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America's $2 Trillion Rescue Leaves Black Neighborhoods Behind · 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 CEO, 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 podcast or wherever you listen to podcasts,
• 0:17
  Speaker 1: and on Bloomberg dot com. Sean Donn, and senior trade
• 0:21
  Speaker 1: and globalization reporter for Bloomberg News, is out with a
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  Speaker 1: story that's just fascinating here, and we want to drill
• 0:27
  Speaker 1: into that a little bit. It's entitled A two trillion
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  Speaker 1: dollar rescue leaves America's black, black neighborhoods behind on Cleveland's
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  Speaker 1: East Side. So interesting. Sean, thanks so much for joining
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  Speaker 1: us here. Tell us kind of what you're reporting kind
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  Speaker 1: of brought to you. Yeah, thanks for having me. I
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  Speaker 1: set out, I guess a month or to to try
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  Speaker 1: and figure out if this tears out, the fiscal rescue
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  Speaker 1: would work. And one of the big questions we immediately
• 0:56
  Speaker 1: launched onto was getting left out and we're America then
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  Speaker 1: hit hardest. And if you look at if you've gone
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  Speaker 1: back a month or so ago and look at the
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  Speaker 1: unemployment statistics you would have discovered that about the fifth
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  Speaker 1: of workers in Cleveland had lost their jobs as a
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  Speaker 1: result of the crisis. The unemployment rate literally went from
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  Speaker 1: a little over uh three percent to twenty three percent
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  Speaker 1: in a matter of weeks. Uh and uh that you know,
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  Speaker 1: when we've seen some incredible spike around around the country,
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  Speaker 1: but that was among the highest we've seen in any
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  Speaker 1: cities in the in the in the United States. And
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  Speaker 1: so I set out that the head to Cleveland and
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  Speaker 1: started asking around, started sitting down carefully with a mask
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  Speaker 1: ONCTA Park outside oftentimes uh, asking people whether they were
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  Speaker 1: seeing this pot of money land anywhere near Cleveland. And
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  Speaker 1: the answer you get from people on the east side
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  Speaker 1: of Cleveland, which is predominantly black, is no, I'm not
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  Speaker 1: seeing it and I need it. Well, there are some
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  Speaker 1: amazing stories in here. You talk about the Bethany Baptist Church,
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  Speaker 1: which was one of eight religious organizations that did get money,
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  Speaker 1: but not enough. And also this wonderful character Tony Jones,
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  Speaker 1: who owns TJ's Barbershop, who only saw that the the
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  Speaker 1: program was opened three days before he was allowed to reopen.
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  Speaker 1: Tell us his story a little bit. Yeah, So Tony
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  Speaker 1: turnand is a Barberry's form of steel worker who left
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  Speaker 1: that business uh twenty plus years ago and opened this
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  Speaker 1: this barbershop that t J is Tony Jones uh and
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  Speaker 1: he has was forced to shut down in the middle
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  Speaker 1: of the March under order show estate uh, and quickly
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  Speaker 1: applied for unemployment, was rejected a number of times. He
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  Speaker 1: then was told to wait to apply for this new
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  Speaker 1: thing and unemployment assistance, which was this new program for
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  Speaker 1: self employed workers who traditionally haven't been able to get unemployment.
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  Speaker 1: And he was knocked back from that as well. Uh.
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  Speaker 1: You have to wait, literally, as you said, until May
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  Speaker 1: twelve to even lodge his application. There. He was allowed
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  Speaker 1: to reopen by the state. Masis themes uh and uh.
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  Speaker 1: But you know, the reality is he's gotten nothing some
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  Speaker 1: out of these two billion dollars that have that have
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  Speaker 1: been appropriate, He's lost his livelihood. He now, if you
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  Speaker 1: walk into his his barbershop, will tell you that he
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  Speaker 1: might see one two clients in a day. He knows
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  Speaker 1: he's got a lot of people at home he need haircuts.
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  Speaker 1: They're still too afraid to come and get there their
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  Speaker 1: hair cut. And he's stuck. And and he's that one
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  Speaker 1: little corner of of the American economy that hasn't gotten
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  Speaker 1: help us. So, Sean, is there a common theme why
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  Speaker 1: some of these business owners have not received the help?
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  Speaker 1: Have they been denied? Have they been unable to uh
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  Speaker 1: fill out the paperwork properly? What's kind of a common
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  Speaker 1: theme that you saw. So there's two common themes that
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  Speaker 1: that you see. One is people like Tony Jones who
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  Speaker 1: have been denied. And in Ohio, something like of people
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  Speaker 1: who applied for unemployment traditional unemployment have had their applications denied.
