Speaker 1: This is Bloomberg Business Wait inside from the reporters and
Speaker 1: editors who bring you America's most trusted business magazine, plus
Speaker 1: global business, finance and tech news the Bloomberg Business Week
Speaker 1: Podcast with Carol Messer and Tim Stenebek from Bloomberg Radio.
Speaker 2: And we want to talk at bit about a headline
Speaker 2: we got and a story that involves Apple and Broadcom.
Speaker 2: We've got Apple shares they're down a bit. Broadcom they
Speaker 2: were rallying this after Apple signed a new multi year,
Speaker 2: multi billion dollar deal with Broadcom to develop five G
Speaker 2: radio frequency components, which made us want to say, I
Speaker 2: feel like, what's interesting about this story, Matty, is you
Speaker 2: keep we all keep kind of watching Apple and what
Speaker 2: it's doing in terms of its supply chain, and you
Speaker 2: know the questions of whether it's reducing its exposure to
Speaker 2: Asia China specifically.
Speaker 3: Yeah, and what they're going to do with all of
Speaker 3: the money that they have, which is a big question.
Speaker 2: Right, A lot of money out there, right, It's the
Speaker 2: richest balanceet whenever you look at it. All right, So
Speaker 2: let's get to it and let's talk about it deal
Speaker 2: and broader Apple. Bloomberg Intelligence Senior Technology Analyst Anara Grana
Speaker 2: is back with us via zoom from Chicago. Honurag good
Speaker 2: to have you here. First of all, folks on radio
Speaker 2: can't see it, but really nice haircut. Can I just
Speaker 2: can I just put that out there something the summary
Speaker 2: air cut? You're very welcome. Tell us about this deal.
Speaker 2: Is this just another company signing up with a supplier
Speaker 2: to make sure that their supply chain works or is
Speaker 2: it something much more significant?
Speaker 4: No, I think it is diversification of supply chain. They're
Speaker 4: trying to make sure everybody knows that. You know, they're
Speaker 4: not just dependent on Asia. They're trying to diversify around
Speaker 4: the world wherever they can make parts for their devices.
Speaker 4: I think they have been criticized quite a bit of
Speaker 4: being very heavy in Asia compared to the rest of
Speaker 4: the world. And you know, this is a statement saying
Speaker 4: if there are pots to be made somewhere else, they
Speaker 4: will go out into it.
Speaker 3: So I want to ask you more about the significance
Speaker 3: of the deal and everything, but just so I can
Speaker 3: understand the trade. Why is Apple getting punished here? Is
Speaker 3: this related to downgrades from earlier in the week, or
Speaker 3: is there something with this deal that the market isn't loving.
Speaker 2: Oh?
Speaker 4: No, there's nothing to do with the deal, or to
Speaker 4: be honest, the last few days of downgrade, if you
Speaker 4: look at it, all tech stocks are really coming under pressure.
Speaker 4: They've had some unbelievable run over the past two to
Speaker 4: three months, and I think probably is the first day
Speaker 4: that I'm seeing some kind of pressure on technology that
Speaker 4: I can remember in like, you know, several weeks.
Speaker 2: So talk to us about Apple and Broadcom, because I
Speaker 2: thought I heard you earlier on TV that these aren't
Speaker 2: necessarily companies that have always come along, especially as Apple
Speaker 2: is building out its own kind of chip world, if
Speaker 2: you will. So you know, I don't know where can
Speaker 2: we go as far as calling them frenemies, But that's
Speaker 2: the tech sector, right, It's often competitors also having to
Speaker 2: work together.
Speaker 4: Yeah, Apple buys products from everywhere. I mean it's you know, Qualcomm, Broadcom,
Speaker 4: I mean, you name it. And in this case, you know,
Speaker 4: one of the big questions out there for qualcomf here
Speaker 4: holders has when you know there will there be a
Speaker 4: time when Apple stops working with them down the road,
Speaker 4: and you know, the Capples just basically saying, you know,
Speaker 4: they'll go and get paths from wherever they can. You know,
Speaker 4: One of the things we talk about is Apple doesn't
Speaker 4: think of these things from a margin point of view,
Speaker 4: in terms of way they can get things cheaper. But
Speaker 4: they're more worried about getting the best product from their suppliers.
Speaker 4: And we see that from a chip point of view.
Speaker 4: When when now they can't find a chip, they went
Speaker 4: ahead and designed their own chip, which has been a
Speaker 4: key driver of their backbooks. And I think we see
Speaker 4: we're going to see that. And Mark has reported on this.
Speaker 4: He broke the story that Apple is looking to develop
Speaker 4: some of these you know, radio frequency devices internally also
Speaker 4: down the road. It's just a matter of, you know,
Speaker 4: how long it's going to take them to do it.
Speaker 3: I wonder too, how you rate this move for Apple
Speaker 3: versus something like I know we've talked before about dividends
Speaker 3: for an Apple. Do you prefer this use of their finances?
Speaker 5: Oh?
Speaker 4: Absolutely, I mean there is no two ways about it.
Speaker 4: A technology company spending more on our far better than
Speaker 4: any other capital allocation they can do. Because technology is
Speaker 4: a lot about innovation, and if they're spending a lot
Speaker 4: more money into that. In the case of Apple, they
Speaker 4: have way too much money, even after spending on R
Speaker 4: and D and other areas, and that's where then you
Speaker 4: have to decide whether you do a buyback versus a dividend,
Speaker 4: and that's always an ongoing debate.
Speaker 2: Hey, Anrach. One of the things I thought too in
Speaker 2: reading Mark's story today along with Ian king story, is
Speaker 2: you know, they reminded us that Apple vowed a couple
Speaker 2: of years ago, right, that they're going to pump about
Speaker 2: not quite half a tillion dollars into the US economy
Speaker 2: over the next five years, right, And so this is
Speaker 2: another deal that helps them move towards that target. So
Speaker 2: it is part of a bigger, broader strategy on the
Speaker 2: part of Apple. And I also do think about the
Speaker 2: politics involved in that as well.
Speaker 4: I mean that goes without saying I think, as I said,
Speaker 4: you know, after the last five six years, there has
Speaker 4: been extreme tension between the US and China. And everybody
Speaker 4: knows Apple makes most of its electronic products in China,
Speaker 4: consumer product They are all assembled there, most of them are,
Speaker 4: and Apple needs to figure that out over the next
Speaker 4: several years as how it's going to diversify it, because
Speaker 4: you know, it could be a big problem for Apple
Speaker 4: if they are not able to furnish products just in case,
Speaker 4: you know, things go south between US and China.
Speaker 2: Having said that, I was talking with someone preparing for
Speaker 2: a couple of panels that I have coming up, a
Speaker 2: former top regulator in the United States and saying that
Speaker 2: this idea gets the idea of planning, you know, backup
Speaker 2: supply chains and so on and so forth, but also
Speaker 2: said US and China are intertwined, they need each other.
Speaker 2: Do you agree, as you look at the tech sector
Speaker 2: more broadly, that that is going to stay in place
Speaker 2: on some level for years to come.
