The Need for Real-Time Data to Combat the Coronavirus

Week on iTunes, SoundCloud, or Bloomberg dot Com. You can also listen to our radio show weekdays at two pm Eastern only on Bloomberg Radio. Well. Another company on the front lines when it comes to the virus is Surgical Solutions. Melissa rap is the CEO of Surgical Solutions, and she joins us on the phone from Illinois. Alyssa, so great to have you here with us. First of all, um, how are you doing. What's the situation in Illinois? How

are your workers doing? Oh? Thanks for having me. We actually have our two hundred plus frontline healthcare workers in thirty hospitals across nine states, and what we're seeing is a lot of probably what you're reporting on. It's obviously we're hit the hardest in New York City, where we're sole in the eye of the storm, but starting to see things a bait in places like Michigan and Tennessee, where we're starting to see elective surgeries begin to be

rescheduled starting in the second half of May. And so give us a reality check here, Alyssa, because I feel like, you know, we hear from Governor, as we hear from the President and the Vice president. The coronavirus task for us PPE is you know all that we hear about. I mean, I don't think the average person really knew what PPE was before. They certainly do. Now, what's the reality check on where we are broadly and then more specifically if you can in terms of the needs and

how those needs are being met. So PPE was a real issue, and it was as dire as you probably reported on as of about a month ago, and in some places in this country it is still dire. But in our experience, things again there have begun to improve. Sourcing has improved. Our frontline team of eight in New York City, it was we had to we had to import our own PPE for the protection of our own people as of a month ago, and now things are starting to um callm to a dull roar. Now it's

a much different issue. There is a desire for elective surgeries to be rescheduled. It's not just to have the system be up and running, but things that were elective can become emergent if they don't get rescheduled. Uh. And so we are starting to see places like Tennessee and Texas and Western Michigan begin to start putting some elective cases back on the calendars. And then the issue is in Ppe. The end of the issue for firms like

Surgical Solutions and others. Others are how quickly do we bring back employees who may have been furloughed, How quickly do how do we think about the recoveries? Are going to be all at once or is it going to be more gradual? Well, and I'm curious to what you're hearing about patients themselves feeling comfortable about going into hospital settings at this point, right because we've been told stay

home for a good reason. But I do wonder as we start to re enter world and go back to a normal or as normal as it can be, how comfortable folks will be, you know, stepping into you know, a hospital or healthcare setting. It's an excellent question, and I think it really comes down to the sites of service. So the degree to which a hospital can segregate the sites of service for COVID patients and non or even within a system designates sites as COVID sites and non.

If you or I were going in for an elective procedure like a laproscopy or an endoscopy and we knew it were to be outpatient and it was at a site that is a designated non COVID site, well we'd probably feel okay. But it's the the our ability to manage COVID and make sure that that's being managed properly and swiftly and excellently, and then we can start bringing in healthy patients again for routine procedures. I do wonder, and I don't know, Jason, if you think about this.

I think about this when, you know, taking my daughter to see her pediatrician when she was younger, and there was a healthy area and the nonhealthy or not. You know that the were people were fighting kids, right, And so I do wonder if it's just going to be that on steroids going forward when it comes to the health care community to make everybody feel comfortable about the environment.

I think. I think there's that approach for patients for sure, and then there's a whole other consideration set, which is the healthcare worker and the degree to which we can get antibody testing in a broadway for all Americans will change all of our feelings about quote unquote returning to normal. But the degree to which we can have our employees, in our frontline, frontline healthcare workers antibody tests so we

can all walk around with a COVID card. If you knew you had the antibodies as a healthcare provider or a patient, you would be less trepidacious about going back, you know, Alyssa, I do wonder, especially given your background, which is is fascinating we and unfortunately don't have time to get through all of it. But you know, you were the CEO of Bottle Notes, your lecture at Stanford and at the Booth School. You understand both the philosophy

and practice of business. You also, I believe, have done some work with the Illinois Housing Authority. So I mean and Illinois is a place, and we interviewed the Mayor of Chicago recently and just talked about this. The haves and the have nots when it comes to this virus and so much that's been exposed here. You're seeing this through all aspects of your work. What has it taught us? What can we do in the short and the mid term to maybe mitigate some of the really hard facts

that we're learning here about who gets what? When I think that your point is the right one, which is there's a short term crisis to manage, and there's a

medium term desired outcome to plan for. And Mayor lightfoots an extraordinary leader and a friend, and we all need to make sure that access to preventative care and access to well care for all of our children across Chicago, of course, Illinois and the country is addressed on the on the backside of COVID as it relates to what's being done right now in my backyard is I'm sure you've seen, you know, a lot of Papa possibles here in another major metropolis are what we have to do

