Up To 40% Of NYC Restaurants May Not Come Back

Outdoor dinning now allowed uh as the restaurant industry tries to get back on its feet. To get a sense of how that went and how the restaurant industry globally is faring here in this pandemic world, we welcome Kate, a creator food editor for Bloomberg Pursuits. Kate, thanks so much for joining us. Give us a sense of how you think the reopening of the restaurant business in New

York City is gonna go. We're all gonna be sitting on sidewalks and in the middle of the street, I guess, But what did you what did you see yesterday and what are some of the restaurant tours thinking as as they reopen. Um, that's a really good question. Um. And I think, um, I think how it went and how it's gonna go, it depends on who you ask. Because for some people, so that's what terms. I think a lot of them are just delighted that they get to

be back in business and serving people. And you know, they've been setting up table six ft apart and you know, all of a sudden like activating their parking lots and turning them into dining rooms. Um. But for then for some other people, it's not a one size fits all situation. And so for some people they realized that selling a ten dollar full of soup is not financially viable when you can only do fifty percent capacity and have people

six feet apart. So it's different, it's different throughout. But I think there's a costive optimism, that's what I would say. Overall. Yeah, Okay, there are twenty seven thousand restaurants in New York City. Surely all of them don't have outside room, do they? No? They they go not in New York City. I mean they're has clothes. I think, like forty three miles of streets and that some of that can live the alleviate.

A lot of restaurants were able to apply for outdoor seating permits in a place like Peter Luger and Brooklyn that has never ever served stake outside their doors. Um got the permit, got the permit, and as of Thursday, is going to have tables outside their restaurant and it's putting the parking lot into a sort of picnic area. So um, So a lot of restaurants can take advantage of it, but certainly you're right, not all of them can, and not all of them want to just to follow there.

I wasn't sure if you needed a permit. How does the permitting system work and how much does it cost? Um, that's a good question that I haven't applied to a permit, and I'm not sure I know that. I know that the permitting um went live on I think it was it was either Thursday or Friday. So it's just like four or five days ago to have a permit for Monday. So there's been a lot of There hasn't always been

great messaging from the government, you know. I think that a lot of restaurants and restaurateurs continue to have a lot of questions about what to do. For instance, you're eating outdoors, but what happens if you have to go to the bathroom because there's all these rules about distance and how many people can use the bathroom and all

of it. So there's still a ton of questions. Um, But the permitting process, I think it went really quickly once people could apply, but the applications went up very late. As I understand it. It's okay. I know Leslie Patton and you wrote a story for Today on the Bloomberg and that the headline really grabbed me. Two point two million restaurants worldwide teeter on the brink of collapse? Can this restaurant industry? Is this gonna be permanently scarred here? Yeah?

Oh my gosh, we're never gonna you know, if you think we're gonna get back to what it was like in February and we're not, you know, I think, Um, there's there's no way, there's no there's no going back. Everybody has to move forward on the successful people, the most successful restfuls were going to be the one realize that figure out see new new ways, new way forward,

an opportunity. But um, there was reports from the National Restaurant Association that the industry has already lost twenty billion and they don't think they can be profitable for at least six months, and I think six months is optimistic, actually, yeah, And I mean for restaurants, you have to be profitable on a weekly basis in order to keep the running cade. How will the restaurants that have low occupancy to begin with, I mean several on My Street alone can only fit

a certain amount of people. How do they manage week to week if they just don't get those extra ten customers that they need to make that profit margin. Yeah, Vanny, that's such a good question. And I think, especially right now in days two works all outdoor season. Um this um chef my Price at the Clam in New York was saying, you could have a slow Monday day, but you're Saturday Saturday would cover your cost. And now there's so many variables. And also outdoor seating is depending on weather.

So if you have a rainy Saturday and you thought you had sold that, you know sort of sold out and then you can't get everybody in, that's a disaster. I mean a lot of them, A lot of restaurants have been enterprising and turned themselves into like grocery stores and selling cocktails, and that's done a surprisingly good job of helping, um, helping create income. But I think exactly as you said, it's still like the margins are so slim anyway. So, um, it's a real uh, it's it's

a very challenging future. So just real quick, Um, in New York City, how many restaurants are expected that boy just go out of business? I guess, um, that's it's a good and scary question. Um. Open table to the survey, and they thought nathma of restaurants wouldn't make get I think in New York that number might be higher. I'm sure.

