WEBVTT - Land Sales, Markets, And Investing In Automation 0:00:00.800 --> 0:00:04.040 Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside 0:00:04.040 --> 0:00:06.920 my co host Matt Miller. Every business day, we bring 0:00:06.960 --> 0:00:11.520 you interviews from CEOs, market pros, and Bloomberg experts, along 0:00:11.560 --> 0:00:15.520 with essential market moving news. Find the Bloomberg Markets Podcast 0:00:15.600 --> 0:00:18.479 on Apple Podcasts or wherever you listen to podcasts, and 0:00:18.480 --> 0:00:21.960 at Bloomberg dot com slash podcast. You know, we talk 0:00:22.040 --> 0:00:24.400 about real estate and the hot real estate market and 0:00:24.520 --> 0:00:28.080 talk often about existing home sales, new home sales. But 0:00:28.080 --> 0:00:32.400 how about the land underneath all that real estate? Jason Walter, 0:00:32.479 --> 0:00:35.960 CEO of National Land Realty, he focuses on that. Jason, 0:00:36.000 --> 0:00:39.440 thanks so much for joining us here again. We're it's 0:00:39.440 --> 0:00:42.280 just been amazing during this pandemic, how strong the real 0:00:42.400 --> 0:00:46.519 estate and housing market has been. How about the land market. 0:00:46.880 --> 0:00:49.960 They're not making any more anymore land, So talk to 0:00:50.000 --> 0:00:53.440 us about the land market. Sure, yeah, that's correct, that 0:00:53.640 --> 0:00:56.600 makes any more of it. Uh. We've experienced exception on 0:00:56.720 --> 0:00:59.200 great this year to the first half of the year, 0:00:59.200 --> 0:01:02.920 our sales were hundred uh and last year we were 0:01:03.000 --> 0:01:09.960 up thirty two since the pandemic April, since it began, 0:01:10.000 --> 0:01:12.960 we we've just sky rocketed. Jason I don't want to 0:01:12.959 --> 0:01:14.440 put you on the spot here, but you could help 0:01:14.480 --> 0:01:17.160 me solve a bit of a debate in my relatively 0:01:17.240 --> 0:01:20.800 new marriage. My husband would love to buy just a 0:01:20.800 --> 0:01:23.360 ton of land down in Virginia or West Virginia and 0:01:23.480 --> 0:01:25.280 not worry about buying a house. Just hold onto the 0:01:25.360 --> 0:01:27.480 land and we can rent. I would rather save up 0:01:27.480 --> 0:01:30.680 and buy a house. Is buying land a better investment 0:01:30.720 --> 0:01:34.319 than buying a house in this market? Well, again, it 0:01:34.360 --> 0:01:36.920 all starts with lands. That you can do both both 0:01:36.959 --> 0:01:41.320 of you can be happy, okay. But but to answer 0:01:41.360 --> 0:01:45.560 your question, yeah, the returns of land, Um, it's a 0:01:45.600 --> 0:01:48.200 less followed to market. You know. After the last Great recession, 0:01:48.800 --> 0:01:53.200 the timber and egg land rule what we consider rule land, 0:01:53.600 --> 0:01:57.440 it outperformed the commercial sector for the first five years 0:01:57.960 --> 0:02:00.880 after the downturn. It's it's less followed to it head 0:02:01.000 --> 0:02:05.400 is really good against inflation. Both timber and and agg 0:02:05.440 --> 0:02:09.480 about performed gold over the last several decades when it 0:02:09.520 --> 0:02:12.640 comes to inflation. So right now is just a really 0:02:12.680 --> 0:02:16.680 popular time to be buying land. So what kind of land? 0:02:16.760 --> 0:02:21.800 I mean? Um, do I buy farmland? Timber ranch land? 0:02:21.960 --> 0:02:25.320 I mean? What kind of land is? You know what 0:02:25.800 --> 0:02:28.880 that you're recommending people take a look at. So it's 0:02:29.120 --> 0:02:32.040 a good question because most people a segmentum we don't 0:02:32.080 --> 0:02:35.919 typically detracts of land we sell incorporate three main components. 0:02:36.880 --> 0:02:42.280 You're typically buying it h for recreational use, could be hunting, 0:02:42.360 --> 0:02:46.720 could be camping, could be four wheeling. But as a 0:02:46.800 --> 0:02:49.400 kind of a backup to your investment, it's typically going 0:02:49.440 --> 0:02:54.120 to have some agriculture done on it and timber, so 0:02:54.240 --> 0:02:55.960 you're you're kind of getting the best of all and 0:02:56.120 --> 0:02:59.640 liveability a lot of there's a really nice wave of 0:02:59.639 --> 0:03:02.400 people that are moving into more rural areas. You know, 0:03:02.440 --> 0:03:08.560 only ninety percent of the US population who lives on 0:03:08.560 --> 0:03:13.800 on yeah of the land. Yeah, Jason, it's so interesting. 