1 00:00:00,560 --> 00:00:03,760 Speaker 1: This is Bloomberg Wall Street Week. We turn our attention 2 00:00:03,880 --> 00:00:07,600 Speaker 1: to the markets this week. Us CPI nevers reinforcing concerns 3 00:00:07,600 --> 00:00:10,800 Speaker 1: about inflation. The financial stories that chief are worth a 4 00:00:10,840 --> 00:00:13,760 Speaker 1: really different reaction to Mark. It's more indications of just 5 00:00:13,960 --> 00:00:16,360 Speaker 1: how hot the U. S economy really is through the 6 00:00:16,400 --> 00:00:19,799 Speaker 1: eyes of the most influential voices Larry Summers, the former 7 00:00:19,800 --> 00:00:22,880 Speaker 1: Treachery Secretary, Katherine Keening, CEO of the n Y Mollins 8 00:00:22,960 --> 00:00:26,239 Speaker 1: Sam's l Sharman, and founder of Equatic Group Investment. In 9 00:00:26,320 --> 00:00:30,280 Speaker 1: Bloomberg Wall Street Week with David Weston from Bloomberg Radio, 10 00:00:31,440 --> 00:00:36,599 Speaker 1: China blinks, Russia threatens, and Democrats sealed the deal in Georgia. 11 00:00:36,960 --> 00:00:40,199 Speaker 1: This is Bloomberg Wall Street Week. I'm David Weston. This 12 00:00:40,240 --> 00:00:43,320 Speaker 1: week special contributor Larry Summers on the search for growth 13 00:00:43,520 --> 00:00:46,400 Speaker 1: in China and in the United States. But we're going 14 00:00:46,479 --> 00:00:52,720 Speaker 1: to be seeing probably the biggest set of policy experiments 15 00:00:52,720 --> 00:00:55,680 Speaker 1: that we've seen in China in decades. And Jeff blau 16 00:00:55,960 --> 00:00:59,720 Speaker 1: related on why the market for upscale office space is hot. 17 00:01:00,200 --> 00:01:03,480 Speaker 1: You look at new modern buildings with the right features, 18 00:01:03,480 --> 00:01:07,400 Speaker 1: the right amenities, and the demand for those buildings is tremendous. 19 00:01:20,240 --> 00:01:23,840 Speaker 1: Global Wall Street saw a week of confrontation as Democrat 20 00:01:23,920 --> 00:01:28,200 Speaker 1: Raphael Warnex facedown Republican herschel Walker and yet another runoff 21 00:01:28,240 --> 00:01:31,679 Speaker 1: election in Georgia and came out the winner. It is 22 00:01:33,520 --> 00:01:38,520 Speaker 1: out of the four most powerful words ever spoken in 23 00:01:38,600 --> 00:01:45,480 Speaker 1: a democracy, The people have spoken. Ukraine continued it's bloody 24 00:01:45,520 --> 00:01:50,000 Speaker 1: confrontation with Russia using drones to strike bases inside of Russia. 25 00:01:50,480 --> 00:01:53,520 Speaker 1: A third air field has come under attack by drones. 26 00:01:54,080 --> 00:01:57,640 Speaker 1: State run Task news service purported that an oil shortage 27 00:01:57,640 --> 00:02:01,440 Speaker 1: tank caught fire attacks where the furthest penetration yet on 28 00:02:01,520 --> 00:02:05,919 Speaker 1: Russian soil since the invasion began, provoking Russian President Putin 29 00:02:06,080 --> 00:02:10,320 Speaker 1: to raise once again the specter of nuclear war. Putin, however, 30 00:02:10,440 --> 00:02:13,880 Speaker 1: I think has used this nuclear card an awful lot 31 00:02:14,720 --> 00:02:17,920 Speaker 1: during the last few months of the war, and what 32 00:02:18,000 --> 00:02:21,560 Speaker 1: he found out from President she of China is a 33 00:02:21,600 --> 00:02:25,080 Speaker 1: warning not to do that. And China took a hard 34 00:02:25,160 --> 00:02:28,320 Speaker 1: look at the pushback from citizens over its zero COVID 35 00:02:28,360 --> 00:02:31,919 Speaker 1: policy and decided to back down at least a bit. 36 00:02:32,280 --> 00:02:35,079 Speaker 1: It includes measures such as allowing people who get sick 37 00:02:35,120 --> 00:02:37,959 Speaker 1: to quarantine at home instead of a government facility. They're 38 00:02:37,960 --> 00:02:41,080 Speaker 1: easing up on testing to get into public spaces, for example. 39 00:02:41,320 --> 00:02:44,000 Speaker 1: So it's a whole series of micro measures that are 40 00:02:44,000 --> 00:02:47,760 Speaker 1: being interpreted as another step away from COVID zero by 41 00:02:47,880 --> 00:02:50,760 Speaker 1: the authorities. Though it may have been encouraged by the 42 00:02:50,840 --> 00:02:53,640 Speaker 1: dismal trade numbers, even as the United States kept up 43 00:02:53,680 --> 00:02:57,320 Speaker 1: the pressure on semiconductors by breaking ground for a new 44 00:02:57,360 --> 00:03:01,440 Speaker 1: plant in Phoenix. These investments happen. It's built on strengthen 45 00:03:01,480 --> 00:03:05,040 Speaker 1: the supply chain here in America. I want to be clear. 46 00:03:05,680 --> 00:03:08,080 Speaker 1: As we build a stronger supply chain, our allies and 47 00:03:08,160 --> 00:03:13,119 Speaker 1: partners are building alongside us as well. I'm not sure 48 00:03:13,120 --> 00:03:15,240 Speaker 1: whether it was all that conflict and confrontation. It may 49 00:03:15,320 --> 00:03:17,520 Speaker 1: just have been growing concerns over a session. But the 50 00:03:17,560 --> 00:03:20,440 Speaker 1: markets were not in a risky mood this week, as 51 00:03:20,440 --> 00:03:22,960 Speaker 1: the SMP five hundred lost three point four percent over 52 00:03:22,960 --> 00:03:25,680 Speaker 1: the week and the NASTAC was off almost four percent, 53 00:03:25,960 --> 00:03:28,959 Speaker 1: while the yield yield on the tenure dipped under three 54 00:03:28,960 --> 00:03:30,760 Speaker 1: point five in the middle of a week, but ended 55 00:03:30,840 --> 00:03:33,040 Speaker 1: up at three point five eight percent at the end 56 00:03:33,040 --> 00:03:35,280 Speaker 1: of the week. Let's bring in now Lazen Saunders, chief 57 00:03:35,320 --> 00:03:37,800 Speaker 1: Investment Strategies for Charles Swab for her view on what 58 00:03:37,880 --> 00:03:39,640 Speaker 1: we saw this week, Lisen, great to have you here 59 00:03:39,640 --> 00:03:41,440 Speaker 1: in New York with us. I am so thrilled to 60 00:03:41,440 --> 00:03:43,640 Speaker 1: be here, first time back in studio in a couple 61 00:03:43,640 --> 00:03:46,440 Speaker 1: of YEARSS A real treat for So give us your 62 00:03:46,440 --> 00:03:48,120 Speaker 1: take on what we saw this week, because, as I say, 63 00:03:48,160 --> 00:03:50,400 Speaker 1: there were some indications the markets were getting a little 64 00:03:50,400 --> 00:03:54,920 Speaker 1: nervous about risk. So I think the economic data was 65 00:03:55,200 --> 00:03:57,480 Speaker 1: at least on the margin weeker than expected. P p 66 00:03:57,600 --> 00:04:01,680 Speaker 1: I obviously came out a bit hotter than expected, and 67 00:04:01,880 --> 00:04:05,160 Speaker 1: I think that there's just more realization that the path 68 00:04:05,320 --> 00:04:09,440 Speaker 1: from here is too slower growth. Whether we ultimately find 69 00:04:09,480 --> 00:04:12,120 Speaker 1: it's declared an official recession, as you and I have 70 00:04:12,160 --> 00:04:15,120 Speaker 1: talked about, I think we're in already a form of recession. 