First U.S. Virus Death Came Weeks Before Previously Thought

on iTunes, SoundCloud, or Bloomberg dot com. You can also listen to our radio show weekdays at two pm Eastern only on Bloomberg Radio. I gotta say though, one of the stories, uh, and one of the main stories on the virus today, that's a little maybe disturbing, um, and maybe we just need to kind of understand it is about how the first US virus case came weeks before previously thought. Uh. Here with our daily coronavirus update. Drew Armstrong.

He is team leader for US Healthcare Bloomberg News. As we've said repeatedly, you have got to check out all of the coverage that has been led by Drew about the virus really keeping us informed. Drew joining us once again on the phone in New York, Drew. Good to have you back with us. This story about the first case coming weeks before previously out. My daughter and I were actually having conversation about this, like, you know, people said, oh,

I think I had the virus. Well, why didn't we see more cases in earlier on help us understand this? And what's the significance of this? Well, I think you know what. What you're actually seeing here is the final effect of what we've known for a long time was a really really lackluster testing situation in the United States.

People complain about the testing UM not being sufficient now, but if you look back to February, when we know that we were seeing the very first trickle of identified cases, the only testing that was happening was actually being done by the CDC, State and local public health labs did not have their own tests. When they finally got those tests sent by the CDC, they didn't work. It took essentially a month for real, significant, more widespread testing to happen.

And so now all of a sudden, we're looking back and we're finding more and more people who did have these infections UM and additionally finding some of these first early deaths. You know, we were also at that time in the middle of a reasonably active flue season, which may have masked some of the UM cases that may

have been circulating early. So it's it's a hint at how much we don't know UM and and that amount is definitely quite significant, I think, and Drew, you know, we were talking about it in my house this morning too, because it feels like one of these things that really could dramatically change the narrative and the reality going forward. Is they're a positive read on this that basically says this was circulating a lot, This was in the population.

We had a lot of people who had either mild or medium systems and as you say, may have thought they had the flu, but really they had this that will maybe portend a broader immunity or a broader ability to sort of deal with this in the short and mid term. I wish that was the case. But if you look at some of the research that's been been done out of that area, and you know, all prefaces by saying some of this, some of these studies I'm

about to discuss are pretty controversial. There's been some criticism other methods, but you know, there have been findings that as many as you know, four percent of people in Santa Clara County, um in in l A H may have been UM effect by this, And there's some variances in those estimates, but they're around that, around that mark, and you know that tells you that, yes, this virus was here, it was probably circulating to some degree. If

we believe that those studies are accurate. It doesn't really provide any reassurances on you know, things like herd immunity, which you need, you know, fifty six of the population to have been infected and has a level of immunity. In order to reach that. There is a tremendous amount we still don't know about that. UM. You have to have quite a bit of penetration of the virus or have a vaccine that essentially replicates that UM that process.

And I don't think that there's any thinking, at least in in the places where we know about that level of penetrance UM, that we're well on our way to any kind of immunity, of widespread immunity. Here my optimism. Well see, and one of the conversations we were having is that, Okay, I mean I thought I maybe had it because some of the symptoms but maybe not as severe. And this was back in I don't know, was that February, right, So I've had families say that they thought it about

they had it around the holidays. If if, if it's the case that maybe people did have sub form of it, but not the extreme or severe case. You know, should we have expected, Drew that the numbers would have ramped up much more quickly, or does it say something about that we do have a greater immunity than we all realized, maybe to this virus. I'm not quite sure what to make of it. Well. I think what's really important to remember is that people are so um to appear to

the cover just find from the virus. You know, our immune system is very good overall reacting this. There are a large number of people who are asymptomatic to it. So it doesn't have you know, anything necessarily to do as far as we know, with you know, one strain or another being milder or weaker. It's just that some people get sicker than other folks. And who gets sick and why is one of the big unanswered questions out there.

