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Western Asset Sifting For Opportunities Amid Credit Rubble · Bloomberg Intelligence

• 0:02
  Speaker 1: Welcome to the Bloomberg Penl podcast on Paul Swing You.
• 0:05
  Speaker 1: Along with my co host Lisa Brahma Waits, each day
• 0:07
  Speaker 1: we bring you the most noteworthy and useful interviews for
• 0:10
  Speaker 1: you and your money, whether at the grocery store or
• 0:12
  Speaker 1: the trading floor. Find a Bloomberg Penl podcast on Apple
• 0:15
  Speaker 1: podcast or wherever you listen to podcasts, as well as
• 0:18
  Speaker 1: at Bloomberg dot com. There's been a lot of focus
• 0:21
  Speaker 1: on credit markets of late, due to some of the
• 0:23
  Speaker 1: big disruptions that we saw in pricing, and then the
• 0:25
  Speaker 1: Federal Reserve coming in and saying that for the first
• 0:29
  Speaker 1: time ever, it would buy corporate bonds through a separate
• 0:32
  Speaker 1: entity financed by the Treasury Department managed by black Rock,
• 0:37
  Speaker 1: giving a floor to a market that at one point
• 0:40
  Speaker 1: was in free fall. Joining us now to talk about
• 0:43
  Speaker 1: where the opportunities or potential future pitfalls continue to be
• 0:46
  Speaker 1: as Mike Buchanan, he's deputy Chief investment Officer at Western
• 0:49
  Speaker 1: Asset Management with more than four hundred billion dollars of
• 0:52
  Speaker 1: assets under management. Mike, I'm so glad we're gonna get
• 0:55
  Speaker 1: a chance to talk with you. Can you give us
• 0:56
  Speaker 1: a sense of a lay of the land, in other words,
• 0:58
  Speaker 1: how effective how as a federal reserve been in back
• 1:01
  Speaker 1: stopping the highest rated companies from facing default going forward.
• 1:09
  Speaker 1: Thanks LEAs and thanks for thanks for having me on UM.
• 1:12
  Speaker 1: You know, I think just the announcement alone UM that
• 1:15
  Speaker 1: they would be for the first time ever, as you said,
• 1:17
  Speaker 1: buying credit UM in one to five years investment grade
• 1:21
  Speaker 1: credit UM. The action itself that hasn't even really taken
• 1:25
  Speaker 1: place yet, but just the announcement of that has gone
• 1:29
  Speaker 1: a long way to restoring stability in the market, restoring
• 1:33
  Speaker 1: order in the market. You've seen a bounce from you
• 1:37
  Speaker 1: know where we were a couple of weeks ago, but
• 1:39
  Speaker 1: make you know, no, no, no confusion here that March
• 1:43
  Speaker 1: was a brutal, brutal month UM second worst month ever
• 1:47
  Speaker 1: for the high yield market UM, worst month ever for
• 1:50
  Speaker 1: investment grade corporate credit. So we've had a bounce UM.
• 1:54
  Speaker 1: But when you look at valuations where they are UM,
• 1:58
  Speaker 1: you know, still look at least on a history oracle
• 2:00
  Speaker 1: basis quite cheap UM. And I think the actions, not
• 2:04
  Speaker 1: only that the fed of of buying corporates, but the
• 2:07
  Speaker 1: Care Act, the accessibility for corporates to access two loans UM,
• 2:14
  Speaker 1: as well as just the the overall stimulus and relief package.
• 2:17
  Speaker 1: I think all those things have gone a long way
• 2:20
  Speaker 1: to bridging a gap to hopefully what will prove to
• 2:24
  Speaker 1: be a turning point in this in this horrible virus. So, Mike,
• 2:28
  Speaker 1: how do you guys just you know, take a look
• 2:31
  Speaker 1: at the market here. I mean, I know you guys
• 2:32
  Speaker 1: have been in a fixing come business a long time.
• 2:34
  Speaker 1: I mean are you do you tend to to step
• 2:37
  Speaker 1: back and and let the market play or you try
• 2:39
  Speaker 1: to go in here and try to find some opportunities. Yeah,
• 2:42
  Speaker 1: I mean, you know, we're we're always looking for opportunity,
• 2:45
  Speaker 1: and in markets like this, UM, even if you're not
• 2:49
  Speaker 1: outright adding risk because of all the dislocations, there's always
• 2:53
  Speaker 1: relative value trades that you could be doing. There's always, uh,
• 2:56
  Speaker 1: you know, one company issue where you could sell to
• 2:59
  Speaker 1: fund the purchase of another one that perhaps you have
• 3:01
  Speaker 1: a higher level of conviction and you think that offers
• 3:04
  Speaker 1: better risk adjusted returns UM. So you know these dislocations, UM,
• 3:10
  Speaker 1: you actually have seen volume trading volume increase UM. So
• 3:14
  Speaker 1: you hear a lot about illiquidity and markets have become
• 3:18
  Speaker 1: less liquid. However, the amount of inquiry, the amount of
• 3:21
  Speaker 1: desired trading is up substantially, um, and we're trying to
• 3:25
  Speaker 1: take advantage of that. We're you know, looking all over
• 3:28
  Speaker 1: both in high yield and investment grade credit and as
• 3:30
  Speaker 1: well as other spread sectors just to find the best opportunities. UM.