71 00:04:15,240 --> 00:04:18,640 Speaker 1: It's just of a rolling variety. We've seen the hit 72 00:04:18,760 --> 00:04:21,840 Speaker 1: areas like housing to certain segments within the good side 73 00:04:21,839 --> 00:04:25,440 Speaker 1: of the economy, the areas that had the big surge 74 00:04:25,640 --> 00:04:27,640 Speaker 1: in the early stage of the pandemic that was also 75 00:04:27,680 --> 00:04:30,200 Speaker 1: the breeding ground for the inflation problem we're still dealing with. 76 00:04:30,800 --> 00:04:34,800 Speaker 1: That then went into recession type conditions. Disinflation in the 77 00:04:34,800 --> 00:04:37,920 Speaker 1: good side of the economy housing related, but we've got 78 00:04:37,960 --> 00:04:41,040 Speaker 1: the offsetting lift on the services side which services is 79 00:04:41,080 --> 00:04:44,479 Speaker 1: a larger employer, so that has kept the labor market 80 00:04:44,480 --> 00:04:46,120 Speaker 1: to flow. But I think we're going to continue to 81 00:04:46,200 --> 00:04:50,440 Speaker 1: see weakness roll through the economy, and I think whether 82 00:04:50,480 --> 00:04:54,200 Speaker 1: it's ultimately declared an official recession is almost an academic 83 00:04:54,800 --> 00:04:57,120 Speaker 1: exercise at this point, and looking back on it, I 84 00:04:57,160 --> 00:04:59,560 Speaker 1: think it's fair to say we had asset inflation before 85 00:04:59,560 --> 00:05:02,640 Speaker 1: we had real price inflation for consumers. Has the FED 86 00:05:02,760 --> 00:05:05,120 Speaker 1: been successful in pricking the bubble on some of the 87 00:05:05,240 --> 00:05:08,520 Speaker 1: station you mentioned housing? For example, we have cryptocurrency certainly 88 00:05:08,560 --> 00:05:10,760 Speaker 1: taken a hit. For that matter, big tech has come down. 89 00:05:11,000 --> 00:05:13,080 Speaker 1: Are we starting to see some of those asset bubbles 90 00:05:13,160 --> 00:05:17,520 Speaker 1: at least deflate a bit? Crypto specs and f T 91 00:05:17,839 --> 00:05:22,880 Speaker 1: s um certain, if not most pockets of the housing market. 92 00:05:22,920 --> 00:05:27,320 Speaker 1: To your point, big tech, other narrative driven, speculation driven 93 00:05:27,360 --> 00:05:32,560 Speaker 1: areas like heavily shorted stocks, nonprofitable, All of those what 94 00:05:32,560 --> 00:05:37,279 Speaker 1: what we've been calling micro bubbles undoubtedly have gotten not 95 00:05:37,440 --> 00:05:41,479 Speaker 1: just pricked, but they sort of popped in spectacular fashion. 96 00:05:41,600 --> 00:05:44,360 Speaker 1: You know. The good news is is a lot of 97 00:05:44,400 --> 00:05:49,120 Speaker 1: that speculative excess, even when we were in the heights 98 00:05:49,160 --> 00:05:53,840 Speaker 1: of those bubbles, had not fully filtered over into the 99 00:05:53,920 --> 00:05:57,400 Speaker 1: traditional market areas. And that's what we were always saying 100 00:05:57,480 --> 00:06:01,039 Speaker 1: was very distinct from the current ironment or the most 101 00:06:01,160 --> 00:06:07,000 Speaker 1: the recent environment and where the speculative excess was concentrated 102 00:06:07,560 --> 00:06:10,960 Speaker 1: in the major averages. It's been just a little bit 103 00:06:11,000 --> 00:06:15,159 Speaker 1: outside that mainstream, say for some of the the big 104 00:06:15,240 --> 00:06:18,440 Speaker 1: cap tech names. And I think it's just evaluation compression 105 00:06:18,600 --> 00:06:22,039 Speaker 1: that was necessary in in large part due to the 106 00:06:22,080 --> 00:06:24,359 Speaker 1: inflation backdrop. And we are joined now by Peter Crests 107 00:06:24,360 --> 00:06:26,640 Speaker 1: of Aperture Investors. Welcome Peter. Great to have you here 108 00:06:26,680 --> 00:06:29,160 Speaker 1: with us, could be here. So once again we're seeing 109 00:06:29,240 --> 00:06:31,800 Speaker 1: rachel ries, although not full points every three weeks, but 110 00:06:31,880 --> 00:06:33,480 Speaker 1: still they're going up, probably going to go up and 111 00:06:33,480 --> 00:06:35,960 Speaker 1: again next week. What does that mean in a broader 112 00:06:36,000 --> 00:06:37,480 Speaker 1: sense for an investor, I mean, this is a different 113 00:06:37,480 --> 00:06:40,360 Speaker 1: world than we've seen for several years now. Yeah. Well, look, 114 00:06:40,440 --> 00:06:43,479 Speaker 1: I think for if you look at the longer time period, 115 00:06:44,120 --> 00:06:46,120 Speaker 1: think of it from a strategic point of view, investors 116 00:06:46,160 --> 00:06:49,919 Speaker 1: have been investing really inequities and very little and fixed 117 00:06:49,920 --> 00:06:53,040 Speaker 1: income for fifteen years, and people have moved away from 118 00:06:53,080 --> 00:06:57,240 Speaker 1: negative interest rates. They've blood private credit, they've bloy private assets, 119 00:06:57,279 --> 00:07:00,320 Speaker 1: they've blood equities, you know, assuming that that's where return 120 00:07:00,440 --> 00:07:02,559 Speaker 1: was going to be. So now you have a paradigm shift, 121 00:07:02,920 --> 00:07:05,520 Speaker 1: and you know you can't say, well, this is what 122 00:07:05,560 --> 00:07:08,360 Speaker 1: I'm gonna do with my money tomorrow. But over the 123 00:07:08,400 --> 00:07:11,480 Speaker 1: next eighteen months you're going to see significant shifts of 124 00:07:11,640 --> 00:07:15,000 Speaker 1: capital into the fixed income complex. That will include longer 125 00:07:15,080 --> 00:07:18,920 Speaker 1: duration securities, that will include high yield securities, that will 126 00:07:18,920 --> 00:07:21,280 Speaker 1: include invest in grade securities, which for the first time 127 00:07:21,280 --> 00:07:24,120 Speaker 1: will actually be attractive, and will include the short duration 128 00:07:24,480 --> 00:07:27,920 Speaker 1: complex as well. I also think interesting enough, emerging markets 129 00:07:27,920 --> 00:07:29,600 Speaker 1: has got to be a place where you look, and 130 00:07:29,640 --> 00:07:35,320 Speaker 1: emerging markets are down. The MBI's down twenty percent, maybe sixteenth, 131 00:07:35,360 --> 00:07:38,240 Speaker 1: and it's probably got a yield of eight percent. Uh. 132 00:07:38,280 --> 00:07:42,160 Speaker 1: And you know, next year, if everybody's predictions are wrong 133 00:07:42,320 --> 00:07:45,200 Speaker 1: and the Fed doesn't rage rage by much, everybody thinks 134 00:07:45,240 --> 00:07:48,040 Speaker 1: fight you're gonna go down, then more than likely you're 135 00:07:48,080 --> 00:07:51,480 Speaker 1: gonna see some recovery and emerging market debt and that 136 00:07:51,520 --> 00:07:54,480 Speaker 1: could yield eight percent plus some price appreciation see ten. 137 00:07:55,160 --> 00:07:57,480 Speaker 1: So frankly, you know, that's a place where I don't 138 00:07:57,520 --> 00:07:59,760 Speaker 1: think people are looking, and I think probably there are 139 00:07:59,800 --> 00:08:04,040 Speaker 1: some If you take what Peter said Lausanne. Ultimately does 140 00:08:04,040 --> 00:08:07,080 Speaker 1: that end up in cash because that's the shortest term investment. 141 00:08:07,120 --> 00:08:08,680 Speaker 1: You can move that around quickly, and maybe you have 142 00:08:08,720 --> 00:08:10,880 Speaker 1: to get ready for a bounce back in eighteen months. 143 00:08:11,000 --> 00:08:13,440 Speaker 1: So I think it depends on who the investor is. 144 00:08:13,480 --> 00:08:18,040 Speaker 1: I think for investors that are much less risk tolerant, 145 00:08:18,440 --> 00:08:20,680 Speaker 1: that if there and I'm talking from the respect of 146 00:08:20,720 --> 00:08:23,680 Speaker 1: an individual investors, if they're older, if they're in retirement, 147 00:08:24,120 --> 00:08:26,880 Speaker 1: they were forced way out the risk spectrum in a 148 00:08:26,960 --> 00:08:30,960 Speaker 1: zero interest rate environment. And for anybody that doesn't have 149 00:08:30,960 --> 00:08:35,000 Speaker 1: a high risk tolerance, that have those liquidity needs, that 150 00:08:35,080 --> 00:08:38,400 Speaker 1: have the need to live off of income getting a 151 00:08:38,480 --> 00:08:42,440 Speaker 1: real yield on a cash like or a very short 152 00:08:42,559 --> 00:08:45,640 Speaker 1: term security, that's the first time they've experienced that in 153 00:08:45,640 --> 00:08:48,240 Speaker 1: in quite some time. But I also agree with with Peter. 