tv Barrons Roundtable FOX Business June 21, 2020 11:30am-12:01pm EDT
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enemies. i'll be back next week right here on "the wall street journal at large." thank you for joining us, and to all of the fathers occupant there, have a very happy -- out there, have a very happy father's day. ♪ ♪ ♪ jack: welcome to barron's round table where we get behind the headlines, i'm jack otter. we begin with what we think are the three most important things investors should be thinking about right now. promising news for covid-19 treatment after research showed a widely available steroid was effective in reducing death. gilead also working on a treatment. jack howe got an update. tech stocks have powered the market's recent surge, but they're looking pricey. barron's found a few for a reasonable price. and the pandemic-fueled down
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ton and the protests following the killing of george floyd, the economic cost of inequality. on the virtual round table, my colleagues bev leveson, carlton english and jack howe. so an old generic steroid proved to be really beneficial for covid-19 patients, and the market moved higher on that news, jack. this is another reminder that this is something that won't kick into full gear until medical science makes some advances. >> that's exactly right. i've been limbering up my lips to pronounce some long words because i want to tell you the good news about dex methadone and say goods things about remdesivir. we started with week with the fda revoking the authorization for the chloroquine and hydroxychloroquine. but a day later we got results from a trial in england, and this is aster oiled,
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dexamethasone, and it was proven to reduce risk. and that brings us to three in terms of proven treatments for covid-19 right now. the others are convalescent plasma where you use the blood of patients who have recovered from covid-19, and you've got the gilead drug remdesivir. i spoke with the ceo there, dan o'day, for my barron's street wise podcast this past week, and he says they're looking at ways to expand the usefulness of that drug. let's listen to a clip. >> doing formulation work to see if we can, instead of this being given as an intravenous injection which it is today, we believe we may be able to provide this inhaled version which would be less invasive, of course. >> keep in mind we've only been talking about drugs that companies already had before the pandemic that they've repurposed. we saw the first drug that was specifically made for covid-199 go into trials this month -- 19.
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that's from regeneral ron. we should hear results in september. so the point is there are more and better treatment options becoming available. jack: and this is so important because we've seen now even while new york is getting better, a lot of other states' cases are spiking, so we've got to make some progress on the medical front. ben, i want to turn to you about tech stocks which, of course, have been what's powering this market higher for a long time. and to the extent that they've gotten pretty pricey. so barron's took a look at tech stocks that have good prospects but aren't quite as expensive. >> that's right. my colleague, erin, took a look at -- eric, took a look at it can stocks, and i didn't realize the expensive tech stocks had gotten even more expensive. the ones that had started the year with 10 or higher have gained 35%. one that he liked was intel. it's been having some trouble with some competition from amd and also apple deciding to use some of its own chips in it
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computers. but the stock is cheap enough at around 3.5 times sales and still such a big chip provider that it looks really interesting. others like western digital also look pretty good. but there's still opportunity out there in tech, and i think especially as the economy keeps getting better and things continue to reopen, you're going to see some of these lower priced tech stocks do a whole lot better. jack: as we're going to hear from hugh delaura, tech is clearly driving this economy. i want to turn to a different topic. one of the interesting things about covid-19 is that it has accelerated all sorts of things that were already in place pre-covid. we know about amazon and e-commerce and all that, but another one is inequality. and, carlton, the barron's cover story this week looks at why inequality is a problem for the market and the economy if it persists. >> absolutely. so a fantastic piece this week,
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everyone should realize it. we've heard a lot of different letters that this recovery could wake -- the one we should pay attention to is k. the top 10% of employees who -- 84 percent of the stock market, they're invested in the stock market. but we're seeing this continued downward a trajectory for lower income workers e, those who have been laid off or working in industries that aren't expected to recover as quickly. and we also have to note that 40% of the people who lost their jobs in this cycle were earning less than $40,000 a year. even before this crisis, we saw that the top 1% of the economy accounted for about 20% of total income while the bottom 50% accounted for only 13% of income. jack: carlton, there are a lot of reasons to worry about that, but can you explain why this will weigh on markets and the broader economy in the future? >> absolutely. so what we know is in the u.s. we are actually lagging other
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developed nations in terms of having a strong middle class. less than 50% of the population is considered middle class or better. and what that means is lost opportunity. so every incremental bit of income has a multiplier effect for lower income people. they put it into the economy right away in terms of consumption, or longer term investments in health and education, it's things like that that really grow the economy long term and, of course, would have benefits to growing earnings as well. jack: how long ago henry ford explained that if his employees weren't paid enough to afford cars, that wasn't going to be good enough for his business. thanks a lot for explaining this, carlton. coming up, how smart devices and the internet of things is expanding to e-commerce and more. honeywell's hugh delaura is next. ♪ ♪ (vo) at audi, we design cars that exhilarate with versatility,
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♪ jack: you may know honeywell from the old thermostat on the wall, but the company sold off that business. now it's becoming a soft ware firm. joining me now is coup that lara, ceo of honeywell connected enterprises. queue da lara, thanks so much for joining us. can you explain what your division does? >> well, the division that i lead is actually a brain child of our ceo, and its mission is really to do two things. one is to build a recurring software business that will be consequential to honeywell, and the second is to help the rest of the company become a software industrial meaning that every one of our core businesses -- we can't imagine releasing new products that do not have sensors or software in it.
