Bloomberg Wall Street Week: Thompson, Corwin, Goolsbee

Kevin Johnson sec Chairman j Clayton. Bloomberg wool Street Week with David Weston from Bloomberg Radio, who knew equities can go down as well as up as we head into an uncertain election and companies continue their struggle with the coronavirus. This is Bloomberg Wall Street Week. I'm David Weston. The White House was pleased by the strong jobs numbers this week, but there is still weakness under the headline numbers of

one point three seven million jobs added. We asked Austin Goulsbury, professor of economics at the University Chicago Booths School of Business, what the numbers really show us about the economy. We've had a nice rebound of the what were the temporary layoffs. So again, if you look at this report, you've got strong job growth, especially strong in temporary sensus employment from

the government that was three something thousands. And then the two major sectors of job growth are retail and leisure and hospitality. Where you saw the giant increases of temporary layoffs, those people are mostly now all the way back or pretty close to back. The question is for the permanent layoffs, can we get them back to work? And if we recovered to something like half where we were before, uh,

that's not really great. And so I think on the political side, we're gonna be in this dynamic where representatives of the Trump administration are clearly going to say, well, look, we're having strong months, and I think other analysts are gonna look at it and say, yeah, but the strength is getting weaker every month, and we're not even getting remotely close to to where we were even before the

before the COVID recession began. So Austin, in your estimation, what was it going to take to get us to the goal we all share reposis of Democrats alike, I really getting back to or close to full employment. Is it a matter of that fiscal stimulus that seems to be hung up in Congress. Is it a matter of really getting our arms around the coronavirus? Yet? Look, I

think everything has to do with that virus. As I've said from the beginning, the viruses the boss, and the first rule of virus economics is that the only way to fix the economics is they get control of the virus. You've seen that in other countries where they've now gotten they've slowed the spread of the virus dramatically more than we have, and their economies are rebounding actually faster than than ours is. So hopefully we can get control of that.

And if we do, I think that we could get on a faster path back to where we were and growing like we were before. If we don't, Look, we need relief, uh, but we shouldn't get ourselves that relief and rescue payments trying to keep people from being evicted.

Um is going to fix the economy. It's not. I mean, we gotta we gotta get the engine going again if we If we don't, and we all want to really beat this virus, but if we don't get the vaccine, if we don't get to a world where we can go back to something like normal again, Do we need to lock down, because that's something that's certainly the problems. Last week accused Vice President Biden of saying that basically we should lock down the country. What is his view

on that. Can we keep going with the economy, even with social distancing and masks and washing our hands and things without actually defeating the virus? Well, I don't speak for the Vice president. You know, you know you you would want to ask them what their view is. I think other countries have shown us that you don't need to have kay there's no vaccine in Germany, there's no

vaccine in Australia. It's not in New Zealand, it's not in Taiwan, it's not in a whole bunch of countries where they have been able through public health measures, whether it's mass whether it's social distancing, whether it's a lot of testing so that you can get the people that are contagious out of the economy, so you don't have to shut down everyone. I don't think you have to have universal lockdowns. Uh, you just have to be smart about it. You've got to follow what works, and thus

far we're mostly not following what works. And we got a lot of mixed messages coming out. We'll address that quite specifically. If it's a matter of doing it better, being smarter, and addressing a virus while it's with us, What would a President Biden do which would be materially different from what President Trump has done. President Biden has laid out at least twenty step detailed plan on the public health side of how you slow the rate of

spread of the virus. And I'm not an epidemiologist or public health esk bert, I would refer everyone to those uh, to those documents. But the center of the of the federal response has got to be a clear, consistent approach coming from the very top from the President himself, who has clearly at many points downgraded what he perceives as the danger of this virus and said it's gonna disappear by a miracle. Initially said, oh, we have virtually no cases.

It's gonna go to none. It's it's under lockdown. Don't worry about it. You don't need to wear masks. He himself won't wear masks. I think that the kind of approach got hundreds of thousands of people killed in this country that did not need to die. That's what the public health experts are saying that if we had moved earlier, with consistent with a consistent approach from the federal government, and done the testing at the beginning, we would be in a lot better spot. But it's not too late.

