1 00:00:00,800 --> 00:00:04,040 Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside 2 00:00:04,040 --> 00:00:06,920 Speaker 1: my co host Matt Miller. Every business day we bring 3 00:00:06,960 --> 00:00:11,520 Speaker 1: you interviews from CEOs, market pros, and Bloomberg experts, along 4 00:00:11,520 --> 00:00:15,600 Speaker 1: with essential market moving news. Find the Bloomberg Markets Podcast 5 00:00:15,600 --> 00:00:18,439 Speaker 1: on Apple Podcasts or wherever you listen to podcasts, and 6 00:00:18,480 --> 00:00:21,800 Speaker 1: at Bloomberg dot com slash podcast and looking at big 7 00:00:21,880 --> 00:00:24,120 Speaker 1: point up twelve and a half percent here seventeen thousand, 8 00:00:24,120 --> 00:00:26,720 Speaker 1: seven hundred hours per token. But let's face in, folks, 9 00:00:26,760 --> 00:00:32,200 Speaker 1: the crypto spaces facing existential crisis. I would say, Um, 10 00:00:32,240 --> 00:00:36,800 Speaker 1: Samuel Bankman Freed SPF to the kids is the FDx 11 00:00:37,000 --> 00:00:39,640 Speaker 1: cryptocurrency to Rivers Exchange CEO and co founder. They've got 12 00:00:39,680 --> 00:00:43,040 Speaker 1: some real problems there, as does some related businesses there. 13 00:00:43,080 --> 00:00:45,800 Speaker 1: We need to roundtable this discussion with people that actually 14 00:00:46,240 --> 00:00:49,680 Speaker 1: report this on a daily basis, cover from a research perspective. 15 00:00:49,720 --> 00:00:53,199 Speaker 1: Mike mcglogan, senior commodity strategist with Bloomberg Intelligence. He's really 16 00:00:53,240 --> 00:00:56,040 Speaker 1: been our crypto crypto go to from b I and 17 00:00:56,120 --> 00:01:00,760 Speaker 1: Katie Greifeld, cross asset reporter with Bloomberg News, joins us, Hey, Mike, 18 00:01:01,080 --> 00:01:04,960 Speaker 1: you know you've seen booms and bus across a wide 19 00:01:05,160 --> 00:01:10,440 Speaker 1: range of securities and commodities. Is this a Lehman moment 20 00:01:10,600 --> 00:01:14,440 Speaker 1: for the crypto space in your learning opinion? Oh yes, 21 00:01:14,760 --> 00:01:17,000 Speaker 1: I do think so. Was quite the shock they have. 22 00:01:17,120 --> 00:01:19,080 Speaker 1: This happened with Sam Bank and Free and ft X. 23 00:01:19,160 --> 00:01:20,959 Speaker 1: I mean they were He was the stud of the 24 00:01:21,000 --> 00:01:23,440 Speaker 1: play industry. Everybody loved him. He was great, He had 25 00:01:23,480 --> 00:01:26,480 Speaker 1: some great conferences everything. This is a big shocker. Um. 26 00:01:26,560 --> 00:01:28,240 Speaker 1: The question is now where do we go from here? 27 00:01:28,640 --> 00:01:31,160 Speaker 1: And I think what we're going to do is, yes, 28 00:01:31,200 --> 00:01:33,480 Speaker 1: we're going to get through this. The the technology is 29 00:01:33,520 --> 00:01:36,520 Speaker 1: still very valid, but it's going to come when we 30 00:01:36,560 --> 00:01:39,199 Speaker 1: do finally break out to back to the enduring trends 31 00:01:39,200 --> 00:01:41,280 Speaker 1: can probably come from a lower plateau. So I'm looking 32 00:01:41,280 --> 00:01:44,520 Speaker 1: at bitcoin now, is now we know pretty significant resistance 33 00:01:44,520 --> 00:01:46,759 Speaker 1: is twenty thou good supports ten thousand. But the key 34 00:01:46,760 --> 00:01:49,160 Speaker 1: thing to point out is a Serriums holding a thousand 35 00:01:49,160 --> 00:01:51,200 Speaker 1: dollars support. Just put that in context. At the end 36 00:01:51,200 --> 00:01:55,400 Speaker 1: of two thousand, it was I think, you know, discussion 37 00:01:55,480 --> 00:01:59,200 Speaker 1: about bitcoin or ethereum as an asset class. That's not 38 00:01:59,240 --> 00:02:01,560 Speaker 1: what this is really a about. Right after Lehman Brothers, 39 00:02:01,880 --> 00:02:06,000 Speaker 1: you wouldn't have said the dollar is a horrible fiat currency. 40 00:02:06,160 --> 00:02:08,400 Speaker 1: It wasn't about that. It was about what Dick Fold 41 00:02:08,440 --> 00:02:11,120 Speaker 1: did and the decisions made at the bank. This is 42 00:02:11,160 --> 00:02:14,560 Speaker 1: about what Sam Bankman, Sam Bankman, Freed did and the 43 00:02:14,560 --> 00:02:17,200 Speaker 1: decisions he made f t X and al Mada a 44 00:02:17,440 --> 00:02:20,760 Speaker 1: kind of lack of transparency there. What do you think happened, Mike? 45 00:02:20,880 --> 00:02:24,360 Speaker 1: What did SPF do that left a four to eight 46 00:02:24,360 --> 00:02:28,560 Speaker 1: billion dollar hole that he can't pay back? Got overshoes, 47 00:02:28,639 --> 00:02:31,720 Speaker 1: that's a very young person. But how did he take 48 00:02:31,840 --> 00:02:34,480 Speaker 1: customer money from f t X and then gamble it 49 00:02:34,720 --> 00:02:39,560 Speaker 1: on at Almeida. Well, there's a lot of acculation accusations 50 00:02:39,560 --> 00:02:42,520 Speaker 1: that that happened. Exactly what happened within that company, I 51 00:02:42,560 --> 00:02:44,639 Speaker 1: don't really know, I mean, but that's what I hear. 52 00:02:45,200 --> 00:02:47,240 Speaker 1: He came out today on Twitter and he's apologized, so 53 00:02:47,280 --> 00:02:49,400 Speaker 1: he's kind of been meeting errors here at least finally, 54 00:02:49,440 --> 00:02:52,440 Speaker 1: so we can kind of, you know, move forward from that. 55 00:02:52,520 --> 00:02:54,959 Speaker 1: But if I was exactly what he did a similar things, 56 00:02:55,000 --> 00:02:56,480 Speaker 1: I think we've had a lot of space. It's just 57 00:02:56,520 --> 00:02:59,519 Speaker 1: that classic human nature of greed. When you cry, I 58 00:03:00,000 --> 00:03:02,200 Speaker 1: it reminds me of what happened with Japan when they 59 00:03:02,240 --> 00:03:05,680 Speaker 1: collapsed Native was that cross acid. But those are real equities. 60 00:03:05,680 --> 00:03:08,880 Speaker 1: They are across the holding of tokens, which only have 61 00:03:09,000 --> 00:03:12,280 Speaker 1: value if someone's willing to buy them. Where do you 62 00:03:12,280 --> 00:03:14,640 Speaker 1: think Where do you think this story goes next? Katie? 63 00:03:14,680 --> 00:03:18,040 Speaker 1: I mean it was Sam Bankman Freed with the space 64 00:03:18,240 --> 00:03:20,560 Speaker 1: kind of what what do you guys on the reporting 65 00:03:20,560 --> 00:03:22,640 Speaker 1: side thinking about, Oh my gosh, well, I'll sell you 66 00:03:22,680 --> 00:03:26,040 Speaker 1: on the reporting side. It's a little bit busy right now, 67 00:03:26,080 --> 00:03:28,720 Speaker 1: but I think I will bring it back to the 68 00:03:28,720 --> 00:03:33,120 Speaker 1: conversation we had with Nick Carter of Cowtil Adventures yesterday. 69 00:03:33,280 --> 00:03:35,920 Speaker 1: The immediate news, of course, is what's happening with f 70 00:03:36,040 --> 00:03:38,480 Speaker 1: t X? Are they hurtling towards bankruptcy? What is going 71 00:03:38,480 --> 00:03:40,680 Speaker 1: to happen with Sam BigMan Freed? But you've got to 72 00:03:40,720 --> 00:03:44,480 Speaker 1: look for the fallout because no matter doesn't f t 73 00:03:44,720 --> 00:03:47,720 Speaker 1: X bankruptcy a foregone conclusion? Well, V don't. We haven't 74 00:03:47,720 --> 00:03:49,680 Speaker 1: gotten the headline, we haven't gotten the filowing, so we 75 00:03:49,760 --> 00:03:52,360 Speaker 1: can't say that yet, right, But is there anyone? So 76 00:03:52,440 --> 00:03:54,440 Speaker 1: c Z and Byance have said they're not going to 77 00:03:54,520 --> 00:03:59,600 Speaker 1: rescue him. Sequoia wrote down there um investments, so they're 78 00:03:59,760 --> 00:04:02,400 Speaker 1: clear not going to do it. Soft Bank has made 79 00:04:02,440 --> 00:04:05,400 Speaker 1: some pretty horrible investment decisions, so maybe soft Bank will 80 00:04:05,440 --> 00:04:07,800 Speaker 1: go in there and throw good money after bad. You know, 81 00:04:07,880 --> 00:04:10,680 Speaker 1: we know that Sam BigMan Fried is trying. He said 82 00:04:10,680 --> 00:04:13,800 Speaker 1: that he's going to quote give anything for capital, So 83 00:04:13,840 --> 00:04:16,200 Speaker 1: maybe someone comes out of the woodwork who were not expecting, 84 00:04:16,240 --> 00:04:19,080 Speaker 1: maybe someone from the trad five space. But to your point, 85 00:04:19,560 --> 00:04:23,000 Speaker 1: with four billion dollars, four billion dollars, I know that's 86 00:04:23,040 --> 00:04:25,800 Speaker 1: those are some big bucks there. But beyond what is 87 00:04:25,839 --> 00:04:28,360 Speaker 1: happening with ft X, the chaos that's happening that, I 88 00:04:28,400 --> 00:04:30,400 Speaker 1: think you need to look at the lenders like Nick 89 00:04:30,480 --> 00:04:34,000 Speaker 1: Carter totalist. If Alameda Research, like Sam Bankman Fried said today, 90 00:04:34,040 --> 00:04:37,599 Speaker 1: is really winding down trading, Alameda was, you know, really 91 00:04:37,640 --> 00:04:39,760 Speaker 1: involved with a lot of the lenders that are still 92 