Coronavirus Update, Peloton’s $1,000 Value Bike

Week on iTunes, SoundCloud, bl Bloomberg dot com. You can also listen to our radio show at two pm Eastern on Bloomberg Radio every weekday, or watch us on YouTube by searching Bloomberg Global News. Well, our tough stories on the virus, you've been hearing them throughout the day here at Bloomberg. Those anti malaria drugs that President trub has touted to fight COVID nint well, they're linked to an

increase of death and heart ailments. Meantime, you've got Oxford and Astra Zeneca they're starting to recruit subjects for advanced human studies of one of the fastest moving experimental vaccines. And then Dr fauci Uh He said he was quote cautiously optimistic about Murderner's vaccine boosting that stock once again. So let's get an update, let's see what you really need to walk away with before we get into the

holiday weekend. Dr Ian LUs Bader is Clinical Associate Professor Medicine at n Y you Land Going Medical Center, joining us once again on the phone from New york Ian. Good to have you back again. How was your week? Thank you Carol and Jason. Hope you guys are doing well. Um, I think it's been overall a good week. You know, we're all transitioning, trying to transition back to whatever a more normal environment is. Certainly we're seeing a fewer cases in the hospital with UH with a cute UH COVID

nineteen UH. Still a number of patients who are in the hospital, and certainly we're still touched by death. Yesterday a colleague of mine who's a cardiologist died uh. Not very old at seventy and a very vital, great teacher. So I think we're all touched one way or another by friends or family or people that we know. So

it's still, you know, a very serious disease. Fortunately, the numbers here or going down there's some data perhaps in South America that the number of cases are going up, which is a concern, and we're trying to transition back to normal patient flow. What's interesting is a lot of the floors that were previously medical or surgical most of the hospital converted to COVID patients. Those patients, many of them fortunately have been discharged UH and now sort of

awaiting the return of regular patients. And what's interesting to see is that volume is not a hundred percent. So it seems that many patients with you know, abdominal pain, chest pain, elective surgery needs are slow to return to the regular healthcare system, which which may reflect either you know,

fears about getting care, maybe fears about getting COVID. But certainly I think the medical system is eddie to return to UH, you know, dealing with patients who might have postponed some of their care and our anxious to have those patients back. So Ian talked to us about New York City at this point. You know, we heard from Governor Cuomo that by next week, essentially every region of this state of New York State will be in the phases that early phases and and and further along in

reopening safe for New York City. We know about the density, we know about the fact that this was the epicenter really in the entire United States. Help us understand what needs to happen, because my understanding is is that part of it is available beds and and basically hospital capacity. That is one threshold that the city has yet to meet. Help us understand that, well. I think it's very hard

to turn on hospital availability like a light switch. When you start filling up your hospital with you know, elective surgery and uh other surgical procedures or cardiac cases and so forth. If there's a sudden surgeon patients, you it's very hard to quickly get those patients out. So it's always better to anticipate what your needs may be, whether

it's ventilators or I c U space. But it does seem at this time whether or not social distancing and and mitigation measures have helped, or whether it's the better weather, we don't really know. But the number of new cases does seem to be uh reducing. So that's certainly very uh you know, encouraging, and I think we have to address our regular patients and other patients, you know, to

deal to deal with those issues. And I think this is really unknown, it's a new virus, and how people will get back, how safe it will be uh in businesses and offices. I certainly I think people will begin to come back in a slower fashion. People who can work from home probably will still be encouraged to work them home. But I think there's a lot of benefit to people getting back to normal psychologically. Um, there may be some people who still want to work from home,

may be more efficient. There's some people who say they're working longer hours, you know, from eight am to six pm, and and actually even being more productive. Yeah. I think just now I've had some of those conversations that you know, I don't think. I think I went into this wasn't quite sure how it was going to work. And I feel probably more productive on a lot of different levels. UM.

