China Ascent Exposes Its Achilles Heel

You can also listen to our radio show at two pm Eastern Time on Bloomberg Radio or watch us on YouTube search Bloomberg Clobal News. Has China reached a tipping point that could endanger its growth, social stability and place in the world. In his weekly callum, Bloomberg New Economy nitorial director Andy Brown writes about China's achilles heel. And you should also know that you can sign up for the New Economy daily newsletter at Bloomberg dot com slash

New Economy. I've signed up for it and I'm getting it every day. Andy joins us in our interactive Broger Student. It's so nice to have you in studio. It's great to be a Carol and thanks for signing up for the newsletter. Welcome. Everybody else did. Because I always feel like, and I've said this to you before, that you often bring to the table, uh, something that ultimately in a month from now or two months, everybody's talking about, especially when it comes to China. You have insight like no

one else, and this story plays to it. Talk to us a little bit about your column. So this, this really is the big one. This is the big tipping point we've been talking about for years. In demographic terms, We've hit peak China. The population is not growing. It's all downhill from now on in. And actually we're going to get the census results, the latest census results this week, and it's quite possible that those data will show that

China's population has already started to shrink, which is staggering him. Okay, so make the connection between the population loss there and what it means for the country's future. So so so, probably just just a recap. You had in China, a massive population boom in the sixties and seventies. Right, This was Mark Chairman Mao basically said to Chinese woman, is your patriotic duty to have babies? So in the sixties,

Chinese woman had on average six babies. You then get this doubling of the Chinese population in thirty years to a billion, and they freak out. The party freaks out and puts in place the most draconian family planning policy in history, one child family. Right. Both of those policies are now coming home to roost with disastrous consequences, so that the boomers, the male boomers, are retiring all mass. Meanwhile,

the working population is shrinking rapidly. And so you project forward to two thousand and fifty, whereas today you have eight workers for everyone retiree, two thousand people, you're gonna have two workers for every retiree who is going to look after the old. So it's not so much that the population is shrinking, but that the age composition is changing radically. Well, we talked about that where in guards to Japan years ago, right, and the impact it had.

We talked about it on the U. S Society. I mean, so, so can't Chinese official just say okay, everybody, go ahead and just more babies now, Well you talk about Japan. It doesn't work. I mean, once your population starts shrinking, it's really all over. I mean you have a situation. Now in Japan, they tried to cause it encourage part the couples to have children. Doesn't work right now, something like one in four Japanese women in their thirties of

single they're not They don't want babies at all. They don't want marriage at all. They want a life outside of the family. And that's true in Singapore, it's true in South Korea, it's true in Hong Kong. You know, the the reversing a demographic trend is virtually impossible. A question that you ask in the column is can't technology offset population loss? Can it? Well? It can, it can to an extent. Right, So people say that it's not about the raw numbers. Now national power is measured more

in terms of technological capability. And that's true. Um, people say, well, why should you worry about, you know, shrinking workforce. You just deploy robots instead of people. But that kind of committigate. I mean, it can offset population imbalances. But you know,

you look at the problems this creates. Who who's gonna you know, what about the medical system in in China of course, where they with with retirees, you have associated problems of you know, strokes and heart disease and dementia, and the hospital system right now is struggling to cope you know. So Okay, so we have been for decades, you know this, The world has been fearing China and its might and its economic might. And we have a lot of stories about the Chinese economy getting ready to

take over the US economy. Right, is the world's biggest economy. Um, So what happens then, Andy, how does this play out potentially? Look? Hum, the Chinese government is very worried about this. Number one, where is the investment going to from? You know, older people have a propensity to spend. Uh. Working age people have a propensity to save. Right, So your national savings rate go down, and so the pools of capital available for investment start to dwindle. That's that's one immediate impact.

