♪ romaine: from bloomberg world headquarters in new york, i'm romaine bostick. joe weisenthal. caroline hyde is out for the rest of the year. romaine: u.s. equities make a push back toward record highs, russell 2000 small caps outperforming. joe: the question is, "what'd you miss?" closing out 2020, a

year many want to put to bed as soon as possible, and like everyone else, you are celebrating at home. joe: everything instantly gets good at midnight. romaine: the theme of the year is at home, working at home, playing at home, everything in between at home, a profound impact not only on our psyche, but reevaluating how we were. maybe some of these trends could be lasting, and that is our theme of the day as we talk about investors maybe trying to figure out whether these themes will be lasting. eyes have turned to a fund that has been on fire all day. wood.athy if there is one etf fund that capture the imagination, the z guy step investing themes, there is no question this is the

etf, a five bagger since the march low. theything kathy wood of arc fund has picked. this is the chart people are seeing that is emblematic of the year 2020. romaine: kathy wood on fire. most significant outflow yesterday, 100 37 million, first daily outflow we have seen going back to early november. there hasn't been a weekly out for all -- weekly outflow from the fund since february, and it is understandable. i know you are a fan of your end rebalancing, joe. profit-taking is another story. let's bring in bloomberg's abigail doolittle. --

joe: let's bring in bloomberg's abigail doolittle. is there any sign of a slowdown in momentum of this theme. we saw some recovery in airlines and other stuff, but by and large, the tech theme is dominant. abigail: i agree, joe. the stay-at-home theme is definitely in place, folks wanting in on the big cap part of stay-at-home, apple, microsofts of the world, the bigger stocks that have made moves on the year zoom, beyond meat, pellet on. they have been a little weak lately, depending on the stock the declines could be 5%, 10%, 20% in the quarter. but when you put that in the scheme of gains we have seen in some of the stocks, absolutely ridiculous, pellet on and zoom up 400%, crazy gains, so it actually makes sense that etf,ow is in the arc

because why wouldn't you want to take some profits off the table and lock things and for the year? docusig doc you sign -- for covid. stock amazon is also its own bees. we have seen rotation into but alsoap tech names, a bet on small-cap material names, the idea that there is a cyclical recovery afoot and investors want to be along for the ride. abigail: that is a part of the story of the cyclical recover we have seen in small caps, because small caps in the fourth quarter are the rage, russell 2000 up 30% on the court, best quarter ever, outperforming the s&p 500 in a huge way. the s&p 500 and the fourth quarter up more than 10%, incredible. but that is outgained by the russell 2000 by 20%. that is definitely a piece of it, romaine, investors looking forward to a brighter 20 to one

when the vaccine hopefully gets into the system and brings some level of what is considered to be normal living back. folks wanting on that "reopening" reflation trade and we are seeing it in spades in that russell 2000. joe: romaine mentioned profit-taking, is that a real thing? abigail: it is a real thing, especially when you see outflows etf, and some stocks that were up 500% on the er only up 440%. i think you see some folks wanting to cash in on the gains. the big question on a fundamental basis is, do we have a year of everyone flocking to amazon? i never used amazon before this year much, and i now love it. i never used zuma before, i now love it. so how much will he be using these technologies in the future? that is the bigger question in terms of this turning out to be a 2000 moment where you had stocks with skyhigh big valuations and then, they simply

dropped. or is this technology that is going to be adapted into our lives more and more, even as a return to a reopening lifestyle? i think the answer is in the middle. romaine: the big question of the day and theme of our show. bloomberg's abigail doolittle giving us a nice set up. we continue the conversation next and talk about some names if you are looking to see whether those names have staying power. a lot will depend on whether the work from home trend has lasting abilities. nick ellume is a professor at stanford and has been -- nick bloom is a professor at stanford -- has been discussing studying to work at home environment. that is next. this is bloomberg. ♪

♪ onaine: today we are focused the work from home economy that has taken hold in 2020. joe, we are in the studio, but i am sure a lot of viewers and family members are stuck in the house. i wonder if the trend will continue. joe: that is the big question -- does the world change forever because of this, the way we work? a survey done on this talks benefits, showing that potential productivity could rise by over 2%, and slow spending in city centers. it could have a major benefit to high-end come workers. there are profound ramifications for cities, workers, how companies are organized, if this turns out to be a lasting trend.

