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Speaker 1: Bloomberg Audio Studios, podcasts, radio news. You're listening to the

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Speaker 1: Bloomberg Intelligence Podcast. Catch us live weekdays at ten am

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Speaker 1: Bloomberg Business app. Listen on demand wherever you get your podcasts,

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Speaker 1: or watch us live on YouTube.

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Speaker 2: So lion Elbasel. If you don't know the company, takers

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Speaker 2: lyb It's basically a chemicals company. It's thirty billion dollar

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Speaker 2: chemicals company, think things like plastic. It is also doing

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Speaker 2: a lot of shift into sustainability, retrofitting certain plans to

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Speaker 2: make greener stuff. And this stuff is important because it's

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Speaker 2: things we use every single day and the most mundane things,

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Speaker 2: and it's difficult to really decarbonize those sectors. Joining us

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Speaker 2: now is Tracy Campbell, Executive VP of Sustainability and Corporate Affairs,

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Speaker 2: but she's held many positions within the company.

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Speaker 3: Tracy, great to see you.

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Speaker 4: Thank you. It's a pleasure to be here, and who

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Speaker 4: doesn't want to be in midtown Manhattan on a day

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Speaker 4: like today. Thank you.

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Speaker 2: That means it's nice out right. Okay, we'll take your reustry.

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Speaker 2: So let's just start with the macro for a second,

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Speaker 2: because for those for those viewers who don't know. Devis

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Speaker 2: Hell makes all the stuff we need, plastics, ethylene, all

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Speaker 2: the things. How's it going, like, what's demand like right now?

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Speaker 4: You know, demand has been very steady, certainly in the Americas,

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Speaker 4: and I think demand got a bit of a boost

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Speaker 4: yesterday the economy did as well. So we're excited about that.

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Speaker 4: And while yes, some of the global markets are substantially weak. China,

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Speaker 4: for example, is an important market, but we're not as

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Speaker 4: exposed there as others. And of course you're up's a

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Speaker 4: bit slow to recover as well. But no, we're really

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Speaker 4: excited about about the demand that we're seeing here in

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Speaker 4: the Americas. And I've been in the industry for more

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Speaker 4: than thirty five years. I've lived through this cycle of

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Speaker 4: low demand and strong demand, and we don't subscribe to

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Speaker 4: this doom and gloom that you hear out there. So

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Speaker 4: we're excited about the recovery that we're going to see because,

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Speaker 4: as you said, Alex, we make the materials that people

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Speaker 4: count on every single day, and that's fundamentally not changing.

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Speaker 5: How does a company like yours and any global petro

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Speaker 5: chemical company, plastics company, how do they balance the business requirements,

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Speaker 5: grow the business, invest delivered profits for shareholders, and then

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Speaker 5: make this transition to maybe a cleaner business. How do

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Speaker 5: you guys balance that?

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Speaker 4: In general, we see it as an end When you

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Speaker 4: think about the value play that we have for more

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Speaker 4: sustainable products, whether they're more circular, perhaps they're low emission products.

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Speaker 4: We believe that that's a value proposition for the company

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Speaker 4: as itself, and we have a play there because we

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Speaker 4: can bring these products to market at scale. We're not

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Speaker 4: doing it for the greater good of society, while that's

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Speaker 4: an added benefit, We're doing it because we believe it's

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Speaker 4: a creative to earnings in the long run. So there

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Speaker 4: are consumers and brand owners out there that are looking

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Speaker 4: for those materials.

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Speaker 3: So in what sense does this happen.

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Speaker 2: Is it like we're going to use greener feedstock to

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Speaker 2: make stuff, Is it we're going to use alternative energy,

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Speaker 2: renewable energy to run our plant? Or is it we're

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Speaker 2: going to capture any sort of emissions? And then with it,

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Speaker 2: like what's the strategy?

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Speaker 4: There are multiple strategies there, and I think you hit

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Speaker 4: on quite a few of them. If you think about

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Speaker 4: our strategy as a company. We still believe that our

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Speaker 4: core petrochemical business is here to stay. However, we can

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Speaker 4: change the way we operate the feedstocks we use the

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Speaker 4: type of like you said, renewable energy and things like

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Speaker 4: that to lower the emissions that are being generated as

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Speaker 4: we make these materials. You know, another core piece of

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Speaker 4: our strategy is to really again leveraging our core business

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Speaker 4: to fund a much less capital intensive ecosystem for circular products,

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Speaker 4: for things waste materials being brought back into our system

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Speaker 4: and using those as the feedstocks essentially for the products

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Speaker 4: of the future. So really, there is renewable energy, there

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Speaker 4: is low carbon emissions, There is technology out there for

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Speaker 4: carbon capture and utilization. All of these are part of

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Speaker 4: the transition, including hydrogen for example, to bring either fossil

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Speaker 4: based materials or renewable and recyclable materials to the market

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Speaker 4: that we're looking at all of those.

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Speaker 5: I know, I mean, your company is truly a global company.

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Speaker 5: Roughly half the revenue in the US, half your revenue

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Speaker 5: outside the.

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Speaker 4: US, roughly, right, How is it?

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Speaker 5: How are the requirements or the environments for maybe migrating

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Speaker 5: your company to a more eco friendly business model. Is

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Speaker 5: it different in the US and it is outside the US?

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Speaker 4: I think the pace of change is different in different

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Speaker 4: parts of the world, but we see that change happening

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Speaker 4: on a global scale. For example, in Europe earlier today,

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Speaker 4: fact in Germany you'll see our press release soon. We

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Speaker 4: are laying the foundation stone of our advanced, our first

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Speaker 4: scalable advanced recycling unit, and we see the Germans sort

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Speaker 4: of and the Europeans advancing quickly right with respect to

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Speaker 4: embracing circular and low carbon. But it is we are

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Speaker 4: seeing the same trends here in the United States and

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Speaker 4: even with our joint ventures and our activity in Asia.

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Speaker 4: So it's just happening at a different time scale, but

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Speaker 4: the momentum and energy and the excitement around those products

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Speaker 4: is really not different. The policies might be a little

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Speaker 4: bit different depending on what country we're operating in, but

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Speaker 4: our direction is still the same. So we're very excited

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Speaker 4: about that announcement today in Germany.

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Speaker 3: So talk me about costs for a second.

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Speaker 2: So the working theory is that when you make stuff green,

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Speaker 2: it costs more. So a is that even true? And

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Speaker 2: if it is, how do you offset those costs? I mean, yeah,

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Speaker 2: and how do you offset it? Like do you wind

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Speaker 2: up having the cost end user have to pay more,

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Speaker 2: or there are different ways it's offset, even if it's

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Speaker 2: from policy like tax credits.

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Speaker 4: You know, when technology it's new, and when you're transitioning technology,

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Speaker 4: yes there are investments that need to be made, need

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Speaker 4: to be made to accelerate that transition. So you know,

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Speaker 4: I don't think in the long run the materials will

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Speaker 4: cost more. But the transition, of course is what where

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Speaker 4: the investment is tricky, right, and we need to look

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Speaker 4: at that. But if you look at consumer demand for

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Speaker 4: these materials, if you look at the governments programs that

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Speaker 4: are out there to accelerate the transition. The unit that

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Speaker 4: I spoke about that we're laying the foundation stone in

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Speaker 4: Germany just this morning was a recipient of a European

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Speaker 4: Innovation Fund, you know, millions of dollars to help us

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Speaker 4: with transition. But we really see the consumers stepping up,

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Speaker 4: the brand owners stepping up, and I think over time

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Speaker 4: the technology to make this transition. Tax credits for example

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Speaker 4: for hydrogen production, for hydrogen consumption are important as well.

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Speaker 4: So I really see a lot of activity in that

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Speaker 4: space to help us transition.

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Speaker 5: Jason from Omaha, Nebraska Rights and how have ocean Freight

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Speaker 5: costs affected the US ability to export our cheaper plastics

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Speaker 5: to the rest of the world ocean.

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Speaker 4: You know, I'm not an expert on ocean rates anymore. Okay,

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Speaker 4: at one point in my career, I can still plan

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Speaker 4: on radio. Yeah I can still Yeah, pretend. But you

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Speaker 4: know what we think about as our company, we really

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Speaker 4: focus on differentiating our assets in terms of feedstock advantages,

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Speaker 4: technology advantages, scale advantages. So do we have assets in

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Speaker 4: regions that depend on ocean freight. Absolutely, we have JVS

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Speaker 4: in the Middle East, We're growing there. We have owned

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Speaker 4: assets in the United States, and yes, we do export

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Speaker 4: these materials and we stay on top and we actually

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Speaker 4: have a supply chain organization and is constantly looking at

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Speaker 4: the optimization of freight to make sure we can deliver

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Speaker 4: those materials to market very competitively.

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Speaker 2: In terms of all of it, the transition, dealing with

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Speaker 2: current slowdown in Europe and Asia, etc. And this comes

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Speaker 2: from Ryan Hornan. So see, I'm going to ask your question,

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Speaker 2: do you think that animal spirits will awaken and we

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Speaker 2: get more M and A in the chemical space with

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Speaker 2: those low rates? And I would add on, are you

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Speaker 2: kind of forced to make acquisitions or even boltons as you're.

