Strategies for Improving Coronavirus Testing

Business 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. Let's set the Business week agenda. Gina Martin Adams with US chief equity strategist at Bloomberg Intelligence on the phone from New Jersey. Also from New Jersey, Dave Wilson, our stocks editor at Bloomberg News,

and Dave just set the trade. As Charlie mentioned, we really have seen quite a bounce in the last hour or so. Oh, no doubt about it. We're back at the highs of the day. If you look at the SMP five hundred you know, yesterday we were talking about how you technology stocks were not at the forefront of the games. In fact, they were trailing the market. Today they are right there best performer among the eleven main industry groups in the SMP five. In fact, ten the

eleven are higher. You know, financial shares the only exception as far as that goes. So, you know, you put this all together, and we're really close to the SMP five hundred breaking its record from February, and it's just a matter of a few points here or there that we'll dictate it. You know, you look across the biggest companies, you know, the big tech companies if you like, call them what you will, all up at least two percent, Apple leading away with a gain of three and a

half percent. So you know, Tesla really jumps out to a thirteen percent after deciding on a five for one stock split. That's the sort of thing that happened in the nineteen nineties and companies were splitting their shares left, right and center, and they're just not doing that anymore. And so Tesla really does, you know, kind of look like a throwback with with its stock performance today. It's like with Apple and that's stock split two m the

real quick on today. So the narrative was that we got higher producer prices and consumer prices over the last two days and then we have a reflation slash inflation scenario. Do you buy any of that? That narrative um to explain why value stocks got a little bit of rotation over the last couple of days. But today's trade is really driven by grows stocks again. So I think the bigger story is we broke out above those July twenty two highs and it's been off to the races ever since.

Where the market breaks through these sort of significant resistance levels, it looks for the next level of resistance, which is not until the most recent peaks. It's just sort of full steam ahead until we get back to those early highs, and then we'll probably test those highs. Uh. You know, it's tough to say what's really driving the rotation. I do think the technicals are a lot of it, because from a fundamental perspective, there hasn't been a whole lot

to hang your hat on. You know, there's still a lot of concern about while they are won't they on the fiscal policy front, they're still uncertain landscape with respect to a vaccine. Certainly, the FED is not adding a ton of more firepower to this market, So I think

it's more technically driven than anything else. Except I do want to say on that last point, um, you know about the FED, I do feel like and I get people, you know, messaging me or tweeting at me, and they're like, listen, if anything starts to fall apart, we know the Fed's going to be there. I mean, is that kind of a given, Gina, Yeah, it is. I mean there's an

implied FED put for sure. And that change that really changed this year, especially in comparison to the last several years when there was more focus and back in two thousand seventeen two eighteen in particular, recall, we were focused more on how much can the FED tightened, which is a very different landscape than today, which is really just Okay, the Fed's going to remain loose for a very very long period of time. But usually what you see is

not it's not just that FED put. You've already priced in the idea that the FED has accelerated the pace of liquidity provision to the market. You've already priced in the fact that rates are extremely low. You usually need to the incrementally more liquidity and incrementally more movement in rates to get really excited about stocks. Nonetheless, that's not the case today. We're still seeing stock prices rise in

the vast majority of the rise is driven by valuation expansion. Um. So it's pretty clear to me that this is largely technically driven. That's not a bad thing, um, It just is is what to me is driving the market higher. Dave. If you take a look at the value trade, you know, the conversation in the market though, is in order to have a sustained value rotation and a really move into small caps, you need a vaccine full stop. You need

a recovery. Is that is that true? Well, there are certainly those strategists who will say so, and we we've seen, you know, if you go back the last few months, I mean occasionally you get these sort of two or three day moves and valius stocks and people think, oh, finally the situation has changed, because value has been trailing really ever since the bull market began back in two thousand nine. Well, you know, we're looking at another move

that's fizzled out, just like the earlier ones. Have, and it's just a matter of you know, as long as those big tech companies kind of stay at the forefront of the market, it's like, you know, there's sort of like a force field. Everything kind of ends up coming back to them in some level, and you know, the value stocks just haven't been able to compete. Alright, good stuff.

