Latest / Bloomberg Intelligence / Why Homebuilder Taylor Morrison Just Had Its Best Month Ever

Transcript

Why Homebuilder Taylor Morrison Just Had Its Best Month Ever · Bloomberg Intelligence

• 0:01
  Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, along
• 0:04
  Speaker 1: with my co host of Bonnie Quinn. Every business day
• 0:06
  Speaker 1: we bring you interviews from CEOs, market pros, and Bloomberg experts,
• 0:10
  Speaker 1: along with essential market moving news. Find the Bloomberg Markets
• 0:13
  Speaker 1: Podcast on Apple Podcasts or wherever you listen to podcasts,
• 0:17
  Speaker 1: and on Bloomberg dot com. Well, it's clear that the
• 0:21
  Speaker 1: pandemic has changed consumer behaviors. It's changed how businesses conduct
• 0:26
  Speaker 1: their business. Uh, that's very much the case in the
• 0:28
  Speaker 1: residential real estate market. So to get some more color
• 0:31
  Speaker 1: on that, we welcome Cheryl Palmer, chairman and chief executive
• 0:33
  Speaker 1: officer of Tayla Marlin Marrison. Taylor Marson is the fifth
• 0:36
  Speaker 1: largest home builder and developer in the United States. Joints
• 0:40
  Speaker 1: us on the phone from Scottsdale. Cheryl, thanks so much
• 0:42
  Speaker 1: for joining us here. I know your company has been
• 0:46
  Speaker 1: moving more towards virtual sales of residential real estate. So
• 0:51
  Speaker 1: this pandemic, I'm guessing as accelerated that process. Talk to
• 0:54
  Speaker 1: us about kind of how your business is changing. Good morning.
• 0:59
  Speaker 1: Thank you for having me. Of course. You know, um,
• 1:02
  Speaker 1: I call it the silver lining of COVID that you know,
• 1:05
  Speaker 1: our industry has really had to make some adjustments on
• 1:11
  Speaker 1: how we communicate. We've we've you know, always been known
• 1:14
  Speaker 1: for being a little kind of archaic and the way
• 1:17
  Speaker 1: we build houses. But I think the first step was
• 1:19
  Speaker 1: really how we market and interact with consumers the way
• 1:23
  Speaker 1: they want to be interacted with. So you're absolutely right.
• 1:25
  Speaker 1: When the pandemic started and everybody went home and we
• 1:30
  Speaker 1: had to generally lock our sales office doors and put
• 1:34
  Speaker 1: safety protocols in, we had to, you know, communicate with
• 1:37
  Speaker 1: our buyers differently. And we had introduced a new website
• 1:41
  Speaker 1: late last year that had an infrastructure with the intentions
• 1:45
  Speaker 1: of really creating a virtual environment. And so what we've
• 1:49
  Speaker 1: seen is the consumer really just loved this virtual environment.
• 1:54
  Speaker 1: In fact, we introduced I think it was early April,
• 1:58
  Speaker 1: we introduced this online of apointment system, and our customers
• 2:02
  Speaker 1: could schedule an appointment to either come in and meet
• 2:06
  Speaker 1: with someone privately and get a private tour, or they
• 2:10
  Speaker 1: could schedule an appointment to be walked through a virtual
• 2:14
  Speaker 1: three D tour of our homes or maybe just to talk.
• 2:17
  Speaker 1: We found about eight percent of the customers still wanted
• 2:20
  Speaker 1: to come in for that private tour, but many did not,
• 2:24
  Speaker 1: and UM since then, we've introduced self guided tours so
• 2:29
  Speaker 1: they could you walk into one of our inventory homes.
• 2:33
  Speaker 1: We've introduced an online reservation system where they can just
• 2:37
  Speaker 1: hold a house and then you know, go directly to contract.
• 2:41
  Speaker 1: It's been tremendous. We've had probably in the last eight
• 2:44
  Speaker 1: ten weeks UM, something like two fifty sales without a
• 2:47
  Speaker 1: customer ever walking in the sales office. And your months
• 2:50
  Speaker 1: of June was your best months ever. You sold sev
• 2:53
  Speaker 1: hundred and fifteen homes, So congratulations on that. I'm looking
• 2:57
  Speaker 1: at your website and there really is a huge variety,
• 3:00
  Speaker 1: starting in the two thirties range and going right up
• 3:03
  Speaker 1: to you know, even past half a million dollars in
• 3:07
  Speaker 1: some areas of Arizona. What about prices though, in general?
