Christmas Season Already in Doubt

Week on iTunes, SoundCloud, or Bloomberg dot Com. You can also listen to our radio show weekdays at two pm Eastern only on Bloomberg Radio. Now. There are a lot of discussions going on about a vaccine in the race for a vaccine, a lot of news coverage over the weekend. Um and our next guest and his team have been facing the virus from day one in this country. They the first US case of the virus actually confirmed in Washington State at Providence Regional Medical Center in Everett, Massive

Hospital System Overall. Dr Rod Hawkman is President and CEO of Providence Health. He joins us on the phone from Seattle. Dr Hawkman, nice to have you back with us. I hope you guys are doing well. Help us. We always kind of lean on you to kind of make sense of some of the headlines that are out there. Uh. And as you see this race for the virus, what's what should we as individuals expect realistically about how we

get there and when we get there? Oh? Sure, And I think the best way to think of that as I was talking to a group of folks that try to you know, they say every time we listen you know, on TV. Uh, you know, we don't know who to believe. So I think it starts out with you know, we're going to get better at treating this virus. So you saw with rom visivie now being approved and you know, we are first patient that we had in the United States,

we actually treated with one visivie three months ago. And what we're going to see are some other medications that are going to be added to that in kind of a cocktail to see if we can really improve patients that get sick and hopefully prevent death. So that's one thing that I think the public can start to say, well, that's a good tranche of research and work that's going on.

On the other side of it is the race for the back scene, where you know, there's probably more than fifteen trials that are ongoing, which is fantastic, and we have a lot of cooperation going on between the scientists with the different trials out there, And to kind of explain it to listeners, it's it's picking different parts of the virus and seeing which one of those parts is gonna give you immunity. And so that's in simple terms.

You know, why would there be fifteen different trials because they're also all looking at different aspects of the virus to see which one seems to be as I would say, the most immunogenic and the ones that can confer immunity. So and then there's an issue of whether you use DNA or RNA, which from your biology from high school has all different consequences. There are some companies that are

looking for a faster turnaround on their vaccine. Uh, we're still we're cautiously hopeful about that, but you know that remains to be seen, you know, so that the most optimistic estimates are sometime in the late all towards the end of the year, and the most realistic are probably in the first quarter of next year. UM for a vaccine, that's what that's what most of us are looking at.

In the in the clinical and scientific community, and so Dr Hakman, as you look across the country and and you drawing the experience that you've had there in Washington State, you see this sort of checkerboard that we keep describing of, you know, different states sort of coming back at different times. But part of that is a response to how the virus has played out in different geographies, different urban areas

versus suburban versus rural. What makes the most sense in terms of the medical side and in terms of what we should be doing before we have a vaccine? What what makes the most sense. Yeah, I I just talked to the Business Roundtable on Friday. We're trying to make some sense for the CEOs around the country about what they should do. And it's all very very dependent upon

your geography and your density. So when I think about, you know, giving advice to different organizations companies, the first question I asked, are where are you in the country, because it will make a different depending on where those states and localities are on the curve of number of cases. And then the second thing that's really important is the density of the work environment. So are you able to

spread people out? Can you spread customers out can you do some of that which will help really really decrease risk and exposure. So it's almost you almost have to go through a checklist of the things that you do in your business or where you are to kind of understand what the best practices are and some of us are. We're actually putting together kind of some of those guidelines so that these are the things that you look for and these are the things that will decrease your risk significantly.

And then a little bit of this is going to be we gotta see what happens in the country. We're gonna learn a lot. Certain places will teach us a lot in our in our environment, Alaska's wide open and open for business. Um, you know, again not a lot of density, but we're also going to learn a lot by doing that. What are the things that we have to look out for. What about something like mass transportation in a city like New York, How do you see

that moving forward? Wow, that is a tough one. That is a really really hard one to think about, because those are the situations where, you know, if you ask me as a physician, that worry us the most. When you've got a crowded subway car that has few people in it in close proximity. How do you do that?

And I don't know whether it's going to take limiting some of that transportation obviously everyone wearing a mask, because there's no question that if everyone wore a mask, it will decrease significantly the transmission rate of this virus, even if they're not what people have on. So some of that, and then you know, you know, not touching anything. If I got on a subway, as soon as I got off, I'd be, you know, washing my hands, doing all those

kinds of things. So I think we're going to have to make some accommodation and probably limiting you know, we can't have a packed subway car. So are there ways that we kind of limit the number of people? But those are going to be some of the tough ones that we're going to have to solve. Yeah, it's such a good point. I mean, this whole question of density I think is certainly very friend of mine for those of us here in the Tri state area. Dr Rod Hochman,

thank you so much, really just great insights. President and CEO of probably in St. Joseph Health joining us on the phone from Seattle, Carroll and the other thing. He said, You know, we're just gonna have to wait and see what happens as we reopened to see do we all of a sudden get a spike in cases or have

we created some kind of herd immunity. Although we use that phrase, would be very careful about how we use it because and I think also comparing and contrasting what happens in different regions and trying to figure out what the variables are is really really important. You're listening to Bloomberg Business Week with Carol Messer and Jason Kelly on Bloomberg Radio. All right, he's a Jedi in his own right.

