1 00:00:02,400 --> 00:00:09,119 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. You're listening to the 2 00:00:09,119 --> 00:00:13,320 Speaker 1: Bloomberg Intelligence podcast. Catch us live weekdays at ten am 3 00:00:13,320 --> 00:00:15,800 Speaker 1: Eastern on Apple card playing and Broid Auto with the 4 00:00:15,800 --> 00:00:19,720 Speaker 1: Bloomberg Business App. Listen on demand wherever you get your podcasts, 5 00:00:19,920 --> 00:00:22,280 Speaker 1: or watch us live on YouTube. 6 00:00:23,960 --> 00:00:25,320 Speaker 2: Let's get to the other big news of the day, 7 00:00:25,320 --> 00:00:28,240 Speaker 2: which was actually the ECB cut rates by twenty five 8 00:00:28,280 --> 00:00:31,720 Speaker 2: basis points. The future, though really questionable downgrade their broke 9 00:00:31,760 --> 00:00:35,080 Speaker 2: growth forecast through twenty twenty six. Inflation, though, is still 10 00:00:35,120 --> 00:00:37,840 Speaker 2: a very big concern for Europe, particularly when it comes 11 00:00:37,840 --> 00:00:41,800 Speaker 2: to services. Hugh Worthington is Bloomberg Intelligence European rate strategist. 12 00:00:41,800 --> 00:00:43,920 Speaker 2: I'm looking at a two year over in Germany and 13 00:00:43,960 --> 00:00:46,880 Speaker 2: boon yields up by over six basis points. What was 14 00:00:46,920 --> 00:00:50,680 Speaker 2: your take? Was it a dubbish hike a hawkish hike? 15 00:00:50,760 --> 00:00:53,240 Speaker 2: The market is looking like a hawkish hike right now. 16 00:00:55,440 --> 00:00:56,959 Speaker 3: Wells obviously, but. 17 00:00:58,920 --> 00:01:00,880 Speaker 4: I think we're suffering a little bit of a hangover 18 00:01:01,200 --> 00:01:06,679 Speaker 4: possibly the cut that the ECB did in June, which 19 00:01:06,720 --> 00:01:09,440 Speaker 4: they signaled to the market in April, and then I 20 00:01:09,440 --> 00:01:12,000 Speaker 4: think basically decided that they probably shouldn't have signaled it, 21 00:01:12,720 --> 00:01:14,480 Speaker 4: you know, quite so soon. I don't think someone on 22 00:01:14,480 --> 00:01:17,960 Speaker 4: the Governing Council we're clearly probably not really happy about that. 23 00:01:18,040 --> 00:01:21,520 Speaker 4: And right now I think they're they're they're very keen 24 00:01:21,640 --> 00:01:24,040 Speaker 4: not to give too much away as to be pre 25 00:01:24,080 --> 00:01:26,960 Speaker 4: committing themselves to do anything in October or even in December. 26 00:01:27,440 --> 00:01:31,240 Speaker 4: Hence this big focus that the ECB is going to 27 00:01:31,240 --> 00:01:33,360 Speaker 4: be data dependent and they're not. They don't want to 28 00:01:33,360 --> 00:01:36,800 Speaker 4: give a strong signals as to as to what's what 29 00:01:36,840 --> 00:01:39,280 Speaker 4: they're going to do next, the one they will say 30 00:01:39,319 --> 00:01:39,760 Speaker 4: about and some. 31 00:01:39,880 --> 00:01:42,240 Speaker 3: Sort of the move from yields. 32 00:01:41,840 --> 00:01:44,440 Speaker 4: I think it was it was suppose lightly predictable if 33 00:01:44,440 --> 00:01:46,240 Speaker 4: they did go down this route and decide not to 34 00:01:46,480 --> 00:01:48,440 Speaker 4: give us too much of a clue as to what 35 00:01:48,440 --> 00:01:50,600 Speaker 4: a they're going to do next. You know, we had 36 00:01:50,600 --> 00:01:52,280 Speaker 4: a big we had a big rally in rates in 37 00:01:52,360 --> 00:01:57,240 Speaker 4: Europe two yels down around seventy five basis points, you know, 38 00:01:57,320 --> 00:01:59,480 Speaker 4: going into that decision over the last couple of months 39 00:01:59,600 --> 00:02:04,360 Speaker 4: or so summer, and expectations where policy rates are going 40 00:02:04,440 --> 00:02:07,440 Speaker 4: to be in a year's time down around two percent 41 00:02:07,520 --> 00:02:10,120 Speaker 4: now and they were running at around three percent at 42 00:02:10,160 --> 00:02:11,639 Speaker 4: the time of the June meeting. So you know, we've 43 00:02:11,639 --> 00:02:15,160 Speaker 4: had a big, you know, a big expectation from markets 44 00:02:15,160 --> 00:02:17,360 Speaker 4: in particular that the ECB is going to cut quite aggressively. 45 00:02:18,320 --> 00:02:23,080 Speaker 5: Also, we are covering the part portions of Christina the 46 00:02:23,080 --> 00:02:27,160 Speaker 5: Guard's speech here talking about slower growth really for the 47 00:02:27,240 --> 00:02:30,600 Speaker 5: foreseeable future. For your peer give us kind of your 48 00:02:30,639 --> 00:02:33,160 Speaker 5: thoughts and what you're seeing from your marketplace as to 49 00:02:33,240 --> 00:02:35,680 Speaker 5: the growth outlook for the EU. 50 00:02:36,720 --> 00:02:40,560 Speaker 4: Yeah, I mean the growth outlook is it's pretty terrible really, 51 00:02:40,639 --> 00:02:45,400 Speaker 4: particularly in core Europe and in particular in Germany. I 52 00:02:45,400 --> 00:02:48,239 Speaker 4: think the Ones Bank penciled in growth of twenty twenty 53 00:02:48,400 --> 00:02:50,440 Speaker 4: or zero point one percent, if you can call that growth. 54 00:02:51,040 --> 00:02:53,280 Speaker 4: You know, France isn't isn't a great deal better either, 55 00:02:53,760 --> 00:02:58,280 Speaker 4: But generally speaking, it's pretty sclerotic the growth outlook going forward, 56 00:02:58,320 --> 00:03:02,280 Speaker 4: and actually it got downgraded slightly you know again today 57 00:03:02,400 --> 00:03:06,720 Speaker 4: from those those what were previously pretty unimpressive figures. 58 00:03:06,720 --> 00:03:07,520 Speaker 3: Anyway, but I. 59 00:03:07,360 --> 00:03:09,040 Speaker 4: Think a lot of the focus this week in Europe 60 00:03:09,080 --> 00:03:11,200 Speaker 4: as well as has been on this Dragi report, which 61 00:03:11,240 --> 00:03:14,480 Speaker 4: is basically focusing on the fact that you know, growth 62 00:03:14,520 --> 00:03:18,359 Speaker 4: in in Europe and in the EU in particular is 63 00:03:18,480 --> 00:03:20,880 Speaker 4: very much underperforming. What's going on around the world particularly, 64 00:03:20,919 --> 00:03:22,400 Speaker 4: but I think underforming a lot of what's going on 65 00:03:22,440 --> 00:03:24,800 Speaker 4: in America and that sort of big reforms are needed 66 00:03:24,840 --> 00:03:28,000 Speaker 4: in that there's this as a structural fundamental issue in 67 00:03:28,040 --> 00:03:30,839 Speaker 4: terms of low growth in Europe, and obviously we're seeing 68 00:03:30,840 --> 00:03:33,320 Speaker 4: the outcome of that at the moment. And it's interesting 69 00:03:33,360 --> 00:03:35,640 Speaker 4: actually obviously the you know, with the ECB saying that 70 00:03:35,680 --> 00:03:38,080 Speaker 4: they that they want to keep rates in restrictive territory 71 00:03:38,120 --> 00:03:40,480 Speaker 4: and focus on inflation more than anything. Well, you know, 72 00:03:40,480 --> 00:03:42,240 Speaker 4: they're not too much to help that because I think, 73 00:03:42,280 --> 00:03:43,840 Speaker 4: you know, one of the main things that it is 74 00:03:43,920 --> 00:03:47,440 Speaker 4: driving that sclerotic growth is very poor internal demand. And 75 00:03:47,480 --> 00:03:49,240 Speaker 4: the one way suppose that they can improve on that 76 00:03:49,480 --> 00:03:51,320 Speaker 4: is the cut rates in prime and pump a bit. 77 00:03:51,760 --> 00:03:53,640 Speaker 4: But they don't seem cam to be to be deliving 78 00:03:53,640 --> 00:03:54,160 Speaker 4: that at the moment. 79 00:03:54,320 --> 00:03:56,920 Speaker 2: So do you think that the UCV is in or 80 00:03:56,960 --> 00:04:00,560 Speaker 2: headed forest tangulation about forty seconds stagflation? 81 00:04:00,640 --> 00:04:01,200 Speaker 3: I suspect not. 82 00:04:01,320 --> 00:04:04,400 Speaker 4: Actually, I think we're probably now really a little bit 83 00:04:04,440 --> 00:04:08,080 Speaker 4: too negative. But on inflation, I think things like oil 84 00:04:08,120 --> 00:04:10,840 Speaker 4: prices are coming down, Signs of other bits of inflation 85 00:04:10,840 --> 00:04:12,800 Speaker 4: are coming down. If I give anything, you know, the 86 00:04:12,960 --> 00:04:15,560 Speaker 4: signs that they may well possibly understoose. On the inflation front, 87 00:04:16,160 --> 00:04:19,520 Speaker 4: what you might get is inflation playing ball. But you know, 88 00:04:19,560 --> 00:04:21,680 Speaker 4: I would say the growth side of things just being 89 00:04:21,800 --> 00:04:24,800 Speaker 4: you know, remaining very unimpressive, very unexciting. 90 00:04:24,800 --> 00:04:25,200 Speaker 6: Indeed. 91 00:04:25,839 --> 00:04:27,760 Speaker 2: All right, Hugh, thanks a lot. We really appreciate it. 92 00:04:27,760 --> 00:04:31,400 Speaker 2: Thank you very much. Hugh Worthington, Bloomberg Intelligence, European rate Strategies. 93 00:04:31,440 --> 00:04:34,400 Speaker 2: I was talking about economists earlier this morning, and basically 94 00:04:34,440 --> 00:04:38,039 Speaker 2: it's like, look, fiscal spend is all all what it's about. Like, 95 00:04:38,040 --> 00:04:40,359 Speaker 2: if you got high fiscal spend, your growth is going 96 00:04:40,440 --> 00:04:40,840 Speaker 2: to be okay. 97 00:04:40,880 --> 00:04:41,200 Speaker 7: You know what. 98 00:04:41,400 --> 00:04:45,040 Speaker 2: Europe doesn't really have the fiscal spend. That's just super capped. 99 00:04:45,040 --> 00:04:46,760 Speaker 2: And that's the problem. They don't have a physical union, 100 00:04:46,960 --> 00:04:48,119 Speaker 2: they have monetary union. 101 00:04:49,640 --> 00:04:53,559 Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live 102 00:04:53,640 --> 00:04:56,680 Speaker 1: weekdays at ten am Eastern on Apple car Play and 103 00:04:56,680 --> 00:04:59,880 Speaker 1: Android Otto with the Bloomberg Business. You can also listen 104 00:05:00,120 --> 00:05:03,160 Speaker 1: live on Amazon Alexa from our flagship New York station 105 00:05:03,520 --> 00:05:06,279 Speaker 1: just say Alexa playing Bloomberg eleven thirty. 106 00:05:07,600 --> 00:05:09,760 Speaker 2: All right, let's get to the eco data. Charl McGill 107 00:05:09,800 --> 00:05:12,080 Speaker 2: god says that's not a movie market, but maybe Michael 108 00:05:12,120 --> 00:05:15,520 Speaker 2: McKee will disagree. International Economics and Policy corresponded. All right, 109 00:05:15,560 --> 00:05:17,760 Speaker 2: so you got the producer prices for August, Mike, Did 110 00:05:17,760 --> 00:05:18,640 Speaker 2: this tell us anything? 