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

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Speaker 1: my co host Matt Miller. Every business day, we bring

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Speaker 1: you interviews from CEOs, market pros, and Bloomberg experts, along

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Speaker 1: with essential market moving news. Find the Bloomberg Markets Podcast

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Speaker 1: on Apple Podcasts or wherever you listen to podcasts, and

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Speaker 1: at Bloomberg dot com slash podcast. Well, we're waiting news

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Speaker 1: on a potential deal in the media space. Amazon reportedly

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Speaker 1: is and talks to acquire the film studio MGM. The

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Speaker 1: reported price tag is up to uh perhaps as high

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Speaker 1: as nine billion dollars. Let's break down this potential deal

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Speaker 1: with Mark Douglas. He's the CEO of Steelhouse. Mark. Thanks

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Speaker 1: so much for joining us here. You know, I look

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Speaker 1: at Amazon and the gajillion dollar you know, almost a

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Speaker 1: two trillion dollar market cap, got tremendous amounts of cash

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Speaker 1: on the balance sheet. Why are they You know, you

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Speaker 1: can look at MGM. It's a great, great film studio,

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Speaker 1: tremendous history, lots of great content, but it's kind of

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Speaker 1: small in the scheme of things. If if Amazon is

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Speaker 1: really serious about the content business and maybe really compete

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Speaker 1: against Netflix and Disney, why don't they go out and

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Speaker 1: buy something big like maybe even a Netflix or Disney

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Speaker 1: at the very least something like a Viacom CBS. Why

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Speaker 1: are they just kind of dipping their toe here with

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Speaker 1: a nine billion dollar deal for MGM. Yeah, So I

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Speaker 1: think that's the question that everyone has. And Amazon is

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Speaker 1: in the streaming business with Amazon Prime. But I think

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Speaker 1: if you were to asked, you know, virtually anyone really

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Speaker 1: um to name a streaming service, you would be hard

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Speaker 1: pressed to anyone to actually name Prime as as one

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Speaker 1: of those services. Because people get Prime to get their

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Speaker 1: packages delivered for free, not in order to watch movie

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Speaker 1: content and other content. And so that's the lemmon um

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Speaker 1: Amazon has. And and they're really not um investing in

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Speaker 1: any huge way with this deal. I think most people expected,

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Speaker 1: but there aren't you know, excited about it. The Prime

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Speaker 1: layout is even worse than the Netflix layout out in

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Speaker 1: terms of, you know, the user interface. I mean, both

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Speaker 1: are pretty bad. I don't know why they can't match Apple,

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Speaker 1: But um, what would be the best way then? Uh,

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Speaker 1: do you think an acquisition is the best way for

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Speaker 1: Amazon to do better in that space? Do you think, um,

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Speaker 1: they is there a specific target that you have in

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Speaker 1: mind mark. Yeah, well, I think the deal that Discovery did,

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Speaker 1: what's the deal to do because you know, HBO Max

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Speaker 1: is if you want, yeah, if you want to give viewers,

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Speaker 1: it starts with original content. And even that's not enough.

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Speaker 1: Apple spends more money on original content than anyone and

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Speaker 1: and and you know, name a show that you love

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Speaker 1: on on Apple TV Plus. So I think you know,

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Speaker 1: both these companies have, you know, huge amounts of money.

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Speaker 1: They both spend. Apple is at least spending in the

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Speaker 1: area that they're hoping finally breaks through and get them

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Speaker 1: that big hits that that you know, essentially gets all

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Speaker 1: the viewers to get side. It was like a handmade

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Speaker 1: tale or in the past, the Game of Thrones and

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Speaker 1: things like that. But Amazon is not even doing that.

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Speaker 1: So I think, can I just say ted Lasso is

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Speaker 1: really underrated. I just finished season one based on your

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Speaker 1: recommendation there, managed I just don't think people know how

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Speaker 1: funny it is. It's smart, but it's also kind of heartwarming. UM.

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Speaker 1: I mean, it's not like a VP or a Silicon Valley, um.

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Speaker 1: But it's really really good. They did they just didn't

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Speaker 1: They don't get the recognition mark for that, do they?

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Speaker 1: Or for Like for All Mankind also was quite good.

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Speaker 1: That just doesn't get the credit. Yeah, well, I mean

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Speaker 1: I agree in some sense, but you know, I'm I'm

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Speaker 1: watching Startup one nextli you know, costs a lot less money. Um, someone,

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Speaker 1: I don't think a lot of people know about the

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Speaker 1: great show. So Netflix cranked out these shows, yeah literally

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Speaker 1: five weeks that people love, and they have incredible technology

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Speaker 1: to figure out what their users want to see. And meanwhile,

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Speaker 1: Apple has got a fire hose of money they just

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Speaker 1: bring around Hollywood and yeah, and and they're just not

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Speaker 1: getting the same result. And the Amazon is now doing

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Speaker 1: the same and they're not going to get the same

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Speaker 1: with dot Well. Tera La Chapelle Bloomberg Opinion Columns is

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Speaker 1: out with a great another great column today looking at

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Speaker 1: this potential deal and saying, hey, you know, you think

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Speaker 1: about the Whole Foods business that didn't wasn't really a

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Speaker 1: game changer for for Amazon or even the industry. Um,

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Speaker 1: And she's kind of saying, hey, this deal kind of

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Speaker 1: feels like a Whole Foods where they're not really all in.

