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Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside

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Speaker 1: my co host Matt Miller.

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Speaker 2: Every business day we bring you interviews from CEOs, market pros,

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Speaker 2: and Bloomberg experts, along with essential market moving news.

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Speaker 1: Find the Bloomberg Markets Podcast on Apple Podcasts or wherever

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Speaker 1: you listen to podcasts, and at Bloomberg dot com slash podcast.

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Speaker 1: Our next guest, I guess I got to call him

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Speaker 1: like my favorite economists, but that's not saying a whole

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Speaker 1: lot quite frankly, but he is good and we're glad

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Speaker 1: we got a few minutes of his time. You know,

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Speaker 1: Carl Ricadona, he's BNP Perry bott and now I trained

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Speaker 1: him up here at Bloomberg Intelligence for many years. But

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Speaker 1: he's pretty solid. Carl, What are you looking at today?

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Speaker 1: You know, we just heard from the good folks Dana

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Speaker 1: Peterson at the Leading Economic Indicator of the Conference Board.

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Speaker 1: They still have a recession call out there, how about

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Speaker 1: you guys at ben P Perry Bow.

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Speaker 3: Well, Paul, I should back that up. You taught me

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Speaker 3: everything I know. Of course, thanks for that.

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Speaker 4: I'll start with that.

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Speaker 3: But in terms of the recession view, you know, we

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Speaker 3: still see some pretty ominous factors looming on the horizon.

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Speaker 3: You've been talking about the resumption of student debt payments. Now,

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Speaker 3: you know, there may be some legal room here that

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Speaker 3: you know, you have a twelve month grace period, you know,

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Speaker 3: to start and whatnot. But if we just look at

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Speaker 3: the you know, the view from sixty thousand feet, the

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Speaker 3: price tag on that is about one hundred billion dollars annualized.

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Speaker 3: So look back to Q one when everything went haywire

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Speaker 3: with the cost of living adjustment and Social Security that

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Speaker 3: was also about one hundred billion dollar price tag. So

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Speaker 3: I'm sure they're not equal, but when you look from

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Speaker 3: a you know, when you're squint from a distance, there

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Speaker 3: are you know, similar sizes, and so all of the

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Speaker 3: things that went up in Q one, discretionary spending and whatnot,

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Speaker 3: we could see kind of a similar fallout in the

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Speaker 3: Q four period.

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Speaker 1: But on top of that, you have, you know, a

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Speaker 1: very divided.

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Speaker 3: Government that has to pass twelve appropriation bills by the

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Speaker 3: end of this month, by the end of September. Rather

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Speaker 3: you know, that seems very unlikely, so there's a risk

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Speaker 3: of a government shut down. Then the excess saving story

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Speaker 3: we've been focusing on this. San Francisco FED wrote on

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Speaker 3: this recently. Those savings are rapidly being eroded. You see

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Speaker 3: that in the retail earnings you discussed in the earlier segment,

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Speaker 3: where Target is noticing that, you know, price sensitivity of

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Speaker 3: consumers in Walmart sees a lot of the higher end

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Speaker 3: consumers walking into Walmart to go after those bargain prices

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Speaker 3: and whatnot. So you kind of see that playing out,

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Speaker 3: you know. So there's a bit of a perfect storm

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Speaker 3: I think coming about in Q four, which still makes

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Speaker 3: me worried about elevated recession risk in Q four and

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Speaker 3: into the kind of first part of next year.

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Speaker 5: How do you swear that away when a lot of

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Speaker 5: this data still is pretty resilient if you're looking at

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Speaker 5: retail sales even the Atlanta Feds GDP now for the

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Speaker 5: current quarter up around five percent, and when you're seeing

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Speaker 5: talking about Walmart coming in and better than expected outlook

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Speaker 5: on the consumer. As far as you talked about student loans,

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Speaker 5: I mean, is what's the main catalyst here to really

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Speaker 5: weigh on consumers when we're looking at the difference between

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Speaker 5: spending when you're talking about obviously goods versus services.

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Speaker 3: Well, I think the GDP tracker in the you know,

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Speaker 3: the early part of the quarter can often go for

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Speaker 3: you know, a real loop, and I think that's what

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Speaker 3: we're going what we're seeing at the moment. I highly

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Speaker 3: doubt we're growing at five percent in the current quarter

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Speaker 3: an inflation adjusted terms. So you know, I value the

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Speaker 3: Atlanta Fed GDP now tracker.

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Speaker 4: It can be volatile follow it, but.

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Speaker 6: It does move.

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Speaker 3: It does move over the course of the quarter. That's

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Speaker 3: not unusual, and so I do think we'll see some

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Speaker 3: moderation in that in that indicator over the course of

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Speaker 3: the quarter. That being said, there is a theme of

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Speaker 3: resilience here, whether it's the labor market or consumer activity

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Speaker 3: and whatnot. But you know, you always have to be

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Speaker 3: looking forward, and you're hearing those anecdotes of price sensitivity

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Speaker 3: from consumers. So the real test will be, you know,

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Speaker 3: if this can hold out over the course of the quarter,

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Speaker 3: or if July just happened to be a good month

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Speaker 3: for retail, whether you know, whether it was driving people

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Speaker 3: into shopping malls or Amazon Prime Day or a lot

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Speaker 3: of these factors maybe just one off developments. When we

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Speaker 3: kind of step back and look at the macro fundamentals,

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Speaker 3: the broader GDP trends, So not the quarter on quarter

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Speaker 3: change that we see in the GDP now forecast, but

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Speaker 3: rather the year and year rate of change is slowing.

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Speaker 3: What does disturb me is GDI. So gross domestic income,

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Speaker 3: which in a perfect world should track in lockstep with

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Speaker 3: the GDP. But you know, the guy who taught me

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Speaker 3: everything I know, Paul Sweeney, you know, don't live in

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Speaker 3: a perfect world. And the gd I numbers look pretty bad.

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Speaker 3: So gross domestic ink, well, first of all, profits are

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Speaker 3: slowing and gross domestic income looks pretty lousy. We'll see

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Speaker 3: the next print on that when we get the second

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Speaker 3: print for Q two GDP. But GDI is a disturbing trends,

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Speaker 3: So there's there's definitely fodder for both sides of the

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Speaker 3: debate here, and I'm not convinced of the reacceleration narrative

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Speaker 3: just yet.

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Speaker 1: We've certainly seen Carl over the last I don't know,

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Speaker 1: a couple of weeks, some really disappointing economic news come

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Speaker 1: out of China. How do you kind of think about

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Speaker 1: that as as you think about the impact of the

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Speaker 1: US economy.

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Speaker 3: Well, I you know that China's obviously a very important

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Speaker 3: trading partner, and global commodity prices are very sensitive to

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Speaker 3: the health of the Chinese economy, and those commodity prices

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Speaker 3: impact the US inflation outlooks. So you know, we're definitely

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Speaker 3: watching the situation very closely and trying to understand what's happening,

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Speaker 3: you know, in the kind of immediate reopening after COVID

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Speaker 3: and then you know, where things settle there, there seem

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Speaker 3: to be some key differences. So, you know, in Europe

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Speaker 3: and the US, we saw a lot of pent up savings,

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Speaker 3: in pent up demand that really led to the you know,

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Speaker 3: kind of revenge spending and house price appreciation and and

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Speaker 3: you know demand for you know, for a lot of

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Speaker 3: consumer spending categories. It looks very different in China, and

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Speaker 3: we're you know, we're seeing that play out that the

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Speaker 3: reopening of the second largest economy in the world looks

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Speaker 3: very different than, you know, than what we've seen in

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Speaker 3: the US and Europe, and we're seeing that pass through

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Speaker 3: to supply chains, and this is feeding into an inflation

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Speaker 3: narrative of of deceleration. But our view has been at

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Speaker 3: BNP for quite a while that the last mile is

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Speaker 3: going to be where, you know, where the real toughness

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Speaker 3: comes out and the real stickiness of the inflation data

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Speaker 3: is apparent, and that's going to mean that this FED

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Speaker 3: can't you know, we'll have a course correction on the

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Speaker 3: the immaculate disinflation narrative, and the FED is going to

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Speaker 3: have to remain vigilant in its inflation fight to get

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Speaker 3: us all the way back to two percent. It's easy

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Speaker 3: to get from nine percent down to six, but from

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Speaker 3: six to four is harder. And getting from four to

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Speaker 3: two is where will really take some softening of labor

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Speaker 3: conditions and some of the categories that have been sticky

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Speaker 3: to to really move lower.

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Speaker 5: All right, you brought up the FED. We do have

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Speaker 5: Jackson Hole next week. How do you view this and

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Speaker 5: what this could potentially mean for their signaling ahead of

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Speaker 5: that September twentieth decision.

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Speaker 3: I don't think they're going to signal much for the

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Speaker 3: September decision. Of course, they'll be asked in the you know,

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Speaker 3: the press conferences and media exchanges and whatnot what they're thinking,

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Speaker 3: and I think they'll give us the you know, the

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Speaker 3: generic FED answers of well, there's more data to be seen,

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Speaker 3: so we don't want to cast a judgment so we.

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Speaker 5: Did get the employment Costs Index CPI PPI and then

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Speaker 5: PCE since the last decision. So it feels like those

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Speaker 5: FED minutes we got yesterday might be a bit backward looking, right.

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Speaker 3: That is spot on analysis because people are focusing on

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Speaker 3: some of the hawkish language that was in the minutes

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Speaker 3: where they said they're still upside risk to inflation and

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Speaker 3: therefore we may need to do more. We have to

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Speaker 3: remember they wrote those words, and then we got a

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Speaker 3: cooler CPI report, cooler ECI report, a still hot but

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Speaker 3: cooling trend in the labor data, right, so that dates

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Speaker 3: some of that language. And I think the more important

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Speaker 3: takeaway from the minutes was that they're looking at this

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Speaker 3: in a very two sided fashion now, is they assess

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Speaker 3: risks for the outlook doing too much but also doing

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Speaker 3: too little, Whereas before they were always kind of worried

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Speaker 3: they were behind the curve and we're just focused on

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Speaker 3: catching up. So this is a different, more thoughtful, more

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Speaker 3: data sensitive FED going forward. You know, I think this

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Speaker 3: may mean that they're on hold, and in fact, they

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Speaker 3: may have been at the peak rate of the cycle

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Speaker 3: at the July meeting and they're done now, even though

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Speaker 3: they don't want to say mission bump right, all.

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Speaker 1: Right, Carl, thanks so much for joining us. Always always

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Speaker 1: appreciate getting your perspective. Your analysis called wreck Don one

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Speaker 1: of the best. He's a chief US economists at b

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Speaker 1: n P. Parrybottle.

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Speaker 6: You're listening to the team.

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Speaker 7: Ken's a live program Bloomberg Markets weekdays at ten am Eastern.

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Speaker 6: On Bloomberg dot Com, the iHeartRadio app.

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Speaker 7: Blomberg Business at or listen on demand wherever you get

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Speaker 7: your podcasts.

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Speaker 1: Here a Bloomberg. We love talking about central bank activity.

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Speaker 1: We're all over that stuff. Today we're going to focus

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Speaker 1: a little bit on the Bank of Japan, and we

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Speaker 1: have a great guest to help us do that, Regina Schlagger,

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Speaker 1: director of Central Bank Policy Research at SGH Macroadvisor. She

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Speaker 1: joined us live here in our Bloomberg Interactive Broker Studio.

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Speaker 1: I have to admit, Regina, of all the central banks

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Speaker 1: and probably least comfortable or knowledge about what they are doing,

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Speaker 1: so just give us a sense of what the boj

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Speaker 1: has been up to really over the last several years

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Speaker 1: and kind of what you expect them to do going forward.

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Speaker 8: Sure, Thanks Paul, thanks for having me, and nice to

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Speaker 8: see you both this morning. So the Bank of Japan

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Speaker 8: has been somewhat of a laggered in terms of central

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Speaker 8: bank policy tightening over a recent recent couple of years,

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Speaker 8: and so markets are quite focused on the timing of

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Speaker 8: their transition to Titan pol see, particularly with respect to

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Speaker 8: transitioning out of what they have had in place now

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Speaker 8: for many years yield yield curve targeting, which is them

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Speaker 8: targeting the ten year yield, and so they have recently

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Speaker 8: shifted toward more flexible arrangement or regime with respect to

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Speaker 8: yield curve targeting, which markets are obviously taking as a

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Speaker 8: signal that they are on the move if you like,

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Speaker 8: and soon to be thinking about higher interest rates at

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Speaker 8: some point. Markets intensely focused on the timing of that

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Speaker 8: and taking every signal they can from the economy to

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Speaker 8: try to gauge when they're likely to move.

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Speaker 5: And very different like you're seeing. If you juxtapose that

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Speaker 5: against the Federal Reserve and other global central banks that

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Speaker 5: clearly have been on this aggressive tightening cycle for over

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Speaker 5: a year now, how do you think that impacts the

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Speaker 5: global economy? Because Japan is the third larger economy behind

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Speaker 5: the United States and China.

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Speaker 8: Absolutely and as you rightly infer there's a huge yield

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Speaker 8: differential now between the US and Japan, and so one

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Speaker 8: of the things that we've become aware of is that

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Speaker 8: officials officials in Japan are you know, waiting for the

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Speaker 8: FED to be done, if you like, with respect to

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Speaker 8: their tightening cycle, so that they can start to think

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Speaker 8: about how they will move on their own rates and

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Speaker 8: narrow that differential. They have a currency right now which

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Speaker 8: is at levels that they're not entirely comfortable with, right,

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Speaker 8: so the end breaching one right, right, So this is

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Speaker 8: a this is a policy driver for them in the

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Speaker 8: sense that they have now i think admitted that it's

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Speaker 8: a big factor in how they're thinking about how to

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Speaker 8: transition smoothly out of this ultra easy policy that they've

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Speaker 8: had now for a very long time. And I think

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Speaker 8: that you know, really that rate differential is not going

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Speaker 8: to narrow.

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Speaker 4: Until they actually moved to move on rates.

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Speaker 5: So the yen bridging it's now around one for six

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Speaker 5: against the dollar. How much does that stoke expectations that

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Speaker 5: it could prompt the Bank of Japan to have more

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Speaker 5: intervention from here.

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Speaker 8: Right, So that right now there is a lot of

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Speaker 8: speculation that they could come in in fact overnight. I

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Speaker 8: was even reading about expectations that they could come well, well,

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Speaker 8: Japan is asleep essentially and do some stealth intervention. There

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Speaker 8: is a lot of focus on when and how they'll

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Speaker 8: intervene and at what level. I think from a broader

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Speaker 8: perspective that whatever that intervention, whenever that intervention is and

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Speaker 8: at what level, it's not necessarily as important as what

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Speaker 8: they do on the monetary policy side.

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Speaker 4: And so the impact on the market.