Uh And I know, Dave, your chart coming up takes a look at fear in the market specifically specifically looking at US options, so looking forward to much more specific alright, really appreciate it. Dave Wilson our stocks that her Bloomberg News. Gina Martin Adams was chief equity strategist at Bloomberg Intelligence. This is Bloomberg Business Week with Carol Messer and Jason

Kelly on Bloomberg Radio. We know that the world is in a race for a vaccine for COVID nineteam more likely several vaccines, but in the meantime, testing and tracing are key to keeping coronavirus in check. And especially when we talk about reopening schools. College in university is our next guest has some thoughts on that, especially when it comes to tapping into what he sees as the under utilization of the nation's test labs. We welcome back Dr Eric Shott, founder and CEO at SEMMA for It's a

patient centric predictive health companies. Also Dean for Precision Medicine UH and Mount Sinai Professor in Predictive Health and Computational Biology. He's really smart, Alex at the Icon School of Medicine at Mount sign Now he joins us once again on the phone in Connecticut. Um, Eric's good to have you back with us. Tell us a little bit about testing and tracing, right. We keep hearing how important this is.

But as Alex said at the top of the show, she recently had to go in for a procedure, got her test done, got the results back pretty quickly. But she and I've seen this to other people taking tests and it takes forever to get the results back. Yeah. So there's, you know, a lot of testing capacity out there. I think it all comes down to logistics and who you know has the right kind of partnerships with the different systems to kind of leverage capacity beyond one lab.

There's no single lab that can handle all of the capacity that's coming. Right. We have these fluctuations and episodes of intense UM outbreaks where the testing demand gets super high, and so it's this it's logistical really the ability to manage and leverage multiple partners to be able to leverage the capacity that's available without getting too political. I mean President Trump talks a lot about how we have the best testing system in the world, and we've really done

a good job with testing UM. So what is he talking about, like where do we do well and then

where do we need to do better. So the the technological side of the testing, you know, being able to provide highly sensitive, very specific, very accurate tests, the technologies those are based on the ability to automate those technologies like we do lead in that arena, I think where we fall down, uh, and would not say we're the best you know in the world, would be again, on this logistics side, the ability to manage huge patient flows,

the collection of samples, the the sending of those samples into the major labs to get them processed like that requires more of a centralized infrastructure that a few big labs have, but they're overwhelmed and can't meet the demands well. As we all said at the beginning to and we heard this from a lot of our guests early on, and UM it was all about kind of a war effort, like we needed to think about getting ahead of this

as if we were fighting. I mean, we were fighting, it was a health war, but I mean that's something Eric Ween kind of needed to do UM and really have federal involvement, national national strategy, but we didn't have it. And it sounds like that's what you're talking about. And the scale of testing is something no lab in the country has had to undertake in the history of the US. You know, the ability to run many hundreds of thousands into the millions of tests today, that's just a scale

we've never had to face before. So the kind of infrastructure you need to accommodate that, the coordination within the government, within the private lab world, that's just not something that existed.

So talk to us about your own personal ramp up that you guys did at Semaphore, because you got involved with this pretty quickly and it wasn't what you were set up to do initially, right right, it definitely you know, we were a state of the art, you know, next generation sequencing UM lab and intelligence company, so we have again familiarity with the technology and the automation, So that

part was easy. So what we were able to do quickly with stand that technology up, run it through a clear, certified UM lab and demonstrate the ability to get highly accurate and quick turnaround results. UM. But like everybody else, we faced you know, from the crunch on availability of re agents and test kids to the logistics of getting

samples to flow through in a very themeless way. Those are some of the obstacles we had to overcome, and of course partnered with the state of Connecticut and a lot of their resources around you know, bringing in UH groups like the National Guard to help and so on. So it was it was an interesting effort and it was a nice way of putting that. UM. So you brought it up sort of the huge effort. Uh, what about financial cost for that? Because it's great to want to change how we do stuff and do but it

feel like it's always gonna come down to dollars and cents. Yeah, the cost um definitely plays a big role, you know, how accommodated you want to be in the test. You know, we do have the ability to test in the home to do you know, through saliva collection and UH anterior nary swabbing of the nose and so on. But those kits cost money. The shipping of those kits in a timely way cost money. The running up the test costs money.

