Why Lockdowns Haven’t Proved They’re Worth the Havoc

so much for joining us. You got a fascinating column a couple of days ago talking about you know, this whole concept of a lockdown and quarantine. This is something that we haven't necessarily done in some past epidemics in this country. And I guess as people think about opening up the economy, now there's really two camps out there. Those that are probably a little bit more aggressive about opening up the economy and those that are a little

bit more conservative. Talk to us a little bit about kind of lockdowns and how effective they've proven to be in the past. Well, they've never been used in the past. This is the first time they never became uh, sort of uh policy, pandemic policy until two thousand six when George bush Um asked the government to come up with a pandemic plan, and the and the scientists who came up with the lockdown idea, Um, they were not infectious disease scientists. Um. Uh. And there was a lot of

controversy about it at the time. Uh. There've been pandemics in nineteen fifty seven, there was one in nineteen sixty eight, of course the famous one in eighteen. Absolutely a lot of people stayed inside because they were terrified, but there was never an official and official lockdown. So so the answer is, um, there's no there's no previous science to

know what good the lockdown does. And although it makes a lot of intuitive sense that you would stay inside and therefore avoid the virus, there's a lot of downsides, as we're about to find out when the economy starts to open. Yeah, this is what people are saying that basically, we don't know how effective it is to limit the spread, and we know that it creates it's a lot of problems when it comes to when it when it comes

to the economy. That said, we are seeing a pretty strong correlation and I know, correlation is not causation, but it is becoming scientifically accepted that the economy is that shut down more aggressively and more quickly were those that managed to stave off some of the worst effects of this virus that we've seen in places like New York and Milan. So from that perspective, how can you dismiss that as showing the efficacy of this type of of shutdown. Well,

I don't. I don't dismiss it. But you know, there's also this mass the social distancing. There's the fact that literally of the people who have died in this pandemic have been the elderly, you know, whether you're inside or outside um. And then you have states like Texas and Florida which have been very lax on lockdowns and and their numbers of death are extremely low. So I mean, I would argue that, you know, it's really unclear as to whether the lockdown is saving a lot of lives

or not. All right, right there, where are you? Where where are you staying right now? I'm in Southampton, Okay, So you're not in the city, right correct? Okay? And my question is, let's say there were no state mandated locktowns of any sort. Would you feel comfortable going about your business the way that you had in the past and going on the subway? Um, I don't know. That's a good question. I think that I if I think if I had a mask and gloved, I would, And

I also think that I would probably have to. I'm also sixty eight years old, so I'm in the high risk group. Um, there's a lot of Look. Look, you know, in March, there's no question I came out to the Hamptons because I was scared. But you know, you watch, you watch data, you watch things happening, you watch what's going to happen to the economy, and you think to yourself, you know, is this really the right way to continue

to proceed. And one distinction that I've been making is between the hotspot states and cities like Detroit, UH and New York and New Orleans and places like Houston and Miami and San Diego which have very very very few Um. Death Yeah, well, look, Joe, he raised a really good point, and Paul, this I think is a really important thing. And I think that Joe, I feel like you want to chop my head off, you know. I I honestly,

I've I'm totally jealous that you're in the Hampton's. I also think this is such a politically fraught issue, and the question is if they okay, I want to talk about that. That is so right, This is the big problem here, here's the big problem. It has become a political issue. And it's and and and It's like if my political party believes in lockdowns, and I believe in lockdowns, if my political party says lockdowns and BS, then I

say that's BS. Nobody on either side is willing to just sit down and say, let's look at this with fresh eyes, let's think about this from a from a point of view of neutrality and science. It's not happening. Everybody on both sides says, you know, I'm following the science. I'm following the science. Well, what does that even mean with a lockdown? Where where? Where? There is where? The

science is unclear? It's no. I think the issue here right now, you know, the conversation Joe is just, you know, the cost of the economic cost of lockdown versus the cost in lives. And that's kind of what the reopening debate seems to be evolving to. I think that's absolutely true. And um, let me let me let me ask you this. This is kind of how I ended my column yesterday.