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jack: can you explain, my colleagues are wondering when we can all go back in the office, when it'll be safe, when we can do so and not put ourselves at health risks. you've got tom procedures and -- some procedures that will make it safer. can you explain that? >> yes. well, we're no stranger to the industrial side. you're worried about things falling on your head and falling off high areas, safety is something we know very well. so the techniques that we've seen in manufacturing and the industrial area can be applied to the office as well, and those are things like personal protective equipment, masks. we're equipping our sellers with safety i kits so that when they travel to see customers, they're connected. we're looking at things like uv sterilization and air purification, vent thatlation, things we're doing in hospitals today that have an application in the office. we're using analytics to people so that people have a sense of confidence because how do you know if the air quality's good. and then we're also applying
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software into our return to work application that will help facilitate the check-in process and securing consent from employees. again, all of this is to help secure confidence for people coming back to work. jack: gotcha. another thing i hope to do one of these days is get back on on airplane. you guys are working on some interesting stuff where maybe there's less chance of a pilot will have to say, oh, gosh, during the preflight check we found we have a maintenance issue, you're going to have to sit in the airport for another two hours. can you explain how you're solving for that? >> oh. we are using analytics to actually help us predict, and if we can do that, we can help the air laurens -- airlines take those parking lots occupant of commission and help stop the scenario you're talking about, which is delays and cancellations. we're also actually using analytics to optimize the flight planning so we can optimize takeoff and landings, help the airlines turn around the
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aircraft faster around the gate, all those things will help you to get from a to b more safely, faster and actually consume less fuel. jack: and i guess since you know that the plane will need a part at a certain time, you can actually route the part to the place where the plane will be when it needs it, which is a pretty neat -- >> oh, yes. i think there's a lot of supply chain improvement we can make as a consequence of having those insights. jack: so all of this means that you will be billing your compliants on a recurring revenue basically -- clients. and that seems to be the holy grail these days for investors. they love these companies that are b to b and have recurring revenue streams. can you explain how honeywell is moving, i realize you're still selling stuff, but how you're also moving to that recurring revenue basis? >> well, it starts with value to the customer. when we release a new product, particularly software or software-enhanced solutions, it's all about selling to the
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customer. they have to get a benefit from it. what we do is we tie the way we price and our billing to that value. then after that what we have to focus on is delivering the value, and then the economics will take care of itself. jack: gotcha. i want to get some insight for investors more broadly about the technology industry. from where you sit, you have a lot of insights into what the current trends are, and i think it's always interesting for investors to figure out what it is maybe the market hasn't seen yet that you see. can you shower some ideas with us? >> yes. well, there's two ideas, jack, for you. one is we all know that we can code on a computer, but few realize that we can actually code physical things. that's the power of the internet of things. and the reason for that is chips are gotting a lot cheaper. -- getting a lot cheaper. your toaster has a computer in it. so if things have chips in them, then we can connect them and program them. but the surprising thing is by
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programming them, we can also control them. so we have an application, for example, that can optimize the climate within a building, as an example, but also optimize your energy consumption at the same time by making automatic microadjustments. so we call this control by code. and it's not just getting insight, it's actually driving the control it. the second, the second idea that i'd offer up to you is crypto. now, cryptois is interesting because it allows you to have ownership over your data, your identity. and bitcoin is the first manifestation of that. you have control over your money because you don't need a third party, tops-down entity to give you that ownership. so the plethora of services and products that will come from the ability to program like that, i think, is a very exciting space to watch. jack: that is interesting. i guess you're referring to a bank by a third party entity, but i will say that if i have to
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reboot my toaster over and over again, i'm going to give you a call and have you fix it for me. thanks very much, que dallara. >> thank you. jack: coming up, a surprisingly strong report on retail sales this week a market, pert join withs the panel, that d expert joins the panel. that's next. i'm a performer. -always have been. -and always will be. never letting anything get in my way. not the doubts, distractions, or voice in my head. and certainly not arthritis. new voltaren provides powerful arthritis pain relief to help me keep moving. and it can help you too. feel the joy of movement
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yields are at all-time lows. i want to hear where you think both of those markets go, but first, can you help us make sense of the news, this week's blowout retail sales number? >> right. well, look, nub of us who were in our cabin were able to go out to do shopping, and many of those people who could work if home continued to get paychecks but all they could really spend was what they could buy in the grocery stores or have delivered to their front door. those who, unfortunately, lost their jobs, many of them got some very big government benefits. but thaw, too, couldn't spend much money, so the savings rate soared in april, a huge fuel of cash built up in april, and we saw quite a bit being spent in may. i think we'll see more spent in june and july. that'll help revi the economy. jack: let's look at the stock market. obviously, we saw this massive surge, and so we're wondering is this just a rational response,