So it's kind of interesting this experience. UM. What did you make of the president taking hydrochloroquin so that that has been asked to me by a number of patients and UH and colleagues and and and friends. And I think, um, because we do not have any medication really that we know of to reduce the uh say, incidents of of COVID nineteen or the symptoms. We're very lucky that of patients approximately more or less seem to do fairly well and a smaller percent again for unclear reasons. We know

some risk factors. Again we talked about age and weight and diabetes and hypertension due to deteriorate UH. We don't really have great medications to to bend that curve. We certainly know hydroxy chloroquine um is very useful for rheumatoid arthritis, lupus, malaria, prophylaxis. We also know from many studies it's not very helpful at all once you're hospitalized and use sort of late

in the disease or when patients are very sick. There are a number of studies going on now to see in a controlled way, and we don't really have good randomized control studies, so so those are starting now. But there's a lot of anecdotal evidence, small case studies and individual reports where it does seem to reduce the viral replication, does seem to reduce the severity um of the disease, or maybe actually prevents some people from getting the disease,

so they're used early on. It right to be very helpful, and I think in the White House where I have the best guest, thirty or forty people there habit and hang on a second, because we've just got to take a break and we'll come back. We're catching up with our pal. Dr Ian les Bader, clinical Associate Professor of Medicine at n y U s Lango Medical Center, joinings on the phone from New York City, and when we left off, we were talking about some of the treatments

that are out there. So Ian, I want to ask you, since testing and tracing are going to be key to reopening, where are we on testing? What are we learning so far? Um, both in sort of broad strokes but also sort of specifically what have you seen here in New York h great questions. So in terms of testing, every one UH, whether they've had mild or no symptoms or severe symptoms,

wants antibody testing and those are generally pretty reliable. We're using some of the national labs um for a blood draw and I g G levels, and it's interesting to me that there are some people who were very sick and they have antibody positive. That's great, not all unexpected. You've got some people who are very mild or no

known exposure and they're positive. But we're also seeing and I would say the majority of patients who are curious negative blood tests for antibodies, and you know, presumably that means those people definitely should be vaccinated when that is available and hopefully soon. In terms of acute patients who are ill, uh, we are now able to get those nasal swabs. Some people go to local urgent care where

they may get nasal swabs or the saliva test. UH. Many go to urgent care to and get antibody tests. Remember that takes about ford to six weeks after symptoms for the antibody tests to be positive. But it seems there's a lot of curiosity and when we get all that data, that will give us a denominator of how many people had exposure and really what the death rate

is when those final numbers come through. But at the end of the day, because we have no specific treatment, even if someone is COVID swab positive, UM, we really don't treat them. And that's sort of hearkens back to what we were talking about before with President Trump taking hydroxy chloroquine that may either prevent more severe disease or may prevent getting the disease or shortened symptoms. Other things, for example, vitamin D, some zinc, vitamin C, all of

those may play a role. I urged patients to talk to their doctor about it. If you're vitamin D deficient, probably good to take a supplement. The hydroxy chloroquine does have risks. People really should get an e KG baseline. We've used it for years successfully in amator arthritis and lupus,

and patients do very well on that. Uh. If I was the president and surrounded by thirty or forty people, including my valet with I wish I had a l A, but and I had a l A who was sick um, I would definitely say, hey, maybe I should take hydroxy clorklin. There is some data. I'm not sure that's appropriate for everyone to do. And I think that's sort of the issue that your role model and you sort of everyone then says, hey, if he's taking it, should I write

that we're really waiting for for data on that. So will. I love that you said, if if you know maybe what the president is thinking, that you know where I am and who I'm surrounded with, maybe it makes sense for me to take it and so I'm going to ask my doctor, if you were his doctor, knowing his age, and you know some of his medical health conditions and um, who he is, would you suggest he do it? That's that's really a great question. There is no question he's

in a high risk group. Um, even though he is appears overall healthy. We don't know. I don't know his e KG results, but if you're overweight, that is a significant risk factor, and a certainly age and male sex as a risk factor. So he definitely is high risk. He's surrounded by a very close UH workers who who have tested positive. I don't think it was really a crazy idea to take it. The next question is, okay, well, how long do you take it? What's the dose you take?

