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

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Speaker 2: You're listening to the Bloomberg Intelligence podcast. Catch us live

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Speaker 2: weekdays at ten am Eastern on Apple Car playing Android

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Speaker 3: US shoppers spend fourteen point two billion dollars during a

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Speaker 3: prime day. I was not one of them, but that's

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Speaker 3: up eleven percent from a year ago, as Lisa was reporting,

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Speaker 3: so pretty solid results here. You got to like that

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Speaker 3: if you're an Amazon follower. Punam Goyle. She is an

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Speaker 3: Amazon follower, senior US equity, e commerce and retail analysts

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Speaker 3: for Bloomberg Intelligence, joining us from Princeton, New Jersey via

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Speaker 3: zoom pullm that the numbers Lisa was just reporting, you know,

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Speaker 3: eleven billion. I'm fourteen point two billion dollars, eleven percent

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Speaker 3: growth year every year. That seems pretty good to me.

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Speaker 3: What do you think?

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Speaker 4: Yeah, the numbers are great. You know, they continue to

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Speaker 4: show that shoppers are focused on sales and their seating value,

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Speaker 4: and when Amazon and others have events such as these,

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Speaker 4: they do drive traffic and conversion onto the platforms. So

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Speaker 4: really good numbers likely some pull forward and spend, so

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Speaker 4: you will probably see things will taper off a little

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Speaker 4: bit after the Prime Day sales event, but nonetheless a

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Speaker 4: very strong start. It seems to three Q for Amazon.

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Speaker 5: Yeah.

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Speaker 3: I was just looking at eMarketer, which I know is

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Speaker 3: an independent group that kind of looks at this stuff.

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Speaker 3: They were expecting your shoppers to spend eight point two

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Speaker 3: billion dollars on Amazon during the event, So I guess

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Speaker 3: better than expected as a way to think about it.

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Speaker 4: Yes, I mean the numbers are a little different because

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Speaker 4: the numbers that Adobe reported are not just on Amazon,

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Speaker 4: they're total online sales okay, but nonetheless very strong results,

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Speaker 4: and they are better than Adobe's initial estimates for a

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Speaker 4: ten point five percent increase.

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Speaker 3: Average households spend one hundred and fifty two bucks on

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Speaker 3: Amazon on Prime Day. That sounds like a good number

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Speaker 3: as well. How does that stack out?

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Speaker 4: It's like good number. We expected Amazon shoppers to shop

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Speaker 4: less this year on Prime Day than last year according

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Speaker 4: to our own survey that we ran ahead of Prime Day,

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Speaker 4: so no surprise there. As you know, shoppers are crunched

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Speaker 4: for cash and they are trying to be picky and

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Speaker 4: choosy on where they spend what they spend shopping really

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Speaker 4: on the lists that they had going into Prime Day.

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Speaker 4: So we're seeing a little bit of that, but overall,

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Speaker 4: more shoppers joined Prime Day this year, reported by Amazon,

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Speaker 4: which proves to be even more encouraging because you know,

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Speaker 4: when you see that, you know that trend hopefully holds

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Speaker 4: up and drives more shopping on the platform even after

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Speaker 4: Prime Day.

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Speaker 3: You know, you see numbers like the Amazon Prime Day

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Speaker 3: number of the eleven percent growth year every year. It

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Speaker 3: seems like a really strong number. We had Retail sales

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Speaker 3: earlier in the week came in better than expected. You know,

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Speaker 3: I know the consumer's hurting out there. I know inflation's

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Speaker 3: hitting a lot of folks really hard, but it doesn't

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Speaker 3: seem like we're seeing in the spending. How do you

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Speaker 3: guys think about it? What do you hear from the

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Speaker 3: companies that you cover?

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Speaker 4: Yeah, I think it depends on the retailers that you're

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Speaker 4: looking at. I do think that, you know, we've talked

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Speaker 4: about this in the past, where the value customer is

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Speaker 4: trading down. We've seen that in the results earlier this

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Speaker 4: year at Walmart, where numbers are strong because they are

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Speaker 4: driving in more customers into their doors and online, and

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Speaker 4: then the middle you know, the department stores. They continue

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Speaker 4: to get squeezed to the large extent, and I think

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Speaker 4: that trend will continue. So I do think that where

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Speaker 4: there's the right product the right price, customers are going there.

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Speaker 4: They're still going to experiences, They're going for convenience, which

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Speaker 4: is where Amazon plays a big role. But they are

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Speaker 4: being picky and choosy, and there will be some bifurcation

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Speaker 4: when they report between the numbers because not everyone will

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Speaker 4: do well as we're hearing and seeing in these numbers.

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Speaker 3: It's only mid July, but I guess people with kids

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Speaker 3: have to start thinking about back this school. My guys

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Speaker 3: are all out of that stage, thankfully. What's the back

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Speaker 3: to school season look like this year? What are the expectations.

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Speaker 4: Yeah, the expectations are for back to school season sales

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Speaker 4: to grow and Prime Day is going to help with that.

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Speaker 4: This year's Prime Day event came a little later in

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Speaker 4: the season, which means that more back to school shopping

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Speaker 4: likely occurred, dorm shopping, etc. On the Prime Day sales event.

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Speaker 4: That said, you know, you will see people buy backpacks,

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Speaker 4: you will see them by supplies, you will see them

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Speaker 4: shop for dorm room stuff and apparel. But at the

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Speaker 4: same time, where are they shopping for that. I think

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Speaker 4: the retailers that are going to drive that spend are

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Speaker 4: continuing to be the same. It's going to be the Amazon's,

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Speaker 4: It's going to be the walmarts, the targets where they

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Speaker 4: can get the value that they're looking for.

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Speaker 3: So what is the expectation for the holiday season this year?

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Speaker 3: Are you guys forecasting growth in holiday spending? Because I

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Speaker 3: know that's the big part for the big season for retailers.

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Speaker 4: We are expecting growth this holiday season, but I do

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Speaker 4: think there are challenges as we enter the holiday season.

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Speaker 4: Keep in mind that the retail calendar is different this year,

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Speaker 4: so it is a tougher calendar. Comparison. Last year was

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Speaker 4: very very strong. Last year had some extra selling days,

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Speaker 4: so the calendar shakes up as being a headwind and

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Speaker 4: going into the holiday season. That said, with elections and

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Speaker 4: just so many other things happening this year, we do

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Speaker 4: think the consumer is going to be a little diverted,

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Speaker 4: so retailers will have to work harder to capture their

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Speaker 4: spend and it will be a tougher holiday season. But

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Speaker 4: we do see some growth still this year.

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Speaker 3: What are we seeing just in the dynamic punum of

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Speaker 3: the of the bricks and mortar versus e commerce Because

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Speaker 3: we had gone through i'm going to say almost a

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Speaker 3: generation of downsizing retail footprint in the United States, and

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Speaker 3: I kind of got the sense that they're in a

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Speaker 3: pandemic that kind of slowed, if not reversed a little bit.

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Speaker 3: Where are we on that dynamic beyond between I need

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Speaker 3: to own some brick and mortar versus you know, I

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Speaker 3: can kind of go lean more heavily on retail.

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Speaker 4: On etail, sure, so I think, you know, we'll always

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Speaker 4: need brick and mortar store. They don't think they go away.

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Speaker 4: But we've talked about this before. I do think we

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Speaker 4: need some balance, and we're still continuing to push forward

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Speaker 4: on that balance. There will be more consolidation in retail.

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Speaker 4: I think it's necessary because we still are overstored. But

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Speaker 4: at the same time, we have retailers coming in from

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Speaker 4: abroad that are expanding. Whether it's the Primarks once again

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Speaker 4: of value play, or whether it's the Alds and some

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Speaker 4: of the Grosers. We are seeing them take space as

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Speaker 4: they encroach on the US landscape.

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Speaker 6: That's that our.

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Speaker 4: Estimates call for retail sales growing to a third, retail

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Speaker 4: sales growing to a third of total retail sales, up

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Speaker 4: from twenty five percent last year. So still high single digit,

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Speaker 4: double digit growth in the online landscape for the next

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Speaker 4: five to seven years, which means that people will be

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Speaker 4: shopping less eforic and mortars and more online. And we

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Speaker 4: saw that trend come back, you know, right after the pandemic,

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Speaker 4: you saw this rush to stores because people wanted the

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Speaker 4: experience of seeing things, touching things being out there. But

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Speaker 4: now they've normalized again and we are seeing the shift

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Speaker 4: back to shopping more online.

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Speaker 3: All right, interesting stuff. Put them Goyle, Thank you so

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Speaker 3: much for joining us. Put Them Goyle, Senior US e

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Speaker 3: Commerce and Retail Annis Bloomberg Intelligence. Joining us via zoom

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Speaker 3: from Princeton.

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Speaker 2: You're listening to the Bloomberg Intelligence Podcast. Catch us live

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Speaker 2: weekdays at ten am Eastern on.

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Speaker 2: Alexa play Bloomberg eleven thirty.

