June Jobs Report Surpasses Expectations

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. Every time we approach Job's day, I can speak for Carol and myself when we say and think, we want to know what Chris Luke thinks about all of this, no matter which way it goes. He is a senior fellow at the University of Virginia Miller Center. Of course, a former Deputary Deputy Secretary of Labor.

I get that. I sort of trip on that almost every time. I'm sorry, Chris for me, former Deputy Secretary of Labor under President Obama. He's on the phone with us. Now, Chris, how are you. I'm doing good. Thank you for having me. All right, well, it's good to have you back. Um. So your initial reaction, like your gut reaction to this and and maybe more important as you saw it, all sort of filter through what do we need to take away from this job's report, both monthly and UH and

then the weekly jobless claims. So there was a lot of data today. Gut reaction was good, with a lot of caveats. You know, we always tell people the monthly jobs data is really kind of looking way back, and in this case, it goes back really to the pay period that began on June eighth. So in that second

week of June, the economy clearly was recovering. But when you add that with the weekly jobs claims, you started get kind of a mixed picture because we're continuing to have again, if you add in not only the people applying under the normal unemployment program, but the new pandemic program for gig workers, it's about two million people applying for unemployment every single week, new people applying, um and you know total right now, but thirty one million people

on unemployment, which is not really going down. So if you put all of this together, you get a sense of an economy that was reopening. By the beginning of June. Jobs were coming back, and that recovery may have slowed, and we don't really know how much it is slowed. And again, as we always say, we're still in the middle of a public health crisis. And until you resolve that, you really can't get a good sense about where that

the economy is going. We're still what about nineteen million in terms of those who are on unemployment benefits that are out of work. Yeah, I mean, if we simply look at the number of people who apply the under the traditional unemployment program, it was one point four million this week, which is more than double the worst week we ever had during the Great Recession. So the numbers

are still elevated. They've come down a lot, but we all need to understand that just in the months of March and April we lost about twenty two million jobs. We've picked up about seven seven to eight millions. We've picked back up again. Um, but these numbers, and we always say jobs created, uh, and we probably this month it's simply need to say jobs were stored to people because you know, one of the quirky things about the

data as you see. You know, just in healthcare employment, a hundred and ninety thousand UH dental jobs were created. I suspect we didn't have a hundred ninety thousand new dentists last months. I think because all dental assises were closed they reopened. So again, this is positive with a lot of caveats, right, I just look at my own world. I mean I went and had a root canal, like like, these are things that I had were not do you know it's not I'm going to go back to my dentist.

So like, yeah, I get that it wasn't a brand new dentist. It was not a brand new dentist. Yes, no, no, no, hey, Chris, I feel like a more constructive conversation at this point. I mean, these numbers are going to be what these numbers are. I mean, we have shut down our economy. We're finding our way back, whether it was a republic in the White House or a Democrat like this is

what you're dealing with. It's really tough. I do wonder though, when we get on the other side of this, are there companies industries are saying you know what, we really don't need those kind of workers anymore, or you know what. I know there's that demand side of what the economy is like and what's going to be needed. But I do wonder if this is going to be a real readjustment and kind of the types of jobs that ultimately stay with us and those that ultimately go away. Yeah.

I mean, look, I I'm in Uh, I'm in the DC area right now, which is you know, partially reopened. I even think in a reopened economy, people just aren't going to go to restaurants, uh if they can do take out. Uh. You know, we know that people aren't traveling. People aren't going overseas because you know, U S systems can't leave the country functionally, at least going to Europe.

So we know that travel will be down. We know that a lot of companies have basically said, hey, you work remotely for the rest of the year, which has been a cascading impact through real estate and through mom and pop, delis and all of the other services that

support companies along the way. Now, there may be other other industries that pick up along the way, but I suspect those are not the ones that are going to be as job intensive and so you know a lot of the broader structural changes we've seen in the economy will probably be accelerated as a result of this. Like what specifically though, Well I think of this. You know, I as a person who probably eats more fast food than I should. Uh, there is you know, you can

order online on your mobile app. You can also use a touch screen, and I suspect in this environment, uh, they're just gonna start to move to that. And it's not to say you don't need people, you know, handling the food, but it's going to be a lot fewer of those people. Um, you know, and I think a lot of the companies are going to realize, you know what, we just don't need in general this many people around

