WEBVTT - Bloomberg Wall Street Week: Cooperman, Tyson, Kelly 0:00:00.240 --> 0:00:04.960 This is Bloomberg Wall Street Week. Market shruggle, higher consumer pricing, 0:00:05.040 --> 0:00:07.400 The economy is in the process of rebounding. Will the 0:00:07.480 --> 0:00:10.479 utter reserve have its own digital currency? The financial stories 0:00:10.520 --> 0:00:12.879 that cheap hard work. Many people think the eels are 0:00:12.880 --> 0:00:15.080 just going to keep marching up. We have more spending 0:00:15.120 --> 0:00:17.160 coming out of Congress. One of the big questions I 0:00:17.200 --> 0:00:19.880 think on investor's mind inflation through the eyes of the 0:00:19.920 --> 0:00:23.560 most influential voices. Larry Summer is the former Treasury Secretary, 0:00:23.640 --> 0:00:27.240 Bryan Wynahan back of America, willmar Ceo of Charlie Sharp. 0:00:27.360 --> 0:00:32.520 Bloomberg Wall Street Week with David Weston from Bloomberg Radio proceed. 0:00:32.720 --> 0:00:36.040 We have cautioned confusing reports on the delta variant and 0:00:36.159 --> 0:00:39.479 mixed numbers on the economy make us think again about 0:00:39.520 --> 0:00:42.880 that rush to reopen. This is Bloomberg Wall Street Week. 0:00:43.120 --> 0:00:46.159 I'm David Weston, and the markets this week seemed to 0:00:46.200 --> 0:00:49.839 reflect all of it the hope, with stronger than expected 0:00:49.920 --> 0:00:53.479 jobs numbers out on Friday taking the SMP record highs 0:00:53.800 --> 0:00:56.920 as well as the trupidation, with the NASTAC actually down 0:00:56.960 --> 0:00:59.520 on Friday a bit, even though it was overall up 0:00:59.520 --> 0:01:01.800 a bit for the week, and the ten year yields 0:01:01.880 --> 0:01:04.600 struggled to get back to one point three after falling 0:01:04.600 --> 0:01:07.399 as low as one point one three earlier in the week. 0:01:07.800 --> 0:01:09.840 To help us put this all together, we have with 0:01:09.920 --> 0:01:13.320 this David Kelly, JP Morgan Asset Management Chief Global Strategist, 0:01:13.440 --> 0:01:16.560 and Laura Tyson, Professor at the Has School of Business 0:01:16.680 --> 0:01:20.039 at University of California, Berkeley. Dr Tyson served as chair 0:01:20.240 --> 0:01:22.800 of the Council of Economic Advisors under President Obama. So 0:01:23.080 --> 0:01:24.880 Dr Tyson, thank you so much for being with us, 0:01:25.120 --> 0:01:28.120 give us a sense of while you interpreted those employment numbers. 0:01:28.200 --> 0:01:30.280 It seemed to be strong pretty much across the board. 0:01:30.440 --> 0:01:33.880 But did it take into account the delta variant? Well, 0:01:33.880 --> 0:01:36.319 it was strong, and I certainly think it's important to 0:01:36.319 --> 0:01:38.200 look at the three months average. If you get a 0:01:38.240 --> 0:01:41.240 three months average of adding eight hundred thousand, uh eight 0:01:41.280 --> 0:01:44.680 hundred thousand jobs a month, those are strong numbers and 0:01:44.680 --> 0:01:48.320 and show continued strengthening of the labor market. That's the 0:01:48.360 --> 0:01:51.200 first thing. The second thing is it is true that 0:01:51.320 --> 0:01:54.680 a lot of the employment growth in July was what 0:01:54.760 --> 0:01:59.360 I would call in person activities. It was leisure, retail, 0:01:59.640 --> 0:02:02.880 hospital totality, people going to restaurants, people going out to 0:02:03.040 --> 0:02:07.360 personal services. What is a little unclear, and by the way, 0:02:07.400 --> 0:02:11.200 also education, what is a little unclear is what is 0:02:11.240 --> 0:02:14.480 the course of delta going into the fall and will 0:02:14.560 --> 0:02:18.160 that slow that momentum for those kinds of jobs and 0:02:18.240 --> 0:02:21.240 services death. And I think that's a legitimate question, and 0:02:21.280 --> 0:02:24.040 I'm not sure. We don't We don't know the answer. Therefore, 0:02:24.160 --> 0:02:26.160 I think that's one of the reasons why the market 0:02:26.680 --> 0:02:30.280 is saying hard to interpret, hard to interpret. So let's 0:02:30.320 --> 0:02:33.000 go to the markets. Actually, David, it's over to you here. 0:02:33.000 --> 0:02:34.840 And what happened, because when I came in and looked 0:02:34.840 --> 0:02:36.600 at the numbers of that, boy, these are great numbers 0:02:36.600 --> 0:02:38.600 and markets are really going to go up, they didn't 0:02:38.639 --> 0:02:39.959 go up that much. It was mixed. In fact, the 0:02:40.000 --> 0:02:42.880 NASTAC was down a little bit. Is that because, as 0:02:42.960 --> 0:02:45.840 Laura said, this is some doubts about delta iron or 0:02:45.880 --> 0:02:48.200 is it really fear that may cause the FED to 0:02:48.400 --> 0:02:51.639 increase rates sooner. I don't really think it's either of those. 