WEBVTT - Surveillance: Inflation Surge with Porcelli 0:00:05.120 --> 0:00:09.200 Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Along 0:00:09.240 --> 0:00:13.080 with Jonathan Ferrell and Lisa Brownwitz Jay Ley, we bring 0:00:13.119 --> 0:00:17.159 you insight from the best and economics, finance, investment, and 0:00:17.280 --> 0:00:23.280 international relations. Find Bloomberg Surveillance on Apple podcast, Suncloud, Bloomberg 0:00:23.360 --> 0:00:29.960 dot Com, and of course, on the Bloomberg terminal. Thomas 0:00:30.000 --> 0:00:33.879 Purcelli joins his chief US economists with RBC Capital Markets. 0:00:34.040 --> 0:00:37.240 Tom Purcelli, how much of this new inflation is wage 0:00:37.280 --> 0:00:41.000 inflation and what does the FETE do about it? Yeah, 0:00:41.040 --> 0:00:43.760 so I think here's here's what I think is really 0:00:44.000 --> 0:00:47.680 very interesting about about this inflation report. In particular, I 0:00:47.680 --> 0:00:49.760 think what we need to keep in mind is those waitings. 0:00:50.320 --> 0:00:52.400 I think those waitings gonna there's new waitings. I think 0:00:52.400 --> 0:00:55.920 they're going to haunt inflation for the next few months. Um. 0:00:56.160 --> 0:00:58.680 You know, you now have a bigger weight on goods. 0:00:59.120 --> 0:01:01.480 And as we've been writing about for quite some time, 0:01:01.800 --> 0:01:04.280 the thing that's really doing most of the driving from 0:01:04.319 --> 0:01:08.200 an inflation perspective is really good prices and make a mistakes. 0:01:08.200 --> 0:01:11.959 Services are certainly um starting the process of of amping 0:01:12.040 --> 0:01:13.440 up here a little bit. But this is really a 0:01:13.520 --> 0:01:17.319 sort of a goods dominated UM inflation backdrop. And what's 0:01:17.319 --> 0:01:20.360 interesting about that is this new waiting. The waiting is 0:01:20.360 --> 0:01:23.160 now about one and a half percentage points more weight 0:01:23.319 --> 0:01:26.760 toward goods UM, which again just keep in mind that's uh, 0:01:26.880 --> 0:01:28.840 this is sort of an interesting thing in the context 0:01:28.880 --> 0:01:32.679 of we are a service dominated economy, but goods now 0:01:32.760 --> 0:01:35.440 have a bigger weight. That's obviously a reflection of what 0:01:35.480 --> 0:01:38.840 happened last year. People were spending uh, you know, um 0:01:39.120 --> 0:01:42.160 a lot of this extra money that they had on goods, 0:01:42.280 --> 0:01:45.160 not services. So I think what's gonna wind up happening is, 0:01:45.400 --> 0:01:47.680 you know, if if the transition from goods to services 0:01:47.760 --> 0:01:51.000 spending um uh you know is sort of slower to 0:01:51.080 --> 0:01:53.760 evolve UM this year, and then we think that probably 0:01:53.760 --> 0:01:55.920 will be the case. That means that you could actually 0:01:55.920 --> 0:01:59.800 continue to see some some additional upward pressure on in 0:02:00.040 --> 0:02:04.320 lation because of this this new bigger weight on on goods. 0:02:04.320 --> 0:02:06.120 I think that's a really sort of an interesting thing 0:02:06.200 --> 0:02:08.080 that that not a lot of people are talking about. 0:02:08.120 --> 0:02:09.840 But here's the but here's the punch line time to 0:02:09.880 --> 0:02:12.040 all of this. While I think that that will be 0:02:12.080 --> 0:02:13.560 the case for the next you know, sort of you 0:02:13.600 --> 0:02:15.519 call it the next couple of months, few months where 0:02:15.520 --> 0:02:18.639 you'll see continued upward pressure from goods. I think what's 0:02:18.639 --> 0:02:20.960 gonna want up happening this year is that this transition 0:02:21.040 --> 0:02:24.040 is going to happen from people basically spending a lot 0:02:24.120 --> 0:02:26.760 on goods and shifting to services. And so what will 0:02:26.800 --> 0:02:29.280 want up happening I think as the year progresses is 0:02:29.320 --> 0:02:32.880 that this new firm weight UM in goods will actually 0:02:32.919 --> 0:02:36.280 want of acting as an anchor around the neck of 0:02:36.440 --> 0:02:39.560 goods prices. So as people