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Speaker 8: I think of any intervention BOJ official sorry ministry finance

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Speaker 8: officials execute is not It has a more transient effect

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Speaker 8: I think on markets. Then does the speculation about what

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Speaker 8: they'll do with interest rates.

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Speaker 1: And when we've had a change in leadership of the

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Speaker 1: Bank of Japan, just talk to us about that, what

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Speaker 1: that means and going forward.

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Speaker 4: Yeah, I think this is a really interesting element.

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Speaker 8: I mean, we're always at pains to try and discern

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Speaker 8: these differences in personality when there's a change in leadership

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Speaker 8: at a central bank. In particular, I think that the

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Speaker 8: exit of the former Central Bank of Japan governor Couroda,

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Speaker 8: you know, ushered in this succession.

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Speaker 4: Of a new governor that comes.

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Speaker 8: From a school of thought or an academic background where

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Speaker 8: he relies more heavily on forward guidance. That's more the

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Speaker 8: Bananki Dragi school of thought. And so I think that

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Speaker 8: one of the elements that's really obvious to me through

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Speaker 8: this transition of the leadership is the extent to which

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Speaker 8: he has been starting to impart that forward garden. I

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Speaker 8: think that he's going to rely quite heavily on signaling Rhetorically,

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Speaker 8: the bank has held quite firm to.

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Speaker 4: This ultra easy.

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Speaker 8: Policy, but you can detect little nuances in the way

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Speaker 8: he's shifting the language so that markets are understanding that

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Speaker 8: the bank is on the move.

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Speaker 5: And also will have another update when it comes to

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Speaker 5: consumer praises. And if you looked at the latest data

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Speaker 5: from the prior month, it did advance at a faster clip.

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Speaker 5: How do you view the direction of where those prices

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Speaker 5: could be headed from here?

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Speaker 6: Right?

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Speaker 8: So this is a really another really interesting element because

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Speaker 8: the headline rate is expected to show.

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Speaker 4: That prices fell in this report.

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Speaker 8: That would be consistent with the boj's own forecasts.

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Speaker 4: They expect in fiscal.

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Speaker 8: Year that inflation will have risen, but in the next

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Speaker 8: fiscal year they anticipate that inflation will slow to under

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Speaker 8: the two percent objectives.

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Speaker 1: So they the same. What is this two percent number?

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Speaker 1: Everybody's got a two percent invation?

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Speaker 4: Yeah, the magic two percent.

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Speaker 5: I never heard it from New Zealand in the nineteen eighties.

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Speaker 4: Yeah.

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Speaker 5: And then Bernaki, I.

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Speaker 1: Think Japan's on the two inflation watch as well.

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Speaker 4: They're on the watch.

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Speaker 1: So I'm looking at the ego function on the Bloomberg

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Speaker 1: terminal and putting it in there for Japan. I guess

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Speaker 1: the forecast is for CPI. I guess the headline year

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Speaker 1: veer three point three percent, right, so getting there but

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Speaker 1: not there, getting there but not there first time, by

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Speaker 1: the way I've ever pulled up.

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Speaker 5: Thing.

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Speaker 8: Okay, and also on an on the line basis, I

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Speaker 8: think that that that's the important number. You know, with

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Speaker 8: X energy, they're very focused on what the core writ

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Speaker 8: is doing.

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Speaker 1: Okay.

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Speaker 5: I have to get your thoughts on when it comes

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Speaker 5: to this discussion. GP Morgan actually had a recent note

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Speaker 5: about China's Japanification risks, So seeing similar concerns that Japan

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Speaker 5: did in the early nineteen nineties kind of set the

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Speaker 5: scene for us about how that worked and what that

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Speaker 5: could mean potentially for China.

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Speaker 8: Well, obviously there is so much concern about China at

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Speaker 8: the moment. It's it's you know, it's it's seeping into

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Speaker 8: market psychology.

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Speaker 4: I think with respect.

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Speaker 8: To how it potentially impacts US federal reserves, future outlook

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Speaker 8: and other economies, it's it's impacting the extent to which

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Speaker 8: weeks we think that central banks might be done in

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Speaker 8: their own respective titaning campaigns. But in terms of the Japan,

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Speaker 8: you know, in terms of China becoming Japan, I think

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Speaker 8: where some way off assessing that that is the decidedly

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Speaker 8: the outlook for China.

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Speaker 4: Having said that, you know, there are.

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Speaker 8: Real concerns there, and I think that China experts more

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Speaker 8: more a depth than I have voiced them for many years.

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Speaker 1: You know, when I started in the business back in

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Speaker 1: the mid eighties, Japan was the bomb. If you were

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Speaker 1: a US investment banker, you had to get a tour

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Speaker 1: of duty in Tokyo. But that's not the case any

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Speaker 1: for like ever for a long time. Give us suchest overview.

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Speaker 1: What's the how do you think or how do comds

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Speaker 1: think that japan economy will be over the next five

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Speaker 1: or ten years.

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Speaker 8: Yeah, it's an interesting point. I like you Paul, you know,

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Speaker 8: was in Japan around that time, and it was a

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Speaker 8: global superpower, no doubt.

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Speaker 4: And since it's been in.

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Speaker 8: The doldrums obviously, I think that as they emerged from

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Speaker 8: from what has been you know, twenty five year slump,

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Speaker 8: the economy is probably not likely to see those heady

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Speaker 8: days again to the extent that they did in the

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Speaker 8: in the eighties and early nineties. That said, I think,

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Speaker 8: you know, the Japanese officials have very long memories and

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Speaker 8: they'll be very very cautious and careful about moving too

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Speaker 8: quickly to curb any kind of ambulance in the economy

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Speaker 8: for fear that they might be reverting back to inflation.

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Speaker 4: That's under too.

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Speaker 1: I mean, again, as you investment banker, there was Asia,

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Speaker 1: then there was non Japan Asian, so basically it was

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Speaker 1: and everything else. Right now it's China and everything else.

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Speaker 1: So it's just how times have changed. For Ginis Schlager,

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Speaker 1: thanks so much for joining us, giving us a view

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Speaker 1: of that part of the world.

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Speaker 7: You're listening to the tape Cansur live program Bloomberg Markets

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Speaker 7: weekdays at ten am Eastern on Bloomberg Radio, the tune

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Speaker 7: in app Bloomberg dot Com.

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Speaker 7: flagship New York station. Just say Alexa play Bloomberg eleven thirty.

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Speaker 1: So we've got one of the leading reinsurance companies here

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Speaker 1: in our Bloomberg Interactor Broker studio. Juan Adrade, CEO of Everes.

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Speaker 1: The based worlds Bermuda scam. But that's how these guys

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Speaker 1: do it. One, he's here in our Bloomberg Interactor Broker Studio. One.

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Speaker 1: Thanks for coming in, appreciate it. Thanks, talk to us

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Speaker 1: about the reinsurance business. What's driving your business these days?

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Speaker 1: I'm looking at your stock. It's a fifteen billion dollar

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Speaker 1: market cap company. You've got one eg is a ticker

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Speaker 1: up about seven percent year to eight thirty percent over

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Speaker 1: the last twelve months. What are the key drivers of

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Speaker 1: your business?

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Speaker 9: Yeah, no, it's a fascinating question. I mean, if you

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Speaker 9: think about the confluence of events that we've all lived

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Speaker 9: through over the last few years, whether it's the pandemic,

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Speaker 9: the supply chain issues, inflation, climate change, all of that

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Speaker 9: is driving demand. And again, as you said, we basically

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Speaker 9: ensure insurance companies. So when you think about what's driving

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Speaker 9: our business right now. It's the fact that these insurance

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Speaker 9: companies are looking for protection for earnings volatility essentially, and

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Speaker 9: so that increases the demand for our.

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Speaker 5: Product, and there's been a price correction in the insurance industry.

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Speaker 9: Why there's been a significant price correction, You're absolutely right,

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Speaker 9: and it's really down to a supply and demand imbalance.

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Speaker 9: The bottom line is, with all the storms and all

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Speaker 9: the activity that we've seen since twenty seventeen, reinsurance companies

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Speaker 9: have deployed less capital into the market, so that's constrained supply.

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Speaker 9: The other thing that's happened on the supply side is

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Speaker 9: a lot of third party allocators, pension funds, sovereign wealth

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Speaker 9: funds that used to put money into our sector have

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Speaker 9: also out and so that's created a supply crunch, if

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Speaker 9: you will, in the industry. But at the same time,

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Speaker 9: because of inflation, climate change, all of these other things,

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Speaker 9: there's more demand. So there's basically a gap of roughly

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Speaker 9: one hundred billion dollars between supply and demand, and that's

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Speaker 9: what's created the price correction that really started at the

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Speaker 9: beginning of this year in a pretty significant way.

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Speaker 1: Hey, on, when you bump into a climate change denier.

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Speaker 1: What do you say to that person? I always say,

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Speaker 1: like somebody when I bump into them, I say, go

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Speaker 1: talk to an insurance company. They'll tell you if it's

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Speaker 1: real or not.

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Speaker 9: What do you say, Well, I think that's good advice,

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Speaker 9: by the way, because that is what we do on

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Speaker 9: a day and day out basis. Look just look at

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Speaker 9: what happened in Maui, and I think that's a perfect

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Speaker 9: example of that, right. You know, the island had significantly

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Speaker 9: high temperatures because of what's been happening around the world,

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Speaker 9: drought which basically dried all the grasses, and then you

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Speaker 9: have a hurricane that's turning off the coast, putting out

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Speaker 9: sixty seventy mile an hour wings. So once you get

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Speaker 9: the spark that started this, and you got those wins,

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Speaker 9: you get the fortunately the strategy that unfolded in Maui.

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Speaker 9: And look, all of this is scientifically proven, right Wildfires, floods, droughts,

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Speaker 9: all of that is directly related to what we're seeing.

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Speaker 9: You know, one of the interesting statistics that's out there

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Speaker 9: right now the ocean, whether it's the Pacific or the

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Speaker 9: Atlantic Ocean right now, is that the warmest temperature it's

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Speaker 9: been since recorded history. That tells you something. Now, the

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Speaker 9: endgame of that is that you're going to get more

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Speaker 9: severe storms because they fuel off of the higher temperatures

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Speaker 9: in the ocean. So what I would just say is

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Speaker 9: look at the facts.

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Speaker 1: So are the insurance companies that you ensure, how is

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Speaker 1: that reflected in their business? They I've heard like a

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Speaker 1: lot of insurance companies won't even do business in Florida anymore.

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Speaker 1: So how do you see that in your business? And

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Speaker 1: I mean, are are you charging more for that an

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Speaker 1: increase risk? How does that affect your business?

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Speaker 9: It affects us in a number of different ways. So yes,

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Speaker 9: one is we're charging more. That's part of that price

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Speaker 9: correction that we talked about. The second thing is we

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Speaker 9: try to embed the latest science into our models to

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Speaker 9: be able to do better predictions on where storms are

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Speaker 9: going to develop, where they're going to hit the coastlines,

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Speaker 9: et cetera, et cetera. But the other thing that you're

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Speaker 9: seeing right now, and you've seen the headlines from companies

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Speaker 9: moving out of Florida A and moving out of California,

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Speaker 9: there's also public policy issues that we have to address.

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Speaker 9: I think the governor of Florida, and the legislature did

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Speaker 9: a nice job with tort reform in Florida because one

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Speaker 9: of their significant issues was not only climate chains and

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Speaker 9: the storms that come out of that, but it's also

441
00:22:24,960 --> 00:22:27,480
Speaker 9: fraud and abuse in the system, and so the governor

442
00:22:27,560 --> 00:22:31,159
Speaker 9: took strong actions on that. California is a different story

443
00:22:31,200 --> 00:22:33,080
Speaker 9: at this point in time. You know, you have a

444
00:22:33,119 --> 00:22:35,399
Speaker 9: lot of companies leaving the state because the market is

445
00:22:35,440 --> 00:22:37,520
Speaker 9: not functioning as well as it should be. And at

446
00:22:37,520 --> 00:22:39,320
Speaker 9: the end of the day, we all have shareholders or

447
00:22:39,359 --> 00:22:41,760
Speaker 9: stakeholders and we're for profit business.

448
00:22:42,200 --> 00:22:45,760
Speaker 5: The Hawaii wildfires insured losses are estimated to be around

449
00:22:45,800 --> 00:22:48,399
Speaker 5: three billion dollars. But at the same time, why is

450
00:22:48,520 --> 00:22:50,719
Speaker 5: one of the nation's lowest rates when it comes to

451
00:22:50,920 --> 00:22:54,720
Speaker 5: homeowner coverage just because it really hasn't had a ton

452
00:22:54,760 --> 00:22:57,879
Speaker 5: of natural disasters. How does that affect insurers?

453
00:22:58,160 --> 00:23:00,880
Speaker 9: Yeah, it's a great point because that also goes back

454
00:23:00,920 --> 00:23:04,280
Speaker 9: to Paul's question on climate change. Hawaii itself is not

455
00:23:04,440 --> 00:23:07,719
Speaker 9: known as sort of a natural catastrophe hot spot, similar

456
00:23:07,720 --> 00:23:09,400
Speaker 9: to when you think about Florida or when you think

457
00:23:09,400 --> 00:23:12,560
Speaker 9: about California. What will happen as a result of this

458
00:23:12,720 --> 00:23:15,439
Speaker 9: is prices will go up again, Right, A lot of

459
00:23:15,480 --> 00:23:17,680
Speaker 9: claims will be paid. I think, as you said, it's

460
00:23:17,680 --> 00:23:20,399
Speaker 9: about three to three point two billion in industry lass

461
00:23:20,480 --> 00:23:23,199
Speaker 9: that is expected to come out of that fire. So

462
00:23:23,240 --> 00:23:26,720
Speaker 9: insurance companies will basically adjust their pricing because the risk

463
00:23:26,800 --> 00:23:27,120
Speaker 9: is there.

464
00:23:27,240 --> 00:23:30,479
Speaker 1: Essentially, you guys are a global company. Talk to us

465
00:23:30,480 --> 00:23:34,520
Speaker 1: about how business is different US versus outside of the US.

466
00:23:34,760 --> 00:23:34,960
Speaker 7: Yeah.

467
00:23:35,040 --> 00:23:37,960
Speaker 9: No, Look, I've spent a vast majority of my career

468
00:23:38,040 --> 00:23:41,760
Speaker 9: actually working outside of the United States. And we are global.

469
00:23:41,840 --> 00:23:44,760
Speaker 9: So we're the fourth largest property casualty reinsurer in the world.

