The Outlook for U.S. Health Care Systems

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. And many of us are talking about the US healthcare system, how it was in many ways, I'm prepared for the virus and really how society was, of course, and how it may change the health care system that is as a result of COVID nineteam, Let's get to someone who's got some thoughts on that.

Dr Vivian Lee is President of Health Platforms at Verily Life Sciences, former CEO of the three and a half billion dollar healthcare system University of Utah Health She's got a new book out today. It's entitled The Long Fixed, Solving America's Healthcare Crisis with Strategies that Work for Everyone. She joins us on the phone in New York City. Dr Lee, nice to have you here with Jason and myself. Um,

tell us a little bit about this book. First of all, I'm curious when you started writing it and how you're thinking about it now in the context of COVID nineteen. Well, thanks for having me. It's really great to be here. You know, when I started writing this book, I really

wanted to write about the solutions. You know, we all know, or many of us know, that our health care system has not really been functioning all that well even before COVID, and I wanted to write about the bright spots, some of the great work that people are doing across the country that are really solving the healthcare crisis locally, and then weave together those stories for a national vision and national narrative for how we could actually make our health

care system better. I called it The Long Fixed because I thought it was going to take us a long time. I mean, I think there's a way there, but it's going to take us a long time. Now with the COVID crisis, I'm really hoping it's going to be a lot shorter fix because I think if if COVID has taught us anything, there's just an incredible urgency to really fixing our health care system. And so give us one of those fixes, because we're all looking for them right now,

and especially things that we can do pretty immediately. Dr Link Well, the underlying problem in our health care system is that we really run a fee for service healthcare system, meaning that our hospitals and doctors live and to mount and so we are designed to do things that generate fees,

like run operating rooms and imaging centers. And when we stopped doing that, as we have in the last few months, except for our frontline providers managing COVID, then we actually start to we start to run the risk of bankruptcy. In fact, we laid off one and a half million doctors and nurses in the last month in April, and we know that there's going to be a rebound in need of care, and who knows what's going to happen with COVID. So we need to create a much more

resilient healthcare system. And we have some terrific examples around the country. We have medical groups that are functioning in a completely different way, getting paid totally differently by Medicare groups like chen Med and Iora Health and Care more and all across the country, and those healthcare systems are able to care for their patients, their Medicare patients in a way that is really focused on prevention, really stable and resilient now in the face of COVID and just

keeping him healthier, healthier and out of the hospital. And so doctor Lee flip it around for us and help us understand how we as patients might need to think about healthcare differently, because I feel like we've all been either experiencing or at least hearing about things like telehealth going forward. What are we doing wrong or what can we do better in thinking about delivery of our own healthcare that can sort of help the system fix itself

a bit. Well, that's such a great question, and we have a lot of time to reflect about that right now, as we're all staying at home and thinking about various conditions that we're worried about. What we don't want to go into the clinic or to the emergency room about. Right So, one of the one of the products that our company actually has made over the years is a

exactly what you're talking about. It's for people who have type two diabetes, and the lessons that that we learned from it apply to other other conditions that people might have, but in this case, for people with type two diabetes very common. The main issue is we've got to keep our blood sugars under control. And typically, you know, you have to prick your finger a few times a day to check your blood sugars. You might to go in and get blood tests in the hospital or in the clinic.

But the new technologies there are continuous coast monitors. These are these are little devices that are like the size of your key fob, and you put it on your arm or your abdomen. They have a little bluetooth chip in them and they measure your blood sugar sends the

tracing to your phone. You can actually look at how your blood traces on your own phone, and then instead of keeping a food log, you take pictures of your meals and snacks, and then you as a diabetic patient, you can actually look and see, oh, you know, Vivian, that second splash of a conpipe wasn't so good for you. Look at what it did to your bloodshers. And then you can text with your coach, and you can video chat with your doctors, all from your phone, all at