But then you also have an impact on entrepreneurship and innovation. I think young societies are innovative, right. And then in raw terms, China's vast population, they have more engineers, they have more so you know, they have more scientists. Um, and that population starts starts shrinking with impact on human capital, uh, Andy, Just very briefly here in thirty seconds. Is this something

we need to worry about happening in the US. The years long US baby drought worsened last year, birth dropped four percent from nineteen to the lowest level since nineteen seventy. Okay, big difference. Immigration. If the US wanted it could open the board it. China doesn't do immigration. It also sounds like this, and they probably won't for very complicated ethnic reasons,

reasons of social cohesion. They just don't open their miniscule numbers of Chinese people are immigrants or people in China immigrants. And this isn't a problem that China can just throw money at correct just quickly, Absolutely not at all. In fact, this isn't the problem they can address at all. Told

you so must read always is Andy Brown. Thank you so much, Andy Brown, editorial director at Bloomberg New Economy, and of course check out as I said, the New Economy daily news letter at Bloomberg dot com slash New Economy. This is Bloomberg Business Week with Carol Masser and Bloomberg Quick Takes Tim Stinovic on Bloomberg Radio. As we mentioned, big story from the weekend, we're still dealing with it that cyber attack that crippled North America's biggest petroleum pipeline.

We're talking about the Colonial Pipeline, Doug talking about the stock impact. It's a critical source of supply for the New York region. The FBI tim already attributing the massive breach to ransomware created by a relatively new gang. It's called dark Side. Yeah, let's go right now to Andre Krelle, founder and chief executive officer of Life Furs in the New York City. Lab was established in collaboration with the FBI DHS in secret service to examine digital evidence of

all forms of cybercrime. Andrea joins us right now on the phone from New York City. Andre, thanks so much for joining us on this. When you see something like this happen, what is your first thought? Uh? Tim and Carroll, thank you really for having me. My first thought is looking to be handled three incidents like this every year, cyber patients coming to my door on daily basis. I feel like a cyber emergency doctor and a therapy So for me, that's a normal day, right to have a

ten sixty victims calling and asking for help. What difference is going to be right now is is the press around and magnificent of the colonialm is like a forty five percent I guess, or for East coast supply and also give the understanding that even such a big entity can be compromised. And the industrial control system, but the

call industrial control system the pipeline can be affected. Do you think the Colonial pipeline is making a mistake by not asking for cyber support support excuse me from the UTH federal government. Is that a mistake or is it better for Colonial to remediate on its own? Carol? I do think they do. Uh, they're part of it is something called Industry of Control Systems Joint Working Group established at the PHS level. I do believe that they are

part of this working joint group. And VHS hold at the John Felker era who was assistant Directive Agency, which we had a personal relationship with. They hold many of these exercises with the existem. You have to think of this thread after like a cyber snipers. It's not like someone who's making mistakes like who the mistake is that some of us gets called tomorrow like should we praise someone for bringing the call to society or any kind

of like a virus society. I don't think there's really like a point of finger to say who is really guilty. Looks thread afters who are making thirty forty million a year, they have some level of sophistication. But for example, there's a speculation the market right now that Colonial was targeted because of high ability to pay through their insurance program. Understanding is that you know such trade after looking forward thirty to forty million, Apparently Colonial holds such money to

pay on some insurance program. So I'm not sure it's true or not, but there's a speculation that the doctor ashould picked them because they're able to pay. What needs to happen to get to a point where where this just doesn't happen anymore, where this can be prevented. It looks like like, let's face the reality being a compromise. Like for me, I still of being a cyber doctor. It's just one of the life certainties right there is there is no way to prevent cyber sickness per se.

In my opinion, like we're all gonna get something right, and the question is going to be mild called to pick cyber cancer, and it's just something we can't answer. But what we can answer to prepare for it, like take all the vitamins? Uh, you know, do lo more holistic approach in cyber security? Do more holistic approach? And how we tried to detect remediating spread actors? How do you actually detect them? And how quickly can we really

deal with them? When you tot check them and isolate those systems that have been compromised most of the networks, for example, what happened to Colonial If these thread actor's gonna come to you the network, it's just the reality. Now, real question is can you isolate them very quickly? Can you eradicate the threat? Can you disconnect and prevent a line of movement for more damage? And he's been in society and the pandemic? How he failed? Why do you

think the enterprise system don't fail? They felt the same way as the whole society felt the pandemic. It's just the nature we as um. I would say computer architects never had to deal with this isolation like a zero trust issue. But how do they really operate? Like, but I can't trust you that you scare on team on the phone, I never met you. How do you know it's really you? And I don't know. It's really boomed the radio. What is this? Is radio going to somewhere else?