I mean, I think that's a conservative estimate. Anyway, it in New York, as you guys were saying, space is much tighter, soft occupancy is is a big difference, like ten people, like Bonnie said, So I think that numbers can be higher. I would not be surprised if it's like at least it's a very scary number. Yeah, it's terrifying. Kate, there's some great details in your story. I would urge everyone to read a two point two million restaurants worldwide

teeter on brink of collapse. That's Kate Crater. They're joining us. And one of those paragraphs, Paul lays out just how much it costs to change to contact less takeout orders and delivery, of course, and this equipment walkie talkies, masks, thermometers, but five thousand dollars a month for the average restaurant apparently, Yeah, that's the economics on delivery business not nearly as good

as in store dining. Daty check Research produces a morning note that is always, always thought provoking, five days a week. Something just sparks the thought process when you take a look at the email. And in recent days the under Nicholas has been looking at everything from yield curve control to the impact of the upcoming elections on stocks and on markets, and how this do nothing market is just a little bit baffling, and some ideas for what to

do in this do nothing market. Let's bring him in now, Nikola's co founder of data check or Research. Nick. Let's start with yield curve control, only because you pointed out today the New York Fed blog out which explains why yield curve control is more efficient than quantitative easing and at the same time in a different region, the St. Louisfide President Jim Bullard is saying, no, we're not going

to have yield curve control. It's it's unnecessary. Yes, it was fascinating to see the New York Fed actually put out a blog analyzing the Japanese experience with yold curve control and pointed out very clearly the yield curve control has the advantage of not requiring as much capital from a central bank to execute a given rate target for

say the long end of the curve. Instead of spending tents and tens and tens of billions of dollars to hold rates at a certain level, simply telling the market we're going to peg it at X means you have to spend much less money to make it stay at X. So it's fascinating to see the New York Feds saying there is some merit to yield of control in terms

of efficiency in central bank balance sheets. Hey, Nick, I mean so when you think about this market here, are you concerned about what I'm going to term or the lack of breath if you will in this market? You know, this move off the bottom, it's you know, centered on a handful of names, the Amazons on the apples of the world. How much of a concern is that for you? Yeah,

it's a fascinating point. I mean, if you look at the two thousand nine rallied, for example, which there are many analogs to the current rally, in that one, the two thousand nine rally was all about the banks. The banks doubled in value from March nine, two thousand nine, through the next sixty days, ninety days rather you know, basically the same days today, So it was led by banks even more than this has been led by tech. So it does feel that big snapback rallies off the

bottom are always led by something. In OH nine, it was banks for all the obvious reasons. This time around, it's been tech because of all the stay at home, work at home phenomena that we're seeing still play out to this day, and that seems so caught investors attention. So I'd say, as unusual as it is, it does fit a paradigm for snap back rallies like OH nine and Nick Robin Hood has been a huge source of interest to you know, so many people all over the

country in the recent days and weeks. Retail platform for retail traders. How much of an impact are these people that maybe have an average account size that you say, less than five thou dollars. How much of an impact are they really having on the market, you know, as a market impact, I'd say not that much. They do get a lot of press because of things like hurts and the U. S O E. T F before that, So they are making some rookie mistakes because that's what

rookies do, and that's fine. But as you said, the account anances are relatively small. Robin Hood doesn't even have an I Rara product. This is all kind of discretionary retail money, taxable money, people putting in a couple of thousand dollars to play the market while sports betting is closed. So I think it's interesting, but I don't think it's

had a big effect in terms of money flows. But I tell you, I mean, having looked at markets for thirty years, it is fascinating to see, you know, a couple of million people decided they want to trade stocks in the course of ninety days, because that hasn't happened in twenty years. So it's it's interesting to see. But from a money flow perspective, not all that relevant. Well, Nick, you are no rookies, you say thirty years, you're a

grizzled veteran here. So you've been through a lot of presidential elections here, and somebody told me is an election year. How are you kind of nobody's really focusing on it right now because obviously there are bigger issues, more immediate issues for folks and investors. How are you thinking about the presidential election coming up here in the fall. You know, the way we're thinking about it is not just the president in the election, but the congressional ones as well.

And we did some work for clients last night that looked at Okay, sit back in the nine. How does the market do when one party controls both the White House and Congress both chambers. It's only happened in thirty years over the last seventy five, so less than half

the time. But when it does happen, if Republicans hold both White House and Congress, the S and P s up an average of six and when Democrats hold both houses both chambers and the White House, it's a fourteen point three percent on average, And the drawdowns are never really bad. Those are both better than the average sup returns in World War two, which is eleven. So the really important thing is somebody, either party, somebody has to own the economy, own the problems, and find the solutions.