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Speaker 1: But boy, you look market some of these other companies, Um,

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Speaker 1: you know what is this Vicom, CBS do what does

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Speaker 1: the Fox do. I mean, we thought you just wonder

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Speaker 1: with you know, market caps that are seven billion dollars

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Speaker 1: that they just don't seem like they're competitive enough in

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Speaker 1: terms of scale and kind of where the world's going again.

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Speaker 1: You look, you mentioned the the A, T and T

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Speaker 1: and Discovery deal. Yeah, well, I mean it starts with vision.

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Speaker 1: If you ask anyone in Amazon what is this deal

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Speaker 1: going accomplished? I don't think they're going to give you

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Speaker 1: a visionary or exciting result. But if you ask the

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Speaker 1: head of Discovery what he what he's going to accomplish?

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Speaker 1: What his vision? I think he knows and he's willing

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Speaker 1: to put his solids on the table and the effort

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Speaker 1: to accomplish it. And so if you want to win

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Speaker 1: in Hollywood, all the biggest players, Netflix, Disney with Disney Plus,

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Speaker 1: now Discovery, what they're doing with HBO, Max and the

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Speaker 1: other assets they bought, they all share one common threat,

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Speaker 1: you know, a thread, which is they have visions, they

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Speaker 1: have original content, and they have huge libraries about the

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Speaker 1: content to go with it. And if you want to

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Speaker 1: be a real player, you need all of those ships

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Speaker 1: on the table. Does the sports aspect help at Amazon?

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Speaker 1: They're getting Are they getting Thursday night football? I think

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Speaker 1: they are getting Thursday at football in Prime? Right? Does

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Speaker 1: that help a lot or um? I mean it forces

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Speaker 1: me to go use the you know, they go to

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Speaker 1: the website of that content I want to watch. So

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Speaker 1: in that sense it does help, But I don't see

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Speaker 1: anyone can say that immeasurably increases put print of Amazon

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Speaker 1: or anyone is leaving watching you know that that that

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Speaker 1: NFL content and is now you know, basically going to

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Speaker 1: consume more hours on Prime Menu? Are so? So it helps,

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Speaker 1: it helps, you know, in terms of some awareness, but

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Speaker 1: I don't think it really moves them up the food

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Speaker 1: chain in terms of their position in the strands market. Hey, Mark,

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Speaker 1: you you know as Steelhouse. You guys work with a

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Speaker 1: lot of advertisers, a lot of brands. What are the advertisers?

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Speaker 1: What is Madison Avenue saying about all those consolidation in

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Speaker 1: the media spaces a good thing? Is it something to

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Speaker 1: be concerned about? What are you hearing? Yeah? I think

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Speaker 1: I mean remember for the advertisers, what they want is

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Speaker 1: good at supported content. Right, So you have streaming subscription

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Speaker 1: supported content that's Netflix, and then you have ad supported content,

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Speaker 1: which is what Discovery and other a number of other

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Speaker 1: companies are doing. And so those advertisers, I think they

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Speaker 1: like these deals, you know, because there's a lot of

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Speaker 1: revenue has to be generating that keeps these studios and

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Speaker 1: everything firmly seeded and ad supported content, which the brands

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Speaker 1: need in order to reach them doing. Baseball is dying.

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Speaker 1: I wonder you're not a huge fan, right, but I

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Speaker 1: wonder what you think about the Major League Baseball if

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Speaker 1: you just ask quickly, because it's like every game is

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Speaker 1: a no hitter and um, the average is down to

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Speaker 1: two thirties or something. Um, is is this in your

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Speaker 1: in your window at all? Here? Mark, I wouldn't say

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Speaker 1: I'm not a huge fan. I actually loved the game

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Speaker 1: and love a really good game. So I think what

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Speaker 1: you're articulating is it's getting harder and harder to find.

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Speaker 1: And so I think, you know, baseball is always going

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Speaker 1: to be part of Americana, and I think the league

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Speaker 1: just has to, you know, really, um, make bringing the

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Speaker 1: players and and and have the rules and everything. Give

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Speaker 1: us short, exciting games and they will get all the

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Speaker 1: viewers they need, all right, Mark, Thanks very much, Mark Douglas.

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Speaker 1: They are he is the CEO of Steelhouse. I always

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Speaker 1: bring up baseball with him because I know he grew

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Speaker 1: up right across the street from Yankee Stadium and became

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Speaker 1: a Mets, became a Mets fan. All right, this is Bloomberg.