the company as much as possible. So you know, we see, um, you know, we might end up having a full recovery, or you know, we might just kind of be operating at this kind of seventy level for the foreseeable future, which in many ways I think is the worst outcome because you'd have a half open economy. Was still all of the increased infections and death. You know, we did tease that this week was interesting. I feel like over the last week or so that we are now once

again UM seeing updates on the virus from the White House. UM. Vice President Pence is often conducting them. And what's interesting is the tone has changed. They seem much more organized, and you know, we were kidding that now they're saying, okay, wear a mask, you know, but the tone has changed. And is it just a case tell us about crisis. I mean, you don't have the playbook initially when the crisis hits, and you do learn as things go along. What do you make of the progression in terms of

how the administration has handled the pandemic? Well, I really think it's been the tale of two administrations. I mean you've got even this week, while you had the Vice President UM encouraging mask wearing, you had Secretary asar Uh test on TV last weekend expressing concerns. Obviously Dr Fauci this week testifying too. And then you have the President who, while yesterday he said, you know, he's encouraging people to wear masks, he again said that he thought this would disappear.

And I think that's kind of the challenge. I mean, you know, UM, below the president, you've got the wheels of government that are moving, um, that are ensuring that you know, states get ventilators and PPEs and trying to issue guidelines. But ultimately, the president has the biggest bully pulpit um and I think the kind of lack of consistent messages coming from him, I think have undermined a lot of what you know, other people in his administration

are trying to do. I mean, you continue to see a fairly significant number of people in this country who you know, are not wearing masks right now. You've got a lot of states which you know, while encouraging masks that got and there's encouraging masks, are not mandating them as well. And we know that's you know, one of

the simplest things you can do. And so um, yeah, there certainly has been an increased, a ramped up level of concern and engagement this week, but I think it would be a lot more effective if the president got

on board as well. And so, Chris, we love talking to you about all branches of government because you've worked in all of them, and I wonder what you make of Congress's response at this point, either from a stimulus perspective or for a stimulus slash rescue perspective, or from the perspective of sort of setting the political and and

the tone around this. Yeah, I mean it's interesting. Um. You know again, just on this mask wearing issue, I mean, Speaker Pelosi has been, you know, very open about her wearing a mask and is basically now requiring that if you show up at a committee room as a House member, you have to wear a mask or you'll get kicked out. So she's trying to set that, um example of leadership.

I do think on the stimulus may think this is gonna be problematic, and I think you know what I hope does not come out of today's jobs numbers is that people read it and say, you know what, mission accomplished. We don't need to do anything else. I mean, we know that these extended unemployment benefits are expiring at the end of July. Fortunately, the Senate this week extended UM the PPE program or the PPP program for small businesses.

That's a good thing. But again we continue to talk about this next wave of layoffs that might come from state and local governments that are just strapped right now, and unless Washington provide some help, we're gonna start to see layoffs. I mean, even this week we saw Mayor Deblasio saying, you know, he might be furloughing workers in New York. In Maryland, yesterday, Governor Hogan uh Is announced he's cutting four million dollars from the state budgetal impact

services and employees as well. So, um, we are not out of the woods and and so. And I think that's sort of the problematic aspect of today's positive job numbers. I think people will read it in the wrong way. Well, I think your point is so smart, Chris, and that this whole idea of that you've got to go the distance, right And you can see certainly with the president, and I'm not being critical, it's just obvious that he has

moved on to running his campaign. And at the same time, like I think about the financial crisis, it wasn't like one program and we were fixed. We still, you know, to some does some extent you know, are thinking about that and still dealing with it, like you have to continue to be on it. Yeah, I mean, look, the lesson we learned from the Great Recession is that we did not put enough stimulus into um into the country, and we we kind of backed off way too quickly.