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Speaker 3: Let's talk to from Earning Shore. We had a big

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Speaker 3: earnings play coming out of the financial services Blackstone profit.

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Speaker 3: Blackstone just huge, huge asset manager. It's just amazing how

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Speaker 3: big they've become on global Wall Street. But their profit

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Speaker 3: missed estimates as real estate exit slow. Let's bring in

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Speaker 3: Paul Goldberg. He follows that part of the financial services

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Speaker 3: sector for us. Paul Blackstone doesn't get any bigger, more

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Speaker 3: influential from an asset management perspective than our friends at Blackstone.

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Speaker 3: Talk to us about the quarter they just reported.

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Speaker 7: Thank you for having me. The quarter was more and

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Speaker 7: more or less as expected. You did mention and missed

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Speaker 7: by a few pennies. But a lot of the profitability

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Speaker 7: depends on realization activity, which was slow, and it wasn't

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Speaker 7: just the real estate. It was kind of on the

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Speaker 7: slower end across the segments and the strategies that they cover.

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Speaker 7: So I don't think it's surprising. And what we've saw

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Speaker 7: is what we're kind of seeing in the headlines. The

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Speaker 7: private equity is improving but slowly. Real estate's still kind

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Speaker 7: of dragging its feet, and the private credit is being

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Speaker 7: very strong. So the profitability that they showed was very

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Speaker 7: much along those lines.

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Speaker 3: What are they saying about the real commercial real estate business?

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Speaker 3: Because when I think about that business. I think about

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Speaker 3: the Blackstones of the world, I think about Morgan Stanley.

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Speaker 3: They've always been big investors in real estate. What are

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Speaker 3: the smart people telling you about that part of the market.

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Speaker 7: The smart people that Blackstone said, we got out of

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Speaker 7: that market, so not not completely. So there's still a

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Speaker 7: few percentage of the portfolio in the US real estate,

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Speaker 7: and they still mention that it's pretty painful and globally

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Speaker 7: there is some commercial real estate that they're in, but

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Speaker 7: three quarters of the real estate portfolio is in multifamily

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Speaker 7: logistic data centers where they're pushing with their AI. It's

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Speaker 7: a very different composition. Can you see idiosyncratic pains, something

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Speaker 7: going out of line, Yes, absolutely, But in terms of

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Speaker 7: the future growth, I think they're positioned quite differently from

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Speaker 7: the kind of seen from the banks.

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Speaker 3: And Blackstone is up about three and a half percent today,

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Speaker 3: the stock at a fifty two week high. What are

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Speaker 3: they saying about deal activity here? Because I know Paul,

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Speaker 3: the m and A market, the IPO market the last

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Speaker 3: couple of years has been pretty slow, so it's tough

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Speaker 3: for the Blackstones of the world to kind of realize

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Speaker 3: and get some liquidity on their investments. What are they

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Speaker 3: saying about that?

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Speaker 7: Yeah, so some green shoots there some improvement in second quarter,

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Speaker 7: although obviously not material enough to lift the earnings, but

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Speaker 7: they're seeing getting better into a second half and most

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Speaker 7: of it and they kind of mentioned it three months

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Speaker 7: ago on the earnings call. We'll probably have to wait

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Speaker 7: till the end of the year and go into the

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Speaker 7: twenty five for material improvement. And that's what you're kind

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Speaker 7: of seen in the consensus reflected that people do see

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Speaker 7: a significant lift. And in terms of activity, they deployed

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Speaker 7: thirty four billion dollars. They had almost forty billion dollars

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Speaker 7: of being closed during the quarter. So the activity is improving.

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Speaker 7: It's not at the twenty twenty one levels, and it

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Speaker 7: will take some time to get back there, but it's better.

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Speaker 3: Hey, Paul, you know when you think Blackstoney thinks Stephen Schwartzman,

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Speaker 3: the chairman, the CEO, the co founder, one of the

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Speaker 3: all time greats of the giants in private equity. He's

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Speaker 3: seventy seven years old. And I know Jonathan Gray there

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Speaker 3: is the president's COO and he's fifty four. What is

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Speaker 3: a succession plan there at Blackstone?

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Speaker 7: You did mention the two figures and it kind of

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Speaker 7: looks pretty straight at the moment unless things engine. But

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Speaker 7: Jonathan Gray has been doing a great job and Schwartzman

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Speaker 7: is not planning to step away as we see in

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Speaker 7: at the moment. But there's a line of succession that's

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Speaker 7: clearly there.

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Speaker 3: Paul, Are they is Blackson in a capital raise mode?

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Speaker 8: Now?

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Speaker 3: Where are they in terms of their capital.

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Speaker 7: I think with one point one trillion dollars of assets

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Speaker 7: on management and different buckets that I discussed earlier, they

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Speaker 7: constantly in the fundraising mode. So the big areas where

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Speaker 7: they fundraising, they fundraising, and infrastructure they're fundraising, and mentioned

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Speaker 7: data centers, then fundraising in wealth strategies. They have already

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Speaker 7: two hundred and forty billion dollars of assets that in

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Speaker 7: different wealth strategies. Early in the year. Last year we

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Speaker 7: had some issues where you saw some outflows from wealth strategies.

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Speaker 7: They all positive this quarter, so those are so those

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Speaker 7: are good things. And then they talked about the big

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Speaker 7: flagship funds. They're raising more of them in the second

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Speaker 7: half and even more coming back in twenty twenty five,

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Speaker 7: which helps their peace YEP.

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Speaker 3: Absolutely all right, Paul, thanks very much, appreciate it. As

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Speaker 3: always Paul Goldberg. He's a senior echoanalyst Bloomberg Intelligence. He

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Speaker 3: covers a lot of those asset managers, the kqrs, the

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Speaker 3: blackstones of the world. He also covers the Canadian banks,

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Speaker 3: so he does it all for Bloomberg Intelligence. He's then

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Speaker 3: in Princeton.

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Speaker 2: You're listening to the Bloomberg Intelligence podcast. Catch us live

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Speaker 2: weekdays at ten am Eastern on AFOCAR, playing Android otto

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Speaker 2: get your podcasts, or watch us live on YouTube.

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Speaker 3: Matt Miller sitting in for Alex Steel here today on

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Speaker 3: Paul Sooney. You live here on our Bloomberg Interactive Brokers studio,

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Speaker 3: streaming live on YouTube as well.

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Speaker 1: Here.

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Speaker 3: We had a raft of economic data recently, including today,

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Speaker 3: we had the initial jobless claims. Give me a little

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Speaker 3: bit higher than expect it. But I don't know. The

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Speaker 3: question I think is has this been a reserve already

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Speaker 3: gotten us a soft landing. I don't know. It feels

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Speaker 3: like it ticking with a professional who does the stuff

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Speaker 3: for a living wall this joins us in studio. How

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Speaker 3: good is that? So he gets a gold star. He's

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Speaker 3: the chief economist over at RSM Joe, how's our FED

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Speaker 3: done here in landing this economy?

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Speaker 5: Okay?

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Speaker 8: So you know, when we look back on this in

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Speaker 8: a number of years, we're gonna think the FED did

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Speaker 8: an extraordinary did an extraordinary thing, a real policy achievement

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Speaker 8: in bringing the US economy in for soft landing after

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Speaker 8: hiking the federal funds rate by five hundred and fifty

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Speaker 8: basis points. You know what, the FED was truly data dependent.

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Speaker 8: We wouldn't be waiting for a September cut to be cutting.

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Speaker 1: Now.

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Speaker 8: As a matter of fact, if you're all out there,

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Speaker 8: look at the tayl on your Bloomberg terminal.

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Speaker 6: Ah, the tailor rule. I love that function.

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Speaker 8: Actually, you can estimate the Fed's reaction function using four

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Speaker 8: percent as a non accelering rate of inflation and unemployment.

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Speaker 8: That's the Fed's estimate, and I would suggest a neutral

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Speaker 8: rate of one point one. You get an optimal rate

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Speaker 8: of three point nine percent, which implies the Fed's policy rate, people,

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Speaker 8: is way too tight.

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Speaker 6: Why do you choose a neutral rate of one point one?

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Speaker 6: Isn't it higher?

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Speaker 4: No?

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Speaker 8: I think it's actually well, the Fed on Williams thinks

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Speaker 8: it two point five. Now I'm double that and it

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Speaker 8: indeed may be higher. That's something that's unobservable. We do

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Speaker 8: our best to make that estimate, Matt. But I think

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Speaker 8: that that's appropriate given where the economy is and the

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Speaker 8: structural changes that we're going through, because I think we're

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Speaker 8: all pretty much here in Wall Street in agreement that

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Speaker 8: rates are going to be higher for longer because inflation

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Speaker 8: is not going to be what it was for the

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Speaker 8: twenty years prior to the pandemic.

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Speaker 1: It's just not due to the just you know, the.

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Speaker 8: Distortions around movement of supply chains back to friendly countries,

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Speaker 8: and the geopolitical tensions that are going to cause problems

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Speaker 8: no matter who's in the White House.