We don't really have that information. Studies are going on, but you're really guessing when you're when you're dosing it as to what the right doses and how long to keep someone on it. But in principle it is not a crazy idea. All right, Well, we hope you have a triffic weekend. Dr lesbader Ian Les Beder, Clinical Associate Professor of Medicine, ny US Langown Medical Center, And I will say just to give him a shout out. He has been such a consistent voice for us in all

of this. I really look forward to our conversations. I feel like I come out the other side smarter and and really able to talk to people because we're all talking about this all the time, Carol, and being able to convey some information not just to our listeners, but even in my personal life. Very grateful to the the infide. Yeah, and I have to say he's often given us a heads up on things that all of a sudden, like in a week or in a few days, are in

everybody's headlines and in everybody's uh conversations. But I really do feel like he's been ahead of the curve, so really appreciate it. Um Dr Ian lust Later LUs Baider, Clinical Associate Professor Medicine at Lanto Medical Center. On the phone from New York City. You're listening to Bloomberg Business Week with Carol Masser and Jason Kelly on Bloomberg Radio. This story Jason is among the most red on the

Bloomberg Today. You and I were both He's rubbing his hands together because we're excited to talk to Ashley Vance. It is in the magazine's double issue. It's online. It's a story that came out of a phone call from Elon Musk to Bloomberg Business Week reporter and New York Times bestselling author Ashley Vats, who, of course, as you know, wrote a biography of Musk entitled Elon Musk, Slow, SpaceX and the Quest for a Fantastic Future, actually also the

host of Hello World. He joins us on the phone from Palo Alto, California. So must just called you up. Yeah, we we uh, you know, we never since my book came out, we've had a bit of unusual relationship, sometimes talking, sometimes not, and it had been a while since we had any kind of really meaningful conversation. But you know, there's this amazing moment that's coming up next week with

SpaceX China launch after us to the Space station. And I got a call from Elan on Sunday and Ashley, you do such a beautiful job setting it up, and I don't want to take I'm not gonna I was gonna read some of your best lines. I'm not gonna read it out loud because people just have to go read it and have the whole experience that we got to have. Of of like sitting and reading and just

sort of being enveloped in this world. But the main point that you make at the top is that this should be a very straightforward, like declare victory, patriotic moment, you know, and you talk about like an immigrant launching people into space. This is what this whole country has has been about. And yet it is so much more complicated, in part because Elon Musk himself is complicated. Help us

understand why and what you really took from this conversation. See, and I just wanted to know, did you like, wait, Ellen, can I just get back to you. I'm hope busy right now now. I'm just kidding answer answer Jason's question. It is funny because you know, I was already working on an essay tied to this launch, because it is

it is this historic moment. You know, we've been we've been relying on Russian rockets for for about ten years to get humans into space, and obviously it's such a good ton with the virus that I wanted to write something about. Look, you know, humans can do a lot

when they really put their mind to it. We all work together Space Action, NASA, the government and the private sector doing something good and and you want had already started to complicate my piece because you know, for the last um two or three weeks, he's been especially flamboyant on Twitter. Um, he's pretty happily in the COVID ninety and Truther camp. Uh. You know, he's been fighting to open his factories when people have been saying maybe that's not the safest thing to do, and so so yeah,

just it's not really complex. I mean, here's this, um super it should be just a super positive thing for humanity at a time when when humanity as a whole is uh is phasing questions and I think you know, the US obviously is as well. Well all right, I know Jason said he wasn't going to read a line, but I am, and I agree everybody has to read this.