111 00:05:20,080 --> 00:05:20,719 Speaker 8: Not a whole lot. 112 00:05:20,720 --> 00:05:23,200 Speaker 9: It tells you that there's still a sort of a 113 00:05:23,279 --> 00:05:29,280 Speaker 9: range bound inflation level in producer prices, some categories up, 114 00:05:29,320 --> 00:05:34,600 Speaker 9: some categories down, But it doesn't suggest any major building 115 00:05:34,800 --> 00:05:39,919 Speaker 9: inflationary pressures, which is what the the FED would be 116 00:05:40,000 --> 00:05:44,560 Speaker 9: worried about. Interesting thing was that trade services rose six 117 00:05:44,640 --> 00:05:48,560 Speaker 9: tens of a percent, a fairly large increase, and that 118 00:05:48,800 --> 00:05:53,599 Speaker 9: is based on retailer and wholesaler margins. So it's good 119 00:05:53,600 --> 00:05:54,520 Speaker 9: news for profits. 120 00:05:54,560 --> 00:05:57,279 Speaker 5: It appears, Oh okay, all right, very good. So you 121 00:05:57,360 --> 00:06:00,640 Speaker 5: take this along with the CPI data. Does this give 122 00:06:00,680 --> 00:06:03,680 Speaker 5: the Fed greater confidence that they in fact have inflation 123 00:06:03,880 --> 00:06:08,679 Speaker 5: under control here and they can start easing interest rates. 124 00:06:09,360 --> 00:06:11,680 Speaker 9: They can certainly start easing interest rates. I think the 125 00:06:12,320 --> 00:06:15,039 Speaker 9: fact that we saw a little bit higher PPI on 126 00:06:15,080 --> 00:06:17,400 Speaker 9: a month over month basis, a little bit higher CPI 127 00:06:17,520 --> 00:06:19,960 Speaker 9: core on a month over month basis tells the Fed 128 00:06:20,000 --> 00:06:23,279 Speaker 9: that they are they have inflation sort of under control, 129 00:06:23,320 --> 00:06:25,960 Speaker 9: but it's not. The victory is not one yet, and 130 00:06:26,000 --> 00:06:28,039 Speaker 9: they still need to be cautious, which puts them on 131 00:06:28,080 --> 00:06:31,159 Speaker 9: the side of twenty five basis points as opposed to fifty. 132 00:06:31,760 --> 00:06:33,800 Speaker 8: Doesn't discourage a cut. 133 00:06:33,960 --> 00:06:36,599 Speaker 9: But I think that's what the markets are pricing now, 134 00:06:36,720 --> 00:06:39,479 Speaker 9: is that the FED has to has to feel like 135 00:06:39,520 --> 00:06:40,599 Speaker 9: it needs to be careful. 136 00:06:41,080 --> 00:06:43,400 Speaker 2: You know, there's been a argument that if they go fifty, 137 00:06:43,520 --> 00:06:45,560 Speaker 2: then it's going to set up you know, what do 138 00:06:45,600 --> 00:06:49,040 Speaker 2: they know that we don't know, et cetera when you're 139 00:06:49,080 --> 00:06:51,560 Speaker 2: talking to people. Is that a real argument or is 140 00:06:51,560 --> 00:06:53,719 Speaker 2: it like, hey, things are actually okay, let's keep it 141 00:06:53,760 --> 00:06:55,560 Speaker 2: that way and not mess about and cut fifty. 142 00:06:56,240 --> 00:07:02,120 Speaker 9: I mean think the latter is correct nowadays, at least 143 00:07:02,320 --> 00:07:04,320 Speaker 9: for people on Wall Street who have Bloomberg's The FED 144 00:07:04,320 --> 00:07:05,800 Speaker 9: doesn't know anything that you don't know. 145 00:07:07,120 --> 00:07:10,120 Speaker 2: I mean, like some inside super cool release the data. 146 00:07:10,240 --> 00:07:13,360 Speaker 9: Well, you know, they release the data they have. Everybody 147 00:07:13,400 --> 00:07:19,480 Speaker 9: else has access to the same economic data, and most 148 00:07:19,880 --> 00:07:24,320 Speaker 9: big banks have analysts who are also talking to CFOs 149 00:07:24,400 --> 00:07:29,840 Speaker 9: and CIOs and talking to people about what's going on 150 00:07:29,960 --> 00:07:31,920 Speaker 9: in the company, So they're getting the same sort of 151 00:07:31,960 --> 00:07:34,600 Speaker 9: read on the economy on a real time basis that 152 00:07:34,640 --> 00:07:38,080 Speaker 9: the FED presidents get by talking to CEOs. 153 00:07:38,680 --> 00:07:39,200 Speaker 8: All the FED. 154 00:07:39,200 --> 00:07:42,160 Speaker 9: Banks do surveys on a regular basis of companies in 155 00:07:42,200 --> 00:07:46,239 Speaker 9: their in their districts, and you know, that's that's. 156 00:07:46,080 --> 00:07:48,559 Speaker 8: What the job of an analyst on Wall Street. 157 00:07:48,880 --> 00:07:51,400 Speaker 9: So I think everybody kind of has the same information, 158 00:07:51,520 --> 00:07:55,440 Speaker 9: but they have different motivations. The markets are looking for 159 00:07:55,520 --> 00:07:57,080 Speaker 9: ways to make more money. 160 00:07:57,160 --> 00:07:59,160 Speaker 8: Well, the FED is looking at. 161 00:07:59,680 --> 00:08:02,720 Speaker 9: Was looking at inflation alone and now they're looking at 162 00:08:02,800 --> 00:08:03,920 Speaker 9: both sides of their mandate. 163 00:08:04,200 --> 00:08:07,200 Speaker 5: Right, So I mean again, if you step back, here 164 00:08:07,320 --> 00:08:09,679 Speaker 5: is there when you talk to people, Michael, your sources, 165 00:08:09,840 --> 00:08:13,600 Speaker 5: where are we in just the recession talk that gee, 166 00:08:13,640 --> 00:08:16,520 Speaker 5: maybe the Fed's too late, and in fact, you got 167 00:08:16,560 --> 00:08:19,320 Speaker 5: to pull this recession talk back onto the table. It's 168 00:08:19,320 --> 00:08:21,239 Speaker 5: been kind of off the table for a while. 169 00:08:21,320 --> 00:08:21,480 Speaker 2: Now. 170 00:08:21,720 --> 00:08:23,760 Speaker 5: Where are we in terms of timing of the FED 171 00:08:23,840 --> 00:08:25,680 Speaker 5: and what it means for the US economy. 172 00:08:26,080 --> 00:08:29,400 Speaker 9: Almost everybody's cut back their recession forecasts. There are some 173 00:08:29,480 --> 00:08:32,600 Speaker 9: people out there who well, there's always the. 174 00:08:32,640 --> 00:08:33,760 Speaker 8: Stopped clock, folks. 175 00:08:33,840 --> 00:08:36,400 Speaker 9: You know, at some point we're going to have a recession. 176 00:08:36,800 --> 00:08:39,559 Speaker 9: And then there are people who think that we are 177 00:08:39,600 --> 00:08:45,360 Speaker 9: going to we might have a recession because of previous 178 00:08:45,400 --> 00:08:48,160 Speaker 9: recession indicators that don't seem to be working. This time, 179 00:08:48,400 --> 00:08:52,200 Speaker 9: and chief among those is the inverted yield curve story. 180 00:08:52,640 --> 00:08:55,880 Speaker 9: So when you look at the rest of the numbers, 181 00:08:55,920 --> 00:08:59,000 Speaker 9: and things have definitely slowed, but they haven't gone into recession. Now, 182 00:08:59,040 --> 00:09:02,120 Speaker 9: the biggest thing about recess is it's a confidence matter. 183 00:09:03,240 --> 00:09:04,840 Speaker 8: You don't have a recession. 184 00:09:06,800 --> 00:09:09,760 Speaker 9: When you go to recession, people stop spending and companies 185 00:09:09,760 --> 00:09:13,720 Speaker 9: stop spending because they have lost confidence in their ability 186 00:09:14,160 --> 00:09:17,120 Speaker 9: to be able to pay for things going forward. And 187 00:09:17,960 --> 00:09:22,360 Speaker 9: at this point that doesn't seem to be on anybody's mind. 188 00:09:22,720 --> 00:09:26,480 Speaker 9: We'll fly out tomorrow what the latest Michigan confidence numbers are. 189 00:09:26,559 --> 00:09:30,079 Speaker 9: But while those have been down some, they're not down 190 00:09:30,160 --> 00:09:35,319 Speaker 9: in recessionary territory. And businesses aren't saying we're going into recession. 191 00:09:36,080 --> 00:09:39,920 Speaker 9: So at this point it might take some external factor, 192 00:09:40,480 --> 00:09:43,559 Speaker 9: some geopolitical thing could destroy confidence. 193 00:09:43,960 --> 00:09:45,440 Speaker 8: After nine to eleven yesterday, I. 194 00:09:45,480 --> 00:09:51,480 Speaker 9: Remember what happened then, but people don't really see it 195 00:09:51,480 --> 00:09:53,200 Speaker 9: and the FED doesn't see it happening. 196 00:09:53,240 --> 00:09:56,080 Speaker 5: Here's my recession data point that I sent to Tom 197 00:09:56,160 --> 00:09:59,720 Speaker 5: Kinyesus yesterday afternoon around lunchtime, walking from the Bloomberg headquarters 198 00:09:59,720 --> 00:10:02,520 Speaker 5: and le Avenue over to the park. Beautiful day walk 199 00:10:02,520 --> 00:10:06,280 Speaker 5: around Central Park, sixtieth Street, a bunch of swanky restaurants 200 00:10:06,320 --> 00:10:10,920 Speaker 5: with outdoor seating packed I mean overflowing pack for lunch. 201 00:10:11,760 --> 00:10:13,920 Speaker 5: So I'm like a guy sent Tom a message. I'm like, 202 00:10:14,320 --> 00:10:16,480 Speaker 5: I don't see a sload on here on thest. Sixtieth Street. 203 00:10:17,360 --> 00:10:18,520 Speaker 6: That's just that, and that's. 204 00:10:18,360 --> 00:10:21,280 Speaker 2: Also tourists and also businesses. That's definitely a combo. Hey, Mike, 205 00:10:21,320 --> 00:10:22,560 Speaker 2: thanks lot, really appreciate it. 206 00:10:23,920 --> 00:10:27,800 Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live 207 00:10:27,880 --> 00:10:30,599 Speaker 1: weekdays at ten am Eastern on Apple car Playing and 208 00:10:30,720 --> 00:10:33,560 Speaker 1: broud Otto with the Bloomberg Business app. Listen on demand 209 00:10:33,640 --> 00:10:37,280 Speaker 1: wherever you get your podcasts, or watch us live on YouTube. 210 00:10:39,160 --> 00:10:41,280 Speaker 5: Alex Deal Paul Sweeney live here in our Bloomberg Dinner 211 00:10:41,280 --> 00:10:44,000 Speaker 5: at a broker studio. We're streaming live on YouTube as well, 212 00:10:44,120 --> 00:10:46,520 Speaker 5: So check us out there search Bloomberg Podcast and that's 213 00:10:46,559 --> 00:10:48,800 Speaker 5: where you will find us. One of the questions I 214 00:10:48,840 --> 00:10:51,920 Speaker 5: think a lot of investors have, Okay, the economy is slowing. 215 00:10:52,000 --> 00:10:54,640 Speaker 5: I get that, is that kind of a normalized slowing 216 00:10:54,760 --> 00:10:56,520 Speaker 5: or is it something more than that? So let's check 217 00:10:56,559 --> 00:10:58,560 Speaker 5: in with somebody who has some of these who thinks 218 00:10:58,559 --> 00:11:00,520 Speaker 5: about some of the same things. I believe is rep 219 00:11:00,720 --> 00:11:03,760 Speaker 5: fixed income portfolio manager for JP Morgan Asset Management, joining 220 00:11:03,840 --> 00:11:06,640 Speaker 5: us via zoom from the Big Apple of New York City. 221 00:11:06,720 --> 00:11:08,800 Speaker 5: So when you look at some of the economic data here, 222 00:11:09,679 --> 00:11:11,599 Speaker 5: is it concerning to you the rate at which the 223 00:11:11,640 --> 00:11:14,160 Speaker 5: economy is slowing or is it seemed something more normalized 224 00:11:14,200 --> 00:11:14,319 Speaker 5: to you? 225 00:11:15,480 --> 00:11:18,280 Speaker 10: Hi, Paul, Thanks for having me. So that's the key question. 