Surveillance: 'Extreme' Jobless Numbers With Hooper

Greek letters Cevita, What does Gamma? What does Delta say about this unusual time? You know, I think we've had a fast and furious comeback in the market. I think that's really interesting to look at today is just the valuation of the market. Um, so, two things have happened over the last month. The market has gone down and then up pretty quickly, and then you've also seen earnings revised down pretty aggressively. So what's happened is the pe

of the market. The price to earnings ratio has has actually risen to almost the same highs that we were at in February, which means the market is again very very expensive, and this time it's because earnings are lower and the prices back to uh to to you know, pretty aggressive levels. So so I guess when we look at the market today, we think, okay, it looks just as expensive as it did about a month ago. And

we're not out of the woods yet. So we've got you know, we've got employment likely to get worse before it gets better. We've got um, you know, a lot of uncertainty around timing uh in terms of business resumption. Um, we've got you know, kind of a very muddled earning season where a lot of companies are just shutting down guidance because they have, you know, kind of a no visibility in terms of what's going to happen. I don't know. When I look at this, I think, okay, we've come

back pretty quickly. But do we really have the underpinnings of fundamental underpinnings of a of a strong bowlmarket from here? And I think that's the big question mark for me. Yeah, And when you talk about questions, we used to say pay attention to fundamentals, and now people are saying numbers don't matter. We're flying blind. It's bad. We don't know how bad. It doesn't matter how bad, as long as we get a sense of when it actually starts to

come back. What's your compass right now for deciding whether to buy or sell? Yeah, I think it's a really good question. And I think the way we're thinking about things is more just the short term is so fraught with uh, with uncertainty, that it might just make more sense to think about a normalized earnings approach, just you know, what are earning is gonna look like over the next

few years. Does the does the global pandemic change a lot for the earnings composition of the SMP five And I think there are puts and takes, you know, So I think if you think about travel and commercial real estate, we might be less inclined to UM to see those uh, those areas continue to to receive the amounts of to continue to generate the amounts of revenue they have to date um as you know this this sort of hastens the work from home less reliance on on office space

aspect of the economy. But on the flip side, if companies are paying less for office space and corporate travel, then maybe that's good for margins UM. So I do think that there are you know, kind of offsets positive offsets to normalize learnings. But here's our take. We think that normalized learnings is going to be about tempers that lower than what what we were expecting prior to COVID nineteen UM And you know, and I think that that's

that's not so bad. I think stocks are still offering a relatively competitive return to most other fixed income assets. And you know, kind of thinking about our quant models, uh, you know, I think one of the things that we find interesting is that valuation doesn't really matter for the short term, but it does seem to matter quite strongly for the long term. The R squared on on you know, the pe ratio of the market over the next ten

years is above six. So that means that evaluation is really important in terms of describing what the market's going to look like over a ten year time horizon. And returns right now look like they could be in the you know, three to four to five percent range over the next ten years. If you add on a two to three percent dividend yield, that's you know, seven percent returns. It's not bad in an environment where where interest rates are super low and most fixed income assets aren't going

to offer that type of quality adjusted return. So I think longer term stocks still look good to me, but I think they've come back a little bit too quickly to help us understand. Then, with all of this in mind, how useful earning season is, Yeah, I mean it's a it's a great question. So I think that earning season is a little bit of a guessing game. A lot of companies aren't going to give you guidance. Um, if you look at the dispersion of analysts estimates, we've reached

all time highs. Nobody knows what's going on. So I think that you know what you want to pay attention to this earning season are surprises. One of the things we found interesting was that in in prior periods when dispersion of analysts estimates was this high, surprises were actually rewarded more than usual. They were rewarded three times as

much as usual. So I think that earnings beats in this environment are going to be very sparse, but but they will definitely see much bigger rewards than what we've what we've experienced historically. So I think that's what we want to pay attention to this earning season. I don't know if we really want to pay attention to guidance because I think companies just like you and me don't really have a good sense of how this year is going to shape up. I'm not sure who's still providing guidance.

Saveta are always great to cash out with you. Thanks for the half work from the team, especially the time like the Savita SUPERMANI in there of Bank America on this pandemic. We have been thrilled by our medical coverage.