0:02:51.639 --> 0:02:54.400 I mean, the markets are very there. I mean, we're 0:02:54.400 --> 0:02:56.799 going up for a very long time. We are for 0:02:56.919 --> 0:02:59.800 these heights. It's it's you know, it's hard to justify 0:03:00.280 --> 0:03:03.519 moving up quickly from here. But on the delta variant. 0:03:03.520 --> 0:03:06.320 I mean, look, I know that the virus is mutating, 0:03:06.560 --> 0:03:08.200 but you know what, in some ways, the economy is 0:03:08.280 --> 0:03:12.200 mutating also. I think it is really interesting that, you know, 0:03:12.280 --> 0:03:15.440 we had a huge crash in the economy last year 0:03:15.480 --> 0:03:17.800 and then and then a rebound in the third quarter, 0:03:17.840 --> 0:03:19.720 but every quarter since then we've grown. We were on 0:03:19.800 --> 0:03:22.480 our fourth wave of COVID here, but the economy is 0:03:22.520 --> 0:03:25.000 really adapting to it. So I do think the delta 0:03:25.080 --> 0:03:27.840 variant will slow things down a little bit over the 0:03:27.880 --> 0:03:31.120 next month or two. Um, you know, I think hopefully 0:03:31.120 --> 0:03:32.760 it will. He can come down again. But you know, 0:03:32.800 --> 0:03:34.399 as I look at the economy, it looks like people 0:03:34.440 --> 0:03:36.440 are adapting to it. Yes, we're gonna have to. We're 0:03:36.440 --> 0:03:39.120 gonna get much more serious about vaccine mandates. You know, 0:03:39.160 --> 0:03:40.800 you want to work here, you gotta have a vaccine. 0:03:40.840 --> 0:03:43.080 We're gonna get more serious about wearing masks, but it's 0:03:43.080 --> 0:03:44.840 not going to stop people from the open. The schools 0:03:44.840 --> 0:03:46.840 are getting back to doing the things that want to do. 0:03:46.880 --> 0:03:48.520 We're just gonna have to do them in a different way. 0:03:48.680 --> 0:03:51.240 But I've I've confidence. You know, Yeah, the virus mutates, 0:03:51.240 --> 0:03:53.240 but we mutate too, and I think the economy is 0:03:53.240 --> 0:03:55.800 actually going to keep on growing through this. So so 0:03:55.880 --> 0:03:57.840 we're back to you. What does that say to the 0:03:57.840 --> 0:04:00.360 Fed and monetary policies a practic matter? But is I 0:04:00.360 --> 0:04:02.120 think what I just heard from David is we're learning 0:04:02.120 --> 0:04:03.880 to adapt to it. It's not going to be as 0:04:03.960 --> 0:04:06.400 robust as we thought. It will be more tempered. But 0:04:06.440 --> 0:04:08.280 does that mean actually the FED can be a bit 0:04:08.280 --> 0:04:13.160 more leaning with monetary policy longer? So I look, I 0:04:13.200 --> 0:04:15.960 think the said is it was very clear you You 0:04:16.080 --> 0:04:19.120 had a comment from Vice Chair Claradon, but we also 0:04:19.160 --> 0:04:23.320 had a comment last week from Jerome Pell And basically, 0:04:23.360 --> 0:04:27.440 what they're saying, is it right now, given the advanced guidance, 0:04:27.480 --> 0:04:31.440 they continue to to continue to issue um with a 0:04:31.520 --> 0:04:35.440 goal of maximum employment and a long run target of 0:04:35.480 --> 0:04:38.880 inflation of two percent with some overshoot for some period 0:04:38.920 --> 0:04:43.560 of time. Yeah. The the conditions in the economy, I 0:04:43.600 --> 0:04:47.640 think continue to indicate that that meeting those conditions may 0:04:47.760 --> 0:04:51.600 sometimes may occur sometime in two or early twenty three. 