470
00:23:44,760 --> 00:23:47,600
Speaker 9: We have customers in one hundred and fifteen countries. And

471
00:23:47,760 --> 00:23:50,240
Speaker 9: you know, our business is really a relationship business, and

472
00:23:50,520 --> 00:23:52,479
Speaker 9: you really have to adapt to how you do business

473
00:23:52,480 --> 00:23:55,240
Speaker 9: in different cultures. Right, whether it's it's an Asian culture,

474
00:23:55,240 --> 00:23:57,840
Speaker 9: a Latin American culture, where you know, before you do

475
00:23:57,880 --> 00:23:59,560
Speaker 9: a deal, they have to understand who you are, they

476
00:23:59,600 --> 00:24:01,720
Speaker 9: need to try us to you, et cetera. Whether it's

477
00:24:01,720 --> 00:24:03,720
Speaker 9: in Europe in the US, you might be more direct,

478
00:24:03,760 --> 00:24:06,040
Speaker 9: get to the bottom line a little bit quicker, et cetera,

479
00:24:06,560 --> 00:24:08,879
Speaker 9: but the issues are fundamentally the same. At the end

480
00:24:08,880 --> 00:24:11,159
Speaker 9: of the day, we're ensuring risk, so we have to

481
00:24:11,240 --> 00:24:13,879
Speaker 9: understand what we're taking on our balance sheet, what we

482
00:24:14,000 --> 00:24:16,800
Speaker 9: price for it, and you also need to understand the geography,

483
00:24:16,880 --> 00:24:20,400
Speaker 9: the climate, the geopolitical issues, regulatory environments, all that.

484
00:24:20,320 --> 00:24:20,800
Speaker 6: Sort of thing.

485
00:24:20,920 --> 00:24:23,440
Speaker 5: We have about a minute left. What's your thought on

486
00:24:23,520 --> 00:24:26,399
Speaker 5: what the reinsurance industry is telling us on where the

487
00:24:26,440 --> 00:24:27,320
Speaker 5: economy is headed.

488
00:24:27,880 --> 00:24:28,160
Speaker 7: Yeah.

489
00:24:28,200 --> 00:24:31,240
Speaker 9: Look, I think if you look at our industry, we're

490
00:24:31,240 --> 00:24:33,479
Speaker 9: sort of a bright light in what's happening in capital

491
00:24:33,520 --> 00:24:35,919
Speaker 9: markets right now. And I'll give your own example. So

492
00:24:35,960 --> 00:24:38,720
Speaker 9: we just posted in the second quarter a twenty five

493
00:24:38,760 --> 00:24:42,080
Speaker 9: percent annualized total shareholder return and a twenty two percent

494
00:24:42,160 --> 00:24:45,040
Speaker 9: plus ROE and so that tells you sort of what

495
00:24:45,080 --> 00:24:48,000
Speaker 9: we're seeing in the opportunities that are out there because

496
00:24:48,040 --> 00:24:51,120
Speaker 9: of the uncertainty in the world right now, heightened risk environment,

497
00:24:51,160 --> 00:24:54,800
Speaker 9: geopolitical issues, climate change issues, et cetera. So we're pretty

498
00:24:54,800 --> 00:24:57,640
Speaker 9: bullish about where the industry is going, not only this year,

499
00:24:57,800 --> 00:24:59,639
Speaker 9: but well into twenty twenty four as well.

500
00:25:00,119 --> 00:25:01,680
Speaker 1: All right, one, thanks so much for joining us. Really

501
00:25:01,720 --> 00:25:03,840
Speaker 1: appreciate you taking the time to come into our Bloomberg

502
00:25:03,840 --> 00:25:07,640
Speaker 1: Interactive Broker studio. Juan Andrade he's the CEO of Everest,

503
00:25:08,000 --> 00:25:11,879
Speaker 1: the tickers EG Everest Group, a New York Stock Exchange

504
00:25:11,920 --> 00:25:13,919
Speaker 1: traded company. You guys have an investor Day coming up

505
00:25:13,920 --> 00:25:17,720
Speaker 1: in November at the NYSEC, so that'll be big for you. Guys.

506
00:25:18,240 --> 00:25:20,240
Speaker 1: Me we'll get you back into studio since you're gonna

507
00:25:20,240 --> 00:25:21,600
Speaker 1: be back in New York. That'll be good stuff.

508
00:25:22,920 --> 00:25:26,320
Speaker 7: You're listening to the team Ken's are Live program Bloomberg

509
00:25:26,359 --> 00:25:29,720
Speaker 7: Markets weekdays at ten am Eastern on Bloomberg dot Com,

510
00:25:29,800 --> 00:25:32,960
Speaker 7: the iHeartRadio app and the Bloomberg Business App, or listen

511
00:25:33,040 --> 00:25:35,160
Speaker 7: on demand wherever you get your podcasts.

512
00:25:36,800 --> 00:25:40,080
Speaker 1: All right, let's talk about commercial real estate. This is

513
00:25:40,240 --> 00:25:42,040
Speaker 1: near and dear to my heart because I walk through Midtown,

514
00:25:42,080 --> 00:25:44,199
Speaker 1: Manhattan every day, back and forth to Penn Station, and

515
00:25:44,240 --> 00:25:47,440
Speaker 1: I'm first hand. I can check out what's happening. Our

516
00:25:47,480 --> 00:25:50,560
Speaker 1: next guest knows about what's happening to Hassam Naji. He's

517
00:25:50,560 --> 00:25:52,719
Speaker 1: the CEO of Marcus and Millichap, which is a New

518
00:25:52,760 --> 00:25:56,919
Speaker 1: York Stock Exchange traded company. MMI is the ticker. He

519
00:25:57,000 --> 00:25:59,440
Speaker 1: joins his live here in our Bloomberg Interactive Broker Studio. Sam,

520
00:25:59,440 --> 00:26:01,720
Speaker 1: thank you very much, which for joining us. All right,

521
00:26:01,760 --> 00:26:04,159
Speaker 1: I walk back and forth twice a day Midtown Manhatan.

522
00:26:04,200 --> 00:26:05,920
Speaker 1: I look up and there's a lot of empty space here.

523
00:26:06,040 --> 00:26:09,640
Speaker 1: This is a disaster in certain big cities. We'll get

524
00:26:09,640 --> 00:26:11,240
Speaker 1: to some of the good parts of commercial real estate,

525
00:26:11,280 --> 00:26:14,400
Speaker 1: but what happens to the New York's, the San Francisco's.

526
00:26:14,560 --> 00:26:17,440
Speaker 1: In reality, they're not converting all this stuff to condos.

527
00:26:17,600 --> 00:26:18,840
Speaker 1: What do you think of? How is this going to

528
00:26:18,880 --> 00:26:19,439
Speaker 1: shake out?

529
00:26:19,840 --> 00:26:21,800
Speaker 10: Good morning, Thanks for having me on. Great to see

530
00:26:21,800 --> 00:26:24,679
Speaker 10: you again. It is going to be painful in the

531
00:26:24,720 --> 00:26:26,840
Speaker 10: next two to four years, there's no way around it.

532
00:26:27,359 --> 00:26:31,120
Speaker 10: But the bifurcation of what's happening with newer, high amenity

533
00:26:31,119 --> 00:26:35,040
Speaker 10: office space versus older, obsolete office space is the story

534
00:26:35,520 --> 00:26:38,919
Speaker 10: in that overall demand is shrunk. The pandemic has changed

535
00:26:39,000 --> 00:26:41,880
Speaker 10: societal patterns that are not going to come back anytime soon.

536
00:26:42,280 --> 00:26:44,359
Speaker 10: We're seeing improvement, by the way. We're up to about

537
00:26:44,400 --> 00:26:49,600
Speaker 10: forty eight fifty percent daily attendance, not vacancy rates, but

538
00:26:49,880 --> 00:26:54,400
Speaker 10: utilization rates of people in office spaces, which is amazing

539
00:26:55,160 --> 00:26:55,920
Speaker 10: to even.

540
00:26:55,720 --> 00:26:56,280
Speaker 6: Share with you.

541
00:26:56,359 --> 00:26:58,400
Speaker 10: And that we're at forty eight or fifty percent up

542
00:26:58,400 --> 00:27:01,040
Speaker 10: from ten or twenty percent right after the pandemic. It

543
00:27:01,119 --> 00:27:04,440
Speaker 10: is a profound reduction of office space demand, which means

544
00:27:04,560 --> 00:27:10,000
Speaker 10: quality buildings can be more popular, and older properties are

545
00:27:10,040 --> 00:27:13,880
Speaker 10: going to see that the vacancies go up significantly.

546
00:27:13,920 --> 00:27:16,159
Speaker 5: And we all know how bullish Paul Sweeny is about

547
00:27:16,200 --> 00:27:19,040
Speaker 5: in office. When it comes to our employees here at Bloomberg,

548
00:27:19,040 --> 00:27:21,119
Speaker 5: what do you think is the key catalyst that could

549
00:27:21,480 --> 00:27:22,679
Speaker 5: fix this situation?

550
00:27:23,320 --> 00:27:28,520
Speaker 10: Time when people realize that working in isolation one hundred

551
00:27:28,520 --> 00:27:30,640
Speaker 10: percent of the time for those that have been virtual

552
00:27:30,680 --> 00:27:33,840
Speaker 10: one hundred percent of the time, really affects your career,

553
00:27:34,200 --> 00:27:37,720
Speaker 10: affects your collaboration, affects your skill sets. That takes time

554
00:27:37,760 --> 00:27:40,639
Speaker 10: to play out, but we're seeing more and more people

555
00:27:40,680 --> 00:27:43,240
Speaker 10: want to come back, just not five days a week

556
00:27:43,480 --> 00:27:47,480
Speaker 10: full time. So amenities, ease of getting to work, different

557
00:27:47,480 --> 00:27:50,760
Speaker 10: ways to attract workers to want to be back together

558
00:27:51,240 --> 00:27:54,359
Speaker 10: are the key strategies we're hearing from our office clients

559
00:27:54,560 --> 00:27:58,000
Speaker 10: all over the country, and they're actively pursuing creative ways

560
00:27:58,040 --> 00:27:58,440
Speaker 10: to do that.

561
00:27:58,560 --> 00:28:01,920
Speaker 5: What about also so much discussion obviously about a recession,

562
00:28:01,960 --> 00:28:04,080
Speaker 5: but whether or not at a certain point the economy

563
00:28:04,119 --> 00:28:06,080
Speaker 5: would slow down in the next few years when that

564
00:28:06,080 --> 00:28:09,520
Speaker 5: could potentially happen, we don't know. But how much is

565
00:28:09,560 --> 00:28:12,600
Speaker 5: that the catalyst, because then you have more power when

566
00:28:12,640 --> 00:28:14,879
Speaker 5: it comes to the employer. And if you are the

567
00:28:14,920 --> 00:28:17,639
Speaker 5: employee and you're looking for a job, does that switch

568
00:28:17,680 --> 00:28:18,680
Speaker 5: the dynamic.

569
00:28:18,240 --> 00:28:22,959
Speaker 10: Absolutely, because we've had no leverage as employers to mandate anything.

570
00:28:23,400 --> 00:28:25,840
Speaker 10: You have to adapt to what the workforce wants in

571
00:28:25,880 --> 00:28:29,040
Speaker 10: a three point seven percent on employment environment. If that shifts,

572
00:28:29,080 --> 00:28:31,359
Speaker 10: of course the dynamics will shift as well. But the

573
00:28:31,400 --> 00:28:34,080
Speaker 10: one thing I really want to highlight is that there's

574
00:28:34,119 --> 00:28:37,560
Speaker 10: so much coverage of this stressed office space putting more

575
00:28:37,600 --> 00:28:39,760
Speaker 10: stress on the banking system, and a lot of headlines

576
00:28:39,800 --> 00:28:43,000
Speaker 10: around that, and I wanted to really share with you

577
00:28:43,200 --> 00:28:46,680
Speaker 10: and your audience that twenty four percent of total bank

578
00:28:46,840 --> 00:28:50,680
Speaker 10: outstanding loans are in commercial real estate and fifteen percent

579
00:28:50,680 --> 00:28:53,959
Speaker 10: of that is in office and a very large portion

580
00:28:54,040 --> 00:28:58,320
Speaker 10: of that office loan portfolio is performing just fine. So

581
00:28:58,920 --> 00:29:01,840
Speaker 10: do we have stress in the system. Absolutely. Is it

582
00:29:01,880 --> 00:29:05,560
Speaker 10: going to get worse as Lisa's rollover for office, Absolutely,

583
00:29:06,160 --> 00:29:09,640
Speaker 10: But is it a threat to the entire banking system?

584
00:29:09,760 --> 00:29:10,440
Speaker 10: The answer is no.

585
00:29:11,240 --> 00:29:13,840
Speaker 1: How About you know, if I want to go build

586
00:29:13,840 --> 00:29:17,000
Speaker 1: a building somewhere in one of the growth markets, my

587
00:29:17,160 --> 00:29:19,600
Speaker 1: cost to capital is much higher. Can I even get

588
00:29:19,640 --> 00:29:21,480
Speaker 1: a loan for commercial real estate? These days. If I

589
00:29:21,520 --> 00:29:23,240
Speaker 1: want to go build an office building.

590
00:29:23,440 --> 00:29:27,040
Speaker 10: The answer is yes, but you're going to pay a

591
00:29:27,280 --> 00:29:29,160
Speaker 10: very high price for that debt. It's going to be

592
00:29:29,200 --> 00:29:32,600
Speaker 10: underwritten so carefully, and as a sponsor a developer you

593
00:29:32,680 --> 00:29:35,160
Speaker 10: have to have an amazing track record and an equity partner.

594
00:29:36,120 --> 00:29:39,600
Speaker 10: It's happening very rarely right now. Part of what happens

595
00:29:39,600 --> 00:29:41,280
Speaker 10: in a cycle like this is you get a big

596
00:29:41,320 --> 00:29:44,920
Speaker 10: pullback in new supply. And thankfully office hasn't had much

597
00:29:44,960 --> 00:29:47,880
Speaker 10: new supply in the last ten years. Otherwise this problem

598
00:29:47,920 --> 00:29:50,800
Speaker 10: would be much bigger. But the construction loans are very

599
00:29:50,800 --> 00:29:54,960
Speaker 10: difficult to get. Land is expensive and materials and laborer

600
00:29:55,080 --> 00:29:59,400
Speaker 10: is also another reason, another deterrent to new supply. The

601
00:29:59,440 --> 00:30:02,080
Speaker 10: other thing to is the other segments of commercial real

602
00:30:02,160 --> 00:30:07,400
Speaker 10: estate outside of office apartments, even shopping centers, self storage units,

603
00:30:07,400 --> 00:30:11,680
Speaker 10: hotels that are performing extremely well because they are aligned

604
00:30:11,680 --> 00:30:14,480
Speaker 10: with a strong economy. We've had great job growth, very

605
00:30:14,480 --> 00:30:17,480
Speaker 10: low unemployment. That is reflected in demand for all kinds

606
00:30:17,520 --> 00:30:20,160
Speaker 10: of commercial real estate space outside of.