• 3:35
  Speaker 1: But I think all this, you know, you have to
• 3:37
  Speaker 1: start with that high level of you know what, what
• 3:40
  Speaker 1: is your view on the path of the virus, because
• 3:42
  Speaker 1: we know that's going to dictate how we emerge from
• 3:45
  Speaker 1: this this quarantine and shelter in place economy, and by association,
• 3:51
  Speaker 1: just how rich or cheap risk assets currently are. Let's
• 3:55
  Speaker 1: let's stick with the concept of market liquidity for a
• 3:58
  Speaker 1: second and pack a little bit of what you just say.
• 4:00
  Speaker 1: There is a lot of concern around the trillions of
• 4:03
  Speaker 1: dollars of triple B rated debts investment grade rated debt,
• 4:08
  Speaker 1: but at the lowest here the potential for it to
• 4:10
  Speaker 1: get downgraded to junk, thus igniting forced selling on the
• 4:14
  Speaker 1: part of investment grade bond managers. We have seen some
• 4:17
  Speaker 1: fallied angels, pretty sizable ones recently. How concerned are you
• 4:22
  Speaker 1: about that pressure creating some fire sales, creating a lot
• 4:26
  Speaker 1: of downward pressure on prices in the investment grade space,
• 4:29
  Speaker 1: and frankly also in the high yield spaces, those names
• 4:32
  Speaker 1: try to get absorbed into the pool of debt that's existent. Yeah,
• 4:36
  Speaker 1: I mean, it's it's a great question. And UM, you know,
• 4:39
  Speaker 1: we we we're seeing firsthand the early phases of that
• 4:43
  Speaker 1: with UM. You know, with certain issuers that are very
• 4:45
  Speaker 1: you know, almost a hundred billion that's going from investment
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  Speaker 1: grade credit into high yield credit UH in April alone,
• 4:52
  Speaker 1: UM and what UM you typically see and this isn't
• 4:56
  Speaker 1: always the case, and I think this time, you know,
• 4:58
  Speaker 1: could certainly play out different it, but investment grade holders
• 5:02
  Speaker 1: are are proactive. They don't just simply wait for the
• 5:05
  Speaker 1: event of the downgrade or index inclusion. They are always
• 5:10
  Speaker 1: looking at UM, Okay, what do we need to do
• 5:12
  Speaker 1: over the next two weeks, what do we need to
• 5:13
  Speaker 1: do over the next month. So oftentimes you see UH
• 5:18
  Speaker 1: selling that actually occurs prior to these issuers going into
• 5:23
  Speaker 1: the benchmark. So with what we saw over the past
• 5:26
  Speaker 1: couple of weeks is some of those fallen angels that
• 5:29
  Speaker 1: we're going in this month actually hit their loads a
• 5:32
  Speaker 1: couple of weeks ago, and you started to see some
• 5:34
  Speaker 1: high yield buying UM I think it's really important for UH,
• 5:39
  Speaker 1: for investors to be looking at relative value. So, you know,
• 5:43
  Speaker 1: Western asset, we have two different teams, investment grade credit
• 5:46
  Speaker 1: and high yield credit, but they're very cohesive. They work together.
• 5:50
  Speaker 1: And the idea of comparing relative value for a fallen
• 5:53
  Speaker 1: angel and looking at it relative to what we see
• 5:56
  Speaker 1: perhaps in the high yield market, that could give us
• 5:59
  Speaker 1: a good UH template to work with in terms of Okay,
• 6:02
  Speaker 1: do we want to buy now do we want to
• 6:05
  Speaker 1: wait until it goes into the index? UM. So there's
• 6:08
  Speaker 1: there's a lot of dynamics that work there. But again,
• 6:10
  Speaker 1: I think that risk that you highlighted is very real,
• 6:14
  Speaker 1: and it's not just for corporate credit. UM. The longer
• 6:17
  Speaker 1: we're in this type of shutdown economy, UM, you know,
• 6:21
  Speaker 1: that has real ramifications for for municipal credit, UM, for
• 6:25
  Speaker 1: sovereign credit. So there's a lot of ways to look
• 6:29
  Speaker 1: at this. There's a lot of things to think about.
• 6:31
  Speaker 1: And again it goes back to what we talked about earlier.
