1 00:00:02,520 --> 00:00:10,280 Speaker 1: Bloomberg Audio Studios, Podcasts, radio news. This is Bloomberg Business 2 00:00:10,280 --> 00:00:13,440 Speaker 1: Week Insight from the reporters and editors that bring you 3 00:00:13,480 --> 00:00:18,400 Speaker 1: America's most trusted business magazine, plus global business, finance and 4 00:00:18,480 --> 00:00:22,880 Speaker 1: tech news. The Bloomberg Business Week Podcast with Carol Masser 5 00:00:23,079 --> 00:00:27,080 Speaker 1: and Tim Stenebeck on Bloomberg Radio chairs A. 6 00:00:27,120 --> 00:00:29,960 Speaker 2: Apple right now are down about one point six percent. 7 00:00:30,000 --> 00:00:32,479 Speaker 2: They were hired by as much as four percent earlier 8 00:00:32,520 --> 00:00:34,800 Speaker 2: in the session, more than four percent earlier in the session. 9 00:00:34,800 --> 00:00:38,920 Speaker 2: This after the company reported earnings yesterday. Not a lot 10 00:00:38,960 --> 00:00:41,159 Speaker 2: of great news in the numbers that came out, some 11 00:00:41,200 --> 00:00:43,720 Speaker 2: real weakness in China and the iPhone. We're going to 12 00:00:43,800 --> 00:00:46,479 Speaker 2: talk about all that in just a minute. First, though, 13 00:00:46,880 --> 00:00:49,640 Speaker 2: we got to talk to Mark German about this Bloomberg 14 00:00:49,680 --> 00:00:52,120 Speaker 2: News exclusive that he reported just in the last couple 15 00:00:52,120 --> 00:00:56,000 Speaker 2: of hours. Mark German is chief Technology correspondent. He joins 16 00:00:56,040 --> 00:00:59,120 Speaker 2: us from Los Angeles. Mark, you came out just in 17 00:00:59,120 --> 00:01:01,360 Speaker 2: the last hour with this story about some big news 18 00:01:01,360 --> 00:01:05,360 Speaker 2: Apple canceling this sort of meta glasses competitor. What are 19 00:01:05,360 --> 00:01:06,080 Speaker 2: the details here? 20 00:01:07,000 --> 00:01:08,640 Speaker 3: Thanks for having me. I mean, as we know, the 21 00:01:08,640 --> 00:01:12,960 Speaker 3: Holy Grail and the mixed reality industry are augmented reality glasses, 22 00:01:13,000 --> 00:01:15,000 Speaker 3: and so Apple's been working on this for some time. 23 00:01:15,360 --> 00:01:18,119 Speaker 3: Obviously the vision pro it's a technical and engineering marble, 24 00:01:18,200 --> 00:01:21,200 Speaker 3: but a commercial failure. Even the people who paid four 25 00:01:21,240 --> 00:01:24,400 Speaker 3: thousand dollars for it really aren't using it. So looking 26 00:01:24,440 --> 00:01:26,320 Speaker 3: for the next big thing in the MR space, and 27 00:01:26,480 --> 00:01:29,080 Speaker 3: that is AR glasses. So the original vision was a 28 00:01:29,160 --> 00:01:31,319 Speaker 3: lightweight pair of glasses that you connect to the phone, 29 00:01:31,640 --> 00:01:34,720 Speaker 3: use the phone's chip, use the phone's operating system to 30 00:01:34,760 --> 00:01:37,360 Speaker 3: power some of it, the battery. That had too many 31 00:01:37,440 --> 00:01:40,840 Speaker 3: technical hurdles to overcome, so they pivoted to making MAC glasses. 32 00:01:40,840 --> 00:01:42,919 Speaker 3: So AAR glasses that you can connect to your Mac 33 00:01:43,120 --> 00:01:47,280 Speaker 3: obviously beef your battery, more processing power, additional engines for 34 00:01:47,360 --> 00:01:50,280 Speaker 3: graphics in AI. But now they've pulled the plug on that. 35 00:01:50,320 --> 00:01:54,000 Speaker 3: Apple is abandoning Project N one zero seven. That's what 36 00:01:54,040 --> 00:01:57,240 Speaker 3: they call it internally, that's their augmented reality MAC glasses. 37 00:01:57,880 --> 00:01:59,560 Speaker 3: And now back to the drawing board. They need to 38 00:01:59,560 --> 00:02:02,240 Speaker 3: figure out future for this platform. They've spent tens of 39 00:02:02,240 --> 00:02:05,680 Speaker 3: billions of dollars investing in augmented and virtual reality, the 40 00:02:05,720 --> 00:02:09,320 Speaker 3: whole XR pipeline. Right now, I would say this is 41 00:02:09,360 --> 00:02:12,639 Speaker 3: not great they're lost, and it's it's it's not good. 42 00:02:12,760 --> 00:02:14,720 Speaker 3: It's not good, especially when you realize how behind they 43 00:02:14,720 --> 00:02:15,400 Speaker 3: are on AI too. 44 00:02:15,600 --> 00:02:17,040 Speaker 2: Well, this is it's funny because we're talking about this 45 00:02:17,080 --> 00:02:19,000 Speaker 2: with Caroly. I had yesterday like this could be you 46 00:02:19,080 --> 00:02:20,600 Speaker 2: know where I was saying, this could be an option 47 00:02:20,680 --> 00:02:23,760 Speaker 2: for them because Meta glasses have been somewhat successful. I mean, 48 00:02:23,800 --> 00:02:26,120 Speaker 2: they're not selling off the shelves and they're you know, 49 00:02:26,120 --> 00:02:28,519 Speaker 2: it's still early technology. And Carolin made the point, well, 50 00:02:28,680 --> 00:02:30,840 Speaker 2: you know, Apple's not necessarily first car and Carol made 51 00:02:30,880 --> 00:02:32,840 Speaker 2: this point too, Apples not necessarily first to stuff, but 52 00:02:33,120 --> 00:02:36,359 Speaker 2: oftentimes they're their best to stuff. So I assume that yes, 53 00:02:36,480 --> 00:02:39,560 Speaker 2: they would come out with some sort of wearable piece 54 00:02:39,560 --> 00:02:42,480 Speaker 2: of eyewear that would really change the game. Does that 55 00:02:42,560 --> 00:02:44,360 Speaker 2: mean they're they're just done with this? 56 00:02:45,520 --> 00:02:47,480 Speaker 3: We're talking about two different things here, right, So we're 57 00:02:47,480 --> 00:02:51,440 Speaker 3: talking about augmented reality glasses versus smart glasses. Right, So 58 00:02:51,520 --> 00:02:55,119 Speaker 3: the Meta raye ND glasses, those don't have displays, those 59 00:02:55,160 --> 00:02:58,160 Speaker 3: don't have augmented reality. Right. Meta is not going to 60 00:02:58,200 --> 00:03:00,880 Speaker 3: have AR glasses on the market until twenty seven on 61 00:03:00,960 --> 00:03:03,400 Speaker 3: the earliest, So we're still two three years out from that. 62 00:03:03,520 --> 00:03:05,880 Speaker 3: Actually happening now. I do think there is a world 63 00:03:05,919 --> 00:03:08,320 Speaker 3: where Apple could come out with some fashionable glasses that 64 00:03:08,400 --> 00:03:12,160 Speaker 3: have cameras and speakers and batteries not built in in 65 00:03:12,280 --> 00:03:15,120 Speaker 3: order to compete with the Meta ray bound glasses. That 66 00:03:15,200 --> 00:03:17,880 Speaker 3: being said, Meta will be adding a small little display 67 00:03:18,000 --> 00:03:20,200 Speaker 3: into their glasses next year. It's not an AAR display, 68 00:03:20,240 --> 00:03:21,519 Speaker 3: but it's going to be something similar to what you 69 00:03:21,520 --> 00:03:23,640 Speaker 3: saw from Google Glass a decade ago. Those are going 70 00:03:23,680 --> 00:03:26,519 Speaker 3: to be quite expensive. But certainly this is not a 71 00:03:26,560 --> 00:03:28,960 Speaker 3: good moment for Apple. This is I would say, this 72 00:03:29,040 --> 00:03:31,880 Speaker 3: is terrible. I quite frankly wouldn't be surprised if they 73 00:03:31,919 --> 00:03:35,200 Speaker 3: all but abandon their mixed reality efforts, but also want 74 00:03:35,200 --> 00:03:37,120 Speaker 3: to be surprised if they pull things together and they 75 00:03:37,120 --> 00:03:40,120 Speaker 3: try to get a model out in the future. I 76 00:03:40,120 --> 00:03:42,040 Speaker 3: would say three to five years from now is the 77 00:03:42,480 --> 00:03:46,240 Speaker 3: time horizon on an Apple standalone augmented reality glasses. So 78 00:03:46,720 --> 00:03:48,720 Speaker 3: these glasses that we're talking about today are something a 79 00:03:48,720 --> 00:03:51,000 Speaker 3: little bit in between what Meta has on the market 80 00:03:51,040 --> 00:03:56,040 Speaker 3: today and the eventual vision. Right, So standalone glasses the 81 00:03:56,080 --> 00:03:59,240 Speaker 3: glasses themselves, they have the displays, they have the OS, 82 00:03:59,280 --> 00:04:01,120 Speaker 3: they have the battery read the heap of the engine. 83 00:04:01,200 --> 00:04:02,720 Speaker 3: You don't need a connected to the phone. It's a 84 00:04:02,720 --> 00:04:05,960 Speaker 3: phone replacement. Apples is a bit of a mix. It 85 00:04:05,960 --> 00:04:08,600 Speaker 3: has the lenses, it has some onboard processing power, some 86 00:04:08,640 --> 00:04:10,480 Speaker 3: of the guts and the glasses, but you're going over 87 00:04:10,520 --> 00:04:14,000 Speaker 3: a cable and using mostly what's inside of the computer. 88 00:04:14,400 --> 00:04:14,600 Speaker 4: Right. 89 00:04:15,600 --> 00:04:18,880 Speaker 3: Meta has no displays. It's phone SYNCD what they're launching 90 00:04:18,920 --> 00:04:21,440 Speaker 3: in twenty twenty seven. This is their Orion prototype they 91 00:04:21,480 --> 00:04:24,479 Speaker 3: showed in October of twenty twenty four, just a few 92 00:04:24,480 --> 00:04:27,560 Speaker 3: months ago, that wirelessly pairs with a puck that you 93 00:04:27,640 --> 00:04:30,800 Speaker 3: keep in your pocket and a wrist device and between 94 00:04:30,800 --> 00:04:33,400 Speaker 3: those three mechanisms that's the whole operation of the device. 95 00:04:33,480 --> 00:04:36,039 Speaker 3: But what we really want are fully standalone glasses and 96 00:04:36,360 --> 00:04:39,240 Speaker 3: quite a ways out from that, all right, what's going. 97 00:04:39,120 --> 00:04:39,719 Speaker 5: On at Apple? 98 00:04:39,839 --> 00:04:41,640 Speaker 6: Like, are they just like is this just a you know, 99 00:04:41,640 --> 00:04:45,159 Speaker 6: they're having a tough kind of design moment or what's 100 00:04:45,200 --> 00:04:47,880 Speaker 6: going on that they are It sounds like kind of 101 00:04:47,920 --> 00:04:49,320 Speaker 6: completely walking away from it. 102 00:04:50,480 --> 00:04:53,680 Speaker 3: This is a company that couldn't figure out a self 103 00:04:53,720 --> 00:04:57,560 Speaker 3: driving car. This is a company that hasn't been able 104 00:04:57,640 --> 00:05:00,200 Speaker 3: to figure out AI. This is a company that is 105 00:05:00,200 --> 00:05:03,240 Speaker 3: not able to figure out ar VR. For the time being. 106 00:05:03,880 --> 00:05:05,600 Speaker 3: The good news for them is they're still selling a 107 00:05:05,640 --> 00:05:07,920 Speaker 3: lot of iPhones and that's going to allow them to 108 00:05:08,000 --> 00:05:10,880 Speaker 3: keep having money to throw at R and D budgets 109 00:05:10,880 --> 00:05:12,520 Speaker 3: and try to figure something out. And I think they 110 00:05:12,520 --> 00:05:15,159 Speaker 3: eventually will, but it's a scary time right now. 111 00:05:15,279 --> 00:05:16,360 Speaker 7: I can hear of you. 112 00:05:17,800 --> 00:05:19,599 Speaker 3: Okay, Well, there's a lot of interest for a major 113 00:05:19,640 --> 00:05:22,120 Speaker 3: new product, and there's just not It just isn't something. 114 00:05:22,320 --> 00:05:24,680 Speaker 3: It's about re skinning the existing widgets. They're going to 115 00:05:24,800 --> 00:05:29,280 Speaker 3: have thinner iPhones, foldable iPhones, all sorts of stuff, smart 116 00:05:29,279 --> 00:05:32,360 Speaker 3: home appliances, foldable iPads. But in terms of a revolution, 117 00:05:32,720 --> 00:05:33,440 Speaker 3: we're far from it. 118 00:05:33,600 --> 00:05:35,919 Speaker 6: But I mean, you know what's going on inside? Are 119 00:05:35,960 --> 00:05:38,040 Speaker 6: they just waiting mark for other people to kind of 120 00:05:38,040 --> 00:05:40,400 Speaker 6: figure some things out before they kind of jump on board, 121 00:05:40,720 --> 00:05:45,240 Speaker 6: or do they not have the right people engineers, design 122 00:05:45,320 --> 00:05:48,120 Speaker 6: folks like, like, what is it that's missing? Maybe in 123 00:05:48,160 --> 00:05:49,800 Speaker 6: the mojo of Apple of today. 124 00:05:50,960 --> 00:05:53,599 Speaker 3: They've lost a lot of their visionaries, right, they lost 125 00:05:53,640 --> 00:05:56,520 Speaker 3: a lot of their top engineering talent over the last 126 00:05:56,520 --> 00:06:00,320 Speaker 3: several years. It's really about you know, vision and willing 127 00:06:00,360 --> 00:06:03,120 Speaker 3: to take bold risks to accomplish the next big thing. 128 00:06:03,520 --> 00:06:05,359 Speaker 3: They didn't want to take the bold risk getting a 129 00:06:05,400 --> 00:06:07,920 Speaker 3: car out. Fine, they took the bold risk getting the 130 00:06:08,000 --> 00:06:10,360 Speaker 3: vision pro out, but that took a little too long 131 00:06:11,000 --> 00:06:12,680 Speaker 3: and it was a bit of a failure at least 132 00:06:12,720 --> 00:06:14,920 Speaker 3: till now. I mean, I think with the proper marketing 133 00:06:14,960 --> 00:06:17,680 Speaker 3: and the proper price points, they'll be okay. But at 134 00:06:17,680 --> 00:06:19,359 Speaker 3: some point they're going to have to figure some stuff 135 00:06:19,360 --> 00:06:20,480 Speaker 3: out and make some hard decisions. 136 00:06:21,680 --> 00:06:23,480 Speaker 2: You said, Apple is still selling a lot of iPhones. 137 00:06:23,480 --> 00:06:25,720 Speaker 2: We know that, but they're not selling as many as 138 00:06:25,760 --> 00:06:29,120 Speaker 2: analysts thought they would sell, especially, Okay, so. 139 00:06:29,720 --> 00:06:33,320 Speaker 3: I will let's just be honest here, right, Like the 140 00:06:33,400 --> 00:06:37,000 Speaker 3: analysts come up with these numbers, they come up with 141 00:06:37,080 --> 00:06:42,360 Speaker 3: these forecasts, right, and then Apple announces a certain number, right, 142 00:06:42,440 --> 00:06:45,360 Speaker 3: and that either beats the number from the forecasts or doesn't. 143 00:06:45,600 --> 00:06:45,760 Speaker 4: Right. 