607
00:30:20,080 --> 00:30:23,360
Speaker 5: Office And how does that compare when you're talking about

608
00:30:23,400 --> 00:30:26,400
Speaker 5: the portion of loan portfolios. If you are looking at say,

609
00:30:26,440 --> 00:30:30,520
Speaker 5: retail apartments versus office can that offset what we see

610
00:30:30,520 --> 00:30:32,440
Speaker 5: with the issues when it comes to the office space.

611
00:30:33,320 --> 00:30:37,320
Speaker 10: You know, I really believe that the heavily tilted loan

612
00:30:37,400 --> 00:30:42,320
Speaker 10: portfolios toward multifamily apartments. You know, they have occupancy of

613
00:30:42,360 --> 00:30:44,880
Speaker 10: around ninety five percent, and even though rent growth has

614
00:30:44,960 --> 00:30:48,440
Speaker 10: really slowed after three years of very robust above average

615
00:30:48,480 --> 00:30:51,400
Speaker 10: rent growth, apartments are doing great and those loans are

616
00:30:51,400 --> 00:30:54,400
Speaker 10: performing just fine. We have a disconnect on the valuation

617
00:30:54,720 --> 00:30:59,160
Speaker 10: of apartments. Therefore, sales activity, trading activities way down because

618
00:30:59,200 --> 00:31:02,440
Speaker 10: interest rates shot up and the lowest cap rate, lowest

619
00:31:02,520 --> 00:31:05,320
Speaker 10: yield product type in the industry, so there's a big

620
00:31:05,360 --> 00:31:08,080
Speaker 10: disconnect between buyers and sellers. The trading is way down,

621
00:31:08,240 --> 00:31:11,480
Speaker 10: but the loan performance is just fine because the occupancies

622
00:31:11,480 --> 00:31:14,720
Speaker 10: are high and apartments make up the bulk of outstanding loans.

623
00:31:14,800 --> 00:31:18,720
Speaker 1: So if I'm a building owner and I got to

624
00:31:18,720 --> 00:31:22,400
Speaker 1: refinance my debt, wow, that's a tough nut. I mean,

625
00:31:22,560 --> 00:31:24,080
Speaker 1: what's happening in that market.

626
00:31:24,560 --> 00:31:27,600
Speaker 10: If your property is in distress, chances are the lender

627
00:31:27,640 --> 00:31:31,000
Speaker 10: will work with you, because the FAD and the Treasury

628
00:31:31,080 --> 00:31:33,280
Speaker 10: have gone to the banks, have said work with your

629
00:31:33,320 --> 00:31:39,000
Speaker 10: distressed borrowers. That's been the message to avoid a fire sale. Nonetheless,

630
00:31:39,080 --> 00:31:41,880
Speaker 10: you're seeing some distress sales come out of loan portfolios.

631
00:31:41,920 --> 00:31:45,280
Speaker 10: There's no question about it. If you're performing well, if

632
00:31:45,320 --> 00:31:47,920
Speaker 10: your asset is performing well and occupancies are good, rent

633
00:31:47,960 --> 00:31:50,920
Speaker 10: collections are good, there is financing available. But it means

634
00:31:50,960 --> 00:31:53,239
Speaker 10: you have to come up with more equity if you're

635
00:31:53,360 --> 00:31:55,959
Speaker 10: upside down in the valuation and the loan to value

636
00:31:56,040 --> 00:31:59,160
Speaker 10: ratios depending on when you finance the deal. I remember

637
00:31:59,600 --> 00:32:02,840
Speaker 10: most commercial real estate loans are five to seven years

638
00:32:02,880 --> 00:32:05,760
Speaker 10: in term, so five to seven years ago prices were

639
00:32:05,800 --> 00:32:09,120
Speaker 10: a lot lower and occupantcies and rents were a lot lower.

640
00:32:09,160 --> 00:32:11,800
Speaker 10: So there is should be plenty of margin even with

641
00:32:11,880 --> 00:32:12,360
Speaker 10: the who.

642
00:32:12,320 --> 00:32:14,280
Speaker 1: Provides the equity? Who would I go to for equity?

643
00:32:14,400 --> 00:32:16,360
Speaker 1: Is there is there private equity out there for just

644
00:32:16,440 --> 00:32:19,160
Speaker 1: real estate? And I guess the question is are they willing?

645
00:32:19,200 --> 00:32:20,440
Speaker 1: I know some of these people now now that I

646
00:32:20,680 --> 00:32:24,360
Speaker 1: think about it, and they do quite well, will they

647
00:32:24,480 --> 00:32:26,160
Speaker 1: make that equity investment today?

648
00:32:26,360 --> 00:32:29,400
Speaker 10: Absolutely, there's plenty of capital, and one thing we're not

649
00:32:29,720 --> 00:32:32,840
Speaker 10: seeing a shortage of is capital ready to pounce. And

650
00:32:32,880 --> 00:32:35,120
Speaker 10: when we see prices that have adjusted from the peak

651
00:32:35,320 --> 00:32:38,000
Speaker 10: to the tune of ten to twenty five percent. There's

652
00:32:38,080 --> 00:32:41,360
Speaker 10: multiple offers on properties even with the credit crunch.

653
00:32:41,080 --> 00:32:43,480
Speaker 1: Network questions like I'd want to see it like in

654
00:32:43,520 --> 00:32:46,960
Speaker 1: New York and in San Francisco's I haven't seen anything trade.

655
00:32:47,160 --> 00:32:49,600
Speaker 1: I think if you see a marqueability to rade in Manhattan,

656
00:32:49,800 --> 00:32:52,160
Speaker 1: is it going to be down ten percent, thirty percent,

657
00:32:52,400 --> 00:32:54,760
Speaker 1: fifty percent? I think those are the numbers we're going

658
00:32:54,800 --> 00:32:56,760
Speaker 1: to be seeing and we haven't seen that. That's going

659
00:32:56,800 --> 00:32:57,800
Speaker 1: to shock the market, won't it.

660
00:32:57,800 --> 00:33:00,160
Speaker 10: If it's an older office building, it's colosial of the

661
00:33:00,200 --> 00:33:02,920
Speaker 10: fifty percent you're talking about. If it's a newer asset

662
00:33:02,960 --> 00:33:05,200
Speaker 10: with good amenities and great occupancies, it's going to be

663
00:33:05,200 --> 00:33:06,720
Speaker 10: closer to the ten percent you're talking about.

664
00:33:07,120 --> 00:33:09,680
Speaker 5: What's the top question you hear from your shareholders?

665
00:33:10,560 --> 00:33:14,120
Speaker 10: How long will it take for this market correction to reverse?

666
00:33:14,400 --> 00:33:17,560
Speaker 10: And what's the outlook for trading activity? Because our business

667
00:33:17,600 --> 00:33:20,920
Speaker 10: as a leading broker of investment properties and financing of

668
00:33:21,560 --> 00:33:24,640
Speaker 10: commercial real estate in the country North America, I should say,

669
00:33:24,680 --> 00:33:30,240
Speaker 10: including Canada, is all dependent on trading activity, and trading

670
00:33:30,240 --> 00:33:33,640
Speaker 10: activities down somewhere between fifty to sixty percent market wide

671
00:33:34,240 --> 00:33:38,920
Speaker 10: because of the buyers seller price disconnect and very tough

672
00:33:39,320 --> 00:33:43,200
Speaker 10: financing environment, and we think that once the FED is done,

673
00:33:43,400 --> 00:33:45,880
Speaker 10: which may be a little bit down the road, we

674
00:33:45,880 --> 00:33:49,120
Speaker 10: were hoping that by now the FED would really declare

675
00:33:49,440 --> 00:33:51,920
Speaker 10: mission accomplished. On inflation, I think we still have a

676
00:33:51,920 --> 00:33:55,200
Speaker 10: little ways to go, but not far because inflation numbers

677
00:33:55,200 --> 00:33:58,120
Speaker 10: still don't reflect the drop in housing the covalent of

678
00:33:58,160 --> 00:34:01,320
Speaker 10: housing costs because they lag by about a year. So

679
00:34:01,440 --> 00:34:04,520
Speaker 10: when the current leases roll over and the index for

680
00:34:04,600 --> 00:34:08,160
Speaker 10: inflation shows the drop in housing costs, I think inflation

681
00:34:08,239 --> 00:34:10,359
Speaker 10: is going to go down quicker. So I think we're

682
00:34:10,520 --> 00:34:14,120
Speaker 10: very close to that end. And the ending of the

683
00:34:14,160 --> 00:34:17,120
Speaker 10: tightening cycle itself will bring a lot of stability for

684
00:34:17,280 --> 00:34:21,600
Speaker 10: both lenders on setting price and buyers which are going

685
00:34:21,680 --> 00:34:24,960
Speaker 10: to be borrowers essentially. And then put a little time

686
00:34:25,000 --> 00:34:27,720
Speaker 10: on top of that with prices adjusting, sellers are usually

687
00:34:28,360 --> 00:34:31,600
Speaker 10: behind the market by a year and being realistic about

688
00:34:31,719 --> 00:34:34,759
Speaker 10: what price and asset will trade at because they're hoping

689
00:34:34,800 --> 00:34:37,919
Speaker 10: for last year's pricing. When the market is corrected, both

690
00:34:37,960 --> 00:34:40,000
Speaker 10: of those are starting to come together, but we're not

691
00:34:40,040 --> 00:34:40,719
Speaker 10: quite there yet.

692
00:34:40,800 --> 00:34:43,480
Speaker 1: All right, Naji, thanks so much for joining us. Really

693
00:34:43,520 --> 00:34:46,280
Speaker 1: appreciate it. Hasam Naji, he is the president and CEO

694
00:34:46,280 --> 00:34:51,440
Speaker 1: of Marcus and Millichap New York Stock Exchange traded COMPANYMI

695
00:34:51,640 --> 00:34:53,720
Speaker 1: is the ticker at one point three billion of market

696
00:34:53,760 --> 00:34:57,000
Speaker 1: cap out there. So looking at the national brokerage commercial

697
00:34:57,000 --> 00:35:00,480
Speaker 1: real estate, interesting time for that market in some of

698
00:35:00,480 --> 00:35:02,440
Speaker 1: the larger markets. Again, I want to see some marquee

699
00:35:02,440 --> 00:35:04,879
Speaker 1: properties trade in New York and see where that goes. Guys,

700
00:35:04,960 --> 00:35:07,680
Speaker 1: just saw Billy Rudon on the Death Start earlier this

701
00:35:07,719 --> 00:35:10,920
Speaker 1: morning talking about the will State market. That family is

702
00:35:11,000 --> 00:35:14,160
Speaker 1: long NYCE real estate, so see how some of that

703
00:35:14,200 --> 00:35:14,680
Speaker 1: plays out.

704
00:35:14,920 --> 00:35:16,200
Speaker 6: You're listening to the tape.

705
00:35:16,320 --> 00:35:19,680
Speaker 7: Cat's are live program Bloomberg Markets weekdays at ten am

706
00:35:19,719 --> 00:35:23,719
Speaker 7: Eastern on Bloomberg Radio, the tune in app, Bloomberg dot Com, and.

707
00:35:23,680 --> 00:35:25,000
Speaker 6: The Bloomberg Business App.

708
00:35:25,040 --> 00:35:27,839
Speaker 7: You can also listen live on Amazon Alexa from our

709
00:35:27,880 --> 00:35:32,920
Speaker 7: flagship New York station, Just say Alexa play Bloomberg eleven thirty.

710
00:35:33,880 --> 00:35:36,280
Speaker 1: Right now, we're talking about Walmart, and that is also

711
00:35:36,320 --> 00:35:39,560
Speaker 1: another great read on the consumer. Their numbers I thought

712
00:35:39,600 --> 00:35:41,880
Speaker 1: came in pretty well. Stock's kind of trading sideways.

713
00:35:42,000 --> 00:35:43,520
Speaker 5: He's its annual profit forecast.

714
00:35:43,640 --> 00:35:45,360
Speaker 1: I mean, I mean people are shopping at Walmart and

715
00:35:45,440 --> 00:35:47,520
Speaker 1: you can't I mean talk about a staple. I mean,

716
00:35:47,560 --> 00:35:50,760
Speaker 1: they're just you can't avoid Walmart at all. Jen Bartash

717
00:35:50,920 --> 00:35:54,080
Speaker 1: is she covers Walmart. She's a senior industry an also

718
00:35:54,120 --> 00:35:58,480
Speaker 1: Bloomberg Intelligence. Jen, what was a key takeaway from the

719
00:35:58,600 --> 00:36:00,640
Speaker 1: results from our good friends from Bettonville.

720
00:36:01,520 --> 00:36:05,520
Speaker 11: Well, it really when we look at Walmart, obviously they're

721
00:36:05,760 --> 00:36:08,680
Speaker 11: on a roll and they're continuing to draw consumers in.

722
00:36:09,320 --> 00:36:11,719
Speaker 11: The messaging that we heard is that consumers continue to

723
00:36:11,719 --> 00:36:14,399
Speaker 11: be a little bit conservative, but they're being selective about

724
00:36:14,400 --> 00:36:17,560
Speaker 11: where they're shopping, and so they're saving on essentials, they're

725
00:36:17,600 --> 00:36:20,560
Speaker 11: splurging a little bit in other areas. But Walmart has

726
00:36:20,600 --> 00:36:24,000
Speaker 11: really positioned itself well to serve any any customer that's

727
00:36:24,040 --> 00:36:26,680
Speaker 11: coming through its stores with how they're offering value to

728
00:36:26,719 --> 00:36:27,200
Speaker 11: those people.

729
00:36:27,239 --> 00:36:29,120
Speaker 1: All Right, Jen, you taught me or you let me

730
00:36:29,160 --> 00:36:30,799
Speaker 1: know a couple of years ago that the number one

731
00:36:31,040 --> 00:36:35,520
Speaker 1: grocery chain in the US is Walmart. I was shocked

732
00:36:35,520 --> 00:36:37,920
Speaker 1: to learn that. Didn't even think about it. So if

733
00:36:37,960 --> 00:36:40,480
Speaker 1: I go in to do my weekly shopping, do I

734
00:36:40,520 --> 00:36:42,440
Speaker 1: then move over to the aisle and go buy some

735
00:36:42,520 --> 00:36:44,680
Speaker 1: clothes and stuff like that? Does that really happen?

736
00:36:45,520 --> 00:36:48,640
Speaker 11: It actually really does, because part of what they're doing

737
00:36:48,760 --> 00:36:51,080
Speaker 11: is they bring you into the store with compelling prices.