your convenience. That's the kind of health care that we need to be embracing now. Many of us wanted to do before, but our health insurers didn't necessarily reimburse the good. The silver lining with COVID is actually now they are reversing reimbursing for that. They're actually now starting to cover this kind of care. And we need to be demanding that. We need to say, hey, you know what, I can care for my own health better with my own devices,

at my own convenience. It understands me. It's not trying to pretend that I'm some other kind of patient and doing a one size of its all. This is care for me, and this really needs to be covered by my health Let's get back to our conversation with Vivian Lee, president of Health Platforms over at Verily Life Sciences, joining us on the phone. She's also got a new book out. It's out today, The Long Fix, Solving America's healthcare crisis

with strategies that work for everyone. So Dr Lee, I mean, I guess on the topic of the day, and you know, this pandemic, what are you seeing right now from the medical side, and how does it jive with the enthusiasm that we're seeing from a market perspective and maybe some optimism for the economy. What's the medical lens that we should be looking at this throat. That's a really, really

great question. It's also a really difficult question because what we're seeing in terms of the landscape of COVID really varies so much by region to region, locality and locality, and how people are responding to the crisis in terms of whether they're able to maintain the social distancing and the precautions and the masks versus not. As the economy starts to reopen, is going to be the big differentiator.

You know. One of the things that I've been thinking a lot about as um as my book has been coming out, is just what is going to happen in the longer term, let's say, just even around the corner to next year. We have all these employers who have been facing big economic challenges of the last couple of months really hoping, hoping to reopen as employees definitely hoping

that the economy gets started again. But one of the biggest challenges and one of the biggest certainties that we have for next year in the midst of all this uncertainty, is that healthcare premiums are going to go up next year. So how can we how can we help as employees really in the interest of our employers, prepare them and really start to change that narrative and actually start to push back against those rising healthcare costs and get us

into a much better place for the next year. You know, I'm listening to us talk, and I'm thinking about people who may be listening, and I feel like the three of us are certainly among the very lucky of probably having really good health care, whether it's by our employer or what have you. There are so many people out there that still don't have health care, and I feel like,

that's got it. We've got to figure that one out, right, We've got to figure out a system that makes sure everybody's part of this system of staying healthier before we can even tackle the rest. That's so true. And you know what, today we waste five to thirty cents on every dollar in healthcare so when people say, you know, there's not enough money to cover the people who are uninsured, I say that is hogwash. There is plenty of money

our health care system. We just need to be able to recover that waste and be able to spend that money more wisely. Because we actually know all politics aside, we know that people who have access to health care, they do better, They are healthier, and they have more um more satisfying lives when they have access to healthcare.

So it's really important that we do that. But I do wonder what's happened and maybe you know, with health care becoming such a business, it's interesting to see ads by health care systems, you know, whether it's on TV or cable, And I do wonder does that make the system better or worse? You know, the fact that healthcare is a business should be or could be in our favor if it were structured right. Uh. The metaphor I like to use is healthcare flies into the headwinds of

capitalism unlike almost any other industry in this country. And what I mean by that is in our fee for service model care, we're we're simply paid for everything we do to people. We as healthcare leaders as as somebody who used to lead a healthcare system invest our resources in things that generate fees, so we don't invest in

primary care, and we don't invest invest in prevention. And what we need is to embrace those models of healthcare, which there are some really great examples of right here in our own country that actually used the capitalism as tailwinds driving innovation for better care. Medicare advantage as an example, the way in which our military pays for military health as an example, the way in which our v A

system pays for v A health another example. We have actually successful examples in this country and we just need to apply those more broadly well as you as you know better than most. This is not something that we can we can solve in seven eight minutes, but we do appreciate your time today and I hope we can get some more time in the future because it's it's a really important subject and I'm glad you've written the

book that you have. The book that is just at the long fix, Solving America's healthcare crisis with strategies that work for everyone, written by Dr Vivian Lee. She's the president of Health Platforms at Verily. Life Science is joining us on this Tuesday on the phone from New York. It's an important one, Jason, and it's not going to be an easy one. But with all the money that spent, we've got to be able to do it better. Certainly here in the United States, healthcare flies into the headwinds