0:03:13.840 --> 0:03:16.679 I'm from the Washington, D c. Area, and every time 0:03:16.680 --> 0:03:19.320 I go home, it seems that the sprawl has gone 0:03:19.440 --> 0:03:22.040 farther and farther out from the city and now there's people, 0:03:22.440 --> 0:03:24.280 you know, new developments going up that are like an 0:03:24.280 --> 0:03:28.320 hour and a half commute into Washington is Land becoming 0:03:28.320 --> 0:03:31.840 more valuable even at farther and farther out distances from 0:03:31.840 --> 0:03:36.600 metropolitan centers. It is the way we track land is 0:03:36.600 --> 0:03:40.640 is what we call development zones. Future development zones and 0:03:40.640 --> 0:03:45.480 the rural land the urban areas. The development area that 0:03:45.560 --> 0:03:49.520 only consists of three percent of the US land mass 0:03:51.280 --> 0:03:54.920 of the U s Land is considered rule. So it 0:03:55.120 --> 0:03:58.160 is treeping out into suburbs. You know, obviously the builders 0:03:58.200 --> 0:04:00.960 are building a lot of new homes um and so 0:04:01.080 --> 0:04:03.960 you're seeing that fringe pushed further and further out in 0:04:04.040 --> 0:04:06.960 with there's a lot of reasons for that. But with 0:04:07.000 --> 0:04:10.160 the with being able to be delivered to the mail, 0:04:10.400 --> 0:04:15.120 with you know, all the technology it's available today, educational line, 0:04:15.560 --> 0:04:18.560 it's a lot easier and things are more accessible to 0:04:18.640 --> 0:04:23.000 live further out. Chason, I live in the most high, 0:04:23.080 --> 0:04:27.120 highly dense UH state in the country, in New Jersey. 0:04:27.120 --> 0:04:29.520 Where should I look in terms of other parts of 0:04:29.520 --> 0:04:32.560 the country. If I wanted to add some land to 0:04:32.640 --> 0:04:34.560 my portfolio, and I going to the south and I 0:04:34.640 --> 0:04:38.280 going west, where am I going? Yeah? Two things about 0:04:38.320 --> 0:04:40.440 that comments that are interesting. One, we just tired of 0:04:40.520 --> 0:04:43.839 land broker in New Jersey. Here you go. I just 0:04:43.880 --> 0:04:48.120 sold my house. I'm done. I'm like Elon Muskom. Very 0:04:48.120 --> 0:04:49.840 few people in the US have to go more than 0:04:49.839 --> 0:04:51.919 an hour to get into a pretty rural area. But 0:04:52.520 --> 0:04:54.680 if you're looking at the entire country. You know, the 0:04:54.720 --> 0:04:58.240 sun Belts obviously experience a lot of growth. On the 0:04:58.279 --> 0:05:02.320 southeast is really booming. Um, that's probably where most of 0:05:02.360 --> 0:05:07.719 the the business has taken place. All right. Interesting, Yeah, 0:05:08.400 --> 0:05:11.360 there's some ideas for you exactly be a rancher, all right. 0:05:11.440 --> 0:05:13.599 Jason Walter, thanks so much for joining us. Jason Walters, 0:05:13.600 --> 0:05:17.800 CEO of National Land Realty. He is a graduate of 0:05:18.320 --> 0:05:21.400 Clemson University. Enjoys watching football and his alma model. Maybe 0:05:21.440 --> 0:05:22.560 not so much this year, a little bit of a 0:05:22.560 --> 0:05:25.640 tough year for the Trevor Lawrence Clemson at tires. But Andy, 0:05:25.680 --> 0:05:27.520 it's interesting again when we talk about it. I don't 0:05:27.520 --> 0:05:31.960 even think about owning land. I think about owning houses 0:05:32.000 --> 0:05:35.080 and stuff, right, But I guess to Jason's point, those 0:05:35.120 --> 0:05:38.559 things aren't necessarily mutually exclusive, maybe especially in this market. 