00:04:39,839 --> 00:04:41,719 Speaker 1: left in the space. So that's where I would look. 93 00:04:41,760 --> 00:04:43,359 Speaker 1: If you look at the coin level, I know that 94 00:04:43,440 --> 00:04:46,240 Speaker 1: every single coin is rallying today, but you look at 95 00:04:46,279 --> 00:04:50,360 Speaker 1: something like Salana, it's up thirty seven percent right now, 96 00:04:50,440 --> 00:04:53,039 Speaker 1: that seems a little bit hairy when you think about 97 00:04:53,080 --> 00:04:56,960 Speaker 1: what big backing that that blockchain got from Alameda, that 98 00:04:57,000 --> 00:04:59,159 Speaker 1: it got from Sam Bankman Freed. I know there was 99 00:04:59,200 --> 00:05:01,960 Speaker 1: a CPI per but I don't know. And you think 100 00:05:01,960 --> 00:05:04,240 Speaker 1: the rally and and Mike, by the way, what do 101 00:05:04,279 --> 00:05:07,000 Speaker 1: you think, because Katie thinks the big rally and crypto 102 00:05:07,120 --> 00:05:09,560 Speaker 1: really is about the CPI print and the huge rally 103 00:05:09,600 --> 00:05:12,560 Speaker 1: in stocks. Okay, but it's kind of ironic. Finally we 104 00:05:12,640 --> 00:05:15,240 Speaker 1: got a CPI number we can expect, which my colleague 105 00:05:15,560 --> 00:05:18,279 Speaker 1: will have been nailed expected. But the key thing is 106 00:05:18,320 --> 00:05:20,279 Speaker 1: why is it weaker and expected? I published on this 107 00:05:20,839 --> 00:05:23,919 Speaker 1: deflation numbers coming out of China because we're heading towards recession. 108 00:05:23,960 --> 00:05:25,920 Speaker 1: The market just hasn't figured out yet. You look at 109 00:05:25,920 --> 00:05:28,520 Speaker 1: the forward curve FED funds a year from now, they 110 00:05:28,600 --> 00:05:31,280 Speaker 1: dropped twenty five basis points obviously two or no. Two. 111 00:05:31,320 --> 00:05:32,599 Speaker 1: But to me, this is what the part of we 112 00:05:32,600 --> 00:05:35,800 Speaker 1: should expect CPI inflation dums will start being weaker and 113 00:05:35,920 --> 00:05:38,120 Speaker 1: expect because my colleague on along and b I it's 114 00:05:38,160 --> 00:05:41,240 Speaker 1: predicting a hundred percent chance or models recession next year 115 00:05:41,480 --> 00:05:43,440 Speaker 1: and then we start tilting over. But this is the 116 00:05:43,480 --> 00:05:48,200 Speaker 1: whole tie. Now, this is chance that seems like a 117 00:05:48,320 --> 00:05:51,640 Speaker 1: dangerous call. Same person called a five percent you know 118 00:05:51,960 --> 00:05:56,000 Speaker 1: fed funds, right, you know? Okay, it was clearly going. 119 00:05:56,080 --> 00:05:57,960 Speaker 1: I mean we all kind of knew that we did 120 00:05:58,000 --> 00:06:00,480 Speaker 1: and that was way out of I would say, six, 121 00:06:00,600 --> 00:06:04,320 Speaker 1: but calling for a chance of something happening next year 122 00:06:04,360 --> 00:06:07,640 Speaker 1: other than the sun coming up. All right, this is 123 00:06:07,839 --> 00:06:09,480 Speaker 1: this is Mike, We're gonna have to leave it. Then 124 00:06:09,480 --> 00:06:12,400 Speaker 1: we're gonna come back. We'll do that later. Mike mcglowan, 125 00:06:12,440 --> 00:06:16,360 Speaker 1: Senior Commodity Strategies from Bloomberg Intelligence. Katie Greifeld Cross Asset Reporter, 126 00:06:16,400 --> 00:06:17,960 Speaker 1: and Matt You've got a show on this stuff, right, 127 00:06:18,040 --> 00:06:21,039 Speaker 1: It's a special, an hour long special today at one 128 00:06:21,160 --> 00:06:25,000 Speaker 1: pm Thursday afternoon, six pm in London, will tell you 129 00:06:25,040 --> 00:06:27,280 Speaker 1: all about what's going on with f t X and 130 00:06:27,360 --> 00:06:34,160 Speaker 1: al Maida markets. Definitely moving on this a CPI print. 131 00:06:34,800 --> 00:06:37,200 Speaker 1: We want to check in with Christian Chan. He's the 132 00:06:37,279 --> 00:06:42,080 Speaker 1: chief investment officer at Asset Mark. Uh. Christian, you see 133 00:06:42,120 --> 00:06:45,360 Speaker 1: the collect that you see the moves in equity markets 134 00:06:45,440 --> 00:06:48,760 Speaker 1: and the fixed income markets today, what does that tell 135 00:06:48,800 --> 00:06:51,440 Speaker 1: you about kind of where this market is in terms 136 00:06:51,480 --> 00:06:54,960 Speaker 1: of you know, expectations pent up, the meaning for a pivot, 137 00:06:55,160 --> 00:06:57,279 Speaker 1: waiting for a pivot? I mean, how do you interpret 138 00:06:57,320 --> 00:07:02,279 Speaker 1: today's data? Egg Good morning a body, Uh yeah, really 139 00:07:02,320 --> 00:07:04,560 Speaker 1: great inflation number. I think all around, if you can 140 00:07:04,600 --> 00:07:07,760 Speaker 1: consider seven point seven percent year on year growth in 141 00:07:07,880 --> 00:07:10,880 Speaker 1: prices as as a good print. UM. But I think 142 00:07:10,920 --> 00:07:13,040 Speaker 1: what everybody is cheering for is that it looks like 143 00:07:13,080 --> 00:07:16,320 Speaker 1: we're finally on the downside of this slope here. Um. 144 00:07:16,360 --> 00:07:18,480 Speaker 1: The core number even fell a bit, so I think 145 00:07:18,560 --> 00:07:22,240 Speaker 1: better than certainly expectations. And when we look across the 146 00:07:22,320 --> 00:07:26,480 Speaker 1: breadth of prices, UM pretty good in terms of UM 147 00:07:26,600 --> 00:07:30,120 Speaker 1: all of the components of CPI that fell, um, and 148 00:07:30,160 --> 00:07:33,160 Speaker 1: it's really just shelter that was you know, still contributing 149 00:07:33,200 --> 00:07:36,040 Speaker 1: to a you know, the pretty good price increase. But 150 00:07:36,360 --> 00:07:39,560 Speaker 1: I think that, as we all know, takes a while 151 00:07:39,600 --> 00:07:42,680 Speaker 1: to percolate through the you know, through the CPI numbers. 152 00:07:42,680 --> 00:07:46,480 Speaker 1: So from the market's perspective, yeah, I think you know. 153 00:07:46,520 --> 00:07:50,320 Speaker 1: The way I think about this is, yes, it's good news, um, 154 00:07:50,320 --> 00:07:53,320 Speaker 1: particularly with I think what was feared, and I kind 155 00:07:53,320 --> 00:07:55,880 Speaker 1: of think of the CPI number as the same way 156 00:07:55,920 --> 00:07:58,920 Speaker 1: we thought about earnings really over the last couple of quarters, 157 00:07:58,960 --> 00:08:02,080 Speaker 1: which is better than fear. Let let me just run 158 00:08:02,120 --> 00:08:04,480 Speaker 1: through the numbers quickly for our listeners so they know 159 00:08:04,560 --> 00:08:07,360 Speaker 1: what we got at eight thirty this morning, so about 160 00:08:07,360 --> 00:08:10,800 Speaker 1: two hours ago, we got the headline number at seven 161 00:08:10,840 --> 00:08:14,000 Speaker 1: point seven percent. It's still as shockingly high inflation as 162 00:08:14,000 --> 00:08:18,600 Speaker 1: I was saying before. It's still um a very big number, 163 00:08:18,680 --> 00:08:21,560 Speaker 1: but it's the lowest that we've gotten this year. And 164 00:08:21,600 --> 00:08:24,000 Speaker 1: we were looking for seven point nine percent, and the 165 00:08:24,040 --> 00:08:26,560 Speaker 1: previous print was eight point two percent, So seven point 166 00:08:26,640 --> 00:08:29,920 Speaker 1: seven makes us feel good. The core was up, or 167 00:08:29,960 --> 00:08:32,880 Speaker 1: at least cp I excluding food and energy was up 168 00:08:32,920 --> 00:08:37,880 Speaker 1: month over month zero point three percent. Um we were 169 00:08:37,920 --> 00:08:40,040 Speaker 1: we were looking for zero point five percent, though, so 170 00:08:40,080 --> 00:08:41,920 Speaker 1: it's much better than that, and we're down from zero 171 00:08:41,920 --> 00:08:46,280 Speaker 1: point six percent, so we're still looking at serious inflation. Christian, 172 00:08:46,320 --> 00:08:48,120 Speaker 1: you mentioned the rent component, and this is something that 173 00:08:48,120 --> 00:08:51,559 Speaker 1: a lot of people have been talking about. Obviously, people 174 00:08:51,559 --> 00:08:55,520 Speaker 1: don't sign new rental contracts every month, so you know 175 00:08:55,760 --> 00:08:58,920 Speaker 1: those effects take a year to play out. Is this 176 00:08:59,040 --> 00:09:02,960 Speaker 1: why you know the market is optimistic about a seven 177 00:09:02,960 --> 00:09:05,880 Speaker 1: point seven percent number, because they don't really believe it's 178 00:09:05,920 --> 00:09:09,280 Speaker 1: as bad as it as it looks. Yeah, I think 179 00:09:09,360 --> 00:09:13,120 Speaker 1: that's exactly right. And when when I think about, you 180 00:09:13,160 --> 00:09:16,040 Speaker 1: know that that rental piece in particularly as you mentioned it, 181 00:09:16,040 --> 00:09:19,800 Speaker 1: it does take a while for for lower rents to 182 00:09:19,800 --> 00:09:22,120 Speaker 1: to work through into the CBI numbers, same thing with 183 00:09:22,160 --> 00:09:25,319 Speaker 1: the owner's equivalent rent um. But I think you're exactly right. 