144 00:06:46,160 --> 00:06:49,760 Speaker 3: But it's not like you're comparing Apple numbers to Apple numbers. 145 00:06:49,800 --> 00:06:53,080 Speaker 3: You're comparing Apple numbers to numbers that a bunch of 146 00:06:53,080 --> 00:06:56,239 Speaker 3: analysts came up with themselves, right. And so the question 147 00:06:56,360 --> 00:06:58,240 Speaker 3: is where are they getting this data from? 148 00:06:58,480 --> 00:06:58,680 Speaker 4: Right? 149 00:06:58,800 --> 00:07:01,040 Speaker 3: Why do we think that's how many they would have sold? 150 00:07:01,360 --> 00:07:03,480 Speaker 3: Is it how many they should have sold? How many 151 00:07:03,560 --> 00:07:05,880 Speaker 3: they thought they were going to sell? Right? So I 152 00:07:05,920 --> 00:07:09,000 Speaker 3: do think there are some fundamental questions about the whole 153 00:07:09,000 --> 00:07:14,280 Speaker 3: comparison between analyst estimates and what really were sold. I 154 00:07:14,440 --> 00:07:18,080 Speaker 3: personally think the better metric is how many they sold 155 00:07:18,200 --> 00:07:20,240 Speaker 3: versus how many they sold in the year prior. Are 156 00:07:20,240 --> 00:07:22,920 Speaker 3: they showing growth? What percentage of growth would we have 157 00:07:23,120 --> 00:07:26,440 Speaker 3: liked to see? Right? In terms of China, I think 158 00:07:26,480 --> 00:07:29,960 Speaker 3: that's more of a clear cut example of their performance. Right, 159 00:07:30,160 --> 00:07:32,840 Speaker 3: they dipped three billion dollars year. Every year, they're down 160 00:07:32,920 --> 00:07:36,040 Speaker 3: seven billion dollars compared to two or three years ago 161 00:07:36,080 --> 00:07:38,120 Speaker 3: in the holiday season. Right, So that's a bit more 162 00:07:38,160 --> 00:07:40,760 Speaker 3: cut and dry. The China things extremely concerning. I think 163 00:07:41,520 --> 00:07:44,000 Speaker 3: the iPhone to me was actually pretty good. 164 00:07:44,320 --> 00:07:46,200 Speaker 6: I mean they're still selling one hundred and twenty four 165 00:07:46,200 --> 00:07:48,920 Speaker 6: billion dollars worth of stuff. Like I always think about 166 00:07:48,920 --> 00:07:50,840 Speaker 6: this mark when the numbers cross and we all kind 167 00:07:50,840 --> 00:07:53,720 Speaker 6: of just throw them out there. I mean, they still 168 00:07:54,080 --> 00:07:56,880 Speaker 6: sell a ton of stuff. That's just a quarterly number. 169 00:07:58,120 --> 00:07:59,760 Speaker 3: Yeah, that's a lot. That's a four percent year of 170 00:07:59,840 --> 00:08:02,440 Speaker 3: year growth. That's good, right. I Mean we were at 171 00:08:02,440 --> 00:08:04,240 Speaker 3: a time period about a year and a half ago 172 00:08:04,320 --> 00:08:06,080 Speaker 3: we talked a lot of bit about this about how 173 00:08:06,080 --> 00:08:09,040 Speaker 3: they were declining on an annual basis quarter after quarter, right, 174 00:08:09,320 --> 00:08:11,160 Speaker 3: that was not a great time for them. But now 175 00:08:11,160 --> 00:08:13,000 Speaker 3: we're back in growth mode and that's why the stock 176 00:08:13,120 --> 00:08:14,960 Speaker 3: is up today. It reflects that they have growth in 177 00:08:14,960 --> 00:08:16,480 Speaker 3: the holiday perier. They're going to grow again in the 178 00:08:16,840 --> 00:08:19,600 Speaker 3: March quarter. So I think there are positive signs on 179 00:08:19,640 --> 00:08:22,760 Speaker 3: an overall basis. In terms of the products, I think 180 00:08:22,880 --> 00:08:27,360 Speaker 3: the Mac and the iPad were sneaky good hits recently. 181 00:08:27,600 --> 00:08:29,560 Speaker 3: And you know we've talked about John Turnis, the head 182 00:08:29,560 --> 00:08:33,200 Speaker 3: of Mac iPad engineering, right being in line to be 183 00:08:33,240 --> 00:08:35,320 Speaker 3: the future CEO. I mean, I think that we're just 184 00:08:35,400 --> 00:08:38,920 Speaker 3: keep pushing in that direction by having the main stays 185 00:08:38,960 --> 00:08:41,720 Speaker 3: in the Apple product pipeline doing as well as they're doing, right. 186 00:08:41,800 --> 00:08:44,360 Speaker 3: I think the questions about Apple are the periphreeze. 187 00:08:44,440 --> 00:08:47,160 Speaker 2: Yeah, how about that services revenue? Though that came in 188 00:08:47,200 --> 00:08:48,520 Speaker 2: above estimates. 189 00:08:48,559 --> 00:08:52,680 Speaker 3: It was great. Yeah, app store, cloud services, advertising business 190 00:08:52,679 --> 00:08:55,079 Speaker 3: at Apple is growing quite steadily, so that's helping on 191 00:08:55,120 --> 00:08:58,040 Speaker 3: the margins for them too. Obviously there's some fear around 192 00:08:58,080 --> 00:09:01,120 Speaker 3: the app store outside of the US the regulatory environments, 193 00:09:01,120 --> 00:09:04,120 Speaker 3: but it even seems like that's tapering down to right. 194 00:09:04,320 --> 00:09:07,440 Speaker 3: So services I think quite the positive. Can you imagine 195 00:09:07,440 --> 00:09:09,880 Speaker 3: if Apple didn't get into the services business and did 196 00:09:09,880 --> 00:09:12,640 Speaker 3: the full potion to services about five years ago, where 197 00:09:12,679 --> 00:09:16,280 Speaker 3: they would be right now. I mean, that whole initiative 198 00:09:16,440 --> 00:09:18,800 Speaker 3: has really I'm not going to say saved the company, 199 00:09:18,840 --> 00:09:20,800 Speaker 3: because it's hard to save a company that's making one 200 00:09:20,880 --> 00:09:23,800 Speaker 3: hundred and twenty billion a year, but it's done wonders 201 00:09:23,800 --> 00:09:24,120 Speaker 3: for them. 202 00:09:24,679 --> 00:09:26,840 Speaker 6: Well, Tim and I talk about you know, we look 203 00:09:26,880 --> 00:09:29,520 Speaker 6: at our monthly statements or you know how much I 204 00:09:29,640 --> 00:09:32,760 Speaker 6: pay out to Apple on the services side, not even 205 00:09:32,800 --> 00:09:35,600 Speaker 6: on the hardware side. It's pretty remarkable. Hey, there's a 206 00:09:35,600 --> 00:09:37,680 Speaker 6: couple of other headlines that have come out over the 207 00:09:37,720 --> 00:09:42,200 Speaker 6: past week or so. Apple and Spacelink to support Starlink 208 00:09:42,200 --> 00:09:45,520 Speaker 6: network of iPhones, some different things coming out. 209 00:09:45,520 --> 00:09:46,920 Speaker 5: What do we need to know about that? 210 00:09:48,440 --> 00:09:50,480 Speaker 3: So this is an interesting one. So T Mobile in 211 00:09:50,520 --> 00:09:52,719 Speaker 3: the US is now rolling out a beta version of 212 00:09:52,800 --> 00:09:57,000 Speaker 3: their Starlink partnership with SpaceX. And even though Apple already 213 00:09:57,040 --> 00:10:00,679 Speaker 3: has its own global network for satellite infrastructure through Global Star, 214 00:10:00,960 --> 00:10:02,920 Speaker 3: if you're a T Mobile customer in the US, you're 215 00:10:02,920 --> 00:10:05,600 Speaker 3: gonna have a great experience using Starlink on your iPhone 216 00:10:06,240 --> 00:10:08,640 Speaker 3: when this rolls out officially in the coming months, and 217 00:10:08,679 --> 00:10:12,680 Speaker 3: so I'm very bullish on satellite networking, very bullish on 218 00:10:12,720 --> 00:10:15,960 Speaker 3: the future of satellite connectivity for devices. I think this 219 00:10:16,120 --> 00:10:18,760 Speaker 3: is going to be a great thing for iPhone customers, 220 00:10:18,800 --> 00:10:22,440 Speaker 3: but also are Android customers. Why this was newsworthy is 221 00:10:22,440 --> 00:10:25,360 Speaker 3: because all the disclosures to date is that this would 222 00:10:25,400 --> 00:10:29,120 Speaker 3: be a Android specific technology. But getting it on the 223 00:10:29,160 --> 00:10:31,240 Speaker 3: Apple ecosystem I think is great and so as an 224 00:10:31,559 --> 00:10:35,360 Speaker 3: as an Apple customer, I'm excited to take it first. 225 00:10:35,360 --> 00:10:40,959 Speaker 5: Man, I'm a starlink customer. It's pretty amazing. It's pretty amazing. Anyway, 226 00:10:40,960 --> 00:10:41,800 Speaker 5: go ahead, Hey. 227 00:10:41,640 --> 00:10:44,360 Speaker 2: Mark, just about forty five seconds left. We haven't gotten 228 00:10:44,400 --> 00:10:46,920 Speaker 2: your take on the deep seek news earlier this week. 229 00:10:46,960 --> 00:10:48,280 Speaker 2: How do you see that relating to Apple? 230 00:10:49,520 --> 00:10:53,560 Speaker 3: Okay, so twofold. On one hand, it validates Apple's model 231 00:10:54,040 --> 00:10:58,760 Speaker 3: for artificial intelligence, right, But on the other hand, Apple's 232 00:10:58,800 --> 00:11:01,320 Speaker 3: model for artificial intelligence this is not very good. And 233 00:11:01,360 --> 00:11:04,240 Speaker 3: you have this random small company that nobody ever heard 234 00:11:04,280 --> 00:11:08,720 Speaker 3: of until last weekend eating Apple's lunch, right, So it 235 00:11:08,840 --> 00:11:11,280 Speaker 3: validates it, but also shows how far behind they are 236 00:11:11,440 --> 00:11:15,559 Speaker 3: at the same time, So I don't think it's a 237 00:11:15,559 --> 00:11:19,480 Speaker 3: great thing for Apple. I'm telling you Apple needs to 238 00:11:19,480 --> 00:11:21,440 Speaker 3: figure something out on their AI stuff. I just don't 239 00:11:21,520 --> 00:11:25,040 Speaker 3: understand how a company this resource rich, with the right 240 00:11:25,080 --> 00:11:28,080 Speaker 3: people in place, have been able to just completely miss 241 00:11:28,160 --> 00:11:30,720 Speaker 3: the boat on the biggest new technology since the Internet. 242 00:11:31,200 --> 00:11:32,800 Speaker 5: Well unbelievable. 243 00:11:32,880 --> 00:11:34,720 Speaker 6: Like I said, the tone in your voice, I haven't 244 00:11:34,720 --> 00:11:37,839 Speaker 6: heard that for a while. When it comes to Apple specifically, 245 00:11:38,440 --> 00:11:39,320 Speaker 6: he is Mark German. 246 00:11:39,440 --> 00:11:39,960 Speaker 5: He's amazing. 247 00:11:39,960 --> 00:11:43,000 Speaker 6: Bloomberg News Chief Technology correspond be sure too to check 248 00:11:43,000 --> 00:11:45,920 Speaker 6: out his weekly newsletter. You can find it at Bloomberg 249 00:11:45,960 --> 00:11:48,120 Speaker 6: dot com and of course I always on the Bloomberg terminal. 250 00:11:48,760 --> 00:11:52,320 Speaker 8: You're listening to the Bloomberg Business Week podcast. Catch us 251 00:11:52,400 --> 00:11:55,839 Speaker 8: live weekday afternoons from two to five pm Eastern. Listen 252 00:11:55,880 --> 00:11:59,360 Speaker 8: on Applecarplay and Android Auto with the Bloomberg Business app, 253 00:11:59,559 --> 00:12:01,719 Speaker 8: or just live on YouTube. 254 00:12:02,280 --> 00:12:06,280 Speaker 6: President Donald Trump intends to move ahead with plans on Saturday. 255 00:12:05,720 --> 00:12:07,559 Speaker 5: Tomorrow to impose twenty five. 256 00:12:07,400 --> 00:12:10,200 Speaker 6: Percent tariffs on Mexico and Canada and a ten percent 257 00:12:10,280 --> 00:12:14,079 Speaker 6: levee on China. This was coming from the White House earlier, 258 00:12:14,160 --> 00:12:16,360 Speaker 6: the White House Press Secretary commenting on it. 259 00:12:17,120 --> 00:12:17,760 Speaker 9: I saw that. 260 00:12:17,679 --> 00:12:20,160 Speaker 10: Report and it is false. I was just with the 261 00:12:20,160 --> 00:12:23,040 Speaker 10: President in the Oval Office, and I can confirm that 262 00:12:23,120 --> 00:12:27,120 Speaker 10: Tomorrow the February first deadline that President Trump put into place, 263 00:12:27,160 --> 00:12:30,440 Speaker 10: that a statement several weeks ago continues, the President will 264 00:12:30,480 --> 00:12:34,640 Speaker 10: be implementing tomorrow a twenty five percent tariffs on Mexico, 265 00:12:35,000 --> 00:12:38,720 Speaker 10: twenty five percent tariffs on Canada, and a ten percent 266 00:12:38,880 --> 00:12:39,880 Speaker 10: tariff on China. 267 00:12:40,400 --> 00:12:41,920 Speaker 6: All right, That, of course is the White House Press 268 00:12:41,920 --> 00:12:44,559 Speaker 6: Secretary Caroline Levitt earlier today when she said, I saw 269 00:12:44,600 --> 00:12:47,080 Speaker 6: that report and it was false. There were earlier reports 270 00:12:47,080 --> 00:12:51,000 Speaker 6: today that these tariffs would not be imposed until March first, 271 00:12:51,080 --> 00:12:53,400 Speaker 6: so she was clarifying that no, yes, indeed, it's going 272 00:12:53,480 --> 00:12:56,520 Speaker 6: to start tomorrow, So certainly something that we're following. We 273 00:12:56,559 --> 00:12:59,760 Speaker 6: also let some US economic news this morning on inflation. 274 00:13:00,280 --> 00:13:02,960 Speaker 6: The FED, of course watches very closely. So let's get 275 00:13:02,960 --> 00:13:05,440 Speaker 6: into it. Let's tie it all together in terms of 276 00:13:05,440 --> 00:13:07,120 Speaker 6: what it means for the US economy and really the 277 00:13:07,120 --> 00:13:10,160 Speaker 6: global economy. With us right now is Molly Smith, Bloomberg 278 00:13:10,200 --> 00:13:13,080 Speaker 6: News Global Economy Reporter. She's right here with Tim and 279 00:13:13,080 --> 00:13:15,880 Speaker 6: me in studio and out there in our DC bureau 280 00:13:15,880 --> 00:13:19,000 Speaker 6: where so much news is coming lately, Bloomberg News Global 281 00:13:19,000 --> 00:13:21,640 Speaker 6: Economy Reporter and a current Hey, Molly, I do want 282 00:13:21,679 --> 00:13:22,440 Speaker 6: to start with you. 283 00:13:22,840 --> 00:13:24,480 Speaker 5: We did get inflation data, we got. 284 00:13:24,320 --> 00:13:27,480 Speaker 6: To read on consumers in terms of spending incomes, and 285 00:13:27,600 --> 00:13:30,080 Speaker 6: yet this is all against the backdrop, like I don't know, 286 00:13:30,120 --> 00:13:32,120 Speaker 6: do we not even care about any of that anymore? 