Italy is a big place for making um, you

know parts, and now that we've had you know, disruptions there and particularly the lockdown in the next couple of days are the last couple of days people are having to scramble then to look for other ways to do this. This is not going to work out. Well. The only thing, and it's not a positive, but at least one thing that's going to happen is probably demand is going to drop.

In parts of Europe where things are locked down, a lot of people are not going to be going out to buy cars, and so in some ways it's it's this mixed blessing. It's gonna slow down the demand for cars, and so therefore the lower production numbers that you're having because of the disruptive supply chain are not going to hurt you as bad as if everyone was going out shopping.

What's going on at Prugio and so many different companies is we are closely looking at the global supply chain, and we were doing that already coming off the US China trade war. But I do wonder what's the long term impact. Can companies really just not play in that world and arena anymore? Probably not. The thing is that there's a lot of talk with you in a lot of ways. Uh, China is a pretty good place to manufact acture. I mean it has a lot of manufacturing

plant infrastructure. It also has great transportation links to the rest of the world. Those are established, we know how they work, and it's not like starting in a brand new country where it's maybe it'll work, maybe it won't make to work now, but it can't really scale up. So therefore people are going to wait for China to get it back together. The other thing is that China is farther along in dealing with the epidemic, and so therefore they may come out of this earlier than other places.

So I don't think anybody is willing to say long term, I'm dropping China. I'm moving to Vietnam, I'm moving to Thailand. I mean, right now, those places are benefiting, but that's a big question about whether those that that manufacturing will shift back to China later. Alright, One thing that is very front of mine for just about every business person is business travel conferences, big gatherings of people. We're seeing them canceled left and right, and yet we send a reporter.

You send a reporter to Las Vegas to a show that went on. Yes, I mean that was the one of the things I wanted to capture, was what happens when the show must go on. And so it turns out that this week in Las Vegas, Connexpo, which is the largest construction industry show, usually about a hundred and twenty thousand people. So it's a very large show. It's only held every three years. And because of that, um,

you know, it's something that's difficult to postpone. If you postpone the strow it's every three years, what are you gonna wait until? No, they decided to go ahead and do it, and what that means is that it has to be done the different way than the typical you know, sort of backslapping, glad handing, um sort of trade show that you expect, lots of people crowded on top of each other, and so there are a lot of things that are different, but surprisingly there's a lot of things

that are the same. What we discovered was obviously there's lots of pure rale everywhere and um, they've even instituted a no handshake policy. Now that's very different than what you're expecting in a business content like that. But they have yeah, that's it. They but they have little buttons that showing the handshaking across the currents them none of that handshaking. And what was interesting is different people are doing in different ways. The CEO of Caterpillar, which is

the largest machinery manufacturer, in the world. He's there and he is doing um an elbow bump when he greets people. There's another um person who's there. The head of Bobcat is doing the shoulder wiggle, and um, there's all sorts of There are people who are knocking knees or people who are shaking their feet. I mean it sounds a little crazy, but it's just, you know, it's one of those things that not to touch, but people are still there.

One of the people um um that we talked to yesterday was he had a mask and he says, yeah, I brought some masks, but they're hanging from his uh you know, his idea is yeah, and so he's not wearing them. People aren't wearing them, and people are kind of going about their business and they're being careful about washing hands, but they're still doing business in a somewhat old ash and way. Thinking about the lucky reporter who got to go there, Yeah, I'm just gonna say speaking

about going about their business. Um, those companies that produce things like Chlorox wipes and purel Anti back. Jason has been really into the anti back in our studios. I mean, they're doing a lot of business right now. And this leads to another story in the business section that talks about price gouging. Yeah, one of the problems is that most companies, UM love when business goes up, you know, and there's more demand. What they don't like, and they're

usually not prepared for, is when business spikes. In other words, what we've been seeing for things like masks and wipes, um you know, the increases in thousands of percent. It's not as if all I have a ten percent increase, I can maybe add three people to my line. This this is up and so how do you deal with that?