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  Speaker 1: State officials say some have been able to get the
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  Speaker 1: pandemic unemployment assistance, but it's unclear how many um they've
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  Speaker 1: been denied because Ohio, like a lot of states, actually
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  Speaker 1: has strict standards for who they will give unemployment assistance too.
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  Speaker 1: You have to hit some thresholds, like any's gonna take it.
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  Speaker 1: Tony Jones, you know, works full time, He according to
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  Speaker 1: the state, didn't work enough hours. It's to the eligible fund.
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  Speaker 1: Employment isn't the other big things of you see when
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  Speaker 1: you go onto the ground, people just don't have access
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  Speaker 1: to information. She said to Washington. Or you have become
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  Speaker 1: very familiar with all of these accredy the PPP, the
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  Speaker 1: p u A, the kills off all of those things.
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  Speaker 1: If you're sitting in the neighborhoods of on the east
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  Speaker 1: side of Cleveland, UH, you don't have the same access
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  Speaker 1: to that information and you're not quite sure where the
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  Speaker 1: help is. In the case of one of the people
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  Speaker 1: I talked to, Elwood Clark, who runs a property management
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  Speaker 1: and maintenance business, UH, he went to his bank to
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  Speaker 1: apply for a PPD lee because he'd heard about it.
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  Speaker 1: But by the time he went to the bank and
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  Speaker 1: bank told him that there was no more money available.
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  Speaker 1: This was the first round of the PPP. Even has
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  Speaker 1: tried to get his bank interested in helping him apply
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  Speaker 1: for a PPP loan since then, and he's just not
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  Speaker 1: getting the calls back that bigger businesses have. He's like,
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  Speaker 1: you know, you employs a couple of people. He's a
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  Speaker 1: small business in in in the neighborhood. UH, is that
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  Speaker 1: you know, full of vulnerable people, and he just cannot
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  Speaker 1: get that people to pick up the phone. Literally. At
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  Speaker 1: the same time as he's struggling through all these different
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  Speaker 1: actents to figure out if there's anything else and he
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  Speaker 1: might be eligible for, he's just decided, you know what,
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  Speaker 1: I'm just going to cobble together what I can to
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  Speaker 1: city councilman who talked about that area being at the
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  Speaker 1: literally get the intersection of a range of pandemics. So
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  Speaker 1: obviously not just coronavirus, but a pandemic of crime, lead, poisoning,
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  Speaker 1: chronic unemployment. In fact, you sited statistic which is terrifying.
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  Speaker 1: A child born today near the corner of one tenth
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  Speaker 1: in Woodland, in this ward of Cleveland has a life
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  Speaker 1: inspectancy more than two decades shorter than one born in
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  Speaker 1: an affluent neighborhood just two miles away. So there's really
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  Speaker 1: just a lot of systemic problems to be overcome, and
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  Speaker 1: you know, it's it's bit by bid, and these these
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  Speaker 1: p p P loans and cares package and so on.
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  Speaker 1: The they're they're designed to be put to effect immediately,
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  Speaker 1: but when you're trying to battle you know, decades of
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  Speaker 1: systemic difference, it's really difficult to put these into into
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  Speaker 1: use where they're needed. Absolutely, I mean that's the import
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  Speaker 1: point here is one of the things we've seen with
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  Speaker 1: this pandemic, and we know this with the health results
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  Speaker 1: that we've seen them and the effect on the black
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  Speaker 1: community Hispanic community who have higher death rates, higher rates
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  Speaker 1: of transmission than than than wide Americans. And that's largely
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  Speaker 1: because they are in these kind of frontline jobs and
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  Speaker 1: have to keep working those an equities as crisis and
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  Speaker 1: the worry, see when you had to a place like
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  Speaker 1: the efect of Cleveland, is that they are only going
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  Speaker 1: to get worse. Well, Sean, everybody will read this story,
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  Speaker 1: hopefully and get a little more educated on the problems
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  Speaker 1: in places like these areas of Cleveland. Sean and Donnan
• 7:34
  Speaker 1: joining us there on Doomberg Radio, OPEC and its allies.
• 7:39
  Speaker 1: They're going to restore some oil supplies next months, but
• 7:42
  Speaker 1: according to Saudia's energy minister, the impact will be barely felt.
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  Speaker 1: That's one piece of oil market news today. The other
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  Speaker 1: is that inventories here in the US were down seven
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  Speaker 1: and a half million barrels. The market was looking for
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  Speaker 1: them to be down way less than that, and as
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  Speaker 1: a result, we are seeing a little bit of an
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  Speaker 1: increase in oil prices today. Let's begin somebody who is
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  Speaker 1: all across this. Dr ellen Wald is president of Transversal Consulting.