You know, it's quite likely that the virus will will fade in the summertime, because that's often what happens, and then it will probably come back with a vengeance in October. And if that happens and we're reopening the economy, are you gonna say, well, let's shut everything down again for three months, because back, I don't know that's gonna be really tough. I don't think. I don't think anybody's going to agree to that. I just don't think the society

is gonna agree to that. And I think we're gonna have to learn to live with this thing with with measures like masks and social distancing that are less severe than a lockdown, we could wind up in a depression. Thanks so much for us. We gotta run, Joe, Joe No. Sarah Colums for Bloomberg Opinion. It's an awesome column. Check it out on Bloomberg dot Com, slash Opinion. All his great work. This is Bloomberg Markets with Lisa Abramowitz and

Paul Sweeney on Bloomberg Radio. What I mean listening to healthcare officials, the big, big thing right now is to continue to test for the virus and then contact trace to see to kind of contain, uh, this spread of the virus. That's certainly important now and will be even

more important. Ty Center is a second wave. And when you talk about the contact tracing, there's been a lot of apps that people have been talking about, mostly the Apple and Google approach, kind of a joint venture there, which is really in and of itself, has been getting most of the press, but a startup out there has also been they think they might have a better mouse trap, and that is a Jared all Good, co founder and chief strategy officer for the firm twenty. They're based in

San Francisco. They've got their own app, Healthy Together, and in fact, the state of Utah is actually adopting it. Jared, thanks so much for joining us here. Tell us about your app and why say a state like Utah would select your app versus at Apple Google, which would seem to be the easy choice. Yeah, good, good morning, Paul and Liza, thanks for having me on um. Yeah. So, Healthy Together was developed to work in partnership and in conjunction with the public Health Department of the State of

Utah UM. So they approached us several weeks ago UM and saw that we had some technology that was unique for helping to augment and automate certain parts of the manual contact tracing process. So we partner with them to develop the Healthy Together application both as a friend end application and also has back in services and tools that

we deploy back into the Department of Health UM. So really, what we've built as a way for residents to UH to help the manual public health contact tracing effort by using an app on their phone that helps us UH and them identify where they've been and who they've been in contact with should they come out positive with COVID nineteen,

so that manual contact go ahead. No. I find this so fascinating, this idea that people are are going to help the effort by volunteering to be tracked on their phones. It strikes me that the scope of data is important for this to be effective, that the greatest number of people need to be registered and tracked for this to actually prevent the virus from spreading. What's your advantage over say Google and Apple who also have an app and also have the host of data in the footprint. Yeah.

So something that I would say to that is, first of all, Healthy Together is more than just a contact tracing application. UM. The State of Utah's strategy is to do assessing, testing and tracing. So the Healthy Together platform allows residents to assess themselves to find out if they should get tested for COVID nineteen uh and then if they should and we can refer them to, you know,

the nearest testing resource through the application. And so just shortening the time from somebody becoming symptomatic to getting them into the testing process and then finding out if they're positive and then quarantining themselves is a huge part of the value proposition that we've delivered with the State of Utah. Now, as it pertains to contact tracing UM, our approach is

actually not an opposition with the Google and Apple approach. UM. Google and Apple are, at least as we understand or not, coming out with applications. What they have built up as a set of APIs the application developers like us can integrate with to to tap into a broader network of contact tracing. And that's something that we see as a as a huge value add uh. We hope to to find a way to work and partner with Apple and Google to use those API s UM so that we

can augment our current process. So you're in the state of Utah. Are there other states you're in discussions with? Yeah, of course. Look since UM, since we released just a few weeks ago in the state of Utah, UM, we've had a tremendous amount of inbound from other states who are interested, who are doing similar strategies in terms of standing up more manual contact tracing and then looking for tools and technology to augment and expedite that process. UM.

So we had several conversations with other states. UM. We will be announcing some partnerships with other states coming soon. UM. And something that's been interesting to us that you know, we we we learned as we got into this UM is that businesses are also participating in contact tracing UM.

Companies now have UH. You know, they're feeling the pressure to bring their employees back to work UM, and they need to do it in a safe way, and they need to communicate to their team members UM that they have a plan and a strategy for dealing with the occasion UM that somebody in their workforce turns out to

be positive for COVID nineteen. And so we're seeing, um, you know, lots of interest from companies as well who want to implement tools and and just figure out the way to respond to this effort using manual and technological contact tracing as well. There's a tension for anyone who's creating a business in order to help facilitate the social distancing and prevention at this proNT of the pandemic. How you make money at a time when you're providing a

service for the social good. How does that tension get resolved with you? Hi, Yeah, that's a great question. Look, UM, you know, as uh, you know, as you know, this was not our business. UM. You know, coming into this UM and we did not raise our hand and say, you know, we want to build contact tracing and sell it to the world. UM. The state of Utah, the Governor's office, reached out to us and identified us as

