Improving Coronavirus Testing

on iTunes, SoundCloud, or Bloomberg dot Com. You can also listen to our radio show weekdays at two pm Eastern only on Bloomberg Radio. We want to move to our own expert here. Brian Granuelotti is the chief executive officer of Atlantic Health System, joining us on the phone from Morristown, New Jersey. Obviously a state like here in New York that has been hit very hard. New Jersey's death rate actually eclipsing the daily death rate, eclipsing New York's, I

believe for the first time today. So clearly a lot going on, and a lot going on as we think about what happens next, even in terms of reopening the economy. Brian, really good to have you with Carol and myself. Thank you so give us a sense of what you are seeing on the front lines there, what is it like, and what's maybe new and different today or this week

versus in the preceding weeks. Sure, you know you you had mentioned the differences between New York and New Jersey, and I gotta tell you that, Um, you gotta follow the transit lines, because what happened in New York followed the transit down into New Jersey. And we have been really overwhelmed, as you described here, uh, in New Jersey,

particularly in northern New Jersey. So today at our command center call, we had five hundred and forty four patients with COVID in our hospitals and um, about thirty five percent of those patients are still on ventilators. So we have a very sick patient population. But that's down from our peak, which was on April ninth, where we actually had eight hundred and thirty four patients. So we're down about thirty but it's still an enormous number of patients.

You know. As we've gone through this process, Brian, I mean, what have we learned about being prepared next time, you know, and what we need to do in terms of really shoring up our health system. And access for everyone. You know, there's a there's a famous statement it's about the economy. Um, well, it's about the testing. I mean, our major lesson here is testing was a problem at the beginning. Testing continues

to be a problem today. And if we don't get this testing right as we go into recovery, we're going to have a rebound effect and we're going to be back in the soup again, and we have to be very, very careful about that. The second thing that we've learned is that just in time delivery doesn't work in a pandemic, and our supply chain is really broken right now. Um, we went through periods of enormous panic making sure that we had the right kind of protective equipment for our

team members to keep them healthy and safe. Ventilators were a big issue over a period of time. I can tell you just uh a weekend we spent scanning the nation for ventilators and and being able to have many of our colleagues in different parts of the country support those. And it's the same thing with medications, particularly those medications

that support people on ventilators. So what we've learned is we've really got to fix this supply chain, we've got to have more control over it because you know, COVID is not going to go away until we have a vaccine, and that could be a year and a half or two years away. So we have just threaded the needle here in UH, New Jersey. The governor has been a fantastic ally and advocate for us, particularly with the federal

government and the stockpiles. But we've learned a lot and we've got to make sure that at UH we continue to use the tools that we have, the predominant one being social distancing. Right now, so Brian, I want to talk a little bit more about testing it if we could, because I feel like we want to go at level down and understand both testing for the disease and also

the zoological, the the antibody testing. What do we know now and what is important for our listeners to know in terms of what they should be doing, what they should expect, especially you know, in and around your hospital system over the coming weeks. So the frustration that we've had with the diagnostic tests, in other words, do you

have COVID or not? Is we needed to get that right at the point of care so there wouldn't be delays in providing a definitive diagnosis because many patients come into the health care system UH and they don't need to be hospitalized about so so when they go back, they need to know if they have a diagnogosis or not, they know whether to self quarantine. That diagnosis wasn't coming back for three or four days, and that was a big problem of the patients that go into the hospital.

We have to treat everybody is COVID positive until we have a definitive diagnosis. And in that instance, about of the patients that would go into the hospital and be tested UM would be under UH. We wouldn't have a test result on them. So we were burning through all that scarce protective equipment because we had to treat everybody the same. So again we have to have a point

of care test on that. And then going forward as we open up healthcare and start doing some of the care that's been tent up, and you've seen articles written recently about that UM where people are just staying home instead of engaging in the health system, which they need

to do. We're gonna need to provide that test at that preoperative time or pre procedure time in order to make sure that we know those patients do not have COVID, so that diagnostic tests are going to have to be at the spot you're doing the care and they need

to be able to be determined right away. And when you say point of care, I just want to make sure that I understand when you say point of care that that could also include a pharmacy or someplace like that, right or am I misunderstanding, Well, if you're coming in for a diagnostic test, or if you're coming in for a surgery, it would be in a facility a lot of that where you do your preoperative testing. Um. The

second piece that you talked about antibody testing. That's going to be important as it provides some clarification on whether or not you have had the disease previously. Now, over the last week you've seen U two things happen in that space which are concerning. One is that we are getting an incredible variation of results on the different tests that are being done, the types of tests that are being done, and it's really caused some pause and some concern.

