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Speaker 1: Bloomberg Audio Studios, Podcasts, radio news.

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Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along

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Speaker 2: with Lisa Bramwitz and Amrie Hordern. Join us each day

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Speaker 2: for insight from the best in markets, economics, and geopolitics

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Speaker 2: from our global headquarters in New York City. We are

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Speaker 2: live on Bloomberg Television weekday mornings from six to nine

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Speaker 2: am Eastern. Subscribe to the podcast on Apple, Spotify or

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Speaker 2: anywhere else you listen, and as always on the Bloomberg

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Speaker 2: Terminal and the Bloomberg Business app.

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Speaker 3: No.

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Speaker 2: We are Rabinie of Rabeni Macro Associates, looking ahead to

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Speaker 2: the new year and writing this. Some of Trump's policies

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Speaker 2: will increase growth and reduce inflation, while others could be stagflationary.

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Speaker 2: So the impact on growth, inflation and on markets depends

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Speaker 2: on how much of the former versus the latter. Noriel

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Speaker 2: joins us now for more. No want for to see us, sir.

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Speaker 2: You're in seeing How difficult does it make it to

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Speaker 2: look ahead to next year with any real clarity, to

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Speaker 2: come up with some kind of outlook when things are

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Speaker 2: so difficult.

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Speaker 3: There's a lot of policy uncertainty, as I pointed out

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Speaker 3: some of the economic policies of TRAUM may increase over

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Speaker 3: time growth, reduce inflation, being overall pro business keeping tax

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Speaker 3: rates on capital and labor law, deregulating the economy, and

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Speaker 3: things like increasing the production of fossil fuels and pushing

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Speaker 3: down the prices of energy. Probably also this Dodge initiative

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Speaker 3: over timing is economic efficiency and so on. So those

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Speaker 3: are the positives, and over time they could increase growth,

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Speaker 3: they could reduce inflation. But we know there are some

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Speaker 3: sets of other policy we don't know how much they're

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Speaker 3: are to be implemented. They will increase inflation and potentially

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Speaker 3: be staflationary. In my view, tariffs are inflationary. Protection is

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Speaker 3: the risk of the economic world with China first draconia,

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Speaker 3: restriction to migration, if not the mass deportation. If we

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Speaker 3: have unfunded physical deficits and the promises imply eight trillion

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Speaker 3: dollars of deficits over additional over the next years, that's

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Speaker 3: going to craft out growth by increasing interest rates normally

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Speaker 3: and real and the bond marketgilands are going to wake up.

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Speaker 3: If you try to disorderly weaken the dollar, that could

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Speaker 3: be inflationary and if you interfere with independence of the FAT. Now,

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Speaker 3: I think on the positive side, I think there are

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Speaker 3: a number of factors that are going to constrain the

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Speaker 3: bad policies. One is market discipline. If you follow pols

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Speaker 3: are inflationary, then bond market vigilands are going to wake up.

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Speaker 3: Bond is going to go higher, the stock market is

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Speaker 3: going to correct, and it cares about the bond market.

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Speaker 3: He cares about the stock market. Secondly, Fed independence. If

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Speaker 3: he follows policies the lead to inflation, the Fed may

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Speaker 3: not continue to cut traits next year, may even raise

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Speaker 3: rates if inflation were to be going higher. And also

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Speaker 3: policy choices, as you pointed out, on one side of

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Speaker 3: people like Scott Besson want to escalate the escalate on

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Speaker 3: tariffs and others were total trade hawks on trade and

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Speaker 3: on China, like Peter Navarro. So it depends on the

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Speaker 3: balance between who's going to be in power.

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Speaker 2: Let's unpack some of that, and Pe can't tariffs to

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Speaker 2: pay already so far this morning, you've heard some of it.

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Speaker 2: Clase weigh in, if it's targeted, could be a good

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Speaker 2: thing for the American economy.

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Speaker 3: Well, if it's targeted, I would say that the impacts

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Speaker 3: on inflation are going to be modest, and maybe some

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Speaker 3: of the reassuring that a radio is occurring is going

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Speaker 3: to continue, and there be actually pressure on our trade

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Speaker 3: partners to say, if you don't want tariffs, you have

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Speaker 3: to bring more investment semiconductors. Authors it beasy you name

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Speaker 3: it to the United States. So that's the escalate in

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Speaker 3: order to de escalate. But I would say the higher

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Speaker 3: the startuff become, the more there's an impact on improprises,

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Speaker 3: the more there's an impact on inflation, and the more

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Speaker 3: there is global fragmentation. There's also the risk, of course

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Speaker 3: of trade wars of our trade partner retaliating against the

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Speaker 3: United States. If that occurs, the impact on growth is

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Speaker 3: going to be more negative. The impact on inflation is

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Speaker 3: going to be value depends on the size of the startifs.

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Speaker 3: If it's Navaro types of policies on trade, is taflationary,

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Speaker 3: if it's escalated, de escalate, Maybe the impact of inflation

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Speaker 3: is modest and the negative impact on growth is also modest.

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Speaker 4: Some peopeople are arguing that we're in this wave of

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Speaker 4: deglobalization that basically reverses some of the disinflationary forces of

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Speaker 4: the three decades following really the mid eighties. I'm wondering

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Speaker 4: whether that's actually true, whether that's what we're seeing, because

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Speaker 4: there still is quite a bit of trade, it's just

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Speaker 4: going different routes, and frankly, you could see that overproduction

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Speaker 4: from places like China are going to lower prices in

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Speaker 4: certain places, even if they don't in the US if

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Speaker 4: there walls up. In other words, are we overestimating the

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Speaker 4: inflationary impact on a dramatic level of a lot of

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Speaker 4: these tariffs.

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Speaker 3: Well, the impact of high tariffs on the United States

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Speaker 3: would be inflationary, But if you think about the impact

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Speaker 3: on growth and inflation, rest of the world will be

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Speaker 3: this inflationary because if there is a shock to the

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Speaker 3: demand for the experts of Europe, Asia, China, then there'll

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Speaker 3: be access supply growth is weakened in those parts of

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Speaker 3: the world, and that leads to these inflation rest of

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Speaker 3: the world. So the impact on the US of high

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Speaker 3: tariff is inflationary. The impact on the rest of the

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Speaker 3: world is this inflationary because the access is applied.