And as long as that happens, markets tend to do okay. So we're not as worried or focused on whether it's Mr Trump or Mr Biden as much as someone's got to own it, because particularly in the economy is still gonna need to need a lot of help, and if one party owns it, one party has to fix it. Yeah. We actually heard the black men say that yesterday as well, that he's not making any predictions or any trades based

on who might be the next president. And at the same time, Nick, we're going to have such different policies under a Joe Biden than under a second term President Trump. Right, absolutely, I mean that the biggest worry I think for markets is okay. Corporate taxes obviously came down in two thousands seventeen will almost certainly go back up if Democrats control

both chambers and the White House. But we might also see continuations of fiscal stimulus programs if unemployment continues to be high, and if one party owns the economy next year, they will have to figure out a way to make growth happen, even if it means more fiscal stimulus. So to me, it's TwixT and tween between the two problems. Yes, probably higher corporate taxes, but if we can we escape velocity and achieve a better economy through fiscal stimulus, that's

a stive, So I think it balances out. So Nick, it seems like I'm just looking at the chart just on and showing kind of the COVID cases in the US and the you know, it's re recently, it's kind of turned the other way the wrong way here. Yet the market seems to be kind of discounting that so much. Whereas if this if we'd seen the spike up in big states like you know, Texas or Florida, we see I think a pretty negative reaction the markets back in

February and early March and early April. What is your sense of kind of how the markets thinking about the virus per se, Yeah, very very important point. I think two things. The first is this is why tech is still rallying. You know, tech was the playoff to bottom because of work at home and all the other things we know, and tech continues to lead. That's one way of knowing that the market is saying, we're not going

to play the rebound. The classic rebound trades were playing tech because those things work regardless of what happens with the virus and infection rates and how states managed lockdowns and so forth. The second point I think the market is saying is America is basically going to try to

power through this. Infection rates are going up, but it seems to be among younger people with at least historically lower mortality rates, and so this will be a problem, but it won't be the existential problem that it was when we locked down the entire country for the better part of a month. So the market is saying profits going to recover, but we still want to be in the more defensive names for this environment, which is tech and technically it's the market higher and Nick, thanks so

much for joining us once again. As always, we learn a thing or two when we talk with you. Nicholas, co founder, Data Trek Research. I recommend you read his stuff. It's just really, really insightful, really gives you some food for thought as we think about navigating these markets here in these uncertain times. But we learned a lot about Apple's strategy yesterday from him Cove at the Worldwide Developers Conference,

which supplies virtually it can news. Let's bring in somebody who knows all about Apple and who can tell us what exactly we need to be watching out for. David Garrity as chief market strategist at laid Law and Company. So we got the big announcement yesterday, David that Apple is going to replace chips with its own chips, So Intel no longer needed, Intel no longer inside Apple inside these days, what else can we anticipate will emanate from

the week that would be of useful interest to investors? Yeah, no, certainly, Vonnie.

What's been coming into the conference, apart from the fact that they move away from Intel to their own design chips, is the fact that with regards to chip designs, they're going to use a r M designed chips as a platform across their entire range of hardware products, with the idea that this can not only provide benefits in terms of reduced power consumption, but also provide a standardized platform that their developers can write programs to across all of

their products. So, David, give us a sense it seems like a have a big deal to me to moving away from you know, the tried and true chip maker that is Intel that they've used for many years, to their own chip. Why are they doing it? Why are they doing it now? What's kind of the rationale? Well, I mean Apple certainly has gotten to a scale where it's possible for them to consider investments, so they may

not have done previously. Note, however, that you know, Apple historically has had a business in which they've been involved in designing semiconductors. Now they've had this in cooperation with IBM in terms of IBM was running the semiconductor fabrication

plant where Apple design chips were made. So this is not entirely a new business for Apple and also speaks to the scale and also arguably speaks to what their own intentions are for their technology that perhaps Intel was not able to support as readily now in terms of supporting its developer community. Uh, Tim Coke has been trying to do a good job. But the US and Europe isn't astigating Apple over antitrust allegations. How much it takes from developers in the app store and so on. What happens?