That's what I don't understand. If we start more significant testing and more significant mask wearing in public and and in these places where people are in crowded conditions, we spaced them out, we can get the rate of spread of this virus down below one in their mathematical terminology. And in countries where they've done that, which is almost every rich country in the world, they've been able to

bring their economies back. That was Austin Goulsby, former chairman of the National Council of Economic Advisors under President Obama and now an advisor to the Biden Harris campaign. Coming up. We've lost all those jobs because of the coronavirus and the shutdowns it triggered. Dr Steve Corwin of New York Presbyterian has fought the virus successfully but says we're not out of the woods yet. That's next on Wall Street Week on Bloombood. This is Bloomberg Street Week with David

Weston from Bloomberg Radio. First it was New York and New Jersey, then California and Texas, and now the coronavirus crisis has moved on to the Midwest. The question is what comes next and what can we do to make sure we can get the economy going again safely, which is what we asked Dr Steve Corwin, CEO of New York Presbyterian, the largest hospital group in the New York area. Well, I think the moving average across the country is moving

down and that that is good news. I think, as we've talked about before, David, as you start to open, you're gonna tight trade infections. You have to be capable of sort of dealing with those outbreaks, which is why testing becomes so important and contact tracing to try to keep a lid on this thing until we're capable of treating it and having a vaccine for it. So the moving average going down is positive. Some of these hot

spots obviously are a problem. The opening of colleges, the the opening of schools presents a challenge, Indoor dining presents a challenge, opening theaters presents a challenge, and we have to be mindful of that so that we can scale it back if it looks like we're having an outbreak in a particular area. In New York, we're down to about two of our COVID peak, which is very comforting.

But now we're gonna look at New York City schools reopening. Uh, there's gonna be a push for more indoor venues as the weather gets colder. We're gonna have influenza start in the fall. So I think seeing that moving average go down and seeing the daily infections go down below the ten thou numbers what Dr Fauci has said would be comforting if we could get to that by October. So a lot of challenges. Are we up to meeting the challenges?

How are we doing on this because it looks like we may have to manage this disease for a while before there's this magical cure called a vaccine. Can't count on that and we reopen our economy? Can we reopen our schools to some extent prudently? I hope that we can. David, I think that we missed the boat a little, quite frankly, in terms of not tamping down the infection number. I think we had the debate over masks social distancing. I don't think that helped us as a country. We politicized it,

which was unfortunate. But I think that maintenance of masks, maintenance of social distancing, getting the infection number dawn will allow us to cautiously reopen the economy as we're doing. Look, we have to reopen the economy. We can't still. We can't say still forever. But you want to do it in as prudent a manner as possible. Uh. You read in the Financial Times today as well as other venues that Germany thinks that they're having a V shaped recovery.

Part of that is because they were able to control the pandemic to a greater extent than than than we have. Um So I think that the two go hand and glove. Are we making good progress on the testing front? You mentioned testing, and it seems like almost every day we have a new report, like Abbot Labs has something out that texts fifteen minutes, it doesn't cost very much money. Are we making substantial progress on testing? Not as much

as I would like. We still have issues with reagent shortages and things of that nature, so we can't do as much testing as we would like. But let's just talk about the point of care testing for for for a moment um. Some of the point of care tests can do a test every fifteen minutes. That's for tests an hour um. The machines that we have uh made by sepied Ross and others, we can do batch testing

where we can do thousands of tests a day. So if we had the reagents for it with these with these machines, we can do turnaround in less than twenty four hours, and we can get these things done quickly. The public ought to be mindful that point of care testing sounds great, but ultimately you want to be able to do a high volume of tests on a frequent basis.

You want a low enough level of an infection so that you know if you identifying infection, you can do contact racing and then test the contact traces in a three to five day period to make sure they're not infected. That's the key. I thought it was unfortunate that the CDC came out with guidelines for less testing. You need more testing um, and I don't think there's much dispute, at least in the scientific community and the people I've been speaking to about that. Well, I wonder about that.

I mean, you're a doctor, you head up one of the major hospitals in the country. You can sort of sift through this. For those of us out here in the real world, how do we figure out what the truth is? Because, as you say, c DC came out and said you don't need to test people who are asymptomatic. We had a flurry of people experts come out and say, no, that's not right at all. Are they undermining their own

credibility of some extent? And then we have this condalescent plasma thing where the government says it's just fine now we're here, and I says, well, I'm not sure we know. I think it was very unfortunate and it does undermine the credibility of of the f d A and the CDC. The f d A mistake was egregious, that should never have happened. You're talking about a subset of patients, and you're talking about a misrepresentation of the statistics, even according

to the people who did the study. Um and that then so what are the consequences of that? Then then gives everyone to say I want convalescent plasma as opposed to let's study this more rigorously and see whether it works or not. And we got into that same conundrum with hydroxy chloroquine. So I think that was very unfortunate. I think the CDC um you know, uh, quite frankly, that was unfortunate as well. The simple answer is, we need to rigorously test various therapies to see if they work.