I think we have some explanation of that in terms of pre existing conditions and age and all that sort of thing. Um, but you know, we still don't really have as comprehensive an answer to that as as we would like. Um. You know, so we know that that has been happening. I think you also look at the differences between you know, a place like southern California and like New York City and you guys live here. You know what it was like before we were all staying

at home. You know, everyone's packed in on subways. There's just a huge amount of population density, shared surfaces, all those things. Last time and I was in l A. I spent the entire time driving around in my rental car, not a tremendous amount of you you just don't if you think about this, virus is something that transmits by people being really close to each other and touching the same stuff. The way your city is built and organized and how people interact really really matters, uh to that.

And I think that that's very very important as people try to interpret why are outbreaks in some places worse than others. You know, if you think about how people live in a you know, widely dispersed suburb in a you know, in the southern part of the country, where I have, you know, relatives, You're you're already practicing social distancing just in the course of you normal life compared

we do every day in New York City. Yeah. Absolutely, it's a great point and we certainly are going to be licking in that whe The responses are so tough to write in terms of every city, every state, or you know, can be very different in terms of what they're dealing with and how do you respond um to Armstrong. Thank you so much, and I do highly recommend our listeners check out all of his coverage and his team's

coverage at Bloomberg dot com. His team leader for US health caret Bloomberg News on the phone in the year This is Bloomberg Business Week with Carol Masser and Jason Kelly on Bloomberg Radio. All lies on Delta this morning, obviously,

and some pretty staggering numbers. Is one of those things, Carol, that you think, Wow, this is gonna be pretty bad, and then it is and you just think, this is a tough, tough business, especially for a company that by all accounts, had been doing very well over the past few years. We had spent some time held with that bastion the CEO there just last year, and he was

telling obviously a very different story. George Ferguson joins a senior aerospace, defense and Airlines analyst for Bloomberg Intelligence on the phone from Princeton. All right, so, George, amid all of the numbers, what's the most important thing we need to take away from the numbers from Delta and the commentary? Oh, well,

good afternoon. I think the most important number we have to take away is that they're going to push hard to get expenses down and only burn fifty million dollars a day by the beginning of May, and we think they'll consume four and a half to five and a half billion dollars during the second quarter. And so right now, really this business is all about trying to survive through the coronavirus effects here to some other side that we we don't know when you know, we've got to get

people comfortable with flying again. We don't know if we need we need a vaccine, we need to we don't know if we need to put dividers between seats. But we've got to survive in order to get to the point where we can put people on airplanes and much larger size so they can make money. They say demand is bouncing along the bottom. They want to finish the end of two queue with ten billion dollars, which would let them burn that kind of cash for two more quarters and make it to the end of the year.

So they've applied delta specifically for four point six billion dollar loan from the US government rescue package. But they might not accept it. I guess what's being offered because the Treasury would get some equity or at least some warrants in exchange for a loan. Should we just do that? Yeah, I think they're all using that as an option here, right.

And so one of the one of the restrictions to that, to the loan, not the grant package, but the loan package, is the loan can go out five years, but for the term of the loan plus an additional year, the company cannot buy back shares, pay a dividend, and it lives with um with caps on pay. And so I think what they're all doing is they you know, they're

I think it's a great thing. I guess they're looking past coronavirus and they're thinking, what if we get into a world here where things resumed somewhat close to normal. We right size the business, we're making money. We can't buy back shares, we can't pay a dividend. That might, you know, unduly restrict us. We might not be able to attract investors like another airline that could get through there. Uh and now and Delta said, look, they've got uh.

I forget what timetable they gave, but I think they've got to the end of the quarter or something like that in order to actually take the loan. Um. Look, I think if things look like we think they're going to look like at the end of two Q meaning not much better, I think they will just go ahead

and take those loans. And hearing what they said, George, you know from a consumer perspective, obviously an investor perspective, but just from the perspective of people like get on planes for business trips and family trips and things like that. What do you hear across the industry about how soon this industry looks at least somewhat healthy. Again, obviously that it's unknowable largely, but what are you extrapolating from what

you hear from these guys? And don't you love how he's not using the word normal, because I don't think anybody expects there's normal. Yeah, I agreed. Um, So you know, I think we're all all the analyst community. I think everybody that surrounds the airlines and I'm sure inside the airlines are just not talking to us about it as much as are sort of you know, war gaming that out in our heads, like how do we get people

comfortable getting back on an airplane? And even at Baster you mentioned today about a vaccine, which you know is potentially a long way off right at sometime into in the next year, and I think everybody's think about taking out seats or you know, blocking out seats or um using masks or things like that. But look, I think it's just hard to imagine demand coming back strongly before you can really get people comfortable getting in an airplane.