How does the story end. Well, you know, it's certainly this has gotten to be the services business for Apple has gotten to be a fairly significant portion of their overall revenue. High last year about forty six billion dollars of what Apple made was coming out of services. These are fueled by third party developers. Now, as we've read, and no Apple charges its third party developers of their

revenues to actually have their products listed in the app store. Uh, you know, from the standpoint of business development, is a pretty big cut. One would argue that Apple perhaps could get by with something half or less of that and still provide a very encouraging signal to its third party developer community and at the same time themselves grow a very substantial business. So clearly the argument here around the

economic in terms of this business model. Certainly Apple is in a position potentially to give more in order to maintain a vibrant third party developer community. David, A big part of the bull case for Apple stock is five G and the arrival of five G presumably will spark a super cycle in phone replacements. Of course Apple will

benefit from that. What do you expect to hear what have we heard at this conference about five G and what it means for Apple, Uh, nothing in particular as of yet, but I would expect that the company should be making some indications that will get people excited about the upcoming launch in late September of the five G I phone. UM, you know, certainly the five G I phone.

Apple in this regardless following other competitors as Apple as want to do in terms of adopting new technologies, but having an Apple product able of using five G networks and the greater speeds in data k of abilities those networks have, we do believe very much will prompt and upgrade in terms of the user base for the Apple

iPhone something clearly. I think that given the scale of Apple, uh, you know, should be an important development for them in terms of not only their smartphone business but that of the overall smartphone market. Tim Cook was very vocal today about the President's decision to suspend the giving out of H one B visas through the end of the year new ones at least, and I'm curious, David, will this

have an immediate impact on Apple? UM. I think if there's anything that we've learned, not specifically from Apple, but more from dealing with the COVID nineteen pandemic is that companies are more and more capable of operating on a distributed basis. We don't necessarily need to have workers co located now. It's obviously the intent of the H one B VISA program was to be bringing workers physically into a location here the United States in order to operate.

I don't think that, you know, not having an H one B VISA program is going to be detrimental to Apple in the near term. The bigger implication, I think, not for Apple, but more for the US economy, is that by potentially denying five thousand high paid workers UH presence in the United States economy, the Trump administration has deprived the US economy of the spending that those five

thousand well paid workers would bring with them. And so from this standpoint, it seems to our view sort of a cut the nose off, despite your face, kind of moved by the Trump administration, not very well informed and certainly misguided. David just got about a minute left. Is the overhang from regulatory risk that was building for the tech industry last year and going into this year, has that kind of abated given all that's going on in

the world. Now. UM, I would say that, you know, there are a matter of prior news or triage, if you will, in terms of dealing with the things that confronts society COVID nineteen being first and foremost. But when things do settle down, once we get past the November election, I certainly do expect that there will continue to be demands for greater oversight with respect of the technology community,

focus on data privacy. Um. You know, the extent to which media continues to be used, uh and to be manipulated with regards to the upcoming election remains a vital concern. So you know, there's a great deal that still remains to be done. Jack Dorsey, the CEO of Twitter, you know, certainly has broken ranks with others such as Zuckerberg and saying that they would take down political content or be

more aggressive in policing this content. Um. But no, we're not out of the woods by any stretch of the imagination as far as greater oversight of the technology community. Hey, David, thanks so much for joining us. As always, A good wrap up a kind of what's going on at Apple their event this week, as well as all things technology. David Garretty chief mark strategist at laid Law and also a partner at bt Block, giving us his overview of the market. Alsy, remember when trade headlines used to quit

the markets? Exactly right. We had a little reminder of that yesterday and into this morning when Peter Novarro, the White House advisor, who of course has been appointed to help the president on US trade with China, sold confusion in a Fox interview. He said basically that the US

China trade agreement was over. Well, you might think that that would have snuck by markets, but no, we got a big change in markets, and US President Donald Trump actually had to come out and clarify and say no, actually, the deal with China is fully intact. For more on what went on behind the scenes and what we should expect trade wise over the next six months, let's bring in Bloomberg Trades. Are Brendan Murray joining us from London? Brendan,

what was this all about? Was Peter Navarro trying to sew some mischief for the Chinese? Well he sounded like uh. In an answer to a question on a TV interview that the that the that the that the China US trade deal, this Phase one deal that they signed in January was over. Uh, and so that's that obviously is underpinning a lot of agricultural purchases and uh and other things that you know, the Trump administration negotiated. Uh and they you know, put the American companies under a lot

of stress with tariffs over the past few years. So the news that or the apparent news that that that that deal had come undone, uh, you know, was really what's investors now. It turns out that President Trump tweeted just a little while later that that that the deal was still intact. That uh, you know Peter Navarro, you know, who wrote a book called Death by China incidentally, uh,

you know, was was misunderstood. So you know, he's obviously one of the you know, one of the most one of the most hawkish um members of the Trump economic team on China. So it's no surprising that you know, he you know, he thinks that you know, the trust has gone. But uh, yeah, it's definitely it goes to show you that, you know, markets are you know, kind of on edge, and and if that trade deal disintegrates, then you know, we might see you know, even more selling.