• 8:04
  Speaker 1: She also Bloomberg Opinion contributor and the author of Saudi,
• 8:08
  Speaker 1: which is a history of Saudi Arabia through Aramco. Ellen,
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  Speaker 1: thank you so much for joining the idea that OPEC
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  Speaker 1: is allowing oil supplies get restored just little by little,
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  Speaker 1: and that it's basically holding fast to the agreement that
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  Speaker 1: was made some time back. Is that a good thing
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  Speaker 1: for the health of oil markets. I think it's a
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  Speaker 1: good thing that OPEC is keeping to the plan that
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  Speaker 1: it originally laid out, because one of the important things
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  Speaker 1: that OPEC has always done is provide this kind of
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  Speaker 1: long term guidance for where oil production is headed, and
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  Speaker 1: in recent months they really abandoned that by basically saying, hey, well,
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  Speaker 1: we're going to reevaluate everything on a month to month
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  Speaker 1: basis about, you know, whether we want to keep production
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  Speaker 1: lowl or increased or not. And so the fact that
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  Speaker 1: they're giving this guidance, um, you know, in in a
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  Speaker 1: slightly longer term situation, I think is a positive for
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  Speaker 1: markets because it helps markets understand what OPEC is thinking
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  Speaker 1: and where they're going in a slightly longer term situation.
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  Speaker 1: On the other hand, is a market really ready for
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  Speaker 1: more production. Russia and Saudi Arabia are really big on saying, look,
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  Speaker 1: we're going to be consuming all of this oil domestically.
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  Speaker 1: Russia has seen domestic demand up, Saudi Arabia wants to
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  Speaker 1: put more into its domestic markets, but at the same time,
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  Speaker 1: it's going to be another two million barrels a day,
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  Speaker 1: and demand, at least in the US and in Europe
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  Speaker 1: is not necessarily showing that it's ready for for more oil. Yes,
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  Speaker 1: we did see a draw in crudual stocks today from
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  Speaker 1: in the United States, but in general these stocks have
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  Speaker 1: been hitting record highs and so there's still so much
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  Speaker 1: oil in storage. So Ellen, give us as we talk
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  Speaker 1: about the supply side of the equation. Where what are
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  Speaker 1: the US shale producers doing today in terms of supply. Yeah,
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  Speaker 1: we're seeing production at about eleven million barrels a day,
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  Speaker 1: which is a pretty significant decline from where we were
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  Speaker 1: back in February when we were up at thirteen million
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  Speaker 1: barrels a day, But it's still not quite as much
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  Speaker 1: as they predicted it would drop. Now, signs are the
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  Speaker 1: indications are that we could see further drops in production,
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  Speaker 1: particularly because one of the factors of shale oil production
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  Speaker 1: is that you need to see more and more drilling
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  Speaker 1: in order for production to stay at the same levels
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  Speaker 1: and to increase, and we're not seeing applications for a
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  Speaker 1: lot more permits for drilling. We're not seeing uh, you know,
• 10:45
  Speaker 1: more rigs opening up. So while some companies may be
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  Speaker 1: increasing their production because they're in better situation, we are
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  Speaker 1: seeing other companies that are going bankrupt, that are folding,
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  Speaker 1: and so it's not out of the question to expect
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  Speaker 1: that US oil production will drop further. That does, however,
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  Speaker 1: depend on the price of oil, and if they stay
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  Speaker 1: around forty barrel, that's enough for a good number of
• 11:13
  Speaker 1: shale oil companies to really continue and possibly even expand
• 11:17
  Speaker 1: their drilling. Well, let's just said Saudi Radia and Russia
• 11:20
  Speaker 1: right now, really depending on the Asian oil market, China
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  Speaker 1: in particular, are they overestimating the capacity of that market
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  Speaker 1: to absorb their oil and therefore this extra two million
• 11:30
  Speaker 1: barrels per day might sort of not find buyers. Yeah,
• 11:35
  Speaker 1: it's it's I think that's a really big important question.
• 11:38
  Speaker 1: And I think that both Saudi Arabia and Russia have
• 11:41
  Speaker 1: been very very focused recently in investing in Asian markets,
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  Speaker 1: particularly in China, and they're very focused on demand, and
• 11:48
  Speaker 1: demand from China in June was very strong, but China
• 11:52
  Speaker 1: also puts a lot into storage, so they were definitely uh,
• 11:58
  Speaker 1: you know, producing more produ bucks, buying oil and producing
• 12:01
  Speaker 1: more products, but they were also putting oil into storage.
