This is Bloomberg Business Week. I'm Karl Masser and I'm Bloomberg Quick Takes Tim Stanobek. We're here every day bringing you the latest news from the world of business and finance, plus technology, politics, economics, all parnessing the power of Business Week reporters and editors, not to mention our journalists and analyst in more than one and twenty countries. You can download Bloomberg Business Week and iTunes, SoundCloud, or Bloomberg dot Com.
You can also listen to our radio show at two pm Eastern Time on Bloomberg Radio or watch us on YouTube search Bloomberg Clobal News. Well, Kitty Gradfeld and I have been talking about it throughout the first bit of our program this afternoon, and that's the rising COVID cases that we're seeing here in New York City and around the world and around the United States, just ahead of the holiday season. Here in New York, new daily cases are at levels not seen since last April, that was
before the Delta variant ripped through the country. On a US basis, we're seeing new COVID cases at levels that we saw on the down trend of the Delta variant back in September, so definitely a concerning story playing out. Let's get some details from Dr Ian LUs Beder, clinical professor of Medicine at n y U Lang going to medical center. He joins us once again on the phone from New York City. How are you, Dr LUs Bader, Hey,
Tim and Katie, Thanks Sheppy Friday. I'm doing well, but I'm definitely perceiving a lot of market volatility, a lot of emotional volatility, because patients are calling in droves with newly positive nasal SWR. Wow. Okay, So that's interesting to note that, because you know, it's quite a different tone than we had last week when we last spoke to you, and it certainly feels like things have shifted a lot
where we are in a few days. I told Katie this earlier this week, but the lines outside of testing facilities in my neighborhood are stretching down the block, sometimes even to the next block. The number of people waiting for tests out. What's going on, Dr LUs Bader, is it? Is it a mix of people getting tested before traveling, or is indeed we're seeing a new surge here ahead of the holidays. I think we're definitely seeing a new surge. We're seeing a number of patients UM that have been
double and triple E vaccinated. Colleagues that I work with in the hospital nurses, UM we've had three vaccines, have a running nosecloth cold, they get swabbed their PCR positive. I suspect most of these are O macron which are really breaking through the vaccines, and we are seeing a surge of increased, almost a doubling in the number of positive cases. So uh. The good news though, is that
these really tend to be fairly mild. People have a headache, muscle aches, kind of like a mild flu, not nearly as bad as real influenza. And uh, unfortunately we don't have a lot of treatment now available for them, the monoclonal antibodies we are using, but now they're going to be rationed a little bit. Well definitely, I'm sorry, Dr Lost, I did just want to ask them given like you say that, you know, it seems to be more mild a macron very it is breaking through, but you're not
going to get as sick as maybe previously. I'm curious how how much you think this current wave that we're starting to see build might delay the return to normal, whatever that looks like. I think it is going to somewhat delay the return to normal. I mean, we've sort of been predicting spring when this will all be over, right, Personally, I still think you know that will be the case. I do think oh Macron hopefully is the final variant and maybe somewhat endemic or even like a yearly flu.
Possibly will get a yearly shot for it, although as we know, the flu shot is not really effective either. UM. My sense is that most people get over this quite well. We are reserving monoclonal antibodies, which we were giving out much more freely before, but now really can't do that for people over sixty five or people under fifty or people below sixty UM that have underlying diseases cardiovascular disease, diabetes,
lung disease. So it is being somewhat rationed UM and I think that's appropriately so, because I think we were giving it too mild to moderate symptoms, you know, and people who would have gotten over this anyway within a few days. And in some ways I think we're trying to make the patients happy, but they probably didn't really need that treatment anyway. The pills that are coming out. Certainly, the Fiser pill is still going to be a little delayed.
It's it's a combination with right ton of her, which is a protease inhibitor that you know has been used for years with HIV. Very safe UM, but again not not approved yet. So really we're treating people symptomatically and DR. I mean, like you said, you know plenty of people double triple vaccinated who have had breakthrough cases. I know plenty of such people in my own life, and I
don't know. I'm curious if you have any concerns that that might dissuade people from getting the boost to this sort of feeling that it's inevitable that I'm going to get it anyway, Why why bother with another shot? I think you raise a good point, and I think for the people who are vaccine hesitant, over time, I think it just reinforces why bother doing this? I'm going to get it anyway, And to some degree I think that's true.