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Speaker 6: Now if we get a Trump presidency, I'm fascinated by

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Speaker 6: some of his proposals because the whole premise of you know,

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Speaker 6: the Republican Party is that Biden caused this inflation, and

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Speaker 6: Biden inflation is bad and they're going to stop inflation.

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Speaker 7: Right.

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Speaker 6: But Trump wants to cut taxes.

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Speaker 1: I'm happy about that.

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Speaker 6: Yes, I know you're not fighting against that, but he

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Speaker 6: wants to basically give us a ton of cash. Plus

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Speaker 6: he wants to put tariffs on everything that's inflationary. Right,

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Speaker 6: those two things are inflationary. And he wants to stop

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Speaker 6: immigration and deport all of the illegal immigrants that are

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Speaker 6: already here, so that would tighten the labor pool. That's inflationary.

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Speaker 6: Seems like everything he wants to do is inflationary. Is

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Speaker 6: he just not going to follow through on this stuff? No?

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Speaker 8: Actually, after the four years of Trump, I actually take

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Speaker 8: him at his word. Literally, that's what he intends to do. Right,

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Speaker 8: So if you look at expectations on Wall Street, matter

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Speaker 8: of fact, look at the WRP screen FED Funds probabilities

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Speaker 8: market's pricing in one hundred basis points of cuts over

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Speaker 8: the next five meetings. Okay, if Donald Trump is elected,

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Speaker 8: that's a big if. And if he's not a very

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Speaker 8: big if, well, I don't want to go there now.

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Speaker 6: Gods are strong.

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Speaker 8: Yeah, I agree, and I see that, and we're all

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Speaker 8: adjusting our base case for twenty twenty five as we speak.

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Speaker 8: But if he gets in, and if he follows through

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Speaker 8: on this, unemployment rate's going to fall, Wage prices are

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Speaker 8: going to go up. The FED is going to be

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Speaker 8: worried about a wage price spiral. Right, then the FED

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Speaker 8: will reverse course and begin hiking rates and there's where

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Speaker 8: we get into what I think is the single biggest

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Speaker 8: economic and financial risk of a potentially second Trump administration

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Speaker 8: the independence of the Central Bank. I'm not talking about personalities.

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Speaker 8: Whether Palace fired, stays, goes is immaterial. It's the instrumental

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Speaker 8: independence of the FED that's at risk.

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Speaker 6: I'm glad you mentioned that. Jason Furman, who was the

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Speaker 6: head of the National Economic Council for Obama. Right, he

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Speaker 6: tweeted out that he has selected recently announced policies and

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Speaker 6: ranked them in terms of how consequentially bad they would be.

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Speaker 6: Number one is the ten percent across the board tariffs.

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Speaker 6: This is Furman's opinion, not mine. Number two is the

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Speaker 6: four and a half trillion of tax cuts. Number three

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Speaker 6: is threatening independence of the Fed. I would have thought

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Speaker 6: that'd be a little bit higher. Number four is permanent

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Speaker 6: tax free tips. I don't see why that matters. Nobody

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Speaker 6: ever claims tips anyway. And then number five is the

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Speaker 6: five percent cap on rent increases that Biden has floated.

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Speaker 8: Okay, so number five, I just want to be on

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Speaker 8: the record that's not a good idea.

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Speaker 1: It might make things worse.

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Speaker 8: And I mean not just on the supply side of

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Speaker 8: you know, people there won't mean a center for builders

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Speaker 8: to build homes. People will not want to move, and

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Speaker 8: we'll have the same problem in the realm market we

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Speaker 8: have as in the in the home buying market. That's

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Speaker 8: not a good move. But you know, I followed Jason

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Speaker 8: and Jase. By the way, Jason Fremant is an excellent economist,

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Speaker 8: and I envy the people get to take EC ten

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Speaker 8: over at Harvard from him these days. All right, he's

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Speaker 8: a professor, that's right, That course is absolutely fantastic. But

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Speaker 8: the thing is, you know what the people who follow

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Speaker 8: him wrote back. They disagreed with him. It was the

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Speaker 8: FED independence that was number one. I think Jason was

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Speaker 8: taken a little bit of.

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Speaker 6: Back, but right, well, I think his premise is that

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Speaker 6: it wouldn't be possible to threaten FED independence. Donald Trump

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Speaker 6: seems to want to. But still you've got to rank

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Speaker 6: them in order.

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Speaker 8: So I saw Liz trust was at the GOP convention. Yeah,

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Speaker 8: they might want to be thinking about what ahead of

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Speaker 8: Lettuce means, right, because if they were to try to

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Speaker 8: do something like that, you know, we would begin talking

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Speaker 8: about the Bond vigilantes, whoever those guys are. By the way,

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Speaker 8: you know, live in Austin, Texas these days. I've seen

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Speaker 8: one of the guys from zz Top and I'm like,

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Speaker 8: that's what a bond.

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Speaker 6: Vigilant is sweet, right, that's a great face, Right.

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Speaker 1: That's that's what a bond vigilante looks like.

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Speaker 8: But they will they will be back quickly, and it

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Speaker 8: will be painful if the GOP attempts to do that

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Speaker 8: or do something something more ridiculous. It's like to value

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Speaker 8: the dollar, right, Yeah.

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Speaker 3: So we got the ten year treasury at four point

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Speaker 3: one six percent. Where's that going to be year end?

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Speaker 3: Do you think?

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Speaker 8: Okay, so my year in target was four point two

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Speaker 8: with some downside risk. I still think that's you know,

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Speaker 8: in intact, I think that when the Fed gets to

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Speaker 8: the point where it begins to telegraph it's cutting rates,

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Speaker 8: probably right after the July thirty first meeting, you begin

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Speaker 8: to see the front end of the curve begin to

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Speaker 8: move down. Because what we're going to be doing here

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Speaker 8: is this is a good thing, right, is we want

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Speaker 8: the price of money to be positive. We want a

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Speaker 8: turn premium that's positive on the on the yield curve, right,

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Speaker 8: We're going to get a dis inversion of the yield

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Speaker 8: curve next year. Hey, guys, this is what's supposed to happen.

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Speaker 8: This is what financial markets are supposed to look like

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Speaker 8: pre two thousand and you know, pre GFC. Right, Yeah,

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Speaker 8: we're going back to the future and it's a good thing.

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Speaker 6: So we'll get so we will have then we will

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Speaker 6: have had two years of inverted yield curve and no

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Speaker 6: real recession.

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Speaker 1: Well, Matt, as.

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Speaker 8: You know, I'm a firm believer in that the yield

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Speaker 8: curves in you know, predicted eleven of the last three recessions.

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Speaker 8: I dropped that rule of thumb a long time ago.

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Speaker 8: Don't get me wrong. We pay attention to it because

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Speaker 8: it shows stresses and strains across the yield curve. I mean,

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Speaker 8: excuse me, stresses and strains across financial markets. But it's

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Speaker 8: not the predictor that it might have been, you know,

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Speaker 8: back in the eighties or nineties, back when.

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Speaker 6: Paul was at Duke, right back when skipping exactly Cam's courses.

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Speaker 3: To go play golf. So the golf course is right

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Speaker 3: across the how I mean exactly who.

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Speaker 1: Is your professor that he can Harvey? Cam Harvey?

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Speaker 3: So really I didn't know that cool? So he's yeah,

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Speaker 3: so he's one of the out of the Chicago school guys.

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Speaker 1: So the primary risk.

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Speaker 3: It sounds like from your perspective, is this FED holds

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Speaker 3: rates too high.

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Speaker 8: Too high for too long, and of course oil. Right,

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Speaker 8: those are the real two big risks. But you know,

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Speaker 8: I don't think that investors or firms have really priced

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Speaker 8: in what friend shoring means. But the relocation of the

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Speaker 8: supply chains means in terms of a permanently altered structure

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Speaker 8: of pricing, both domestically and globally, We're going to have

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Speaker 8: higher inflation, We're going to have higher interest rates, right,

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Speaker 8: and I do think that's going to be an ongoing

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Speaker 8: issue again, regardless of who wins the White House.

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Speaker 6: I want to get your take on the markets quickly.

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Speaker 6: We lam a minute left. But as an economist, what

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Speaker 6: do you think of the fact that Gena Martin Adams

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Speaker 6: has written about the S and P four ninety three, Right,

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Speaker 6: the companies that aren't the giant megacap tech stocks have

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Speaker 6: been in an earnings recession for six quarters and they're

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Speaker 6: finally going to start to post some growth, at least

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Speaker 6: that's the hope. Do you watch earning season.

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Speaker 1: Oh, very closely.