• 6:34
  Speaker 1: It's how long are we going to be in this
• 6:36
  Speaker 1: type of economy and when will we start to see
• 6:39
  Speaker 1: some improvement in the path of the virus. So, Mike,
• 6:43
  Speaker 1: let's just kind of go there to that backdrop. A
• 6:45
  Speaker 1: lot of Wall Street firms out with some very dire
• 6:47
  Speaker 1: GDP numbers quarterly this year, with the second quarter being
• 6:51
  Speaker 1: particularly ugly, but then some have kind of bouncing back
• 6:53
  Speaker 1: in what might be called a v shape recovery in
• 6:57
  Speaker 1: three and four. What's kind of the backdrop that's the
• 7:00
  Speaker 1: of pends your out look there at Western Yeah, I
• 7:03
  Speaker 1: think we would agree. I mean it's you're seeing everyone
• 7:06
  Speaker 1: trip over themselves to downgrade growth forecast for you know,
• 7:10
  Speaker 1: for the for the second quarter. UM, it's going to
• 7:13
  Speaker 1: be ugly. We all know that. UM. You've you've seen
• 7:16
  Speaker 1: a virtual uh you know, halter drop in demand almost
• 7:21
  Speaker 1: nothing in certain industries. So the second quarter numbers, you know,
• 7:25
  Speaker 1: early third quarter, um, you know, are going to look
• 7:28
  Speaker 1: pretty brutal, and first quarters as well. UM. I think
• 7:33
  Speaker 1: the Fed and the Treasury have gone a long ways
• 7:35
  Speaker 1: to bridging the gap. I think they've bought time, UM,
• 7:39
  Speaker 1: and that's really important. I think the way that the
• 7:42
  Speaker 1: markets priced right now, UM, there is probably I would
• 7:45
  Speaker 1: say it's hard to really gauge, you know, what consensus
• 7:48
  Speaker 1: view is, but I think it's generally that um, you know,
• 7:52
  Speaker 1: the virus is brought under control by late second quarter,
• 7:55
  Speaker 1: perhaps early third quarter, UM called third quarter maybe a
• 7:59
  Speaker 1: transition and quarters people start going back to work. And
• 8:02
  Speaker 1: then by the fourth quarter, UM, you're you're starting to
• 8:05
  Speaker 1: get some of that bounce from pent up demand. So
• 8:09
  Speaker 1: we know that the time between now and then is
• 8:11
  Speaker 1: going to be pretty ugly. And I think you know, again,
• 8:14
  Speaker 1: the Fed and the Treasury, they they've done policy in general,
• 8:17
  Speaker 1: has done a great job of bridging that gap, right,
• 8:20
  Speaker 1: Mike Bichannan, thanks so much for joining us. We appreciate
• 8:23
  Speaker 1: your thoughts as always. Mike Bichannon's a deputy Chief investment
• 8:25
  Speaker 1: officer for Western Asset Management, a four and sixty billion
• 8:29
  Speaker 1: dollars under management, mostly in the fixed income side. They're
• 8:32
  Speaker 1: based in Pasadena, so I think, but Mike was suggesting
• 8:35
  Speaker 1: least a little bit more of a U type recovery,
• 8:37
  Speaker 1: and I think that's kind of maybe where the markets
• 8:39
  Speaker 1: evolving from a V to you hopefully not to an L. I.
• 8:43
  Speaker 1: I can't keep track. Are we in a W exactly?
• 8:47
  Speaker 1: So we'll see, but interesting, but that's clearly people trying
• 8:50
  Speaker 1: to just get a handle kind of on the path
• 8:52
  Speaker 1: of the coronavirus and the timing associated with it, because
• 8:56
  Speaker 1: that will obviously drive where the kind of how the
• 8:59
  Speaker 1: economy is able to open up again. On the other side,
• 9:04
  Speaker 1: given all the uncertainty that we have and certainty as
• 9:08
  Speaker 1: it relates to timing of this virus any impact on
• 9:10
  Speaker 1: the global economy, we welcome Peter Kenny, founder of Strategic
• 9:13
  Speaker 1: Board Solutions. Peter, thanks so much for joining us. UM.
• 9:17
  Speaker 1: You know, give us a sense of kind of how
• 9:19
  Speaker 1: you're viewing markets here from a thirty foot view level. Yeah, Paul,
• 9:24
  Speaker 1: good morning UM. You know, first of all, interestingly, UM
• 9:27
  Speaker 1: first day at Q two UM smps down two UM
• 9:33
  Speaker 1: and it seems to be holding the level, which I
• 9:36
  Speaker 1: think is extremely interesting because given all of the negative
• 9:41
  Speaker 1: news and given the negative breath of the market, to
• 9:45
  Speaker 1: be holding at UH what could end up being a
• 9:48
  Speaker 1: very important technical level is significant. Of course, the Dow,
• 9:53
  Speaker 1: the NaSTA, CAN, Positi sp are all lower, and global
• 9:56
  Speaker 1: markets are lower, and clearly Q two is shaping up
• 9:59
  Speaker 1: to be a very very tough quarter at least for
• 10:01
  Speaker 1: April UM. But so far the markets are doing better
• 10:06
  Speaker 1: than frankly I was expecting this morning, Peter, I think
• 10:09
  Speaker 1: a lot of people are thinking that Howard marks his
• 10:11
  Speaker 1: latest memo kind of outlined how there's still a lot
• 10:15
  Speaker 1: of optimism baked into current valuations and equities if you
• 10:18
  Speaker 1: just look at, for example, the multiples that are baked
• 10:21
  Speaker 1: in here. I'm wondering there seems to be a push
• 10:24
  Speaker 1: pull here of the money being pumped into the system
• 10:27
  Speaker 1: by central banks globally and frankly by government's globally, mixed
• 10:31
  Speaker 1: with the idea that we have a complete global shutdown
• 10:34
  Speaker 1: and production and activity in an unprecedented way. Can government
• 10:39
  Speaker 1: money overwhelmed that and be the predominant driver here? Well,
• 10:44
  Speaker 1: that that at the end of the day, that that's it.