So a lot of companies are in the up with trouble, you know, being able to stock their regular customers, and a lot of people, particularly in the on on world, are taking advantage of that by raising prices and but not raising prices in a small way, but sort of doubling tripling prices. I think a lot of people have seen that things like on Amazon where you see three hundred dollar pureile four hundred dollar pureil when it should cost and so that sort of we think of that

as price gallaging. But price gauging, it turns out, is a a lot difficult. It's difficult to figure out exactly what it is, and it's really hard to stop right, and regulators and lawmakers are really wrestling with this a sort of getting out ahead of it, but be also figuring out, well, what do we go after, what we not go after, what does the market need to take care of, and what do we need to take Yeah, we figured out that most likely the regulators aren't going

to be able to stop this for a lot of reasons. Um, you know, consumer laws in most states are pretty weak when it comes to this, and even laws that snap in and say, oh, you you shouldn't have this kind of predatory pricing, they do it after an emergency has been declared and usually by that time the prices are already up and so you say, okay, you can't raise it,

but it's already a three dollars, so so what. But it also turns out that a lot of times the pricing that we see online that we think of as predatory pricing or price gal jing, is sometimes driven by, um, the pricing models that you have to have in the online world. I find this fascinating. It turns out that it Amazon for a person who is sell a seller there there they are penalized in Amazon's um world by being out of stock, and so you never want to

be out of stock. So what they've done is their own pricing models around you know, software, So it says the less stock, I have raised the prices, so they will slow down sales so that I won't go out of stock, and then I'll be penalized for Amazon. So what happens is those last few items suddenly become a lot more expensive. And they consciously didn't try to do that, but they're trying desperately not to run of file of the algorithms that at at at Amazon. That's Jim Ellis.

He's responsible, of course for the business section of the magazine, and business folks are trying to figure out how to keep the business running. They're looking at supply chains. There's so many different angles to this part of the story, absolutely, and all the way down to all that price gouging you're seeing online. Also, the idea of people getting together in mass gatherings right certainly took a turn this week, and yet you have folks still getting together, clearly under

different rules. Let's get back to the special issue of the magazine. It is devoted to the coronavirus and the architect of it all our editor Pat mcneer. That's right. He oversaw sort of putting all the pieces together. It wasn't easy. Lucky for him, he had the global empire of Bloomberg News at his disposal, whether it was picking the right stories, writing the stories, even putting all the right images together. So, Pat, there was so much for you guys to get into and what was a fast

and rapidly moving story. How did you structure it? Well, we started by just thinking of it in terms of scale, So we started with kind of the big picture literally macroeconomics, and we moved on to government, uh, and then we started to look at how is this affecting individual businesses, and then we really get to the heart of the story, which is the people that it's affecting, and then all the way down to the microbe and looking at the virus and what we know about it, which is in

many ways the most challenging part because there's still so much we don't know about it and how it's working epidemiologically and sort of what's going to happen well and what was interesting too for us to sort of watch pretty close and man and we're talking to you guys all throughout the week on our daily show as well.

Is this was I mean beyond a team effort in many ways, really leveraging the entire Bloomberg Empire in many ways because this is a global pandemic, emphasis on global, This is a global story, and we we we really felt strongly that one of the things that we could do was to get people to look, you know, outside to the United States and to see where this is already happening. You know, I think a lot of us feel like, you know, this is a fast moving public

health story. Uh, this is a time when people are going to have to work together, and I think a part of that is to actually see what's happening, both to maybe get a sense of what's coming um but also to get a sense of some of the human experiences that people are having there. Some of some of the stories we have in the magazine are truly heartbreaking. Now, I was gonna say, what's trucking about the coverage this week?

You know, one of the stories that a lot of the editors have talked the most about a story about a family in China and where they've really just sort of seen the family decimated. We talked to a woman she lost both her mother and her grandmother UM as they were facing UM you know, shortages of hospitals. They simply couldn't kept beds UM. And you know, the last time she spoke to her mother, her mother was very sick and wasn't able to talk to her and they

weren't able to get her the care she needed. And she spoke to her mother in anger because she was so frustrated at what happened. And that was the last conversation she had had and it was it was a very dramatic story. And we're beginning to see that unfold and Italy as well, and we're all kind of thinking about um. Is this system here in the United States and in other parts of the world prepared for the

strain that's to come. And that's one of the reasons why it's so important to understand what we know about the courts of the virus and how it spreads. Well, let's talk about that a little bit, because you guys do go down all the way to the microbial level in in some ways to understand some of the science to help us understand and viewers and listeners and readers