We need to do the rigorous testing on the phase three of the vaccine trials to make sure that if we're going to inoculate and mass inoculate, that that we're and there can't be any appearance that this is politicized, either for the President's benefit or the or or the benefit of Mr Biden. It's got to be that we're in this together and that we're trying to to improve the public health. So I don't think we're in a

good place in terms of that. You've got now, this is a Democrat Republican issue, and it should not be Dr Corey. You of course are a physician, and you were chieve a medicine before you were CEO. But you are CEO now and you've got a really big company, a business that to run. You've said before that your company may lose as much as a billion dollars out of operating come because the coronavirus this year. How are

you doing financially? And in particular, there was a hundred billion dollars appropriated in the Cares Act to go to hospitals. Did you see some of that money will lose uh in the two to three hundred million dollar range through June. And that's uh, far less than we would have lost that we not received the Care's money. We've advocated that the Medicare and answers for all hospitals around the country, rural and otherwise be converted into grants that would help

as well. We still are anticipating a loss anywhere between seven hundred million and a billion dollars towards the end of the year. We do see our volumes coming back. That's been very encouraging. Uh. The fact that again the volumes are coming back, is completely coincident with the fact

that people feel safer. Um. That being said, I think that um, you know, we're looking for a twenty that will be rough, uh and we're hoping the twenty one will be better, and we're looking that that by twenty two will be out of the worst of it from from a from a perspective of a major institution. That was Dr Steve Corwin, CEO of New York Presbyterian coming up. A tsunami hit the news media over the last few years,

taking much of the newspaper industry with it. We talked with the man who led The New York Times not just to survive, but to thrive, Mark Thompson, It's CEO through a remarkable and a remarkably challenging time. That's next our Wall Street Week on Bloomberg. This is Bloomberg Wall Street Week with David Weston from Bloomberg Radio. For all the difficulties experienced by most of the traditional newspaper business, the New York Times over the past eight years has

managed to embrace the future. And we asked it CEO Mark Thompson, how he went about doing it what we decided to do. There were four revenue streams when when I arrived at the company still are today. Print advertising, which once had been more than eighty percent of the total revenue of the company have been print advertizing, print subscription,

digital advertising, and digital subscription. And really my kind of bed I narrative on on digital subscription as the as the revenue stream we should really grow, and indeed had to grow, because ultimately, for different reasons, all of the other revenue streams seemed to me were in trouble potentially

and ultimately I even disappear. So we double down on the very simple idea of great journalism packaged effectively in good digital products, which established a very close relationship with people who are prepared to pay to get that journalism, and that becoming really the bedrock of the entire future of the company. And to do that, we invested in our news room. We actually built the news room. We've got hundred and fifty more journalists now than then when

I walked into the building. And we also got smart about digital product. We had hundreds of software engineers and data scientists, machine learning people, and graphic designers and videographers and and really worked on the digital product. And and we've ended up with a kind of virtuous circle where I think the content is as rich and and broaders has ever been. It's much more effectively packaged up in products, and people are flocking to buy the products as as

as new subscribers. So Mark, you described it as simple, but it was far from conventional wisdom when you took over I mean most newspaper people, as you and I both know in the United States, and said, look at we made the mistake early out of making this free on the internet. There's no way we can charge with it. With the possible exception of the Financial Times maybe the Wall Street Journal because it's especially business publication. So what you did may have been simple, but it was not

what most people thought would work. That's true of my industry. But if you step back, I mean read Hastings was thinking the same thought about about high quality TV and in relation to Netflix. Daniel Eck and co at Spotify were thinking the same about music, that there was a way of getting great entertainment of great music to the world's public, and enough people out there would pay for

it to make a great business. And really all we're really doing I think we're part of a broader trend towards direct digital subscription relationships with people who want really good stuff, and that's a that's an entire sector which is growing very rapidly, and in a way, it's a little bit like the moment when cable TV arrived in the US and suddenly the was a choice there was

a choice of something beyond regular broadcast TV television. And I think that although it's true that the broadcast model is happening to broadcast TV right now, is is post growth and it is going to be very difficult to stay even its current level. Um it turns out these other forms of getting TV and music and news could grow. There was once a really big market in in paid news in America. And it wasn't just The New York Times. It was local newspapers, it was metros, it was magazines.