0:05:38.600 --> 0:05:39.800 I mean, we have a great story out on the 0:05:39.800 --> 0:05:42.400 Bloomberg terminal right now about how first time home buyers 0:05:42.520 --> 0:05:45.400 like myself in theory, I can't get into the market 0:05:45.480 --> 0:05:48.280 right now because prices have just risen to such an 0:05:48.279 --> 0:05:51.039 extreme level. People are paying all cash. Maybe if you 0:05:51.080 --> 0:05:52.640 can't go for it and buy the whole house, you 0:05:52.680 --> 0:05:54.640 can buy a plot of land with the intention to 0:05:54.680 --> 0:06:01.320 build later. Maybe that's kind of the backwards way into it. Well, Kayley, 0:06:01.320 --> 0:06:03.720 when I was a sell side equity analyst, the two 0:06:03.760 --> 0:06:06.480 meetings you had to get on your West Coast marketing 0:06:06.480 --> 0:06:09.960 trip was Capital Group and TCW, both in l if 0:06:10.000 --> 0:06:13.000 he didn't get those meetings on your schedule, my boss 0:06:13.040 --> 0:06:15.520 won't even pay for the ticket. Tc WS. Big Brian 0:06:15.520 --> 0:06:18.400 will and joins this group Managing director for TCWS Fixed 0:06:18.440 --> 0:06:21.440 Income Group. Um, Brian, thanks much for joining us here. 0:06:21.480 --> 0:06:24.560 We've had a little bit of a pickup in yield 0:06:24.640 --> 0:06:26.600 out there. We had we kind of started the day 0:06:26.680 --> 0:06:29.640 yesterday with the you know, the ten year that the 0:06:29.680 --> 0:06:32.600 thirty year up, you know, ten basis points. What do 0:06:32.640 --> 0:06:35.000 you make of what we're seeing in the rates market 0:06:35.160 --> 0:06:39.560 right here? Yeah, you know, it's interesting. Thanks for that introduction, 0:06:39.560 --> 0:06:42.640 Paul um In that uh, you know, we we had 0:06:42.760 --> 0:06:46.040 such kind of high employment numbers, positive employment numbers for months, 0:06:46.080 --> 0:06:48.479 we had very high, you know, inflation numbers, and then finally, 0:06:48.720 --> 0:06:51.160 why don't you get into September, we actually have an 0:06:51.200 --> 0:06:54.440 underwhelming employment number and an inflation number that comes and 0:06:54.480 --> 0:06:57.080 blow expectations. And then it's only two weeks after that 0:06:57.080 --> 0:06:59.520 that the market starts to sell off, which kind of 0:06:59.520 --> 0:07:02.240 tells you the mark the waiting on the economic numbers 0:07:02.279 --> 0:07:03.840 from the at least on the bond market, it's not 0:07:03.920 --> 0:07:06.520 what it historically is. And really the bond market saying 0:07:06.520 --> 0:07:08.800 it's more focused on you know, the reopening and the 0:07:08.800 --> 0:07:11.240 pandemic and what's going on with Delta, etcetera. And then 0:07:11.920 --> 0:07:14.520 and so what you've seen is a sell off, although 0:07:14.520 --> 0:07:16.760 it's it's a little different than what we saw early 0:07:16.800 --> 0:07:17.920 in the year. You know, we had a big sell 0:07:17.960 --> 0:07:21.360 off in the first quarter. Rates jumped higher. This time around, 0:07:21.440 --> 0:07:23.880 it's being led by the short end. Uh And actually, 0:07:24.320 --> 0:07:26.040 you know, while the two year in the five year 0:07:26.120 --> 0:07:28.680 are are kind of at their highs in terms of 0:07:28.760 --> 0:07:31.200 rates on the year, the ten uere in the thirty year, 0:07:31.280 --> 0:07:33.080 the long end of the curve is actually still about 0:07:33.120 --> 0:07:36.840 twenty thirty basis points lower than we saw back in March. Yeah, 0:07:36.880 --> 0:07:38.680 I feel like now we're much more focused on on 0:07:38.720 --> 0:07:41.480 the belly rather than the long end. So in this 0:07:41.560 --> 0:07:44.840 kind of environment where yields are higher than they were 0:07:44.880 --> 0:07:47.840 but still low historically around one and a half percent, 0:07:47.960 --> 0:07:52.200 can you be a buyer of bonds? Well, I think 0:07:52.400 --> 0:07:53.760 the answer, that's what do you want it to be 0:07:53.760 --> 0:07:56.200 in your portfolio? I mean, you can't. Look. The nice 0:07:56.200 --> 0:07:58.320 thing about a discussion about bonds is it's pretty much 0:07:58.360 --> 0:08:01.000 just math. Uh. In you know, you're looking at you know, 0:08:01.120 --> 0:08:04.120 yields of of one and a half percent, even if 0:08:04.120 --> 0:08:05.880 you move out of treasuries and you buy you know, 0:08:05.960 --> 0:08:08.640 investment grade corporate bonds, maybe you're talking two and a 0:08:08.720 --> 0:08:10.240 quarter or two and a half percent, and even like 0:08:10.280 --> 0:08:12.600 the lowest quality bonds out there. You know, you're talking 0:08:12.600 --> 0:08:15.040 about the high yield bonds. You know, brace yourself. You're 0:08:15.040 --> 0:08:18.240 talking about a four percent yield um on that market. 