• 3:11
  Speaker 1: Have they been dropping during the pandemic. I would tell
• 3:17
  Speaker 1: you that if you were to go back to late
• 3:20
  Speaker 1: March early April, everybody was speaking to understand what was
• 3:24
  Speaker 1: going to happen with the consumers, you know, kind of mindset,
• 3:28
  Speaker 1: what was going to happen with jobs, and I would
• 3:30
  Speaker 1: tell you there was a freeze on prices. I don't
• 3:33
  Speaker 1: think because the inventory has always been so tight coming
• 3:35
  Speaker 1: into the pandemic and even tighter today. I don't think
• 3:39
  Speaker 1: you saw this tremendous dropping prices at all. I mean,
• 3:42
  Speaker 1: you had situations, you could have had a close out,
• 3:44
  Speaker 1: things that have been very typical to the industry. But
• 3:47
  Speaker 1: in total, I'd say no prices have held, and if anything,
• 3:52
  Speaker 1: over the last many weeks, I would tell you that
• 3:54
  Speaker 1: there's been very thoughtful price increases going on across the industry.
• 3:59
  Speaker 1: But once again, you have to remember that we are
• 4:02
  Speaker 1: sitting at very very low inventories in both the resell
• 4:06
  Speaker 1: and the new home market, and I think as you
• 4:09
  Speaker 1: look at kind of the way the consumers thinking about
• 4:13
  Speaker 1: the relationship with the home, we've really started to see
• 4:17
  Speaker 1: a bias to new We've seen that. You know, there's
• 4:20
  Speaker 1: a lot of reasons why people are moving today, right
• 4:22
  Speaker 1: It could be because they need more rooms, they need
• 4:25
  Speaker 1: more office space, really around wellness features, um and so
• 4:31
  Speaker 1: it's it has helped, it has kept prices pretty healthy.
• 4:35
  Speaker 1: Sure are you seeing you know, the phenomena we've seen
• 4:38
  Speaker 1: or heard about a right about since the pandemic is
• 4:40
  Speaker 1: a kind of a de urbanization move, and you know,
• 4:44
  Speaker 1: as people try to get to a less dense living environment.
• 4:47
  Speaker 1: Do you think that it's a longer term trend or
• 4:50
  Speaker 1: maybe just a short term effect from the pandemic. It's
• 4:55
  Speaker 1: such an important question, and it's some that's gotten a
• 4:58
  Speaker 1: question that's gotten a lot of kind of i'd say
• 5:01
  Speaker 1: chatter over the last um, you know, ten twelve weeks.
• 5:04
  Speaker 1: Interestingly enough, I would tell you at the beginning it
• 5:06
  Speaker 1: was just that it was a lot of talk. Um.
• 5:09
  Speaker 1: We UM do a lot of research and talking to
• 5:12
  Speaker 1: our buyers are shoppers that are walking in the door,
• 5:16
  Speaker 1: the folks that are coming on through our website, and
• 5:19
  Speaker 1: we've been doing that every week since this started. And
• 5:22
  Speaker 1: for the first time, I would tell you that we
• 5:25
  Speaker 1: are seeing in our buyer data, UM this I don't
• 5:29
  Speaker 1: want to call it a flight to rural or suburban,
• 5:32
  Speaker 1: but we're absolutely seeing those numbers rise. And I think
• 5:36
  Speaker 1: what you're really seeing is that people are thinking about
• 5:38
  Speaker 1: being able to work home and not having to do
• 5:40
  Speaker 1: those commutes. I'm being able to buy and you know,
• 5:45
  Speaker 1: look at the difference in what happens to prices as
• 5:48
  Speaker 1: you move out into kind of the suburban market. Um,
• 5:51
  Speaker 1: we are seeing a lot more interest and a lot
• 5:54
  Speaker 1: of interest as people are in that shopping mode as well.
• 5:58
  Speaker 1: It's not just for single family I think that, um,
• 6:01
  Speaker 1: that's probably going to be the beneficiary. But we're seeing
• 6:06
  Speaker 1: a lot of interest around town homes as well. UM,
• 6:10
  Speaker 1: but yeah, not not kind of in the central core, Cheryl,
• 6:13
  Speaker 1: we have to leave it there, but a pleasure to
• 6:14
  Speaker 1: speak with you. Cheryl Homer is chairman and CEO of
• 6:17
  Speaker 1: Taylor Morrison based in Scottsdale, Arizona, but with a presence
• 6:21
  Speaker 1: in many many states, primarily Arizona and California and Colorado, Florida,
• 6:26
  Speaker 1: but also in sort of the more north states like Oregon,
• 6:32
  Speaker 1: and then some of the southeastern states as well. We
• 6:36
  Speaker 1: have Washington in there and some really beautiful homes on
• 6:39
  Speaker 1: this website. Poll you could get someft in very easily.
• 6:42
  Speaker 1: I got plenty of real estate right now, the fifth
• 6:44
  Speaker 1: largest home builder in the United States. So what exactly
• 6:50
  Speaker 1: is going on in bond markets here in the United States?