understand the science. What struck you about that? So one of the things that really struck us was you do have to think about, you know, as we're all washing our hands and social distancing from one another, why are we doing that? Um? Some people take reassurance, and maybe too much reassurance from the fact that, you know, if you're relatively young, if you're healthy, Uh, it's unlikely that

you'll get very sick. Um. But a part of a part of what we're doing as we're all washing our hands, is not taking care of ourselves, but taking care of the other people around us, trying to slow the spread. And that's again, that's what gets back to this thing about the health care system. The more you can slow the spread, even if ultimately the raw numbers of people who get it are very high, what really matter is the timing. Um, are there, you know, are their beds,

are their ventilators? Um? You know, my wife happens to be a nurse, and uh, we're we're seeing this firsthand. We're already beginning to see some of the strains in the system. Jason and I've been looking enough to actually spend some time with one of the doctors out on the West coast. That's part of that Seattle hospital system, which has been kind of ground zero and where the

first patient happened. You know, one of the things that we've heard is the inability to get test kits and and there is everybody's working on a vaccination, but it takes time and you guys get into this, which I think is so crucial to understanding this story. It's so it's so important to have the tests bolt so that we have a sense of like what is the actual case fatality of this. I mean, you don't really know what the fatality rate is until you actually know how

many people have it, how many people get it. But also again so that you can direct care to people, so that you can, um know what to do with people who are the worried. Well, um, you know, uh is if you have cold, should you come to work? It would help to know if you only have a cold, right, you know. Well, And one of the things you talked about, which was a surprising story and an eye opening one for for me at least, is the availability of a

specific type of mice in order to test for a vaccine. Right, So we have a story about sort of the struggle to, you know, find this specific sort of mouse in order in order to do this testing. You know, other places in Bloomberg are looking at you know, they're doing some testing, you know in baboons Um. You know, Carol, I know that you've recently talked to people at healthcare companies who were talking about, we need the re agents right, uh, to to run these tests. The whole system is straining

to find this. We had in more than one place in the magazine people talking about how like we're working fourteen eighteen hour days. You know, Ordinarily, when we're doing a magazine, we would find things that are repeating and we would take it out and we would only have it in one place. In this in this thing, we were looking at something so unique. Over Here people are working fourteen and eighteen hour days. Over Here, people are

working fourteen and eighteen hour days. Every time someone told us wash your hands, cover your cough, we left that in the magazine. You'll read it about a hundred times in our magazine this week, and we think it really matters. And that's pat reag Near. What a nice overview of what they were trying to do. Also, the seriousness of

all of this a reminder the human toll here. We talk so much about the macro effects here at Bloomberg, we talk about markets numbers, but there's a real human toll here, and I have to say, Jason, I do love that. Obviously, this is a science story and understanding the virus is really crucial to us figuring out how to contain it control it in the future. Uh And the magazine and Pat's coverage of the team here at Business Week really got into that as well, very very important,

and I must read no doubt about it. This is going to be the business story of twenty twenty summer, calling it the Lost year, Jason Kelly, Well, and certainly when that comes to the economy, it's a massive question, especially given this full run that we have been in. A key week for sure, and king ahead for us as always is Peter Koy, economics editor for Blueberg Business Week. Tell us what you set out to do here, because

this is a big assignment in some ways. Joel Webber decided he wanted to devote brilliant entire issue to this coronavirus, and so I wrote economic story. But it's not just the numbers. I try to be getting the concepts here, and to me, the fascinating analogy between the way the coronavirus attacks the body and what happens is that it

provokes an overreaction of the immune system. You get what's called a cytokine storm, which unleashes uh the bodies amuses them to attack like the lungs, which causes pneumonia, and its conversation is death. So there's an analogy. What's the damage to the economy that we've suffered so far, it's primarily from the attempts to fight the virus rather than the ravages of the virus itself, which includes kind of shutting down a lot of things. Warrantines, plant shutdowns, you know,

businesses closing transportation and so on. All those things are devastating global GDP. And so the question is, and you said, the question of how are we collectively meeting the human race going to manage to fight off the virus as we must without destroying everything else we care about, the economy,