Speaker 4: I'm very honest, I hope so, and not just for
Speaker 4: tech products, but also for consumer products, because you know,
Speaker 4: while I'm getting my stuff made over there, I like
Speaker 4: to go out and sell them some you know, Ray
Speaker 4: banglasses and jeans about it at the same time. So
Speaker 4: for me, it's a very big consumer market. It spends
Speaker 4: a lot of money, and it'll be stupid for American
Speaker 4: corporations not to sell their products in China.
Speaker 3: Well, I wonder, since you brought up products, I do
Speaker 3: want to do a look ahead with you to some
Speaker 3: of Apple's product announcements that should be coming soon. Do
Speaker 3: you have any fun surprises you can tell us, and
Speaker 3: what are you most looking forward.
Speaker 2: To because we've talked a lot about the virtual headset
Speaker 2: with Mark German and that how this is kind of
Speaker 2: a big project for Tim Kok kind of his alone
Speaker 2: to move forward.
Speaker 4: I'm so looking forward to that release when it comes out,
Speaker 4: and again it's probably the best not well kept secret
Speaker 4: out there. From a financial point of view, I don't
Speaker 4: think it is going to have a material impact in
Speaker 4: the first year or second year, third year, just because
Speaker 4: then the Apple's revenue size is so big that you know,
Speaker 4: these new product launches even are three thousand dollars a pop,
Speaker 4: it's not going to have that many unit shipments out there.
Speaker 4: But what it does is that, you know, it opens
Speaker 4: up a new ecosystems of applications. You're going to have
Speaker 4: a brand new operating system that's for virtual reality. People
Speaker 4: are going to build applications on it. You're going to have,
Speaker 4: you know, people developing e commerce applications, gaming applications, So
Speaker 4: it's an entire new ecosystem. It's going to have a separate,
Speaker 4: i would say, schema of how to build those applications.
Speaker 4: So it's going to be a lot of fun to watch.
Speaker 4: But from a mathematical point of view, I don't see
Speaker 4: that adding that much to the bottom line or the
Speaker 4: top line anytime soon.
Speaker 2: It's like an octopus, right Apple, right, Like they just
Speaker 2: have all these tentacles and they don't even care. Like
Speaker 2: the watch or these different things which may bring in,
Speaker 2: you know, a few billion dollars but maybe aren't behemoths,
Speaker 2: but they feed kind of you know, people into the
Speaker 2: Apple infrastructure, right, and that's where you start to see
Speaker 2: some of the money really grow.
Speaker 4: The ecosystem is the most important thing for Apple, and
Speaker 4: that's where we've been talking about it. Imagine. I mean,
Speaker 4: if I'm bound everything from my pictures to my music
Speaker 4: into the system, and I use Apple Pay to pay
Speaker 4: for products, all of that really feeds to the bottom line.
Speaker 4: Remember services, even though it's on twenty percent of revenue
Speaker 4: or roughly, it has gross margins of seventy percent. I
Speaker 4: mean that's very high compared to the product gross margins
Speaker 4: or hardware gross margins. And that's really I think that's
Speaker 4: going to improve the profitability of the company down the road.
Speaker 4: It is already doing.
Speaker 3: It actually well really quickly.
Speaker 1: Though.
Speaker 3: I know in your report you talk about how AirPods
Speaker 3: are expected to be the third most important product for
Speaker 3: Apple in the next decade and our final thirty seconds here.
Speaker 3: If it's the most important product, why are there only
Speaker 3: like two options. I just feel like we should get
Speaker 3: some diversity of offering in the air pod space. What
Speaker 3: do you think.
Speaker 4: I'm sure they'll offer one and yellow color for you
Speaker 4: one of these days. But okay, from my side of you,
Speaker 4: From my point, it is an absolute essential accessory to have.
Speaker 4: I have very rarely seen people go back to some
Speaker 4: of the other you know, AirPods after they've tried it.
Speaker 4: You know, it just increases the average cost that a
Speaker 4: user spends on an iPhone because before it was part
Speaker 4: of the iPhone accessory you have to p ex struckloaded.
Speaker 2: I have to say they are crucial and as soon
Speaker 2: as I lose one, I order us a pair right
Speaker 2: away and replace it.
Speaker 3: So it's like a consumer staple like this is not discretionary.
Speaker 2: Spot on yellow or white. I don't care what color,
Speaker 2: but I've got to have them. Thank you so much,
Speaker 2: Honourrog really appreciate it. Onnorrog Rana. He is our senior
Speaker 2: technology analyst at Bloomberg Intelligence, joining us on Zoom from Chicago.
Speaker 2: As we mentioned, Apple shares, they are a little bit lower,
Speaker 2: but as he mentioned, Averal Tech Space is a little down.
Speaker 2: Apple down about one and a half percent, but they
Speaker 2: are in quite a tear hair. In twenty twenty three,
Speaker 2: they're up about thirty two percent here, so we've seen
Speaker 2: quite a run here.
Speaker 3: Good year for them and also good year to have
Speaker 3: that market cap ever right.
Speaker 2: Oh my gosh, it's two point seven trillion, It's unbelievable.
Speaker 1: You're listening to the Bloomberg Business Week podcast. Catch us
Speaker 1: live weekday afternoons from three to six Eastern Listen on
Speaker 1: Bloomberg dot com, the iHeartRadio app, and the Bloomberg Business App,
Speaker 1: or watch us live on YOUTUBEA.
Speaker 2: All right, everybody, you know that music, which means we're
Speaker 2: gonna talk a little bit about entertainment and one company
Speaker 2: that plays into it in a big way, and that is,
Speaker 2: of course, the Walt Disney Company. This story actually popping
Speaker 2: up earlier on the Bloomberg and it was a result
Speaker 2: of some comments from former News Corp. Executive Peter Chernan.
Speaker 2: He was at the Cutter Economic Forum that's underway by
Speaker 2: Bloomberg and it happened earlier today. And what it was is,
Speaker 2: he said, Walt Disney facing a very rushed succession process
Speaker 2: as it searches for a candidate to replace CEO Bob Iger.
Speaker 2: With more on Life after Iger, who was there for
Speaker 2: a long time, he left it for a brief time,
Speaker 2: came back, and also some cool research on the streaming
Speaker 2: download world with us as Bloomberg Intelligence Technology and Media
Speaker 2: analyst Gita Ringanathan. She's with us from BI headquarters in Princeton,
Speaker 2: New Jersey. Gita, so nice to have you back with us.
Speaker 2: We did see that story and it made us kind
Speaker 2: of stop and think. Bob Iger. He is just back
Speaker 2: at the company that he was at for a long time.
Speaker 2: How do you think about the world in Life after
Speaker 2: Bob Iger? Is it too soon for us to even
Speaker 2: be thinking about this?