And you know this past week you had the said Chairman J. Powell saying to Congress, don't get complacent, uh, you know, in your in your economic response. And I feel like we're getting a little complacent right now. And the irony about the president's you know, kind of quote unquote transition to greatness is that actually more stimulus would help the economy and probably would help his re election prospects. You Unfortunately, you know, there's this dynamic obviously with Senate

Republicans concerned about debt. Obviously, how Democrats have a pretty expensive bill out there. So I'm hoping when they get back from July four, um, cooler heads prevail and they find some kind of compromise because we need that stimulus in the economy. Absolutely, all right. Always great to catch up with you. Never enough time. I feel like we

always have fifty eight more questions for you. But we appreciate you coming with us on this day, as you do most jobs, stays Chris Lew Senior Fellow, University of Virginia Miller Center, former Deputy's Victory of labor under President Obama. Johnnius on the phone from the DC area, This is Bloomberg Business Week with Carol Masser and Jason Kelly on Bloomberg Radio. I defy anyone to listen to this sentence

and not want to read this story. Sean Murphy was an epic weed smoker, a devoted Tom Brady fan, and the best cat Burglar that Lynn, Massachusetts had ever seen. I mean, it's irresistible, it is you're in, it is coming to a theater near you. Let's just put that out there. Absolutely, and to boot the stories written by one of our all time favorite writers at Bloomberg Business Week, Zeke Fox, finance reporter for Bloomberg. He joins us on the phone and Zeke, this story is incredible. How did

you find out about this? Well? I was I had read a little bit about the about the case. It was made the papers when the rings were stolen there when they were recovered, and uh, these are we should point out sorry, these are super Bowl rings. These are um New England Patriots or excuse me, New York Giants

super Bowl rings stolen by a Patriots fan. Yis yeah, So after the infamous helmet catch super Bowl Super Bowl forty two and two thousand and eight, when the Patriots, who were on their way to an undefeated season and we're upset by Uli Manning and the Giants. Uh, this kapt burglar slash furniture mover from Lynn, Massachusetts stole the Giants Super Bowl rings and spoiler alert. I wrote to him in prison and said, you know, I had heard a little about your about this story. By any chance,

are you Patriots fan like me? Would you like to talk about it? And over the course of the last year or so, he's he's been telling me his story, and the true story of what happened is, you know, crazier than I even imagine. Well, this is a guy. I mean, the stealing of the rings is one thing, but he is quite a character right and has been,

you know, stealing things for a long time. So he's from Lynn, which is a suburb on Boston's North Shore, and when he was growing up it was a pretty down and out place, and burglary was like a career path that a lot of or at least a good number of young people actually pursued and got taught by older generations of burglars. And burglars and lymb specialized in trying open the doors to pharmacies and stealing the pills

to resell. It's a pretty easy thing that could be done, you know, in the cover of night, and you know, you could often get away with it. And Murphy was introduced to this world in middle school, I believe at Christmas time sleep over at his aunt's house. His cousin taught him how to do it. But before long he

had moved on to much bigger scores. And so what's he I mean in your correspondence, like how would you describe You do a nice job describing him the story of but like how would you describe him to to folksy? So he really is like a typical Boston character. He loved the Patriots. He worked money through Friday at his real moving company, which really did move future people's furniture. He drove muscle cars. He liked to work on his Camaro,

which had a custom red vul or interior um. He liked Motley Crue and other hair metal A lot of the times. He had a mullet and a biker mustache um and he liked He didn't really do drugs, which was the downfall of a lot of his contemporaries among Blend's burglars. But he really liked smoking weed and coming up with complex heists. I mean it's remarkable, you know. First of all, it's it's so well written. It's such

a great read. And I'm not kidding that I could see, you know, certainly here we are working from home and we've all binged on Tiger King like this is I could see in a multi part series um on one of the streaming services. Because it's almost too good to be true, but it is true, um. And it's just this fascinating character, right who It was just a way of life for him, right in terms of where he was born and and and you know what he did, and as you said, he kind of builds up to

his crimes. I mean ultimately though, and I'm going to say there's some interesting personal life stuff that went on too, in terms of girlfriends and and how he went about that. But I mean, ultimately he was caught, right, Yes, So Murphy, if you talk to him, he'll say he's never really been caught because he doesn't consider it being caught unless he's caught in the act. The problem is that quite

a few times he has been caught. He's spent almost i think even more than half his life in prison because the ways that the police work is not so much to catch people in the act, but to find out about things that happened, talk to people who might know about it, and prosecute the guilty party once they've identified them. It's kind of like a myth that they