a solution. UM, and you know, to be able to pivot our business and dedicate the number of resources engineers, designers, product managers UM to really build a high quality product both in the mobile application and also in these back end systems, and those things just cause resources to be able to do it um and so our goal is to serve as many you know, states and enterprises as we possibly can um and to do that and to scale up, it's just going to take money for us

to be able to do it. Twenty co founder Jared all Good, thank you so much for being with us, talking about his Healthy Together contact tracing app, which has been deployed by the State of Utah. This is Bloomberg Markets with Lisa Ramowitz and Paul Sweeney on Bloomberg Radio. Certainly a lot of news coming out of China and Hong Kong in the last twenty four hours. We've seen some news here that it's uh, you know, really trying to really trying to reassert some or reassert more power

and control over Hong Kong. To get a sense of what's really going on, what it means for Hong Kong, and it's economy and it's people. We welcome Yvonne Man. She's the anchor for Daybreak Asia and Bloomberg Markets China Open. She's in Hong Kong, and Tom or like chief economist for Bloombrick Economics, on the phone from Washington, d C. Tom spent a lot of time living in Beijing as well. So, Yvon,

thanks so much for joining us. I want to start with you just give our listeners a sense of what actually happened between China and Hong Kong over the last twenty four hours. Well, it certainly has been quite an interesting twenty four hours fall And basically what has happened is that the NPC, the National People's Congress in Beijing, decided to enact this National Security Law which basically curbs DIO sessions addition for interference and terrorism in Hong Kong.

It's also known as Article twenty three here in the city, and which was legislation that has basically been installed in the Legislative Council for for many years now, since two thousand and three. Back then when it was introduced, is fueled some widespread demonstrations. The government was then forced to scrap it. So we now see a very stronger and much more bold in Beijing than seventeen years ago. So they're taking matters into our own hands. They're frustrated by

the months of unrest that it's hearth the economy. They're frustrated by lawmakers who have failed to get through this legislation. So the new strategy now from Beijing is to basically by pass Legislative Council here, skip the whole legislative process and do this. And they're from the MPC, so that's why this jokes so much outrage from those in the pro democracy side. Yvonne, you've done a great job of outlining this, and we thank you so much for staying so late to speak with us and lay it out

for us here. Tom, I'd love your perspective from an economic viewpoint. Why Beijing is doing this now against a backdrop of a pandemic and a huge hit to its

economic growth. Why is it not more concerned about the loss of Hong Kong as an international center and hub for finance and beyond UM So, I think what's what's really clear, Lisa, is that the politics is trumping the is trumping the economics UM and the national curiocy considerations the Beijing are more important than any risk to Hong kong status as a as a financial hub and a pathway for capital and expertise in trade between the mainland

and the rest of the world. I think the other point to keep in mind about that the timing of this is, I mean, this is a move um, which in normal times would be expected to be controversial internationally. Right, a move which would be controversially in the United States, with the United Kingdom with its historic relationship with Hong Kong, Um with potentially some European countries as well. But at this particular moment in time, the world is in crisis, Um.

Domestic leaders President Trump, Boris Johnson, Angelo Merkel, Um, they have other things on their mind. Right, They're dealing with a pandemic. They're dealing with economies in deep, in deep crisis. Um. So I don't have a crystal ball into the thinking of China's leadership, But potentially this is also a moment where they can make this controversial, mute move with perhaps less global repercussions than they would see in normal times. Yvonne,

what is the expected response from those in China? Prior in Hong Kong, prior to the pandemic, the protesters were consistent week after week after week in their protests. Um, what is the expectation here for this move. Well, there's already some calls for people to hit the streets this weekend and the following uh A week after as well, and we've seen the activists already hitting the streets tonight handing out leaflets to the people in the streets educating

about them about this national security law. So we have seen the anger resurface thing again and potentially we are could be saying the stage for a repeat of what we saw late last year. So the prospects aren't good at this moment. And it just seems like at this point from from the opposition side, they believe that by bypassing legislative process, that this is the end of one country, two systems, this is the end of Hong Kong's autonomy.