0:04:51.600 --> 0:04:54.960 I don't think there's any news here in this report 0:04:55.400 --> 0:04:58.080 which would suggest what the SAID has been saying. The 0:04:58.200 --> 0:05:01.919 SED has believes, and I believe that most of the 0:05:02.320 --> 0:05:05.880 significant increase in inflation over the past few months has 0:05:05.920 --> 0:05:09.599 been the result of transitory factors. Those factors won't die out, 0:05:10.120 --> 0:05:13.040 and we will end up with a perhaps a somewhat 0:05:13.120 --> 0:05:16.760 higher inflation rate over two percent, but not much, and 0:05:16.960 --> 0:05:20.359 that will be consistent with the Fed's guidance on what 0:05:20.480 --> 0:05:23.279 its policy is going to be. So David's that means 0:05:23.279 --> 0:05:24.960 the sky's the limit. As far as equity is scary 0:05:24.960 --> 0:05:27.240 concern because it seems like almost no matter what happens, 0:05:27.320 --> 0:05:30.000 equity markets just go up. How much of that is 0:05:30.040 --> 0:05:34.000 just supported by the FED as opposed to fundamental underlying growth. Well, 0:05:34.040 --> 0:05:35.600 I think a lot of it is. But of course 0:05:35.640 --> 0:05:39.400 the Federal Reserve has been fueling asset price increases all 0:05:39.480 --> 0:05:41.760 over the place for years, ready for a decade now. 0:05:42.080 --> 0:05:44.320 And my real concern is not so much the FED 0:05:44.440 --> 0:05:47.719 is fueling inflation, but it's just causing assetprises to rise 0:05:47.839 --> 0:05:50.960 much faster than the economy overall, and that could cause 0:05:51.600 --> 0:05:54.039 asset bubbles, are generalized asset bubbles, So I think the 0:05:54.080 --> 0:05:57.320 Federal Reserve needs to begin to normalize. I agree with Laura, 0:05:57.320 --> 0:05:59.119 I don't think they're going to We're looking at hyper 0:05:59.160 --> 0:06:02.200 inflation are very high inflation. I think most of its transitory, 0:06:02.240 --> 0:06:04.760 but we have seen big increases in asset prices, and 0:06:04.800 --> 0:06:06.520 I'm you know, I think what's going on is these 0:06:06.600 --> 0:06:08.799 very low interest rates are fueling a lot of nefarious 0:06:08.839 --> 0:06:11.200 things in the economy that we really don't want to see. 0:06:11.400 --> 0:06:14.000 You very high increases in home prices, a lot of 0:06:14.040 --> 0:06:16.720 spectors of assets, and you're drawing money in. So I 0:06:16.760 --> 0:06:19.320 think the Federal Reserve really needs to think about normalizing 0:06:19.360 --> 0:06:21.240 and they also have to think about timetables. Here. You're 0:06:21.279 --> 0:06:24.440 supposed to get ahead of this, not not react late 0:06:24.480 --> 0:06:26.560 to it. So I'm worried that they're they're taking too 0:06:26.640 --> 0:06:31.039 much time getting to tapering and talking about raising interest 0:06:31.120 --> 0:06:33.880 rates from essentially zero levels in an economy which is 0:06:33.920 --> 0:06:36.719 really barreling towards full employment. That's former Chair of the 0:06:36.760 --> 0:06:40.200 Council of Economic Advisors Laura Tyson and David Kelly from 0:06:40.279 --> 0:06:44.240 JP Morgan Asset Management. Coming up, we hear from legendary 0:06:44.240 --> 0:06:48.680 investor Leon Cooperman. That's next on Wall Street Week on Bloomberg. 0:06:54.000 --> 0:06:57.960 This is Bloomberg Wall Street Week with David Weston from 0:06:58.080 --> 0:07:02.560 Bloomberg Radio. This week's another chapter in the drama of Washington, 0:07:02.640 --> 0:07:05.680 with the Senate apparently getting closer to a major bipartisan 0:07:05.760 --> 0:07:08.880 infrastructure package, coming on top of over five trillion dollars 0:07:08.880 --> 0:07:11.600 in fiscal stimulus already pumped in the system, and more 0:07:11.680 --> 0:07:14.720 on the way if Democrats have their way. Leon Koperman 0:07:14.840 --> 0:07:17.560 has been a key investor for many years, first of 0:07:17.640 --> 0:07:19.480 Goldman Sachs and then his head of his own firm, 0:07:19.600 --> 0:07:22.440 Omega Advisors. And we welcome now to Wall Street Week. 0:07:22.520 --> 0:07:25.040 So Lee, thank you so much for joining us. So 0:07:25.080 --> 0:07:27.720 many people look to you for investment advice. I've heard 0:07:27.720 --> 0:07:30.920 you described as a fully invested bear. Could you tell 0:07:31.000 --> 0:07:33.600 us what that means and why? Yeah, Well, let me 0:07:33.640 --> 0:07:36.040 first say, you know, it's a pleasure to be with you. 0:07:36.040 --> 0:07:39.520 You know, I reside with Ruis Lewis Luckyser on Direct 0:07:39.560 --> 0:07:42.080 and the initial Wall Street Week four or five times. 