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Speaker 8: We use we actually use the artificial tool on bloomber

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Speaker 8: to go through and look at the key earnings that

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Speaker 8: really are important to our firm. Look, no one likes

438
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Speaker 8: the over concentration or risk in the bag seven. I'm

439
00:21:31,960 --> 00:21:34,359
Speaker 8: happy now it's beginning to broaden out. That puts a

440
00:21:34,400 --> 00:21:37,840
Speaker 8: smile on my face. Although I think that we generally

441
00:21:37,880 --> 00:21:42,840
Speaker 8: are underestimating the positive productivity shock that artificial intelligence is

442
00:21:42,920 --> 00:21:46,840
Speaker 8: going to bring to the US in global economy, That too,

443
00:21:46,880 --> 00:21:50,119
Speaker 8: should begin to spill over as we're in the second

444
00:21:50,119 --> 00:21:52,600
Speaker 8: phase of AI, where we're past the euphoria.

445
00:21:53,000 --> 00:21:54,439
Speaker 1: Now, how are we going to use that?

446
00:21:54,680 --> 00:21:54,880
Speaker 5: Right?

447
00:21:55,160 --> 00:21:57,920
Speaker 3: Yep, So we'll get to that. That's the next big

448
00:21:57,920 --> 00:22:00,440
Speaker 3: thing in this market. How do you use AI? Joe Ruswallows,

449
00:22:00,440 --> 00:22:03,480
Speaker 3: thanks for joining us. Appreciate that Joe Bershwall's chief economists

450
00:22:03,480 --> 00:22:05,520
Speaker 3: are semi joining us here in studio.

451
00:22:06,560 --> 00:22:10,440
Speaker 2: You're listening to the Bloomberg Intelligence Podcast. Catch us live

452
00:22:10,520 --> 00:22:14,040
Speaker 2: weekdays at ten am Eastern on applecar Play and Android

453
00:22:14,080 --> 00:22:16,840
Speaker 2: Auto with the Bloomberg Business app. You can also listen

454
00:22:16,960 --> 00:22:20,040
Speaker 2: live on Amazon Alexa from our flagship New York station,

455
00:22:20,400 --> 00:22:24,960
Speaker 2: Just Say Alexa, playing Bloomberg eleven thirty.

456
00:22:24,720 --> 00:22:27,399
Speaker 3: Looking at the Airline Business United airlines. They said a

457
00:22:27,480 --> 00:22:31,000
Speaker 3: third quarter profit will fall short of Wall Streets expectations

458
00:22:31,040 --> 00:22:35,000
Speaker 3: as US carriers slash ticket prices to lore domestic travelers,

459
00:22:35,160 --> 00:22:39,240
Speaker 3: keeping even the industry's largest players from fully capitalizing on

460
00:22:39,359 --> 00:22:42,880
Speaker 3: record summer travel. Let's bring in George Ferguson. He does

461
00:22:42,920 --> 00:22:45,320
Speaker 3: this stuff for living. He's his senior Aerospace, Defense and

462
00:22:45,359 --> 00:22:49,159
Speaker 3: airlinesanos from Bloomberg Intelligence. George, again, I haven't been on

463
00:22:49,160 --> 00:22:51,600
Speaker 3: a plane in a long time that wasn't packed to

464
00:22:51,680 --> 00:22:54,320
Speaker 3: the gills. Here. If the airlines can't make money, now,

465
00:22:54,440 --> 00:22:56,480
Speaker 3: when can they? What's happening in your industry?

466
00:22:57,440 --> 00:22:57,640
Speaker 5: Yeah?

467
00:22:57,760 --> 00:22:59,760
Speaker 9: So I tell a lot of people who, right, you

468
00:22:59,760 --> 00:23:04,719
Speaker 9: can't confuse airline airplanes being full with profitability. Right, everything

469
00:23:04,720 --> 00:23:09,919
Speaker 9: depends on the price paid by those folks flying. Really,

470
00:23:10,320 --> 00:23:14,440
Speaker 9: the industry is just suffering from overcapacity, right. United confirm

471
00:23:14,520 --> 00:23:17,840
Speaker 9: that today. Delta told us the same thing earlier. We

472
00:23:17,880 --> 00:23:21,600
Speaker 9: saw Alaska results come out today as well, their load

473
00:23:21,640 --> 00:23:24,920
Speaker 9: factors down, yields flat load factors down, telling me they

474
00:23:24,920 --> 00:23:27,800
Speaker 9: can't fill airplanes at the right price point.

475
00:23:28,040 --> 00:23:29,520
Speaker 5: We need capacity to come out.

476
00:23:29,560 --> 00:23:35,720
Speaker 9: Everybody's pointing to an inflection point in three Q. You

477
00:23:35,760 --> 00:23:37,800
Speaker 9: know today United said that, you know they'd get down

478
00:23:37,840 --> 00:23:42,720
Speaker 9: and maybe after mid August maybe two three percent growth

479
00:23:43,160 --> 00:23:46,120
Speaker 9: in capacity. I just think I think that's just still

480
00:23:46,160 --> 00:23:49,000
Speaker 9: a too high level of capacity growth. Right, This isn't

481
00:23:49,000 --> 00:23:52,440
Speaker 9: an economy that probably a year over year grew about

482
00:23:52,440 --> 00:23:54,760
Speaker 9: a percent. I think that number ought to be tied

483
00:23:54,840 --> 00:23:57,879
Speaker 9: much closer to GDP growth you just talked about in

484
00:23:57,920 --> 00:24:02,760
Speaker 9: the update about unemployment right right to the the US

485
00:24:02,840 --> 00:24:05,360
Speaker 9: economy appears to be slowing a bit. So I think

486
00:24:05,400 --> 00:24:07,679
Speaker 9: those things are working against the airlines right now. A

487
00:24:07,680 --> 00:24:09,439
Speaker 9: bunch of capacity has to come out, I think, to

488
00:24:09,440 --> 00:24:12,159
Speaker 9: get back to pricing power, and that's what's needed to

489
00:24:12,200 --> 00:24:13,280
Speaker 9: get profitability going.

490
00:24:13,400 --> 00:24:15,520
Speaker 6: So how does that happen? I mean, do the airlines

491
00:24:15,520 --> 00:24:20,200
Speaker 6: themselves pull capacity out? Don't they have competition in this market?

492
00:24:20,359 --> 00:24:22,080
Speaker 6: Don't we have regulators to ensure that?

493
00:24:23,240 --> 00:24:27,040
Speaker 5: Yeah, So how does it happen? We're starting to see

494
00:24:27,119 --> 00:24:29,199
Speaker 5: some of it happen. Today.

495
00:24:29,280 --> 00:24:32,880
Speaker 9: Alaska announced that they were going to add more premium

496
00:24:32,920 --> 00:24:33,399
Speaker 9: seeding to the.

497
00:24:33,520 --> 00:24:36,160
Speaker 6: Can I just pause here for a fun fact, George.

498
00:24:37,320 --> 00:24:44,080
Speaker 6: For a long time, Paul Sweeney thought that the Eskimo

499
00:24:44,240 --> 00:24:47,159
Speaker 6: on the Alaska Airlines tail was actually a picture of

500
00:24:47,200 --> 00:24:47,960
Speaker 6: Jerry Garcia.

501
00:24:48,200 --> 00:24:51,399
Speaker 9: I did, Yeah, actually he's told me that.

502
00:24:52,680 --> 00:24:54,160
Speaker 5: I'm not sure what that says about, Paul.

503
00:24:55,800 --> 00:24:57,480
Speaker 6: I mean, what an airline do you put a picture

504
00:24:57,520 --> 00:24:58,760
Speaker 6: of Jerry Garcia on the tail.

505
00:24:58,840 --> 00:24:59,639
Speaker 3: They're so cool?

506
00:25:00,240 --> 00:25:00,520
Speaker 5: All right?

507
00:25:00,560 --> 00:25:01,800
Speaker 6: So sorry, sorry, go ahead.

508
00:25:02,160 --> 00:25:04,520
Speaker 9: So we're starting to see capacity come out with these

509
00:25:04,520 --> 00:25:07,600
Speaker 9: announcements like Alaska where they said, hey, we're gonna take

510
00:25:07,680 --> 00:25:10,200
Speaker 9: you know, we're gonna add more premium seating, which usually

511
00:25:10,200 --> 00:25:12,800
Speaker 9: means a bit less capacity in the marketplace. Frontier is

512
00:25:12,840 --> 00:25:14,800
Speaker 9: gonna block your middle seat so you can get a

513
00:25:14,840 --> 00:25:18,600
Speaker 9: premium seat out of Frontier. That obviously brings the capacity out.

514
00:25:18,840 --> 00:25:20,880
Speaker 9: But what you really you know, what you really need

515
00:25:20,960 --> 00:25:24,159
Speaker 9: is you need air airlines to start parking airplanes. And

516
00:25:24,200 --> 00:25:27,879
Speaker 9: I think that's hard too, right, So United Delta all

517
00:25:28,000 --> 00:25:30,880
Speaker 9: jazzed up about this inflection point. But look, I would

518
00:25:30,960 --> 00:25:33,920
Speaker 9: note that there's a lot of very fast growing, low

519
00:25:34,000 --> 00:25:39,159
Speaker 9: cost airlines in the US. Frontier, Spirit, even Jet Blue, right,

520
00:25:39,200 --> 00:25:42,119
Speaker 9: they lease a lot of airplanes. You fly airplanes you

521
00:25:42,200 --> 00:25:44,120
Speaker 9: lease because you got you gotta pay that least.