our family lives and so on. And one of the interesting things about this economic moment, and you quote Mark Xandy, well known guy over at Moody's Chief Economists, he says, we could be moving from a self reinforcing positive cycle to a self reinforcing negative cycle. And that seems to be such a key insight here because what is a recession. Recession is when you lose faith in the future and you don't invest for the future. If you're a business,

you don't buy. If you're a consumer, you hunker down. And that very act of honkering down, which is trying to protect you from the recession itself, can trigger the recession because what works for one family or one company doesn't work collectively when everybody tries to do it at once. This is what John Maynard and Kane's called the paradox of thrift. That is fascinating the theory of it. I do wonder, Peter, can we use How do we look at China in terms of they're what they have been doing.

Is it a cautionary tale? I don't know how to judge China because on the one hand, the number of cases they're reporting is way way down, and you have to think that's good news. It's good news for the Chinese, potentially very good news for the rest of the world if indeed it's replicable. So two things, One is will China's have a rebound of cases as they gear up, go back to normal life, reopen factories and businesses and

people start communicating again. And you know, that's a huge unknowne and we really haven't talked about that, but is And I don't know the answer either, but I'm extremely curious. I think the world should be intensely watching China's experience whether to get new flare ups. The second thing is a little more predictable, which is that the rest of the world is probably not going to be able to do what China has done. I mean, China is a

authoritarian police state with high tech surveillance capabilities. They can shut things down in a way that other countries can. I look at the case of Italy. The Prime ministers wants to shut down the entire country I mean and effectively has ye well that's on illegally has Whether it's going to work in practice is to me great unknown. I just don't think Italy has either the technology or the culture to do what the Chinese did in Hubei Province.

We'll go back to China because we know that their economic output right their GDP is going to be cut dramatically in the first quarter in the first quarter, So we don't ultimately know that by doing and they can easily kind of shut down the Chinese society. Whether or not that ultimately makes a difference or whether it make you know what I mean in terms of because the other point is it's spread, right, the virus move beyond China,

so it's not like it was shut down. Because so it continues to be a debate over whether China did the right thing. I mean, But the one good thing about what China did is that by holding down the number of cases, they call it shaving off the top

of the spike. If you can spread out the incidence of a disease over a longer period of time without reducing the number of cases, that itself is a good thing because it means you can handle your emergency rooms, can handle the cases as they come in, whereas if they're all concentrated at once, there give a lot of people who just be untreated. So where does the US go from here? This has been quite a decade plus

for US economic growth. Something was going to get in the way of this bullmarket, something was going to stop it, and there was a lot of speculation you and we and everybody else in twenty nineteen said it's going to be likely an exogenous event. Well, here we are. This is a classic exogenists event. It's not something that was internal to the economy, like growing, a deadness or something,

the way the last financial crisis occurred. It's like it's something there's a weird little piece of RNA virus that's suddenly spreading like wildfire. And we have been in the longest economic expansion in US history, going back to eighteen fifty four. It's been remarkable. Ever since the end of the financial crisis in June two thousand nine, the US economy has been growing and and sometime there are more and more reconnoissers saying that it just could be the year.

And I wrote something that said that we may already be in a recession. I e. February may have been the peak of economic activity. Right, you put that out about a week ago last week. Well, what's interesting is the stock market. They'll just throw that in, just one more thing is not the economy. And yet the stock

markets certainly can impact spending behaviors. Right, So we've had big decline, a lot of turmoil out of volatility in the stock market, and so that again, is both a symptom of the trouble and possibly a cause of more trouble, because what happens when when the stocks go down people feel poorer r This is the wealth effect. The wealth effect. You know, I don't want to go out and buy that new refrigerator because my portfolio as smaller than it was.