shift from goods to services spending, 0:02:39.880 --> 0:02:41.800 we think that that will actually want to putting some 0:02:42.360 --> 0:02:45.280 pretty notable downward pressure UM in the good space. I 0:02:45.320 --> 0:02:47.400 want to be clear, you know, that's the anatomy of 0:02:47.440 --> 0:02:49.799 what we see happening over the balance of the year. UM. 0:02:49.840 --> 0:02:51.560 I think in the immediate term, I do think that 0:02:51.560 --> 0:02:54.280 you're going to see continued up pressure so so so Tom, 0:02:54.320 --> 0:02:56.360 I think, and again it's not to not answer your 0:02:56.400 --> 0:02:58.280 question directly, but I think that that's the thing that's 0:02:58.280 --> 0:03:00.720 really sort of doing most of the drive from from 0:03:00.760 --> 0:03:03.440 from an inflation perspective, the consumers are in a great 0:03:03.480 --> 0:03:05.760 spot from a wage perspective, you know, to sort of 0:03:05.760 --> 0:03:08.880 the continue to sort of drive UM to drive spending. 0:03:08.919 --> 0:03:11.440 I mean, look, we all we live in a nominal world, 0:03:11.480 --> 0:03:14.919 whether that's you know, sort of a better or worse idea. Um. 0:03:15.000 --> 0:03:16.600 But and so I think that that, you know, sort 0:03:16.639 --> 0:03:19.560 of gives the consumers some some confidence to be able 0:03:19.600 --> 0:03:22.480 to spend. But but again, I think that you're going 0:03:22.520 --> 0:03:24.720 to see this transition away and I think goods prices 0:03:24.760 --> 0:03:27.760 could actually start the process of slowing pretty meaningfully. Again 0:03:27.840 --> 0:03:29.359 give that, give that a handful of months. But I 0:03:29.360 --> 0:03:31.480 think that's probably where we're going to get me too, March, 0:03:31.680 --> 0:03:33.840 because we need to do March first, middle of March, 0:03:33.919 --> 0:03:36.680 March six, the fed mates what's on the table and 0:03:36.680 --> 0:03:39.560 what on earth happens with that dolt plot. Yeah, so 0:03:39.680 --> 0:03:41.840 I think that you know, you're looking at probably for 0:03:42.520 --> 0:03:45.000 four hikes this year. Um uh, you know the fedt 0:03:45.040 --> 0:03:47.120 is gonna go twenty five to start this process off. 0:03:47.160 --> 0:03:49.600 I mean, look again, you know, I love that the 0:03:49.600 --> 0:03:51.320 pal keeps on saying, you know, they want to be 0:03:51.440 --> 0:03:53.840 humble and they want humility. Look at all, Frank this 0:03:54.200 --> 0:03:56.680 they should have had that last year, all of last year. 0:03:56.800 --> 0:03:59.200 I think what they actually need now this year is 0:03:59.600 --> 0:04:03.600 also a hefty dose of patients because I think if 0:04:03.760 --> 0:04:06.440 the patients will be rewarded. If they do not get 0:04:06.440 --> 0:04:09.000 aggressive here early on in the cycle, inflation is going 0:04:09.040 --> 0:04:12.120 to start the process of slowing at a minimum base 0:04:12.200 --> 0:04:14.760 effects are going to eat into the year and year pace. 0:04:15.000 --> 0:04:17.159 But if I'm right about this transition from goods to 0:04:17.200 --> 0:04:20.400 services um spending and that taking quite a bit of 0:04:20.440 --> 0:04:22.440 the heat off of this this you know, sort of 0:04:22.480 --> 0:04:24.880 the singular component that now has a bigger weight that's 0:04:24.920 --> 0:04:27.080 been doing a lot of the driving. I think that 0:04:27.120 --> 0:04:29.240 they can they if they have a bit of patients, 0:04:29.600 --> 0:04:32.200 they can avoid a fifty, They can avoid going every 0:04:32.200 --> 0:04:34.680 meeting over the balance of the year. Um. But you 0:04:34.680 --> 0:04:38.160 know it's that's repelled to decide where does the balance 0:04:38.160 --> 0:04:39.919 sheet come into play here, Tom, Because it's not just 0:04:40.000 --> 0:04:43.200 about the rate hYP mechanism. Yeah, no, I think that's true. 0:04:43.200 --> 0:04:44.800 I mean, look, and this is I don't know how 0:04:44.839 --> 0:04:48.039 much time we have. This is I'll try to I'll 0:04:48.040 --> 0:04:50.479 try to keep this part of it tight. Also simply say, 0:04:50.560 --> 0:04:53.040 is QT is not the mirror image of q E. 0:04:53.200 --> 0:04:55.400 That's not the how it works with q E. You 0:04:55.480 --> 0:04:57.360 know the amount of duration that the FED is pulling 0:04:57.360 --> 0:04:59.200 out of the market right there buying you know X 0:04:59.360 --> 0:05:02.520 number of ten Eccember of seven, etcetera. We know that definitively. 