Time to recover. We have doubt. We expect choppy conditions to come in the months ahead. Choppiness heading into the next couple of quarters. Jonathan joining us now is priya misra. Fantastic to have you with us on the show. Clearly this recovery is stalling and you are getting incrementally more bullish on treasuries. Is that right . Priya i am. The data is better than my we were looking for. We were looking for data to improve and it is coming in better than that. In the backdrop we have rising covid infections in the u. S. And globally, which means we have to live in this environment for a while. That will hurt the opening, perhaps delay, slow down. It will affect consumer confidence. Event. A very big a different policy proposals on both sides. That is going to make risk assets hard to price. Things look pretty positive in august. We are near the lower end of the trading range in the 10 year. Are going backe to that 60, 80 basis point range. Jonathan there is a ton of risk on the horizon. It is the pandemic, the crisis, the struggle to normalize. We are going to face an extended period of time below potential, capacity. Inflation expectations are drifting higher. If you are below potential capacity for an extended amount of time, that is a. Isinflationary world why are we pricing in higher . Policythe fed will make to inflation. We actually think that they will linksuce Forward Guidance to inflation. The market is not pricing in inflation expectation, but the spread will let the economy run if inflationblink moves higher, which is more of a risk premium story. Look at real rates. They are near alltime lows. If the fed had this in mind, they would not have hiked. Inflation was below the 2 level. Jonathan they have been talking about the symmetrical approach to inflation for a while, have been conditioned by their experience in the labor market, that they should wait for unemployment to go lower. Maybe target something closer to 3, 4. How do they formalize that in Forward Guidance . Do you have an antiof what that looks like in the coming meetings . Priya where they have been more clear is on the inflation front. I have more confidence that we are not hiking between 2 and 2. 25. It all boils down to what is structural unemployment. Probably 4, 4. 5. Officials are making the economy run hot for a while, actually draw people into the labor market. They are not just targeting the Unemployment Rate but bringing people back into the labor force, minorities, lowwage workers. Whatever threshold it is, it will be much lower than what it was in the last. Jonathan what im curious about in the years to come is in the previous crisis, the United States was able to engineer recovery. Europe could not do it, japan could not do it. Every time we end up in a crisis like the one we are in right now, we add debt to recover from it. The tolerant for higher Interest Rates seems to diminish over time. Re we facing the same situation in the u. S. . Priya i think we are. When people tell me more debt means higher rates, actually think it means lower rates. I think this is arguing for lower real rates. Pessimistic, but we needed more fiscal support after this pandemic than after the lehman crisis. We have had a global disco stimulus aspect as well. I Hope Congress is talking about another plan. They need to go much bigger. That is the way you get more debt. Central banks everywhere are willing to take these down. This is the time where they should be doing stimulus to build a longer bridge to the other side. Jonathan what should the stem this look like . Isnt about size or composition . Enhanced Unemployment Benefits will expire. We have tremendous support of consumption in america. In the back end of the summer, there is a fear of hitting this air pocket of demand. What do you see in negotiations . Priya the two sides are pretty far apart. Payroll tax on one side, the democrats do not want that. Providing more of an income cushion for those that have not gotten their jobs back. The talk was in april, we would all be back to work in july, but we are not. As states are reopening, we see whats happening with the virus. It is certainly putting a slowing on the reopening. Providing more support to businesses that are cashstrapped, providing for the consumer, that has to be a part of this to be effective. The market stimulus is there. You look at how equities are. They dont need to do much for the markets. They need to do things for the real economy. Lending programs have not really taken off. This is about getting cash to businesses and consumers. Hopefully, that is what the next package looks like. Jonathan lets get to the final spread, the week ahead. Eu leaders wrapping up stimulus talks in brussels this weekend. Congress getting back to work in washington, d. C. On monday. Ecb officials speaking dropped the week. On thursday. S friday, u. S. Market pmi and flash pmis out of the eurozone. Audience a the condensed version of real yield. If it is a success, we will roll something out much longer, but we have to do the rapidfire round together. Three quick questions. Yield i0year believe we have lost priya misra. So im afraid we are going to have to go. Priya misra of td securities. That is unfortunate. We will continue the coverage right here from new york city. This was our best try and bring back the program. From new york, this was bloomberg real yield. This is bloomberg. Vonnie this is Bloomberg Markets. Im vonnie quinn. Coronavirus is affecting everything from education to media from the way we work. Will hear from Michael Lomax of the United Negro College fund, randi weingarten, president of the American Federation of teachers, and scott crowe. First, lets get it quick check on the markets. The s p 500 up. 2 . Certain stocks making big moves. The dollar index is weaker by. 4 thanks to a stronger euro. European leaders meeting this weekend. We will talk more about a rescue fund. Gold up. 6 . Lets get an update on all the Market Action that we saw this week with scarlet fu. Scarlet i am keeping a close eye on tech. Tech is one of the worst performers, down 1. 