Kevin Cirilli, our chief Washington correspondent, joining us from Washington, keeping track of all the comings and goings the next leg of the stimulus. It ain't gonna be easy, keV. What's going on? It's not. Did you guys see what President Trump said the other night. He says that he's on board for a next round of economic stimulus looking in in the next month or so or early summer,

provided it include the payroll tax cut. So the payroll tax cut is the bargaining chip from the White House, and they say no deal unless they include the payroll tax cut. So looking beyond that in terms of where this goes from here, well, remind us exactly what the Paill tax cut is. Well, it would allow for businesses in order to qualify for for large businesses and medium sized businesses as well to qualify for some some tax relief as it relates to keeping some individuals on their

on their payroll. And so especially at a time in which the people are having this conversation about furloughs and laying people off, many of these businesses on Main Street in Wall Street, they want to make sure, uh that that you know that they're going to be able to have that. This actually happened if you think pre COVID, this was another debacle during the Obama White House, but also pre COVID during the tax uh, the tax debate.

But another thing that I'm really interested in is where the conversation shifts in terms of policy, uh with China and how Democrats and Republicans this is becoming increasingly a nonpartisan issue. Yeah, So tell us more about that, because we're gonna have a big deep dive into China at the top of the hour with uh Andy Brown. What's the political side of this, keV. Well, the political side

is threefold. First and foremost, from a from a congressional standpoint, there is a host of different legislation that was that existed prior to COVID, but even during this is getting re It relates to five G and businesses and in the United States being able to do business with European companies that might be uh, you know, working with Huawei and other Chinese firms uh. And Secondly, from a higher education standpoint, there could be new regulatory structures domestically U

pertaining to China's ability to impact higher education. And finally, I would you cannot talk about this in an election year without mentioning the presidential election. And so I think you're going to hear the administration and you heard this from President Trump in his Fox Newstown hall last night, increasingly taking a tougher tone against China and Beijing as

he did with with regards to tariffs. But from the democratic perspective and Biden's orbit, they're going to say that this is why they would argue they should come in and be able to have a better relationship with Europe so that the US and Europe can work together to combat some of the inconsistencies. To put it mildly, coming from from Beijing, I gotta say, I don't know if any of you saw sixty minutes over the weekend, and it was all it was all about, right, you know

the impact of the virus. It was gut wrenching, to say the least in terms of small business owners. You know, people still waiting on checks. And then the whole piece about farmers who we know already got some aid earlier, um you know, from the Trump administration because of tariffs, speaking in the fight between US and China, and yet you know they're not getting especially the smaller players not getting assistants. I do think any increased trade tensions we're

talking about another hit to the economy potentially here. And that's such a good point because if you think back to when we were covering the U. S. And China and how Beijing really saw the heartland America as as a way to specifically get the president's attention because that's

the base of his political coalition. And so you're absolutely right, it looks like we're headed towards more of a more volatility on the U. S. China economic front, and one more thing that I would I should mention is that the World Health Organization and there is a legislation bipartisan but also coming from intelligence community sources and from the administration obviously questions about shi Jing Ping's relationship with the

World Health Organization and vice versa. Yeah, and all of that is sort of backdrop or maybe foreground to this very difficult relationship that we're seeing continue between President Trump and President she Kevin Cirelli always made it. He works at, as Tom Keene would say, such a high velocity that you just get. It's like convinced he doesn't sleep, but you just jam so much in a very short amount

of time. Love that guy. Uh. And he's also very fun to follow on Twitter, as you know, kept at kept Sarelli lots lots of lots of flexing, lots of the little flexing emojis. It's good, It's good, all right. Kevin Surli is our chief Washington correspondent. As you heard Charlie mentioned, if you're in the DC area, check out his show. It's called Sound on Uh. It's on Bloomberg one in DC at five pm, well street time. You're

listening to Bloomberg Business Week. How Master along with Jason Kelly, and I feel like Jason, a little bit of what we just talked to for our New York audience about the Amazon and engineer who quit in protest about how Amazon is treating some of its workers fits into this next story. It's in the magazine this week, and it's really fascinating because throughout this virus pandemic, we've been talking about essential workers, right and hopefully it's made all of

us realize how important they are. Some of the workers that I think it's fair to say that a lot of us have taken for granted before the virus. So a story in the magazine, as I mentioned, takes us back to nine o two to help us really think about these essential workers. Susan Burfield is Projects and Investigations report at Bloomberg News from Brooklyn. She wrote this story.