to make sure there's adequate care for all of our impacted um citizens because when you don't have social distancing is hard. It's just not that easy, and it requires a level of independence and oversight and physical space to do it, and that is not evenly distributed amongst our population. So that's going to take a medium term, a medium term solve. Well. In social distancing essentially is much easier for people of means. I think that's just a fact,

right it. Unfortunately, social distancing is easier when you have space, and you can access digital learning through digital technologies, and you have space to do your work from home, and you don't have to be somewhere to do it, and those are all by definition things to socioeconomics. Yet just got about thirty seconds, you know, earlier, the New York City mayor said that they're going to create their own strategic reserve, you know, um, and it's all about I

feel like we're federal versus states right now? Is that what we're going to see states having to do at this point? I would like to think we will not have to go there. I would like to think we

can be a coordinated, unified team federally and statewide. But it's you know, I think that what we're seeing today is that the decision of whether to reopen or not is going to ultimately be relegated to the governors, and then what's going to be done will not been across the country, and how that will ripple effect and will will be a resurgence in the fall. Well, time will tell alyssa come back, because we would love to talk

some more with you. As Jason said, your background is just so impressive and just crosses so many different areas, so hopefully we can get your back. Sine A Lissa Wrap, CEO of Surgical Solutions, on the phone from Illinois. This is Bloomberg Business Week with Carol Masser and Jason Kelly on Bloomberg Radio. We throw around the world unprecedented a lot these days, Carol, but what's happening in the oil

patch certainly is that. Let's get into it with Stuart Glickman, head of Energy Research over at cf are A Research, joining us on the phone from New Jersey. Stuart, great to have you with Carol and myself. I know it's an incredibly busy time. I guess to start, let's just briefly take thirty seconds remind people what we're seeing and why it matters so much. Thanks for having me, Jason. So what we're seeing is on precedented because we've never had the contract for for West Texas Intermediate w t

I which is the U S benchmark. We've never had that contract go negative before. Uh. It seems kind of um indecipherable at first glance. Why why that price might be negative And what it really reflects is a fairly thinly traded contract that was getting close to expiration. Uh,

and a handful of speculators got burned on it. Um. I think a better indication of where things are in the oil markets is probably the next contract, the June contract, which is also down considerably over the last couple of days too. Well, that's what I wanted to go to, um stew is that it's not right. Okay, we get kind of a guess what happened with the most recent you know, the contract that's expiring, but even you know, the forward looking contract is under a lot of pressure.

Tell us what that is. Is it the supply story? Is it the lack of demand story? Is it both? What is go? You know, we know this sector has been deder pressure. What's the big story here? Yeah, Carol, It's it's really both. So what you have, on the one hand, is you have a plummeting demand. So demand that is normally in a steady state around a hundred million barrels a day has dropped perhaps by a third in a very short period of time. You still have

a lot of supply making its way to UM. You know, not not just the US market, but other markets as well. But you have so much supply, and if you're a producer and you don't like the price that you're going to get at the pump, excuse me from your refiner, normally you just throw it into storage, which is a viable option so long as you have available storage. And I think what the market is telling us is that

we're getting very worried about hitting an upper limit on storage. Uh, and that's why prices are reacting in the way they

are today. So what does this mean for a typical investor who's looking at this, you know, an investor, maybe a small investor who's also a consumer, because you know, I get all sorts of tweets and text from people saying like, well, I guess it's gonna be each Not that anybody's going anywhere, But what does it actually like play this through the economy beyond the folks who do this for a living and sort of trade these futures for a living. What does it mean to the everyday

person for the next three six months, especially amid this pandemic. Yeah, so, so the U. S economy is now a net exporting nation. Uh. You know, US production, through lots of innovation by small companies, has really built out its production potential. And so you know, yes, at the pump, if you happen to need to drive somewhere, you can fill up for cheap. The problem is that the pandemic is disrupting the natural mechanism which would normally

stimulate more demand. Right and in the meantime, if you are tied to the production of crude oil, and there are, you know, there's a handful of states where it's a really meaningful piece of overall economic activity. You've got Oklahoma, New Mexico, Texas, Louisiana, North Dakota, all you know, all all that have have all benefited from this from the

surgeon oil a production in the last ten years. But really now we're are kind of taking it in the teeth because um, you know, there's just there's just way too much supply and not enough demand. So what does this mean globally? Like I just think about Saudi Arabia, Like I just think this is what I want like the bigger pictures do, Like, what does this mean? We know they've been struggling, as we've seen oil prices go down. This is such a big part of their economy, but