287 00:13:32,160 --> 00:13:34,040 Speaker 6: Because tariffs are now front and center. 288 00:13:34,160 --> 00:13:34,680 Speaker 9: It really is. 289 00:13:34,760 --> 00:13:37,760 Speaker 11: I mean, I honestly even was forgetting that we already 290 00:13:37,840 --> 00:13:38,840 Speaker 11: had pc this morning. 291 00:13:38,920 --> 00:13:40,040 Speaker 9: So much has happened since then. 292 00:13:40,160 --> 00:13:40,600 Speaker 5: Good point. 293 00:13:40,920 --> 00:13:43,520 Speaker 11: So and of course this data for PCE is back 294 00:13:43,559 --> 00:13:46,920 Speaker 11: in December, so I mean tomorrow, February first, like man like, 295 00:13:46,960 --> 00:13:49,720 Speaker 11: December is really old news right now. And we also 296 00:13:49,840 --> 00:13:52,240 Speaker 11: kind of had a good sense of how this data 297 00:13:52,320 --> 00:13:54,400 Speaker 11: was going to come in because we got the GDP 298 00:13:54,679 --> 00:13:57,720 Speaker 11: data yesterday, which is quarterly and wraps a lot of 299 00:13:57,720 --> 00:14:00,280 Speaker 11: this stuff into it. So not too many surprise is 300 00:14:00,280 --> 00:14:02,920 Speaker 11: coming out of the December data, but just wrapping up 301 00:14:02,960 --> 00:14:06,080 Speaker 11: what we had a sense of that inflation is well, 302 00:14:06,400 --> 00:14:08,520 Speaker 11: maybe coming down depending on how you look at it, 303 00:14:08,559 --> 00:14:10,800 Speaker 11: but in a lot of ways still moving sideways, and 304 00:14:10,840 --> 00:14:13,960 Speaker 11: consumer spending tough to bet against the consumer, even if 305 00:14:14,000 --> 00:14:17,000 Speaker 11: it looks like there are signs that disposable incomes are 306 00:14:17,040 --> 00:14:20,480 Speaker 11: slowing in the savings rate is dipping, so reasonable to 307 00:14:20,560 --> 00:14:23,200 Speaker 11: think that, you know, consumer spending would start to slow, 308 00:14:23,280 --> 00:14:26,880 Speaker 11: especially if tariffs are enacted, if that is meaningfully going 309 00:14:26,880 --> 00:14:29,920 Speaker 11: to increase consumer prices. But it's just really hard to 310 00:14:29,920 --> 00:14:33,480 Speaker 11: bet against the American consumer. That's tales all the time. 311 00:14:33,320 --> 00:14:36,480 Speaker 6: And a good that we have you here with Molly Smith, 312 00:14:37,120 --> 00:14:39,080 Speaker 6: and you look at the global economy, you look at 313 00:14:39,080 --> 00:14:43,400 Speaker 6: the US economy. Tarriffs twenty five percent on Mexico, Canada, 314 00:14:43,480 --> 00:14:46,320 Speaker 6: ten percent on China. I mean, these are the US's 315 00:14:46,720 --> 00:14:49,960 Speaker 6: largest trading partners. There's a lot that goes back and forth. 316 00:14:51,000 --> 00:14:54,520 Speaker 6: Your initial read on if this sticks, if it sticks 317 00:14:54,560 --> 00:14:56,560 Speaker 6: around for a while, what it could mean. 318 00:14:57,240 --> 00:14:59,560 Speaker 12: Well, certainly a big headline, add a depressed briefing int 319 00:14:59,560 --> 00:15:03,120 Speaker 12: White High. Even though the President has warned about these tariffs, 320 00:15:03,800 --> 00:15:07,320 Speaker 12: imposing them tomorrow for everyone, I think is probably at 321 00:15:07,320 --> 00:15:09,560 Speaker 12: the shock end of the scale for most economists. But 322 00:15:09,600 --> 00:15:11,440 Speaker 12: still we have to wait and see to your point, 323 00:15:11,920 --> 00:15:14,600 Speaker 12: just what exactly our details in this The Press Secretary 324 00:15:14,600 --> 00:15:16,600 Speaker 12: did say will be twenty five percent on Canada and 325 00:15:16,600 --> 00:15:19,000 Speaker 12: Mexico and the ten percent on China. But we need 326 00:15:19,000 --> 00:15:20,880 Speaker 12: to know are we talking about all of the goods, 327 00:15:20,880 --> 00:15:23,480 Speaker 12: the merchandise goods across the borders and come in from 328 00:15:23,520 --> 00:15:25,880 Speaker 12: those countries. We need to know will there be any 329 00:15:25,920 --> 00:15:29,720 Speaker 12: exemptions for some sectors? How long will these tariffs be 330 00:15:29,720 --> 00:15:32,239 Speaker 12: in place for I mean, will there be mitigating circumstances 331 00:15:32,240 --> 00:15:34,840 Speaker 12: where Canada and Mexico and China complete their case. So 332 00:15:34,880 --> 00:15:37,240 Speaker 12: there's lots of you know, devil in the detail on this, 333 00:15:37,360 --> 00:15:39,480 Speaker 12: but taking it at face value, it would be quite 334 00:15:39,520 --> 00:15:43,320 Speaker 12: a shock because you're talking about, you know, everything from food, 335 00:15:43,440 --> 00:15:46,680 Speaker 12: avocado's my colleagues are all about today, lumber crossing the 336 00:15:46,680 --> 00:15:49,840 Speaker 12: border from Canada, cars and car parts go back and 337 00:15:49,880 --> 00:15:53,120 Speaker 12: forth on both borders, and then of course when it 338 00:15:53,160 --> 00:15:55,600 Speaker 12: comes to the US and China. I mean, obviously, China's 339 00:15:55,600 --> 00:15:57,960 Speaker 12: the world's biggest trading nation. They're the factory of the world, 340 00:15:58,040 --> 00:16:00,560 Speaker 12: so you know, the whole gambit of can asumer goods 341 00:16:00,600 --> 00:16:03,160 Speaker 12: will be coming in from that side of things. Now, 342 00:16:03,160 --> 00:16:04,760 Speaker 12: you can argue to talk about how much of an 343 00:16:04,720 --> 00:16:06,680 Speaker 12: inbact ten percent would have, but I think the bigger 344 00:16:06,720 --> 00:16:08,840 Speaker 12: focus for now, the bigger folcus I think right now 345 00:16:08,920 --> 00:16:11,400 Speaker 12: is on that twenty five per cent level. Chann and sorry, 346 00:16:11,400 --> 00:16:12,600 Speaker 12: Canada and Mexico. 347 00:16:12,480 --> 00:16:15,320 Speaker 2: Well to that end, And I'm wondering who you think 348 00:16:15,360 --> 00:16:18,680 Speaker 2: absorbs the majority of these tariffs, especially those from Mexico 349 00:16:19,320 --> 00:16:22,440 Speaker 2: and from Canada. Does it, in your view, happen that 350 00:16:22,520 --> 00:16:25,040 Speaker 2: it's the consumer or is it the company where it 351 00:16:25,040 --> 00:16:27,080 Speaker 2: eats their bottom line who absorbs more Here. 352 00:16:27,920 --> 00:16:31,040 Speaker 12: So there are a few parts in this chain. Number one, 353 00:16:31,200 --> 00:16:34,160 Speaker 12: the question becomes, will the exporter or the producer selling 354 00:16:34,200 --> 00:16:38,120 Speaker 12: their product cut their prices to factor in the tariff. 355 00:16:38,160 --> 00:16:40,040 Speaker 12: That's one side of it. The other side of it 356 00:16:40,080 --> 00:16:43,840 Speaker 12: is will the buyer the importer absorb the tariff rather 357 00:16:43,920 --> 00:16:45,720 Speaker 12: than pass it on? You know, if they have good margins, 358 00:16:45,800 --> 00:16:47,880 Speaker 12: kind of take the tariff on board I rather than 359 00:16:47,880 --> 00:16:50,480 Speaker 12: pass on to consumers. But to your point, this is 360 00:16:50,480 --> 00:16:52,880 Speaker 12: where economists say the rubber hits the road. In truth, 361 00:16:53,240 --> 00:16:56,000 Speaker 12: you know, these companies don't have those margins. Nobody's going 362 00:16:56,040 --> 00:16:57,840 Speaker 12: to take a cut in their selling price. So these 363 00:16:57,880 --> 00:17:01,160 Speaker 12: prices will eventually be passed along to consumer, pass on 364 00:17:01,400 --> 00:17:04,640 Speaker 12: to main street. Now, the Treasury Secretary Scott Besson made 365 00:17:04,640 --> 00:17:08,560 Speaker 12: the point recently his hearing that there are mitigatting circumstances. 366 00:17:08,560 --> 00:17:10,359 Speaker 12: He made the point that it's strong dollar can offset 367 00:17:10,359 --> 00:17:12,800 Speaker 12: the impact of tariffs, and they say consumer patterns will 368 00:17:12,880 --> 00:17:15,679 Speaker 12: change anyway. They won't buy tariff goods or there are 369 00:17:15,680 --> 00:17:19,560 Speaker 12: ways around us. But you know, writ large, there's a 370 00:17:19,680 --> 00:17:23,520 Speaker 12: question mark for sure over the impact prices for consumers 371 00:17:23,560 --> 00:17:24,080 Speaker 12: from tariffs. 372 00:17:24,280 --> 00:17:25,880 Speaker 6: I do want to point out the tariffs would mark 373 00:17:25,920 --> 00:17:28,600 Speaker 6: the first wave of trade levies in Trump's new term, 374 00:17:28,720 --> 00:17:31,360 Speaker 6: and their impact will ripple well beyond Canada and Mexico 375 00:17:31,359 --> 00:17:34,040 Speaker 6: as other nations brace for the possibility that they may 376 00:17:34,080 --> 00:17:38,679 Speaker 6: be targeted next, and as US businesses await possible retaliatory measures. 377 00:17:38,720 --> 00:17:40,479 Speaker 6: And this is the one thing that it maybe stops 378 00:17:40,520 --> 00:17:43,119 Speaker 6: business from kind of moving ahead on something as they 379 00:17:43,119 --> 00:17:45,040 Speaker 6: try to figure out the impact of it. Molly, I 380 00:17:45,040 --> 00:17:47,600 Speaker 6: want to bring you back in here, because how much 381 00:17:47,720 --> 00:17:51,600 Speaker 6: can the US economy absorb if there is a bit 382 00:17:51,600 --> 00:17:54,479 Speaker 6: of a tariff war trade war here? And is it 383 00:17:54,520 --> 00:17:56,479 Speaker 6: more of an impact on growth or is it more 384 00:17:56,480 --> 00:17:57,760 Speaker 6: of an impact on inflation. 385 00:17:58,119 --> 00:17:59,879 Speaker 11: Well, that's what we had a story out this We 386 00:18:00,080 --> 00:18:03,679 Speaker 11: those just examining that exact question. And the conversation this 387 00:18:03,760 --> 00:18:06,960 Speaker 11: time around really has been about inflation. But that's because 388 00:18:07,320 --> 00:18:10,440 Speaker 11: inflation is you know, of course, has dominated the conversation 389 00:18:10,520 --> 00:18:13,560 Speaker 11: for the last couple of years here versus in twenty nineteen, 390 00:18:13,600 --> 00:18:16,680 Speaker 11: the first full year after Trump's first room taffs were enacted. 391 00:18:17,080 --> 00:18:19,800 Speaker 11: You know, the inflation quote problem then was that we 392 00:18:19,840 --> 00:18:22,479 Speaker 11: couldn't get up to two percent inflation, that it had 393 00:18:22,520 --> 00:18:24,920 Speaker 11: been running so low for so many years coming out 394 00:18:24,920 --> 00:18:28,040 Speaker 11: of the financial crisis. So it's a very different conversation 395 00:18:28,200 --> 00:18:31,040 Speaker 11: now versus back then. What was really the concern that 396 00:18:31,160 --> 00:18:34,119 Speaker 11: was starting to unfold was looking at how growth is 397 00:18:34,119 --> 00:18:36,800 Speaker 11: starting to slow down in response to tariffs, how business 398 00:18:36,840 --> 00:18:41,480 Speaker 11: investment is stalling, industrial production is contracting, those factory jobs 399 00:18:41,480 --> 00:18:44,159 Speaker 11: are actually not coming back here, and how these are 400 00:18:44,200 --> 00:18:47,159 Speaker 11: then going to be headwinds to growth. Of course, that 401 00:18:47,280 --> 00:18:49,960 Speaker 11: all got very soon overshadowed by the pandemic and we 402 00:18:50,000 --> 00:18:51,840 Speaker 11: didn't really get to see the full effects of it 403 00:18:51,920 --> 00:18:54,240 Speaker 11: play out, but it's a good lesson for this time around, 404 00:18:54,320 --> 00:18:57,199 Speaker 11: and that's what our story was looking at. As we 405 00:18:57,359 --> 00:19:00,480 Speaker 11: just recently got new transcripts from the FED. These are 406 00:19:00,880 --> 00:19:03,120 Speaker 11: verbatim closed door accounts that come out with a five 407 00:19:03,200 --> 00:19:05,800 Speaker 11: year lag from those meetings that were in twenty nineteen, 408 00:19:05,840 --> 00:19:08,040 Speaker 11: and we saw that it was really more the growth 409 00:19:08,080 --> 00:19:11,800 Speaker 11: concerns rather than inflation that dominated the conversation back then. 410 00:19:11,920 --> 00:19:13,359 Speaker 2: Well, speaking of the FED, there were a lot of 411 00:19:13,400 --> 00:19:15,720 Speaker 2: questions Molly to Fed chair J. Powell earlier this week 412 00:19:15,760 --> 00:19:19,480 Speaker 2: about Trump's proposed policies, and you know, just to paraphrase 413 00:19:19,480 --> 00:19:21,160 Speaker 2: a little bit, he basically said, well, we haven't seen 414 00:19:21,200 --> 00:19:24,280 Speaker 2: the policies enacted yet, so we can't really comment on them. 415 00:19:24,320 --> 00:19:27,439 Speaker 2: We don't have a roadmap for them necessarily. Now he's 416 00:19:27,480 --> 00:19:29,239 Speaker 2: now at the FED, they have their work cut out 417 00:19:29,320 --> 00:19:32,080 Speaker 2: for him because they know that these tariffs are starting tomorrow. 418 00:19:32,280 --> 00:19:34,120 Speaker 2: How does it change the conversation that they're having. 