We really might try to make it come to speak to experts on this weeks and weeks and weeks ago, and we want thrilled, thrilled to have an agreement with Johns Hopkins to bring you their best and brightest across all of their facilities, including the Bloomberg School of Public Health, of course, with the philanthropy there of our founder Michael Bloomberg, founder of Bloomberg Gelpi, and of course this television and

radio operation as well. But there's much more at the Johns Hopkins University, and that includes a world class nursing program. Jason Farley is a doctor at the nursing program. He is expert on the people in the trenches and we spoke today about the dynamics of this nation and nursing

here is Professor Farley. So we know that when we're looking at how many people become critically yell and we're still looking at approximately of people hospitalized UH needing some form of acute care, and of that group, approximately half will need some form of mechanical ventilation. Now needing mechanical ventilation tend to be tend to skew toward our older population. And we're still seeing that data in the United States

consistent with what we've seen around the world. Does our response team in the US and in other parts of the world have enough equipment, have enough personal protection to deal with the virus in the coming weeks and months. So so, the the administration has finally started to UM offer support to the states in trying to get more PPE. There have been herculean efforts by various governors across the United States to UM bring in more in maps, to bring in more gowns and gloves, to bring in face

shields for our frontline healthcare workers. UH. That has been different across states, and as you've seen recording UM, different governors across the United States have had to basically barter decal in you know, for lack of a better word. UM, personal protective equipment from various agencies, including going overseas to obtain you know, maths from China and their supports mass

from other countries. UM. It's also in my home state of Maryland, the governor has launched a in ninety reprocessing center, one of the largest in the country, to facilitate the reuse and cleaning of IN nine mass, which is something that's unheard of. We would never typically reuse those types of maps, so we're being very resilient in our efforts

to try to make sure we have enough ppe. Dr Farrow, you are expert in the epidemiology of infectious diseases, and your Johns Hopkins is flat out done the best job of a regional, a city, almost a nationwide epidemiology and study of these statistics. The statistics, the slopes, the second derivatives for some of these regions California, Florida, they're really not very good. New New Jersey just it's not happening.

Tell us about the diffusement of a virus from hot spots which get all the media attention out into the greater public. What is the experience you have of infectious disease from a hot spots out to broader geographies. Sure, so when we talk about hot spots, it's important for everyone to understand that where we have ongoing you know, replication of the virus and transmission of the virus UM.

You know, when a when we know what the effectivity uh potential of the virus is, and that's what we call are not um In this case, it's between two and three. So that means for every person that you uh, in fact, that person with COVID infects, they're gonna in fact approximately two to two and a half to three people UM with the virus. And so hot spots allow that propagation or that that transmissibility to occur um ongoing in an ongoing basis. Now the trickle effect, you know,

it's bleeding out into other locales and locations. It's the perfect example in the United States right now in the Rhode Island. It's been getting cases coming in from New York, from New York State as well as in from Connecticut. And it would not have deemed a hotspot, but because of you know, migration, because of contact, because of UM, you know, people's movement, it has now started to see

bleed over. Jason Farley Johns Hopkins University thrilled to have him on today with their School of Nursing Mishall Meyer. Where the Bank of America, Michelle, I guess I did math there. I don't know if it's a Bank of America quality, but I took twenty two million divided by a hundred and fifty five million employed. That's really ugly. How do you fold that into a guestimate of where the unemployment rate will ahead? Um? Good morning, Good morning

Tom Coom morning John so. Um. Yes, absolutely, those are disturbing numbers, UM, and your math is correct. Um, it's about fourteen per suddenly before that have already lost jobs in an extremely short order amount of time, So the unemployment is already in double digits. It's um with these numbers, if you assume one to one translation to the household survey UM from the BLS, which is probably not quite right.

Probably there's some wiggle room there, but it would suggest you're probably already at about a fourteen percent fifteen percent unemployment rate. What do you think it's going to eventually end up being given the pace that we're seeing, Given the lack of clarity as far as the ability to process these claims versus the demand for unemployment benefits right now, So you know, the bulk of the loss is happening right now. I mean, that's this what this recession looks like.

It's an acute crisis. It's it's shutting down of parts. They come all happens very very suddenly. So UM, you know, we certainly should assume some moderation going forward. UM. I don't think we've returned anything that you know as kind of pre COVID levels for a really long time. When it comes to claims, UM, they will remain elevated, UM, but coming up they will come off of these extraordinary

levels of five six million a week UM. Nonetheless, you know, April jobs report will be clearly very ugly with what we're seeing, you know, millions of of of jobs lost. UM. They will probably also be very weak because you have some residual weakness there companies that had tried to to to stay along UM, but you know, at some point kind of decided that the math doesn't make sense anymore and their employees would probably be better if they do

go on unemployment insurance. So you know, there's some laggers there as well. UM, And I do think that it's going to take some time to work through all of that, Michelle. In four weeks, we've taken out ten years of jobs growth in just four weeks, and quite clear it's easier quicker to get rid of jobs than it is to add them. Have you got any projections whatsoever at this point about how long it's going to take to heal these wounds that are deep into this labor market in

