fortune--2020-10-04--Housing flips the recession script: Prices will keep rising for up to a year, but here’s how the par

Housing flips the recession script: Prices will keep rising for up to a year, but here’s how the party will end

The single most extraordinary feature of the COVID-19 economy isn’t the stock market’s record-setting spree. It’s the phenomenal, unforeseen boom in the most fundamental, economically sensitive area of all, the sector you’d think would rank among the hardest hit from the worst recession in decades: housing. According to a top industry expert, the current rampage in prices will keep running for months to come, even as the extraordinary sales sprint over the past few months slows to a more normal pace.
“These increases are unsustainable, but prices will keep rising in double digits for another six months to a year,” says Ed Pinto, director of the American Enterprise Institute (AEI) Housing Center and the former chief credit officer for Fannie Mae. “America is running out of inventory. Buyers can’t buy houses that aren’t for sale, so they’re bidding up the prices of the relatively few on the market. That means price increases will keep racing until more inventory comes on. And new supply will come on slowly.”
For Pinto, three factors are responsible for the dearth of homes for sale. The first is the lag time required for homebuilders to bring on new supply, following the slowdown from March through May. Second, baby boomers are staying put in their colonials and ranches as their kids return home, curbing the traditional flow from retirees’ putting their manses on the market. The third restraint: widespread forbearance from banks and federal agencies that’s enabling super-stressed homeowners, who would otherwise be forced to sell, to hold on for now.
But Pinto predicts that when lenders end their grace periods, a wave of foreclosures will hit the market and push down prices in the lower tiers. The most vulnerable group, he warns, are low-income Americans––and especially minorities––who bought using FHA mortgages in the past couple of years. “We’re seeing a huge overhang of FHA delinquencies that haven’t yet translated into foreclosures,” says Pinto. “But in six to 12 months, we’ll see a flood of people lose their homes. That will be the main force causing a sharp correction in prices in the lower levels.”
Prices are rising faster than pre-pandemic
In August, home prices nationwide rose 8%, according to a survey from the AEI Housing Center, beating the 5.1% year-over-year increase posted in 2019’s final summer month. Believe it or not, the trend is now speeding into double digits, where Pinto expects the rate of appreciation to remain: For the week ended Sept. 11, prices nationwide jumped 12.5%.
Of course, it’s the confluence of hordes of families shopping for homes and the lack of for-sale signs in America’s neighborhoods that are driving prices at that spectacular pace. Bargain home loans offering extra-low monthly payments are exerting a powerful pull on buyers. Since mid-2019, the rate on the 30-year mortgage has dropped steadily, from 4% to today’s 2.94%, an all-time low. Millennials are moving into their prime years for home ownership at an average age of 30 to 31. A relatively small proportion of young middle- and upper-middle-class couples on track to buy houses have lost their jobs. Now, the COVID-19 economy is motivating many young couples to move out of cities and do something they’d never even thought of––buy a home in the suburbs––or do it a lot sooner than they’d originally planned.
So far this year, signed contracts are running 27.5% above the level of 2019, according to AEI, which measures the volume of buyers who’ve just obtained loans, data that’s a proxy for pending sales. (Because they’re based on pending sales, the AEI numbers reflect closings that will happen in 30 to 60 days. Hence, they anticipate the widely reported monthly price data from final sales.)
That average 27.5% is depressed by the steep drop in March and April. From May through August, new contracts exceeded the 2019 count by over 50%. But since the start of September, the numbers are dropping again. “We’re seeing a decline in activity, although sales will remain above last year’s levels,” says Pinto.
The lever that’s now taking charge as demand recedes is the ongoing big shrink in inventory.
An inventory shortage
The severe inventory shortage plagues both the existing and new home markets. Each is facing special barriers that will continue to delay the jump in new listings that usually arises from a sustained period of strong price increases, when the prospect of pocketing big gains entices more and more owners to place properties on the market. Pinto notes that the inventory in the existing market that furnishes 90% of all sales is at an extraordinarily slender 3.0 months. That’s the time it would take at today’s strong pace of buying to sell all the homes on the market. Today’s three-month supply is down from an already tight four months in August of last year. “That’s a big move,” says Pinto. “Scarce inventory has been a problem for many years; it’s just gotten much worse recently.” A balanced market, he notes, has six months of inventory in existing homes.
“It has gotten so low because buyers robbed a couple of months from future inventory when very few homeowners were putting their houses up for sale, and hence adding to the supply,” says Pinto. “The big price increases did little to increase the number of houses for sale, so the inventory shrunk.” He notes that shoppers managed to find some relief by going door-to-door and asking owners who hadn’t listed their homes if they’d consider selling. “That shadow supply added a little to inventory, but not much,” he says. “Nor did many owners who were renting out their houses decide to put them on the market.”
The pattern is similar for new homes. In 2019, the inventory in the category most crucial to holding prices in check stood at around 5.7 months. This year, it has dwindled to just 3.4. The surge in sales started in June. By August, purchases of newly built homes jumped to 83,000 homes, from 57,000 the year before, an almost 50% increase. “That’s huge. We stole from the future in both existing and new home markets,” says Pinto. He adds that builders have some flexibility, since they can speed up construction in ready-to-go lots where all the roads and utilities were installed. But that safety valve didn’t release enough pressure to prevent inventories from dropping by one-third as sales rose rapidly.
Price spikes
Pinto points out that new supply can only come from three sources: lots of new building, a big increase in the ranks of baby boomers who put their homes on the market, or a surge in foreclosures.
The flow of new houses springing up in America’s subdivisions will be slow for some time. In that sector, America can be roughly divided into two domains: what we’ll call the “zoned world” and the “spacious Sunbelt.” The former are mainly Northeastern and Pacific Coast metros where local laws make it extremely time-consuming and expensive to obtain approvals for new construction. So when demand surges in times of strong income or population growth, buyers find few if any new homes to buy. Instead, they bid up the prices of existing houses. That gridlock leads to extremely expensive housing overall and huge price spikes in strong markets such as today’s.
Pinto notes that it takes around eight years for a builder to go from buying land to delivering houses in Los Angeles, and even in rural Riverside and San Bernardino counties, the process fills three years. “Look what’s happening in Connecticut,” he says. “It’s having a boom, and the cupboard for existing homes is now bare. It might take two or three years for any new construction to come on.”
So in the zoned world, new construction will play little part in curbing today’s soaring prices for the foreseeable future.
In the “spacious Sunbelt,” fresh supply will come on sooner, but relief is still far enough away that prices should keep galloping for months to come. “We’re seeing more building permits in three major Texas markets where [housing] stocks are also depleted: Houston, Dallas, and Austin. Metros in the Southeast such as Raleigh and Charlotte are also seeing more construction,” says Pinto. Even in North Carolina, he adds, it takes builders a year to buy a tract of land, get all the entitlements in place, add roads and sewers, then put up the homes. Pinto believes that new building should start curbing price increases in the most active cities such as Houston and Dallas within six to nine months, while it will take a year more in most Florida metros.
Seniors are downsizing at a far slower rate than in the past, further constraining supply. “We were predicting that baby boomers, like past generations at their age, would move into apartments, condos, or to their second homes en masse,” says Pinto. That isn’t happening. “A main reason they aren’t moving is that their adult children move back in and work from the home they grew up in,” says Pinto. The boomers not only enjoy having their nests full again, they also appreciate lounging in the backyard a lot more than before the pandemic, and are reluctant to sacrifice that newly prized outdoor space for the confines of an apartment. “That’s why we’re seeing so much remodeling, while little inventory is getting freed up,” says Pinto. “What’s the chance that folks who own a nice single-family home would want to move to more crowded housing—to a high-rise condo or retirement community?”
Looming foreclosures
Pinto predicts that the strongest impetus for new supply will come from foreclosures. They’ll also provide the principal force in taming prices. “It isn’t the older, repeat buyers who are in trouble,” he says. “It’s lower-income people who bought at high prices in the last one to three years and are heavily leveraged.” These are families typically earning between $40,000 and $70,000, who work in higher-end retail jobs, in construction, or in modestly paying positions in health care, and their unemployment rate in the pandemic far exceeds the national average of 8.4%. So far, those lost paychecks have brought relatively few foreclosures, since banks and government bodies that guaranteed the loans have been granting forbearance that, for now, enables folks to keep their homes even if they can’t make payments.
It’s unclear when lenders will end the abeyance awarded all of those delinquent mortgages. But the end of forbearance will break the logjam by forcing large numbers of stressed owners to either sell if they can obtain a price exceeding their loan balance, do a “short sale,” or surrender their homes to their banks, which will put the properties back on the market.
The huge buildup in delinquencies foreshadows the flood to come. Most endangered are borrowers that hold loans from the FHA, the agency that guarantees most of the mortgages for lower-income families, and typically allows for low downpayment and credit scores. Of the 7.98 million FHA loans outstanding in August, 1.39 million or 17% were delinquent, meaning more than 60 days past due, and 891,000 or two-thirds of those were classified as “seriously delinquent,” where borrowers typically hadn’t made payments in months, and the chances many of them will catch up look remote.
Overall FHA delinquencies have almost doubled in the past year, yet the foreclosures have barely budged because of the grace periods granted by the lenders. The most vulnerable metro is Atlanta, followed by Houston, Chicago, Washington, D.C., Dallas, and Riverside–San Bernardino. “It will take six to 12 months for the foreclosures to start arriving in large numbers,” says Pinto. “By that time, supply will also be getting a boost in the Sunbelt markets from new construction.” Housing is marching to a different drummer than most of the stricken U.S. economy. It will be the loss of homes by blue-collar Americans that changes the tune.


fortune--2020-10-04--How to fix Silicon Valley

How to fix Silicon Valley

Housing flips the recession script : Prices will keep rising for up to a year , but here ’ s @ @ @ @ @