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Speaker 4: You used to be called doctor doom. Are you retiring

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Speaker 4: that mantle?

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Speaker 3: I always said I'm not doctor Doom. No, doctor realist.

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Speaker 3: There are plenty of upside in hallomic growth, and by

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Speaker 3: the way, some of them are thinking that are more cycular.

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Speaker 3: I think the impact of technological innovation implied that potential

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Speaker 3: growth in the US by the end of the decade

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Speaker 3: could be close to three percent. And the fact we

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Speaker 3: already have seen for the last couple of years growth

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Speaker 3: of two point five to twenty eight percent with inflation falling,

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Speaker 3: is signed that maybe PRODUCTI growth is increasing and potential

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Speaker 3: is increasing, and we can grow faster with having lower inflation.

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Speaker 3: So I'm not doctor dum well.

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Speaker 1: When it comes to terriffs. Just to go back to

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Speaker 1: this idea of the personnel. We know what Jamison Greer

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Speaker 1: as well thinks about China. In hearing to Congress, he

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Speaker 1: had talked about strategically coupling. Do you expect that over

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Speaker 1: the next four years between Beijing and Washington.

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Speaker 3: Yes, I do. I think that one of the biggest

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Speaker 3: risks is not just tariff in general, but a broader

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Speaker 3: economic war against China. Fleet they listen to the long

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Speaker 3: list of complaints of the drum administration. They say China

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Speaker 3: has been thriding on free riding on international trading system,

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Speaker 3: Tariff non tariferiy barriers, government procurement policies, FTI policies, intellectual

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Speaker 3: property rights, and of course fend and lots of other things.

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Speaker 3: And also geopolitically, there may be an attempt to try

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Speaker 3: to contain the rise of China. So the biggest risk

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Speaker 3: is not just tarif on China, but how much the

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Speaker 3: overall policies for China is going to be confrontational. And

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Speaker 3: if they feel that we're trying to contain their rise,

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Speaker 3: they could become quite aggressive themselves.

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Speaker 1: Well, from page of the ft today is talking about

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Speaker 1: these four government back authorities that are telling local chip

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Speaker 1: companies that you can no longer buy silicon from the

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Speaker 1: United States, they're no longer safe or reliable or we

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Speaker 1: already in this moment you're describing, Well.

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Speaker 3: Certainly in anything to do with the high tech, we've

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Speaker 3: started already in the by the administration to be in

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Speaker 3: a process of the coupling restriction to experts both of

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Speaker 3: semiconductor and secconductor equipment, restriction to anyth investiated with AI

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Speaker 3: and high technology. Under Biden was an narrow yard and

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Speaker 3: high fences and stuff that was supposed to be critical.

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Speaker 3: So the risking I think that in the case of

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Speaker 3: Trump administration, we may move from the risking with China

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Speaker 3: to decoupling with China did something much more how to say.

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Speaker 2: Severe, does Europe need to pick a side?

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Speaker 3: They'll be in a very very tough position because geopolitically

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Speaker 3: Europeans are close to the United States, NATO and so on,

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Speaker 3: but they do a lot of trade and investment with China.

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Speaker 3: You know, under the Bider administration was easier because there

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Speaker 3: was a compromise within the digit seven about the risking

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Speaker 3: as opposed to decoupling. If his US goes towards the coupling,

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Speaker 3: it says European I have to follow us. Otherwise the

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Speaker 3: consequences not just on trade but also NATO security and

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Speaker 3: you name it. Then I think Europe is already weak

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Speaker 3: to being a tougher spot.

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Speaker 2: How much worse could things get for the Europeans. We've

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Speaker 2: been saying through this morning that France is ungovernable at

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Speaker 2: the moment, which means it can't still of reforms. And

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Speaker 2: you know in Europe things have to get worse before

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Speaker 2: ultimately they find solutions. How much worse does it needs

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Speaker 2: to get?

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Speaker 3: Well, things are really pretty bad already in Europe. I

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Speaker 3: think that potential growth is below one percent in Europe.

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Speaker 3: Growth Europe is going to be in the Eurozone less

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Speaker 3: than one percent next year, and structural reform I'm not

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Speaker 3: going to occur anytime soon. There's a fragmentation between these

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Speaker 3: twenty seven countries. Some of them want more integration, some

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Speaker 3: of them one less. At the core of Europe, German

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Speaker 3: and Germany and France are going to politically unstable. So

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Speaker 3: I don't see either the Letter Report or the Drug

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Speaker 3: Report for more integration, for a common market, for more

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Speaker 3: productivity combatants being implemented. So it looks pretty dark for

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Speaker 3: Europe right.

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Speaker 4: Now, which is the reason why I'm surprised that so

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Speaker 4: many people come in and they say it's priced in.

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Speaker 4: We don't really see a path out of here. We

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Speaker 4: don't necessarily see an economic engine or the political will

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Speaker 4: or capability to really counter it. At what point are

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Speaker 4: we facing off with a potential dollar shock? And I

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Speaker 4: asked this because yes, the euro is likely to stay

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Speaker 4: around here a week and further, but what if it

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Speaker 4: actually weakens dramatically, is the ECB is forced to cut

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Speaker 4: rates and that divergence widens.

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Speaker 3: Well, there are many good reasons why the dollar may

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Speaker 3: continue to strengthen. One is, of course tariff if they

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Speaker 3: reduce the trade deficit, is going to strengthen. Two. Trumpet said,

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Speaker 3: I want to have actually the dollar the center of

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Speaker 3: the global reserve system. And therefore that implies you want

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Speaker 3: strong dollar than a week dollar. Relative grow differential relative

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Speaker 3: monetary policies, the fact that the US is innovating and

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Speaker 3: capital is flowing into the US capital market and the

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Speaker 3: stock market all implied that the dollar over time should

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Speaker 3: become stronger, the euro and other currencies should become weaker.