And the software to support how you can manage large flows of individuals like like consider back to work, back to school programs where you know, those systems they don't need just a test that they can flip, right, because they're not accustomed to testing everybody that way. And and say a school or a business they need they need help managing that both, um, you know, managing who's eligible for testing? What are their results? Are they eligible to

come back into the workplace or the school? Like So there's a lot, a lot of again of infrastructure um needed And so the cost varies widely depending on are you just running a test that somebody has provided you the sample or are you managing the entire flow I do. That's why you see no no please finish, no, no, please finish. That's why you see the wide variability and um, you know in the costs and the accessibility to those

kinds of services. I mean, what do we need realistically in this country to be able to do in the testing. That's that's kind of demanded for a comfortable or more comfortable reopening. And we just got about a minute. We're gonna do some news and then we'll come back there. I think it's you need uh, very large scale, very low cost sample collection methods, and there are a number of very significant efforts under way, you know, funded by

the Gates Foundation and the National Institutes of Health. Like how do we for very low cost enable samples to be collected in a home UM environment not have to be medically observed? Like that's a big obstacle that UM is being overcome. And then I think it's all about like how do you enable laughs to handle hundreds of thousands of samples coming in in a day. Like again, that's just like a logistical like think of your sitting in a warehouse and hundreds of thousands of these samples

are coming at you. They have to be very carefully managed and tracked and so on. UM. Doctor, you also run a business. You had to deal with the business during the pandemic. UM, how did you keep people motivated? How did you do it? What did you learn? Well? I think, you know, first of all, we're on a cool mission that some of more like it is about how do we better enabled patients and physicians to uh

make better decisions around their care. We have Core had to stay in full operation while this was going on because we provide standard care services and then the COVID testing, so it was like putting in place the right kinds of protections enabling employees to feel save. We went to the labs, went to alternating shifts where you know, we had a chance to clean between shifts and and if one shift got uh infacted, we you know had another

shift that could could pick up the ball. So it was a lot of again logistical maneuvering and putting in place the right protections and we you know, started doing testing as well on the employees and um you know, symptom tracking and so on to you know, just just be as protected as possible. I am curious to dr Shot you know, from your channels also at UM the Icon School of Medicine at Mount Sinai and just the folks that you're talking within your industry, in the medical

community at large. You know, how do you see playing out, Do you have any visibility and what are your expectations. Yeah, it's it's one of those times we don't we don't have any visibility, so we're we're just asking everybody else for it, right, Yeah, you know it's a it's a tough one. I think you know, the testing will get under more control. Uh, We'll we'll play out whether the antibodies are predictive for immunity, uh, some vaccines. Hopefully we'll

roll onto the scene. Like I think what we'll see as increasingly better management, better protection, allowing a more relaxed dance given those better protections. Um, so I see thanks getting um, you know, more back to normal uh into but yeah, but definitely don't see this disappearing. I think you know, it's going to stick with us for a while, and it's going to really be our ability to better

manage it and return to as normal as dance as possible. Well, I'm glad that you mentioned that because I've been back at work for I think this is my fifth week, and in the beginning when I came back, it was really jarring. Um, and then I got all my systems in place, like to sanitize, when to wipe stuff down, and then it feels okay. And as I mentioned earlier,

I had a test last week and I'm negative. I mean is this what we're all kind of in for, Like we all just have to kind of bite the bullet, kind of get back in gear, and then we realize

it's going to be okay. And the protocols that we've been taking or working, I think that's exactly right, Like the evidence will build that those kind of protections are working and do prevent um spread and new infections, and they're not so onerous, and they do enable us to get back into a somewhat normal stance and have more face to face contact. You know, we are human beings where where I don't think we were intended to live in a completely digital world. So I think it is

important to get back to that kind of level. In the back to work programs were helping manage we see exactly what you mentioned, like if you follow those kind of protocols like you can, you can be really well protected.