It was one of big tech’s most ignominious moments. Back in 2015, the search feature of the Google Photos app tagged two Black people as “gorillas,” prompting a toe-curling apology from the tech giant, which blamed machine learning–trained “automatic image labeling.”
While the affair was plainly an unintentional glitch, it was in another sense no mere accident, but a product of an industry dangerously out of touch with its users. From disinformation and voter manipulation to privacy breaches and the new “feudal system” unleashed by the gig economy, tech’s toxic fallout emanates essentially from one source: how tech is built, the way engineering teams work, the bubble a lot of them live in, and the pool from which talent is selected.
It’s usually glossed over that tech engineers tend to be recruited from similar backgrounds. In my own experience, backed by academic research, they are also likely to be introverts who—because of their often narrow training and early experiences—have difficulties seeing the world from others’ perspectives, and end up writing code with little appreciation of its impact on users.
Meanwhile, for all its “woke” ideology, Silicon Valley has always been overwhelmingly male, and white or Asian. In 2019, 92% of Facebook employees, 95% of Google employees, 89% of Microsoft employees, and 84% of Apple employees were white or Asian, according to company data. Women represented 21% of employees at Microsoft, 23% at Facebook and Apple, and 26% at Google.
This entrenched underrepresentation of minorities has often resulted in an absence of diverse thinking. It’s also allowed a number of dangerous stereotypes to take root, including something I call “Steve Jobs Syndrome.” Jobs has been associated with a belief that his undoubted genius excused any kind of behavior, even to the point where many believe a founder actually has to be a jerk to be a genius. Other received wisdom includes “Tech companies are meritocratic,” “There is no bias in code,” “Whatever the problem, the answer is always more tech,” and “Disruption is just another word for innovation.” (Spoiler on that last one: It isn’t.)
Now, it must be said that many of these convictions have also helped spur a fast-moving, solution-oriented culture where people do not balk at difficult challenges, enabling small startups to take on the biggest incumbents. Yet at a macro level, it impacts the world at large not by solving society’s problems, but by creating new ones.
So what can be done?
Unsurprisingly, it starts with increasing diversity. Gender, race, and age aside, I’ve long argued that the tech giants should also hire people with humanities backgrounds—individuals as familiar with Voltaire and Paine as with Java and Python—and create special career pathways for them in product and engineering. This will bring in more diverse candidates with a wide variety of experience, not only resulting in smarter teams (according to research by McKinsey), but ones with greater emotional intelligence and that are more innovative.
Beyond increasing diversity (necessary, but not enough on its own), we need to work on instilling a more empathetic approach within engineering teams. The finest engineers I’ve worked with have all mastered cognitive empathy (the ability to put yourself in someone else’s shoes, in their case a user’s), and appreciate its pertinence to software development. It starts in undergraduate education, where classes around the ethics of innovation, conscious capitalism, and empathetic tech should be made compulsory for any computer science student.
Sending engineers out of the office to meet users would also help. Engineers, facing relentless deadlines, rarely spend meaningful time with people on the sharp end of their code. Imagine a Facebook engineer being sent to Myanmar to meet genocide victims to understand firsthand how Facebook’s product has been abused. Or consider a Twitter engineer, once a week for a year, sitting across from women who’ve faced rape and death threats on the platform. Odds are that they would return to the office chastened, and pull out all the stops to design more empathetic tech and fix these issues.
It’s also crucial that empathy is embedded within the product and feature development process itself. One way of achieving this would be to handpick a few experienced engineers, chosen for their ability to spot potentially negative impacts on users and wider society, to challenge product and engineering teams on that basis throughout the development process.
For the most strategic features, having an “empathy committee,” composed not just of engineering and business people, but also of sociologists, ethicists, and philosophers, would help. I concede that this measure would act as a brake on productivity, but would Google’s gorillas blunder have happened under this sort of scrutiny?
Clearly, none of the above will remedy overnight a situation that has been brewing for decades. But diversity targets and unconscious bias training courses certainly won’t either. And while governments and regulators have much to do to curb big tech’s worst excesses, unless the Valley itself faces up to the fact that it won’t solve its empathy crisis until it rebuilds internally, then the industry’s precipitous fall from grace is only set to continue.
Maelle Gavet is a tech executive, entrepreneur, former COO of Compass, and former executive vice president of global operations at Priceline Group. This commentary is adapted from her new book, Trampled by Unicorns: Big Tech’s Empathy Problem and How to Fix It.


fortune--2020-10-04--Why right now is the time to start aging your wine collection

Between social distancing and more time spent at home these days in the coronavirus age, many people are turning to new hobbies as well as organizing multiple facets of their personal belongings.
For wine novices and self-described oenophiles alike, there could be no better time to start, grow, and improve one’s wine collection. Here is a helpful starter guide with tips from wine distributors, wine directors, sommeliers, and other industry experts on how to nurture your own collection and ensure your bottles age safely well beyond 2020.
“A wine fridge will also have racks that are sized for bottles to lay on their side, which is better than standing upright in order to keep the cork in contact with the wine to stop it from drying out,” says Andrea Morris, wine director at New York’s Union Square Café. Getty Images
Safe storage
Ideally, for long-term wine storage, wine should be kept at around 55 degrees Fahrenheit with 50% to 80% humidity, and in a dark space.
It all depends on the storage horizon of the wine, says Lauren McPhate director of sales at Tribeca Wine Merchants in New York City.
“If you’ll be drinking it within the next few months, a regular refrigerator is just fine,” says McPhate. “The key thing with any wine storage is a consistent temperature. You want to avoid fluctuations, both hot or cold, and too much movement in the wine. So, if you’re planning on storing wines for a year or more, it’s best to put them in a designated location with consistent temperature, such as a deep basement or wine fridge, where they’re out of the way.”
While aging in a cellar is best, for most that is unattainable. Storing wines in a refrigerator specifically designed for wine works just as well. Sara Maule, a specialist in Italian fine wines with wine wholesaler and importer Frederick Wildman, explains a wine fridge is best because it keeps the temperature constant, keeps the bottles out of direct light, and keeps them horizontal.
If a wine fridge is not an option, keep the wines in as cool and as dark of a place as possible. Sometimes that means the back of a closet or pantry. Humidity is not as critical as light; heat (including from window exposure) can “cook,” or maderize wine, muting the fruit aromas.
For white and sparkling wines, a regular home refrigerator often works well. But for reds—and bottles you want to preserve in general—you need to be cautious about storing these in a regular fridge.
“A wine fridge and a regular household fridge are two very different devices made to serve their own purpose only,” says Jean Frederic Hugel
the 13th-generation owner of Famille Hugel, a winery in France’s Alsace region. “A fridge is supposed to keep perishables; even the mildest setting is way too cold for wine aging or even wine servicing, except for whites, of course. In a fridge, your wine will simply not age.”
Regular household fridges are designed for general storage purposes, says Valentina Abbona, owner of the Marchesi di Barolo winery in Piedmont, Italy, and the typical working temperature is around 39 degrees Fahrenheit, or four degrees Celsius, which is quite low for wine storage. Specific wine fridges usually have a working temperature that can be set at 57 to 60 degrees Fahrenheit, or 14 to 16 degrees Celsius, which is very close to that of underground cellars.
Another reason to invest in the wine fridge is the issue of vibration, says Hak Soo Kim, assistant wine director at Chef Thomas Keller’s Per Se restaurant in midtown Manhattan. “Household refrigerators use the motor to cool the unit. As for wine, you definitely do not want the motor to constantly stir up the wine. I believe this is why wine fridges tend to be expensive.” Kim suggests looking at the secondary market for a starter wine fridge, adding he bought a used one a few years ago to hold part of his home collection encompassing more than 60 bottles.
“Specific wine fridges normally have cooling engines generating very little vibrations, which is not always the case when referring to multi-purpose fridges,” Abbona explains. “Moreover, dedicated fridges have a large glass door which can be chosen as UV-proof, to better preserve your wines from the outside lighting.”
The absolute worst places to store your wine at home: Near the oven, the stove, the fireplace, or near a window. “Wines don’t like the light or temperatures shocks—never keep the wines next to where you are cooking,” Maule stresses.
Maule says she has approximately 80 bottles of wine within her home, storing part of them in a wine fridge, and others in a cabinet in the living room. “And I currently have a bottle of Hofstatter Pinot Bianco Bartenhau in my fridge as I’m planning to drink it soon at a dinner with my dearest friends.”
Abbona’s personal cellar is located in her basement, where the temperature is constant all year round between 60 and 68 degrees Fahrenheit, or 16 and 20 degrees Celsius. She notes the humidity is constantly around 50%, not very high, which is why she keeps the bottles lying down.
If you’re really short on space, or you want to keep your wine somewhere else for safe keeping, there are local services available around the country that will store and organize your wine collection off-site and then deliver them to when you would like a particular bottle.
You can do better than this. Getty Images
Which wines should you age?
The simplest way to tell if the wine is a good candidate for long aging is price. For example, if you are buying a $100 bottle of red wine from Burgundy, more likely than not, it will have more ageability than a random $25 bottle.
The second attribute to consider is the quality level. The higher the classification of the wine is, the greater the aging potential.
Look for top vintages to age and put them away for many years. For example, French winemaker Pol Roger only releases their vintage Champagne in the best years for harvest in the eponymous region. You can put those away and age them even longer, and the bubbles will become finer and aromas more complex.
Next, there are the four qualities that help in aging a wine successfully: residual sugar, alcohol, acidity, and high tannin levels—all four of which are natural preservatives. Vintage Port, for example, is high in all four, which is why it is so long lived.
“All of them must be balanced in a wine. This is the most important thing to know,” Maule notes. “None of them should prevail on the other to create the perfect palate mix.”
Acidity is important to keep an older wine tasting fresh, says Andrea Morris, wine director of Union Square Café in New York City. But alcohol can be a double-edged sword when it comes to aging.
“As the fruit flavors fall back as a wine ages, high alcohol can start to taste sharp and out of balance,” Morris explains. A wine with residual sugar (sugar that’s still present after fermentation has stopped) ages. The sugar doesn’t decrease, but the sweetness becomes less obvious, especially as the fruit flavors that magnify sweetness fade with age. This is why older Kabinett and Spatlese Rieslings don’t taste as sweet as their younger counterparts, she adds.
Tannin softens with age, meaning that the texture and finish of the wine feels less grippy and more silky. “The more tannic the wine is when young, the longer this process takes, which is why Barolo and Bordeaux can age for so long,” Morris says. “As the tannins soften the wine will feel lighter in body, so a 20-year-old Barolo will feel less intense than one that’s five years old. This is why it is traditional to drink an older wine before a younger one if you’re enjoying a progression of wines.”
Residual sugar is found mainly in sweet young wines (such as Moscato d’Asti DOCG) or passito wines (wines made from raisins), which usually can be stored at a lower temperature (12 degrees Celsius) to better preserve their fruity aromas.
High-tannin levels, often matched by a higher ABV, are more typical of aged red wines, such as a Barolo. In this case, a slightly higher storage temperature (16 degrees Celsius) could better match the characteristics of the wine.
“High tannins, high acid, and high residual sugar wines have to be aged for a long time because you want to soften these edges,” Hugel says. “Acidity and tannins will soften up, and sugar will integrate in the end bring more drinkability to the wine.”
Hugel suggests there is one more critical aspect to determining which wines to age: how concentrated the wine is. “This generally means wines that show all of the above: high tannins in the case of reds, high alcohol, and/or high residual sugar and high acidity. High concentration wines are generally grown with low yields (the quantity of wine produced from a single vine) and longer hanging time on the vine, which means the juice will be more concentrated.”
Finally, when in doubt, ask the purveyor at your local wine shop or refer to the producer’s website on ageability.
“Wine is subject to a constant and steady evolution,” says Martin Foradori, owner of Hofstätter, a producer of Pinot Noir and Gewürztraminer wines in northern Italy. “Proper wine storage and the chance to develop an idea of the right time frame to open is the squaring of the circle. It is true that the four factors mentioned above play an important role in the chemistry of wine and its aging potential. But be aware: there is far more to consider than just trusting numbers. Talk to the grower about the terroir and microclimate of his vineyards and about the special attributes of the specific vintage.”