• 6:52
  Speaker 1: If you give your money away to the US government
• 6:54
  Speaker 1: for ten years, you get sixty basis points right now,
• 6:57
  Speaker 1: which doesn't seem like a whole lot. Let's bring in
• 6:59
  Speaker 1: someone who's been working in the field for a long time,
• 7:03
  Speaker 1: Tim Vogel and Financial Couple Markets, and he joins us
• 7:06
  Speaker 1: from Memphis, Tennessee. Of course, f h N is a
• 7:09
  Speaker 1: national fixed income dealer, as we all know, Jim, are
• 7:13
  Speaker 1: you board right now? Let's just let's just be blunt
• 7:16
  Speaker 1: about it. Are there interesting moves in the bond markets
• 7:19
  Speaker 1: right now? Are you just waiting for the Fed to
• 7:21
  Speaker 1: start getting out of the way so that you know,
• 7:23
  Speaker 1: other buyers have influence again, Well, this week has been
• 7:28
  Speaker 1: interesting because as we came into the third quarter, people
• 7:31
  Speaker 1: were concerned that we may not see demanded treasury auctions
• 7:34
  Speaker 1: to finance all the stimulus spending. Instead, we have seen
• 7:37
  Speaker 1: an excellent response to the treasury supply, even as it
• 7:41
  Speaker 1: grows every single month, and that's translated into lower interest
• 7:45
  Speaker 1: rates because the fear of supply is diminished. So, Jim,
• 7:50
  Speaker 1: let's talk about the FED here. Um, you know the
• 7:53
  Speaker 1: phrase I'd like to use in people listening kind of know,
• 7:56
  Speaker 1: this is the FEDS kind of back stopping the market here.
• 8:00
  Speaker 1: How long do you think they can continue to do that?
• 8:05
  Speaker 1: Two to three years? Well? Yes, Um, they've got a
• 8:10
  Speaker 1: proven track record of managing expectations that long. And there's
• 8:16
  Speaker 1: going to be a long period of time before people
• 8:19
  Speaker 1: are convinced that the economic we can recover to the
• 8:23
  Speaker 1: point that inflation is going to return and send rates
• 8:27
  Speaker 1: up from obviously low levels. Yeah. I mean it's interesting
• 8:30
  Speaker 1: the Fed literally, with its with its forecast, has you know,
• 8:33
  Speaker 1: sort of hinted it to to three years, if not
• 8:35
  Speaker 1: explicitly outright said it. But it will only take for
• 8:39
  Speaker 1: the market to get a whiff of inflation at some point,
• 8:41
  Speaker 1: if you get you know, a few more gang blusters,
• 8:44
  Speaker 1: jobs numbers or what have you, for the curve to
• 8:47
  Speaker 1: steep in quite sharply again, right, Jim, have you seen
• 8:49
  Speaker 1: this before? Is it an actual risk? Absolutely? Uh? Curve
• 8:54
  Speaker 1: steeping in? Is the question really for the next at
• 8:57
  Speaker 1: least the next six months, if not for uh, an
• 9:01
  Speaker 1: extended period in which is why it's so interesting that
• 9:05
  Speaker 1: this week we absorbed the long part of the treasury supply.
• 9:10
  Speaker 1: Their treasuries were sort of left um by the side
• 9:14
  Speaker 1: of the road during the stock market um excitement during
• 9:17
  Speaker 1: the second quarter, and now treasuries aren't necessarily rebounding, but
• 9:22
  Speaker 1: they're certainly getting a lot more attention than they did
• 9:24
  Speaker 1: over the previous two months. Such where you know, right now,
• 9:28
  Speaker 1: given where we stand, given kind of the economic outlook,
• 9:31
  Speaker 1: given some of the uncertainties about some of these states
• 9:33
  Speaker 1: that are seeing a surge in cases. Where do you
• 9:37
  Speaker 1: see value or opportunity in the fixing come markets today? Uh,
• 9:42
  Speaker 1: you have to pay very careful attention and try to
• 9:45
  Speaker 1: find the best corporate bonds that you can. If you
• 9:49
  Speaker 1: are trying to produce a little bit extra yield, you've
• 9:54
  Speaker 1: got to consider lower cupon mortgage backed securities. But then
• 9:57
  Speaker 1: in terms of the all important yield curve strategy, all
• 10:01
  Speaker 1: of our work this week that tested different scenarios suggested
• 10:05
  Speaker 1: that concentrating around the seven year, it's a great place
• 10:09
  Speaker 1: for an awful lot of intermediate bond portfolios to concentrate
• 10:13
  Speaker 1: around the seven year. That's interesting, Well, who who would
• 10:16
  Speaker 1: they be hoped us about flows? Brian Shapata had a
• 10:19
  Speaker 1: nice column today about pension funds, and you know how
• 10:22
  Speaker 1: it's conceivable that they could actually sort of do to
• 10:25
  Speaker 1: debt markets what they used to be able to do
• 10:27
  Speaker 1: or are able to do to equity markets, and that
• 10:29
  Speaker 1: has moved the market. Did you see it? What do
• 10:32
  Speaker 1: you make of that idea or what do you make
• 10:34
  Speaker 1: of that idea? Jim? Pension funds are critical, particularly at
• 10:37
  Speaker 1: the long end of the market. They are critical to
• 10:40
  Speaker 1: the credit um markets in terms of their demand there,
• 10:44
  Speaker 1: but in terms of current flows, the massive size away
• 10:49
  Speaker 1: from the FED is from households UH that have basically
• 10:55
  Speaker 1: put their their spare cash to the extent it's not
• 10:58
  Speaker 1: in stocks, into mutual real funds and into bank deposits.