226 00:11:19,040 --> 00:11:22,000 Speaker 10: And as we're contemplating FED easies, I think it becomes 227 00:11:22,040 --> 00:11:25,240 Speaker 10: important what level of interest rates would be contingent or 228 00:11:25,280 --> 00:11:27,880 Speaker 10: would be consistent with the soft landing. You know, I 229 00:11:27,920 --> 00:11:30,760 Speaker 10: think that the base of deceleration does concern me a 230 00:11:30,840 --> 00:11:33,680 Speaker 10: little bit. Now, if the FED can aggressively take greates 231 00:11:33,840 --> 00:11:38,160 Speaker 10: to neutral or accommodative territory, maybe that pace of deceleration 232 00:11:38,280 --> 00:11:40,960 Speaker 10: can slow down. But I still think the data mixed. 233 00:11:41,080 --> 00:11:42,959 Speaker 10: You look at the layoff numbers, they are still low, 234 00:11:43,000 --> 00:11:45,440 Speaker 10: they're not consistent with the recession. But then I look 235 00:11:45,480 --> 00:11:48,040 Speaker 10: at other things. I look at, you know, the quits rate, 236 00:11:48,679 --> 00:11:51,679 Speaker 10: the fact that the hiring rate has slowed down on 237 00:11:52,280 --> 00:11:55,839 Speaker 10: the small business. You know, intent to hire has been 238 00:11:55,920 --> 00:11:58,840 Speaker 10: slowing now for a while. The housing market's a little frozen, 239 00:11:59,240 --> 00:12:03,160 Speaker 10: and this bace of decline that you talked about. I 240 00:12:03,240 --> 00:12:05,760 Speaker 10: think you could argue it was normalization six months ago. 241 00:12:06,280 --> 00:12:08,160 Speaker 10: Now it's making me a little bit more nervous that 242 00:12:08,240 --> 00:12:10,319 Speaker 10: this might be something more. But I don't want to 243 00:12:10,320 --> 00:12:12,120 Speaker 10: say that this is a recession. I think we're iner 244 00:12:12,280 --> 00:12:15,080 Speaker 10: soft landing right now. The question is how long can 245 00:12:15,200 --> 00:12:18,200 Speaker 10: it stay and can the FED cut rates quickly enough 246 00:12:18,440 --> 00:12:20,360 Speaker 10: to allow that soft landing to continue. 247 00:12:20,440 --> 00:12:22,520 Speaker 2: So that's sort of what I was asking Mike about, 248 00:12:22,559 --> 00:12:24,280 Speaker 2: right because there is a school thought that they cut 249 00:12:24,320 --> 00:12:26,600 Speaker 2: fifty next week, it's going to mean things are really bad, 250 00:12:27,120 --> 00:12:28,719 Speaker 2: or it could also mean that they don't want it 251 00:12:28,800 --> 00:12:30,520 Speaker 2: to get really bad and that that was sort of 252 00:12:30,600 --> 00:12:31,240 Speaker 2: pre emptied. 253 00:12:31,600 --> 00:12:34,480 Speaker 10: What do you think. I think it's how they message 254 00:12:34,480 --> 00:12:36,320 Speaker 10: a fifty. If they do fifty, I think they might 255 00:12:36,360 --> 00:12:38,920 Speaker 10: go twenty five. But if they do go fifty, I 256 00:12:39,000 --> 00:12:42,560 Speaker 10: think suggesting that this is risk management front loading. Governor 257 00:12:42,600 --> 00:12:45,600 Speaker 10: Waller last week brought up front loading for the first 258 00:12:45,679 --> 00:12:47,719 Speaker 10: time any FED official has brought it up. On the 259 00:12:47,880 --> 00:12:50,160 Speaker 10: easing side, I think it makes a lot of sense. 260 00:12:50,640 --> 00:12:54,439 Speaker 10: The risks are clearly skewed to the downside. Six months ago, 261 00:12:54,520 --> 00:12:57,160 Speaker 10: we were saying, well, risks are balanced, inflation might be high, 262 00:12:57,640 --> 00:13:01,400 Speaker 10: inflation's not a concern anymore road based decline in inflation, 263 00:13:01,520 --> 00:13:05,160 Speaker 10: notwithstanding monthly volatility. It's the growth side, is the labor 264 00:13:05,240 --> 00:13:07,880 Speaker 10: side that's concerning. So if the Fed spins a fifty 265 00:13:07,960 --> 00:13:10,880 Speaker 10: basis point, thud as being front loading. We're trying to 266 00:13:10,960 --> 00:13:14,240 Speaker 10: get to neutral faster. And look at the starting point, 267 00:13:14,320 --> 00:13:16,600 Speaker 10: we're at five and a half on the fund's rate 268 00:13:16,800 --> 00:13:19,080 Speaker 10: or real rates, given inflation is running about two percent, 269 00:13:19,400 --> 00:13:22,240 Speaker 10: that's a very restrictive level of policy. So it's how 270 00:13:22,280 --> 00:13:24,280 Speaker 10: they spin it. I don't think a fifty will be 271 00:13:24,400 --> 00:13:27,319 Speaker 10: viewed negatively if the Fed says we're just trying to 272 00:13:27,400 --> 00:13:30,080 Speaker 10: get ahead of the curve or not be behind the curve. 273 00:13:30,559 --> 00:13:32,760 Speaker 10: But on the same bend, I think if they go 274 00:13:32,920 --> 00:13:35,079 Speaker 10: twenty five and we get the dot lot, and the 275 00:13:35,160 --> 00:13:38,880 Speaker 10: dot lot suggests that they'll get to neutral sometime next year, 276 00:13:39,440 --> 00:13:41,760 Speaker 10: I think they can finish the message and say, look, 277 00:13:41,800 --> 00:13:45,680 Speaker 10: we've seen the market, we've seen the economy. We're responding quickly. 278 00:13:45,840 --> 00:13:47,760 Speaker 10: We just think we can start at twenty five, but 279 00:13:48,400 --> 00:13:50,439 Speaker 10: if things slow down faster, we can go fifty. I 280 00:13:50,480 --> 00:13:53,240 Speaker 10: think that message the market will need to hear. Otherwise, 281 00:13:53,320 --> 00:13:55,720 Speaker 10: get ready for a lot of tightening in financial conditions. 282 00:13:56,360 --> 00:13:59,439 Speaker 5: So how does one structure or portfolio given kind of 283 00:13:59,480 --> 00:13:59,959 Speaker 5: that background. 284 00:14:01,880 --> 00:14:03,440 Speaker 10: You know, I would say fixed incer makes a lot 285 00:14:03,480 --> 00:14:05,920 Speaker 10: of sense. We've been talking now for a year. When 286 00:14:05,960 --> 00:14:07,839 Speaker 10: does the FED start to cut rates. They've told you 287 00:14:07,880 --> 00:14:10,080 Speaker 10: they're going to cut rates next week. We're debating twenty 288 00:14:10,120 --> 00:14:14,320 Speaker 10: five or fifty, but it's starting. Lock in yields. I mean, 289 00:14:14,360 --> 00:14:16,360 Speaker 10: I think the front end look very attractive, and the 290 00:14:16,400 --> 00:14:20,120 Speaker 10: FED might have hiked you're getting five percent in cash. Well, 291 00:14:20,120 --> 00:14:22,080 Speaker 10: now if you're getting six percent in a five year 292 00:14:22,120 --> 00:14:25,560 Speaker 10: bond or seven percent if you move into high quality, 293 00:14:25,640 --> 00:14:29,240 Speaker 10: high yield, I would say lock in yields, and I 294 00:14:29,360 --> 00:14:32,440 Speaker 10: would argue for your end of cycle. We can debate 295 00:14:32,520 --> 00:14:35,640 Speaker 10: how long that end can last, but active management makes sense. 296 00:14:35,840 --> 00:14:37,960 Speaker 10: So one of the things we're doing, we're still buying 297 00:14:38,320 --> 00:14:41,280 Speaker 10: high quality spread product. We think fundamentals are strong in 298 00:14:41,400 --> 00:14:44,640 Speaker 10: many sectors, so not just concentrated in any one sector. 299 00:14:44,840 --> 00:14:47,760 Speaker 10: But we're also buying duration. We're buying ten year treasuries, 300 00:14:47,760 --> 00:14:50,560 Speaker 10: We're putting on steepness. What if the economy does slow 301 00:14:50,600 --> 00:14:53,400 Speaker 10: down faster and the FED lags. You know, the FED 302 00:14:53,480 --> 00:14:55,280 Speaker 10: can cut rates, but it takes a while for that 303 00:14:55,400 --> 00:14:59,000 Speaker 10: to show up in the economy, interstrates will be a hedge. 304 00:14:59,320 --> 00:15:02,720 Speaker 10: So I would say that hedged portfolio ownspread, product, lock 305 00:15:02,800 --> 00:15:05,480 Speaker 10: and yield, buy some duration or or put on gas 306 00:15:05,520 --> 00:15:08,200 Speaker 10: stepnas to try and hedge that downside scenario. 307 00:15:08,720 --> 00:15:10,200 Speaker 2: Just some breaking news. We want to bring it to 308 00:15:10,400 --> 00:15:15,400 Speaker 2: our listeners. US sanctions Venezuela Court chief and election officials. 309 00:15:15,680 --> 00:15:19,520 Speaker 2: This is over that July twenty eighth presidential election that 310 00:15:19,760 --> 00:15:23,000 Speaker 2: is questioning that many like the US, are questioning the 311 00:15:23,080 --> 00:15:28,360 Speaker 2: legitimacy of that election that elevated Maduro again to the 312 00:15:28,640 --> 00:15:34,760 Speaker 2: head seat there. Just earlier today, Spain voted to recognize 313 00:15:34,800 --> 00:15:40,720 Speaker 2: the opposition leader a Mundo Gonzalez, challenging Nicholas's Maduro's election 314 00:15:40,960 --> 00:15:44,040 Speaker 2: in July, and Venezuela was not happy about that either, 315 00:15:44,200 --> 00:15:49,520 Speaker 2: so US sanctioning Venezuelan Court chief and election officials. Prio, 316 00:15:49,720 --> 00:15:52,680 Speaker 2: what's the question? How do you look at neutral? So 317 00:15:52,800 --> 00:15:55,160 Speaker 2: like we can obsess over next week for sure, what 318 00:15:55,280 --> 00:15:58,560 Speaker 2: to do short term, but what do you do longer 319 00:15:58,680 --> 00:16:00,640 Speaker 2: term if we don't know what is going to be? 320 00:16:00,720 --> 00:16:03,320 Speaker 2: What if it's four, is it two or four? That's 321 00:16:03,360 --> 00:16:05,400 Speaker 2: a huge difference it. 322 00:16:05,560 --> 00:16:07,520 Speaker 10: Is now you're at five and a half right now, 323 00:16:07,880 --> 00:16:10,000 Speaker 10: So I think we have time to figure out neutral. 324 00:16:11,200 --> 00:16:14,520 Speaker 10: You know, and the fact that growth is slowing despite 325 00:16:14,600 --> 00:16:17,960 Speaker 10: all the fiscal easing, despite the fact that financial conditions 326 00:16:18,000 --> 00:16:21,160 Speaker 10: are easy, tells you that monetary policy is restrictive. So 327 00:16:21,440 --> 00:16:23,480 Speaker 10: if I go back to basics and I look at 328 00:16:23,560 --> 00:16:27,040 Speaker 10: our star estimates, they're all over the place, somewhere between 329 00:16:27,200 --> 00:16:30,400 Speaker 10: zero and one percent, inflation close to two percent, so 330 00:16:30,920 --> 00:16:33,440 Speaker 10: I come down to around three percent with a wide 331 00:16:33,560 --> 00:16:35,680 Speaker 10: error band, maybe it's two and a half to three 332 00:16:35,720 --> 00:16:38,080 Speaker 10: and a half. But I think this is why the 333 00:16:38,200 --> 00:16:41,840 Speaker 10: FED might have the luxury near term. They can cut 334 00:16:41,840 --> 00:16:44,200 Speaker 10: about one hundred basis points and see how the economy 335 00:16:44,280 --> 00:16:47,000 Speaker 10: is responding. And it's not just neutral rate. It's also 336 00:16:47,080 --> 00:16:50,720 Speaker 10: availability of credit, it's financial conditions, it's everything else that 337 00:16:50,880 --> 00:16:54,160 Speaker 10: go into conditions that help the economy, and then they 338 00:16:54,240 --> 00:16:56,640 Speaker 10: can decide are we're getting close to neutral. So I 339 00:16:56,720 --> 00:16:59,800 Speaker 10: think they can finish that neutral. It's unobservable to your point, 340 00:17:00,000 --> 00:17:02,640 Speaker 10: it's extremely important and we can't observe it, but we 341 00:17:02,760 --> 00:17:05,960 Speaker 10: can look at data and see how it's responding to 342 00:17:06,520 --> 00:17:09,000 Speaker 10: interest rates. But I would say somewhere in that three percent. 