I think everyone will be getting O Macron sooner or later unless you've really been able to isolate UM effectively. The bottom line is, really the vaccines do seem to help with with severity of illness, and I certainly feel better having gotten a third booster shot. It's very hard to measure specifically in any one individual if they're exposed,
because it really depends on the viral load. If if someone is very sick with omicron and they cough in your face, you're going to have a high viral load. So it's very hard to measure. But I think the vaccines are helpful. Um. I think if you haven't been vaccinated, certainly be very careful going out in crowds because there's a long incubation period. People seem very minimally sick, and they can be very contagious. Dr lust Beder, we have
thirty seconds left with you. Should people rethink gathering together for the holidays, Yes, to some degree, I think they should be careful. I'm not sure how I think everyone is going to wind up with omicron sooner or later. But I think if you are healthy and you've been
a triple vaccinated, get together with family. I think if you haven't been vaccinated, or if you have underlying disease, I would be very careful at this point, and until we have a little more data on Dr Ian LUs Beder, we are really grateful you join us each and every week. He's clinical professor of medicine at n y U Lane Goes Medical Center. He joins us on the phone from New York City, said it several times, Katie, everyone is going to get it sooner or later. I mean, that's
the moon music. It feels like everyone I talked to they're just you know, looking at their watch, wondering what their time is. Do alright, such such as where we are right now? Happy Friday, everyone is Bloomberg Business Week with Carol Messer and Bloomberg Quick Takes Tim Stinovic on Bloomberg Radio. Well. McDonald's was once celebrated in black entrepreneurial circles. Now though it's settling with black franchise the owners who say that they were blocked from the best and most
profitable locations. In fact, in a little over a year, McDonald's has faced multiple lawsuits that McDonald's itself practices his own form of redlining. It's the subject of a detailed Its subject of a detailed story by Susan Burfield, senior investigative reporter for Bloomberg Business Week. She joins us on the phone from Brooklyn. Joel Webber joins us as well editor of Bloomberg business Week. He's on the access line
from Brooklyn, Joel. To understand the story of of what's going on right now at McDonald's, you have to go back decades, all the way back to the nineteen seventies and the nineteen eighties. What did McDonald's do then in order to attract black franchise owners. Well, it was one of the first corporations that really UH did a job
of being proactive about welcoming black franchisees. UM. And there's some nuance to that, but UH, for the large part, and this is what you said at the top, there there was an entrepreneurial spirit and welcoming of the black community to own McDonald's. UM. And Susan's reporting really UM, which is just incredible, but largely centers on on one character UH phone named Herb Washington, who who kind of speaks to that comes from that era. UM and started
with one franchise and quickly amassed others UM. At one point he was had in the twenties, UM, but they were never turned out, never quite the best locations. UM. And that led to a lawsuit that just settled yesterday. But Susan Before we get into all that, who is Herb Washington and what was the opportunity that he saw
in owning McDonald's. Yeah, so thanks UM. You know, I think for Washington and a lot of other black entrepreneurs, McDonald's offered them an opportunity to own a business um UM and to be part of a system UM at a time when those kinds of opportunities were often denied to them. And so you know, Herb had been UM a track star in college. He briefly played for the Oakland A's UM and then he decided he wanted to
be a businessman. UM. He was given a first restaurant in Rochester, New York, in a neighborhood that was pretty impoverished and mostly black and Hispanic residents. And what he realized over the next couple of years is that there was a pattern at McDonald's, and that was that they initially believed that UM, it was best to put black owners UM into in black neighborhoods. You know, civil rights activists wanted it, UM it seemed good for the community
these UM definitely was good for McDonald's. But over time, and what herbs experience showed is that that also served to constrain them to those neighborhoods and made it harder for them to own restaurants in communities um that were either more diverse or more white and well off, where the restaurants were usually easier to run and often more profitable. And Susan lock me through how this relationship works. Because
McDonald's owns the actual restaurant building, right. And then you know, franchisees such as Washington have to pay them rents, right so we yeah, so I mean everyone calls them owners, but what they own really is the equipment inside the restaurants, um, the sign you know, outside the restaurant. M McDonald's own the building. The franchisees pay rent um, they pay a percent of their sales to McDonald's. UM, they pay all
kinds of fees to McDonald's. Of course, they have to follow McDonald's rules, um, and so they are beholden um to the corporation. McDonald's of course wants them to succeed. But you know, if they don't, McDonald's is not really responsible for helping them. You know. So when the franchisees or if franchise's fall into financial trouble, sometimes they have to take on a lot of debt for these restaurants. For McDonald's asked them to renovate restaurants that can be
quite costly. UM. You know, they bear um the burden of those costs. So bring us up to speed to where we are right now, Susan, and and where herb Washington is with his lawsuit? What is what was he looking for? And and what's the latest? Yeah, So, um, her Washington has filed his lawsuit alleging racial discrimination in the ways that you know we've just talked about in February of this year, and his is actually the fourth
UM in about his year to make similar allegations. Uh. And last week McDonald's settled one of the other lawsuits brought by two other franchisees. And just yesterday, UM it's settled with her Washington. UM it bought him out entirely. So it purchased thirteen of his restaurants UM for his restaurants are total and paid him thirty three point five
million dollars for them. So UM, as of yesterday, Her Washington, after forty years, is no longer part of McDonald's UM and his restaurants in the hands of other franchisees, which you know speaks to. There's there's two lawsuits that you mentioned there. One was a class action lawsuit that settled a week ago. There's two other ones that you mentioned
the story that are also related. And just curious, like what does what does this mean altogether when you when you step back, can and think about you know, these culminating lawsuits and somebody like Washington like bringing all together?