just four weeks, You're absolutely right. It's a lot easier to shut the lights sticks off and put it back on, especially in this environment where you know it's it's a dramatic, quick shutdown, a lockdown, um from the shelter at home orders and then it's going to be a very slow and properly partial reopening. UM. So the one thing to look at when you talk about the job cuts is

the percent that are reportedly considered temporarily unemployed. UM. You know, Esthmus, I've seen suggested to that half of the current flow and two unemployed are considered temp. So if that is the case, those workers in theories should be more attached to their employers um and they should be able to have a clearer trajectory as to when they'll be hired

back on what that might look like. UM, so you'll see an initial You know, once once we go to the point where companies can start opening, businesses can start coming back, even partially, they will bring their workforce back to some content where it gets really sticky and where

you see the frictions. Is that next phase. Um, So you bring back your essential workers and then what comes next, It's going to be very slow because you describing you improve your rise and claimed folks with this Michelle Meyer Bank of America h this morning, your your rise to economic acclaim. Michelle was founded on the housing market and that dying to ask you this, give us the Michelle

Meyer Rent Dynamic Housing, sales dynamic housing, build dynamic. If you had to write a three page essay right now on housing amid this unemployment rate, how would you frame it? Housing is under stress? Very simply? Um. You know, housing is a sector that's heavily debt financed. So um, you know it's reliant on the ability to get leverage and

the willingness suspend that debt. Both I would argue or challenged right now from the household and from the builder perspective, small builders UM and it also as respector that requires quite a lot of confidence to go out and to purchase the new property. Um to spend the money and the time and the effort in terms of making that your home of your dreams at all requires having confidence about your current and future income. And I would argue

that that's certainly not the key today either. So you're going to see quite a big drowsivity. Then what's the elasticity of rent or house price? I mean, do you do we finally get how you know, we're addicted to housing always going up? Yeah, right, we learned in a seven that doesn't work. But should we anticipate now flatness or even declining cost of us living in rent or homes? So you know it? First I'll take the un rents. I mean on either rents are housing prices, they tend

to be sticky, so they don't adjust immediately. They you first have to see transactions adjust er. You find the market clearing price, and then you see the price data actually um adjust. So but but what what's interesting on the rent side is that you could see in theory, you know, landlords across the boards, they look we're going to give a reduction in in in rent very quickly.

Given the unprecedented nature of this shock. UM, you've seen a number of nfc s trying to push for mandated you know, rent reductions at least for a period of time to ease the burden UM on individuals. So it depends. I mean, I think given the unprecedented nature of the shock, you could see a faster reduction perhaps UM in the cost of living UM, given how much income has been reduced. But typically UM rent and home praises tend to lack. You first need to see the move in terms of transactions,

and then you see it in terms of the price variable. Michell, there's a lot of people really struggling in this moment. You know that everybody listening in this very moment knows that. And I'm just wondering if this anything else we can do on the policy side to help. Is there anything left? I do think that there's more that probably will be done.

I mean, the response has been aggressive, it's been targeted UM, but there are, naturally, you know, some frictions you know there the clock is ticking, particularly when it comes to small businesses who are forced to cut workers as we're seeing this morning. UM. So the quicker that funds will be distributed better. Now it's a really hard thing to do is to turn around and all of a sudden get all the money to where it needs to go.

In the private sector, it's not an easy task. And naturally there's going to be some operational challenges and and and issues there, which is what what what looks to be happening to some extent, But UM I suspect we will see additional funds be allocated, so they're likely will be another round of stimulus, probably in pretty short order. UM targeting smaller meme sized businesses and trying to create the ray incentives to keep their workers on the books. Michelle, this,

these numbers are brutal. They're really really depressing to see this scope of Americans lose their jobs and frankly, people worldwide I'd lose their jobs. And yet we're looking at SMP futures that are up a half percent there, Uh, they actually climbed after this data came out. Can you look to any positive economic developments that could be edifying the sort of positive sentiment that we're seeing bleed out in stocks today? So there's always a question what's priced

in UM and I think. You know, presumably very weak data has been priced in, right, there's an awareness that UM with a shutdowns being enforced, you're going to see these level sets down in the data, which is exactly what's coming through UM. But no, obviously the data on the headline is absolutely UM is absolutely stunning in terms of its degree of weakness. UM. The other thing probably driving Marcus presumably is what we just talked about around stimulus.