Andre just got about fifty seconds left here, so I am what do your you say? You get calls every day, So is this just kind of part of our norm going forward? Carol? For me, it's been for the last fifteen years. So yeah, I can tell I've been running the cyber emergency room. This is a business what they do as a life first, this is the digital for end against a response. We also have an offensive team that's basically breaking this for clients being paid, and we

do this like every day. This is what we're actually living in. So is it about just quickly we've only got about thirty forty seconds? Is it about doing harm? Or is it just about finding entities that can pay the ransom money and just quickly if you could. It's truly just getting paid. Criminal just want to get paid.

That's all what they want and it's easy. In two, three days, four days only ransom get paid in the bitcoins disappear and thanks to momentum what happened with the bitcoin going up, some of them acknowledge on Mr Tesla and and congratulating that we're being going going up. Well, good to check in with you. I'm sure you're busy, as you mentioned at the top, So Andre, thank you for your time again. Drake Kroll his founder and CE

of the cybersecurity solutions and services company Life Oars. He has done a lot of contract work for the Department of Justice and the special cyber operations at the US Air Force. Joining us on the phone in New York City. But a Way of Life is the organization that has been connected to this, pointed out in a in a statement on the dark Web earlier. They don't want to necessarily cause harm their business people, right, it's a transaction.

It's hard to do this without causing harm. Yeah, exactly, because this pipeline has been down. Exactly. This is Bloomberg Business Week with Carol Masser and Bloomberg Quick Takes Tim Stinovic on Bloomberg Radio. We are definitely We talked about this store actually last week. It's in the current issue at Bloomberg Business Week magazine. It was a most read story in the Bloomberg went acrossed about. Yes, women and Tim are getting top jobs at fun houses, but just

not the ones that managed money. Yeah, it's a little surprising because there have been so many initiatives over the past twenty years to try to actually increase diversity. Joe Weber's at at Bloomberg Business Week. He joins us from the New York City Bureau. Liz McCormick is a bond and FX reporter at Bloomberg News. So, Joel, it's it's surprising because despite years of initiatives, the statistics have not

budged what's going on. Yeah, and that's sort of what led us to want to kind of dig into it. And so when Liz um Uh Katie her Uh co write around this mentioned that um it was a story that they were interested in, we sort of said, see what's going on there? And what is interesting is that there are some top jobs um with some interesting developments and some some hires there, but the rink and file, we're still not really seeing much action there despite a lot of put forth. So so, Liz, what what do

you attribute that to? Well, it's interesting, Like Joel said, it's like in the middle is where you know, we're hearing there's more women because to run a fund, there's the fund managers and then there's lots of strategists and analysts that help and what it seems to be from our reporting and some of the data from morning Stars that you know, there are more women coming in and taking the roles of strategists and helping the fund managers, but there doesn't seem to be that many that are

moving from that level to the next level. And there's a mix of reasons we can talk about why people think that is uh, And to be honest, morning Stars said they want to kind of dig deeper in the data to kind of see what, you know, what's coming up the wheels. Where is it not working to get

them to the next level. Yeah, it's a head scratcher because you do see, as to mention, a lot of companies and initiatives to increase women, certainly at financial firms, and it doesn't look like the numbers are moving as you reported. Tell me about the one woman that you profiled in your story. You talked to a few, but you start off with Linda Jang. Yeah, she was quite compelling and interesting and it's you know, she started her

own firm. She's done at several big asset managers, started her own firm, and you know she didn't you know, mint her words and said, I think there's still some biases in there that you know, men feel comfortable letting you know, women you know, kind of assists and give some advice, but you know, for the firms to let

them kind of run the fund themselves. She believes there's still some bias against that um but we're seeing, like said, with her, you know, she went on, you know, to start her own firm, and I you know, it was very happy to talk to Gene Hines, who's going to be the new CEO of Wellington. And I will say Jean is hopeful. You know, she's realistic, but she's hopeful. And she said, you know, fifteen years ago she was the only woman in the room all the time, and

now that's changing. And she's hoping that maybe eventually, like it's just a slow moving thing, right, that maybe since we're seeing some all these initiatives and some more women you know research analysts, that maybe the numbers give us five years whatever, we're going to see more women fund managers. We can hope, you know. So it's nice to have hope, but it's it's a little distressing to see the numbers. Well, is another person another woman profile is our investment managements.