What does it all mean? Susan, Yeah, well, I think you know McDonald's is being held to account by UM, the very people who you know, it has depended on UM for many years to help it profit in the black community, and you know, many of whom have profited themselves, but you know they are they are UM, you know, asking McDonald's to consider how it's treated them over many decades. UM. You know McDonald's of course is not UM is settling.
You know, it is not admitting any guilt. UM you know makes a point of saying that the court have not found that it's violated any laws. But nonetheless, you know, it wants UM these problems and these people to go away, And Susan quickly, I am curious, you know, are there any numbers we can attach to what this kind of version of redlining has meant for those franchisees who are
in these areas. Yeah, so, in the lawsuits, some of the franchisees claim that their stores brought in about seven hundred thousand dollars less um than stores owned by other operators. And so you could figure an average um store these days makes about two point seven two point nine million dollars. So you know, it's not that they're not making anything, but seven hundred thousand dollar sales difference is pretty considerable. Well,
it's just a great read. Susan, thank you so much for taking the time and for joining us on Bloomberg Business Week. Be sure to check out Susan's story on the Bloomberg terminal. You can also read it at Bloomberg dot com as well. McDonald's made enemies of black franchise ease. Now it's settling, is what Susan's story is called. That Susan Burfield, Senior investigations reporter at Bloomberg Business Weeks. She joins us on the phone from Brooklyn. Also joining us
Joel Weber, editor at Bloomberg Business Week. He's on the access line from Brooklyn as Well, you're listening to Bloomberg Business Week with Carol Messer and Bloomberg Quick Takes Tim Stinovic on Bloomberg Radio. You're listening to Bloomberg Business Week with Carol Messer and Bloomberg Quick Takes Tim Stinovic on Bloomberg Radio. Tim, it feels like bitcoin cannot get off the ground. We are closing out the fifth straight week of losses. The price of bitcoin now below for thousand
dollars per coin. We're going to talk to Mark Michael Sonenshein. He's the chief executive officer of Gray Skill. He joins us on the phone from New York City. Michael, There's so much I want to get into with you, but I feel like we have to start with the biggest cryptocurrency out there, Bitcoin. What is going on? It feels
like all of the excitement has really exited the crypto markets. Well, first of all, great to be back talking to you guys, But I have to say that prices have never been and I don't think anytime soon will be the indicator of excitement or activity in and around bitcoin or a crypto asset class. I think from the lens that we look through it at great scale. There is no question that there is still as much as ever, it's not a growing excitement around the asset class, the use cases
being developed, applications being developed. UM. While it grows user growth, UM price is not going to be the best sentiment indicator UM for activity on these networks. Okay, fair point, fair point, But I am curious to hear your explanation
for why bitcoin is down over the past month. Well, listen, as we've seen time and again, bitcoin has a period of repeatable pattern rather of going through these you know, bubbles and bursts, and each time it does that, you see the price get a little bit overextended, course correct forms a new base UM and then usually continue to
move out to new kind of all time highs. The bitcoin price has obviously had a meteoric rise throughout twenty one and I think what's so inspiring about being involved with the asset class that it means something different to everyone. So in some circles bitcoin may be seen as a risk asset, and so in a world in which investors may be taking money off the table and risk assets
as we may be seeing. Yet you know, another flare off around the COVID nineteen pandemic um or investors may be thinking about it as a store of value a head. Everybody is using this as a slightly different tool um And so over time we found that investors will continue to allocate to the asset class. But after a year, when it's had the run that it's that it's had,
you know, there's certainly could be some profit taking. Hey, Michael, we haven't had a chance to speak with you since the crypto executives faced questions from uh the House and the Senate this week, the House last week. I'm wondering
your takeaways from those hearings. And and if you think that regulators and lawmakers get it, I mean and if you rewind the clock twenty four months ago, you couldn't even get crypto to be spoken about on the floor of the US Congress, right, And now we're having these very meaningful conversations that really underscore, you know, the democratic process that we have. The conversations that we've been seeing
taking place are really informed, thoughtful questions being highlighted by Congress. Right. They're really listening and learning about the crypto industry, and instead of really taking the time to focus on the exaggerated risks or money laundering, or hats or ransomware. They're actually starting to really ask questions about the benefits of the asset class um using it to democratize finance, using these technologies to democratize the lady Internet is being used.