would catch a burglar in the act so much. Um so, he's frequently throughout his career, I guess I'll call it has been uh sold out by people who you know, had worked with him or who knew him. In the Super Bowl, Uh, theft was really no was they worked out like that too? Yeah, I mean it's really I mean there's also for for Patriots fans, and everything's turned out just fine for Patriots fans. Let's not le let's

not shed any tears for for the Pats fans. But it does take you back to a really a really sort of pivotal time. And I mean that rivalry, and I mean I remember watching that game and he mentioned, you know, the helmet catch and and that was Peate Eli man uh in many ways, and so it's just it's a tail that really resonates in in time for a lot of sports fans more than as much as anything, well, yeah, I hope that it's Uh, it's something fun for sports

fans who haven't had anything to watch for exactly. All right, So how do you fit it? Just before we let you go, how do you feel about Brady and Tampa? Oh well, I'm I'm a past fan myself, so I know I hate to see it. I hate to see if, but I'll still be rooting for him to do well. And Cam Newton, how are you feeling about that? I think you know he makes the past super Bowl contenders. I'm psyched to see what Belichick comes up with for him to do. Yeah, never bet against Belichick. I think

that's the one. One of the takeaways that we all have this story. It's a must read, the perfect long weekend read. Carol can't recommend it enough. And love, love, love anything. Fox puts his mind to Ben Affleck maybe does the movie. Yeah, yeah, checks out. It's just it's such a great week and it is just kind of fascinating. The guy, like, you know, while I was in in jail, like taught himself law, right, I think, so we can represent himself and understand the law. Um, so it's just

a great thing. I'll put it out on Twitter. And you guys pick up the magazine or check it out at Bloomberg dot com. So really fascinating. Um, Seek Fox, what I love talking to him? I could just imagine the communication. I mean, that's kind of a side story. I mean, maybe that's how you do the movie. Like the reporter's perspective of reaching out and getting access to seek Fox. We'll have to work on that. I'll have to ask seek I don't know want to play him.

I don't put that on on Twitter. This is Bloomberg Business Week with Carol Masser and Jason Kelly on Bloomberg Radio. All right, let's do a little business week economics. Now. Obviously we've been talking about it all day, the jobs report and the is data that have come out. Obviously, one of the strongest and most important voices that we turned to in the administration's Larry Cutlow, the chief Economic

Advisor to the President. He caught up with our own John Farrow this morning on Blueberg Surveillance to talk about the job support. Here he talks about the trend of temporary workers getting back to work. Well, look, first of all, it's a spectacular number and it helps the overall situation enormously. So you know, that's really the key point. We've created a lot of jobs in the last couple of months, and the trends continue. I want to say one thing

I was listening to that earlier conversation. I don't think people understand that relationship the rescue package that the President led with bipartisan support and Congress, and the p p P that Secretary manution uh fostered and implemented. It's the temporary layoffs, John, It's the furloughs that are coming down.

We kept people connected their employers. Okay, they did receive assistance, but we kept them connected so that as the economy reopened and the businesses reopened, roughly a small business reopened. So we saw it again today. I mean, sixty three and a half percent of unemployed now are temporary workers. That number was seventy and was seven point seven million. I don't see why that trend can continue. That's the

point I'm making. I don't I'm not sure. It's like an intellectual disconnect why that trend can continue a lot of temporary layoffs will go back to work. And certainly is Larry Cutler, the chief Economic codpiser to the President Carol. Yeah, absolutely, and I guess time will tell Jason right if that trend continues. I mean, he's making that point and we'll see uh in job reports to come. Certainly, that weekly number was a bit troublesome, So let's get more analysis

of today's data set. Business Week Economics continuing with Bloomberg Economics senior US economist Lana shill Chiva joining a sound the phone in Long Island. So, Eleen, how did you and the Bloomberg Economics team read the data points that we got on the jobs market? Right? We got monthly jobs numbers backward looking and before we started kind of closing down parts of the economy again. And then of course we got the weekly numbers absolutely and both are

very significant. So pay rolls was an upward surprise, and it was a positive report all across, once again highlighting that economic fundamentals are strong enough for the recovery to take place once the health crisis is over. And that's a big heavy at though. So because you know, we we all listen to the news, we all watch the news, and we see the big acceleration in the number of