343 00:17:09,160 --> 00:17:11,800 Speaker 10: But I think what's fascinating is the market's not pricing 344 00:17:11,840 --> 00:17:15,119 Speaker 10: and accommodative despite the fact that the recession talk is 345 00:17:15,200 --> 00:17:18,600 Speaker 10: in the air. The end point after all the rate cuts, 346 00:17:18,680 --> 00:17:21,240 Speaker 10: So look at the totality of rate cuts is around 347 00:17:21,280 --> 00:17:24,240 Speaker 10: three percent. So the market's essentially telling you the Fed's 348 00:17:24,280 --> 00:17:25,800 Speaker 10: going to get too neutral and that's going to be 349 00:17:25,960 --> 00:17:28,800 Speaker 10: enough to keep the soft landing going. I have a 350 00:17:28,840 --> 00:17:30,880 Speaker 10: bit of a question there. If the lags are long, 351 00:17:31,119 --> 00:17:33,320 Speaker 10: or the FED is slow, or the economy is actually 352 00:17:33,359 --> 00:17:37,400 Speaker 10: decelerating faster in terms of underlying maybe the FED will 353 00:17:37,440 --> 00:17:40,080 Speaker 10: have to go into accommodative territory, so below three percent. 354 00:17:40,440 --> 00:17:42,120 Speaker 10: But I think we're going to figure that out as 355 00:17:42,240 --> 00:17:42,840 Speaker 10: time goes on. 356 00:17:43,160 --> 00:17:44,679 Speaker 5: All right, Prea, thank you so much for joining us. 357 00:17:44,720 --> 00:17:45,280 Speaker 6: Really appreciate it. 358 00:17:45,320 --> 00:17:48,760 Speaker 5: Pre Israe Fixed Income portfolio Manager, JP Morgan Asset Management 359 00:17:48,840 --> 00:17:50,120 Speaker 5: in New York City. 360 00:17:51,760 --> 00:17:55,600 Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live 361 00:17:55,720 --> 00:17:58,639 Speaker 1: weekdays at ten am Eastern on Apple car Play and 362 00:17:58,800 --> 00:18:02,000 Speaker 1: Android Auto with them Blomberg Business. You can also listen 363 00:18:02,160 --> 00:18:05,240 Speaker 1: live on Amazon Alexa from our flagship New York station 364 00:18:05,640 --> 00:18:08,359 Speaker 1: Just Say Alexa playing Bloomberg eleven thirty. 365 00:18:10,040 --> 00:18:12,000 Speaker 5: Well, some of the news on the Bloomberg News wire 366 00:18:12,040 --> 00:18:16,240 Speaker 5: that's getting a lot of readership today is about two 367 00:18:16,480 --> 00:18:19,240 Speaker 5: of Wall Street's largest investment banks were rolling out measures 368 00:18:19,280 --> 00:18:23,040 Speaker 5: that may ease junior bankers workloads amid complaints across the 369 00:18:23,119 --> 00:18:27,000 Speaker 5: industry that weekly hours are increasingly creeping past one hundred 370 00:18:27,119 --> 00:18:30,000 Speaker 5: hours per week. Shreadanata Rogen joins us. He covers all 371 00:18:30,000 --> 00:18:32,320 Speaker 5: the big investment banks. He's a senior financial reporter for 372 00:18:32,400 --> 00:18:34,840 Speaker 5: Bloomberg News. He joins us here in our studio, shre So, 373 00:18:35,600 --> 00:18:38,399 Speaker 5: I guess bankers they've always been known, particularly the junior bankers, 374 00:18:38,480 --> 00:18:41,600 Speaker 5: for working long hours. And I know that kind of 375 00:18:42,280 --> 00:18:45,880 Speaker 5: during the financial I mean, you know, during the pandemic, 376 00:18:46,000 --> 00:18:49,359 Speaker 5: that became a recurring issue of concern. Where are we 377 00:18:49,440 --> 00:18:51,800 Speaker 5: today in terms of having to try to ease some 378 00:18:51,880 --> 00:18:53,520 Speaker 5: of the workload from some of those junior bankers. 379 00:18:53,720 --> 00:18:55,680 Speaker 11: I mean, what you're saying is dejvo all over again. 380 00:18:55,800 --> 00:18:55,879 Speaker 10: Right. 381 00:18:56,359 --> 00:18:58,560 Speaker 11: It just feels like we come back to the same 382 00:18:58,640 --> 00:19:01,640 Speaker 11: topic every few years. Not a surprise that it's often 383 00:19:01,720 --> 00:19:03,760 Speaker 11: tied to the time than we are starting to see 384 00:19:03,800 --> 00:19:06,600 Speaker 11: an upswinging deals. The last time this did become a 385 00:19:06,640 --> 00:19:09,320 Speaker 11: big issue was back during the pandemic. Remember the phase 386 00:19:09,880 --> 00:19:12,720 Speaker 11: probably a few months after the pandemic, when companies suddenly 387 00:19:12,840 --> 00:19:16,080 Speaker 11: needed this massive funding needs. All the investment banking firms 388 00:19:16,119 --> 00:19:20,200 Speaker 11: were working overtime on that. That turned into deal making opportunities. 389 00:19:20,240 --> 00:19:22,200 Speaker 11: And then you had the twenty twenty one s backpoom 390 00:19:22,240 --> 00:19:26,679 Speaker 11: and whatnot, and that viral presentation out out of Golden 391 00:19:26,760 --> 00:19:29,200 Speaker 11: Sacks and those junior bankers that really caused the stir 392 00:19:29,280 --> 00:19:33,040 Speaker 11: in the industry. What happened back then you had pay 393 00:19:33,160 --> 00:19:35,160 Speaker 11: rises across. 394 00:19:35,480 --> 00:19:36,399 Speaker 8: All of Wall Street. 395 00:19:36,440 --> 00:19:38,600 Speaker 11: All the firms were raising their base salary for their 396 00:19:38,680 --> 00:19:41,879 Speaker 11: junior bankers. And these are kids right out of college 397 00:19:41,920 --> 00:19:44,159 Speaker 11: who in their first, second, third year are standing to 398 00:19:44,200 --> 00:19:46,359 Speaker 11: make two hundred, three hundred thousand dollars at these firms. 399 00:19:47,359 --> 00:19:51,320 Speaker 11: It's become part of the conversation again a because there 400 00:19:51,359 --> 00:19:53,320 Speaker 11: has been an uptakeing deal after a bit of a 401 00:19:53,400 --> 00:19:56,159 Speaker 11: lull for a year eighteen months, and then there was 402 00:19:56,200 --> 00:19:58,879 Speaker 11: an unfortunate incident at Bank of America where one of 403 00:19:58,880 --> 00:20:01,920 Speaker 11: the junior investment bankers died, and people have tried to 404 00:20:02,600 --> 00:20:06,440 Speaker 11: draw a connection between the reason for his death with 405 00:20:06,760 --> 00:20:08,600 Speaker 11: the workload that he had. We don't know if there 406 00:20:08,640 --> 00:20:10,760 Speaker 11: can be a direct connection established, but at least that 407 00:20:10,800 --> 00:20:14,720 Speaker 11: has sparked conversation again, and you're seeing some of the results. 408 00:20:14,720 --> 00:20:17,719 Speaker 11: The Wall Street Journal was just the latest news outlet 409 00:20:17,800 --> 00:20:20,600 Speaker 11: to report on this fact that Bloomberg and everyone else 410 00:20:20,640 --> 00:20:23,600 Speaker 11: has been talking about for a few months now. Everyone's 411 00:20:23,680 --> 00:20:27,119 Speaker 11: talking about these rising workloads. There is tension and strain, 412 00:20:27,520 --> 00:20:29,480 Speaker 11: and banks are being forced to respond. Here you have 413 00:20:29,600 --> 00:20:33,399 Speaker 11: JP Morgan coming out with sort of fixed, trying to 414 00:20:33,520 --> 00:20:36,720 Speaker 11: fix some hours for its junior bankers for the first 415 00:20:36,760 --> 00:20:38,919 Speaker 11: time ever. Bank of America already had that, and it's 416 00:20:38,960 --> 00:20:42,760 Speaker 11: trying to do a better job of enforcement. When you 417 00:20:42,920 --> 00:20:46,280 Speaker 11: read the fine print zone when they talk about some exceptions, 418 00:20:46,320 --> 00:20:49,159 Speaker 11: when they talk about well except when there are live deals, 419 00:20:49,560 --> 00:20:51,399 Speaker 11: then you have to sit back and wonder. It's not 420 00:20:51,600 --> 00:20:54,119 Speaker 11: that people were logging eighty hour weeks and ninety hour 421 00:20:54,160 --> 00:20:56,160 Speaker 11: weeks and one hundred hour weeks just twiddling their thumbs. 422 00:20:56,160 --> 00:20:58,560 Speaker 11: They were probably doing it when there were live deals. 423 00:20:58,720 --> 00:21:01,000 Speaker 11: So will this really change anything or will we be 424 00:21:01,119 --> 00:21:03,199 Speaker 11: having the same conversation two years from now. 425 00:21:03,359 --> 00:21:05,280 Speaker 2: Well, also, I was reading I forget where I read it, 426 00:21:05,320 --> 00:21:09,480 Speaker 2: but that higher banking officials will just tell their junior 427 00:21:09,520 --> 00:21:11,920 Speaker 2: bankers like just don't log the hours like work. But 428 00:21:12,000 --> 00:21:14,159 Speaker 2: don't log it like you get around the requirements. 