It works well. And that's what's interesting because you are working with corporations on back to work testing and also with schools and colleges, So are you anticipating that that's like, as Alex said, that testing becomes more the norm that we're all going to be doing it kind of on a regular basis or maybe doing it for herselves. I mean, is that what's going to be as well? Just quickly, just got about a minute left. Yeah, I think, I

think absolutely. I think testing is going to become a very critical component going forward, but it's it's a necessary component, but not sufficient. I think a lot of the kind of symptom tracking, how people are feeling, even some degree of contact tracing, all of that combined will provide a robust solution, like we will enter the era of surveillance kind of testing like that, will I believe be here to stay. That's like people knocking on our doors being

like are you home? I don't think people knocking on your doors. I think it's surveillance from the standpoint of are you infected? Is the virus spreading through communities? Like? Because if it is, we can take extra protective steps to slow it or prevent it. Yeah, it's definitely a different new world her um, Eric, thank you so much, really appreciate checking in with you again. Dr Eric Shott, He's founder and CEO at SEMA, for joining us on

the phone from Stanford, Connecticut. This is Bloomberg Business Week with Carol Masser and Jason Kelly on Bloomberg Radio. We've got a special vaccine issue this week. It's all about how we got here, the science, manufacturing, politics, and persuasion that might just end the pandemic. It is called the vaccine issue, and there's a really interesting story, a disturbing one too, about how vaccine nationalism is making this deadly disease even worse. Let's get into this story. Vernon Silver

Projects and Investigations Report re Bloomberg News. He joins us on the phone from Rome. He wrote it, and also with us is the editor of the magazine, Joe Webber on the phone from Massachusetts. Joel, you know, just when you think this story can't get any worse, you do think about the nationalistic issues of this virus. It's right, and you know again in one of the defining elements of this issue was to sort of take this idea of a vaccine and look at it from as many

different ways and angles as we could think of. And it wasn't just about the sort of the horse race, if you will, of trying to make this thing. And as much as that's an important part, it also had

there's plenty of other components. And the political one is obviously especially important dimension here and when when Arnon Vernon sort of roses raised his hand about this idea, I think it got to a deeper place because what we're seeing is countries really having this in general, just this resurgence of nationalism, and that's now manifesting itself um around how they're approaching the vaccine, and as countries are digging their heels in to sort of do everything by themselves,

it actually makes the whole situation worse because through collaboration, we might have been able to pull resources and maybee maybe reach a cure or a vaccine quicker than we otherwise might and benefit more people. And what I think Vernon really found that was so in thing was being in Rome, you know, which was one of the first places affected by the pandemic. Uh. It really felt like Italy was at sort of the forefront of this conversation. So so Vernon, what was the Italian perspective on all

of this? I mean what we did was started following the vial literally of how the vaccine were being produced. And the first strand came in just ten little vials that were sent from Oxford, uh to Rome to this company that was going to make over ten thousand doses for the trials, the very first large scale trials of

a vaccine in the world. Um and by happenstance um, the you know, the initial supply of that vaccine was within the borders of Italy, and the politicians here latched onto it and it kind of it kind of steamed, you know, it was a snowball where you had more deals being made and more kind of nationalist rhetoric coming out of the mouths of the leaders here who needed a redemption from having been the worst hit at the outset um and the the end result is that we've

got about, you know, a quarter of the supply of the Astra Zeneca Oxford vaccine now being bottled within Italy's borders. And how it plays out in the end is one of the questions that that's been left open as they balanced, you know, let's all cooperate with well, we do have it here. Well, I'm glad you brought that part up,