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Speaker 1: Let's bring in Mark roberts Is Um Paul was saying,

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Speaker 1: he's a co founder and owner of eleven eleven hotel

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Speaker 1: and residences in Miami, and Mark, let me first ask

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Speaker 1: you a question. We've talked to a lot of hotel

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Speaker 1: and restaurant owners and operators throughout UM the Southeast to

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Speaker 1: have told us it's very difficult to hire people right

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Speaker 1: now if you had the same experience. Yes, we've had

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Speaker 1: a little little issue with the hiring at the beginning,

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Speaker 1: but because our strong brand, our strong name, and our

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Speaker 1: recognition and people understand when they worked for us to

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Speaker 1: be very lucrative, We've had a lot of people showing

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Speaker 1: up in the last couple of weeks and we're gonna

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Speaker 1: have a full staff probably another week or two, will

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Speaker 1: be fully staffed. With the first Yeah, I have to

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Speaker 1: hire them, then you have to some culture, and then

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Speaker 1: you have to train them. But will have a full

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Speaker 1: staff ready and rare and to go very shortly. So

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Speaker 1: market there's I know you have here. An eleven eleven

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Speaker 1: brand in Miami talked us about the Miami market. It's

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Speaker 1: just gotta be one of the hottest markets in the country.

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Speaker 1: Talk to us about how it's kind of evolved over

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Speaker 1: the course of the last fourteen months. Sure, well eleven

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Speaker 1: Hotel and Residents of course is leading the charge, but

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Speaker 1: we sold out basically almost uh million dollars in real

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Speaker 1: estate just under a month. And Miami has become such

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Speaker 1: a hot market for a bunch of reasons. I think

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Speaker 1: people first started moving to Miami because of the tax situation,

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Speaker 1: get always from high pastes. I think they also like

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Speaker 1: the political atmosphere, pro business uh. And then they get

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Speaker 1: to Miami and they understand the quality of light is unbelievable.

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Speaker 1: All of a sudden, they're boating around the water, the

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Speaker 1: weather has been fantastic. Stick All they see is uh people,

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Speaker 1: you know, feeling good, working out. And then they get

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Speaker 1: there and they start seeing that business is booming. The

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Speaker 1: restaurant like almost every restaurant you can name that there's

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Speaker 1: lines to get in, there's you know, everybody's selling the condo,

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Speaker 1: U interest selling things, are renting houses are selling it's

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Speaker 1: crazy prices on multiples of what they want for just

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Speaker 1: a year, a year and a half ago. And I

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Speaker 1: really believe that New York and these other areas like

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Speaker 1: San Francisco, l A, Chicago, the major stages are losing

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Speaker 1: all these people. Uh, people are coming to Miami and

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Speaker 1: understand of Miami's much more than just the tourist place. Now,

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Speaker 1: Miami's coming the most major city there is probably in

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Speaker 1: the world, and it's really grown up to be what's

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Speaker 1: gonna be the epicenter of business. I mean, all the

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Speaker 1: text that's coming in there now is just incredible. And

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Speaker 1: and you know it's restaurants as restaurants. See all the

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Speaker 1: other restaurants are being successful. Um for instance, like Carbone

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Speaker 1: came down from New York. They're opening up twenty new restaurants.

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Speaker 1: All it's like a stampede. It's like it's like a

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Speaker 1: herd mentality, and everybody sees the numbers, and the numbers

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Speaker 1: per square foot is just incredible, and I do everybody

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Speaker 1: is shattering records. And and you know, as you know,

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Speaker 1: the restaurant guys follow the restaurant guys, So there's an

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Speaker 1: influx of top top top restaurants. I'm surely been called

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Speaker 1: a col in every center of the universe. So so

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Speaker 1: what have you done too? Because it's not a hotel

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Speaker 1: in residents just the beginning for eleven and eleven, you've

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Speaker 1: got UM one of the most famous, I guess nightclub

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Speaker 1: spots in the US. Everybody wants to go and see.

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Speaker 1: You've got shows with DJ's rappers. But you've got burlesque,

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Speaker 1: You've got trapeeze acts. You've got also other UM products

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Speaker 1: like your own vodka brand. How how are you branching

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Speaker 1: out into into this economy. Well, we're doing is we've

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Speaker 1: become such a strong name recognition amongst really almost to

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Speaker 1: all sectors. Uh, the lifestyle, you live your life, live

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Speaker 1: a better life. So what we're doing is we've now

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Speaker 1: form to separate I P Division Intellectual Property Division, and

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Speaker 1: we're stamping that up and we're going to create a

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Speaker 1: multi multibillion dollar brand. How are we going to do that?

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Speaker 1: Eleven hotel and residences. When we open them up all

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Speaker 1: over the world, we're gonna be Uh, we're branding. The

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Speaker 1: vodka is unbelievable. We just launched it this year and

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Speaker 1: Nicky Simptons is my partner's wife is a CEO, is

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Speaker 1: doing a tremendous job, and we literally and all over Florida.

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Speaker 1: We're dominating Florida and we're gonna be taking that vodka

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Speaker 1: national soon. And you know, for first year, I think

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Speaker 1: we're breaking rectors there everybody. The vodka, by the way,

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Speaker 1: won the Double Gold Award in San Francisco last month.