You know, that's one one way businesses look at and say, um gee, my stock prices down. People are collectively expressing less confidence in my future. Maybe I'm shouldn't be overstretching, and these things feed on themselves. It gets back to the canes. Note again, that's Peter Koyer, economics editor here, and you know, just a week ago he was talking about the US already probably being in a recession. Here he talks about how as we fight the virus, we're

also pretty much harming the economy at the same time. Absolutely, I mean, this is ultimately a consumer economy, especially here in the United Dates. How we take it on, how the administration takes it, on how central banks taken on, that's going to have a knock on effect. And it's possible that the way this is fought will ultimately hurt the global economy. All right, so I have a million things to ask our next guest, uh. And it's a

homecoming of sorts for him Dexter Roberts. He is now Mansfield Fellow at the University of Montana, but he's former China beer chief for Bloomberg Business Week. He's got a book out, The Myth of Chinese Capitalism, The Work of the Factory and the Future of the World. No big deal, just taken on a huge topic here he's here with me in our Bloomberg Getteractor Broker studio. Welcome back, Well, thank you, Uh, so I gotta I don't. I've been

debating with myself where to start. Let's start with the book, just because it's so timely in a lot of ways. You probably couldn't have imagined how timely it was going to be when you started it. What was the idea that you set out to capture? So the basic idea or the myth of the title is this idea that uh, China is becoming more capitalistic, that China is uh continuing on this reform path that started way back under Dung

Shao ping Um and continuing. The myth is that China will continue to grow its middle class and all right, so I'm gonna stop you there only to say, what does the last three months mean for that? Well, um,

the last so we were talking coronavirus exactly. Yes, So I mean I think I think that we're what what some of the things the arguments I make in the book about uh uh at the other China, the migrant workers and the farmers, their their cousins in the countryside, which by the way, is about five million people, so we're talking getting close to half the population. Um. They've been long more people live in the United States, Yes,

considerably more than live in the United States. Well, for a long time, they've in effect been treated as second class citizens. Um. They don't have access to the same health care, they don't have access to the same education. On average, they're making you know, less than a or roughly a third of of of urban incomes. And there's policies that that keep them in that position, which we

can get into later. Um. But that relationship between the city, the people in the city, and the second class citizens has really been brought home. I mean, the the unequal relationship has really been brought home by the coronavirus. Because these even as cities in Beijing seem to be returning to some degree, and normalcy is not the right word,

but things are a little more regular there. You know, if you're a white collar worker, you're working from home, you're going into the office some sometimes things are a little more normal. Companies are reopening. That's not happening for the for these people, these vans and rural people. And so you were in Beijing for twenty three years, you

were in Taiwan. But before that, how did this story change? What, how did your thesis evolve or what did you see happen over that period, because that twenty three years it just ended for you just a couple of years ago. I mean, what a period in the history of the country. Yes, I mean when I arrived in I think it was January in Beijing, and uh, you know, the economy was somewhere in the bottom of the top ten economies in the world. I think, Uh, there wasn't really a consumer economy.

There really wasn't. I mean, the car sales were eighty five percent government and fleet sales for big state enterprises. There weren't people buying cars. There was no housing market. Really, there was no housing market until until later reforms happened

in the late nineties, so the place was transformed. UH. W t O entry in two thousand and one, which I covered for Business Week was a you real seminal moment, obviously bringing in enormous amounts of investment UH and really trying its forming the economy and bringing up this UH factory to the world export model into its into its full full character. And so when you left, what what what sort of what were you thinking China would become?

Is that sort of what's manifested in this book? And so yeah, So, I mean I first met some of the people that I talked about in the book. This, this family from our this relatives from a small town in rural Guajoe the most in the year two thousand, I was doing a cover story. I did a cover story for Business Week called the Great Migration. And at that point, um, uh, you know, we're uh a year before w t O Entry, everyone knew China was getting in.

Then the agreement was signed, there was great hope, including for these villagers in this small town, this idea that foreign investment would come in. And they were glad to see me as a Business Week reporter who might somehow let the world know about their village. They wanted to processing factories for the chilies that they grew in the slopes in their in their town. So there was really great hope and this continued for years, I must say.

But what I argue in the book is, uh uh, particularly in the last five years, uh that vision of a continual reform and more opportunity for people has has has really vanished. And that's Dexter. Roberts really enjoyed catching up with him because his book is really about the worker in China. But it's so timely given the rural versus city element of this virus crisis. What we've learned there and what we may need to learn as it spreads around the world. As you said, Jason, a timely conversation.