of capitalism. That's quite a quote. This is Bloomberg Business Week with Carol Masser and Jason Kelly on Bloomberg Radio. In the magazine, there's a great story about the Jersey Shore, and yes it does reference the TV show that Carol Masser thought was just a documentary about her life, but it actually wasn't. I kid, I kid, because she is the furthest thing from Just watch It, Kelly, I know where you live? Who was the who was the star? Oh God, I forget all their names, right, Mike, the

situation snooky who was now a mother with several kids? Yeah, there you go. Anyway, Devin Leonard went there. Uh. He's one of our favorite writers at Bloomberg this Week, always right on the news and telling a great tale about the Jersey Shore, but also a cautionary one when it comes to the economy. The beaches are open sort of Devin Leonard joins us on the phone to give us the breakdown of what he saw and coming out of this Memorial Day what we may see for the rest

of the summer. So, Devin, what's going on on the shore? Well, I mean, you know, it's sort of a sort of the reopening of America in a microcosm. I guess, I guess these towns are are beginning to open up, you know, up and down the you know, the East Coast. But they're full of businesses that are you know, basically need to make or basically they make all their money. And you know, six months really just four months of the year beginning with Memorial Day. In a lot of cases,

they couldn't even reopen for Memorial Days. So so a lot of folks are are, you know, wondering whether or not they're gonna able to survive. But at the same time, you have the mayors and all these sounds have to worry about. All these people are worried about, uh, you know, being inundated with people from you know, other parts of the country and bringing COVID Night Team with them. So it's you know, it's a really difficult situation. Yeah, I don't know how they're going to make it work. I

was thinking about this, devon. You know, my family and I, UM and extended family members often you know, rent a house down in the Jersey Shore in Ocean City, New Jersey. The boardwalk is part of the life, um, you know. And I don't know how you do that. You can't

do that. But I do wonder about these businesses who write the bulk of their business happens in these summer months and it's not going to be business as usual, no, I mean, you know, I went to Seaside Heights you know again, you know the you know the place where the MTV show, you know, Jersey Shore with films, and I walked around to the boardwalk with Anthony of Oz who's the who's the mayor, and uh, you know, basically he just wanted me. He just wanted me to go here.

From the from the local business owners, whether they owned bars, you know, well most of them were, you know, own bars and restaurants because the the you know, the the arcade folks you know can't can't reopen. And you know you have the the whole casedo Piers which has you know, all the attractions you know that's closed, but he wanted to hear from me. He wanted me to hear from them. You know, you know the situation that that they're in, and you know, most of the people were saying, you know,

we can't survive. You know, the restaurants are just doing take out. They were saying, it's five percent of there. You know, you know the revenue, and you know they can't make it. I guess unless they can open up more, and they can't because Governor Phil Murphy and New Jersey won't let them yet. And is there a sense that this could evolve to a more open situation like what's the either the timeline or what's the most optimistic case here? Devon? Well, Jason,

I mean that's it's it's really interesting. I didn't really understand this, but this is happening all over the country too. All of these states, uh you know are sort of reopening in phases. You know in some cases that did the town's control certain things about how they reopened too. But so what we're going to see is is um and you basically see it in Myrtle Beach. Right, didn't go to Myrtle Beach, but I talked to some people down there, and you know they're they're in the South.

They you know, they have less uh you know, less COVID nineteen there. But so they've reopened, they've allowed the states allowed restaurants to uh off you know, for indoor seating, but only only of their capacity. But they had to do tons and tons of cleaning. A woman told me, you know, literally it takes ten minutes to you know, to flip a table, you know, because you have to you have to disinfect it, wipe it down, you know,

you know, I mean there's for those four steps. She sounded tired just talking about it, um and uh and you know she was she was only using of her capacity because fifty you know, it was too much. So but but really, to you know, to directly answer your question, even that's not going to be enough for you know, for a lot of businesses, particularly restaurants, and you know that.