• 12:04
  Speaker 1: And there's always a chance that, uh, that strong demand
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  Speaker 1: may not hold up, particularly when you look at how
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  Speaker 1: the demand picture is shaping up in Europe and the
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  Speaker 1: United States. And the fact is that it's possible that
• 12:17
  Speaker 1: side of you at Russia maybe too focused on their
• 12:20
  Speaker 1: Asian customers and on the Asian market and not paying
• 12:23
  Speaker 1: quite enough attention to some of the continued weaknesses that
• 12:27
  Speaker 1: we're seeing in the US and in Europe. Yeah, that's
• 12:31
  Speaker 1: kind of where I wanted to go Ellen. As I
• 12:32
  Speaker 1: think about, you know, some of these really big states California, Texas, Florida,
• 12:37
  Speaker 1: you know, kind of slowing the reopening, maybe even shutting
• 12:40
  Speaker 1: down certain parts of their economy. I can't imagine that
• 12:43
  Speaker 1: bodes well for diesel fuel. And we saw Delta reduced
• 12:47
  Speaker 1: the number of flights they're going to add next month,
• 12:50
  Speaker 1: so I think about jet fuel there. So I mean,
• 12:53
  Speaker 1: the demand side, it's got to be precarious at best.
• 12:56
  Speaker 1: I would think, yeah, it really is, And I think
• 12:59
  Speaker 1: that there's a risk in focusing too much on gasoline demand.
• 13:03
  Speaker 1: And we have seen increases in gasoline demand, but it's
• 13:06
  Speaker 1: not a straight lineup. We're looking at you know, we're
• 13:10
  Speaker 1: looking at the deliveries of gasoline to UH service stations,
• 13:15
  Speaker 1: and we're not necessarily seeing the kinds of major increases.
• 13:19
  Speaker 1: We'll see one week where it goes up and then
• 13:20
  Speaker 1: the next week where uh, you know, it's going down.
• 13:23
  Speaker 1: And I think that shows that there's it's really uneven
• 13:26
  Speaker 1: and that yes, people are going out and they're traveling
• 13:29
  Speaker 1: more than they were in April, but they're still traveling
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  Speaker 1: so much less than they were compared to last year.
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  Speaker 1: And then when you put jet fuel and you put
• 13:38
  Speaker 1: diesel on top of that, I mean, diesel has been
• 13:40
  Speaker 1: weak for two years now, really, and so uh, any
• 13:45
  Speaker 1: increase in diesel or jet field demand looks good, but
• 13:49
  Speaker 1: you have to take into account the fact that it's
• 13:51
  Speaker 1: so so weak that yes, there's an increase, but that
• 13:54
  Speaker 1: doesn't mean that we're seeing a big return or a
• 13:57
  Speaker 1: big resurgence. L I'm very curious about NBS these days.
• 14:02
  Speaker 1: You know, we heard a lot about him until the
• 14:05
  Speaker 1: killing of Demalg and suddenly you know, he's gone very quiet.
• 14:08
  Speaker 1: What's his position, like security wise, is he stable and
• 14:12
  Speaker 1: what's his current strategy. That's that's a huge, huge issue.
• 14:16
  Speaker 1: I'm glad you you brought that up, because one of
• 14:19
  Speaker 1: the interesting things that we're seeing in Saudi Arabia right
• 14:21
  Speaker 1: now is that they've decided to increase their vat um.
• 14:25
  Speaker 1: They recently instituted a vat uh to kind of put
• 14:28
  Speaker 1: them in line with the vat and other Gulf countries,
• 14:32
  Speaker 1: but now they've decided to increase it too, I think
• 14:34
  Speaker 1: about which is much higher than compared to other economies
• 14:39
  Speaker 1: in the Gulf, and that's really putting a strain on
• 14:42
  Speaker 1: the Saudi population. And then we just heard today that
• 14:45
  Speaker 1: they've also decided to basically cut like two million people
• 14:49
  Speaker 1: from their you know, basically their welfare roles, and that's
• 14:53
  Speaker 1: going to have a big impact. And so what we're
• 14:55
  Speaker 1: seeing in Saudi Arabia is that, um, we're actually seeing
• 14:59
  Speaker 1: people speak out against this and say, look, you know
• 15:02
  Speaker 1: where you're cutting our you know, our funds just at
• 15:05
  Speaker 1: this time when everything is more and more difficult, and
• 15:08
  Speaker 1: that could really start to pose some issues for NBS,
• 15:12
  Speaker 1: particularly as he looks like he's spending so much on
• 15:15
  Speaker 1: these big projects and the population is suffering. Yeah, just
• 15:18
  Speaker 1: as extraordinary times they're in Saudi Arabia and across the
• 15:21
  Speaker 1: global oil patch. Dr Ellen Wall, President Transversal Consulting, also
• 15:25
  Speaker 1: Bloomberg Opinion contributor, joining us, giving us uh kind of
• 15:29
  Speaker 1: the latest on the global energy markets as production starts
• 15:33
  Speaker 1: to tick back up. We'll have more on that certainly
• 15:36
  Speaker 1: going forward. Now let's move to the media sphere and
• 15:42
  Speaker 1: geeze that rank and Nathan who is an analyst for
• 15:44
  Speaker 1: Bloomberg Intelligence. She covers all sorts of companies from Facebook
• 15:48
  Speaker 1: to Apples, TikTok. These days, why com CBS so much
• 15:52
  Speaker 1: happening in the field as the pandemic reshapes media. Gee,
• 15:57
  Speaker 1: thanks for joining. Talked to us first of all about
• 16:00
  Speaker 1: to you know, theme parks and how you know we're
• 16:03
  Speaker 1: seeing Disney bring people back but at a very small pace.