We'll get to her in a moment, but with us right now is Bluemberg Business Week itor Joe Webber on the phone from Brooklyn and Jill, Jason and I were just talking about um Amazon, which, as you know, it's kind of in a bit of a pr nightmare for how it's treating some of its warehouse workers and others and for getting rid of a whistle blower. But you do wonder this pandemic, these social ills that have been out there are really being laid bare. You know, how

we will come out on the other side. Will we totally ignore it or will we work to make it a better society for every everyone? Uh? You know, there's

a lot of questions out there. Yeah. So I mean I think that you get right to the heart of it there, um And and you know, just throughout you know, history, there's been these flashpoints and I think, um, one of the things that this this shows is like there there is always this silent agreement I guess between labor and employers, right and when you when you come to a flashpoint like this, you know, it lays it bare and like a pandemic like foot we're enduring right now, you can

kind of go through a task of companies and it just exposes that in the very essence is like, you know, employment and labor. This is a conversation that um, that we need to have. And I think the thing that you know, if you really want to bring that um into focus now, the thing that's really um, I think unique uh forever for all times right, is this idea of gig employment, and that gig employment thing is um, you know, not having a worker who's a full employee.

I think that is a conversation that we're going to just have more and more of than you know. The fact that you know, like the state like California has sort of been really at the forefront of this shows how how some people are are beginning to look at that relationship too. And so Susan come on in here. Susan Burfield, Projects and investigations reporter for Bloomberg, author of

this piece and a book, a new book. So tell us about what you found about this coal strike, because for those of us who don't know about it, there's a bit of a wait, what that tell us? How this connects? Yeah, So for us, you have to think back in nineteen o two, So Theodore Roosevelt was the president. Um, he had come to power unexpectedly after McKinley had been assassinated by a former factory worker, and so there was a general sense of unease. You know, America was an

industrializing nation, it was urbanizing nation. There was a lot of immigration, a lot of the issues intentions that we face now. We're very prevalent there. And so when the coal uh miners went on strike, UM, Roosevelt at first was a little bit unsure about what to do. His main concern was social order, but he also wanted to show that he, as a president and his administration would be on the side of workers and would stand up

for them when the time came. And so, what is the main thing you take away that we should be thinking about in the context of the current government and maybe even our own sort of commercial or personal response here. Yeah, So, you know, the strike lasted five months. UM, winter was approaching. There was a real possibility that millions of people would be without heat and light. Um, the Post office was threatening to shut down, steel mills were threatening to layoff workers,

and it was a real crisis in America. And you know, one of the things it revealed was that the coal miners were really the essential workers of their time. And so,

you know, much like today, it was. Um, it was a bit of a shock, you know, for people to realize that the kind of luxuries that they have, the convenience of their life was dependent on people who were often underpaid or poorly paid, were vulnerable, you know, worked in dangerous jobs, and what Roosevelt suggested was that it wasn't and shouldn't only be up to the companies to

do right by their workers. So they should, but that the government also had a responsibility to step in and to protect them and to you know, make sure that they were working for a living wage. Um, and that really overall it was an economy that worked for everyone. So I think those are the lessons and what's hopeful about this moment. And then you know what also is is uh, as I called it in the piece, kind of haunting question that we're all going to be faced with,

you know, Susan. Um. I also just want to point out, hey, first of all, our of fate again, we're talking about Susan's book, which we excerpted in the magazine. And just congratulations, uh, like just high fives from over here, um, Jason Carroll. I got a personal copy. I got a personal copy, which actually we did it. We did a socially distant um drop off. So she lived it understooped and I picked it up, uh, in that in an envelope that said Joel on it. So I was like very honored

with that. People. I want to I want to just um, say that. You know, I think that, you know, even though it's a historical book, I think there are lessons from history that are going to just prove really powerful right now. And I think Susan's book gives us a sense of that. Um Susan, if I if I could kind of bring it, I spent a second of it the beginning kind of just talking about gig workers sort

of being a modern day equivalent. And you know that is such a topic now when we think about uber drivers or instant cart workers and like they've just we've sort of taken them for granted until suddenly we realized, you know, all of these people are are on the front line in a way that um um are our instrument integral to the modern economy. And yet you know, we weren't thinking about them in the same way before

all of this. And you know, California is one model of how how a state looking out for people in a different way. How would how do you think, uh like a Roosevelt would view you know, California's policy and all of this, and and is that enough? Yeah, that's

