Moneybeat – COVID relief and tech companies


MARY REICHARD, HOST: Coming up next on The World and Everything in It: The Monday Moneybeat.

NICK EICHER, HOST: Let’s welcome financial analyst and advisor David Bahnsen.

DAVID BAHNSEN, GUEST: Morning, Nick. Good to be with you.

EICHER: So you were out at the coffee shop this morning. That’s different. Things are opening up in New York City.

BAHNSEN: Yes. They are. I reopened my office out here in New York after Fourth of July and it was a ghost town throughout most of Manhattan. Slowly but surely throughout the summer we saw things starting to pick back up and the now here after Labor Day with schools reopening and restaurants getting ready to reopen on the inside—they’ve been open on the outdoor patio for quite awhile now—you definitely feel some energy coming back into the city.

EICHER: Good to hear! Well, let’s talk about jobs right here at the top. Looks like initial jobless claims stayed at 884,000. Continuing claims, am I right, that it went up?

BAHNSEN: Continuing claims were up modestly and even the initial claims were up just a little bit. But, yeah, right there in between 850 and 900. And then the continuing claims were up on the margin. So not a big move up or down on the jobless front this week.

EICHER: Do you draw any conclusions from that? I mean, did you expect something different?

BAHNSEN: No, I don’t have any expectation week-by-week. We try to use trailing three week averages to take out noise from the numbers. And on a trailing three week period, everything is declining and we expect it to continue declining. 

My frustration is I want it declining quicker and the only thing holding that back is the very sector we were talking about with Manhattan. It’s food and beverage. It’s hospitality, travel, leisure. These are not necessarily very high paying jobs, but they’re just so important to those people, to those sectors, it’s a lot of hourly wage employees. That, to me, is where you have the lowest hanging fruit. 

But there’s just no reason for these places—I mean, here in New York, you understand the positivity rate has been less than 1 percent for months, OK? There’s just no reason to not have these restaurants open.

EICHER: So, a lot of people read these reports that the Labor Department puts out and the Commerce Department puts out, and so when a listener reads a story like “Consumer prices rebounded in August for the third straight month after a sharp decline following the COVID outbreak, so everyday items are becoming more expensive,” how do you interpret that, just as a reader of one of these stories? Is it just another one of these demand side figures that don’t mean much to you?

BAHNSEN: No, I mean, it means nothing at all. It’s not even really true because it’s just a fluctuation of the numbers that bounce a little bit. 

So, on the margin, this whole issue of where consumer prices stand, there’s never been a need—ever—for economic data to tell us. You and I know what stuff costs when we’re paying the bill for dinner with our family. That’s where Americans feel consumer stuff and that’s where you can’t create a national index because people travel differently, people spend differently, there’s different habits, different preferences, the whole issue of inflation trying to become a monolithic tag is very difficult. 

First of all, healthcare costs, housing costs, and higher education costs are where all the inflation is coming from. Well, indexes that look to oil prices, gas prices, see I don’t drive a car much. I walk around Manhattan and even Newport Beach, my house and my office are a mile apart from each other. So, the way that gas prices affect someone like me is somewhat irrelevant. But then there’s people that drive 40 miles to work every day, so the oil price inflation or deflation is going to have a huge impact on them. 

Well, how do you capture all of that in a particular index? I just don’t think it can be done. 

So, I understand there’s going to be all these data points that fluctuate, but here’s what we know to be the case: There is significant disinflation in prices overall as a result of technology. And, overall, I think people should consider that a good thing.

EICHER: Let’s talk a little bit of politics, congressional politics. What do you know about what’s going on with—I hesitate to call, everybody calls it a stimulus package, but it’s not really a stimulus package. It’s really more relief, I guess, than anything else. But what’s your sense of where those negotiations stand? Or is it just we’re done here and we’re going to have the election and then we’ll decide what’s next?

BAHNSEN: Yeah, I have a couple sources that I am very hesitant to contradict because they’ve been very reliable and they’re very qualified in their assessment of things. They continue to tell me, they’re adamant a deal’s going to end up getting done. And yet I am really of the opinion that this thing is dead, that at this point both parties have determined that there’s no political damage being done to them to not do a deal. 

And so the House Democrats can tell their base, “Sorry, we’re not getting anything for you but it’s because the White House is not playing ball.” And the White House and Senate Republicans can say, accurately, “We’ve offered smaller deals. We want to go get done what everyone agrees to. The House Democrats won’t even do the things that we agree to getting done.” 

So, the bill this week that the Senate passed and then the Democrats blocked from going forward, that would have provided a few hundred billion more to PPP for small business relief, it would have provided $300/week in unemployment insurance supplement, it would have provided liability protection for reopening and it would have provided $105 billion to schools. It was not going to give the hundreds and hundred of billions to states. 

And that’s supposedly what the issue is now. 

My opinion, though, Nick—and I’m not being partisan here, I’m just reading the tea leaves—I just think they’ve decided they’re not going to do a deal before the election.

EICHER: OK. I’m leaving the big market story of the week for last. You and I talked a week ago about overpriced tech stocks—overvalued—and the air really started coming out of a lot of tech companies.

BAHNSEN: Yeah, that’s a big story. That’s the big story this week.

EICHER: Right, so before we go, talk about the reason for that.

BAHNSEN: Well, the technology sector is what created extra downside volatility in the stock market this week and the latter part of last week. Some of these stocks that were trading at 30x earnings are still trading at 70x. You look at some that are trading at 150x earnings. There’s still plenty of froth in the technology sector. But what you’re seeing, Nick, is that the overall market is not dropping that much, you’re just seeing a leadership change, people coming out of overpriced tech, into more better value type areas. 

 So I would not be surprised to see ongoing volatility in technology, but bond yields did not drop this week. If you were just having a full-on risk-off panic out of the market, you would see all stocks going down and bonds going up and bond yields dropping. We did not see that at all, and so I still just think this has to do with over valuation in technology more than anything else.

EICHER: Alright, great to talk with you. David Bahnsen, financial analyst and advisor, thanks so much.

BAHNSEN: Thanks for having me, Nick. Appreciate it.


(AP Photo/Mark Lennihan, File) In this Aug. 31, 2020 file photo, buildings line Wall Street, in New York. 

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