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Speaker 3: Also making this energy transition.

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Speaker 4: You know, growth is important to us, and I talked

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Speaker 4: about growing and upgrading our core and even growing this

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Speaker 4: circular and low carbon economy that we're looking at. So

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Speaker 4: I think M and A is always part of our

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Speaker 4: part of our optionality.

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Speaker 6: Right.

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Speaker 4: You've seen us grow our footprint in the Middle East.

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Speaker 4: I lived in Asia recently where we grew some footprints,

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Speaker 4: we grew some joint venors over there. So I think

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Speaker 4: M and A is always going to be in the

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Speaker 4: cards for us. And we do see ourselves as a

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Speaker 4: consolidator and a very efficient, scalable provider of these circular

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Speaker 4: and low carbon solutions. So there's a lot of activity

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Speaker 4: that we're doing there to consolidate feedstock acquisition, to build

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Speaker 4: these integrated hubs in order to have a very scalable

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Speaker 4: and optimized delivery system for these materials of the future.

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Speaker 4: So M and A is always an option for companies

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Speaker 4: of our size for sure.

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Speaker 5: Again, as a global company, I'm guessing you guys have

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Speaker 5: a vested interest in all this talk coming into Washington

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Speaker 5: to various degrees various parties about tariffs and things like that.

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Speaker 5: Does that impact your business? Has it impacted your business

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Speaker 5: over the last four or five years.

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Speaker 4: And you know, tariffs to me are I'm a believer

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Speaker 4: in a free market economy, right, and I think tariffs

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Speaker 4: in the long run tend to hurt to hurt that.

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Speaker 4: So you know, we really are positioning our company need

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Speaker 4: to be resilient no matter the outcome of any election

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Speaker 4: in the world. So you know, we're making sure that

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Speaker 4: we've got the right products, the right assets. We have

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Speaker 4: that differentiation to really be successful regardless of whether a

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Speaker 4: particular person wants to have tariffs or not.

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Speaker 3: So that was a very That was an SVP answer.

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Speaker 4: I try to be an enterprise thinker.

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Speaker 3: It's fair.

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Speaker 2: It's fair when we talk about the cost situation. And

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Speaker 2: this also plays into Paul's tariff question. Do you secure

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Speaker 2: customers for your products and that then help you build

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Speaker 2: the product, or after it's done, you have to go

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Speaker 2: out and sell them And what is both?

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Speaker 3: What do both of those processes look like?

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Speaker 4: We work with brand owners and with customers to build

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Speaker 4: the future materials and to help design those applications, so.

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Speaker 2: They have to commit to stuff. They have to be

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Speaker 2: like we will give you this much money for this

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Speaker 2: much product.

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Speaker 4: We work with them right from the early stage of

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Speaker 4: concepts through designed through perhaps a long term contract for example.

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Speaker 4: But yeah, having that being solutions provider requires us to

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Speaker 4: really develop those materials together.

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Speaker 2: Is it hard to come up with those numbers right

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Speaker 2: now with your customers in terms of pricing?

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Speaker 7: You know?

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Speaker 4: I don't think so. I think it's always been. We've

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Speaker 4: always worked with our customers and with downstream, so the

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Speaker 4: entire value chain to really design the materials that you know,

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Speaker 4: consumers like ourselves are looking for. So yes, as we

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Speaker 4: work through that process, we're looking at our cost to

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Speaker 4: deliver the material, the intermediate, the converter costs, the custom

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Speaker 4: consumer costs. But I don't think. I don't think the

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Speaker 4: uncertainty is any more, you know, is any higher than

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Speaker 4: it's ever been. Frankly, I think it's just something that

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Speaker 4: we're always making sure that we design for all options

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Speaker 4: and we have the flexibility to pivot if we need to.

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Speaker 3: All Right, Tracy, so great.

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Speaker 2: I've been trying to get Tracy on for like since

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Speaker 2: what February March LA here. Yeah, yes, it's great to

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Speaker 2: be Thank you so much, really appreciate I know you're

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Speaker 2: here for Climate Weeks. I'm looking forward to what will

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Speaker 2: come out and yes as well, Tercy Campbell joining us.

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Speaker 3: There your titles long is SVP of No, I'm trying

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Speaker 3: to find it.

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Speaker 5: I've got executive stainability over affairs.

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Speaker 2: Oh, come on an email, Alex, come on, all right, trades,

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Speaker 2: appreciate that. Joining us from mine elvisl on all things

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Speaker 2: energy transition when it comes to petro chemicals.

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Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live

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Speaker 1: weekdays at ten am Eastern on applecard Play and Android

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Speaker 1: Auto with the Bloomberg Business. You can also listen live

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Speaker 1: on Amazon Alexa from our flagship New York station. Just

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Speaker 1: say Alexa play Bloomberg eleven thirty.

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Speaker 2: Markets at a record there's some serious volume coming into play.

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Speaker 2: I was talking to one market technician who was like,

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Speaker 2: we get options expiration tomorrow. You gotta reshuffle your delta,

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Speaker 2: which I guess is a fancy option word. So that's

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Speaker 2: why you're seeing a lot of the flows here. Emily

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Speaker 2: Rowland is co chief investment strategist for John Hancock Investment Management,

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Speaker 2: and she joins us. Now, Emily, do I just blame

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Speaker 2: technicals an options expiration or is this some serious, real fomore.

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Speaker 3: Yeah?

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Speaker 8: No, I think that that's probably some noise that does

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Speaker 8: a curve periodically. You know, Look, markets are celebrating today.

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Speaker 8: We're near new all time highs or kissing them, as

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Speaker 8: you said earlier, and I think there's a lot of

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Speaker 8: relief around this Dubvish pivot that the Fed has taken.

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Speaker 9: Here.

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Speaker 8: There was a bit of confusion in the markets yesterday

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Speaker 8: after Powell came out and told us not to get

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Speaker 8: too excited that more fifty basis point CODs aren't coming.

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Speaker 8: But I think overall, it was a Dubvish FED meeting

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Speaker 8: and it looks like markets can continue sunning themselves on

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Speaker 8: soft Landing Island.

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Speaker 2: Very nice Netflix Season one.

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Speaker 5: Hey, we've actually got a yield curve that's steepening here.

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Speaker 5: We got the two year at three point five eight percent,

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Speaker 5: ten years three point seven two percent.

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Speaker 7: What does that tell you?

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Speaker 8: Yeah, I mean you're bond yields came a long way

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Speaker 8: prior to this Dubvish FED meeting yesterday, So I think

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Speaker 8: you're seeing a little bit of repricing there across the curve.

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Speaker 8: You know, I think that we could see some chopping

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Speaker 8: rates from here as we kind of navigate through this

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Speaker 8: environment where there's kind of some better than expected economic data.

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Speaker 8: You know, maybe we're continuing to see some broad deceleration,

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Speaker 8: but again, this deceleration is happening slowly enough that it's

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Speaker 8: sort of providing this perfect backdrop for the Fed to,

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Speaker 8: you know, to continue to implement rate cuts amidst a

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Speaker 8: decelerating economic environment. It's going to happen in choppy fashion,

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Speaker 8: but for now, I think you're kind of going to

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Speaker 8: see rates hold steady. As yesterday was a big event.

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Speaker 8: We've gotten through it and we'll see what happens from here.

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Speaker 2: So do you chase here or is there something on

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Speaker 2: your shopping list or is it just a rotation at

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Speaker 2: this point?

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Speaker 8: Yeah, I mean we would look at any backup in

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Speaker 8: bond yields is a nice opportunity to lean in income.

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Speaker 3: There is still elevated.

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Speaker 8: Of course, yields have come down a lot over the

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Speaker 8: course of this summer, but we still don't think that

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Speaker 8: bonds have fully sniffed out this disinflationary, lower growth environment.

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Speaker 8: So we'd like higher quality areas like mortgage backed securities,

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Speaker 8: investment great corporate bonds, sprinkle in a little bit of

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Speaker 8: treasuries there. So we think there's a buying opportunity there.

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Speaker 8: You know, stocks are fully reflective of this soft landing backdrop.

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Speaker 8: We continue to embrace higher quality stocks, and we're looking

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Speaker 8: for areas that provide quality at a reasonable price as well,

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Speaker 8: so we would be leaning into things like healthcare stocks.

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Speaker 8: We're legging into more defensive areas of the market like

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Speaker 8: utilities and infrastructure equities. And we continue to see US

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Speaker 8: mid cap stocks is a big beneficiar area of onshoring

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Speaker 8: activity and the fiscal spending that's still happening against this

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Speaker 8: this this decent economic backdrop.

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Speaker 5: Emily, when you get big moves into market like we're

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Speaker 5: seeing today, that kind of just raises the valuation flag

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Speaker 5: for a lot of investors. How are you kind of

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Speaker 5: thinking about valuation any equity markets?