738
00:36:51,280 --> 00:36:53,600
Speaker 11: People are going into shop for groceries and then on

739
00:36:53,640 --> 00:36:55,640
Speaker 11: their way to the checkout, they see a T shirt

740
00:36:55,680 --> 00:36:58,359
Speaker 11: that's maybe five dollars and they think, oh, well, there's

741
00:36:59,040 --> 00:37:02,160
Speaker 11: some value, and that it gets added into their cart,

742
00:37:02,440 --> 00:37:04,600
Speaker 11: Or as they're looking to prepare meals, they're adding small

743
00:37:04,680 --> 00:37:07,200
Speaker 11: kitchen appliances to help with the preparation of those meals,

744
00:37:07,840 --> 00:37:11,000
Speaker 11: and so that cross shopping into general merchandise is happening.

745
00:37:11,320 --> 00:37:13,840
Speaker 11: And one of the things that Walmart called out is

746
00:37:13,840 --> 00:37:16,480
Speaker 11: that even though general merchandise sales are still lower than

747
00:37:16,560 --> 00:37:20,719
Speaker 11: last year, they're sequentially improved meaningfully from first quarter, and

748
00:37:20,760 --> 00:37:24,560
Speaker 11: so that increase in momentum is actually really important as

749
00:37:24,560 --> 00:37:26,279
Speaker 11: we get into back to school when people will be

750
00:37:26,320 --> 00:37:28,960
Speaker 11: looking for clothing and backpacks and shoes and things for

751
00:37:29,040 --> 00:37:32,040
Speaker 11: like that for their kids. So all signs point to

752
00:37:32,160 --> 00:37:34,240
Speaker 11: a pretty good back to school season for Walmart.

753
00:37:34,480 --> 00:37:36,719
Speaker 5: Walmart is in the staples sector in the S and

754
00:37:36,760 --> 00:37:40,080
Speaker 5: P five hundred because that huge percentage of grocery sales,

755
00:37:40,120 --> 00:37:43,200
Speaker 5: but so is Target. Target had been in a discretionary

756
00:37:43,239 --> 00:37:46,240
Speaker 5: sector earlier in the spring, it did get moved into

757
00:37:46,280 --> 00:37:49,680
Speaker 5: Staples because of its percentage with groceries. But Target has

758
00:37:49,719 --> 00:37:52,239
Speaker 5: a bit of a different story. It's still cut its forecast,

759
00:37:52,440 --> 00:37:55,440
Speaker 5: even though we saw improvements when it came to the inventories.

760
00:37:55,440 --> 00:37:58,080
Speaker 5: What is it about Walmart? What is it doing differently

761
00:37:58,120 --> 00:38:01,399
Speaker 5: that some of its counterparts aren't doing well?

762
00:38:01,440 --> 00:38:03,880
Speaker 11: I think the first thing is to just acknowledge the

763
00:38:03,880 --> 00:38:07,279
Speaker 11: fact that Walmart's grocery offering is comprehensive. You can buy

764
00:38:07,400 --> 00:38:10,560
Speaker 11: everything you need for a grocery shop at Walmart. That's

765
00:38:10,560 --> 00:38:13,440
Speaker 11: a little bit different than at Target. Target's food strategy

766
00:38:13,480 --> 00:38:16,480
Speaker 11: has been a little bit more targeted and that they

767
00:38:16,480 --> 00:38:19,879
Speaker 11: were looking specifically for products that may have some sort

768
00:38:19,880 --> 00:38:23,960
Speaker 11: of unique appeal or attribute. So Target never wanted to

769
00:38:24,000 --> 00:38:25,960
Speaker 11: positions itself as a place where you would go and

770
00:38:26,000 --> 00:38:27,920
Speaker 11: do all of your grocery shopping. It was more of

771
00:38:27,960 --> 00:38:30,799
Speaker 11: a place of look at these interesting things for discovery

772
00:38:30,840 --> 00:38:34,239
Speaker 11: that are in the food area, some essentials that you need.

773
00:38:35,120 --> 00:38:38,960
Speaker 11: But that difference in strategy is really showing now with

774
00:38:39,080 --> 00:38:42,320
Speaker 11: the current economic backdrop and the way Walmart is acquiring

775
00:38:42,480 --> 00:38:45,040
Speaker 11: more and more of the food shopping that's out there.

776
00:38:45,600 --> 00:38:49,280
Speaker 1: Hey, Jen, what is Walmart Plus and how do Walmart

777
00:38:49,280 --> 00:38:51,320
Speaker 1: Plus members how do they shop?

778
00:38:52,280 --> 00:38:56,040
Speaker 11: So Walmart Plus is Walmart's subscription service and it's similar

779
00:38:56,080 --> 00:38:59,280
Speaker 11: to Amazon Prime for people who know that, and Walmart

780
00:38:59,280 --> 00:39:02,040
Speaker 11: pruss Is Plus is ninety eight dollars a year. It

781
00:39:02,120 --> 00:39:05,120
Speaker 11: offers you free shipping without any order minimum for things

782
00:39:05,160 --> 00:39:07,719
Speaker 11: shipped to your house. But it also gives you free

783
00:39:07,880 --> 00:39:11,160
Speaker 11: same day delivery to your home from Walmart stores. And

784
00:39:11,239 --> 00:39:15,279
Speaker 11: because Walmart is so big in the grocery business, membership

785
00:39:15,320 --> 00:39:18,120
Speaker 11: has really been growing. It's been increasing, and in fact,

786
00:39:18,200 --> 00:39:21,920
Speaker 11: we actually think that is a much underappreciated aspect of

787
00:39:21,920 --> 00:39:24,680
Speaker 11: Walmart's business that's going to really drive sales and profit

788
00:39:24,719 --> 00:39:26,320
Speaker 11: growth over the next five years.

789
00:39:26,600 --> 00:39:28,640
Speaker 5: We still have a lot of economists that are warning

790
00:39:28,719 --> 00:39:31,800
Speaker 5: about the trajectory of the economy. When you look at

791
00:39:31,840 --> 00:39:35,320
Speaker 5: Walmart's results, though it's saying very much of a different story.

792
00:39:35,560 --> 00:39:38,440
Speaker 5: What's your view of where the economy is headed When

793
00:39:38,520 --> 00:39:42,560
Speaker 5: you have the world's biggest retailers signaling still some strength there.

794
00:39:43,800 --> 00:39:46,640
Speaker 11: Well, you know, when we're looking at the economy in general,

795
00:39:47,000 --> 00:39:50,040
Speaker 11: consumers are still under pressure. I think the advantage that

796
00:39:50,080 --> 00:39:53,480
Speaker 11: Walmart has is that we are in a spot where

797
00:39:53,480 --> 00:39:57,000
Speaker 11: we're seeing, for example, inflation on food come down it's

798
00:39:57,040 --> 00:39:59,840
Speaker 11: still high compared to two years ago, but it is

799
00:40:00,000 --> 00:40:03,360
Speaker 11: starting to come down, and as inflation comes down, Walmart

800
00:40:03,440 --> 00:40:07,280
Speaker 11: is able to very quickly work with their suppliers lower

801
00:40:07,320 --> 00:40:10,400
Speaker 11: their prices and pass it on to customers. And so

802
00:40:11,080 --> 00:40:15,040
Speaker 11: that is the backdrop is still quite conservative, and there

803
00:40:15,040 --> 00:40:16,920
Speaker 11: are still a lot of consumers out there who have

804
00:40:17,440 --> 00:40:19,760
Speaker 11: a lot of have to be careful with their budgets

805
00:40:19,840 --> 00:40:23,400
Speaker 11: or being very selective on where they're spending. But Walmart's

806
00:40:23,400 --> 00:40:26,000
Speaker 11: size and scale does position it well to take advantage

807
00:40:26,040 --> 00:40:30,080
Speaker 11: of tempting them with even better deals as inflation starts

808
00:40:30,120 --> 00:40:32,359
Speaker 11: to come down and people feel like they can spend

809
00:40:32,400 --> 00:40:33,120
Speaker 11: a little bit more.

810
00:40:33,640 --> 00:40:37,719
Speaker 1: Jen does Walmart open new superstores in America anymore? Are

811
00:40:37,760 --> 00:40:41,160
Speaker 1: they pretty much everywhere where they want to be.

812
00:40:40,920 --> 00:40:44,640
Speaker 11: It's pretty rare. They have slowed their new store growth

813
00:40:44,719 --> 00:40:47,640
Speaker 11: where it's they're only a handful of year. A handful

814
00:40:47,680 --> 00:40:51,439
Speaker 11: of year. Sometimes they're replacing old stores or relocating them,

815
00:40:51,960 --> 00:40:55,000
Speaker 11: and then they are very targeted new openings that are happening.

816
00:40:55,239 --> 00:40:57,160
Speaker 11: But the majority of their new store growth is happening

817
00:40:57,200 --> 00:41:01,280
Speaker 11: in the international markets. For example, in Mexico, they're adding

818
00:41:01,560 --> 00:41:03,759
Speaker 11: many new stores every year because they're still in a

819
00:41:03,760 --> 00:41:06,839
Speaker 11: growth phase. They're adding new stores in China and in

820
00:41:06,880 --> 00:41:10,360
Speaker 11: other international markets, and so there is still kepex for

821
00:41:10,520 --> 00:41:12,600
Speaker 11: new store development, but it tends to be outside the

822
00:41:12,680 --> 00:41:13,360
Speaker 11: United States.

823
00:41:13,480 --> 00:41:16,000
Speaker 5: When it comes to back to school shopping, which is

824
00:41:16,040 --> 00:41:18,319
Speaker 5: the key driver in the current quarter, How do you

825
00:41:18,440 --> 00:41:20,400
Speaker 5: view that as far as what that could mean for

826
00:41:20,440 --> 00:41:22,000
Speaker 5: Walmart and other retailers.

827
00:41:23,280 --> 00:41:25,879
Speaker 11: Well, in terms of back to school, Walmart actually said

828
00:41:25,920 --> 00:41:28,120
Speaker 11: that so far they're off to a good start, which

829
00:41:28,160 --> 00:41:30,200
Speaker 11: is a little bit different than the sound we heard

830
00:41:30,200 --> 00:41:33,680
Speaker 11: from Target, which was much more cautious, saying there were

831
00:41:33,680 --> 00:41:36,200
Speaker 11: only a couple of days into the season and that

832
00:41:36,239 --> 00:41:39,280
Speaker 11: they didn't have a good read on it yet. For Walmart,

833
00:41:39,840 --> 00:41:42,120
Speaker 11: one of their strategies they've done in the past year,

834
00:41:42,160 --> 00:41:46,600
Speaker 11: as inflation has been really high, is they've targeted bundles

835
00:41:46,600 --> 00:41:49,360
Speaker 11: of things and kept them at prices that were the

836
00:41:49,360 --> 00:41:51,880
Speaker 11: same as last year. They did that at Thanksgiving for

837
00:41:52,120 --> 00:41:54,719
Speaker 11: Thanksgiving dinner. They're doing that for back to school. So

838
00:41:54,760 --> 00:41:57,160
Speaker 11: they have a basket of thirteen or fourteen most common

839
00:41:57,200 --> 00:42:00,760
Speaker 11: school items, whether it's crayons or colored pencils, and offering

840
00:42:00,760 --> 00:42:03,320
Speaker 11: them at the same price as last year as a bundle.

841
00:42:04,040 --> 00:42:07,200
Speaker 11: And that can be very appealing to consumers. So they've

842
00:42:07,480 --> 00:42:11,879
Speaker 11: very clearly been thoughtful in their approach on how they're

843
00:42:12,040 --> 00:42:14,560
Speaker 11: going to handle back to school and make sure that

844
00:42:14,600 --> 00:42:17,040
Speaker 11: they are attracting customers to what they have to offer.

845
00:42:17,200 --> 00:42:18,759
Speaker 5: I know we might be a little bit ahead of this,

846
00:42:18,880 --> 00:42:22,279
Speaker 5: but any sort of early indications about the holidays.

847
00:42:24,520 --> 00:42:27,280
Speaker 11: Well, you know, historically the rule of thumb in retail

848
00:42:27,440 --> 00:42:30,040
Speaker 11: is that if back to school is strong, holiday tends

849
00:42:30,080 --> 00:42:32,720
Speaker 11: to be strong as well. You know, back to school

850
00:42:32,800 --> 00:42:36,440
Speaker 11: is a very reliable precursor to how the holiday season

851
00:42:36,480 --> 00:42:39,319
Speaker 11: is going. So by the time we get through this

852
00:42:39,400 --> 00:42:41,319
Speaker 11: current quarter and we have an idea of the third

853
00:42:41,400 --> 00:42:43,759
Speaker 11: quarter results, we will have a very good read into

854
00:42:44,200 --> 00:42:46,080
Speaker 11: how we think the holiday season will play out.

855
00:42:46,800 --> 00:42:52,080
Speaker 1: Walmart stock at a all time high here today, and

856
00:42:52,080 --> 00:42:55,359
Speaker 1: they went public back in nineteen seventy, stock at an

857
00:42:55,360 --> 00:42:58,440
Speaker 1: all time high. Stevens and Company took them public and

858
00:42:58,440 --> 00:43:00,680
Speaker 1: Steven's in company good, little invest some bank and little

859
00:43:00,719 --> 00:43:03,480
Speaker 1: Rock really good. Uh, they're still in business, Jen, is

860
00:43:03,480 --> 00:43:06,839
Speaker 1: there any what's the what's the risk to Walmart? What's

861
00:43:06,880 --> 00:43:09,360
Speaker 1: the risk of owning Walmart? Worst case it's a GDP

862
00:43:09,600 --> 00:43:10,840
Speaker 1: road story.

863
00:43:11,440 --> 00:43:15,160
Speaker 11: Well, I mean I think the risk is, you know, potentially.

864
00:43:16,320 --> 00:43:19,160
Speaker 11: You know, the the current management team has done a

865
00:43:19,160 --> 00:43:21,880
Speaker 11: great job in shifting the entire culture of the company,

866
00:43:22,520 --> 00:43:24,799
Speaker 11: but there are you know, we've we saw earlier this

867
00:43:24,840 --> 00:43:28,239
Speaker 11: week some some announcements of some management changes, especially at

868
00:43:28,239 --> 00:43:31,440
Speaker 11: the heads of the different businesses. You know, Doug McMillan

869
00:43:31,600 --> 00:43:34,080
Speaker 11: appears to be ready to stay for a couple more years,

870
00:43:34,120 --> 00:43:36,919
Speaker 11: but you know, when that changes, there's always the risk

871
00:43:37,000 --> 00:43:39,600
Speaker 11: that the company culture that he's worked so hard to

872
00:43:39,640 --> 00:43:42,960
Speaker 11: instill will change, So that you know that that there

873
00:43:43,040 --> 00:43:45,840
Speaker 11: is a risk. And then just because you're the biggest

874
00:43:45,840 --> 00:43:48,200
Speaker 11: person in the room, there are always people coming, you know,

875
00:43:48,640 --> 00:43:52,200
Speaker 11: who have you in their sights, and so complacency, you know,

876
00:43:52,280 --> 00:43:54,799
Speaker 11: is the is the other real risk for Walmart and

877
00:43:54,880 --> 00:43:57,719
Speaker 11: reality to make sure that they're continuing to execute on

878
00:43:57,760 --> 00:43:59,120
Speaker 11: all these different yea, not buying.