522
00:25:43,960 --> 00:25:44,840
Speaker 5: Payment, no matter what.

523
00:25:45,080 --> 00:25:48,199
Speaker 9: Right, So I think it gets difficult here, and it

524
00:25:48,240 --> 00:25:52,240
Speaker 9: takes a little while to get capacity out. Maybe next summer,

525
00:25:52,880 --> 00:25:53,600
Speaker 9: you know, I don't know.

526
00:25:53,720 --> 00:25:57,360
Speaker 6: I was talking to the CEO of JSX the other

527
00:25:57,440 --> 00:26:01,200
Speaker 6: day on my new television program called Bloomberg Open Interest

528
00:26:01,280 --> 00:26:04,879
Speaker 6: Tune in weekdays nine to eleven. And you know, they

529
00:26:05,320 --> 00:26:09,320
Speaker 6: fly fascinating roots. For example, they'll fly from the west

530
00:26:09,400 --> 00:26:15,240
Speaker 6: Chester Airport to the Naples Airport, right or some airport

531
00:26:15,280 --> 00:26:19,439
Speaker 6: outside of l A into you know, Palm Beach. So

532
00:26:19,640 --> 00:26:22,680
Speaker 6: are we gonna see more of these upstarts, George.

533
00:26:23,400 --> 00:26:26,960
Speaker 9: Well, so we always do in the industry, right. So

534
00:26:27,080 --> 00:26:30,760
Speaker 9: the beautiful thing about this industry is when people sell airplanes,

535
00:26:30,800 --> 00:26:33,880
Speaker 9: someone buys them cheap and starts flying routes like that,

536
00:26:34,800 --> 00:26:37,119
Speaker 9: and there's always someone that wants that come to this industry, right.

537
00:26:37,160 --> 00:26:40,159
Speaker 9: It's it's got just a heavy allure. Everybody wants to

538
00:26:40,160 --> 00:26:42,680
Speaker 9: own an airline. That becomes one of the challenges too,

539
00:26:42,720 --> 00:26:45,800
Speaker 9: I think, and sort of making money in this industry.

540
00:26:46,119 --> 00:26:48,080
Speaker 5: But the big folks, they'd love.

541
00:26:47,960 --> 00:26:50,719
Speaker 9: To have more, you know, more maybe the ultra low

542
00:26:50,840 --> 00:26:53,840
Speaker 9: cost point at those smaller airports, but you just don't

543
00:26:53,880 --> 00:26:57,359
Speaker 9: get the demand out of those smaller airports, you know,

544
00:26:57,520 --> 00:27:01,240
Speaker 9: to really fill big airplanes, and so that becomes part

545
00:27:01,280 --> 00:27:03,480
Speaker 9: of the challenge I think right now. One of the

546
00:27:03,480 --> 00:27:06,840
Speaker 9: bigger parts of the challenge is definitely business is kinda

547
00:27:07,240 --> 00:27:09,280
Speaker 9: We heard United say one hundred percent of what it

548
00:27:09,400 --> 00:27:12,320
Speaker 9: was in twenty nineteen. Obviously that gives you sort of

549
00:27:12,320 --> 00:27:15,199
Speaker 9: no growth since the pandemic. They're saying the share of

550
00:27:15,240 --> 00:27:18,639
Speaker 9: revenue in the cabin is lower. That's always at a

551
00:27:18,640 --> 00:27:21,639
Speaker 9: really nice price point. And business likes to go different

552
00:27:21,680 --> 00:27:24,919
Speaker 9: places than leisure does, so it diversifies your routes to

553
00:27:24,920 --> 00:27:27,280
Speaker 9: a certain degree, but you need enough of it to

554
00:27:27,280 --> 00:27:31,480
Speaker 9: go to those other destinations. So business just isn't back enough.

555
00:27:31,600 --> 00:27:34,560
Speaker 9: I think to let the big full service carriers move

556
00:27:34,600 --> 00:27:40,159
Speaker 9: into maybe some smaller sized airplanes, more diversified destinations and

557
00:27:40,280 --> 00:27:44,200
Speaker 9: get competition off those sort of heavy volume routes.

558
00:27:44,200 --> 00:27:45,760
Speaker 5: And I think that's part of the problem too.

559
00:27:46,320 --> 00:27:49,160
Speaker 3: And Matt, you know, once a year George Ferkston goes

560
00:27:49,160 --> 00:27:51,760
Speaker 3: on this boondoggle with all these other airline people. They

561
00:27:51,760 --> 00:27:54,479
Speaker 3: go to either Paris one year and then the next

562
00:27:54,560 --> 00:27:56,880
Speaker 3: year it's London for these air shows where the big

563
00:27:56,920 --> 00:27:59,320
Speaker 3: airlines and the aerospace companies buy and sell it always

564
00:27:59,320 --> 00:28:01,760
Speaker 3: see guys jab Yeah, it's just a total scam. But anyway,

565
00:28:01,800 --> 00:28:05,880
Speaker 3: George is going next week to Farnborough in England, George,

566
00:28:05,920 --> 00:28:07,640
Speaker 3: what do you expect there? Are we going to see

567
00:28:07,680 --> 00:28:10,879
Speaker 3: some big orders? What's Boeing going to do? Do they have

568
00:28:10,920 --> 00:28:14,320
Speaker 3: to go do like a mayor culpritur in Farnsborough.

569
00:28:15,200 --> 00:28:15,800
Speaker 5: I think they are.

570
00:28:15,840 --> 00:28:18,399
Speaker 9: I think they'll be holding customer's hands, talking to about,

571
00:28:18,760 --> 00:28:21,240
Speaker 9: you know, all their quality changes, how it's going to

572
00:28:21,280 --> 00:28:24,800
Speaker 9: make a better airplane, and you know, sort of giving

573
00:28:24,800 --> 00:28:26,879
Speaker 9: them an update on when they're going to get deliveries.

574
00:28:27,320 --> 00:28:30,359
Speaker 9: I don't see this being a big sales show. It

575
00:28:30,440 --> 00:28:32,760
Speaker 9: is a sales show, but I don't see you know,

576
00:28:32,920 --> 00:28:36,199
Speaker 9: sort of Airbus and Boeing walking out the door with

577
00:28:36,280 --> 00:28:38,880
Speaker 9: bags and bags of orders if you put them in bags.

578
00:28:39,560 --> 00:28:39,760
Speaker 5: You know.

579
00:28:39,880 --> 00:28:42,160
Speaker 9: I just kind of think it's going to be pretty

580
00:28:42,240 --> 00:28:46,880
Speaker 9: muted because of both those supply chain challenges and you know,

581
00:28:47,000 --> 00:28:49,760
Speaker 9: the US airlines earning season showing us that maybe too

582
00:28:49,840 --> 00:28:53,800
Speaker 9: much capacity in the US. We heard Lufton's of Warren already.

583
00:28:54,280 --> 00:28:57,120
Speaker 9: Maybe there's a little too much capacity In Europe. I

584
00:28:57,120 --> 00:28:59,960
Speaker 9: think people really expected, you know, a much harder bounce

585
00:29:00,120 --> 00:29:03,160
Speaker 9: back from the pandemic again, still missing some of that

586
00:29:03,200 --> 00:29:07,480
Speaker 9: business travel economy slowing just not there. So I think

587
00:29:07,480 --> 00:29:11,600
Speaker 9: it'll be a bit of a muted sales show at

588
00:29:11,680 --> 00:29:12,960
Speaker 9: the at the show.

589
00:29:13,360 --> 00:29:15,240
Speaker 3: All right, George, thanks so much for joining us. Appreciate

590
00:29:15,280 --> 00:29:17,840
Speaker 3: it as always. George Ferguson, senior Aerospace, Defense and Airlines

591
00:29:17,880 --> 00:29:21,440
Speaker 3: analysts for Bloomberg in Intelligence. But always had some those

592
00:29:21,480 --> 00:29:23,840
Speaker 3: air shows. You see these monster deals, you know, Emmerts

593
00:29:23,880 --> 00:29:25,640
Speaker 3: Airlines buying, you know, fifty.

594
00:29:25,440 --> 00:29:28,680
Speaker 6: Seven true air and they're often the surprise, so, you know,

595
00:29:29,000 --> 00:29:34,000
Speaker 6: tough to predict. But I feel like both of the

596
00:29:34,120 --> 00:29:39,400
Speaker 6: members of our airplane making duopoly have already got order

597
00:29:39,480 --> 00:29:43,280
Speaker 6: backlogs going out years, right, So what difference.

598
00:29:43,000 --> 00:29:43,280
Speaker 1: Does it make?