So it's hard to see that this national security law could actually end the the unrest out there, even carry a LANDA chief executive herself said tonight that she doesn't expect protests to end amid this security law, and if anything, it's it's only feels more anger on the streets, especially now that this this outbreak and the coronavirus has eased a bit here in the city. It's it's calm down in terms of the numbers of local infections has been

down for the last couple of weeks. Now that's given a little more comfortable people to come out again to you thought. I'm just wondering from your perspective, I saw that real estate stocks got hit the hardest in Hong Kong. I'm wondering how much you're seeing anecdotally or from data perspectives foreign money and will the money going out of

the property sector in Hong Kong. Yeah, certainly was a concern late last year when when you were hearing people saying that they were pulling money out of Hong Kong and moving it to Singapore, for example. There's a lot of questions of whether Hong Kong status as an international finance hub is now under a question. Uh, and so markets really took this by surprise, the fact that the

MPC we heard this type of legislation. Um, you know, at this point, we haven't seen a whole lot of those concerns or at least that type of movement just yet. But what's different now versus say, back in two thousand and eight, and what led to Hong Kong I should say stars not two thousand and eight, was that what led to a revival in the economy was the fact that they opened up the borders from mainland tourists to come that essentially gave it a v shaped recovery here

in Hong Kong. Now that we're in a recession, a lot of economists say it's unlikely we're going to see that quick of a bounce back in the economy because we have been the mainline tours arrivals dwindle. In fact, I think they're they're in a single digit at most, so and given the anti China sentiment there is in the streets there, you can't exactly rely on Chinese tourists to revive the economy anymore. And they were key buyers in the property market as well, so potentially we could

see thumb rupture there in in the property market. We haven't seen a whole lot of it just yet. It's actually been still quite table at this point. But you know, Tim will tell Tom just real quick here thirty seconds before we let you go, what are you looking for over the weekend? As Beijing has its annual power So we've already seen China step back from its growth target, that GDP target, which set the tone set expectations for

the year UM. They've significantly ramps up fiscal stimulus, so that will provide some support to sentiment and demand UM in terms of Hong Kong is As Von said, I think the key thing to look for now is what's the reaction on the Hong Kong Street. Does this bring a very large number of people back out to protest? And if that happens, what then are the consequences for Hong Kong markets, real estate and the economy going forwards.

Tom or Like chief economist for Bloomberg Economics, and Von Man, anchor of Daybreak Asia and Bloomberg Markets, which had to open for Bloomberg joining us, staying late to give us that report from Hong Kong. Definitely a historic seizure rupture here between Hong Kong and Beijing. Long time in the works, yet really raising questions about why now amid a backdrop of rising see no US tension. You're listening to Bloomberg Markets with Lisa Abrama Ed's and Paul Sweeney on Bloomberg Radio.

We've talked a lot about how passive investing is all the rage and everyone wants to go into an index fund, and yet we often failed to discuss the very active process of composed using the underlying index, and that's very much in the forefront of people's minds right now. Is the SMP, which is the most tracked index bypassive funds, goes under potentially a pretty big overhaul. Joining us now to discuss this is Nick KOLs, co founder of Data

Trek Research. Always great to get your thoughts, Nick, I want to start with why the SMP may have to rejigger which companies includes. Yes, the biggest reason, and you know we see this day to day, is that there are a lot of companies at the bottom end of this index in terms of market cap, that have fallen away below the typical levels where the SMP committee begins

to think about replacing them. So, for example, Harley Davidson three billion dollar market cap, GAP stores at three point five billion dollar market cap, that's well below these five to eight billion dollars the committee tends to think about in terms of taking companies out of the index and replacing them with new ones. And it's a function of all the issues of the COVID crisis that we've seen

in terms of how different companies are doing versus others. So, Nick, is the SMP that the committee there that looks at some of these companies. Are they trying to give some of these companies the benefit of the doubt and turn in a sense that hey, this is really related to this pandemic, and the pandemic is we think it will be a relatively short lived issue. And then once we get to the other side of this, these stocks were rebound.

You know that that has to be part of their calculus, because one virtue of the five hundred is that it is pretty sticky. You only see twenty to thirty changes in the index a year, and they try to maintain a very low portfolio turnover because that's one of the advantages of index investing, is not having a lot of churned and transaction costs in the portfolio. But as we go through the balance of the year, some of this

doesn't have their force their hand. How much longer do you want to wait before some of these companies that were already in structural decline, like anybody that sells stuge department stores, Gaps stores, or Harley Davidson. How long do you want to give them before you realize, Okay, they're not going to come back in any really serious form and we've got to move along. What's the reputational pressure

for them? For the S ANDP Committee, the reputational issue is as you said at the top, this is the most widely followed, widely indexed measure of U S stocks

anywhere in the world. It is the most popular, not just here in the US, but everywhere, largely because it's done so well relative to any of the same For example, M s C I EFA M S C I E M. You know, the ST five hundred has been an absolute horse of an investment over the last ten years, compounding at thirteen percent annually until the fall off the beginning of two thousand and twenty. Done far better than everything else.