419 00:19:34,240 --> 00:19:36,800 Speaker 11: Well, I think the flat that honestly Powell has gotten, 420 00:19:37,160 --> 00:19:39,760 Speaker 11: you know from economists who have commented on this since 421 00:19:39,760 --> 00:19:42,760 Speaker 11: the FED meeting on Wednesday, is that the Fed you know, 422 00:19:43,080 --> 00:19:46,360 Speaker 11: communication up until Wednesday was we are data dependent. We're 423 00:19:46,359 --> 00:19:49,400 Speaker 11: going away to see how economic data evolves and that's 424 00:19:49,440 --> 00:19:52,200 Speaker 11: going to guide our policy and how we think about 425 00:19:52,200 --> 00:19:55,280 Speaker 11: the economy. But the message that a lot of people 426 00:19:55,440 --> 00:19:57,960 Speaker 11: heard on Wednesday was we're going to wait to see 427 00:19:57,960 --> 00:20:00,320 Speaker 11: what Donald Trump and his administration doesn't that that's going 428 00:20:00,359 --> 00:20:02,600 Speaker 11: to guid or understanding of the economy. Those are two 429 00:20:02,720 --> 00:20:06,000 Speaker 11: very different things, and that's I mean, it's still just 430 00:20:06,119 --> 00:20:08,919 Speaker 11: again was saying devil in the details, like there's just 431 00:20:08,960 --> 00:20:11,399 Speaker 11: still so much unknown with that, and of course, how 432 00:20:11,480 --> 00:20:13,600 Speaker 11: much the data of that is going to pick up 433 00:20:13,600 --> 00:20:14,320 Speaker 11: as well. 434 00:20:14,119 --> 00:20:16,560 Speaker 6: You know, and it makes me wonder about kind of 435 00:20:16,600 --> 00:20:20,920 Speaker 6: this Goldie Locke's economy, perhap, or just write economy that. 436 00:20:20,920 --> 00:20:23,560 Speaker 5: President Trump inherited in his second term. 437 00:20:23,600 --> 00:20:26,359 Speaker 6: You write about it in the BusinessWeek newsletter b W 438 00:20:26,600 --> 00:20:29,520 Speaker 6: Daily that is out on the Bloomberg and at Bloomberg 439 00:20:29,560 --> 00:20:30,119 Speaker 6: dot com. 440 00:20:30,200 --> 00:20:31,960 Speaker 5: I mean, he came into this. 441 00:20:33,320 --> 00:20:37,159 Speaker 6: Second term with a lot of things doing really well. 442 00:20:38,200 --> 00:20:40,320 Speaker 12: Yeah, like Molly was saying, there, you've got a very 443 00:20:40,359 --> 00:20:44,600 Speaker 12: strong consumer base at the moment, you have strong aggregate GDP. 444 00:20:45,359 --> 00:20:48,360 Speaker 12: The labor market is cooling, but still in pretty good order. 445 00:20:48,400 --> 00:20:51,320 Speaker 12: The Fed chairman himself, Jerome Pile, said this week that 446 00:20:51,359 --> 00:20:54,280 Speaker 12: the economy is in a good place. Of course, the 447 00:20:54,359 --> 00:20:57,840 Speaker 12: question becomes what sort of a bouncing act President Trump 448 00:20:57,880 --> 00:21:01,359 Speaker 12: faces under one hounds once a go ahead with these tariffs, 449 00:21:01,600 --> 00:21:05,200 Speaker 12: how might that impact consumer confidence and business confidence? For example, 450 00:21:05,440 --> 00:21:07,359 Speaker 12: he also has other programs going on, for example, a 451 00:21:07,359 --> 00:21:11,080 Speaker 12: deportation program, which is a question mark for businesses who 452 00:21:11,359 --> 00:21:14,800 Speaker 12: might be impacted by that labor source. But of course, 453 00:21:14,960 --> 00:21:17,560 Speaker 12: on President Trump's side, he would make the point that 454 00:21:17,560 --> 00:21:20,720 Speaker 12: they're also pushing for lower taxes that will spur investment. 455 00:21:20,960 --> 00:21:23,680 Speaker 12: They also say higher tariffs will bring manufacturing and investment 456 00:21:24,000 --> 00:21:26,920 Speaker 12: back to the US as well, and of course raise 457 00:21:27,000 --> 00:21:30,280 Speaker 12: revenues to offset fiscal depths. So they're making the case 458 00:21:30,280 --> 00:21:32,040 Speaker 12: for what they need to do. But I think at 459 00:21:32,080 --> 00:21:34,560 Speaker 12: the very least, it's a lot of policy change for 460 00:21:34,640 --> 00:21:36,640 Speaker 12: any economy to manage in a short space of time, 461 00:21:36,800 --> 00:21:37,960 Speaker 12: and I think there's going to be a lot to 462 00:21:38,000 --> 00:21:40,199 Speaker 12: assess that's coming at US pretty fast now in the 463 00:21:40,200 --> 00:21:41,160 Speaker 12: weeks and the months ahead. 464 00:21:41,200 --> 00:21:42,840 Speaker 6: We should point out too that, of course, this was 465 00:21:42,880 --> 00:21:46,919 Speaker 6: a major part of President Trump's campaign, his pledges to 466 00:21:46,920 --> 00:21:50,359 Speaker 6: impose sweeping tariffs. He is already ready ordered up reports 467 00:21:50,359 --> 00:21:53,280 Speaker 6: there do April first on overall trade issues in tariffs 468 00:21:53,480 --> 00:21:55,399 Speaker 6: that could lead him to trigger new levees or to 469 00:21:55,480 --> 00:21:58,600 Speaker 6: quit the Continental Trade pack giving negotiated with Canada and 470 00:21:58,640 --> 00:22:00,400 Speaker 6: Mexico in his first term. That agreement, by the way, 471 00:22:00,480 --> 00:22:02,800 Speaker 6: is up for review in twenty twenty six. One thing 472 00:22:02,840 --> 00:22:06,560 Speaker 6: I want to ask you, and you know, we filter 473 00:22:06,800 --> 00:22:10,680 Speaker 6: all of what comes out of Washington through the financial markets, 474 00:22:10,880 --> 00:22:13,520 Speaker 6: and we did see equity markets take a leg down 475 00:22:13,600 --> 00:22:16,960 Speaker 6: here on news from the White House Press secretary that 476 00:22:17,000 --> 00:22:20,800 Speaker 6: indeed there would be Tarr's forthcoming on Canada, on Mexico, 477 00:22:20,920 --> 00:22:24,600 Speaker 6: and on China. So I do wonder the president is 478 00:22:24,640 --> 00:22:27,120 Speaker 6: also sensitive to what happens in the financial markets. 479 00:22:27,400 --> 00:22:29,440 Speaker 5: What is the overall thinking. 480 00:22:29,080 --> 00:22:32,600 Speaker 6: Within the economic community in terms of how much of 481 00:22:32,640 --> 00:22:36,320 Speaker 6: it is bluster, how much of it is still campaigning, 482 00:22:36,359 --> 00:22:39,119 Speaker 6: how much of it is now a real activity, How 483 00:22:39,119 --> 00:22:40,919 Speaker 6: do you make sense of it, and how much do 484 00:22:41,000 --> 00:22:43,479 Speaker 6: we think that the president, once he sees some market reaction, 485 00:22:44,240 --> 00:22:45,679 Speaker 6: might reverse course. 486 00:22:46,760 --> 00:22:49,080 Speaker 12: It's certainly a moving target. I mean, to your point, 487 00:22:49,440 --> 00:22:51,840 Speaker 12: a lot of e commists say this is a negotiating tool. 488 00:22:52,119 --> 00:22:54,800 Speaker 12: Some of President Trump's own officials have made that point. 489 00:22:54,840 --> 00:22:57,480 Speaker 12: I mean, Howard Lipnik in his hearing for Commerce Secrety 490 00:22:57,560 --> 00:22:59,840 Speaker 12: made the point this week Tariff's circumbany us for negotiating. 491 00:23:00,119 --> 00:23:02,000 Speaker 12: Scott Beston has made that point. So there is a 492 00:23:02,080 --> 00:23:05,040 Speaker 12: kind of a feeling. Now. Critics would say that's complacency 493 00:23:05,320 --> 00:23:08,040 Speaker 12: among the market watching community, because President Trump has made 494 00:23:08,040 --> 00:23:11,040 Speaker 12: it very clear to the people during his campaign that 495 00:23:11,080 --> 00:23:13,240 Speaker 12: he's going to go ahead with tariffs, and he has 496 00:23:13,240 --> 00:23:16,280 Speaker 12: a mandate to do so. But then to your point, 497 00:23:16,440 --> 00:23:17,960 Speaker 12: there is a question, and this is what it goes 498 00:23:18,000 --> 00:23:20,480 Speaker 12: back to. Earlier the point is making about the economy 499 00:23:20,480 --> 00:23:22,200 Speaker 12: and the bouncing Act. There is there a point where 500 00:23:22,200 --> 00:23:25,479 Speaker 12: if markets responding negatively, would that put the brakes on 501 00:23:25,560 --> 00:23:27,920 Speaker 12: President Trump's use of tariffs. This is a talking point 502 00:23:27,920 --> 00:23:30,480 Speaker 12: among market watchers all the time. You'd have to say, 503 00:23:30,880 --> 00:23:33,960 Speaker 12: so far, given all the tariff talks since President Trump 504 00:23:34,000 --> 00:23:36,120 Speaker 12: won the election and come back to office, markets having 505 00:23:36,160 --> 00:23:39,439 Speaker 12: to really toss themselves upside down on this, certainly not 506 00:23:39,480 --> 00:23:42,199 Speaker 12: equity markets. There's been bigger moves in currency markets. But 507 00:23:42,440 --> 00:23:45,040 Speaker 12: if we start to see equities come off sharply over 508 00:23:45,040 --> 00:23:46,600 Speaker 12: the coming weeks, I think that certainly would add a 509 00:23:46,600 --> 00:23:48,639 Speaker 12: fuel to this idea that there is a break in 510 00:23:48,680 --> 00:23:51,360 Speaker 12: President Trump's ambitions. But I wouldn't say we're there yet 511 00:23:51,359 --> 00:23:51,800 Speaker 12: on that one. 512 00:23:51,840 --> 00:23:52,680 Speaker 5: It's a good point, Molly. 513 00:23:52,760 --> 00:23:54,439 Speaker 6: One thing I want to ask you, though, if you 514 00:23:54,480 --> 00:23:57,400 Speaker 6: know a lot of analysis, is to also come down 515 00:23:57,400 --> 00:23:59,040 Speaker 6: that when it comes to tariffs, if it's kind of 516 00:23:59,040 --> 00:24:02,119 Speaker 6: one big dump and we know kind of what's hitting us, 517 00:24:02,160 --> 00:24:05,800 Speaker 6: that's one thing. But if it's a constant barrage every 518 00:24:05,840 --> 00:24:09,560 Speaker 6: few weeks or every month about some new tariffs being levied, 519 00:24:10,080 --> 00:24:13,240 Speaker 6: that is a bigger toll on the US economy, right. 520 00:24:13,160 --> 00:24:15,440 Speaker 11: And to the point then of as well, what was 521 00:24:15,480 --> 00:24:18,600 Speaker 11: the real factor on growth in twenty nineteen, back when 522 00:24:18,720 --> 00:24:21,520 Speaker 11: in the first turn, when this was happening. The broader 523 00:24:21,600 --> 00:24:24,800 Speaker 11: uncertainty about US trade policy also factors into that that 524 00:24:25,119 --> 00:24:28,320 Speaker 11: businesses are really just almost paralyzed, you know, in like 525 00:24:28,440 --> 00:24:30,600 Speaker 11: terms of we just don't know how this outlook is 526 00:24:30,640 --> 00:24:33,040 Speaker 11: going to evolve. How can you really move forward with 527 00:24:33,400 --> 00:24:36,280 Speaker 11: investments that are moving on a much longer timeline than 528 00:24:36,320 --> 00:24:38,840 Speaker 11: what the White House is coming out with every other day. 529 00:24:39,160 --> 00:24:42,439 Speaker 11: So that really is difficult when you're thinking about how 530 00:24:42,720 --> 00:24:45,600 Speaker 11: you're going to be making, you know, multimillion billion dollar 531 00:24:45,680 --> 00:24:48,040 Speaker 11: decisions and you just really have no idea when that 532 00:24:48,119 --> 00:24:49,480 Speaker 11: moving target is going to hit. 533 00:24:49,600 --> 00:24:51,359 Speaker 2: Yeah, I think important to look at the fine print 534 00:24:51,400 --> 00:24:54,680 Speaker 2: too of what happens tomorrow, given that some products could 535 00:24:54,680 --> 00:24:57,720 Speaker 2: be exempted, and you know, get an understanding for what 536 00:24:57,880 --> 00:25:01,080 Speaker 2: exactly this is going to hit. Hey, next week, we 537 00:25:01,119 --> 00:25:04,199 Speaker 2: do have more economic data coming a real look at 538 00:25:04,200 --> 00:25:07,720 Speaker 2: the jobs market next week with Jolts with the January 539 00:25:07,760 --> 00:25:11,679 Speaker 2: Employment Report survey says for at least the change in 540 00:25:11,760 --> 00:25:14,600 Speaker 2: private payrolls or changeing non front payrolls, rather one hundred 541 00:25:14,600 --> 00:25:17,800 Speaker 2: and sixty five thousand jobs added, what's the conversation that 542 00:25:17,800 --> 00:25:18,880 Speaker 2: you're going to be having around that. 543 00:25:19,119 --> 00:25:22,080 Speaker 11: Though, honestly, the bigger conversation I keep forgetting that we 544 00:25:22,160 --> 00:25:24,639 Speaker 11: are getting January data, because the bigger one is more 545 00:25:24,640 --> 00:25:27,400 Speaker 11: about the revisions to all of last year. So that's 546 00:25:27,440 --> 00:25:30,240 Speaker 11: really where the conversation is happening. If you remember, we 547 00:25:30,280 --> 00:25:33,560 Speaker 11: got a report last August, this was an initial estimate 548 00:25:33,640 --> 00:25:37,320 Speaker 11: of what the revisions might show for payrolls through March 549 00:25:37,359 --> 00:25:40,720 Speaker 11: of twenty twenty four, and that estimate said that payrolls 550 00:25:40,720 --> 00:25:42,959 Speaker 11: would be marked down by more than eight hundred thousand 551 00:25:43,040 --> 00:25:45,760 Speaker 11: and that was the biggest downward revision since two thousand 552 00:25:45,760 --> 00:25:48,520 Speaker 11: and nine. That was very scary at the time and 553 00:25:48,640 --> 00:25:51,960 Speaker 11: even drew a lot of attention from Congress, which usually 554 00:25:52,080 --> 00:25:54,240 Speaker 11: like this is a pretty sleepy report for the most part. 555 00:25:54,320 --> 00:25:56,280 Speaker 11: So that's where a lot of the eyeballs are going 556 00:25:56,320 --> 00:25:58,320 Speaker 11: to be. The other big thing is we're going to 557 00:25:58,359 --> 00:26:02,000 Speaker 11: see how the new population estimates are going to impact 558 00:26:02,240 --> 00:26:04,480 Speaker 11: the household survey, and right this is going to be 559 00:26:04,520 --> 00:26:07,760 Speaker 11: really important to the Trump administration as well, because so 560 00:26:07,920 --> 00:26:10,920 Speaker 11: much of what has boosted the labor market in recent 561 00:26:11,000 --> 00:26:13,840 Speaker 11: years has been immigration, and if we start to see 562 00:26:13,840 --> 00:26:16,560 Speaker 11: that that's really starting to falter off, could really change 563 00:26:16,560 --> 00:26:18,000 Speaker 11: our understanding of the strength. 