599
00:29:43,360 --> 00:29:45,400
Speaker 3: Yeah, what difference does it make? And Boeing's got its problems.

600
00:29:45,440 --> 00:29:47,440
Speaker 3: I mean, George talks about the builds they're building, like

601
00:29:47,480 --> 00:29:50,400
Speaker 3: the thirty five, thirty six, seven thirty seven months that

602
00:29:50,440 --> 00:29:53,720
Speaker 3: needs to be well north of forty for them to

603
00:29:53,720 --> 00:29:55,000
Speaker 3: start getting some cash flow.

604
00:29:55,480 --> 00:30:00,920
Speaker 2: There you're listening to the Bloomberg Intelligence Podcast. Catch us

605
00:30:00,960 --> 00:30:04,360
Speaker 2: live weekdays at ten am Eastern on applecar Play and

606
00:30:04,360 --> 00:30:07,280
Speaker 2: Android Auto with the Bloomberg Business app. You can also

607
00:30:07,360 --> 00:30:10,840
Speaker 2: listen live on Amazon Alexa from our flagship New York station,

608
00:30:11,200 --> 00:30:14,000
Speaker 2: Just Say Alexa Play Bloomberg eleven thirty.

609
00:30:15,520 --> 00:30:17,920
Speaker 3: Paul Sweeney live here in o Bloomberg Interactive Broker Studio

610
00:30:18,000 --> 00:30:19,760
Speaker 3: or streaming live on YouTube. So head over to that

611
00:30:19,840 --> 00:30:23,680
Speaker 3: internet thing, go YouTube dot com search Bloomberg podcast. Alex

612
00:30:23,720 --> 00:30:26,640
Speaker 3: steels out Today. They're telling me Matt Miller is going

613
00:30:26,680 --> 00:30:28,680
Speaker 3: to be here thin eleven o'clock hour. I will believe

614
00:30:28,720 --> 00:30:31,600
Speaker 3: it when I see it. Let's talk some real estate here,

615
00:30:31,600 --> 00:30:33,720
Speaker 3: commercial real estate, residential real estate. We can do that

616
00:30:33,760 --> 00:30:37,200
Speaker 3: with David O'Reilly. He's the CEO of Howard Hughes. Howard

617
00:30:37,280 --> 00:30:40,360
Speaker 3: Hughes is a public traded company. Triple hhhh is a

618
00:30:40,440 --> 00:30:45,200
Speaker 3: ticker in your Bloomberg terminal. That'll bring it up for you, David,

619
00:30:45,200 --> 00:30:47,200
Speaker 3: Thanks very much for being here in what pre're city,

620
00:30:47,240 --> 00:30:50,360
Speaker 3: in New York City, other than being that world's financial capital.

621
00:30:50,240 --> 00:30:52,160
Speaker 10: Allways, a pleasure to be here. Thanks for having me.

622
00:30:52,240 --> 00:30:53,960
Speaker 10: We do have an asset here at the South Street

623
00:30:53,960 --> 00:30:56,360
Speaker 10: Seaport in the Lower eas side of Manhattan. We're in

624
00:30:56,400 --> 00:30:58,840
Speaker 10: the middle of filing with the SEC for spinoff of

625
00:30:58,840 --> 00:31:01,560
Speaker 10: those assets into its own separately traded company focused on

626
00:31:01,720 --> 00:31:04,920
Speaker 10: entertainment that will leave Howard. You is positioned really just

627
00:31:05,200 --> 00:31:07,600
Speaker 10: entirely focused on building world class communities that we've been

628
00:31:07,640 --> 00:31:09,400
Speaker 10: doing since we were form.

629
00:31:09,240 --> 00:31:11,400
Speaker 3: Stories for me and my gang at the South stat

630
00:31:11,440 --> 00:31:13,440
Speaker 3: Street Board in the late nineteen eighties. We'll just leave

631
00:31:13,440 --> 00:31:16,080
Speaker 3: it at that. Talk to us about, first of all,

632
00:31:16,080 --> 00:31:19,120
Speaker 3: Howard Hughes. Where did this company come from? Given the name?

633
00:31:19,680 --> 00:31:21,920
Speaker 1: So it was spun out from General Growth Properties.

634
00:31:21,960 --> 00:31:24,360
Speaker 10: Bill Ackman of Pershing Square took control of General Growth,

635
00:31:24,400 --> 00:31:28,120
Speaker 10: the mall company that went bankrupt fourteen years ago, and

636
00:31:28,160 --> 00:31:30,960
Speaker 10: he found in the mall company were these great communities,

637
00:31:31,000 --> 00:31:35,600
Speaker 10: the woodlands outside of Houston summer and outside of Las Vegas, YEP, Columbia, Maryland.

638
00:31:35,200 --> 00:31:37,280
Speaker 1: Between DC and Baltimore. He said, these.

639
00:31:37,120 --> 00:31:39,360
Speaker 10: Companies don't belong in a public mall red Okay. They

640
00:31:39,400 --> 00:31:40,440
Speaker 10: need their own company, all.

641
00:31:40,400 --> 00:31:42,200
Speaker 3: Right, So let's just talk. I'm just looking at what

642
00:31:42,280 --> 00:31:45,840
Speaker 3: you guys have there. Let's talk about office space. You

643
00:31:45,880 --> 00:31:49,240
Speaker 3: have six point eight million square of office space. Six

644
00:31:49,280 --> 00:31:52,120
Speaker 3: point eight million square feet of office space. I go

645
00:31:52,160 --> 00:31:55,280
Speaker 3: through any town, USA, any office yard, You're going to

646
00:31:55,360 --> 00:31:58,640
Speaker 3: see the sign stuck in the grass outside X number

647
00:31:58,760 --> 00:32:03,240
Speaker 3: square feet for for rent here. What's your portfolio look

648
00:32:03,280 --> 00:32:05,240
Speaker 3: like in terms of occupancy rates, that kind of thing.

649
00:32:05,360 --> 00:32:07,800
Speaker 10: You know, our occupancy is traveling up close to ninety

650
00:32:07,840 --> 00:32:10,959
Speaker 10: percent last quarter really and it has defied gravity and

651
00:32:11,000 --> 00:32:13,920
Speaker 10: really defied the national headlines of doom and gloom.

652
00:32:14,040 --> 00:32:14,560
Speaker 3: Why is that?

653
00:32:14,960 --> 00:32:17,960
Speaker 10: You know, we during the pandemic saw the migration of

654
00:32:18,000 --> 00:32:20,560
Speaker 10: a lot of really smart, well educated workers coming from

655
00:32:20,600 --> 00:32:24,560
Speaker 10: the coasts, leaving higher crime, leaving higher taxes, chasing quality

656
00:32:24,560 --> 00:32:28,240
Speaker 10: of life, chasing affordability. And now we're seeing companies chase

657
00:32:28,280 --> 00:32:31,320
Speaker 10: those employees. And we're seeing those companies come in from

658
00:32:31,360 --> 00:32:34,440
Speaker 10: those big cities into places like the Woodlands, where we

659
00:32:34,560 --> 00:32:37,360
Speaker 10: filled up over the past two years almost three quarters

660
00:32:37,360 --> 00:32:38,160
Speaker 10: of a million square feet.

661
00:32:38,520 --> 00:32:42,880
Speaker 3: Interesting, So where is your office space today versus maybe

662
00:32:42,960 --> 00:32:45,800
Speaker 3: pre pandemic in terms of vacant occupancy and rate and

663
00:32:45,840 --> 00:32:46,440
Speaker 3: that kind of thing.

664
00:32:46,600 --> 00:32:49,800
Speaker 10: I would say vacancy is a tick higher. We were

665
00:32:49,800 --> 00:32:53,560
Speaker 10: about ninety two percent. Pre pandemic rates are almost identical.

666
00:32:53,760 --> 00:32:56,280
Speaker 3: Really, yes, interesting because I mean you know the story.

667
00:32:56,320 --> 00:32:58,840
Speaker 3: And then cities like New York City, for example, you

668
00:32:58,840 --> 00:33:00,480
Speaker 3: know the story Here is if if you're in an

669
00:33:00,480 --> 00:33:04,360
Speaker 3: a office space like Bloomberg's headquarters, you're fine. Right, If

670
00:33:04,400 --> 00:33:07,000
Speaker 3: you're in anything else, good luck.

671
00:33:07,040 --> 00:33:08,280
Speaker 1: Tough sletting, no doubt.

672
00:33:08,440 --> 00:33:11,520
Speaker 10: But in a community like the Woodlands, we control the

673
00:33:11,560 --> 00:33:14,520
Speaker 10: development of all new product, so We're only building to

674
00:33:14,560 --> 00:33:16,960
Speaker 10: meet supply. There aren't four folks with a shovel in

675
00:33:16,960 --> 00:33:19,320
Speaker 10: the ground, all at the same time, rushing to be

676
00:33:19,400 --> 00:33:20,640
Speaker 10: first and the other three lose.

677
00:33:21,240 --> 00:33:22,800
Speaker 1: So by controlling the.