You know, how much of an offset will there be? Uh? There seems to be a large willingness from the policy side to try to counter the weakness in the private economy and try to upset the shock from the COVID pandemic. So you know, I would imagine investors there as a paying very close attention to that as well. What have the degree of stimulus and how that bleeds into the broader co Michelle quite to get your thoughts as always. Michelle Meither of Thank America Internet of Trades joins with

Data Partners. I can't keep track, Henrietta the alphabet soup, but one big small business pot has already been used up. Is anybody in Washington aware that is a percent of g d P there a third or maybe halfway to where they're going to go. It's interesting. I think that they are aware of that, but they are slowly being becoming more comfortable with making it take as long as possible to get each of these stimulus bills out, so that the complicated way of saying, they get it, and

they know that there's more stimulus coming. Fourth bill, a fifth bill, a sixth bill. But I've been tracking the duration of time it takes them to agree to these pieces of legislation, the first three and now three point five, which hopefully we'll get by the end of this weekend. Um, and it keeps taking them just a little bit longer each time. So they're comfortable with the spending, but they're getting more dug in politically about what points they want

to make. UM. Whether they sense any kind of urgency, they it's almost like they know it's coming, so they're willing to take it slow. Do you sense urgency at the moment um? I don't sense urgency right now. No, And I think that Treasury sec Reminution tried to create some urgency starting last Wednesday, and now here we are more than a week later, and we still don't even

have this urgent stimulus to the point five bill. UM. I think Republicans are trying to make a political point in the Senate, and Democrats still are the minority in the House, so eventually you're gonna have to have partisan, bipartisan conversation, and they're just not doing that at this time despite the urgent calls from Treasury. So ultimately we'll

get this money spent. I think the three point five bill will be about five billion dollars, and then the fourth stimulus bill could easily get you into the one point five to two trillion dollar package. They're seeing this macro data come in. They know it's a horror show out there, and there are still political games being played. Um, and that decondo a sense that they know it's coming, but it's not urgent. And we have said that's shocking to me that in nine minutes time will have another

ugly jobless claims print. And for someone like yourself who has to read the room in Washington and you don't sense urgency, I mean, how disappointing is that, in a moment like this that you don't sense that at all. It's it's really painful. It hurts my feelings. If we're being honest. I mean, there are some staff who are deeply entrenched in this and understand the daily goings on

on the market, but that is not the norm. Um. And you also have you also have the problem of having these members spread across the nation, you know, so not physically in DC capable of generating a momentum for passing any specific legislation. So UM, I think we're seeing

that really play out. And while the President keeps holding these daily press briefings, Um, it's almost like no one can get a word in edgewise because she sort of sucks the acute out of the room, So nobody is able to make their individual political points even if they wanted to. Let's let's take a little bit deeper into

the urgency of this. We've seen figures that of the Small Business Business Administration lending facility has been already extended, it has not been delivered yet, the cash not necessarily in the hands of the businesses, but promised out. Now there's another wave of funding being requested from even smaller businesses. How urgent is it that Congress re ups the amount of money to this program in order to stave off another round of bankruptcies. I think that's exactly the question.

We don't have any oversight er data about what Treasury is doing, who's getting these loans, how effective it's been, its stemming payroll cuts, UM, and I think a lot of members want that information and they want to see it roll out. What the Democrats are trying to do is not necessarily delay the PPP from being replenished, but they want to steer the funding into specific baskets, which

members like Marco Rubio have an issue with. So, for instance, if you can't oversee exactly who's getting these loans and you don't know if it's really reaching the hands of the folks who need it, what you can do is you can streamline and say, all right, we want, you know, a hundred and fifty billion dollars this money directly to go to businesses with fewer than five people UM in specific locations, UM, minority owned, women owned, you know, kind

of try to direct it in that regard. And that's what Democrats have tried to put into their pieces of legislation. But the Republicans are essentially saying, look, we just need to get this money out there, and we don't have time for these games. Let's just put the money in this basket and get it spent um. So it's it's a competing view of how to control where this money

is delivered and how effectively it's used. And when you see the Fed and Treasury can saying we're just trying to shovel money out the door right now, it's really difficult to exert oversight in a specific time of crisis. That should really come later, and it will. Is there more urgency with respect to coming up with a plan to reopen the economy. The plan to reopen the economy is really just a mess um, if we're being honest.

There is a really haphazard effort going on at the administration level, and almost nothing in that main going on to bet the House or the Senate. Obviously, we have some select governors who are in states you've been deeply hit and are trying to coordinate amongst each other to try to bring their states out of this shutdown. But the administration is creating a situation where people have different senses of different dates. So May first is the thing,

May seventh is a thing. Jam onest is the thing. There's no cohesion and the you know, quote unquote opening our city Council that the administration has been um, you know, sort of dangling in front of us. How as no members, It has no concrete plan, it is not unified. A most importantly, it has nothing to do um with providing testing to the extent that we need. You know, no state has been able to test one in two point seven of its population. That's just not going to cut it.