But you're right, so the moment of achievement is complicated, sort of like the right stuff meets the electrical maid acid test or the idea that anything is possible is as unnerving as it is encouraging. Mind mail Jason Kelly, Um, it's such a great line, but but it is significant. My dad was very involved in the space race, UM back in the you know, fifties, sixties seventies. Um, so tell us about this moment and really, you know Elon Musk, you know, really does stand at this moment of doing

something incredible for our country. Yet at the same time, right he kind of complicates everything he does. Yeah, I mean, it's sort of it speaks to everything about Ellen. I think, you know, SpaceX, of all his businesses, is probably the most improbable, and yet it is ended up being the most consistent, reliable, and high achieving of all his companies. So much though that NASA, which is this very traditional um risk averse organization, is willing to put human lives

on top of the the SpaceX rocket. You know, if you're if you're not a space nerd, it's it's kind of hard maybe to put what an unlikely achievement this is

and and how hard it was to do it. Um, I think then you just have the wrapper of law all around is you know, there was a day when he was firing off a ton of his tweets when he was gonna sell off his possessions that we have to open the factors and like, at that very same moment, Master was having a press conference with Gwinn Shotwell, the president of SpaceX talking about the launch, and and so you just have you have these such extreme things where um,

this is not your traditional NASA rocket lodgers just out there giving a vision of public safety and you and we beings every and so we'd be remiss if we didn't ask you about some other sort of musky and things, you know, not the least of which is Tesla because you know, despite everything, I mean you go back and and read sort of the headlines or a timeline over

the past couple of years. You know, this is a company that's had lovers and haters, and it feels like most people are sort of binary on this, both from an investor perspective and even from a personal perspective. And you have a great line where you talk about, you know, defying when you especially when you look across his portfolio, you know, like lottery like odds to be successful. Um here remind us of the Tesla piece of this, because in terms of influencing everyday life, he has had a

massive influence there. Yeah, I mean on the you know, say is incredible. Tesla is a remarkable story as well. You know, without Tesla, I do not think most people would be talking about electric cars, and so whether you love Tesla or here, I think they're going to go banker up to turn a profit. I mean, the reality is that Elon shifted um the car market to to actually pay attention to electric cars and get consumers interested

in them. In this particular story, Tesla is strange as a result of Musk tweets, because a lot of people buy Tesla's to kind of virtue signal that they care about the environment and may hope, you know, human kind ends up in a better place. Um. But because of Musk tweets where he's been he's been threatening the pool Tesla out of California and go to tech, and he's been tweeting a lot of kind of right stuff. He's suddenly now now a post child for for conservatives, a

clident Denis as well. So it's a very strange situation. What's also and I love the way towards the end of your story you talk about Musk's larger ambitions, which I think some people are like, Okay, this is the crazy side of Elon Musk, you know, building a human colony on Mars. But here we are with the pandemic and not quite sure about how this is all going to play out, or really what our future is when it comes to you know, devastating viruses and the idea

of an alternative planet to maybe go to. Not such a crazy idea anymore. Yeah, that's kind of the irony of it. What do you allowed to use this? People like, why do you want to spend your money on space? Actually? Like, wow, humans might get wiped out one day and we should have this backup plan. And people like whatever, man, you know you're crazy. Why don't you go do something else? And then you know, a plague hits the world and

then he's dedying it. But but this is kind of the reason SpaceX was started at the beginning, and so there's a lot of symbolism in to the human is actually exiting the pandemic on a SpaceX rocket. Yeah. Well it's amazing and uh fortunate for us. You are in a position to take that call, Ashley fans and write about it for Bloomberg Business, Like you got your voicemail and you're like, wait, I bet they were going to connect. It sounds like he was. It sounds like he wanted

to unburden himself. Ashley. You're the best. Thank you so much for spending some time with this feature writer for Bloomberg Business Week. His book on Elon Musk. It's a great quarantine read so timely now given everything that's going on. This is Bloomberg Business Week with Carol Masser and Jason Kelly on Bloomberg Radio. Well as Jason Kelly and I've been talking. It's been the world tour for FED Chief

J Powell. I believe what do we call it, the lending not spending tour, ending not spending tour JP and the Feds. We have heard from j Pale a lot over the past week, and he certainly has reaching been reaching out getting his message of us. Uh, what does it all mean in terms of FED policy. Let's get into that with Jeffrey Cleveland. He's Chief Economistic Paidon and Regal. He's joins us on the phone from Los Angeles. Jeffrey, great to have you back with us on Bloomberg Radio.