184 00:09:25,400 --> 00:09:28,880 Speaker 1: I think that we're hopefully on this, you know, down 185 00:09:29,000 --> 00:09:32,200 Speaker 1: slope of inflation UM. And I think about the other 186 00:09:32,280 --> 00:09:35,320 Speaker 1: parts of the market and what's happened, so the inflation 187 00:09:35,360 --> 00:09:38,640 Speaker 1: swaps UM. So I think yesterday they're trading at three 188 00:09:38,679 --> 00:09:41,480 Speaker 1: point four percent, so implying at three point four percent 189 00:09:41,520 --> 00:09:45,160 Speaker 1: inflation rate one year from today down to about two 190 00:09:45,160 --> 00:09:47,480 Speaker 1: point nine percent. So I think people are pricing in 191 00:09:47,960 --> 00:09:50,640 Speaker 1: a different not just a different level inflation, but a 192 00:09:50,720 --> 00:09:53,840 Speaker 1: different path in terms of the progression back down to 193 00:09:54,480 --> 00:09:57,480 Speaker 1: something closer to two or three percent UM in a 194 00:09:57,559 --> 00:10:02,800 Speaker 1: year or so. You University of Michigan expectations tomorrow morning. Um, 195 00:10:02,880 --> 00:10:06,920 Speaker 1: Right now, it looks like the economists that we've talked 196 00:10:06,960 --> 00:10:10,480 Speaker 1: to expect the one year inflation outlook to be five 197 00:10:10,559 --> 00:10:13,080 Speaker 1: point one percent. That's still very high. That's higher than 198 00:10:13,080 --> 00:10:15,559 Speaker 1: it previously was. But you know, maybe that number is 199 00:10:15,600 --> 00:10:19,840 Speaker 1: a beat. Um. University Michigan such a strong football team 200 00:10:19,880 --> 00:10:22,480 Speaker 1: this year they are. That's really worries me. A huge 201 00:10:22,480 --> 00:10:25,840 Speaker 1: game as high state. I'm concerned about that. But in 202 00:10:25,920 --> 00:10:28,120 Speaker 1: terms of the markets, Christian what do you what are 203 00:10:28,160 --> 00:10:32,959 Speaker 1: you expecting? Because we've really rallied up to over on 204 00:10:33,000 --> 00:10:35,559 Speaker 1: the SNP. You know, two weeks ago, three weeks ago, 205 00:10:35,640 --> 00:10:37,319 Speaker 1: we were at thirty six hundred. Are we going to 206 00:10:37,440 --> 00:10:41,559 Speaker 1: finish the year at these levels or even higher? I 207 00:10:41,600 --> 00:10:44,720 Speaker 1: think that's a that's a really distinct possibility. I think, um, 208 00:10:44,920 --> 00:10:47,040 Speaker 1: you know, certainly, earnings have been better than I think 209 00:10:47,080 --> 00:10:49,760 Speaker 1: we had feared, better than a lot of folks have 210 00:10:49,760 --> 00:10:53,319 Speaker 1: have expected. Um. And if we continue to get good 211 00:10:53,400 --> 00:10:57,760 Speaker 1: prints on CPI I think we could see you know, 212 00:10:57,840 --> 00:11:00,560 Speaker 1: these levels hold or even trade higher. I don't think 213 00:11:00,559 --> 00:11:03,720 Speaker 1: we'll rip, you know, well above four thousand, but um 214 00:11:04,000 --> 00:11:06,920 Speaker 1: and and stay there for that long. But um, I 215 00:11:06,920 --> 00:11:10,240 Speaker 1: think that the big macro driver today is clearly inflation. 216 00:11:10,760 --> 00:11:13,520 Speaker 1: And if we start to get a sensor that's under 217 00:11:13,559 --> 00:11:17,400 Speaker 1: control and we're pricing that properly in the marketplace, UM yeah, 218 00:11:17,440 --> 00:11:21,120 Speaker 1: I think we could finally see inflation prints being a 219 00:11:21,120 --> 00:11:24,520 Speaker 1: bit of a tail wind for both equity and bond 220 00:11:24,600 --> 00:11:27,720 Speaker 1: markets as opposed to, um, you know, the big headwind 221 00:11:27,760 --> 00:11:29,920 Speaker 1: that they've been over the last six months or so. 222 00:11:30,160 --> 00:11:34,240 Speaker 1: All Right, Christie, you're based in Concord, California, right, yes, alright, 223 00:11:34,280 --> 00:11:36,679 Speaker 1: just east of San Francisco. Are you guys gonna get 224 00:11:36,679 --> 00:11:40,600 Speaker 1: snow up at Tahoe this this this winter, that's what 225 00:11:40,640 --> 00:11:43,400 Speaker 1: we're hoping for. I don't know that we have much yet, 226 00:11:43,440 --> 00:11:46,640 Speaker 1: but uh yeah, we're all hoping for a good skies 227 00:11:46,679 --> 00:11:48,680 Speaker 1: and that's for sure. I love tom It's a great 228 00:11:48,679 --> 00:11:51,920 Speaker 1: place to ski up there. Squaw Valley, you know that's 229 00:11:51,960 --> 00:11:54,840 Speaker 1: my favor I love well. I love the movie Hot Dog. 230 00:11:55,040 --> 00:11:57,120 Speaker 1: You've got to be a certain age to even remember 231 00:11:57,160 --> 00:11:59,360 Speaker 1: that movie, but that was based at Squaw Valley. That's 232 00:11:59,360 --> 00:12:01,600 Speaker 1: some good stuff up there. We're all basically we're hoping 233 00:12:01,600 --> 00:12:05,880 Speaker 1: for a mild winter for continental Europe, but we want 234 00:12:05,920 --> 00:12:08,680 Speaker 1: as much snow as possible in the Alba Stand in 235 00:12:08,679 --> 00:12:11,679 Speaker 1: the Rockies, exactly out of the Sierra Nevada. Christian Chan, 236 00:12:11,920 --> 00:12:17,360 Speaker 1: CEO of a st Market, joins us, we've got the 237 00:12:17,400 --> 00:12:20,080 Speaker 1: infestrates pulling back today, but we think about the mortgage 238 00:12:20,160 --> 00:12:23,440 Speaker 1: rates out there, they've searched the north of seven percent. 239 00:12:23,520 --> 00:12:25,240 Speaker 1: I think Matt might have locked in something like three 240 00:12:25,240 --> 00:12:28,240 Speaker 1: and a quarter percent when he bought his house recently. 241 00:12:28,240 --> 00:12:30,680 Speaker 1: So a big, big move up in reinfest rates really 242 00:12:30,720 --> 00:12:33,880 Speaker 1: impacting the real estate business. So the Federal Reserve is 243 00:12:33,880 --> 00:12:35,680 Speaker 1: certainly haven't an impact there. We want to talk about 244 00:12:35,720 --> 00:12:38,960 Speaker 1: the commercial real estate business and for that we checked 245 00:12:38,960 --> 00:12:42,880 Speaker 1: on the Hassam Naji, President and CEO of Marcus and Millichap, 246 00:12:42,960 --> 00:12:46,160 Speaker 1: which is a New York Soaker change traded company. M 247 00:12:46,360 --> 00:12:49,840 Speaker 1: m I is the symboliscott of market capitalization about one 248 00:12:49,840 --> 00:12:52,960 Speaker 1: point four billion dollars. Hassan, thanks so much for joining 249 00:12:53,040 --> 00:12:55,600 Speaker 1: us here, so talk to us about the state of 250 00:12:55,600 --> 00:12:59,920 Speaker 1: the commercial real estate business. We've seen the residential business 251 00:13:00,000 --> 00:13:01,800 Speaker 1: are to roll over here with the higher rates. What 252 00:13:01,840 --> 00:13:05,040 Speaker 1: are we seeing in your commercial space? Good morning, Thanks 253 00:13:05,080 --> 00:13:08,320 Speaker 1: for having me on the program. Very similar to the 254 00:13:08,320 --> 00:13:12,000 Speaker 1: trans you mentioned on the residential side of the marketplace. 255 00:13:12,400 --> 00:13:16,640 Speaker 1: We're seeing essentially a reaction to a shock delivered by 256 00:13:16,679 --> 00:13:22,360 Speaker 1: the rapid and steep interest or increases. Therefore, pricing is challenged, 257 00:13:22,800 --> 00:13:26,439 Speaker 1: maturing loans that now need to be refinanced are challenged, 258 00:13:26,920 --> 00:13:29,800 Speaker 1: and the market is just recalibrating to try and figure 259 00:13:29,840 --> 00:13:35,080 Speaker 1: out what the actual valuations on each asset should be 260 00:13:35,080 --> 00:13:37,680 Speaker 1: because of the cost of debt. Debt is a very 261 00:13:37,679 --> 00:13:42,480 Speaker 1: big component of commercial real estate transactions, especially among private investors, 262 00:13:42,480 --> 00:13:46,480 Speaker 1: which make up the vast majority of transactions and ownership 263 00:13:46,720 --> 00:13:50,199 Speaker 1: throughout the US. So when rates go up two d 264 00:13:50,360 --> 00:13:54,720 Speaker 1: and fifty basis points, it does make a very big 265 00:13:54,760 --> 00:13:58,120 Speaker 1: difference on the valuation component. The second part of we're 266 00:13:58,120 --> 00:14:03,600 Speaker 1: seeing this especially if um, a lot of businesses feel 267 00:14:03,679 --> 00:14:06,439 Speaker 1: like they can just act half of their office space, right, 268 00:14:06,480 --> 00:14:08,560 Speaker 1: I mean, if you have so many employees working from 269 00:14:08,559 --> 00:14:11,080 Speaker 1: home and it looks like that's no longer just a 270 00:14:11,080 --> 00:14:15,239 Speaker 1: pandemic thing for at least a significant portion of your workforce, 271 00:14:15,880 --> 00:14:18,400 Speaker 1: it's going to stay that way. You just don't need 272 00:14:18,440 --> 00:14:22,520 Speaker 1: as much room, do you. On the office side of 273 00:14:22,560 --> 00:14:25,720 Speaker 1: the equation, You're