But but clearly we've got to run that down because what we don't want to do is give somebody an impression that they have built up the immunities. And then the second piece that's been of concern was the was the feedback we got from the World Health Organization over the weekend that perhaps having those antibodies does not necessarily

protect you again from getting this virus. I think more work needs to be done in that space, because the consequence of thinking your bulletproof on this and you're not

going to get it again, uh, is a problem. So Okay, I don't want to get all dystopian on everybody, but Brian described to me, then what our world is like going forward, is it we all just have to get used to a lot more testing, wearing masks and potentially I mean, you got you oversee a massive hospital system, seven hospitals in New Jersey, I think roughly sev men ers um almost five thousand physicians, eleven counties. You know, five million people you know have access to your system.

Is it a case that you know, how we go about getting procedures, It's going to be very different and we have to just get used to it. That's going to become the new norm. And we also will have health facilities that are separated into virus where people have the virus and those places that do not. Yeah, the first, the first thing I want to say is that our

hospitals are safe. UM. I would I would argue our hospitals are very safe compared to some of the other things we engage in um UH in our communities as we UM seek our activities of daily living UM so we're we're safe to begin with. But as we think about needing to continue to care for this virus UM we will as our volumes go down in our hospitals, these patients will be contained in very specific areas where

they won't be interact with other patients. The team members that will care for them will care for those patients and not care for other patients during their shifts. And we need to make sure that UM we have safe pathways through our organizations so that we don't have people intersecting UH inadvertently, and all those steps are being put

in place literally as we speak. We also UM have when we do turn a unit over and have it become an on COVID unit, we do a terminal cleaning in there and make sure that everything is safe, so so patients shouldn't be safe or shouldn't be scared, and there are safe. The thing that we need to think about though, to your question, is this will be a period of wearing masks. This will be a period of maintaining social distance. This will be a period where you

can't bring your entire family in on your office visit. Um. Uh. Those are the kinds of things that we're doing. We're going to continue to really use telehealth in a big way, um. But we're also in the process of opening our offices. You mentioned we have a lot of physician practices, and we're doing that also. And so I guess just to to drill down at a further level, how long does the sort of era of social distance and masking and

all of that last. In your estimation, Brian, is it till we have a vaccine or is what do we need to see in order for you know, life to even optically look something like close to normal, you know, in a perfect world, that's the answer. It's a vaccine. But the but the reality is that that's going to take a while. So we've got to continue to pursue

a couple of things. One is we've got to pursue effective treatments for this disease, because that will go a long way in itself to taking the scare out of this UM. The second thing that we've got to work on is just contin enuing to educate the public about the importance of washing your hands and using a lot of common sense, you know, the kinds of things that you you learned when you were a kid, UM, and

make sure that we're adhering to those things. But we also are going to be in a position where our lives are going to be a lot different. You know, I think about restaurants, you know, um, paper disposable menus, um. Instead of something that seats a hundred, it'll seat fifty and those all have huge uh impacts on those various industries.

But we will be in a different place. But the key thing, again, just to go back to it, is we've got to we've got to be able to have the testing available so that when we do get an outbreak, we are on that in doing the tracing we need to do. And that is kind of the blocking and tackling of public health system. Ryan just just got about thirty seconds here are you bracing your team and preparing your team though potentially for another second wave here and

just gotta be quick. Yes, we are we are absolutely preparing for that wave and we will pray that it doesn't happen, but we will be there as we always are to serve our communities safely, and that's really what we're all about. All Thank you so much. We really appreciate it. Thank you so much, Brian granielatia really thoughtful conversation, realistic conversation about where we are on the medical front

as it comes to the health system. Carol, he is the CEO of Atlantic Health System, joining us on the phone from Morristown, and you're a great state of New Jersey and my great state of New Jersey and just understanding a little bit more of what life is like on the other side. And I think, you know, the more information we know, the more secure we will feel about kind of re entering um. And so it's really

great to get some time with him. All right, coming up, we're going to check in on an interesting story that's in Bloomberg Business Week magazine this week, and it all has to do with that active passive management kind of at it again. I gotta say, I'm just not sure how this is going to go today. It's just it's just one of those days. It's one of those limits Tuesday, and we're going with it as much as we can. Joel Weber is joining us, as he does most days

