Levisohn, carlton english and jack howe. Ben, im going to start with you. According to the textbook, the value of stocks is based on future cash flows. And with Interest Rates so low, of course, those future cash flows are a little more valuable. Add that to the fact that this Coronavirus Crisis presumably will pass over a couple quarters, and that hes eye academically at least the stock market should be rallying. To you buy that . Do you buy that . I think the market in some ways have lost its mind, but theres so much money out there right now. The feds dumped money and the governments put money, and now were seeing this good news in terms of reopening. And, you know, its as if we can just look past, the market is looking past all the bad stuff right now to a time when everything is back to normal. And if we can get back to normal, if earnings can get back to the trajectory they were on before, if the economy can get back to the trajectory it was on before, then the market make makes complete sense. Im just not that optimistic. Jack because you think well get bad news before we get out of this . I just think that when youre looking at earnings, that theyre not going to be quite what people have extrapolated them to be. Right now, you know, earnings are doing pretty much what theyve always done, you know . Companies are beating about 59 of the time which is right around the longterm average. And, you know, stocks it doesnt really matter what theyre doing. This week we saw stocks go up on pretty much anything. If you beat earnings, they went up. That was Something Like paypal which was a stock that was expected to do well. It still went up double digits. Stocks that have been having a tough time because people thought they werent going to do well like lincoln national, an insurer, they went up. Then you have Companies Like lyft who everyone knows is not doing well but seems to have a plan for when the economy reopens, and they went up double digits. And so the earnings dont really seem to matter. But in some ways theyre also telling us about some of the things about the future. When you look at the earnings that have been doing the best, the sector is the health care sector. Biggest gains on the day of the earnings release, and that, i think, makes sense. This is a sector weve talked about that we like that we just think is going to be really made for this kind of market experiencing that were going to have. Jack jack, you had a thought . I never like to pass up an opportunity to argue with ben, but ive got to say when you say that investors are forwardlooking, im wondering how much forward are they looking from now . Stocks are expensive relative to last years record earnings. Were not going to be back there, i think, for at least a couple of years. Look, im a permabull, im still in stockings. But if youre someone who had thought raising cash because youre getting nervous, im not sure the penalty is so high. I think longterm for stocks before might be below average. Jack that said, when people look at what theyre getting in cash, its pretty darn low. Carlton, youve got a few strategies to boost that up a little bit north of 1 which actually sounds good right now. Absolutely. You guys know how much i love cash. You can look at it jack who doesnt . Exactly. Problem is for years it hasnt even earned that much for you, i should say, and you know the fed lowering rates near zero, its earning even less. Weve identified a handful of savings accounts, most of them on line, where youre able to get Interest Rates in excess of 1 , sometimes even 1. 5 . So thats one way where you can put your cash to work. You still is have it, you still access it, but youre earning a Little Something on it. When you look at shortterm cds, youre not really earning as much there. Again, a lot of the rates are kind of near zero, but there is a potential strategy where if you go longer term, you could look at maybe a fiveyear cd, that the allied financials offering, its at 1. 6 . You could park your money there. And if the outlook for Interest Rates improve down the line, this would be a chance for you take the withdrawal, ill be honest, you could trade up for maybe a bond fund that could be getting more of a return. So theres a few different ways that you can play with cash right now. Also interesting, if youve been on the sidelines, youre feeling incomesecure right now, looking to get back into the market, dollar cost averaging into companies that, you know, reflect the Current Situation were in, defensive stocks, things hike that, that could just be a way to start making money on that cash that youve been holding for a while. Jack one thing i love about that cash approach, carlton, is that often people feel like, well, institutions, big banks, they get all the advantages. The little guy, you know, gets the dregs. In this case this is something that average Retail Investors can do that Goldman Sachs cannot. They cant put a billion dollars in a cd, but you can, and youre getting a far better return than youd get on a 30year bond even at 1. 