And I think it's a vaccine because I mean, the last time I checked, the middle seat wasn't six ft wide when I you know, last time I was on an airplane. It's been a while now, but I think it's that's that's the million dollar. And you know, even if you take the middle seats out, um, you know, like a typical narrow body airplane. You've got sort of six rows three and three on each side. You know, the airlines just line at sixty six full. They typically

can't make money at that level. So do you do you envision just twenty seconds that we may be a wearing like some kind of helmet or something, you know, to get on a plane. I mean, I think people are wargaming everything, and that's something that's ticking about. Maybe not an elmet, maybe the face mask that's already on the airplane. Yeah. Interesting, that interesting, Wow, amazing. All right, well, we appreciate your context as always, especially in such a

busy day. George Ferguson, senior aerospace, defense and airlines analysts for Bloomberg Intelligence, joining us on the phone from New Jersey, and as he said, just huge, huge, you know, billion billion dollar questions that these guys are going to have to answer. We're all going to have to answer, right, and those international flights, which are the more expensive flights where they make money or not happening. Spain's parliament, by the way, voting to extend the lockdown through May night.

That was a headline that just crossed the Bloomberg This is Bloomberg Business Week with Carol Masser and Jason Kelly on Bloomberg Radio. We've talked a lot about the moves in the oil market and the reasons why we've seen such dramatic drops. But Bloomberg Business Week Economics editor Peter Corey, he writes this week in the magazine that the historic crash and oil prices that we saw on Monday to below zero, believe it or not, can be explained with

one wonky word. Charlie Pellett said it. We've got Peter joining us on the phone from New Jersey, So Peter, good to have you here with us. I feel like your story is one of those stories everybody. We've talked a lot about the energy markets, but you really explain it well why we are in today's current situation. It's not like this is something that just happened, uh, seemingly overnight. It was kind of long and coming. Tell us a little bit about what you wrote about. Well, first, thank

that Charlie Pellett for that great segue. What a setup. Yes, in tosticity is one of those terms that you've learned intro econ, which is the idea that for certain products, their prices, the demand and supply do not adjust very much in response to a change in the price. And oil is a perfect example that in the short term, so like, look on the demand side, COVID nineteen pandemic, the price of gasoline is plunged, But how many people

are filling up their tanks these days? Practically nobody because we're not driving and so we're not The demand for gasoline has not responded to the falling prices. Uh. Meanwhile, on the supply side, you're not seeing supply falling in response to the decline in price. Uh somewhat, yes, Uh. You see, you know, across the shale fields, producers cutting back, but Saudi Arabian Russia are still producing far more than the market will bear. That cuts and production have not

matched the decline in demand. Now, usually what happens in a case like that is that that you just mora olil goes into inventory. That's kind of the buffer. What was happening now is we've run out of room to store, and that's why we're getting these extreme moves. Well, and that storage, as you point out in your story, I'm glad you brought that up, because that seems to be or it is, and it's not that it seems to be.

I mean, that's really what's happening here, that this has gone on for so long there's literally no place to to put it. It's one of these things where I'm sure that people look at the complexities of the financial system and global trading and things like that and they say, well, surely it can't be that simple, and it kind of actually is, except that geopolitics obviously have entered into this as well. You mentioned Russian Saudi Arabia, So what are

we to do about this? And can I just can I just jump in for a second, because part of this too is it's usually futures contracts, right Peter, that are traded, and you don't you never expect to actually take the physical delivery of oil. That's not usually how the markets work, the futures markets, but that's what's right. So it depends. There are different rules for different contracts. For the Brent crude, which is you know, North Sea

that's settled in cash. The vast majority of contracts for West Texas Intermediate on the Nymex are also settled in cash. But if you own a contract to receive oil and you have not managed to sell it before the deadline, then you have to take it. And of course the joke is like where you gonna put in your garage? So what ends up happening is that the seller will arrive at a punitive deal with you. You'd have to pay through the nose to wriggle out of the contract