564 00:26:18,000 --> 00:26:20,200 Speaker 6: All Right, Molla Smith, thank you so much, Bloomberg News 565 00:26:20,200 --> 00:26:22,280 Speaker 6: Global Economy Reporter, and of course out there in DC, 566 00:26:22,359 --> 00:26:24,119 Speaker 6: Bloomberg News Global Economy Reporter. 567 00:26:24,240 --> 00:26:24,720 Speaker 5: End to current. 568 00:26:24,920 --> 00:26:27,639 Speaker 6: Some newmes from Meta that maybe not surprising since we 569 00:26:27,760 --> 00:26:29,359 Speaker 6: kind of see a trend maybe happening. 570 00:26:29,560 --> 00:26:31,840 Speaker 2: Yeah, the Wall Street Journal reports that Medicine talks to 571 00:26:31,920 --> 00:26:37,080 Speaker 2: reincorporate in Texas or another state. This would not relocate 572 00:26:37,160 --> 00:26:41,439 Speaker 2: its corporate headquarters from California, but it follows moves that 573 00:26:41,520 --> 00:26:45,320 Speaker 2: Elon Musk companies have made as far as leaving Delaware 574 00:26:45,359 --> 00:26:47,800 Speaker 2: and going to Texas. Again, the Wall Street Journal reporting 575 00:26:47,840 --> 00:26:48,920 Speaker 2: that news just moments ago. 576 00:26:49,000 --> 00:26:51,520 Speaker 6: And we know most of US companies right are incorporating Delaware, 577 00:26:51,560 --> 00:26:53,040 Speaker 6: so this would be a little bit of a switch 578 00:26:53,440 --> 00:26:55,800 Speaker 6: against the trend that we've seen for decades. All Right, folks, 579 00:26:55,840 --> 00:26:58,680 Speaker 6: you are listening and watching Bloomberg Business Sweek Carol Master, 580 00:26:58,800 --> 00:27:01,119 Speaker 6: Tim Stanevek, morticalm In just a moment. 581 00:27:02,040 --> 00:27:05,719 Speaker 1: You're listening to the Bloomberg Business Week podcast. Catch us 582 00:27:05,800 --> 00:27:08,800 Speaker 1: live weekday afternoons from two to five eas during Listen 583 00:27:08,880 --> 00:27:12,400 Speaker 1: on Applecarplay and Android auto with the Bloomberg Business app 584 00:27:12,600 --> 00:27:15,040 Speaker 1: or watch us live on YouTube. 585 00:27:15,480 --> 00:27:18,560 Speaker 6: The nation's biggest office to residential conversion, it is hitting 586 00:27:18,600 --> 00:27:21,840 Speaker 6: the market with thirteen hundred apartments carved from a million 587 00:27:21,880 --> 00:27:26,240 Speaker 6: square foot brick fortress originally built to house computers and 588 00:27:26,280 --> 00:27:28,040 Speaker 6: not much else, which means they didn't really care too 589 00:27:28,119 --> 00:27:29,160 Speaker 6: much about window placement. 590 00:27:29,400 --> 00:27:31,600 Speaker 2: No, they didn't, but after a two year transformation the 591 00:27:31,600 --> 00:27:34,439 Speaker 2: fifty five year old at building in Manhattan's Financial District. 592 00:27:34,760 --> 00:27:37,240 Speaker 2: For years it was used to process checks, money transfers, 593 00:27:37,240 --> 00:27:40,720 Speaker 2: and other paperwork for manufacturers, handover trust and later for 594 00:27:40,800 --> 00:27:44,360 Speaker 2: back office staff at a company called JP Morgan. That 595 00:27:44,400 --> 00:27:46,760 Speaker 2: building now Carol It's unrecognizable. 596 00:27:46,840 --> 00:27:49,480 Speaker 6: GFP real Estate is one of the developers behind the building. 597 00:27:49,520 --> 00:27:51,879 Speaker 6: The firm has a portfolio of more than sixteen million 598 00:27:51,960 --> 00:27:56,080 Speaker 6: square feet, focusing on operating, property management, and development of 599 00:27:56,119 --> 00:27:58,000 Speaker 6: commercial real estate in addition to owning. 600 00:27:58,040 --> 00:27:58,480 Speaker 5: Of course. 601 00:27:58,800 --> 00:28:02,160 Speaker 6: Brian Steinwertzel, co CEO and principal of GFP real Estate. 602 00:28:02,160 --> 00:28:04,560 Speaker 6: He joins us from New York City. Brian, so happy 603 00:28:04,560 --> 00:28:06,840 Speaker 6: to have you here with us. As story, We've been 604 00:28:06,840 --> 00:28:10,120 Speaker 6: a little obsessed with it. Contextualize it for us. How 605 00:28:10,119 --> 00:28:13,440 Speaker 6: big of a project was this for your team. How 606 00:28:13,480 --> 00:28:15,600 Speaker 6: difficult was it to make this conversion? 607 00:28:16,480 --> 00:28:20,000 Speaker 7: Well, Carroll, Tim, thanks for having me here. This is 608 00:28:20,320 --> 00:28:24,040 Speaker 7: the largest office residential conversion projects in the country to date. 609 00:28:24,280 --> 00:28:27,800 Speaker 7: We took a one million square foot building, basically had 610 00:28:27,800 --> 00:28:29,600 Speaker 7: to remove all of the brick from the outside of 611 00:28:29,640 --> 00:28:33,639 Speaker 7: the building, carved two lightwells throughout the building, and then 612 00:28:33,720 --> 00:28:36,639 Speaker 7: took all of that floor area and restacked it on 613 00:28:36,720 --> 00:28:40,960 Speaker 7: top for an extra ten stories. And what results from 614 00:28:40,960 --> 00:28:45,360 Speaker 7: that is over one three hundred apartments which we launched 615 00:28:45,400 --> 00:28:49,480 Speaker 7: leasing this week. That will include over one hundred thousand 616 00:28:49,480 --> 00:28:53,240 Speaker 7: square feet of amenities. And if you're in the building today, 617 00:28:54,120 --> 00:28:59,760 Speaker 7: there is a rooftop deck, indoor and outdoor pool, coworking, 618 00:29:00,720 --> 00:29:07,160 Speaker 7: pickleball courts, basketball courts, bowling alley, golf, simulators, arcades, pretty 619 00:29:07,200 --> 00:29:10,960 Speaker 7: much anything anyone would want in a residential building, Brian. 620 00:29:11,000 --> 00:29:13,200 Speaker 2: For years, Carol and I've been talking to folks in 621 00:29:13,200 --> 00:29:15,600 Speaker 2: real estate, especially in the wake of the pandemic when 622 00:29:15,640 --> 00:29:19,040 Speaker 2: people weren't coming to offices in Manhattan and other cities. 623 00:29:19,080 --> 00:29:21,200 Speaker 2: But there was also a housing crunch and a lot 624 00:29:21,200 --> 00:29:24,840 Speaker 2: of affordabilly issues in cities such as this. How do 625 00:29:24,880 --> 00:29:27,280 Speaker 2: you make the numbers work here? Because we were told 626 00:29:27,320 --> 00:29:29,800 Speaker 2: over and over again it's just too hard to do. 627 00:29:29,880 --> 00:29:32,880 Speaker 2: In most buildings, the windows don't open, the bathrooms aren't 628 00:29:32,920 --> 00:29:35,440 Speaker 2: in the right place, the plumbing doesn't make sense. It 629 00:29:35,600 --> 00:29:37,840 Speaker 2: just doesn't work from a numbers perspective. How do you 630 00:29:37,840 --> 00:29:38,360 Speaker 2: make it work? 631 00:29:39,320 --> 00:29:41,720 Speaker 7: Well, we start with an extraordinary team and the team 632 00:29:41,760 --> 00:29:44,920 Speaker 7: at GFP real Estate had just finished building David Geffenhall 633 00:29:45,000 --> 00:29:47,920 Speaker 7: for Lincoln Center, and we brought on such a Ruddy, 634 00:29:47,960 --> 00:29:50,120 Speaker 7: which is one of the top firms that does this 635 00:29:50,240 --> 00:29:53,120 Speaker 7: kind of work, and along with our partner metro Loft, 636 00:29:53,760 --> 00:29:58,000 Speaker 7: assembled a team that included over a thousand people that 637 00:29:58,040 --> 00:30:01,640 Speaker 7: have touched this project in order to make happen. You know, 638 00:30:01,760 --> 00:30:06,600 Speaker 7: New York City unfortunately has suffered a distress commercial office environment, 639 00:30:07,280 --> 00:30:11,520 Speaker 7: but we are looking to make lemonade where there's lemons. 640 00:30:11,840 --> 00:30:14,760 Speaker 7: And so we bought this building from the lenders and 641 00:30:14,800 --> 00:30:17,479 Speaker 7: from the prior owner, and we brought on a capital 642 00:30:17,480 --> 00:30:19,560 Speaker 7: partner that was willing to take the risk to do this. 643 00:30:20,080 --> 00:30:22,240 Speaker 7: And with that team of over a thousand people have 644 00:30:22,360 --> 00:30:24,280 Speaker 7: created this project. 645 00:30:25,080 --> 00:30:26,760 Speaker 6: And you guys got what a five hundred and thirty 646 00:30:26,760 --> 00:30:29,200 Speaker 6: six million dollar loan for the acquisition of the building 647 00:30:29,640 --> 00:30:31,760 Speaker 6: its existing debt and the cost of conversion. 648 00:30:32,640 --> 00:30:34,440 Speaker 5: And you know, so you. 649 00:30:34,360 --> 00:30:37,360 Speaker 6: Did this, is it fully give us an idea of 650 00:30:38,280 --> 00:30:41,440 Speaker 6: occupancy what you were seeing, give us an idea of 651 00:30:42,000 --> 00:30:43,240 Speaker 6: the interest in the building. 652 00:30:44,880 --> 00:30:48,120 Speaker 7: So the Financial District has done extraordinarily well over the 653 00:30:48,200 --> 00:30:50,680 Speaker 7: last decade. I actually lived in the Financial District in 654 00:30:50,680 --> 00:30:53,880 Speaker 7: two thousand and four, and the neighborhood is completely different today. 655 00:30:53,920 --> 00:30:56,640 Speaker 7: There's tens of thousands of residents that live there, and 656 00:30:56,680 --> 00:30:59,240 Speaker 7: every day there's more and more that are coming in. 657 00:31:00,360 --> 00:31:03,840 Speaker 7: You know, the big building has a big capitalization, but 658 00:31:03,920 --> 00:31:07,640 Speaker 7: the absorption in this market has been nothing sort of extraordinary. 659 00:31:07,960 --> 00:31:11,080 Speaker 7: There were two buildings that opened up recently in the 660 00:31:11,120 --> 00:31:13,560 Speaker 7: last year. Both of those are one of them is 661 00:31:13,600 --> 00:31:17,280 Speaker 7: completely full and the other one has actually is almost full. 662 00:31:17,680 --> 00:31:20,360 Speaker 7: And our anticipation just based on opening on Wednesday and 663 00:31:20,400 --> 00:31:23,160 Speaker 7: the number of tours and inquiries we've had, which is 664 00:31:23,200 --> 00:31:25,680 Speaker 7: in the hundreds, that we will lease very quickly. 665 00:31:26,560 --> 00:31:27,640 Speaker 5: Can you say how quickly? 666 00:31:28,800 --> 00:31:31,960 Speaker 7: Well, you know, I think for GFP real Estate and 667 00:31:31,960 --> 00:31:35,440 Speaker 7: our partners were very conservative in our assumptions of how long. Yeah, 668 00:31:35,520 --> 00:31:37,080 Speaker 7: but our hope is that by the end of next 669 00:31:37,120 --> 00:31:38,360 Speaker 7: year will be entirely leased. 670 00:31:39,000 --> 00:31:41,680 Speaker 2: Does this create some sort of new blueprint for how 671 00:31:41,720 --> 00:31:45,720 Speaker 2: you move forward with conversions, is that what's next? Are 672 00:31:45,720 --> 00:31:48,000 Speaker 2: you interested in converting any more buildings? How are you 673 00:31:48,000 --> 00:31:49,400 Speaker 2: thinking about the path forward right now? 674 00:31:50,160 --> 00:31:53,160 Speaker 7: Yeah, So, including this building, we have approximately three thousand 675 00:31:53,280 --> 00:31:56,040 Speaker 7: units that are in our pipeline that we're creating. So 676 00:31:56,040 --> 00:31:58,360 Speaker 7: we have several other projects that are coming down the 677 00:31:58,440 --> 00:32:02,600 Speaker 7: road and will be complete. And I think what's helped 678 00:32:02,680 --> 00:32:05,480 Speaker 7: us be successful is a partnership with the city and 679 00:32:05,520 --> 00:32:08,320 Speaker 7: state who recognized early on in the pandemic that this 680 00:32:08,480 --> 00:32:11,280 Speaker 7: was a major issue and that they had to sit 681 00:32:11,360 --> 00:32:13,440 Speaker 7: with the industry and come up with a game plan 682 00:32:13,560 --> 00:32:17,520 Speaker 7: for us to take these distress office buildings and create 683 00:32:17,560 --> 00:32:20,120 Speaker 7: housing out of them. And so there's a program called 684 00:32:20,120 --> 00:32:23,920 Speaker 7: the four sixty seven M program that the mayor and 685 00:32:24,000 --> 00:32:27,920 Speaker 7: governor both put into law last year and that has 686 00:32:27,920 --> 00:32:31,280 Speaker 7: helped become an accelerator for getting these kinds of buildings done. 687 00:32:31,600 --> 00:32:35,360 Speaker 7: And we are, along with our partners, fully invested in 688 00:32:35,400 --> 00:32:36,200 Speaker 7: these programs. 689 00:32:36,400 --> 00:32:38,400 Speaker 6: Hey, one of the things, though, you know, you obviously 690 00:32:38,440 --> 00:32:42,440 Speaker 6: got through it all, what was though, the largest hurdle 691 00:32:42,840 --> 00:32:47,040 Speaker 6: to overcome with the office to residential conversion of this 692 00:32:47,200 --> 00:32:48,080 Speaker 6: size and scope. 693 00:32:49,720 --> 00:32:52,480 Speaker 7: It's it's a great. It's a great question, and I'd 694 00:32:52,480 --> 00:32:54,720 Speaker 7: say there's almost like it feels like the largest hurdle 695 00:32:54,760 --> 00:32:57,160 Speaker 7: every month when you're in a project of this magnitude. 