154 00:08:48,320 --> 00:08:51,160 Speaker 1: I think there are paradigm shifts that happen when you 155 00:08:51,200 --> 00:08:53,320 Speaker 1: go through cycles, particularly when you go through a full 156 00:08:53,320 --> 00:08:56,000 Speaker 1: cycle where you have an economic contraction and you go 157 00:08:56,120 --> 00:08:58,240 Speaker 1: from a bull market to a bear market into a 158 00:08:58,240 --> 00:09:00,839 Speaker 1: new bull market. There's always that recency bias. There's always 159 00:09:00,880 --> 00:09:03,680 Speaker 1: that obsession with looking at what had been the leadership 160 00:09:03,720 --> 00:09:06,160 Speaker 1: and feeling that there's not going to be momentum and 161 00:09:06,200 --> 00:09:09,160 Speaker 1: asset class. One should go back to that leadership, leadership changes. 162 00:09:09,240 --> 00:09:12,600 Speaker 1: I think there is opportunity in fixing. There is opportunity international. 163 00:09:13,240 --> 00:09:15,480 Speaker 1: We've got to look through the windshield, not the review Marreor. 164 00:09:15,559 --> 00:09:17,640 Speaker 1: It's interesting. I just saw a note from Rock Creek 165 00:09:17,880 --> 00:09:21,320 Speaker 1: outside in Best Losses note that said something I hadn't 166 00:09:21,320 --> 00:09:23,240 Speaker 1: focused on, which is actually one of the winners this 167 00:09:23,280 --> 00:09:25,880 Speaker 1: year has been Latin America. The Latin America has done 168 00:09:25,880 --> 00:09:27,920 Speaker 1: surprisingly well. I've not been paying any attention to Latin 169 00:09:27,960 --> 00:09:31,280 Speaker 1: American at all. I must say mostly commodity driven, oil driven. 170 00:09:31,480 --> 00:09:34,360 Speaker 1: You know that that's what's driving that. But look, I 171 00:09:35,120 --> 00:09:37,640 Speaker 1: I don't think that we're saying don't invest in equities. 172 00:09:37,920 --> 00:09:40,199 Speaker 1: I just think that the when you look at the 173 00:09:40,360 --> 00:09:42,679 Speaker 1: where your money is allocated, you're going to start to 174 00:09:42,720 --> 00:09:47,720 Speaker 1: allocate more money to the fixed income complex and pretty 175 00:09:47,800 --> 00:09:50,000 Speaker 1: much you're gonna go through a period of volatility here 176 00:09:50,200 --> 00:09:54,120 Speaker 1: where private assets are probably going to have some challenges. Uh, 177 00:09:54,200 --> 00:09:55,800 Speaker 1: you won't be able to get any liquidity. They're just 178 00:09:55,840 --> 00:09:57,679 Speaker 1: gonna have to hold them. So you're gonna have opportunity 179 00:09:57,800 --> 00:10:01,520 Speaker 1: losses there. You've seen some that already in these large 180 00:10:02,320 --> 00:10:05,640 Speaker 1: pools of private assets that have cash with rows or 181 00:10:05,679 --> 00:10:08,199 Speaker 1: cash requirements, and I think you're going to continue to 182 00:10:08,240 --> 00:10:10,559 Speaker 1: see that as people try to take their liquidity and 183 00:10:10,640 --> 00:10:12,559 Speaker 1: get eight to nine percent, which they haven't seen for 184 00:10:12,640 --> 00:10:14,679 Speaker 1: fifteen years. Thank you so much to Peter Cross of 185 00:10:14,720 --> 00:10:17,120 Speaker 1: Apature Investors and liz Ane Saunders of Charles Schwapp for 186 00:10:17,240 --> 00:10:19,280 Speaker 1: being with us on Wall Street Week. Coming up, we're 187 00:10:19,280 --> 00:10:21,320 Speaker 1: gonna take a look at the mood on Wall Street 188 00:10:21,480 --> 00:10:23,880 Speaker 1: as we head into a bumpy patch. That's next on 189 00:10:23,960 --> 00:10:35,000 Speaker 1: Wall Street Week on Bloomberg. This is Bloomberg Wall Street 190 00:10:35,040 --> 00:10:40,640 Speaker 1: Week with David Weston from Bloomberg Radio. Real Estate. It's 191 00:10:40,640 --> 00:10:43,439 Speaker 1: the investment people turned to in times of inflation. The 192 00:10:43,600 --> 00:10:46,360 Speaker 1: real estate market is probably the best major markets investing 193 00:10:46,440 --> 00:10:49,040 Speaker 1: right now. Inflation in general is good for real estate 194 00:10:49,360 --> 00:10:52,600 Speaker 1: and rock creeks. Asani Beschelis says, they are seeing portfolios 195 00:10:52,760 --> 00:10:56,079 Speaker 1: shift to real estate as investors turned to private investments 196 00:10:56,400 --> 00:10:59,440 Speaker 1: in an uncertain time. The big thing that is happening 197 00:10:59,480 --> 00:11:02,040 Speaker 1: in the ports and as we're looking at is obviously 198 00:11:02,040 --> 00:11:05,520 Speaker 1: a lot of investors, institution investors have been also investing 199 00:11:05,720 --> 00:11:09,760 Speaker 1: in venture, private equity, real estate in private form, and 200 00:11:09,880 --> 00:11:12,520 Speaker 1: I think that is going to some sort of transformation too, 201 00:11:12,720 --> 00:11:15,800 Speaker 1: but with interest rates climbing, real estate is becoming trickier. 202 00:11:16,240 --> 00:11:18,800 Speaker 1: Tom Shapiro of g T I S says the housing 203 00:11:18,840 --> 00:11:21,839 Speaker 1: market is taking a real hit. The housing market is 204 00:11:21,920 --> 00:11:25,800 Speaker 1: tremendously decelerating at this point sales or optomendastin. Famed investor 205 00:11:26,000 --> 00:11:28,480 Speaker 1: Sam Zell says it may be worth less than the 206 00:11:28,559 --> 00:11:31,880 Speaker 1: market thinks. I felt that the real estate market generally 207 00:11:31,960 --> 00:11:36,640 Speaker 1: has been overpriced, particularly in on the private sector. And 208 00:11:36,800 --> 00:11:40,199 Speaker 1: now Blackstone has limited withdrawals from its massive real estate 209 00:11:40,280 --> 00:11:43,280 Speaker 1: investment fund because too many people were taking their money 210 00:11:43,320 --> 00:11:47,079 Speaker 1: out too fast, which Larry Summers sees as a potentially 211 00:11:47,200 --> 00:11:52,720 Speaker 1: ominous sign. When you see prominent financial institutions telling people 212 00:11:52,840 --> 00:11:56,280 Speaker 1: that they can't take their money out, that's never a 213 00:11:56,360 --> 00:12:04,559 Speaker 1: happy thing. Makes me wonder about what's head And we 214 00:12:04,679 --> 00:12:06,640 Speaker 1: welcome back to Wall Street Week. Now somebody who knows 215 00:12:06,720 --> 00:12:09,200 Speaker 1: real estate terribly well. He's Jeff Blau. He's the CEO 216 00:12:09,360 --> 00:12:11,599 Speaker 1: of Related and that is, of course one of the 217 00:12:11,720 --> 00:12:14,679 Speaker 1: largest real estate developers around the country. They have properties 218 00:12:14,800 --> 00:12:16,839 Speaker 1: throughout the countries and our unlast time I checked the 219 00:12:16,920 --> 00:12:19,920 Speaker 1: largest landlord in New York City. I think Jeff one Off. 220 00:12:19,960 --> 00:12:21,480 Speaker 1: I don't know if all of the largest, but who 221 00:12:21,480 --> 00:12:24,160 Speaker 1: are up there, so welcome back. Great, So tell us 222 00:12:24,160 --> 00:12:27,240 Speaker 1: about real estate right now. It has been a good 223 00:12:27,360 --> 00:12:29,480 Speaker 1: hedge against inflation. Inflation is a problem. At the same 224 00:12:29,559 --> 00:12:32,000 Speaker 1: time interest rates are going up. At this