• 11:02
  Speaker 1: The bank deposit growth, even taking out some of the
• 11:05
  Speaker 1: stimulus payments, et cetera, has been extraordinary this year, Jim.
• 11:10
  Speaker 1: You know, it's we're several months into this pandemic and
• 11:13
  Speaker 1: several months into the economic fallout from it. What's your
• 11:17
  Speaker 1: thought about credit quality? Are we're seeing We're going to
• 11:19
  Speaker 1: see the bank's report next week. You're gonna set aside
• 11:22
  Speaker 1: some more big reserves. But as you look across your portfolio,
• 11:25
  Speaker 1: are you starting to see some concerns as it relates
• 11:28
  Speaker 1: to credit quality? Not yet, because the big worry about
• 11:33
  Speaker 1: credit quality inter recession is that the taps get turned
• 11:36
  Speaker 1: off too quickly and so that it's really not a
• 11:40
  Speaker 1: credit problem, it's a liquidity problem, and that's certainly what
• 11:43
  Speaker 1: aggravated the financial crisis twelve years ago. Here we've got
• 11:48
  Speaker 1: plenty of liquidity thanks to the FED into those flows
• 11:51
  Speaker 1: that we've already talked about and so we will not
• 11:54
  Speaker 1: see the um the real credit problems outside specific industries
• 12:00
  Speaker 1: developed probably until early part of next year. So we'll
• 12:04
  Speaker 1: be looking for signs that credit might deteriorate. But right
• 12:07
  Speaker 1: now people have have banked, in effect, so much debt
• 12:11
  Speaker 1: on their balance sheet that they won't need to come
• 12:13
  Speaker 1: to market uh to to raise new funds unless they
• 12:17
  Speaker 1: unless the economy improves and they start spending those dollars again. Jim,
• 12:21
  Speaker 1: what coronavirus data do you watch to give you any
• 12:24
  Speaker 1: hint about what might happen in the treasury market. We
• 12:28
  Speaker 1: look very carefully at transmission rates by state. We look
• 12:33
  Speaker 1: very carefully at what we call real time mortality rates
• 12:37
  Speaker 1: and how they are shifting as Sun Belt states undergo
• 12:41
  Speaker 1: a tremendous increase in their cases. And the bond market
• 12:46
  Speaker 1: has been watching, in fact, a slower pace of COVID
• 12:50
  Speaker 1: nineteen statistics compared with the stock market that reacts every
• 12:55
  Speaker 1: single day to daily data. Unfortunately, from an economic perspect if,
• 13:00
  Speaker 1: daily data are just too erratic and have too many
• 13:04
  Speaker 1: reporting lags and errors to really be a dependable source
• 13:08
  Speaker 1: for what's happening in the bond market. So right here,
• 13:12
  Speaker 1: what are some sectors Jim May on the corporate side.
• 13:14
  Speaker 1: You're mentioned might as they go to the corporate side
• 13:16
  Speaker 1: to get some yield. There's some sectors that you find
• 13:18
  Speaker 1: attractive here. You've got to keep looking at the pharmaceuticals,
• 13:24
  Speaker 1: the obviously the tech sector never really needs cash, but
• 13:27
  Speaker 1: there's an awful lot of attractive paper out there. And
• 13:30
  Speaker 1: then you have to selectively look at lower rated industrials
• 13:37
  Speaker 1: when they get out of line with stock market performance.
• 13:41
  Speaker 1: So in particular, you want to try to take advantage
• 13:45
  Speaker 1: of wider credit spreads down the curve or down the
• 13:49
  Speaker 1: credit curve when stock market volatility rises. Well, it's always
• 13:55
  Speaker 1: a tutorial to speak with Jim Fola. I have to say, Jim,
• 13:58
  Speaker 1: thank you. How are things in Memphis? Very briefly, Uh,
• 14:02
  Speaker 1: quite well. Uh we had a spike, as many places
• 14:06
  Speaker 1: did in the South, um in recent weeks and that
• 14:09
  Speaker 1: appears to have leveled off. Thanks, We'll stay safe. Jim
• 14:13
  Speaker 1: Vogel is with f h N Financial Markets, and obviously
• 14:18
  Speaker 1: it's a primary dealer. Jim has been steeped in treasury
• 14:21
  Speaker 1: market activity for a little while now. Yeah, it's actually
• 14:24
  Speaker 1: it's great to speak speak to Jim and kind of
• 14:26
  Speaker 1: looking at he's saying, if you need yield here, you
• 14:29
  Speaker 1: might have to look on the corporate credit side, given
• 14:31
  Speaker 1: where treasury rates are. So we'll certainly pay attention to
• 14:34
  Speaker 1: that coming up. Balance of power with David Weston for
• 14:38
  Speaker 1: Vannie Quinn and Paul Sweeney, and this is Bloomberg. Well,
• 14:43
  Speaker 1: I guess the narrative about the pandemic right now is
• 14:47
  Speaker 1: one of trying to balance the medical risk of reopening
• 14:51
  Speaker 1: the economy with the economic risk of not reopening the economy,
• 14:55
  Speaker 1: and that's being played out across the country with varying effects.