fortune--2020-10-05--When is the best time to book holiday travel this year—if at all?

Our mission to help you navigate the new normal is fueled by subscribers. To enjoy unlimited access to our journalism, subscribe today.
Many people are looking to reunite with their loved ones for the holidays—perhaps for the first time this year given COVID-19. And with the airlines in dire straits, there’s a common assumption that booking travel in general this season will be cheaper because of the pandemic. But this is not necessarily true.
Pre-pandemic, the best time to book holiday travel was typically pegged at around three to six weeks in advance. But this year—as if you needed to hear or read this one more time—everything is different.
Jeremy Prout, director of security solutions at International SOS, a global medical and travel services firm, recommends booking now (or by mid-October at the latest) for flights and hotel accommodations during the month of December 2020. And flight and hotel availability could be limited owing to either border restrictions or economic impact—so either way you want to ensure your reservation.
“There are a lot more risks and protocols to take into consideration, and that’s why planning far in advance of your expected departure is the safest bet,” says Prout. “Knowing these guidelines can change at the drop of the dime, it’s also important to continuously monitor those health guidelines on a regular basis and right before you leave for your trip, just in case anything changes.”
Even for domestic travel, many U.S. states have issued mandatory quarantines so it’s important to brace for the possibility of a quarantine if you are going to travel to another state, notes Brian Kelly, founder of the popular U.S.-based travel site The Points Guy.
“If you’re planning to fly home for the holidays, or are still hoping to take your annual holiday season vacation, know that you’ll need to do way more research than you normally would—and take more risks,” Kelly says.
Still, while 2020 is fraught with new challenges and decisions when it comes to travel, Kelly says some deals have started to return, so now might be a great time to use points and miles.
“There are definitely deals out there right now, and if you decide to travel for the holidays, it may cost fewer miles than it has over the past few years,” Kelly says. “For example, if you want to fly from Newark to Miami for Thanksgiving, it’ll cost you just 5,000 United miles to fly the Thursday before Thanksgiving or just 6,000 miles to fly on the Saturday before. Keep in mind that even though there isn’t currently a mandatory quarantine upon arrival in Florida, there will be one coming back to New Jersey. On American [Airlines] through much of November and December, you can fly from Houston to Jackson Hole [Wyo.] for just 10,000 miles each way.”
A good rule of thumb, according to Kelly, is that traveling on the holiday itself—such as Thanksgiving, Christmas, or New Year’s Day—will usually get you the cheapest rate, and that’s generally true every year.
However, keep in mind that while many locations are reopening, COVID-19 is still a huge threat on a domestic and international level, so part of travel preparation should include doing extensive research on health guidelines at the destination and any other areas you may be stopping by or returning to prior to booking accommodations.
Airlines and hotels have taken extraordinary measures to ensure safety during the pandemic, Kelly says, but he concedes there is still a level of risk, adding it could be good to contact your doctor for additional guidance before departure. “But that being said, I have traveled safely to Croatia, Antigua, and Tahiti and have had incredible trips with minimal crowds,” Kelly notes. “I have had the ability to explore once-crowded and touristy places nearly to myself, so there is a reward for travelers willing to travel this year—and there is a ton of award seat availability.”
“Travelers also need to consider the financial obligations that could arise with an unexpected quarantine [or] border closure, such as lodging and meals, as well as consider what implications on your career could be, should you become sick on the way home from travel and need to quarantine for two weeks at home,” Prout says.
If your flight is canceled by the airline, you are entitled to a full refund, Kelly notes. And if you choose to cancel your flight reservation, and the flight takes off, most major U.S. airlines—including United, American, Delta, Alaska, Hawaii, and Southwest—have permanently dropped change fees for most domestic flights. Still, if you want to make sure you can cancel your trip for any reason, The Points Guy recommends that you purchase “Cancel for Any Reason” insurance. However, as Kelly explains, this is the most expensive option, so be sure to first weigh the option of changing your trip to another date given that there are no longer any change fees.
Travel insurance could be a good idea in some scenarios, but it’s not always a guaranteed safety net. Prout specifically suggests purchasing insurance for any airline travel taken during the pandemic: “With that said, insurance policies vary from company to company, so it’s important to contact flight insurance providers—or if purchasing insurance via the airline, contact the airline—prior to purchase to discuss COVID-19 policies and have a full understanding of what they are able to do or will cover in an instance such as a flight cancellation due to a border closure.”
For travelers who fail to reach out to insurance providers or the airlines before departure to confirm what can be refunded or credited in the case of a COVID-19 related cancellation or border closure, Prout recommends the following three steps. First, if travelers have purchased travel insurance, they should contact their insurance provider to determine next steps. Second, if you purchased your trip on a credit card, you might be able to cancel or get a refund for the tickets purchased through the credit card company. In some cases, the credit card provider could be able to help with even a partial refund, if not a full refund. Third, for business travelers especially, keep your managers (as well as your family) in the loop about your travel plans. If you are short on financial resources at any step of the way, your contacts back home might be able to book return flights on your behalf or provide emergency funds.
Regardless, International SOS continues to advise against nonessential travel during the pandemic. Though Prout says the firm recognizes that with the upcoming holiday season, it’s likely that many people will be looking to travel in order to be with family and friends.
“If you do choose to travel, it’s important to evaluate your own risk level, which you can do by looking at your personal health (age, weight, physical shape, underlying medical conditions, etc.), as well as the risk level of anyone you are going to visit,” Prout says. “For example, if someone you are going to visit is elderly, or has an underlying health condition, they are considered high-risk, and I would strongly advise against traveling to visit them at this time.”
Experts stress continuing to follow CDC guidelines for curbing the spread of COVID-19, including practicing good hygiene, wearing a mask at all times when visiting areas outside your home, and not traveling if you’re feeling sick. (A full list of mitigation measures can be found on the CDC website.)
But in the case you or a traveling partner become sick and test positive for COVID-19 while in transit, you will need to find an isolated location to quarantine for two weeks, as well as enough personal protective equipment (PPE) and medical supplies to sustain yourself.
“Although there are several tracking tools to predict where the next outbreak will occur, the reality is that a COVID-19 outbreak could happen at any time and any place, and local government leaders can impose restrictions and change guidelines quickly,” Prout says. “Travelers need to anticipate those various instances that could happen, should one of the locations they are visiting, traveling through, or even returning home to, have a sudden outbreak.”


fortune--2020-10-05--Has Trump made business better?

Has Trump made business better?