And if you're a boutique, you you know, you know you're gonna have to limit the number of people people inside in the The president of the Marble Beach Area Chamber of Commerce told me that she expected members, you know, to you know, not to make it, you know, and that's out of members, which I thought was an amazing thing for somebody for the Chamber of Commerce. There's supposed to be positive and she couldn't do it. Yeah, well,

right exactly. I mean, the business formula, the business equation right for profitability is just kind of so fragile just when everything goes goes right that if you throw anything, and especially at something on this level, Um, you really do have to wonder about the amount of businesses that can survive. On the other side, I do think, you know, devon a lot about the conflict between officials at a

higher level versus the local level. You know, there really is and there's a lot of we're talking about that there's just kind of no clear consensus about what to do, but there's a lot of conflict right about how to move forward. Well, I think I think Mayor of oz he would probably like things to move a little quicker. Uh, but he he doesn't still restaurants at the same time he does the town does control the hotels and motels and in June they're gonna be they're gonna be allowed

to open up of their unions. So so so you know that's a little quicker, but uh, you know, that's he still has to. You know, this is a town where you know there's residents, but on a on a hot summer day, you know, the number of people swells to thirty thousands. So yeah, I know, it's just it's just it's just incredible when when you think about it. So he's trying to and he needs to do something to limit the number of people who are coming. He's hoping for, which I guess is and it still sounds

like a lot, but it just sounds incredibly tricky. And I do wonder about as law enforcement or enforcement tries to, you know, prevent the crowds from coming, what kind of conflicts we're going to see. I mean it kind of scares me a little bit because you know people are anti to get out. Well, I did talk to some of the epidemiologists who's who who said, you know, summers coming, people are gonna need need to get out there. You know there is a way to do it that they

weren't saying, no, no way, don't do it. It's it's too dangerous. But but there have to be some some sort of limits. And you know that to your point, I mean, how do you set that? How do you how do you enforce that, especially in the talic Seatside Heights, which is really you know, a fun town, a party town, and um you know people people don't people go there to let loose and and uh so, um so I think just that in them itself makes it diff difficulty.

It definitely does. All Right, Well, it's a really nice read and a good reality check. Devin Leonard always get to catch up with you projects and investigations reporter. His project this week was figuring out the Jersey Shore and it's a really nice piece. You should check it out on the Bloomberg and on Bloomberg dot com. And it's going to be something we're gonna keep watching for sure.

I have to say. One of the first beaches I went to was my older sisters took me to Seaside Heights specifically, and it's it's it is it's like where your help with college kids go. I know, I know, I know, but I mean it's just they were quite, you know, so much of their livelihood is what happens in the summer season of all those people coming in. And I was a funnel. I was a really little kid. I was you're listening to Bloomberg Business Week with Carol

Masser and Jason Kelly on Bloomberg Radio. So as recent tweet show President Trump continuing to point the finger out China when it comes to the pandemic, this too, as US China attentions, as we know, and as we've been reporting over the last week or so, have once again increased. In today's version of Business Week, Economic someone we often turned to when we want you talk about what's going on in China, how the US is approaching the nation.

David Retal is president and founder of Real Research Group. He rejoins us on the phone from San Francisco. Hey, David's so nice to have you back with us. How are you. How's your life? Very well, it's sheltering in place like everyone else, but watching things from around the world from from from here in the Bay Area. Yeah, I'm curious about the conversations too. As the world reopens.

What are you guys discussing and the impact it's having. Well, you're starting to see a lot of Asia emerge from this, of course, with South South Korea and China emerged sort of first. You're seeing some of Southeast Asia come out of this. Now Unfortunately, a lot of the concern has now shifted to Latin America, where you've got some of the largest growing cases down there, and and and countries really taking a different view. But in the emerging markets world,

Asia is the place to look first. I think Latin America is a place to be a little cautious, and we're still looking for opportunities in Europe, but it's hard to tell what direction some of those economies are going

right now. David, I want to ask you about Hong Kong because I feel like that's a situation where, you know, we were very focused on it last fall, and I was reminded by some colleagues here at Bloomberg of how focused, uh we were on that as a news room, and then obviously the pandemic sort of overtook everything in many ways. Now Hong Kong is back front and center. Help us sort of remind everyone sort of what's going on there

and what the implications are, especially at this increasingly fragile moment. Absolutely, it is a really really important topic for people to say on on on top of and also it remind us that despite the pandemic, other things are happening around the world as well. Your listeners will remember that China.