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Speaker 8: Yeah, I mean it's not great, I'll tell you. You know,

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Speaker 8: certainly with markets you know, bumping up on twenty one

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Speaker 8: twenty two times forward earnings, I think are well priced

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Speaker 8: for this soft landing scenario that we've been talking about.

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Speaker 8: You know, and you look at areas like technology stops

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Speaker 8: which are trading at thirty times forward earnings, which is

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Speaker 8: about as high as we've gotten over the last cycle.

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Speaker 8: It's not the fifty times forward earnings that we saw

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Speaker 8: in the late nineteen nineties. So I think the froth

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Speaker 8: is is a bit of a concern. But I would

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Speaker 8: tell you that valuations just simply aren't a catalyst for

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Speaker 8: a market rotation. They haven't been historically. I think you'd

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Speaker 8: need to really see some kind of shift in the

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Speaker 8: economic regime. You'd have to see a big shift in

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Speaker 8: earnings trends to really see that market leadership change. And

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Speaker 8: you know, you can blame a lot of things on

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Speaker 8: the multiple expansion that we've seen in technology, but you

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Speaker 8: can't blame the denominator. The earnings have been there for

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Speaker 8: these companies, which makes us continue to be constructive there.

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Speaker 2: Which also the reason of the question, how where do

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Speaker 2: you go in terms of large, mid small? So I've

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Speaker 2: been reading a lot about, particularly from Bank of America,

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Speaker 2: how maybe this is the time for midcaps? And mid

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Speaker 2: caps hit a record high yesterday, they outro foot today,

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Speaker 2: they outperformed yesterday, Like, is not the sweet spot for

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Speaker 2: that environment that you're talking about?

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Speaker 8: Yeah, midcaps are the sweet spot for us. You know,

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Speaker 8: when you go down into small caps, you're looking at

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Speaker 8: companies that are unprofitable, they have higher interest burdens. You know,

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Speaker 8: the Rustle of two thousand is comprised about forty percent

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Speaker 8: of that index is comprised of companies that don't make money.

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Speaker 8: They could do really well in an early cycle environment,

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Speaker 8: but we just don't think that we're there yet. And

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Speaker 8: you see these little rallies in small cap equities based

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Speaker 8: on the idea that rates are coming down. But remember

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Speaker 8: rates are coming down because there's a challenge with growth,

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Speaker 8: and we think that that does not benefit the most

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Speaker 8: cyclical areas, namely small caps. Moving up into MidCap equities,

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Speaker 8: you get a big overweight to the industrial sector. So

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Speaker 8: think about the relative sector composition there, and we think

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Speaker 8: mid cap industrials are massive beneficiaries of the spending that's

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Speaker 8: happening in the US. There's a manufacturing renaissance happening right

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Speaker 8: now in the US Midwest due to onshoring and due

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Speaker 8: to things like the Chips Act and the Infrastructure and

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Speaker 8: Jobs Act. So we want to look to mid caps

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Speaker 8: as a way to capture that. They're also trading at

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Speaker 8: the deepest discount to their large cap counterparts since the

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Speaker 8: late nineteen nineties, so you're not overpaying for this theme.

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Speaker 5: Emily, how do you feel about the earnings backdrop here

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Speaker 5: for the.

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Speaker 8: Market, Well, I love it going into the third quarter

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Speaker 8: because the bar is low. It's actually analysts are penciling

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Speaker 8: in four point three percent earnings growth as we look

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Speaker 8: forward to the next quarter's earning.

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Speaker 3: Season, So we love a low bar there.

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Speaker 8: I think we should enjoy it while we can because

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Speaker 8: Q four earnings growth is penciled in to be about

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Speaker 8: fifteen percent, and then analysts are looking at fifteen percent

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Speaker 8: into next year. So not only is the market trading

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Speaker 8: at an elevated valuation, but that's also against expectations that

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Speaker 8: we're going to see about fifteen percent earnings growth next year.

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Speaker 8: That's probably a bit optimistic, so we may see a

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Speaker 8: challenge to that right now. Multiple expansions helping as we

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Speaker 8: continue to embrace the fad pivot here and the soft landing,

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Speaker 8: but ultimately the earnings need to come through as stock

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Speaker 8: prices over time, we're going to follow profits and follow earnings,

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Speaker 8: so we think that's going to be critical to watch

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Speaker 8: as we look forward.

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Speaker 3: Emily, great stuff.

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Speaker 2: Really good to see you, Emily Roland, co, Chief Investment

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Speaker 2: Strategies for John Hancock Investment Management, joining us.

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Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live

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Speaker 1: weekdays at ten am Eastern on Apocarplaying and Broyd Auto

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Speaker 1: with the Bloomberg Business app. Listen on demand wherever you

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Speaker 1: get your podcasts, or watch us live on YouTube.

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Speaker 2: It's a good moment to check in on media stuff

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Speaker 2: and media deals. And I read that really interesting article

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Speaker 2: in the Wall Street Journal about how there's going to

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Speaker 2: be a show on Amazon where people get to basically

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Speaker 2: compete to get a slot in the in their big

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Speaker 2: Amazon dot com store. So they're describing it as like

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Speaker 2: Shark Tank meets Home Shopping Network, which.

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Speaker 3: I don't know. For me, you would actually watch this

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Speaker 3: one hundred percent? Would you not? Okay, you're not gonna

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Speaker 3: watch it. Paul, No, that's not his thing. KEITHA helped

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Speaker 3: me out.

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Speaker 2: Keithan wrong or not them, Boomberg Intelligence US media analyst.

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Speaker 2: This sounds brilliant to me. Did you see this article?

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Speaker 6: I did not, but it definitely sounds intriguing.

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Speaker 2: So it's a new competition show next month. Entrepreneurs are

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Speaker 2: going to pitch their products to a studio audience as

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Speaker 2: well as to judges including Amazon executives and some celebrities.

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Speaker 2: Like Goop founder Gwyneth Paltrow and designer Christian Siriano, and

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Speaker 2: then finalists will have their inventions sold in a new

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Speaker 2: Amazon Buy It Now online store.

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Speaker 3: That's synergy, That's what I'm saying.

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Speaker 2: Yes, whether or not you watch it, that has some synergy.

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Speaker 2: So she's not gonna watch it. I'm I the only

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Speaker 2: one that gonna watch thinks, So all right, fine, fine,

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Speaker 2: all right, you talk now, Paul.

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Speaker 5: All right, Keitha, thanks so much for joining us here.

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Speaker 5: What I want to talk to you is about is

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Speaker 5: just kind of where are we these days, Githa on

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Speaker 5: cable networks, staying on cable systems like the old days.

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Speaker 5: I know, Warner Brothers Discovery. They have a new deal

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Speaker 5: with Charter. Talk to us about that and why it's important.

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Speaker 6: This was a really big deal for Warner Brothers Discovery.

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Speaker 6: And the reason it's such a big deal is, of course,

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Speaker 6: one thing is ninety percent of Warner Brothers Discoveries profits

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Speaker 6: actually come from its television networks. But the reason it

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Speaker 6: was so critical, and especially from a timing perspective, was

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Speaker 6: because Warner Brothers has just lost its rights to NBA programming.

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Speaker 6: And remember NBA is one of the main draws for TNT,

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Speaker 6: which is their most expensive channel right now in their

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Speaker 6: network lineup, and so there's been a lot of fear,

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Speaker 6: you know, amongst investors that Warner Brothers TV revenue, especially

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Speaker 6: it's affiliate fee revenues, is going to be a tremendous risk.

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Speaker 6: And so this deal actually with Charter, it was actually

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Speaker 6: coming up for renewal only next year, but I guess

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Speaker 6: David Zaslav wanted to go ahead and assuage investor fears,

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Speaker 6: and so he signed this deal a whole year in advance,

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Speaker 6: maintaining the same affiliate fee revenue trajectory. So it's kind

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Speaker 6: of it's definitely provides some temporary relief from an outlook

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Speaker 6: perspective for Warner Brothers.

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Speaker 2: All right, fine, see, but you know they're struggling because

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Speaker 2: there's cool shows like this like Shark Tank and a

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Speaker 2: home shopping network on Amazon now whatever. Fine, all right,

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Speaker 2: so what are their questions? Are still a bubbling up

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Speaker 2: in the media community. There was a great piece on

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Speaker 2: By your Succession a couple of weeks ago talking about

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Speaker 2: that what else are you focusing on?

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Speaker 6: The carriage continues to be a big, you know, a

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Speaker 6: big bone of contention across the whole TV space, Alex.

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Speaker 6: I mean, yes, we had this Warner Brothers Discovery each

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Speaker 6: Other deal, which was somewhat of a low drama deal,

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Speaker 6: but there was one that was high drama, and that

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Speaker 6: was actually Disney with Direct TV. Those two companies were

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Speaker 6: fighting it out. There was a blackout of all Disney

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Speaker 6: programming on DirecTV systems for almost two weeks until finally

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00:21:44,480 --> 00:21:47,520
Speaker 6: both of them caved. And you know, Disney obviously wanted

438
00:21:47,520 --> 00:21:49,680
Speaker 6: to have carriage free increases, which I think at got.