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Speaker 1: It's the top award for a spirit. So the taste

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Speaker 1: is unbelievable. So you always have to have the quality.

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Speaker 1: People know that eleven stands for quality. When you're dealing

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Speaker 1: with eleven, you're gonna first class, first not top quality.

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Speaker 1: It's could be the best, and that's really what will

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Speaker 1: relate to it. And of course all ips are built

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Speaker 1: on the brand and brand awareness, which we have incredible

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Speaker 1: brand awareness and per square foot, but the most profitable

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Speaker 1: nightclub in the world by far, I don't think anybody's

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Speaker 1: even close for only thirteen thousand square feet, even though

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Speaker 1: people think it's huge. Um, but like you said, the

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Speaker 1: lines have been around the block. I mean we literally

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Speaker 1: have five hundred to a thousand people waiting to get

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Speaker 1: in now uh charges sometimes and people paying no problem. Well, no, no,

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Speaker 1: we've we've believe it or not, we've been having like

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Speaker 1: two hundred covered charges just because we've been having great acts,

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Speaker 1: the aerial acts, and we would spend a lot of

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Speaker 1: money to make sure the experience inside is people leave

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Speaker 1: there thinking they've got value. So we spent a lot

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Speaker 1: of money, you know, putting on the shows and making

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Speaker 1: sure we have a great service and staff feel very professional.

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Speaker 1: It looks easy, but it it takes a lot of work. Work. Hey, Mark,

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Speaker 1: thank you so much for joining us. We really appreciate you.

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Speaker 1: Take in the time. Mark Roberts, co founder and owner

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Speaker 1: of an eleven eleven hotel and residents in Miami. Uh,

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Speaker 1: certainly the Miami has been just an incredibly hot market,

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Speaker 1: really accelerated during this pandemic. Well, it seems like over

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Speaker 1: the last several days inflation concerns in the market place

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Speaker 1: are waning just a little bit. I'm looking at the

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Speaker 1: ten year here here one point five seven seven percent.

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Speaker 1: That's off a couple of basis basis points today. Uh,

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Speaker 1: let's see how things are going in the municipal bond market,

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Speaker 1: which which has been one of one of the hottest

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Speaker 1: markets out there. Michael Jay's chief US Public Policy and

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Speaker 1: municipal strategies from Morgan Stanley joins us. Michael talked to

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Speaker 1: us about the bond market has had such a great run, Um,

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Speaker 1: there are some inflation fears out there in the market place,

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Speaker 1: maybe ebbing a little bit over the past several days.

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Speaker 1: How's the municipal bond market reacted to that? Yeah, I

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Speaker 1: think the municipal bond market is not really reflecting any

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Speaker 1: meaningful concern about inflation at the moment. Actually think the

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Speaker 1: place to start here is at credit quality in the market, unabashedly,

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Speaker 1: year over years, substantially improved and probably will continue to

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Speaker 1: improve meaningfully. But the challenge now is that a lot

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Speaker 1: of that good news is already in the price. You've

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Speaker 1: got saluations no matter how you slice it, UH yield

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Speaker 1: ratios versus treasuries, quality spreads, all kind of pre COVID tights,

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Speaker 1: and so what that means is that if you've got

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Speaker 1: good fundamentals and they're going to continue to improve, but

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Speaker 1: relative valuations are pretty tight, it's probably something outside the

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Speaker 1: municipal bond market that would have to make things cheapen up.

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Speaker 1: And this is why we say we don't think there

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Speaker 1: really particularly price for inflation. If you've got some meaningful

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Speaker 1: um upside inflation or the said had to start talking

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Speaker 1: about tapering sooner. Our concern would be in that scenario

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Speaker 1: that you could get a bear steepening of the treasury curve.

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Speaker 1: Mini market historically is not done well in those situations.

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Speaker 1: It tends to lead to outflows. And because it's a

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Speaker 1: long only market UM dominated by long only sters, you

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Speaker 1: tend to get cheapness on the back end of that.

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Speaker 1: So in some ways we think the real wistom uni

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Speaker 1: market is some of these inflation prints. Even though it

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Speaker 1: wouldn't tell you much about credit quality. It wouldn't tell

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Speaker 1: you that credit quality is getting any worse. Sorry, my

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Speaker 1: microphone is off. Okay, so credit quality um. And we

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Speaker 1: kind of all braced ourselves for a difficult time here

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Speaker 1: pre pandemic or during the pandemic, and it hasn't happened.

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Speaker 1: Do you expect any changes throughout the next quarter or two?