0:08:18.280 --> 0:08:20.840 So there there isn't a lot there obviously, But at 0:08:20.840 --> 0:08:22.640 the on the flip side, you know it should just 0:08:22.680 --> 0:08:25.440 be part of an investor's portfolio, whether it's a you know, 0:08:25.560 --> 0:08:29.360 individual or an institution. Um and look at one and 0:08:29.440 --> 0:08:32.880 a half percent um. If we get a dramatic sell 0:08:32.920 --> 0:08:34.760 off in the equity markets and and you know they 0:08:34.800 --> 0:08:39.679 go down by more likely than not, you're gonna see 0:08:39.720 --> 0:08:41.960 bonds rally. Uh. And the math would tell you that 0:08:41.960 --> 0:08:43.800 if you got you could still get a good solid 0:08:43.840 --> 0:08:46.320 hundred basis point rally in the bond market, which would be. 0:08:46.360 --> 0:08:47.920 You know, it would probably put your piece of your 0:08:47.920 --> 0:08:50.880 bond portfolio up about seven eight percent. And you know, 0:08:51.000 --> 0:08:53.920 on an absolute basis that does not sound all that interesting, 0:08:54.320 --> 0:08:56.480 But on a relative basis, relative to what's going to 0:08:56.559 --> 0:08:58.640 happen in your equity portfolio, you could still play a 0:08:58.720 --> 0:09:02.120 role for you. Ryan talked us about credit quality. UM, 0:09:02.280 --> 0:09:05.439 I mean, you guys see everything out there. I haven't 0:09:05.480 --> 0:09:09.360 heard much about a real credit quality issues either from 0:09:09.400 --> 0:09:11.800 the big banks on the report earnings. Uh. Is that 0:09:11.920 --> 0:09:14.960 simply because we had the fedback stopping everything and we 0:09:14.960 --> 0:09:18.120 had fiscal stimulus every time we we we we turned around? 0:09:18.200 --> 0:09:20.360 Is that kind of the story? Are? Is there no 0:09:20.400 --> 0:09:23.000 real risk there? There's not enough time in your program 0:09:23.080 --> 0:09:27.760 to talk about that? Is to your direct question, I'd say, yeah, 0:09:27.960 --> 0:09:30.360 let's two ways to measure credit quality, kind of observed 0:09:30.400 --> 0:09:33.360 credit quality, And by that I mean like, how are 0:09:33.640 --> 0:09:36.960 um let's say, borrowers default thing, uh, consumers let's say 0:09:37.000 --> 0:09:39.040 on credit cards, like what's the loss rate and it's 0:09:39.080 --> 0:09:41.000 at all time lows? Or let's say like in the 0:09:41.040 --> 0:09:43.760 corporate bond market, even in the high yield market, the 0:09:43.800 --> 0:09:46.520 leverage finance market. UM, let's say, look over the last 0:09:46.520 --> 0:09:49.520 twelve months, like, what's the default behavior? How often are 0:09:49.559 --> 0:09:51.880 they not paying you know, the debt that comes due? 0:09:52.400 --> 0:09:55.240 Really again at all time lows, I think historical trailing, 0:09:55.320 --> 0:09:58.360 historical default rates is less than one percent. And so 0:09:58.360 --> 0:09:59.720 so if you if you, if you want to look 0:09:59.720 --> 0:10:02.120 back words, it's never been a better time to to 0:10:02.200 --> 0:10:03.840 kind of lend or be, you know, invest in the 0:10:03.840 --> 0:10:06.360 credit side of the fixed income market. But on a 0:10:06.440 --> 0:10:10.240 forward looking basis, I can tell you that, first of all, 0:10:10.240 --> 0:10:13.080 which mentioned earlier, you're not getting paid to take a 0:10:13.080 --> 0:10:15.079 lot of risk right now in the bond market, right 0:10:15.240 --> 0:10:18.240 whether inspiration or whether it's credit. And then kind of 0:10:18.280 --> 0:10:22.600 the implicit credit quality that has deteriorated significantly. It is, 0:10:22.960 --> 0:10:25.720 without a doubt a a borrow or friendly market, meaning 0:10:25.760 --> 0:10:28.439 that whether you're a person UM or particularly if you're 0:10:28.440 --> 0:10:31.960 a company or even a even a country, a sovereign nation, um, 0:10:32.040 --> 0:10:34.040 the terms of which you can borrow, not just the rates, 0:10:34.320 --> 