end, we 225 00:12:32,080 --> 00:12:35,360 Speaker 1: have some real problems with some office occupancy. So you've 226 00:12:35,360 --> 00:12:38,240 Speaker 1: got a lot of topics in there. Uh. First, if 227 00:12:38,280 --> 00:12:40,319 Speaker 1: you think about what's happened over the last year, we've 228 00:12:40,360 --> 00:12:43,720 Speaker 1: had the fastest rise in interest rates in in probably 229 00:12:43,760 --> 00:12:46,679 Speaker 1: twenty plus years, and the impact on real estate is 230 00:12:46,679 --> 00:12:49,920 Speaker 1: pretty significant. Now you break down different parts of real 231 00:12:50,000 --> 00:12:54,000 Speaker 1: estate because real estates broad so unstabilized assets buildings that 232 00:12:54,080 --> 00:12:57,199 Speaker 1: people own, whether it's apartment buildings or office buildings. In 233 00:12:57,280 --> 00:12:59,480 Speaker 1: a in a way, inflation is good for those assets, right, 234 00:12:59,559 --> 00:13:02,400 Speaker 1: rents eyes they go up, and if you did a 235 00:13:02,440 --> 00:13:04,640 Speaker 1: good job managing your assets, you might have fixed rate 236 00:13:04,760 --> 00:13:07,719 Speaker 1: long term debt, so cash flows increase. So in the 237 00:13:07,920 --> 00:13:12,840 Speaker 1: in that bucket of real estate, inflation is a great head. Uh. 238 00:13:13,000 --> 00:13:16,520 Speaker 1: Inflation is great for for real estate assets. Um, if 239 00:13:16,559 --> 00:13:19,360 Speaker 1: you're in the funds business, whether they're credit funds or 240 00:13:19,440 --> 00:13:21,920 Speaker 1: equity funds, this is a great time for that business. 241 00:13:22,200 --> 00:13:24,599 Speaker 1: The banks, as you know, have stopped lending or have 242 00:13:24,760 --> 00:13:28,880 Speaker 1: certainly pulled back um significantly, and so the private credit 243 00:13:29,280 --> 00:13:33,319 Speaker 1: markets are are booming because where they were competing with 244 00:13:33,440 --> 00:13:35,440 Speaker 1: the banks in the past, the in effect could make 245 00:13:35,520 --> 00:13:39,040 Speaker 1: bank type loans at two times the rate. So that's 246 00:13:39,040 --> 00:13:42,680 Speaker 1: a great opportunity for credit funds equity funds. We haven't 247 00:13:42,760 --> 00:13:45,400 Speaker 1: yet seen real distress. We might start seeing that in 248 00:13:45,480 --> 00:13:47,040 Speaker 1: the in the next couple of months, So I think 249 00:13:47,080 --> 00:13:49,719 Speaker 1: the funds management business in real estate is going to 250 00:13:49,800 --> 00:13:52,959 Speaker 1: be very strong going into twenty three. The difficult part 251 00:13:53,000 --> 00:13:55,199 Speaker 1: for real estate is is anything you want to do 252 00:13:55,360 --> 00:13:57,720 Speaker 1: new new development is difficult if there's not a lot 253 00:13:57,720 --> 00:14:00,400 Speaker 1: of financing. There's not a lot of construction loans. Costs 254 00:14:00,440 --> 00:14:04,280 Speaker 1: have gone up, UM, so it makes harder to build UM. 255 00:14:04,400 --> 00:14:06,160 Speaker 1: So it's it depends where you are in the real 256 00:14:06,280 --> 00:14:09,760 Speaker 1: estate markets. UM. As to what you know, the impact 257 00:14:09,920 --> 00:14:13,559 Speaker 1: is the office sector. As you mentioned, that's that's a 258 00:14:13,640 --> 00:14:17,280 Speaker 1: whole topic into itself, UM. And I think really people 259 00:14:17,440 --> 00:14:19,400 Speaker 1: people ask me all the time tell me about what 260 00:14:19,480 --> 00:14:23,440 Speaker 1: the office market, and really the office market is very bifurcated, 261 00:14:23,480 --> 00:14:26,640 Speaker 1: and I don't think there's one answer. Again, UM, what 262 00:14:26,800 --> 00:14:30,000 Speaker 1: we have seen is is a real dispersion in values 263 00:14:30,120 --> 00:14:34,920 Speaker 1: between older buildings and and brand new buildings. Um. And 264 00:14:35,000 --> 00:14:37,360 Speaker 1: it's not just new, it's new with the right features, 265 00:14:37,400 --> 00:14:40,400 Speaker 1: the right amenities that tenants are looking for today. UM. 266 00:14:40,720 --> 00:14:44,880 Speaker 1: So we're seeing more and more corporations thinking about how 267 00:14:44,960 --> 00:14:47,360 Speaker 1: do they get people back to their office and thinking 268 00:14:47,400 --> 00:14:51,440 Speaker 1: about using the physical space as the attraction to bring 269 00:14:51,560 --> 00:14:54,400 Speaker 1: people back. But truthfully, people don't want to go back 270 00:14:54,480 --> 00:14:57,720 Speaker 1: to old kind of quiet offices that are dark and 271 00:14:57,840 --> 00:15:00,480 Speaker 1: have bad air circulation and long waits in the elevators 272 00:15:00,520 --> 00:15:04,080 Speaker 1: and no amenities. So what corporations are doing is investing 273 00:15:04,800 --> 00:15:08,000 Speaker 1: in their office space not for occupancy but for talent 274 00:15:08,120 --> 00:15:12,440 Speaker 1: attraction and retention. And I think that's where you're really seeing, uh, 275 00:15:12,800 --> 00:15:15,520 Speaker 1: the A buildings and the new buildings that are focused 276 00:15:15,560 --> 00:15:17,240 Speaker 1: on this, that have the right amenities, that have the 277 00:15:17,360 --> 00:15:21,320 Speaker 1: right h v A C circulation, that have hospitality type services, 278 00:15:21,440 --> 00:15:24,120 Speaker 1: that have great air and light, um and the right 279 00:15:24,160 --> 00:15:27,280 Speaker 1: type of build out. The build out in office space 280 00:15:27,400 --> 00:15:30,400 Speaker 1: is changing tremendously. Where we used to see kind of 281 00:15:30,480 --> 00:15:32,840 Speaker 1: the old mad Max version of a build out with 282 00:15:33,280 --> 00:15:37,560 Speaker 1: you know, private offices on the exterior wall and assistance 283 00:15:37,600 --> 00:15:41,520 Speaker 1: offices or cubes inside. That's really not the way office 284 00:15:41,560 --> 00:15:46,640 Speaker 1: is built today. We're seeing well much more collaboration space, 285 00:15:46,760 --> 00:15:50,880 Speaker 1: teeming space, meeting space, food service tables around food where 286 00:15:50,920 --> 00:15:53,840 Speaker 1: people are using for gathering and working as opposed to 287 00:15:53,920 --> 00:15:57,560 Speaker 1: private offices. So this type of office of the future 288 00:15:57,920 --> 00:16:01,000 Speaker 1: UM we think can be successful and is successful. The 289 00:16:01,120 --> 00:16:04,240 Speaker 1: data is there today, UM for these new buildings. So 290 00:16:04,800 --> 00:16:10,320 Speaker 1: we compared brand new buildings across markets in the United States, UM, 291 00:16:10,400 --> 00:16:12,400 Speaker 1: not just here in New York. And you look at 292 00:16:12,920 --> 00:16:15,920 Speaker 1: new modern buildings with the right features, the right amenities, 293 00:16:16,240 --> 00:16:19,640 Speaker 1: and the demand for those buildings is tremendous. And at 294 00:16:19,680 --> 00:16:22,680 Speaker 1: the very same time, you can go a couple of blocks, 295 00:16:22,720 --> 00:16:24,360 Speaker 1: like if you take huts in Yards for example, we 296 00:16:24,480 --> 00:16:27,960 Speaker 1: just opened last last week. Actually a first tenant moved 297 00:16:28,000 --> 00:16:30,600 Speaker 1: in at fifty Huts and Yards. Fifty Huts and Yards 298 00:16:30,720 --> 00:16:33,640 Speaker 1: is a three million square foot building. It costs US 299 00:16:33,720 --> 00:16:36,840 Speaker 1: over four billion dollars to build this building, and and 300 00:16:36,880 --> 00:16:39,800 Speaker 1: it's essentially ninety plus percent at least at this point, 301 00:16:40,280 --> 00:16:43,080 Speaker 1: we're getting the highest rents in New York City in 302 00:16:43,200 --> 00:16:46,320 Speaker 1: that building, over two hundred dollars a foot in that building. 