Speaker 6: Yeah, thank you so much, Carol. Yeah, I definitely think
Speaker 6: it is really soon. But having said that, I mean,
Speaker 6: he has been now at the company, or he's been
Speaker 6: back for more than six months now, so time is
Speaker 6: kind of running out. So his new contract expires at
Speaker 6: the end of twenty twenty four, so he definitely does
Speaker 6: have a year and a half left. But you know,
Speaker 6: it's I don't know's They're just too many different things
Speaker 6: that need to be solved. He's already made I think,
Speaker 6: considerable progress when it comes to cost cutting efforts. But
Speaker 6: then there are so many existential questions that still remain.
Speaker 6: Whether it's the future of ESPN, what happens to so
Speaker 6: many of these movie franchises, what happens to the linear
Speaker 6: TV bundle, So there are lots of different things, and
Speaker 6: of course the top most question, as you rightly pointed out,
Speaker 6: is really the question of succession.
Speaker 2: Can I just jump in for a second. When he
Speaker 2: was brought back, was it just considered a stop gap?
Speaker 2: I'm trying to remember and going back to that time
Speaker 2: when we were all kind of shocked that he was
Speaker 2: coming back in Bob Chapek just having been there for
Speaker 2: what seemed like a pretty short time. Was it considered
Speaker 2: just a stop gap or was it something more?
Speaker 6: It was considered I think at that point they just
Speaker 6: needed somebody to kind of stabilize, you know, the narrative,
Speaker 6: the organization. There were just too many missteps, both internally
Speaker 6: as well as politically, so they just kind of kind
Speaker 6: of needed that guiding force, which obviously, you know, Bob
Speaker 6: Iger was more than happy to do. Of course, it
Speaker 6: was you know, a contract that ran for two years
Speaker 6: but I think coming in so far and seeing the
Speaker 6: amount of work that it's going to take to kind
Speaker 6: of right the ship, I think people are feeling now
Speaker 6: that the two years is really way, way too short
Speaker 6: of a time.
Speaker 3: Well that makes me wonder whether or not this two
Speaker 3: years thing is real. Can he just re up the
Speaker 3: contract at the end of it?
Speaker 6: And he's done that so many times now, I mean,
Speaker 6: this is this is probably like the biggest joke in
Speaker 6: you know, the entertainment world in Hollywood. You know, he
Speaker 6: is a legendary CEO. There's absolutely no doubt about it.
Speaker 6: World class track record, especially when it comes to those acquisitions.
Speaker 6: You look at Picks, or you look at Marvel, you
Speaker 6: look at Lucasfilm, and you look at of course the
Speaker 6: biggest one of them all, which was Fox. And he
Speaker 6: has really executed, I think, tremendously well in all of those.
Speaker 6: But if it comes down to, you know, one thing
Speaker 6: that he hasn't done well, it's been you know, succession,
Speaker 6: and this has just been such a persistent issue for him.
Speaker 6: And of course his hand picked successor, who was Bob Chapek,
Speaker 6: that completely flopping. So you know, he has to do this,
Speaker 6: He has to get this right this time. I think
Speaker 6: that's absolutely imperative for for Bob Biker.
Speaker 2: Internally candidates, which is what they have done historically. It
Speaker 2: feels like, right, yes, Or is it because when they've
Speaker 2: gone outside that has created some disaster outcomes? Is that
Speaker 2: what's expected at this point? Does that make the most sense?
Speaker 6: I think that definitely does make a lot of sense.
Speaker 6: I mean, he has now two executives who are heading
Speaker 6: the entertainment division. So you have Alan Bergman, you have
Speaker 6: Dana Walden, both of them creative maestros in their own right.
Speaker 6: They have fantastic, you know, creative skills, which is really
Speaker 6: needed for a company like Disney. I think that was
Speaker 6: one area where kind of Bob chape it really fell short.
Speaker 6: And you know, so Dana Walden Alan Bergman bring a
Speaker 6: wealth of experience. Bergman is a thirty year veteran at Disney,
Speaker 6: kind of knows the movie business inside out. I don't
Speaker 6: know if they want to maybe make them co CEOs
Speaker 6: to start off with or.
Speaker 2: Wait, because that always works out well, Tita, it actually did,
Speaker 2: It actually did for Netflix, right, Okay, so it's always
Speaker 2: an exception. There's always an exception, but go ahead, go ahead.
Speaker 6: So you know, I think one thing, if you if
Speaker 6: you if we have recognized one thing, it's that you know,
Speaker 6: you need you need folks who have very strong creative expertise,
Speaker 6: and of course Alden and Bergmann bring that. But then
Speaker 6: again you have to look at the business as a whole.
Speaker 6: And if you look at you know, the parks business,
Speaker 6: which is where kind of Bob Chapek excelled parks actually
Speaker 6: brings in about sixty five to seventy percent of Disney's
Speaker 6: profit Disney's bottom line. So it's going to be interesting
Speaker 6: to see how they kind of do this balancing act.
Speaker 6: Because you need the movie business, you need the creative
Speaker 6: expertise there for creating new ip because that's what that's
Speaker 6: what is ultimately going to drive people to your parks
Speaker 6: with all those characters and the franchises and all that stuff.
Speaker 6: But then you also have to be able to execute
Speaker 6: in terms of running the parks and running them really
Speaker 6: really well.
Speaker 2: Go back again. So the biggest profit drivers are the parks.
Speaker 6: Yes, the streaming business is still losing about three to
Speaker 6: four billion dollars. The linear TV business is in secular decline.
Speaker 6: We still really don't know what's going on with ESPN
Speaker 6: and the studios. They don't really generate a whole lot
Speaker 6: of money. Yes, Disney is practically half of the global
Speaker 6: box office, but it's not really necessarily a profit generator.
Speaker 6: It's really just more you know, kind of fueling the
Speaker 6: content flywheel, if you will. So it's so parks are
Speaker 6: really it's going to come down to a person who
Speaker 6: can kind of balance both those, right. You need the
Speaker 6: operational and the executional expertise and the acumen, which a
Speaker 6: Bob Chapek did have, but he was kind of falling
Speaker 6: short when it came to, you know, dealing with all
Speaker 6: these creative heads and they can be a really tough punch,
Speaker 6: and so you need that balance. It's it's going to
Speaker 6: be you know, Bob Iger's shoes are really hard to fill.
Speaker 6: They're really big shoes to fill.
Speaker 2: I mean, he grew up in this company.
Speaker 6: He did, he did, and and I think the mailroom.
Speaker 2: I think, wasn't it where you started away?
Speaker 3: Are you serious?
Speaker 2: Right?
Speaker 6: I think if he's starting actually as a weather man
Speaker 6: in an in an Itaca broadcast station and kind of yeah,
Speaker 6: he's a broadcaster and kind of made it, yeah, and
Speaker 6: made his way up. So but it's but it's really
Speaker 6: his his his power. I mean, he understood the power
Speaker 6: of storytelling and creativity and the and how important it
Speaker 6: is for the company to build franchises and made those
Speaker 6: acquisitions when you know they needed to be made. So
Speaker 6: he's absolutely a genius when it comes to that.
Speaker 3: So, Gi, then our final couple of minutes with you here,
Speaker 3: I want to broad in it out just a little
Speaker 3: bit because you have some great analysis on the streaming
Speaker 3: wars in general, and in it you say, like it
Speaker 3: it's no competition anymore when it comes to the subscriber's space.