a really good question. So you know, Roosevelt really ushered in the progressive era in America, and it was really the first in the time that a president kind of came out very directly and said we in the government, we as Americans, need to provide a square deal for

everyone with his term. You know. Then later we had the New Deal and we had the Great Society, but first there was a square deal, and it was the idea that you know, everybody should have, you know, as an equal a chance as possible, and that you know, everyone should be equally protected. And so while I think Roosevelt would be supportive of what California and the other state is doing, or for that matter, what any single company is doing, he really BELI in the power of

the federal government. Well, and I have to say, I love to this idea of covid capitalism, and we'll have to see where the country goes, whether it whether it just helps to benefit those that have already benefited a lot, or whether we rewrite some of what's been going on in our society. Sous In Burfield, check out our book. We'll hopefully talk to you more about that and of

course our thanks to Joe Webern. You're listening to Bloomberg Business Week with Carol Masser and Jason Kelly on Bloomberg Radio.

All right, let's do a little business week economics and sort of a special edition today because we want to really focus on what's going on between the US and China, and we try to catch up this time more or less every week with Andy Brown, He's editorial director of Bloomberg New Economy, joins us on the phone from New Hampshire, and Andy, I have to say, we were talking on our planning call earlier today and realizing everything that is

going on between the US and China. Some comments made by both uh, you were the guy we need to shock too, So we really appreciate you, uh taking some time here give us the context because this has been complicated to say the least, but it feels like it got turned up to eleven as they say, over the past hours. Yeah. So you know, this whole lame game between the US and China, as you say, has now

gone to a whole new level. Um And what's happened now is that uh, Donald Trump has threatened UMU China with with trade retaliations, um, you know, with tariffs on Chinese goods. So you know here you are here, we are sort of teetering on the edge. We suddenly on the in in a in a recession, teetering on the edge of a depression, and the last thing the world needs now is a trade war. Uh, And it looks

as though we may be getting one. Well and yet exactly I mean, Andy, it makes me wonder, you know, what are the conversations that are going on in the White House at this point. But that's you know, it was interesting. There was a story we talked about this earlier on our broadcast sixty Minutes this weekend, looking at farmers who we know were hurt in the trade wars, and they're still struggling because they're not necessarily getting some

of the stimulus money out of these bailout packages. But yeah, this, you know, trade tensions are pushback on globalization. Just exacerbates what's going on in the economy, the negative side to it, and makes it much more difficult to come out of it,

doesn't it. Right? So you know, people people forget we you know, half of all of the tariffs that um Trump put on China are still in place, and you know it's a myth that the Chinese are paying for this and that this is a sort of a net budget plus for the US UM US import is of course pay these tariffs and then pass it along UM to the consumer. And so you know it was bad

enough UM before before COVID nineteen came along. And now you have US consumers who UM, many of whom are out of work, paying additional prices UM for basic products. So I mean it's an even heavier burden now for the U. S economy. And Trump is threatening to reignite the whole trade war UM in as retaliation or as punishment UM for China's failures in the early stages of this pandemic when there was clearly a cover up, UM.

You know. But but what what what's happening now is you have all of these allegations that you know, uh, this the COVID nineteen came out of a out of a lab in Mouhan. So the scientific community say, look, it's possible, um, And this is the consensus of the scientific community. It's possible, but not likely. Uh. It probably wasn't man made or you know, artificially engineered. Probably came

out of an animal. And Trump and Pompeo keeps saying, well, you know there's evidence, and you're getting this drip drip drip. But you know, there is no evidence. So you know, right now the Chinese is saying, okay, this plays right into their own narrative, which is this all basically it's all about the White House deflecting blame for their own, uh late catastrophic response at a federal level to to

the coronavirus. Well, and I do wonder Andy, to how much the Chinese not that that you know, this lessens the severity of what Trump is doing essentially in in impacting the relationships between the two nations even more severely. But how much did the Chinese also say he's running for re election, he's playing the game again. Well, yeah, that that you know that that's that's exactly what they're saying that and and and the Chinese, in their own way,

they're playing, you know, a similar game. So you know, you've had statements from Chinese Foreign Ministry spokesman, um, you know, spinning this this conspiracy theory that the coronavirus came out of the US military during these military games that took place, um, you know, in in Buhan. So both sides are playing this. But you know, the the this is having real impact

right now on the economy. The markets are down today because they're very worried that in the middle of this global pandemic, we may say, see a a interruption of trade tensions. And I just saw I just saw that the remne b the Chinese currency uh is sliding. It's almost at a historic low. Um. You know, as as

a result of all these tensions. Well, and it's interesting, you know, Andy, we heard from Kevin Cirilli, Chief Washington correspondent earlier that China feels like something that actually the Democrats and Republicans, at least in broad strokes, can kind of agree on. Do you agree with that? And what are the implications of sort of finding something that finding something to agree on in a place where nobody agrees