0:10:36.760 but the terms around let's say like the covenant quality, 0:10:36.840 --> 0:10:39.680 let's say UM is as friendly as it's ever been. 0:10:39.720 --> 0:10:41.800 And so what that means is, you know, at some 0:10:41.880 --> 0:10:44.200 point in the future that's going to come back to 0:10:44.280 --> 0:10:48.440 kind of bite bond investors um for that type of lending. UM. 0:10:48.480 --> 0:10:50.920 And those question is obviously it always is, is when 0:10:50.960 --> 0:10:54.600 does that trigger occur? Uh? And that all that kind 0:10:54.600 --> 0:10:58.440 of poor credit quality come back to to hurt bond investors. Brian, 0:10:58.640 --> 0:11:02.000 just quickly on spurs. We're still sitting around two five 0:11:02.080 --> 0:11:04.480 basis points for high yield spreads. Have we seen the 0:11:04.520 --> 0:11:08.400 tights of this particular credit cycle? Is it only wider 0:11:08.440 --> 0:11:12.120 from here? Hard to say. I mean, look, you know 0:11:12.559 --> 0:11:15.720 everyone is so starved for for yield and for income. 0:11:15.760 --> 0:11:18.280 I mean, that's that's really that was the objective, right, 0:11:18.360 --> 0:11:20.240 you know of the FED kind of you know, it's 0:11:20.240 --> 0:11:23.520 it's a repression. UM. So you know, we hit a 0:11:23.520 --> 0:11:26.600 little early in the year two basis points of spread. 0:11:26.640 --> 0:11:29.320 You know, we're at two eight five today. UM. I think, 0:11:29.400 --> 0:11:31.679 way way way back when before the credit crisis. At 0:11:31.679 --> 0:11:33.360 one point, I think we hit about two and a quarter. 0:11:33.640 --> 0:11:36.319 That was the all time low. So look, if we 0:11:36.400 --> 0:11:41.000 sit in this very kind of tight monetary controlled environment 0:11:41.080 --> 0:11:44.360 where you know, effectively the FED doesn't let um financial 0:11:44.360 --> 0:11:47.600 conditions deteriorate and volatility to pick up, and we let 0:11:47.679 --> 0:11:50.480 we we stayed in this environment for another year, Sure, 0:11:50.760 --> 0:11:53.720 I think we could breach to um. But but that's 0:11:53.760 --> 0:11:56.120 the question, right, you know, could they actually contain it? 0:11:56.280 --> 0:11:58.800 You know, if let's say, let's say the Fed blanks 0:11:58.920 --> 0:12:00.680 you know, or that you know, they the playing this 0:12:00.720 --> 0:12:03.080 game of kind of almost like chicken with inflation, right, 0:12:03.120 --> 0:12:06.000 and if what if the fled finches flinches first, you know, 0:12:06.040 --> 0:12:08.120 they get into next year and they're not so confident 0:12:08.120 --> 0:12:10.520 in the transitory narrative, and then it starts to maybe 0:12:10.760 --> 0:12:13.480 increase interest rates a little sooner than the markets expects. 0:12:13.760 --> 0:12:15.920 That would be all that might be a trigger. We'll 0:12:15.960 --> 0:12:17.760 pay attention to that certainly. Brian Will and thanks so 0:12:17.840 --> 0:12:20.439 much for joining US Group Boundaging Director for TCWS Fixed 0:12:20.440 --> 0:12:25.520 Income Group. Well, there's a lot going on down in Washington, 0:12:25.600 --> 0:12:28.800 DC right now. From a legislative perspective. We've got infrastructure, 0:12:28.800 --> 0:12:32.720 we've got spending plans, we've gotta keep the government going on. 0:12:32.840 --> 0:12:36.560 Just in terms of day to day operations. What's going 0:12:36.600 --> 0:12:39.080 on as it relates to the markets. How should we 0:12:39.120 --> 0:12:42.200 think about this? Michael Jesus, chief US public policy and 0:12:42.280 --> 0:12:46.040 municipal strategist for Morgan Stanley, a little firm here in 0:12:46.080 --> 0:12:48.960 New York City, joins us. Michael, how are you framing 0:12:49.000 --> 0:12:51.880 out in your mind as you talk to your clients 0:12:52.240 --> 0:12:55.439 about how we should think about all of the variables 0:12:55.480 --> 0:12:59.480 in Washington, d C. From a legislative perspective. Yeah, hey, 0:12:59.480 --> 0:13:03.160 good morning. I think the more important debate at the 0:13:03.240 --> 0:13:06.160 moment is the one about overall fiscal policies. So that's 0:13:06.200 --> 0:13:10.480 the infrastructure bill and the reconciliation bill, kind of the 0:13:10.480 --> 0:13:14.280 expansion of the social safety net, and there's some interesting 0:13:14.440 --> 0:13:16.760 decision points this week. They tell you if the Democrats 0:13:16.800 --> 0:13:19.120 are going to be able to go go big or 0:13:19.120 --> 0:13:22.720 if they're gonna go small, And that to us is 0:13:22.760 --> 0:13:26.600 important because I think the big option, which is our 0:13:26.679 --> 0:13:30.240 base case, it's probably a necessary condition for rates to 0:13:30.280 --> 0:13:32.720 continue to rise at the pace that they've been having. 