Speaker 3: But what could Disney do to beat out a Netflix?
Speaker 3: Is ESPN the saving grace?
Speaker 6: That's a great question. I think everyone's kind of scratching
Speaker 6: their heads at this point, and you're absolutely right, Madison.
Speaker 6: I think the streaming wars are really over at this point.
Speaker 6: What it's coming down to now is which company can
Speaker 6: get to profitability and who can get to it fastest
Speaker 6: and who can make the most money for the longest
Speaker 6: period of time. Yes, I think content of you know,
Speaker 6: content obviously is going to be a huge differentiator. But
Speaker 6: at the same time, we're seeing all these company and
Speaker 6: these kind of really tightened the reins on their content
Speaker 6: spending budgets, whether it's a Disney, Netflix, all all of them.
Speaker 6: You know, they are spending money, but they're also going
Speaker 6: to be careful. They're not just green lighting you know,
Speaker 6: projects all over the place. So it's going to be
Speaker 6: really Again, this comes down again to this balancing act
Speaker 6: of you know, subscribers, you know, driving pricing. With ESPN again,
Speaker 6: there is that perennial question mark. There was a story
Speaker 6: which ran a few days ago it said, you know,
Speaker 6: they are very they're looking very closely at kind of
Speaker 6: launching this direct to consumer service. But it's a little
Speaker 6: more complex than that with the ESPN because you have
Speaker 6: all the leagues, you have these different sports rights that
Speaker 6: you have to negotiate, and remember most of these rights
Speaker 6: only still exist for the linear world, so they have
Speaker 6: to go back, they have to work out all those arrangements.
Speaker 6: And they know this is like pulling the trigger on
Speaker 6: a grenade because the minute they launched that ESPN trect
Speaker 6: to consumer service, you're basically going to accelerate cord cutting
Speaker 6: at a pace that was you know, that's unimaginable. So
Speaker 6: if you're seeing right now, like a seven to eight
Speaker 6: percent erosion. Right, there's nothing to stop like a fifteen
Speaker 6: to twenty percent erosion if that ESPN you know, direct
Speaker 6: to consumer service comes to market, so they have to
Speaker 6: do it very very tightfully.
Speaker 2: God, you know this company so well, it's so much fun.
Speaker 2: And forgive me Bob Iger because right, Keita knows it
Speaker 2: all and she was right. Seventy four, Bob Iger work
Speaker 2: started work as a weatherman at an ABC news station. Keita,
Speaker 2: Thank you. Keita. Ringing Athon technology media analyst a Bloomberg
Speaker 2: Intelligence on zoom from BI headquarters in Princeton, New Jersey.
Speaker 1: You're listening to the Bloomberg Business Week podcast. Catch us
Speaker 1: live weekday afternoons from three to six Eastern on Bloomberg Radio,
Speaker 1: the Bloomberg Business App, and YouTube. You can also listen
Speaker 1: live on Amazon Alexa from our flagship New York station.
Speaker 1: Just say Alexa play Bloomberg eleven thirty.
Speaker 2: Hey listen. The retail sector definitely has been in focus.
Speaker 2: We talked a little bit about high end luxury retail earlier,
Speaker 2: Maddie and I did, but we've seen a lot of
Speaker 2: the publicly held companies reporting the latest quarterly updates and outlooks.
Speaker 2: I mean, we got lows today.
Speaker 5: Right.
Speaker 2: They reported some gains among professional contractors, but a drop
Speaker 2: in comp sales comparable sales that was less than that
Speaker 2: of its main rival, Home Depot, which reported last week.
Speaker 2: So we have been talking about the space a lot,
Speaker 2: and we wanted to get to our next guest, who's
Speaker 2: got some thoughts and specifically how the property retail kind
Speaker 2: of fits in together and what we're seeing and maybe
Speaker 2: what needs to be done. So we welcome back the
Speaker 2: president and CEO of ICSC, the International Council of Shopping Centers.
Speaker 2: He is Tom McGee, and he's actually at a company
Speaker 2: convention in Las Vegas where the focus is on the
Speaker 2: real estate side of retail. Tom joining us on the phone. Tom, Hey,
Speaker 2: good to have you here with us. How are you.
Speaker 7: I'm doing great. It's great to be with you again.
Speaker 7: I hope you're doing well.
Speaker 2: Doing okay, hanging in there, trying to keep up with everything.
Speaker 2: I'm curious the event you're at. Let's just start there.
Speaker 2: Tell us a little bit about it and what the
Speaker 2: mood is and what seems to be top of mind,
Speaker 2: the big topic that everybody wants to talk about.
Speaker 7: Sure, So I'm at ICC Las Vegas. It is the
Speaker 7: largest commercial real estate event in the country. We have
Speaker 7: about twenty five thousand people in attendance. The focus is
Speaker 7: on retail real estate and the mood is quite positive.
Speaker 7: I mean, the demand for physical space is very strong,
Speaker 7: you know, if you really kind of take a big
Speaker 7: picture perspective. Over the course of the last fifteen years,
Speaker 7: retail sales in the United States have almost doubled, but
Speaker 7: the supply of physical retail has visually been unchanged over
Speaker 7: that fifteen year time period. So there's a lot of
Speaker 7: demand for really a limited amount of supply of physical retail.
Speaker 7: And that's the focus of this conference. It's really around
Speaker 7: leasing activity. It's a deal making conference, and so it's positive.
Speaker 7: There is obviously challenges in urban retail. Suburban retail because
Speaker 7: of work from home and the move of the suburbs
Speaker 7: is exceptionally strong enoughs where the vast majority of physic
Speaker 7: with retail resides.
Speaker 3: That's really interesting to me because I feel like when
Speaker 3: I'm home in Florida, shop in person way more than
Speaker 3: I do in New York City because it's harder to
Speaker 3: do everything here and carry my bags around. But can
Speaker 3: you explain to me, Tom, when you said that you're
Speaker 3: you're seeing demand within the retail space. Can you talk
Speaker 3: to me about where the strongest demand is.
Speaker 7: Sure, well, you know, clearly the strongest demand for space
Speaker 7: right now is in open air growth. Your traditional grocery
Speaker 7: anchored suburban retail center. I mean, as people are working
Speaker 7: from home more, those suburban retail centers have become exceptionally
Speaker 7: popular as well as regional malls, but particularly grocery anchored
Speaker 7: suburban centers, discount retail centers, target anchored Walmart anchored centers.
Speaker 7: You know, the store has become not just for traditional shopping,
Speaker 7: but increasingly has become a mini fulfillment center, you know,
Speaker 7: solving for that last mile. So that's where the highest
Speaker 7: demand is the most challenge A part of the sector
Speaker 7: would be urban retail, and that really interrelates not so
Speaker 7: much with retail, but obviously the challenges in the office market,
Speaker 7: as all of us are from New York as well,
Speaker 7: and we know that midtown Manhattan, for example, is challenged
Speaker 7: because people aren't coming into the office at the same rate,
Speaker 7: and so you are going to see vacancies and urban
Speaker 7: retail as a result of that. But again, the vast
Speaker 7: majority of physical retail isn't in central business districts. It's
Speaker 7: in suburban America, and that is super strong.