• 10:47
  Speaker 1: You just put your finger on on the real The
• 10:50
  Speaker 1: conversation is government money, government liquidity, whether it comes in
• 10:55
  Speaker 1: the form of fiscal or monetary policy, is it up
• 10:58
  Speaker 1: to the task of really addressing in an efficient manner
• 11:02
  Speaker 1: the risks inherent in the market that is in the
• 11:05
  Speaker 1: stage is early stages of a global shutdown. So I mean, investors, markets,
• 11:09
  Speaker 1: the global economy are all being held hostage by this
• 11:13
  Speaker 1: COVID nineteen pandemic, and the federal governments, not just in
• 11:17
  Speaker 1: the United States, and as you accurately point out, globally,
• 11:20
  Speaker 1: are doing everything conceivable to address this shutdown, this this
• 11:25
  Speaker 1: tightening up of credit. Um, there really is no other option. Um,
• 11:30
  Speaker 1: that's all we can do. And hope that in time
• 11:35
  Speaker 1: that what is being thrown at this finds traction with investors,
• 11:39
  Speaker 1: investors find opportunity in that and begin to once again
• 11:43
  Speaker 1: take that it, you know, take on that sense of
• 11:46
  Speaker 1: there's a risk worth taking in the market. I think
• 11:49
  Speaker 1: we'll find that. And oddly, and in a very counterintuitive
• 11:53
  Speaker 1: sense of things, this morning, the fact that the SMP
• 11:56
  Speaker 1: has remained at in spite of the fact that it's
• 11:59
  Speaker 1: trade fractionally lower on an all morning is significant because
• 12:04
  Speaker 1: it's saying it's telling us that there there is a
• 12:07
  Speaker 1: bit of a risk appetite in the market, as counterintuitive
• 12:11
  Speaker 1: as that may seem. Well, Peter, this is sort of
• 12:14
  Speaker 1: the theoretical idea I've been struggling with for a couple
• 12:17
  Speaker 1: of days now, this idea that you have governments around
• 12:20
  Speaker 1: the world printing cash, printing money as quickly as they
• 12:23
  Speaker 1: can through their central banks and through their government spending,
• 12:26
  Speaker 1: and yet inflation expectations are coming down. In the past,
• 12:30
  Speaker 1: this has been consistent, however, asset inflation has been real,
• 12:34
  Speaker 1: and I'm wondering at what point this will trickle into,
• 12:36
  Speaker 1: at the very least asset price inflation. Yet again, yes, right, well, frankly,
• 12:43
  Speaker 1: I think that policymakers on both sides of that equation,
• 12:47
  Speaker 1: fiscal and monetary, are looking for inflation, whether it be
• 12:52
  Speaker 1: an asset inflation or otherwise. Any inflation would be welcomed
• 12:57
  Speaker 1: frankly and expected given every form of economic modeling. This
• 13:04
  Speaker 1: level of cash generation and liquidity being forced through the
• 13:09
  Speaker 1: system should absolutely should provide for some sort of inflationary
• 13:15
  Speaker 1: lift two markets. That's the idea. Do we get it?
• 13:20
  Speaker 1: I think we do get it, Lisa, I think we
• 13:23
  Speaker 1: do get it. But there is a drag. There's a
• 13:26
  Speaker 1: lag between fiscal monetary policy and accelerated liquidity being pumped
• 13:32
  Speaker 1: through the system and markets and investors willing to step
• 13:37
  Speaker 1: out of the risk offen into the risk on and
• 13:40
  Speaker 1: start taking advantage of that opportunity, because it is an opportunity,
• 13:44
  Speaker 1: all right. So, Peter, if you are willing to look
• 13:46
  Speaker 1: past to the other side, where do you think investors
• 13:49
  Speaker 1: should tread first? Okay? So I think there are two
• 13:53
  Speaker 1: basic DCCs which you have to sort of get your
• 13:57
  Speaker 1: head around looking past this. For first of all, is
• 14:00
  Speaker 1: it a V shape or is it a U shape? Um.
• 14:03
  Speaker 1: I think it's something in between. But I don't think
• 14:06
  Speaker 1: that this lasts longer than three quarters in terms of
• 14:10
  Speaker 1: the ability of the economy to find real sustainable even
• 14:16
  Speaker 1: if it's marginal but sustainable economic expansion. So I'm actually optimistic.
• 14:21
  Speaker 1: On the other side of this, I think there's two
• 14:24
  Speaker 1: basic themes that you can go with. One is growth
• 14:27
  Speaker 1: and the other is a less growth centric and more
• 14:32
  Speaker 1: of a given in centric, very very low beta sort
• 14:37
  Speaker 1: of portfolio. I like both. I tend to be on
• 14:42
  Speaker 1: the on the former rather than the ladder in terms
• 14:45
  Speaker 1: of I tend to be a more of a growth
• 14:47
  Speaker 1: of investor, and I think there's huge opportunity UM in cloud,
• 14:52
  Speaker 1: huge opportunity in cloud, huge opportunity in in retail online,
• 14:58
  Speaker 1: and I have remained very, very convinced. So that's a
• 15:00
  Speaker 1: big part of the future for investors. Peter Kenny of
• 15:04
  Speaker 1: the Strategic Board Solutions founder joining us from New Jersey
• 15:08
  Speaker 1: really insightful. A lot of push pull cross currents at
• 15:11
  Speaker 1: a time, and a lot of people are flying blind.