0:05:02.839 --> 0:05:06.000 With QT, you do not know the amount of duration 0:05:06.360 --> 0:05:08.880 that's being added back into the market because what happens 0:05:08.880 --> 0:05:12.000 when the Fed basically starts the process of unwanting to 0:05:12.000 --> 0:05:14.120 balance you, they create a funding gap between themselves and 0:05:14.160 --> 0:05:17.240 the Treasury, and so it's the Treasury that decides what 0:05:17.320 --> 0:05:19.359 duration is going to be added back into the market. So, 0:05:19.360 --> 0:05:21.279 in other words, if the if the treasure is going 0:05:21.320 --> 0:05:23.440 to meet the funding gap with you know, loading up 0:05:23.440 --> 0:05:25.840 on bills, well then there's no duration added back into 0:05:25.839 --> 0:05:27.400 the market. And we think that's actually what they're gonna 0:05:27.400 --> 0:05:30.560 want to do, because bills is a relative too. I'm 0:05:30.560 --> 0:05:33.240 totally outstanding is actually pretty pretty small time. I got 0:05:33.320 --> 0:05:34.960 a bright to hit, so if I've got a few seconds, 0:05:34.960 --> 0:05:36.800 But let me just put a conclusion on this with you. 0:05:36.839 --> 0:05:39.159 Are you saying this gets worse before it gets bets up. 0:05:40.440 --> 0:05:42.520 I don't think there is any question about that. But 0:05:42.560 --> 0:05:45.320 again I think you live with a live with it 0:05:45.360 --> 0:05:46.880 being a little bit worse because I think by the 0:05:46.960 --> 0:05:48.440 end of the year it will be quite a bit better. 0:05:49.400 --> 0:05:51.919 Of BC Capital markets, TM, we appreciate you, so we 0:05:51.920 --> 0:05:59.599 always do thank you. If you are in the stock market, 0:06:00.120 --> 0:06:02.920 you need to stop what you're doing now and listen 0:06:03.000 --> 0:06:07.040 to one William Booth. Bill Booth is an epic and 0:06:07.080 --> 0:06:10.360 they have a method, they have a style, and you 0:06:10.400 --> 0:06:12.400 need it when it's a bull market, you need it 0:06:12.400 --> 0:06:14.640 when it's a bear market, and you really need it. 0:06:15.400 --> 0:06:19.040 Among the historic tumult of the moment, the tenure yield 0:06:19.520 --> 0:06:23.080 touching up two percent, we're not quite there yet, down 0:06:23.200 --> 0:06:27.320 negative to seven on the opening, Bill Booth. What a 0:06:27.400 --> 0:06:30.800 shareholder yield and why is the study of that so 0:06:30.920 --> 0:06:37.359 valuable right now? Good morning? Shareholder yield is all about cash. 0:06:37.920 --> 0:06:40.560 Cash is king in the equity markets in our view, 0:06:41.000 --> 0:06:45.320 and shareholder yield is all about owning companies that are 0:06:45.360 --> 0:06:48.400 returning gobs of cash flow to shareholders in the form 0:06:48.480 --> 0:06:53.920 of dividends, sherry purchases, or debt reduction. And the market 0:06:54.000 --> 0:06:57.600 like this with the prospect of rising rates. I think 0:06:57.600 --> 0:06:59.920 there's been a lot of talk about shortening the dire 0:07:00.000 --> 0:07:03.600 ation of of portfolios, and you can think of shareholder 0:07:03.680 --> 0:07:06.520 yield is a short duration approach because you're getting more 0:07:07.440 --> 0:07:10.480 of the intrinsic value of the company up front. What 0:07:10.520 --> 0:07:13.000 do you do with a short duration focus is the 0:07:13.160 --> 0:07:15.640 X axis. You hear me talk about what do you 0:07:15.720 --> 0:07:19.040 do with an X X is dynamic, shorter, medium, or 0:07:19.160 --> 0:07:23.440 longer with a huge cash flow tech generators like Microsoft, 0:07:23.800 --> 0:07:29.360 Google and Amazon. So I think those those companies actually 0:07:30.240 --> 0:07:33.360 are owned in some of our shareholder yield strategies UM, 0:07:33.400 --> 0:07:35.960 and I think in those instances the dividend yields tend 0:07:36.040 --> 0:07:39.520 to be a bit more modest, but certainly there are 0:07:39.680 --> 0:07:44.840 very large and aggressive share repurchase programs, and so I think, uh, 0:07:45.000 --> 0:07:48.680 we look at the dividends and repurchases of roughly equivalent 0:07:48.680 --> 0:07:51.760 forms of returning cash. And of course there's another use 0:07:51.760 --> 0:07:55.000 of cash, which UM if you have right management teams. 