Speaker 3: And we still right across the street from the Bloomberg
Speaker 3: office have open space from retailers that used to be
Speaker 3: right across the street from us. What does that look
Speaker 3: like then in the next let's say, five years, what
Speaker 3: happens to those empty spaces?
Speaker 7: Well, I mean, I think that's the big question. You know,
Speaker 7: so much of that is dependent upon what happens in
Speaker 7: the office sector and just the trends around you work style,
Speaker 7: and if you have fifty percent occupancy in offices, that's
Speaker 7: going to be challenge for urban retail, urban food, food
Speaker 7: and beverage, all those types of things. Even if you
Speaker 7: look at you know, Manhattan as a sub sector, if
Speaker 7: you look at the neighborhoods, you know, the Upper East,
Speaker 7: the Upper West, the villages, et cetera, and any other boroughs,
Speaker 7: they're doing really actually quite well. I mean, retail is
Speaker 7: thriving in those areas. But in the areas that are
Speaker 7: very dependent upon office traffic, that is more challenging. And
Speaker 7: and you know, I think that is going to depend
Speaker 7: upon what happens in you know, this whole work from
Speaker 7: home work from office environment and what that means. That's
Speaker 7: going to create a lot of challenges for cities for sure,
Speaker 7: not just for retail, but you know, just the economics
Speaker 7: of a city like New York or San Francisco or
Speaker 7: Los Angeles, et cetera, which are so dependent upon property
Speaker 7: taxes and dependent upon communities coming into the city.
Speaker 2: Tom, you mentioned at the top of our conversation that
Speaker 2: there was optimism right at this event, and you are.
Speaker 2: You know, it's all about using activity. And I'm curious
Speaker 2: about what is it the volume of deals that are
Speaker 2: being done, And I'm curious about pricing on spacing. You know,
Speaker 2: is it twenty nineteen levels, is it above that? Is
Speaker 2: it below that? Give us a little bit more color
Speaker 2: on what's going on.
Speaker 7: Well, if you took, for example, you know, some of
Speaker 7: the high profile occupancies that you know have a results
Speaker 7: from some some you know, retailers that have regionallyp opera
Speaker 7: fanquency like a bed bath and beyond, I mean there
Speaker 7: are multiple folks lined up for that space because it's
Speaker 7: very desirable, very well located physical space. And so you know,
Speaker 7: in that case, pricing is is definitely strong. I don't
Speaker 7: know whether it's twenty nineteen twenty seventeen levels. It depends
Speaker 7: upon the geography and so forth, but there's a lot
Speaker 7: of demand for that space and it makes sense. I mean,
Speaker 7: just to give you a stat in the last fifteen years,
Speaker 7: I said, you know, retail sales of almost doubled this country.
Speaker 7: They're up by about eighty two percent. The GDP has
Speaker 7: grown by twenty nine percent, populations grown by almost ten percent.
Speaker 7: Retail square footage is almost not grown at all in
Speaker 7: that period of time. And there's been to the extent
Speaker 7: there's been new development, A lot of obsolete retail space
Speaker 7: has gone off market, have been converted into other sources,
Speaker 7: and so that demand for that space that exists because
Speaker 7: of economic growth, and quite frankly, retailers using stores for
Speaker 7: multiple purposes now not just for traditional shopping but for
Speaker 7: fulfilling online orders is really increasing demand for physical space
Speaker 7: quite significantly.
Speaker 2: So even though when you talk about that retail sales
Speaker 2: number doesn't mean everything is necessarily being purchased at the store,
Speaker 2: but if it's purchased online but picked up at the store,
Speaker 2: that's how you're seeing. It just got about fifteen seconds
Speaker 2: left here. Is that fair?
Speaker 7: Absolutely? I mean, obviously retailers want to use their stores
Speaker 7: to fulfill and retailer is agnostic want to They want
Speaker 7: to sail and use their sort of fulfil the order.
Speaker 7: That's to their.
Speaker 2: Benefit to do so. Yeah, I guess as a consumer,
Speaker 2: I'm really happy when I can order online and pick
Speaker 2: up at a store, return it at a store. It
Speaker 2: makes me more inclined to push the buy button if
Speaker 2: I have that flexibility. Tom, always good to get some
Speaker 2: time with you and some color on what's going on
Speaker 2: in retail and specifically today on retail and real estate.
Speaker 2: Tom Aghee, President and CEO at ic SC on the
Speaker 2: phone in Vegas. This is Bloomberg Radio.
Speaker 1: Fights the Pom.
Speaker 2: Fight, all right. They're definitely fighting the fight if you will,
Speaker 2: and we'll get into exactly what they're doing. Especially if
Speaker 2: you're head out west to the University of California at Berkeley,
Speaker 2: you will find a class called the Berkeley Citizen Clinic,
Speaker 2: and in it, students are learning how to fight hackers
Speaker 2: and help non governmental organizations. We're talking about the NGOs
Speaker 2: really better protect themselves. This story is uh in the
Speaker 2: upcoming new double issue of Bloomberg Business Week on newstands
Speaker 2: later this week. Already online at Bloomberg dot com, slash
Speaker 2: Businessweekend on the Bloomberg So let's get to it. Bloomberg
Speaker 2: News cybersecurity reporter Margie Murphy on zoom in San Francisco.
Speaker 2: The editor of Bloomberg Business Week, Joe Webber right here
Speaker 2: in our Bloomberg Interactive Broker's studio, Jill. This clinic the
Speaker 2: first of it's kind in the country. I'm just curious
Speaker 2: how this story got the green light, Like, what was
Speaker 2: the pitch?
Speaker 8: I just thought it was so interesting because we look,
Speaker 8: we're always interested in what's happening in the cybersecurity world,
Speaker 8: and this was just an effort that I hadn't heard about,
Speaker 8: and yet students are doing cool stuff and this the
Speaker 8: Travers Project, when I first even read about it in
Speaker 8: the story, just was like, wow, this is they're doing
Speaker 8: something that I had not been aware of before this
Speaker 8: Travis Project. I hadn't been aware of what they were doing.
Speaker 8: But what they're doing is actually, you know, draws attention
Speaker 8: from people that aren't exactly like, you know, doing good
Speaker 8: stuff in the world. Right, And so the Berkeley Citizen
Speaker 8: Clinic comes in there and this is a pro bono
Speaker 8: effort and it just has a little bit of a
Speaker 8: feel good quality. But what I'm really curious about is
Speaker 8: what happens in the classroom to lock this stuff down, Margie.
Speaker 8: So let's start actually Traverse Project. What are they doing
Speaker 8: this nonprofit?
Speaker 1: And why do that?
Speaker 8: Does that draw the attention of the bad people in
Speaker 8: the world?
Speaker 9: Yeah? Absolutely, So.