about anything. You only have a better minute, lub. Yeah, I mean not not only do they are they agreeing on it, but I think they're going to be competing with each other. Um, it's this election to be to be tough on China. Um, you know, it's a it's China. China bashing is going to be a central theme I

think of this or this election, the presidential election. Wow. Yeah, No, I mean it's interesting to think about that too, because you do see it, you know, coming down on you know, even if you're just sort of comparing and contrasting tweets, you know between the president and uh presumptive nominee former Vice President Joe Biden. Fascinating. Well, uh, you know, we asked key deliverous. That's what we love. Andy Brown, great context editorial director of Bloomberg New Economy Journius on the

phone from New Hampshire. Of course, you know, he's the former China editor senior corresponding comments for The Wall Street Journal. So he and he grew up largely over in Asia and Hong Kong and elsewhere and lived in Beijing. So he really knows his stuff and knows how complicated but also how important this is and how it not going well could really have vast long term implications. And that's

the thing. They're you know, the games being played on both sides, right, but there are implications to all of this, and we can't forget that, especially when it comes to the impact on individuals in each of the countries. You're listening to Bloomberg Business Week with Carol Masser and Jason Kelly on Bloomberg Radio. Well, it's beginning to look a lot like Christmas. Not really, but we know retailer here, I know are already starting to think about it, and

what they're thinking about doesn't look good. I was not excited from what it says, but excited to read the story because it's so smart. Uh. And by one of our top reporters, Matt Townsend, he joins us on the phone from Brooklyn. So this isn't great retail sector clearly suffering here, Matt, but already Christmas looking grim. Yeah, that's right.

I mean, you know, there's a lot of thought out there that at some point we'll have this nice recovery coming into the fourth quarter and consumers will bounce back. So we looked at it, and you know, companies like Fitch, the ratings company, I mean, they're already baking in as much as a temper cent decline in sales for discretionary companies. Um.

And it really boils down to two things. One the consumer they expect, and other firms expect the consumer to still be under pressure, whether it's high unemployment, the thread of the virus. Also, shopping in a retail environment that has all this social distancing might not be that great of an experience that could damp in sales. So there's a lot of problems with the consumer that could lead to a blue what we're calling out quote blue Christmas. Yeah.

I mean, I just think there are so many questions and I think you just hit it, you know, And I do wonder what it means for retailers. I mean, Macy's is opening up, right, Matt, And I just think about do I want to go in there? Where? How do you keep a place of those of those you know, that size, how do you keep it totally clean? Safe?

I just think it's difficult. It is, and you know, so far we've seen from some of this early states opening up, or even for some of the retailers that have been opened the whole time, like a Walmart, um, you know their or Target, they're having some issues with their in store sales. And the other thing is, you know people expect, oh well, if people don't want to

go to stores, alto shop online. But the problem with that is online e commerce is a much lower margin uh business for most retailers because they have to do all the shipping and the return shipping, and then on top of that impulse buys. So the whole point of a story as you walk in and you buy stuff that you didn't go there for. You know, the whole thing if you go there to buy milk at the grocery store and you end up walking out with a full cart. Well, online that doesn't really happen as much.

So that's that's basically the fundamental way a lot of these retailers work. So if more store sales going to online could impact margins margins in a big way. Yeah, that's really interesting. And also, I mean, not for nothing, we could be in a horrible economy by the time it gets to Christmas time and you know, people just are not gonna wen it be spending a lot of

money presumably. Yeah, I mean that's you know, it's it's hard to model this like it's been set a nausea throughout this whole thing is that there's nothing to compare this to um. And you know, another thing we wrote about in the story is that there's this other side

to this as well. Whereas you know, retailers are financially distressed. Obviously, we saw j Crewe file for bankruptcy in past twenty four hours and there's a big question mark about will they be be able to even get enough products on the shelves to meet demand that the supply chains have been upended. And you know, we reported about this a

couple of times already in the past few weeks. Is that vendors are very upset and feel very burned by the retail industry because they basically had months of ordered, months of orders canceled on them. They're stuck with all these goods nowhere to sell them. So there's this frostiness between the retailers and their vendors, and you know, it's it's becoming dicey to ship to a retailer at this

point knowing, not knowing what's going to happen. So matt, let me just as gives a consumer because I've been watching this and you know, my daughter and I like if we see something that's online and were like, I'm gonna wait because I think these you know, the retailers are going to go down. Yeah, totally. And you do see it kind of move around a little bit, and and how retailers are keeping track of what's in your basket and they're like, hey, did you see you know

now it's on sale. So I do wonder for consumer, will there be lots of deals are not necessarily because, as you say, supply chains. But I do wonder about all that old inventory that's just sitting around and they've got to get rid of it. Yeah. No, I think there will be deals or there will be you know, a flood of inventory going to the discounters and they teach mx is of the world, um and the marshals

and things like that. But there is there is that consumer behavior where you're expecting to see bigger discounts at this point because you hear the news about all these retailers and trouble and for the most part, we haven't seen you know, wholesale liquidations of products within anything like that. So we got, yeah, talk to us about Jay Crew because you know, this is obviously an incredibly well known brand.