3 . That has been the case over the past couple of days as well. The commentary about how these megacap companies are dominating the s p 500, perhaps too much concentration. Tech then, you have seen shares underperformed. 500 is a chart of the s p infotech relative to the s p. That sharp rotation into cyclicals and you are seeing it happen again. Respondents said that they felt long u. S. Tech was the most crowded trade out there. You mentioned some big movers. Netflix at the top of the chart. The company reporting earnings that for the most part were fine for the Second Quarter but the outlook missed the mark. 2. 5 million subscribers is what netflix expects, only half of what wall street anticipated. Viacom, theyfox, are down today over concern about marketing budgets. Media is a laggard for the week, along with chip companies, retailers, Software Services as well. Mostly this week is about banks, stayathome stocks. As we head further into the earnings season, what should we looking for . Scarlet big Cap Tech Companies start reporting earnings. People are looking for the kind of reception it gets as a precursor to how they will respond to tech earnings. Microsoft really gets going next week. Ibm, texas instruments. A couple of other names there as well. Twoon was due to report weeks from now but it got pushed back to the end of august, so not clear why that is but we know that last time around amazon announced it was spending more money than investors had anticipated, certainly to bolster its Delivery Network also tohe pandemic, but keep its warehouses clean and employees safe. Vonnie i imagine there is a lot to do for companies this quarter. Scarlet fu, thank you. Ahead, funding schools of historically black universitys. We will discuss that with Michael Lomax, president and ceo of the United Negro College fund. This is bloomberg. Vonnie this is Bloomberg Markets. Im vonnie quinn. Couple of headlines. One out of new jersey. Virus transmission rates have risen to the highest level in weeks. A headline out of new jersey, virus transmission rates have risen to the highest level in weeks. Yellen also urging substantial fiscal support to state and local governments. Helpedmer fed chair stewart the u. S. Through the last financial crisis. She and ben bernanke er speaking to a house are speaking to a house panel. Meantime, its a time of increased tension in racial equality. Our next guest has worked to improve that his entire career. Michael lomax is the president and ceo of the United Negro College fund. Ofn worked off and endowment 100 million or so, they have Just Launched a new fun with the goal of raising 6 billion and 10 billion for scholarships and other programs. Great to see you. Give us some statistics about the United Negro College fund, how you fund students, and why it is so important this funding keeps rising. Are a 76yearold organization, we raised 750,000 that first year. We have raised 5 billion over those 76 years. We have awarded scholarships to over 500,000 students who have gone on to earn a college degree. We have also supported historically black colleges throughout that time. Annually, we support students to the tune of 100 million a year. We are also seeing 50 of black students are the First College attendees in their home. Its incredibly important to keep those numbers rising. We have seen some other historic black colleges and universities go to the bond market recently. Why is that not a good idea for these particular colleges and universities . Bondel when you go to the market, you get good rates but you are borrowing, and you have to pay that back. In the very volatile times like right now, it may make sense if you can get a lower Interest Rate and you already have debt, to refinance. We think borrowing based on enrollment projections in 2020 may be challenging because you are not sure whether you will be able to maintain the enrollment, whether enrollment will decline. We face an existential moment for black College Students who are going to college because the black community has been hardest hit by covid, severe unemployment, students who have been going to college may not be able to return to college because they dont have the resources to pay tuition, or they are the only breadwinner left in the family. Is working tocf do everything that we can to ensure that when our colleges are able, they open with strong enrollment, that their students have the resources to be able to remain there, and that they get the education they need to not be the first in their family to go to college, so that they become the first of many in their family that go on to, which, and they get all the benefits of a college education, which includes getting a better job, joining the middle class, and not being eligible for telegrams, which is the number 1 pell grants, which is the number one way that the Government Supports the lowest income students. Hbcus students who go to are low income, and 50 of them are the first in their family. Alsoe many of them competing with liberal schools that have billions in endowments michael they are not really competing. Thatlite schools, the ones set the highest selection standards, they are skimming a small percentage of black students. Historically black colleges have had the highest enrollments they have had in generations. When you add onto that predominately black institutions, schools where about 60 of their students are africanamerican, then these account for almost half a Million Students attending college. There are a whole bunch of lowincome students who are trying to break the cycle of poverty by going to college, but very few of them get accepted to the