Speaker 5: I talked to Austin Shamlin, who is the founder of
Speaker 5: the Travis Project, and he's spent many years working in
Speaker 5: the kind of anti human trafficking industry, I guess you
Speaker 5: could call it. And he's he's set up this nonprofit
Speaker 5: and what it is, it's tech. It's a tech company really,
Speaker 5: and they provide technology to law enforcement.
Speaker 9: Around the world.
Speaker 5: And so they you know, they have a special proprietary technology,
Speaker 5: which you know is.
Speaker 9: It's kind of their secret source.
Speaker 5: And they're helping find the bad guys, the people who
Speaker 5: are supplying women from Ukraine who are trying to get
Speaker 5: over to poland sending them to brothels around eastern Europe.
Speaker 5: And he's helping with his tracking technology.
Speaker 2: A little bit of a freeze here, we'll see if
Speaker 2: we can. Are you there, Margie, I'm here, Okay, great, no, no, no,
Speaker 2: technology it happens go ahead and pick up please go ahead.
Speaker 5: Yeah, So often is you know, for this his human
Speaker 5: trafficking technology company. He's helping track down the people who
Speaker 5: are moving women and children around the world, often for
Speaker 5: sex trafficking, and so he's attracting the ire of some
Speaker 5: really bad people, and all the money that he's getting
Speaker 5: to fund his company, it's going into the technology that
Speaker 5: he's providing to help with this effort, and he doesn't
Speaker 5: have the budget to spend it on actually securing himself
Speaker 5: and his volunteers and his employees who are kind of
Speaker 5: putting themselves on the front line against criminal gangs, you know,
Speaker 5: potential moles.
Speaker 9: In the law enforcement themselves.
Speaker 5: So although he's working in tech, he doesn't have the
Speaker 5: budget to go and get a consultant to kind of
Speaker 5: show him where all the vulnerabilities. Maybe every time he
Speaker 5: speaks to a volunteer talk about, you know, where there
Speaker 5: could be people who might be in their networks watching
Speaker 5: what they're.
Speaker 9: Doing, trying to get a step ahead of them.
Speaker 5: So he heard about this clinic at Berkeley and now
Speaker 5: he's this fall will get about fifteen students who are
Speaker 5: going to help him draw up a cybersecurity plan, tell
Speaker 5: him kind of the best ways for him to communicate
Speaker 5: with his volunteers and with the partners that they have
Speaker 5: all around the world to make sure that they can
Speaker 5: continue doing what they need to do in a safe
Speaker 5: manner and not putting their volunteers at risk.
Speaker 8: So what's the backstory at Berkeley? Where did this program
Speaker 8: come from?
Speaker 4: Right?
Speaker 5: So it kind of it all came from there's a
Speaker 5: program which is like the Public Interest Cybersecurity Program, and
Speaker 5: that that was a module that cybersecurity students could teach,
Speaker 5: and Sarah Powers out at Berkeley has been kind of
Speaker 5: spearheading that.
Speaker 9: And they thought, you know, often.
Speaker 5: These universities do you have a bit of a pro
Speaker 5: bono effort and they look around in their community and think,
Speaker 5: you know, how can we be helpful?
Speaker 9: And they realized that.
Speaker 5: A lot of these students were going on to work
Speaker 5: with large companies with huge sums of money, and they
Speaker 5: were never they were never going on to help kind
Speaker 5: of work with the smaller organizations around them or the
Speaker 5: NGOs and nonprofits that they felt really needed the help,
Speaker 5: the help securing themselves. And so they started off by
Speaker 5: I think they did a couple of local women's health
Speaker 5: clinics anti abortion clinics, and then they started getting more
Speaker 5: interest and they realized this is like an international thing,
Speaker 5: and so now they they they've been doing it for
Speaker 5: about I think it's like four years now, and they
Speaker 5: now they have to scream for the clients that they
Speaker 5: have come in and they make sure that they're going
Speaker 5: for the kind of lowest budget but higher risk clients.
Speaker 2: Margie, you know what I think is interesting too, And
Speaker 2: we have so many conversations where when you talk to
Speaker 2: the head of a company, a publicly held company or other,
Speaker 2: you know, cybersecurity is a big issue. It is just
Speaker 2: a part of doing business. Of course they're going to
Speaker 2: spend on it, they have money to do so, but
Speaker 2: there's a there's some information in your story. We write
Speaker 2: about these NGO small organizations that they are three times
Speaker 2: more likely to be targeted by hackers than large companies,
Speaker 2: and about sixty percent of those groups shut down within
Speaker 2: six months of an attack. So they are very vulnerable
Speaker 2: and their organization is really at stake of being shut
Speaker 2: down if they get hacked. I had no idea and
Speaker 2: didn't think about how vulnerable they are, and that they
Speaker 2: don't have the access to either spend to protect their
Speaker 2: information or their organizations.
Speaker 1: Yeah.
Speaker 5: Absolutely, And there's two things here. So these specific NGOs
Speaker 5: that the Berkeley Clinic are working with, it's like that
Speaker 5: they tend to be super high risk because they are
Speaker 5: doing things like anti human trafficking, abortion work, you know,
Speaker 5: political kind of NGOs, and so they're super high risk
Speaker 5: and they are highly highly at risk of being hacked
Speaker 5: because of the work they do, because of prying governments
Speaker 5: and the criminal gangs. Then on top of that, there's
Speaker 5: also the risk that is too small businesses generally across
Speaker 5: the US, because we hear so much about really large
Speaker 5: scale hats hackers going after you know, publicly listed companies
Speaker 5: because the return one, you know, if they do a
Speaker 5: ransomware attack and if they try and get like five
Speaker 5: percent of their quarterly.
Speaker 9: Earnings, it's a huge sum.
Speaker 5: But we never really talk about how like the scale
Speaker 5: of the smaller organizations that are being hacked and the
Speaker 5: returns are smaller for the hackers, but it's easier for
Speaker 5: them to get in and cumulatively they're making tons of
Speaker 5: money off the smaller organizations which are less likely to
Speaker 5: be protected, which are less likely to have cyber insurance.
Speaker 5: And then as the stats show, are more likely to
Speaker 5: fold as a result of that attack.
Speaker 2: Marguie.
Speaker 3: This isn't really featured in the story, but I'm just curious.
Speaker 3: Is this something that the sources you spoke with think
Speaker 3: they could scale in a tangible way. Do they anticipate
Speaker 3: trying to roll out resources that make the education on
Speaker 3: how to do this a little bit more accessible.
Speaker 9: I think it's something they'd love to do.
Speaker 5: And in this example, what the students are doing is
Speaker 5: essentially it's free consultancy, so they're not providing any technology themselves.
Speaker 5: And I think that a lot of what the students
Speaker 5: going to do is they become consultants. They're working like
Speaker 5: one of the one of my sources, Rachel, she now
Speaker 5: works at Deloitte, and they're kind of I guess they're
Speaker 5: hoping that they could maybe bring what they learn with
Speaker 5: them and pay it back in terms.
Speaker 9: Of scaling it.