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Speaker 3: The problem, however, is that Trump says a strong dollar

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Speaker 3: has led to the industrialization, to American carnage, people free

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Speaker 3: writing on us, to having large trade deficits, and we

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Speaker 3: want at some point a week dollar. The fundamentals imply

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Speaker 3: a stronger dollar. But policy that may be an attempt eventually,

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Speaker 3: maybe in a second enough of an administration to find

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Speaker 3: an agreement on currency, maybe to say either you accept

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Speaker 3: ten percent tariffs or you accept a ten percent depreciation

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Speaker 3: of the dollar. I would not rule out there'll be

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Speaker 3: some big Mara lago agreement. Is you know, the effects

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Speaker 3: agreement are always in a resort, you know, Bretton Woods

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Speaker 3: and Maria the coach Lasa, you know Louver and so on.

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Speaker 3: So Mara lagoa cord is something that they're gotta think about,

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Speaker 3: not in the first two years, but down the line

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Speaker 3: they're gonna say to the trading partners, you don't want tariffs.

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Speaker 3: You have to do other things for us as right

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Speaker 3: the currency.

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Speaker 2: Talk about bitcoin, Bitcoin pushing one hundred and three k

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Speaker 2: upon the session by more than five percent. Norian Repining

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Speaker 2: is back with us. Norio. You've had a big move

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Speaker 2: in bitcoin over the last month or so. I had

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Speaker 2: a big move over the last several years. Have you

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Speaker 2: rethought the way you think about what's happening here?

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Speaker 3: Not really. I mean people talk about bitcoin being a

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Speaker 3: cryptocurrency like the other ones, but they're not really currencies.

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Speaker 3: They're not a unit of account, they're not a scalable

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Speaker 3: means of payment. They're not a stable store of value,

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Speaker 3: not a single numeror Bitcoin in the past went to

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Speaker 3: seventeen down, then to sixteen, has above one hundred. You

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Speaker 3: could have another fifty percent correction. So it's a speculative

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Speaker 3: act like mime stocks, sparks and others, highly volatile. Many

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Speaker 3: people are going to eat but don't take El Salvador

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Speaker 3: the force. Everyone's used bitcoin as legal tender, and less

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Speaker 3: than one percent of all transaction occurring in bitcoin, so

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Speaker 3: I don't think it's going to ever become a currency.

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Speaker 3: There's going to be a speculative act.

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Speaker 2: One thing the dollar is depreciated against is bitcoin, and

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Speaker 2: I think this is where I would see some separation

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Speaker 2: between what's happening with main coins and main stocks and

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Speaker 2: what is happening with bitcoin. There seems to be a preference.

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Speaker 2: There are market participants who believe that this is a

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Speaker 2: place to be if you're worried about the depreciation of

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Speaker 2: the US dollar and a fiscal trajectory of the United

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Speaker 2: States of America, Do you see a case for it there?

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Speaker 3: Not really, because actually when the FED was essentially arising

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Speaker 3: rates and inflation was higher, Bitcoin was falling, like in

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Speaker 3: twenty two as there was the stock market correction. And

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Speaker 3: now the stocks are going higher and the fact is

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Speaker 3: easy and inflation has fallen, Beacon is going higher again.

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Speaker 3: So historically has not been a hedge against inflation. Actually

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Speaker 3: looks like it's highly correlated. Positively, bit stocks a better

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Speaker 3: relative to the equity market, so it's not a traditional

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Speaker 3: like hedge like gold that is in periods of time

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Speaker 3: or inflation rising, or the basement or worries about the dollarization.

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Speaker 3: So it's something to me, it looks like expectedlyve A said,

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Speaker 3: it is highly correlated with equity, so it's not a

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Speaker 3: hedge against inflation, you say, sort.

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Speaker 4: Of parallel tracks to meme stocks and some of the

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Speaker 4: other euphoria that we've seen. At the same time, there

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Speaker 4: seems to be something more concrete behind this. You mentioned gold,

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Speaker 4: and we are seeing that rally in gold and tandem

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Speaker 4: because of what John is talking about, that store of

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Speaker 4: value outside of the US dollar to protect against some

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Speaker 4: sort of laws of fiscal dominance. Do you see with

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Speaker 4: a more institutionalized structure endorsed by a presidential administration there

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Speaker 4: being a case for at least a crypto based store

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Speaker 4: of value that could offset some of the risks of

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Speaker 4: volatility in the dollar and the potential loss on the

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Speaker 4: margins of fiscal dominance.

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Speaker 2: Down the road.

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Speaker 3: I'm not sure, because if you're worried about inflation, the

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Speaker 3: basement of field currency, or even the dollarization, there are

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Speaker 3: plenty of other assets that provide a good hedge. Shortened treasuries, tapes,

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Speaker 3: oil out commod it is gold, precious metal, so it's

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Speaker 3: not as if there is not other alternatives. And as

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Speaker 3: I pointed out, in the last few years, when inflation

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Speaker 3: was higher, actually bitcoin was falling. And when inflection has fallen,

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Speaker 3: Bigcone is going higher, so it doesn't look like it's

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Speaker 3: been actually negatively correlated with inflation. So it is a

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Speaker 3: spectultive act for some people. E is a store of value.

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Speaker 3: But if you want to hedge yourself against inflation, I

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Speaker 3: think that a spectrum of variety about their assets that

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Speaker 3: are backed actually by real income or something store of

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Speaker 3: value that are a better hedge against some of the

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Speaker 3: risks that people worry about.

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Speaker 1: But given the change of tone in Washington, do you

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Speaker 1: think there could be retail adoption at any point?

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Speaker 3: Oh? Yeah, and there's already been retail adoption. But my

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Speaker 3: word is actually that the regulation on crypto might become

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Speaker 3: looser like they were before, and then you have another

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Speaker 3: speculty run, you have another sets of scams like FTXSPF

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Speaker 3: and so on, and then you get another bust. So

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Speaker 3: there ri is kids who are going to go towards

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Speaker 3: a very little regulation. You know, there are lots of

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Speaker 3: players in this space. That are quite shady, and the

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Speaker 3: lack of regulation actually leads to a bigger bubble and

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Speaker 3: a bigger bust down the line.

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Speaker 2: None you a long time. Just want to finish up

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Speaker 2: with something positive looking out to twenty twenty five. Favorite

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Speaker 2: region right now, Favorite economy, the place you're most optimistic

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Speaker 2: about for next year? Which one?

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Speaker 3: It's a bit consensus, but I think the United States

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Speaker 3: still is going to outperform both in terms of economic

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Speaker 3: growth and equity markets.

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Speaker 2: Yes, seems to be the one place to big here.