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Speaker 1: Not particularly, And I mean you know I traveled the

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Speaker 1: same journey you did. We put out an initial estimate

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Speaker 1: around this time last year of what the cumulative fifty

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Speaker 1: state budget shortfall is going to be versus the revenue

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Speaker 1: estimate in our base case was about two hundred and

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Speaker 1: seventy billion dollars um. That number appears to be on

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Speaker 1: paper now we're still counting things substantially lower. And then,

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Speaker 1: of course, on top of that, in the COVID released

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Speaker 1: bill earlier this year, the federal government appropriated three hundred

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Speaker 1: and fifty billion dollars of AIDS. So in the state

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Speaker 1: and local sector, you've got plenty of money to cover

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Speaker 1: potential shortfalls. The money that was appropriated via UM the

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Speaker 1: other A packages put plenty of money to the hospital system,

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Speaker 1: the airport system, So this is a sector. Broadly speaking,

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Speaker 1: most municipal sectors are not just writing the v shaped

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Speaker 1: economic recovery. They were also given plenty of cash by

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Speaker 1: the federal government, and so you wouldn't expect to see

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Speaker 1: anything directionally negative show up on income statements or balance

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Speaker 1: sheets over the course of this year. Michael, where are

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Speaker 1: you guys seeing value here in a bond market? Where

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Speaker 1: are you guys spending some time? You know, it's tough

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Speaker 1: because a lot of the value has been squeezed out here.

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Speaker 1: On a relative basis. The sectors that we still like

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Speaker 1: here are airports and higher education. So certainly that the

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Speaker 1: relative yield you can get here is not nearly as

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Speaker 1: much as it was during the pandemic or the high

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Speaker 1: of the pandemic. Of these are sectors where there's a

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Speaker 1: lot of concern about their economic model relies on population density,

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Speaker 1: on people being together. Um So in some ways you

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Speaker 1: saw their fundamentals decrease the most. Uh. And here we

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Speaker 1: think the trajectory out of the pandemic is going to

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Speaker 1: benefit the fundamentals. They're the most. So there's a little

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Speaker 1: bit of extra yeld breast there. And frankly, we just

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Speaker 1: think that when there isn't the market's not giving you

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Speaker 1: a lot of spread to go credit picking, you might

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Speaker 1: as well put things in your portfolio you think have

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Speaker 1: the sharpest positive fundamental trajectory. I'm curious to know about

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Speaker 1: your your career, Michael Um. I don't want to get

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Speaker 1: too personal, but I think it's fascinating. You studied um

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Speaker 1: political economy at Georgetown, public affairs at Austin. Then you

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Speaker 1: want you're a chloral fellow, went to Fitch. Then you're

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Speaker 1: on the by side, And how do you get from

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Speaker 1: there to here? Yeah? I don't know. Actually, I mean

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Speaker 1: a little at a little bit of luck, a little

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Speaker 1: bit of accident, happenstance. I mean, I think for me,

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Speaker 1: UM municipal market was always fascinating because it was about

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Speaker 1: taking the numbers that are in financial statements and seeing

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Speaker 1: through to what the actual policy choices that were being

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Speaker 1: made were. And then really, I think to be any

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Speaker 1: to be a good municipal credit analysts, you really have

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Speaker 1: to have a forecasting ability about national policy, tax policy,

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Speaker 1: healthcare policy, etcetera. And that's a skill set that that

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Speaker 1: then translated into broader public policy forecasting for other markets.

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Speaker 1: So unconventional path as supposed but have worked out well.

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Speaker 1: I just think it's fascinating because you have that public

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Speaker 1: policy background and now we're in a situation where we're

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Speaker 1: looking at you know, trillions of dollars in fiscal spending

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Speaker 1: and even more in Fed assistance. And I mean really, um,

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Speaker 1: really a paradigm shift in the way on the US

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Speaker 1: economy is operated from a government level. Right, we went

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Speaker 1: from the Reagan years making smaller government, deregulating, and and

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Speaker 1: now forty years later we're just turning a correer here.

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Speaker 1: Does that inform your investment strategy? Well, I mean absolutely.

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Speaker 1: I think as an investor you sort of learn to

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Speaker 1: if you if you want to track these things correctly,

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Speaker 1: to take your personal views about what you want to

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Speaker 1: happen in Washington, d C. Or any other state capital

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Speaker 1: out of it, and you focus on what will happen.

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Speaker 1: And right now, we have a very polarized electorate in

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Speaker 1: the US and therefore a disincentive to bipartisanship. And what

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Speaker 1: it tells you is that the when one party or

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Speaker 1: the other has control, that's the only are sort of

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Speaker 1: likely the best time to get any legislation done. And

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Speaker 1: legislation tends to get done only in the way that

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Speaker 1: all members of a party can agree upon. So when

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Speaker 1: you overlay on what you're talking about on fiscal policy, uh,

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Speaker 1: it means that when Republicans have been in power, they

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Speaker 1: can all agree on tax cuts, you tend to get

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Speaker 1: fiscal expansion that way. When Democrats are empower, they can

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Speaker 1: all agree on the spending side, less so on the

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Speaker 1: tax side. And until the electorate is going to punish

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Speaker 1: someone for deficit spending, maybe because you actually see inflation

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Speaker 1: impacting people's disposable income, well then the incentives is just