because you're basically violating its terms. And that's why we saw oil on Monday go to negative thirty six something dollars of barrel. This was people who were totally desperate to get out of their contract so they wouldn't be put into that squeeze. And so, so what happens next year? I mean you, as you often point out to us, you're not an economist, but you do. You are an expert business Week, You are an expert on on the

world of economics. I mean, I guess synthesized this into the rest of what we're seeing because also, by the way, we're in the midst of a global pandemic. Yeah, so, like the June contract. I talked to the guy named Steve Short I quote him in my story from Pennsylvania, has been in the market for years. He was looking at how how much higher the price of June oil was than May oil saying that can't last. June has got to come down, and he's right, it has come down.

And as I would not be surprised if as we get closer to the expiration of the June contract, we're gonna see much of the same kind of craziness, because it's very unlikely that between now and then, which would be the beginning of May, we're gonna yeah, the desert of late in May. We're good that we will see

the change in the supply demand conditions. We're not going to see people buying a lot more gasoline because COVID is not going away, and it's just gonna be really, really difficult for producers to cut their production enough to stop putting it into storage. So is this the beginning of the end of the oil market. No, obviously got the end of the oil market. We're gonna have oil um, but it's the beginning beginning the It's not only the beginning of the end, it's the end for a lot

of speculators here getting wiped out here. They made some really bad decisions, and a lot of them are, by the way, people who decided to go into exchange trading funds because they figured ah, yeah, oil prices gotta go off from here. They're getting killed as the one contract rolls over into another. So maybe I should ask is it the end of the oil age? In the oil age? Now that's the more profound question. Well, you know in a way that we've accelerated the transition out of the

oil age, um, which was coming anyway right uh. Um, And once this happens, we're certainly gonna have still demand for oil. But this is waking people up to the fact that, um, you don't want to be investing a lot in new oil production that when this kind of thing can come along and slam you. Well. And it's interesting too, you know that E T F element of it. We talked about that at the top of the show with their own Critty Gupta who follows these markets so closely.

I mean, I also I love the kicker quote in your story. I just want to read it. Uh. Some might consider an event that happens point to five of the time to be too improbable to worry about. However, I ask yourself this, I cannot get this image out of my head. How well will you sleep tonight if you know that once every year to someone is going to wake you up by dropping a tarantula on your face. Wow, that is that is scary as heck. Yeah, that's a lot of people these days feel like that tarantula just

landed on their face. It sounds like it's happening more often though, Man, yeah, more than a year or two. But I do think but it does speak to to a broader thing that I think we're all thinking about, which is, are we entering a new era of much more I don't know regular uncertainty, if that's such a thing, Peter, and I know it's something that that you spend a lot of time thinking about from an economics perspective, because

there there's academics and then there's reality. Yeah, I have to say that very few people saw that we would have oil negative something dollars a barrel. So there's an example of a black Swan event. Um. I tend to shy away from the idea that there's more uncertainty now than there ever has been, because I think it's a it's a lot of because we don't know what's going

to happen next. You know, you look back in history and say, well, it was obviously we're gonna have a nine eleven or or whatever else it wasn't at the time. It came with a shock to us. All right, we gotta go. Sorry, Peter, we love you, thank you so much. A journal now, but you let me drive? Oh no, no, no, no no please, I'll do drivel exprest. I want to drive all just drive baby, good question, trying the drive to the globe Commune to thanks, We'll drying us to

Dawn Bloomberg Radio. All right, it's time for a special edition of Drive to the Close at double Shot, because this guy deserves it. Henry Cornell, Founder, senior partner of Cornell Capital, longtime investor, a globally minded guy, and full disclosure, a friend of mine, so happy to have him on the line from Long Island. Henry, how are you. I am fine, miss Kelly. It's very nice to speak with you. I look forward to seeing you live at some point soon.