• 15:00
  Speaker 1: Laurence Sour, Assistant Professor of Emergency Medicine that JOHNS Hopkins
• 15:04
  Speaker 1: uh School of Medicine, joins us on the phone. I
• 15:06
  Speaker 1: should note that the Bloomberg School of Public Health is
• 15:08
  Speaker 1: supported by Michael Bloomberg, founder Bloomberg LP and Bloomberg Philanthropies. Lauren,
• 15:13
  Speaker 1: thanks so much for joining us here. I think the conversation.
• 15:16
  Speaker 1: One of the more recent aspects of this conversation is
• 15:20
  Speaker 1: schools reopening schools in the fall. What do you think
• 15:24
  Speaker 1: as the most prudent um path there? Yeah, so there's
• 15:30
  Speaker 1: been a lot of conversation about schools and what it
• 15:33
  Speaker 1: means and the pros and cons of reopening. I think
• 15:36
  Speaker 1: everybody wants to see schools reopening, and we understand that
• 15:39
  Speaker 1: not being in school and and missing as much classroom
• 15:43
  Speaker 1: time as they have is going to be detrimental to
• 15:46
  Speaker 1: varying degrees to students and kids across the country and
• 15:50
  Speaker 1: truly across the world. The thing is, we have to
• 15:53
  Speaker 1: do it safely or else we'll just be back in
• 15:55
  Speaker 1: this situation and it'll be even more disruptive in a
• 15:58
  Speaker 1: few months or next years. So we have to take
• 16:01
  Speaker 1: the time of the summer to plan how to do
• 16:03
  Speaker 1: it safely. Our schools don't have a ton of resources already.
• 16:07
  Speaker 1: Um so the idea that they could bring in additional
• 16:09
  Speaker 1: resources to do all the things that are being asked
• 16:11
  Speaker 1: to them to bring kids back safely is really hard. Yeah.
• 16:14
  Speaker 1: I mean it strikes me that, I mean, one child
• 16:18
  Speaker 1: gets it and that's that's schooled one for for you know,
• 16:21
  Speaker 1: for a long time, right, Lauren. Yeah, I think we're
• 16:24
  Speaker 1: still trying to understand how it, how virus transmission happens
• 16:28
  Speaker 1: and kids and what it looks like. We know that
• 16:30
  Speaker 1: in general kids seem to have less severe disease um,
• 16:33
  Speaker 1: but we are still doing a lot of work on
• 16:35
  Speaker 1: how transmissibile it is and kids and how they spread
• 16:38
  Speaker 1: the virus. And we also have to think about the parents, UM,
• 16:41
  Speaker 1: and the teachers and the administrators in these schools and
• 16:44
  Speaker 1: how it could impact them if they have a sick
• 16:46
  Speaker 1: kid who maybe is in symptomatic asymptomatic and brings the
• 16:49
  Speaker 1: virus to school and then all of a sudden, all
• 16:51
  Speaker 1: your teachers are sick and several of your kids are sick,
• 16:53
  Speaker 1: and then their parents and their families get sick too. So, Lauren,
• 16:57
  Speaker 1: what's the latest thinking on second way? I mean, here
• 17:00
  Speaker 1: in the New York metropolitan area, I think we've generally
• 17:03
  Speaker 1: done a quite a good job, as well as the
• 17:06
  Speaker 1: Massachusetts even in Maryland and you're where where you are,
• 17:09
  Speaker 1: UM is there it is it still fair to think
• 17:13
  Speaker 1: about a second wave because I look what's happening in
• 17:16
  Speaker 1: California and Florida and Texas, and to me that is
• 17:18
  Speaker 1: not so much as a second wave but almost their
• 17:21
  Speaker 1: first wave quite frankly, So, how how did you think
• 17:23
  Speaker 1: about that? Yeah? I completely agree with you. I think
• 17:26
  Speaker 1: most places we're not feeling like we're out of the
• 17:29
  Speaker 1: first wave. I think there's been a lot of talk
• 17:31
  Speaker 1: about second wave. Um, But when we're seeing six cases
• 17:35
  Speaker 1: or more across the country, UM, you know, and having
• 17:39
  Speaker 1: our our repeatedly having our our largest days of increased cases, UM,
• 17:44
  Speaker 1: it's hard to think about that as a second wave. Uh.