Beijing tried to impose a change in the judicial law the extradition from Hong Kong, so making it easier for Hong Kong citizens to be brought into the mainland justice system, and this sparked a huge rally of a number of rallies and protests over months and months. Uh they eventually pulled back from that threat of implementing that law, but still the protests remained, and as you'll remember, we were having daily, almost hourly updates on how those those protests

were going. And so now we everyone had forgot about Hong Kong for a long time, except for of course Beijing. Now Beijing realized last week that they've given Hong Kong fourteen years to write a national security law in Hong Kong really hasn't made any good progress, so they said, okay, we'll write it. And that really is the crux of the of the issue here. This is another attempt by Beijing to um change the the semi autonomous nature of Hong Kong uh and and really start to increase Beijing's

grip on the city. So where do you think china It's it's goal or intent is longer term here well, longer term, it's clear that they intend for Hong Kong to be yet another Chinese city. Uh there they certainly they've agreed to the one country, two systems agreement until I but that's that's that's where we're headed. So I think this is an inexorable move towards increasing integration of Hong Kong into China, and unfortunately the world and certainly

the world of investors loses um in that situation. What they had really considered their best way to get access to Chinese names. Hong Kong was always respected as a market with great liquidity, very good and skilled regulators, good rule of law, and the ability to get access to the growth in China just next door. And that really gets called into question with some of these steps. And so frame that for us within the broader context of US China tensions, which again have have escalated on the

trade front as well. What do we need to be most worried about, sort of from a self interested perspective and maybe from a self interested perspective in terms of the global economy, How did these escalating tensions ultimately play through in your best estimation, Well, we'll start with the premise that It's never good when too largest economies in the world are are having conflict and having having disputes UM. So that's never good for for the global economy, especially

when the global economy doesn't need any more headwinds. They really need an opportunity to heal and to grow, like we saw coming out of the Great Recession. So it is a big issue now that we've got trade back on the on the um uh table. Uh. There is no way that China is going to be able to achieve their commitments of increased purchases from the US in

the next eighteen months. UH. If they were going to do that, they'd have to buy every drop of energy produced in the US period in order to achieve that two billion dollar goal that they'd agreed to in the past. So I think you're going to hear more about out of the Republican administration about how China's sailed on this this trade the deal. I wish they wouldn't go down that path. I wish that they would realize that this

is a new situation. UH and and cooler heads do need to prevail, But unfortunately I don't see that happening on either side in this case. David, you know, do you think this inflict or this renewed conflict between the US and China is real or is it just a case of President Trump just you know, counting down to the election and kind of saying what he thinks his

base wants to hear. And secondly, when China does go along with something the US wants to do, is it just because China's marking time until it's develops its own industries domestically And just got about a minute here. Sure, I think that you're right that there is a political element to this. I hope that there is also some longer term thought about how both economies and societies are better positioned as a result of this. But Beijing plays to their base, as does Washington d C. So I

hope that cooler heads will prevail. I hope it doesn't lead to any sort of mistaken conflicts in the South China see or anything like that. But we need to uh, sort of calm nerves a little bit, calm down the rhetoric a little bit, stop pointing fingers, and get back to the work of repairing this global economy. Yeah, it's really interesting to to get your perspective, David Reda. We we really appreciated president and founder a retal research group,

joining us on the phone from the Bay Area. As he said, you know, a really good vantage point, and he's been looking after this for quite some time, Carol, And it echoes some of what we heard last week from our own Andy Brown, who's been watching this very closely, and a reminder that the Hong Kong issue is not a domestic one ultimately for China and the city that