And so we find this to be really really encouraging, and it's certainly been proponents of seeing increased regulation that will only lend itself to greater validity around the asset class And Michael, I mean I would agree with you, at least, especially in the house hearing. I was really impressed by the quality of the questions, but it feels like there's so many cooks in the kitchen when it
comes to crypto regulation. I want to talk about the SEC because Gray Scale you've filed to convert your Gray Scale Bitcoin Trust. It's the largest crypto fund in the world. You filed to convert that into an e t F. Obviously, physically backed e t f s for bitcoin aren't allowed yet. But what caught my eye was in the past few weeks, both gray Skill has submitted a letter and then coin based this week on gray Skills Behalf submitted a letter to the SEC, just really urging them to allow that
conversion to happen. And I guess i'd love to hear why first of all, and whether or not you've have a response yet from the SEC. Sure, So, the SEC um has been exceedingly recepted to the crypto asta class overall, and we've been engaging with them, you know, I would say at least in two thousand six UM on r EPs endeavors for the Great Scale Bitcoin Trust tick our
g b TC. What's been a really encouraging and really meaningful milestone for the investment management industry is that this year we saw the approval of not one, but several bitcoin futures based ct s, and that signaled to us a change in the posture of the SEC around these types of products. But when we did see that, we were also very quick to say that, while that is a very meaningful step forward, well what about spot based
or physically back to bitcoin products like GBTC. And what's interesting is that these two products are going to be tied to that same underlying bitcoin market, which is where the SEC has you know, really historically had their issues. They want to see surveillance of the bitcoin market and um, you know, the types of protections in place that they've
seen in equities and and other asset classes. And there was a letter submitted on our behalf in filing first for the E T F right, but actually called out the fact that the SEC should really mean brain and even playing field. Michael, Yeah, we unfortunately have to leave it there because we are running up against the clock. We love having you on. You've got to come back soon, please,
do we really appreciate it. Michael Sunshine is chief executive officer at Grace Scale joining us on the phone from New York City. You're listening to Bloomberg Radio and this is Bloomberg Business Week. Yeah, but you let me drive. Oh no, no, no, no, this is not a toy. Please, I'll do bridevel. I want to drive. It's good question, this is good Drive to the globe, mull drive up down on Bloomberg Radio. It's Bloomberg Business Week and it's
time for it. Drive to the close. Katie and I just talking about the indicase that we're seeing move lower on the day today and look over the last five day days and for the week, we're going to see it down weeks, especially on the NASDAC, looking like it's going to close by about three percent. Let's get into it with Vince Nichols, global equity investment strategist at BNP Pariba Asset Management. Vince, how are you. I'm doing well.