0:07:42.280 --> 0:07:44.000 This is a lot more convenient. You know, I'm sitting 0:07:44.000 --> 0:07:46.520 in my home in New Jersey and I didn't have 0:07:46.560 --> 0:07:50.400 to travel Owens Mills, Maryland, so it's a pretty painless experience. 0:07:50.880 --> 0:07:54.880 Fully invested bear is uh explained by the fact that 0:07:55.080 --> 0:07:58.760 is a cyclical and secular outlook. The cyclical conditions are 0:07:58.840 --> 0:08:02.520 not uh suggestive of a bear market. You know, basically, 0:08:02.520 --> 0:08:05.960 bear markets don't come about through a maculate conception. To 0:08:06.080 --> 0:08:10.760 come about for certain fundamental reasons. Number one, celebrating problematic inflation. 0:08:11.000 --> 0:08:13.320 We're heading in that direction. We're not there yet, mainly 0:08:13.320 --> 0:08:16.800 because the FED speak hostile FED, which you don't have. 0:08:16.880 --> 0:08:18.960 In fact, I'm critical of the FED, and I'll talk 0:08:19.000 --> 0:08:21.720 about that in the moment. Uh an oncoming recession. We're 0:08:21.720 --> 0:08:26.720 just coming out of recession or a exhuberantly braced price market. 0:08:27.000 --> 0:08:29.480 I have to say, even though I'm conservative in my outlook, 0:08:29.520 --> 0:08:31.160 I have to admit the stock market has been very 0:08:31.200 --> 0:08:33.760 self corrective. The area of the market has been most 0:08:33.800 --> 0:08:37.560 exploited and overvalued has had a very big decline. So cyclically, 0:08:37.640 --> 0:08:40.160 the conditions are big decline on present and that explains 0:08:40.240 --> 0:08:44.360 my positive view. My long term concerns are I think 0:08:44.360 --> 0:08:47.800 we're's kind of barring from the future. You know, Laura 0:08:47.840 --> 0:08:49.960 Tyson is a very distinguished economists. I know if you're 0:08:50.000 --> 0:08:52.480 still listening, But I would say, if I lined up 0:08:52.520 --> 0:08:54.760 a hundred economists and they asked him, what is the 0:08:54.760 --> 0:08:58.560 potential real growth of the U S economy? Responsively centered 0:08:58.600 --> 0:09:01.840 around two percent real and that's been a function of 0:09:02.480 --> 0:09:04.320 labor force growth, which is about a half and one 0:09:04.320 --> 0:09:07.000 percent per antum, and productivity growth was about one and 0:09:07.040 --> 0:09:09.360 a half percent peratum. So that determines real growth in 0:09:09.400 --> 0:09:12.120 any economy. So two percent real if you're economic bull, 0:09:12.160 --> 0:09:13.440 you say two and a half of your bear, you 0:09:13.480 --> 0:09:15.559 say one and a half. Add to that about two 0:09:15.559 --> 0:09:19.880 percent for inflation. So nominal GDP grows four percent. We 0:09:19.960 --> 0:09:23.319 have real growth this year of four times potential. Yet 0:09:23.360 --> 0:09:25.920 the fittest holding interest rates in near zero. Makes no 0:09:26.040 --> 0:09:28.960 sense to me, and I understand what they're doing or 0:09:28.960 --> 0:09:30.760 why they're doing it, but I think it's going to 0:09:30.880 --> 0:09:33.600 have a bad end to it. Secondly, you just referenced 0:09:33.600 --> 0:09:36.079 in a minute ago. You know we've already injected into 0:09:36.080 --> 0:09:39.040 the economy a trillion dollars of stimulus and excess of 0:09:39.120 --> 0:09:41.679 wage is lost. Yet they're trying to do another two 0:09:41.679 --> 0:09:44.120 it's for trillion on top of that. And so you 0:09:44.160 --> 0:09:46.640 know this nation was found two and forty five years ago. 0:09:46.679 --> 0:09:48.920 We had no national debt. Three years ago is about 0:09:48.960 --> 0:09:51.280 twenty trillion. I think now it's not going to do 0:09:51.320 --> 0:09:53.760 a twenty eight trillion is growing at a rate foreign 0:09:53.800 --> 0:09:57.360 nexus the growth rate the economy, and when this party ends. Basically, 