• 15:13
  Speaker 1: This is bloomberg well. As the coronavirus continues to spread
• 15:21
  Speaker 1: and shuts down large parts of the economy. One of
• 15:23
  Speaker 1: the questions is what's going on in the world of
• 15:26
  Speaker 1: real estate. To answer that, we welcome Best Friedman Cheese
• 15:28
  Speaker 1: as CEO of Brown Harris Stevens, based in New York City. Best,
• 15:32
  Speaker 1: thanks so much for joining us. So what is going
• 15:35
  Speaker 1: on in the world of real estate? Has that completely
• 15:37
  Speaker 1: shut down as well? Yeah? Hi, good morning, Hi, Parhi Lisa,
• 15:41
  Speaker 1: how are you? Um, you know, it has I mean,
• 15:43
  Speaker 1: we we had a really we closed March, and the
• 15:47
  Speaker 1: numbers were very good for March, but that was business
• 15:50
  Speaker 1: from a different market. And now because you know, agents
• 15:53
  Speaker 1: cannot show properties. Um, well, you know, the market has
• 15:57
  Speaker 1: completely slowed, has been completely hated because we're still able
• 16:01
  Speaker 1: to do some closings and we're still you know, agents
• 16:04
  Speaker 1: are still getting calls from you know, consumers, but it
• 16:07
  Speaker 1: has slowed down incredibly, Yes, and we expected to slow
• 16:11
  Speaker 1: further into April. Bus heading into this the New York
• 16:15
  Speaker 1: City a real estate market was already slowing. We saw
• 16:17
  Speaker 1: declines and prices pretty much across the board, particularly the
• 16:21
  Speaker 1: luxury sector and the larger apartments. And I'm just wondering
• 16:24
  Speaker 1: how much this is going to just accelerate those declines. Yeah,
• 16:29
  Speaker 1: I think this is definitely accelerating those declines. Uh, you know,
• 16:33
  Speaker 1: for speaking about new developments, I mean all of those,
• 16:36
  Speaker 1: every project is stopped, they can't continue work, they can't
• 16:40
  Speaker 1: do you know, showing the sites are closed. Um. So
• 16:44
  Speaker 1: I think that it's going to take a little while
• 16:47
  Speaker 1: for it to pop back. Um. But I think that's
• 16:50
  Speaker 1: just being aggravated by all of this. So best given word,
• 16:55
  Speaker 1: I mean, interest rates are historically low. Um. But the
• 16:58
  Speaker 1: reality is, I mean this is are you can or
• 17:00
  Speaker 1: that this calls into question New York as a real
• 17:02
  Speaker 1: attractive place to own real estate, to live in, that
• 17:06
  Speaker 1: type of thing, given that we are one of the epicenters. No,
• 17:10
  Speaker 1: I mean, listen, this is not permanent. Remember the virus
• 17:13
  Speaker 1: is hopefully a temporary saying. The question is when is
• 17:17
  Speaker 1: the peak which people experts are saying, and I'm listening
• 17:20
  Speaker 1: to the experts that we have another week or two
• 17:22
  Speaker 1: until we hit the peak, and then once we get
• 17:25
  Speaker 1: this under control, the uncertainty goes away and we're back
• 17:28
  Speaker 1: to business. I mean, this is not forever and ever.
• 17:31
  Speaker 1: I mean, this is a virus that needs to be uh.
• 17:34
  Speaker 1: We hopefully will have some sort of cure, vaccinations, something
• 17:37
  Speaker 1: that helps, but right now people are concerned for their lives,
• 17:40
  Speaker 1: and until we get that under control, you know, you're
• 17:43
  Speaker 1: not going to have calmness. And consumer morale is low
• 17:46
  Speaker 1: right now, but it should be. If people wanted to
• 17:48
  Speaker 1: go out there and shop, I'd be worried. You know,
• 17:51
  Speaker 1: it's not go ahead. I'm sorry, No, it's fine. I
• 17:54
  Speaker 1: mean best if you take a step back. I've talked
• 17:57
  Speaker 1: to a number of people who are wondering about a
• 18:00
  Speaker 1: flight from the City's basically saying, look, if we're gonna
• 18:02
  Speaker 1: get pandemics, if this is gonna happen again, why do
• 18:05
  Speaker 1: we want to be in a concentrated area with lots
• 18:07
  Speaker 1: of people who are breathing all over each other. Why
• 18:09
  Speaker 1: not go somewhere where there's a lot of open space.
• 18:11
  Speaker 1: You got a yard, you can get away from people,
• 18:13
  Speaker 1: social distance all you want. And I'm just wondering, I mean,
• 18:17
  Speaker 1: do you expect that kind of flight away from New
• 18:19
  Speaker 1: York City in response to this a sort of an
• 18:22
  Speaker 1: existential threat. I mean, listen, you were you guys lived
• 18:25
  Speaker 1: through nine eleven. I was here as well, and there
• 18:28
  Speaker 1: was for a few months after that people were afraid.
• 18:31
  Speaker 1: They're like, should we leave New York City. I'm afraid
• 18:33
  Speaker 1: there's gonna be another bombing. We're gonna you know, we're
• 18:35
  Speaker 1: a target. And what happened is came January, the market
• 18:39
  Speaker 1: went crazy. People believed in this city and they still
• 18:42
  Speaker 1: believe in this city today. We are the most resilient
• 18:45
  Speaker 1: city in the world. And I don't believe people are
• 18:47
  Speaker 1: going to want to just move to the suburbs because
• 18:49
  Speaker 1: of this. We love to be together, we need each other.