COVID nineteen cases, particularly in the Sun Belt States. And I would say that the month so July will actually help us define the trajectory of the economic growth going forward for the remainder of the year. So will we see another um round of business closures or we will just continue to jog along and and uh, you know

this uh recent spike in the number of cases will subside. Uh. So I think it's it's a lot of questions the data telling us, yes, things were looking good in June, but well in July already, and a lot of things have changed since June. Yeah, I mean a lot of things have changed that I think we're already seeing in some of the other data, right, Elene, I mean, what are you looking at the givets maybe a more realistic picture of of current issues, current economic activity beyond the

job and jobless claims. So you just mentioned one of them, right, And this is the number of jobless benefits and jobless benefits have been stubbornly, stubbornly elevated. So and that might not be surprising given that the re acceleration in COVID nineteen cases started right after the payroll survey week for

the months of June. So the second half of June actually already saw uh pick up in cases, and that might be telling us that some businesses were ready to reopen, but they didn't, so that resulted in a significant in high number in jobless claims, or maybe there were some new um claimants and uh, this number may in fact rebounds. So Jason and I caught up with as we usually do on monthly Jobs Days, with Chris Lew, former Deputy

Secretary of Labor under President Obama. And you know, his point is, you know that we learned some things from the financial crisis that they didn't put enough stimulus out in in the beginning. Right, So the lesson right now is he said, you can't be complacent that we're gonna probably need more stimulus when those benefits um stop in July. Um, is that a given, Elena that in order for us to maintain whatever economic recovery is happening right now, we're

going to need those stimulus checks from the government. Bottom line. Absolutely, and uh and unfortunately as well. So I mean listening to what Mr Cuddler was saying. He was saying that they basically the package helped the companies to keep their workers on the payrolls. And this is absolutely true. The package was very timely. It was right in size, and that's why we see all these numbers that being so strong.

And you absolutely right, if we if we see this UH falling off a cliff, we may see a significant decline in economic activity. Is simply due to the fact that a wage income remains well below pre crisis level. It's it's something like seven point two below that February level. We made some progress in kind of closing that gap, but it's way below still and going forward it will depend on how many jobs we create and how these jobs are playing well. The economic applications of all of

this are are very broad and wide, no doubt about it. Hey, Lena, thank you so much. Have a good holiday weekend. You'll initially Giva of course of our Bloomberg Economics team joining us on the phone from Long Island. This is Bloomberg Business Week with Carol Masser and Jason Kelly on Bloomberg Radio. The virus. Jason, We've talked about this a lot. It's been a big reminder about the inequalities when it comes to health care access and those who ultimately suffer the

most really from it. Dr Shemi uh Sheima excuse me. Dr Sheima Hamidi was recently named Bloomberg Assistant Professor of American Health and Environmental Challenges and Engineering at Johns Hopkins University, the Bloomberg School of Public House supported by Michael R. Bloomberg, founder, Bloomberg ALP, and Bloomberg Philanthropies, and Dr Hamidi joins us on the phone in Baltimore. Dr Remedy, It's nice to

have you here with us. We are taking, you know, a really hard look at the virus and you know, talking a lot more UM how different communities are impacted, and that is something that has certainly been front and center for you. Thank you for having me um absolutely UM. So, you know, there's been a lot of UM research and uh many many researchers have been looking at different aspects of COVID nineteen pandemic. One aspect that has been less

studied relatively has been density. UM to what extent we see there, you know, any connection between density and the COVID nineteen pandemic. What we see from the conversations among practitioners, UM in even in the academic context or news media outlets. Uh, you know, you see extensive coverage that blaming density urban density for the rapid growth of COVID nineteen, particularly in New York City, and referring to suburban sprawl as the