0:07:55.000 --> 0:07:57.400 And I heard your comment about Disney and I you're 0:07:57.440 --> 0:08:00.320 in SHAPEC if you have good management teams. Were happy 0:08:00.360 --> 0:08:03.520 to see reinvestment through things like M and A. And 0:08:03.560 --> 0:08:05.760 we know we saw Microsoft use some of its pocket 0:08:05.840 --> 0:08:10.080 change seventy billions to announce the acquisition of Activision UM 0:08:10.120 --> 0:08:12.840 and we're perfectly happy with with M and A UM 0:08:12.880 --> 0:08:17.600 if if it makes strategic and financial sense. So Bill, 0:08:17.760 --> 0:08:19.480 you know again, we did have some good numbers from 0:08:19.640 --> 0:08:22.280 Disney last night. The time, and I've been parsing through, 0:08:22.320 --> 0:08:23.840 and I guess we're about two thirds of the way 0:08:23.880 --> 0:08:25.720 through the earning season here, and earnings that come in 0:08:26.560 --> 0:08:30.000 very strong and potentially allaying some of the valuation concerns 0:08:30.040 --> 0:08:32.800 in this market. What's been your takeaway from the earnings 0:08:32.800 --> 0:08:36.200 that you've seen so far this season. I agree with 0:08:36.240 --> 0:08:40.200 your assessment. I think on balanced, they've been quite strong. Um. 0:08:40.360 --> 0:08:43.920 Certainly we've had a few hiccups, like Meta the other day, 0:08:44.720 --> 0:08:47.760 but I think, you know, some of these earnings disappointments 0:08:47.840 --> 0:08:52.480 largely seem to be I would say company specific issues 0:08:52.559 --> 0:08:54.640 right with Meta clearly has to do with you know, 0:08:54.679 --> 0:08:58.640 maybe it's competition, maybe it's the iOS changes privacy. UM. 0:08:58.720 --> 0:09:00.959 So when we've had disappoint meants, I don't think they 0:09:00.960 --> 0:09:04.120 have been um alarm bells that whoa, there's just something 0:09:04.160 --> 0:09:07.760 systematically wrong here. I think the Ernie disappointments have largely 0:09:07.880 --> 0:09:11.079 been company specific one offs, and for most of the 0:09:11.120 --> 0:09:14.680 company's recording it's been quite quite good and above expectations. 0:09:15.760 --> 0:09:17.559 So I know some of the names you like, one 0:09:17.640 --> 0:09:19.800 jumped out at me, Sony. I would love to hear 0:09:19.880 --> 0:09:22.680 your Sony call here, because that's a company that a 0:09:22.720 --> 0:09:26.439 lot of people don't really know how to value is 0:09:26.480 --> 0:09:30.280 it electronics companies and immediate company? This is brilliant. Bill 0:09:30.360 --> 0:09:33.800 Booth and Paul Sweeney between the two of you, has 0:09:33.800 --> 0:09:36.240 Sony been a train wreck for ten or is it 0:09:36.360 --> 0:09:39.440 twenty years? Yeah? Tom, you're exactly right, And I don't 0:09:39.440 --> 0:09:42.319 think anybody really knows what to do with this name. Bill, 0:09:42.360 --> 0:09:45.120 what do you think about Sony here? Well, we really 0:09:45.160 --> 0:09:46.719 really like it. And actually if you look at this 0:09:46.880 --> 0:09:49.880 stock price chart, it's it's tripled over the last five years. 