• 16:06
  Speaker 1: But yet it's theme parks that allow companies very often
• 16:09
  Speaker 1: have their media landscape sorted out for the year. Oh yeah, absolutely, Ronnie,
• 16:16
  Speaker 1: thank you. So, as you rightly pointed out, the media
• 16:19
  Speaker 1: sector has been completely pummeled by by COVID nineteen. Um,
• 16:23
  Speaker 1: you know, we have movie theaters that have been shut down,
• 16:25
  Speaker 1: Live sports is on hold, and as you mentioned theme
• 16:27
  Speaker 1: parks have been closed. Of course, we're seeing some green shoots.
• 16:31
  Speaker 1: So Disney of course opened it Florida Theme Park a
• 16:34
  Speaker 1: little bit earlier this this week. But what was really
• 16:38
  Speaker 1: tricky is as they were doing that, they were forced
• 16:40
  Speaker 1: to close down their Hong Kong uh property once again,
• 16:45
  Speaker 1: starting actually today. So it's it's it's really a tricky situation.
• 16:49
  Speaker 1: I mean, until a vaccine is widely available, I don't
• 16:52
  Speaker 1: think we're going to be able to see these uh
• 16:56
  Speaker 1: parks open to full capacity. So it's probably gonna take
• 16:58
  Speaker 1: another couple of years before we see, um, you know,
• 17:03
  Speaker 1: theme park attendants kind of go back to pre pandemic levels.
• 17:08
  Speaker 1: So Keith, I mean, that's that's amazing in and of itself.
• 17:11
  Speaker 1: A couple of years before we get back to the
• 17:12
  Speaker 1: theme park attendance levels. And that's been such a driver
• 17:15
  Speaker 1: for a lot of these big media companies, Disney, Comcast
• 17:18
  Speaker 1: and some others. How about you know, we take we
• 17:21
  Speaker 1: think about the film and TV production that's been effectively
• 17:24
  Speaker 1: shut down on a global basis, and while other manufacturing
• 17:28
  Speaker 1: has started to reopen. I think about you know, the
• 17:30
  Speaker 1: auto plants in Detroit and so on, they're starting to reopen.
• 17:33
  Speaker 1: But the the you know, the manufacturing of the media
• 17:36
  Speaker 1: industry that is making TV shows, making movies that is
• 17:40
  Speaker 1: still shut down. What's the ripple effect and the repercussions
• 17:44
  Speaker 1: for that across the media landscape. Yeah, that's that's a
• 17:48
  Speaker 1: great point that you bring up, Paul Um. It is
• 17:51
  Speaker 1: it is effectively being shut down, which means that the
• 17:54
  Speaker 1: whole fall TV season, the season that all advertisers are
• 17:58
  Speaker 1: kind of excited about typically every year, is kind of
• 18:02
  Speaker 1: completely gone away, which is why it's really important for um,
• 18:07
  Speaker 1: you know, TV networks that sports because if if you
• 18:11
  Speaker 1: really think about its sports and entertainment, those are the
• 18:14
  Speaker 1: two big components that bring in audiences. With you know,
• 18:18
  Speaker 1: production kind of shutdown, it's really important. You know, all
• 18:21
  Speaker 1: of these media companies are now banking heavily on the
• 18:23
  Speaker 1: return of life sports, which should then hopefully spark back
• 18:28
  Speaker 1: an advertising rebound as well. Keether, we're looking for Netflix
• 18:33
  Speaker 1: earning tomorrow. I mean, that's one company that should have
• 18:35
  Speaker 1: a very different story from the rest of the companies.