First of all, tell us a little bit about your world out in l A. We know the world is slowly across the country reopening. Um, how have you been impacted? What's going on? Well, the work from home protocol is going pretty well. You know, I'm able to adjust quickly to that. I think that the real downside here in l A. The weather has been beautiful the last couple of weeks, and only within the last week or so

did they open up the detrails here. I went. I went hiking in the Santa Monica Mountains, which was great, and then down to the beach. You can carol. You can swim in the ocean, they said, and run at the beach, but you're not supposed to sit on the beach and gather in in crowd. So it's a little bit limited. Alright, so some some rules still, right, Yeah, but you know, we we're looking at high frequency data.

So if you're looking at l A public transit, you know you got a huge client and activity obviously during March and April and into early part of May. But it looks like it's bottomed out. Looks like those high frequency data measures have bottomed out. So if you want to find a silver lining, the the April period was probably the worst and we are starting to recover because things are reopening slowly, and so that sort of data, those are the same sorts of things that the FED

is looking at. That J. Powell and his team are looking at what do you think are the most important data that they should be taking into consideration as they figure out what the rest of the m O could be in their arsenal and as they make recommendations around monetary policy, but also clearly influenced the way we're all

thinking about the economic landscape going forward. Jeffrey, I think if you had to pick one, I would look at Thursday morning, I would look at the continuing claims with the continued claims data, because that, for me, is in real time the best thing to look at. It's at million as of yesterday's data. Uh, and it's you know,

continuing to rise. You want to see that plateau, and then you want to see that decline because that would be a sign that the p p P program for examples, working people are being brought back on payroll, people are finding employment that we're reopening, and people are going back to work. So that's what I would watch. If that doesn't if that stays elevated or doesn't come down as quickly, I think then people might change their tune about the

shape of the recovery here. It really all comes down to that are the people laid off, are they permanently laid off. Are they temporary laid off? Well, what do you think? You know, Jeffrey, you've seen a fair amount of cycles. I mean, what do you think. Do you think it's gonna stay elevated? Um, we have lots of stories on the Bloomberg that's say some of those temporary setbacks in the labor market will become permanent. Yeah. I think people, the hopeful people, the optimists are saying you

are temporary and then mostiple people will come back. I

think it's much lower than that, Carol. I think maybe something closer to six or temporary and permanent, because you are I think you are seeing a reallocation here of restructuring of the U. S economy and the global economy before the crisis and after the crisis, and so that will be different staffing levels, that will be different types of people needed, so you won't just have like you can't flip the lights on and then therefore what goes

right back to work as before the world has changed. Jeffrey, what do you make of all these discussions around some major demographic shifts and geographic shifts that we're hearing about. I mean, we're talking to you from the New York area, you're in Los Angeles, you know, you look up the coast from you to San Francisco. You know, these are all extraordinarily expensive housing markets. Now we're are facing a situation where, you know, Mark Zuckerberg is saying Facebook employees

maybe remote in the next ten years. Is that something that plays into how you think about the economy and the short and midterm. Yeah, I think you know, you can the phrase I like, gradually then suddenly I think there was a gradual sort of murmuring out there about remote work and distributed work, and but I think there was reluctance. You know, people were conservative, or there's there's inertia and management of firms and they, you know, didn't want to go that route. And then a crisis happens

and then suddenly you have to experiment. And I could speak for our firm, it's gone really quite well. And so I think we've discovered through that process, hey, we can be very effective in communicating with clients, uh, you know, remotely distributed. So I think that trend now is exhilarating. What does that mean? I think my bias for certain geographic areas that have really benefited from the concentration of of capital and wealth. San Francisco would be a good

example of that. Maybe maybe that's been the peak, and now as as people get more distributed, they'll they'll filter out over the rest of the world. I think this is a good thing though, for growth longer, because this opens up the avenue for talent from all over the world to be brought into the economy and not just people who can make it and struggle in areas where which are very expensive, like Los Angeles and San Francisco.