at this time. He, of course is the editor Bloomberg Business Week, as is Justine, the lead markets and quant reporter quantz reporter for Bloomberg, joining us on the phone from London and Joel, I feel like this is almost like a little throwback to your time as editor of Bloomberg Markets. Like I started, I'm digging this, I'm digging

in it. Tell us, tell us about this story. So there was a kind of a Bloomberg News Call regular call about a week ago, and Justina kind of piped in with this idea that she was kind of noodling, and as she was describing it, I was just like, Wow, just sounds so perfect for Bloomberg Markets. I want it for Bloomberg Business and I want it for Bloomberg Business Week. Um, and it's really about small versus big companies, which is one that I think, you know, we're we're gonna obviously

spend a couple of minutes talking about here. It's also going to be I think I've seen that will resonate um for the coming year for investors particular um, if not years. And it really what really caught my ear though, was the word quantz um. So just you know, you want to figure out how to make sense of this for for us? Yeah? Sure, because essentially what quantitative investors do is that, you know, they don't rely on human judgment.

They use their computer models to try to find a couple of trading fingales that they then apply across thousands of securities. And so I initially got this idea talking to a quant fund and what they were telling me is that the dominance of all these megacap stocked you know, like Netflix or Facebook was really not good for their kind of strategies because they're essentially underweight megacaps given doubt,

they're so diversified. And I thought that was a really interesting kind of intersection and of this nerdy realm of quantz and also a phone phenomenon that I'm sure all of us are noticing in the market. So what does it tell us about kind of what what they're seeing?

And because it's it's interesting, you know, justine it because we talked so much about active versus passive, right, uh, and we know the passive play has been you know, done so well for so long coming off of the financial crisis and until recently, Um, kind of what did you take away from kind of doing this story and about that argument in that debate that's been going on, right, I mean, essentially one trend that has been making it even harder for the active stock pickers is that, you know,

since the crisis, we have seen big companies get even bigger. Now a lot of people think this is you know, a structural trend in this sense that a lot of the tech companies are taking an advantage of essentially a winner took all economy. Because as an active stock picker, you want to be different from the benchmark. So you want to feel like you have your own original ideas. So a lot of the times were naturally underweight large caps, but you know, when the they gets bigger, that's not

an advantage for active stock pickers. And we've kind of seen that, you know, repuls be the asset management industry with a lot of acquisitions and even more people at turning to eats each year. So so just what what about right of late? Just you know, the past few months have been so crazy and you know, in theory, I guess maybe you know, quantitative approach could take out

that the emotional effect um. What's been happening with quants of late, right, I mean, obviously I'm generalizing a little, but this year hasn't been great for quantz either. And part of the reason is that, you know, they tend to have more experiensures to small caps which have been underperforming. They also have more exposure to value stocks typically, which as you know, have also suffered even more than growth stocks. And so it hasn't been a great year for on theater.

But they're always saying, you know, in every market, when valuations are so stretched between the winners and losers, there could be a snap back. And it's interesting because I think the past couple of days we've seen a little bit of that, like small cups coming back a little. It's definitely far too early to say then, Yeah, I

mean it's interesting too. I mean, I guess guys to to think about who the winners and losers are, at least so far in this and I feel like we're going to get a little bit of a picture of this this week, Carol, when all the companies are are starting to perform, and Joel it it does take me back to some extent and this uh, this company has mentioned in the lead of Justine's story. It takes it back to Zoom, which was the subject of a great cover story in the magazine a couple of weeks ago.

I mean sort of discerning the winners and losers here even from beyond the quant perspective, but just from a stock in a business perspective, is it feels even trickier right now. Yeah, and especially as you know, if if we think about the market share the um it's sort of the situation like this pandemic kind of creates for like an Amazon where you can just see like how a big company could really really thrive here while so

many small ones get hurt. But now that said, like you know, I recorded a podcast earlier with Eric ful Tunis, and one of those things that um, he was kind of thinking about on the E t F side is just like you know, small companies have been so beaten down, and he just kind of has a theory that like, you can only beat these things down so far, like over the long term, we might actually see some of these, um, the smaller companies and even the small small company value

ones really outperformed over the next three to five years, so from a long term play, there might be something to that just you know, like any any reporting on that and um from from you right exactly. I mean for my story, I spoke to the head of Quantitative Strategies and Northern Trust Assets. His name is Michael hunts Deed. What he told me is that besides factor which is you know, betting on small caps, it's not dead. It's