• 17:48
  Speaker 1: I think there will be a second wave, but I
• 17:50
  Speaker 1: think we have to get to the end of the
• 17:51
  Speaker 1: first wave first, and I don't think we're there yet. Lauren,
• 17:55
  Speaker 1: what do you make of the idea that airborne particles
• 17:58
  Speaker 1: now should we looked at the w H O been
• 18:00
  Speaker 1: you know, refusing or at least not really taking it
• 18:03
  Speaker 1: up seriously, And there's a growing consensus now that perhaps
• 18:05
  Speaker 1: it should. Yeah. Several hundred scientists wrote a letter, I believe,
• 18:10
  Speaker 1: to the New York Times UM, indicating that they wanted
• 18:12
  Speaker 1: the WHO to take the role of airborne particles more
• 18:16
  Speaker 1: seriously in the spread of COVID nineteen. And I think
• 18:21
  Speaker 1: the guidance has changed a bit, and the w H
• 18:23
  Speaker 1: two is thinking has changed a bit. Um. We are
• 18:26
  Speaker 1: continually learning about the virus and how it spreads. I
• 18:29
  Speaker 1: still do believe that droplet transmission, so those bigger droplets
• 18:33
  Speaker 1: are what's driving the bulk of transmission. And I think
• 18:36
  Speaker 1: there is a role for aerosol transmission or airborne transmission.
• 18:40
  Speaker 1: But it's in specific circumstances like inside close quarters things
• 18:45
  Speaker 1: like singing or loud talking or yelling, UM, places where
• 18:48
  Speaker 1: the ventilation is not great. So there are specific circumstances
• 18:51
  Speaker 1: where those are going to be the drivers. Those are
• 18:53
  Speaker 1: that that airsol transmission is going to be the driver.
• 18:56
  Speaker 1: But it's those very specific circumstances. Lauren, you're just mentioning
• 19:00
  Speaker 1: the World Health organizations. How important is it that the
• 19:04
  Speaker 1: US is pulling out of the w h O. UM.
• 19:07
  Speaker 1: I hope that that it doesn't happen. I think it's
• 19:11
  Speaker 1: incredibly important to put resources towards making sure that it
• 19:14
  Speaker 1: doesn't happen and that we truly evaluate the impact of
• 19:16
  Speaker 1: a decision like that. UM. We will lose a lot
• 19:19
  Speaker 1: of access to a lot of international expertise, a lot
• 19:22
  Speaker 1: of international information, UM, global collaboration around the exact things
• 19:27
  Speaker 1: that we are having such a hard time handling here
• 19:29
  Speaker 1: in the US right now. UM. So it will impact
• 19:32
  Speaker 1: our ability to UH manage and understand the seasonal flu vaccines, UM,
• 19:39
  Speaker 1: the potential for COVID vaccines, UH, global therapeutic trials, all
• 19:44
  Speaker 1: of those things. UM. The w h O has a
• 19:47
  Speaker 1: very large role in and we support the w h O,
• 19:49
  Speaker 1: and we participate through our relationship with the WHO and
• 19:53
  Speaker 1: our role in the w h O. And so the
• 19:55
  Speaker 1: idea that we would pull out simply because of a
• 20:00
  Speaker 1: a disagreement on how this COVID nineteen response has been
• 20:03
  Speaker 1: managed by them is truly unbelievable and very very shortsighted. Basically, Lauren,
• 20:08
  Speaker 1: do you stop getting updates on not on the latest
• 20:11
  Speaker 1: science if you pull out of the w h O.
• 20:13
  Speaker 1: Or are they not obliged to sort of share it
• 20:15
  Speaker 1: with the world anyway, They are bliged to share it
• 20:18
  Speaker 1: with the world. But but, and we would receive that
• 20:21
  Speaker 1: information purely as a recipient, just like any UM anyone else.
• 20:25
  Speaker 1: But we currently have a role at the table in
• 20:29
  Speaker 1: decision making, in in primary information sharing and information gathering,
• 20:34
  Speaker 1: and supporting policy development, supporting operational response decisions and all
• 20:40
  Speaker 1: of those things. We would simply be on the receiving
• 20:43
  Speaker 1: end of the actions, not UM as an active and
• 20:46
  Speaker 1: willing participant and not as a you know, a global
• 20:49
  Speaker 1: public health authority. UM. So when you're not in the
• 20:52
  Speaker 1: beginning edge of that conversation, you have no say in
• 20:56
  Speaker 1: how the conversation plays out until you're at the end
• 20:59
  Speaker 1: of it. Wow, all right, Lauren, Thank you always learned
• 21:02
  Speaker 1: something new from our conversations. Lawrence Hower is Assistant Professor
• 21:05
  Speaker 1: of Emergency Medicine at Johns Hopkins School of Medicine, and
• 21:08
  Speaker 1: of course, the Bloomberg School of Public Health is supported
• 21:10
  Speaker 1: by Michaelaurd Bloomberg, founder of Bloomberg LP, Bloomberg Philanthropies, and
• 21:13
  Speaker 1: Bloomberg News. So, as Dave Wilson was telling us earlier,
• 21:18
  Speaker 1: Michael Batnik at ridholes Well Management talks about comparisons between
• 21:22
  Speaker 1: US tex stocks gains and the bubble twenty years ago.