stanfordlet's bring in university professor of economics and senior fellow at the stanford economics research, nick bloom. let's start on the data, give us a sense of the increase in terms of numbers of folks working at home, and your general projections of what that level might be post-covid? professor bloom: i should start by saying the increase is massive. we have been surveying 2500 americans a month. and before covid, 5% of working days in u.s. work from home, so 95% of working days were on business premises. during the worst covid, april may, it was 60%, fell and is back up to 50% now. currently in december, we have 10 times as much working from home as we did before covid. andyone is experiencing enormous, absolutely

unprecedented increase. joe: so in terms of trying to gauge productivity increase, where does the productivity come from? what is better about it in terms of functioning? and are there specific types of industries or office workers whose productivity really jumps when they are working from home? professor bloom: absolutely. there are two ways to look at it. short-run productivity, doing the same thing over and over, filling out reports, dealing with the same customers, kind of repetitive, that appears to be significantly up working from home. i have been working this for about 10 years in various toearch projects, talking dozens of hundreds of executives, and it is easier and quieter at home to get done what you have always been doing effectively. productivity is substantially up. 10% is a rough number you classically hear and see in our

survey spirit the problem is the long run, to be creative and come up with new ideas. here is where the challenge is at here is where working from home is frankly not as good as face-to-face interaction. romaine: that suggest we could maybe see differences regarding certain industries maybe embracing this longer than other industries. i'm curious about geographic shifts. four years, we have had a futuristic discussion that we would all be able to work from our laptops anywhere we please. this year, we got to experiment with that. is there any sense here that the shift in demographics, meaning people moving out of one state to maybe a more rural area because they have the ability to work remotely, that that itself will continue, that pattern? professor bloom: there are two big trends in the data. one is what i call the doughnut effect. you see the center of cities, particularly san francisco, manhattan, washington, chicago, emptying out. but people are not leaving the

cities to go to mississippi or alaska, they are leaving to go to the suburbs, leaving manhattan to go to the bronx, living downtown san francisco to go to the east pay. so people are moving out of city centers that we are seeing property values go down and spending go down and move out of the centers for that is one big change. the other change that is pretty much here to stay is hybrid working from home. google made the announcement last week. i must have spoken to 200 executives by now. overwhelmingly in the survey data post-covid, people want something like three days a week in the office, where the whole team comes in and you work together, and two days we got home. that is the best of both worlds, three days a week to be reductive and innovative, get your long-run productivity done then, and two days a have quite time at home. that is why people are moving to the suburbs. they are thinking, i am only going to commute monday, tuesday and thursday, but wednesday and friday, i work from home. i am not going to move to

wyoming. i still have to go to work three days a week, but don't need to live in the center of town. i can live in the suburbs. joe: what about office politics? tople like to be seen, like be seen working, like to get to know people, network within their organization, is that a source of anxiety? how have people not a gated that tissue? professor bloom: yes, absolutely. it is very important that the days you come in ordinate among the whole team. there is no point you come in one day and the others coming in another day. and it has to be leadership from the top. it needs to be that the ceo down only comes in on monday, tuesday and thursday, and maybe you use the space wednesday and friday, but it has to be from the top down. a study done in china 10 years ago, we saw in mixed modes, some people in the office and others at home, rates were higher with

those working at home. so office politics are important and that is why it has to be the same three days the whole company comes in. or you can break it up by teams if you are in a big firm, a red-blue thing is week one and when team is monday, tuesday and wednesday and the other is thursday and friday. but either way, you have to come in with your manager. concept, you talk about the potential of promotional issues, people getting promotions and advancing their careers, if they are not visible and not seen. what about the general shift and how companies compensate employees working from home? professor bloom: this adds more heat than light in the sense that it is already in the media and people are obsessed with this, but it is not a big issue in practice and the reason is that very few employees are going to be remote five days a week.

i know right now, most people are remote five days a week. but i talk to companies that almost none of them want that to remain indefinitely. it may be possible for some employees, but the vast majority of us are going to be in three days a week, not five days a week. as soon as you realize that, it is not really possible to move to alabama or miami that alabama -- alabama or wyoming or alaska. work and 3 americans million is a lot in number but not a lot in quantity. i don't think most firms, i would not spend much ceo or management time working on this. i would go with the three days in and today's out at the office and working from home. is ane: nicholas bloom professor of economics at stanford university who focuses a lot on management rectus is and is homed in on the work at

home trend and done research on whether that will continue. we will continue the conversation about the work from home trend and talk about the effect on the commercial real estate market. a lot of executives are rethinking their real estate needs. our guest joins us in a moment to talk about what is going on. this is bloomberg. ♪

♪ romaine: today, we are focused on that work from home trend. we talk about how this has reshaped to the economy and you have gigantic office buildings that are basically empty, and companies are rethinking, do we need all this office space? joe: exactly.