439
00:21:50,160 --> 00:21:53,480
Speaker 6: What Direct TV was really looking for was more flexibility

440
00:21:53,520 --> 00:21:56,239
Speaker 6: and you know, programming and packaging, and they got that.

441
00:21:56,760 --> 00:21:59,119
Speaker 6: So we're seeing kind of all these deals become really

442
00:21:59,160 --> 00:22:03,639
Speaker 6: contentious as kind of the whole video A landscape keeps shifting,

443
00:22:03,680 --> 00:22:06,399
Speaker 6: so carriage continues to be a really big thing. And

444
00:22:06,440 --> 00:22:08,320
Speaker 6: then the other thing is, of course, we have you know,

445
00:22:08,359 --> 00:22:10,560
Speaker 6: the M and A chatter coming up every now and then.

446
00:22:10,680 --> 00:22:13,280
Speaker 6: The most recent one, of course, was direc TV with

447
00:22:13,440 --> 00:22:17,160
Speaker 6: Dish that will obviously have huge implications for the entire

448
00:22:17,520 --> 00:22:18,680
Speaker 6: TV landscape.

449
00:22:19,520 --> 00:22:22,280
Speaker 5: So let's switch gears a little bit to a business

450
00:22:22,280 --> 00:22:25,360
Speaker 5: that I think is actually investors still like, and that's

451
00:22:25,359 --> 00:22:27,520
Speaker 5: just a theme park business. We think theme parks, we

452
00:22:27,560 --> 00:22:29,960
Speaker 5: think the Walt Disney company. I'll be down a Walt

453
00:22:30,000 --> 00:22:32,120
Speaker 5: Disney World in a few weeks doing some due diligence.

454
00:22:32,840 --> 00:22:37,160
Speaker 5: But Comcast also has a big theme park business. Talk

455
00:22:37,160 --> 00:22:39,560
Speaker 5: to us about their theme park business and the investments

456
00:22:39,560 --> 00:22:42,040
Speaker 5: they're making and how important it is to that company.

457
00:22:42,800 --> 00:22:44,800
Speaker 6: Oh, absolutely so with Comcast. I mean when we think

458
00:22:44,800 --> 00:22:46,520
Speaker 6: of Comcasts, we always think of the cable business, and

459
00:22:46,840 --> 00:22:49,720
Speaker 6: rightly so. Cable actually makes up eighty percent of their ibadah.

460
00:22:50,119 --> 00:22:52,200
Speaker 6: But the one area that has kind of been ignored

461
00:22:52,200 --> 00:22:54,280
Speaker 6: for Comcast I think over the past few years has

462
00:22:54,320 --> 00:22:57,240
Speaker 6: been their NBC division, and NBC through Universal of course,

463
00:22:57,520 --> 00:23:00,680
Speaker 6: not only owns TV Networks studios, but also the theme parks.

464
00:23:00,800 --> 00:23:03,320
Speaker 6: And the big thing for Comcasts and its theme parks

465
00:23:03,359 --> 00:23:06,280
Speaker 6: is they're actually opening a whole new theme park next year,

466
00:23:06,320 --> 00:23:09,960
Speaker 6: which is Epic Universe in Orlando. It actually doubles their

467
00:23:10,160 --> 00:23:12,919
Speaker 6: entire Orlando footprints, So they go from about eight hundred

468
00:23:12,920 --> 00:23:16,480
Speaker 6: acres right now in Orlando to almost sixteen hundred acres

469
00:23:16,480 --> 00:23:19,679
Speaker 6: with this park, and it's going to obviously do you know,

470
00:23:19,840 --> 00:23:23,000
Speaker 6: so much for their attendance. So right now, Universal attracts

471
00:23:23,040 --> 00:23:27,560
Speaker 6: about thirty million subscribers domestically to their parks. Of course,

472
00:23:27,600 --> 00:23:30,080
Speaker 6: the big behemoth is Disney with about eighty two hundred

473
00:23:30,119 --> 00:23:34,440
Speaker 6: million almost domestically. But with this we think Comcast actually

474
00:23:34,520 --> 00:23:36,320
Speaker 6: kind of gets closer to Disney, right, they can get

475
00:23:36,320 --> 00:23:41,159
Speaker 6: about forty forty five million visitors to their domestic parks

476
00:23:41,160 --> 00:23:43,000
Speaker 6: on an annual basis, so it's going to do a

477
00:23:43,000 --> 00:23:45,440
Speaker 6: whole lot for their attendance. And really, Paul, as we

478
00:23:45,520 --> 00:23:48,000
Speaker 6: kind of see the business going out, we think, you know,

479
00:23:48,080 --> 00:23:50,600
Speaker 6: theme parks almost it used to be a few years ago,

480
00:23:50,640 --> 00:23:54,040
Speaker 6: theme parks was about twenty five percent of NBC's profit.

481
00:23:54,480 --> 00:23:56,320
Speaker 6: In a few years, we think theme parks can actually

482
00:23:56,320 --> 00:23:58,159
Speaker 6: be fifty percent of NBC's profit.

483
00:23:58,880 --> 00:24:01,520
Speaker 3: That's fascinating. Well, it's it is and it's not.

484
00:24:01,720 --> 00:24:03,639
Speaker 5: It's good because the theme bark business is growing, but

485
00:24:03,680 --> 00:24:05,840
Speaker 5: it also reflects the fact that their cable network business

486
00:24:06,119 --> 00:24:09,560
Speaker 5: is declining dramatically and that's the cashal historically.

487
00:24:09,240 --> 00:24:12,159
Speaker 2: A good point, I guess. I wonder though too, that

488
00:24:12,320 --> 00:24:15,840
Speaker 2: is that also more recession proof or not? Like what

489
00:24:15,960 --> 00:24:19,119
Speaker 2: goes first? Ad spending for a linear TV or people

490
00:24:19,160 --> 00:24:20,480
Speaker 2: not taking their kids to Disneyland.

491
00:24:20,600 --> 00:24:22,639
Speaker 3: Is there an Avengers theme park. Do we note? I

492
00:24:22,680 --> 00:24:25,200
Speaker 3: don't know why am I asking Paul? All right?

493
00:24:25,240 --> 00:24:28,119
Speaker 2: Anyway, thanks Ethan, We appreciate you. Geith the wrong and

494
00:24:28,160 --> 00:24:31,360
Speaker 2: not then. Bloomberg Intelligence US media analysts.

495
00:24:33,000 --> 00:24:36,879
Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live

496
00:24:36,960 --> 00:24:40,480
Speaker 1: weekdays at ten am Eastern on applecar Play and Android

497
00:24:40,480 --> 00:24:43,280
Speaker 1: Auto with the Bloomberg Business app. You can also listen

498
00:24:43,400 --> 00:24:46,480
Speaker 1: live on Amazon Alexa from our flagship New York station,

499
00:24:46,840 --> 00:24:49,600
Speaker 1: Just say Alexa playing Bloomberg eleven thirty.

500
00:24:51,080 --> 00:24:53,240
Speaker 2: All right, let's get to David Koodlan now, a founder

501
00:24:53,280 --> 00:24:55,919
Speaker 2: and CEO and chief investment strategist, I should say at

502
00:24:55,960 --> 00:24:59,119
Speaker 2: Mainstay Capital Management, He joins us. Now, hey, David, are

503
00:24:59,160 --> 00:25:00,440
Speaker 2: you buying into this record rally?

504
00:25:00,480 --> 00:25:00,640
Speaker 10: Here?

505
00:25:01,880 --> 00:25:03,520
Speaker 11: We're buying into this record rally.

506
00:25:04,560 --> 00:25:06,920
Speaker 9: I know that there are many who are still concerned

507
00:25:06,920 --> 00:25:11,040
Speaker 9: about a recession, that are worried at that price, the

508
00:25:11,080 --> 00:25:14,920
Speaker 9: price of stocks at these levels, we're at new highs.

509
00:25:15,480 --> 00:25:20,040
Speaker 9: But look what we've seen here now, with this cut

510
00:25:20,119 --> 00:25:25,280
Speaker 9: yesterday and what we have going forward, we're you know,

511
00:25:25,320 --> 00:25:28,840
Speaker 9: if there's such a thing as a Goldilocks scenario, we're

512
00:25:28,840 --> 00:25:31,400
Speaker 9: about as close as we can be to it. So

513
00:25:31,800 --> 00:25:35,800
Speaker 9: you know, I've had the expression for the last two years,

514
00:25:35,840 --> 00:25:38,639
Speaker 9: the recession that's always six months away. The recession is

515
00:25:38,640 --> 00:25:42,679
Speaker 9: always six months away. GDP now right now Atlanta GDP

516
00:25:42,840 --> 00:25:46,000
Speaker 9: now for the third quarters at two point nine percent.

517
00:25:46,040 --> 00:25:48,119
Speaker 11: We had three percent growth in the second quarter.