Know that people paid billions and billions of dollars as subscribers and buying buying these products from newsstands. There's no reason why that market can't be recaptured. But how would that happen? Marcus A practical markers. When you came in, the New York Times still had a very robust newsroom directed toward print, larger but very US newsroom. A lot of newspapers across the country, these are regional as well as local papers, really have had to cut back so

far they've let those newsrooms go. Is it possible this point to rebuild that. Can your model apply beyond the New York Time? And I guess that's what I'm asking. And the answer is because so few people have even tried it, I don't think we know. But but to me, I mean, I think there's one basic, big caveat which is this is a kind of horse and buggy to automobile moment, and that requires capital. You have to risk some money, you have to invest to make the change.

But assuming someone wants to invest, I don't see at all why if you rehire your journalists, rebuild that newsroom, start doing great reporting, and start getting smart about how you get it to the public while you can't really build a new business. I think the mistake made was thinking that you could kind of eke your way to the digital future without putting any fresh money in. And

no one could do that. Nobody could take a to two, could take a a kind of horse carriage factory and turn it into a car company without vast fresh investment. And this is one of those periods in media, which is very capital intensive, requires lots of money. But for people who prepared to put the money in, I think

there are great businesses to be built. But the other thing we saw was people take a look at Facebook and Google and say they're so massive there are audience is so large, we have no choice but to go through them. We have to hitch our wagon to them, even though they will have the direct relationship with our subscriber, our customer. I mean even New York Times flirted with that for a time. So is it possible for if you do this directly, I mean, you have a direct

relation to the subscriber. And we believe that although um uh digital social media, Facebook and the rest of it, Google Search and all of these platforms are really important in people finding our content, hearing about the Times and making sure our journalism is really influential, that we really needed a kind of trail of breadcrumbs from these other platforms back to the mothership, back to the New York Times experience. That was Mark Thompson, outgoing CEO of the

New York Times company. Coming up, we wrap up the week with our special contributor, Larry Summers. This is Wall Street Week on Bloomberg. This is Bloomberg Wall Street Week with David Weston from Bloomberg Radio. It was a week of ups and downs and sometimes just playing moving sideways. To wrap it up for us, we welcome now our special contributor and former Treasury Secretary Larry Summers of Harvard. So, Larry, we had a lot of information on the stock market

towards the end of the week. I mean, in the early week it was going up. The Latin part of the week it really sold off quite a bit. How much of this is signal and how much is this as noise? To Barro from Nate Silver, you know, David uh Bob Rubin famously told everybody in the Clinton White House, markets go up, markets go down. I think it's a mistake always to make judgments about deep and profound things, even about the future of markets, from how they behave

over a period of uh several days. So I'd be very surprised if the events of the last couple of days are historically memorable. My uh, my son, who's in his mid twenties, UM, sent me a note in the middle of the day saying, uh, hell of a correction, Dad, And I wrote back, by the standards of your young life, UM, and he had the good grace to write back, uh fair enough. UM. So I don't know whether where markets are.

I I have come to think that the idea that many had early on, how can the markets be so strong in the midst of a COVID shock, So big, I did that idea that treats the divergence as overwhelming av instant markets are wrong is misguided. You would expect that, uh, when interest rates were reduced as much as they have, when the Fed is just freely providing liquidity, when action is shifting towards technology companies, you'd expect to see a variety of the things we've seen. Are they overdone? Are

the movement's overdone? What fraction of that has been corrected in the last couple of days. Each investor will have to make uh their own judgment. But just as every time it starts to snow, it's not a blizzard. Though it might be h every time you have a significant market move, it's not the beginning of something UH profound. So I think people should be worried about whether we're going to carry on an honest election in the United States.

They should be worried about whether we're going to have a competent effort, which in many ways we haven't so far to contain COVID. They should be worried about whether we're going to find a way of making our economy function. So it helps UH middle class UH people and large fraction of population shares in any prosperity that's created. I think the fundamentals are the more important things to be worried about than UH this particular UH market fluctuation, which

I think is unlikely to be long remembered. Larry, there's a lot of talk this week, because it was a sell off led by big tech, that this might look like two thousands, But as you pointed out to me, it's very different, in part because of what you just pointed out, which is the central bank liquidity being infused into the marketplace, as well as the fact that the big tech companies aren't making a lot of money unlike some of those tech high flyers back in two thousands. Yeah,