Speaker 5: At the moment, there's actually Berkeley is one of several
Speaker 5: clinics that have actually popped up, and there is a
Speaker 5: consortium that they've all pulled together, and there are donors
Speaker 5: who are feeding some money into that, and I think
Speaker 5: they're hoping that that will expand and that will get
Speaker 5: bigger and we'll see more community based pro bono work
Speaker 5: as we see more cyber attacks happening and we see
Speaker 5: the cost of cybersecurity software rising. So in terms of scaling,
Speaker 5: it wouldn't be a scale like we would see with
Speaker 5: a product, but I think in terms of people getting
Speaker 5: involved in trying to help and maybe seeing private companies
Speaker 5: put some funding behind it, that we might see scale.
Speaker 8: So the Travis project, obviously, that was a really interesting one.
Speaker 8: I'm curious what other organizations the clinic at Berkeley and beyond,
Speaker 8: who else are they attempting to assist with these efforts.
Speaker 5: Yeah, so interestingly, each each clinic so they they're attached
Speaker 5: to universities, and each university has their own I guess
Speaker 5: the theme probably isn't the right word, but the type
Speaker 5: of organization they do, so Berkeley was these high risk NGOs.
Speaker 9: I think M I T was doing more community focused
Speaker 9: like local healthcare and.
Speaker 5: Government, and so they kind of special on that, but
Speaker 5: Berkeley specifically. I also spoke to the administrative manager at
Speaker 5: the abortion clinic in the San Francisco General Hospital who
Speaker 5: has worked with them. They've also done other women's health
Speaker 5: organizations they also work with. There was a organization in Guatemala,
Speaker 5: which was kind of more of a political NGO, so
Speaker 5: it's quite international, and I think that what really struck
Speaker 5: me was how this could be applied to pretty much
Speaker 5: any vertical as well, you know, impacts.
Speaker 9: It's not just the NGOs.
Speaker 5: There are small businesses around the country which really need
Speaker 5: this help and they're not getting it and they can't
Speaker 5: afford it.
Speaker 8: And yeah, we've read about all the ransomware that have
Speaker 8: gone down, and it's like hospitals, schools, private companies. It's
Speaker 8: like take your pick, and like anytime it happens, it
Speaker 8: is your nightmare. And then to think like you don't
Speaker 8: have the funding that you need to actually defend yourselves
Speaker 8: from these things, and especially if you're attemptantion you could
Speaker 8: work like these folks. It's an amazing conundrum.
Speaker 2: Right, the concept of that, like what you're doing is
Speaker 2: all of a sudden shut down and then maybe you
Speaker 2: can't even recover from it. So it's really really concerning.
Speaker 2: The other thing I thought was interesting, Margie, and maybe
Speaker 2: because we've been talking a lot about earlier on our broadcast,
Speaker 2: Matty and I got into how women participation, certainly in
Speaker 2: the prime earning their participation post pandemic is at a
Speaker 2: record high, and I just think about the tight labor
Speaker 2: force that is forcing Also companies or folks that maybe
Speaker 2: night might not have in another environment leaned on students
Speaker 2: to help them. They're like, I'm okay with it because
Speaker 2: it's actually kind of solving a problem because there's just
Speaker 2: not enough cybersecurity officials right to go out there and
Speaker 2: do it.
Speaker 9: Totally. I mean, the idea itself sounds terrifying.
Speaker 5: Setting a load of students on your kind of cybersecurity
Speaker 5: you practice, which is meant to be you know, the
Speaker 5: most people well cyber security people would argue is the
Speaker 5: most important part of your business. But when you don't
Speaker 5: have the people to help you that, you know, when
Speaker 5: you can't afford it, you'll take what you're given. And
Speaker 5: it turns out that actually these students are really really
Speaker 5: good and they are being trained by the best in class.
Speaker 5: So the tutors that they have a people who've worked
Speaker 5: in the industry for years and they want to give
Speaker 5: back and they know what the problem is. And oftentimes
Speaker 5: these problems aren't really expensive to solve. That Sometimes people
Speaker 5: are being sold things that you know, they're being told
Speaker 5: you need to pay a certain amount for this. A
Speaker 5: lot of it comes down to cyber hygiene. But with
Speaker 5: the kind of growing threat and the sophistication in which
Speaker 5: cyber criminals are, you know, evolving, we just need people
Speaker 5: need refreshes quite often on how to you know, privately
Speaker 5: message access controls over your files, who can see what
Speaker 5: It can be quite simple stuff, but unless you have
Speaker 5: someone who knows telling you that you know, you don't
Speaker 5: know until you don't know, and then you've been hacked,
Speaker 5: and that's a problem.
Speaker 2: So I think seven weeks of training. I love this, right,
Speaker 2: power of backups, importance of privacy controls and software, the
Speaker 2: operation of virtual private networks, and how to assemble it
Speaker 2: all into a cybersecurity plan. Seven weeks and they can
Speaker 2: then take on clients. I love it. It's just a
Speaker 2: really smart story and just people figuring out how to
Speaker 2: get it done. Margie, thank you so much. Appreciate it.
Speaker 2: Margie Murphy, cybersecurity reporter at Bloomberg News. She is there
Speaker 2: on zoom in San Francisco. Jill Webber, the editor of
Speaker 2: Bloomberg business Week, here in studio. This story in the
Speaker 2: upcoming new issue of BusinessWeek. Do add on newsstands on
Speaker 2: Thursday online already on the Bloomberg This is Boomberg.
Speaker 10: Radio, Umbromark.
Speaker 4: Journal.
Speaker 8: Yeah but you me, no, no, no, no, who's going
Speaker 8: to drive home?
Speaker 7: Honey?
Speaker 4: Please?
Speaker 10: How do the driving gravels?
Speaker 1: Let's make I want to try it.
Speaker 9: It's a good question, Ti.
Speaker 1: This is good drive to the Globe dot com for me.
Speaker 1: Think well by An on Bloomberg Radio.
Speaker 2: All right, everybody, only Tuesday, but it feels like it
Speaker 2: should be Friday because every day is a packed one.
Speaker 2: But you look at the trade and it's safe to say,
Speaker 2: certainly on the equity side of things, investors just kind
Speaker 2: of waiting for something out of DC Tech in particular,
Speaker 2: as you heard from Charlie, really taking it on the nose,
Speaker 2: down about one percent on the NASDAX. So let's get
Speaker 2: to it. Tom Martin is with Maddie and me in
Speaker 2: our Drive to the Close here. He's lead portfolio manager
Speaker 2: for ESG Strategies at the Atlanta based RIA registered investment
Speaker 2: advisor Global Investments. He joins us on Zoom from Atlanta. Tom,
Speaker 2: nice to have you here. Let's start broad macro because
Speaker 2: I do wonder how you think about what's going on
Speaker 2: in DC the perspect of default. We've been here before,
Speaker 2: but it does feel a little bit more tortured this
Speaker 2: time around. As the debt continues to grow. What could
Speaker 2: be the implications for the financial markets longer term and
Speaker 2: the ESG space, especially if we see some cutbacks on
Speaker 2: spending in the ESG and green world.
Speaker 10: Great, well, yeah, thank you for having me on your program.