518
00:25:49,040 --> 00:25:51,760
Speaker 9: We're looking for We're still looking for that soft landing

519
00:25:51,800 --> 00:25:55,040
Speaker 9: that the FED rarely pulls off, so more of a

520
00:25:55,080 --> 00:25:58,919
Speaker 9: mid cycle slow down and then we slowly reaccelerate and

521
00:25:59,359 --> 00:26:02,439
Speaker 9: we don't get that recession. And if that's the case,

522
00:26:02,840 --> 00:26:06,119
Speaker 9: twelve months later after a first rate cut, stocks are

523
00:26:06,200 --> 00:26:10,520
Speaker 9: higher and significantly higher. If you get a recession after

524
00:26:10,560 --> 00:26:14,719
Speaker 9: a first rate cut, stocks are lower. So that's what

525
00:26:14,760 --> 00:26:17,919
Speaker 9: we're pivoting on. But we're still optimistic and constructive on

526
00:26:18,000 --> 00:26:20,720
Speaker 9: stocks at this point.

527
00:26:21,160 --> 00:26:23,560
Speaker 5: So, David, I think when I listen to some folks

528
00:26:23,600 --> 00:26:25,600
Speaker 5: that are still constructive on the market, they just kind

529
00:26:25,600 --> 00:26:26,840
Speaker 5: of I think they hang their hat on a couple

530
00:26:26,880 --> 00:26:28,360
Speaker 5: of things, which is one, I've got to fed the

531
00:26:28,359 --> 00:26:31,320
Speaker 5: cutting rates, and I've got a pretty decent earnings environment.

532
00:26:31,359 --> 00:26:33,720
Speaker 11: That's pretty good. But one of the things that we.

533
00:26:33,880 --> 00:26:36,480
Speaker 5: Just don't know it's an election year, and I don't

534
00:26:36,520 --> 00:26:38,760
Speaker 5: know what that means for the markets. How do you

535
00:26:38,800 --> 00:26:40,560
Speaker 5: guys talk about that to your clients.

536
00:26:41,920 --> 00:26:43,040
Speaker 11: I'm glad you brought that up.

537
00:26:43,080 --> 00:26:48,320
Speaker 9: You know, we get preoccupied with politics as it relates

538
00:26:48,359 --> 00:26:52,399
Speaker 9: to our investment strategy. And when I say that, I

539
00:26:52,440 --> 00:26:55,359
Speaker 9: mean at average investors out there. You know, there are

540
00:26:55,400 --> 00:26:59,080
Speaker 9: investors that believe if so and so gets elected, it's

541
00:26:59,800 --> 00:27:03,639
Speaker 9: the We're it's doomsday.

542
00:27:04,359 --> 00:27:06,440
Speaker 11: If so and so gets elected, it's nirvana.

543
00:27:06,840 --> 00:27:09,000
Speaker 9: What we find out is, and this is why we'll

544
00:27:09,000 --> 00:27:12,320
Speaker 9: have volatility over the next couple of months until the election,

545
00:27:13,000 --> 00:27:15,560
Speaker 9: is the market's hate uncertainty. So it's about getting that

546
00:27:15,680 --> 00:27:18,080
Speaker 9: uncertainty out of the way. But then it's not as

547
00:27:18,160 --> 00:27:21,760
Speaker 9: much about whether it's Democrat or Republican as far as

548
00:27:21,960 --> 00:27:26,080
Speaker 9: where we invest. As tactical asset allocators, we want to

549
00:27:26,119 --> 00:27:29,520
Speaker 9: look at the difference in policies. There's differences in policies

550
00:27:29,840 --> 00:27:33,919
Speaker 9: and energy and a lot of areas between these two candidates,

551
00:27:33,960 --> 00:27:37,320
Speaker 9: and depending on how the House and Senate go in

552
00:27:37,400 --> 00:27:40,800
Speaker 9: terms of taxes and everything, So that matters as far

553
00:27:40,840 --> 00:27:43,199
Speaker 9: as technically how we invest. But the people that go

554
00:27:43,280 --> 00:27:48,360
Speaker 9: to cash because they're scared, concerned, wait and see end

555
00:27:48,440 --> 00:27:52,720
Speaker 9: up typically in election years, end up suffering an opportunity costs,

556
00:27:52,720 --> 00:27:55,159
Speaker 9: and that's exactly what's happened this year so far for

557
00:27:55,240 --> 00:27:57,080
Speaker 9: people that have stepped to the sidelines.

558
00:27:58,119 --> 00:28:00,520
Speaker 2: Is there a risk by pivot back to the fit

559
00:28:00,560 --> 00:28:02,959
Speaker 2: per second, so put elections on the side. Is there

560
00:28:03,000 --> 00:28:05,120
Speaker 2: a risk that we're going to see kind of more

561
00:28:05,200 --> 00:28:08,480
Speaker 2: growth and demand resurface in a particular way because we're

562
00:28:08,480 --> 00:28:10,840
Speaker 2: in that rate cutting cycle, because we got that jumbo

563
00:28:11,480 --> 00:28:15,639
Speaker 2: rate hike. And is that a risk eventually for resurgence

564
00:28:15,640 --> 00:28:16,200
Speaker 2: and inflation?

565
00:28:17,400 --> 00:28:17,800
Speaker 7: It is.

566
00:28:18,160 --> 00:28:21,200
Speaker 9: It is a risk. But what we've seen so far

567
00:28:22,040 --> 00:28:26,880
Speaker 9: is inflation is on this glide path to the Fed's target.

568
00:28:27,520 --> 00:28:31,879
Speaker 9: If anything, I think with the disinflationary forces that will

569
00:28:31,920 --> 00:28:34,679
Speaker 9: come back into effect as we get by all the

570
00:28:34,760 --> 00:28:39,040
Speaker 9: effects of the pandemic. You know, we may overshoot the

571
00:28:39,080 --> 00:28:41,680
Speaker 9: two percent, but we're certainly on a glide path to

572
00:28:41,760 --> 00:28:46,600
Speaker 9: two percent. And right now, you know where we are

573
00:28:46,640 --> 00:28:47,760
Speaker 9: with the labor market.

574
00:28:48,320 --> 00:28:49,600
Speaker 11: We had some good news today.

575
00:28:50,800 --> 00:28:54,080
Speaker 9: You know, there's still some concern out there about credit

576
00:28:54,120 --> 00:28:58,640
Speaker 9: card debt, credit card industry, auto loan delinquencies, things like that,

577
00:28:58,920 --> 00:29:01,800
Speaker 9: But we balance that all out and we think the

578
00:29:01,800 --> 00:29:07,960
Speaker 9: inflation problem is gone. It's now about labor unemployment. We

579
00:29:08,000 --> 00:29:11,200
Speaker 9: get to the point where that needs to be rates

580
00:29:11,240 --> 00:29:13,680
Speaker 9: come down to, you know, if it's the long term

581
00:29:13,720 --> 00:29:17,200
Speaker 9: neut rate of three percent here through twenty twenty five

582
00:29:17,880 --> 00:29:21,240
Speaker 9: for the Fed funds rate. We're in a good environment

583
00:29:21,280 --> 00:29:25,240
Speaker 9: for stockstill. We know they're expensive, but stocks can be

584
00:29:25,440 --> 00:29:29,120
Speaker 9: we know, overvalued or undervalued for a very very long time.

585
00:29:29,800 --> 00:29:33,560
Speaker 5: All right, David, So what sectors are screening well for

586
00:29:33,600 --> 00:29:35,040
Speaker 5: you these days? Again, we've had an S and P

587
00:29:35,520 --> 00:29:38,880
Speaker 5: five hundred index move about twenty percent year today. But

588
00:29:38,880 --> 00:29:40,760
Speaker 5: I know not everybody's participated. So how are you guys

589
00:29:40,760 --> 00:29:43,120
Speaker 5: approaching maybe like sector selection.

590
00:29:43,640 --> 00:29:47,120
Speaker 9: Right, So you know one area for sure that that's

591
00:29:47,160 --> 00:29:51,840
Speaker 9: been troubled for quite a while, you know, especially a

592
00:29:51,880 --> 00:29:54,760
Speaker 9: while back here with some of the a few of

593
00:29:54,760 --> 00:30:00,640
Speaker 9: the bank failures. But banks, financial services look very good.