So it's actually a long run of very good thing, right if you think about you know how so many struggles, so many cities around the country have struggled, right because, as you know, people don't want to live there because there's nothing happening. But if you can live anywhere and still work for Google or Facebook or our company or your company, I mean, think about, um, what that opens up it It It would be pretty dramatic in terms of changes for our economy. Listen, we just have about a

minute left. You mentioned about you can do some hiking, You can do some swimming. I did not know this about you, but you are a big time open water swimmer. You have swam across the English Channel, the Catalina Channel. Um,

and you've also uh swam around Manhattan. I had no idea. Yeah, twenty eight and a half miles around Manhattan, up the East River, across the Harlem River if you can call it a river, I don't know, you tell me, and then down the beautiful Hudson, which was just great to finish down the Hudson, and it was I thought the cleanest of the three. So yeah, that took eight hours and about fourteen minutes, so that those three together considered

the triple Crown of open water swimming. And I did that and at the time, I think Carol person to do it. There's there's been a two others that have joined that list now though, Wow, amazing, that's incredible. I live about two blocks from the Hudson, a little further up in Westchester, and I have to say it is quite a beautiful river. So I'm glad you've got to experience it in a way very very few people have. Jeffrey Cleveland, thank you so much. Great to spend some

time with you here on a Friday. Chief economists of course at Payton and Regal joining us on the phone from Los Angeles. I think his point about what this up ends in terms of the workforce is huge, and it might be a great way to really get more evenly distribute. We talked about the inequalities. What if you could just help rebuild cities around the country, around the world right by making it possible for people to kind

of live anywhere well. And also you think about the implications of those cities Los Angeles, San Francisco, New York in many ways become unattainable. Um, you have a huge homeless problem in many cases because housing is unaffordable. If housing comes down a little bit, and you're hearing some anecdotal evidence of this already, it's a game changer for sure.

Your listing to Bloomberg Business Week with Carol Messer and Jason Kelly on Bloomberg Radio Listen, we want to get right to our next guest, because this call across the Bloomberg terminal and it comes from Bernie McTurnan. He works over at Rosenblatt. He's an analyst, and he says, the fitness and wellness company Peloton maybe looking to make another version of its high end bank. So Bernie joins us on the phone in Fairfield, Connecticut. Bank bike bike. Did

I say bike based bank? Oh? Sorry, well maybe maybe they're gonna make bank on their new bike. Maybe they're gonna make bank on their new bike. It is definitely Friday, Bernie. Thanks for your patients here. UM tell us about your note here, and you specifically cite some comments from John Foley, Peloton CEO that they have talked about launching a value bike. What did you hear? Yep, thanks for having me on.

So there was an article that was published in Time magazine and talking about having a cheaper bike, and we already assume a cheaper track bill uh comes in fiscal twenty two, which personally I think is a bigger opportunity than the value bike. But the conversation of the value

bike is consistent with their recent discussion on affordability. And I think the reason why they're increasingly talking about affordability is because they've learned from the coronavirus is that their customer acquisition costs are just a lot lower than they originally anticipated, and they have a strategy where they their

in net customer acquisition costs. So the gross profit that they make from selling the biker the treadmill um goes into sales and marketing expects and all of a sudden they think they don't need to spend as much on sale as and marketing, so that allows them to invest back in the business. Uh. And that means focused on affordability. And the reason why we like the stock so much is because of their subscription product. Once people becomes connected

Fitness subscribers, they don't turn off customer lifetime values. So focus on affordability increases with ham drives more subscribers, right, And that's really what this all comes down to. An this is and I know this is a tired metaphor, Bernie, but I'm going to use it anyway. I mean, this is razors and razor blade sort of eight point oh right in the sense of once you get that bike and and full disclosure, I have one, Carroll has one um and you really do get Hey, it's hard to

get rid of to some extent. You're not just gonna be like, yeah, I'm gonna send it back. I'm not really using it anymore, and you're going to keep paying for it. And it is you know, it's pretty reliable from a from a revenue stream perspective, I would imagine Yeah, and the two analogies that and I completely get your Razors and Razorblar analogy. The ones that we like to use are comparing to Netflix and comparing it to Roku. So with Netflix, uh, this is a business that really scales.