429 00:21:14,240 --> 00:21:17,720 Speaker 11: No, and that's been a problem. Either people are working 430 00:21:17,880 --> 00:21:20,000 Speaker 11: longer than the hours that they're supposed to and just 431 00:21:20,160 --> 00:21:22,680 Speaker 11: not to not get their bosses in trouble, which is 432 00:21:22,720 --> 00:21:26,040 Speaker 11: a thing, they will try and log less than the 433 00:21:26,400 --> 00:21:28,680 Speaker 11: number of hours they're working. In some cases, junior bankers 434 00:21:28,680 --> 00:21:30,679 Speaker 11: will feel that they have to log more ours than 435 00:21:30,720 --> 00:21:33,000 Speaker 11: they're working so that the very precious little spare time 436 00:21:33,080 --> 00:21:35,840 Speaker 11: that they do have does not get allocated under some work. 437 00:21:35,880 --> 00:21:37,880 Speaker 11: But we have to take a step back and wonder, 438 00:21:37,920 --> 00:21:39,600 Speaker 11: and this is this has been a conversation in the 439 00:21:39,800 --> 00:21:43,240 Speaker 11: in the in the industry for three four decades, five decades, 440 00:21:43,280 --> 00:21:47,200 Speaker 11: maybe longer. Now there is a cultural shift that needs 441 00:21:47,280 --> 00:21:51,160 Speaker 11: to take place, right, can't you can't have There has 442 00:21:51,240 --> 00:21:55,200 Speaker 11: to be a better utilization of these hours. Oftentimes you 443 00:21:55,440 --> 00:22:00,119 Speaker 11: have junior bankers responding to requests from their bosses and 444 00:22:00,160 --> 00:22:02,880 Speaker 11: then not hearing back till until they come back from 445 00:22:02,920 --> 00:22:06,399 Speaker 11: their dinner with their client. Notice something minor or major, 446 00:22:06,480 --> 00:22:09,160 Speaker 11: but suddenly say, fine, you know I might be looking 447 00:22:09,200 --> 00:22:11,120 Speaker 11: at this at nine thirty pm, but now that I'm 448 00:22:11,160 --> 00:22:13,360 Speaker 11: responding to you, I want the fix in the next 449 00:22:13,440 --> 00:22:15,280 Speaker 11: two us. The next three US, the next four US. 450 00:22:16,160 --> 00:22:19,399 Speaker 11: That cultural change is more important in figuring out how 451 00:22:19,480 --> 00:22:21,600 Speaker 11: to cap these hours out. I don't know how you 452 00:22:21,760 --> 00:22:22,119 Speaker 11: solve for. 453 00:22:22,160 --> 00:22:24,480 Speaker 5: That easily, but I'll tell you technology has changed the 454 00:22:24,560 --> 00:22:26,680 Speaker 5: game because part of the reason you're in the office 455 00:22:26,680 --> 00:22:28,520 Speaker 5: because you had no other resources. Yet if you wanted 456 00:22:28,560 --> 00:22:30,159 Speaker 5: to fix that thing in three hours, you had to 457 00:22:30,160 --> 00:22:31,359 Speaker 5: be in the office. Now I can do it from 458 00:22:31,440 --> 00:22:33,400 Speaker 5: I can do it for my phone at the Yankee Game. 459 00:22:33,600 --> 00:22:37,240 Speaker 5: Shriana rogens, senior financial reporter for Bloomberg News, a great 460 00:22:37,640 --> 00:22:40,920 Speaker 5: article today on junior bankers on Wall Street. They're working 461 00:22:40,960 --> 00:22:41,440 Speaker 5: pretty hard. 462 00:22:43,000 --> 00:22:46,840 Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live 463 00:22:46,960 --> 00:22:50,480 Speaker 1: weekdays at ten am Eastern on applecar Play and Android 464 00:22:50,520 --> 00:22:53,240 Speaker 1: Otto with the Bloomberg Business App. You can also listen 465 00:22:53,400 --> 00:22:56,480 Speaker 1: live on Amazon Alexa from our flagship New York station. 466 00:22:56,880 --> 00:22:59,600 Speaker 1: Just say Alexa, play Bloomberg eleven thirty. 467 00:23:01,400 --> 00:23:04,439 Speaker 2: So here's a company that I find is really interesting 468 00:23:04,480 --> 00:23:06,440 Speaker 2: and I feel like it's an important conversation and want 469 00:23:06,480 --> 00:23:09,440 Speaker 2: to discuss. And the company is Calumet Specialty Products. Ticker 470 00:23:09,520 --> 00:23:12,440 Speaker 2: is CLMT. It trades in the New York Stock Exchange. 471 00:23:12,440 --> 00:23:15,200 Speaker 2: It trades about sixteen dollars and forty four cents a share. 472 00:23:15,280 --> 00:23:17,879 Speaker 2: It's a one billion dollar company. It's been around for 473 00:23:18,000 --> 00:23:20,440 Speaker 2: a very, very long time. It's been growing through M 474 00:23:20,480 --> 00:23:22,119 Speaker 2: and A for the past thirty years. They have a 475 00:23:22,200 --> 00:23:25,840 Speaker 2: ton of assets. They make things like vasoline WT forty 476 00:23:26,119 --> 00:23:29,040 Speaker 2: tire shine. They take oil and they make the products 477 00:23:29,160 --> 00:23:32,920 Speaker 2: that you use every day to function. Three years ago, though, 478 00:23:33,400 --> 00:23:36,760 Speaker 2: one one asset was turned into something a little bit different. 479 00:23:37,320 --> 00:23:40,879 Speaker 2: It's their Montana Refinery and they now use that to 480 00:23:41,000 --> 00:23:45,440 Speaker 2: process things like vegetable oil, canola oil, corn oil to 481 00:23:45,600 --> 00:23:49,320 Speaker 2: make sustainable aviation fuel. That's kind of interesting, so I 482 00:23:49,400 --> 00:23:53,120 Speaker 2: want to talk about it. CEO Todd Browman joins us. Now, hey, Todd, 483 00:23:53,440 --> 00:23:55,280 Speaker 2: you make all the stuff that we use every day. 484 00:23:55,640 --> 00:23:58,080 Speaker 2: Walk us through your decision though, to spend all this 485 00:23:58,160 --> 00:24:00,879 Speaker 2: time and money on the Montana refinery to make staff. 486 00:24:02,280 --> 00:24:05,359 Speaker 7: Yeah, you bet first. First Alex Paul, thanks, thanks for 487 00:24:05,440 --> 00:24:07,919 Speaker 7: having us today. I'm super excited. 488 00:24:07,560 --> 00:24:08,240 Speaker 8: To be here with you. 489 00:24:10,000 --> 00:24:14,200 Speaker 7: Look, we're we're an entrepreneurial and innovated company at our heart. 490 00:24:14,240 --> 00:24:16,400 Speaker 7: That's that's what we've been, you know, for the last 491 00:24:16,480 --> 00:24:19,320 Speaker 7: thirty years. And we saw an opportunity. We had a 492 00:24:19,359 --> 00:24:24,560 Speaker 7: great facility that was making specialty asphalt in Great Falls, 493 00:24:24,640 --> 00:24:27,960 Speaker 7: Montana a few years ago, early on in kind of 494 00:24:28,040 --> 00:24:30,680 Speaker 7: the COVID days, actually in twenty twenty, we kind of 495 00:24:30,680 --> 00:24:33,760 Speaker 7: looked at the environment and said, hey, this facility is 496 00:24:33,800 --> 00:24:36,640 Speaker 7: in exactly the right place at exactly the right time. 497 00:24:37,920 --> 00:24:41,000 Speaker 7: You know, arguably the fastest growing area in all of 498 00:24:41,160 --> 00:24:45,240 Speaker 7: energy is you know, sustainable aviation fuel, renewable diesel, and 499 00:24:45,760 --> 00:24:47,480 Speaker 7: we were a logistically advantaged facility. 500 00:24:47,600 --> 00:24:49,440 Speaker 3: We sit right on top of a whole bunch of 501 00:24:50,000 --> 00:24:50,960 Speaker 3: renewable feedstock. 502 00:24:51,040 --> 00:24:55,600 Speaker 7: We have direct access to California, British Columbia, Washington, Oregon, 503 00:24:55,680 --> 00:24:57,479 Speaker 7: a truck right away from from Canada. 504 00:24:57,560 --> 00:25:01,119 Speaker 3: So we looked at that opportunity and just said, hey, 505 00:25:01,480 --> 00:25:01,639 Speaker 3: you know. 506 00:25:01,760 --> 00:25:05,240 Speaker 7: We can make this conversion and turn something that's a 507 00:25:05,359 --> 00:25:10,159 Speaker 7: really nice niche specialty asphalt facility into a you know, 508 00:25:11,400 --> 00:25:13,640 Speaker 7: leader leader in sustainable aviation field. 509 00:25:13,640 --> 00:25:15,960 Speaker 3: In fact, we're the largest in the Western hemisphere. 510 00:25:16,000 --> 00:25:17,640 Speaker 7: And we'll keep saying that for a little bit longer, 511 00:25:18,040 --> 00:25:21,040 Speaker 7: but you know, just really excited about the business where 512 00:25:21,080 --> 00:25:24,440 Speaker 7: we're at in the growth trajectory of both that niche 513 00:25:24,480 --> 00:25:26,360 Speaker 7: of a business and Calium met as a whole. 514 00:25:27,800 --> 00:25:29,920 Speaker 2: So I guess the question becomes so here we go. 515 00:25:29,960 --> 00:25:32,600 Speaker 2: If we talked to like airline CEOs and they're like, yeah, yeah, 516 00:25:32,680 --> 00:25:35,040 Speaker 2: we totally want SAFF, but you know, it's kind of 517 00:25:35,080 --> 00:25:39,040 Speaker 2: expensive and or the supply is not really there. When 518 00:25:39,080 --> 00:25:42,040 Speaker 2: you decided to make this transformation, did you set up 519 00:25:42,160 --> 00:25:44,480 Speaker 2: long term contracts with an airline where they're going to 520 00:25:44,520 --> 00:25:46,240 Speaker 2: pay you a certain amount of money for your off 521 00:25:46,320 --> 00:25:48,400 Speaker 2: take and if so, how did that work? 522 00:25:49,400 --> 00:25:53,000 Speaker 7: Interesting question. So what we have is a massive amount 523 00:25:53,040 --> 00:25:56,920 Speaker 7: of flexibility. We can make renewable diesel or SAF And 524 00:25:57,160 --> 00:25:59,640 Speaker 7: obviously we talk a lot about SAFF because that's new 525 00:25:59,720 --> 00:26:02,639 Speaker 7: and you know, associated with a potential DOE loan, and 526 00:26:02,760 --> 00:26:06,480 Speaker 7: we have a large potential max SAFF expansion that will 527 00:26:06,520 --> 00:26:09,760 Speaker 7: take us from the largest producer of North America one 528 00:26:09,760 --> 00:26:11,879 Speaker 7: of the largest, not the largest in the world. So 529 00:26:12,080 --> 00:26:13,959 Speaker 7: so very excited about that. And Staff gets a lot 530 00:26:14,000 --> 00:26:18,200 Speaker 7: of coverage. But but really early on, you know, we 531 00:26:18,560 --> 00:26:22,560 Speaker 7: we initially launched with almost all renewable diesel, and we 532 00:26:22,640 --> 00:26:26,440 Speaker 7: were selling to you know, large blue chip companies and 533 00:26:26,800 --> 00:26:29,720 Speaker 7: and on the south side we're partnered with Shell, who's 534 00:26:29,760 --> 00:26:33,639 Speaker 7: one of the largest staff into wing fuelers there is. 535 00:26:34,040 --> 00:26:36,879 Speaker 7: So so what we do is we provide you know, 536 00:26:37,000 --> 00:26:40,080 Speaker 7: the s p K, which which Shell will then take 537 00:26:41,400 --> 00:26:44,680 Speaker 7: take all across the country even into even into. 538 00:26:44,560 --> 00:26:46,040 Speaker 3: Canada, you know, blend it. 539 00:26:46,160 --> 00:26:49,159 Speaker 7: They have the last mile logistics and then they actually 540 00:26:49,560 --> 00:26:52,159 Speaker 7: you know, serve the serve the airline, do the QC, 541 00:26:52,400 --> 00:26:56,159 Speaker 7: do the last mile terminaling, fueling at the facilities, all 542 00:26:56,240 --> 00:26:58,360 Speaker 7: of that and and sounds interesting, you know, it's it's 543 00:26:58,440 --> 00:27:01,440 Speaker 7: a it's such a high growth area that at this 544 00:27:01,560 --> 00:27:04,399 Speaker 7: point it's one airline, you know, one airport at a 545 00:27:04,520 --> 00:27:08,280 Speaker 7: time in converting because when you think about the complexities 546 00:27:08,359 --> 00:27:13,240 Speaker 7: that are involved and really changing the supply chain in 547 00:27:13,320 --> 00:27:16,600 Speaker 7: the fueling of something as sensitive as an important as 548 00:27:16,800 --> 00:27:18,919 Speaker 7: an airport, you want to make sure you have it right. 549 00:27:19,040 --> 00:27:21,800 Speaker 3: So it's really one airport at a time. We sell 550 00:27:21,880 --> 00:27:22,359 Speaker 3: to Shell. 551 00:27:22,880 --> 00:27:26,440 Speaker 7: Shell takes it to their facility, they blend it and 552 00:27:26,800 --> 00:27:30,040 Speaker 7: ultimately inject it into the you know, fuel the airplane. 