United States secret weapon against Corona virus. UM. So, what myself and my team have been trying to do I was to look closer at this issue and topic, doing a national study looking at nine d and thirteen metropolitan counties in the US and really looking at what what the data sells us and what does it tell you? Because I believe in in your research, Darctor Remitte, you have you distinguished between activity density density as being distinct

from crowding or overcrowding. And I feel like that's a real important distinction to help us understand that absolutely, uh, this is very very important because these are the two UM concepts that are most often confounded with each other, density and crowding or overcrowding. Crowding could happen when a large number of people gathered closely together UM, and it could happen in bars, restaurants, schools, sports events, airports, supermarket or even on beaches as you've been UM seeing on

the news in Florida or or beaches in California. And by definition, the crowding could happen even at the very low density areas and all of these venues. UM and always that they've been trying to distinguish between the two crowding and density and see to what extent, Uh, you know, when you control for the level of crowding or people's level of social distancing, what is the relationship between density,

UM activity, density and the COVID nineteen spread. Yeah, it's you know, something that's just kind of unfortunately a stark reality. You know when you look at this, how can we do better going forward? Because this is just you know, in terms of how people are living and their exposure. I feel like it's a reality. But how do we change that? So the first thing I want to mention is, which is our biggest message, is that density is not

a factor. Uh. Dense places are not linked to a higher infection rates per capital infection rates and mortality rates. They quiet the opposite. These places are linked to significantly lower death rates. But what is really important is crowding. UM. I have done a follow up study that's currently under under review by a journal looking at New York cities, for example, and different neighborhoods in New York and what we've see in of the special disparities of the infection

rates and built environment. And what I found on these twistories and the other one is that, uh, it's it's about crowding, crowded housing. UM, it's about crowded businesses um as assign mentioned bars, restaurants or other venues where you have a large number of people gathered together. UM. And it's about um, the social demographic and racial disparities. The most significant factor being um, you know being um racial disparities or percentage of African Americans who are more vulnerable

to the pandemic. According to CBC. The other big factor is to what extent people are working on job sectors that allow them to do social distancing for example, UM, you know, um, the the educational attainments and job sectors. UM. The other very important factor, particularly in New York City, is the extent to be people could actually leave the city and emptying out um the city uh to scape dependemic and you have you you can see that particularly

in Manhattan, New York. In Manhattan, part of New York City where um the majority of neighborhoods had a significant portion of residents leaving the city and by definition, you can't get the virus, you know, if you leave the city right But you can only do that if you can afford to leave rightly in terms of your jobs. And that is definitely something we've talked about a lot, certainly on our broadcast in fact, just talking about some of the closings when it comes to Manhattan real estate

right now and what's going on. But that that exodus is something we've talked about and who can do it? Dr Sima Hamdy, she is Bloomberg Assistant Professor of American Health, Environmental Challenges and Engineering at Johns Hopkins University, joining us on the phone from Baltimore, and all 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, good questions trying. This is the drive to the Globe community.

Thanks well, try us on Bloomberg Radio. Well, all right, as we drive to the clothes on this Thursday, the end of the trading week ahead of the long holiday weekend, let's check in with our pal, Alan Zaffron, founding partner in co CEO of I e Q Capital. He joins us on the phone from Foster City at California, Alan, how are you. I'm doing great, seventy three the grades, Johnny, no humidity. It is a beautiful day in California. My friend good well, I'm glad to hear it. Um. I

gotta ask you. You know, you get to the end of this week, you see the job to report, you see the jobless claims to report. You're seeing the headlines in California that we are that are pretty scary when it comes to what's going on with the virus in California and Texas, in Arizona and Florida and elsewhere. How do you square it all? You square it all because you realize a lot of the capital that the balance sheet is expansion. For the sad it's happening is going

right to the stock market. It's not connected to people working in the leisure and hospitality industry are out here in southern California's the motion picture and sound recording industry. Those people have lost jobs and it's not clear they're

coming back. So there's clearly a disconnect between the current status of the financial markets in the main economy and it's it's difficult because patients is going to play out that probably this was the right thing to do, is goose up the economy, and it's very hard to swallow if you don't have a job right now, you watch the market go up and you feel like you're not participating. It's a very difficult visceral thing to experien because you're

not participating. I think that's the one thing to alan that I do get a little concerned that folks in Washington the administration are focusing maybe too much as are on the stock market as an indicator of us bouncing back from the virus. When we know that a large part of Americans don't participate in the equity markets. Well that's right. You know something close to six Americans have less than twenty five thousand dollars of safet. Do you wonder why there's a gap that says it right there?