0:09:49.920 --> 0:09:52.719 So the train wreck is maybe go ok good? The 0:09:52.840 --> 0:09:56.360 track the tracks um. It's funny because because most people 0:09:56.360 --> 0:09:58.079 when they think of Sony that they think, like me 0:09:58.760 --> 0:10:00.960 when I grew up, Sony is all about the Walkman 0:10:01.040 --> 0:10:03.200 jority even know what a cassette tape is, let alone 0:10:03.320 --> 0:10:07.880 Walkman Um. But that that stodgy consumer electronics reputation has 0:10:07.920 --> 0:10:11.000 sort of stayed with the company. But what Sony really 0:10:11.040 --> 0:10:14.160 is as a premier global media and content company six 0:10:14.720 --> 0:10:17.720 its profit is now coming from video games, music, and movies, 0:10:18.160 --> 0:10:20.160 and we know we're in a world where content as king, 0:10:20.640 --> 0:10:22.880 and so this company has a seven percent free cash 0:10:22.880 --> 0:10:27.600 flow yield, valued very much like a stodgy consumer electronics company, 0:10:27.640 --> 0:10:31.080 even though it is a premier entertainment company UM. And 0:10:31.160 --> 0:10:33.439 we think that, you know, as the company continued to 0:10:33.440 --> 0:10:36.360 deliver good strong revenue and profit and pre cash flow 0:10:36.400 --> 0:10:38.880 growth UM, that this stock will continue to work up 0:10:38.920 --> 0:10:42.560 even after it's UM recent rise. And I will note 0:10:42.559 --> 0:10:45.560 that it did set off on the Microsoft Act Division 0:10:45.600 --> 0:10:49.840 news on fears of increased competition in the PlayStation business, 0:10:49.840 --> 0:10:52.920 going head to head with with Xbox and a potentially 0:10:53.000 --> 0:10:56.360 more formidable Microsoft. But we're very comfortable that that Sony 0:10:56.440 --> 0:10:58.920 has UM the strategy and assets in place to to 0:10:58.960 --> 0:11:01.679 deal with that. Yeah, Tom, I'm looking at the c 0:11:01.840 --> 0:11:04.800 o MP function for Sony. This is a stock that's 0:11:04.840 --> 0:11:06.920 over the last five years has had a compoundent on 0:11:07.000 --> 0:11:09.600 a return of almost eighteen percent per year, so smidge 0:11:09.640 --> 0:11:14.080 better than SMP is completely removed from that. Yeah, it's 0:11:14.080 --> 0:11:16.880 this extraordinary. So I just wanted to amateur, I am, 0:11:17.080 --> 0:11:19.160 but that's why we wanted we get experts like Bill 0:11:19.200 --> 0:11:21.920 on here and Bill, I mean this inflation. You know, 0:11:21.920 --> 0:11:25.360 when Tom goes to fill up the surveillance Bentley, he 0:11:25.440 --> 0:11:27.520 sees it at the pump. When I go to the supermarket, 0:11:27.559 --> 0:11:32.160 I see it there. Inflation. I'm just I'm I continue 0:11:32.200 --> 0:11:35.040 to be concerned about it because many people in this market, 0:11:35.200 --> 0:11:38.560 most people in this market had never really experienced long 0:11:38.640 --> 0:11:43.320 term inflation. How concerned are you about that after this morning? 0:11:43.320 --> 0:11:45.200 It's a little bit more than I was last night. 0:11:45.920 --> 0:11:49.160 You know that the reading this morning we're we're troubling 0:11:49.200 --> 0:11:51.880 in the sense that we're seeing a broadening of inflation. 0:11:51.960 --> 0:11:54.480 You know, it was really a good and adorable, good 0:11:54.559 --> 0:11:57.600 story for for a good spell. But now you've got 0:11:57.640 --> 0:12:00.960 services inflation over four percent year in the year. Um, 0:12:01.000 --> 0:12:03.199 and it really is a tax on the consumer. I 0:12:03.880 --> 0:12:05.600 see the same thing at the gas at the gas 0:12:05.640 --> 0:12:08.559 station myself. So, um, it is a tax on the consumer. 0:12:08.600 --> 0:12:10.840 And so we sort of have you know, maybe the 0:12:10.880 --> 0:12:13.040 said now the rate market saying maybe there's a fifty 0:12:13.440 --> 0:12:16.040 chance of a big increase in March, and you have 0:12:16.160 --> 0:12:18.960 decellering earnings growth probably through the rest of this year. 0:12:19.040 --> 0:12:22.359 That competition of a combination of rising rates and decellerting 0:12:22.360 --> 0:12:25.720 earnings growth generally is a good one for markets. Bill 0:12:25.720 --> 0:12:28.160 and did a chart this morning of American banking is 0:12:28.200 --> 0:12:32.200 compared to your European banking. Is banking where you want 0:12:32.200 --> 0:12:35.720 to be given inflation, given the curve oddities we see 0:12:36.280 --> 0:12:39.360 and is European banking a value or the mother of 0:12:39.400 --> 0:12:45.560 all continued value traps? Well, for decades it's been the 0:12:45.679 --> 