So Brendan, what is the status of the Phase one deal. Ever, it's some reports where maybe China's only bought maybe or so or of what they were committed to in terms of agricultural products and and other other products. Where are we with phase one? So the person to listen to on Phase one is Robert Lightheiser, the U S trade representatives, the deal he negotiated. He you know, seems to be

the point person on at not to Barrow. So if you if you listen to Lightheiser, he thinks that basically China, uh, and he testified in Congress last week that China really didn't get started buying uh, you know, the agricultural commodities that they promised to until maybe March or April kind of once they got through the worst of the coronavirus

outbreaks there. So he he sounds a bit sympathetic, and you know, it's giving them the benefit of the doubt, and you know it's and has seen some purchases in recent weeks. Uh. You know, whether that continues is anybody's guess. But Lightheizer, for his part, at least, you know, seems to be still still confident that that it's gonna that purchase are going to pick up in the second half of the year in China will keep you know, keep

those commitments well. And there was always the question mark over whether China could actually fulfill all the purchases that I had promised. But separately from that, Brendan, was there any impact on the deal from the John Bolton allegations

that the president sort of asked China too. You know, it's not something we didn't know or didn't suspect, but the sort of very black and white the idea that the National Security Advisor was saying that President Trump straight out asked China to buy agricultural goods in states where he might be you know, on the balance between getting reelected and not reelected. Will that have any impact on the talks? It doesn't seem to have had an impact on,

you know, the actual deal that they signed itself. But it just throws it just throws the whole relationship, you know, into more into into more turmoil. And you know, if you doubted, uh, you know, if you doubted whether there were political motivations behind um, you know that that that deal that Trump was pushing, you know, you might you might, you might think twice now, but but it's it's it's definitely added a layer of intrigue and UH and and

a lot to talk about in Washington. In Washington at least so Brendan, you say, Robert, Robert Laheiser's is one of the folks in Washington we should be listening to. And he recently said in Bloomberg News was reporting that UH tariffs, maybe even higher tariffs on medical supplies and PPE would be a good thing. I'm just not sure how that would be to the extent we are seeing some spikes in cases and we may have a you know, kind of another wave of the virus in the all.

What do you think his logic is there? Well, his logic is that if we put tariffs on on imports, then then producers will have an incentive to make them domestically. So his his you know, tariffs drive you know, the

return of manufacturing jobs to to the U S in uh. Uh. Ambassador Lightheiser's, um, you know world, And you know that's debatable obviously, but um, you know, it's it's it's it gives you a sense of of all that we've been through two years of the trade war with China, three hundred and seventy billion dollars worth of of teariffs, of

of products that have tariffs on them. You know that he still finds UH and some problems with the you know, the medical supplies, the personal prospective equipment coming to the US during the during the worst of the pandemic. You know that that tariffs still UH, you know, are the answer for him and UM. You know it kind of it could give you a sense to of where where we might be headed with UH, with Europe in the

trade relationship. That's that's not getting better either, UM and UH, and you know sets up sets us up for an interesting second half of the year. Brendan Murray with the understatement of the day, perhaps Brendan Murray trades are for Bloomberg News. We always appreciate getting your perspective on trade and his bonny. As you mentioned, it's kind of a topic we haven't spent too much time on over the past couple of months as we've been dealing with the pandemic.

But as you suggested earlier, Vannie, that that it is still you know, right front and center for the markets here because it really impacts the economic trajector duty if not only the United States, but also our trading partners around the world so it bears watching, and folks like Brenda Murray help us do that. Thanks for listening to the Bloomberg Markets podcast. You can subscribe and listen to interviews at Apple Podcasts or whatever podcast platform you prefer.

I'm Bonnie Quinn, I'm on Twitter at Bonnie Quinn. And Paul Sweeney I'm on Twitter at pt Sweeney. Before the podcast, you can always is catch us worldwide at Bloomberg Radio