• 18:52
  Speaker 1: We just need to get it under control. So I
• 18:54
  Speaker 1: don't think that that's going to be the result of
• 18:57
  Speaker 1: this at all. We love to be we love to
• 18:59
  Speaker 1: be together. Just Paul, don't breathe on me. That's right exactly.
• 19:03
  Speaker 1: So that's what do we do. What do you think
• 19:05
  Speaker 1: is going to happen from the international buyer that's been
• 19:07
  Speaker 1: such a big supporter of the luxury market, particularly in
• 19:10
  Speaker 1: New York City, You know, I think that has that
• 19:13
  Speaker 1: had slowed down anyway, as Lisa had indicated, UM, but
• 19:17
  Speaker 1: I think, you know, I'm hoping that morale will come
• 19:21
  Speaker 1: back over the summer. But you know, that has been
• 19:24
  Speaker 1: a big question mark for everyone because we have seen
• 19:26
  Speaker 1: a flow down of that for over a year now,
• 19:29
  Speaker 1: and um, it's been more domestic that's been buying the
• 19:32
  Speaker 1: high end luxury stuff, and so you know, I I
• 19:35
  Speaker 1: don't know. I mean, that's for me, it's anybody's gas
• 19:38
  Speaker 1: at this point, I don't know. There's also a question
• 19:41
  Speaker 1: how quickly the New York City housing market will recover.
• 19:44
  Speaker 1: Do you have a sense of that? I mean, I
• 19:46
  Speaker 1: understand we have to wait and see what the virus
• 19:48
  Speaker 1: brings in terms of just the virology of it. But
• 19:51
  Speaker 1: do we have a sense of, once we have that
• 19:55
  Speaker 1: kind of under wraps or there's some kind of solution,
• 19:58
  Speaker 1: how quickly it'll take. Yeah. I mean, I think second
• 20:02
  Speaker 1: quarter is going to be very challenging for all of
• 20:05
  Speaker 1: us because all the you know, businesses slowed and people
• 20:08
  Speaker 1: aren't gonna be writing much new business. And then hopefully
• 20:12
  Speaker 1: third quarter is when we start to see I think
• 20:14
  Speaker 1: economists have been talking about this sort of v shaped recovery,
• 20:18
  Speaker 1: you know where things kind of jump, you know, drop
• 20:20
  Speaker 1: off a cliff and then pop back up. I'm hoping
• 20:23
  Speaker 1: that we're going to see something like that because we
• 20:25
  Speaker 1: had a lot of pent up demands and I'm hoping
• 20:28
  Speaker 1: that we pop back up come let's say September, after
• 20:32
  Speaker 1: the summer that the market gets back to its regular business.
• 20:36
  Speaker 1: Best give us a sense of how things are in
• 20:38
  Speaker 1: the mortgage market. We've seen some real stress in the
• 20:41
  Speaker 1: mortgage market over the last couple of weeks. Yeah, they.
• 20:45
  Speaker 1: I spoke to a colleague at Wells recently and he
• 20:50
  Speaker 1: told me that that environment is also very challenged. He's
• 20:53
  Speaker 1: not really originating many loans. You know, people are slowed
• 20:57
  Speaker 1: down incredibly. Um he's giving advice to people because rates
• 21:01
  Speaker 1: are really low and people are doing some refives. I mean,
• 21:04
  Speaker 1: now it's a good time to do a refinance if
• 21:06
  Speaker 1: you'd like, but to originate a new loan for a
• 21:09
  Speaker 1: new purchase has really slowed down, and I think that's
• 21:12
  Speaker 1: going to be challenging for a lot of people in
• 21:14
  Speaker 1: the mortgage industry. Definitely. The one plus is that the
• 21:18
  Speaker 1: Hampton's um at least I had mentioned. I mean, because
• 21:22
  Speaker 1: people do want to get out of the city because
• 21:24
  Speaker 1: of the density and they don't want to be close
• 21:25
  Speaker 1: to each other. You know. That rental market, Our environment
• 21:29
  Speaker 1: there has been crazy. We can't keep anything on the
• 21:31
  Speaker 1: market there. People. Everything has been rented. So that's one plus,
• 21:35
  Speaker 1: I guess in this environment. Yeah, Actually, I've been hearing
• 21:38
  Speaker 1: anecdotes of people who try to rent a house out there,
• 21:40
  Speaker 1: and it's just the rates are absolutely outrageous and I'm
• 21:43
  Speaker 1: just trying to figure out is that going to have
• 21:45
  Speaker 1: lasting power? Is this also just sort of a temporary,
• 21:47
  Speaker 1: da jerk, get me out of here for the moment
• 21:49
  Speaker 1: kind of thing that will fade as time goes on. Yeah,
• 21:52
  Speaker 1: I think it's you're seeing a knee jerk, Like everybody
• 21:54
  Speaker 1: is trying to get out of the city, and if
• 21:56
  Speaker 1: they don't have a place, you know, upstate, they want
• 21:58
  Speaker 1: to go to the Hampton's or if they have a
• 22:00
  Speaker 1: house there, they're going there. So I think people are
• 22:03
  Speaker 1: trying to take a little bit advantage of the fact
• 22:05
  Speaker 1: that there's a real demand to have like a house,
• 22:08
  Speaker 1: especially if you have children. Um, if you're stuck in
• 22:10
  Speaker 1: a very small space, we all know that that could
• 22:12
  Speaker 1: be challenging. Wheelbarrows if you if you do wheelbarrows up
• 22:16
  Speaker 1: and down the hallway, it's really effective. And I'm also
• 22:19
  Speaker 1: forcing them to run up and down the stairs. Amazing
• 22:24
  Speaker 1: that as well. Yeah, dumping jags, alexas Uh, you work
• 22:29
  Speaker 1: out seven minute workouts, highly recommend best freedomen to every day. Yeah,
• 22:36
  Speaker 1: I do them with my kids best. Fred Ben, chief
• 22:38
  Speaker 1: executive officer of Brown Harris Stevens in New York, join