0:12:49.120 value mother of all value traps um. I think you know. 0:12:49.160 --> 0:12:52.280 The struggle with with banks in general is it's almost 0:12:52.320 --> 0:12:55.480 a Goldilocks scenario because in theory, rising rates are good 0:12:55.480 --> 0:12:58.960 for banks net interest margins. We all know that, but 0:12:59.520 --> 0:13:03.200 at some point we've know the less twelve hiking cycles 0:13:03.200 --> 0:13:05.920 eleven have resulted in a recession. You don't want to 0:13:05.920 --> 0:13:09.040 own a bank going into recessions. It's almost like the 0:13:09.080 --> 0:13:12.320 markets saying with the financials Goldilocks. The fen is gonna 0:13:12.360 --> 0:13:15.800 do just enough to make the macro backdrop ideal for banks, 0:13:15.840 --> 0:13:18.280 but they're not gonna do so much that they cause 0:13:18.360 --> 0:13:21.920 an economic contraction. And that's something that history says doesn't 0:13:21.960 --> 0:13:24.559 really happen all that often. Bilbo, thank you so much, 0:13:24.559 --> 0:13:32.800 greatly appreciate with the epic investments and shareholder yield. Right now, 0:13:32.840 --> 0:13:35.320 we're gonna digress. And when you go to Brown Harris 0:13:35.320 --> 0:13:38.480 Stevenson for those Stevens, for those of you worldwide and 0:13:38.520 --> 0:13:41.240 across this nation, all you need to know is fancy 0:13:41.280 --> 0:13:44.280 real estate in New York. We're gonna talk to Best Friedman, 0:13:44.360 --> 0:13:48.160 their chief executive officer, about the real world. Best, You've 0:13:48.200 --> 0:13:51.400 got a listing on eight Street and not the fancy 0:13:51.480 --> 0:13:55.560 part of eightieth Street, which is one bedroom, one bath 0:13:55.679 --> 0:13:58.480 and a kitchen. I can't turn around in and it's 0:13:58.520 --> 0:14:03.400 popping five nine thousand. My question to you, and this 0:14:03.520 --> 0:14:06.079 goes with all the great work that you do nationwide 0:14:06.080 --> 0:14:09.920 with Brown Hairs Stevens, is do we have the income 0:14:10.000 --> 0:14:15.960 levels to afford the new real estate price you're touting? Yeah? 0:14:16.040 --> 0:14:17.960 I mean, hi, Tom, It's so nice to see you, 0:14:18.040 --> 0:14:21.920 by the way. Um, Listen, none of us expected that 0:14:23.280 --> 0:14:25.760 would be the performed the way that it was in 0:14:25.800 --> 0:14:28.240 real estate in New York City. It came back with 0:14:28.280 --> 0:14:33.280 a vengeance and prices have gone up. Um. But remember 0:14:33.360 --> 0:14:35.680 we were in a buyer's market. We have now shifted 0:14:35.680 --> 0:14:38.880 to a seller's market. So people made a lot of 0:14:38.920 --> 0:14:41.800 money during the pandemic and things are starting to open. 0:14:41.880 --> 0:14:44.320 There's a sense of safety. We have a new administration, 0:14:44.800 --> 0:14:48.760 new mayor and governor working together, um, looking to mitigate 0:14:48.840 --> 0:14:51.760 crime and get our city back and working. And so 0:14:51.800 --> 0:14:54.520 I think there's a lot of good things happening in 0:14:54.520 --> 0:14:57.360 New York City. It's turned around. But as you were, 0:14:57.400 --> 0:14:59.640 guys are talking about and frightening me a little bit 0:14:59.640 --> 0:15:03.440 with this inflation talk. Uh, the cp I going up 0:15:03.600 --> 0:15:06.040 is you know, not ideal. You know, we have less 0:15:06.080 --> 0:15:09.240 power in our money to spend um. But you know, 0:15:09.280 --> 0:15:11.720 the truths don't grow to the sky the best best 0:15:11.840 --> 0:15:16.120 This is really really important. Is the lack of rising 0:15:16.240 --> 0:15:22.360 incomes one of the constraints unsurging real estate inflation? Or 0:15:22.400 --> 0:15:24.320 is that just something nobody worries about because there's so 0:15:24.400 --> 0:15:27.440 much money slashing around them. Yeah, I mean I think 0:15:27.440 --> 0:15:30.920 there's definitely a lot of money slashing around, as you 0:15:30.960 --> 0:15:34.040 put it, um and prices have ticked up, but not 0:15:34.160 --> 0:15:37.360 incredibly in New York City, and so people have come 0:15:37.400 --> 