Kathy Would, who also started her own firm, started her own fund right right, So it's interesting. It's like I have two young daughters in their twenties, both working and I they're not each in finance, but I like to show them these things to say, like listen, there's a way, you know, and some of these really sharp women, I guess, have said, like listen, if if the system isn't going to move me, I'm going to create my own you know, create my own firm, do my own niche. And I

think that's important. You know, there's there's a way to do it. I remember I did a story a while ago which was saying that women running fixed income funds are those funds that had women on at morning Star. Data showed the returns were better than just like pure mail run funds alone, not mixed gender, and someone were saying, kind of it's crazy, you know, should just go by the number. So I think these women are saying, listen, I'm I'm confident myself, I was doing well, my returns

are good. I'm just gonna start my own biss. So I think it's great to see. At the same time, you know, there's the gene Hynes story is ultimately of one of somebody who's persevered within a company for a long time, and like you mentioned, she's gonna be UM CEO on July one. So so her root, I suppose it's sort of the one that a lot of of companies and other executives are hoping to annulate, where you can sort of rise through the ranks and eventually take over a fund and then become a CEO of a

fund of funds. Right, So, so what what is she talked about in her experience since that's a pretty high profile position that she'll be inheriting here soon. Yeah. She she was really interesting and she was saying not to minimize her talents, um, but she said, listen, I rose to these ranks. And she had a lot of good things to say about Wellington and what they've done, and you know, she had a great mentor in ed Owens

that really helped. But she said, in some ways I rose to these ranks, not because the system facilitated it, just because it worked out. I had a firm, a good mentor, you know, she's smart, etcetera. But it wasn't designed that way. And she was saying, so we need the systems to be designed, whether it's in a lot of these women talk about role models, like people you heard this about kids, what's doing different things, the same thing.

For any job, young women need to see women doing it, you know, like and say oh, hey, I can be that, like someone like Jeane to say wow, I could be a CEO, or I could run a fun or you know. So I think they all feel like we still need more women role models, and a lot of firms are working on that, but it's rights success. What's amazing to me is that you would think that performance alone would

just be like, well, wait a minute. If Morning Star has done the research and shows that women running fixed income the performances there better than there are male counterparts, you would think that that would be a no brainer. And it it kind of boggles the mind here, Liz, Yep, yep. And it's funny like one thing. And I have heard this in other years that have kind of followed this topic for a while. Maybe I'm biased because I'm interested in it, but I think it's important to shine a

light on it. Um. But that you know Tracy Chen who's at Brandywe who spoke to us, she says like I've heard before, like also young women who we know. There's a lot of initiatives of one daughter who's an engineer to get more women into STEM. But she was saying,

what fun management. You don't have to be this super quant and she thinks sometimes that keeps women away, she said, And it's true, like knowing history and geopolitics and all that's so important in making decisions on which stocks, which bonds, and so maybe we just need to give that message to young women that you know, you could come from a wealth of different background as far as academic studies

and some into this. It's a great story and in the current issue of Bloomberg Business Week magazine, Liz thanks so much. Liz McCormick. She's Bond, an FX reporter at Bloomberg News along with Joe Weber, Editor Bloomberg Business Week. Hey is in our New York City bureau. Lives on the phone from New Jersey. Is Bloomberg Business Week with Carol Messer and Bloomberg Quick Takes Tim Stinovic on Bloomberg Radio.