because I was wondering what the nationalism part means. Does it mean that you provide the money to the company to make the vaccine, that you then buy all the vaccines and have to be a local company that's making the vaccine or is it the distribution like the vials and the manufacturing part. Like, there are lots of different angles to it. Yeah, and the best way to understand it is it breaks down into two areas, the bad

actors and the bad planners. And the bad actors are you know, the accusations against the Chinese and Russian governments that they've been hacking the Western efforts. The bad actors are. We already saw it in March when protective equipment was being blocked by different countries. Ninety different countries blocked equipment that would have been of use during the pandemic. Those are those are the bad actors, and we kind of

know about those the bad planners. It's sort of just the splintering of where, you know, are you going to throw a lot of money at it? You know, the Trump administration is throwing ten billion dollars at this operation warp Speed that sucks up supply poorer countries then you know, are trying to pull money to buy their own supplies.

That drives up prices. And these companies that are trying to you know, save the you know, save the world and also makes the money or trying to find solutions, and Astra Zeneca is a great example because they've decided they need to fight the nationalism by creating the supply chains on four different continents. If everyone's gonna fight over it,

give everyone their own darned supply chains. The Russia has a supply chain of the Oxford vaccine, and Brazil will have one, and there's the one in Italy, and there's a billion doses being made in India. So okay, best laid plans, right, we create vaccine or vaccines and the world has equal access to it, and then there's reality. Is there vernon the possibility the likelihood that we're going to see people ordering the vaccine, but then there's going to be countries who are not going to let it

cross their borders. Absolutely, that's what That's what the companies are planning for. That's what the governments are planning for. That's why you try to get a clear idea of how these these orders are. Who goes first? You know, in the UK said, you know it's been developed at Oxford, We're going to get the first doses for our people. How does that play out in the end? And that's that's sort of what we're looking at next, is that borders have become the battle lines in this nationalism of

the vaccines. Vernon Um. The the other thing that you said in here, Um was something about poor countries, and I just want to bring that out here because for basically everything that we're looking at here, we're basically talking about rich nations that have the ability to actually have

the science and manufacturing in place. Is this yet another example of sort of uh, this ongoing conversation that we have about inequality and and uh, and here we have some countries with many people who will actually have access to something first, while probably a greater portion of the world has nothing. Yeah. Absolutely, I mean across the board. From the beginning, this pandemic has exposed and exacerbated inequality

of all types. And we're going to see in the coming months as the vaccines and there are tons of them, as they roll out, that there will be huge inequalities and everybody will get hurt by that because the fact

is that these viruses don't know borders. So if the UK or the US or China hords their own supply, well, you know, somebody in the poorer parts of the world is going to uh not get it, and that's just you know, if they if if there were some magic way to get everyone spread it around at the same time for the people who most needed it, uh, you know, healthcare workers, the vulnerable, then we'd be out of this

mess a lot quicker. But that's not what's happened. Yeah. Um, And I do wonder too, because, especially in these emerging markets, it's where you're seeing some of the early testing of the vaccine happening, and it would be kind of ironic, unfair. Um. I don't even know what other words to use about it if ultimately these countries then don't have access to the vaccine when it's finally confirmed. So it's a deep,

deep read. Um. The coverage in the magazine about the race for a vaccine Isjuel said, it's not just about the horse race, but about so many other issues such as vaccine nationalism, so it's a must read. Alex. Yeah, I think we saw that, um with HIV in Africa, that like that that they were that's where they did all the early testing, and that's where you're going to run into some albums. Yeah, exactly exactly. I feel like, man, there's just so many different facets to this story and

so much more to come. Um our thanks to Joe Webber, editor of Bloomberg Business Week, on the phone from Massachusetts. Vernon Silver great reporting always projects and investigations reporter at Bloomberg News has been watching this virus firsthand from Italy and joining us on the phone from Row. This is Bloomberg Business Week with Carol Masser and Jason Kelly on Bloomberg Radio and Alex we resently noted here at Bloomberg