0:15:40.480 back and they're here and they're investing, and they're changing, 0:15:40.480 --> 0:15:42.640 they're moving around, and so I don't think that's a 0:15:42.720 --> 0:15:45.720 huge The inflation piece is not the thing that's worrying 0:15:45.760 --> 0:15:48.520 people in New York City. It's really the focus is 0:15:48.520 --> 0:15:52.120 making sure that crime is under control, that we're focusing 0:15:52.160 --> 0:15:54.960 on getting people back to work. Because the market, it 0:15:55.000 --> 0:15:56.960 did not take up so much in New York City, 0:15:56.960 --> 0:16:00.360 the prices. It's the other regions like Connecticut, Palm Beach. 0:16:00.640 --> 0:16:03.960 Those markets you saw incredible prices go up, and now 0:16:04.200 --> 0:16:07.000 the supply chain is really sure there's nothing to buy there. 0:16:07.240 --> 0:16:09.520 It's an inventory issue. Best. Just because we are so 0:16:09.600 --> 0:16:12.480 focused on that inflation data today, given how hot it was, 0:16:13.200 --> 0:16:15.200 we're going to have to see some sort of reaction 0:16:15.240 --> 0:16:17.280 to that. On the monetary side, we are expecting that 0:16:17.320 --> 0:16:19.600 the Federal Reserve is going to raise rates a number 0:16:19.600 --> 0:16:22.360 of times this year. When that translates through to higher 0:16:22.400 --> 0:16:24.840 mortgage rates, what impact is that going to have on 0:16:24.960 --> 0:16:26.600 real estate, not just here in New York City but 0:16:26.640 --> 0:16:31.800 across the country. Kelly, Look, rates are still historically low, 0:16:31.960 --> 0:16:34.080 and I think it's good that they increase them and 0:16:34.080 --> 0:16:36.720 they go up maybe once or twice. It will be 0:16:36.760 --> 0:16:39.240 good because it can't keep moving at this page. This 0:16:39.360 --> 0:16:41.520 is why part of the reason why the prices have 0:16:41.720 --> 0:16:45.760 gone up. It's a contributor. And so we can't you know, 0:16:45.800 --> 0:16:48.800 can't be Champagne and Cave are forever. Things have to 0:16:48.840 --> 0:16:51.360 slow down a little bit, and so we need supply 0:16:51.400 --> 0:16:54.160 and demand to intersect in a better way in other 0:16:54.240 --> 0:16:57.000 regions so that the market will stay fluid um. But 0:16:57.080 --> 0:16:59.960 inflation we can always you know, We've dealt with inflation 0:17:00.040 --> 0:17:02.040 in the past. We've dealt with rates going up. What 0:17:02.120 --> 0:17:04.600 we can have is a paralyzed market from something like 0:17:04.640 --> 0:17:08.040 a pandemic or like we saw after nine eleven uh 0:17:08.080 --> 0:17:10.880 an act of terrorism. That's when markets freeze, and that's 0:17:10.880 --> 0:17:13.600 when people are scared. Inflation we can deal with. We 0:17:13.600 --> 0:17:16.639 can manage with inflation well. And obviously it's not just 0:17:16.680 --> 0:17:18.920 about on the monetary side. There's the fiscal side of 0:17:18.920 --> 0:17:21.320 the equation, and there's a great debate about how that 0:17:21.359 --> 0:17:23.560 has contributed to the inflation we are seeing. But best 0:17:23.560 --> 0:17:25.920 on the fiscal side, a lot of what we thought 0:17:26.040 --> 0:17:29.120 might come to fruition under the Biden administration, differences potentially 0:17:29.160 --> 0:17:31.840 a change in the salt cap have not. What is 0:17:31.880 --> 0:17:34.119 the impact of that when you're thinking specifically of this 0:17:34.200 --> 0:17:38.560 Tristate area, I mean, we're that's still they're still discussing that. 0:17:38.640 --> 0:17:40.720 We'd like to see that increase from ten thousand I 0:17:40.720 --> 0:17:43.200 think they said eighty thousand dollars, which would be helpful. 