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Speaker 2: It repeated it. Don't we the United States. It keeps

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Speaker 2: coming back to America.

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Speaker 4: It feels like Tina. This is the Tina trade. There

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Speaker 4: is no alternative at a time or essentially, growth is

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Speaker 4: concentrated in the world's biggest economy, and maybe it's trickling out,

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Speaker 4: maybe it's not. But nonetheless you also have yield.

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Speaker 2: Here, Lariel, It's good to see us, sir, Thanks for

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Speaker 2: catching up with us. Thank you. Noria Rabini there of

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Speaker 2: Rabini Macro Associates. Let's keep it on the administration, Let's

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Speaker 2: stick with politics. President lec. Donald Trump rounding out his

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Speaker 2: economic team, naming former Congressman Billy Long to lead the IRS,

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Speaker 2: former Georgia Senator Kelly Loffler for Small Business Administrator, and

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Speaker 2: former SEC Commissioner Paul Atkins for the role of Chairman

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Speaker 2: of the Commission. Joining us now is Tobin Marcus of

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Speaker 2: Wolf Research. Tabin, Welcome to the program. A lot of

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Speaker 2: focus on the Atkins appointment. A lot of focus because

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Speaker 2: bitcoin is rallying so hard when we hear things like

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Speaker 2: they are a crypto advocate, they are pro crypto tope

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Speaker 2: and in practice, what does that actually mean for policy?

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Speaker 5: Well, the big complaint about the SEC from a digital

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Speaker 5: asset perspective over the course the past few years was

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Speaker 5: the so called regulation by enforcement approach that Gensler took.

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Speaker 5: I think that's frankly more of an issue for a

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Speaker 5: lot of these sort of smaller and newer entrant digital

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Speaker 5: assets in terms of like not being able to get

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Speaker 5: the clarity from the SEC that they wanted, either by

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Speaker 5: trying to go through formal channels or through sort of

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Speaker 5: seeking forgiveness not permission. From a Bitcoin perspective, I mean,

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Speaker 5: obviously it's been able to thrive despite Gensler's approach to

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Speaker 5: the SEC and has continued to rip hire. So I

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Speaker 5: think that's obviously a kind of an animal spirit story.

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Speaker 1: What kind of U turns can we see at the

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Speaker 1: SEC under akins that were put in place by Gensler.

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Speaker 5: I think Acinus is going to be broadly dirego story

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Speaker 5: across pretty much every access. I mean, he's talked about

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Speaker 5: rolling back formal roles. He's also been critical of penalty

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Speaker 5: as imposed by the SEC in the past, So I

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Speaker 5: think even where there are enforcement actions, he's going to

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Speaker 5: be tending to take a more lenient approach with an

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Speaker 5: eye towards not kind of reducing competition, not imposing costs,

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Speaker 5: and ultimately flow through to shareholders. You know, a lot

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Speaker 5: of the formal rules that Gensler put put forward that

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Speaker 5: have faced the most criticism are already in litigation in

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Speaker 5: terms of climate disclosures, for example. You know there's already

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Speaker 5: litigation against the market structural rules that they put out

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Speaker 5: earlier this fall. So you know, I don't know how

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Speaker 5: much of it is going to be a story of

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Speaker 5: formally rolling back rules as opposed to just sending a

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Speaker 5: very clear message that you know, we're not going to

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Speaker 5: try and regulate through enforcement. You don't need to sort

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Speaker 5: of worry about what we're going to do quite as much.

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Speaker 1: We also know who's going to be filling in now

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Speaker 1: taking the job of Jonathan kantor over at the DOJ

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Speaker 1: when it comes to antitrust, and that's Gail Slater. What

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Speaker 1: can we glean into what she has said in the

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Speaker 1: past about big tech companies into maybe how Trump two

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Speaker 1: point zero might potentially be a continuation of what the

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Speaker 1: Biden administration was already doing.

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Speaker 5: Yeah, that was a very interesting pick. I think a

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Speaker 5: little bit more populoust at the margin than we expected

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Speaker 5: heading into the election, where I think are we going

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Speaker 5: to get a fairly traditional pro business Republican approach at

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Speaker 5: DOJ and FTC From a competition policy perspective, I think

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Speaker 5: the clearest signal about what she stands for is what

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Speaker 5: Trump said about her announcement and what we can glean

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Speaker 5: from her working for Vance, both of which you know,

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Speaker 5: are really focused on big tech. In terms of what's

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Speaker 5: in the crosshairs, I don't see as much risk on

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Speaker 5: in sectors that are not kind of explicitly targeted as

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Speaker 5: we saw under connin Canter in the Biden administration, you know,

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Speaker 5: but her personal trajectory, I mean, she spent ten years

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Speaker 5: as a staff attorney at the FTC. She's done some

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Speaker 5: work for the tech industry, so you know, looking at

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Speaker 5: her resume, you wouldn't necessarily think that she's going to

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Speaker 5: be pitchfork wielding. But I do think the expectation, based

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Speaker 5: on what Trump advancer are saying, is that we'll see

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Speaker 5: some populism in that approach.

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Speaker 4: So far, Tobin populism aside, A lot of businesses are

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Speaker 4: looking at the agenda and saying this gives us a

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Speaker 4: lot more confidence going forward in our business models. There

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Speaker 4: are a couple of surveys done by different places, one

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Speaker 4: of them showing that now two thirds of business executive

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Speaker 4: survey are optimistic about the path ahead versus twenty six

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Speaker 4: percent of respondents in August. Do you think that that

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Speaker 4: is justified simply because of the deregulation and do you

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Speaker 4: think that was sort of I don't know a commentary

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Speaker 4: on the regulatory regime before.

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Speaker 5: It's fairly typical to see very dramatic reversals in business

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Speaker 5: sentiment on transitions.

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Speaker 1: You know, generally.

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Speaker 5: Republican leadership tends to be better welcomed. Especially you know,

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Speaker 5: some of those surveys like NFIB have a very very

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Speaker 5: strong part is in balance to them. So, you know,

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Speaker 5: I think that's not terribly surprising. You know, I think

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Speaker 5: the sentiment swings tend to be bigger than the activity

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Speaker 5: swings in terms of what people are doing versus what

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Speaker 5: they're saying. But you know, I think in both cases

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Speaker 5: we're seeing stronger animal spirits.