You know, a troubled last decade in many ways for the company, specifically some comings and goings at the at the very top. What ultimately took it down. You know, Jay Crew won over you know a lot of these companies they went over a generation of consumers. You know, they went over the Gen xers you know, in the nineties and every anything like that, and they just were never able to win the next generation for whatever reason, whether it was competitors fast fashion, Um, you know Mickey

Drexler obviously the architect of the of the brand. Um, did he lose his way? Did the brand lose its way? I mean, there's a lot of things are a part of this, but a big thing is the consumer really just moved on and they never were able to win that next generation like my generation love j Crew. The generation below us who are now in their early thirties twenties did not go to Jay Crew as as as as as big as as as much as we did. Yeah. No,

it's it's really true. They're shopping differently and there and there's the whole private equity angle to which which obviously uh saddled the company uh with some debt and you know, maybe made some decisions that ultimately ultimately took it down. So too early to talk Christmas though, No, it is never,

it's never. And as I said the top of the show, though, all I really want for Christmas is a plate of your Christmas cookies that you will get a plate of car All right, that's good, all right, Matt Town, give me the flower, like I said, I'll get you the flower that that'll be the deal. That'll be we'll do some bartering here in Mattowns and retail reporter for Bloomberg. A really great story. It's one of the most read. Check it out on the Bloomberg terminal and at Bloomberg

dot Com. Will send it out via the Twitter as well. We need to keep it behind Macy's right, Yes, yeah, how they do through all this because they're already in a tough state road macro journal. Yeah, but you let me drive? No, no, no, no, who's going to drug home? Honey? Please? I'll do the riding gravels me. I want to drive, just drive, baby questions trying. This is the drive to the Globe Commune. Thanks, we'll drying up dawn. On Bloomberg Radio,

it is time for the drive to the close. David Dietz is back with US President and chief investment Officer at Point View Wealth Management, joining us once again on the phone from Summit, New Jersey. David, nice to have you here on a day where we're pretty much now at our highs at the set. But it's not been a big mover kind of day, but we're definitely off our loads. Um tell me you know here we are? What week seven week gate here when it comes to working from home for many of us with the virus.

What's your take on the economic outlook, the market outlook, and what it all means for investors. So, Carol, uh, thanks for having me on here. Um. We really in some ways it's almost a more difficult time than it was seven weeks ago because here, of course your market is up close to from the apparent bottom march. Yet there's still tremendous uncertainty as to where we're going with

the coronavirus. When are we going to see a vaccine, When will sufficient testing be done, where the therapeutics and so forth. We're getting glimmers of hope. Still nothing definite, um, but prices are up higher, and so you know, the question is has the low hanging fruit been picked? And now should we moved to the sidelines or what. And with respect to our clients, basically it's all about your time horizon. If you're longer term investor, I think you

can do well. If you're short term oriented, as you're gonna see some voluntil the return. And so where do you go here, David? I mean, like, what are the types of side So let's assume you've got a long term perspective, because if you've got a short term perspective, as you said, like, that's a whole different discussion. But let's assume you're long term. I gotta ask you because it's one of our favorite names to talk to you

about about Wells Fargo. You sure, so you know here we are interest rates or at some of the off time lows. In fact, many people are worried about us ultimately going negative. Well all low interest rates are an athombout the financial service companies. If your insurance company, for example, if you can't make anything when you collect your premiums before paying them out, if you're a bank, there's no spread between what you're paying your depositors and what you're

getting for your mortgages and so forth. So of course that's where we are now. So the question is where will we be several years out. And I think that if Convince returns, if we can, if we can get past this coronavirus, I think the economy will come back. I think that demand for loans will come back. I think you'll see some more inflation. I'll push interest rates up.

So I think that is just what the doctor ordered for these financials, and so then the question is which financial I like Wells Fargo just because it has you know, one of the best coast to coast franchises, has historically been a very good underwriter, very conservative, but the loans they extend and they're focused on your middle market retail.