• 21:25
  Speaker 1: I particularly want to bring this up with our next guest,
• 21:27
  Speaker 1: now is David Kat's, chief investment officer at Matrix Asset
• 21:30
  Speaker 1: Advisors with more than eight hundred million dollars in assets
• 21:33
  Speaker 1: under management. David, it is great to speak with you.
• 21:36
  Speaker 1: I know that one of your sort of areas of
• 21:38
  Speaker 1: expertise is the tech sector. You've obviously, you know, been
• 21:42
  Speaker 1: following that area in the melt up for for many years,
• 21:46
  Speaker 1: decades even, and and you did like some of those docks.
• 21:48
  Speaker 1: What do you make of the idea that we might
• 21:51
  Speaker 1: have a lot further to go. If you look at
• 21:53
  Speaker 1: comparisons between how the NASDAC one hundred sword in the
• 21:56
  Speaker 1: five years leading up to the March two thousand peak
• 21:59
  Speaker 1: and how it's it's been quote unquote soaring up to now. Yeah,
• 22:03
  Speaker 1: we would not look at that and say, oh, good,
• 22:05
  Speaker 1: you have five years and take comfort in the current
• 22:07
  Speaker 1: melt up because it ended hideously and it took ten
• 22:11
  Speaker 1: years for the Nattic to get back to break even.
• 22:13
  Speaker 1: Uh So, we think the market is going to be
• 22:16
  Speaker 1: higher over the next nine to twelve months, but we're
• 22:18
  Speaker 1: getting increasingly wary about the tech melt up right now,
• 22:23
  Speaker 1: and we would not be using the higher stock prices
• 22:26
  Speaker 1: every day as a signal to jump aboard. We think
• 22:31
  Speaker 1: best case, a lot of returns have already been made
• 22:33
  Speaker 1: in that area. We think that there are a lot
• 22:36
  Speaker 1: more risky in terms of the downside, and we do
• 22:39
  Speaker 1: think there are lots of the areas of the market
• 22:41
  Speaker 1: that have been left behind entirely by the recovery and
• 22:44
  Speaker 1: are selling a pretty attractive valuation. So you've got parts
• 22:47
  Speaker 1: of the market at thirty and forty times earnings and
• 22:49
  Speaker 1: then a lot of stock at ten and fifteen times
• 22:51
  Speaker 1: earnings that are paying three and four percent yields, So
• 22:54
  Speaker 1: we think investors should really focus on the the better businesses.
• 22:59
  Speaker 1: But at lower evaluations you went through the bond numbers
• 23:02
  Speaker 1: before interest rates or zero bonds are paying less than
• 23:05
  Speaker 1: a half percent. At some point getting three or four
• 23:08
  Speaker 1: percent dividends is going to be a really good thing,
• 23:11
  Speaker 1: all right. So David, what are some of those sectors
• 23:13
  Speaker 1: that you think have been left behind that might offer
• 23:16
  Speaker 1: some attractive return. So in terms of sectors, um, you know,
• 23:20
  Speaker 1: we have not like utilities for a very long time.
• 23:23
  Speaker 1: They've been an outlier, bad performer this year, so we've
• 23:26
  Speaker 1: really warmed up to them and we've been buying in
• 23:28
  Speaker 1: that group. We think you can buy select healthcare companies
• 23:31
  Speaker 1: like a CVS or Murk UH pretty attractive, select consumer staples.
• 23:36
  Speaker 1: We think that telecom companies like Verizon UH and A
• 23:39
  Speaker 1: T and T are very attractive. Also some media companies
• 23:43
  Speaker 1: like a Comcast or Viacom. So there are lots of
• 23:45
  Speaker 1: really good businesses out there. If you have a six
• 23:48
  Speaker 1: or twelve month time arizing, and all the businesses that
• 23:51
  Speaker 1: I mentioned are going to be able to get through
• 23:53
  Speaker 1: the COVID recession and very good form, have very good
• 23:56
  Speaker 1: balance sheets, and our survivors. You say that, David me
• 24:00
  Speaker 1: convert you with something a little devil's advocating if you like.