0:09:57.400 --> 0:10:00.640 it's not gonna end well, and nobody knows is gonna end. 0:10:00.960 --> 0:10:04.600 You know, Socrates around I think four BC said he 0:10:04.640 --> 0:10:07.240 was the wisest man alive. He knows one thing, and 0:10:07.240 --> 0:10:09.720 that is I know nothing. And then a few thousand 0:10:09.760 --> 0:10:13.000 years later, Warren Buffetts at Forecast of the Future, tell 0:10:13.000 --> 0:10:14.880 you more about the forecast, and they tell you about 0:10:14.920 --> 0:10:17.719 the future. So we're all guessing. But I think we 0:10:17.800 --> 0:10:19.360 have a bad end to this. I think we've been 0:10:19.360 --> 0:10:24.040 borrowing from the future. I think bonds are totally totally mispriced. 0:10:24.400 --> 0:10:27.120 You know, if I told you historically, attending US government 0:10:27.120 --> 0:10:30.840 bond is yielded in line with nominal GDP. So let's 0:10:30.840 --> 0:10:34.040 say nominal GDP on trend basis grows at four percent, 0:10:34.360 --> 0:10:37.359 so that would imply a four percent ten year bond. Okay, 0:10:37.400 --> 0:10:39.720 this year, I think in the third court of nominal 0:10:39.880 --> 0:10:43.360 GDP is expected to grow with thirteen percent. Yet we 0:10:43.440 --> 0:10:45.960 have a one point three percent tenure government bond rate. 0:10:46.200 --> 0:10:49.000 You're an investor, you pay taxes, you keep sixty percent 0:10:49.160 --> 0:10:52.360 of the one point three that's what seventy eight basis 0:10:52.400 --> 0:10:55.040 points called eighty basis points inflation. Your rates running four 0:10:55.080 --> 0:10:58.400 or five. So you know, stocks make all the sense 0:10:58.400 --> 0:11:00.960 in the world relative to bonds. The bonds make no sense. 0:11:01.000 --> 0:11:03.480 And I think the FED is over staying in their position, 0:11:03.880 --> 0:11:07.800 and that that bothers me greatly. So also in troubled 0:11:07.840 --> 0:11:10.680 by the shift to the leftist taking place in the country. 0:11:11.120 --> 0:11:14.760 You know, of the young people today, I think socialism 0:11:14.840 --> 0:11:17.280 is prefer insistance to capitalism. They don't have a clue. 0:11:17.600 --> 0:11:20.000 My good buddy who I admired greatly, cal and go 0:11:20.080 --> 0:11:22.000 and says it, well, he'd like to put a bunch 0:11:22.040 --> 0:11:24.640 of people in his private plane flight to Venezuela, Cuba 0:11:24.800 --> 0:11:27.520 and let them see what socialism is all about. So 0:11:28.120 --> 0:11:30.120 let me ask you one specific question. If you're putting 0:11:30.120 --> 0:11:32.160 money to work right now, how do you take into 0:11:32.200 --> 0:11:34.920 account the fact that some people have said the referee 0:11:35.000 --> 0:11:36.480 is now playing in the game, whether it's on the 0:11:36.480 --> 0:11:39.960 monetary policy side or or the fiscal policy side. You 0:11:40.040 --> 0:11:42.840 referred to long term growth patterns, but thus far the 0:11:42.880 --> 0:11:44.800 government and this, by the way, it's true under President 0:11:44.800 --> 0:11:47.880 Trump as well. I could argue Goose is up the 0:11:47.960 --> 0:11:52.720 nominal growth rate by really intervening. Absolutely, Trump was no hero. 0:11:52.960 --> 0:11:55.360 In my opinion. We were running a trillion dollar deficit 0:11:55.720 --> 0:11:59.839 in early UM while he was president and we had 0:11:59.840 --> 0:12:03.240 all the employed economy. Well, really what happened is prior 0:12:03.320 --> 0:12:06.800 prior to COVID, hitting the unemployed, when there's about five 0:12:06.840 --> 0:12:09.720 and a half million people, it balloon to twenty three 0:12:09.720 --> 0:12:15.600 million people and uh at the peak, and now we're 0:12:15.640 --> 0:12:19.080 down about eight million. And we're conducting fiscal monetary policy 0:12:19.120 --> 0:12:21.320 with the idea of getting unemployment that back down to 0:12:21.400 --> 0:12:23.840 it was pre COVID, and so, you know, not a 0:12:23.840 --> 0:12:26.959 worthwhile objective. But I think the combination very similar to 0:12:27.040 --> 0:12:30.199 fiscal monetary policy, it will turn out to be problematic. 