what's the bigger story here? The bigger story is that everyone across the board is struggling. Uh, and there is really no place to hide. So I think back about a month, six weeks ago April excuse me, March six, Russia and Saudi Arabia walked away from the bargaining table because they could not agree over one and a half

million barrels of production cuts. A month later, because of this crisis, they agreed to to cut effectively ten million barrels off the world market, which is historically massive and yet still completely insufficient. And what that tells you is that demand has really just fallen off the table. Yeah, it's really, I mean, it's it's just remarkable when you look at it. I really appreciate that perspective. Thank you so much. I feel like this is a story that I want to be able to walk out of a

conversation like that. And I do feel a lot more informed, you know, and I think people need to understand it, not just from the prospective like whoa, those are big numbers, but more how this plays out, as you rightly pointed out, Carol, globally, because Saudi obviously has geopolitical uh implications as well. We know that to be trued. And I think Jason, it was happening anyway, but it's been exacerbated because of this crisis and demand has just come to a stop. So

for sure. Stuart Clickman is the head of Energy Research over at cfr A Research, joining us on the phone from New Jersey. Smart kay, for sure. This is Bloomberg Business Week with Carol Masser and Jason Kelly on Bloomberg Radio. There are two things we love on this show. One data we love numbers. To love being able to explain things. It's our training at Bloomberg. We're very much in the midst of that, all the way up to our founder.

The other thing we love on this show Sean Donnon just can't get enough of that guy seenior trade reporter for Bluemberg. Johnny is on the phone from Washington, d C. As is of course the man himself, Joel Webber, editor of Bluemberg Business Week. Can I just say this guy's just opened up. But I don't know whether that's Sean and Joel's power. I don't know as you introduced them, but literally thunder and lightning just went crazy. Yeah outside my window here alright. So Joel Webber, you I think

you agree with me. We love data, We love to be able to prove things. I think about the Bloomberg fifty and the fact that it's got to have a number around it. This story is all about numbers, all about numbers, um and and you know, I think this was um one that really started with Sean as I get some thunder in my background as well, really sets the table for talking about right totally. But the numbers

are feeling this time. Why is that, Sean? Well, I just you look out there and we look at this great, big economy that we've got, and you're trying to reach for some data to show you what's happening in there. And the reality is you look at the normal economic data that we rely on, the non farm payrolls, the inflation data, all of that stuff, and it's just not telling us what we need to know right now because this thing is just moving too fast, and that tells

us something bigger. Here we have you know, ostensibly the biggest economic crisis of our lifetime, and yet the data we rely on to measure the economy isn't keeping up well. For something new, I love this line in your story. Peering into our future might be easier if we knew with certainty what happened in our immediate past. I mean to get an idea. This is what Jason and I talk about so much, and I'm assuming you know Joel and your team. It's like, what does life look like

post COVID nineteen? But unless we can kind of trust the data that we're dealing with now, we really don't know, right Sean, And we don't have the data yet on on our media past, a lot of our media past that first quarter GDP, those three months to March. The first reading we're going to get of that is April nine. The data, you know, the one that we really care about, that the second quarter that we're in now, where most

economists agree the big downturn is happening. We're not going to get that until the end of July, all right. So this is such a great read in part because there are some history lessons in here, some callbacks the McNamara fallacy, tell us about that shunk. Right. So, there was this grim bit of data that the American military operated it really planned the war around in Vietnam for for years, and that was body count literally from the

ground on up. They were reporting the number of enemy combatants killed on a daily basis, and commanders back in Washington, we're using that to assess how the war was going. The problem was is that you've got some really perverse and incentives in the system. There where UH commanders on

the ground whose careers depended on this data. We're inflating the data and reporting that back up all the way to Robert McNamara, who was then leading the war effort in the Kennedy administration, and um he was looking at these daily body counts thinking the war was going great for years, that the US was winning, when in fact

it was losing quite heavily on the ground. The McNamara fallacy is what came out of that, and that is what happens when policymakers in particular, but it could be investors, quants, it can be UH politicians, business leaders, CEOs. When they have their nose in the data and they ignore what is going on in the world around them. And that leads to just some really bad choices and some big mistakes. And so that's you know, that's the downside of data.