it's trying to in its estimation bring onside. This has massive implications, especially candidly thinking sort of parochially for our Wall Street community because this has been the outpost in many ways in Asia and as David rightly said, a way to to really play into the Asian market that

didn't exist anywhere else. Yeah, absolutely have an impact on global financial markets, right and and in terms of various markets, in terms of access or where you thought things were moving Alright, great conversation always is with David understands those emerging markets and in particular what's happening in emerging Asia. This is Bloomberg Business Week with Carol Masser and Jason on Bloomberg Radio this weekend. Our Bloomberg Business Week Small

Business Survival Guide. Finding a fresh start in bankruptcy court makes sense, and I guess we should get ready for more of this and we'll see this certainly gives a leg up, in particular to some of those small businesses. Jason, we just talked about the hard time that that small business world is having. Bloomberg News editor Demitra Cassadis joins

us on the phone from New Jersey. So Demitra talked to us a little bit about the approach because Jason and I were just talking about, you know, it feels like a lot of the large businesses certainly have had a lot of lifelines to reach out to, but the small businesses, they are really getting caught. So talk to us about bankruptcy and how that might give them an option,

a viable opure. Yeah, I mean, it's it's not necessarily a pleasant reality to confronts, but sometimes, um, you know, after going through stages of looking for lifelines, bankruptcy might feel like a reasonable option. And it could be especially if small businesses consider Chapter eleven, because Chapter eleven is really an opportunity to reorganize and that might be just

what they need. They might have a little more flexibility to be able to handle some of the depths, uh, to really rethink about what what they're going to do with the business, and so you know, if not the first thing that comes to mind, especially for small businesses, Chapter seven sometimes is more typically something that they look at in terms of liquidation and having to pay off all their deaths and not really reorganized. So we walk through some steps um for small businesses to consider this

as as we call it, a fresh start. You know, it can it can seem like it's anything but, but you know, if you start to talk to your creditors, talk to your lawyers, and really put a plan in place, it might be that what you're going to see emerging as a plan that will actually enable you to come

back even stronger. Well and Demitri, it's also interesting to think about this right now at a time where I feel like people and companies to some extent or being given maybe a little more latitude given the expanse of this, the severity of it, that maybe it gets uh, maybe there's less of a stigma at this point if you have to go through this. This is a time where people say, well, yeah, I mean some was a time where the world was just turned upside down. Sure exactly.

I mean, I think that the stigma question is definitely a big one. It most certainly affects your credit. You know, it's not as though this is not a process that is serious. It's a serious process. It will affect things going forward. But you know, really key to something like considering chapter eleven is, you know, do you have something at the heart of your business that is worth preserving that you want to restructure and that you want to see keep going. And if that's the case, there are

measures that you can take. And in fact, there's even a very recent provision that was added to chapter eleven just as we were getting into this very challenging period in February. It's a sub chapter five. It's a little technical, but it essentially has made reorganization a little easier and a little cheaper, and it's lowered let's call it the threshold for the time being, for this year and in one.

And so it is really something that a lot of small businesses might not be aware of, but they should be aware of it, and they should really see this as a solution, not as something that is going to you know, sort of be stuck to them as a

label and really drag them down. Yeah, and it's interesting and you know, listen, uh, you know, none of us are lawyers here, but you know, in a bankruptcy court, lawyer will tell you because there's so many nuances to all of this, right, because there's instances where you know, you gotta remember it's gonna cost you money to do this.