absolutely right. There is a reduction of 274 00:14:25,800 --> 00:14:29,480 Speaker 1: footprint that is created by the hybrid workplace that is 275 00:14:29,520 --> 00:14:31,360 Speaker 1: here to stay. We really do believe that, most of 276 00:14:31,400 --> 00:14:34,640 Speaker 1: our clients believe that. But it's also to some extent 277 00:14:34,880 --> 00:14:37,160 Speaker 1: overstated in that even I mean here right here in 278 00:14:37,200 --> 00:14:39,920 Speaker 1: New York today and you're seeing people come back into 279 00:14:39,920 --> 00:14:43,080 Speaker 1: the city office occupancies probably half of what it was 280 00:14:43,320 --> 00:14:46,360 Speaker 1: pre pandemic, and it will probably take two or three 281 00:14:46,400 --> 00:14:49,840 Speaker 1: more years for it to become more normal, if you will. 282 00:14:50,320 --> 00:14:53,720 Speaker 1: But you're bringing up a great point. Valuations for office 283 00:14:53,960 --> 00:14:58,400 Speaker 1: under are under the most pressure. Valuations for apartments and 284 00:14:58,680 --> 00:15:02,400 Speaker 1: uh Indu streel which were the lowest yields because there 285 00:15:02,400 --> 00:15:05,840 Speaker 1: were the darling of the industry, are very challenged because 286 00:15:05,920 --> 00:15:09,640 Speaker 1: the higher interest rates are challenging those yields a lot 287 00:15:09,680 --> 00:15:13,240 Speaker 1: more than say shopping centers, which were trading already trading 288 00:15:13,280 --> 00:15:16,160 Speaker 1: at a higher yield. Therefore they had some room to 289 00:15:16,240 --> 00:15:20,800 Speaker 1: absorb the interest rate shock. But the good news all 290 00:15:20,840 --> 00:15:24,080 Speaker 1: around commercial real state, with the exception of office, is 291 00:15:24,120 --> 00:15:27,520 Speaker 1: that supply and demand or in grade shape vacancies were 292 00:15:27,560 --> 00:15:31,240 Speaker 1: at all time low. There's not been an overbuilding cycle, 293 00:15:31,640 --> 00:15:34,360 Speaker 1: and there hasn't been an over leveraging cycle like we 294 00:15:34,400 --> 00:15:37,840 Speaker 1: had an eight o nine where the basically the credit 295 00:15:37,840 --> 00:15:41,320 Speaker 1: markets collapsed. We don't see any of that happening, but 296 00:15:41,880 --> 00:15:44,880 Speaker 1: I can tell you live from mine interactions, there's a 297 00:15:44,960 --> 00:15:46,920 Speaker 1: there's a shock factor on the interest rate side. What 298 00:15:46,960 --> 00:15:50,160 Speaker 1: about the stores we used to have on this block. 299 00:15:50,440 --> 00:15:51,840 Speaker 1: I don't know where you are in New York right now, 300 00:15:51,880 --> 00:15:54,560 Speaker 1: but you should come over on this block. We used 301 00:15:54,560 --> 00:15:57,880 Speaker 1: to have a container store. There was an H and M. 302 00:15:57,920 --> 00:16:03,560 Speaker 1: There was Jay Crew Ah, there was a Victorious secret Um. 303 00:16:03,720 --> 00:16:06,720 Speaker 1: You know, all of those places are not only gone, 304 00:16:07,120 --> 00:16:10,520 Speaker 1: but nothing has filled them in yet. They're still just 305 00:16:10,560 --> 00:16:13,680 Speaker 1: sitting here empty in one of Dare I say, the 306 00:16:13,800 --> 00:16:17,840 Speaker 1: nicest buildings in midtown Manhattan on a block that used 307 00:16:17,840 --> 00:16:19,800 Speaker 1: to be you know, I mean we're across street from 308 00:16:19,800 --> 00:16:25,600 Speaker 1: blooming Tail's right, Matt to your point, Urban retail and 309 00:16:25,800 --> 00:16:29,840 Speaker 1: older shopping centers in the suburbs that don't really have 310 00:16:30,160 --> 00:16:35,320 Speaker 1: a sustainable anchor tenant anymore, or the hardest hit among 311 00:16:35,360 --> 00:16:37,440 Speaker 1: retail that will take a long time to come back. 312 00:16:37,920 --> 00:16:40,840 Speaker 1: If they come back. Some of those older shopping centers 313 00:16:40,840 --> 00:16:45,800 Speaker 1: are being reimagined and really acquired for reuse, which is 314 00:16:45,800 --> 00:16:48,600 Speaker 1: the reinvention of retail. But I'll tell you our core 315 00:16:48,960 --> 00:16:54,640 Speaker 1: neighborhood shopping center clients and even the strip centers that 316 00:16:54,680 --> 00:16:57,560 Speaker 1: are more in the path of traffic outside of core 317 00:16:57,680 --> 00:17:02,880 Speaker 1: urban areas, are they come back? It? Uh. Those shopping centers, 318 00:17:02,920 --> 00:17:06,960 Speaker 1: because they're tied to restaurants, fitness and entertainment, which is 319 00:17:07,000 --> 00:17:11,520 Speaker 1: back in full force, are doing very well. Um. In fact, 320 00:17:11,600 --> 00:17:14,720 Speaker 1: they're they're leading in terms of the sales trans for 321 00:17:14,760 --> 00:17:17,879 Speaker 1: a third quarter versus all the property types. So the 322 00:17:17,920 --> 00:17:20,560 Speaker 1: real estate is always changing. That's the one thing to remember. 323 00:17:20,840 --> 00:17:23,600 Speaker 1: So if if I'm a commercial real estate investor, is 324 00:17:23,640 --> 00:17:28,000 Speaker 1: it as simple as going along the Nashville's, the Austin's, 325 00:17:28,040 --> 00:17:30,919 Speaker 1: the Miami's, the world and you know, maybe not so 326 00:17:31,000 --> 00:17:33,919 Speaker 1: much some of the northern cities, the higher tax cities. 327 00:17:34,000 --> 00:17:37,959 Speaker 1: Is as simple as that. You know, they follow the demographics. 328 00:17:38,000 --> 00:17:41,320 Speaker 1: And the sun Belt is a winner Florida, Texas, some 329 00:17:41,400 --> 00:17:44,359 Speaker 1: of the markets you mentioned, uh in the Northwest. I 330 00:17:44,359 --> 00:17:48,879 Speaker 1: think Seattle is an incredibly strong market with great demographics. 331 00:17:49,440 --> 00:17:52,320 Speaker 1: So you're absolutely right. Those are the growth markets, follow 332 00:17:52,400 --> 00:17:55,959 Speaker 1: the growth. But I also have to say that some 333 00:17:56,000 --> 00:17:59,439 Speaker 1: of the urbier markets San Francisco, Bay Area in southern California, 334 00:17:59,520 --> 00:18:03,640 Speaker 1: New York, not so much Chicago. Yet those core markets 335 00:18:04,080 --> 00:18:07,440 Speaker 1: where pricing is adjusted and is adjusting further, all of 336 00:18:07,480 --> 00:18:09,919 Speaker 1: a sudden become the diamond in the rough. You have 337 00:18:10,000 --> 00:18:12,960 Speaker 1: to think five years out, where will the recovery have 338 00:18:13,920 --> 00:18:16,280 Speaker 1: not just gone with the demographics, but what are some 339 00:18:16,359 --> 00:18:19,680 Speaker 1: of the metro's you know, left for big bruises and damage. 340 00:18:20,160 --> 00:18:22,640 Speaker 1: That can be the diamond and the rough investment. I'm 341 00:18:22,640 --> 00:18:24,800 Speaker 1: a big believer in the fact that urban America will 342 00:18:24,840 --> 00:18:27,400 Speaker 1: come back. It will take time, but it will come back. 343 00:18:27,600 --> 00:18:29,200 Speaker 1: I love it. I'm still hung up on the strip 344 00:18:29,240 --> 00:18:33,600 Speaker 1: mall success that's pretty awesome. I mean e commerce, I 345 00:18:33,600 --> 00:18:36,440 Speaker 1: mean some e commerce searched during the pandemic. But what 346 00:18:36,520 --> 00:18:39,920 Speaker 1: we're hearing for some retailers is foot traffic is coming back. 347 00:18:41,200 --> 00:18:45,119 Speaker 1: It is people really want that experiential retail. Every one 348 00:18:45,160 --> 00:18:47,879 Speaker 1: of our clients that owns the shopping center that has 349 00:18:47,920 --> 00:18:51,240 Speaker 1: a nice mix of restaurants, bars, in other forms of 350 00:18:51,359 --> 00:18:56,680 Speaker 1: entertainment and fitness, uh, you know, personal care, beauty, all 351 00:18:56,680 --> 00:18:59,960 Speaker 1: of those things are attracting consumers back, especially in the 352 00:19:00,040 --> 00:19:03,040 Speaker 1: birds rights on because people those people who are working 353 00:19:03,080 --> 00:19:05,640 Speaker 1: from home. You know, my wife, Um, she doesn't ever 354 00:19:05,720 --> 00:19:07,840 Speaker 1: have to go into the office anymore. So now instead 355 00:19:07,840 --> 00:19:11,720 Speaker 1: of doing pilates downtown in Manhattan, she does pilates on 356 00:19:11,800 --> 00:19:15,840 Speaker 1: Central Park Avenue and Scarsdale exactly. I mean, you're you're 357 00:19:15,920 --> 00:19:18,160 Speaker 1: you're nailing the trend right there. But I do think 358 00:19:18,160 --> 00:19:20,400 Speaker 1: in the next two or three quarters there will be 359 00:19:20,720 --> 00:19:24,920 Speaker 1: some very unique buying opportunities because values of commercial real 360 00:19:25,000 --> 00:19:28,400 Speaker 1: estate in general have to adjust to the higher interest rates. 