This is the web version of CEO Daily. To get it delivered to your inbox, sign up here.
Good morning.
Has Trump made business better? It’s interesting to consider how events of the last four years have changed the business community. Trump’s positions on issues like climate change, immigration and racial justice have helped force U.S. business leaders to take strong stands on those issues—often at the insistence of their employees.
If Joe Biden wins next month, and especially if the Democrats increase their congressional numbers, the positional dynamics will change. Business could find themselves facing a raft of regulatory proposals on these same issues—many of them ill-conceived—that forces them to shift to a defensive crouch.
But the forces driving the stakeholder capitalism movement go well beyond the vicissitudes of America politics. Colin Mayer captured the most important of those forces with a statistic he cited in his book Prosperity. I’ve quoted it before, but worth repeating:
“Forty years ago, 80% of the market value of US corporations was attributable to tangible assets—plant, machinery, and buildings—as against intangibles—licenses, patents, and research and development. Today, intangibles account for 85% of the market value of U.S. corporations.”
In a world where intellectual property rules, it is human capital—not financial or physical capital – that drives value. And the best companies ignore the social aspirations of their employees only at their peril. Climate change, relatively open labor markets, and racial and social justice will remain high on the agenda of companies that want to attract the best workers.
One basic political principle that I’m hearing more CEOs articulate these days, however, is this: Partisan solutions—whether the Affordable Care Act or the Trump tax cut—are not stable. And business needs certainty if it is going to deal effectively with long-term issues. Regardless of who wins next month, business should use its lobbying might to insist regulatory and tax efforts be bipartisan. Otherwise, the lurch from one political extreme to the other will continue.
More news below. And a new report out this morning shows the dramatic change of fortune that has hit the U.S. oil, gas and chemical industry this year. The report says that 70% of the 107,000 jobs lost by the industry between March and August may not return by the end of 2021. You can find the full report here.
Alan Murray
@alansmurray
alan.murray@fortune.com
TOP NEWS
Trump's condition
How is President Trump doing? Good question. His medical team is talking about him being released from Walter Reed as soon as today, but his need for supplemental oxygen, and the nature of the medication we know he's been given, suggests he has a more severe case of COVID-19 than he's letting on. Trump is also facing criticism for getting into a car with his Secret Service agents for a photo op, despite his potentially deadly infection. Fortune
Cinema closures
Cineworld is temporarily shuttering all of its locations in the U.K. and the U.S. (where it operates Regal Cinemas). The move comes after yet another delay for the release of the new Bond flick, No Time to Die, and the tepid box office receipts for Christopher Nolan's Tenet. Cineworld CEO Mooky Greidinger: "We are like a grocery shop that doesn’t have vegetables, fruit, meat. We cannot operate for a long time without a product." Guardian
Google India
Google's strict enforcement of its 30% commission fee for in-app purchases is being delayed by six months in India, where the company says it needs to be "mindful of local needs and concerns." The enforcement was supposed to kick in at the end of September next year, but now Google will set up "listening sessions" to understand the concerns of Indian startups. Reuters
Rainforest protection
McDonald's, Unilever, Tesco, Nestlé and other food companies operating in the U.K. are lobbying the government to ban produce from all deforested land—not just illegally deforested land, as the government is already planning to target. "Restricting action to illegal deforestation would not achieve halting the loss of natural ecosystems, especially when governments have discretion to decide what is legal," the companies said in a response to a consultation over the proposed law. BBC
AROUND THE WATER COOLER
German exception
Here's the list of countries in the eurozone that are currently enjoying solid economic growth: Germany. Everyone else is still suffering due to a services sector that's being hammered by travel and other coronavirus restrictions. IHS Markit economist Chris Williamson: "The chances of a renewed downturn in the fourth quarter have clearly risen. Much will depend on whether second waves of virus infections can be controlled, and whether social distancing restrictions can therefore be loosened to allow service sector activity to pick up again." Bloomberg
Paris alert
Paris and its surrounding suburbs are being put on "maximum alert" today, due to soaring numbers of coronavirus cases. Bars will need to close tomorrow, but restaurants get to stay open for now. The COVID-19 incidence rate in the French capital is more than 250 infections per 100,000 people. CNBC
BlackRock criticism
Climate activists have criticized BlackRock for backing fewer environmental votes at annual meetings this year than it did last year. That comes despite CEO Larry Fink's dire warnings about the effects of climate change on markets. FollowThis founder Mark van Baal: "As a shareholder, voting and divestment are the only ways to make your request evidently visible, everything else is just talk." Financial Times
Silicon Valley
Big Tech is "dangerously out of touch with its users," writes tech executive Maelle Gavet in a piece for Fortune: "From disinformation and voter manipulation to privacy breaches and the new 'feudal system' unleashed by the gig economy, tech’s toxic fallout emanates essentially from one source: how tech is built, the way engineering teams work, the bubble a lot of them live in, and the pool from which talent is selected." Fortune
This edition of CEO Daily was edited by David Meyer.


fortune--2020-10-05--What is ‘VIP Syndrome’? Trump’s COVID-19 diagnosis underscores challenge of treating famous patients

The team of medical professionals treating U.S. President Donald Trump for COVID-19 are providing him with “all the standard of care and beyond,” Trump’s personal physician, Sean Conley, said on Saturday.
The medical team in charge of Trump’s care have prescribed the President an experimental antibody cocktail, an antiviral drug, and a steroid usually administered to patients with severe cases of COVID-19. The comprehensive nature of Trump’s treatments and the conflicting reports about his health have led medical experts to raise concerns about a new risk: “VIP syndrome.”
“VIP syndrome,” coined in 1964 by Walter Weintraub, a doctor at the University of Maryland School of Medicine, describes a phenomenon in which the medical treatment of a famous, powerful, or influential patient—a very important person, or VIP—faces challenges caused by the person’s fame, power, or influence.
Subscribe to The Capsule , a weekly brief monitoring advances in health care and biopharma, delivered free to your inbox.
Doctors might make decisions they wouldn’t normally make because they are more willing to accede to the famous person’s demands or are more concerned than usual that the VIP avoids feeling pain or recovers quickly.
“[VIP syndrome] often pressures the health care team to bend the rules by which they usually practice medicine,” according to a 2011 paper in the Cleveland Clinic Journal of Medicine.
Complications can arise when doctors embark on medical treatments that diverge from the standard course of care that may turn out to be detrimental to the patient’s health.
“A VIP draws special attention based on his or her status in society and level of importance as perceived by the health care professional providing treatment,” according to a 2007 article in the peer-reviewed medical journal Intensive Care Medicine. “The special handling of the VIP patient…induces the potential for inappropriate and ineffective care.”
To be clear, there is no firm evidence that VIP syndrome is a factor in the President’s care, but experts have offered it as a possible explanation for the mixed messages from Trump’s medical team.
Thomas McGinn, physician-in-chief at Northwell Health in New York, told the New York Times that the range of drugs prescribed to Trump “raises the question: Is he sicker than we’re hearing, or are they being overly aggressive because he is the President, in a way that could be potentially harmful?”
Trump announced his diagnosis early Friday. By the end of the day, he had been airlifted to Walter Reed National Military Medical Center and had received an unauthorized, experimental antibody treatment developed by U.S. biotech firm Regeneron that’s been issued to patients 10 or fewer times.
Conley, Trump’s physician, said at the Saturday press briefing that Trump had started advanced therapies “a little bit earlier than most of the patients we know and follow.”
In addition to the antibody treatment, Trump is on a course of remdesivir, an antiviral drug with emergency use authorization from the U.S. Food and Drug Administration. Trump’s doctors also gave him dexamethasone, a steroid given only to people with severe cases of COVID-19.
Conley also said on Saturday that Trump was “up and active” and his cholesterol and blood pressure levels were “great.” In response, one reporter asked why the medical team had decided to transfer Trump to Walter Reed. “Because he’s the President of the United States,” Conley said.


fortune--2020-10-05--The ‘World’s Best Airport’ issues a new forecast about travel in the COVID era

Not even the “world’s best airport” can escape the fallout of COVID-19.
On Friday, Changi Airport Group—operators of the Changi International Airport in Singapore, known for its indoor waterfall and lush vegetation—announced a 36% decline in profit for the financial year ended March 31 and warned that “the battle with COVID-19 has only just begun.”
According to its report—which covers the year from April 2019 to March 2020—the Singapore airport operator saw revenue increase 2.6% over the previous year to $2.28 billion. But most of those earnings came in the first 10 months of the fiscal year—April to January. The airport’s initial “strong performance,” the group says, was “severely negated by the collapse in air travel” in February and March.
Subscribe to Eastworld for weekly insight on what’s dominating business in Asia, delivered free to your inbox.
On Feb. 1, Singapore became the first country in Southeast Asia to ban arrivals from mainland China, where the coronavirus outbreak was spreading rapidly. The hit to Changi was immediate, since Chinese tourists account for roughly 20% of its arrivals. In March, the government went further and banned all “short term” arrivals—meaning tourists and those in transit couldn’t use Changi Airport.
Passenger numbers at the Asia transit hub plummeted 33% and 71% in February and March, the last two months of the reported year, compared with the year before. In a bid to consolidate operations, the group suspended them at Terminal 2 for 18 months, beginning May 1. Terminal 4 operations have been placed “on standby” until air demand returns—but the future of air travel remains hazy.
In July, Singapore’s Ministry of Transport halted construction at a $10 billion fifth terminal for at least two years, while the government reviews the need for another terminal in a post-pandemic world. (Changi Airport is government-owned; the group manages the airport’s operations as a licensee.)
“We have decided to take a pause for two years. Let us complete this study of the future of aviation,” Transport Minister Khaw Boon Wan said. “The key words there are ‘this study of the future of aviation,’ not just ‘a reassessment of local demand.’”
Changi Airport Group is exposed to the global downturn in aviation in a way besides the obvious. Roughly half the group’s profit decline this year came from a write-down on its assets in Rio de Janeiro’s Tom Jobim Airport. The group has a 51% stake in Tom Jobim, which was performing poorly before Brazil recorded the third-highest number of COVID-19 cases in the world.
The pandemic has only worsened after the fiscal year ended in March, with Singapore imposing mandatory stay-at-home orders in April. So the group predicts revenue will be “materially and adversely impacted” for the year ahead, too, “with travel recovery highly dependent on how countries around the world manage border controls, the relaxation of air travel requirements, and the development of viable medical treatments for the virus,” the group said.
“The future does appear daunting, with the situation showing no signs of abatement.”