303 00:16:46,960 --> 00:16:50,160 Speaker 1: And because it is it has all those features and amenities. 304 00:16:50,280 --> 00:16:52,240 Speaker 1: It is new, it has all those things that we're 305 00:16:52,280 --> 00:16:56,280 Speaker 1: talking about. You can go three blocks away and find 306 00:16:56,440 --> 00:16:59,040 Speaker 1: as much space as you want in B buildings that's 307 00:16:59,080 --> 00:17:01,280 Speaker 1: probably listed for six exteen dollars and they can't at 308 00:17:01,320 --> 00:17:04,080 Speaker 1: least even with everything you say about the A. Are 309 00:17:04,160 --> 00:17:06,560 Speaker 1: people needing a little less A space? I mean we 310 00:17:06,640 --> 00:17:08,879 Speaker 1: had the Meta situation actually hunts in yards where they 311 00:17:08,880 --> 00:17:11,359 Speaker 1: gave back two or fift square feet. Are you seeing 312 00:17:11,400 --> 00:17:13,399 Speaker 1: that more broadly where people saying, yes, I really like 313 00:17:13,560 --> 00:17:15,680 Speaker 1: A but I don't need as much of it? So 314 00:17:15,920 --> 00:17:18,760 Speaker 1: not really. So there's a couple of different situations. So Meta. 315 00:17:19,480 --> 00:17:22,320 Speaker 1: Actually what Meta did is when we made the deal 316 00:17:22,400 --> 00:17:24,840 Speaker 1: with them, they are anchored one of the anchor tenants 317 00:17:25,160 --> 00:17:27,600 Speaker 1: along with Black Rock in in fifty Huts and Yards. 318 00:17:28,080 --> 00:17:30,040 Speaker 1: When we made the deal for them to move into 319 00:17:30,119 --> 00:17:33,600 Speaker 1: fifty huts and yards, that was three plus years ago, 320 00:17:33,680 --> 00:17:36,560 Speaker 1: four years ago UM, and they needed space immediately, so 321 00:17:36,680 --> 00:17:39,960 Speaker 1: they took some swing space in thirty UM with the 322 00:17:40,000 --> 00:17:42,399 Speaker 1: intent to move into fifty So that's the space that 323 00:17:42,520 --> 00:17:45,200 Speaker 1: they are not staying in today. Everyone thinks there was 324 00:17:45,240 --> 00:17:47,720 Speaker 1: this big announcement, but that was that's that was the plan. 325 00:17:48,560 --> 00:17:51,080 Speaker 1: So they are moving the employees that they have in 326 00:17:51,440 --> 00:17:53,680 Speaker 1: thirty huts and yards, which was which were in swing 327 00:17:53,800 --> 00:17:58,200 Speaker 1: space into fifty And answer your question, there are companies 328 00:17:58,280 --> 00:18:01,760 Speaker 1: like Meta today that are back on office space in general, 329 00:18:02,359 --> 00:18:04,760 Speaker 1: but that has nothing to do with their build out 330 00:18:04,840 --> 00:18:07,320 Speaker 1: of the space. That's you know, the tech sector is 331 00:18:07,359 --> 00:18:10,720 Speaker 1: pulling back, they're cutting costs. That's based on their business. 332 00:18:10,800 --> 00:18:13,600 Speaker 1: That's based on kind of what's happening in the broader economy. 333 00:18:14,119 --> 00:18:18,160 Speaker 1: If you if you ask Meta about their office space 334 00:18:18,280 --> 00:18:21,080 Speaker 1: per employee in their new types of buildouts, and so 335 00:18:21,240 --> 00:18:25,200 Speaker 1: they have actually stepped back rethought about the office space 336 00:18:25,280 --> 00:18:27,520 Speaker 1: of the future, and it's all the things that I 337 00:18:27,600 --> 00:18:32,359 Speaker 1: talked about. Much fewer private offices, much more gathering and 338 00:18:32,440 --> 00:18:35,840 Speaker 1: meeting spaces. And when you when you take the same 339 00:18:36,080 --> 00:18:38,320 Speaker 1: when you take the the same number of employees and 340 00:18:38,440 --> 00:18:41,160 Speaker 1: compared the old build out and the new build out, 341 00:18:41,520 --> 00:18:45,200 Speaker 1: the mix of public space and private space is completely different. 342 00:18:45,480 --> 00:18:47,760 Speaker 1: But the total square footage per employee is the same. 343 00:18:48,000 --> 00:18:49,760 Speaker 1: Now if they have if they're pulling back because of 344 00:18:49,840 --> 00:18:52,879 Speaker 1: general economic issues, that's not a real estate issue, right, 345 00:18:52,920 --> 00:18:54,639 Speaker 1: It's not an office space issue. Let's come back to 346 00:18:54,680 --> 00:18:57,480 Speaker 1: the BNC buildings as we call them. I've read about 347 00:18:57,480 --> 00:18:59,960 Speaker 1: so called zombie office buildings now in New York City 348 00:19:00,000 --> 00:19:02,920 Speaker 1: they're really empty. How bad a problem is that? What 349 00:19:03,040 --> 00:19:04,520 Speaker 1: are we going to see? What's the followup? And by 350 00:19:04,520 --> 00:19:07,080 Speaker 1: the way, does that also create some opportunities and bargains 351 00:19:07,119 --> 00:19:09,800 Speaker 1: to pick things up cheap? Right? So I think it 352 00:19:09,960 --> 00:19:13,040 Speaker 1: is a pretty significant issue for New York City. You've 353 00:19:13,080 --> 00:19:15,920 Speaker 1: had some companies leave New York. Um, You've had some 354 00:19:16,080 --> 00:19:19,879 Speaker 1: companies suffer through the economic downturn and COVID and supply 355 00:19:20,040 --> 00:19:22,119 Speaker 1: chain and all the things that have happened, UM, and 356 00:19:22,240 --> 00:19:25,800 Speaker 1: have vacated space in those B buildings. UM. The problem 357 00:19:25,960 --> 00:19:27,960 Speaker 1: is there's not there's not a lot of tenants that 358 00:19:28,000 --> 00:19:32,840 Speaker 1: want to release those spaces. So we're seeing vacancy in 359 00:19:32,920 --> 00:19:37,040 Speaker 1: the B buildings increased significantly. We're seeing the vacancy in 360 00:19:37,200 --> 00:19:41,680 Speaker 1: the not just A buildings, but in new product A buildings. Jeff, 361 00:19:41,720 --> 00:19:46,840 Speaker 1: thank you so much, Jeff Bloggy, CEO of Related Coming up, 362 00:19:46,880 --> 00:19:49,240 Speaker 1: we'll wrap up the week with our special contributor Larry 363 00:19:49,280 --> 00:19:53,639 Speaker 1: Summers of Harvard. This is Wall Street Week on Bloomberg. 364 00:20:00,960 --> 00:20:03,000 Speaker 1: This is Wall Street Week. I'm David Weston, and we 365 00:20:03,080 --> 00:20:05,640 Speaker 1: welcome back now our special contributor in Wall Street Week. 366 00:20:05,720 --> 00:20:08,240 Speaker 1: He is Larry Summers of Harvard, So Larry, normally we 367 00:20:08,359 --> 00:20:10,440 Speaker 1: talked about what's happened during the week, particularly what the 368 00:20:10,520 --> 00:20:12,400 Speaker 1: FED might make of it, what might happen with rates, 369 00:20:12,800 --> 00:20:14,560 Speaker 1: But it strikes me there isn't a lot of that 370 00:20:14,720 --> 00:20:17,760 Speaker 1: this week. Let's talk about larger issues that really you 371 00:20:17,920 --> 00:20:21,800 Speaker 1: are focused on. David. I think it's important for us 372 00:20:21,800 --> 00:20:27,600 Speaker 1: always to remember that ultimately, trends are more important than events, 373 00:20:28,560 --> 00:20:32,400 Speaker 1: and trends most of the time are positive, and events 374 00:20:32,800 --> 00:20:35,480 Speaker 1: most of the time are negative. So we have to 375 00:20:35,640 --> 00:20:39,320 Speaker 1: step back and look at things that may be markers 376 00:20:39,520 --> 00:20:43,720 Speaker 1: of trends. And I saw too such things this week, 377 00:20:44,680 --> 00:20:50,159 Speaker 1: China's huge evolution away from the zero COVID strategy, and 378 00:20:50,359 --> 00:20:55,520 Speaker 1: what happened with chat GPT from open Ai, which may 379 00:20:56,200 --> 00:20:59,879 Speaker 1: be a marker of a profound change in what it 380 00:21:00,080 --> 00:21:02,080 Speaker 1: means to be a machine and what it means to 381 00:21:02,160 --> 00:21:04,840 Speaker 1: be human. So let's take each of those up in turn, 382 00:21:04,880 --> 00:21:07,240 Speaker 1: if we could. Let's start with China, because as you say, 383 00:21:07,280 --> 00:21:09,639 Speaker 1: they really are backing off of their strict policy on 384 00:21:09,840 --> 00:21:13,200 Speaker 1: COVID and the isolation and that they've been pursuing, and 385 00:21:13,240 --> 00:21:14,920 Speaker 1: also up a lot of the testing. But do we 386 00:21:15,040 --> 00:21:16,879 Speaker 1: know yet, well, that's gonna be positive or negative. It 387 00:21:16,920 --> 00:21:19,439 Speaker 1: could be positively for the economy. But now and if 388 00:21:19,440 --> 00:21:22,440 Speaker 1: they have a real spike in cases and really overload 389 00:21:22,480 --> 00:21:25,800 Speaker 1: their medical system, we may have a problem. Look, I 390 00:21:26,119 --> 00:21:30,640 Speaker 1: think we know two things. We know that a big 391 00:21:30,880 --> 00:21:35,640 Speaker 1: change in China happened because of an expression of popular 392 00:21:35,760 --> 00:21:42,240 Speaker 1: will and protests. That's a profound thing for the governance 393 00:21:42,600 --> 00:21:48,600 Speaker 1: of that superpower with one point four billion people. You're 394 00:21:48,720 --> 00:21:52,040 Speaker 1: quite right, we don't yet know how this is going 395 00:21:52,200 --> 00:21:55,879 Speaker 1: to work out. Is this going to be a successful 396 00:21:56,119 --> 00:21:59,040 Speaker 1: rejoining of the reality of the rest of the world, 397 00:21:59,840 --> 00:22:05,240 Speaker 1: or or is this going to lead to catastrophic delegitimizing 398 00:22:06,200 --> 00:22:11,399 Speaker 1: performance of the Chinese healthcare system? And we don't know. 399 00:22:12,280 --> 00:22:16,280 Speaker 1: But either way, there's a big chance that China is 400 00:22:16,280 --> 00:22:19,400 Speaker 1: going to be a quite different country six months from 401 00:22:19,480 --> 00:22:23,160 Speaker 1: now than it is today. And so I think all 402 00:22:23,240 --> 00:22:26,520 Speaker 1: of us are always watching China carefully, but we need 403 00:22:26,600 --> 00:22:30,200 Speaker 1: to be watching China much more carefully over the next 404 00:22:31,000 --> 00:22:34,080 Speaker 1: over the next six months, when you're gonna be seeing 405 00:22:34,280 --> 00:22:38,919 Speaker 1: leadership change at the same below the level of shijimping. 406 00:22:39,040 --> 00:22:41,520 Speaker 1: Of course, at the same time that we're gonna be 407 00:22:41,680 --> 00:22:48,040 Speaker 1: seeing probably the biggest UH set of policy experiments UH 408 00:22:48,320 --> 00:22:51,359 Speaker 1: that we've seen in China in decades. So let's turn 409 00:22:51,400 --> 00:22:53,680 Speaker 1: to that second SUT together, the open AI creation of 410 00:22:53,800 --> 00:22:56,680 Speaker 1: chat GPT. I won't pretend that I understand this, but 411 00:22:56,800 --> 00:22:59,920 Speaker 1: I have read about it. Again, Is this a positive 412 00:23:00,000 --> 00:23:01,960 Speaker 1: thing or potentially a negative thing? Because we already have 413 00:23:02,119 --> 00:23:03,680 Speaker 1: a lot on the Internet, we don't know where it 414 00:23:03,720 --> 00:23:06,080 Speaker 1: comes from or its origins. Now we're gonna have something 415 00:23:06,680 --> 00:23:10,000 Speaker 1: we can't even tell whether a person created it. Look, 416 00:23:10,080 --> 00:23:12,760 Speaker 1: when I went to graduate school, we used to estimate 417 00:23:13,040 --> 00:23:17,320 Speaker 1: statistical models with five parameters. Now they're gonna be a 418 00:23:17,400 --> 00:23:21,959 Speaker 1: hundred and seventy five billion parameters that go into UH 419 00:23:22,520 --> 00:23:27,719 Speaker 1: one of these UH systems. The great computer scientist Alan 420 00:23:27,840 --> 00:23:32,159 Speaker 1: Turing seven years ago said that it was going to 421 00:23:32,320 --> 00:23:38,080 Speaker 1: be a threshold for humanity when a machine could sept 422 00:23:38,200 --> 00:23:42,280 Speaker 1: could it could imitate a human being's answers to questions 423 00:23:42,840 --> 00:23:46,480 Speaker 1: in a way where another human being wouldn't be able 424 00:23:46,560 --> 00:23:50,560 Speaker 1: to tell the difference. We're somewhere in the territory of 425 00:23:50,720 --> 00:23:55,600 Speaker 1: that right now, and that is a profound thing for humanity. 426 00:23:56,240 --> 00:24:01,000 Speaker 1: It points to a profound change in the way we're 427 00:24:01,280 --> 00:24:04,560 Speaker 1: all going to be working. We're all going to have 428 00:24:04,920 --> 00:24:08,000 Speaker 1: a kind of caddy that or many of us are 429 00:24:08,080 --> 00:24:11,040 Speaker 1: going to have a kind of caddy that is going 430 00:24:11,240 --> 00:24:17,680 Speaker 1: to augment our creativity, augment our capacities, to bring knowledge 431 00:24:17,760 --> 00:24:23,359 Speaker 1: to bear on what we do, augment our accuracy. But 432 00:24:24,320 --> 00:24:29,240 Speaker 1: just as the printing press or electricity was a huge 433 00:24:29,640 --> 00:24:33,920 Speaker 1: change because it was a general purpose technology, this could 434 00:24:33,960 --> 00:24:38,879 Speaker 1: be the most important general purpose technology since the wheel 435 00:24:39,280 --> 00:24:44,400 Speaker 1: or fire, and that is something we are all going 436 00:24:44,600 --> 00:24:50,640 Speaker 1: to be changed by. My hope is that the very 437 00:24:50,840 --> 00:24:56,080 Speaker 1: transcendence of these kinds of events can bring a kind 438 00:24:56,200 --> 00:25:00,359 Speaker 1: of unity, can bring a kind of unity because they 439 00:25:00,400 --> 00:25:05,359 Speaker 1: are so large relative to the differences between Democrats and Republicans, 440 00:25:05,880 --> 00:25:11,000 Speaker 1: or even the difference between the West and China, that 441 00:25:11,600 --> 00:25:17,720 Speaker 1: these opportunities and threats because they are both, whether it's microbes, 442 00:25:17,800 --> 00:25:23,280 Speaker 1: whether it's artificial intelligence, whether it's a climate change, that 443 00:25:23,480 --> 00:25:29,119 Speaker 1: the very transcendence of these global events can become a 444 00:25:29,280 --> 00:25:34,240 Speaker 1: source of cohesion and progress. But there is no assurance 445 00:25:34,520 --> 00:25:40,439 Speaker 1: at all of that we are living in truly historic times. 