Tim one of our top stories, certainly on this Monday, kind of his every day and that is the latest on the virus in COVID nineteen uh and we are seeing vaccinations being given out slowing down. We've talked about that a lot here in the United States, and there were some comments by Dr Anthony Fauci noting that COVID caused more deaths in the United States than reported. He caught up on Meet the Press over the weekend. Check

it out. We've been saying in the CDC has been saying all along that it is very likely that we're undercounting. You know, the model says that it's a significant amount, as you mentioned, correctly, nine thousand. That's a bit more than I would have thought the undercounting was. But you know, sometimes the models are right online, sometimes they're a bit off. But I think there's no doubt, um chuck, that we

are and have been undercounting alright, So undercounting. Let's see what our next guest has to say about that and kind of where we are when it comes to COVID nineteen. Bruce Farber is back with us. He is chief of Infectious Diseases at Northwell Health north Shore University Hospital in Long Island Jewish Medical Center. He's with us once again on the phone from Inhassett, New York. Dr Farber, nice to have you here with Tim and me. How are

you well? Thanks for having me? Well? Good to hear that. Uh. Tell us about your thoughts when you heard Dr Anthony Fauci over the weekend. Um, what do we need to kind of understand? Uh? And the significance of his comments? Well, I don't think there's any doubt that we've significantly undercounted that has always been in play. You will call last year when there was peaks, many people died at home, never made it to a hospital. They never counted as

COVID cases. Other people didn't count as COVID cases when they were not diagnosed because we didn't have enough tests. Uh. There's no doubt in India that there's a dramatic under account of people who are not making it into hospital and being tested. Um. I think we've always known that

that's true. So does it does it change? I mean, since it's something that you've known, I mean's it's it's it's not necessarily something that that I've followed closely, but as a medical professional, I mean, it sounds like that's something that has been something that's been realistic throughout this and I'm wondering to what extent you think about this from the perspective of Okay, people putting off going to the doctor and then people getting sick from something unrelated

to COVID, But in the end it is related to COVID because they didn't actually go and visit a provider. Yeah. Absolutely, And in the beginning, even when people went, they couldn't the diagnosis couldn't be made because we didn't have enough tests. I mean, that's obviously not the case now, but I need something unrelated to COVID, like if they if they

were scared in those first few months to actually adventure. Oh, if you count people who, if you will, died of COVID who never had COVID's malignancies and things exactly, Yeah,

there was there was a huge group of people. Well that's much harder to count, but there's no question anecdotally we saw many people who had advanced malignancies that had been put off to many months, heart attacks, pulmonary ambuli um, other medical problems that just were delayed because the fear of going anywhere, no question, But is this about getting it right for the history book so that we understand the significance of this pandemic going forward, and that might

shape policy going forward, research going forward, the hunt for the next virus that might be problematic for our society. Yeah, I think it's it's all of those things plus others. It's also relates to, you know, how we um how we consider this virus in terms of therapeutics, in terms of vaccinations, in terms of figuring rates of how vaccinations are going to prevent people, in terms of understanding what variance would do to a population depending upon whether our

accounts were right or wrong. So yeah, it's important to get all those things right. This data drives our policies, or at least should drive our policies. Well, speaking of data, Dr Farber, I'm looking at the latest data from New York City. The percent positive of people who have tested positive, decreasing confirmed cases, decreasing total cases, decreasing hospitalizations, decreasing confirmed deaths, decreasing. How are you guys doing it at north Well Health?

I mean that all sounds great. We're doing exactly what you said. Our numbers are dramatically down every week. They're down deaths or down, hospitalizations are down, um new admissions with COVID or down. There their mirror exactly what you said and there and that rate, those rates have significantly fallen week after week, um, not just linearly, but but even more and more. I mean, our numbers are so much lower. I think nor Shall Hospital has roughly forty

or fifty COVID patients in it now. It was probably a hundred and thirty less than two and a half weeks ago. What are this case is like? What are the demographics on it? The demographics are I mean, we used to think that we would see a younger group of people. We have predominantly seen at least particularly in the very sick people, the same group the elderly people with co morbidities who never got vaccinated. That's what's common to the people who are in our I c us

none of them have been vaccinated. Um. And that's, to be honest to me, the most troubling and depressing statistic of them all. You know what, that's not something that that's not a way that we hear this communicated, right, We don't hear It's like it's it makes me think of the way that I was taught about smoking when I was a child, and and the way that the imagery associated with that, and we don't necessarily hear public health experts talking about vaccination in the context of life