361 00:19:28,440 --> 00:19:31,080 Speaker 1: I think the FED was behind the curve. Now they're 362 00:19:31,160 --> 00:19:33,960 Speaker 1: hitting the economy with the head sledge hammer. As soon 363 00:19:34,000 --> 00:19:36,159 Speaker 1: as we get a little relief on you know, the 364 00:19:36,200 --> 00:19:39,400 Speaker 1: worst of the interest rates being interested, increases being over 365 00:19:39,920 --> 00:19:44,480 Speaker 1: and the inflation curve starting to go the other way 366 00:19:44,520 --> 00:19:47,160 Speaker 1: like we saw this morning. And look at the market reaction, 367 00:19:47,400 --> 00:19:50,479 Speaker 1: you're gonna see some you know, relief rally and commercial 368 00:19:50,560 --> 00:19:53,240 Speaker 1: real estate too. But I do think there will be 369 00:19:53,240 --> 00:19:56,520 Speaker 1: some buying opportunities. Alright, good stuff, as always saw Nay, 370 00:19:56,840 --> 00:20:01,840 Speaker 1: president and CEO of Marcus and MILLICHEP, publicly traded real 371 00:20:01,920 --> 00:20:04,880 Speaker 1: estate company m m I is the ticket to put 372 00:20:04,880 --> 00:20:08,600 Speaker 1: into your Bloomberg terminal. They're commercial real estate. Yeah, and Matt, 373 00:20:08,640 --> 00:20:10,760 Speaker 1: there is actually a store going in at fifty nine 374 00:20:11,000 --> 00:20:13,320 Speaker 1: and Lex here in our building, so they are putting something. 375 00:20:13,359 --> 00:20:15,240 Speaker 1: What is it? I don't know. Oh, I think it's 376 00:20:15,240 --> 00:20:21,840 Speaker 1: gonna be a bank, like a bank slash lounge market. 377 00:20:21,880 --> 00:20:24,840 Speaker 1: Since Charlie was just reporting a moving seriously higher to 378 00:20:25,040 --> 00:20:27,560 Speaker 1: yes booming. You know what This kind of rally is 379 00:20:27,560 --> 00:20:32,480 Speaker 1: called face ripping. Face ripping rally. That's a little hard, 380 00:20:32,680 --> 00:20:34,960 Speaker 1: I think, but it is just ripping. It's the most 381 00:20:35,240 --> 00:20:39,439 Speaker 1: smps up, the most since twenty twenty. I used that 382 00:20:39,480 --> 00:20:42,679 Speaker 1: sense function that Lisa Brahmwoods like, we're not allowed to 383 00:20:42,720 --> 00:20:48,440 Speaker 1: tell listeners because you know that's an internal function. Other 384 00:20:48,720 --> 00:20:51,400 Speaker 1: clients don't have access to that function. Is that right? 385 00:20:51,920 --> 00:20:54,600 Speaker 1: Why it doesn't do anything? I don't know why, but 386 00:20:54,960 --> 00:20:57,320 Speaker 1: all right, yeah, alright, I use it and I'm proud 387 00:20:57,359 --> 00:20:59,320 Speaker 1: to use it. Right. Amanda Rebella joins us here in 388 00:20:59,320 --> 00:21:02,280 Speaker 1: our Bloomberg her active broker studio. She's ahead of passive 389 00:21:02,359 --> 00:21:05,560 Speaker 1: sales US on shore d w S group. We've determined 390 00:21:05,640 --> 00:21:09,199 Speaker 1: that as a Deutsche Bank group there what is chassive sales? 391 00:21:09,320 --> 00:21:10,840 Speaker 1: What does that mean? We we go over this but 392 00:21:10,880 --> 00:21:13,440 Speaker 1: I forget now, which that's okay. It's basically anything which 393 00:21:13,480 --> 00:21:16,200 Speaker 1: is tracking an index, so um E t S would 394 00:21:16,240 --> 00:21:18,040 Speaker 1: be the main thing. But also we have scope for 395 00:21:18,200 --> 00:21:22,600 Speaker 1: offering clients as opposed to active because there are obviously 396 00:21:22,600 --> 00:21:25,080 Speaker 1: e t f s with active managers. But you're just 397 00:21:25,160 --> 00:21:28,479 Speaker 1: looking at the passive side of But working with our 398 00:21:28,560 --> 00:21:30,959 Speaker 1: Steam colleagues on the active side as well, there's no 399 00:21:31,359 --> 00:21:34,639 Speaker 1: passive or active. You know, they make sense in the 400 00:21:34,640 --> 00:21:37,320 Speaker 1: portfolio together. All right, every time we talk to your man, 401 00:21:37,359 --> 00:21:39,280 Speaker 1: you've got new E T S force. What do you 402 00:21:39,280 --> 00:21:43,000 Speaker 1: get today? So today we're delighted to announce that yesterday 403 00:21:43,080 --> 00:21:47,480 Speaker 1: we listed on see both three new tickets smp D, 404 00:21:47,800 --> 00:21:51,560 Speaker 1: SMPG and smp V. These are providing exposure to E 405 00:21:51,760 --> 00:21:56,320 Speaker 1: s G dividend aristocrats, UM growth and also value as well. 406 00:21:56,320 --> 00:22:00,520 Speaker 1: And delighted to be partnering with SMP again there So, UM, 407 00:22:01,440 --> 00:22:03,840 Speaker 1: I love E t F s. As you may remember, 408 00:22:04,320 --> 00:22:06,159 Speaker 1: I have an E t F show UM that I 409 00:22:06,280 --> 00:22:09,919 Speaker 1: host with Katie Greifeld and Eric Balcunus, the ladder of 410 00:22:10,119 --> 00:22:13,879 Speaker 1: whom is a legend in the E t F space. Um, 411 00:22:13,960 --> 00:22:18,200 Speaker 1: what what makes you want to track these specific indexes? 412 00:22:18,280 --> 00:22:21,960 Speaker 1: Why do you pick um? You know, value makes sense 413 00:22:21,960 --> 00:22:25,400 Speaker 1: to me, dividend aristocrats, That's that's an interesting one. Why 414 00:22:25,480 --> 00:22:29,680 Speaker 1: why do you choose these right now? Yeah? Sure so? Um, Well, 415 00:22:29,720 --> 00:22:31,240 Speaker 1: first of all, Matt, you were talking about how you 416 00:22:31,240 --> 00:22:32,840 Speaker 1: want to pay rise. Maybe you need to think about 417 00:22:32,840 --> 00:22:36,280 Speaker 1: passive income in your portfolio. And so dividend strategies generally 418 00:22:36,640 --> 00:22:39,240 Speaker 1: have been really interesting. This year. We've seen about forty 419 00:22:39,280 --> 00:22:42,800 Speaker 1: five billion dollars worth of flow go into dividend strategies 420 00:22:42,840 --> 00:22:46,040 Speaker 1: here to date across different ETFs, and so we feel 421 00:22:46,040 --> 00:22:48,840 Speaker 1: that there's something that we can add value in for 422 00:22:49,200 --> 00:22:52,440 Speaker 1: our investors and new investors. How does that get back 423 00:22:52,480 --> 00:22:54,359 Speaker 1: to an E t F if I on a stock 424 00:22:54,480 --> 00:22:56,960 Speaker 1: that has a dividend page of dividend. Obviously I'm getting 425 00:22:57,000 --> 00:22:58,760 Speaker 1: they nail it to me, you know, or my broker 426 00:22:58,800 --> 00:23:00,920 Speaker 1: gets it. Um, how does that work with an e 427 00:23:00,960 --> 00:23:03,160 Speaker 1: t F because you have a whole basket of stocks, 428 00:23:03,480 --> 00:23:06,360 Speaker 1: and you know, I don't even own really the basket, 429 00:23:06,359 --> 00:23:10,840 Speaker 1: I just own a ticket for the basket, right, So UM, 430 00:23:10,880 --> 00:23:13,399 Speaker 1: what we do is the portfolio managers, they'll accrue all 431 00:23:13,400 --> 00:23:16,159 Speaker 1: of the dividend cash that they're receiving, and then we'll 432 00:23:16,200 --> 00:23:19,560 Speaker 1: pay it out typically on the quarterly, will SENDI annual basis. Um, 433 00:23:19,640 --> 00:23:21,439 Speaker 1: you end up getting a check through your broker that 434 00:23:21,480 --> 00:23:25,400 Speaker 1: you're holding them holding the E t F with and UM. 435 00:23:25,400 --> 00:23:27,640 Speaker 1: With dividend strategies, what we're looking to do is we're 436 00:23:27,680 --> 00:23:32,639 Speaker 1: thinking about within in this case the smp fift universe, UM, 437 00:23:32,760 --> 00:23:35,320 Speaker 1: which are the names that are strong dividend paers. When 438 00:23:35,320 --> 00:23:37,880 Speaker 1: we mean when we say strong dividend pairs, we want 439 00:23:37,880 --> 00:23:40,640 Speaker 1: to be thinking about sustainable dividends. So forgive the pun, 440 00:23:40,800 --> 00:23:44,399 Speaker 1: but it's about over the last twenty five years, which 441 00:23:44,520 --> 00:23:48,320 Speaker 1: names have paid good qualitary dividends and haven't yet. And 442 00:23:48,480 --> 00:23:50,720 Speaker 1: you don't want to get into a BP situation. Remember that. 443 00:23:50,800 --> 00:23:54,240 Speaker 1: Actually exactly they hadn't cut their dividend for like thirty 444 00:23:54,320 --> 00:23:57,560 Speaker 1: years maybe longer, and then all of a sudden, uh, 445 00:23:57,600 --> 00:24:00,600 Speaker 1: you know, they junked it really, which was Spad news, 446 00:24:00,600 --> 00:24:03,480 Speaker 1: and the CEO is out right exactly talk to us 447 00:24:03,520 --> 00:24:07,280 Speaker 1: about E s G. I continue waiver here, what's what 448 00:24:07,359 --> 00:24:09,639 Speaker 1: are the good folks adws think about the E T 449 00:24:09,760 --> 00:24:11,720 Speaker 1: F S and E s G as A I don't 450 00:24:11,840 --> 00:24:14,200 Speaker 1: set a factor? Is it style? Is it? I don't 451 00:24:14,200 --> 00:24:15,919 Speaker 1: know what it is. Yeah, this is a question that 452 00:24:15,960 --> 00:24:18,560 Speaker 1: we get a lot so UM for us. E s 453 00:24:18,600 --> 00:24:21,600 Speaker 1: G is just another lens to look through when you're 454 00:24:21,600 --> 00:24:26,480 Speaker 1: thinking about investment