most elite institutions with the big endowments. Those institutions have the lowest savages of low income students. Even their black students are wealthy. Mainly in the bond market, some institutions had a lower credit rating, which makes it more expensive. Competing for philanthropic dollars, talk about your new fund. Uncf inheard about recent weeks because of reed donation but it is a tiny drop in the donations that are out there. Michael there is a huge amount of wealth in america right now, it is highly concentrated. The generosity has been largely focused on elite private and Public Institutions that dont really serve a low income, firstgeneration black student. Areinstitutions there 101 historically black colleges and universities. They enrolled 10 of the black students going to college. But they produce 20 of the graduates and 25 of the stem graduates. They are high impact institutions. The student to graduate from there, within a decade after graduation, are earning around 71,000 a year. They are engines of social mobility. These institutions have not been the darlings of the philanthropic world. Saying is invest in historically black colleges. Uncf is creating a strategic Impact Investment fund which will do the following. With morelp scholarship support for the lowest income students so that they dont have to borrow and debt. Te with heavy and we are going to build endowments. American colleges and universities are some of the wealthiest in the world. Harvard university alone has a 40 billion plus endowment. When you add up the endowments historically black universities and colleges, it is less than 10 of harvards endowment. We believe we have to challenge american philanthropy. The wealthiest, the most successful, and the most generous, to begin to invest in those institutions that are the workforce, serving the black community, moving them out of poverty and into the middle class, helping them to be the last in their family to be poor, and the first to be college graduates. Vonnie tell us when you are targeting, 6 billion, 10 billion over the longterm, and you have just started on this. Give us an idea of what sold this to Reed Hastings, if all of that was not enough . Michael Reed Hastings is one of the most innovative people. E is a contrarian he always takes the opposite position. With one another on the board of Charter Schools for the last 15 years but we have also built a strong friendship. Patty quinlan, his wife, and Reed Hastings, are committed to ending inequality in america. They believe education is the best lever. They have supported k12. Patty has been involved in criminal justice reform. They understand historically black colleges are making a big difference in the lives of their students. They can make an even bigger difference if they have the resources to help those students. Morehousem to visit college last year. They decided to make an initial to morehouse, spellman, and others. They are already seeing the return on that investment. Memphis alson in made a 40 million gift to at historically black college. Vonnie we will follow this as it goes along. Get in touch with Michael Lomax to make your donation. The United Negro College Fund President and ceo. Thank you. T and ceo. Thank you. Mark im Mark Crumpton with bloomberg first word news. Supreme Court Justice ruth eater ginsburg has been getting treatment for a recurrence of cancer. She is receiving chemotherapy for layins on her liver. She says treatment has been successful and she has been able to keep up with her work and says she is fully able to stay on at her post. As her vibeburg bouts of cancer amid a slew of Health Applications in recent years. Across the United States, public theyials are warning that could impose lockdowns again if people dont act to hold the research of coronavirus. Angeles,s of los miami, and houston have offloaded the prospect. Persuasion is not working to stop the record numbers of cases and deaths. A new poll says six out of 10 americans disapprove of the way President Trump is handling the coronavirus pandemic. According to the survey by the Washington Post and abc news, more than half of the public says they disapprove strongly. In march, more than half approved of the way the president was dealing with the crisis. New york ready is ready for phase for every opening starting monday, according to mayor bill de blasio. Indoor dining, museums, and malls will remain closed. It comes as hospitalizations has dropped to a fourmonth low. Statewide, more than 400,000 infections have been reported, the highest figure for any state. Global news 24 hours a day, onair, and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in over 120 countries. Im Mark Crumpton. This is bloomberg. Amanda im amanda lang in toronto. Welcome to Bloomberg Markets. Vonnie im vonnie quinn in new york. We are joined by our bloomberg and Bnn Bloomberg audiences. Here are the top stories we are following from around the world. Reopening schools in a pandemic. We will discuss the troubles schools, teachers, and parents face with randi weingarten, the mannequin federation of teachers president. Shares of netflix and drop after delivering a technet subscriber forecast. We will break down the companys earnings. Asices face record vacancies employees shift to remote work. We will discuss the commercial Real Estate Market with scott crowe of centersquare investment. Eyes on theing our markets, we are managing to see gains but certainly some sentiment weighing across stocks helping outx not the rotation out of tech we have seen in the last few sessions. Dow now in negative territory. The s p just six points higher. We are led by utilities, health care, real estate. Weakness for consumer facing groups and energy today. This as we continue to watch the pace of the pandemic. It is not just texas and florida, but we now know in new jersey, they are seeing