696 00:32:57,840 --> 00:32:59,720 Speaker 7: But this is a very complex building. It was designed 697 00:32:59,720 --> 00:33:02,480 Speaker 7: to look like an IBM punch card, and the way 698 00:33:02,480 --> 00:33:04,640 Speaker 7: they made the punch card lines is they actually had 699 00:33:04,640 --> 00:33:07,960 Speaker 7: the facade and each floor jut in and out at 700 00:33:07,960 --> 00:33:11,360 Speaker 7: different times on every different floor. And one thing that 701 00:33:11,400 --> 00:33:13,240 Speaker 7: we made a decision on early on in the project 702 00:33:13,400 --> 00:33:17,520 Speaker 7: is we wanted to actually carry forward that architecture but 703 00:33:17,720 --> 00:33:20,400 Speaker 7: at the same time have a new window wall throughout. 704 00:33:20,720 --> 00:33:22,600 Speaker 7: And so one of the most difficult things was we 705 00:33:22,640 --> 00:33:26,600 Speaker 7: actually have the window wall custom made and it comes 706 00:33:26,640 --> 00:33:28,960 Speaker 7: in and out on each floor and that architectural feature 707 00:33:29,000 --> 00:33:31,080 Speaker 7: can still be seen from the inside and the outside 708 00:33:31,120 --> 00:33:35,000 Speaker 7: of the project. But doing that and preserving that work 709 00:33:35,200 --> 00:33:37,200 Speaker 7: was one of the most difficult parts of this project. 710 00:33:37,240 --> 00:33:39,200 Speaker 5: But you knew you wanted to do it right. It 711 00:33:39,240 --> 00:33:41,440 Speaker 5: wasn't just because you had to. You wanted to. Is 712 00:33:41,480 --> 00:33:41,880 Speaker 5: that fair? 713 00:33:43,600 --> 00:33:46,160 Speaker 7: Yes, it is. I think every project that we take on, 714 00:33:46,240 --> 00:33:49,680 Speaker 7: and the majority of our portfolio are historic buildings. We 715 00:33:49,760 --> 00:33:53,800 Speaker 7: are looking to preserve whatever can be preserved, especially the 716 00:33:53,800 --> 00:33:56,440 Speaker 7: most important elements of that project, and even if it 717 00:33:56,480 --> 00:33:58,240 Speaker 7: costs a little bit more or takes a little bit 718 00:33:58,240 --> 00:34:01,040 Speaker 7: more time to do it important part and I think 719 00:34:01,080 --> 00:34:03,520 Speaker 7: the residents that will live there will see that and 720 00:34:03,960 --> 00:34:06,040 Speaker 7: feel good that this was preserved. 721 00:34:06,120 --> 00:34:08,720 Speaker 2: Do the economics of this only work when you create 722 00:34:08,760 --> 00:34:11,800 Speaker 2: them for rentals or would it work for sales as well? 723 00:34:13,719 --> 00:34:16,160 Speaker 7: I think the hard part with sales is the building 724 00:34:16,239 --> 00:34:18,400 Speaker 7: of this size you're doing. You have to do so 725 00:34:18,640 --> 00:34:24,279 Speaker 7: much condo sales that it's more suited towards rental. That 726 00:34:24,360 --> 00:34:27,480 Speaker 7: being said, there are a number of other conversion projects 727 00:34:27,480 --> 00:34:31,000 Speaker 7: that are condo. Our organization has owned the Flat Iron 728 00:34:31,040 --> 00:34:34,680 Speaker 7: Building with partners since the nineteen nineties. In that building 729 00:34:34,719 --> 00:34:37,560 Speaker 7: will be turned into a condominium building, but that building 730 00:34:37,640 --> 00:34:41,879 Speaker 7: has only a few dozen units, and so it's really 731 00:34:41,920 --> 00:34:43,560 Speaker 7: a different scale and magnitude. 732 00:34:43,760 --> 00:34:45,879 Speaker 5: Hey, Brian just quickly got thirty seconds left. 733 00:34:45,880 --> 00:34:50,600 Speaker 6: Here our team Arshanali Bosik catching up with Blackstone president 734 00:34:50,719 --> 00:34:54,080 Speaker 6: John Gray, and I think members of our team also 735 00:34:54,120 --> 00:34:57,280 Speaker 6: talking with him. He said they're the world's largest commercial 736 00:34:57,280 --> 00:34:59,200 Speaker 6: property owner. He said the worst is over for the 737 00:34:59,239 --> 00:35:02,600 Speaker 6: global office market after prolonged slump fueled by the pandemic. 738 00:35:02,719 --> 00:35:04,000 Speaker 6: Just got twenty five seconds here. 739 00:35:04,120 --> 00:35:07,800 Speaker 7: Do you agree, Well, I certainly hope so, and I 740 00:35:07,840 --> 00:35:08,560 Speaker 7: would agree. 741 00:35:09,040 --> 00:35:09,160 Speaker 2: So. 742 00:35:09,280 --> 00:35:11,920 Speaker 7: GFP is the largest landlord of small and medium sized 743 00:35:11,960 --> 00:35:14,400 Speaker 7: tenants in New York City, and I think for a 744 00:35:14,440 --> 00:35:17,960 Speaker 7: while now we've seen positive absorption and and tenants returning 745 00:35:17,960 --> 00:35:20,040 Speaker 7: to the office. I think that he has it right 746 00:35:20,120 --> 00:35:21,280 Speaker 7: and I hope that continues. 747 00:35:21,480 --> 00:35:23,360 Speaker 6: All right, great to check in with you, and hopefully 748 00:35:23,360 --> 00:35:26,400 Speaker 6: we can do so again in the future. Brian stein Wertzel, 749 00:35:26,440 --> 00:35:29,000 Speaker 6: he's co CEO and principle of GFP real Estate. Joining 750 00:35:29,040 --> 00:35:30,640 Speaker 6: us here in New York City. 751 00:35:31,120 --> 00:35:34,480 Speaker 8: You are listening to the Bloomberg Business Week podcast. Catch 752 00:35:34,560 --> 00:35:37,800 Speaker 8: us live weekday afternoons from two to five pm Eastern. 753 00:35:37,920 --> 00:35:41,000 Speaker 8: Listen on Applecarplay and the Android Auto with the Bloomberg 754 00:35:41,040 --> 00:35:44,560 Speaker 8: Business app, or watch us live on YouTube. 755 00:35:44,840 --> 00:35:46,080 Speaker 2: I don't need to tell you this, but there's a 756 00:35:46,080 --> 00:35:48,320 Speaker 2: lot out there for CEOs to navigate. Right now, we 757 00:35:48,400 --> 00:35:50,839 Speaker 2: got breaking news from the White House on tariffs. We've 758 00:35:50,880 --> 00:35:53,440 Speaker 2: been covering that this afternoon. Not to mention the new 759 00:35:53,480 --> 00:35:57,200 Speaker 2: administration in the White House, their priority is geopolitical threats, 760 00:35:57,239 --> 00:35:59,959 Speaker 2: technological disruption from AI and. 761 00:36:00,440 --> 00:36:03,560 Speaker 6: Yeah, there are so much. Sharon Marcel is CEO of 762 00:36:03,560 --> 00:36:08,040 Speaker 6: Boston Consulting Group. Here's regularly from chief executive officers from 763 00:36:08,040 --> 00:36:10,120 Speaker 6: the c suite, and she joins us right now from 764 00:36:10,200 --> 00:36:14,080 Speaker 6: Raleigh Durham, No, North Carolina. Sharon, good to have you 765 00:36:14,200 --> 00:36:17,399 Speaker 6: here with us. You are just back from Davos. Our 766 00:36:17,440 --> 00:36:20,200 Speaker 6: team too. We've all been kind of talking about what 767 00:36:20,320 --> 00:36:22,560 Speaker 6: was talked about, what was top of mind, what was 768 00:36:22,640 --> 00:36:26,840 Speaker 6: concerned to the things that I heard It was President 769 00:36:26,840 --> 00:36:28,600 Speaker 6: Trump and artificial intelligence. 770 00:36:28,640 --> 00:36:29,399 Speaker 5: What did you hear? 771 00:36:30,320 --> 00:36:33,200 Speaker 13: Yeah, Carolyn, tim thanks for having me. I really appreciate it. 772 00:36:33,320 --> 00:36:37,120 Speaker 13: And exactly right, just back from Davos. I'm Sharon Marcel. 773 00:36:37,280 --> 00:36:40,799 Speaker 13: I'm the North America head of BCG, the Boston Consulting Group. 774 00:36:41,360 --> 00:36:44,799 Speaker 13: So this is my third year at Davos. I think 775 00:36:44,920 --> 00:36:47,960 Speaker 13: each each year you get a bit more out of it. 776 00:36:48,160 --> 00:36:50,720 Speaker 13: And you know, I was struck by a few things 777 00:36:51,040 --> 00:36:56,000 Speaker 13: in terms of Davos. I think number one was the 778 00:36:56,040 --> 00:37:00,719 Speaker 13: optimism in terms of the business growth orientation. And I 779 00:37:00,719 --> 00:37:03,680 Speaker 13: think that's you know, of course, particularly true in the 780 00:37:03,840 --> 00:37:07,400 Speaker 13: US and then in Asia, less so in core Europe 781 00:37:08,120 --> 00:37:10,640 Speaker 13: and in places like Canada and Mexico. When you spoke 782 00:37:10,719 --> 00:37:14,560 Speaker 13: to some of the uncertainty there with respect to tear US, 783 00:37:14,840 --> 00:37:17,759 Speaker 13: but there was, you know, a good sense of optimism. 784 00:37:18,280 --> 00:37:19,160 Speaker 9: I think the other. 785 00:37:21,239 --> 00:37:23,120 Speaker 6: Can I jump in for a second, because I'm just thinking, 786 00:37:23,200 --> 00:37:25,920 Speaker 6: what is the story that's dominating on this Friday, and 787 00:37:25,920 --> 00:37:29,040 Speaker 6: we're all trying to put some context around it. But 788 00:37:29,160 --> 00:37:32,560 Speaker 6: we do have President Trump attending to move ahead with 789 00:37:32,600 --> 00:37:35,680 Speaker 6: plans tomorrow to compost twenty five percent tariffs on Mexico 790 00:37:35,680 --> 00:37:38,640 Speaker 6: and Canada, a ten percent leve on China. The White 791 00:37:38,680 --> 00:37:42,760 Speaker 6: House has confirmed this, and this could be just step 792 00:37:42,800 --> 00:37:45,680 Speaker 6: one in more tariffs to come, perhaps on other nations. 793 00:37:45,719 --> 00:37:49,640 Speaker 6: We know that that has been certainly some broad expectations 794 00:37:50,200 --> 00:37:50,719 Speaker 6: ahead of. 795 00:37:50,760 --> 00:37:52,320 Speaker 5: Donald Trump coming into the White House. 796 00:37:52,880 --> 00:37:56,759 Speaker 6: How might this news, if it was out before Davos 797 00:37:56,800 --> 00:37:58,600 Speaker 6: maybe impact some of that optimism. 798 00:37:59,640 --> 00:38:03,200 Speaker 13: I think what was anticipated at Davas was there would 799 00:38:03,200 --> 00:38:05,719 Speaker 13: be tear us, you know. I think that was a 800 00:38:05,760 --> 00:38:10,359 Speaker 13: promise during the presidential campaign, and I think that was anticipated. 801 00:38:10,440 --> 00:38:14,400 Speaker 13: I also think that we did a survey of companies 802 00:38:14,440 --> 00:38:17,360 Speaker 13: from around the world. Eighty five percent of companies have 803 00:38:18,080 --> 00:38:21,040 Speaker 13: a plan in terms of how to deal with it. 804 00:38:21,080 --> 00:38:21,239 Speaker 9: Now. 805 00:38:21,440 --> 00:38:24,839 Speaker 13: It's a plan which is very much in flux and 806 00:38:25,080 --> 00:38:29,200 Speaker 13: lots of different scenarios because it's not known exactly when 807 00:38:29,239 --> 00:38:32,360 Speaker 13: it will come, exactly what it will look like, and 808 00:38:32,760 --> 00:38:34,839 Speaker 13: so I think those scenarios are very fluid. But I 809 00:38:34,880 --> 00:38:39,239 Speaker 13: do think that versus in previous times, I think there 810 00:38:39,320 --> 00:38:42,160 Speaker 13: has been a lot of planfulness in terms of preparing 811 00:38:42,200 --> 00:38:42,959 Speaker 13: for what might come. 812 00:38:43,960 --> 00:38:46,160 Speaker 2: You know, one thing that I've been pretty surprised about 813 00:38:46,200 --> 00:38:48,640 Speaker 2: over the last couple of weeks has been the changing 814 00:38:48,640 --> 00:38:51,560 Speaker 2: tone that we're hearing from US companies about this administration 815 00:38:52,120 --> 00:38:55,400 Speaker 2: and their willingness to really embrace it. And I'm wondering 816 00:38:55,840 --> 00:38:59,560 Speaker 2: what you're hearing behind the scenes from CEOs about that 817 00:38:59,800 --> 00:39:03,160 Speaker 2: is is it really is it really purely the cost 818 00:39:03,160 --> 00:39:05,879 Speaker 2: of doing business? Is that what it's seen, or are 819 00:39:05,920 --> 00:39:09,640 Speaker 2: they seeing this as embracing a fundamental shift in America 820 00:39:09,760 --> 00:39:10,160 Speaker 2: right now? 821 00:39:11,280 --> 00:39:13,279 Speaker 13: Look, I think I think if you if you talk 822 00:39:13,360 --> 00:39:17,520 Speaker 13: to business leaders, you know they're positive in terms of 823 00:39:17,520 --> 00:39:20,640 Speaker 13: some of the economic signals. Now, those signals, you know, 824 00:39:20,719 --> 00:39:24,440 Speaker 13: aren't brand new, They're coming from twenty twenty four and before. 825 00:39:25,719 --> 00:39:28,399 Speaker 13: And I think I think there's optimism about the pro 826 00:39:28,719 --> 00:39:34,320 Speaker 13: growth posture of the administration. So so you know, I 827 00:39:34,600 --> 00:39:37,600 Speaker 13: don't know how much there is really new, but I 828 00:39:37,600 --> 00:39:41,200 Speaker 13: think there will be greater investment in the US. 829 00:39:41,320 --> 00:39:42,640 Speaker 9: I think that's seen as a positive. 830 00:39:42,680 --> 00:39:46,000 Speaker 13: I think there's an there there may well be a 831 00:39:46,040 --> 00:39:50,440 Speaker 13: lower tax regime, which could be positive in terms of 832 00:39:50,480 --> 00:39:53,920 Speaker 13: actually investing more on R and D, investing more in 833 00:39:54,239 --> 00:39:57,000 Speaker 13: the business community, and also for returns, and so I 834 00:39:57,040 --> 00:39:59,920 Speaker 13: think there's there's reasons for positivity, but I don't want 835 00:39:59,920 --> 00:40:02,719 Speaker 13: to underplay there's also a lot of volatility and a 836 00:40:02,800 --> 00:40:05,960 Speaker 13: lot of which is unknown that I think business leaders 837 00:40:05,960 --> 00:40:06,719 Speaker 13: are preparing well. 838 00:40:06,719 --> 00:40:08,040 Speaker 2: Sharon, just give us an idea of who's some of 839 00:40:08,040 --> 00:40:10,040 Speaker 2: the business leaders you spoke to at Davos where we 840 00:40:10,120 --> 00:40:11,280 Speaker 2: like specifics here. 841 00:40:13,000 --> 00:40:14,400 Speaker 9: Well, from a range of industries. 