How are you all doing? I'm doing well. Thanks. Thanks for joining us on the phone from New York City. Then t help us make sense of this week. I mean, where do we even begin. Obviously, global central banks a huge part of it, inflation a huge part of it, but also the rise of the amicron variant, and the changing tone that we're seeing not just in New York
City but around the country. Yeah, I think those are all, um, huge factors and all of this and and to the larger point, Um, you know, we're we're entering two in a very different place than we entered last year. We're coming out of the pandemic, or at least thinking we were. Um, you know, huge amounts of stimulus feeding the economy. NASS compares versus last year and in both growth and economic fundamentals or for corporates as well. Um, and this year
it's it's obviously a lot different. Uh, stimulus is rolling off. Um, We're not going to see the same the same impact either from the fiscal side of things or um for monetary policy either and we saw that this week as you mentioned UM, but the FED now on a double of the pace that we originally expected for the tapering UM and who knows where it goes from there either. So I think there's a lot of uncertainty going into
this next year. Doesn't necessarily mean I'm bearished or we as a firm our bearished, but I think one thing that that's probable for next year is is more of the same of this is a little bit more volatility. And Vince, how do you position a portfolio around that volatility and around some of those different factors that you walked through the fact that you know, it's clear we're not quite at the end of the tunnel when it
comes to the pandemic, that much is clear. And like you said, the FED doubling the pace of the taper really taking a hawk is tone here. It's it's tough, um, but also it's great for active managers. Right, You're not going to just see multiple expansion and everything kind of rise in tandem. UM that there's going to be differentiation
in investments that are working investments that don't work. I think it's important to focus on the bottom up UH companies with cash flow, companies that have the ability to pass on inflationary pressures to consumers UH. And those are the companies with you know, enduring competitive advantages UM, whereas
others may face more margin pressure. Companies that are are pre earnings if you want to be nice to them or just uh nonprofitable to be a little bit more honest, UM, those companies might be more challenged going forward and may have less of a bid from optimistic UH market participants. And you may see a decline and market participation as well with less money in UM, you know, the retail
trader's pockets. UM. So I think, as I said, you're gonna have more volatility, more dispersion, So I think important to focus on fundamentals. I think also when as we talked about inflation, it's UH. While our base case would be that you're going to get a moderation of inflation UH next year and pretty much throughout next year, so decelerating pretty soon but still above trend and also very high upside risks or a fat tail fattail risk to
the upside UH. And in that case, I think you need to be prepared, um to have positions that will do well in such an environment. Even when do you think inflation will peak? That that's that's a great question. Um. A lot of people smarter than me would have said already that would have happened. Yeah, hence why we've retired the word transitory at least if you're talking to right,
exactly exactly. Um So, not only the FED, but I think economic forecasters at at at many banks, um and people that are doing this professionally would have thought so in many cases. Uh. And here we are the last inflation report, um, the highest in decades. You know, that's more than three decades, to be exact. Uh. And that's that's that's an inflationary environment that many people in my industry have not seen in their working careers. Um. So
it's going to be an interesting challenge. So to your question, when do we think it will peak? You know, I think base cases first half of the next year. At some point we are starting to see a lot of inflationary pressure's ease, and particularly the ones that we really deemed to be transitory. Um So those those are starting to roll over. But things like wage pressure things um. Uh So some of these aspects of inflation may be more sticky UM wages in particular, and I think that
could um for some upside risk to that outlook. Then I'm hoping you can walk me through what this all means for the bond market, because if I look at the long end of the treasury curve, I see a ten year yield that just can't seem to say, above one point five per cent. And I mean we're talking about inflation, the fact that so many people have been wrong in trying to call the top. I mean, why
can't we get long end yields sustainably higher? You know, that's a great question, and I'm a little bit out of my element here, But the one thing I will will say when I'm commenting on the bond market is, uh, it's really surprising to see bond prices where they are
given the level inflation that we're seeing. Uh. You know, so such a large percentage of fixing COUM assets out there are having negative real returns UM and that's that's surprising to me that investors would be comfortable taking that on over a long period of time unless there's more
tactical investing in that area. And I would imagine. So that's that's very surprising to me, even I know, at the risk of at the risk of being a little out of your element here, I'm just wondering, in your view as somebody who focuses more inequities, what is the signal that that's sending you, What is that telling you? Why is that surprising to you? It's it's telling you that had a lot of things have been bid up in the last uh well certainly the last eighteen months,
but over the last decade as well. UM, simply global financial crisis. You've seen we're in a bull market for bonds for you know, I think approaching forty years now. Maybe in an excess of that, I don't know exactly. UM, that's that's very surprising to me. But it also shows you that you're seeing bids across all asset classes. You're seeing it, and even outside of equity and fixed income and real estate UM, prices for assets universally are much higher.
And I think that that goes hand in hand with some of the the accommodative policies that we've seen. Evince, We're gonna have to leave it there, but thank you so much for joining us on this Friday afternoon for our Drive to the Close. That's Vince Nichols, global equity investment specialist at BNP Perry bat Asset Management. Thanks for
listening to Bloomberg Business Week. Download the podcast on iTunes, SoundCloud, or Bloomberg dot com, and you can also listen to our radio show at two pm Eastern on Bloomberg Radio or watch us on YouTube. Search to Bloomberg Global News