you actually brought this up on our planning call. You talked about how some companies have been out there to kind of the rush, if you will, for sustainable finance. I think there's a recent bond steal from Google right their parent alphabet, Google Visa. It's sort of like the new trend in the middle of the pandemic, and there is the demand. I think the question that becomes like do you actually make a good enough return on it

versus blaying something else. Ultimately, it's about the returns. In our weekly Bloomberg Green Segment today are Emily Chason, she sustainability editor Bloomberg New She's got a look at how long term investors now hold more sway when it comes to e s G. Environmental. Um, I can't remember what that is now, Environmental, Sustainable and Governance. Thank you. A momentary break here man, Time has no meaning, thank you, partner. Let's get into Emily. She joins us on the phone

in New York City. Time has no meeting Emily. Thank you, thank you, save me, save me. So what's going on? Yeah, well, absolutely know. That's a really good start of this conversation, that time has no meaning. You know, we're talking a

lot about short term investors. We talked about long term investors. Um. One of the things that's interesting in this pandemic is that short term activists have not really been making the big bet stay they were right, like, the market is pretty volatile, it's pretty risky to take such a big bet.

So long term investors right now actually have a much um at least a big companies have a much larger influence, and they've been warning for years about all these stomach and workforce issues with diversity and climate change, and so this is kind of like help help, This is kind of their moment um. So e SC has definitely been stirred. Jing and Um. We looked a little bit this week about the tools that long term investors actually happen incluce companies.

So the criticism in terms of say the last six months with the s G is that the reason why E s G did well is because it's mostly tech like E s G is you're not gonna think of it as an as an energy, right, and Texas out performing energy, So therefore E s G performance better. But that's not really because of E s G. Well what

do you think about that? Well, you know, it's interesting because Bloomberg Intelligence did something this week where they looked at diversity and like stocked with more women on board, and they're actually starting to bee divergent for companies that have more woments on board. So it's not um, it's not just and um. What a lot of the E s G investors have found is that they chose companies that had better management and were more able to pivot or um rethink what they were doing in the pandemic

as well. Interesting, So what so what does this mean then for kind of the E s G world. I do love though that the statistics are showing to show because I feel like we went through a period I keep kind of going backwards here, but and we went through a period where E s G people just wanted to do because they felt like it was the right thing to do. But now it's become much more mainstream. Yeah, E s G I mean after they're just flowing in. UM.

We looked at ubs this week. They were out with a note saying that they had seen seventy one billion and infos and E s g F in the second quarter, which brought their E s g F to one trillion for the first time. Just that U b asked UM and they found that fifty of sustainable funds outberform their peers in the second quarter, So that definitely is happening from there. But then we also looked at UM annual meeting practices and just ended. So there's all those environmental

resolutions that these long term shareholders bring. UM, we're actually getting more support as well well. Yeah, and then to that so let's get to it. So these proposals, whether they're social, environmental, or governance, et cetera. UM, what what kind of support are they getting, are they being implemented, et cetera. Yeah, it was a really long term process. It's more sort of the direction of travel and where

things are going. UM, and you know what issues investors want to flag to companies because these are mostly non binding proposals and then the company probably takes a year or so to implement them, if they do at all. But um, anyway, the votes are coming back stronger this year even though it was all virtual and your leading seasons, so there weren't any climate protests or um gad by and executive facts like they usually aren't in your leading season.