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Speaker 4: But you know, our.

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Speaker 5: Expectation heading into the Trump administration, or heading into the

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Speaker 5: possibility of Trump win, was always that the good news

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Speaker 5: would be kind of front loaded on some of those

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Speaker 5: priorities like deregulation that were very clear, and then the

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Speaker 5: more potentially adverse news is backloaded in terms of what

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Speaker 5: happens with tariffs, what happens with some of these offsets

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Speaker 5: for a fiscal package next year where we're going to

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Speaker 5: need to wait to where these risks land.

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Speaker 4: Backloaded at the same time that people are talking about

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Speaker 4: how this is really going to be first order priority

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Speaker 4: for President elect Trump when he takes office to put

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Speaker 4: tariffs on and I wonder how much you expect that

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Speaker 4: to really impact sentiment. We've been talking to a number

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Speaker 4: of people about how much investors are really aware of

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Speaker 4: that the idea of tariffs coming in and not just

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Speaker 4: being a negotiating tool.

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Speaker 2: What's your take on that.

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Speaker 4: How much are the people you speak to taking it

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Speaker 4: truly seriously?

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Speaker 5: So I certainly don't think tariffs are priced in from

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Speaker 5: a market perspective. I think that's the clearest thing. Even

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Speaker 5: people who are taking it seriously. I think it's very

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Speaker 5: challenging to figure out, you know, what are some of

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Speaker 5: these single name traits, given how much prescretion the president

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Speaker 5: has in implementing tariffs, and how much uncertainty there is

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Speaker 5: about exactly what his agenda looks like. So you know,

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Speaker 5: there's a lot of uh, sort of interest in it.

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Speaker 5: We're having tons of conversations with institutional investors about what

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Speaker 5: that might look like. But ultimately there is a lot

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Speaker 5: of uncertainty, and I think people are going to need

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Speaker 5: to see it to fully believe it.

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Speaker 2: Hi Tibin, good to hear from you. It's Tobin macus

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Speaker 2: that of Wolf Research on the alex of policy. Market's

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Speaker 2: very focused on one thing tomorrow morning, and that's the

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Speaker 2: payrolls report, with the hospitality sector coming into focus. Bloomberg

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Speaker 2: Economics ranks in the following as this sector has been

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Speaker 2: the biggest drank on headline payrolls in past novembers. We

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Speaker 2: think underperformance here will be a major factor in a

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Speaker 2: disappointing headline print. A man who has to manage the

436
00:21:24,800 --> 00:21:29,040
Speaker 2: hospitality sector is Eric Resling, the CEO of KSSL Capital Partners,

437
00:21:29,200 --> 00:21:31,439
Speaker 2: which invest in travel and leisure. It joins us now

438
00:21:31,480 --> 00:21:33,000
Speaker 2: for more. Eric, good morning, it's good to see you.

439
00:21:33,160 --> 00:21:34,639
Speaker 6: Good Mary, Jane, great to see you all to day.

440
00:21:34,720 --> 00:21:37,560
Speaker 2: How are things going you managed in a hospitality sector.

441
00:21:37,600 --> 00:21:39,320
Speaker 2: What does the labor market look like at the moment.

442
00:21:39,760 --> 00:21:43,600
Speaker 6: Well, if you step back, we're the largest private investor

443
00:21:43,680 --> 00:21:46,560
Speaker 6: in travel, solely focused on travel we believe in the world.

444
00:21:46,640 --> 00:21:49,399
Speaker 6: We have about twenty five billion assets under management. Two

445
00:21:49,480 --> 00:21:51,359
Speaker 6: thirds of that's inequity, a third in credit, and we

446
00:21:51,400 --> 00:21:54,320
Speaker 6: employ about fifty thousand people. So when we look at that,

447
00:21:54,400 --> 00:21:56,800
Speaker 6: I realized that in October there was comments on the

448
00:21:56,920 --> 00:22:02,880
Speaker 6: softness in leisure hiring. Really see that. So there's been

449
00:22:03,119 --> 00:22:07,439
Speaker 6: I think a resurgence of consumer confidence post election, when

450
00:22:07,480 --> 00:22:10,960
Speaker 6: you alleviate the uncertainty around the presidential election, and so

451
00:22:11,040 --> 00:22:13,800
Speaker 6: we're seeing bookings strong when we look into twenty twenty five.

452
00:22:13,880 --> 00:22:16,879
Speaker 6: So I anticipate that whether the November jobs report is

453
00:22:16,920 --> 00:22:19,880
Speaker 6: strong or not, I suspect that you'll see increase hiring

454
00:22:19,920 --> 00:22:21,600
Speaker 6: as we look out over the next few months.

455
00:22:21,440 --> 00:22:24,680
Speaker 4: Before we continue, you mentioned the sort of uncertainty around

456
00:22:24,720 --> 00:22:27,040
Speaker 4: the election and that affects travel. Can you explain why,

457
00:22:27,400 --> 00:22:29,199
Speaker 4: because none of us can figure that out. We've been

458
00:22:29,280 --> 00:22:31,959
Speaker 4: trying to understand this is that there's an election coming up,

459
00:22:32,000 --> 00:22:33,680
Speaker 4: so I'd better just stay home.

460
00:22:34,000 --> 00:22:36,880
Speaker 6: I was hoping you could tell me it's an odd thing,

461
00:22:36,960 --> 00:22:39,800
Speaker 6: but we see it most This is not specific to

462
00:22:39,880 --> 00:22:43,560
Speaker 6: this election. Often in presidential elections, right ad spending goes

463
00:22:43,640 --> 00:22:46,800
Speaker 6: up and generally consumers become a little less confident. I

464
00:22:46,840 --> 00:22:51,080
Speaker 6: think it's just the basics of uncertainty is unnerving. Unnerving

465
00:22:51,280 --> 00:22:54,600
Speaker 6: is less confidence. Less confidence, you don't spend as much

466
00:22:54,640 --> 00:22:57,159
Speaker 6: and travels a place. In that circumstances, you tend to

467
00:22:57,440 --> 00:22:58,320
Speaker 6: delay a little bit.

468
00:22:58,520 --> 00:22:59,400
Speaker 3: So we saw a little bit.