And unfortunately think COVID has accelerated a lot of trends, one of which is the widening gap between the rich and report. If you have a balance sheet, you're actually benishiting as we bounced back. If you live you know day to day, Um, you may have lost that job and you don't have any savings. The benefit here, um,

it is incredibly difficult um to message properly. But you know, I look at the Sandilis said, President of Buller just came out and he said, we're keeping the balot a sheet loose for a long while because we are worried about a potential wave of bankruptcies if the health crisis gets out of control. It's not our base case, but

we have to be ready in advance. We can't react after the fact that the consequence of that if you get an expansion the FED balance sheet, and if you believe Morgan Stanley and Jeffreys, somewhere between seventy the balance sheet expansion flows right through the stocks. And so we asked, why are we bouncing up right now? The belief is the Fed is going to expand the balance sheet kind of around ten trillion dollars. Well, we've already expanded six trillions.

And so you say to yourself, you know what does that mean? Well, put it in context. So follow the math the market right now, the SMP five hundreds worth about twenty seven trillion. Every one trillion dollars a stimulus adds so quickly. And if you go back to Europe, in Japan, their balance sheets in the Central Bank are a hundred percent of ep R GDP is twenty trillion. Instead of going from six to ten trillion, we go from six to twenty trillion. Bearing in mind that slows

through the stocks. You're gonna see a huge move up on the stock market. And that's why you don't fight the fact if money is flowing right into the stock most, and that's that's a really hard bill to swallow. If you were working in the motion theater industry or a sight seeing industry, or some kind of transiitent ground transportation, those are all the jobs have been lost, and it's really tough to swallow. And so um the fat has to play that loose because and then we've gotta wave

a bankruptcy. There's got to be a mechanism to take care of those people who don't have the jobs. So Alan talk to me about real estate because it's something that I know you think about. We think about it here on the East Coast. I think if you're in one of these like highly or very expensive areas, both from a commercial and a residential perspective, you sort of

wonder what the future is. You wonder where the other shoote ops if it does when it comes to real estate, how do you think about real estate in this environment? Real estate is really challenged because I don't know what the rules are regarding poor bearance. So um, I think all you can do is recognized the banks don't want to take possessions of buildings if you're a landlords. Landlords like they're getting stuck with the fact that they have

to deal with people differing the rent payments. The reality of a lot of people differing the rent payments can't afford to make the payments. I'm not sure everyone's game playing the system. I think it is difficult to be an investor in real estate in the short run, in that you don't know what your cash flows are going to be from people renting apartments, store owners in office buildings.

I think the assurances if you're it's like everything else, if you're in the right location with the right type of property, Um, you can recognize today this is still going to be a somewhat temporary, uh situation of diminished cash flow as long as in the white property. If you're in a tertiary property in an office building, good luck.

So I think this whole crisis reinforces real esty comes down to a quality of property, and even if you think there's a modest diminishment of cash flow in the next three to twelve months, um, that property is going to hold during value long one. We will get through this eventually, and there will still be people eventually working out of office buildings, and people will still be paying the rent, paying the rent because they will still mostly

be employed. It says to me, though, alan the building boom that we've seen in so many different cities, you know, out of the Great Recession, and certainly in the last few years, you know it's going to ultimately they'll mean that we've done some overbuilding here. We've done a lot

of overbuilding, particularly in retails. You're gonna see retail, by the way, is going to get repurposed um in the forms of things life apartment buildings, or in the thing that hip and cool office going forward, but with more square foot per employee, which may make it a little less attractive cash flow perspectives. But the reality is we are over retailed, we are overbuilt selectively. The flip side of that is you're going to see renewed demand for housing,

suburban housing. You're going to see a whole new wave of interest either in high quality apartment or in single family residential away from the city and more towards the suburbs. Interesting. Yeah, I mean I feel like there's a lot left to be figured out and written and said about this. Allen Zaffron, Always good to catch up with you, so thoughtful as always, Joining us from Foster City, California. Allen Zaffron, founding partner and co CEO of I e Q Capital. Thanks so

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