one company's income is another company's cost. companies are identifying opportunities to cut costs on office space and do stuff like that. but of course, that means that for those who rent out office space, potentially challenging conditions going forward. insight iswith more our guest. it feltapril, may, absolutely catastrophic. we were talking about commercial real estate assets, there was no way to make a mark because it wasn't even happening, nothing was moving. iswe close out the year, there a greater sense of where marks are on commercial real estate assets in the city center? or do we still need time to appreciate how things are going to shake out? >> joe, we need a couple more months to see how this is going to shake out. because the biggest variable on

how the workforce is going to come out is the vaccine, that we still haven't had a widespread vaccine. we won't know what percentage of the workforce goes back full-time, what percentage goes back on a hybrid schedule, and which positions are going to be promoted. we are in a holding pattern until that happens. pierre, the fallout, i'm in new york city and you walk around the city and see not only office buildings, but retail spaces and restaurant spaces are empty now. let's assume we get to a stage in the next year or so people are back to their normal, day-to-day lives. what type of shape our commercial landlords and owners in right now, and are they going to be able to survive if this carries on for another year? pierre: we were on the show a year ago talking about the resale market and how it was struggling then. the pandemic is not helping that tissue.

and the problem will grow to be encountering is that, for how zerocan landlords sustain cash flow coming from those retail spaces? the one positive note that could come out of his dad out of this is that it could bring down retail rents significantly, opening up the door for small memo -- small mom-and-pop's to take over retail space from bigger chains. once that happens, we are going to be in a precarious position with respect to landlords carrying debt service with a prolonged. of time and no cash flow. joe: manhattan has gone through periods of the vacancies, and even during good economic times, one thing people point out is that while landlords don't want to enter rent concessions, the bank is maybe a high-end you hold out for that,

but are there definitely going to be concessions in a meaningful sense, or will landlords still try to eventually make the bet that tourists all come back, we get normalcy, and they don't want lock in years and years at some market rate? wisdom conventional would lead you to believe conventions are inevitable and they would have to make them. i am a few blocks from you guys and we are at 10% or 20% capacity. probably closer to 10%. how could concessions not be given? interestingly, representing landlords throughout this crisis, i have seen all different reaction taylor:. reactions.different a number of landlords have the position that if you can't pay your rent, leave. perspective, it is mind-boggling. think of the restaurant industry. restaurant owners coming to new

york city in the next 12-24 months, let's start a restaurant in the middle of a pandemic, take on space costing thousands of dollars and told it out into a restaurant. it is very highly unlikely. somehat is a position landlords are taking. but most reasonable ones are working things out with tenants. the most interesting one i have seen is basing the current rent off a percentage of gross receivables that they actually receive the next 12 months. romaine: good to hear some landlords are try to work with their tenants in that sort of way. for those landlords sticking more towards the contract, i am wondering when you talk about debt service, have there been any break given by the banks themselves on some commercial landlords, that maybe will give them the flexibility to work with their tenants? pierre: we are still in a

period of forbearance, to be honest. fromof the suffering is forbearance where i believe they extended freddie mac and fannie mae, so we don't know how that will play out. but eventually, banks will have to come to the table and probably restructure a lot of the commercial debt that is out there in the marketplace. biggestt does the source of potential rethinking of the space itself? sometimes office space gets turned into apartments or apartments get turned into something commercial, restaurant, whatever it is. how much of that do you see, landlords fundamentally rethinking what they can do with their property? pierre: it is in the conversation at the moment, but nobody is taking steps to do it because everyone is hopeful that's because months -- everyone is hopeful that six months from now, we will have a vaccine i get back to normal. many are skeptical that we go back to where we were months

ago. but you are hearing everything, right? most people are realizing they are going to have to re-vin -- re-envision how they utilize their assets. companies are going to consider downsizing real estate holdings and liabilities, and that will have an impact, but the demand or need i don't think is going away, where you see an influx of commercial buildings being turned into apartments. romaine: pr, great to get your thoughts as always. wishing you a happy new year, pierre debbas managing partner er -- partner at romer. i think it is safe to say we are all rooting for the comeback of our cities, new york or anywhere else. joe: i think it is safe to say it is going to come back.

i am a pessimist generally, but in this case, i look around and it feels like a city that doesn't feel dead. romaine: that is all for "what'd you miss?", bloomberg technology coming up next. joe: daybreak australia coming up in australia. have a good evening. ♪

♪ emily: welcome to "bloomberg technology." i'm emily chang in san francisco. over the next half hour we look at our biggest interviews in this unprecedented year. the tech sector seemed to do what it did best, adapt. 2020 themes are all about work from home and play from home. the covid cloud brought the