• 18:37
  Speaker 1: I mean it literally added millions of new subscribers thanks
• 18:41
  Speaker 1: to the pandemic. Oh absolutely, I mean we're seeing you know,
• 18:46
  Speaker 1: Covid nineteen is really accelerating the shift of you know,
• 18:49
  Speaker 1: viewers away from traditional TV to streaming. We saw that
• 18:53
  Speaker 1: in Netflix's numbers in one queue, I mean they guided
• 18:57
  Speaker 1: to about seven million, they came in at about so
• 19:00
  Speaker 1: of teen million are So again, we've seen the download
• 19:04
  Speaker 1: momentum across the app space very very strong for all
• 19:08
  Speaker 1: streaming apps in general, than especially for Netflix, both of
• 19:11
  Speaker 1: the domestic market as well as the international market, especially Asia,
• 19:15
  Speaker 1: where downloads were up almost hunt fift So with cancelations
• 19:19
  Speaker 1: at record lows UM, we actually think that those numbers
• 19:22
  Speaker 1: are going to come in really really strong. They have
• 19:24
  Speaker 1: again guided for about seven and a half million UM
• 19:27
  Speaker 1: global subscribers, but we think they'll be in at a
• 19:30
  Speaker 1: much much higher level. So is this is the court
• 19:33
  Speaker 1: cutting Keith in the next thirty seconds. Here is court
• 19:37
  Speaker 1: cutting just accelerating? Here? Oh absolutely, COVID nineteen Paul has
• 19:41
  Speaker 1: put court cutting on steroids. I mean, there's red use,
• 19:43
  Speaker 1: disposable income, no sports, the economic fallout, that's just a
• 19:47
  Speaker 1: perfect storm. And we're seeing that base of courd cutting
• 19:49
  Speaker 1: get really really higher and higher. Wow, it's just extraordinary,
• 19:53
  Speaker 1: Like those trends affecting the media industry just being accelerated here.
• 19:57
  Speaker 1: Keith Running Athen thanks so much for joining us. Githa
• 20:00
  Speaker 1: is one of the top media analysts on Wall Street,
• 20:02
  Speaker 1: and we're fortunate to have her Bloomberg Intelligence giving us
• 20:05
  Speaker 1: her thoughts here. We got Netflix tomorrow reporting that will
• 20:08
  Speaker 1: be interesting news that stocks had a great run, one
• 20:11
  Speaker 1: of those handful of names that's really benefited, uh from
• 20:15
  Speaker 1: the shutdown from the coronavirus and UH. But again, the
• 20:19
  Speaker 1: media sector overall really facing some just challenging, challenging headwinds
• 20:24
  Speaker 1: as people consume media in much different ways and in
• 20:27
  Speaker 1: much less profitable ways for the media companies. And so
• 20:31
  Speaker 1: what we're seeing is a lot of these big media companies,
• 20:33
  Speaker 1: led by the Walt Disney Company trying to catch up
• 20:35
  Speaker 1: and compete with Netflix, and they try to pivot towards
• 20:39
  Speaker 1: streaming and we'll see how they do here. But their
• 20:42
  Speaker 1: core businesses, that cable networks, the team parks all those things,
• 20:45
  Speaker 1: the movies really really challenged right here, so uh and
• 20:48
  Speaker 1: the stocks are reflecting it, and that is probably the
• 20:55
  Speaker 1: one that the market is most focused on, at least
• 20:57
  Speaker 1: in earlier hours of the session. And so let's bring
• 21:00
  Speaker 1: in somebody who knows a lot about banks and how
• 21:03
  Speaker 1: they work and whether they work. Chris Whalen of Chris
• 21:06
  Speaker 1: Whalen Advisors is great to have you back on the radio, Chris,
• 21:10
  Speaker 1: and to chat with you talk to us about Goldman Sachs.
• 21:13
  Speaker 1: You said you went into the Q two earning season
• 21:15
  Speaker 1: with a combination of expectation and dread. How do you
• 21:19
  Speaker 1: feel this morning, Well, I feel a little better. When
• 21:23
  Speaker 1: Goldman is making money. That tells you that the markets
• 21:27
  Speaker 1: are functioning UH, and we need to look to make
• 21:31
  Speaker 1: sure that all the different market sectors are functioning in
• 21:34
  Speaker 1: The good news is that they are um. But on
• 21:37
  Speaker 1: the other hand, the credit costs that we've seen from
• 21:39
  Speaker 1: JP Morgan and the rest of the banks are of
• 21:43
  Speaker 1: concern because we're looking at losses this yere Vanni that
• 21:46
  Speaker 1: could be twice two thousand nine in terms of credit.
• 21:50
  Speaker 1: And it's different from two thousand nine because it's not
• 21:52
  Speaker 1: about residential real estate and private mortgage securities this time.