So UM, we looked at environmental resolutions and there were four climate child reposals at wrestles three thousand companies that received majority support this year. Um. There were none last year that did, so that was a big change. And then the diversity proposals also got a lot more UM passing rates this year than they had previously. Yeah, I do wonder what initiative when it comes to the E s G space has just gotten you know, the most um, I guess resulted in the most changes, if you will,

And it's really brought about changes at companies. Is it is it diversity is an environment? What have we seen? Emily, Well,

that is a million dollar question, I think for sure. Um. You know one thing that has interesting about that is that, um, these social issues often have a bigger impact on stocks going So if your company has take issue or a diversity issue, UM or me two issue, that can have a much bigger impact on your stock price than environmental issues, which are sort of slow and steady and it's sort of feels further out to the market. So that's definitely one thing to watch for. I'm really upset that we

didn't talk about. Oh go ahead, Alex, what we're gonna do you? Its right, yes, Tom you first suptus its like you missed it, mansues institutes, um you only about three seconds left. I just wanted to get your take on the fact that even the environmental proposals, I mean, does it mean that it's more it's more less cost effective for companies because I want to having to put up money to change stuff, and maybe that's why it doesn't get as much traction. Just got about thirty seconds. Um. Yeah,

environmental proposals are actually down this year. But what it means is that companies are being more preemptive with their shareholders and they're trying to um negotiate, and they've been more willing to issue sustainable finance things themselves on their own accord. Without so much pressure from child as not having to like get all the way to a proposal. Interesting stuff. I love that stat though, that the Morning Star finding that of sustainable funds outperform their peers in

the second quarters. That's pretty cool Tuesday, right. I was gonna let it go, but I'm glad you brought it up again. Exactly. Not so good though for the environment. Emily Chason, Sustainability editor up Bloomberg News on the phone from n y C mac Journal. Yeah, but you let me drive. No, no home, honey, please, I'll do the right lt me. I want to drive, just drive, baby. The questions drying yea, this is the drive to the globe. Give me thanks, We'll drying up Dawn on Bloomberg Radio.

It is time for the drive to the clothes. Joining us once again, Brian Yatman. He's Chief Investment Officer, portfolio manager and lead manager of the y CG Enhanced Fund. The fund, by the way, in the nineties six percent all over the past five years, returning nearly twelve percent on average annually. Brian based in Austin, Texas, and that's where we find him on this Wednesday. Brian, great to have you here. Have you back on Bloomberg Radio? How

are you? How are your how's your family doing? How's your work family doing? Man, We're doing great, Um, both family and work family. Um. You know, I feel a little bit bad to say that, but during such difficult times, I'm actually really enjoying the family time and just being around my my wife and children more. Yeah, I've heard that a lot, Alex. I don't know how you you know, like it's just I know you're back at work, but that kind of bubble feeling a little bit, It's cute.

I had mixed feeling, um about all those things. Um, Brian, do you have mixed feelings about the market at record Nize? Oh? Well, yeah, I mean it's this is crazy time. I mean I've never seen anything like it, nor has anyone. I'm sure you keep hearing that a lot, um, And I'd say it's definitely a time to invest with care and and not. I'm not saying it's dangerous just because there's so much economic and political uncertainty, but just the fact that there's

so much speculative fever running rampants out there. I mean, it's it is a casino out there. God, that doesn't sound too good because we know, we know the house always wins. I'm refering to like the robin Hood effect, right, Like, so robin Hood, they went to free trading, and then it led to free trading at all these other online brokerages to be competitive, and there's you know what gambling and sports down where do you turn to? Well, this is this seems to be the the most popular place

to now gamble. You look at Charles Schwab as an example, there's six times larger in assets than robin Hood, but robin Hood has twice as many trades on a daily basis than Schwab. Yeah, but isn't this a little isn't a little simplistic? Because I look at the SMP and I look at the last leg of the rally that we've seen in the last six weeks. It's been led by industrials, materials, and financials, and that's a pure recovery trade.