469
00:22:59,320 --> 00:23:02,840
Speaker 6: Of software third quarter and fourth quarter bookings going to

470
00:23:02,920 --> 00:23:05,800
Speaker 6: the election. We've seen it rebound since, and when we

471
00:23:05,880 --> 00:23:08,479
Speaker 6: look to twenty five, you know, bookings for US advanced

472
00:23:08,480 --> 00:23:12,119
Speaker 6: bookings up about fifteen percent. So we're very excited about that.

473
00:23:12,480 --> 00:23:14,119
Speaker 6: But it is odd to me. I can't give you

474
00:23:14,160 --> 00:23:15,080
Speaker 6: an answer. I wish I knew.

475
00:23:15,240 --> 00:23:17,160
Speaker 4: So when you talk about hiring and I do want

476
00:23:17,160 --> 00:23:18,600
Speaker 4: to stick on that because that's one of the key

477
00:23:18,640 --> 00:23:21,080
Speaker 4: components of people's confidence and their ability to keep going

478
00:23:21,160 --> 00:23:25,360
Speaker 4: and traveling. How much easier is it to hire people now?

479
00:23:25,440 --> 00:23:28,240
Speaker 4: I remember a time post pandemic where it was incredibly

480
00:23:28,359 --> 00:23:30,760
Speaker 4: difficult and you couldn't find people, and in order to

481
00:23:30,840 --> 00:23:32,520
Speaker 4: find somebody, you had to find someone who didn't work

482
00:23:32,600 --> 00:23:34,720
Speaker 4: very hard and pay them thirty dollars an hour after

483
00:23:34,760 --> 00:23:36,120
Speaker 4: paying them fifteen dollars an hour.

484
00:23:36,280 --> 00:23:37,520
Speaker 3: How different is it now?

485
00:23:38,240 --> 00:23:42,280
Speaker 6: It's very different. I would say, looks zooming back, what's

486
00:23:42,320 --> 00:23:44,160
Speaker 6: fifteen dollars an hour? Like you mentioned, it is probably

487
00:23:44,200 --> 00:23:46,919
Speaker 6: more like twenty. In big cities it's more. But if

488
00:23:46,920 --> 00:23:48,760
Speaker 6: you look across the industry, I would say it's gone

489
00:23:48,760 --> 00:23:51,080
Speaker 6: fifteen to twenty over four or five years. So it's

490
00:23:51,320 --> 00:23:54,800
Speaker 6: still meaningful wage inflation that has helped. So right now

491
00:23:54,960 --> 00:23:59,439
Speaker 6: we are staffed well above levels that were typically staffed

492
00:23:59,480 --> 00:24:01,159
Speaker 6: at this time year in terms of the pace of

493
00:24:01,280 --> 00:24:04,280
Speaker 6: hiring for us going into the winter ski season, so

494
00:24:04,920 --> 00:24:08,440
Speaker 6: we are basically ninety five percent hired across Alterra Mountain

495
00:24:08,480 --> 00:24:11,760
Speaker 6: Company and the Icon Pass, which is our ski pass

496
00:24:11,800 --> 00:24:14,440
Speaker 6: that we created about seven years ago, catering to go

497
00:24:14,560 --> 00:24:20,480
Speaker 6: on right Yeah, over that time period, we've seen a

498
00:24:20,600 --> 00:24:23,800
Speaker 6: dramatic ramp up in demand for skiing and hiring this

499
00:24:23,960 --> 00:24:27,080
Speaker 6: year has gone easier than it has probably any time

500
00:24:27,800 --> 00:24:29,240
Speaker 6: since pre pandemic.

501
00:24:29,040 --> 00:24:32,400
Speaker 4: Which traces this question about how sustainable this is going forward.

502
00:24:32,400 --> 00:24:33,920
Speaker 4: And I don't want to get glimmy, because this is

503
00:24:33,960 --> 00:24:36,200
Speaker 4: all very positive and vacation plans are something that we

504
00:24:36,280 --> 00:24:39,000
Speaker 4: all want to make. But I am curious about whether

505
00:24:39,000 --> 00:24:41,560
Speaker 4: you're sort of getting to this place where what we

506
00:24:41,680 --> 00:24:44,119
Speaker 4: hear from companies is that consumers are pushing back against

507
00:24:44,119 --> 00:24:46,399
Speaker 4: price increases. That's true, they don't want to pay that

508
00:24:46,520 --> 00:24:50,119
Speaker 4: much more. Hiring is pretty easy. People are plentiful in

509
00:24:50,240 --> 00:24:54,240
Speaker 4: terms of availability, not demanding that much more. Does this

510
00:24:54,400 --> 00:24:56,800
Speaker 4: speak to a moment that in the past, over your

511
00:24:56,880 --> 00:25:00,440
Speaker 4: decades in this industry have been tipping points things start

512
00:25:00,480 --> 00:25:01,560
Speaker 4: to not be quite as good.

513
00:25:02,880 --> 00:25:05,400
Speaker 6: I think that the rate of growth, which was robust

514
00:25:05,480 --> 00:25:09,320
Speaker 6: coming out of COVID, has now stabilized to a more

515
00:25:09,440 --> 00:25:11,800
Speaker 6: normal rate of growth. There's no doubt about that. I

516
00:25:11,840 --> 00:25:15,560
Speaker 6: think we also see that the more luxury end of

517
00:25:15,600 --> 00:25:19,320
Speaker 6: the market is growing faster than the lower end of

518
00:25:19,359 --> 00:25:21,960
Speaker 6: the market. This past year, you've seen three or four

519
00:25:22,000 --> 00:25:24,000
Speaker 6: percent red part growth in the luxury endo the market.

520
00:25:24,160 --> 00:25:26,440
Speaker 6: You've seen a couple percent red part decline in the

521
00:25:26,520 --> 00:25:28,920
Speaker 6: economy into the market. I think that speaks of a

522
00:25:29,000 --> 00:25:32,159
Speaker 6: bit of what you're going after. There is some pricing

523
00:25:32,240 --> 00:25:34,879
Speaker 6: fatigue out there. I think the consumer is willing to

524
00:25:34,960 --> 00:25:37,360
Speaker 6: pay at all ENDO the market do want to pay

525
00:25:37,440 --> 00:25:39,760
Speaker 6: for service. You have to execute against that.