Right now, we don't have the data we need. At the same time, we can all look out into the world and know that things are not going well. So do we need to think please Well, I was just gonna say, you know, like, hey, there, we're not totally dreading blind here, and that there are places that you know, the Federal Reserve and the GDP now index, Shaun is one way that we have attempted that economics has attempted

to kind of put its puls on the now. But even that has its limitations, right, So so what we're what we're starting to do now and you're seeing it in in a lot of the alternative pieces of data that we're all looking at. People were looking at open table bookings there for a while, uh at the beginning of this crisis, just that collapse uh in in reservations through that booking app uh reservations at restaurants that that

happened in cities as the shutdown orders went through. We've been looking at t s A security clearance data to show the number of air travelers. We're looking at traffic data, electricity usage data, all of that stuff. But all of that is is kind of partial. It's not necessarily reliable.

And while the Federal Reserve and the number of the regional sets have put together, uh these efforts to try and measure short term GDP and the Atlanta said does this, The New York fed is is played with this, The Silly set has played with it as well. Um, none of those things are really reliable enough to count on yet. So we need that data. We're looking for that high frequency data, but we don't yet have that magic data that we need. What makes me nervous is not having

that magic data. Is that here we have policymakers trying to figure out what's the right steps to take. We're gonna be talking with Paul Krugman and get his take on this um a little bit later on our broadcast. But I do under sean like, if we don't have that magic data, might we be taking the wrong policy steps right now that will hurt us later on. That's

absolutely the risk. We really don't yet know where the damage is in this economy, the U S economy right now, And that means you can't necessarily target the policy response to the right areas. And that's something that we're gonna be adjusting where that policymakers are going to be adjusting, uh or in dealing with a lot in the months

to come. Well, and it's interesting to Sean, you know, you talk about China in your story, which you know normally I feel like, in in normal times whatever that used to be, you know, we would look at Chinese GDP data and things like that be like, well, you can't really trust them, but we have these other ways

to do it. Unfortunately, now literally life and death decisions are being made based on data that we have from China, which we now know probably isn't reliable, and global leaders, central bankers, presidents, heads of state, they're making decisions on that data. How worried should we be about China here? Well, yeah, China has has has always been a question in terms

of its data. There's also clearly now there are some big questions over how they covered up the data early on, in particular in whether they are continuing to cover rope the health data. But we also know the Chinese leaders have for years had their own ways of adapting to bad data and Lee Ka Chang, who's the premier right now. Famously about a decade ago, sat down for dinner with then Chinese ambassador when he was a provincial leader, and he said, look, I don't trust our own GDP number.

So I look at three things. I look at freight movements, I look at bank loans, I look at electricity usage. And that tells me what's happening at the Chinese economy. Amazing what we're all kind of right now. We're all becoming like we're all becoming or hit fun people right, Hedge investors looking at you know, different metrics shown Donn and we do love you and adore you everybody. It's in the magazine online, It's a must reach on Donn and Bloomberg News and our thanks to Joe Webber. We

also endore Appleburgus this week row the journal. Yaw. But you let me drive? Oh no, no, no, no, who's going to run? Please? I'll do the right vels me. I don't want to drive all just drive baby, the questions trying. This is the drive to the Globe community. Thanks, We'll drying us down on Bloomberg Radio. It is time for the Drive to the Clothes with us as Jimmy Quare, portfolio manager at the Buffalo Small Camp Fund, joining us

on the phone from Mission Kansas. Gotta point out that fund a top performer, beating just about all of its peers over the past five years, returning on average nearly eight percent annually. Jamie, good to have you here with Jason and myself on Bloomberg. How are you and tell us a little bit about what's going on in Kansas? I am doing well. Thank you for having me on. We're quarantine like everybody else, so a lot of the same. And so what do you make from the market of

the markets sitting there in Kansas? Because you know, we I feel like our view is a little bit colored by you know, a day to day that is probably similar to yours, uh in in broad strokes in terms of you know, work from home and all that stuff. But you know, being in the epicenter, I do think that that changes maybe our our perspective a little bit, uh to the negative. As Carol pointed out, you have done extremely well by any measure in the markets and

focusing on on small caps. How do you cut through the noise and frond the signal here? Uh? Yeah, well, um, typically, you know, we do have the same issues obviously that's going on into your Clearly we don't have as bad of the cases as you guys are having there, and it is a slower pace here in Kansas, thankfully, but we do obviously have the same concerns. Um, you know, the market volatility that we're seeing. It's just as hard, um.