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Speaker 1: kind of keep pushing the deficit wider. So that's what

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Speaker 1: sets up for the for the spending that you've seen

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Speaker 1: so far this year and that we think is going

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Speaker 1: to continue. All right, Michael, thanks very much for joining

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Speaker 1: us pleasure having on the program. Michael jesus their chief

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Speaker 1: US public policy and unique strategist at Morgan Stanley. I

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Speaker 1: remember he did a great podcast with Ritholts Masters in

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Speaker 1: Business Podcasts a few years ago that that I loved,

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Speaker 1: So I'm glad we got to get him on This

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Speaker 1: is Bloomberg. You know, since the beginning of this pandemic,

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Speaker 1: you know, when the markets across the board just created

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Speaker 1: one market showed incredible resiliency, it just amazed me. That's

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Speaker 1: the real estate market, whether it's existing homes, new homes,

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Speaker 1: housing starts. You know, the numbers were generally really strong

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Speaker 1: throughout the pandemic, and we got some more data today,

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Speaker 1: but it's just an amazing market. Let's kind of dig

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Speaker 1: into it. We can do that with Craig Gimmona. He's

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Speaker 1: a real estate reporter for Bloomberg News. He actually joins

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Speaker 1: us again live in this Bloomberg Interactive broken studio. The

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Speaker 1: first guest I've had in this studio in fourteen months,

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Speaker 1: so it's you're the first Craig thanks so much for

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Speaker 1: coming in here. Talk to us about some of the

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Speaker 1: data we saw today. I know the US no new

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Speaker 1: home sales fell by more than forecast, but I mean

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Speaker 1: the demand still out there, right, The demand is definitely

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Speaker 1: still out there, and I think in the two reports

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Speaker 1: that we got today Case Shiller plus home sales, you're

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Speaker 1: seeing kind of the way the trend is playing out.

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Speaker 1: As you said back last April, things froze, you know,

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Speaker 1: there was not much transactions. People thought real estate prices

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Speaker 1: were gonna fall, but as soon as people started moving

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Speaker 1: again a little bit, home prices have just been on

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Speaker 1: a steady climb. I mean, there's demographic tail winds. The

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Speaker 1: millennial generation is at home buying age, they're having that

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Speaker 1: second kid. There's demand for extra space for offices for

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Speaker 1: remote learning. So the suburbs are about as hot as

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Speaker 1: they've been in fifteen or twenty years, and there's nothing

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Speaker 1: to buy. There's a severe inventory shortage. Basically every home

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Speaker 1: that hits the market moves and record speed. There's cash offers,

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Speaker 1: bidding wars, so incredible demand for houses in the United States.

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Speaker 1: The question is are the prices going to run out

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Speaker 1: ahead of the demand and keep those first time buyers,

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Speaker 1: the millennial couple that's looking for something in that three

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Speaker 1: hundred thousand, four hundred thousand dollar range. It's very very

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Speaker 1: tough out there right now. And I do think that's

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Speaker 1: what you're seeing in new home sales. I know my

429
00:23:23,040 --> 00:23:25,320
Speaker 1: brother is looking for a place in the Try State area,

430
00:23:25,480 --> 00:23:29,520
Speaker 1: and every time they put in an offer, they are

431
00:23:29,600 --> 00:23:32,800
Speaker 1: instantly overbid by like five or six different people. I

432
00:23:32,800 --> 00:23:35,359
Speaker 1: know somebody who just bought a place in the DC

433
00:23:35,640 --> 00:23:40,560
Speaker 1: area without even having seen it. Very very common. Yeah,

434
00:23:40,600 --> 00:23:44,399
Speaker 1: that's just to me, that seems crazy like buying a

435
00:23:44,520 --> 00:23:47,360
Speaker 1: used car without test driving, and it's just absolutely nuts.

436
00:23:47,400 --> 00:23:49,760
Speaker 1: But I guess you've got to do that. Um. Why

437
00:23:49,960 --> 00:23:53,520
Speaker 1: why aren't we seeing a ton of new supply come

438
00:23:53,560 --> 00:23:55,679
Speaker 1: online in the market where you see prices going up

439
00:23:56,160 --> 00:24:03,240
Speaker 1: ten or per month? Um? Doesn't that make construction workers

440
00:24:03,320 --> 00:24:06,560
Speaker 1: want to go out and build spec houses? Um? It does?