526
00:25:40,119 --> 00:25:40,760
Speaker 3: If you don't.

527
00:25:40,560 --> 00:25:42,600
Speaker 6: Execute against it, you're going to be a net loser

528
00:25:42,960 --> 00:25:46,000
Speaker 6: in that industry in terms of market share. So for us,

529
00:25:46,240 --> 00:25:48,000
Speaker 6: we try to be an employer of choice that helps

530
00:25:48,080 --> 00:25:51,120
Speaker 6: us on gaining effectively market share of the labor market,

531
00:25:51,359 --> 00:25:52,000
Speaker 6: and we try.

532
00:25:51,920 --> 00:25:52,119
Speaker 4: To be.

533
00:25:54,240 --> 00:25:56,359
Speaker 6: I'll try to also provide choice to the consumer, value

534
00:25:56,359 --> 00:25:58,480
Speaker 6: to the consumer in the terms of in terms of

535
00:25:58,560 --> 00:26:00,720
Speaker 6: high end service, so that they feel like while they're

536
00:26:00,720 --> 00:26:03,480
Speaker 6: paying more for their vacation, they're getting more as a result.

537
00:26:03,760 --> 00:26:05,520
Speaker 6: And so if we get that equation right, I don't

538
00:26:05,520 --> 00:26:08,159
Speaker 6: think there's any inflection point that we're at now. A's negative.

539
00:26:08,200 --> 00:26:11,240
Speaker 6: I think we're in a sixty frankly sixty year cyclical

540
00:26:11,280 --> 00:26:15,600
Speaker 6: trend of people spending more towards experiences over material goods

541
00:26:15,760 --> 00:26:16,000
Speaker 6: when it.

542
00:26:16,000 --> 00:26:18,119
Speaker 1: Comes to employment, though, how are you thinking about potential

543
00:26:18,200 --> 00:26:22,000
Speaker 1: change of policies and the crackdown of illegal immigration by

544
00:26:22,040 --> 00:26:24,639
Speaker 1: the incoming Trump administration and what that could mean for

545
00:26:24,840 --> 00:26:26,359
Speaker 1: the supply right now in the market.

546
00:26:27,080 --> 00:26:31,080
Speaker 6: Look, it's a relevant issue again, think for us in

547
00:26:31,160 --> 00:26:36,160
Speaker 6: our industry, legal immigration policies are very important and creating

548
00:26:36,320 --> 00:26:40,800
Speaker 6: vertical pathways for often legal immigrants and people getting their

549
00:26:40,880 --> 00:26:43,560
Speaker 6: first job and giving them an opportunity to grow their

550
00:26:43,600 --> 00:26:46,080
Speaker 6: careers over time in the leisure and hospitality industry, we

551
00:26:46,119 --> 00:26:48,800
Speaker 6: think is a wonderful opportunity that our industry provides. Now

552
00:26:48,960 --> 00:26:52,639
Speaker 6: we take very seriously making sure that our employees are

553
00:26:52,760 --> 00:26:56,320
Speaker 6: legally here. And I don't think there's a broad issue

554
00:26:56,359 --> 00:26:58,720
Speaker 6: in our industry in that regard, but certainly anything in

555
00:26:58,800 --> 00:27:00,760
Speaker 6: the industry, but the knock on a fact, there is

556
00:27:00,800 --> 00:27:05,000
Speaker 6: a knock on effect. We'll see what happens. There's talk

557
00:27:05,080 --> 00:27:08,040
Speaker 6: and then there's action. Certainly we can't predict exactly what's

558
00:27:08,040 --> 00:27:10,680
Speaker 6: going to happen. If there were something that resulted in

559
00:27:11,040 --> 00:27:14,200
Speaker 6: a meaningful pullback in that kind of entry level labor market,

560
00:27:14,480 --> 00:27:16,440
Speaker 6: that would certainly have a knock on effect. You know,

561
00:27:16,520 --> 00:27:19,000
Speaker 6: as you mentioned emory in our industry. But what we

562
00:27:19,080 --> 00:27:22,680
Speaker 6: have shown that could be inflationary if there's less available labor,

563
00:27:23,040 --> 00:27:25,760
Speaker 6: it could be inflationary on wages. If that's the case,

564
00:27:25,760 --> 00:27:28,159
Speaker 6: We've shown in our industry that we're very resilient. Just

565
00:27:28,240 --> 00:27:30,320
Speaker 6: looking at the COVID, we were able to manage through

566
00:27:30,320 --> 00:27:33,639
Speaker 6: a period of rapid inflation and come through that actually

567
00:27:33,800 --> 00:27:34,840
Speaker 6: healthier than we went into it.

568
00:27:35,040 --> 00:27:37,960
Speaker 2: The post COVID tourism flows have shifted, though, and geopolitics

569
00:27:38,000 --> 00:27:41,840
Speaker 2: has been that Russian tourism has disappeared in certain places,

570
00:27:42,480 --> 00:27:44,920
Speaker 2: the Chinese tourist was very slow to come back, and

571
00:27:44,960 --> 00:27:47,119
Speaker 2: still our states for America as well. What do you

572
00:27:47,280 --> 00:27:49,959
Speaker 2: noticeeing with regards to that, where's the tourism coming from?

573
00:27:50,000 --> 00:27:51,400
Speaker 2: Where's it going? Where do you want to be? Where

574
00:27:51,440 --> 00:27:52,320
Speaker 2: do you want to have a prophecy?

575
00:27:53,440 --> 00:27:58,280
Speaker 6: Well, I can't give you a specific answer and perspective investments,

576
00:27:58,400 --> 00:28:02,000
Speaker 6: but what I would say is Indian tourism is way up,

577
00:28:02,240 --> 00:28:06,280
Speaker 6: China is down, Middle Eastern tourism is up, Russia is down,

578
00:28:06,520 --> 00:28:07,639
Speaker 6: American tourism to.

579
00:28:08,640 --> 00:28:09,560
Speaker 3: Europe is up.

580
00:28:09,960 --> 00:28:13,400
Speaker 6: European tourism to the US has come back actually quite robustly.