And frankly we also cover Netflix even neutral rating on the stock. But with with Netflix, it's um, you know, there's a lot of competition for their content. With HBO Max launching next week, you know, there's it's it's a bidding process for all the scripts. For peloton um not that same way, and it doesn't matter for them if you have a thousand people watching, um, you know a cycling ride or or a million or two million doesn't matter. Um. And so it's the same thing. So we think that

there's the economies of scale Kinne to Netflix. And then also with Roku is interesting because you know, you're selling a device and this is very similar to the Razors and Razor Boys, but you're selling a device and that you're making, you know, but the real reasons because of that the ancillary revenues on top of it. So for Roku with advertising, but for Pelotonic subscription right, well, Bernie,

how much of you know do you foresee too. And I think they're learning this with because of COVID nineteen. You know, not only is it having their specific pieces of equipment, but just tapping into a streaming world. Yeah. Well, I think one of the shifts that we that was was happening before the coronavirus was the shift towards home fitness. There were things like tonal and mirror like you was

coming out with an app to um. So, I think there's there was a shift towards home fitness coming anyways, and then this and then all of a sudden, trenches got accelerated. Um. You know, I don't know who's going to be you know, clamoring to go back to a you know, a soul cycle or a flywheel and be sweating, you know, on the bike, you know, six inches away from someone else. So I think Holton already had an advantage of business model just because there's not fifty people

per class. There could be you know, fifty thou people in the class. Um So. I think, you know, tapping into those economics, um really is what makes the business models so attractive and why we think they'll be able to win long term. Really quickly, fifteen seconds, you've got a fifty six dollars share price target. You feel pretty conservative about that? Are you feel pretty good with that for the next year? Just quickly. I think there's still lots of leverage for them to pull to the upside.

Wrest and the people higher from here? Wow? Interesting? All right? Well, great stuff, really interesting. Note and it's a stock certainly we've watched very closely since the I p O. Love to keep in touch with Bernie McTernan. He is an analyst for Rosenblat Securities. Join us on the phone from Connecticut Road Journal. Now, but you let me drive? Oh no, no, no no, no home, honey, please, I'll do the riding drivel. I want to drive. Just drive, baby, it's the questions trying.

This is the drive to the globe. Give me thanks. We'll drying us Dawn on Bloomberg Radio, It is time for the drive to the close, getting ready to wrap up the trading day and the trading week before the long holiday week, and Larry Pittkowski is back with us, co founder, UH and portfolio manager at good Haven Capital Management based in Milburgh, New Jersey. And that's exactly where we find him on the phone on this Friday Larry. Nice to have you hear. How how are you doing?

I am doing fine, Carol, and doing okay? How are you doing? We're doing okay. You know, it's amazing we can uh, and it's pretty remarkable of the folks that we talked to. And a lot of people are working and doing their thing. That's certainly we know unfortunately not the case for everyone. Um, but move it along. And it's been an interesting week where we saw some enthusiasm come back into the equity markets. We continue to hear a lot from the Federal Reserve overall, and certainly the

Fed Chief J. Powell. Uh, what are you noticing that's kind of interesting in the trade and maybe what you're hearing from some of your clients, Well, it's been a very unusual period, uh, Carol. You know, we are modus operandi overall the years at good Haven, in in my prior life, was to you know, be very aggressive investing when there is severe downturns and market volatility and panic selling and the things that we saw in March. And