a jump in transmission, the highest transmission rates in weeks. Moving to a more open economy, so what kind of transmission do you get . We will take a closer look at what that means for schools in the fall. Netflix is one factor on the markets today. The stock falling sharply after the bill yesterday. One of the stayathome stocks not delivering with the street hoped to see. We have an analyst joining us. In terms of netflix disappointing, you could argue it was priced to perfection. What did they do that let the street down . Thank you so much. There was a fast and furious nt untilnto the q2 pri yesterday. Guidance from the company was about half what the street was expecting. That looks disappointing at first blush but i think it may actually prove to be conservative, especially if you look at what they have laid out for 3q. It looks strong with a lot of returning series, some highprofile movies. We may find out they under promised and overdeliver. Having said that, you have to take a look at the big picture. The first half of 2020, netflix already added 26 million global subscribers. That is 2 million short of what they added in the whole year last year. Yes, it is at it, going to be a little bit of a bumpy road, there is that pull forward in fact that will weigh on the stock. Into 2021, they will have some comps to deal with from this year, but the longterm pieces very much intact. Vonnie is the market being too tough . Better . Oing it they are adding copious numbers of scribers, has production back on track in several countries, planning on having new series in movies out. Who can do this better . Nobody really. If you look at the current environment and you bring up an excellent point. You look at their Global Production capabilities, they have the benefit of that local production. Global production. A lot of their production hubs in asia are up and running, some of them never shut down. One of the things that they can benefit from which other networks do not have is a long lead time. They are able to drop episodes all at once, rather than episode by episode or some of the other net works. Because of that, the majority of their 2020 content is intact. The first half of 2021, they may have fewer production, but one thing they said that was reassuring, if you look at the number of originals they will be dropping on their surface, it will still be larger than 2020. Content is still very much in the story, differentiator for netflix. Vonnie we should not forget it is already up 50 this year. Thank you so much. Coming up, we are speaking with randi weingarten, American Federation of teachers president on how to bring kids safely back to school. This is bloomberg. Vonnie this is Bloomberg Markets. Im amanda lang in toronto. Im vonnie quinn in new york. Schools debating resuming in person classes, as there is an increase in cases among children and teens. Joining us now with more is randi weingarten, American Federation of teachers president. How concerned are your members that children can be a symptom medicare ears, and perhaps more children are contracting covid19 then we realized previously . Randi very concerned. What they are most concerned is that there is this carelessness and recklessness with the lives and education of children and the lies of lives of teachers. Teachers working conditions are childrens learning conditions. Teachers want to be back in the classroom. They know the limitations of remote learning. They would have told you that before the pandemic. They know that kids are suffering because of social isolation. Before the recklessness of our president last week when he said schools should open regardless of safety five days a week, and before this huge surge of ournavirus cases, we polled members and they were basically saying, three quarters of them said that if we could get the safeguards that every european country has put into place that they would be comfortable going back to School Buildings because they knew the importance of it. What is happening in america is by cases are surging, we are getting new information all the time a what about what the illness does. Are very few plans right now because there are no resources. Just theno guidance, threats and the bullying and the bluster from the trump administration. So they are concerned. 1. 7 million plus Members Around the country. Everysly, you cannot poll single 1 or it would be difficult to do that. Withe main, are they ok social distancing, hygiene measures, masks, or are there things that they would like to see before going back into the classroom . Yes, that is what im saying. In the middle of june and you are right i tried, but i cannot talk to all 1. 7 million. We did a very extensive polling of where our membership was. They said that if we could get the social spacing of six feet, masks, ventilation, the extensive cleaning, and start ally, knowing that Community Spread was tackled, you have a situation like you have in europe or new york right had some they confidence about going back into School Buildings. The issue right now is coming in the United States, trump and politics withyed this, just like they are doing with masks. People are now scared because they dont think that we are going to get any of these precautions. And they are right to be scared because trump is reckless and devos is reckless. Devos goes further and says they will pull funding from schools that dont we open. What kind of response can you and your members offer to that . It is dangerous, unconscionable, it is ludicrous. They should not be in the offices they are in. It is pretty remarkable when a former secretary of education looks at a camera and says working with their counterparts in the administration to try and figure this out. There are places where we are working more closely than others. For example, i sat on the new york state reopening schools