0:13:33.240 --> 0:13:35.840 Right now, we think the evidence points in the direction 0:13:35.880 --> 0:13:37.680 that they're going to be able to go big, or 0:13:37.720 --> 0:13:40.959 at least keep the possibility of going big alive, because 0:13:41.440 --> 0:13:44.959 the option where they go small would probably require a 0:13:45.160 --> 0:13:48.440 vote on the smaller bipartisan plan to go ahead without 0:13:48.600 --> 0:13:53.280 a commitment on that larger reconciliation plan, and right now 0:13:53.320 --> 0:13:55.160 that doesn't seem like it's going to be possible because 0:13:55.200 --> 0:13:58.240 House Progressives has effectively said they're going to hold their 0:13:58.320 --> 0:14:00.760 votes on the smaller bill. Well, the Michael, the House 0:14:00.840 --> 0:14:04.120 is one thing, and the battle Pelosi is having to 0:14:04.160 --> 0:14:07.360 wrangle her caucus, especially the progressive ones there. But in 0:14:07.400 --> 0:14:10.360 the Senate, Joe Manchion Christ and Cinema have said, we 0:14:10.400 --> 0:14:12.200 don't want to go big. Three and a half trillion 0:14:12.240 --> 0:14:14.560 dollars is too large a price tag. So even if 0:14:14.559 --> 0:14:17.600 the House does one thing, can going big make it 0:14:17.640 --> 0:14:21.480 through the Senate. Well, I think that you've identified the 0:14:21.840 --> 0:14:24.480 right tension here. It's not just about it's not just 0:14:24.560 --> 0:14:27.320 within the House or within the Senate. It's actually across 0:14:27.320 --> 0:14:29.800 both chambers and in many ways the groups that need 0:14:29.840 --> 0:14:33.480 to come to an agreement or the House progressive and 0:14:33.520 --> 0:14:37.680 the Senate moderates within the Democratic Party, and until there 0:14:37.800 --> 0:14:40.360 is some type of agreement, and at this point, you know, 0:14:41.480 --> 0:14:45.120 Speaker Pelosy herself, it's self evident that a big deal 0:14:45.160 --> 0:14:47.120 won't be as big as the three and a half 0:14:47.160 --> 0:14:50.920 trillion dollar reconciliation bill, but somewhere south of that, if 0:14:50.920 --> 0:14:54.400 House Progressives and Senate moderates can agree on something like that, 0:14:54.440 --> 0:14:58.360 you could see forward progress on the smaller bill this week. 0:14:58.600 --> 0:15:00.960 But that doesn't seem to be there's no evidence so 0:15:01.000 --> 0:15:05.520 far that that agreement is forthcoming, and therefore there's probably 0:15:05.560 --> 0:15:07.960 still a fair amount of negotiation that has to happen, 0:15:08.360 --> 0:15:10.240 and we think this will easily slip into the fourth 0:15:10.320 --> 0:15:13.680 quarter and continue as a debate. Michael, as you talked 0:15:13.720 --> 0:15:16.600 to your institutional investor clients, did they get a sense 0:15:16.640 --> 0:15:18.640 of or did you get a sense of this is 0:15:18.680 --> 0:15:20.960 just kind of how the sausage is made, it's business 0:15:21.000 --> 0:15:24.160 as usual. Or do you sent from your clients that 0:15:24.200 --> 0:15:27.440 they're saying, boy, this is problematic here. We can't even 0:15:27.480 --> 0:15:32.480 agree on infrastructure. Here is there concern out there? Um? 0:15:32.920 --> 0:15:34.840 I think if you're asking about as they're kind of 0:15:34.880 --> 0:15:38.320 an existential concern about whether or not government is functioning. 