842 00:40:14,520 --> 00:40:18,080 Speaker 13: I mean I spoke to people from the pharmaceutical industry, 843 00:40:18,200 --> 00:40:22,160 Speaker 13: people from the tech industry, people from the aviation industry, 844 00:40:22,200 --> 00:40:25,440 Speaker 13: So it was really a wide range of industries. No 845 00:40:25,960 --> 00:40:27,600 Speaker 13: one sample set, no. 846 00:40:27,719 --> 00:40:28,760 Speaker 2: Can you give us any names. 847 00:40:29,719 --> 00:40:30,120 Speaker 9: I can't. 848 00:40:32,040 --> 00:40:34,200 Speaker 6: But you did say that there was optimism, and I 849 00:40:34,239 --> 00:40:38,000 Speaker 6: guess you know what I do wonder for CEO's Sharon, 850 00:40:38,239 --> 00:40:41,480 Speaker 6: is that, as you said, they expected tariffs, we were 851 00:40:41,560 --> 00:40:45,279 Speaker 6: kind of surprised on Donald Trump's first day or even 852 00:40:45,280 --> 00:40:47,120 Speaker 6: two days in the White House that we really didn't 853 00:40:47,120 --> 00:40:49,480 Speaker 6: get anything specific on that front. Because I think everybody 854 00:40:49,480 --> 00:40:51,239 Speaker 6: expected that to be the first thing out of the gate. 855 00:40:51,719 --> 00:40:56,919 Speaker 6: Having said that is for the C suite, even if 856 00:40:57,080 --> 00:40:59,960 Speaker 6: twenty five percent tariffs can be on Mexico and Canada 857 00:41:00,000 --> 00:41:04,480 Speaker 6: and who knows what might come might be onerous or problematic, 858 00:41:05,200 --> 00:41:08,240 Speaker 6: knowing what you are dealing with rather than the unknown, 859 00:41:08,840 --> 00:41:11,040 Speaker 6: is that better for the C suite or not? 860 00:41:11,080 --> 00:41:11,799 Speaker 5: Necessarily? 861 00:41:12,560 --> 00:41:14,040 Speaker 9: I think you're right. I think it's better. 862 00:41:14,080 --> 00:41:17,080 Speaker 13: And I think when when you know what direction things 863 00:41:17,080 --> 00:41:20,600 Speaker 13: are heading in, you know you've done all the scenario analysis, 864 00:41:20,920 --> 00:41:24,239 Speaker 13: you have tentative plans for which direction you can head in, 865 00:41:24,960 --> 00:41:26,720 Speaker 13: but you know you're not going to put your dollars 866 00:41:26,719 --> 00:41:29,640 Speaker 13: at work until there's greater certainty. And so I think 867 00:41:30,400 --> 00:41:33,360 Speaker 13: I think as there is greater certainty, whatever direction that 868 00:41:33,400 --> 00:41:35,480 Speaker 13: heads be in, I think it will open up the 869 00:41:35,520 --> 00:41:37,120 Speaker 13: aperture in terms of investment. 870 00:41:38,400 --> 00:41:41,080 Speaker 2: I think one area that we've been obsessed with over 871 00:41:41,120 --> 00:41:44,399 Speaker 2: those lists last week has been AI and really trying 872 00:41:44,440 --> 00:41:48,600 Speaker 2: to understand the way that the narrative was rewritten or 873 00:41:48,640 --> 00:41:51,080 Speaker 2: could be rewritten as a result of what we saw 874 00:41:51,160 --> 00:41:53,319 Speaker 2: from Deep Seek. And I know that was a big 875 00:41:53,360 --> 00:41:56,960 Speaker 2: part of the conversation at Davos. In your view, when 876 00:41:57,000 --> 00:41:59,239 Speaker 2: are you going to start to see companies that are 877 00:41:59,280 --> 00:42:02,839 Speaker 2: not actually in the AI space start to increase their 878 00:42:02,840 --> 00:42:04,960 Speaker 2: bottom lines as a result from this technology. 879 00:42:05,480 --> 00:42:07,319 Speaker 13: I think that's a great question, and I think that 880 00:42:07,520 --> 00:42:11,160 Speaker 13: was actually the question at Davos, and there was a 881 00:42:11,160 --> 00:42:13,839 Speaker 13: lot of great discussion. A couple of years we've been 882 00:42:13,880 --> 00:42:17,239 Speaker 13: talking about AI, and the business community has been very 883 00:42:17,239 --> 00:42:22,600 Speaker 13: excited about AI, and I think what's encouraging is those 884 00:42:22,600 --> 00:42:27,280 Speaker 13: conversations are moving from hype and experimentation and use cases. 885 00:42:27,360 --> 00:42:29,680 Speaker 13: You know, we're doing twenty five use cases over here 886 00:42:29,680 --> 00:42:32,560 Speaker 13: and thirty five use cases over there, to actually, where 887 00:42:32,600 --> 00:42:35,040 Speaker 13: are we going to get tangible value in the core 888 00:42:35,120 --> 00:42:36,880 Speaker 13: processes in our business. 889 00:42:36,520 --> 00:42:39,520 Speaker 9: That actually drive competitive advantage. You know. 890 00:42:39,560 --> 00:42:42,160 Speaker 13: In fact, in twenty twenty four, PCG did a survey 891 00:42:42,280 --> 00:42:45,320 Speaker 13: of executives and we found that two thirds of AI 892 00:42:45,480 --> 00:42:50,160 Speaker 13: transformations were falling short of expectations. But we're finding with 893 00:42:50,200 --> 00:42:53,000 Speaker 13: our clients and in the conversations at Davos that are 894 00:42:53,040 --> 00:42:57,440 Speaker 13: succeeding it's because they're focusing. They're focusing on the areas 895 00:42:57,440 --> 00:43:00,920 Speaker 13: of the business that they can transform and create competitive 896 00:43:00,920 --> 00:43:04,400 Speaker 13: advantage versus lots of areas around the edges. And we 897 00:43:04,560 --> 00:43:07,680 Speaker 13: like to say, you know, look you can get the algorithms, 898 00:43:08,120 --> 00:43:11,120 Speaker 13: that's ten percent. You can get the tech stack, it's important, 899 00:43:11,160 --> 00:43:13,120 Speaker 13: but it's twenty percent. But what you have to be 900 00:43:13,160 --> 00:43:15,920 Speaker 13: able to do is get the processes in people and 901 00:43:15,960 --> 00:43:19,800 Speaker 13: really scale the transformation that we call it ten twenty seventy. 902 00:43:20,400 --> 00:43:24,320 Speaker 13: And I think that's a place where companies, clients, you know, 903 00:43:24,360 --> 00:43:26,680 Speaker 13: the folks and davas are leaning into where can we 904 00:43:26,800 --> 00:43:29,319 Speaker 13: really scale and get competitive advantage. 905 00:43:29,520 --> 00:43:31,760 Speaker 6: Hey, before we go, just got about a minute left here, Sharon, 906 00:43:31,800 --> 00:43:33,640 Speaker 6: and I do wonder going back to you know, we're 907 00:43:33,719 --> 00:43:36,480 Speaker 6: just focusing once again on davas a little bit more. 908 00:43:37,160 --> 00:43:43,239 Speaker 6: Is the corporate community breathing a sigh of relief that 909 00:43:43,440 --> 00:43:49,080 Speaker 6: even though Donald Trump, many would say, President Trump is 910 00:43:49,800 --> 00:43:53,000 Speaker 6: unpredictable or can be unpredictable in terms of what we 911 00:43:53,040 --> 00:43:58,279 Speaker 6: get from him and sometimes at unexpected times or unexpected places, 912 00:43:58,400 --> 00:44:02,880 Speaker 6: that they expect it to be an easier regulatory and 913 00:44:03,040 --> 00:44:05,560 Speaker 6: very business friendly environment. So they're willing to kind of 914 00:44:05,560 --> 00:44:09,120 Speaker 6: put up with some things because they think the overall 915 00:44:09,160 --> 00:44:13,920 Speaker 6: policies will be much more friendly to doing business in 916 00:44:13,920 --> 00:44:14,640 Speaker 6: the United States. 917 00:44:14,680 --> 00:44:16,200 Speaker 5: And just got about thirty seconds here. 918 00:44:16,960 --> 00:44:22,000 Speaker 13: Sure, I think there's a couple of the economy is strong, right, 919 00:44:22,080 --> 00:44:23,880 Speaker 13: So I think that's that's the core input. And I 920 00:44:23,880 --> 00:44:27,279 Speaker 13: think if you think about this current administration, I think 921 00:44:27,320 --> 00:44:30,640 Speaker 13: some of the policies that Donald Trump campaigned on and 922 00:44:30,760 --> 00:44:34,800 Speaker 13: was elected on are a little bit more pro growth 923 00:44:35,000 --> 00:44:38,440 Speaker 13: oriented and and I think that you know, the business 924 00:44:38,520 --> 00:44:42,279 Speaker 13: leaders can see some of those policies and regulations as 925 00:44:42,400 --> 00:44:46,440 Speaker 13: being adventacious in terms of the growth the growth of 926 00:44:46,480 --> 00:44:48,520 Speaker 13: their business. 927 00:44:47,560 --> 00:44:51,319 Speaker 6: And even tariffs. Just ten seconds they thought tariffs were 928 00:44:51,360 --> 00:44:52,320 Speaker 6: growth oriented. 929 00:44:54,680 --> 00:44:58,120 Speaker 9: I think those are. I think tariffs are. I think 930 00:44:58,160 --> 00:44:59,120 Speaker 9: tariffs are back. 931 00:44:59,160 --> 00:45:02,279 Speaker 13: But I think other policies that the administration is advocating 932 00:45:02,360 --> 00:45:04,080 Speaker 13: our growth oriented. 933 00:45:04,120 --> 00:45:06,359 Speaker 6: All right, Great to get some time with you and 934 00:45:06,440 --> 00:45:09,640 Speaker 6: to share what you saw and heard at DAVO. Sharon Marcel, 935 00:45:09,880 --> 00:45:12,879 Speaker 6: chief executive officer of Boston Consulting Group North America, joining 936 00:45:12,960 --> 00:45:14,040 Speaker 6: us from North Carolina. 937 00:45:16,960 --> 00:45:20,600 Speaker 1: This is the Bloomberg Business Week Podcast. Listen live each 938 00:45:20,640 --> 00:45:24,000 Speaker 1: weekday starting at two pm Eastern on Applecarflay, and Android 939 00:45:24,040 --> 00:45:27,120 Speaker 1: Auto with the Bloomberg Business App. You can also listen 940 00:45:27,200 --> 00:45:30,440 Speaker 1: live on Amazon Alexa from our flagship New York station. 941 00:45:31,000 --> 00:45:33,680 Speaker 1: Just say Alexa, play Bloomberg eleven thirty. 942 00:45:34,760 --> 00:45:37,040 Speaker 6: All right, everybody just got about eighteen minutes to go 943 00:45:37,120 --> 00:45:39,240 Speaker 6: until we wrap up the trading day and the trading week. 944 00:45:39,400 --> 00:45:41,239 Speaker 6: Carol Master along with Tim Staneviek live here in our 945 00:45:41,239 --> 00:45:44,600 Speaker 6: Bloomberg Interactive Broker Studio live on Blueberg Business Week. Just 946 00:45:44,600 --> 00:45:47,120 Speaker 6: a reminder, we are anticipating at the top of the 947 00:45:47,320 --> 00:45:52,439 Speaker 6: hour in an update and briefing from the NTSB looking 948 00:45:52,520 --> 00:45:56,640 Speaker 6: at into that investigation to Wednesday's mid air collision at 949 00:45:56,640 --> 00:45:59,120 Speaker 6: Reagan National. So as soon as that begins, we will 950 00:45:59,120 --> 00:46:01,760 Speaker 6: take you there live the latest on that. In the meantime, 951 00:46:01,960 --> 00:46:03,480 Speaker 6: got to talk about the markets because a lot of 952 00:46:03,480 --> 00:46:06,279 Speaker 6: news coming out of DC and really top of mine 953 00:46:06,320 --> 00:46:09,840 Speaker 6: right now, Tim, is what we are anticipating at this point, 954 00:46:10,120 --> 00:46:12,240 Speaker 6: tariffs that go into effect tomorrow. 955 00:46:12,320 --> 00:46:13,720 Speaker 2: Yes, I knew you were going to say. 956 00:46:13,600 --> 00:46:16,880 Speaker 5: Tariffs the chief trading partners with the United States. 957 00:46:16,960 --> 00:46:20,399 Speaker 2: Yeah, that would include Mexico Canada of those twenty five 958 00:46:20,440 --> 00:46:23,080 Speaker 2: percent tariffs, then ten percent tariffs on China. Shan O'Hara 959 00:46:23,160 --> 00:46:26,120 Speaker 2: is president at piacer Ets. They got about forty seven 960 00:46:26,200 --> 00:46:30,399 Speaker 2: billion dollars in assets under management. Sean joins us from 961 00:46:30,560 --> 00:46:33,480 Speaker 2: West Palm Beach, Florida this afternoon. Sewan, good to have 962 00:46:33,560 --> 00:46:35,759 Speaker 2: you with us. We did see stocks take a leg 963 00:46:35,840 --> 00:46:38,200 Speaker 2: lower after the White House said during the press briefing 964 00:46:38,520 --> 00:46:41,640 Speaker 2: that those tariffs would begin tomorrow. How are you looking 965 00:46:41,680 --> 00:46:44,400 Speaker 2: at the policies that have been enacted thus far at 966 00:46:44,480 --> 00:46:47,319 Speaker 2: least been talked about thus far by the Trump administration. 967 00:46:48,640 --> 00:46:50,880 Speaker 14: Good afternoon, Thanks for having me. It's nice to be 968 00:46:50,960 --> 00:46:53,040 Speaker 14: with you both. I think there's some good and some bad, 969 00:46:53,080 --> 00:46:56,640 Speaker 14: if you will, or some that are appealing to investors, 970 00:46:56,680 --> 00:46:59,000 Speaker 14: and then some that make investors a little nervous, which 971 00:46:59,040 --> 00:47:02,680 Speaker 14: is probably why this information or news on tariffs is 972 00:47:02,719 --> 00:47:04,839 Speaker 14: sort of causing a little bit of stress in the 973 00:47:04,880 --> 00:47:08,120 Speaker 14: market overall. You know, if you take the President at 974 00:47:08,120 --> 00:47:11,160 Speaker 14: his word, he's going to reduce regulation, make it easier 975 00:47:11,200 --> 00:47:13,960 Speaker 14: for businesses to do the things that they do. I 976 00:47:14,000 --> 00:47:16,680 Speaker 14: think that's generally a positive. He's definitely got to focus 977 00:47:16,680 --> 00:47:20,160 Speaker 14: on America first. I think that's also generally a positive. 978 00:47:20,920 --> 00:47:24,160 Speaker 14: So as all of these policies sort of tend to 979 00:47:24,239 --> 00:47:25,799 Speaker 14: roll themselves out, we'll get a. 980 00:47:25,719 --> 00:47:27,120 Speaker 4: Clearer and clearer picture. 