446 00:25:40,920 --> 00:25:42,280 Speaker 1: Learn I want to talk about a different sort of 447 00:25:42,320 --> 00:25:44,760 Speaker 1: threshold that I came across this week, and I was 448 00:25:44,800 --> 00:25:47,920 Speaker 1: a little bit surprised. I was reading Bono the Leader 449 00:25:47,960 --> 00:25:51,240 Speaker 1: of You too. His new memoir called Surrender is a 450 00:25:51,320 --> 00:25:53,840 Speaker 1: fascinating book. I find it very, very compelling. And who 451 00:25:53,880 --> 00:25:56,400 Speaker 1: do I find in there but one Larry Summers when 452 00:25:56,440 --> 00:26:00,080 Speaker 1: you were, according to Bano, originally new Treasury secretary, and 453 00:26:00,200 --> 00:26:02,400 Speaker 1: he came in to meet with you and Cheryl Sandberg 454 00:26:02,520 --> 00:26:05,440 Speaker 1: and Stephanie Flanders to talk about debt forgiveness for the 455 00:26:05,520 --> 00:26:08,440 Speaker 1: poorest countries. And according to his rendition of it, it 456 00:26:08,560 --> 00:26:11,760 Speaker 1: really started. You started with President Clinton, a real process 457 00:26:12,000 --> 00:26:14,960 Speaker 1: that led to really historic changes in the debt of 458 00:26:15,040 --> 00:26:16,960 Speaker 1: some of the poorest countries in the world. What about that. 459 00:26:17,160 --> 00:26:18,800 Speaker 1: We've still got a long way to go, don't we. 460 00:26:19,600 --> 00:26:25,080 Speaker 1: David Barno is an unlikely but very close friend. I 461 00:26:25,160 --> 00:26:28,920 Speaker 1: will confess it. I'd never heard of him before we 462 00:26:29,160 --> 00:26:32,760 Speaker 1: had our meeting, and Cheryl Sandberg had to force me 463 00:26:33,640 --> 00:26:36,680 Speaker 1: to take the meeting because I thought Secretaries of the 464 00:26:36,760 --> 00:26:39,120 Speaker 1: Treasury should only meet with people who had a first 465 00:26:39,240 --> 00:26:45,600 Speaker 1: name and a last name. But he was mesmerizing both 466 00:26:45,760 --> 00:26:49,920 Speaker 1: in his charisma and his knowledge, and he drove that 467 00:26:50,280 --> 00:26:55,920 Speaker 1: debt relief program forward. We had an unlikely coalition. Pat 468 00:26:56,080 --> 00:27:00,560 Speaker 1: Robertson Senator Jesse Helms, and we were able to do 469 00:27:00,760 --> 00:27:04,639 Speaker 1: something that I think was hugely important for the African 470 00:27:04,760 --> 00:27:09,320 Speaker 1: continent at that time. Sad to say, right now, the 471 00:27:09,440 --> 00:27:15,359 Speaker 1: world needs comprehensive debt relief for the poorest countries, and 472 00:27:15,480 --> 00:27:23,440 Speaker 1: what the world is getting is grudging, incremental, partial, limited, 473 00:27:24,400 --> 00:27:29,040 Speaker 1: small efforts. And we've got to find a way to 474 00:27:29,240 --> 00:27:32,840 Speaker 1: do UH better. And I hope bot I was going 475 00:27:32,880 --> 00:27:37,879 Speaker 1: to get the band together again. I'm certainly willing to 476 00:27:38,000 --> 00:27:41,639 Speaker 1: do my part UH to help. This time it is 477 00:27:41,680 --> 00:27:44,000 Speaker 1: going to be different because a lot of that debt 478 00:27:44,240 --> 00:27:47,959 Speaker 1: is owed to China, and finding a way, even when 479 00:27:48,080 --> 00:27:52,840 Speaker 1: things are vexed with China, to involve them in helping 480 00:27:52,960 --> 00:27:57,879 Speaker 1: these countries UH move forward based on an understanding of 481 00:27:58,000 --> 00:28:01,800 Speaker 1: how they see UH. The you is going to be 482 00:28:02,400 --> 00:28:07,960 Speaker 1: UH necessary and profoundly important for a large number of 483 00:28:08,080 --> 00:28:10,600 Speaker 1: human loves. And finally, Larry, give us a moment, if 484 00:28:10,600 --> 00:28:12,639 Speaker 1: you would, on what we normally do on this program, 485 00:28:12,720 --> 00:28:14,840 Speaker 1: which is talking about what happens this week and specifically 486 00:28:14,920 --> 00:28:17,359 Speaker 1: the question of the likelihood recession. We saw developments in 487 00:28:17,480 --> 00:28:21,440 Speaker 1: the marketplace, oil price coming down, bond deals coming down, 488 00:28:21,880 --> 00:28:24,159 Speaker 1: stocks coming down. Most people think that has to do 489 00:28:24,240 --> 00:28:27,200 Speaker 1: with real anticipation of a significant recession. Where are you 490 00:28:27,240 --> 00:28:32,200 Speaker 1: on that I've been I've been saying, uh, soft landing 491 00:28:32,400 --> 00:28:34,960 Speaker 1: very unlikely for a while, and I think it's looking 492 00:28:35,040 --> 00:28:40,040 Speaker 1: even more unlikely. Uh right now, I noticed that the 493 00:28:40,360 --> 00:28:45,440 Speaker 1: consensus is reflected by the Ft University Chicago survey of 494 00:28:45,560 --> 00:28:49,360 Speaker 1: a group of fifty economists, is now moving closer to 495 00:28:49,440 --> 00:28:52,000 Speaker 1: where I've been. They're saying that we're going to have 496 00:28:52,120 --> 00:28:55,840 Speaker 1: a recession and that the unemployment rate will peak at 497 00:28:55,920 --> 00:28:59,040 Speaker 1: five and a half percent. That's up from where they were, 498 00:28:59,240 --> 00:29:02,080 Speaker 1: way ahead of of the fat Is I've been saying 499 00:29:02,240 --> 00:29:07,120 Speaker 1: six percent. So I think there's a growing coming together 500 00:29:07,400 --> 00:29:10,240 Speaker 1: that we probably are going to make more progress on 501 00:29:10,400 --> 00:29:14,360 Speaker 1: inflation than many people expected. But it's because the fat 502 00:29:14,560 --> 00:29:18,720 Speaker 1: is gonna do what's necessary. But there's likely to be uh, 503 00:29:19,280 --> 00:29:25,640 Speaker 1: some adverse aspect of that. But you know, David, next week, 504 00:29:25,720 --> 00:29:29,200 Speaker 1: I hope we can talk about what's happening globally, because 505 00:29:29,280 --> 00:29:32,680 Speaker 1: we tend to focus here just on the American picture, 506 00:29:33,160 --> 00:29:36,840 Speaker 1: but the two other major polls of the economy, China 507 00:29:37,000 --> 00:29:40,680 Speaker 1: and Europe, are both going to have a huge impact 508 00:29:40,840 --> 00:29:43,640 Speaker 1: on how the soul plays out globally. Let's do exactly 509 00:29:43,720 --> 00:29:45,840 Speaker 1: that next week. Thank you so much to Larry Summers, 510 00:29:45,880 --> 00:29:50,560 Speaker 1: our very special contributor here on Wall Street Week, coming 511 00:29:50,640 --> 00:29:53,160 Speaker 1: up to the winners go to spoils, or at least 512 00:29:53,200 --> 00:29:56,160 Speaker 1: to the big time pro baseball players. That's next on 513 00:29:56,280 --> 00:30:02,840 Speaker 1: Wall Street. Reek on Bloomberg. This is Wall Street Week. 514 00:30:03,000 --> 00:30:06,239 Speaker 1: I'm David weston Bloomberg. Wall Street reporter Chaney Bosset got 515 00:30:06,280 --> 00:30:09,800 Speaker 1: a ringside seat at the Goldman Secs US Financial Services 516 00:30:09,880 --> 00:30:12,400 Speaker 1: Conference in New York this week, and this is what 517 00:30:12,600 --> 00:30:16,000 Speaker 1: she learned about the mood on Wall Street. Thanks David. 518 00:30:16,200 --> 00:30:17,960 Speaker 1: When it comes to the mood on Wall Street, a 519 00:30:18,040 --> 00:30:21,480 Speaker 1: lot of the energy has been focused on talent. Talent 520 00:30:21,640 --> 00:30:23,640 Speaker 1: is often the biggest cost. And for all the talk 521 00:30:23,680 --> 00:30:26,640 Speaker 1: of podential job cuts and reductions and pay it's worth 522 00:30:26,720 --> 00:30:29,600 Speaker 1: taking a look at which jobs are under pressure, which 523 00:30:29,640 --> 00:30:32,600 Speaker 1: are not, and how employees can adjust to new positions 524 00:30:32,920 --> 00:30:36,400 Speaker 1: As they try to realign to a new macro economic environment. Now, 525 00:30:36,520 --> 00:30:40,240 Speaker 1: bankers are looking to reinvent themselves. Investment banking at Bank 526 00:30:40,280 --> 00:30:42,280 Speaker 1: of America is on track to drop by more than 527 00:30:42,320 --> 00:30:46,200 Speaker 1: fifty this year, for example, and that bank has actually 528 00:30:46,280 --> 00:30:49,920 Speaker 1: gained market share in mergers and acquisitions and investment grade underwriting. 