0:12:30.360 --> 0:12:32.520 So so let me ask you one last question here, 0:12:32.559 --> 0:12:37.960 which goes to a fundamental issue. Historically, historically the best 0:12:37.960 --> 0:12:40.560 and the brightest have gone to Wall Street. Is that 0:12:40.760 --> 0:12:44.080 still true? Or is Wall Streets struggling to attract the 0:12:44.160 --> 0:12:47.240 best talent these days because they're going off to other sources, 0:12:47.280 --> 0:12:51.120 including tech as well as maybe biotech. I don't know. 0:12:51.559 --> 0:12:54.200 In all honesty, David, I've always advocated I do a 0:12:54.200 --> 0:12:57.760 lot of speaking to young people in high school and colleges, 0:12:57.800 --> 0:12:59.520 and I tell them the only way to be successful, 0:13:00.000 --> 0:13:01.760 he said, do what you love and love what you do, 0:13:02.200 --> 0:13:04.200 so you know, don't go into a field to make 0:13:04.240 --> 0:13:05.880 a lot of money. Go into a field because you 0:13:05.920 --> 0:13:08.400 have a passion for it. And I think wolf Streets 0:13:08.440 --> 0:13:11.520 a place where uh, I love every minute I worked there. 0:13:11.520 --> 0:13:13.600 I had a great twenty five year un a Golden Stacks, 0:13:13.679 --> 0:13:16.040 terrific firm, had a great run, and O make it 0:13:16.080 --> 0:13:18.880 for another twenty five years. And then in two thousand 0:13:18.920 --> 0:13:22.640 and eighteen, I decided to I tell everybody, I'm like 0:13:22.880 --> 0:13:26.319 uh Hyman Roth and Godfather too. You know if I 0:13:26.400 --> 0:13:28.280 saw the movie a hundred times, but it's a scene 0:13:28.320 --> 0:13:31.360 at the airport right before they shoot him. He professed 0:13:31.400 --> 0:13:33.880 to be retired executive living in a pension. I'm a 0:13:34.040 --> 0:13:37.120 retired money manager living on investment income. The bad news 0:13:37.160 --> 0:13:39.800 is they have no active income, no wages, no salaries. 0:13:41.000 --> 0:13:43.040 You know. All my income has differences an interest. I 0:13:43.160 --> 0:13:45.360 have enough of it. Don't worry about me. Uh. And 0:13:45.480 --> 0:13:47.520 the good news is I have no pressure. So at 0:13:47.559 --> 0:13:51.600 a seventy eight I decided to swept pressure for income. 0:13:52.160 --> 0:13:56.040 You know, pressure, uh for income, let's pressure more income. 0:13:56.080 --> 0:13:58.360 I like to make money because my goal is to 0:13:58.400 --> 0:14:00.520 give it away, and I like to have more money giveaway. 0:14:01.400 --> 0:14:05.400 But basically I love what I'm doing, so wals she 0:14:05.480 --> 0:14:08.080 will get its share of good people, and the legal 0:14:08.120 --> 0:14:10.120 profession is gonna get its share of good people. And 0:14:10.520 --> 0:14:12.360 you know, money goes the money streeted best. But I 0:14:12.400 --> 0:14:14.439 think the way to be successful is to go we 0:14:14.559 --> 0:14:17.520 have a passion and you know, uh And that's kind 0:14:17.520 --> 0:14:19.200 of what got me to Wall Street. I I just 0:14:19.800 --> 0:14:23.400 I look at my career. I say, you know, uh uh, 0:14:23.680 --> 0:14:28.040 it was luck, hard work and intuition that made for 0:14:28.120 --> 0:14:31.840 my success. Hard work, intuition. That's Omega Family Office Chairman 0:14:32.120 --> 0:14:36.360 Leon Cooperman. Coming up. The CEO of True America, Robert Hart, 0:14:36.680 --> 0:14:40.160 on the extension of the eviction moratorium that's next on 0:14:40.240 --> 0:14:49.360 Wall Street Week on Bloomberg. This is Bloomberg Wall Street 0:14:49.400 --> 0:14:53.800 Week with David Weston from Bloomberg Radio. Millions of Americans 0:14:53.840 --> 0:14:56.520 were exposed to possible eviction because of the pandemic, but 0:14:56.640 --> 0:15:01.040 we're protected by Congress. When that moratorium on evictions lapsed, 0:15:01.120 --> 0:15:04.840 than they were exposed, along with hundreds of thousands of landlords. 0:15:04.880 --> 0:15:08.560 The CDC this week stepped in and imposed a new moratorium. 