or death. Yeah, I mean, I don't think that there's any doubt that no matter what you think of these vaccines, they are preventing hospitalizations and deaths. And although they're not perfect, and although they're not a hundred sent effective, there's no question that you see very few people who have been vaccinated in the hospital. I've seen only handful, but I've never seen any in the I see you, and I've

never seen any die. I'm not saying that couldn't happen, particularly in the NUMUNO suppressed individual but from a practical point of view, they're they're so good preventing that. So we've covered a lot of ground, and I think it was significant what you had to say about the demographics of folks that are in your hospital coming down with COVID, that they are all people who didn't get vaccinated. So

where do we go from here? What are your expectations about the rest of the year in terms of COVID, because I think for a lot of us who have had the vaccine were increasingly feel like kind of the world is ours again. Yes, I think most people should be optimistic. I think we're gonna have a very good summer. Not only are reached down, not only are more people vaccinated, but we'll be outside. So I anticipate that our rates, hopefully we'll go even below what they were last summer.

Remember last summer, even prior to vaccination, our rates fell dramatically. They're actually lower than they are right now in New York. And so I think we'll beat that and get better. Um, And that's all good news. The bad news is, I mean, we still have roughly hesitancy, and I think as a result of that, COVID will be in the background basically, uh, for for a long long time. But one thing that I still have trouble understanding, doctor is natural immunity versus

acquired immunity and versus vaccinations. So if people who were eager to get vaccinated, and even those who weren't eager to vaccinated, but everybody gets vaccinating wants to vaccinated, and then so many people who have gotten COVID have immunity from that, um, doesn't that give us an achievement of her immunity to a certain extent, um to some extent, But unfortunately, uh, natural born immunity is certainly not permanent.

I mean, it's certainly very secure for three, four, maybe a little longer months, but there's no question that you can get COVID over and over again. And regarding the vaccine, you know, I think we'd be naive if we thought that that vaccine is going to give you lifelong immunity. I'd be happy if it's two years. At this point in time, I think we should plan on the fact that we will need boosters on a regular basis. Some people will need them more frequently than others, depending upon

their age, their immune system, and their commobilities. How do we think about that at this point where we're still dealing with just, you know, the first round of getting everybody vaccinated, but for those who have gotten vaccinated, how do we need to be thinking about as individuals about the next booster shot. I guess I'm assuming we'll get some kind of guidance from the FDA or the CDC, And are we keeping the infrastructure in place to make

sure that that happens. Yeah, I don't think there's any doubt that our infrastructure, and an extended one that will hopefully involve more community based practices and eventually physicians offices and more drug stores will need to be in place forever. Um. I think we're naive if we think that we're going to reach HERD immunity and COVID is going to go

away and not come back. That's just not realistic. I don't think that will ever happen, for a wide variety of reasons, not the least of which is the hesitancy. Not the least of which is the fact that there are variants, and you know the variants we have now, these vaccines are currently pretty good, not quite as good as as they are against non variant or the ancestral strains,

but they're pretty good. But that could change. And natural born immunity is not going to be long lasting, and certainly vaccine induced immunity is most certainly not going to be lifelong. So when will it happen? Probably the beginning

of next year. I think it will vary. We need better vaccine correlates, meaning tests to say whether you're still immune or not, and they really haven't been worked out, but I think those types of tests will be much more likely to be available in the next six months. When you talk about immunity, and we've had some conversation. Are you talking about the longer term immunity would be

T cell immunity? Is that correct? Yeah, it's both B cell and T cell immunity, and we have pretty good ways of measuring B cell in very poor ways of looking at long lasting T cell immunity. But that would be the holy grail, right, Yes, and not and not likely anytime soon. Well, I mean things happen a lot faster than sometimes I think, so I'm hopeful that by the end of the year we'll have good vaccine correlates

to know whether you're still immune or not. So, kind of building on Carol's question from from earlier, what's just a realistic way for us to think about life? I always say, on the other side of this pandemic, But it doesn't sound like we're gonna get to the other side of this pandemic. And and and when we say we might live with this, like the seasonal flu. You know, the seasonal flu doesn't shut us in homes, right, it doesn't prevent us from going to work typically, right, we