I know I know well and also full disclosure, he has an amazing taste in wine, and he and I have been able to share a glass over the year class or maybe more than in the glass. But in any case, Henry, first of all, trust your well and your family and all of that, your employees. What's it like running a firm right now. Well, I can tell you my kids, and I've got five of them, ages seven to fourteen. I think this is an early summer vacation with just a drop of teleschool thrown in to

keep them in line. So, you know, that is an interesting day to day. And then, clearly, like many many people, we are working remotely, and the idea of creating some level of efficiency when you're going call to call to call to call all day long is pretty hard. And then you know, we have an office in New York and then one in China, and so getting on with our folks over there and just keeping it up. I feel like I should have bought stock in a T and T because we're on the phones all day every day,

and Zoom and Blue Jeans and every one of these services. Well, it's interesting, you know, I'm curious about your thoughts on the economy me and what it looks like afterwards, Henry, because I think that's the thing we're trying to figure out. We're hearing about how the airlines are going to have to operate. You know, sporting events. Don't expect any kind

of big sporting events for a long time. Education. You know, what's your expectations about the US economy, which has proven itself so resilient through so much Well, I think I would you know, key off of your last comment, I am an optimist by nature. I always think of the glass is half empty, but I'm actually genuinely optimistic. This is different than anything I've experienced in my lifetime, from the first oil shock in the early seventies when I

was in college to seven. This is a social you know, fallout that is just hard to imagine. And I can tell you when I go to the local supermarket, people are wrapped up like mummies and they're depressed, and it's a bad version of Night of the Living debt. However, saying that I was in the York City this weekend because I just needed to have a few meetings in person, and when you went to Central Park, spring was in

the air. People were out social distancing somewhat appropriately. And I'm hopeful that this year is going to be getting back to what the new normal is, and that I believe next year you will see a real bounce. I think the pent up demand of people who just want to get back to work, want to get on with their lives and enjoy themselves a bit and be productive is ingrained in our country, and I think we'll get back there, but this is definitely gonna be a huge

punch in the nose. Henry've only got about a minute left before we bring you back and continue the conversation. But in that minute, what are your colleagues in China say? They say things are recovering. People are going to restaurants, people are actually traveling a bit. Factories are open. We own a number of factories in China, and it was slow getting backed up to producing level, but right now

we're actually experiencing. I wouldn't call it a resurgence capital are, but a resurgence lower R and I think the social norms pre virus will continue to grow there. So I'm taking a little bit of a key off of what's happening in China with how I know things can recover here. I want to get back to Henry Cornell, founder and senior partner at Cornell Capital, on the phone from Long Island, New York. So, Henny, one thing I want to ask you.

There's a story in Bloomberg Business Week magazine this week, uh and it talks about Wuhan reopening and what's involved, and it talks about use of robots, and you know, meeting rooms that are kept to a capacity of just a handful of people. You don't use elevators, you use stairs. Um, there's a lot of changes. Is that going to be our world as well as we get back to I certainly think so for a period of time. I'll give

you an example. I flew to Chicago last week to have a meeting that I just didn't want to do over Bloomberg not Bloomberg sorry blue Jeans. And you have to teach me how to use it because I'm somewhat technologically inefficient. But we we flew and we went to hotel by the airport, and you know that. I asked the lady at the desk and she said, on a good day where seven percent occupied. And so they gave

us the ballroom. I'm not I kid you not. And it was for three people on my side in one person and we literally sat at a table that was twenty twenty and it was certainly much better than being on the telephone. But I think those types of things until people feel safe and protocols are in place, and hopefully infections go down and vaccinations are arriving. You're you're

just going to see some strange changes. But the interesting thing is how people have innovated during this period of time because they want to get on with their life. And I think that's the important part here. People. There are some who are hiding in their foxholes, but I think people are really trying to figure out how to get on with it. And I think that's that's the important thing, which also underscores my own optimism for how

we will get back to stasis at some point, hopefully soon. Well, and as you're demonstrating with that story, Henry, I mean there are some things, especially in your world, where you are entering into a long term relationship and private equity. If you're doing a deal with someone, I mean it is it's intimate in a lot of ways and important and as I said, sort of long term that requires

a certain type of interaction. I mean, you've experienced this over many decades in this business, and I do wonder, um, you know what this portends for a business like private equity that is so relationship reliant. Well, I think every

business has a very powerful element of personal relationship. We're not special or different, but clearly when you're about to commit capital to someone, you want to look them in the eye, shake their hand, oh my god, and actually have a meal with them, and just make sure that you're all on the same comic wavelength in order to continue to do business together. Because even in the best of times, doing things profitably as hard work. And so I do think people will need to get back there.