594
00:30:00,680 --> 00:30:04,480
Speaker 9: As the yield curve continues to steepen. NIM improves net

595
00:30:04,480 --> 00:30:07,080
Speaker 9: interest margin for the banks. We're finally getting that yield

596
00:30:07,080 --> 00:30:11,360
Speaker 9: curve steepening. So we like the financials a lot. We

597
00:30:11,480 --> 00:30:17,680
Speaker 9: still like technology a lot, the AI story. But what

598
00:30:17,720 --> 00:30:21,240
Speaker 9: we're able to do now we can broaden into value,

599
00:30:21,280 --> 00:30:24,760
Speaker 9: we can broaden into cyclicals, we can broaden into small

600
00:30:24,840 --> 00:30:28,920
Speaker 9: caps and diverse, diverse fire portfolios from the Magnificent seven

601
00:30:29,400 --> 00:30:33,080
Speaker 9: to these other areas. You know, small cap companies are

602
00:30:33,160 --> 00:30:37,720
Speaker 9: far more reliant on debt and with interest rates coming down,

603
00:30:37,720 --> 00:30:40,200
Speaker 9: their costs of capital coming down, maybe coming down a

604
00:30:40,240 --> 00:30:43,040
Speaker 9: lot over the next year. That's good for small caps

605
00:30:43,040 --> 00:30:46,720
Speaker 9: and that's what we've been seeing recently in IWM or

606
00:30:46,720 --> 00:30:48,200
Speaker 9: the Russell two thousand index.

607
00:30:48,840 --> 00:30:50,120
Speaker 3: Mid caps sweet spot.

608
00:30:50,200 --> 00:30:53,440
Speaker 9: You like them mid caps as well. Mid caps the

609
00:30:53,440 --> 00:30:57,000
Speaker 9: same thing. Small and mid caps just become more attractive,

610
00:30:58,560 --> 00:31:01,760
Speaker 9: and mid caps a kind of that sweet spot in between.

611
00:31:01,960 --> 00:31:04,600
Speaker 9: You know, it's been a large cap dominated stock market

612
00:31:04,640 --> 00:31:05,400
Speaker 9: for quite a while.

613
00:31:05,440 --> 00:31:07,680
Speaker 11: We've had a lot of headcake at fakes.

614
00:31:07,480 --> 00:31:10,160
Speaker 9: With small cap in MidCap, but we think they now

615
00:31:10,160 --> 00:31:12,800
Speaker 9: have a runway with raids coming down.

616
00:31:13,920 --> 00:31:15,560
Speaker 5: All right, David, thank you so much for joining us.

617
00:31:15,560 --> 00:31:18,600
Speaker 5: Always appreciate getting a few minutes of your time. David Kudlap,

618
00:31:18,640 --> 00:31:20,720
Speaker 5: he's the founder, he's the CEO, and he's a chief

619
00:31:20,720 --> 00:31:23,640
Speaker 5: investment strategist at Mainstay Capitol Management.

620
00:31:23,680 --> 00:31:24,520
Speaker 11: I call him the boss.

621
00:31:24,600 --> 00:31:24,760
Speaker 7: There.

622
00:31:24,800 --> 00:31:26,080
Speaker 5: I guess basically.

623
00:31:27,480 --> 00:31:31,360
Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live

624
00:31:31,440 --> 00:31:34,960
Speaker 1: weekdays at ten am Eastern on applecard Play and Android

625
00:31:35,000 --> 00:31:37,760
Speaker 1: Auto with the Bloomberg Business App. You can also listen

626
00:31:37,880 --> 00:31:40,960
Speaker 1: live on Amazon Alexa from our flagship New York station.

627
00:31:41,360 --> 00:31:45,080
Speaker 1: Just say Alexa play Bloomberg eleven thirty.

628
00:31:45,840 --> 00:31:47,360
Speaker 11: All Right, the FED cuts rates.

629
00:31:48,280 --> 00:31:49,840
Speaker 5: One of the beneficiaries I would think.

630
00:31:49,760 --> 00:31:51,200
Speaker 11: Would be real estate people.

631
00:31:51,320 --> 00:31:53,600
Speaker 5: People if you want to build a building, develop a building,

632
00:31:53,640 --> 00:31:55,720
Speaker 5: if you want to rent in a building, buying a building.

633
00:31:55,800 --> 00:31:57,280
Speaker 5: I mean, it's got to be good for them, right,

634
00:31:57,400 --> 00:31:59,720
Speaker 5: Money's cheaper. Let's talk to somebody who actually does it

635
00:31:59,720 --> 00:32:02,040
Speaker 5: for being. Mickey enough Tally, chairman and Sea of the

636
00:32:02,080 --> 00:32:05,040
Speaker 5: Naught Tally Group, joined by Abigail Dulo, our market's reporter

637
00:32:05,080 --> 00:32:07,040
Speaker 5: for Bloomberg News, got them all here in a Bloomberg

638
00:32:07,040 --> 00:32:12,040
Speaker 5: Interactive Broker studio. Let's talk luxury condos. I'm asking for

639
00:32:12,080 --> 00:32:15,640
Speaker 5: a friend here Mickey talks about the luxury condo business.

640
00:32:15,640 --> 00:32:17,160
Speaker 5: I know that's an area of the market that you

641
00:32:17,280 --> 00:32:17,920
Speaker 5: know very well.

642
00:32:17,960 --> 00:32:18,760
Speaker 7: You're very active.

643
00:32:19,160 --> 00:32:20,640
Speaker 11: It's a sense of how the market is in New

644
00:32:20,720 --> 00:32:21,440
Speaker 11: York City these days.

645
00:32:21,520 --> 00:32:23,240
Speaker 7: Right, So the market is actually good.

646
00:32:23,320 --> 00:32:27,440
Speaker 12: We opened last week three sales offices at the same

647
00:32:27,520 --> 00:32:29,960
Speaker 12: day in the same week, which is the right quote

648
00:32:29,960 --> 00:32:31,680
Speaker 12: for us, and all.

649
00:32:31,600 --> 00:32:34,680
Speaker 7: Three so we have three new projects starting three new projects.

650
00:32:34,680 --> 00:32:39,720
Speaker 12: They're already under construction, but we we launched sales Upper

651
00:32:39,760 --> 00:32:43,240
Speaker 12: west Side, Upper east Side, and Williamsburg on the waterfront.

652
00:32:43,680 --> 00:32:45,840
Speaker 7: All three are doing very well.

653
00:32:45,920 --> 00:32:48,800
Speaker 12: There is not much inventory in New York City and

654
00:32:48,960 --> 00:32:51,120
Speaker 12: buyers are looking for the right product.

655
00:32:51,360 --> 00:32:53,480
Speaker 10: So the FED cut reads yesterday, of course by fifty

656
00:32:53,520 --> 00:32:56,200
Speaker 10: basis points. That certainly helps you, I imagine with some

657
00:32:56,240 --> 00:32:58,360
Speaker 10: of your carrying costs. But given the fact that you

658
00:32:58,480 --> 00:33:02,480
Speaker 10: are catering to a high net worth individual, how many

659
00:33:02,480 --> 00:33:05,200
Speaker 10: cash deals do you see or does this really help

660
00:33:05,320 --> 00:33:06,440
Speaker 10: you know your buyers as well?

661
00:33:06,640 --> 00:33:11,320
Speaker 12: Right, So it's very interesting the more expensive apartments we

662
00:33:11,360 --> 00:33:15,239
Speaker 12: see cash type of deals. But when we do it,

663
00:33:15,280 --> 00:33:17,840
Speaker 12: for example in Williamsburg, we have a lot of the

664
00:33:17,880 --> 00:33:22,400
Speaker 12: inventory trading between two to five million. Those are buyers

665
00:33:22,400 --> 00:33:26,640
Speaker 12: that usually take mortgage and the cut, the rate cut

666
00:33:26,720 --> 00:33:29,800
Speaker 12: is obviously helping them a lot, and I suspect that

667
00:33:29,880 --> 00:33:32,520
Speaker 12: we'll see much more activity in the market in the

668
00:33:32,600 --> 00:33:34,520
Speaker 12: next twelve to eighteen months.

669
00:33:35,160 --> 00:33:39,240
Speaker 2: What is the competition like to get the apartments?

670
00:33:39,280 --> 00:33:39,360
Speaker 10: Like?

671
00:33:39,560 --> 00:33:41,480
Speaker 2: Is there the kind of competition that we would have seen,

672
00:33:41,520 --> 00:33:43,680
Speaker 2: say five years ago for these kind of properties.

673
00:33:44,120 --> 00:33:47,760
Speaker 12: Yes, so there is not much inventory and definitely there

674
00:33:47,840 --> 00:33:52,200
Speaker 12: is not much of quality inventory. The reason is that

675
00:33:52,760 --> 00:33:56,240
Speaker 12: it was very and it's still very difficult to get

676
00:33:56,320 --> 00:34:00,440
Speaker 12: construction loans. So for example, developers are just on the

677
00:34:00,480 --> 00:34:03,440
Speaker 12: sideline they can get the construction loans. There are not

678
00:34:03,480 --> 00:34:06,600
Speaker 12: too many projects under construction in New York.

679
00:34:06,640 --> 00:34:07,320
Speaker 7: That's number one.

680
00:34:07,400 --> 00:34:12,640
Speaker 12: Number two, construction cost insurance costs are just really almost

681
00:34:12,719 --> 00:34:16,319
Speaker 12: doubled then five years ago, So it's very difficult to

682
00:34:16,520 --> 00:34:19,440
Speaker 12: get to a point that the project make financial sense,

683
00:34:20,880 --> 00:34:23,239
Speaker 12: which means that there is very low inventory.