441
00:24:06,600 --> 00:24:08,199
Speaker 1: And I think two things on that. I mean, I

442
00:24:08,200 --> 00:24:10,439
Speaker 1: think as far as existing homes, I think some of

443
00:24:10,440 --> 00:24:12,600
Speaker 1: the older people that own those bigger homes in the

444
00:24:12,640 --> 00:24:15,040
Speaker 1: suburbs have not sold them because maybe the kid from

445
00:24:15,040 --> 00:24:17,879
Speaker 1: college moved back in in the pandemic suddenly they like

446
00:24:18,040 --> 00:24:21,240
Speaker 1: that big place in Granwage or Westchester because they have

447
00:24:21,359 --> 00:24:23,800
Speaker 1: room for the entire family. So people have been on

448
00:24:23,840 --> 00:24:26,320
Speaker 1: the sidelines, the people that typically would be downsizing at

449
00:24:26,320 --> 00:24:28,359
Speaker 1: this life stage. And you know, we went into this

450
00:24:28,400 --> 00:24:30,760
Speaker 1: with a severe shortage, and I think the builders have

451
00:24:30,880 --> 00:24:33,880
Speaker 1: ramped up as fast as they can. But you've also

452
00:24:33,920 --> 00:24:36,119
Speaker 1: seen a situation where it's so hot and lumber is

453
00:24:36,160 --> 00:24:37,800
Speaker 1: going up so much that the builders are kind of

454
00:24:37,800 --> 00:24:40,920
Speaker 1: deliberately slowing things down because they don't want to lock

455
00:24:40,920 --> 00:24:42,560
Speaker 1: in a price right now because in two months the

456
00:24:42,600 --> 00:24:44,679
Speaker 1: price could be up ten percent. So you know, a

457
00:24:44,680 --> 00:24:46,280
Speaker 1: lot of factors. But we went into this with a

458
00:24:46,359 --> 00:24:49,280
Speaker 1: huge supply shortage, and I do think the millennial sort

459
00:24:49,280 --> 00:24:52,040
Speaker 1: of demographic tailwind, it's a big factor here. So Craig,

460
00:24:52,040 --> 00:24:54,840
Speaker 1: when we talk about new housing, one of the areas

461
00:24:54,920 --> 00:24:58,520
Speaker 1: that had been problematic, I think from just the market's

462
00:24:58,560 --> 00:25:02,520
Speaker 1: perspective is builders were building a lot of new entry homes.

463
00:25:02,520 --> 00:25:04,840
Speaker 1: They're buying, you know, building the McMansions and things like that.

464
00:25:04,880 --> 00:25:07,280
Speaker 1: The trade up homes are have they've sensed that there

465
00:25:07,520 --> 00:25:10,480
Speaker 1: is a market for that move in early first buyer

466
00:25:10,560 --> 00:25:13,120
Speaker 1: kind of house. I think they know that that market exists,

467
00:25:13,119 --> 00:25:15,520
Speaker 1: and some of them at least pay lip service to that.

468
00:25:15,560 --> 00:25:17,520
Speaker 1: But I think what you're seeing there also is that

469
00:25:17,960 --> 00:25:20,199
Speaker 1: you know it costs about the same to build that

470
00:25:20,200 --> 00:25:22,119
Speaker 1: eight hundred thousand dollar home, you know, with the with

471
00:25:22,160 --> 00:25:25,679
Speaker 1: the way lumber is, with land labor that you know

472
00:25:25,800 --> 00:25:27,600
Speaker 1: told brothers are one of these other guys is looking

473
00:25:27,640 --> 00:25:29,520
Speaker 1: at it and saying, I could build a house for

474
00:25:29,520 --> 00:25:32,000
Speaker 1: four fifty there. I could certainly sell that. But I

475
00:25:32,000 --> 00:25:34,240
Speaker 1: could sell this home for eight hundred two. So why

476
00:25:34,240 --> 00:25:36,199
Speaker 1: don't I build that when the margins are better? So

477
00:25:36,320 --> 00:25:38,840
Speaker 1: it's a it's a massive problem. I think, Um, there's

478
00:25:38,840 --> 00:25:41,359
Speaker 1: an affordability crisis that's looming here where you have a

479
00:25:41,400 --> 00:25:43,480
Speaker 1: generation of people that you know are going to have

480
00:25:43,520 --> 00:25:46,040
Speaker 1: a very very hard time buying that first home when

481
00:25:46,080 --> 00:25:49,119
Speaker 1: if things day like this. I've always thought, I wish

482
00:25:49,240 --> 00:25:53,560
Speaker 1: I could do this job broadcasting for Bloomberg Radio, Bloomberg Television,

483
00:25:54,400 --> 00:25:58,280
Speaker 1: UM remotely and get a place in like rural Montana.

484
00:25:58,760 --> 00:26:01,280
Speaker 1: So for me, that's not going to be a possibility.

485
00:26:01,320 --> 00:26:03,560
Speaker 1: I'll talk to Al from Jersey about that one. But

486
00:26:03,560 --> 00:26:07,560
Speaker 1: but for others, Um Craig, that's become a real possibility. Uh.

487
00:26:07,880 --> 00:26:10,159
Speaker 1: In the pandemic and now it looks like post pandemic.

488
00:26:10,440 --> 00:26:14,080
Speaker 1: Are you seeing things spread out a little bit due

489
00:26:14,080 --> 00:26:17,160
Speaker 1: to that? I mean, I think places like the Hampton's,

490
00:26:17,280 --> 00:26:20,639
Speaker 1: places like Aspen Tahoe, those are those are places that

491
00:26:20,680 --> 00:26:23,600
Speaker 1: went crazy in the pandemic because people said, Okay, I

492
00:26:23,640 --> 00:26:25,800
Speaker 1: don't have to go into my office in midtown anymore.