529 00:30:50,000 --> 00:30:53,360 Speaker 1: During this week, Market CEO Brian moynihan said the company 530 00:30:53,560 --> 00:30:56,960 Speaker 1: is slowing hiring ahead of a possible recession, but he's 531 00:30:57,040 --> 00:31:00,280 Speaker 1: also said they're trying to move traditional dealmakers to new 532 00:31:00,400 --> 00:31:02,720 Speaker 1: roles within the bank. He spoke to me at the 533 00:31:02,840 --> 00:31:06,400 Speaker 1: annual Goldman's Acts Financial Services Conference this week. We know 534 00:31:06,520 --> 00:31:09,920 Speaker 1: we can absorb those teammates. We we by just manage 535 00:31:09,920 --> 00:31:11,560 Speaker 1: our headcap carefully. So what do we do in at 536 00:31:11,680 --> 00:31:13,880 Speaker 1: times like this? You look at your open positions, You 537 00:31:13,960 --> 00:31:17,840 Speaker 1: look at your phil rate, which is how many people hires. 538 00:31:17,840 --> 00:31:20,360 Speaker 1: Acent of people leave and in shape ahead come back 539 00:31:20,440 --> 00:31:22,040 Speaker 1: in across the whole company. We take some of us 540 00:31:22,040 --> 00:31:24,680 Speaker 1: talent teammates investment banking and bring them into other parts 541 00:31:24,720 --> 00:31:30,000 Speaker 1: of the company at times like this. Finally, one more thought, 542 00:31:30,480 --> 00:31:34,360 Speaker 1: maybe we're not really all in this together. Just about everyone, 543 00:31:34,560 --> 00:31:36,800 Speaker 1: at least every economist agrees that we are in for 544 00:31:37,000 --> 00:31:41,160 Speaker 1: some harder economic times, and that includes former presidential economic 545 00:31:41,160 --> 00:31:45,200 Speaker 1: advisor Glenn Hubbard of Columbia. I think it's still likely 546 00:31:45,400 --> 00:31:48,080 Speaker 1: that we will see a recession at the Federal Reserve 547 00:31:48,240 --> 00:31:51,600 Speaker 1: pursues its path to get to two percent inflation relatively quickly, 548 00:31:51,840 --> 00:31:54,160 Speaker 1: But to say that we are all facing an economic 549 00:31:54,240 --> 00:31:56,800 Speaker 1: downturn does not mean that we will all take the 550 00:31:56,880 --> 00:31:59,479 Speaker 1: same hit from that downturn. Some of us will get 551 00:31:59,560 --> 00:32:02,440 Speaker 1: laid off, of which Morgan Stanley's Mike Wilson says is 552 00:32:02,560 --> 00:32:05,560 Speaker 1: necessary and could actually be a good side for investors. 553 00:32:05,720 --> 00:32:08,959 Speaker 1: One layoffs cycle picks up in earnest, that will actually 554 00:32:09,040 --> 00:32:11,080 Speaker 1: be one of the keys for us to get bullish, 555 00:32:11,160 --> 00:32:13,840 Speaker 1: because that means the bleeding will stop on the operating leverage. 556 00:32:14,200 --> 00:32:16,320 Speaker 1: One of the first group of workers to get hit 557 00:32:16,480 --> 00:32:19,640 Speaker 1: has been tech, particularly big tech, which in some cases 558 00:32:19,680 --> 00:32:22,480 Speaker 1: it may have been overdue the hiring that we sold 559 00:32:22,480 --> 00:32:25,640 Speaker 1: through the pandemic, where companies like Amazon and Matza basically 560 00:32:25,680 --> 00:32:28,840 Speaker 1: double the workforce. Clearly the semexis there then needs unwind 561 00:32:29,120 --> 00:32:32,880 Speaker 1: I thought echoed by for Tero's Dean Forbes. Most of 562 00:32:32,960 --> 00:32:35,760 Speaker 1: these layoffs at scale are happening in the supers right, 563 00:32:35,800 --> 00:32:38,360 Speaker 1: the happening in the metsas the happening in the Facebook's 564 00:32:38,360 --> 00:32:40,920 Speaker 1: that happening in Twitter, and to a degree, it's just 565 00:32:41,040 --> 00:32:43,960 Speaker 1: kind of right sizing. Even if we're not losing our jobs, 566 00:32:44,120 --> 00:32:46,640 Speaker 1: most of us are finding that we make less because 567 00:32:46,680 --> 00:32:50,280 Speaker 1: of the bite of inflation and now Goldman Sachs CEO 568 00:32:50,480 --> 00:32:53,240 Speaker 1: David Solomon says that at least some of his bankers 569 00:32:53,400 --> 00:32:56,920 Speaker 1: should expect cuts in compensation over and above what inflation 570 00:32:57,200 --> 00:33:00,280 Speaker 1: is doing. It shouldn't be surprising to people why the 571 00:33:00,320 --> 00:33:03,800 Speaker 1: performance of the business this year. That one was an 572 00:33:03,840 --> 00:33:06,160 Speaker 1: exceptional year. It was a record year for the firm, 573 00:33:06,600 --> 00:33:10,200 Speaker 1: was the highest revenue year ever for the firm. Twenty 574 00:33:10,240 --> 00:33:13,360 Speaker 1: two is a different year, and so naturally compensation will 575 00:33:13,400 --> 00:33:16,440 Speaker 1: be a lower But never fear those layoffs and comp 576 00:33:16,520 --> 00:33:19,760 Speaker 1: couents won't be reaching all workers, not by a long shot, 577 00:33:20,080 --> 00:33:23,440 Speaker 1: and certainly not if you are a star pro baseball player. 578 00:33:24,000 --> 00:33:26,960 Speaker 1: Just last week, the Texas Rangers took two time Cy 579 00:33:27,160 --> 00:33:30,000 Speaker 1: Young Award winner Jacob Degram away from the New York Mets, 580 00:33:30,400 --> 00:33:32,960 Speaker 1: and in the process gave him a nice raise to 581 00:33:33,120 --> 00:33:37,080 Speaker 1: thirty seven million dollars a year. But the Mets didn't 582 00:33:37,200 --> 00:33:41,000 Speaker 1: grieve for too long. They turned around inside Justin Verlander, 583 00:33:41,360 --> 00:33:44,400 Speaker 1: raising his pay to a cool forty three million dollars 584 00:33:44,400 --> 00:33:47,240 Speaker 1: a year, putting him just about on a par with 585 00:33:47,400 --> 00:33:51,520 Speaker 1: his Mets teammate now Max Scherzer. But then we had 586 00:33:51,600 --> 00:33:54,520 Speaker 1: the Yankees step up with three or sixty million dollars 587 00:33:54,640 --> 00:33:57,720 Speaker 1: or nine years to keep star slugger Aaron Judge in 588 00:33:57,840 --> 00:34:02,600 Speaker 1: pinstripes million our deal for nine years with the Yankees. 589 00:34:02,680 --> 00:34:05,240 Speaker 1: That being reported by the Athletic forty million dollars a year. 590 00:34:05,360 --> 00:34:08,560 Speaker 1: And I'm sorry, Lisa, it's just simple sports wins. The fact, 591 00:34:08,640 --> 00:34:10,720 Speaker 1: as you see it, in the signing season of baseball, 592 00:34:10,840 --> 00:34:14,160 Speaker 1: big money is being thrown around. Now. Nobody can deny 593 00:34:14,360 --> 00:34:17,239 Speaker 1: that all of these are truly great players, sure to 594 00:34:17,320 --> 00:34:19,279 Speaker 1: make it into the Hall of Fame. But to put 595 00:34:19,320 --> 00:34:22,600 Speaker 1: it all in a broader perspective, Mickey Mantle, surely one 596 00:34:22,600 --> 00:34:25,440 Speaker 1: of the greatest players ever in the game, became the 597 00:34:25,560 --> 00:34:28,200 Speaker 1: highest paid baseball player in the land back in nine 598 00:34:29,440 --> 00:34:32,960 Speaker 1: And what do you get paid? Whopping one hundred thousand 599 00:34:33,040 --> 00:34:35,960 Speaker 1: dollars a year And that is just over two percent 600 00:34:36,280 --> 00:34:39,560 Speaker 1: of what Justin Verlander will make next year. And yes 601 00:34:39,960 --> 00:34:43,200 Speaker 1: that is adjusted for inflation. That does it for this 602 00:34:43,239 --> 00:34:46,320 Speaker 1: episode of Wall Street Week, I'm David Weston. This is Bloomberg. 603 00:34:46,400 --> 00:34:47,160 Speaker 1: See you next week.