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because we're going to come out of this, and the market as it does is pricing in future earnings, or have investors lost their minds? [laughter] >> well, there's a little bit of everything going on here. there's a little bit of questioning about whether this is irrational exuberance. but the reality is we don't really have a lockdown recession, we had a recovery coming out of that, is and it looks as though like that recession actually lasted only two months, march and april, and already may and june data are starting to show that we're recovering. it could be a v-shaped recovery for the next few months, and then maybe it will be the widely heralded nike swoosh, you know? be down, be up, kind of swoosh for a while, and maybe we don't get back until maybe late 2022 to where we were in 2019. i be -- but i think the market's factoring in the recovery, factoring in a lot of companies actually were able to benefit from some of the adversities
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that we went through. technology companies, for example. and i think the market is just looking forward. and on top of that, less liquidity piled up because we've had the fed providing lots of liquidity. the treasury cutting the taxes and providing checks, and so you put that all together, a trillion here, a there, and you get what really feel like a mount-up since march 23rd. >> ed, carlton english here. just curious, is there anything that's worrying you that could prevent that nike swoosh recovery that you just mentioned? >> well, i'm no virologist, i'm not an epidemiologist. i, obviously, like everybody else, i'm concerned that if we're not careful, if we don't wear masks in public places, if we don't practice some social distancing, that we will get hot spots and recurrences here. and we're not even talking about a second wave. we're still in the first wave of this thing.
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i i hope, i think there's some reason for hope that vaccines will be coming in the fall or early next year, and meanwhile we think they'll come across some treatments and cures that reduce the likelihood of dying from this, which is extreme hi important, obviously. -- extremely important, obviously. that's the biggest nightmare from this virus. so i think the risk is still on the health care, on the health side, the health care issues relate to the virus. but short of that, i don't think we're going to lock down the economy again. >> the bank sector took a hit today when there was some comments from a fed member that maybe the stress test will be a little tougher, that dividends might be under a little more scrutiny than before. just wonder what you think. >> well, the banks have responded is very quickly to this great virus crisis, locked down the recession. they've provisioned for loan losses to the tune of several
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billion dollars. so they're, they're anticipating that they're going to have to take some charge offs. so far it's actually been fairly tame, and i don't think we're going to get the kind of charge-offs that we had back in 2008 because the government has just intervened too rapidly here compared to what they did in 2008 with all sorts of lending programs, liquidity facilities. i'm not sure the banks are going to be that stressed in terms of loan losses. but the government, i think, is going to put some pressure on them to be a little bit more circumspect about paying dividends during tough times like this. so i think some of them are going to relent and cut back their dividend payouts, and that's what the market discount today. jack: thank you so much, dr. yardenu. next time you come on, we've got to ask you about what movies to stream, but we're out of time. [laughter] up next, we give our investment ideas for the coming
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♪ ♪ jack: jack, on friday amc theaters did a sudden act face and deciding that a maybe cramming a couple hundred people into a darkroom with no masks wasn't actually a great business plan. >> look, the good news is they're going to open the theaters, right? next month. and i'm rooting for them. i like to go to the movies. they say masks will now be mandatory. i want to be safe, i want to keep others safe, so i will go to the movies, i wear my mask. i'm just saying i also view the movies as a good reason to sit in the dark for two hours and cram popcorn and junior mints into my mouth as fast as i possibly can. and if we've got 3m watching or
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elon musk or america's engineers, there's got to be a way that we can put a safe and effective popcorn hatch or maybe candy dispenser in one of these. we've tackled bigger problems than this before, america, let's figure out a way that i can overeat snacks safely. jack: mike bloomberg could figure out how to get you a soda. carlton, you're looking look atl patch. >> yeah, marathon petroleum has been on barron's radar for some time. we saw the reopening play, also news it's looking to sell off its speedsway division, also talking about doing a pinoff. either way, we could see that stock going to 50 at some point. jack: that's a refiner, not quite reliant on oil prices. ben, what do you have for us? >> biotech stocks, they've been sort of stuck in place for the last six weeks after having a really nice rally off the low in march. they are looking like they're setting up for another leg higher. i think they look great.
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jack: had a nice pop on friday. to read more, check out this week's edition at barron's.com. don't forget to follow us on twitter, that is all for us. wear that a mask, see you next wear that a mask, see you next week... male announcer: up next on "leading the way." dr. michael youssef: there is nothing that weakens the testimony of believers more than their inability to resolve their own disputes biblically. if we believers are going to reign and rule with christ, surely we can rule ourselves. when you take your brother or sister to court, you lose spiritually. i would rather give up some of my rights, even when i'm clearly in the right. ♪
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