portfolio management, and so we think about 455 00:24:26,480 --> 00:24:28,600 Speaker 1: it a lot. In terms of data. There's like clues 456 00:24:28,600 --> 00:24:31,040 Speaker 1: in the data that can help us UM. We see 457 00:24:31,080 --> 00:24:34,320 Speaker 1: more and more that E s G um has, like 458 00:24:34,480 --> 00:24:38,080 Speaker 1: in these tough markets, provided some outperformance. And it's not 459 00:24:38,160 --> 00:24:41,199 Speaker 1: always going to provide out performance necessarily, it's not meant to. 460 00:24:41,280 --> 00:24:45,080 Speaker 1: It doesn't promise too But the reason why it has 461 00:24:45,119 --> 00:24:47,959 Speaker 1: done more recently is that E s G data can 462 00:24:48,000 --> 00:24:51,720 Speaker 1: provide us with some insights into things like reprose, for example, 463 00:24:51,840 --> 00:24:54,080 Speaker 1: So there is some scope for dampening. On the downside, 464 00:24:54,840 --> 00:24:58,119 Speaker 1: we think it's just you know, another a set of 465 00:24:58,200 --> 00:25:01,159 Speaker 1: data points that some can use in terms of like 466 00:25:01,200 --> 00:25:04,639 Speaker 1: stop picking or bond picking to think about, um, you know, 467 00:25:04,720 --> 00:25:07,119 Speaker 1: names are maybe more resilient. And also at the end 468 00:25:07,160 --> 00:25:09,720 Speaker 1: of the day, we've had COP twenty seven this week, Um, 469 00:25:09,800 --> 00:25:14,080 Speaker 1: we need to be thinking about which companies are oh yeah, 470 00:25:14,240 --> 00:25:17,280 Speaker 1: you know, more resilient and like to regulatory change as 471 00:25:17,280 --> 00:25:19,960 Speaker 1: well to helping us with this one and a half 472 00:25:20,000 --> 00:25:23,680 Speaker 1: degree um target us all aiming towards and net zero economy. 473 00:25:24,040 --> 00:25:26,280 Speaker 1: These are the companies that should be doing better at 474 00:25:26,280 --> 00:25:28,520 Speaker 1: the end. I just came back from Indonesia. I was 475 00:25:28,560 --> 00:25:32,199 Speaker 1: there for two weeks, exploring the oceans around Indonesia, and 476 00:25:32,240 --> 00:25:34,919 Speaker 1: you know what, one of the things that really bothers me. 477 00:25:35,119 --> 00:25:39,200 Speaker 1: Rich countries around the world send all their trash to Indonesia, 478 00:25:39,359 --> 00:25:41,800 Speaker 1: ostensibly to recycle, but of course they don't recycle at 479 00:25:41,840 --> 00:25:44,080 Speaker 1: the businesses that get paid to take the trash there 480 00:25:44,200 --> 00:25:45,600 Speaker 1: just turn around and dump it in the street or 481 00:25:45,640 --> 00:25:48,280 Speaker 1: in the ocean. Even worse. So I would like to 482 00:25:48,520 --> 00:25:50,720 Speaker 1: vote with my money, you know, and buy an e 483 00:25:50,800 --> 00:25:53,359 Speaker 1: t F that fights against that kind of thing. All right, 484 00:25:53,400 --> 00:25:55,200 Speaker 1: I'm sure you can. I mean, you know, there's there's 485 00:25:55,200 --> 00:25:56,760 Speaker 1: an et F for everything after. That's kind of what 486 00:25:56,760 --> 00:25:58,879 Speaker 1: I've been learning over the last several years. Amenda Rebella, 487 00:25:58,920 --> 00:26:01,400 Speaker 1: thank you so much for joining us. Amanda is the 488 00:26:01,400 --> 00:26:03,560 Speaker 1: head of passive sales. We now know what that is 489 00:26:03,640 --> 00:26:05,960 Speaker 1: for the US on shore business at DWS Group. We 490 00:26:06,000 --> 00:26:08,720 Speaker 1: now know what dw S stands for. We've learned so 491 00:26:08,760 --> 00:26:12,639 Speaker 1: much in this segment. Market's still moving, holding onto the games. 492 00:26:15,920 --> 00:26:20,000 Speaker 1: Question for a lot of investors here is recession. Are 493 00:26:20,040 --> 00:26:23,320 Speaker 1: we going to go into recession? If so, how long? 494 00:26:23,520 --> 00:26:26,000 Speaker 1: How deep? That's kind of the question that a lot 495 00:26:26,040 --> 00:26:28,720 Speaker 1: of folks have, a lot of economists are figuring out 496 00:26:28,800 --> 00:26:32,320 Speaker 1: right now. And along chief US economists for Bloomberk Economics Joints. 497 00:26:32,359 --> 00:26:33,600 Speaker 1: And I gotta call this out because I do it 498 00:26:33,640 --> 00:26:35,480 Speaker 1: every time because it's just so ridiculous. She gets a 499 00:26:35,560 --> 00:26:38,840 Speaker 1: b A and economics and statistics from Berkeley, I mean, 500 00:26:38,880 --> 00:26:41,160 Speaker 1: who does that? And then she turns around and gets 501 00:26:41,160 --> 00:26:44,760 Speaker 1: a PhD in economics from the University of Chicago. I 502 00:26:44,760 --> 00:26:47,960 Speaker 1: mean that is serious math there. So she's a real 503 00:26:48,480 --> 00:26:51,200 Speaker 1: economics geek, and we're glad that she's on our team. 504 00:26:51,280 --> 00:26:53,959 Speaker 1: I'm pretty sure she also had a couple other like 505 00:26:54,000 --> 00:26:56,639 Speaker 1: scholarships and rams and stuff that we don't know but 506 00:26:56,760 --> 00:26:58,719 Speaker 1: I don't know about. I'm sure Cambridge and Oxford are 507 00:26:58,720 --> 00:27:01,359 Speaker 1: in there somewhere, But I gotta ask Anna, did they 508 00:27:01,400 --> 00:27:04,480 Speaker 1: never tell you any of these schools don't forecast something 509 00:27:04,680 --> 00:27:10,680 Speaker 1: that's a hundred percent chance to happen, that's very high? Well, 510 00:27:11,160 --> 00:27:15,840 Speaker 1: you know, I have to tell you that that is 511 00:27:15,880 --> 00:27:21,040 Speaker 1: what the models telling you. And but it's your model. Well, 512 00:27:21,119 --> 00:27:25,280 Speaker 1: the model does have forecast errors, right, and so in 513 00:27:25,359 --> 00:27:30,280 Speaker 1: terms of the confidence level, there's still a slither possibility 514 00:27:30,440 --> 00:27:35,600 Speaker 1: that there's you know that the model prediction of I'm going, 515 00:27:35,640 --> 00:27:38,040 Speaker 1: I'm going with your call and because you were absolutely 516 00:27:38,119 --> 00:27:39,920 Speaker 1: spot on the way ahead of the market on where 517 00:27:40,000 --> 00:27:44,040 Speaker 1: rates were going and uh um, but for this recession, 518 00:27:44,600 --> 00:27:49,480 Speaker 1: um that you were other economics are economists are forecasting? 519 00:27:49,680 --> 00:27:52,240 Speaker 1: Do you have any sense of how deep it maybe, 520 00:27:52,480 --> 00:27:54,520 Speaker 1: how long it may be, like how much of a 521 00:27:54,560 --> 00:27:58,639 Speaker 1: problem is this going to be? You know, usually a 522 00:27:58,720 --> 00:28:04,639 Speaker 1: deep recession is triggered by some kind of underlying financial vulnerability. 523 00:28:04,920 --> 00:28:07,879 Speaker 1: So if you recall, the two thousand and eight recession 524 00:28:08,000 --> 00:28:11,480 Speaker 1: was deep because it started off where where credit market 525 00:28:11,520 --> 00:28:15,840 Speaker 1: completely freeze, um, you know, due to um mortgages go 526 00:28:16,440 --> 00:28:19,679 Speaker 1: blowing up, right, So we don't see a similar kind 527 00:28:19,720 --> 00:28:23,600 Speaker 1: of vulnerabilities on the balance sheet of household and corporates 528 00:28:23,720 --> 00:28:28,000 Speaker 1: right now. So um, as of the information that we have, 529 00:28:28,320 --> 00:28:31,000 Speaker 1: we we don't see that trigger for that kind of 530 00:28:31,480 --> 00:28:36,920 Speaker 1: uh landing free freeze up in the lending and credit market. Um. 531 00:28:36,960 --> 00:28:41,680 Speaker 1: So that's sad. Um. We think that the recession might 532 00:28:41,720 --> 00:28:45,200 Speaker 1: be a shallow one. Um and I think that that's 533 00:28:45,240 --> 00:28:47,800 Speaker 1: the consensus on Well Street as well. One thing I'm 534 00:28:47,840 --> 00:28:50,760 Speaker 1: interested in, Anna, is the is the housing market. Because 535 00:28:51,480 --> 00:28:54,760 Speaker 1: you know, we see these rates continue to go higher 536 00:28:54,760 --> 00:28:57,680 Speaker 1: and higher. People are now saying six percent could be 537 00:28:57,720 --> 00:29:01,640 Speaker 1: even higher than that for the FEDS terminal rate, which 538 00:29:01,680 --> 00:29:06,960 Speaker 1: means mortgage rates are going to be what eight nine 539 00:29:07,360 --> 00:29:10,120 Speaker 1: ten per cent? That makes it harder to buy houses. 