fortune--2020-10-05--How COVID-19 will remake the restaurant industry

The restaurant industry, with its razor-thin profit margins, is a brutal one even in the best of times.
Now COVID-19 has weakened its already fragile financial structure. Between March and the end of May, the restaurant sector had already lost $120 billion in sales, according to research from the National Restaurant Association.
But along with exposing some of the sector’s fundamental problems, the havoc coronavirus has wreaked has also highlighted the critical role that restaurants play in fueling other parts of the economy.
“We are banks,” says Momofuku chef and founder David Chang. “We just don’t hold on to the money and collect interest. We are banks that bring it in, and we immediately send it out to a variety of things, from florists to bakers to purveyors to farmers to employees.”
Chang spoke to Fortune for the first episode of Reinvent, a podcast about fighting to thrive in a world turned upside down by the coronavirus. For the inaugural episode, we dug into how COVID is remaking the restaurant industry.
Chang is one of the most influential figures in the food world. In addition to his restaurant empire, which began in 2004 with Momofuku Noodle Bar, Chang also has a podcast, a Netflix series, and a recently published memoir, Eat a Peach.
The pandemic has forced Momofuku to close two of its restaurants, but the company is also turbocharging its five-year plan to have 50% of its revenue come from outside the four walls of its restaurants through efforts like selling Momofuku-branded consumer packaged goods.
Essentially, Chang believes Momofuku can survive as a restaurant company by looking beyond its restaurants. He says the company has always known that it needs to “diversify for bad times.”
“Maybe the country can absorb a million restaurants closing,” he told Fortune. “I don’t know. I don’t know if we can make lemonade out of it. I need to believe that we can.”
Melissa Wilson, a principal at industry consultancy Technomic, shared Chang’s outlook that there will be tough times ahead. “Six months to a year from now, you’re going to see a lot fewer restaurants,” she told Fortune.
She expects restaurants to implement technology like UV portals that “de-germify” you as you walk through the door. And in the back of the house, A.I. could help remotely monitor whether employees are following cleaning protocols.
To hear more from Chang and Wilson on the future of the industry, listen to the episode above.


fortune--2020-10-05--Global stocks, U.S. futures recover on hopes Trump will too

This is the web version of the Bull Sheet, Fortune’s no-BS daily newsletter on the markets. Sign up to receive it in your inbox here.
Good morning. The global markets and U.S. futures are bouncing back on rising optimism that President Trump will be discharged from the hospital as soon as today. Investors are downplaying for now the confusing messages coming from Trump’s medical team on his condition.
Meanwhile, the global pandemic picture continues to worsen as cases top 35 million, and further restrictions are mulled, from Paris to New York.
Let’s see where investors are putting their money.
Markets update
Asia
The major Asia indexes are mostly higher in afternoon trading, with Hong Kong’s Hang Seng up 1.3% .
are mostly higher in afternoon trading, with up . Shares of HSBC were up as much as 5% in Hong Kong this morning. Traders are warning of volatile spikes as put/call contracts soar to an 11-year high for the embattled lender.
in Hong Kong this morning. Traders are warning of volatile spikes as soar to an 11-year high for the embattled lender. It’s been ten months since the U.S. and China signed the “Phase One” trade deal, and the results look pretty meager for America’s exporters. According to Fortune‘s Shawn Tully, “so far, the pact is delivering only about half the benefits the president promised.”
Europe
The European bourses were higher out of the gates with London, Paris and Frankfurt up 1% at the open, before falling.
were higher out of the gates with and up at the open, before falling. Brexit talks were thrown a lifeline over the weekend as Boris Johnson and European Commission President Ursula von der Leyen agreed to extend talks . But now France is objecting to any compromise on a key sticking point, fishing rights .
were thrown a lifeline over the weekend as Boris Johnson and European Commission President Ursula von der Leyen agreed to . But now is objecting to any compromise on a key sticking point, . Coronavirus cases continue to soar in Great Britain, France and Spain, forcing officials to plot elaborate new lockdown measures—including Paris restaurants—to keep the virus in check.
U.S.
U.S. futures are pointing to a positive open, but are off their highs. That’s after Trump’s COVID diagnosis plunged the major exchanges into the red on Friday, with the Nasdaq off 2.2% . The pace of his recovery is likely to add to stocks volatility, at least for today.
are pointing to a positive open, but are off their highs. That’s after Trump’s COVID diagnosis plunged the into the red on Friday, with the off . The pace of his recovery is likely to add to stocks volatility, at least for today. From the hospital this weekend, Trump issued an ALL CAPS tweet to restart talks around a stimulus package , and that’s giving the markets a bit of a lift. House Speaker Nancy Pelosi says the odds of an agreement are improving, but, as of Friday, the two sides were still hundreds of billions of dollars apart.
issued an ALL CAPS tweet to restart talks around a , and that’s giving the markets a bit of a lift. House Speaker says the odds of an agreement are improving, but, as of Friday, the two sides were still hundreds of billions of dollars apart. Regeneron Pharmaceuticals shares were 3.7% higher in pre-market trading after news broke on Friday that Regeneron’s polyclonal antibody cocktail was part of Trump’s COVID treatment. Regeneron has yet to win COVID FDA approval for the treatment. Here’s why it was cleared for the president.
Elsewhere
Gold is down, trading around $1,900/ounce .
is down, trading around . The dollar is flat.
is flat. Crude is up, but Brent continues to trade in a range around $40/barrel.
***
The F-word
Fundamentals are shot. That’s the unmistakable conclusion to be drawn from the 2020 bull market rally.
In short, profits are down—way down, even. And stock prices are up. Way up. This dichotomy is throwing a key indicator, return on equity, into a funk, says Goldman Sachs.
“While valuations have expanded, fundamentals have collapsed; trailing 4-quarter S&P 500 return on equity (ROE) dropped by 150 bp to 14.9% in 2Q 2020 vs. 1Q 2020,” Goldman wrote in an investor note on Friday. “After reaching a peak of 18.6% in 1Q 2019, trailing 4-quarter S&P 500 ROE now ranks in the 45th percentile vs. the past 40 years.”
Here’s what that looks like:
The good news is that ROE hasn’t fallen by nearly as much as the plunge we saw a dozen years ago, during the global financial crisis. Still, that’s little comfort for those of you holding bank and energy stocks.
Meanwhile, in P/E terms, stocks are now trading 20 times earnings, up from an already elevated 16X at the start of the year. Such a reading would put valuations well within bubble range, markets historians say.
The great shrinkage of Corporate America’s top- and bottom lines is to blame for the collapse in fundamentals. That may sound obvious. But the component parts are still worth calling out. “Falling tax rates, lower interest expense, and rising leverage were insufficient to offset the large declines in margins and turnover,” Goldman writes. Here’s how they illustrate that collapse:
What does this mean for S&P full-year forecast? Goldman still sees the benchmark index around 3600, and that’s because ROE will bounce back in 2021, they say.
According to Goldman, we should see the S&P reach and then tick above the 2019 EPS level at some point around the second half of next year. But there are a few big assumptions baked into that forecast, namely, that we would see vaccine approval/distribution occur in the first half of 2021, and that the world’s biggest economies can successfully manage the escalating COVID outbreak in the meantime.
Those are not small ifs.
***
Have a nice day, everyone. I’ll see you here tomorrow.
Bernhard Warner
@BernhardWarner
Bernhard.Warner@Fortune.com
As always, you can write to bullsheet@fortune.com or reply to this email with suggestions and feedback.
Today's reads
Imagine the electoral odds if there were no pandemic. Fortune's Geoff Colvin goes back in time to assess the huge impact the pandemic has had on Trump's re-election chances. As recently as March, Trump was a strong favorite as he could boast of impressive achievements in reducing poverty, increasing household income and closing the income inequality gap. The models gave him 55% of the popular vote. The models are calling him a big underdog these days. Leaving the models aside for a moment, it's fascinating to read just what a shock—down to the number—the pandemic has had on Trumpenomics and his quest for re-election.
Revisiting "spygate." It was about a year ago that a spying scandal broke in Zurich involving a star banker and his former company, Credit Suisse. You probably remember what happened next. The story led to the downfall of Credit Suisse's Tidjane Thiam, the only Black CEO of a major international bank. The New York Times' Kate Kelly revisits Thiam's troubled time at the top. Despite his remarkable track record returning the bank to a profit, the Swiss "rejected him as an outsider," Kelly reports.
Energy woes. This next stat may not surprise those of you who are still long on energy stocks. The oil and gas sector has lost more than 100,000 jobs this year, according to a Deloitte study. With crude hovering around $40 this morning, job security continues to look fraught.
Some of these stories require a subscription to access. There is a discount offer for our loyal readers if you use this link to sign up. Thank you for supporting our journalism.
Market candy
Quote of the day
These increases are unsustainable, but prices will keep rising in double digits for another six months to a year.
That's Ed Pinto, director of the American Enterprise Institute (AEI) Housing Center and the former chief credit officer for Fannie Mae. As you can tell by his title, he's not talking about stock prices. He's talking about house prices. Fortune's Shawn Tully lays out the forces driving the housing market, and why the momentum will come to an abrupt end next year.


fortune--2020-10-05--Confusion grows over Trump’s condition after weekend in hospital with COVID-19