we live life. That's what normal is for us. Do we get to a point with COVID like that? Yeah? I think essentially it's going to be very similar to that. Obviously, there's profound differences between flu and COVID. COVID is much more deadly, much more serious, um and is not seasonal um and so but yeah, I do think we're going to get to normal. I think we're going to basic. We accept a background rate of morbidity and mortality with COVID that will be much higher than it is every

year with flu. But remember, there are anywhere from twenty five to sixty five thousand people each year dying from flu. The overwhelming majority have or elderly and have underlying medical problems, but infants can can certainly die of flu. And I think, yeah, that's going to be in the background, and hopefully we can just you know, keep at at bay and and I mean, we're not going to go you know, the

world's not gonna be on lockdown forever. I don't think there's any doubt about that, right, But I get the feeling that the background rate statistic will be something that we will kind of have UM with us for a long time. Dr Farber, thank you so much, really appreciated and appreciate catching up with you once again. Dr Bruce Farber, Chief of infectious Diseases at north While Health, north Shore University Hospital and Long Island Jewish Medical Center on the

phone from Inhassett, New York. We learned a lot there, we did. And I look like everything in life, it's about adjusting expectations, right, you know about vacations, being realistic about those expectations. Listen. I feel like humans are pretty flexible and can figure it out, and we do adapt. We adapt when we resilient. Yeah, exactly, I'm groc journal. Yeah, but you let me drive? Oh no, no, no, no, home all night please, I'll do the riding gravel. Lets me.

I want to drive, Just drive, baby, question, trying job. This is the drive to the globe. Give me thanks. We'll drying us to dawn. On Bloomberg Radio. All right, just about ten minutes left in today's trading session. We're covering neural loads of the session. That bigger game that we saw in the Dow Jones Industrial average running a little bit out of steam but still holding on to

a thirty point advantage. Both the NASTAC is heard from Doug and the S and P are down the NASDAC really taking it on the chin down about two point

three down, three points. Let's get into it with Steve Brown, senior portfolio manager at American Century Investments two thirty billion in assets under management, come outager on the company's Real Estate Fund and Global Real Estate Fund, the latter, by the way, beating most of its peers over the past five years, returning on average annually more than nine percent according to Bloomberg Data. Steve joins us on the phone in New York City. Steve, good to have you here

with us. What's the market environment like for you? It's it's been pretty good this year. Last year was a difficult year for reads because of the lockdowns and the concerns about rent payment. But this year they're acting a lot better. They're up about on optimism about reopening the economy. Well, it's got It's a geographic story though, right, because it's all about where the economy is reopened and where it's

not well. For the US fun it's opening pretty much across the country and having more success with the vaccines. And then both of the FED policy as well as the Biden administration. Are you low interest rates, have a lot of stimulus, that's good for the ALEC, for GDP growth, So we're seeing strength to an other property sectors throughout their country. Certainly housing related property stocks are doing well

as well as a timber. And then some of the bomb bout sectors like retails have bounced back very smartly this year in two thousand one. Well, let's talk about retail because Simon Property Group reporting after the bell today and I'm wondering what you've heard and how you felt about the way that the company is talking about occupancy

and the bounced back after just a terrible year. Yes, So, as Simon, they're the largest owner of regional malls in the country and last year there were long periods of time when they're malls were closed due to state mandate. Well, let's shift it so virtually all their balls are open and ready for business. Also, last year's they had in the middle of the year the rent collection was close to six quite poor. It's approaching now or through December one,

we'll hear what happens in side of the call. We expect the further improvement in rent collection and then thirdly a store closing in the first quarter of this year. First que we're amongst the lowest in the last four or five years, so very little store closing. There are a lot in two thousand twenty, but very little in twenty one, and then leasing activity has been strong, so we think Simon can put up some good numbers and should have some optimism about the leasing progress for the portfolio.