540 00:29:10,160 --> 00:29:13,360 Speaker 1: And if unemployment rises and people are forced to sell 541 00:29:13,440 --> 00:29:16,520 Speaker 1: houses they can no longer make their monthly not those 542 00:29:16,560 --> 00:29:21,720 Speaker 1: prices are going to have to come down pretty steep. Well. So, 543 00:29:21,840 --> 00:29:25,760 Speaker 1: for first of all, mortgage rate price is most related 544 00:29:25,800 --> 00:29:28,920 Speaker 1: to ten year and thirty year treasury yields, and those 545 00:29:29,160 --> 00:29:34,680 Speaker 1: those prices react to expectations of where the fat will go. So, um, 546 00:29:34,720 --> 00:29:37,840 Speaker 1: if if today people are priced in a five percent 547 00:29:37,960 --> 00:29:41,640 Speaker 1: terminal rate, then it's already you know, reflected in the 548 00:29:41,720 --> 00:29:45,200 Speaker 1: mortgage rate. So so so as the fat actually hikes 549 00:29:45,280 --> 00:29:49,040 Speaker 1: to five, the mortgage rate would not increase further. So 550 00:29:49,040 --> 00:29:51,320 Speaker 1: that's what they're going to five? Right, are they going 551 00:29:51,320 --> 00:29:56,120 Speaker 1: to six? Well, our baseline is still five percent. Um 552 00:29:56,160 --> 00:29:59,040 Speaker 1: And because we precisely for the reasons that you saw 553 00:29:59,040 --> 00:30:03,880 Speaker 1: in the CPI really least today there's strong disinflationary forces 554 00:30:03,920 --> 00:30:07,840 Speaker 1: in in the economy, and um, it could there's a 555 00:30:07,840 --> 00:30:12,560 Speaker 1: possibility that inflation could fall rather sharply after March of 556 00:30:12,720 --> 00:30:16,160 Speaker 1: next year, which will would which would still put the 557 00:30:16,280 --> 00:30:19,280 Speaker 1: terminal rate at about five percent from my point of view, 558 00:30:20,600 --> 00:30:29,760 Speaker 1: at four in May. That's right and um. But regarding 559 00:30:29,800 --> 00:30:33,120 Speaker 1: the housing market though, um um, So you know, the 560 00:30:33,240 --> 00:30:37,240 Speaker 1: US market has underbuilt houses for almost a decade now, 561 00:30:37,360 --> 00:30:42,040 Speaker 1: and we estimate that there's been a three to four 562 00:30:42,120 --> 00:30:46,720 Speaker 1: million shortfall and houses that have been human accumulated over 563 00:30:46,760 --> 00:30:50,000 Speaker 1: the past ten years, which means that you know, there's 564 00:30:50,000 --> 00:30:54,240 Speaker 1: still a lot of latent demand for housing and houses 565 00:30:54,400 --> 00:30:58,360 Speaker 1: housing place do fall by the that we are forecasting 566 00:30:58,440 --> 00:31:01,280 Speaker 1: over the next few years, there would be just uh, 567 00:31:01,440 --> 00:31:04,280 Speaker 1: it would become more portable for maybe half of the 568 00:31:04,360 --> 00:31:08,000 Speaker 1: population of the US. And so I think that half, 569 00:31:08,160 --> 00:31:11,040 Speaker 1: at least half of the population would be cheering for 570 00:31:11,360 --> 00:31:15,400 Speaker 1: housing price corrections because these are the people who really 571 00:31:15,440 --> 00:31:17,960 Speaker 1: wanted to buy but don't have how you know, you 572 00:31:18,000 --> 00:31:21,239 Speaker 1: cannot afford to right now. And the second thing is 573 00:31:21,240 --> 00:31:25,040 Speaker 1: that this housing uh bubble that we are in right now, 574 00:31:25,480 --> 00:31:29,760 Speaker 1: the rise in prices happened really quickly, and the fall 575 00:31:29,840 --> 00:31:32,920 Speaker 1: of the happened really quickly. So the number of people 576 00:31:32,920 --> 00:31:36,120 Speaker 1: who actually bought the houses, well, at the peak of 577 00:31:36,160 --> 00:31:38,920 Speaker 1: those prices, it's not there are not as many of 578 00:31:38,920 --> 00:31:41,280 Speaker 1: those people as back in the two thousands of four 579 00:31:41,800 --> 00:31:44,960 Speaker 1: to two thousand and six housing market bubble. And a 580 00:31:45,000 --> 00:31:49,360 Speaker 1: lot of the house owners now have much more equities 581 00:31:49,400 --> 00:31:51,600 Speaker 1: in their houses them back in the two thousand and 582 00:31:51,640 --> 00:31:55,240 Speaker 1: four two own six cycles. So so yeah, so that 583 00:31:55,240 --> 00:31:58,840 Speaker 1: that aspect alone could limit downside risk and so over 584 00:31:59,040 --> 00:32:02,239 Speaker 1: the housing market corrections to the broader economy. All right, 585 00:32:02,280 --> 00:32:04,000 Speaker 1: and we got to get you in the office, which 586 00:32:04,200 --> 00:32:06,239 Speaker 1: in London right now. You're in London right now. When 587 00:32:06,360 --> 00:32:08,800 Speaker 1: you come to New York, please stop by and and 588 00:32:08,840 --> 00:32:10,760 Speaker 1: come on the show with me and Paul. We'd love 589 00:32:10,800 --> 00:32:12,520 Speaker 1: to have you here. Thank you so much for joining us. 590 00:32:12,560 --> 00:32:16,680 Speaker 1: Anna Wong, I'm gonna say chief Economists for Bloomberg in 591 00:32:17,240 --> 00:32:20,760 Speaker 1: chief you as economist um for Bloomberg. But she's dot 592 00:32:20,800 --> 00:32:24,000 Speaker 1: a ton of addition to the crazy education. Former chief 593 00:32:24,000 --> 00:32:25,920 Speaker 1: in the National Economists on the White House Council of 594 00:32:25,960 --> 00:32:29,160 Speaker 1: Economic Acrisors. That sounds big. Former Deputy Director in the 595 00:32:29,200 --> 00:32:32,040 Speaker 1: Office of International Economic Analysis at the U. S. Treasury. 596 00:32:32,520 --> 00:32:34,720 Speaker 1: I don't know. That sounds kind of important, massive, massive, 597 00:32:34,760 --> 00:32:37,480 Speaker 1: And here we are talking to her about inflation and 598 00:32:37,480 --> 00:32:38,960 Speaker 1: and she's given us some of her best work and 599 00:32:38,960 --> 00:32:42,160 Speaker 1: her model says chance of a recession next year. We're 600 00:32:42,160 --> 00:32:48,240 Speaker 1: gonna go with that. I want to talk activist investoring. Uh. 601 00:32:48,320 --> 00:32:50,760 Speaker 1: That is a very interesting part of the market, and 602 00:32:50,760 --> 00:32:52,479 Speaker 1: there are some people that are pretty good at it, 603 00:32:52,640 --> 00:32:54,080 Speaker 1: and you have to have patience and you have to 604 00:32:54,120 --> 00:32:56,560 Speaker 1: really do your bottoms of homework. One of those folks 605 00:32:56,600 --> 00:32:58,640 Speaker 1: that does that is James Arrest, a founding partner in 606 00:32:58,720 --> 00:33:01,840 Speaker 1: c i O of co Capital LLLC. He's been doing 607 00:33:01,880 --> 00:33:03,320 Speaker 1: this for a long time. One of the things that 608 00:33:03,720 --> 00:33:06,200 Speaker 1: popped up at me former managing director head of International 609 00:33:06,240 --> 00:33:09,960 Speaker 1: Investing in Janet partners Um. That popped out to me, James, 610 00:33:09,960 --> 00:33:11,640 Speaker 1: thanks so much for joining us here in our Bloomberg 611 00:33:11,640 --> 00:33:15,400 Speaker 1: Interactive Broker studio. You're one of the You're one of 612 00:33:15,440 --> 00:33:20,680 Speaker 1: the many that relocated from New York to Miami. Give 613 00:33:20,760 --> 00:33:24,040 Speaker 1: us thirty seconds on that. I'm not sure I should 614 00:33:24,040 --> 00:33:26,000 Speaker 1: be telling that story to anyone. I'm certainly not on 615 00:33:26,120 --> 00:33:29,520 Speaker 1: live there. But we have an office at Rock Center, um, 616 00:33:29,640 --> 00:33:31,800 Speaker 1: and I have to tell you trying to get a 617 00:33:31,840 --> 00:33:37,080 Speaker 1: round Rock Center at Christmas, Yes, with that demonic fifteen 618 00:33:37,120 --> 00:33:41,080 Speaker 1: second Christmas song played by by Sacks, with thousands of 619 00:33:41,120 --> 00:33:43,960 Speaker 1: people squished next to each other at some point to 620 00:33:43,960 --> 00:33:46,200 Speaker 1: see a tree being lit up like we've never witnessed 621 00:33:46,200 --> 00:33:49,960 Speaker 1: a miracle of electricity. The last year that I was here, 622 00:33:50,000 --> 00:33:52,920 Speaker 1: I started telling people, go to a Starbucks, lock yourself 623 00:33:52,920 --> 00:33:54,920 Speaker 1: in the bathroom, turn off the light, turn it back on. 624 00:33:55,120 --> 00:33:58,400 Speaker 1: It's a much more dramatic way to experience electricity. People 625 00:33:58,400 --> 00:34:01,040 Speaker 1: thought I was crazy, so I bought a person's cane 626 00:34:01,360 --> 00:34:04,520 Speaker 1: to make my way around without being you know, accosted. 627 00:34:05,040 --> 00:34:07,320 Speaker 1: And people that I know saw me do this, and 628 00:34:07,360 --> 00:34:09,000 Speaker 1: I thought it's time to take a bit of a 629 00:34:09,000 --> 00:34:12,880 Speaker 1: break from you. I have to expect their tax implications 630 00:34:12,960 --> 00:34:17,760 Speaker 1: as well, but talk to us about you know, your um, 631 00:34:17,840 --> 00:34:21,400 Speaker 1: your flavor of activists investing. Tell us a story about 632 00:34:21,400 --> 00:34:23,600 Speaker 1: what what drives you when you get up in the morning, 633 00:34:23,760 --> 00:34:26,000 Speaker 1: A deal that you've done that you really are proud of. 634 00:34:26,880 --> 00:34:29,880 Speaker 1: You know. I get to work every day with people 635 00:34:29,920 --> 00:34:32,600 Speaker 1: who are inspired and inspiring and who are the best 636 00:34:32,600 --> 00:34:36,480 Speaker 1: operators in the industries that we invest in, and the 637 00:34:36,480 --> 00:34:38,719 Speaker 1: the things that I learned from them, and the engagement 638 00:34:38,760 --> 00:34:42,279 Speaker 1: and the intellectually stimulating dialogue is what really gets me 639 00:34:42,280 --> 00:34:45,200 Speaker 1: out of bed. The other thing is, you know I 640 00:34:45,360 --> 00:34:48,799 Speaker 1: have I think as a bona fide New Yorker, you 641 00:34:48,840 --> 00:34:52,920 Speaker 1: need to have several neurological conditions, you know, to lasting 642 00:34:52,920 --> 00:34:55,080 Speaker 1: the city as long as as one does. One of 643 00:34:55,120 --> 00:34:58,920 Speaker 1: them is I seem to really want to address problems 644 00:34:58,960 --> 00:35:00,560 Speaker 1: that I see in the world, and I seem to 645 00:35:00,560 --> 00:35:03,160 Speaker 1: be really convinced that I can do something about these things. 