• 24:03
  Speaker 1: So those telecoms, for example, we all know that there
• 24:06
  Speaker 1: are problems right now and making content and in sort
• 24:09
  Speaker 1: of fighting with all of these other streaming services to
• 24:12
  Speaker 1: gain eyeballs. If covid hasn't sort of made that go
• 24:17
  Speaker 1: faster than I don't know what will. What are you
• 24:20
  Speaker 1: seeing across media and across telecom that makes you believe that, Yeah,
• 24:25
  Speaker 1: the particular companies you mentioned are in a better spot
• 24:29
  Speaker 1: well in terms of Comcast. You know, while they have NBC,
• 24:34
  Speaker 1: they also provide the pipes into the house, so that
• 24:36
  Speaker 1: business is doing very very well. So they're very well
• 24:40
  Speaker 1: diversified their global h and as more people need the internet, uh,
• 24:45
  Speaker 1: and as more people are sitting at home looking for
• 24:47
  Speaker 1: something to watch on whether it's a TV or a
• 24:49
  Speaker 1: computer or your iPad. Uh, they're a net beneficiary. So
• 24:53
  Speaker 1: they've gone through this in very good form, have consistently
• 24:57
  Speaker 1: raised the dividend. We really like management there. Viacom is
• 25:01
  Speaker 1: is a little bit different insofar as uh, they are
• 25:05
  Speaker 1: a content producer and they've got a massive library in powamount. Uh.
• 25:09
  Speaker 1: You know, if you look at Netflix at sixty or
• 25:11
  Speaker 1: seventy or a hundred times earnings and at a two
• 25:14
  Speaker 1: billion market cap, and then you look at Viacom with
• 25:17
  Speaker 1: his massive content at a thirteen billion dollar market cap,
• 25:21
  Speaker 1: at some point something's going to be better for them.
• 25:24
  Speaker 1: They are doing quite well in terms of their earnings
• 25:26
  Speaker 1: and running the business. Uh. CBS is a very strong franchise. End.
• 25:31
  Speaker 1: You know, people are looking at content, whether it's over
• 25:34
  Speaker 1: the top, whether it's you know, linear or watching on television. Uh,
• 25:38
  Speaker 1: they are looking for content, and and six and a
• 25:41
  Speaker 1: half times earnings, you're not paying a lot for that.
• 25:44
  Speaker 1: So David, let's just switch gears real quickly to another
• 25:47
  Speaker 1: sector that has really been out of favor. Uh. And
• 25:50
  Speaker 1: that is kind of some of that energy patch. I'm
• 25:52
  Speaker 1: looking at w T I crude here. It's just about
• 25:53
  Speaker 1: forty dollars a barrel. Anything there that gets your attention.
• 25:58
  Speaker 1: So we have owned the energy and have been beaten
• 26:01
  Speaker 1: up pretty badly. We think from here, if you have
• 26:04
  Speaker 1: a six to twelve month time horizon, that there's a
• 26:07
  Speaker 1: pretty good likelihood that when the economy recovers, oil prices
• 26:10
  Speaker 1: will recover into those energy stocks will come back. Um.
• 26:14
  Speaker 1: We try to stick to the highest quality energy company,
• 26:17
  Speaker 1: so CVX is absolutely committed to a very very healthy yield.
• 26:21
  Speaker 1: We think that stock could be higher. Schlumberge, which is
• 26:26
  Speaker 1: you know, the top quality driller out there, is going
• 26:31
  Speaker 1: to have pretty slow business, but they have revamped themselves.
• 26:34
  Speaker 1: They are going to be positive cash flow. They definitely
• 26:36
  Speaker 1: will be a survivor. And the stocks at seventeen and
• 26:39
  Speaker 1: a half, we think it ultimately goes to thirty or forty.
• 26:43
  Speaker 1: So it's a very out of favor group, but we
• 26:46
  Speaker 1: think you're gonna make money if you can hold your
• 26:48
  Speaker 1: nose with it. There are other places that you can
• 26:50
  Speaker 1: get in the market with out that type of risk.
• 26:52
  Speaker 1: But we do think if you are looking at energy
• 26:55
  Speaker 1: and don't mind the risk, you'll do okay there as well.
• 26:57
  Speaker 1: David Cats, thanks so much for joining us. David at
• 27:00
  Speaker 1: the chief investment officer at Matrix Asset Advisors about eight
• 27:04
  Speaker 1: hundred million dollars in assets under management, getting his thoughts
• 27:08
  Speaker 1: on the market. Thanks for listening to the Bloomberg Markets podcast.
• 27:12
  Speaker 1: You can subscribe and listen to interviews at Apple Podcasts
• 27:15
  Speaker 1: or whatever podcast platform you prefer. I'm Bonnie Quinn, I'm
• 27:19
  Speaker 1: on Twitter at Bonnie Quinn, and I'm Paul Sweeney. I'm
• 27:22
  Speaker 1: on Twitter at pt Sweeney. Before the podcast, you can
• 27:24
  Speaker 1: always catch us worldwide at Bloomberg Radio