553 00:27:30,359 --> 00:27:32,920 Speaker 5: Wow, it's just me and man, you weren't kidding, Todd. 554 00:27:33,040 --> 00:27:36,119 Speaker 5: Great Falls, Montana, Dude, that is up there. I mean 555 00:27:36,160 --> 00:27:39,160 Speaker 5: it's north of Yellowstone National Park. You're just a stone 556 00:27:39,200 --> 00:27:41,960 Speaker 5: stew from Canada, So I can't imagine that is just 557 00:27:42,080 --> 00:27:44,480 Speaker 5: extraordinary out there. Todd talk to us about like the 558 00:27:44,640 --> 00:27:46,520 Speaker 5: quality of the fuel. We were just talking to an 559 00:27:46,520 --> 00:27:48,680 Speaker 5: airline's analyst. It was just talking about, you know, the 560 00:27:49,280 --> 00:27:52,880 Speaker 5: need to get greater efficient engines from a fuel efficient perspective, 561 00:27:53,480 --> 00:27:57,400 Speaker 5: what's the quality and the performance of the sustainable aviation 562 00:27:57,840 --> 00:27:59,040 Speaker 5: fuel that you guys produce. 563 00:28:00,040 --> 00:28:02,840 Speaker 7: One of the things that's that's so beautiful about both 564 00:28:02,880 --> 00:28:06,520 Speaker 7: sustainble aviation fuel and renewable diesel is it's really a 565 00:28:06,640 --> 00:28:09,160 Speaker 7: drop in fuel. You know, there have been a lot 566 00:28:09,240 --> 00:28:14,000 Speaker 7: of technologies talked about to help with the energy transition, 567 00:28:14,640 --> 00:28:17,560 Speaker 7: and and a lot of them, particularly in an airline, 568 00:28:17,640 --> 00:28:19,480 Speaker 7: you know, which which we think is the hardest to 569 00:28:19,560 --> 00:28:22,280 Speaker 7: debate of all of the transportation. 570 00:28:23,400 --> 00:28:28,440 Speaker 3: Sectors. You know, it's it requires a change in infrastructure. 571 00:28:29,160 --> 00:28:32,440 Speaker 7: You know, if you're doing if you're doing battery fuel, 572 00:28:32,600 --> 00:28:34,440 Speaker 7: you know, you have to obviously have a have a 573 00:28:34,520 --> 00:28:38,000 Speaker 7: completely different plane. Hydrogen has been talked about, completely different engine, 574 00:28:38,280 --> 00:28:40,240 Speaker 7: you know. South one of the beautiful things about it 575 00:28:40,600 --> 00:28:43,320 Speaker 7: is it really just drops into an existing supply chain, 576 00:28:43,640 --> 00:28:47,080 Speaker 7: so it's easy. It works just as well as as 577 00:28:47,160 --> 00:28:50,960 Speaker 7: traditional fuel. Obviously, it's it's very highly monitored. The QC 578 00:28:51,120 --> 00:28:54,960 Speaker 7: on it's incredibly important, but molecularly it's it's very similar 579 00:28:56,000 --> 00:28:59,840 Speaker 7: to existing jet fuel that is out there today, so 580 00:29:00,160 --> 00:29:02,160 Speaker 7: we can just drop it into the same you know, 581 00:29:02,280 --> 00:29:05,480 Speaker 7: into the same system. There's some blending in QC work 582 00:29:05,560 --> 00:29:08,520 Speaker 7: that happens kind of there at the facility from shell, 583 00:29:08,960 --> 00:29:12,360 Speaker 7: but it's not something like an ethanol or biodiesel that 584 00:29:12,960 --> 00:29:16,080 Speaker 7: you know requires is able to be blended at very 585 00:29:16,120 --> 00:29:20,160 Speaker 7: small amounts. It's really molecular a very similar product to 586 00:29:20,240 --> 00:29:23,080 Speaker 7: the jet field that's being used today and on renewable 587 00:29:23,080 --> 00:29:27,360 Speaker 7: diesel front. In fact, end users don't even have to differentiate. 588 00:29:27,680 --> 00:29:29,880 Speaker 7: You can use renewable diesel or diesel and not even 589 00:29:29,920 --> 00:29:33,560 Speaker 7: differentiate between the two. You know, they're molecularly the same. 590 00:29:34,040 --> 00:29:36,640 Speaker 2: So when you decided to make this transformation in the 591 00:29:36,720 --> 00:29:39,640 Speaker 2: last three years with this refinery, was it expensive? Did 592 00:29:39,720 --> 00:29:40,360 Speaker 2: it cost a lot? 593 00:29:41,320 --> 00:29:43,280 Speaker 7: Yeah, it costs a lot and in fact, only started 594 00:29:43,360 --> 00:29:45,120 Speaker 7: at our stock was about a dollar in a depth 595 00:29:45,200 --> 00:29:45,640 Speaker 7: of COVID. 596 00:29:45,760 --> 00:29:47,800 Speaker 3: So we really went all in on this. 597 00:29:47,960 --> 00:29:52,200 Speaker 7: We've had a lot of conviction about sustainable aviation, feel 598 00:29:52,240 --> 00:29:57,960 Speaker 7: about renewable diesel, and most importantly, I think Montana's competitively 599 00:29:58,040 --> 00:30:00,400 Speaker 7: advantaged position in that area. 600 00:30:01,160 --> 00:30:02,600 Speaker 3: So so it was a major bet. 601 00:30:03,760 --> 00:30:07,200 Speaker 7: But we were able to make that decision quickly and 602 00:30:07,360 --> 00:30:10,960 Speaker 7: actually go from you know, ideation to fully operating in 603 00:30:11,200 --> 00:30:14,080 Speaker 7: just a few years. So, you know, we stood it 604 00:30:14,200 --> 00:30:17,560 Speaker 7: up at the very end of twenty twenty two. Twenty 605 00:30:17,600 --> 00:30:20,880 Speaker 7: twenty three was kind of we were piecing together the 606 00:30:21,800 --> 00:30:25,760 Speaker 7: various phases of the startup and commissioning. We worked out 607 00:30:25,800 --> 00:30:29,560 Speaker 7: the kinks, and in the second quarter of twenty four 608 00:30:29,920 --> 00:30:34,080 Speaker 7: we really demonstrated what a full steady state you know, 609 00:30:34,200 --> 00:30:36,640 Speaker 7: production can look like at Montaney Nobles. 610 00:30:36,680 --> 00:30:38,200 Speaker 3: So incredibly exciting time. 611 00:30:38,880 --> 00:30:41,560 Speaker 5: So who do you compete against? Is there a competition? 612 00:30:41,720 --> 00:30:43,720 Speaker 5: Is there a market here? Is there a competitive landscape 613 00:30:43,760 --> 00:30:45,840 Speaker 5: for sustainable aviation fuel? 614 00:30:46,920 --> 00:30:50,040 Speaker 7: You know, it's interesting. So every country is a little 615 00:30:50,040 --> 00:30:54,160 Speaker 7: bit different. In North America, there are really only two 616 00:30:54,320 --> 00:30:57,400 Speaker 7: suppliers currently. There are a few more that are coming 617 00:30:57,480 --> 00:31:00,160 Speaker 7: on because obviously this is just a major growth there are, 618 00:31:00,800 --> 00:31:03,160 Speaker 7: but right now, you know, there are only two that 619 00:31:03,240 --> 00:31:07,080 Speaker 7: are producing. So so and it's not, at least today 620 00:31:07,600 --> 00:31:12,200 Speaker 7: a mandated market. So obviously airlines will will make commitments 621 00:31:12,240 --> 00:31:14,080 Speaker 7: and try to get ahead of the game. They expect 622 00:31:14,200 --> 00:31:18,040 Speaker 7: mandates to come down the road. Same thing with with 623 00:31:18,320 --> 00:31:22,280 Speaker 7: with individual entities, you know, so there's private airlines are 624 00:31:22,280 --> 00:31:22,760 Speaker 7: a big either. 625 00:31:22,840 --> 00:31:24,760 Speaker 3: So there's there's certainly a big. 626 00:31:24,720 --> 00:31:29,400 Speaker 7: Market as it exists today, but the incremental supply is 627 00:31:29,760 --> 00:31:33,200 Speaker 7: actually imported. Now if you go globally, that's a little 628 00:31:33,240 --> 00:31:36,560 Speaker 7: bit different. When you go globally, there are mandates, and 629 00:31:36,840 --> 00:31:38,760 Speaker 7: the UK, for example, just came out and they're going 630 00:31:38,800 --> 00:31:40,720 Speaker 7: to mandate, you know, nearly a third of a billion 631 00:31:40,760 --> 00:31:44,200 Speaker 7: gallons by twenty thirty, Singapore, you know, same thing, one 632 00:31:44,240 --> 00:31:46,920 Speaker 7: hundred and fifty million gallons by twenty thirty, Japan, India. 633 00:31:47,000 --> 00:31:50,600 Speaker 3: So so there are globally a lot of mandates coming on. 634 00:31:51,280 --> 00:31:54,160 Speaker 7: And just here in our own, you know, backyard in 635 00:31:54,200 --> 00:31:56,880 Speaker 7: the United States, we have the SAFF Grand Challenge, which 636 00:31:57,000 --> 00:31:59,840 Speaker 7: says we want to have three billion gallons a year 637 00:32:00,080 --> 00:32:04,320 Speaker 7: of saff production by twenty thirty and thirty five billion 638 00:32:04,400 --> 00:32:06,440 Speaker 7: gallons a year by twenty fifty. 639 00:32:06,600 --> 00:32:09,360 Speaker 3: So you know, today we're the largest in North. 640 00:32:09,200 --> 00:32:11,800 Speaker 7: America and we're making thirty million gallons to forty five 641 00:32:11,880 --> 00:32:12,719 Speaker 7: million gallons a year. 642 00:32:12,880 --> 00:32:16,160 Speaker 2: Yeah, toss, how really we are? We gotta leave it there, 643 00:32:16,320 --> 00:32:18,760 Speaker 2: but that was really interesting. I really appreciate it, and 644 00:32:18,840 --> 00:32:20,400 Speaker 2: definitely come back let us know how that's going on. 645 00:32:20,440 --> 00:32:23,080 Speaker 2: I want to hear expansion plans or other plans along 646 00:32:23,120 --> 00:32:26,720 Speaker 2: this area. Tab Roman, CEO of Calummet Specialty of Products, 647 00:32:26,920 --> 00:32:29,160 Speaker 2: joining us on the future of staff and also like 648 00:32:29,240 --> 00:32:30,960 Speaker 2: they make sed up like Basoline. 649 00:32:31,040 --> 00:32:36,440 Speaker 1: Also, you're listening to the Bloomberg Intelligence Podcast. Catch us 650 00:32:36,520 --> 00:32:39,800 Speaker 1: live weekdays at ten am Eastern on applecar Play and 651 00:32:39,920 --> 00:32:42,800 Speaker 1: Android Auto with the Bloomberg Business app. You can also 652 00:32:42,920 --> 00:32:46,400 Speaker 1: listen live on Amazon Alexa from our flagship New York station. 653 00:32:46,800 --> 00:32:49,520 Speaker 1: Just say Alexa Play Bloomberg eleven. 654 00:32:49,280 --> 00:32:52,880 Speaker 5: Thirty, Alex Steel, Paul Swen, you live here in our 655 00:32:52,880 --> 00:32:55,520 Speaker 5: Bloomberg Directive for Workers Studio. We're streaming live on YouTube 656 00:32:55,640 --> 00:32:58,360 Speaker 5: as well. That's the Internet, I'm told. So you go 657 00:32:58,400 --> 00:33:00,800 Speaker 5: to Bloomberg dot com, go to YouTube dot com and 658 00:33:00,800 --> 00:33:03,240 Speaker 5: search Bloomberg Podcast, and that's where you'll find this. Let's 659 00:33:03,240 --> 00:33:06,400 Speaker 5: talk about housing, and there's a pronounced shortage of housing 660 00:33:06,800 --> 00:33:09,160 Speaker 5: in the United States, and that is certainly true here 661 00:33:10,080 --> 00:33:12,000 Speaker 5: in New York City. So let's break that down a 662 00:33:12,040 --> 00:33:14,920 Speaker 5: little bit. David Schwartz joins US Data's co founder and 663 00:33:15,000 --> 00:33:19,880 Speaker 5: principal of Slate Property Group slatest, developing over four billion 664 00:33:19,880 --> 00:33:22,720 Speaker 5: in real estate throughout New York City, representing over four 665 00:33:22,720 --> 00:33:25,000 Speaker 5: thousand apartments, so a good source for us and aw 666 00:33:25,080 --> 00:33:27,520 Speaker 5: Miguil do a little joints this markets reporter for Bloomberg News, 667 00:33:27,640 --> 00:33:30,600 Speaker 5: both of them in our studio here, David at Slate, 668 00:33:30,840 --> 00:33:33,320 Speaker 5: What are you guys doing? First of all, frame out 669 00:33:33,640 --> 00:33:36,719 Speaker 5: the housing challenges in New York City and the kind 670 00:33:36,720 --> 00:33:37,920 Speaker 5: of how you guys are trying to deal with that. 671 00:33:38,400 --> 00:33:40,160 Speaker 6: Yeah, first of all, thanks for having me here today. 