In two thousand one, what happened to the expectations that real estate was just going to fall apart? Commercial real estate in particular because of the pandemic. Why didn't it okay? A couple of things. The concern was that working from home was taking off, and they had a lot of some governments allowed rent moratoriums were people don't have to pay their rent. So there's concerned about policy having a negative impact in real estate values. As we've moved into

twenty one. Firstly, the first piece of good news was sort of the announcement of a vaccine. Whether it's from my diner or five or November of two thousand and twenty, that's what It's turned things around in terms of the conversation as we did here in mid May. The vaccine rollout in the US appears to be successful. Governments are reopening. I believe New York State, New York City is gonna

be fully reopened by July one. So that's positive and a change in mindset getting back to living, you might say. And that's been good for real estate in the sense that there's more confidence than to be able to cut rent in the Tommily manner, and there's more confidence that

things will go back to normal. Now, normal may not really come to frow U till say the fall of this year, when many companies, whether it's in New York or Boston or l A, etcetera, we'll begin asking the employees to show up for work a certain amount of time, whether it's three days a week or five days a week. But you'll get more of that back to back to normal scenario, and that's that's certainly a positive for real

estate values and real estate activity. Sticking with retail, what does what does long term look like for companies that own and and operate malls as as retail shifts from I mean, it's a story that's been happening. It's been going on for Look, this is a long story now, right, the shift to e commerce from brick and mortar and the move at least with brick and mortar to experiences. What does it look like? Sure, we're not overly optimistic about the mall sector. Long term. We think this year

there could be a good bounce back. And Simon's the leading owners, so they owned some of the most productive balls in the country, so those continue to gain market share. There will be some malls closing just because of difficult financial activities, but I think in terms of assignment, uh, it comes into the year training at thirteen times earning. There's a lot of upside and their earning power, so we like it over the next twelve months or so.

Where we're more optimistic is in community shopping centers that are grocery store anchored, because they did pretty well during the pandemic and obviously people, you know, we're busy goings the grocery stores are having order to pick up and deliver from the grocery stores, so they're leasing. Activity is good and we definitely like the long term picture of open air shopping centers. Give us one in particular that

you like. One we we like is called the Brick Smore a New York phase read it owned shopping centers throughout the United States. It's it's a nationwide portfolio and they have been a beneficiary of the reopening trade, and they've been a beneficiary of you know, very strongly. Thrownings came out last week and they raised guidance for two one.

They had very strong leasing activity, they showed a big improvement and rent collection, and they had a very linibal store closing in in the first quarter of this year. So again they were a beneficiary of those trends. And then grocery stores in general had a good U lesson and they're looking to expand or signed new leases, so they should be a beneficiary of that trend. All. So

let's talk invitation homes real quick. Um, I'm curious long term changes that you're seeing during the pandemic is more and more people are priced out of actually owning a home and instead they choose to rent long term. Yes, So what happened over the last twelve to fifteen months.

We had the dramatic reduction and short term interest rates by the Federal Reserve, and so mortgage rates went down to three, you know the lowest and ten or twenty years and that did stimulate a housing boom, partly because of work from home in lockdown in the cities. People were concerned about quality of life as well as actors is good public school, so people moved out to the suburbs. About homes. Home prices. Over the last twelve months or thirteen to fift so, home prices have gone up a lot,

although the cost of money is cheap. We're at a point now where it's it's obviously uh a toss up between renting versus buying in terms of the cost and with a company invitation homes, owned homes, owns homes and

rents zones. Demands have been very strong as people as families are probably stand of the housing market, probably because they don't have the ten or required for down payment, but the demand for their product type offensees are is very high and their ability to raise brands is very strong. So we're quite excited about things of family rentals such as invitation homes as well as traditional apartment companies like U D are all right, gonna leave it on that note, Hey, Steve,

thank you so much. Steve Brown. He's senior portfolio manager at American Century Investments. They've got two hundred thirty billion in assets under management. On the phone from New York City, he mentioned invitation homes up about eighteen percent so far this year. Little changed last year. Simon Property, which will report after the closing bell, was up nearly fifty so far here in one down about last year. So certainly we've seen understandably bounce back, but we'll see what they

have to say on their earnings. Called Thanks for listening to Bloomberg Business Week. Download the podcast on iTunes, SoundCloud, or Bloomberg dot com, and you can also listen to our radio show at two pm Eastern on Bloomberg Radio or watch us on YouTube search Bloomberg Global News