• 22:41
  Speaker 1: you guys to talk about the real estate market. It
• 22:43
  Speaker 1: is amazing that creative ways that uh that you have
• 22:46
  Speaker 1: to you have to try to make sure that they
• 22:48
  Speaker 1: get out their energy. I'm telling you wheelbarrows are great
• 22:51
  Speaker 1: because they also don't create noise for the neighbors downstairs,
• 22:54
  Speaker 1: so it's it's great. It's for the upper body, really good,
• 22:57
  Speaker 1: hold their legs, make walk up and out until they
• 23:00
  Speaker 1: cantymore is great. One of the themes of this entire
• 23:05
  Speaker 1: coronavirus induced shutdown that we're experiencing globally has been the
• 23:10
  Speaker 1: shift and the acceleration in the shift to the cloud
• 23:14
  Speaker 1: to online business transactions and delivery, and the question of
• 23:18
  Speaker 1: Amazon's role very much front and center, is They've become
• 23:22
  Speaker 1: a lifeline for so many households to just get basic
• 23:25
  Speaker 1: food and other staples. Joining us now Alex Webb of
• 23:28
  Speaker 1: Bloomberg opinion columnist in London, and Alex, there's a question
• 23:31
  Speaker 1: here as we look at Amazon's role, which they have
• 23:35
  Speaker 1: made sure to maintain and said they were going to
• 23:37
  Speaker 1: hire a many more employees, of whether they continue on
• 23:40
  Speaker 1: their premise of delivering cheaply and quickly at a time
• 23:44
  Speaker 1: when they are actually the main way that people are
• 23:47
  Speaker 1: getting supplies that they need. Yeah, the issue is to
• 23:50
  Speaker 1: here that there have been a significant number of complaints
• 23:54
  Speaker 1: from their employees about the working conditions in that fulfillment sentence.
• 23:57
  Speaker 1: We've seen a strike badist more one um in Catn Island.
• 24:02
  Speaker 1: We've got Whole Foods employees, Whole Foods of course a
• 24:05
  Speaker 1: unit of Amazon. Sorry, um, you know, essentially striking as well.
• 24:10
  Speaker 1: They're actually claiming the six days, but it is a
• 24:12
  Speaker 1: is a protest and they've been strikes in Italy, not
• 24:17
  Speaker 1: restricted to those countries, they have been a plaintuff where
• 24:20
  Speaker 1: and their argument is that we we're filling a crucial
• 24:23
  Speaker 1: service right now, but actually we're not being protected as
• 24:25
  Speaker 1: well as we think we should be. And what it
• 24:29
  Speaker 1: means to us is that we often don't really question
• 24:31
  Speaker 1: how we're getting these deliveries. You know, we we've heard
• 24:34
  Speaker 1: we click something on Amazon, Amazon's website and next day, um,
• 24:38
  Speaker 1: it arrives on our doorstep, and often that has human cost,
• 24:42
  Speaker 1: and that cost has probably been potentially been accentuated in
• 24:45
  Speaker 1: the current situation. So Alex do we have a sense
• 24:49
  Speaker 1: of how Amazon is performing just in terms of the
• 24:52
  Speaker 1: basic functions of delivery right now, they have sort of
• 24:56
  Speaker 1: restricted their warehouses too, only particularly in crisis countries like Italy,
• 25:02
  Speaker 1: the only taking essential goods. Now, that doesn't necessarily mean
• 25:06
  Speaker 1: they're not delivering essential goods, but it means they're not
• 25:08
  Speaker 1: replenishing them in their warehouses, so it might be harder
• 25:11
  Speaker 1: to get hold of some of those things. And ultimately,
• 25:14
  Speaker 1: you know, there is a lot of expectation from the
• 25:17
  Speaker 1: anis community covering the company that there will be a
• 25:19
  Speaker 1: significant uplift in um in demand for e commerce offering,
• 25:25
  Speaker 1: and that seems to be reflected in the statements in
• 25:29
  Speaker 1: the company, which you know, Jeff Bezos CEO has said
• 25:31
  Speaker 1: they're going to hire hundred thousands more employees in this
• 25:35
  Speaker 1: period to try to meet demand. You know, I was
• 25:38
  Speaker 1: struck by a Well Street Journal story yesterday talking about
• 25:41
  Speaker 1: how the employees at Amazon have so much more leverage
• 25:44
  Speaker 1: than ever before, and not just Amazon, but EPs and
• 25:47
  Speaker 1: a lot of the other businesses that are on the
• 25:48
  Speaker 1: front lines, and we're employees actually still have to go
• 25:51
  Speaker 1: to work and face off with the potential of getting
• 25:54
  Speaker 1: the virus, and it talked about how Amazon now gives
• 25:58
  Speaker 1: its employees in the US and Canada two dollars more
• 26:01
  Speaker 1: per hour. Now there are more sickly benefits. There's a
• 26:04
  Speaker 1: feeling that the shift toward better employee treatment will lead
• 26:09
  Speaker 1: to consumers having to pay more. How much more are
• 26:12
  Speaker 1: we expecting to look at? So I actually I am sorry,
• 26:15
  Speaker 1: but I just fundamentally disagree with that premise. Uh. If anything,
• 26:19
  Speaker 1: Amazon is in a far stronger position than right now
• 26:24
  Speaker 1: than it was a month ago, because there are so
• 26:27
  Speaker 1: many more unemployed people and that means they are far
• 26:30
  Speaker 1: greater scope. As we saw with the guy who kicked
• 26:33
  Speaker 1: up the the fast with Amazon insat n you know,
• 26:39
  Speaker 1: it's responseful kind of rallying the protest lost his job
• 26:42
  Speaker 1: because Amazon, We'll hire something else. There is three million
• 26:47
  Speaker 1: people out of a job in the US right now.