672 00:33:40,240 --> 00:33:42,640 Speaker 6: I'm happy to be here to talk about housing. I mean, 673 00:33:42,800 --> 00:33:45,719 Speaker 6: I think it's no surprise that we have a shortage 674 00:33:45,760 --> 00:33:47,680 Speaker 6: of housing. We have a supply side issue. There just 675 00:33:47,760 --> 00:33:50,680 Speaker 6: aren't enough units for people. So if you think about 676 00:33:51,320 --> 00:33:53,760 Speaker 6: overall supply and demand metrics, we have more people that 677 00:33:53,880 --> 00:33:56,640 Speaker 6: need housing than housing to be supplied. New York has 678 00:33:56,680 --> 00:33:59,520 Speaker 6: been under supplying housing for a long time, and now 679 00:33:59,560 --> 00:34:01,560 Speaker 6: we're starting to see that around the country. But we 680 00:34:01,640 --> 00:34:04,040 Speaker 6: have many, many years of under supply of housing and 681 00:34:04,280 --> 00:34:07,640 Speaker 6: more people that need housing than housing available. So housing 682 00:34:07,680 --> 00:34:09,640 Speaker 6: prices are going up and we're seeing a crisis. 683 00:34:10,239 --> 00:34:13,200 Speaker 12: Well before we dig into affordable housing here in New 684 00:34:13,280 --> 00:34:14,640 Speaker 12: York City, and I know that you have a couple 685 00:34:14,680 --> 00:34:18,400 Speaker 12: of exciting projects, one in Brooklyn and one out by 686 00:34:18,480 --> 00:34:21,120 Speaker 12: JFK let's talk about the fact that, for the first 687 00:34:21,160 --> 00:34:25,160 Speaker 12: time in your memory, housing, affordable housing is a core 688 00:34:25,320 --> 00:34:29,600 Speaker 12: issue in the presidential election. Is it that exact, that 689 00:34:29,800 --> 00:34:32,719 Speaker 12: supply issue, or what's going on nationwide that this is 690 00:34:32,760 --> 00:34:33,359 Speaker 12: such a big deal. 691 00:34:33,840 --> 00:34:36,920 Speaker 6: Thanks for bringing that up. I am so pleased to 692 00:34:37,040 --> 00:34:39,759 Speaker 6: see that this is being talked about at the national level. 693 00:34:40,320 --> 00:34:42,960 Speaker 6: Housing is a crisis that all Americans are facing. Whether 694 00:34:43,040 --> 00:34:45,880 Speaker 6: we're in New York or North Carolina, Florida, the Midwest, 695 00:34:46,320 --> 00:34:49,640 Speaker 6: the West Coast, it's everywhere, and it's becoming a huge issue. 696 00:34:49,680 --> 00:34:52,640 Speaker 6: And it's a supply side problem. We don't have enough 697 00:34:52,760 --> 00:34:54,359 Speaker 6: units and we need a lot more. And that's why 698 00:34:54,840 --> 00:34:58,080 Speaker 6: it's nice to hear we heard a presidential candidate talking 699 00:34:58,120 --> 00:35:01,239 Speaker 6: about producing a lot more housing. I think she talked 700 00:35:01,239 --> 00:35:03,160 Speaker 6: about three million units. I think that's a good start. 701 00:35:03,560 --> 00:35:05,000 Speaker 6: I actually think we need a lot more than that, 702 00:35:05,080 --> 00:35:07,200 Speaker 6: but I'll start with three million. I think it's a 703 00:35:07,239 --> 00:35:08,800 Speaker 6: good way. But I think we're talking about a problem 704 00:35:08,880 --> 00:35:11,400 Speaker 6: that's in the ten million plus range. 705 00:35:11,600 --> 00:35:12,480 Speaker 8: How did we get here? 706 00:35:12,600 --> 00:35:15,399 Speaker 5: I mean, is our population surged over the last twenty 707 00:35:15,440 --> 00:35:15,960 Speaker 5: or thirty years? 708 00:35:16,000 --> 00:35:19,600 Speaker 6: How do we get here? Look, it's it's slowly and 709 00:35:19,680 --> 00:35:23,279 Speaker 6: then quickly. I think we've stopped producing enough units. I 710 00:35:23,320 --> 00:35:26,440 Speaker 6: think that after the GFC we stopped producing a lot 711 00:35:26,480 --> 00:35:29,840 Speaker 6: of units. We built fewer units, we built bigger units 712 00:35:30,120 --> 00:35:33,200 Speaker 6: housing the size of houses. If you guys remember like 713 00:35:33,280 --> 00:35:35,560 Speaker 6: the Levit towns for people from the New York area, 714 00:35:35,600 --> 00:35:38,640 Speaker 6: we were building houses that were thirteen hundred square feet. Now, 715 00:35:38,719 --> 00:35:41,160 Speaker 6: how's it a three thousand square feet? There are fewer units, 716 00:35:41,520 --> 00:35:45,239 Speaker 6: they're bigger, they're more expensive, but it's just total number 717 00:35:45,239 --> 00:35:47,200 Speaker 6: of units. If you look at anywhere, New York hasn't 718 00:35:47,239 --> 00:35:50,120 Speaker 6: supplied enough, but the whole country hasn't. And now we're 719 00:35:50,120 --> 00:35:52,960 Speaker 6: in a place in which housing costs have increased with inflation, 720 00:35:53,560 --> 00:35:57,520 Speaker 6: borrowing costs of increased, So we're adding more problems to 721 00:35:57,760 --> 00:35:59,520 Speaker 6: an already problematic area. 722 00:36:00,560 --> 00:36:04,360 Speaker 12: So in terms of actual affordable housing, I know that 723 00:36:04,440 --> 00:36:07,759 Speaker 12: this is an umbrella term for say, workforce housing, among 724 00:36:07,840 --> 00:36:10,360 Speaker 12: other types of housing. Can you dig down into that 725 00:36:10,400 --> 00:36:13,040 Speaker 12: a little bit more before we get specific on sleeves 726 00:36:13,080 --> 00:36:16,759 Speaker 12: propers And we should mention we actually had your other 727 00:36:16,920 --> 00:36:19,480 Speaker 12: co founder and principal, Martin Nusbaum, joined us a couple 728 00:36:19,520 --> 00:36:22,080 Speaker 12: of months ago to talk more broadly about your multifamily 729 00:36:22,640 --> 00:36:24,719 Speaker 12: and outside of affordable housing. But this is such an 730 00:36:24,760 --> 00:36:25,839 Speaker 12: interesting topic. 731 00:36:26,040 --> 00:36:28,440 Speaker 6: Yeah, thanks for bringing that up. I think it's important 732 00:36:28,480 --> 00:36:31,280 Speaker 6: to realize that this is one ecosystem. So all housing 733 00:36:32,000 --> 00:36:34,120 Speaker 6: is related to all other housing. So if you know 734 00:36:34,120 --> 00:36:36,480 Speaker 6: anybody who's bought a home, you might have wanted to 735 00:36:36,480 --> 00:36:38,560 Speaker 6: buy a home for certain dollars, you can't afford it. 736 00:36:38,840 --> 00:36:40,840 Speaker 6: You buy a home for a little bit less. So 737 00:36:40,960 --> 00:36:46,200 Speaker 6: everything is related. So any housing that's produced impacts affordable housing. 738 00:36:46,640 --> 00:36:48,400 Speaker 6: So we need to produce a lot more housing. So 739 00:36:48,560 --> 00:36:50,719 Speaker 6: one of the things that SLATEE is doing is we 740 00:36:50,840 --> 00:36:53,680 Speaker 6: filled the role where we are providing leverage, where we're 741 00:36:53,760 --> 00:36:56,600 Speaker 6: filling the gap where a lot of banks are no 742 00:36:56,840 --> 00:36:59,799 Speaker 6: longer able to provide financing because of all the things 743 00:36:59,840 --> 00:37:04,200 Speaker 6: that having in the banking sector. So without financing, can't 744 00:37:04,239 --> 00:37:06,600 Speaker 6: build more units. So that's one of the areas that 745 00:37:06,640 --> 00:37:08,680 Speaker 6: we're looking at. And then on the other side, we're 746 00:37:08,719 --> 00:37:11,160 Speaker 6: looking to build lots of units, whether it's workforce housing 747 00:37:11,960 --> 00:37:14,920 Speaker 6: or all. The difference is the truth is affordable housing 748 00:37:15,040 --> 00:37:18,600 Speaker 6: means different things to different people. But the fact is 749 00:37:18,760 --> 00:37:22,400 Speaker 6: most people are spending the majority of their income on housing. 750 00:37:22,719 --> 00:37:27,640 Speaker 6: Unless you're really really wealthy, your biggest expenditure is probably housing. 751 00:37:28,040 --> 00:37:31,120 Speaker 6: So whether you're talking about the teacher or the fireman, 752 00:37:31,640 --> 00:37:34,040 Speaker 6: or you're talking about somebody that works in a fast 753 00:37:34,080 --> 00:37:37,239 Speaker 6: food restaurant, they're both probably having a real crisis with 754 00:37:37,320 --> 00:37:40,440 Speaker 6: affording their housing. And it's not really pitting them against 755 00:37:40,480 --> 00:37:43,239 Speaker 6: each other because they both really need good quality and 756 00:37:43,320 --> 00:37:45,439 Speaker 6: affordable housing, but just at different levels. 757 00:37:45,600 --> 00:37:47,359 Speaker 2: So tell me some of the projects that you had 758 00:37:47,400 --> 00:37:49,360 Speaker 2: gone on, so you know. 759 00:37:49,400 --> 00:37:52,480 Speaker 6: We're doing something that I think is super innovative. We're 760 00:37:52,560 --> 00:37:55,200 Speaker 6: converting the first hotel in New York State to one 761 00:37:55,280 --> 00:37:58,640 Speaker 6: hundred percent affordable housing, the Baisley Park. 762 00:37:58,520 --> 00:38:01,200 Speaker 2: And a hotel to ho that's usually really tricky, right, 763 00:38:01,239 --> 00:38:02,800 Speaker 2: It's not as simple as like put a door in 764 00:38:02,880 --> 00:38:03,439 Speaker 2: and you're done. 765 00:38:03,880 --> 00:38:04,080 Speaker 8: Well. 766 00:38:04,680 --> 00:38:06,239 Speaker 6: It is tricky, but we made it a little bit 767 00:38:06,280 --> 00:38:08,239 Speaker 6: less tricky. So I think what we liked about it 768 00:38:08,400 --> 00:38:10,600 Speaker 6: is we take a hotel room, and if you have 769 00:38:10,680 --> 00:38:13,799 Speaker 6: a one hotel room that's a studio, you knock down 770 00:38:13,800 --> 00:38:15,719 Speaker 6: a wall for two hotel rooms and you turn it 771 00:38:15,760 --> 00:38:18,600 Speaker 6: into a one bedroom. You knock down two walls and 772 00:38:18,680 --> 00:38:20,960 Speaker 6: it's a two bedroom, if that makes sense. And really 773 00:38:21,480 --> 00:38:23,719 Speaker 6: the key there is we can build these units in 774 00:38:23,840 --> 00:38:26,200 Speaker 6: half the time because one of the problems we have 775 00:38:26,400 --> 00:38:28,839 Speaker 6: is that people that need affordable housing. If you need 776 00:38:28,840 --> 00:38:31,960 Speaker 6: affordable housing, you need it pretty quickly, right, So three 777 00:38:32,080 --> 00:38:34,640 Speaker 6: years or five years is probably less important to you 778 00:38:34,760 --> 00:38:36,160 Speaker 6: than if we could deliver it in a year or so. 779 00:38:36,440 --> 00:38:38,120 Speaker 6: I think that's something we could do around the country. 