You know, if you're President Trump and you can walk down to that and you shoot somebody, that's different. Henrietta, that's the statistical theday. Thank you for bringing us that wisdom of under three percent testing right now. Certainly that's what everyone's talking about this Thursday morning. Henrietta trace with Veta Partners. Well, in the United States we have Uber

we have left for our rides sharing. In China, they have a company by the name of d D. David Rubinstein Carlisle co chairman, sat down with the president of d D and part of his latest peer to peer conversations, let's take a listen. Uber is now publicly traded and it's losing a fair amount of money every year, a billion dollars plus a year or something like that or more. Um, are you thinking of going public and are you losing

money or are you making money? Well, um, we do have a specific type of timetable has put it that way and back to the upper point. I'm sure it's temporary and they would go through it. There is very diligent CEO and a very experience for us. We think profitability is natural result of the value usually create. And there are two things in China very different from the other market. First, the right share is cheaper than car ownership, so that's the huge value creation you provide to your users.

And secondly, in China we're going through a transition that people, you know, people urged for better life quality, better lives. Jean Lou of d D. David Rubinstein joins us SNOW and of course he's pure to pure. Conversations are just superb and they're always names we know, except not now, David. I want you to sell miss Lou to our audience. Why do we care about this interesting investor from China. It's a very interesting woman. She's educated in China. Her

father is a prominent business person. He he started Lenovo, which is a major computer factor. She later went to Harvard got a computer science degree and then did what many Chinese educated United States do. They went to work in Wall Street. She went to work for Goldman Sachs in in Hong Kong and um she became an investor and she wanted to invest in a company called d D and they wouldn't take her money Goldman sachses money. Eventually she said, let me just join the company. She did.

Now she rose up to be the president. We think in the United States that were the center of the universe very often. But d D is bigger than Uber. Now. D D is not publicly traded, so we don't know completely the value. But it has more customers than Uber does, and it just has a bigger base than than Uber does. Get people there. That scream you heard last night, uh David Rubinstein was Paul Sweeney screaming at Uber left or one of them in New Jersey as well. What's the

ability to bring d D over to America. Well, interestingly, many of the Chinese companies that are the dominant in China don't really do that well in the United States are having become major presences here. So like Ali Bob was not a major presence here, at least not yet. Uh d D actually is owned in part by Huber.

Uber is an investorent at Uber tried to be a major presence in China and ultimately couldn't beat d D, so it basically invested in d D. A d D is uh is really the dominant partner there and Uber will not really compete in China with him. Whether d D will come to the United States, I think right now probably they've got their hands full with China. So, David, what did ms lou suggest to you, as you know the key challenge for continuing the growth of d D. Well,

of course this was done before the coronavirus. The interview was done a little while ago. Um, now everybody has the channel. Is that nobody's traveling though though China is coming back online and therefore China is um more using these kind of divide these kind of things than they are in the United States right now because people are going back to work. So it's not like the United

States where nobody's traveling. D D basically is a company like Ali Baba, which has become a major presence in China. Everybody knows it, everybody likes it. And interestingly, what she does very often is she drives the car herself. She wants to see what our customers are thinking. So she drives the car and very often, uh, you know, she gets comments from people saying, you're not a very good driver, I'm gonna report you to the company or something like that,

or sometimes people say she's very good. So what's what's the competitive landscape in China for the ride sharing business? Here in the States, We've got Uber, We've got Liver duking it out. When this when when they started, when he was started in China, there were roughly thirty of these companies and in the end they got down to it just a few and d D is the dominant one there, just says Uber Withlift or the two dominant ones here. Um, but DD has a much bigger presence

than Huber really has in the United States. It's much more dominant and many more customers. And I just think it's likely to expand in the other areas. And it's it's it's extremely well respected for their service and their their ability to kind of take care of customers various needs. David Rubinstein, thank you so much, greatly appreciated the Carlisle Cole Chairman and of course UH interviewer extraordinaire. I can't say enough folks about the David Rubinstein Show. Peer to

Peer Conversation, seven pm Friday in New York. Thanks for listening to the Bloomberg Surveillance podcast. Subscribe and listen to interviews on Apple Podcasts, SoundCloud, or whichever podcast platform you prefer. I'm on Twitter at Tom Keane before the podcast. You can always catch us worldwide. I'm Bloomberg Radio