0:15:08.800 --> 0:15:11.720 But the issue still remains. And we turn now to 0:15:11.920 --> 0:15:15.760 Bob Heart. He's the CEO of True America Multi Family, 0:15:16.080 --> 0:15:20.320 which manages some forty seven thousand units around the country. So, Bob, 0:15:20.400 --> 0:15:22.480 thank you so much. Welcome to Wall Street. We're good 0:15:22.520 --> 0:15:25.160 to have you here. Give us a sense about this industry, 0:15:25.200 --> 0:15:27.240 because some of us may not have followed that closely. 0:15:27.560 --> 0:15:30.400 How many people really are behind on their rent? How 0:15:30.440 --> 0:15:33.080 many people do you have in your units who are behind? Well, 0:15:33.200 --> 0:15:36.440 David Um, there's quite a number of people in America 0:15:36.480 --> 0:15:41.200 that are behind right now. It's about fifteen percent of 0:15:41.280 --> 0:15:45.680 the total rental population of about forty four million households, 0:15:46.480 --> 0:15:50.360 and either they're currently behind or they have some pass 0:15:50.400 --> 0:15:56.160 through form of rent um. However, the situation has improved 0:15:56.680 --> 0:16:00.120 for many many of us because more people are are 0:16:00.160 --> 0:16:03.880 working as the economy has improved. And I think if 0:16:03.920 --> 0:16:08.080 you look at current statistics, it's probably less than five 0:16:08.200 --> 0:16:11.360 per cent of the rent of population that is currently 0:16:11.440 --> 0:16:15.680 not paying, either because you're choosing not to pay due 0:16:15.720 --> 0:16:19.480 to the eviction mortorim or they simply cannot pay. So 0:16:19.920 --> 0:16:22.840 the situation has improved, but there is a lot of 0:16:23.040 --> 0:16:27.280 past do rent that's affecting particularly the small landlord. The 0:16:27.360 --> 0:16:30.720 corporate landlords are hurting as well. But to the extent 0:16:31.160 --> 0:16:35.440 UH this problem is really partially affecting a small landlord. 0:16:35.520 --> 0:16:40.520 It's deriving uh passive income or or retirement income from 0:16:40.760 --> 0:16:45.160 the rental of apartments. Congress has enacted various rental assistant programs. 0:16:45.840 --> 0:16:48.160 How much have they helped and why haven't they've taken 0:16:48.160 --> 0:16:51.080 care of the problem. It just began a few months ago. 0:16:52.320 --> 0:16:55.480 The programs have traveled from the federal government to the 0:16:55.520 --> 0:16:59.280 state government down the local government, and the administration lies 0:16:59.360 --> 0:17:03.400 with local government. So it's spotty in California. And we 0:17:03.480 --> 0:17:06.160 have areas like Sacramento that are doing really, really well, 0:17:06.200 --> 0:17:10.240 Orange County that's doing really well and paying folks. Los 0:17:10.320 --> 0:17:14.199 Angeles City not so much. It depends on the local jurisdiction. 0:17:14.680 --> 0:17:17.240 So there's a lot of hope. But the landlord has 0:17:17.280 --> 0:17:19.320 to do the work. The landlord has to work with 0:17:19.440 --> 0:17:22.480 the individual household and get them to cooperate with the 0:17:22.520 --> 0:17:26.240 submission of an application to the municipal authority in order 0:17:26.240 --> 0:17:27.879 to get in the line. And then you have to 0:17:27.920 --> 0:17:30.720 get in line after that. And wait, isn't your impression 0:17:30.760 --> 0:17:33.320 this is a timing issue, as we might say in business, 0:17:33.640 --> 0:17:36.760 or a fundamental issue is to say billion dollars has 0:17:36.800 --> 0:17:38.760 been appropriate. I think three or four billion has been spent. 0:17:39.119 --> 0:17:41.560 When it comes out, that's gonna really address much of 0:17:41.640 --> 0:17:43.840 the problem. I think it will address a lot of 0:17:43.920 --> 0:17:46.720 the past two problem and a little bit of the 0:17:46.920 --> 0:17:51.399 current problem. It's not a permanent solution. We've got to 0:17:51.440 --> 0:17:54.280 get people back to work and we've got to get 0:17:54.520 --> 0:17:58.640 into a normalized economic situation as far as rendership goes, 0:17:59.200 --> 0:18:01.879 and we are moving in that direction because more and 0:18:02.000 --> 0:18:07.200 more people are paying their rent. So the headlines always 0:18:07.200 --> 0:18:08.960 talk about the folks that aren't, but we have to 0:18:09.040 --> 0:18:12.199 remember that over the people are paying their rent. They 0:18:12.240 --> 0:18:16.320 are protecting their livelihoods, their households, and their families, and 0:18:16.359 --> 0:18:18.480 they're doing the right thing. As I listened to you, 0:18:18.640 --> 0:18:20.760 as I read about this, it sounds like this is 0:18:20.800 --> 0:18:24.680 a somewhat troubled business right now. Is investing in and 0:18:24.840 --> 0:18:27.600 owning rental units right now? Is that a good business? 