684
00:34:23,600 --> 00:34:26,439
Speaker 10: So you're saying that there's very low inventory. And yet

685
00:34:26,520 --> 00:34:28,839
Speaker 10: I've certainly been a part of the speculation. Other people

686
00:34:28,880 --> 00:34:30,640
Speaker 10: have been part of the speculation that some of these

687
00:34:30,760 --> 00:34:33,520
Speaker 10: massive buildings out here on Billionaire's Row, or even some

688
00:34:33,920 --> 00:34:35,880
Speaker 10: up on the Upper east Side, one of which I

689
00:34:36,040 --> 00:34:38,399
Speaker 10: know for a fact a few years ago, a big

690
00:34:38,440 --> 00:34:40,279
Speaker 10: bulk of it was empty, even though you never would

691
00:34:40,280 --> 00:34:42,440
Speaker 10: have guessed that from the website. So as all that

692
00:34:42,560 --> 00:34:45,320
Speaker 10: inventory that would seem to be floating out there in

693
00:34:45,360 --> 00:34:47,319
Speaker 10: these fancy buildings, has that been eaten up?

694
00:34:47,600 --> 00:34:52,440
Speaker 7: No? So well, no, no, no, yes, But it's all

695
00:34:52,480 --> 00:34:54,120
Speaker 7: about quality. First of all.

696
00:34:54,320 --> 00:34:59,120
Speaker 12: Whatever someone decided to call this fifty seven billionaire Row,

697
00:35:00,160 --> 00:35:05,160
Speaker 12: this is a different market, really mainly relying on foreigners.

698
00:35:05,480 --> 00:35:08,120
Speaker 12: How many New Yorkers really want to live on fifty

699
00:35:08,200 --> 00:35:13,160
Speaker 12: seventh Street. Think about schools, think about kindergarten whatever, right,

700
00:35:13,200 --> 00:35:17,040
Speaker 12: you need the infrastructure. It doesn't feel as a residential neighborhood.

701
00:35:17,440 --> 00:35:22,160
Speaker 12: Beautiful views, big buildings, right, So those are cater to foreigners.

702
00:35:22,160 --> 00:35:24,520
Speaker 7: So we had the Russians, they're not buying anymore.

703
00:35:24,560 --> 00:35:27,359
Speaker 12: We had the Chinese, they're not buying anymore, and so

704
00:35:27,400 --> 00:35:29,560
Speaker 12: on and so forth. And every time there is a

705
00:35:29,640 --> 00:35:32,400
Speaker 12: wave of foreigners that are coming to New York. Because

706
00:35:32,440 --> 00:35:35,200
Speaker 12: New York is still the capital. I see it as

707
00:35:35,200 --> 00:35:37,360
Speaker 12: the capital of the world, right, but this is a

708
00:35:37,480 --> 00:35:38,440
Speaker 12: very different market.

709
00:35:39,239 --> 00:35:40,720
Speaker 7: It's also about quality.

710
00:35:40,880 --> 00:35:43,719
Speaker 12: Yes, there are a couple of buildings that are not

711
00:35:43,840 --> 00:35:47,319
Speaker 12: selling well. But when you dive into the detail and

712
00:35:47,360 --> 00:35:50,719
Speaker 12: you walk those buildings and you look at those apartments,

713
00:35:51,200 --> 00:35:55,680
Speaker 12: they're not good. They're not well designed, they're not well esthetically,

714
00:35:55,719 --> 00:35:58,400
Speaker 12: they are not good, you know whatever. Maybe they're in

715
00:35:58,880 --> 00:36:01,480
Speaker 12: a busy area. So it's all about the buyers are

716
00:36:01,600 --> 00:36:05,600
Speaker 12: very sophisticated. Buyers know what they want and when they

717
00:36:05,680 --> 00:36:09,560
Speaker 12: see a product that is well designed, were located, and

718
00:36:09,719 --> 00:36:13,520
Speaker 12: reasonable price to the market to whatever the market they're buying.

719
00:36:13,560 --> 00:36:16,080
Speaker 7: There's not much inventory in this segment of the market.

720
00:36:16,120 --> 00:36:18,160
Speaker 10: That's really interesting to hear about a divergence within the

721
00:36:18,239 --> 00:36:20,600
Speaker 10: high end. There would not have necessarily anticipated that.

722
00:36:20,840 --> 00:36:22,960
Speaker 5: All Right, So you call me up and you want

723
00:36:22,960 --> 00:36:25,680
Speaker 5: a construction loan. Why am I making a loan to you?

724
00:36:25,680 --> 00:36:27,280
Speaker 5: And maybe I'm not making them to other people?

725
00:36:27,400 --> 00:36:30,680
Speaker 12: You're right, and I have an answer on the two sides.

726
00:36:30,719 --> 00:36:35,160
Speaker 12: Because part of our business is debt business. We are

727
00:36:35,760 --> 00:36:38,880
Speaker 12: lending to other developers, so we're running also a debt fund.

728
00:36:39,560 --> 00:36:43,879
Speaker 12: And it's all about reputation, and it's all about can

729
00:36:44,040 --> 00:36:48,360
Speaker 12: this developer can really get the project done?

730
00:36:48,520 --> 00:36:50,879
Speaker 7: And the commercial lenders are looking at you.

731
00:36:51,280 --> 00:36:53,359
Speaker 12: Okay, if you ask for a loan and they look

732
00:36:53,400 --> 00:36:57,239
Speaker 12: at your reputation, what you have done? I mean, are

733
00:36:57,280 --> 00:37:00,120
Speaker 12: you capable to do it? Do you have enough equity?

734
00:37:00,600 --> 00:37:04,719
Speaker 12: And if you're underwriting make financial sense? And if you

735
00:37:04,800 --> 00:37:07,680
Speaker 12: are dreaming dreams and the project that you have in

736
00:37:07,719 --> 00:37:10,480
Speaker 12: mind is not going to make financial sense, you're not

737
00:37:10,520 --> 00:37:13,880
Speaker 12: going to get financing, definitely, not from the commercial lenders.

738
00:37:13,880 --> 00:37:14,879
Speaker 7: You might be able to.

739
00:37:14,840 --> 00:37:20,400
Speaker 12: Get financing at ten over sofa, right, Okay, you're not

740
00:37:20,440 --> 00:37:21,359
Speaker 12: going to make it right.

741
00:37:21,760 --> 00:37:23,600
Speaker 7: So you really want to be in.

742
00:37:23,440 --> 00:37:28,359
Speaker 12: The mid threes to low force over soffur and that's

743
00:37:28,400 --> 00:37:29,640
Speaker 12: the only way you're going to make it.

744
00:37:30,200 --> 00:37:33,240
Speaker 2: Are there any deals you think to taking office buildings

745
00:37:33,239 --> 00:37:35,040
Speaker 2: and converting them. I know, I feel like this is

746
00:37:35,040 --> 00:37:37,200
Speaker 2: a pretty sensitive topic. Like some are like, yeah, I

747
00:37:37,200 --> 00:37:38,360
Speaker 2: can totally make money up of that.

748
00:37:38,400 --> 00:37:38,440
Speaker 7: No.

749
00:37:38,440 --> 00:37:40,880
Speaker 3: Others are like no way, right, So.

750
00:37:40,960 --> 00:37:44,200
Speaker 12: There's a lot of hype about that. And from two

751
00:37:44,239 --> 00:37:47,680
Speaker 12: thousand to two thousand and seven I converted a lot

752
00:37:47,719 --> 00:37:51,840
Speaker 12: of buildings in New York from office to residential, so

753
00:37:51,920 --> 00:37:53,600
Speaker 12: I have a lot of experience doing so.

754
00:37:54,840 --> 00:37:57,000
Speaker 7: Most of the office buildings.

755
00:37:57,160 --> 00:38:01,399
Speaker 12: Their floorplate, each and every floor is just too big,

756
00:38:01,600 --> 00:38:05,240
Speaker 12: too deep. Residential you have for each and every bedroom.

757
00:38:05,560 --> 00:38:07,440
Speaker 12: You have to have light and air. You have to

758
00:38:07,480 --> 00:38:09,719
Speaker 12: have a window, you have to have legal.

759
00:38:09,480 --> 00:38:10,120
Speaker 7: Light and air.

760
00:38:10,200 --> 00:38:13,160
Speaker 12: There's a certain distance that it needs to be from

761
00:38:13,640 --> 00:38:17,880
Speaker 12: the neighbor a building. And when you have a very

762
00:38:17,920 --> 00:38:21,520
Speaker 12: for example, here, this floor is very deep, so it's

763
00:38:21,640 --> 00:38:25,879
Speaker 12: very good for office, it's very good for studios. It's

764
00:38:25,960 --> 00:38:29,359
Speaker 12: not very easy to convert it to residential. So there's

765
00:38:29,400 --> 00:38:30,240
Speaker 12: a lot of five.

766
00:38:30,160 --> 00:38:33,160
Speaker 2: A really nice floor through the apartment, right, I mean

767
00:38:33,480 --> 00:38:34,560
Speaker 2: from both right.