493
00:26:26,280 --> 00:26:28,120
Speaker 1: You know, now I can live wherever I want. I mean,

494
00:26:28,160 --> 00:26:31,040
Speaker 1: we'll see. I think the narrative that you know, midtown

495
00:26:31,040 --> 00:26:35,280
Speaker 1: offices are dead was way overblown a year ago. Obviously,

496
00:26:35,359 --> 00:26:37,280
Speaker 1: we're seeing people start to trickle back. I think there's

497
00:26:37,280 --> 00:26:39,160
Speaker 1: a lot of people waking up in the cats skills.

498
00:26:39,600 --> 00:26:41,159
Speaker 1: You know, now the boss is saying you have to

499
00:26:41,200 --> 00:26:43,040
Speaker 1: come back, wondering, you know, why did we buy this

500
00:26:43,080 --> 00:26:45,800
Speaker 1: place that's two and a half hours from midtown Manhattan.

501
00:26:45,880 --> 00:26:48,880
Speaker 1: So it'll be interesting to see, you know what flex

502
00:26:48,880 --> 00:26:50,399
Speaker 1: work means. I think in a world where you have

503
00:26:50,440 --> 00:26:52,199
Speaker 1: to be in the office three days a week, you know,

504
00:26:52,400 --> 00:26:54,800
Speaker 1: it's still you don't want to go so far out

505
00:26:54,840 --> 00:26:57,840
Speaker 1: and you know something. Houses near transit in New Jersey

506
00:26:57,920 --> 00:27:01,280
Speaker 1: have remained pretty hot. Long Island where Chester, So I

507
00:27:01,320 --> 00:27:03,240
Speaker 1: think some people did leave the city. They wanted to

508
00:27:03,240 --> 00:27:06,680
Speaker 1: get bigger properties, a lot of that was life stage demographics.

509
00:27:06,720 --> 00:27:09,959
Speaker 1: But you know, office as offices reopen, it'll be interesting

510
00:27:10,000 --> 00:27:13,200
Speaker 1: to see if things stay so frothy in these more

511
00:27:13,240 --> 00:27:15,960
Speaker 1: remote locations. I mean Kingston, New York has led the

512
00:27:15,960 --> 00:27:18,040
Speaker 1: home price gains I think for two quarters in a row.

513
00:27:18,320 --> 00:27:20,359
Speaker 1: You know, that's people that's a lot of vacation homes,

514
00:27:20,359 --> 00:27:22,399
Speaker 1: but that's also people that figured they would never have

515
00:27:22,440 --> 00:27:26,800
Speaker 1: to go back to the office. All right, interesting stuff.

516
00:27:26,840 --> 00:27:31,119
Speaker 1: Obviously everyone cares um because everyone's on one side of

517
00:27:31,160 --> 00:27:33,240
Speaker 1: the trade or the other in the US, right. I mean,

518
00:27:33,680 --> 00:27:38,000
Speaker 1: either your site because your house is appreciating like crazy,

519
00:27:38,160 --> 00:27:40,120
Speaker 1: and it's probably for a lot of people, for most

520
00:27:40,119 --> 00:27:44,440
Speaker 1: people their biggest asset, or you're bummed because you want

521
00:27:44,480 --> 00:27:47,520
Speaker 1: to buy a house and you can't afford it. That's right, um,

522
00:27:47,600 --> 00:27:49,399
Speaker 1: and that's why the market seems to have come to

523
00:27:49,440 --> 00:27:52,440
Speaker 1: a standstill. Standstill. Great to have Craig gi Amona there,

524
00:27:52,560 --> 00:27:56,760
Speaker 1: Bloomberg real estate reporter in the studio with Paul Wow.

525
00:27:56,840 --> 00:27:59,679
Speaker 1: The times they are a change in But I'm guessing

526
00:27:59,680 --> 00:28:02,679
Speaker 1: you're fully vaxed. We're fully vaxed. It's all good to go.

527
00:28:03,119 --> 00:28:07,399
Speaker 1: That's awesome, This is Bloomberg. Thanks for listening. To the

528
00:28:07,400 --> 00:28:11,360
Speaker 1: Bloomberg Markets podcast. You can subscribe and listen to interviews

529
00:28:11,359 --> 00:28:15,640
Speaker 1: with Apple Podcasts or whatever podcast platform you prefer. I'm

530
00:28:15,680 --> 00:28:20,040
Speaker 1: Matt Miller. I'm on Twitter at Matt Miller three. Put

531
00:28:20,080 --> 00:28:22,680
Speaker 1: on fall Sweeney. I'm on Twitter at pt Sweeney. Before

532
00:28:22,680 --> 00:28:25,560
Speaker 1: the podcast. You can always catch us worldwide at Bloomberg

533
00:28:25,600 --> 00:28:25,840
Speaker 1: Radio