I don't think you were not. You were talking about pets dot com UH in two thousands. You were talking about an era when people raised UH money before they had their first dollar of profits, before they had their first dollar of revenues, before they had their first coherent

UH plan. I think when you're talking about the largest companies in the marketplace, which is what the tech companies UH now are, you're looking at something very different than what we were looking at in two thousands, and if you look at price earnings ratios, they're not in the same kind of stratospheric place that the tech sector price earnings ratios were in uh in the year two thousands. Now, look, that doesn't mean there isn't gonna be a substantial correction

of some sort. Uh, No one, No one can know that, and I certainly wouldn't want to claim that. But I think that those who have been saying it's all a big bubble and declaring themselves vindicated right now are premature in their declarations of victory. Larry, one of the things that the markets don't appear to be waiting for is a fiscal stimulus package, that so called fourth round. Otherwise they'd be waiting for good because it keeps going on

another week this week without getting it. At the same time, we had to report of the CBO about the level of episode which is going to go over a g d P for the first time since World War Two. Do the Republicans up on Capitol Hill who are concerned about this have a point, you know, David Um what I learned from the CBO actually made me a little less concerned about a fiscal crisis and made me a little more focused on providing fiscal support for the economy

that I was before. We all know that the United States ran a big deficit in We all know that the debt to GDP ratio, which was around at the beginning of the year, is going to rise to around because of uh, that big deficit and because of the declining g d P. The thing I didn't have a beat on until the CBO report was what was the

path gonna be out for a decade. And what I learned from the CBO report is while the debt to GDP ratio is projected to go up slowly over the next two or three years from two thousand and twenty three to two thousand and thirty on current law and on current projections, the debt to GDP ratio isn't exploding. It isn't rising very rapidly at all. It's basically of at And what that says to me is that we're in a relatively stable situation. Now, then you can ask

the question is it a dangerous situation? Well? There, I think the way you have to look at a debt is to look at the interest flows that it generates, and in fact, we're spending less on interest UM as a share of GDP than we have historically on average over the last decades. And if you do what economists would tend to say you should do, which is look at UH the real interest cost of the debt, that is,

the cost net of inflation. Real interest rates are now negative, which makes it much much easier to carry UH debt. So what I learned from the CBO is not the current deficit figures there in the papers every day, there in the treasury accounts. What I looked to the studio for every six months is an update on the long run debt path, and that was actually a relatively serene um UH projection. So I feel better now than I

did then. But is that because of the Fed? Larry to put it simply, because if the real issue is the interest cost right now we're approaching the zero bound and interest cost because the Fed are we essentially financing that that that debt, is this really a form of modern monetary theory. I don't think that's quite the right

way to think about it, David. I think that if most economists will tell you that, yes, the Fed can set the interest rate this year, or maybe the said FED can set the interest rate next year, but the interest rate on long term debt, the so called five year five year interest rate, the interest rate that's baked into markets for borrowing that starts five years from now and continues for five years half after that, that's not something that the FED can immediately control. And it's remarkably low.

I think it's fundamental factors about savings and investment that are determining the low level of interest rates, and the FED is basically tracking that in its effort to keep the economy stable. And this is the secular stagnation idea that you and I have talked about on this UH show, or the low neutral interest rate that people in the

Federal Reserve system we've been talking about. I think they're fundamental factors that mean we're going to have lower interest rates and therefore can carry larger debts than we historically. It's fascinating. Thank you so much. It's always a treat to talk with you. Larry. That is Wall Street. We special contribute Larry Summers of Harvard coming on a rather remarkable week a lot of all time in the marketplace, but maybe not telling us very much in the end, finally,

one more thought, a different kind of Labor Day. In the United States, we celebrate Labor Day this weekend, traditionally marking the end of summer and back to school, but originally Labor Day had a bit more edge to it than picnics and beach parties. Starting locally here in New York City, in eighteen eighty two, it became a national holiday as part of President Grover Cleveland's efforts to come labor strife that had led to deaths in eighteen ninety four.

This year, we celebrate Labor Day with millions upon millions of people out of work, with back to school very much up in the air for millions of children, with warnings about the need to wear masks and keep our distance from one another, and with racial strife and cities around the country triggered by police shootings. But despite all that, we're dealing with. Happy Labor Day wherever you are, and

however you can celebrate it safely. Let's hope for holiday next year we can go back to worrying only about getting a sunburn and eating too much. That does it. For this episode of Wall String Week, I'm David Weston. This is Bloomberg see you next week.