They're not in the more volatile trading area. And of course the stock was sixty five just twenty six months ago, now picking up at seven with a seven percent dividend. That looks pretty good for me if you have a you know, if you're looking more than a couple of months out. Well and I also have to think that part of the place, David has to be that if you're looking at some of the big banks that are

so involved, certainly in the mortgage market. I mean, how many consumers probably have a mortgage with Wells Fargo or home equity with Wells Farg. I mean, on the other side of this, the bigger players are probably going to manage even if it gets tough, They're gonna do, you know,

the best compared with some of the other players. You are so right, Carol, I mean, often tough times allows the biggest players in the market to expand market share is smaller, less well capitalized, less well known, less efficient players kind of fall off the tables were I think Wells Fargo can get them back to them bank first fucking terms to advertising, cross selling, all those good things. One thing I do want to ask you, Joe Wisenthal.

He and I think it's Tracy Alloway. They put out five things to start your day every day, different editions, and one of the things that he brought out and we we've talked about this, whether we're looking at airlines, retail that if you believe in capitalism, you know, company as be allowed to put company be out of business if they're doing a better job at that. But I do wonder about what the impact is on a good

macro policy. What is it what's going to go be better for us certainly going through this crisis on the other side of it, in terms of helping out the economy, And I do wonder what you think about providing assist to some of the smaller players that are out there, and how important that is in terms of the overall health of the US economy and of the overall US market. Wow, that's a great question. And I think normally, I think most investors and an economists say for capitalism to survive UM,

there has to be failure as well as success. And if you prop up everyone, no one fails, you end up with these zombie entities, and then capital start reallocated from UM the weak, unsuccessful to those who have a better mousetrap. That's what you normally want. This situation that's been a little bit different because there was so no one could really plan for it, no one, no one

forecast it. And so I think what the Federal Reserve is trying to do, as well as Congress, is to provide some sort of safety net so that no one fails, at least because of the coronavirus. But there's no question about it. After we get past that, then the props should be taken out and then you should uh um thrive on your merits and fail if you can't be

ab used to consumers. So who else do you like here in this market, David uh in terms of things that things that you hold that you're excited about, Well, you don't never waste a good crisis. And you know, as much as I admire Warren Buffett and I agree with him, America is going to do great with a long call. I do not see in America without the airlines. You can't get to Florida, Vegas, Disney, Hawaii. It doesn't work. I think the airlines are ultimately gonna make it may

take a little bit longer. So I want to go with the bluish the blue ships. South West Airlines, which has beaten the S and P five since it first came public in nineteen seventy one by about three to one, is even beating the SP five from the low point of the last crisis. Now it's down by about but very little debt. The most efficient, simple fair prices, free check back, saw the customer services, lower union exposure. I think this comes out. It's the largest of the domestic carriers.

I think this comes out very solidly. In fact, Gary Kelly just the other day I think Sunday said he thought the first week of April was the worst period for company, and business is picking up. So at a fifty two week low, um uh. I think this is an interesting speculation going forward. Unless you think all the airlines are gonna be nationalized, I don't think that's going

to happen. Well, there's a conversation I was listening to this morning I'm blog radio about this whole idea of like the Chinese coming in with money, but that is going to be there's going to be a lot of pushbacks, certainly with its Cifius reviews. Uh. And you know politicians waitnute seeing that. I agree, I agree, I totally agree. Um, David Eats, thank you so much. Take care of yourself.

He mentioned Southwest Airlines stocks down almost so far this year and taking another hit no doubt on those Warren Buffett comments and backing out of airlines. Uh. Southwest is down about six percent in today's session. David Eats over at Point View Wealth Management, Jason, Yeah, so good to catch up with him, and good to talk some names who always love hearing what's on his mind. And I have to say he's been a wells fargobule for a

long time. Love talking to him about that. Even in its darkest days when they were settling with the government, couldn't find a CEO. Uh, he stuck with it. So we'll see if he ultimately is right. Well, it's beginning to look a lot like Christmas, not really, but retailer here I know are already starting to think about it and what they're thinking about doesn't look good. I was not excited from what it says, but excited to read the story. It's so smart. Uh. And by one of

our top reporters, Matt Townsend. He joins us on the phone from Brooklyn. So this isn't great retail sector clearly suffering here, Matt, but already Christmas looking grim. Yeah, that's right. I mean, you know, there's a lot of thought out there that at some point we'll have this nice recovery coming into the fourth quarter and consumers will bounce back. So we looked at it, and you know, companies like Fitch, the ratings company, I mean, they're already baking in as

much as a temper center client in sales for discretionary companies. Um. And it really boils down to two things. One the consumer they expect and other firms expect the consumer to still be under pressure, whether it's high unemployment to thread of the virus. Also, shopping in a retail environment that has all this social distancing might not be that great of an experience that could damp in sales. So there's a lot of problems with the consumer that could lead

to a blue What we're calling a quote blue Christmas. Yeah. I mean, I just think there are so many questions and I think you just hit it, you know, And I do wonder what it means for retailers. I mean, Macy's is opening up, right, Matt, and I just think about do I want to go in there? Where? How do you keep a place of those U of those you know, that size? How do you keep it totally clean? Safe?