0:18:27.800 --> 0:18:29.639 If you read the headlines, you would say it's not. 0:18:30.440 --> 0:18:33.600 But there's really two different worlds. The investment world, uh 0:18:33.920 --> 0:18:37.800 seems to be running counter to the headlines, and multi 0:18:37.840 --> 0:18:40.639 family investment is extremely robust in the country right now 0:18:41.400 --> 0:18:45.600 because the landlords and the corporate owners and folks believe 0:18:45.760 --> 0:18:49.960 that things will normalize. Things have improved, Rents are going 0:18:50.320 --> 0:18:54.000 up in certain areas UH, and the business model is 0:18:54.200 --> 0:18:58.640 very very sound, so the investment climate is quite robust. 0:18:59.119 --> 0:19:02.600 What makes it a good business is it a cash business? 0:19:02.680 --> 0:19:04.479 That is to say, you don't have to invest very 0:19:04.560 --> 0:19:08.640 much more. You can sort of really receive rents ongoing 0:19:08.720 --> 0:19:11.880 from the current investments. What's always made apartments of good 0:19:11.880 --> 0:19:14.680 business is what you just said, the durability of the 0:19:14.760 --> 0:19:19.400 cash flow streams. People can invest twenty or thirty percent 0:19:19.480 --> 0:19:23.000 of the value of a building and borrow at at 0:19:23.119 --> 0:19:26.760 rates today that are very very attractive UH fixed rate 0:19:26.840 --> 0:19:29.639 loans or in the sub four percent range and variable 0:19:29.720 --> 0:19:32.200 rate loans or as low as three percent or even lower. 0:19:33.000 --> 0:19:36.560 And if they can buy UH at a cash on 0:19:36.720 --> 0:19:39.640 cash return of say five or six percent, they're making 0:19:39.680 --> 0:19:43.320 a spread of their money. Rents do grow and there 0:19:43.480 --> 0:19:48.320 is economic benefits through depreciation and other factors that improve 0:19:48.440 --> 0:19:51.320 that durability of cash flow over a long period of time. 0:19:51.560 --> 0:19:54.919 And finally, Bob, are you seeing inflation because we hear 0:19:55.000 --> 0:19:58.960 some economists concerned about the possibility of rising housing prices, 0:19:59.440 --> 0:20:01.320 both on the ownership side on the world side. Are 0:20:01.359 --> 0:20:03.760 you seeing that in your units are you raising prices? 0:20:04.080 --> 0:20:07.600 We are. We're trying to do so thoughtfully because we 0:20:07.640 --> 0:20:10.480 don't want to price out the renter. But we're facing 0:20:11.080 --> 0:20:15.440 higher labor costs, higher costs of goods when we're renovating 0:20:16.200 --> 0:20:18.320 and and so forth. So we are in fact seeing 0:20:19.200 --> 0:20:23.400 core inflation. It's not spiraling, but we are seeing inflation. Okay, Bob, 0:20:23.440 --> 0:20:25.399 thank you so very much, Really appreciate you being with 0:20:25.520 --> 0:20:28.000 us today. On Wall Street Week. That is Bob Hart. 0:20:28.320 --> 0:20:32.520 He is CEO of True America. Coming up staffing the FED. 0:20:32.960 --> 0:20:36.320 We ask our special contributor Larry Summers about what leadership 0:20:36.440 --> 0:20:40.200 the FED needs going forward as President Biden considers whether 0:20:40.320 --> 0:20:43.480 to make some changes at the top. That's next on 0:20:43.600 --> 0:20:52.760 Wall Street Week on Bloomberg. This is Bloomberg Wall Street 0:20:52.800 --> 0:20:56.720 Week with David Weston from Bloomberg Radio. No one ever 0:20:56.880 --> 0:20:59.240 said that the job of fit share is an easy one. 0:20:59.600 --> 0:21:01.960 But when J. Powell moved up to the big chair, 0:21:02.200 --> 0:21:04.800 he couldn't have known that he'd be faced with a pandemic, 0:21:05.160 --> 0:21:07.840 an economy brought to an abrupt stop, and that he'd 0:21:07.880 --> 0:21:10.159