I was aggressive in March. We probably put about you know, our to work during those you know, really dark days of market volatility. Uh. And now you've had prices uh lift substantially in some areas, and you've had credit markets much improved. And I think you've shifted now from will the economy and will be you know, credit markets and

banking markets, Will everything function normally? And now you're asking a question of what are certain companies going to earn over the next six to twenty four months, which is a lot harder. So I think you've you've taken the fear of a lack of uh functioning of a lot of important parts of the system. You you put that over to this side thanks to the you know, very strong efforts of the Federal Reserve and you know, Congress

in the White House. And now you've got to sift through as an investor in try and see if you are comfortable looking a little bit forward. And some industries are relatively straightforward, but lots of others, you know, it's, uh, it's a bit of a wild card. Yeah, So Mary, walk us through some of that. I mean, obviously you were makeing some initial bets, as you say, during a very dark period of time when most people were certainly

running the other way. You know, you were running into this market which is noble and probably paid off quite well for you, as as you alluded to and its care alluded to. In terms of where the markets are today, how has your thinking evolved in terms of who may come out of this, either in terms of individual names or in terms of sectors now that we are starting to at least get some sense of the shape of

the recovery. Well, I think as as I was looking at purchases to make during that period, and and you know, I'm not as I'm not as young as I look. We're sounds, so I've seen my share of downturns, but I think what was most unusual about this one, and it is nothing that's been seen before by anybody, is you know, to have a cessation of such a large part of the economy makes forward thinking very difficult for lots of industries where some of the potential bargains so are.

And so you know, there were lots of industries where, you know, where the relatively straightforward, but that's not where the potential opportunities may have lied. For instance, in the financial sector during March, I think there was a uh, you know, a bit of a view that a lot of the alternative asset managers who had some leverage within their investment portfolios would be in for a very difficult period and might have some real problems. Uh. We had had our eye on kk R for quite some time

at good Haven. We like to buy good businesses run by talented management teams, where the management teams have skin in the game. And you know, KKR has built quite a machine. Assets under management or two seven billion dollars. They've grown in about seventeen percent years since so five

employees in the management own about of the company. They've grown books value at a very nice clip, I think about ten percent a year since O nine and as the share is really cascaded all the way down to the mid teams, h we use it as an opportunity to make some purchases which I think, you know, they've already worked out fine, but I think they'll work at very well over time. And I think it's still interesting well, and it's interesting about KKR. And keep me honest here, Larry.

One of the differentials I believe between them and their competitors like Blackstone and Carlisle is that they are more aggressive or sort of structurally able to use their balance sheet right in a different way than some of those other names are Yeah, I think that's a great point. I mean they have become more focused on growing book value. Uh, and they've been very articulate about that. And you know,

it's interesting. We own some Brookfield Asset Management, which we own because we own some oak Tree and it got what by Brookfield and Brookfield came at their current business structure being a grow book value for the owners and then build an asset management business. And KKR has come at it from having asset management business and then focus

on growing book value. And you know, they've got I think to see the one of the executives set on the recent call, they've got something like of the assets are locked up for eight years or longer, and so they're focused on it. As you said, in a different sense. But you've got a great underlying business. You've got people that seem to be very talented investors, they've got skin in the game, and they are focused on growing books

value and they have been very active. I think they put you know, eight billion dollars to work, probably more by now during let's call it, you know, March and April, including a substantial amount in the credit market. So we think that will serve owners well over time. Is there anything you would not buy in particular in this market environment. That's a hard question, Carl. I mean there's always, there's

always things. I think you just have to look at something and see if you can come up with some reasonable range of estimates about what you think the future looks like, and then has that stock price or bond price compare with what you think the UH company is worth. And there's always things where you just you know it belongs in the too hard pole. You just can't figure it out, or you think the price is no bar again, or you think it's it's too dangerously leveraged, or there's

there's there. There should be very few things, even during a downturn. You've always got to be very picky. There should be very few things you're willing to do. You should pretend you've got UH. You know a limited number of decisions you can make in your investment lifetime, and it will serve you better. You'll make fewer and hopefully there will be a better quality. All right, We're gonna leave it there. I hope you have a nice long

holiday weekend. Larry Pittkowski, co founder portfolio manager of good Haven Capital Management, Johnny's on the phone from Millburn, New Jersey. Thanks so much for listening to Bloomberg Business Week. Download the podcast on itune, South Cloud, blooberg dot com, or wherever you get your podcasts. And of course you can always listen to our radio show at two pm Eastern on Bloomberg Radio, or watch us on YouTube by searching Bloomberg Global News.