So it's really important from an indexing perspective, from a business perspective, that this index continue to hold that structural advantage over every other measure of global stocks. So, Nick, I know there are traders out there that like to kind of, you know, speculate on aims that are going to come into the SMP. Conversely, also and also names that that will come out of the index. Are we seeing some higher volatility around some of those names? You know,

it has been hard to measure. We did look at that for our client. Note it was very hard to pick out what the volatility from the macro environment has been versus what you really point out is a very common kind of index ad index um delete kind of mentality. So hard to tell right now, but if you look at I'm looking at the bottom ten names in the SMP right now, Haynes Brands, Harley Davidson, Norwegian Crews, L Brands, PVH Clow, Serve, H and R, Block, Discovery, and Xerox.

Those are at the very bottom of the list, all brand names, all things we know, some of them. I would assume we're going to leave the index in the next year, just because there's gonna be new names that

the committee wants to add. I'm struck, Nick by a point that you made in your recent research, which I thought was really fantastic, which is this concept that yes, people want to invest passively in broad markets, and yet the decision and how to how to count that market is very subjective, the sort of active quality of index composition. What types of subjective measures does the SMP committee have

to consider were deciding on some of these issues. Yeah, it's it is to me the most fascinating points in all this because it is ultimately a choice. You know, the committee has a very well, you know historically, you know, very precise measure of what they want to add. There's

profitability requirements as market cap requirements. I would kind of take the conversation a little bit different direction, and just everybody considered the fact that Tesla is not in the SP five hundreds, but Hard Davidson is um which to me is a central irony, and the issue is one issue, It is profitability. Tesla has not yet had a sequence of four quarters with a strunk together a profitable four

quarter trailing. They could have done it this quarter, they miss by about a hundred and twenty four million dollars, and so as a result, they're not going to be an index for a while. Now, that's a hundred and fifty billion dollar plus market cap company that could have been added when it was ten or twelve or even fifty billion dollars and added a hundred billion dollars of values the index, and yet because of that profitability measure, they're not, And given what's going on in the world,

they're not gonna be there for a while. So does that kind of suggest Nick that the SMP needs to rethink some of this as you think about some of the technologies out there, you know, like a Tesla, like some other tech companies that are just huge, and they're focusing more on market share gains than profitability, and the market seems to be okay with that and rewarding that. So should not the name like Tesla be in there?

It absolutely should be, But I understand the committee's tension because for every test that there's an uber or lift or if you had added those, you know it would not have had the same results. You've got to take good with the bad in the end. You know, the SMP Committee may one day decide, okay, let's add an ear G overlay to some of our decision making. And if a company is clearly relevant from saying E standpoint, then it should have some weight against the lack of profitability.

But the committee is not there yet. And these are things that take a long time to develop, but I think they're going to have to get there just real quick. Nick, I wonder how much the reconsideration here of the SMP Committee comes in the heels of NAZDAC success. Is that part of it? You know, that is definitely a part

of it. And I would also say, look at, for example, what the Hong Kong the Hang Sang is thinking about in terms of adding some Chinese companies purely based on whether or not they have enough stock listed in Hong Kong. Hang Sang is a big property and bank index, and that's not really where the world is going. So I think every index provider and every exchange is thinking about how do we pull things into something that we can index because the world has not so passive and it's

become a much more important conversation. And Nick, thanks so much for joining us. We appreciate you taking some time here before the three day weekend, Nicholas kofe under Data Trek Research giving us some always some interesting food for thought, Lisa, and that is, you know, kind of looking at that SMP five hundred, the components of the SMP five hundred, and Nick brought up a great point that Harley Davidson, with a five billion dollar market cap is in there,

but uh Tesla is not. Yeah, but how do you even determine who the winners and the losers are going to be in this environment when you've got no forward guidance, you have such an uncertain backdrop. It becomes a very difficult decision to make for the longer term. Yeah, it really does. And I think as Nick was suggesting the SMP Committee favors some stability and stability and profitability, so

but interesting to see how that plays out. For Lisa Bramo it's on Paul Sweeney that does it for Bloomberg markets for this week and during the weekend. This is Bloomberg. Thanks for listening to the Bloomberg P and L podcast. You can subscribe and listen to interviews at Apple Podcasts or whatever podcast platform you prefer. Paul Sweeney, I'm on Twitter at pt Sweeney. And Lisa abram Woyds I'm on

Twitter at Lisa A. Bramwoit's one before the podcast. You can always catch us worldwide on Bloomberg Radio.