I just think it's difficult, it is, and you know, so far we've seen from some of this early states opening up, or even for some of the retailers that have been opened the whole time, like a Walmart, um, you know their or Target, they're having some issues with their in store sales. And the other thing is, you know people expect, oh well, if people don't want to

go to stores, alto shop online. But the problem with that is online e commerce is a much lower margin uh business for most retailers because they have to do all the shipping and the return shipping, and then on top of that impulse buys. So the whole point of a story as you walk in and you buy stuff that you didn't go there for, you know, the whole thing if you go there to buy milk at the grocery store and you end up walking out with a full cart. Well, online that doesn't really happen as much.

So that's that's basically the fundamental way a lot of these retailers work. So if more store sales going to online could impact margins margins in a big way. Yeah, that's really interesting. And also, I mean, not for nothing, we could be in a horrible economy by the time it gets to Christmas time and you know, people just are not going to open it be uh spending a

lot of money presumably. Yeah, I mean that's you know, it's it's hard to model this like it's been set a nauseam throughout this whole thing is that there's nothing to compare this to um. And you know, another thing we wrote about in the story is that there's this other side to this as well. Whereas you know, retailers are financially distressed. Obviously we saw j Crewe file for bankruptcy the past twenty four hours and there's a big question mark about will they be be able to even

get enough products on the shelves to meet demand. That the supply chains have been upended, and you know, We've reported about this a couple of times already in the past few weeks, is that vendors are very upset and feel very burned by the retail industry because they basically had months of ordered, months of orders canceled on them. They're stuck with all these goods nowhere to sell them.

So there's this frostiness between the retailers and their vendors, and you know, it's it's becoming dicey to ship to a retailer at this point, knowing, not knowing what's going to happen. So Matt, let me just ask as a consumer, because I've been watching this and you know, my daughter and I like if we see something that's online and we're like, I'm gonna wait because I think these you know,

the retailers are going to go down. Yeah, totally, And you do see it kind of move around a little bit, and and how retailers are keeping track of what's in your basket and they're like, hey, did you see you know now it's on sale. So I do wonder for consumer, will there be lots of deals are not necessarily because as you say, supply chains, but I do wonder about all that old inventory that's just sitting around and they've

got to get rid of it. Yeah. No, I think there will be deals or there will be you know, a flood of inventory going to the discounters and the t J Maxes of the world, UM and the Marshals and things like that. But there is there is that consumer behavior where you're expecting to see bigger discounts at this point because you hear the news about all these retailers and trouble and for the most part, we haven't seen you know, wholesale liquidations of products within anything like that.

So we got, yeah, talk to us about Jay Crew because you know, this is obviously an incredibly well known brand. You know, a troubled last decade in many ways for the company, specifically some comings and goings at the at the very top what ultimately took it down. You know, Jay Crew won over you know a lot of these

companies they went over a generation of consumers. You know, they went over the Gen xers you know, in the nineties and everything like that, and they just were never able to win the next generation for whatever reason, whether it was competitors, Fast Fashion, um, you know, Mickey Drexler obviously the architect of the of the brand. Um, did he lose his way? Did the brand lose its way?

I mean, there's a lot of things are a part of this, but a big thing is the humor really just moved on and they never were able to win that next generation, like my generation love J Crew. The generation below us who are now in their early thirties twenties did not go to Jay Crew as as as as as as big as as as much as we did. Yeah, no,

it's it's really true. They're shopping differently and there and there's the whole private equity angle to which which obviously uh saddled the company uh with some debt and you know, maybe made some decisions that ultimately ultimately took it down. So too early to talk Christmas though, No, it is never, it's never. And as I said the top of the show, though, all I really want for Christmas is a plate of your Christmas cookies. That's good. You will get a plate

of car all right, that's good. All right, Matt Town, give me the flower, like I said, I'll I'll get you the flower that that'll be the deal. That'll be. We'll do some bartering here in Mattowns and retail reporter for Bloomberg. A really great story. It's one of the most read. Check it out on the Bloomberg terminal and at Bloomberg dot com. We'll send it out via the Twitter as well. We need to keep it hand me eas right. Yes, how they do through office because they're

already in a tough state. Thanks for listening to Bloomberg Business Week. You can subscribe to the podcast on iTunes, SoundCloud, or Bloomberg dot com. You can also listen to our radio show every weekday at two pm Eastern only on Bloomberg Radio