0:15:38.360 --> 0:15:40.720 I don't think that's the way most investors are are 0:15:40.720 --> 0:15:43.080 thinking about it. They're thinking about whether or not this specific, 0:15:43.560 --> 0:15:46.280 this specific set of decisions can happen. What is going 0:15:46.320 --> 0:15:48.720 to be the impact to the debt and the death 0:15:48.720 --> 0:15:50.760 sit and how is it going to play out? And 0:15:50.760 --> 0:15:55.240 in that sense, this type of disagreement slow movement on 0:15:55.280 --> 0:15:58.600 what would be a very substantially sized bill. Um, it 0:15:58.680 --> 0:16:00.440 was a little bit of business as you will, and 0:16:00.480 --> 0:16:02.800 it's frankly, I think if it were too completely collapse 0:16:02.840 --> 0:16:05.760 and fail. That wouldn't also be that surprising to many investors, 0:16:05.800 --> 0:16:09.480 because uh, it is I'd say generally the default assumption 0:16:09.560 --> 0:16:12.760 that that DC doesn't get things done as opposed to 0:16:12.840 --> 0:16:16.760 getting big, transformational things done. All Right, it would be 0:16:16.760 --> 0:16:19.400 great if this were the only conversation that is having 0:16:19.440 --> 0:16:21.520 to happen on Capitol Hill, but that is not the case. 0:16:21.560 --> 0:16:23.960 We have the potential government shutdown coming at the end 0:16:23.960 --> 0:16:26.320 of the week if a continuing resolution isn't passed. They've 0:16:26.360 --> 0:16:30.240 separated out raising the debt ceiling from that since Republicans 0:16:30.320 --> 0:16:33.640 voted it down. How is the debt ceiling going to 0:16:33.680 --> 0:16:36.960 get raised by that October eighteenth deadline that Janet Yellen said, Hey, 0:16:36.960 --> 0:16:40.920 we're going to run out of money. Yeah, I mean here, 0:16:40.920 --> 0:16:44.400 I just highlight that there's a lot of paths that 0:16:44.520 --> 0:16:48.040 lead to the debt ceiling being raised. The most obvious 0:16:48.080 --> 0:16:50.240 one that that's pretty well talked about at this point 0:16:50.360 --> 0:16:53.400 is that the Democrats decide to pivot to using the 0:16:53.400 --> 0:16:57.680 budget reconciliation process, move quickly on that process, and get 0:16:57.680 --> 0:17:02.240 that done with a party line vote the October eighteen deadline. Um, 0:17:02.280 --> 0:17:06.440 it's of course also possible that the option to use 0:17:06.440 --> 0:17:10.880 reconciliation expired over time if you'll move fast enough, sort 0:17:10.880 --> 0:17:15.879 of forcing Republicans into the negotiation. But the point is 0:17:15.920 --> 0:17:19.960 that there's there's time, and there's options, and so the 0:17:20.000 --> 0:17:22.119 fact that you were not hearing from a lot of 0:17:22.160 --> 0:17:25.080 clients who are terribly worried about this, and I think 0:17:25.200 --> 0:17:28.360 it is probably up to early to be too concerned 0:17:28.359 --> 0:17:32.159 about it. Michael, you're also the municipal strategist at Morgan Stanley. 0:17:32.200 --> 0:17:35.360 What is your strategy for municipals right here given all 0:17:35.400 --> 0:17:39.000 that's going on down in Washington. Yeah, I mean, I 0:17:39.040 --> 0:17:40.760 think I think it depends on what type of investor 0:17:40.800 --> 0:17:43.719 you are. UM, if you are an investor in an 0:17:43.800 --> 0:17:47.400 attack bracket and you have a need for owning duration, 0:17:47.640 --> 0:17:50.199 then it probably still makes sense to own municipals at 0:17:50.200 --> 0:17:53.600 the moment because credit quality is actually quite good. It's 0:17:53.600 --> 0:17:58.320 improving largely across the board, and on a tax adjusted basis, 0:17:58.400 --> 0:18:03.399 there's necessarily a a better place to get that duration. UM, 0:18:03.440 --> 0:18:07.080 if you are someone who is managing against a broader 0:18:07.119 --> 0:18:09.800 fixed in COMME index and you want munies because you 0:18:09.800 --> 0:18:13.320 think they'll outperform corporates or something else, we wouldn't agree 0:18:13.359 --> 0:18:16.000 with that strategy, we think units are probably going to 0:18:16.040 --> 0:18:19.720 be an average, perhaps a slight underperformer versus other types 0:18:19.800 --> 0:18:24.000 of US dollar denominated credit. Alright, Michael, thanks so much 0:18:24.200 --> 0:18:26.880 for joining us. We really appreciate getting your perspective here 0:18:26.880 --> 0:18:29.000 as