Speaker 10: You know, that's what's on everybody's mind. It's all it's
Speaker 10: on everybody's mind is what's going to happen with the
Speaker 10: debt ceiling, and the markets for the most part, are
Speaker 10: priced as though a deal is going to get done.
Speaker 10: The only thing that's not really priced that way is
Speaker 10: the one month Treasury bill because there is some risk
Speaker 10: of potentially missing payments, although that hasn't happened and probably
Speaker 10: isn't going to happen now. What's more important really is
Speaker 10: what happens to liquidity afterwards and the raising of the
Speaker 10: debt that needs to be issued by the Treasury, what
Speaker 10: effect that has on the market, and what kinds of
Speaker 10: actions can be taken so that that doesn't really affect
Speaker 10: the markets.
Speaker 2: This is what we were talking about with our IRA
Speaker 2: Jersey right that ultimately after a deal is done right,
Speaker 2: the amount of issuance and what it does to the
Speaker 2: liquidity within the market, right and pulling essentially cash out.
Speaker 10: That's right. And if you overlay a chart of the
Speaker 10: Nasdaq with liquidity, you find that they're kind of right
Speaker 10: on top of each other. And so that's what has
Speaker 10: been not today accepted. But the Nasdaq is up very
Speaker 10: strongly as we all know, year to date, and a
Speaker 10: lot of that is liquidity driven. So when that liquidity
Speaker 10: goes away, and you know if to what degree it's
Speaker 10: replaced and how it's replaced, is going to have an
Speaker 10: impact on the equity markets and particularly the technology stocks
Speaker 10: that we've seen run so much.
Speaker 3: Okay, I keep kind of hammering the horse on this,
Speaker 3: but do you think that there's potential upside a relief
Speaker 3: rally in store once they do resolve the debt ceiling?
Speaker 2: You could be real you're working in a story.
Speaker 3: Yea, I'm doing a story about this, and I'm kind
Speaker 3: of double dipping my workday here, so I'm trying to
Speaker 3: get some some quotes about, yeah, the relief rally that
Speaker 3: might be in store here.
Speaker 10: Well, there's so much pessimism that is embedded in the markets,
Speaker 10: notwithstanding that the S and P and the NASDAC have
Speaker 10: done very well in a year to day. Yes, but
Speaker 10: you know you've seen that the bearishness is still pretty
Speaker 10: one sided. Everybody thinks there's going to be a recession.
Speaker 10: We've had, you know, the biggest fastest rate rise almost
Speaker 10: in history. You have the banking crisis, which may not
Speaker 10: be as much of a crisis anymore, but certainly there's
Speaker 10: a tightening in standards there. So the question is is
Speaker 10: that those things act with lag, and everybody's looking for
Speaker 10: signs of a session. The problem is is that we
Speaker 10: haven't seen it in employment, and we really haven't seen
Speaker 10: it to any large degree even with the consumer, although
Speaker 10: this quarter's retail information was a little bit on the
Speaker 10: softer side. So to answer your question, if something goes
Speaker 10: right as opposed to going wrong, you at least see
Speaker 10: the market grind higher, if not a relief rally. But
Speaker 10: I do think we have to be careful about this
Speaker 10: liquidity after the deal is announced, the raising of the
Speaker 10: debt ceiling.
Speaker 3: Okay, so then on the liquidity question, come with me
Speaker 3: on this journey. Right, Let's say liquidity is pulled out,
Speaker 3: but then the Fed says that's good news for us,
Speaker 3: Maybe we don't have to raise raids and be as hawkish.
Speaker 3: So then is that happy for markets?
Speaker 10: Right? So we were in in the past this era
Speaker 10: of bad news is good news and good news is
Speaker 10: bad news. And that's when the FED was raising and
Speaker 10: we weren't sure what was happening with inflation. Now that
Speaker 10: we know that inflate disinflation has started at any rate,
Speaker 10: and it's on its way back down, maybe not as
Speaker 10: fast as people would like. And we know that the
Speaker 10: FED has gotten to that sort of magical five to
Speaker 10: five and a quarter percent area, and they say that
Speaker 10: we are now in restrictive territory and we've had an issue.
Speaker 1: With the banks.
Speaker 10: The FED is in a position to be able to pause.
Speaker 10: But since inflation's not done. If you pay attention to
Speaker 10: the FED speak lately, it's about fifty to fifty between yes,
Speaker 10: we can pause and to know we have more to
Speaker 10: do even if we do pause. So that's the open question.
Speaker 10: I think the FED still has to be very pawkish
Speaker 10: and make sure that everybody knows that they are going
Speaker 10: to stamp out inflation. On the other hand, they really
Speaker 10: would like to pause here see what happens and let
Speaker 10: some of this, other these other things that you mentioned
Speaker 10: do their work for them.
Speaker 2: So I want to go back to ESG since that's
Speaker 2: something that's certainly under your purview. I do wonder, you know,
Speaker 2: we talk a lot about it going through a bit
Speaker 2: of a reckoning. What are the flows that you are
Speaker 2: seeing tom an investor interest in ESG, which, as I said,
Speaker 2: really has gone through a bit of a reckoning, certainly
Speaker 2: when it comes to performance. Over the past year or.
Speaker 10: So, well, it has gone through a reckoning far as
Speaker 10: far as performance. It's also gone through a lot of
Speaker 10: sort of batting around in the culture wars of politics
Speaker 10: and in politics, et cetera. And I think that, you know,
Speaker 10: it's sort of taken on a life of its own
Speaker 10: apart from what ESG was originally really meant to do.
Speaker 10: It wasn't really meant to sew divisiveness. It was meant
Speaker 10: to sow positive ness. But in the meantime you see
Speaker 10: this sort of the growth of ESG has slowed certainly,
Speaker 10: and we've seen that as well as people sort of
Speaker 10: get their hands and their minds around what it is
Speaker 10: that they want from it and what they expect from it.
Speaker 10: So there's all sorts of different things and ways to
Speaker 10: manage it. Our way of doing it is to not
Speaker 10: be an activist and to not sort of enter into
Speaker 10: an argument about morals so much as to look at
Speaker 10: where the risks are with regard to some of the
Speaker 10: metrics and to be able to protect against those and
Speaker 10: incorporate that into our investment decisions.
Speaker 2: Which is really what it initially set out to be.
Speaker 2: But this gets it too, some of the problems, and
Speaker 2: this is why ESG everybody looks at it kind of differently.
Speaker 2: Hey Tom Good, to get some time with you on
Speaker 2: this Tuesday time. Artines, senior portfolio manager at Globald Investments,
Speaker 2: over seeing those ESG strategies at the firm. Right here
Speaker 2: on Bomberg Radio.
Speaker 1: This is the Bloomberg Business Week podcast, available on Apple, Spotify,
Speaker 1: and anywhere else you can get your podcasts. Listen live
Speaker 1: weekday afternoons from three to six Eastern on Bloomberg dot Com,
Speaker 1: the iHeartRadio app, tune In, and the Bloomberg Business App.
Speaker 1: You can also watch us live every weekday on YouTube
Speaker 1: and always on the Bloomberg Terminale