879
00:43:59,600 --> 00:44:04,120
Speaker 1: I mean Amazon came in. Amazon came in, and here's

880
00:44:04,280 --> 00:44:06,959
Speaker 1: Walmart still hitting all time highs. I mean, if they've

881
00:44:06,960 --> 00:44:10,520
Speaker 1: shown they can compete against Amazon and that amazing business.

882
00:44:10,160 --> 00:44:11,040
Speaker 5: Model so true.

883
00:44:11,080 --> 00:44:13,239
Speaker 1: I mean you got to take your hat off. And

884
00:44:13,280 --> 00:44:15,799
Speaker 1: that's why if you look at rich Go, there are

885
00:44:15,840 --> 00:44:18,520
Speaker 1: Walton's all over the rich Go, which is the world's

886
00:44:18,600 --> 00:44:22,040
Speaker 1: richest people, so they're doing something right, as is Jen Bartash's.

887
00:44:22,760 --> 00:44:26,319
Speaker 1: Jen Bartasha's senior industry analyst Bloomberg Intelligence, one of our

888
00:44:26,360 --> 00:44:29,279
Speaker 1: absolute best analysts. We appreciate getting a few minutes of

889
00:44:29,320 --> 00:44:29,880
Speaker 1: her time.

890
00:44:30,360 --> 00:44:33,480
Speaker 7: You're listening to the tape Cat's are live program Bloomberg

891
00:44:33,520 --> 00:44:37,120
Speaker 7: Markets weekdays at ten am Eastern on Bloomberg Radio, the

892
00:44:37,200 --> 00:44:39,279
Speaker 7: tune in app, Bloomberg dot Com.

893
00:44:38,960 --> 00:44:40,399
Speaker 6: And the Bloomberg Business App.

894
00:44:40,440 --> 00:44:43,279
Speaker 7: You can also listen live on Amazon Alexa from our

895
00:44:43,280 --> 00:44:49,280
Speaker 7: flagship New York station Just Say Alexa playing Bloomberg eleven thirty.

896
00:44:49,040 --> 00:44:52,080
Speaker 1: Again probably one of the bigger news coming out over

897
00:44:52,120 --> 00:44:55,239
Speaker 1: the last several weeks. It's just been this seemingly kind

898
00:44:55,239 --> 00:44:59,640
Speaker 1: of never ending or continuous flow of negative economic data

899
00:44:59,680 --> 00:45:02,399
Speaker 1: coming out of China. Obviously not good for them, because

900
00:45:02,440 --> 00:45:04,640
Speaker 1: remember we started the year and this was going to

901
00:45:04,680 --> 00:45:07,600
Speaker 1: be a good year for China. Reopening was kind of

902
00:45:07,640 --> 00:45:09,600
Speaker 1: the theme, and how how do you play that and

903
00:45:09,640 --> 00:45:11,719
Speaker 1: what would it and we're just not seeing.

904
00:45:11,520 --> 00:45:13,520
Speaker 12: Anyth Yeah, and then there was the downgrade in terms

905
00:45:13,520 --> 00:45:16,759
Speaker 12: of the expectations for GDP growth and then you know,

906
00:45:16,840 --> 00:45:20,680
Speaker 12: oh wait, the property crisis is still escalating or it's

907
00:45:20,719 --> 00:45:23,480
Speaker 12: still very much alive and then you know all this tension,

908
00:45:23,520 --> 00:45:24,680
Speaker 12: geopolitical tensions.

909
00:45:24,840 --> 00:45:25,080
Speaker 6: Yep.

910
00:45:25,200 --> 00:45:26,239
Speaker 12: But we're going to sort this out right.

911
00:45:26,480 --> 00:45:28,959
Speaker 1: We're going to work this out right now with Jennifer Welt.

912
00:45:29,040 --> 00:45:33,160
Speaker 1: She's a chief geoeconomist for Bloomberg Economics. She joined us

913
00:45:33,200 --> 00:45:35,960
Speaker 1: from Washington, d C. First, Jennifer, thanks for joining us.

914
00:45:36,200 --> 00:45:38,600
Speaker 1: Please tell me what a geo economist is. That's a

915
00:45:38,600 --> 00:45:39,200
Speaker 1: new term for me.

916
00:45:40,520 --> 00:45:43,239
Speaker 13: Thanks so much for having me. Yeah, it's a term

917
00:45:43,280 --> 00:45:46,120
Speaker 13: we're still defining. But essentially, we look at the intersection

918
00:45:46,280 --> 00:45:50,719
Speaker 13: of geopolitics and economics, so, for example, geopolitical developments of

919
00:45:50,840 --> 00:45:54,640
Speaker 13: economic impacts, and the use of economic tools to achieve

920
00:45:54,680 --> 00:45:55,760
Speaker 13: geopolitical ends.

921
00:45:56,400 --> 00:45:58,919
Speaker 1: Dave de Wire thought of that. It seems a little

922
00:45:58,920 --> 00:46:01,040
Speaker 1: above his pay grade, all right, Jennifers, So what do

923
00:46:01,080 --> 00:46:05,320
Speaker 1: we think about China here the economic data, I don't know.

924
00:46:05,320 --> 00:46:07,120
Speaker 1: It just doesn't seem very good, and I guess it

925
00:46:07,120 --> 00:46:09,240
Speaker 1: seems disappointing, realtive to maybe expectations.

926
00:46:10,520 --> 00:46:12,560
Speaker 13: Yeah, no, I think that's a really great point, I

927
00:46:12,560 --> 00:46:15,600
Speaker 13: would say from a geopolitical perspective, and this is a

928
00:46:15,600 --> 00:46:18,600
Speaker 13: piece we put out recently. I think we shouldn't over

929
00:46:18,640 --> 00:46:22,280
Speaker 13: exaggerate the impact that this will have on China's geopolitical importance,

930
00:46:22,840 --> 00:46:25,120
Speaker 13: or exaggerate the effect that this will have on their

931
00:46:25,160 --> 00:46:30,120
Speaker 13: foreign policy. There's a history here of rising powers lashing

932
00:46:30,200 --> 00:46:33,000
Speaker 13: out when they feel they've hit their economic peak or

933
00:46:33,000 --> 00:46:35,879
Speaker 13: when they're feeling sensitive about economic challenges, and we don't

934
00:46:35,880 --> 00:46:38,960
Speaker 13: necessarily see that happening with Beijing. I think at the

935
00:46:39,000 --> 00:46:41,960
Speaker 13: same time, we should expect that they'll be more defensive

936
00:46:42,000 --> 00:46:45,280
Speaker 13: when they do feel challenge. But again, we're not looking

937
00:46:45,320 --> 00:46:48,279
Speaker 13: at a major foreign policy crisis on the horizon as

938
00:46:48,320 --> 00:46:50,160
Speaker 13: the result of the latest economic data.

939
00:46:51,000 --> 00:46:54,040
Speaker 12: You know, we had an interview with the front runner

940
00:46:54,080 --> 00:46:58,440
Speaker 12: in the presidential race in Taiwan, who is I guess

941
00:46:58,480 --> 00:47:01,480
Speaker 12: seen as a little bit less favorable of a candidate

942
00:47:01,520 --> 00:47:04,920
Speaker 12: with respect to China. I mean, can you weigh in

943
00:47:04,960 --> 00:47:12,480
Speaker 12: on how China's economic woes are influencing that situation, particularly

944
00:47:12,600 --> 00:47:16,400
Speaker 12: especially because it's so close, because the tensions with Taiwan,

945
00:47:16,480 --> 00:47:20,080
Speaker 12: Taiwan just being so physically close to China.

946
00:47:21,360 --> 00:47:24,040
Speaker 13: Yeah, sure, things so, I think you're referencing the recent

947
00:47:24,080 --> 00:47:28,160
Speaker 13: interview with Taiwan's vice president and leading presidential candidate, Lai Chinda,

948
00:47:28,600 --> 00:47:31,080
Speaker 13: who is actually just wrapping up a transit back through

949
00:47:31,080 --> 00:47:34,600
Speaker 13: the United States on his way back to Taiwan. Lii

950
00:47:34,760 --> 00:47:38,480
Speaker 13: is definitely not Beijing's preferred candidate. They've made that quite clear,

951
00:47:38,920 --> 00:47:43,280
Speaker 13: including in their pretty strongly worded responses to his recent transit.

952
00:47:43,880 --> 00:47:46,480
Speaker 13: This is despite the fact that it's pretty common for

953
00:47:46,560 --> 00:47:49,560
Speaker 13: Taiwanese vice presidents and presidential candidates to come through the

954
00:47:49,640 --> 00:47:52,359
Speaker 13: United States, and this case, lie was on his way

955
00:47:52,400 --> 00:47:56,480
Speaker 13: to Paraguay for the presidential inauguration there. Lai is ahead

956
00:47:56,480 --> 00:47:59,640
Speaker 13: in the polls. It's early days still, but he does

957
00:47:59,760 --> 00:48:02,080
Speaker 13: look to have a pretty strong lead for the elections

958
00:48:02,080 --> 00:48:04,799
Speaker 13: in January, and I think there's a real question of

959
00:48:04,840 --> 00:48:08,080
Speaker 13: how China would react to a live victory should he

960
00:48:08,160 --> 00:48:11,640
Speaker 13: emerge at the top when when the election is held

961
00:48:11,640 --> 00:48:13,280
Speaker 13: in January.

962
00:48:13,680 --> 00:48:16,239
Speaker 1: Jennifer, can you give us a sense of how this

963
00:48:16,320 --> 00:48:20,239
Speaker 1: administration kind of views or would like to see the

964
00:48:20,280 --> 00:48:23,880
Speaker 1: relationship with China go over the next several years. Is

965
00:48:23,920 --> 00:48:27,040
Speaker 1: it one of engagement, is it one of limited engagement?

966
00:48:27,160 --> 00:48:29,799
Speaker 1: Is it one of just shutting China and letting them

967
00:48:29,920 --> 00:48:32,440
Speaker 1: kind of, you know, kind of deal with themselves. What's

968
00:48:32,480 --> 00:48:33,040
Speaker 1: the approach?

969
00:48:34,239 --> 00:48:38,080
Speaker 13: Sure? So, I think that the term is strategic rivalry,

970
00:48:38,239 --> 00:48:42,880
Speaker 13: and the common catchphrase is you know, intense competition requires

971
00:48:42,880 --> 00:48:46,000
Speaker 13: intense engagement, so we're likely to see both of these things.

972
00:48:46,080 --> 00:48:48,360
Speaker 13: And frankly, I think the paradigms of the past of

973
00:48:48,880 --> 00:48:52,360
Speaker 13: it's either engagement or its hawkishness don't really apply anymore.

974
00:48:52,400 --> 00:48:54,840
Speaker 13: I think the administration is trying to balance both of

975
00:48:54,880 --> 00:48:58,120
Speaker 13: these features with trying to engage Beijing, as we saw

976
00:48:58,239 --> 00:49:02,200
Speaker 13: from Secretary Blincoln's visit, Secretary Yellen's visit, discussion of Secretary

977
00:49:02,239 --> 00:49:06,360
Speaker 13: Armando heading out this month, with continuing to take actions

978
00:49:06,400 --> 00:49:09,680
Speaker 13: from the administration's perspective that are aimed at, you know,

979
00:49:09,760 --> 00:49:12,879
Speaker 13: defending US interests, as for example, rolling out the most

980
00:49:12,920 --> 00:49:14,880
Speaker 13: recent outbound investment screening regime.

981
00:49:15,960 --> 00:49:21,320
Speaker 12: I mean, when you think of the struggles that China's

982
00:49:21,320 --> 00:49:24,799
Speaker 12: economy is having right now, how does that change the

983
00:49:24,880 --> 00:49:29,640
Speaker 12: dialogue in the Biden administration in the White House about

984
00:49:29,719 --> 00:49:32,920
Speaker 12: how tough to be with respect to some of their

985
00:49:32,960 --> 00:49:33,960
Speaker 12: geopolitical issues.

986
00:49:35,120 --> 00:49:37,520
Speaker 13: I think from a political perspective, this is a pretty

987
00:49:37,520 --> 00:49:40,000
Speaker 13: good look for the administration. You know, for the first

988
00:49:40,040 --> 00:49:43,040
Speaker 13: time in many, many years, the US GDP growth seems

989
00:49:43,080 --> 00:49:46,080
Speaker 13: to be outpacing China's and that's a pretty exciting story,

990
00:49:46,840 --> 00:49:50,160
Speaker 13: I think from a foreign policy perspective. I don't see

991
00:49:50,160 --> 00:49:53,439
Speaker 13: this changing in a major way. The administration's approach. Again,

992
00:49:53,480 --> 00:49:56,280
Speaker 13: I think that's based on fundamentals that are unchanged here.

993
00:49:56,640 --> 00:49:58,920
Speaker 13: China is going to continue to be a major power

994
00:49:58,960 --> 00:50:01,720
Speaker 13: to be reckoned with. You know, for example, they still

995
00:50:01,760 --> 00:50:05,239
Speaker 13: have plenty of resources to put towards their military modernization,

996
00:50:05,360 --> 00:50:10,400
Speaker 13: their technological advancement, etc. So I think the broad arc

997
00:50:10,480 --> 00:50:12,239
Speaker 13: of the strategy is going to say the same. But

998
00:50:12,600 --> 00:50:15,960
Speaker 13: I would imagine there'll probably be some celebration about the

999
00:50:16,000 --> 00:50:19,360
Speaker 13: recent economic data and how that shows how the administration

1000
00:50:19,480 --> 00:50:21,160
Speaker 13: is handling the US economy.

1001
00:50:21,560 --> 00:50:23,840
Speaker 1: You know, it's interesting, Jennifer, I kind of feel a

1002
00:50:23,840 --> 00:50:25,799
Speaker 1: little bit of a dichotomy here. Trying to take a

1003
00:50:25,840 --> 00:50:31,319
Speaker 1: tough government stance against China. There are some executive order

1004
00:50:31,400 --> 00:50:34,480
Speaker 1: last week to that end on the technology side, Yet

1005
00:50:34,520 --> 00:50:37,399
Speaker 1: it just seems like a parade of US CEOs making

1006
00:50:37,400 --> 00:50:39,440
Speaker 1: the way over to Beijing, whether it's Elon Musk or

1007
00:50:39,480 --> 00:50:43,080
Speaker 1: Tim Welch or Jamie Diamond. I guess it's a kind

1008
00:50:43,120 --> 00:50:44,920
Speaker 1: of a fine line everybody's trying to walk here. We

1009
00:50:44,960 --> 00:50:47,400
Speaker 1: want to be tough against China, but we got to

1010
00:50:47,400 --> 00:50:48,400
Speaker 1: do business with these folks.