Donald Trump’s condition remains clouded by confusion over his treatment for Covid-19, with the president’s effort to show strength contradicted by conflicting accounts from his doctors that raise doubts about how soon he’ll be able return to work and his re-election campaign.
Trump made a surprise outing from Walter Reed National Military Medical Center on Sunday, waving to supporters gathered outside from his motorcade and saying in a video posted on Twitter that he’s learned a lot about the virus. “I get it,” he said.
A member of his medical team, Brian Garibaldi, a pulmonary expert at Johns Hopkins University, said at a briefing on Sunday that the president could be released from the hospital as soon as Monday.
But the White House physician, Sean Conley, disclosed for the first time that he was given supplemental oxygen and has received a medication that’s typically used in more severe Covid-19 patients. That raises questions about the president’s condition as he heads into a phase of the illness where the health of some patients worsens suddenly and dramatically.
The questions about Trump’s treatment and recovery as well as demands for more complete disclosure about his health come amid the prospect of widening outbreak among White House and campaign staff and Senate Republicans, even as campaign aides predicted the president would soon be back on the campaign trail.
“We have to trust that what they’re telling us about the president’s condition is real,” House Speaker Nancy Pelosi said on CBS’s “Face the Nation,” adding that she’s getting details about Trump’s health from the press and alleging that Trump is approving the medical team’s public statements.
But Conley also revealed that Trump’s blood-oxygen saturation level dropped twice since his diagnosis, and that the president’s medical team decided to administer dexamethasone, a steroid used to treat inflammation in Covid patients. Asked about X-rays and CT scans of the president’s lungs, Conley said there were “some expected findings” but nothing “of any major clinical concern.”
“The president is not out of the woods,” said William Schaffner, an infectious disease doctor at Vanderbilt University. Trump’s doctor was “very evasive” in discussing what lung scans had showed, he said. The disease’s effects on patients’ lungs is often worse than is indicated by their outward symptoms. “It is kind of a stealth infection,” Schaffner added.
Asked why he didn’t disclose during Saturday’s briefing that Trump had received oxygen despite repeated questions about it, Conley said, “I was trying to reflect the upbeat attitude” of the team and the president.
“I didn’t want to give any information that might steer the course of illness in another direction, and in doing so, it came off that we were trying to hide something, which wasn’t necessarily true,” Conley said.
The president first tested positive after he returned from a fundraiser at his New Jersey golf resort on Thursday, White House Press Secretary Kayleigh McEnany told reporters on Sunday evening. Trump made an appearance on Fox News on Thursday night before disclosing on Twitter shortly after midnight on Friday that he had tested positive.
Trump campaign senior aide Jason Miller said on NBC’s “Meet the Press” on Sunday that Trump would soon be “ready to get back to the campaign trail,” and in a separate appearance on ABC’s “This Week,” Miller downplayed a new NBC-Wall Street Journal poll that showed Joe Biden, the Democratic nominee, leading Trump by 14 percentage points. The campaign is optimistic about Trump’s prospects in key battleground states needed to get to 270 electoral votes, he said.
But almost 3.3 million people have already cast ballots for the Nov. 3 election, according to data compiled by University of Florida professor Michael McDonald. David Gergen, a former White House aide to both Democrats and Republicans, said it’s unacceptable that the American public doesn’t know the full extent of Trump’s condition.
“The voters should have full information about the outlook for the president’s health before they cast a vote,” Gergen said on CNN.
Questions have also arisen about whether Trump’s White House and campaign events became super spreader locations for the virus. Hope Hicks, a top aide to the president; his campaign manager, Bill Stepien; his debate coach, former New Jersey Governor Chris Christie; and Republican Senators Thom Tillis of North Carolina, Mike Lee of Utah and Ron Johnson of Wisconsin have tested positive for coronavirus infection.
Scott Gottlieb, a former Food and Drug Administration commissioner, said on CBS it’s “likely” there will be additional Covid-19 cases stemming from the outbreak in the White House and among Republican lawmakers.
“Anyone who was with the president on Tuesday, Wednesday is not in the clear,” Gottlieb said on “Face the Nation.”
A debate between Vice President Mike Pence and California Senator Kamala Harris, Biden’s running mate, is set to take place at the University of Utah on Wednesday. Biden, whose campaign said Sunday night that he again tested negative for Covid-19, is scheduled to travel to Florida on Monday for a campaign event in Miami and an NBC News town hall.
At the same time, Senate Minority Leader Chuck Schumer said it won’t be safe for the Senate to move ahead with Supreme Court hearings for Amy Coney Barrett given the virus outbreak that sickened the three Republican senators. Senate Majority Leader Mitch McConnell has said the hearings would go forward as scheduled on Oct. 12 and that senators could attend remotely, though they would have to be present for a vote.
Unfinished Business
Other unfinished business in Washington involves a new stimulus package to bolster an economic recovery and help for beleaguered airlines. Trump tweeted on Saturday that the country “wants & needs stimulus,” and he urged the parties to “work together and get it done.”
Treasury Secretary Steven Mnuchin spoke with the president on Saturday to discuss the administration’s efforts to pass another round of stimulus, according to one person familiar with the the matter. The administration still sees the best pitch for more coronavirus relief at about $1.5 trillion, the person said.
House Democrats last Thursday passed a $2.2 trillion package as their latest offer, and Pelosi said on CBS that “we are making progress.” But when asked whether anything could happen this week, she said that will depend on whether Republicans “understand what we have to do to crush the virus.”
–With assistance from Sophia Cai, Josh Wingrove, Emma Kinery, Alan Levin, Drew Armstrong, Justin Sink, Steven T. Dennis, Robert Langreth and Saleha Mohsin.


fortune--2020-10-05--The oil and gas industry has lost more than 100,000 jobs this year

The oil and gas sector isn’t just facing a price crunch—it’s facing a jobs bust, too.
The oil, natural gas, and chemicals industry in the U.S. eliminated 107,000 jobs between March and August of this year, according to a report released Monday by Deloitte on the future of work in the sector. It’s the “fastest rate of layoffs in the industry’s history,” the report says—a remarkable pace even for a sector famed for its sky-high booms and punishing busts.
In fact, that’s part of the problem. Since 2014, the year Saudi Arabia unleashed a price war to try to protect market share from the shale boom, the impact on sector workers has become more extreme, the study found.
Between 2014 and 2019, a single dollar swing in oil prices affected 3,000 exploration, production, and oilfield services jobs, Deloitte said. That’s up from 1,500 jobs throughout the 1990s, when rising oil prices also largely added jobs. In the years between—the first decade and a half of the 2000s—jobs were highly price-sensitive, too, the report notes. But because oil prices were rising, those jobs were being added, rather than taken away.
But this time around, many of the jobs lost aren’t expected to come back quickly. If oil stays around $45 per barrel—at the moment, it’s well below that—70% of those jobs will not return before the end of next year, the report predicted.
The forces weighing on oil prices are both immediate—the risks to economic growth and to political stability in the U.S.—and long term. Last week, S&P Global estimated that changing consumer patterns spurred by the pandemic (think working from home), and the economic impact of the pandemic means 2.5 million barrels per day of oil demand has likely been lost long-term. That builds on warnings even from oil and gas CEOs themselves that oil demand may be on the verge of peaking—or that it has already peaked.
Add to that the transformational change the oil and gas sector, particularly in Europe, is embarking on. Shell, BP, Total, Equinor, and other major European legacy energy companies have committed to reaching “net zero” emissions by 2050. That process has to happen quickly, and so far, it’s come with billions of dollars in write-offs and announcements of nearly 20,000 job losses from BP and Shell alone. (Whether that’s truly because of the net-zero transformation, or a matter simply of sinking oil prices—or, more likely, both—is a matter of debate.)
Nearing retirement
That transformation doesn’t just mean, as seems initially clear, huge job cuts. The Deloitte study also raises questions about how the companies’ recruitment efforts will also adapt to make these transformations work. Those employees look, generally, like relatively young people, with the kinds of technical and mathematical skills that can help guide the mass digitization that will need to occur alongside the low-carbon shift. (Renewable energy networks, by their very nature, are more digital and complex, as the U.K.’s National Grid found out during lockdown.)
There are a few problems here. Many of the sectors’ existing workers are, for one, nearing retirement. An oil and gas job search study from last year that Deloitte references estimated that about 50% of the workforce is “tenured,” with the majority retiring within the next five to seven years. Whether through job cuts or retirement, the sector faces a huge loss of institutional knowledge over the coming years.
Meanwhile, even for “conventional” oil and gas jobs, the skills pipeline has narrowed. University graduates from fields like geology and petroleum engineering dropped between 15% and 21% between 2015 and 2019, according to data cited in the report.
And attracting a new kind of oil and gas employee runs up against both stiff competition from tech companies vying for many of the same skills, but also employee concerns about “sustainability”—in other words, resistance from young people to working for energy companies in an age of climate change.
Training the existing workforce to adapt to these new kinds of jobs—and limiting those punishing waves of job losses—may be the most obvious option, and there’s evidence that companies like Shell have been doing this.
But that takes investment, in a time of crunched profits, with plenty of competing demands for where the money should be put. Clean energy investment by oil and gas companies, for one, is still at an incredibly low base: Deloitte puts it at 1% to 2% of capital investment in 2019, a figure also cited internationally by the International Energy Agency. Such an investment still rests on having the revenue to do so. Even a repositioning oil company is still reliant on oil prices, as Shell CEO Ben van Beurden admitted earlier this week.
The impact on oil towns
It’s a vicious cycle that doesn’t just affect oil and gas companies, but whole regions, from Houston to Calgary, Alberta.
“The [oil, gas, and chemicals] industry is often held to ransom by brutal price cycles and painful successions of over- and under-capacity periods,” the report’s authors said—and that hurts the sector long-term.
“Appallingly, these periods come in the way of the industry’s progressive efforts toward sustainability, operational agility, and workforce improvement,” the authors added.
Naysayers may brush off the “new normal” part of the sector’s cyclicality, the report notes: in other words, just another bust before the boom.
But companies that see the challenge now, it warned, and push to actually embrace the shift, may get a critical head start in what will eventually be an industrywide race.


fortune--2020-10-05--Staying fit is more important than ever during the COVID-19 pandemic