3 . All this bad news has sent people to stock up the liquor cabinet. Youve been looking at those stocks. Well, theres this narrative that were all, you know, boozing hard, that were hitting the quarantines is. I was going to inspect your recycling bins, but fortunately, some better evidence came out and it suggests that after this initial pantry loading period, you know, where people stocked up right after the shutdown, there has been growth in alcohol purchases from school. Its growing about 23 , but it would have to grow at 22 just to offset the lost business at bars and restaurants right now. So maybe were boozing a little bit more, but its just a little bit. No need for an intervention. I will say liquor and wine sales are way ahead of pace, beer sales are way behind. And the top performer by far is hard seltzer. Really going bananas on the hard seltzer, and that speaks to a Company Called boston beer, its truly brand really growing quickly. Jack yeah, thats a fascinating story. Jim koch kind of ushered in the whole craft were, hes doing very well with hard cider. Coming up, what the Coronavirus Crisis means for the value of your home. One of barrons 100 most influential women in the u. 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Round and round with love well find a way, just give it time. Round and round what comes around, goes around. For bundling made easy, go to geico. Com jack how will the Coronavirus Crisis affect home prices . Joining me now, a member of barrons 100 most influme women in finance, ivy zelman. How is the Coronavirus Crisis affecting housing . Well, surprisingly, housing has been much more resilient than i would have expected and certainly fearedded. When the economy shut down initially are, activity plunged, as you would have expected. But over the last several weeks, builders and brokers have been reporting subsequent improvement in each of the recent weeks. So we went from declines of 5080 to some reporting as much as only 11 decline like dr horton. So its within remarkable. Its been remarkable, definitely better than feared. Jack well, one aspect of that improvement is that new home sales are doing a little bit better than resales, and thats kind of logical given whats going on. Right. Builders are able to sell homes that are movein ready whereas a lot of homeowners that had their homes on the market, they pulled their homes off the market. In fact, inventory already at record lows declined probably another 25 . People really dont want having others coming through their homes. But, you know, the new home market has already been gaining substantial share over the last several years as a lot of people want brand new homes. They dont want peoples old homes, they want open floor plans, the newest technology. Smart homes are all the rage. So we expect that that trend will continue. Jack now, before we get into what regions are doing well, can you explain, youve got cities, suburbs, how is this affecting the popularity of those various options . Well, prior to the pandemic what we call the e exurbs, that had been the strongest area because builders were finally building Affordable Homes in that third ring. And that trend, in fact, has continued post, you know, the shutdown. So builders are seeing in the entry level the strongest. But as you move closer into the sub you suburbs and the higher e points, thats where we see more of the challenge continuing. And that trend had been the case, and the luxury is probably the most challenged especially in those dense urban markets. Jack so lets talk about regions of the country. Whos doing well and whos hurting more during this . Well, you know, markets that are exposed to regions, to industries that have been the hardest hit, hospitality, recreation, entertainment, weve seen definitely weakness on the west coast, las vegas. Markets that have actually fared better have been predominantly in the southeast. We look at low risk versus high risk based on where the Employment Base is, so the Technology Industry the which is still very strong right now, market like seattle even though it was shut down seems to be doing very well with multiple bids on that first entrylevel price point which is like a half a million. So definitely differences. New york city is very, very weak right now, as youd imagine. So im happy to go into more detall, but detail, very significant differences based on region. Jack i do want to get a stock pick from you with. Investors know that the best place to look for value is where the market doesnt really fully seem to understand the dynamics of a company. And you say thats playing out right now amongst the mortgage insurers. Right. The mortgage insurers have been definitely hit very, very hard. The stocks have plunged. Theyre trading below book value, and theyre really more, i think, well capitalized and ready to withstand the significant pressure and likely to still generate positive roe. They did even indicate they can withstand up to 2030 defaults which right now we have about 78 percent of mortgages that are currently in forbearance. So i think below book value is a compelling entry point. It could be very volatile, but think theyre very well positioned. And, in fact, most of