678
00:33:22,800 --> 00:33:25,520
Speaker 10: Supply side of the equation, we're able to mitigate some

679
00:33:25,560 --> 00:33:27,600
Speaker 10: of those bigger swings that are typically associated with the

680
00:33:27,600 --> 00:33:28,280
Speaker 10: office market.

681
00:33:28,640 --> 00:33:32,720
Speaker 3: Six thousand multi family units. Where are those units generally speaking?

682
00:33:32,880 --> 00:33:34,160
Speaker 3: And how's that business doing?

683
00:33:34,200 --> 00:33:36,880
Speaker 10: The business is incredible. We've seen great same store growth

684
00:33:36,960 --> 00:33:40,160
Speaker 10: year over year. A big picture, we have a three

685
00:33:40,240 --> 00:33:42,920
Speaker 10: million plus housing you to shortfall across the country, and

686
00:33:43,040 --> 00:33:45,240
Speaker 10: multi family is trying to address some of that, especially

687
00:33:45,320 --> 00:33:48,720
Speaker 10: from an affordability perspective. Our portfolio in the Woodlands remains

688
00:33:48,760 --> 00:33:52,400
Speaker 10: high nineties, rents increasing year over year. Same with our

689
00:33:52,440 --> 00:33:55,240
Speaker 10: portfolio in Columbia and some of land outside of Las Vegas.

690
00:33:55,320 --> 00:33:57,320
Speaker 3: I love some of another great golf course there and

691
00:33:57,360 --> 00:34:00,560
Speaker 3: some of it all those courses out there. How is

692
00:34:00,680 --> 00:34:02,800
Speaker 3: Vegas doing generally, because that's one of those markets up

693
00:34:02,840 --> 00:34:04,520
Speaker 3: and down. It's kind of the poster child from when

694
00:34:04,560 --> 00:34:07,000
Speaker 3: things are great, poster child when things are bad. Where

695
00:34:07,040 --> 00:34:08,560
Speaker 3: are we now in that cycle for Vegas?

696
00:34:08,680 --> 00:34:10,640
Speaker 10: Vegas isn't a really good spot right now. You know,

697
00:34:10,680 --> 00:34:14,279
Speaker 10: we're selling over a thousand homes in Summerland this year,

698
00:34:14,320 --> 00:34:16,160
Speaker 10: and last year we hit ruck at home sales. First

699
00:34:16,239 --> 00:34:19,200
Speaker 10: quarter we were up twenty four percent. Builders are buying

700
00:34:19,239 --> 00:34:21,239
Speaker 10: land from US at a record price per acre, and

701
00:34:21,320 --> 00:34:23,239
Speaker 10: where you know, kind of the catcher's mitt of all

702
00:34:23,280 --> 00:34:25,200
Speaker 10: those residents looking for quality of life.

703
00:34:25,560 --> 00:34:27,640
Speaker 3: All right, you've got a land bank. I'm not a

704
00:34:27,680 --> 00:34:28,880
Speaker 3: real stick guy, so I don't know what a land

705
00:34:28,920 --> 00:34:31,439
Speaker 3: bank is. I'm guessing you guys just own you guys

706
00:34:31,480 --> 00:34:33,919
Speaker 3: owned thirty five thousand acres in a land bank.

707
00:34:34,120 --> 00:34:35,160
Speaker 1: All right, what do.

708
00:34:35,080 --> 00:34:37,880
Speaker 3: You do with that? Build stuff he developed, develop it

709
00:34:37,960 --> 00:34:38,440
Speaker 3: or we sell it.

710
00:34:38,560 --> 00:34:39,480
Speaker 1: We play SimCity.

711
00:34:39,840 --> 00:34:41,400
Speaker 10: We build, We put in the roads, we put in

712
00:34:41,440 --> 00:34:45,080
Speaker 10: the hospital's, police, fire stations, wetewater treatment plans, and then

713
00:34:45,120 --> 00:34:47,680
Speaker 10: we grade land and sell it to homebuilders who build homes.

714
00:34:47,719 --> 00:34:48,560
Speaker 1: Residents move in.

715
00:34:48,920 --> 00:34:52,000
Speaker 10: They need commercial amenities, places to shop, office buildings to work.

716
00:34:52,040 --> 00:34:54,080
Speaker 10: We build those with the cash from selling land to

717
00:34:54,120 --> 00:34:57,160
Speaker 10: home builders and create these communities like Summerland.

718
00:34:57,760 --> 00:34:59,439
Speaker 1: Sometimes we build golf courses.

719
00:34:59,200 --> 00:35:01,480
Speaker 3: Right exactly, the TPC some in I've lost a lot

720
00:35:01,520 --> 00:35:05,319
Speaker 3: of golf balls in that desert. What's next? What's the

721
00:35:05,360 --> 00:35:08,120
Speaker 3: growth for your company. Here I'm looking at just on

722
00:35:08,120 --> 00:35:10,399
Speaker 3: the Bloomberg terminal. Here here's a company, folks. You got

723
00:35:10,400 --> 00:35:13,440
Speaker 3: a market cap about the three point seven billion dollars.

724
00:35:14,040 --> 00:35:17,040
Speaker 3: This company's got revenue, you know, about just right around

725
00:35:17,040 --> 00:35:19,920
Speaker 3: a billion dollars billion. Two is a forecast for twenty

726
00:35:20,160 --> 00:35:22,839
Speaker 3: twenty four ebitdah, which is what I look at because

727
00:35:22,840 --> 00:35:25,360
Speaker 3: that's actually you guys are a real estate company, so

728
00:35:25,400 --> 00:35:27,560
Speaker 3: operating come three hundred million. So this is a real

729
00:35:28,200 --> 00:35:30,520
Speaker 3: size company, some heft. You got about a five billion

730
00:35:30,560 --> 00:35:33,200
Speaker 3: dollars of debt on your balance sheet. Where's the growth

731
00:35:33,239 --> 00:35:33,760
Speaker 3: going forward?

732
00:35:33,960 --> 00:35:35,400
Speaker 1: It's across all of our communities.

733
00:35:35,600 --> 00:35:38,799
Speaker 10: Our job is to transform that raw land, that land

734
00:35:38,840 --> 00:35:41,600
Speaker 10: bank as you referred to it, into income producing assets

735
00:35:41,840 --> 00:35:44,560
Speaker 10: by meeting the demands in our community. And like I said,

736
00:35:44,600 --> 00:35:47,759
Speaker 10: across our portfolio, our multi family is very tight, high

737
00:35:47,800 --> 00:35:48,960
Speaker 10: nineties occupancy.

738
00:35:49,280 --> 00:35:50,120
Speaker 1: We need to build more.

739
00:35:50,360 --> 00:35:52,560
Speaker 10: So we're moving very quickly to start that next multi

740
00:35:52,560 --> 00:35:54,320
Speaker 10: family project in the Woodlands and the next one in

741
00:35:54,360 --> 00:35:56,320
Speaker 10: Summerland to meet the demand that's in that community.

742
00:35:56,320 --> 00:35:58,160
Speaker 3: So it's better to stay, I guess your strategies and

743
00:35:58,200 --> 00:36:01,320
Speaker 3: take your existing communities, the Woodlands in outside of Houston,

744
00:36:01,520 --> 00:36:03,920
Speaker 3: summer land in Vegas and expand those as opposed to

745
00:36:03,960 --> 00:36:05,840
Speaker 3: saying I'm going to Phoenix or something.

746
00:36:05,960 --> 00:36:08,279
Speaker 10: Well, it's funny you should say that. Two years ago

747
00:36:08,320 --> 00:36:10,520
Speaker 10: we went to Phoenix and bought thirty seven thousand acres

748
00:36:10,560 --> 00:36:14,160
Speaker 10: in a community called Arravalis. We're entitled for three hundred

749
00:36:14,160 --> 00:36:17,560
Speaker 10: thousand residents and fifty five million square feet of commercial space,

750
00:36:17,840 --> 00:36:21,560
Speaker 10: roughly the size of Saint Louis. We've already under contract

751
00:36:21,560 --> 00:36:24,160
Speaker 10: and sold over eight hundred lots to home builders at

752
00:36:24,239 --> 00:36:26,960
Speaker 10: over seven hundred thousand dollars an acre to meet the

753
00:36:27,000 --> 00:36:29,320
Speaker 10: housing demand that exists in the West Valley of Phoenix.

754
00:36:30,239 --> 00:36:32,040
Speaker 3: So who builds the homes? Do you build the homes here?

755
00:36:32,040 --> 00:36:34,040
Speaker 3: You go to DH hort and or Toll Brothers are

756
00:36:34,080 --> 00:36:34,600
Speaker 3: one of those guys.

757
00:36:34,640 --> 00:36:36,480
Speaker 10: We sell to all the public builders, a lot of

758
00:36:36,760 --> 00:36:39,400
Speaker 10: large regional private builders as well. We try to be

759
00:36:39,440 --> 00:36:43,440
Speaker 10: Switzerland sell land whoever bids highest and delivers the best product.