981 00:47:28,040 --> 00:47:30,560 Speaker 14: My own personal view on the tariff side is I 982 00:47:30,560 --> 00:47:33,160 Speaker 14: think we're making a lot out of something that may 983 00:47:33,200 --> 00:47:35,840 Speaker 14: not ultimately mean that much in the long run. 984 00:47:36,719 --> 00:47:37,200 Speaker 4: I think the. 985 00:47:37,160 --> 00:47:40,879 Speaker 14: President uses terrorists as a way to negotiate, if you will, 986 00:47:40,920 --> 00:47:42,959 Speaker 14: to get people to do the things that he thinks 987 00:47:43,000 --> 00:47:45,840 Speaker 14: they should do that would benefit Americans the most and 988 00:47:45,880 --> 00:47:48,080 Speaker 14: benefit the American economy the most. But I think you 989 00:47:48,080 --> 00:47:49,719 Speaker 14: get a little bit of a mixed bag going on, 990 00:47:50,200 --> 00:47:53,279 Speaker 14: some good, a little bit that makes us nervous, I guess, 991 00:47:53,320 --> 00:47:54,680 Speaker 14: or at least makes the market nervous. 992 00:47:54,760 --> 00:47:57,000 Speaker 6: So soon, what do you make though of really the 993 00:47:57,000 --> 00:47:59,640 Speaker 6: pushback what seems on ESG, which has been actually happening. 994 00:47:59,640 --> 00:48:02,520 Speaker 6: I would say, certainly here on the financial side of 995 00:48:02,560 --> 00:48:07,000 Speaker 6: things for a while now, but even on DEI diversity, 996 00:48:07,040 --> 00:48:10,960 Speaker 6: equity and inclusion, the pushback on those policies, How do 997 00:48:11,000 --> 00:48:13,520 Speaker 6: you square when after I feel like it's been years 998 00:48:13,600 --> 00:48:16,319 Speaker 6: and years and years that consultants, McKinsey and others have 999 00:48:16,400 --> 00:48:21,040 Speaker 6: talked about the importance of diversity from even a financial level, 1000 00:48:21,080 --> 00:48:23,880 Speaker 6: that diverse boards companies that are diverse in terms of 1001 00:48:23,880 --> 00:48:27,880 Speaker 6: their approach and their composition, that they financially do better. 1002 00:48:28,000 --> 00:48:29,000 Speaker 5: Was that just all lies? 1003 00:48:30,520 --> 00:48:30,719 Speaker 4: Well? 1004 00:48:30,760 --> 00:48:32,239 Speaker 14: I mean, I guess that's what you get when you 1005 00:48:32,280 --> 00:48:35,000 Speaker 14: ask mckensey consultants how you should run your business? A 1006 00:48:35,120 --> 00:48:37,319 Speaker 14: little poke at that maybe within their twenty six year 1007 00:48:37,320 --> 00:48:40,680 Speaker 14: old MBAs. I think generally speaking, if you run a company, 1008 00:48:40,680 --> 00:48:42,359 Speaker 14: you should run a company for the benefit of your 1009 00:48:42,360 --> 00:48:45,920 Speaker 14: shareholders first. And I think that you know it's it's 1010 00:48:46,120 --> 00:48:48,200 Speaker 14: it couldn't happen soon enough in my view, that we 1011 00:48:48,280 --> 00:48:50,200 Speaker 14: sort of have shifted some of these things off to 1012 00:48:50,239 --> 00:48:53,720 Speaker 14: the side. I think that's a net positive for companies. 1013 00:48:53,760 --> 00:48:56,239 Speaker 14: You know, one of the things that we need in 1014 00:48:56,280 --> 00:49:00,720 Speaker 14: this market, and that American companies need is productivity growth. 1015 00:49:01,280 --> 00:49:04,560 Speaker 14: When you have programs that sort of potentially stunt that 1016 00:49:04,640 --> 00:49:08,960 Speaker 14: productivity growth or are an additional expense line in terms 1017 00:49:09,000 --> 00:49:10,880 Speaker 14: of how they run their business, then that sort of 1018 00:49:11,080 --> 00:49:15,520 Speaker 14: stunts productivity. And so we never were real big believers 1019 00:49:15,560 --> 00:49:18,759 Speaker 14: in ESG or DEI. We never followed all the big 1020 00:49:18,800 --> 00:49:21,319 Speaker 14: ETF issuers into the ESG to try to get the 1021 00:49:21,320 --> 00:49:26,560 Speaker 14: big institutional assets under management. We just focused on trying 1022 00:49:26,560 --> 00:49:29,479 Speaker 14: to find strategies in our ETF lineup that were really 1023 00:49:29,480 --> 00:49:32,040 Speaker 14: focused on fundamentals that were good for companies that would 1024 00:49:32,120 --> 00:49:35,719 Speaker 14: hopefully over time, make those companies more valuable and see 1025 00:49:35,719 --> 00:49:36,880 Speaker 14: their stock prices rise. 1026 00:49:37,800 --> 00:49:40,319 Speaker 6: So, in terms of you said we kicked it off 1027 00:49:40,360 --> 00:49:43,480 Speaker 6: talking about the second term of Donald Trump and the 1028 00:49:43,480 --> 00:49:46,440 Speaker 6: White House, you said, some good policies, some bad policies. 1029 00:49:47,000 --> 00:49:49,040 Speaker 6: The most right story in the Bloomberg has to do 1030 00:49:49,360 --> 00:49:55,319 Speaker 6: with these tariffs that are coming on China, Mexico and Canada, right, 1031 00:49:55,360 --> 00:49:58,240 Speaker 6: and they are expected to go into effect tomorrow. Twenty 1032 00:49:58,239 --> 00:50:01,839 Speaker 6: five percent on Mexico and Canada, ten percent levy on China. 1033 00:50:02,040 --> 00:50:05,160 Speaker 5: Is that in your good bad column? In the bad column? 1034 00:50:05,160 --> 00:50:07,719 Speaker 6: In terms of the possible impact on companies and the 1035 00:50:07,800 --> 00:50:13,360 Speaker 6: US economy and ultimately on US publicly held companies, I 1036 00:50:13,440 --> 00:50:13,680 Speaker 6: did it. 1037 00:50:13,800 --> 00:50:15,600 Speaker 14: Put it in my bad. I put it in my 1038 00:50:15,800 --> 00:50:18,160 Speaker 14: unknown category. We'll have to seek category. 1039 00:50:18,239 --> 00:50:19,760 Speaker 4: I think generally, why unknown? 1040 00:50:19,880 --> 00:50:22,920 Speaker 14: Yeah, Well, because I don't think we really know what 1041 00:50:23,200 --> 00:50:25,279 Speaker 14: the ultimate tariffs are going to be, or if there 1042 00:50:25,320 --> 00:50:28,920 Speaker 14: are actually tariffs that last. I mean, everybody needs to 1043 00:50:28,960 --> 00:50:31,040 Speaker 14: keep in mind this is the second time that President 1044 00:50:31,080 --> 00:50:33,919 Speaker 14: Trump has been president, and the first time he wasn't 1045 00:50:34,000 --> 00:50:35,280 Speaker 14: very different in terms of. 1046 00:50:35,120 --> 00:50:37,200 Speaker 4: How vocal he was about tariffs. 1047 00:50:37,200 --> 00:50:39,879 Speaker 14: And in spite of all of that, the markets did 1048 00:50:39,960 --> 00:50:43,719 Speaker 14: just fine and the American economy grew. And so I 1049 00:50:43,760 --> 00:50:46,040 Speaker 14: think he's focused on the tariff side because of all 1050 00:50:46,080 --> 00:50:48,640 Speaker 14: these trade deficits. In other words, we shouldn't have trading 1051 00:50:48,680 --> 00:50:51,480 Speaker 14: partners where we're as unequal as we are. I'm not 1052 00:50:51,480 --> 00:50:54,120 Speaker 14: sure we'll ever be equal on the trade side with China, 1053 00:50:54,160 --> 00:50:55,960 Speaker 14: but we should do what we can, if you will, 1054 00:50:56,320 --> 00:50:59,239 Speaker 14: to make sure that the American companies that are exporting 1055 00:50:59,239 --> 00:51:02,080 Speaker 14: outside of the US US have an equal chance. And 1056 00:51:02,160 --> 00:51:05,160 Speaker 14: so I suspect that we're not going to see, you know, 1057 00:51:05,239 --> 00:51:08,800 Speaker 14: twenty five or thirty percent tariffs on Mexico or Canada. 1058 00:51:09,080 --> 00:51:11,640 Speaker 14: They might meet somewhere in the middle, or they may 1059 00:51:11,960 --> 00:51:15,480 Speaker 14: recraft an overall trade deal that makes them not necessary. 1060 00:51:15,520 --> 00:51:17,200 Speaker 14: So I just I just think we need to wait 1061 00:51:17,239 --> 00:51:19,440 Speaker 14: and see and be a little bit calm. I know that, 1062 00:51:19,680 --> 00:51:21,120 Speaker 14: you know, it's one of those things that we talk 1063 00:51:21,200 --> 00:51:23,400 Speaker 14: about on or that some people talk about on the 1064 00:51:23,400 --> 00:51:25,799 Speaker 14: air all the time, and it makes everybody nervous. I 1065 00:51:25,800 --> 00:51:28,160 Speaker 14: would just say, with regard to that, you know, let's 1066 00:51:28,200 --> 00:51:31,279 Speaker 14: just pump the brakes a little on the hysteric hysteria there, 1067 00:51:31,640 --> 00:51:33,319 Speaker 14: and let's wait and see what happens and what the 1068 00:51:33,320 --> 00:51:33,920 Speaker 14: outcome is. 1069 00:51:34,280 --> 00:51:38,520 Speaker 2: Well, you have dozens of ETFs at PACER, including those 1070 00:51:38,560 --> 00:51:42,160 Speaker 2: that are you've categorized as risk mitigation, high value growth, 1071 00:51:42,200 --> 00:51:47,000 Speaker 2: somatic growth factor, structured structured outcome and income. Where are 1072 00:51:47,040 --> 00:51:49,839 Speaker 2: you seeing the flows right now as far as money 1073 00:51:49,840 --> 00:51:51,400 Speaker 2: coming in where people putting. 1074 00:51:51,200 --> 00:51:52,919 Speaker 4: In a great, great question. 1075 00:51:53,080 --> 00:51:55,320 Speaker 14: The biggest flows for us are coming into an ETF 1076 00:51:55,320 --> 00:51:59,360 Speaker 14: the tickers COLG, it's our growth like twin sister or 1077 00:51:59,400 --> 00:52:02,960 Speaker 14: brother to the cow Z value story used free cap move. 1078 00:52:03,160 --> 00:52:04,760 Speaker 4: We used free cash flow margin. 1079 00:52:05,560 --> 00:52:08,640 Speaker 14: That's a simple calculation as the sales a company gets 1080 00:52:08,680 --> 00:52:10,960 Speaker 14: divided into the free cash flow, so it's just a 1081 00:52:11,000 --> 00:52:14,680 Speaker 14: measurement of how effectively companies convert their sales to profits. 1082 00:52:14,719 --> 00:52:17,040 Speaker 14: And the higher that free cash flow margin, the more 1083 00:52:17,080 --> 00:52:21,200 Speaker 14: effective companies are. What's fascinating, and I think what's leading 1084 00:52:21,200 --> 00:52:22,920 Speaker 14: to some of the inflows is that if you look 1085 00:52:22,960 --> 00:52:25,840 Speaker 14: at say col G versus the Nastak one hundred or 1086 00:52:26,320 --> 00:52:29,759 Speaker 14: the Russell one thousand growth, we're performing as well or 1087 00:52:29,880 --> 00:52:32,319 Speaker 14: better over the last couple of years than those two 1088 00:52:32,360 --> 00:52:35,680 Speaker 14: big indexes with one major distinction which I think is important, 1089 00:52:35,719 --> 00:52:38,760 Speaker 14: and that is it we only have seventeen percent overlap 1090 00:52:38,840 --> 00:52:41,840 Speaker 14: to the Russell growth and only about seventeen or fifteen 1091 00:52:41,840 --> 00:52:44,000 Speaker 14: percent overlap to the Nastak one hundred in terms of 1092 00:52:44,520 --> 00:52:47,560 Speaker 14: portfolio names, but we only have four percent of the 1093 00:52:47,560 --> 00:52:50,080 Speaker 14: portfolio weight in the mag seven names, and so One 1094 00:52:50,120 --> 00:52:53,960 Speaker 14: of the things that we're talking to advisors and investors 1095 00:52:53,960 --> 00:52:57,960 Speaker 14: about is that what once was designed to be diversified 1096 00:52:58,200 --> 00:53:01,320 Speaker 14: is not necessarily as the fight as you think based 1097 00:53:01,360 --> 00:53:03,560 Speaker 14: on the way the market's performed the last couple of years, 1098 00:53:03,880 --> 00:53:06,279 Speaker 14: and potentially one of the biggest risk to investors is 1099 00:53:06,320 --> 00:53:09,320 Speaker 14: that over concentration, as much as has made us feel 1100 00:53:09,320 --> 00:53:12,080 Speaker 14: great on the way up, could be ultimately as disappointing 1101 00:53:12,120 --> 00:53:14,399 Speaker 14: on the way down. And so we're not saying, you know, 1102 00:53:14,640 --> 00:53:17,960 Speaker 14: sell all your cues or sell your IWF, which is 1103 00:53:17,960 --> 00:53:20,279 Speaker 14: the Russell growth ETFO. What we're saying is, you know, 1104 00:53:20,400 --> 00:53:23,799 Speaker 14: you should recognize how how concentrated and dependent you are 1105 00:53:23,880 --> 00:53:26,319 Speaker 14: to a very small number of names and perhaps find 1106 00:53:26,360 --> 00:53:28,080 Speaker 14: a different way to do that. Yeah, and when you 1107 00:53:28,160 --> 00:53:30,359 Speaker 14: use three cash flow margin as your screen, you wind 1108 00:53:30,440 --> 00:53:31,920 Speaker 14: up owning names like Apple love. 1109 00:53:31,840 --> 00:53:33,799 Speaker 4: In, which is in the Russian growth but a very 1110 00:53:33,840 --> 00:53:34,319 Speaker 4: small wave. 1111 00:53:34,520 --> 00:53:36,560 Speaker 6: We got to run have a great weekend, So glad 1112 00:53:36,600 --> 00:53:39,839 Speaker 6: we got time. Sean O'Hara, President at Pacer ATFS. 1113 00:53:39,960 --> 00:53:40,719 Speaker 5: This is Bloomberg. 1114 00:53:41,200 --> 00:53:45,560 Speaker 1: This is the Bloomberg Business Week podcast, available on Apple, 1115 00:53:45,760 --> 00:53:50,080 Speaker 1: Spotify and anywhere else you get your podcasts. Listen live 1116 00:53:50,160 --> 00:53:54,040 Speaker 1: weekday afternoons from two to five pm Eastern on Bloomberg 1117 00:53:54,080 --> 00:53:58,000 Speaker 1: dot com, the iHeartRadio app tune In, and the Bloomberg 1118 00:53:58,040 --> 00:54:01,120 Speaker 1: Business app. You can also watch as live every weekday 1119 00:54:01,120 --> 00:54:04,160 Speaker 1: on YouTube and always on the Bloomberg terminal