them, they have over 90 of their book reinsured. So their losses are capped on those individual mortgages at about 23 . So i think we feel pretty good about the longterm opportunity for sn and the other insurers like magic and radiant. Jack maybe investors are just skittish after the last rash. That was a very different reason. I wish we could talk longer. The good news is weve got a long interview with you in barrons this week, and weve got a deeper dive into the Real Estate Industry including commercial as well. Coming up, how long before laidoff americans can get back to work . And what will the postcovid economy look like . Michelle meyer there if bank of hey, can i. Safe drivers save 40 guys guys safe drivers save 40 safe drivers save 40 safe drivers save 40 thats safe drivers save 40 . It is, thats safe drivers save 40 . Hes right there. Its him safe drivers do save 40 . Click or call for a quote today. I come face to face with a lot of behinds. So i know theres a big need for gasx maximum strength. It works fast. Relieving pressure, bloating, and discomfort before you know it. So no one needs to know youve got gas. Gasx sodaddy, i found you know youve got gas. Good job. Now im gonna stay here and you go hide. Watch your favorites from anywhere in the house with the Xfinity Stream app. Free with your xfinity service. Now any room can be a tv room. Stream live tv, on demand shows and movies, even your dvr recordings. Download the Xfinity Stream app today to stream the entertainment you love. Jack what does the dismal unemployment report mean for the economy and investors, and how can could it take for laidoff employees to return to the work force . Joining the round table is bank of americas head of economics, michelle meyer. Im going to start with you, carlton, to talk about this weeks cover package in barrons. Obviously, these numbers are horrific, but looking to the long term, how do you expect it to play out with unemployment . Exactly. The numbers dont necessarily reflect the true reality. As people start to come back to workings we may still see lore wages or workweeks. A quick example is imagine the restaurants that reopen because of safety and social distancing measures, theyre going to be maybe serving at 50 occupancy to a client base that isnt going to be that excited to be spending. Thats going to mean all those workers are going to be hired back. And also thats lost tip revenue or lost wages for them. Jack yeah. That can reverbing rate throughout the economy. You think about new york, i dont think a restaurant can stay in business at 50 occupancy, but then if it tells its landlord it cant play, the landlords probably leveraged. Michelle, id love for you to address that but also your thought is that we might be able to bounce back quickly from 20, 25 , whatever awful number well have but getting much below 10 unemployment could be a slog . I think thats exactly right. So you have to think about these numbers, put em in perspective here. So we had considerable job loss all at once. Based off the numbers we saw this morning, just over 70 of those that went into unemployed were considered temporary. So that means they have some attachment the their employer once there is a reopening. A portion will be hired back fairly quickly and seamlessly. And and that probably will get you to an Unemployment Rate somewhere around 10 or so. Thereafter i think it is going to be very difficult because you have residual damage to the broader economy. You have businesses, to your point, that are going to be operating on a smaller scale for quite some time until the virus is well past us. Theres going to be stages in this recovery and stages in this economic cycle, and its certainly not as easy as flipping a light switch off and turning it right back on. As you mentioned, a clear majority of workers really expect to get their jobs back, but is it possible theyre too optimistic . That companies are going to use this as an opportunity to get even leaner . Well, after any recession you end up seeing Companies Take a step back and think about efficiency, how they want to staff. And i would argue its to the extreme because youve had businesses shut their doors for a period of time or certainly operate on a much smaller scale. So is as they ramp back up, as they think about the longterm trajectory and what kind of needs they have for labor versus capital, for example, i do think theyre going to spend some time really thinking about the optimal levels of labor right now, how they want it fast. So theres certainly a risk that even those that are assuming theyll be able to be brought back, they were temporarily unemployeded, it might be challenging for a portion of that population as well. Michelle, if were going to be stuck with relatively high unemployment for a long time, is there something more that we should be doing from from a policy standpoint when people are talking about a grand infrastructure plan, is that a good idea . Is there a better idea for creating jobs . So i think the stimulus has to be thought of in terms of stages. The stimulus thats going on right now is more stabilization. Its there