And you know it's interesting in this story too, you talk about some people have to give up some equity in that reorganized, you know company, So you know, it's not like you come out with your company and everything's hunky dory, like you might have to give up a lot in order to do this correct. That's absolutely and um, that's the one thing I wanted to make sure I wasn't sort of downplaying was that it's as a big decision,

an important, a serious one, and a tough one. But when you're looking out of the world right now and really considering is this a business that's going to carry on? Should it carry on? Is there a service that we're delivering that really is worthwhile? But because of the pandemic, you know, we've been challenged like so many others. It is certainly in the category of possibilities to raise with the professionals that are advising you, and you know, and

to turn to those people and to really examine everything carefully. So, you know, I think that that is something that we just felt like we wanted to get that message out there. We were not hearing that a lot from small businesses. We hear about Chapter eleven practically daily now, right when it comes to very big businesses, whether it's J. J. Honey or Hurt was a lea Um. So you know, I think that when you hear those headlines and you're a small business owner, you know, you might not even

consider that this is a viable option for you. And it is and it could be, and it could be the fresh start and just a new path that you're going to go down where your business is going to be a little different because everybody is having to reconsider their businesses right now. That is that is so true, and it's interesting. I think we've heard I can't remember who was who said that, you know, get ready for the lawyers, because whether it's divorce lawyers or bankruptcy lawyers,

like they are going to be busy. On the other side, the lawyers are going to be very busy, and maybe the divorce lawyers and the and the people handling you know, leases and things like that. But it is unfortunately the way these things go. All right, Sure, always nice to check in with you, take care of yourself, to meet your Kessaiti. She's Bloomberg News editor joining us on the phone from New Jersey. I'm just I'm just saying, I'm

just repeating what we are hearing. No, it's true, it's true. Um, and we know that in any crisis. I mean, that tends to be something. But it is really good advice. I really like this Small Business Survival Guide because, as we've been talking about, and I think we've been spending an appropriate amount of time on it, this is an economy. It's ultimately driven by small businesses. I live in a

small town. You lived sort of in a small town, very very close to a very big but we do a lot to support small businesses, to avoid some of the bigger names coming in, to just kind of support that that network. We think it's important to the community. Yeah. Absolutely, I bro a journal. Yeah, but you let me drive Oh no, no, no no, no, home honey, please, I'll do the riding drivel. I want to drive, Just drive, baby, the questions keep trying. This is the Drive to the Globe.

Com Thanks, we'll drying us down on Bloomberg Radio. Yes, indeed, it is time for the Drive to the close was Alan's afron is back with us, founding partner and co CEO at I e Q Capital. He joins us once again on the phone from Foster City, California. We were so eager both of us to get to you, and we started the introduction together. Hey, Alan, how's it going.

It's going great. We've got a little heat wave out here and it couldn't be more beautiful, lack of smog, and because no one's been on the roads for a couple of months, it is a picture perfect day here in California. It is sort of amazing. And I know we talked a lot about this when we last had you wanted probably a month or so ago. Alan, you know how much it has changed, both you know, literally

and figuratively the scene out there. I did want to ask you, you know what you have encountered of late, because I know you're very involved in the Silicon Valley community in terms of folks there are thinking about kind of the future of Silicon Valley in many ways both sort of helping in the short term, but also you know, some of the implications ends for a more virtual Silicon valley in some ways, maybe folks fleeing the high real

estate prices, Like what's the net effect here? You think, uh, there's winners and losers, and as usual, it's a pragmatic optimism. So the key term pragmatic because if you're a startup, you've you've gotten down the hatches here, You've absolutely tried to create as much runway. Possibly it's possible two years time, with enough cash to weather, we could still be a pretty difficult economic environment despite the stock market going up.

But again, in the midst of chaos, there's always opportunities. So you're seeing that with the zoom videos and the Teledoc healthcares, there are new cottage industries being that come up immediately. When people have to work from home, there's all kinds of applications they have to think about how to get their office at home to work more effectively. All kinds of gadgets are now being creative to think about ways to operate when the confines of allowed family

try to operate around you. At the same time, it's fascinating. It's this is destructive capitalism and destructive creation all at the same time. So, um, you know, sadly, it's very difficult if unfortunately this we all as we all know, those that can least afford are the ones that are most adversely hit by this economic downturner are gonna be the ones that take the longest to come back. But