just that it's an incredibly long cycle. I think it's around eight years, and his research meaning that you could be underperforming for eight years, but if you stick it out over the long term, it actually still works out. So of course, the problem for most people, especially if you're a fun manager and then needs to get paid, is that most people don't have that kind of patience. But if you do, um, you know, the academic research indicates that exposure to small caps should still out perform

over the long one. I gotta say, this is the kind of story that just you know, Jill, it just makes the market even more interesting as we try to figure out kind of what happens next. Yeah, I mean, it's like to me, it's like that great buy and hold lesson Like if you if you can seriously like buy and holding. It might be might be worth thinking about. Yeah, absolutely,

all right. It's a great story on the Bloomberg one of the most read, and not surprisingly, it's in the upcoming edition of Bloomberg Business Week, so find it online or pick up the magazine when it's out later this week. Justina Lee joining us from London. Joel Webber, the editor of Bloomberg Business Week, joining us from Brooklyn. I'm brooom journal now, but you let me drive. Oh no, no, no no, no, honey, please, I'll do the riding drivel. I want to drive, Just drive, baby.

The question dry This is the drive to the globe. Give me thanks. We'll drying us down on Bloomberg Radio. It is time for the drive to the clothes. Just got about fifteen minutes left in today's trading day. Calm us along with Jason Kelly. Back with us is Alan Zaffron. He is founding partner in co CEO at I e Q Capital, joining us on the phone from Foster City, California. Allen, good to have you here with us. How's it all going well, I'll tell you what, it's beautiful weather out here.

Home sheltering is a badly got eightygree weather in sunshine, so it isn't all bad in California. Are people still sheltering though, with that kind of weather? They are? And if you're listening to Mayor London Breed in San Francisco and you're in the six counties around surrounding San Francisco, you're sheltering at least through the end of May. So California has a, um, you know, a tighter lockdown possibly

than other parts of the country. And we'll see the long run whether that was prudent or not, both from a health as well as an economic perspective. But the rules are the rules, and that's the way we're in California and Northern California currently. And so what do you make of it? I mean, as a longtime businessman, you know, someone who's watching both the markets, but obviously has watched the rise of Silicon Valley and and just the economic

boom that you've seen there in Northern California. Obviously it's a balance Alan, But but I do I wonder what do you make of it? I may convit it's it's fraught with challenges. Uh, clearly, it's a negative economically, clearly it's a positive from a healthcare perspective. UM, the reality is we probably were not built to handle a massive amount of emergency UH cases heading into hospitals. We would have been overwhelmed. UM. It's easier look in retrospect and

think we should have acted sooner. We didn't. In the absence of doing that, we had to take some action steps. The question will obviously be was the cure worse than the disease? Not entirely sure. It's very clear that there's been significant economic damage that's gonna last years, not weeks, not months, years, and so that's the sad part of this is you're gonna see a tremendous amount of economic damage.

And the worst part of this, Jason and Carrol, the inequity between the wealthy and those that don't have has only been exacerbated by this crisis. Let's get back to Alan Zaffron founding partner a co CEO over at I e Q Capital, on the phone from Foster City, California. Ellen, what do you what do you think so far of UM? We can debate a lot about how long it took and you know whether the you know, the shutdown will

hurt us more in the long term. Um, there's lots to be said, lots of criticism about what we did wrong, and there are things certainly that folks have h done right. UM, But I do wonder about the AID that's coming because that's really important, and that's the kind of forward looking story about how we get through this and how do we look on the other side of the virus. So far, so good. Um, so far, so good. But if you think of it this way, AID can only do so much.

It's almost like there's four things that have to get done because you really have a medical crisis. So you can you can lower rate to zero like the said did, and that helps. That doesn't solve a virus problem. You can have the subtle government throw money the individuals who are unemployed, and that doesn't stop a virus problem. So ultimately it's helpful fills the whole from some of the unemployment gaps and lack of economic activity when of small

businesses are shut down in America. But the until we get a solution for the problem, you're still going to end up in a world of volatility and uncertain and until someone has a clear cut vaccine with being widely distributable, it's a fools errand to think that the volatility has suddenly gone away. Don't be fooled by the last week. We're not out of the water yet. It's still gonna be tough, right and and that's clearly true, Alan, for

anyone who's looking this with a clear eye. And yet I take a look at the actually want to bring you one headline related to your state, California reporting one thousand, seventy six new COVID cases fifty four deaths uh in the last twenty four hours. I believe that's a tick up maybe from yesterday. So we'll bring you more details on that. That of course coming uh from California Governor Gavin Newsom. He's giving his daily update over the last hour.