I mean, that's, ah, we're going to get a vaccine and or we're combating the virus in an efficient way. We're gonna buy the recovery stocks the reflation stocks. Yeah, and that and that's true. But the thing that I guess keeps happening is just so unpredictable that it's risk on, risk risk off, and it just keeps going back and forth because the reality is nobody really knows how this will shake out in the next few weeks, months, and even in the next year. You know, the reality is

there's still fear out there. The virus is still out there, and so is there's fear. It's leading to a whole different dynamics of the marketplace. Right, But then I think the problem is if you just invested with fear that you'd missed the rally that we saw, because then you'd be buying big tech. Um, well, I guess you'd be buying gold, so you might have a nice run of it, but you'd be buying you know, treasuries, and you'll be

buying big tech. And that's what got shaken out. So how do you as an investor deal with um the macro versus the reality what we're seeing in the market. Well, rather than trying to predict the directions, I think the key is as an investor, you are buying ownership in the business. So the key is to focus on businesses with proven business models, and particularly they need to be

conservatively capitalized so that you know that they'll survive. You don't want to buy into something where the bondholders of today become the shareholders of tomorrow, right, So you just want to make sure that things are going to work out over the long term. On the businesses you choose to own, well, let's talk about some of the names you're always so good about because you guys are buying names and you know, putting names into your portfolio. Let's

talk about some of the names that you like. And I know one of the bigger holdings UM is St Lauder. Talk to us about that brand. As you know, we're always looking for global champions and Stay Lauders is certainly one of those. They have the number one or number two spot and Prestige Beauty in over forty countries, so huge market share in the Prestige beauty UM. And you know this is they're right in the fire as well

because obviously they're being affected. Uh you pointed out the software side or some of these other businesses that have this recurring revenue stream being more protected. Of course, Est Lauders being hit. But you know this is a selfie generation and people are still getting on zoom calls and

they're still they're taking photos, posting on social media. People want to be at their best and look their best, and so traditionally what's been the challenge for St. Lauder was they were primarily coming through the partment store channel. Over the years, they've declined from over fifty in the department store channel to under and what happened was airports became the new malls. Well, obviously it's a ghost town in both those places, department stores and airports, but the

management smart. I mean, they're they're dedicating their budget towards digital marketing, so they're adapting and online sales are growing super rapidly. It's over now. So that I think the point is is whether it's directed consumer or whatever channel it is, this is a disposable good that's a short repurchase cycle and people are going to seek out their their desirable brands. I'm just gonna say I had an

who worked at St. Latter for a long time. They have become brilliant and have been for years now of buying up smaller and really popular kind of in brands. And so it's not just about the St. Lauter you know brands, but it's about Bobby Brown and everybody else that they bought, um, and that has helped them tap into a younger generation. And let's not for get Brian.

I mean the margins on some of that stuff, it's unbelievable. Yeah, you're actually reminding me of when we first bought a Sta Lauder several years ago when it was getting hit hard. And I remember coming home to the family dinner table and I told my my children bought some Sta Lauder stock today, and my teenage daughter's Tally and Sky. They said to me, You're like, why are you buying s DA Lauder. That's a terrible makeup brand, which I thought it was funny to hear from them. They're like, you

should be buying into Mac. Was like, well, that's done by Lauder exactly. Oh and Dad just crushes the teenagers. But my question is who's going to come up with the mask resistant foundation, because if you can do that, you win everything. My mask is full of makeup stuff. Yeah no, I mean That's what I'm saying, Like, if you can make a MAC resistant foundation, like you know, they should get on that. The whole thing. Um. But what I think is interesting is that if you look

at the track record. Uh, you know, over the last month that fund is up by about three point four percent and heard a day they're pretty much flat. And then the last year, uh, they're up by about twelve So you know, there are opportunities that don't have to be Facebook, right, And they've been really you know, pretty open Alex about kind of their more recent performance and no longer term they've done. They've done well, but it's been tougher, you know, in this environment right where people

are just chasing some of those big tech names. So um good, good good to check in with him. Um mask resistant foundations. Seriously, I mean that that's an end lipstick. If that could happen, you'd be a bazillionaire. Something called waterproof kind of mish. I don't know, not so much. I know, think yeah, maybe to discuss it. Thanks to Brian Yakman over at Yakman and Company. Thanks so much

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