• 21:57
  Speaker 1: It's about commercial real estate and commercial exposures of all kinds.
• 22:02
  Speaker 1: Any kind of small, mid size, even large business you
• 22:05
  Speaker 1: can think of that's affected by this terrible disease and
• 22:10
  Speaker 1: the reaction to COVID nineteen UH is affected the whole
• 22:14
  Speaker 1: services sector. You know New York Bunny, we both lived here.
• 22:18
  Speaker 1: Everything in the arts, everything in hospitality. UM, so you
• 22:23
  Speaker 1: know we're we're facing a tough couple of years. I think,
• 22:26
  Speaker 1: uh Dick Bove was out with a note this morning
• 22:28
  Speaker 1: saying that I totally agree with Dick. This is a
• 22:31
  Speaker 1: credit event and it's going to take time to work through.
• 22:34
  Speaker 1: But the good news is all of the assets I
• 22:35
  Speaker 1: just mentioned, aircraft, hotels, whatever, are managed by professionals, and
• 22:41
  Speaker 1: so unlike resolving consumer issues as we had ten years ago,
• 22:45
  Speaker 1: and you remember that it was brutal. It went on
• 22:48
  Speaker 1: for years and years and years. My sense is this
• 22:51
  Speaker 1: time people are going to cut to the chase. You
• 22:53
  Speaker 1: saw the way the markets reacted. We had two weeks
• 22:55
  Speaker 1: of death and destruction at the end of March, and
• 22:58
  Speaker 1: then we had one of those great opportunities in April.
• 23:02
  Speaker 1: I sold most of my common chairs and banks, all
• 23:04
  Speaker 1: of them. In fact, US Bank was my last position,
• 23:07
  Speaker 1: and I loaded up on prefers because they were trading
• 23:09
  Speaker 1: close to the par Again, they have been very expensive
• 23:13
  Speaker 1: because of the income. So I think, you know, there's
• 23:16
  Speaker 1: still an enormous hunger in the street behind a trick duration,
• 23:19
  Speaker 1: and it's good to see City and Goldman coming in
• 23:21
  Speaker 1: with some some good numbers because I think we need
• 23:24
  Speaker 1: to make sure that the markets are functioning. The Fed's
• 23:27
  Speaker 1: done the right thing, and the big good news for
• 23:29
  Speaker 1: me is that the residential mortgage sector this year is
• 23:32
  Speaker 1: gonna have a record production. We're gonna be up on
• 23:35
  Speaker 1: volume year over year, and very good profitability too. Yeah. So, Chris,
• 23:41
  Speaker 1: as we look across these earnings over the last couple
• 23:43
  Speaker 1: of days, and we've got still got Morgan Stanley and
• 23:45
  Speaker 1: some others coming up. Obviously, the theme is the you know,
• 23:48
  Speaker 1: the capital markets business have been, you know, kind of
• 23:51
  Speaker 1: coming to the rescue here with a tremendous volatility and
• 23:54
  Speaker 1: trading levels. And that's been great for the folks that
• 23:56
  Speaker 1: have big trading desks. But as you point out, Christo's
• 24:00
  Speaker 1: those lone lost provisions and even the commentary I took
• 24:03
  Speaker 1: from Jamie Diamond yesterday really suggested that it's gonna be
• 24:08
  Speaker 1: tough for a perhaps a longer period than maybe the
• 24:11
  Speaker 1: market initially anticipated. Well, that's right. The metaphors about VS
• 24:17
  Speaker 1: and new shape, recoveries and all that, I think reflect
• 24:21
  Speaker 1: the past. They reflect our view that most of the
• 24:24
  Speaker 1: issues we've had in recent years have been liquidity driven,
• 24:29
  Speaker 1: and the market snapped back. You saw how fast people
• 24:31
  Speaker 1: came back this time. It was remarkable. So the thing
• 24:35
  Speaker 1: is so credit is different. In credit, we have to
• 24:37
  Speaker 1: reduce the value of assets. We have to apply losses
• 24:40
  Speaker 1: to equity and in some cases debt, and then we're
• 24:43
  Speaker 1: going to turn the deadholders that remain into the owners
• 24:46
  Speaker 1: and start again. So that's the difference. And I think
• 24:50
  Speaker 1: for banks, you know, we've already got over a hundred
• 24:53
  Speaker 1: on the on the fire in terms of lost provisions,
• 24:55
  Speaker 1: a hundred billion dollars in provisions, and I think we
• 24:59
  Speaker 1: could see twice that. Will they end up losing all
• 25:01
  Speaker 1: of that? No, a lot of that number may get
• 25:04
  Speaker 1: recovered later on, But the industry is for us, for
• 25:07
  Speaker 1: a lot of reasons, to kind of take a worst
• 25:09
  Speaker 1: case scenario, mark things down. I think this quarter, next
• 25:13
  Speaker 1: quarter won't be so bad, but by the time we
• 25:15
  Speaker 1: get to the fourth quarter for the banks, there's gonna
• 25:17
  Speaker 1: be a lot of stuff taken into the curb. They'll
• 25:20
  Speaker 1: just have to clean house, and then we've got to
• 25:21
  Speaker 1: get ready for the next cycle the next year. Chris,
• 25:25
  Speaker 1: it's fascinating. I was hoping they'd come in lower JP,
• 25:28
  Speaker 1: but they came in higher this time. So there is
• 25:31
  Speaker 1: so much that I would like to ask you about.