780 00:38:38,239 --> 00:38:40,600 Speaker 6: So we're doing the first one in New York. We're 781 00:38:40,640 --> 00:38:43,560 Speaker 6: fortunate here to have some really really smart and talented 782 00:38:43,719 --> 00:38:46,560 Speaker 6: and innovative people because it was complicated. But it's something 783 00:38:46,600 --> 00:38:49,520 Speaker 6: that we are looking at doing elsewhere. We're actually working 784 00:38:49,520 --> 00:38:51,200 Speaker 6: on a deal in North Carolina right now to do it, 785 00:38:51,280 --> 00:38:53,560 Speaker 6: and I think there's some prospects in Tennessee, out in 786 00:38:53,680 --> 00:38:54,840 Speaker 6: Utah and a few other places. 787 00:38:55,160 --> 00:38:58,399 Speaker 5: It's like building housing in New York City. 788 00:38:58,760 --> 00:39:01,320 Speaker 3: It doesn't I got lots of images. 789 00:39:01,320 --> 00:39:02,919 Speaker 5: I think the movie has been made about a TV 790 00:39:03,040 --> 00:39:05,319 Speaker 5: shows what's it like building stuff in New York City? 791 00:39:05,640 --> 00:39:10,760 Speaker 6: You know? I think, look, let's not let's not pretend 792 00:39:10,840 --> 00:39:12,640 Speaker 6: it's not really hard to do anything in New York. 793 00:39:14,000 --> 00:39:15,359 Speaker 6: You know, I grew up here and I first started 794 00:39:15,360 --> 00:39:17,040 Speaker 6: building here, So I think it's easier to start in 795 00:39:17,040 --> 00:39:18,880 Speaker 6: the hardest place and go to the other places. 796 00:39:19,040 --> 00:39:19,160 Speaker 12: Right. 797 00:39:19,400 --> 00:39:21,000 Speaker 6: I think they say, if you make it here, you 798 00:39:21,040 --> 00:39:23,080 Speaker 6: can make it anywhere. I'd say, that's what it's like. 799 00:39:23,160 --> 00:39:26,000 Speaker 6: In housing. Look, it's really hard to build in New York. 800 00:39:26,080 --> 00:39:29,239 Speaker 6: It's hard. New Yorkers are spirited, have a lot of opinions, 801 00:39:29,680 --> 00:39:31,879 Speaker 6: you know. I say that if you have ten people, 802 00:39:31,920 --> 00:39:35,080 Speaker 6: you'll get fifteen opinions on how to do something. But 803 00:39:35,160 --> 00:39:36,520 Speaker 6: I think it's great. I do think we have the 804 00:39:36,600 --> 00:39:41,600 Speaker 6: most talented people working in government sector, in financing and 805 00:39:41,680 --> 00:39:43,000 Speaker 6: building in New York. I think we have the most 806 00:39:43,440 --> 00:39:46,319 Speaker 6: talented people in the country, which is great. It's hard, 807 00:39:46,520 --> 00:39:48,200 Speaker 6: it's challenging, but we're up for the challenge. I'm a 808 00:39:48,239 --> 00:39:50,959 Speaker 6: lifelong New Yorker, I'm a brooklyn Ie, So we're ready 809 00:39:51,000 --> 00:39:52,799 Speaker 6: for the challenge and you know, having a little bit 810 00:39:52,800 --> 00:39:54,640 Speaker 6: of a fight as part of it. That's kind of 811 00:39:54,680 --> 00:39:55,759 Speaker 6: what we do so well. 812 00:39:55,840 --> 00:39:58,399 Speaker 12: Not only are you a lifelong New Yorker, but your 813 00:39:58,440 --> 00:40:02,280 Speaker 12: family is so known New York family. Your father's Gridlock 814 00:40:02,360 --> 00:40:04,560 Speaker 12: Sam and so of course we've recently had some of 815 00:40:04,719 --> 00:40:07,680 Speaker 12: this controversy around congestion pricing. It was about to happen 816 00:40:07,760 --> 00:40:10,799 Speaker 12: and then at the ninth hour Governor Hogel struck it down. 817 00:40:10,840 --> 00:40:12,600 Speaker 12: Where recently I heard that maybe we're going to get 818 00:40:12,600 --> 00:40:14,000 Speaker 12: a more diluted version of it. 819 00:40:14,360 --> 00:40:15,319 Speaker 6: What are your thoughts there? 820 00:40:15,440 --> 00:40:17,880 Speaker 12: And if it doesn't go through, do the businesses of 821 00:40:17,960 --> 00:40:20,719 Speaker 12: New York have to pick up that extra revenue and 822 00:40:20,800 --> 00:40:21,640 Speaker 12: doesn't get passed down? 823 00:40:21,719 --> 00:40:23,640 Speaker 6: Of course it does, yes, so if my dad does 824 00:40:23,840 --> 00:40:27,400 Speaker 6: it was the first Deputy Transportation Commissioner, Coin Gridlock. So 825 00:40:27,880 --> 00:40:30,480 Speaker 6: for many years I've been known as Gridlock, Saym's Sun 826 00:40:30,560 --> 00:40:34,920 Speaker 6: and even sometimes nicknamed Gridlock myself. So traffic has been 827 00:40:35,280 --> 00:40:37,000 Speaker 6: a big part of our life. Yeah, look, there's no 828 00:40:37,360 --> 00:40:40,839 Speaker 6: question that it is clogging up our streets. We can't move. 829 00:40:41,080 --> 00:40:44,600 Speaker 6: Anyone who drove in Manhattan yesterday was probably stuck in 830 00:40:44,640 --> 00:40:45,120 Speaker 6: traffic room. 831 00:40:45,160 --> 00:40:48,080 Speaker 2: Oh my god. I mean, but that's unique. Yesterday, it 832 00:40:48,200 --> 00:40:48,879 Speaker 2: was a unique day. 833 00:40:49,480 --> 00:40:51,640 Speaker 6: But you know, in general, I think it's slowing down 834 00:40:52,480 --> 00:40:55,040 Speaker 6: the economy. I think something needs to be done. I think, 835 00:40:55,880 --> 00:40:58,480 Speaker 6: you know, congestion pricing. I'm a fan of it. I 836 00:40:58,560 --> 00:41:01,200 Speaker 6: know there's a lot of people that are not so 837 00:41:01,280 --> 00:41:03,279 Speaker 6: happy with it. But again, we need something to make 838 00:41:04,120 --> 00:41:06,000 Speaker 6: traffic work better. We need people to be able to 839 00:41:06,080 --> 00:41:08,600 Speaker 6: get to places and do business. So we've got to 840 00:41:08,640 --> 00:41:10,919 Speaker 6: do something because New York sometimes grinds to a halt 841 00:41:11,560 --> 00:41:12,200 Speaker 6: and what I mean. 842 00:41:12,280 --> 00:41:15,280 Speaker 5: It kind of goes to the pull and push between 843 00:41:15,760 --> 00:41:19,399 Speaker 5: mass transit, taking money from congestion pricing to fund what's 844 00:41:19,480 --> 00:41:22,840 Speaker 5: underground oftentimes, which I'm a big fan of the subway system. 845 00:41:22,840 --> 00:41:25,160 Speaker 5: It's the most efficient way to get around to the system. 846 00:41:25,280 --> 00:41:29,960 Speaker 5: I'll die on that hill against anybody. So it's so much, 847 00:41:30,080 --> 00:41:32,560 Speaker 5: it's so complex, I get. It's just simply a question 848 00:41:32,719 --> 00:41:34,239 Speaker 5: dollars and cents. Who's going to pay for. 849 00:41:35,040 --> 00:41:37,560 Speaker 6: Look, we need a lot of investment into our subway system. 850 00:41:37,600 --> 00:41:40,759 Speaker 6: A big subway guy myself. It's the fastest way to 851 00:41:40,760 --> 00:41:42,839 Speaker 6: get around if I can't walk. We need a big 852 00:41:42,920 --> 00:41:44,919 Speaker 6: investment into it. If you look at our subways versus 853 00:41:45,920 --> 00:41:48,400 Speaker 6: other first world countries, you know they're lacking. I think 854 00:41:48,400 --> 00:41:50,279 Speaker 6: our subway system was incredible. We need a lot more 855 00:41:50,320 --> 00:41:52,919 Speaker 6: money for it. And yeah, that's always the problem. Who's 856 00:41:53,000 --> 00:41:55,440 Speaker 6: going to pay for any of our infrastructure. It's with 857 00:41:55,480 --> 00:41:57,600 Speaker 6: our affordable housing, right, we need a lot more money. 858 00:41:58,040 --> 00:42:00,239 Speaker 6: You know, affordable housing is infrastructure as well. I think 859 00:42:00,280 --> 00:42:02,520 Speaker 6: that's a big point. It really is. It's it's like 860 00:42:02,640 --> 00:42:06,239 Speaker 6: schools and roads and bridges and fire departments. I mean, 861 00:42:06,600 --> 00:42:08,440 Speaker 6: I don't it's the life blood, you know, why do 862 00:42:08,520 --> 00:42:11,080 Speaker 6: we Why does society pay for those other things? It's 863 00:42:11,239 --> 00:42:13,720 Speaker 6: to make society work. And I think you know, affordable 864 00:42:13,760 --> 00:42:16,560 Speaker 6: housing is infrastructure. It's all related. You can't look at 865 00:42:16,640 --> 00:42:17,799 Speaker 6: it on its own. 866 00:42:18,080 --> 00:42:21,759 Speaker 2: Yeah, where's Sean Tucker when you need them? We have 867 00:42:22,200 --> 00:42:24,200 Speaker 2: someone that joins us for the radio show who lives 868 00:42:24,239 --> 00:42:27,560 Speaker 2: in Jersey and is like horrifically horrified by the congestion 869 00:42:27,680 --> 00:42:30,400 Speaker 2: pricing is because it's gonna cost him so much more 870 00:42:30,440 --> 00:42:31,319 Speaker 2: money to get to work. 871 00:42:31,680 --> 00:42:33,279 Speaker 6: Let's get them up. Let's get him on with my 872 00:42:33,360 --> 00:42:34,839 Speaker 6: dad Gridlock say, oh my god. 873 00:42:35,440 --> 00:42:37,600 Speaker 2: And he also comes in at like three am or 874 00:42:37,800 --> 00:42:39,279 Speaker 2: like two am in the morning, right, so we've got 875 00:42:39,360 --> 00:42:41,280 Speaker 2: gonna take a train at two am in the morning. 876 00:42:41,440 --> 00:42:43,960 Speaker 2: So anyway, he bemoans it quite a bit, all right, David, 877 00:42:43,960 --> 00:42:46,880 Speaker 2: thanks a lot, really appreciated, great stuff. David Schwartz joining 878 00:42:46,960 --> 00:42:50,440 Speaker 2: us co principal and CEO of the Slate Property Group 879 00:42:50,520 --> 00:42:53,239 Speaker 2: Abagail do a little. Also appreciate you coming in for 880 00:42:53,360 --> 00:42:54,080 Speaker 2: that as well. 881 00:42:54,480 --> 00:42:58,960 Speaker 1: This is the Bloomberg Intelligence podcast, available on Apples, Spotify, 882 00:42:59,160 --> 00:43:02,319 Speaker 1: and anywhere else you get your podcasts. Listen live each 883 00:43:02,400 --> 00:43:05,560 Speaker 1: weekday ten am to nooon Eastern on bloomberg dot com, 884 00:43:05,880 --> 00:43:09,239 Speaker 1: the iHeartRadio app tune In, and the Bloomberg Business app. 885 00:43:09,400 --> 00:43:12,360 Speaker 1: You can also watch us live every weekday on YouTube 886 00:43:12,640 --> 00:43:14,400 Speaker 1: and always on the Bloomberg terminal