646 00:35:03,600 --> 00:35:06,279 Speaker 1: And and it doesn't just extend to my investing. It 647 00:35:06,360 --> 00:35:08,640 Speaker 1: extends to to to a whole lot of different arenas 648 00:35:08,640 --> 00:35:10,040 Speaker 1: of life. I want to be helpful, I want to 649 00:35:10,080 --> 00:35:12,719 Speaker 1: fix things. Um and you're a board member of Human 650 00:35:12,760 --> 00:35:15,000 Speaker 1: Rights Watch, for example, I am, and that's some of 651 00:35:15,040 --> 00:35:17,000 Speaker 1: the most important work that I think I get to do. 652 00:35:17,200 --> 00:35:20,360 Speaker 1: I just got involved with an organization called Young Audiences, 653 00:35:20,400 --> 00:35:23,120 Speaker 1: which exposes kids to the arts, which you know, arts 654 00:35:23,120 --> 00:35:25,560 Speaker 1: funding is dying in this country. It's down seventy percent 655 00:35:25,600 --> 00:35:27,960 Speaker 1: since the beginning of this century. We're behind that too. 656 00:35:28,000 --> 00:35:30,160 Speaker 1: But we want to hear about making money. Making money 657 00:35:30,239 --> 00:35:33,000 Speaker 1: is what makes all of these other endeavors possible. But 658 00:35:33,040 --> 00:35:35,719 Speaker 1: it's fun. Um. Look, there's a lot that we've done 659 00:35:35,719 --> 00:35:39,160 Speaker 1: that we're really uh grateful to have gone to do. 660 00:35:39,280 --> 00:35:40,799 Speaker 1: I think that it all. I'll tell you where it 661 00:35:40,800 --> 00:35:43,640 Speaker 1: all kind of started. A number of years ago. We 662 00:35:43,680 --> 00:35:45,840 Speaker 1: bought into a company, or I bought into a company 663 00:35:45,840 --> 00:35:48,000 Speaker 1: called Compass Group, which at the time was the biggest 664 00:35:48,040 --> 00:35:51,680 Speaker 1: contract catering company in the world. Right, and the Compass 665 00:35:51,719 --> 00:35:53,239 Speaker 1: Group is a company that I had grown up with 666 00:35:53,280 --> 00:35:54,759 Speaker 1: and I had always wanted to buy, but it was 667 00:35:54,800 --> 00:35:57,200 Speaker 1: always too expensive. I am, I think, first and foremost, 668 00:35:57,239 --> 00:36:00,560 Speaker 1: a deep value investor, and my partners share that incentivity 669 00:36:00,640 --> 00:36:03,239 Speaker 1: as well. But it was always like thirty five times 670 00:36:03,239 --> 00:36:05,960 Speaker 1: earnings and generated ten percent margins and grew double digits 671 00:36:05,960 --> 00:36:08,600 Speaker 1: because of consolidation, because everybody was going from having their 672 00:36:08,640 --> 00:36:12,520 Speaker 1: in house canteens to outsourcing. So this company fast forward 673 00:36:12,560 --> 00:36:15,520 Speaker 1: five to six years is valued at ten times earnings 674 00:36:15,520 --> 00:36:17,440 Speaker 1: and the margins have gone from ten to three percent. 675 00:36:17,719 --> 00:36:20,800 Speaker 1: But meanwhile, as the biggest operator in the sector, it 676 00:36:20,880 --> 00:36:24,399 Speaker 1: should have had the highest margins. Thinker as CpG Space Ellen. 677 00:36:24,480 --> 00:36:26,800 Speaker 1: This is many years ago, twice as big as the Dexel. 678 00:36:27,000 --> 00:36:29,000 Speaker 1: I mean, this is you know who used to love 679 00:36:29,040 --> 00:36:33,200 Speaker 1: this company, John Marie Eveyard, you know famous. Yes, I 680 00:36:33,280 --> 00:36:36,239 Speaker 1: know him very well and I you know, but he's 681 00:36:36,320 --> 00:36:38,920 Speaker 1: he's I would consider him a friend. He's you know. 682 00:36:40,840 --> 00:36:44,120 Speaker 1: So he had a colleague named Chel Duvaux and child 683 00:36:44,320 --> 00:36:45,960 Speaker 1: at the man who you know, we met with and 684 00:36:46,000 --> 00:36:48,600 Speaker 1: presented our work to. This ended up being a very 685 00:36:48,719 --> 00:36:50,920 Speaker 1: very good investment, went up ten folding period in which 686 00:36:50,960 --> 00:36:53,799 Speaker 1: the market went down. This story is a pretty lengthy one, 687 00:36:53,800 --> 00:36:55,719 Speaker 1: but it's an interesting one, so I go into some 688 00:36:55,800 --> 00:36:58,799 Speaker 1: detail without taking too much off your time. Um, it's 689 00:36:59,040 --> 00:37:01,799 Speaker 1: nobody knew what the album was. Everybody knew this is cheap. 690 00:37:01,840 --> 00:37:03,799 Speaker 1: This is a world class company, should be doing a 691 00:37:03,840 --> 00:37:06,080 Speaker 1: lot better than it's doing. It's cheap on the pressed earnings, 692 00:37:06,080 --> 00:37:07,880 Speaker 1: But nobody knew what the problem was, and certainly management 693 00:37:07,920 --> 00:37:10,279 Speaker 1: didn't either. So we looked high and low for someone 694 00:37:10,280 --> 00:37:12,399 Speaker 1: who could help us turn the company around, figure out 695 00:37:12,400 --> 00:37:14,760 Speaker 1: how what the problems were, how to solve them. Found 696 00:37:14,760 --> 00:37:17,600 Speaker 1: a guy called Jerry Robinson, who got rest his souldiers 697 00:37:17,600 --> 00:37:21,520 Speaker 1: passed away last year, almost exactly ye year ago. Jerry 698 00:37:21,840 --> 00:37:24,759 Speaker 1: Surgery was the founder of the company, bought it out 699 00:37:24,760 --> 00:37:26,759 Speaker 1: of Grand Met in the eighties, brought it public in 700 00:37:26,800 --> 00:37:28,439 Speaker 1: what was the biggest I p O at the time, 701 00:37:28,480 --> 00:37:30,879 Speaker 1: and basically took this from a two hundred million dollar 702 00:37:30,920 --> 00:37:33,560 Speaker 1: company to a multibillion dollar entity. Cashed out when we 703 00:37:33,600 --> 00:37:35,719 Speaker 1: reached out to him. He had gone on to turn 704 00:37:35,760 --> 00:37:38,399 Speaker 1: around five different multi billion dollar companies in the UK 705 00:37:38,520 --> 00:37:41,200 Speaker 1: with dramatic success. He said, look, James, I happened to 706 00:37:41,200 --> 00:37:43,640 Speaker 1: still be an investor in the company. I am heartbroken 707 00:37:43,680 --> 00:37:45,640 Speaker 1: and how poorly managed it is. I have a plan 708 00:37:45,760 --> 00:37:47,160 Speaker 1: for you. I will come and meet you. He flew 709 00:37:47,200 --> 00:37:49,759 Speaker 1: to New York on his own time, met with me, 710 00:37:49,880 --> 00:37:53,080 Speaker 1: presented me with the most compelling operational turnaround plan I 711 00:37:53,080 --> 00:37:55,000 Speaker 1: think I've ever seen and will probably ever see in 712 00:37:55,040 --> 00:38:00,239 Speaker 1: my life. Here's what was happening in compass to have 713 00:38:00,280 --> 00:38:02,279 Speaker 1: you back to talk about it, because and now, I 714 00:38:02,280 --> 00:38:05,520 Speaker 1: mean it's a thirty three billion dollar company, right and 715 00:38:06,400 --> 00:38:09,719 Speaker 1: huge success story. James, so grateful that you came into 716 00:38:09,719 --> 00:38:11,360 Speaker 1: the office. I hope we get to talk to you again. 717 00:38:11,480 --> 00:38:13,600 Speaker 1: I think there's a hurricane in Miami right now, so 718 00:38:13,600 --> 00:38:15,480 Speaker 1: you're gonna stick around. I'm assuming in New York for 719 00:38:15,480 --> 00:38:17,200 Speaker 1: a little while. I'm actually had it to to to 720 00:38:17,320 --> 00:38:21,000 Speaker 1: California to visit some good stuff. James Rasta, thank you 721 00:38:21,120 --> 00:38:23,040 Speaker 1: very much for joining us, founding partner in c i 722 00:38:23,120 --> 00:38:25,920 Speaker 1: O at Coast Capital, joining us in our Bloomberg Interactive 723 00:38:25,920 --> 00:38:31,600 Speaker 1: Broker studio. Thanks for listening to the Bloomberg Markets podcast. 724 00:38:32,000 --> 00:38:35,200 Speaker 1: You can subscribe and listen to interviews with Apple Podcasts 725 00:38:35,320 --> 00:38:39,239 Speaker 1: or whatever podcast platform you prefer. I'm Matt Miller. I'm 726 00:38:39,280 --> 00:38:43,320 Speaker 1: on Twitter at Matt Miller three. Put on Ball Sweeney 727 00:38:43,320 --> 00:38:45,960 Speaker 1: I'm on Twitter at pt Sweeney Before the podcast. You 728 00:38:45,960 --> 00:38:48,640 Speaker 1: can always catch us worldwide at Bloomberg Radio.