we try to make sense of what's going on 0:18:29.080 --> 0:18:31.720 down in Washington in terms of all those legis pieces 0:18:31.760 --> 0:18:34.120 of legislation that are winding their way through Congress. Michael 0:18:34.200 --> 0:18:38.400 jesus chief US Public Policy and Municipal Strategists for more 0:18:38.440 --> 0:18:45.880 in Stanley, based in New York City. This is Bloomberg. Well, 0:18:45.920 --> 0:18:50.000 when enhanced unemployment benefits in US ended earlier this month, Manye, 0:18:50.000 --> 0:18:53.720 businesses thought that job seekers would flood back into the 0:18:53.760 --> 0:18:56.040 labor market, but so far that hasn't happened. So what 0:18:56.119 --> 0:18:59.840 are businesses to do? Maybe one solution might be automation, 0:19:00.440 --> 0:19:04.399 enhanced automation. William Studebaker joins us. He's president in chief 0:19:04.400 --> 0:19:06.919 investment officer of robo Global. They have about four billion 0:19:06.960 --> 0:19:11.160 dollars in assets under mass man management across various indicries. Bill, 0:19:11.240 --> 0:19:13.080 thanks so much for joining us here. Talk to us 0:19:13.119 --> 0:19:17.840 about I don't know, automation robots. Is that kind of 0:19:17.840 --> 0:19:21.080 the future for a lot of businesses that might post 0:19:21.080 --> 0:19:24.160 pandemic have a hard time, you know, finding a job 0:19:24.680 --> 0:19:28.560 folks to fill their job openings. Yeah, good morning, Paul Kaley. 0:19:28.640 --> 0:19:31.600 Yeah it wasn't. I mean, fortunately, as I discussed in 0:19:31.720 --> 0:19:35.639 my blog, the robots are here, and UM, the obvious 0:19:35.680 --> 0:19:39.960 solution right now, you know, is automation, and the trajectory 0:19:39.960 --> 0:19:44.240 of automation is definitely undeniable. And what's exciting about what's 0:19:44.280 --> 0:19:47.639 happening now, it's that this revolution is very different in 0:19:47.720 --> 0:19:51.160 terms of scope, scale, and complexity of any other technological 0:19:51.200 --> 0:19:54.119 revolutions that we've seen. It is really coming down to 0:19:54.359 --> 0:19:57.800 really dollars and cents, and the competitive advantage that the 0:19:57.840 --> 0:20:01.119 service industry had had was access to cheap labor, and 0:20:01.240 --> 0:20:05.199 automated systems have had to compete against this. Historically, the 0:20:05.280 --> 0:20:10.439 upfront capita costs UM made robots less competitive. But you know, 0:20:10.480 --> 0:20:14.800 with astronomical wage increases, particularly lower wage labor in the 0:20:14.880 --> 0:20:18.240 absence of labor in many cases UM, the service industry, 0:20:18.280 --> 0:20:22.640 wage increases UM have really changed this equation. So we're 0:20:22.640 --> 0:20:25.440 at a tipping point. As we have wage costs and 0:20:25.560 --> 0:20:28.760 is accelerated, you have costs of automation that have plummeted 0:20:29.320 --> 0:20:32.760 and quality is obviously improved as a result of automation, 0:20:32.840 --> 0:20:36.360 and this is really giving birth to a whole new 0:20:36.359 --> 0:20:40.440 evolution to our economy and how business has done. Yeah, 0:20:40.480 --> 0:20:43.520 it's interesting. I was reading a note a story about 0:20:43.560 --> 0:20:45.840 a note from Mike Mayo, who's a bank analyst over 0:20:45.880 --> 0:20:48.800 at Wells far Ago very closely followed, and he said 0:20:48.800 --> 0:20:51.720 that the banking industry, the financial industry would be maybe 0:20:51.720 --> 0:20:54.560 cutting a hundred thousand jobs over the next five years 0:20:54.840 --> 0:20:58.760 in part due to improving a technology and automation. Is 0:20:58.880 --> 0:21:02.720 finance or any other industries sectors in particular that could 0:21:02.720 --> 0:21:06.720 see this happening in a more accelerated way. Well, I 0:21:07.119 --> 0:21:09.440 think that's a hard question to ask. I think every 0:21:09.480 --> 0:21:12.879 industry is actually you know, right for automation, there isn't 0:21:13.080 --> 0:21:16.080 you know when you when you think about automation in general, 0:21:16.080 --> 0:21:19.320 and you know how much or how penetrated are are 0:21:19.359 --> 0:21:21.320