1011
00:50:49,680 --> 00:50:52,759
Speaker 13: I think that's absolutely right, and I think that's contributing

1012
00:50:52,800 --> 00:50:56,080
Speaker 13: to a slightly more sophisticated discourse on what the future

1013
00:50:56,120 --> 00:50:59,200
Speaker 13: of the US China economic relationship looks like. You know,

1014
00:50:59,239 --> 00:51:02,320
Speaker 13: the conversation around decoupling is largely seen as a pretty

1015
00:51:02,719 --> 00:51:06,560
Speaker 13: infeasible task, and now there is increased conversation about how

1016
00:51:06,560 --> 00:51:08,879
Speaker 13: do you quote unquote de risk how do you kind

1017
00:51:08,880 --> 00:51:11,880
Speaker 13: of carve out the areas that you're most concerned about.

1018
00:51:12,280 --> 00:51:14,040
Speaker 13: And by the way, this applies on the China side

1019
00:51:14,040 --> 00:51:17,439
Speaker 13: as well. They've certainly been concerned about overreliance on US

1020
00:51:17,480 --> 00:51:21,200
Speaker 13: technology for some time now, even before the latest US

1021
00:51:21,239 --> 00:51:24,839
Speaker 13: moves to restrict their access to it. So I think

1022
00:51:24,840 --> 00:51:27,040
Speaker 13: that's going to be part of the conversation going forward,

1023
00:51:27,160 --> 00:51:30,640
Speaker 13: is how do we maintain an economic relationship that benefits

1024
00:51:30,640 --> 00:51:35,680
Speaker 13: both sides while still preserving each side's perceptions of their

1025
00:51:35,760 --> 00:51:36,560
Speaker 13: national interests.

1026
00:51:37,800 --> 00:51:41,359
Speaker 12: How do you view some of the I guess it's

1027
00:51:41,400 --> 00:51:44,920
Speaker 12: maybe unfair to call it unrest or anything like that,

1028
00:51:44,920 --> 00:51:49,719
Speaker 12: but the dissatisfaction among the population with well, boy, we

1029
00:51:50,040 --> 00:51:54,600
Speaker 12: put our money into these these apartments, or we're not

1030
00:51:54,600 --> 00:51:57,240
Speaker 12: getting we're not seeing the return, we're not seeing payments

1031
00:51:57,239 --> 00:51:59,920
Speaker 12: on our investments. I think you know, there's some degree,

1032
00:52:00,320 --> 00:52:04,080
Speaker 12: at least a certain segment of the population feels a

1033
00:52:04,120 --> 00:52:10,480
Speaker 12: little perhaps betrayed by what's happened in the with with

1034
00:52:10,520 --> 00:52:15,239
Speaker 12: respect to some of the economic situation that's been going on.

1035
00:52:15,960 --> 00:52:18,120
Speaker 12: How do you view the population and their reaction.

1036
00:52:19,520 --> 00:52:21,600
Speaker 13: I think that's a really important question. I think it's

1037
00:52:21,680 --> 00:52:24,680
Speaker 13: especially important for youth, right, many of whom are emerging

1038
00:52:24,719 --> 00:52:28,080
Speaker 13: from college and looking to land their first job, looking

1039
00:52:28,120 --> 00:52:31,080
Speaker 13: to find their first home to live in, start to

1040
00:52:31,200 --> 00:52:34,560
Speaker 13: kind of acquire assets. That's a really important part of

1041
00:52:35,600 --> 00:52:37,600
Speaker 13: you know, sort of the cycle of life there having

1042
00:52:37,719 --> 00:52:40,960
Speaker 13: property in your name as you start to build out

1043
00:52:40,960 --> 00:52:44,000
Speaker 13: your own life for yourself. And I think people are

1044
00:52:44,040 --> 00:52:47,400
Speaker 13: starting to feel sort of a major difference between the

1045
00:52:47,440 --> 00:52:49,799
Speaker 13: situation of growing up in the nineties and the early

1046
00:52:49,840 --> 00:52:53,200
Speaker 13: twentys and twenty tens, as China was on the ascent

1047
00:52:54,000 --> 00:52:59,640
Speaker 13: and livelihoods were significantly improved from prior generations into perhaps

1048
00:52:59,719 --> 00:53:02,319
Speaker 13: what is going to be a new mode of as

1049
00:53:03,280 --> 00:53:07,239
Speaker 13: Beijing would put it, high quality growth, rather than necessarily

1050
00:53:07,239 --> 00:53:10,320
Speaker 13: focusing on the top up GDP numbers.

1051
00:53:11,120 --> 00:53:13,800
Speaker 1: You know, it's for a while there. Again, as you mentioned,

1052
00:53:13,800 --> 00:53:15,920
Speaker 1: back in those those time periods, it seemed like China

1053
00:53:15,960 --> 00:53:17,799
Speaker 1: was opening up and that was a good thing for

1054
00:53:17,840 --> 00:53:21,239
Speaker 1: the world. Is it now simply the fact that g

1055
00:53:21,600 --> 00:53:25,880
Speaker 1: IS continues to be even more firmly enhanced, that doesn't

1056
00:53:25,920 --> 00:53:27,600
Speaker 1: necessarily need to do that anymore, and he can kind

1057
00:53:27,600 --> 00:53:29,800
Speaker 1: of go back to maybe what his natural inclination was,

1058
00:53:29,840 --> 00:53:31,560
Speaker 1: which would be a little bit more closed.

1059
00:53:32,960 --> 00:53:35,880
Speaker 13: I think she is Dual circulation policy is a really

1060
00:53:35,920 --> 00:53:38,680
Speaker 13: interesting example of kind of the twin paradigms that they're

1061
00:53:38,680 --> 00:53:42,320
Speaker 13: trying to hit here, of one not necessarily being overly

1062
00:53:42,360 --> 00:53:45,600
Speaker 13: reliant on foreign technology for fear that access to that

1063
00:53:45,640 --> 00:53:48,319
Speaker 13: could be cut off, as they see recent US moves

1064
00:53:48,320 --> 00:53:51,759
Speaker 13: as kind of indicative of that perception being valid, while

1065
00:53:51,760 --> 00:53:55,480
Speaker 13: at the same time recognizing that in order to continue growing,

1066
00:53:55,480 --> 00:53:57,520
Speaker 13: in order to kind of beat the middle income trap,

1067
00:53:57,880 --> 00:54:01,640
Speaker 13: China needs to continue advancing technologically, and right now a

1068
00:54:01,719 --> 00:54:07,000
Speaker 13: lot of that sort of superior IP and technology exist

1069
00:54:07,239 --> 00:54:10,279
Speaker 13: in other economies that they need to learn from. So

1070
00:54:10,600 --> 00:54:12,560
Speaker 13: I think that's the thrust of his approach, is trying

1071
00:54:12,560 --> 00:54:17,560
Speaker 13: to balance and make that bridge without becoming overly reliant

1072
00:54:17,560 --> 00:54:21,000
Speaker 13: on what he sees as being a risky sort of proposition.

1073
00:54:21,400 --> 00:54:25,480
Speaker 1: All right, Jennifer, thanks so much for joining US geoeconomists.

1074
00:54:25,520 --> 00:54:28,440
Speaker 1: I like the term, and I like Jennifer Welch. You're

1075
00:54:28,440 --> 00:54:30,200
Speaker 1: gonna be coming back here. You get new friends with

1076
00:54:30,440 --> 00:54:34,879
Speaker 1: Bloomberg Radio. Jennifer Walsch, chief economists for Bloomberg Economics down

1077
00:54:34,960 --> 00:54:37,960
Speaker 1: in Washington, d C. Trying to kind of get a

1078
00:54:38,000 --> 00:54:43,960
Speaker 1: sense of what you know, geopolitics, economics. They certainly have,

1079
00:54:44,280 --> 00:54:46,399
Speaker 1: They certainly influence one another, and that's kind of what

1080
00:54:46,680 --> 00:54:47,880
Speaker 1: I think, Jennifer watching Bloomer.

1081
00:54:47,920 --> 00:54:51,560
Speaker 12: So many interesting data points and headlines, recently the latest

1082
00:54:51,560 --> 00:54:54,279
Speaker 12: one China. Please visit Shadow Bank Investors at home to

1083
00:54:54,360 --> 00:54:55,520
Speaker 12: quash on the rest.

1084
00:54:55,719 --> 00:54:58,000
Speaker 1: There you go. We're gonna have more coming up. This

1085
00:54:58,040 --> 00:54:58,560
Speaker 1: is Bloomberg.

1086
00:54:59,160 --> 00:55:02,800
Speaker 7: You're listening to the Cats Are Live program Bloomberg Markets

1087
00:55:02,880 --> 00:55:06,239
Speaker 7: weekdays at ten am Eastern on Bloomberg Radio, the tune

1088
00:55:06,280 --> 00:55:08,000
Speaker 7: in app, Bloomberg dot Com, and.

1089
00:55:07,960 --> 00:55:09,280
Speaker 6: The Bloomberg Business App.

1090
00:55:09,280 --> 00:55:12,120
Speaker 7: You can also listen live on Amazon Alexa from our

1091
00:55:12,120 --> 00:55:17,200
Speaker 7: flagship New York station Just Say Alexa playing Bloomberg eleven thirty.

1092
00:55:18,200 --> 00:55:20,520
Speaker 1: A lot of kinds are still talking about the recession.

1093
00:55:20,640 --> 00:55:22,680
Speaker 1: I am not buying it. I took it off the

1094
00:55:22,680 --> 00:55:24,640
Speaker 1: table a month and a half ago. I'm just not

1095
00:55:24,719 --> 00:55:26,440
Speaker 1: buying it. But I like to talk to people who

1096
00:55:26,520 --> 00:55:29,080
Speaker 1: actually out there in the marketplace, talk at the companies

1097
00:55:29,160 --> 00:55:31,000
Speaker 1: large and small, give them a sense of kind of

1098
00:55:31,040 --> 00:55:32,760
Speaker 1: what they're seeing out there. And we've got a great opportunity.

1099
00:55:32,840 --> 00:55:33,000
Speaker 7: Now.

1100
00:55:33,000 --> 00:55:35,640
Speaker 1: Don McCree joins, as he said, of commercial banking and

1101
00:55:35,719 --> 00:55:40,759
Speaker 1: vice chairman at Citizens Financial, publicly traded bank. CFG is

1102
00:55:40,840 --> 00:55:44,200
Speaker 1: the ticker about thirteen point three billion dollars in market cap.

1103
00:55:44,239 --> 00:55:45,520
Speaker 1: Looks like it's been caught up in some of that

1104
00:55:45,960 --> 00:55:48,800
Speaker 1: regional bank's downdraft there off twenty eight percent year to

1105
00:55:48,880 --> 00:55:51,560
Speaker 1: data on this stock. Don, thanks, thanks so much for

1106
00:55:51,640 --> 00:55:54,319
Speaker 1: joining us here. What are you seeing out there? I mean,

1107
00:55:54,440 --> 00:55:56,440
Speaker 1: I think we had Citizens. You guys talked at pretty

1108
00:55:56,520 --> 00:55:59,640
Speaker 1: much everybody, small business, it's midsize, larger companies, you compete

1109
00:55:59,640 --> 00:56:02,000
Speaker 1: against the big banks. What are you seeing out there

1110
00:56:02,000 --> 00:56:02,720
Speaker 1: from your clients?

1111
00:56:02,760 --> 00:56:05,480
Speaker 14: You know, it feels pretty good. We're not seeing a

1112
00:56:05,480 --> 00:56:08,720
Speaker 14: lot of distress in the portfolio. I think companies are

1113
00:56:08,760 --> 00:56:12,640
Speaker 14: generally performing pretty well. I've said before that, you know,

1114
00:56:12,719 --> 00:56:14,760
Speaker 14: because of COVID a couple of years ago.

1115
00:56:14,640 --> 00:56:16,040
Speaker 4: Companies really tightened their belts.

1116
00:56:16,040 --> 00:56:19,160
Speaker 14: They got their their cost bases down, they built their liquidity,

1117
00:56:19,239 --> 00:56:22,239
Speaker 14: they refinance their debt, and so they're operating with strong

1118
00:56:22,280 --> 00:56:22,960
Speaker 14: balance sheets.

1119
00:56:22,960 --> 00:56:24,680
Speaker 4: They've had some of.

1120
00:56:24,600 --> 00:56:27,120
Speaker 14: The things that had been plaguing them, like supply chain

1121
00:56:27,520 --> 00:56:29,680
Speaker 14: issues and things like that, seem to be behind and

1122
00:56:29,719 --> 00:56:32,600
Speaker 14: a lot of the input costs that grew from inflation

1123
00:56:32,640 --> 00:56:35,960
Speaker 14: and the rapid changes of inflation have kind of subsided

1124
00:56:36,000 --> 00:56:38,839
Speaker 14: a little bit. So I think we're hearing pretty good things.

1125
00:56:38,920 --> 00:56:45,719
Speaker 14: There's there's absolutely a cautionary toll tone being flag being

1126
00:56:46,200 --> 00:56:48,399
Speaker 14: flown by a lot of the customers, just because there's

1127
00:56:48,400 --> 00:56:50,760
Speaker 14: still a lot of uncertainty out in the marketplace right.

1128
00:56:50,640 --> 00:56:54,000
Speaker 12: And you wonder if companies have been preparing for recession

1129
00:56:54,280 --> 00:56:57,640
Speaker 12: so long, if we don't see quite the depth of

1130
00:56:57,680 --> 00:57:00,319
Speaker 12: the reception recession that we could have seen, maybe they

1131
00:57:00,320 --> 00:57:02,719
Speaker 12: are just better able to prepare for it. I wonder, though,

1132
00:57:02,719 --> 00:57:06,200
Speaker 12: you know, credit is tighter, do you see companies delaying

1133
00:57:06,719 --> 00:57:08,600
Speaker 12: transactions deals.

1134
00:57:09,360 --> 00:57:14,880
Speaker 14: It's been The demand for loans is definitely tepid, and

1135
00:57:14,920 --> 00:57:17,720
Speaker 14: I think a little bit of that, particularly new money transactions.