commission. Governor cuomo accepting all of our recommendations and made them part and parcel of new york state policy. In new york, if we can get the resources, if we keep continue to tackle the spread as has already happened, there is less than 1 Community Spread of covid, meaning less than 1 infection rate then you will see schools opening in new york state in a hybrid model, a model spacing,rs the social assuming we can get the money from congress. Because flipside is, cases are surging in l. A. , san diego, houston, palm beach , you havelanta already seen those districts say that they are going to delay the reopening of School Buildings and start remotely, even though none of us think that remote works effectively, but you have to put safety first. Arenow that trump and devos blustering, threatening, really trying to create chaos in politics. They cannot do what they are suggesting in reference to money. Amanda a few seconds here. Can we expect to see some states open and others not open . It will not be a uniform response across america. Randi no. 50 states, 50 different responses. Schools in montana are already over in. Summer camp is open in some places. It will be dependent on the resources and Community Spread. We have to leave it there, randi weingarten, American Federation of teachers president. Appreciate it. Reopening, onerd question that many are asking is will offices go the way of shopping malls when it comes to investment . We are speaking to centersquare investments scott crowe, next. This is bloomberg. Toronto, im amanda larry, alongside vonnie quinn in new york. We have seen commercial real damage from the coronavirus lockdown as behaviors first took down shopping malls. Many are asking, our offices next . Scott crowe is the chief investment strategist at centersquare. We wonder what the office will look like. On the one hand, many will stay at home. Others when they go back, will be distanced. It will be an interesting proposition, will we need more or less space out there . What is your thesis . Aret the question is offices and asset class . The answer is no. Our assumption is that by the middle of next year we will have enough herd immunity or the vaccine that will allow us to turn to a more normal life. Painbeing said, the big point for office is not the density of the office, its about public transit. New york city moves 4. 7 Million People in and out of the city every single day. That is people packed in trains, buses. That is really the issue we need to solve before going back to a more normal working life. Say,ther thing i would some of the habits we have learned through this forest experiment is that we can work remotely, we can work more efficiently, we have had to utilize technology more. I think some of those habits will stick. What that means on a netnet basis for office, it has a painful 12 months ahead. There will be so many tenants not renewing, people asking to lower rent because they are not using the space, but even as we hit june 2021, what youll find is behavior patterns have changed and we potentially use office differently. We use it less, work from home more. One of the trends that was already in place precovid that will be accelerated and thattuated is the fact have a premiumll because it is a safer space. Vonnie is there a discount beyond which it is not worth it at all for landlords to have an occupant . It is interesting, because you think of most businesses, there is work that needs to be done, but what you lose when you dont have face to face interaction is that organic creativity. Firms are going to want that. They will want places to meet. Discount athere a which it is better not to have anybody in the building . In the scenario where people continue to work from home because they have to, not because they decide to. Scott that is a question. Collegell becoming majors in biochemistry with this virus trying to understand what it will look like. Lets just back up to a historical view. The world has been through many pandemics. Cities like london and new york still exist. Why do they exist . Density is creative. People bumping into each other, talking to each other, is what makes things happen, it spurs creativity. I dont think that will change. I think we will work from home more, yes. One of the interesting things is, what is more important to a firm today, their Office Building or their data center . You will see a shift away from firms investing in their office space in terms of their marginal dollar, toward their infrastructure, digital infrastructure, latency. But i dont think Human Interaction is over. It has not been overthrew all the pandemics in history. Density matters because it spurs creativity and ideas. Vonnie we are out of time, thank you. Scott crowe, Centersquare Investment Management chief investment strategist. We have the s p 500 still positive but paring back as we learned that new jerseys transmission rate has picked up above 1. It had been down to 0. 7. Back in the peak in april it was at 5. Something to keep an eye on. New jersey transmission rates higher than in weeks. We will see you next week. This is bloomberg. Caroline its 2 00 p. M. In new york, 7 00 p. M. In london. Live from bloomberg world headquarters, this is Bloomberg Markets the close. Im caroline hyde. Romaine and im romaine bostick. Elections moratoriums are set to expire in coming weeks. What it could mean for the millions out of work. And u. S. Stocks drifting mostly higher at the end of friday trading, as investors digest the week of earnings against coronavirus developments. Nasdaq has towards its first today slide in more than two months, and salvaging the summer blockbuster season netflixs disappointing subscribers outlook. Realistically, as virus cases continue to mount, will theaters be back . The ceo this hour about his plan t
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