But I also see the technology that is seems to have come to the forefront here will certainly be more in use than it has. I mean, I've used video teleconferencing because it is efficient than flying somewhere for just an hour meeting, but at the end of the day, there's nothing like the personal touch. I do wonder in the world of private equity and you, as you pointed out at the early part of our conversation, Henry, you've

seen cycles, You've seen crises. You've seen emerging markets like China in the late eighties, in China, Japan, all across Asian the late eighties, early nineties. You practice a form of private equity. I think it's fair to say, and keep me honest here, that's a little bit different than maybe what we would ascribe to a black Stone or at KKR. You know, they use a lot of leverage, and you know ten dollar deals. You're practicing a more sort of bespoken and maybe even sort of purer version

to some extent. Where do you see opportunity here for that type of model, whether it's sectors or whether it's specific dislocations in this type of environment. Well, our firm strategy has been to effectively invest in US companies and take them to Asia. I lived in Asia for twelve years from a D eight to two thousand. A number of my partners are veterans of that era as well, and that is poor to us. And the other part

is we are genuinely low leverage in our portfolio. We have no subordinated securities, no mezzanine debt, only senior positions. And before the virus, our average leverage was three point eight times. That protects us in an environment like that. And I think the portfolio we have will have oppert tunities from competitors where we can help to arrescue finance, do a merger, um and and basically help people get

out of this. You know, we're not um, shall we say vulture investors at all, we try to be constructive. We want to protect franchises, and you know, this opportunity, since we are and I'm knocking on what as I say this in a reasonably good position, allows us to actually be very constructive in conversations. And I'll tell you in the last three weeks phone has been ringing off the hook in a very good way. And we're having lots of conversations, which is why some of those conversations

I want in person. So I hopped on a plane last week as opposed to you know, doing it over the phone. So you've made investments in over the last couple of weeks, We've made conversations over the last few weeks, UM, and things are in the in what they call the pipeline. UM, these are these are very positive positive things. You know. There are so many industries that Jason, I've been talking out Henry about, whether it's the restaurant industry, watching very

closely retail, which has been was troubled. Safe to say going into this, what's the fallout that you see that will be the result of this cal That's really tough. One one of my oldest friends is one of the largest owners of various franchises in the United States, and this is the toughest thing he's ever gone through, because you literally have a mandate to shut your business, and how you pay your rent, how you pay the electric bill which still comes in, and how you maintain your

employees is going to be very, very hard. And then you know, there are articles in the papers today even some of the great restaurateurs in New York City like Danny Myers and and you know, and others like that they're going to have to have restaurants that are for arguments sake, full as opposed to capacity. Those numbers just don't work, and so it's it's tough. I wish I had a crisp silver bullet response to that. But no, from hotels to restaurants to any leisure activity. You guys

mentioned sporting events. You know, I'm an old bonks boy, so I've got tickets at Yankee Stadium. I can't wait to get to the stadium. But God knows how many people are going to be allowed in right well, and or even if we'll see baseball. I mean, I think it's I think we're hard pressed to imagine, uh seeing each other running into each other at Yankee stadium this year,

Henry Jason, break my heart right now. I'm sorry. Maybe maybe you'll have to get on a plane to Arizona or Florida to uh to see the Arizona has been offering up right, come on over exactly exactly all right, Well, look forward to catching up with you again before too long, hopefully in person, hopefully over a glass of wine. Henry Cornell really appreciate it. Founder and senior partner at Cornell Capital.

And as we describe, you know someone who just has truly global experience, you know, for a number of decades and in real time, you know, working with his partners there in China cre and I guess I have to I do appreciate his optimism, certainly when I see a headline crossing the Bloomberg that talks about Californi when you're recording eight six COVID nineteen death since Tuesday, and that is up six point eight percent, and that's not what we want to be seeing. We want to see those numbers,

certainly the percentage increases going down. 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