this also breeds American entrepreneurialism. And this is from the ashes rises a new bowl market and a new growth engine of America going forward. Yeah, I do hope we figure out some better ways to cover. Uh, certainly those that have, you know, the less fortunate, the more vulnerable, because they have really been exposed and in many ways they're still struggling. I do wonder, Alan, what's the R word that you use more often right now? Is it

recovery or recession? It's both. We're in a recession, but we may end up being in the world's The US is shortest recession of all time. I mean, most recessions last at least a year. Um. This has been anything but average. Um, this is absolute recovery. When you see stock markets already up to thirty seven from a peak. It's telling you that the likelihood that you're going to

go back down and retest the lows um, it's pretty small. Um. What's what's interesting also is to take an account that you are witnessing, at least recently, a broadening of a stock market activity. You're finally seeing small caps and value stocks beginning to pick up and do a little better here.

And we're right at a critical point here. You know, we're right at the two adre DAID moving average on the SMP five dred um and if we break through this three thousand level one hold, you're gonna see capitulation because as you know, this is probably the most despised, hated bowl market we've seen yet, meaning there's been very little participation. There are number of investors that are short or in cash, and there's going to be the fear

of missing out. If they're particularly institutional investors, if they're benchmarked to an index, they're gonna have to compitch late with prices go higher. Even if we're still in an environment where there's a twenty unemployment rate and millions upon billions of people unemployed whose jobs won't come back for several years, and that's what I'm just having such a hard time getting my head around Alan, is this notion

of where this optimism is coming from. And I fully concede that we view this or I shouldn't say we I I definitely view this from a different lens, sitting here in the Tri State area and seeing the devastation that this has wrought on New York City. You know, a city that is still under complete lockdown in many ways, um. And you know companies not talking about going back to work even in any sort of reasonable measure until the fall. And and I also understand intellectually that the rest of

the country is not the same. But we also talked to doctors on this show every day who warned us about a second wave and all of those different things. Is the market just being rational about this or is it being overly optimistic? Um? We don't know if it's being overly optimistic, because neither you or I can predict with a second wave will be coming and how bad it will be, given how devastated the economic downturn has been to so many. It'll take a lot to shut

down the economy again. But but I underserved the stock market is in some ways of bifurcated from the general economy. And there's two ways to think about it. One is, the kinds of businesses that are represented in the stock market index you'll look at are not barber shops and hair salons and small something very different. The other thing

is think of it this way. The federal government federal reserved in the US government have printed or will print something together on the on the order of ten trillion dollars of spending power and two trillion dollar economy. The money has to go somewhere. And if cash is paying zero and a tender church upond pays less than one percent, I nottainly is going to go into a stock where I can get a two percent dividend. You allows us hold it for ten years, and my odds are eventually

the economy will get better. So that money is finding its way into equities partly because there is no alternative, and that's what pumping money into that closed system does. It has to get back into the fat that's like stocks and cash pays nothing. Well, I saw this movie before, Allen z Afron. I thought that was the story coming off of the financial crisis. That's pretty much the same story that the thing about this event, there's a lot

to be said. They learned from the two thousand and eight crisis, and the FED played played its playbook, as did the federal government, much more quickly and with much bigger firepower. And that's why you speed. At least at least the financial markets have recognized that and assumed things look better more quickly than they were bouncing out of

bowid No. Nine. Yeah, really interesting, alright, great comparisons. Great Insights has always really appreciated Allen Zaffron, founding partner co CEO of I e Q Capital, on the phone from False your City, California. He's got a long history working

for Goldman. Uh. You know a lot of well to do clients who trust him with their money candidly, and he sees a lot and it's good to get his perspective also from Silicon Valley versus New York City in some ways, because they tend to see things a little bit differently. I think back to our conversation with Tom Sewel. Yeah, totally. It's good for us to get all of these perspectives. It's just much smarter. Thanks so much for listening to

Bloomberg Business Week. Download the podcast on iTunes, South Cloud, Bloomberg dot com, or wherever you get your podcasts, And of course you can always listen to our radio show at two pm Eastern on Bloomberg Radio, or watch us on YouTube by searching Bloomberg Global News