He's into that walk in music. Jaston chief executive officer of Dream Hotel Group, now you get it. He's based in New York City. He's here with us in our Bloomberg Interactive Brokers studio right now. He is a veteran of this business. We're going to talk about some of his new hotels, but Jay got to start by asking coronavirus and its effect on the travel business. Feels heavy. What are you seeing out there? Yeah? So uh, internationally, certainly over in Asia, we've been here hearing and reading

about this or for a number of months. Uh. China uh got hit very hard, Hong Kong hit very hard, and most of the other prime Asian markets over the last six weeks had been hit fairly hard as well. And then of course we heard about Italy, and now in the last really just in the last week or so, it's really hit hard here in the US, and most

of it has been you know, precautionary. I think if you look at the numbers, the actual numbers, they're still very low, but we're not sure where they're going to ahead. And uh, in this modern era, people have been told to be cautious and less travel and less movement around and less neat for hotels. So we're really seeing an impact now. So wait, you have hotels in Nashville, hollywo A, New York City, Miami, Thailand. Tell me about Thailand, New York and New York and New York Yes, oh I

thought I said New York. Okay, sorry, New York City. So Thailand, tell me about that specifically, So that hotel the business has been off probably about fifty over the last month or so. Um, and I think, you know, it's stabilized now, and I think we'll start to see things start to move. It has stabilized, stabilized, it's not

dropping anymore. Are people coming in? Are you starting to give me an idea of like people saying, because one of the things we're trying to figure out is how much of this virus is lasting in terms of people saying, I don't know that I want to travel so far anymore. So I'm just curious. Most of the people come to your places in Thailand where they coming from. So it's a fair amount of domestic and Asia driven business, okay,

business from other Asian countries. So any signs in terms of business people looking to book in a couple of months later this year. Yeah, So, as just said, I still think we're about fifty off from where we would normally be, Okay, but I don't see it dropping, uh, significantly more at this point. So I'm kind of leveling off at that range from about fifty of where we'd normally be. But we'll see if that holds and if it starts to move and so where and and so

do you just start to see it in cancelations. Do you start to see it sort of Carroll's question, in sort of behavior where people are coming from. I mean, you guys have a lot of data at your disposed. I do wonder is you go a level down? What are you you know? So it starts with the group bookings. So those are you know, the most the furthest out, and the biggest numbers and the ones that need to

be a little more questionary. So once we see the group numbers starting to to take impact, and those go quick because you know, if you drop six seven groups of thirty people a night for four or five nights each, you know you're dropping uh, you know, half a million dollars uh in an hour. And so we're even seeing a fair amount of group cancelations, particularly this week here in the States. Well continue it to that point. I mean, it does feel like we've been talking a lot about this.

This notion of what people are being advised against is more around large gatherings and less around I mean, obviously people are scaling back travel in a lot of companies, including ours, are saying hey, maybe don't take that business trip. But more you're just seeing, well we're not gonna do this conference. You know, we're supposed to go to the milk In conference in l A, you know, coming up in two months. They pushed that back to July. Uh

for now. So those to your point, those group bookings and did those come back, Well, they do come back. Most of those are our annual like what you were talking. I was supposed to be in Berlin for the big hotel conference first week of March every year. That got canceled two days before, so it started on a Sunday. I think on Friday they made the official announcement that it was going to cancel that. I t b the largest trade show, hotel trade show on the heels of

that every year it was also got canceled. But then he get canceled, they got postponed, and I think they moved into June. We'll see how that holds. Obviously with the Olympics coming up, a huge amount of travel. Um. But as you say, you know, it's it's group stuff, so starts suggesting people not to be at those. The impact is so so I am curious about some of your properties here in the United States, whether it's New

York City and we're all kind of watching very closely. Hollywood, UM, Nashville, Miami. Are you seeing, um, are you seeing any kind of pullback in terms of reservations and people canceling? Oh? Yeah, you are, Oh definitely, Yeah, we're damn probably. But it's still dropping. So and that's more for the month of March, people a little less because some people just haven't made their decisions. A lot of the groups have already made their decisions, but a lot of the transient have not.