to offset a dramatic loss in jobs and a dramatic loss of income associated with that. So its just to, you know, prevent what could be an even deeper and more sustained recession. The next round of stimulus will be around actually generating Stronger Economic growth and doing so in a way that can improve efficiencies. So when you think about the labor market, what we just spoke to, you have workers that might be displaced maybe from leisure and hospitality, maybe from the Retail Sector as these Companies Come back at a smaller scale or maybe not at all to some extent, these workers are going to need to find a new path and job training programs, relocation programs, incentives for companies to do on the job training, all of that could be really effective. Jack and, michelle, i guess the idea behind those big infrastructure things is not only to you, obviously, put money into peoples pockets, but over the long term you can boost the efficiency of the economy with some of these prompts . Yeah, thats right. Infrastructure spending is one of the best policies, it doesnt do much in the short term. If they do have the ability to pass additional rounds of stimulus where they can start thinking about the forwardlooking trajectory for the economy, Infrastructure Spending makes a lot of sense. You build highspeed trains, for example, that gets somebody from point a to point b much more quickly, efficiently. So it puts people to work in terms of those projects in the short term, but the longterm benefits are each more notable. Jack thank you very much, michelle. We appreciate it. Up next, roundtable members give their investment ideas for the coming week. Stay right there. My agerelated Macular Degeneration could lead to vision loss. So today i made a plan with my doctor, which includes preservision. Because he said a multi vitamin alone may not be enough. And its my vision, my morning walk, my sunday drive, my grandsons beautiful face. 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Call your doctor if worsened breathing, chest pain, mouth or tongue swelling, problems urinating, vision changes, or eye pain occur. Think your copd medicine is doing enough . Maybe you should think again. Ask your doctor about oncedaily trelegy and the power of 1, 2, 3. Trelegy, 1,2,3 man save at trelegy. Com. Jack so, jack, you were talking about hard seltzer earlier in the show. I understand youre using that to wash down a few slices of pizza. Well, pizza is probably the best performing part of the restaurant universe right now, and im on the hunt for things that are working. Papa johns reported numbers this past week, samestore sales growth of over 4 . Thats pretty good. I spoke with their new ceo, rob lynch, from my barrons street wise podcast. He said theyre stressing that, look, all of the food goes into a 40degree 450degree ovens, and when it comes out, no ones handling the food. Theyve been putting that in their commercials, and they said customers are really responding to that. So theres some good growth there. Jack and were seeing, certainly, kind of a technological advantage that some of these big pizza chains have over the mom and pop operators, and in the barrons tradition of getting an actionable idea from everybody, karltop, your actionable idea is connected to just that thing. Exactly. So im taking a look at a paypal this week. They did report earnings earlier this week with. Theyve also had an incredible runup of soft, but they so far, but they represent the new dynamic of paying online. They exceeded transactions that they saw black friday and cyber monday, so this is going to represent the new normal. Ive reported on some Financial Services consolidation this week, and the overarching theme this move towards fintech, and paypal operates in that space. Jack and, ben, you are really getting gut city this week. Gutsy this week. The market is always right, and right now its telling us that the economy is going to be stronger than we think. Im skeptical, but it doesnt matter what i think. The market is, its what the market thinks. I think value stocks are going to outperform. Looking at the russell 1000 value etf. Im not sure its a longterm trade, but i think this could do quite well if the market wants to get behind that idea. Jack certainly value has been lagging forever. Thanks, ben, carlton and jack, all great ideas. To read more, check out this weeks edition at barrons. Com and dont forget to follow us on twitter. Thats all for us. Wear your masks, be healthy. Well see you next week on a freaky forest that scrapes the sky. Thats a redwood . Its several redwood trees. Mysterious, incredible. Believe it or not. You might see Something Like this in lord of the rings or game of thrones. This is natural . Of course. Mother nature can only do this. But when life and limbs at risk. Omeone could have gotten hurt. Verybody in it. Can they work without a net . That gives you the direction of where its gonna fall. Hopefully. The stress that you go through, the mayhem, the sleepless nights we have to do it. Thats part of the fun. [ door creaks ] [ wind howls ]
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