581
00:28:13,840 --> 00:28:17,560
Speaker 6: Japanese tourism is down to the US, Chinese tourism, or

582
00:28:17,600 --> 00:28:21,560
Speaker 6: actually all tourism to Japan is up, currency flows, macroeconomics

583
00:28:21,640 --> 00:28:24,080
Speaker 6: all coming too play there. We think of those as

584
00:28:24,119 --> 00:28:26,760
Speaker 6: short term trends generally speaking, when you look over the

585
00:28:26,840 --> 00:28:32,560
Speaker 6: long term, fundamentally, we think that global tourism, global travel flows,

586
00:28:32,640 --> 00:28:35,920
Speaker 6: if you will, all generally are pointing up into the right.

587
00:28:36,280 --> 00:28:39,680
Speaker 6: But yes, everything you said is true for us. We're

588
00:28:39,720 --> 00:28:42,960
Speaker 6: looking for those unique destinations that have broad appeal, ideally

589
00:28:43,040 --> 00:28:46,840
Speaker 6: a place that we can take a consumer. If they

590
00:28:46,880 --> 00:28:49,360
Speaker 6: haven't appealed to the Indian tourists, how do we create

591
00:28:49,440 --> 00:28:52,080
Speaker 6: more appeal to the Indian tourists that's growing will come

592
00:28:52,160 --> 00:28:55,040
Speaker 6: to our new destination. Maybe that's in Italy, maybe that's

593
00:28:55,080 --> 00:28:57,240
Speaker 6: in the US, maybe that's in our resorts in the Maldives,

594
00:28:57,800 --> 00:29:01,560
Speaker 6: just as one example. But I wouldn't say that we're

595
00:29:01,600 --> 00:29:05,280
Speaker 6: particularly concerned about that. We've never where the where the

596
00:29:05,320 --> 00:29:07,320
Speaker 6: trends are weaker. We've never had a lot of Russian

597
00:29:07,360 --> 00:29:09,680
Speaker 6: demand is for example, at our properties. But yes, you

598
00:29:09,720 --> 00:29:13,440
Speaker 6: are right when we look at markets like Kurschevel in France,

599
00:29:13,760 --> 00:29:16,320
Speaker 6: just as a consumer, the Russian travel of that market

600
00:29:16,400 --> 00:29:18,080
Speaker 6: is down materially over the last several years.

601
00:29:18,240 --> 00:29:20,600
Speaker 4: So I know you can't talk about prospective deals, but

602
00:29:20,680 --> 00:29:22,720
Speaker 4: you can talk about the type of deals that you

603
00:29:22,880 --> 00:29:25,320
Speaker 4: are interested in, and you had been focused much more

604
00:29:25,360 --> 00:29:29,040
Speaker 4: on debt. Now you're much more shifting your focus to

605
00:29:29,400 --> 00:29:30,600
Speaker 4: equity investments.

606
00:29:31,000 --> 00:29:33,040
Speaker 6: Why, Well, I wouldn't say it's a shift. It's more

607
00:29:33,080 --> 00:29:35,120
Speaker 6: if you look back last year, the typically year, we

608
00:29:35,480 --> 00:29:38,520
Speaker 6: deploy about three billion dollars worth three billion dollars of capital,

609
00:29:38,720 --> 00:29:41,720
Speaker 6: half in debt, half inequity. In the last year, credit

610
00:29:41,960 --> 00:29:44,480
Speaker 6: debt was up fifty percent and equity was down fifty percent,

611
00:29:44,840 --> 00:29:48,720
Speaker 6: And that was simply a symptom of a big bid

612
00:29:48,800 --> 00:29:51,760
Speaker 6: ass gap between buyers and sellers on equity offset by

613
00:29:51,800 --> 00:29:55,440
Speaker 6: a tremendous amount of refinancing demand combined with bank pullback

614
00:29:55,880 --> 00:29:58,680
Speaker 6: on the credit side. Looking forward, we still see those

615
00:29:58,720 --> 00:30:01,640
Speaker 6: seams trends ends in credit, but on the equity side

616
00:30:01,680 --> 00:30:04,480
Speaker 6: we see real reason for optimism. We see NDAs that

617
00:30:04,560 --> 00:30:08,520
Speaker 6: we've signed increasing, We've seen initial conversations with banks and

618
00:30:08,600 --> 00:30:12,760
Speaker 6: sellers increasing. Going into twenty five, bank or get availability

619
00:30:12,840 --> 00:30:15,280
Speaker 6: is there, So that helps spinning us acquisitions. Interest rates

620
00:30:15,280 --> 00:30:17,920
Speaker 6: for down seventy five basis point, it's hopefully more coming.

621
00:30:18,200 --> 00:30:20,040
Speaker 6: So all of that boats well for the equity market

622
00:30:20,080 --> 00:30:21,760
Speaker 6: as we go into the first after twenty five. It

623
00:30:21,800 --> 00:30:23,200
Speaker 6: will take a quarter or two to play out.

624
00:30:23,360 --> 00:30:25,160
Speaker 2: Just before you go. I am an amateur hotel and

625
00:30:25,240 --> 00:30:28,480
Speaker 2: restaurant critic. Congratulations, I'm aware. Yes, Bil, Savannah Lake Como.

626
00:30:28,920 --> 00:30:32,800
Speaker 2: Fantastic property. It is a fantastic property. I highly recommend it.

627
00:30:33,000 --> 00:30:36,200
Speaker 2: The self drive boats there are fantastic. Did that? The

628
00:30:36,280 --> 00:30:41,000
Speaker 2: mini reeve of boats A beautiful think there, they are wonderful, sir, amateur, thank.

629
00:30:40,840 --> 00:30:43,760
Speaker 6: You, thank you, thank you, thank you for being one

630
00:30:43,800 --> 00:30:44,760
Speaker 6: of our past guests.

631
00:30:44,760 --> 00:30:46,640
Speaker 2: Anytime, sir, anytime. Thank you.

632
00:30:46,760 --> 00:30:47,800
Speaker 3: Good to see it, Thank you great.

633
00:30:48,240 --> 00:30:49,320
Speaker 6: I appreciate you you having me.

634
00:30:49,360 --> 00:30:52,680
Speaker 2: On, Eric Restmika KOs sound Capital pon this. This is

635
00:30:52,800 --> 00:30:57,120
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00:30:57,200 --> 00:30:59,959
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638
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639
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640
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641
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