• 26:48
  Speaker 1: You know what, Alex, I'm really glad that you're saying that,
• 26:51
  Speaker 1: because that is one side of the equation there the employee,
• 26:54
  Speaker 1: uh that actually still is the employer that's having actually
• 26:58
  Speaker 1: um higher in spray. At the same time, you are
• 27:01
  Speaker 1: seeing them make more concessions to their workers to keep
• 27:04
  Speaker 1: people coming in, and you're seeing absentee rates climb, So
• 27:08
  Speaker 1: at what point does that power shift back to the employees.
• 27:13
  Speaker 1: I mean, the concessions they're making a temporary they're saying,
• 27:16
  Speaker 1: we'll pay you two dollars an hour, um. I think
• 27:18
  Speaker 1: at the moment it's still the under April UM. They're
• 27:22
  Speaker 1: changing over time pay as well. You know, these are
• 27:25
  Speaker 1: temporary measures which we don't know if they're going to
• 27:27
  Speaker 1: carry on in the long term. Now, my personal view
• 27:30
  Speaker 1: is that we as consumers are responsible here for actually
• 27:33
  Speaker 1: perpetuating this. We Amazon has done quite well and sort
• 27:36
  Speaker 1: of grooming us to expect that stuff should turn up
• 27:38
  Speaker 1: the next day. We don't ask about the cost and
• 27:41
  Speaker 1: um And itself going to really afford to do that
• 27:43
  Speaker 1: because it has a cloud business which is hugely profitable
• 27:47
  Speaker 1: and that subsidizes the loss making or low margins on
• 27:51
  Speaker 1: the e commerce side. But that's very hard for anyone
• 27:53
  Speaker 1: else to compete with. You know, other companies do not
• 27:55
  Speaker 1: have the benefit of that's hugely profitable cloud business. Um
• 27:59
  Speaker 1: and yet so yet they're trying to compete with Amazon
• 28:02
  Speaker 1: on the delivery front. And what we see is across
• 28:04
  Speaker 1: the board a reduction in the in the kind of uh,
• 28:09
  Speaker 1: you know, rewards that their employees are able to get
• 28:13
  Speaker 1: the hard work Sweb. Thank you so much for joining us.
• 28:17
  Speaker 1: Alex is eat European Technology Calmness for Bloomberg Opinion joining
• 28:20
  Speaker 1: us from London and Lisa. I think that's a great
• 28:23
  Speaker 1: discussion you and Alex we're having just kind of who
• 28:25
  Speaker 1: has the leverage here, um in the case of Amazon,
• 28:29
  Speaker 1: you know, the workers versus Amazon. Uh, there's certainly a
• 28:31
  Speaker 1: strong case to be made on both sides. Look, Amazon
• 28:34
  Speaker 1: has already come out and said you can expect your
• 28:36
  Speaker 1: deliveries to be delayed, right, how many people are are
• 28:39
  Speaker 1: protesting or how many people have for you know, Fresh
• 28:42
  Speaker 1: Direct and other delivery service. It's come under a lot
• 28:44
  Speaker 1: of strain, are trying to look for other avenues because
• 28:47
  Speaker 1: it's so overwhelmed that it can't actually deliver in any
• 28:50
  Speaker 1: reasonable amount of time. It just raises a question, right,
• 28:53
  Speaker 1: this leverage for the workers is a temporary or are
• 28:55
  Speaker 1: they going to be forced to continue, especially as we
• 28:58
  Speaker 1: see the walkouts continue to percolate throughout the country as
• 29:01
  Speaker 1: far as workers at Amazon. Thanks for listening to the
• 29:05
  Speaker 1: Bloomberg P and L podcast. You can subscribe and listen
• 29:08
  Speaker 1: to interviews at Apple podcasts, or whatever podcast platform you prefer.
• 29:11
  Speaker 1: I'm Paul Sweeney. I'm on Twitter at pt Sweeney. I'm
• 29:14
  Speaker 1: Lisa abram Wits. I'm on Twitter at Lisa A. Bram Wits.
• 29:17
  Speaker 1: One before the podcast, you can always catch us worldwide.
• 29:20
  Speaker 1: I'm Bloomberg Radio