760
00:36:43,719 --> 00:36:46,360
Speaker 3: What's this interest We've been in this interest rate environment

761
00:36:46,400 --> 00:36:48,160
Speaker 3: for the past couple of years of much higher rates.

762
00:36:48,160 --> 00:36:50,000
Speaker 3: We all grew up, seems to like over the last

763
00:36:50,000 --> 00:36:53,880
Speaker 3: fifteen years with zero in interest rates. How's that impacted

764
00:36:53,960 --> 00:36:56,560
Speaker 3: your business's higher rates for longer.

765
00:36:56,280 --> 00:37:00,880
Speaker 10: It's been an accelerant sell It's absolutely contrary to popular opinion,

766
00:37:00,920 --> 00:37:03,160
Speaker 10: and its contrary to the headlines that we read every

767
00:37:03,239 --> 00:37:05,680
Speaker 10: day that higher rates is killing homes.

768
00:37:05,520 --> 00:37:06,560
Speaker 1: They're less affordable.

769
00:37:06,920 --> 00:37:09,760
Speaker 10: But really what it's done is it's taken out supply.

770
00:37:10,320 --> 00:37:11,200
Speaker 1: There's almost no.

771
00:37:11,200 --> 00:37:14,160
Speaker 10: Resale out there, so the home build there's a new

772
00:37:14,200 --> 00:37:16,680
Speaker 10: home construction, which is our business, are thriving.

773
00:37:17,560 --> 00:37:19,200
Speaker 1: We're seen greater.

774
00:37:19,000 --> 00:37:20,759
Speaker 10: Demand for those new homes than we have seen in

775
00:37:20,800 --> 00:37:25,080
Speaker 10: a long time. And if you add in that, last month,

776
00:37:25,400 --> 00:37:29,319
Speaker 10: for the first time in decades, new home pricing was

777
00:37:29,520 --> 00:37:32,880
Speaker 10: less expensive than resale. New homes have typically traded on

778
00:37:32,920 --> 00:37:36,440
Speaker 10: average for twenty or seventeen percent premium. Last month, they

779
00:37:36,480 --> 00:37:40,239
Speaker 10: were less expensive, interesting, and it's really pushing a lot

780
00:37:40,239 --> 00:37:42,040
Speaker 10: of buyers that want that quality of life in our

781
00:37:42,040 --> 00:37:44,680
Speaker 10: communities to buy new home construction. And that has been

782
00:37:44,760 --> 00:37:46,160
Speaker 10: an accelerant on our business.

783
00:37:46,360 --> 00:37:48,640
Speaker 3: I'll tell you, I mean just dh Horton. Just today

784
00:37:49,280 --> 00:37:51,480
Speaker 3: the stock jumps to a record high as their third

785
00:37:51,520 --> 00:37:53,120
Speaker 3: quarter earnings beat estimates.

786
00:37:54,560 --> 00:37:56,240
Speaker 1: Sometimes I'm lucky, not good.

787
00:37:56,480 --> 00:37:58,399
Speaker 10: I think it was about six months ago I thought

788
00:37:58,440 --> 00:38:00,359
Speaker 10: that to twenty twenty four would be the goal age

789
00:38:00,400 --> 00:38:02,880
Speaker 10: of home building rates would start to tick down a

790
00:38:02,920 --> 00:38:06,080
Speaker 10: little bit so that we'd see more demand in buying homes,

791
00:38:06,239 --> 00:38:07,160
Speaker 10: but not so much that.

792
00:38:07,160 --> 00:38:08,320
Speaker 1: We'd see resale pickup.

793
00:38:08,960 --> 00:38:11,680
Speaker 10: And the record margins that public homebuilders have been printing,

794
00:38:11,880 --> 00:38:13,799
Speaker 10: you know, twenty five to thirty percent, which to me,

795
00:38:13,920 --> 00:38:17,080
Speaker 10: I don't remember that in my career, just going to

796
00:38:17,080 --> 00:38:17,680
Speaker 10: remain strong.

797
00:38:17,880 --> 00:38:19,759
Speaker 3: So when you're selling lant to a dhort and you're like,

798
00:38:19,840 --> 00:38:21,319
Speaker 3: I'm not giving you a break on this, and I

799
00:38:21,360 --> 00:38:23,880
Speaker 3: just saw your earnings yesterday, guys are crushing it.

800
00:38:23,920 --> 00:38:26,040
Speaker 10: We put them out for bid, and we bid based

801
00:38:26,080 --> 00:38:28,480
Speaker 10: on a couple of different factors. One is price per acre,

802
00:38:28,719 --> 00:38:32,600
Speaker 10: but other is our builder price participation. We're expecting a

803
00:38:32,640 --> 00:38:35,360
Speaker 10: home to sell for call it five hundred thousand dollars.

804
00:38:35,719 --> 00:38:38,200
Speaker 1: If it trades for six hundred thousand, I get about

805
00:38:38,200 --> 00:38:40,920
Speaker 1: twenty percent of that upside. Okay, to make sure it's

806
00:38:40,920 --> 00:38:41,359
Speaker 1: a little bit.

807
00:38:41,280 --> 00:38:43,319
Speaker 10: Of smuck insurance, right if the market rips, I want

808
00:38:43,360 --> 00:38:45,200
Speaker 10: to make sure I get paid for my dirt appropriately,

809
00:38:45,440 --> 00:38:46,880
Speaker 10: so we have a little true up at the end

810
00:38:46,880 --> 00:38:47,719
Speaker 10: when the homes are sold.

811
00:38:47,880 --> 00:38:51,120
Speaker 3: Interesting, that's so smart. What do you expect in straits

812
00:38:51,400 --> 00:38:54,080
Speaker 3: to do? Here, I mean here, this global Wall Street,

813
00:38:54,120 --> 00:38:55,919
Speaker 3: that's all we talk about. It seems like what you're

814
00:38:55,960 --> 00:38:57,600
Speaker 3: on the ground, actually in the business.

815
00:38:57,719 --> 00:38:57,919
Speaker 1: Yeah.

816
00:38:57,960 --> 00:38:59,799
Speaker 10: Look, if I knew for sure, I wouldn't be talking

817
00:38:59,840 --> 00:39:01,959
Speaker 10: to you. I'd be on a beach somewhere. I do think,

818
00:39:02,200 --> 00:39:03,800
Speaker 10: you know, rates will start to come down towards the

819
00:39:03,840 --> 00:39:05,760
Speaker 10: end of the year. I think it'll be a modest decrease.

820
00:39:06,320 --> 00:39:08,759
Speaker 10: I don't think there'll be anything massive that will that

821
00:39:08,840 --> 00:39:11,520
Speaker 10: will shift the tides, so to speak. And I think

822
00:39:11,560 --> 00:39:14,880
Speaker 10: it'll be continue to be good for new home sales,

823
00:39:14,880 --> 00:39:17,799
Speaker 10: continue to be good for home builders, and continue to

824
00:39:17,800 --> 00:39:19,000
Speaker 10: be good for the value of our land.

825
00:39:19,160 --> 00:39:21,239
Speaker 3: All right, very good, and we'll see I mean again,

826
00:39:21,480 --> 00:39:24,480
Speaker 3: DH Horton came up with some big numbers today, so

827
00:39:24,520 --> 00:39:26,920
Speaker 3: that new housing market remains very strong. And if you've

828
00:39:26,920 --> 00:39:30,319
Speaker 3: got quality prop properties like you know the woodlands, or

829
00:39:30,440 --> 00:39:33,080
Speaker 3: you know someone in a good spot to be David O'Reilly,

830
00:39:33,080 --> 00:39:35,000
Speaker 3: thank you for joining us. David O'Reilly. He's the CEO

831
00:39:35,080 --> 00:39:39,480
Speaker 3: of Howard Hughes Trades on the NASDAQ. This ticker is

832
00:39:39,719 --> 00:39:41,719
Speaker 3: h h H. It's got a market cap at three

833
00:39:41,760 --> 00:39:44,760
Speaker 3: point six pillion dollars, up one point four percent today,

834
00:39:44,760 --> 00:39:45,799
Speaker 3: We appreciate you coming in.

835
00:39:46,160 --> 00:39:50,680
Speaker 2: This is the Bloomberg Intelligence Podcast, available on Apple, Spotify,

836
00:39:50,880 --> 00:39:53,800
Speaker 2: and anywhere else you will get your podcast. Listen live

837
00:39:53,880 --> 00:39:57,480
Speaker 2: each weekday, ten am to noon Eastern on Bloomberg dot com,

838
00:39:57,600 --> 00:40:00,320
Speaker 2: the Ihart radio app tune In, and the Blue Bomberg

839
00:40:00,360 --> 00:40:03,480
Speaker 2: Business app. You can also watch us live every weekday

840
00:40:03,520 --> 00:40:06,120
Speaker 2: on YouTube and always on the Bloomberg terminal