• 25:33
  Speaker 1: We won't have time today, but maybe you can give
• 25:36
  Speaker 1: me some quick thoughts on a mortgage finance the future.
• 25:39
  Speaker 1: Friddie and Freddy you just talked about how you know
• 25:42
  Speaker 1: mortgage underwriting and so on will be up this year.
• 25:45
  Speaker 1: But also this new SEC proposal to have a three
• 25:48
  Speaker 1: and a half billion dollar threshold for public disclosure of
• 25:50
  Speaker 1: equities holdings. That's all the way up from just one million.
• 25:55
  Speaker 1: What does that mean? But in terms of having the
• 25:59
  Speaker 1: disclosed benefit asial ownership, well, now, in terms of you know,
• 26:03
  Speaker 1: the public knowing who owns was you know who I'm
• 26:06
  Speaker 1: talking about the likes of Stan rock and Miller, George Sorols, Bridgewater,
• 26:10
  Speaker 1: John Paulson. Is it important for the public to know
• 26:12
  Speaker 1: what they own in terms of stocks? Short of course,
• 26:17
  Speaker 1: especially if it's a control position. If the new cash
• 26:19
  Speaker 1: coming in has influenced on management, then of course it's material. Um.
• 26:25
  Speaker 1: But you know, to your other question, I think, Resie,
• 26:28
  Speaker 1: make pull us out of this mess. I mean, we're
• 26:30
  Speaker 1: going to print money. We're gonna do probably three point
• 26:33
  Speaker 1: two trillion dollars in residential mortgages this year, mostly rate reefies.
• 26:38
  Speaker 1: That puts cash back in the households. That's a beautiful thing.
• 26:42
  Speaker 1: And then we're still doing purchase mortgages. Bonny, people are
• 26:45
  Speaker 1: migrating out to the suburbs to get Who would have thought, right,
• 26:48
  Speaker 1: we would have been sitting here talking about walkability of
• 26:50
  Speaker 1: cities last year, right, So the whole narrative is flipped over,
• 26:55
  Speaker 1: and I think, you know, for a while, Uh, it's
• 26:57
  Speaker 1: gonna be very helpful multi family too. So those assets
• 27:00
  Speaker 1: are fine, and I think they'll continue to be very
• 27:02
  Speaker 1: attractive for investors. The big question is commercial um and
• 27:07
  Speaker 1: that you see that in the reads. If you look
• 27:09
  Speaker 1: at any of the valuations for the big equity reads,
• 27:11
  Speaker 1: the ones with office and retail exposure are shown it. Uh,
• 27:15
  Speaker 1: you know, it's it's stark, frankly, the difference between different sectors.
• 27:20
  Speaker 1: John Warehouses, You're a genius. Thank Chris, thanks so much
• 27:24
  Speaker 1: for joining us. We appreciate it. As always, Chris whal And,
• 27:27
  Speaker 1: chairman of the Weiler Whalen Global Advisers based in New
• 27:31
  Speaker 1: York City, giving us his thoughts on the market. Here
• 27:34
  Speaker 1: we have again a lift to the market. Here some
• 27:37
  Speaker 1: good Goldman Sachs numbers and some good vaccine data. This
• 27:40
  Speaker 1: is Bloomberg. Thanks for listening to Bloomberg Markets podcast. You
• 27:45
  Speaker 1: can subscribe and listen to interviews at Apple Podcasts or
• 27:49
  Speaker 1: whatever podcast platform you prefer. I'm Bonnie Quinn. I'm on
• 27:52
  Speaker 1: Twitter at Bonnie Quinn, and I'm Paul Sweeney. I'm on
• 27:55
  Speaker 1: Twitter at pt Sweeney. Before the podcast, you can always
• 27:58
  Speaker 1: catch us worldwide at Bloomberg Radio. No Oh