So what I was gonna say, Alan, is in terms of valuations, and we've been talking about this over the last couple days, especially because it's a to a a big tech week. Uh, You've got the NASDAC that I'm looking at. My Bloomberg termament right now is down less than four percent for the entire year, So things aren't necessarily cheap right now. Yeah, you've hit the nail on the head. I haven't. I can't tell how many questions the last week I've had about I can't believe how come this

market's going up? Um. The indexes are hiding the weakness. The NASDAC is reasonably flat for the year. UM, the SMP is down a ten percent for there but small caps are down. It's because defense is what used to be high BATA to no longer bid a large cap growth businesses that aren't as reliant on basic economic activity. You don't need people visiting you with the low contact sports, so to speak. Those are the businesses that have been working in this economy and probably will continue to in

the low growth environment. So the sp and the NASDAC are in a way hiding the broader main street economic weakness, and that is where the any is rotating. And until there's greater symbolance of a reflationary economy, which could be

several years away. Large camp us centric large camp growth seems to be the place where there's more steady growth, and all things equal, ironically, it's a safer place to put your equity camp, right, and the companies that we can probably bank on and get through all of this. Ultimately on the other side of it, are you putting would you suggest Alan, that's still it's a time to kind of pick up um some names, certainly in the

equity universe. Um, there are some opportunities out there. Or do you feel like those easy gains, the bounces off the low that's already been been done. Yeah, I think the trains left the station on the easy games. Um. It always makes sense if you're a long term investor, be dollar cost averaging. However, it's it's a world of low growth. You want to stick with franchises, strong balance sheets, and the ability to grow earnings regardless of a very

slow economic environment. So don't get caught in a value trap. Just because there's a high dividend doesn't mean it's going to stay at high dividend, nor does it mean that businesses will be able to generate the cash flows to pay that dividend. Focus on quality, quality, quality right now. Make sure you know the franchises and sectors you're buying into. There's a reason healthcare and tech for the best performing sectors here, because that's where the secular growth is now

and going forward. I feel like that's I was just gonna say, I feel like that's going to be our new world order. Healthcare and tech. Yeah, yeah, secular growth. Um. So Alan talked to us about real estate. I feel like this is going to be one of the big questions that we are talking about for some time to come, not just from an investment perspective, but from the perspective of how do we consume real estate, how do we use it both residentially and commercially. We had Kent Swigg

on our program last week. He obviously has invested heavily, especially on the coast in San Francisco near you, and in New York City here near us. We also have these big questions around our big company is going to take less realist state more real estate, What does social distancing look like? What is the new workplace look like?

And I do wonder, especially given your history of advising a number of wealthy families over the years, real estate has always been a pretty comfortable place for folks, right, Yeah, it really has because it's got, you know, very tacticfficient mechanism to deliver income. And I think it's very clear, Um, there have been some secular changes, and the secular changes are first and foremost. There is going to be a shift in work behavior going forward. It's clear not everybody's

going to jump back to the office as frequently. On the one that, I kind of like that because will be less traffic driving to and from the office. On the other hand, so I'm an owner of an office building, um, I think my buyers now my renters are going to have more buying powers, does need less demand for office So there's definitely going to be some valuation discount, probably other than an exceptionally high quality office in that major

metropolitan cities. Secondarily, I would argue that industrial properties, core industrial probably has actually gone in value the notion of delivering with more goods and services to more consumers going forward. If you're a warehouse provided for a target Walmart, you know, Amazon, it's gonna be a good thing. So there's winners and losers. I think the place that's really complicated not retail. It's pretty clear that that's an over retailed environment. Will have

to refigure it out. But its apartments, which has traditionally

been a very safe environment. You know, if we're in a world where renters are given a free pass to pay rent, possibly for very good reason, I don't know if that makes the landlord feel very good, and I don't know who's culpable in the back end, and so there is going to be, at least in the short run, some discount evaluations on basic conventional apartment buildings because what was once perceived to be an exceptionally low risk income stry and you know, is arguably a little more risk.

It depends on what kind of apartment property and what location. All Right, we're gonna leave it. They're great to catch up with you. Thanks for be impatient with us as we jumped around. We really appreciate Alan's affron founding partner co c of I e Q Capital on the phone from northern California. 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 h