You know, as far as how we're kind of handling all of this, we have a process that really kind of doesn't change despite what's going on in the economy. We tend to invest in companies that benefit from long term trends, and those trends are going to remain intact

regardless of what the economy does. But obviously we're having to scrub our portfolio and make sure that you know, companies, Uh, they will be impacted to a certain extent by a weaker consumer and slower economy, and clearly, work from home INSA's changing everyone's work environment. Um. But we're really looking for, you know, those companies that are positioned well during this and hopefully we'll actually come out of this even stronger, uh,

provided they have a decent opportunity for recovery. Well, Jamie, I'm curious about kind of changes you might have made then to your portfolio. As I mentioned, your fund has done really well consistently. It's not just a one year thing, but over the past five years at least based on Bloomberg data. So have you made any changes because of the situation, because of the virus impact? UM tell us

about that. Yeah, we've made a few changes, thankfully. Once we saw this start to hit, we really took a look, especially in certain areas like like consumer UM in terms of you know, how hard these companies are gonna be hit, and you know what's going to happen to their revenues overall, and what can they do to really um, you know, pivot a little bit and change what's going on. Certainly other sectors like healthcare. You know, if you have a

left of surgery, those are gonna be in trouble. Uh. If you're a tech company and you have a lot of small and medium business uh exposure or UM you know, you're exposed to to some industries that could be hit harder, like travel. You know, we really need to scrub through those.

We've we've made a few changes here and there. We've actually even made some ads so as well, if companies that we think that could even benefit from all this overall, I clearly need to make sure that these and if it's going to be sustainable and not just flash in the pan. But uh, you know, you know, you really want to find those these that have great management teams

that can have it well through this. So, Jason, I love talking about specific stocks, So give us some names that maybe you've been buying into as a result of this thesis. Well, I can't really talked about ones that we've been buying during the quarter, but I tell you someones that we do like and have like coming into this that I think I could take advantage. So the first one is called love Sack, which is an interesting name, but it's one of our smallest companies we have overall.

It's a hundred and fifty million dollar market cap company. Uh so pretty small. They make seatings, so a modular sectional couch called the sactional, and uh what's probably best to strite as a modern dame being bag called the stack. So very innovative products. They sell online as well as through showrooms. The company got really just trashed through this.

They first got hit by the trade war in China, had adjust their supply chain, and then they obviously had to close all the show rooms through the coronavirus, so the stock got completely orphaned. At one point this was a forty stock. It traded all the way down to four dollars. Uh. And it's a founder led microcap company, which you kind of, you know, worry about good decisions

that manage makes. But these guys have really done just an exceptional job conserving cash, cutting expenses, pivoting their advertising and their customer sales support to really support online and they reported a couple of weeks ago done an excellent job here. Um, you know they're starting to see a lot more improving trends after a rough couple of weeks. Uh,

their e commerce business was up over fo. They think that they can be cash flow positive here going forward and actually think they'll be back to plan here in a couple of weeks. So these guys have pivoted grade stock still oversold. It is down to tin bucks and like I said, it was up at forty. I think these guys have a lot more to go. And it looks like and it looks like no dead on their balance sheet. I mean they're their balance sheet looks pretty cool,

even with all the stuff that's going on. That's right. You know they're not a big company, but you know you've got about thirty five million in cash. I think they're a survivor, and you know, the survivors, especially consumer that can make it through this, they're gonna have a lot less competition going forward, and they're gonna be winners.

I remember hearing about this. The ticker is love L O V E. I believe Dave Wilson, our stocks editor, had it as his stock of the day a while back, and I just remember being uncomfortable hearing Dave Wilson's they love sack in any case, Uh banned with B A N D as another one. You like, only got about forty seconds here, but give us a pitch on that. Yeah.

So this is a cloud based communications services company. UM. They use their software expertise to get enterprise customers to carry their voice uh and even more so these days, they're messaging over bandwidth network, which they own themselves, so they carry voice traffic for a lot of the next gen cloud based service providers companies like Ring Central, eight by eight, Microsoft, Skuy for business and even UH. They'll do some audio for video conferencing companies like Zoom, which,

as everyone knows right now, is just crushing it. Um. So right now, their their customers are all market share gainers. Um. They're getting bigger and bigger, more strategic accounts. They've been expanding into Europe with a lot of their customers. Uh. And like I said, they own their own network. Incremental margins here on on incremental revenue, we're going to be outstanding and balance sheets in great shape here just to confer head into this solid, solid balance sheet, and they're

looking good going forward. It's time to be a stock picker, that is for sure. I love the bottoms up analysis all right. Jimmy quay are portfolio manager for Buffalo Funds, on the phone from Missions, Kansas. Uh. The Buffalo, I believe, refers to the actual like Buffalo. You know where the Buffalo roam, not Buffalo Buffalo. Have you seen Buffalo? I have, and I've seen your pictures from Colorado. Thanks for listening to Bloomberg Business Week. You can subscribe to the podcast

on iTunes, SoundCloud, or Bloomberg dot com. You can also listen to our radio show every weekday at two pm Eastern only on Bloomberg Radio,