1136
00:57:17,960 --> 00:57:20,000
Speaker 14: I think there's a little bit of a hesitancy to

1137
00:57:20,120 --> 00:57:22,680
Speaker 14: invest right now. There's a little bit of a there's

1138
00:57:22,720 --> 00:57:27,000
Speaker 14: definitely a little bit of a weakness and the leverage

1139
00:57:27,000 --> 00:57:30,080
Speaker 14: buyout markets, and some of the big transaction markets. M

1140
00:57:30,080 --> 00:57:31,840
Speaker 14: and A is a little quieter that it's been, and

1141
00:57:31,880 --> 00:57:33,880
Speaker 14: a lot of that's because valuations need to adjust and

1142
00:57:33,920 --> 00:57:37,160
Speaker 14: buyer buyers and sellers are still quite far apart. We

1143
00:57:37,280 --> 00:57:40,360
Speaker 14: tend to play in our investment banking businesses in the

1144
00:57:40,360 --> 00:57:43,840
Speaker 14: middle market. That's been a little healthier because the transaction

1145
00:57:43,920 --> 00:57:46,040
Speaker 14: sizes are small and you don't have to raise massive

1146
00:57:46,040 --> 00:57:48,600
Speaker 14: amounts of capital to complete a transaction. And on the

1147
00:57:48,680 --> 00:57:50,640
Speaker 14: M and A side, it's a little friendlier from a

1148
00:57:50,640 --> 00:57:53,680
Speaker 14: government standpoint in terms of getting approvals for transactions. But

1149
00:57:54,080 --> 00:57:57,560
Speaker 14: I think regular way lending is okay, but it's not great,

1150
00:57:57,560 --> 00:57:59,280
Speaker 14: and I think that's more demand than supply.

1151
00:57:59,360 --> 00:58:02,720
Speaker 1: Frankly, any stress in your loan portfolio at this point.

1152
00:58:02,840 --> 00:58:06,400
Speaker 14: The commercial side's pretty good. CE and I side. Obviously,

1153
00:58:06,400 --> 00:58:09,840
Speaker 14: real estate is the flashpoint, and office real estate is

1154
00:58:09,880 --> 00:58:12,560
Speaker 14: the place that we're all focused. We're working through the issues.

1155
00:58:12,600 --> 00:58:12,840
Speaker 6: Fine.

1156
00:58:12,920 --> 00:58:15,200
Speaker 14: We put a lot of disclosure out in the second

1157
00:58:15,240 --> 00:58:17,840
Speaker 14: quarter and kind of went through the portfolio, so you know,

1158
00:58:17,880 --> 00:58:21,919
Speaker 14: nothing that really is causing us to have sleepless nights,

1159
00:58:21,920 --> 00:58:23,840
Speaker 14: and we have an enormous amount of earnings power to

1160
00:58:24,520 --> 00:58:27,040
Speaker 14: basically absorb any losses that do come along.

1161
00:58:27,320 --> 00:58:32,080
Speaker 12: Look at beyond yourself. There was a series of downgrades

1162
00:58:32,120 --> 00:58:35,080
Speaker 12: by Moody's on the regional banks. You guys saw your

1163
00:58:35,080 --> 00:58:37,919
Speaker 12: outlook cut, but that was actually a sort of positive thing.

1164
00:58:39,400 --> 00:58:41,760
Speaker 12: Looking at your peers, do you what's the extent of

1165
00:58:41,800 --> 00:58:44,200
Speaker 12: the commercial real estate stress that you see? That was

1166
00:58:44,200 --> 00:58:45,600
Speaker 12: a particular point that you.

1167
00:58:45,600 --> 00:58:48,000
Speaker 14: Know, I think, like us, I think most of them

1168
00:58:48,000 --> 00:58:50,120
Speaker 14: are working through. It's going to be a two or

1169
00:58:50,120 --> 00:58:52,640
Speaker 14: three year kind of work, you know, working through any

1170
00:58:52,680 --> 00:58:54,800
Speaker 14: distress we have in the portfolio. We're having a fair

1171
00:58:54,840 --> 00:58:58,040
Speaker 14: amount of success restructuring loans that we were worried about.

1172
00:58:58,080 --> 00:59:01,400
Speaker 14: So we've taken a couple losses, nothing too significant. And

1173
00:59:01,480 --> 00:59:04,040
Speaker 14: I think as I looked at earnings from our peers

1174
00:59:04,120 --> 00:59:07,080
Speaker 14: across the board, everyone said about the same thing that

1175
00:59:07,120 --> 00:59:09,200
Speaker 14: we said, which is, yeah, we're focused on it. Obviously

1176
00:59:09,360 --> 00:59:11,320
Speaker 14: is going to be stressed to stress in the in

1177
00:59:11,360 --> 00:59:13,080
Speaker 14: the office market, but there's a lot of equity in

1178
00:59:13,120 --> 00:59:13,600
Speaker 14: these deals.

1179
00:59:13,640 --> 00:59:14,440
Speaker 4: That's the first to go.

1180
00:59:14,520 --> 00:59:16,520
Speaker 14: And then any losses that the banks will take are

1181
00:59:16,600 --> 00:59:18,720
Speaker 14: going to be you know, small fractions of the oldverall.

1182
00:59:18,960 --> 00:59:20,400
Speaker 12: Yeah, I mean, we've seen some of these large private

1183
00:59:20,400 --> 00:59:23,080
Speaker 12: equity firms or real estate firms in particular, like walking

1184
00:59:23,120 --> 00:59:27,560
Speaker 12: away from poor investments. I mean, as a to what

1185
00:59:27,680 --> 00:59:30,200
Speaker 12: extent are you guys happy to end up with the

1186
00:59:30,280 --> 00:59:31,160
Speaker 12: asset at the end?

1187
00:59:31,240 --> 00:59:33,520
Speaker 14: Well, we generally won't. You know, we generally won't end

1188
00:59:33,600 --> 00:59:35,440
Speaker 14: up with the asset. We go to great links not

1189
00:59:35,440 --> 00:59:37,160
Speaker 14: to end up with the assets. So we would probably

1190
00:59:37,160 --> 00:59:39,480
Speaker 14: sell the note or or do some other kind of

1191
00:59:39,480 --> 00:59:43,600
Speaker 14: restructuring and bring in alternative alternative equity rather than take

1192
00:59:43,640 --> 00:59:44,520
Speaker 14: down the asset.

1193
00:59:45,640 --> 00:59:49,120
Speaker 1: Let's talk just about the regulations on your industry more

1194
00:59:49,120 --> 00:59:52,120
Speaker 1: coming down. What are you telling your showholders about a

1195
00:59:52,240 --> 00:59:54,200
Speaker 1: the regulations, how they're going to impact you, and kind

1196
00:59:54,240 --> 00:59:56,200
Speaker 1: of what you're trying to do to get ready.

1197
00:59:56,400 --> 00:59:58,560
Speaker 14: I think you know, there's there's clearly going to be

1198
00:59:58,640 --> 01:00:01,600
Speaker 14: higher capital requirements as to be stricter liquidity requirements, and

1199
01:00:02,200 --> 01:00:04,280
Speaker 14: we're preparing for those. We have been preparing for those

1200
01:00:04,720 --> 01:00:09,320
Speaker 14: long before the regulatory kind of talk talk about exactly

1201
01:00:09,400 --> 01:00:11,640
Speaker 14: what it's going to be started to leak out. So

1202
01:00:12,040 --> 01:00:14,400
Speaker 14: I think that our returns will be a little bit

1203
01:00:14,480 --> 01:00:16,960
Speaker 14: under pressure. But you know the benefit that we have

1204
01:00:17,080 --> 01:00:19,320
Speaker 14: is we have a really diversified business model with a

1205
01:00:19,320 --> 01:00:21,520
Speaker 14: lot of earnings power, So if it goes down a

1206
01:00:21,560 --> 01:00:23,520
Speaker 14: little bit, we're going to continue to be able to

1207
01:00:23,520 --> 01:00:28,720
Speaker 14: return capital to shareholders. And and it's it's it's going

1208
01:00:28,760 --> 01:00:30,320
Speaker 14: to be an adjustment, but we've been through these kind

1209
01:00:30,320 --> 01:00:31,200
Speaker 14: of adjustments before.

1210
01:00:31,760 --> 01:00:34,240
Speaker 12: We had some reporting on how US regulators are going

1211
01:00:34,280 --> 01:00:37,200
Speaker 12: to propose requiring banks with as little as one hundred

1212
01:00:37,200 --> 01:00:40,400
Speaker 12: billion dollars in assets to issue enough long term debt

1213
01:00:40,440 --> 01:00:42,880
Speaker 12: to cover capital losses, and then the head of the

1214
01:00:42,960 --> 01:00:46,600
Speaker 12: FDIC coming out and talking about how this bolster's financial stability?

1215
01:00:47,320 --> 01:00:47,920
Speaker 1: Do you agree?

1216
01:00:48,000 --> 01:00:49,320
Speaker 12: Disagree? I?

1217
01:00:49,520 --> 01:00:53,200
Speaker 14: You know, at the margin, it bolsters, you know, stability,

1218
01:00:53,240 --> 01:00:55,520
Speaker 14: But we don't think we think that the banks are

1219
01:00:55,560 --> 01:00:59,240
Speaker 14: in really good shape. We think capital levels are quite high,

1220
01:00:59,280 --> 01:01:01,000
Speaker 14: better than a lot of other parts of the world,

1221
01:01:01,120 --> 01:01:04,840
Speaker 14: and well managed banks have really strong liquidity profiles and

1222
01:01:04,920 --> 01:01:07,560
Speaker 14: really strong capital absorption absorption capacity.

1223
01:01:08,240 --> 01:01:11,280
Speaker 1: How's loan growth across your client base here, because boy,

1224
01:01:11,360 --> 01:01:14,160
Speaker 1: we've been shocked with these rise and interest rates. If

1225
01:01:14,160 --> 01:01:15,520
Speaker 1: you want to go out and get a mortgage, or

1226
01:01:15,640 --> 01:01:17,200
Speaker 1: or if you want to go out and finance some

1227
01:01:17,240 --> 01:01:20,280
Speaker 1: capital spending or finance and acquisition, what's loan growth like

1228
01:01:20,320 --> 01:01:20,760
Speaker 1: these days?

1229
01:01:20,800 --> 01:01:23,000
Speaker 14: It's been it's been kind of flatish, yeah, for the

1230
01:01:23,080 --> 01:01:25,680
Speaker 14: last for the last couple of quarters, and we're expecting

1231
01:01:25,720 --> 01:01:27,680
Speaker 14: a little bit here and there, depending on the sector,

1232
01:01:27,720 --> 01:01:30,720
Speaker 14: but we expect, you know, reasonably low levels of long

1233
01:01:30,760 --> 01:01:33,800
Speaker 14: growth for the balance of the year, less on the

1234
01:01:33,880 --> 01:01:35,600
Speaker 14: less on the you know, that's on my side, the

1235
01:01:35,640 --> 01:01:38,400
Speaker 14: retail side. Should you know, we're having some pretty good

1236
01:01:38,440 --> 01:01:41,840
Speaker 14: expansionary growth in places that were growing on the retail

1237
01:01:41,840 --> 01:01:43,440
Speaker 14: side in the retail portfolio.

1238
01:01:43,600 --> 01:01:47,840
Speaker 12: Have consumers just adjusted faster? Do businesses catch up with

1239
01:01:47,920 --> 01:01:49,720
Speaker 12: them to a higher rate environment?

1240
01:01:49,800 --> 01:01:49,960
Speaker 7: Yeah?

1241
01:01:50,400 --> 01:01:50,720
Speaker 4: I think.

1242
01:01:51,680 --> 01:01:53,760
Speaker 14: I think we have to keep from perspective that where

1243
01:01:53,840 --> 01:01:56,480
Speaker 14: rates are aren't that high and from a historical standpoint,

1244
01:01:56,760 --> 01:01:59,400
Speaker 14: so I think the issue with with borrowers has been

1245
01:01:59,680 --> 01:02:01,960
Speaker 14: this beat of the change in rates as opposed to

1246
01:02:02,000 --> 01:02:05,160
Speaker 14: the absolute level of rates. So yes, I do think

1247
01:02:05,200 --> 01:02:08,360
Speaker 14: that consumers and businesses will adjust to a higher rate environment,

1248
01:02:08,400 --> 01:02:10,040
Speaker 14: and I think rates are going to stay high for

1249
01:02:10,600 --> 01:02:11,520
Speaker 14: quite a period of time.

1250
01:02:12,480 --> 01:02:16,400
Speaker 1: University of Vermont, big fan. Two of my siblings went there,

1251
01:02:16,760 --> 01:02:19,800
Speaker 1: your big player. Give us twenty thirty seconds on UVM.

1252
01:02:20,120 --> 01:02:23,880
Speaker 14: UVM is doing fantastic where the school is growing. We're

1253
01:02:24,040 --> 01:02:27,640
Speaker 14: very financially healthy, you know, great statistics we are. The

1254
01:02:27,640 --> 01:02:29,480
Speaker 14: major thrust we have right now is growth of our

1255
01:02:29,520 --> 01:02:35,000
Speaker 14: research programs, and we're basically getting enormous levels of research

1256
01:02:35,040 --> 01:02:37,840
Speaker 14: grants from a variety of businesses and governments. And it

1257
01:02:37,880 --> 01:02:40,560
Speaker 14: feels very strong up there, and Burlington is obviously a

1258
01:02:40,600 --> 01:02:41,320
Speaker 14: fantastic place.

1259
01:02:41,400 --> 01:02:43,960
Speaker 1: Yeah, go to school man. My brother and sister went there,

1260
01:02:44,120 --> 01:02:45,800
Speaker 1: like why, and I had another brother go up there.

1261
01:02:46,480 --> 01:02:48,560
Speaker 1: Michael's have been vermonly. What are you guys thinking about?

1262
01:02:48,560 --> 01:02:50,400
Speaker 1: It's cold up there, so what do I do? I

1263
01:02:50,480 --> 01:02:53,200
Speaker 1: go south. Don McCree, head of Commercial Banking and a

1264
01:02:53,280 --> 01:02:55,640
Speaker 1: vice chairman Citizens Financial, joining us live here in our

1265
01:02:55,640 --> 01:02:58,360
Speaker 1: Bloomberg Interactive Broker studio. We appreciate getting some of his time.

1266
01:02:58,840 --> 01:03:00,000
Speaker 1: This is Bloomberg.

1267
01:03:00,360 --> 01:03:03,440
Speaker 2: Thanks for listening to the Bloomberg Markets podcasts. You can

1268
01:03:03,480 --> 01:03:07,240
Speaker 2: subscribe and listen to interviews at Apple Podcasts or whatever

1269
01:03:07,320 --> 01:03:11,040
Speaker 2: podcast platform you prefer. I'm Matt Miller. I'm on Twitter

1270
01:03:11,280 --> 01:03:13,200
Speaker 2: at Matt Miller nineteen seventy three.

1271
01:03:13,640 --> 01:03:16,000
Speaker 1: And I'm Faull Sweeney. I'm on Twitter at pt Sweeney.

1272
01:03:16,120 --> 01:03:18,800
Speaker 1: Before the podcast, you can always catch us worldwide at

1273
01:03:18,800 --> 01:03:20,560
Speaker 1: Bloomberg Radio