And hopefully, uh, you know, once it does start to stabilize, some of those won't drop out, and there will be some pent up demand, but the wrap up won't go back in a week. You can't get those group bookings back in a week. That'll take some time. The transition stuff moves a little quickly. Is there a lasting impact in terms of the virus? I mean in terms of I don't know, and how you guys, I don't know. Definitely not, you know, uh, you know, even as something

like the cruise ships. And I'm not a cruise ship specialist, but even there, and there's been some scares over the years and that's always come back. But I can say, certainly from the hotel part, and I've been through a number of these different things over the many years I've been doing it. Um, it's it's always come back as long as that market is still a good market. Um. But I don't think it's uh, the virus that's gonna

cause the industry to change. Maybe this industry for five thousand years people have traveled and needed a place to stay and get something to eat and be safe. So I don't see that changing anytime. Jay Stein So with the CEO of Dream Hotel Group based here in New York City, So I gotta ask you the New York hotel scene. I mean, I live here now, but I used to travel here a lot. It's a crazy hotel scene. But it's sort of the birth in many ways of the boutique, or at least it it feels like it.

How has the New York hotel scene evolved during your career? Yes, I agree this, so it is kind of the birthplace where boutique. You know, Kimpton Ontells was doing something like it on San francistem But really, Ian Schrager, really do you put it on steroids? And uh, it's it's what

we like. Jack Morgan's was more ground zero and then uh and Royalton and you know, we were pretty early on and Barry Sterling did the first w and um, you know, so I always you know, point to Ian that he realized our industry just have gotten off base. We were doing these bland hotels that were pleasing and not offensive and not highly stylized, and the food was just and it was just great to finally saying, now you could offend some people and you don't have to

have everybody love it. And uh so we got involved in about nineties seven starting to do lifestyle hotels and have really uh evolved over the last twenty two years. And that's our only focus is doing lifestyle How much of the people that come to stay they come back again and again and again. You really it's sticky. Yeah, you know, it's fun. You get there and a lot of times people will say, oh, I'm going to this bar and then they find out, oh, that's the hotel

I'm staying at. You know, so they really they feel like they know they've made the right decision. Well, what are the amenities? And we just got about twenty five seconds here, so that you've got to have in a New York City hotel, you know, we kind of started the whole rooftop bar situation. We really did at the

Dream in Midtown back in two thousand three. But if you could do a rooftop bar with a pool, even if it's seasonal like New York you only have three months, you know, great with the pool, but it's amazing to have. We also do some other nightlife components. We have an electric room which is really cool and downstairs. And so we're here at j Stein, CEO of the New York based Dream Hotel Group, here in our Bloomberg Interactive Broker studio. You do have a lot of properties around the country

also around the world. Um, what are your expansion plans. I've been signing up almost a deal of month over the last fifteen months or so. We've gotten very active. More of the deals now or with other developers. And the old days we were the We were the developer and the and the and the brand and the manager. But most of it we've morphed into a Brandon management company.

So just recently we've signed up Turks and Caicos, Applied Dell, Common, uh Las Vegas, San Antonio, UM, and recently behind that was Cleveland and UM Memphis, on the hills of our national property. How do you pick? Well, you know, some of it is opportunistic. We have developers that are building hotels. They want to work with a great lifestyle company, and they'll meet a few of them and hopefully we're able to convince them we're the right when to go to.

And then we also look in particular markers. We're still not in Washington in Boston, and to be based there in New York for for so many years and to not have those key cities, um, you know, that's certainly on our our radar. We need to be in San Francisco and London. So those are probably the top four that we definitely want to make happen. We've got some possible deals on all of them at the moment, but

none of them are signed yet. So that's Jason on the CEO of the New York a Stream Hotel group, And as we know and as you heard, they've got hotels all across the country, but they also have them

overseas in Thailand and elsewhere. And so getting a chance to talk with him and find out in real time what's going on in his business is so relevant to what the magazine's about all week well, and that institutional history of understanding the hospitality industry at various moments in time and times of crisis, and this is certainly one of those. Well. That wraps up the weekend edition of Bloomberg Business Week from Bloomberg Radio. We really appreciate you

joining us. I'm Jason Kelly and I'm Carol Masser. Be sure to tune into Bloomberg Business Week Radio Live Monday through Friday, starting at two pm Wall Street Time. And you can't catch us live, get our daily podcast wherever you download your podcast, and of course you can watch the show live on YouTube. Just search for Bloomberg Global News. This week's edition of the magazine on newsstands now. We'll be back next week at the same time. This is Bloomberg