COVID-19 is a terrifying wake-up call for out-of-shape Americans.
More than four in 10 U.S. adults are obese, and 60% have at least one chronic disease, putting them at high risk of serious COVID-19 complications—or worse. Individuals with chronic illnesses are 12 times more likely to die from the virus.
In light of President Trump’s recent COVID-19 diagnosis, the dangers of having any of those conditions have been thrust into the national spotlight. Trump is in a high-risk age group, clinically obese, and has “elevated” blood pressure—all of which puts him at risk for more severe complications.
For decades, health care professionals have cautioned people about the dangers of obesity. But those warnings have largely gone unheeded. Until recently, too many Americans viewed exercise as the ticket to a beach body—not the first line of defense against deadly diseases.
COVID-19 is finally changing that mistaken belief. Now, it’s incumbent upon health professionals to help Americans get in shape. Lives depend on it.
Everyone knows that exercise promotes good health. But many don’t understand just how important it really is.
Exercise increases blood flow throughout the body, meaning that more immune cells can circulate at a higher rate. Over time, that immune response builds up—with a measurable effect on health outcomes. A study published in the British Journal of Sports Medicine found that among people who engaged in aerobic exercise five or more times per week, upper respiratory tract infection decreased by 40% over 12 weeks.
Staying active also reduces body fat and inflammation, which helps to fend off infections and prevent chronic conditions such as hypertension or heart disease.
Due to extensive media coverage of COVID-19’s disproportionate impact on the chronically ill, Americans are starting to finally realize that staying fit isn’t just about looking good—it’s about strengthening the immune system and staving off serious health problems.
Fortunately, the fitness industry is trying to accommodate this mass awakening.
Many gyms moved fitness classes outdoors and online for the first time, in response to social distancing and statewide lockdowns. Organizations like the American College of Sports Medicine have actively campaigned for the health benefits of physical activity in the midst of the pandemic—specifically calling for outdoor fitness resources in disadvantaged communities.
Further transforming Americans’ relationship with exercise—and making it a critical component of their health and wellness plans—will also require the help of exercise science professionals. These individuals are trained to develop individualized wellness programs that consider people’s age, health, culture, and other factors that influence their ability to maintain a healthy routine.
Consider someone at risk of developing high blood pressure; they may know they need more exercise, but have no idea where to start. An exercise science professional can help set realistic and achievable goals—something as simple as a short morning walk. That person can then build on those smaller activities and develop longer-term habits that incorporate more vigorous exercise into their routine.
Or take someone who already has an illness. Exercise science experts can educate chronic disease patients about the ways physical activity can help manage their conditions—from reducing the pain associated with rheumatoid arthritis to increasing insulin sensitivity for diabetics.
These professionals can also adjust their methods based on clients’ individual comfort levels. Many Americans still don’t feel safe entering brick-and-mortar gyms—and it’s unclear if they’ll ever want to return. In response, exercise science professionals can build out other innovative tools and training models, such as remote platforms and outdoor workout settings.
COVID-19 has disrupted our society. But it has also created an opportunity to improve our country’s health—by transforming exercise into the primary weapon in our fight against disease.
Alex Rothstein is an instructor and program coordinator for the exercise science degree program at New York Institute of Technology.


fortune--2020-10-05--It’s October, COVID-19 is sweeping through Congress, and there is still no formal testing protocol i

It’s October, COVID-19 is sweeping through Congress, and there is still no formal testing protocol in place

Our mission to help you navigate the new normal is fueled by subscribers. To enjoy unlimited access to our journalism, subscribe today.
As a new wave of COVID-19 sweeps across Washington, a number of lawmakers are publicly calling out the confusion and misguidance over safety and testing policies at the Capitol.
Three Republican Senators have tested positive for coronavirus in the wake of a mass-infection event held at the White House in late September. At least ten high level staffers including President Donald Trump are ill with the deadly virus. The numbers could increase quickly as more Republican Senators have said that they may have been exposed but had not yet tested positive.
Still, some Senators may opt out of testing altogether as there is no concrete COVID testing protocol for members of Congress, who have an average age that places them at high-risk for deadly complications related to the virus. Senate Majority Leader Mitch McConnell himself refused to tell reporters whether he had been tested or would be this weekend.
McConnell said this week that he would continue his agenda of pushing Supreme Court nominee Amy Coney Barrett through her Congressional confirmation hearing. The proclamation alarmed a number of his Democratic colleagues who said the response was irresponsible.
“If it’s too dangerous to have the Senate in session it is also too dangerous for committee hearings to continue,” Senate Minority Leader Chuck Schumer wrote in a statement Saturday.
The rules in the Senate regarding safety are largely decided by political parties and display a vast disparity between Republican and Democratic approaches to the virus. Democrats no longer hold in-person caucus meetings and instead conduct business over conference calls. Republicans, meanwhile, hold in-person lunches three times a week and though most wear masks in public, there have been instances where they’ve spoken to members of the press and at campaign events without them.
There have been some changes made. In May, the House approved rule changes that allowed them to conduct business through proxy voting and conduct remote hearings through the pandemic. The Capitol is closed to the public and social distancing is encouraged. Still, it wasn’t until July that House Speaker Nancy Pelosi required members of Congress to wear masks and there are no rules about members of Congress attending outside engagements with or without masks on. There is no official testing policy in either the House or Senate, and leadership on both sides of the aisle seem eager to press on with business as usual.
“The Senate’s floor schedule will not interrupt the thorough, fair, and historically supported confirmation process previously laid out by Chairman [Lindsey] Graham,” McConnell said in a statement. “Certainly all Republican members of the committee will participate in these important hearings.”
Pelosi also continued to work full days last week, though she did say she was getting tested out of “an abundance of caution.”
But behind the scenes, both leaders are under pressure by coworkers and staffers to formalize safety protocol. At least 20 members of Congress have been infected or are presumed to have been infected with the virus thus far along with over one hundred of their staffers.
“This episode demonstrates that the Senate needs a testing and contact tracing program for senators, staff, and all who work in the Capitol complex,” said Schumer in his statement.
Representative Rodney Davis, the ranking Republican on the House Administration Committee, also called for an increase in formalized testing, especially for staffers on the Hill. “That’s going to help the people who protect this House every day. Let’s begin to protect them, too. And that includes the Capitol Police, the Architect of the Capitol employees, the folks who are here on the grounds, like members of the media,” he said.
The Capitol’s Office of the Attending Physician revised their guidelines to say that any lawmaker, staffer or media member who exhibits systems or has been in contact with someone who has tested positive can receive a test, but there is no requirement.
So far, Pelosi’s office has denied to comment on changing the testing protocol but McConnell’s team told The Washington Post that he believed they were already doing enough.
“We’ve got our masks on, we practice social distancing. We’ve got a few members quarantined at various times but we’ve been able to function,” McConnell told the Post. “So far the disease has not kept us from operating as we would normally and there’s no reason to expect that to be the case in the foreseeable future.”
Members of Congress, however, say, loose protocols have stopped them from properly doing their jobs.
“I’ve stopped going to in-person Judiciary Committee meetings because of the number of members on that side who’ve either tested positive or just refuse to wear masks there, and it’s selfish. It’s reckless, and it furthers this virus,” Democratic Representative Eric Swalwell told the press.
Senators Thom Tillis and Mike Lee who both serve on the Senate Judiciary Committee tested positive for COVID-19 after attending a Rose Garden ceremony celebrating Barrett, Trump’s Supreme Court pick, late last month. Another Senator, Ron Johnson also tested positive on Saturday though he did not attend the ceremony.
Senator Ted Cruz also attended the ceremony and said he would self-quarantine but had plans to return for the hearings. “He feels healthy, hasn’t exhibited any Covid-19 symptoms, and has tested negative,” a Cruz spokesperson said. “In accordance with medical advice, he will return to the Senate for the Supreme Court nomination hearings.”
Senator Josh Hawley, also on the committee and also present at the ceremony said he would be tested as well.
Republican Senators Kelly Loeffler and Marsha Blackburn, meanwhile, held an indoor event on Friday with many going maskless after they had met with the president earlier in the week.


fortune--2020-10-05--Biden ‘blue wave’ would boost economy, says Goldman Sachs chief economist

A Democratic “blue wave,” where the party takes control of both the White House and Congress, is becoming more likely, and that could juice the U.S. and global economy in early 2021, according to Goldman Sachs.
Goldman’s chief economist, Jan Hatzius, explored the possibility of a Biden blue wave in a note sent to clients on Monday. While acknowledging that a Democratic sweep would produce an increase in corporate taxes, Hatzius predicts this would be outweighed by the benefits of a stimulus package that would likely arrive shortly the January 20 presidential inauguration.
In a key passage of the note, Hatzius predicts such a package would be at least $2 trillion, and that it would be part of a larger spending agenda that would benefit the economy (emphasis mine):
All else equal, such a blue wave would likely prompt us to upgrade our forecasts. The reason is that it would sharply raise the probability of a fiscal stimulus package of at least $2 trillion shortly after the presidential inauguration on January 20, followed by longer-term spending increases on infrastructure, climate, health care and education that would at least match the likely longer-term tax increases on corporations and upper-income earners.
Hatzius concludes that a blue wave would have “mixed” implications for U.S. stock markets but that, overall, it “would likely result in substantially easier US fiscal policy, a reduced risk of renewed trade escalation, and a firmer global growth outlook.” He predicts these developments would particularly benefit cyclical sectors (such as luxury goods, appliances and other industries vulnerable to macroeconomic trends) as well as firms that pay most of their taxes outside of the U.S.
The optimistic note about a blue wave comes as analysts at other major banks suggest a Biden-led blowout could help stocks. In comments to Bloomberg, for instance, a strategist at Swissquote Bank SA said polls are pointing to a clean Biden win, and that this is reducing investor uncertainty.
Analysts are not political scientists, of course. But Hatzius’s note points to recent polls that suggest Biden has opened up a commanding lead over President Trump, while Democrats are in strong position to retake the U.S. Senate.
Meanwhile, betting sites like PredictIt, which let users place wagers on the outcome of November’s contest, show Biden as a clear favorite to win the Presidency.
More must-read finance coverage from Fortune:


fortune--2020-10-05--Companies with happier employees outperform their peers

Corporate America is changing.
Look no further than the Business Roundtable’s redefined statement of purpose for corporations. Instead of putting shareholders’ interest alone first, its members have agreed to prioritize the interest of various stakeholders, such as employees.
So how does doubling down on employees affect the bottom line? Pretty well, according to our research.
Fortune teamed up with Thrive Global, SAP SuccessFactors, and Qualtrics to build the Thrive XM Index*, a ranking of companies with the best employee wellbeing. To create the index, we surveyed a sample of more than 20,000 full-time U.S. employees from over 900 companies. We asked them about everything: work-life balance, career advancement, mental health, company policies.
From this massive survey, Thrive Global researchers used a scoring algorithm to generate the score for companies. Then they looked at the highest-ranked companies on the index to see if their better employee experiences translated into better financial results.
The top-ranked Thrive XM Index companies—even when factoring in industry—saw their stock gains outperform those of their peers. What’s more, the top 10% of Thrive XM Index companies saw their return on equity climb 27.2% in the second quarter of 2020.
The same goes for profits: Among the top 10% of Thrive XM Index companies, EBITDA climbed 24.8% in the second quarter. The group’s S&P 500 Index peers saw EBITDA climb 20.5% during the same period.
Maybe stakeholder capitalism is good for shareholders after all?
*Methodology: Thrive Global, SAP SuccessFactors, Qualtrics and Fortune teamed up to build the Thrive XM Index. To create the Thrive XM Index, the group surveyed a sample of more than 20,000 full-time U.S. employees from over 900 distinct companies across the country, asking than 100 questions describing the influence their organization has/had on critical life experiences and moments that matter—both in and outside of the workplace—as well as the impact working for their company has on their holistic wellbeing.
All employee experience data was collected between August and November 2019. Thrive XM Index scores were calculated only for those companies incorporated in the U.S. and eligible for the Fortune 500. We required enough responses in each participating company to reach a 95% statistical Confidence Level and 5% Margin of Error or better.
For a full methodology go here.
This is an excerpt from Fortune Analytics, an exclusive newsletter that Fortune Premium subscribers receive as a perk of their subscription. The newsletter shares in-depth research on the most discussed topics in the business world right now. Our findings come from special surveys we run and proprietary data we collect and analyze. Sign up to get the full briefing in your inbox.


fortune--2020-10-05--COVID-19 is making a dangerous comeback in most parts of America

COVID-19 is spreading again across most of the U.S., hammering rural America and smaller cities and raising anxiety in New York, as experts warn that school reopenings and colder weather may cause the situation to rapidly deteriorate.
In 34 states, the seven-day average of new cases is higher now than it was a month ago. Although the virus has waned in populous states including California and Florida, it is wreaking unprecedented havoc in the Midwest and making an incipient return in parts of the Northeast.
“The weather report is darkly cloudy with further storms on the horizon,” said William Schaffner, an infectious disease professor at Vanderbilt University in Nashville, Tennessee.
Medical professionals have long warned about a resurgence of the novel coronavirus as colder temperatures in North America drive people inside and many jurisdictions reopen schools. Knowing that, scientists have been racing to prepare a vaccine. But even if it is approved, it’s unlikely to reach most of the public for many months.
Meanwhile, most attention has turned to President Donald Trump, who remains hospitalized with the disease that has killed about 210,000 Americans so far.
‘Twindemic’ threat
Schaffner said the lack of adequate social distancing and masking in rural areas may combine with the coming cold weather and influenza, possibly resulting in a “twindemic” that further strains the health-care system.
In Nebraska, the seven-day average of cases hit a record Saturday, joining Midwestern and Western states including Wisconsin, Montana and the Dakotas in confronting a virus that had eluded them until recently. In New York City, schools in virus hot spots will close down Tuesday.
Across the country, there were 41,075 new cases reported on Sunday, bringing the total to 7,420,921, according to Johns Hopkins University.
“We’re in very bad shape, never having achieved any sense of containment, never gotten below 20,000 new confirmed cases per day,” said Eric Topol, director of Scripps Research Translational Institute. “Things can only get worse on this course.”


fortune--2020-10-05--The White House offers a lesson on how to notify employees about COVID exposure

The White House’s recent email to staffers advising them what to do if they experience COVID-19 symptoms—apparently the first such notice they’ve received—raises a related question for millions of employers: What do we tell employees if a fellow worker has COVID-19?
While Trump tweeted his diagnosis to the world early on Oct. 2, most employers will face a different environment. Much of it will be shaped by state and federal laws, some of which are changing quickly.
The first steps are the clearest, based on guidance from the Centers of Disease Control and Prevention, federal government agencies, and state governments. If an employer finds that an employee has COVID-19, tell that employee to go home immediately and quarantine, duration to be determined. Then clean areas of the workplace where the employee has been in the previous seven days.
Obvious question: How does an employer know if an employee has the disease? Mandatory testing is one option. The Equal Employment Opportunity Commission affirms that this does not violate the Americans with Disabilities Act. But without mandatory testing, employees are mostly on the honor system. It’s okay to ask employees directly if they have or have had COVID-19, and it’s okay to require them to tell HR if they have symptoms. But it’s not okay to ask employees if any of their family members have COVID-19 or its symptoms; that would violate the Genetic Information Nondiscrimination Act, says the EEOC.
After that things get still more complicated. The employer should notify employees, but the employer’s location may determine how quickly it must be done. Under a Virginia law that took effect in July, an employer must notify “employees who may have been exposed” and must do so within 24 hours of becoming aware of the possible exposure. A California law that takes effect January 1 will require employers to give “written notice” to employees, employers of subcontracted employees, and representatives of employees such as unions and attorneys, within one business day of “potential exposure” to the coronavirus.
Which raises another complication: Who was potentially exposed? In a major corporation it may not make sense to tell all employees worldwide that an employee in one office or other facility tested positive. But all those who were potentially exposed must be notified—without disclosing the identity of the worker who tested positive. As a practical matter that may be nearly impossible. If Bill stops showing up and workers in hazmat suits whom you’ve never seen before are swabbing down his workspace, per CDC guidelines, no one will doubt why. Still, employers must do everything they can to avoid divulging Bill’s identity, even if Bill chooses to identify himself.
Legal requirements continue to change. In addition to Virginia and California, Oregon has also adopted temporary rules regulating employers during the pandemic, and more states will follow. But the basic principles for notifying employees of possible exposure to the coronavirus are simple. Notify them as fast as you can, don’t disclose personally identifiable medical information, and realize that your actions will be governed by laws and regulations far more than by HR policy.


fortune--2020-10-05--Why L.L. Bean is finally teaming up with other retailers

L.L. Bean is turning to a new source of help to lift sales: other retailers.
The Freeport, Maine-based L.L. Bean, beloved for its iconic duck boots and fleece sweaters, has always kept tight control over how and where its products are sold, exclusively using its own stores, catalog, and website to build what is now a roughly $1.5 billion annual business.
But the brand’s limited store fleet of 54 locations, and the need to reach a wider clientele are now prompting it to move beyond so-called ‘direct-to-consumer’ selling by branching out into wholesale. L.L. Bean will soon be selling some of its products at Nordstrom, adding to roster of new retail partners that includes Staples and Midwest sporting goods chain Scheels All Sports.
Asked why the 108-year-old L.L. Bean was gingerly testing the wholesale waters after all these years, CEO Stephen Smith tells Fortune, “The simple answer is, to expose new customers to the L.L. Bean brand.” As beloved as the brand is, he concedes, many shoppers don’t have it top of mind, or think L.L. Bean is only about fleece or flannel, while its assortment actually includes things like furniture, bikes, and fishing gear. And that is dangerous at a time when rival brands like Patagonia and The North Face—which are widely sold beyond their own stores including at Nordstrom—tend to have a higher profile with shoppers.
“We are so well known as a brand but we don’t always have such great brand relevance to customers,” Smith continues.
That will soon change, he hopes. This back-to-school season, L.L. Bean sold backpacks and water bottles at Staples. And next month, 20 Nordstrom stores and the upscale chain’s website will start selling a subset of L.L. Bean products including its Bean Boots and some fleece and flannel items.
L.L. Bean’s selling entirely via its own channels to working with wholesalers contrasts with a wider retail trend that is seeing many brands, most notably Nike, reduce their exposure to retailers like department stores and shift more business to their own stores and websites. Other such brands include Levi’s, Coach and Ralph Lauren.
But while the approach differs, the goal is the same: striking the balance between maximizing a brand’s reach and ensuring it is presented as well at a wholesaler as in its own stores.
“We’re doing the same thing, but starting from different directions,” Smith says of Nike’s strategy. At the same time, he says, “We don’t want to get to a place where we are overly reliant on the health of somebody else’s business.”
Nordstrom’s business has been severely hurt by the pandemic and a shift away from fancier clothes as fewer people go to the office or to special events. But the Seattle-based retailer, family run just like L.L. Bean, is prized as a wholesaler for how it showcases brands with nice presentations rather than the shabby displays common at other department stores. What’s more, Nordstrom’s reputation for good customer service struck a chord with Smith, whose company is renowned for its generous returns policy. And Nordstrom caters to the affluent customer L.L. Bean is aiming for too.
“We wanted to be sure we were in an environment with the same type of customer service,” says Smith. For Nordstrom, the partnership allows it to further build up its active wear assortment. In another example of L.L. Bean trying new partnerships, the brand is launching a collection with men’s wear designer Todd Snyder, its first such collaboration.
Smith, CEO since 2016, says that the exploration of wholesale partnerships began a couple of years ago to help L.L. Bean diversify its sources of revenue. And the L.L. Bean could use a boost: sales slipped 3% to $1.5 billion in 2019 and are on track to be down slightly again in 2020, this time because of the pandemic which shut stores for weeks, overshadowing an online sales jump that continues.
To be sure, sales of many products exploded for L.L. Bean as Americans worked from home and took to the outdoors, with products like quilts, outdoor furniture, and more recently, down puffers leading the way. But those categories have lifted its competitors too.
Yet L.L. Bean is in no rush to go too far down the wholesale road, or to set a sales percentage target for wholesale, though Smith says that share is unlikely to exceed 25% and could be far less. So don’t expect L.L. Bean product to show up at a million stores in your town anytime soon.
Says Smith: “This is a test, we’re very clear.”