0:17:43.600 --> 0:17:45.960 The good news, Kayley, is that we have a new 0:17:46.000 --> 0:17:48.560 city council. We have a new speaker, Adrian Adams, who 0:17:48.640 --> 0:17:51.680 is much more moderate, and we're hoping that the legislation 0:17:51.720 --> 0:17:55.119 in Albany is going to be much more reasonable economically 0:17:55.440 --> 0:17:57.639 so that we don't drive people out of the city. 0:17:57.800 --> 0:18:00.880 So I think we want to create sort of tax policy, 0:18:00.960 --> 0:18:03.159 as I always say that seat in economics and that 0:18:03.200 --> 0:18:05.920 we work to create an environment that keep people here. 0:18:06.280 --> 0:18:08.160 We need rich people here. We don't want to drive 0:18:08.200 --> 0:18:10.600 them out. We want them to be here. It's important 0:18:10.640 --> 0:18:12.720 for the city. Best Freeman, thank you so much. We've 0:18:12.720 --> 0:18:15.720 got Marcus moving with Brown Harris Stevens on what we're 0:18:15.760 --> 0:18:18.040 all talking about, which is the inflation and rent in 0:18:18.160 --> 0:18:26.800 ownership of real estate nationwide as well. When I go 0:18:26.880 --> 0:18:28.920 out for dinner this Friday, do we need to take 0:18:28.960 --> 0:18:31.560 photo ID to get in a restaurant on Saturday morning? 0:18:31.600 --> 0:18:33.679 Do we need photo I D to get a coffee 0:18:33.920 --> 0:18:36.280 to go into a cafe? I believe the answer is 0:18:36.560 --> 0:18:40.760 it depends. Because there's no longer the mask or vaccine mandate. 0:18:40.800 --> 0:18:42.919 As of today, a business doesn't have to ask you 0:18:42.960 --> 0:18:45.240 to wear a mask or check your identification, but that's 0:18:45.280 --> 0:18:47.119 going to depend on business to business. They're free to 0:18:47.160 --> 0:18:49.000 make their own decisions. So John, I guess it depends 0:18:49.000 --> 0:18:51.199 on where you go. Maybe bring the passport in your 0:18:51.880 --> 0:18:54.480 McDonald's on Third Avenue is taking a very loose check. 0:18:54.600 --> 0:18:56.080 Would you like to test this a little bit later 0:18:56.119 --> 0:18:58.400 this morning? I do that, you know every day when 0:18:58.440 --> 0:19:00.320 I go there for breakfast, you know, we check it out. 0:19:00.920 --> 0:19:03.399 I look forward to checking out of it, like, Okay, 0:19:03.560 --> 0:19:06.840 Christian Briers going, what are they talking about with us? 0:19:06.880 --> 0:19:10.479 Truly one of the world's experts on epidemiology and this virus. 0:19:10.800 --> 0:19:13.199 Christian Brier joins us, of course with John Hopkins in 0:19:13.280 --> 0:19:16.119 South Africa, and we're so honored he could attend to 0:19:16.200 --> 0:19:19.960 us on a weekly basis. It is an important moment 0:19:20.040 --> 0:19:22.879 for me. Dr Byra And then I just noticed in 0:19:22.920 --> 0:19:27.160 the Washington Post the chart where I can report deaths 0:19:27.359 --> 0:19:32.639 have rolled over. They're not like cases, they're not like hospitalizations. 0:19:32.680 --> 0:19:35.560 But now that we've finally seen the moving average of 0:19:35.600 --> 0:19:39.000 deaths roll over, do you feel that will continue from 0:19:40.520 --> 0:19:45.679 on down to the nirvana of nine deaths? Well, we 0:19:45.760 --> 0:19:49.560 always knew that deaths were going to lag behind hospitalization 0:19:49.800 --> 0:19:55.000 and hospitalizations behind cases. The cases are down, hospitalizations finally 0:19:55.080 --> 0:19:58.200 coming down, and so the decline in deaths is is 0:19:58.280 --> 0:20:02.199 what we'd expected. It's still high. And remember that we 0:20:02.280 --> 0:20:04.960 started at a very high baseline before a macron in 0:20:05.000 --> 0:20:08.560 the United States. So but yes, it is, it is 0:20:08.600 --> 0:20:11.199 trending in the right direction. We're paying attention to the 0:20:11.240 --> 0:20:15.879 new A macrons subvariants in pluting the point to but 0:20:16.000 --> 0:20:20.520 it again looks highly infectious and not as pathogenic as delta. 0:20:21.000 --> 0:20:23.920 What should we know about that? Give us thirty seconds 0:20:23.960 --> 0:20:29.080 on these new sub variants. Well, these have emerged within 0:20:29.280 --> 0:20:33.920 a macron lineage and they share that same high infectious nous. 0:20:34.520 --> 0:20:39.040 But it does appear that they are not more lethal, 0:20:39.200 --> 0:20:42.359 not more pathogenic. It's taken over very quickly here in 0:20:42.400 --> 0:20:46.120 South Africa, so that the amicron B A point too 0:20:46.240 --> 0:20:49.720