768
00:38:34,640 --> 00:38:37,960
Speaker 12: So when you are close to the window, right, that's great.

769
00:38:38,200 --> 00:38:41,239
Speaker 12: Here is the problem now when you when you try

770
00:38:41,280 --> 00:38:43,400
Speaker 12: to convert it and you have a lot of space

771
00:38:43,480 --> 00:38:46,080
Speaker 12: that is not usable, what.

772
00:38:46,000 --> 00:38:46,960
Speaker 7: Are you going to do with it?

773
00:38:47,320 --> 00:38:50,880
Speaker 12: So it goes back to yes, you can convert those buildings,

774
00:38:51,200 --> 00:38:54,760
Speaker 12: but most of those buildings need some type of incentive,

775
00:38:55,280 --> 00:38:58,719
Speaker 12: either tax or some type of incentive to help the

776
00:38:58,760 --> 00:39:01,319
Speaker 12: developers to convert their And if you really stop for

777
00:39:01,360 --> 00:39:03,600
Speaker 12: a second and you ask yourself, how many of those

778
00:39:03,640 --> 00:39:07,520
Speaker 12: buildings are really being converted versus all the talk around it,

779
00:39:07,520 --> 00:39:09,920
Speaker 12: there are not too many that are doing well.

780
00:39:10,600 --> 00:39:13,919
Speaker 10: Speaking of office in terms of the overall commercial real

781
00:39:14,000 --> 00:39:16,239
Speaker 10: estate space, I know that you don't do office, but

782
00:39:16,400 --> 00:39:21,600
Speaker 10: other developers told us that the weakness from that one space,

783
00:39:21,640 --> 00:39:24,280
Speaker 10: that there is an impact on the rest of commercial

784
00:39:24,280 --> 00:39:24,680
Speaker 10: real estate.

785
00:39:24,680 --> 00:39:25,560
Speaker 3: Do you feel that at all?

786
00:39:25,960 --> 00:39:29,520
Speaker 12: So I don't do it for a reason because I

787
00:39:29,560 --> 00:39:33,440
Speaker 12: think the residential space, to me, is the most safe

788
00:39:33,600 --> 00:39:35,719
Speaker 12: kind of a space of sector in real estate.

789
00:39:36,040 --> 00:39:40,160
Speaker 7: But what we see in the office space is very interesting.

790
00:39:40,880 --> 00:39:46,120
Speaker 12: The brand new, truly class A office buildings are doing well.

791
00:39:46,480 --> 00:39:49,800
Speaker 12: Those that are new with all the amenities and the

792
00:39:49,840 --> 00:39:54,399
Speaker 12: state of the art systems, mechanical systems, those are doing well.

793
00:39:54,680 --> 00:39:56,960
Speaker 12: But if we look at New York, and not only

794
00:39:57,000 --> 00:39:59,920
Speaker 12: in New York, every major urban city does a lot

795
00:40:00,040 --> 00:40:02,960
Speaker 12: out of inventory of what we call B and C

796
00:40:03,239 --> 00:40:07,960
Speaker 12: type of office buildings, those struggle a lot. Some of

797
00:40:08,000 --> 00:40:11,200
Speaker 12: them will need to be converted from one use to another.

798
00:40:11,440 --> 00:40:14,960
Speaker 10: But does that weakness there in the possible the faults

799
00:40:15,040 --> 00:40:17,680
Speaker 10: that could be coming and just everybody's talking about, you know,

800
00:40:17,680 --> 00:40:21,200
Speaker 10: extended pretend values. Does that impact.

801
00:40:20,800 --> 00:40:21,759
Speaker 3: Your area at all?

802
00:40:21,960 --> 00:40:25,640
Speaker 10: Do you see it pushing out in any way, like

803
00:40:25,719 --> 00:40:28,160
Speaker 10: on the financing that sort of right?

804
00:40:28,560 --> 00:40:34,400
Speaker 12: No, because because the residential construction lenders are not they

805
00:40:34,560 --> 00:40:38,160
Speaker 12: mostly focus on the residential sector, the same as when

806
00:40:38,200 --> 00:40:41,200
Speaker 12: we on our that side, we focus.

807
00:40:40,880 --> 00:40:42,320
Speaker 7: Only on the residential sector.

808
00:40:42,680 --> 00:40:45,560
Speaker 12: I don't lend, I don't I don't know enough about

809
00:40:45,560 --> 00:40:49,520
Speaker 12: the office or retail to really make a judgment if

810
00:40:49,600 --> 00:40:52,840
Speaker 12: one location or one building is better than either. I

811
00:40:52,840 --> 00:40:56,040
Speaker 12: have a general review, but you know it's so specific.

812
00:40:56,080 --> 00:40:59,520
Speaker 12: Real estate is so specific, and it's so it's it's

813
00:40:59,600 --> 00:41:03,799
Speaker 12: quite sophisticated. I better know what I'm doing before I

814
00:41:03,840 --> 00:41:06,480
Speaker 12: land money, so much money, before.

815
00:41:06,320 --> 00:41:07,920
Speaker 5: We let you go here. It give us your thoughts

816
00:41:07,920 --> 00:41:10,600
Speaker 5: on South Florida, and you've got experience there as well.

817
00:41:10,800 --> 00:41:12,520
Speaker 5: Is that are we overdone there?

818
00:41:12,640 --> 00:41:12,719
Speaker 10: Is?

819
00:41:12,719 --> 00:41:15,240
Speaker 7: It's still right, So so South Florida.

820
00:41:15,640 --> 00:41:19,120
Speaker 12: Let's zero in again, because every every market is different.

821
00:41:19,440 --> 00:41:22,839
Speaker 12: I think Miami is actually doing well. Of course, it's

822
00:41:22,840 --> 00:41:26,560
Speaker 12: all about the very delicate between inventory and demand. But

823
00:41:26,680 --> 00:41:29,600
Speaker 12: Miami mature to a point of no return. There's so

824
00:41:29,680 --> 00:41:33,560
Speaker 12: many great things. This is not only anymore just okay,

825
00:41:33,560 --> 00:41:35,640
Speaker 12: I want to be there a couple of months during

826
00:41:35,680 --> 00:41:40,040
Speaker 12: the winter time. I mean there are amazing restaurants, museums, sports,

827
00:41:41,000 --> 00:41:44,200
Speaker 12: you know, whatever you want is they're not not too

828
00:41:44,400 --> 00:41:46,880
Speaker 12: exactly the level of New York City, but very close

829
00:41:46,880 --> 00:41:49,799
Speaker 12: to it. So the market is doing well. We have

830
00:41:50,000 --> 00:41:53,279
Speaker 12: we have a very big project in Miami. This is

831
00:41:53,280 --> 00:41:56,000
Speaker 12: the fourth sales office that that is open for us

832
00:41:56,440 --> 00:42:00,200
Speaker 12: and and and the product is selling well. So what

833
00:42:00,320 --> 00:42:03,640
Speaker 12: we see over there, we see different buyers than we

834
00:42:03,719 --> 00:42:04,640
Speaker 12: see in New York City.

835
00:42:05,080 --> 00:42:06,879
Speaker 5: Just for a cookie thirty seconds, who's your buyer?

836
00:42:06,920 --> 00:42:08,839
Speaker 7: Who's your best buyer to walk through the door where?

837
00:42:09,400 --> 00:42:11,840
Speaker 5: Yeah, I mean it's not the Russians, it's not the Chinese.

838
00:42:11,920 --> 00:42:13,160
Speaker 11: Who's a good buyer for you?

839
00:42:13,239 --> 00:42:15,880
Speaker 12: Just someone that really wants to buy and really looking

840
00:42:15,960 --> 00:42:19,719
Speaker 12: for for a product in a specific area, and I

841
00:42:19,840 --> 00:42:22,520
Speaker 12: want them to step in and look at my product,

842
00:42:22,920 --> 00:42:26,799
Speaker 12: and if you know, if they like it, that's fifty percent.

843
00:42:26,520 --> 00:42:28,160
Speaker 7: Of the sale. Right.

844
00:42:28,160 --> 00:42:30,719
Speaker 12: They might it might be too expensive for them, it

845
00:42:30,840 --> 00:42:34,319
Speaker 12: might be whatever, not the right size for them. But

846
00:42:34,440 --> 00:42:37,919
Speaker 12: if they step in and they like the product, it's

847
00:42:37,920 --> 00:42:39,520
Speaker 12: fifty percent of the world.

848
00:42:39,520 --> 00:42:40,960
Speaker 5: All right, Mickey, thank you so much for joining. I

849
00:42:41,040 --> 00:42:43,920
Speaker 5: really appreciate it. Love getting your perspective. Mickey Natally, chairman

850
00:42:44,000 --> 00:42:46,839
Speaker 5: and CEO of Naftali Group, talking about the residential real

851
00:42:46,880 --> 00:42:49,000
Speaker 5: estate business in Manhattan.

852
00:42:49,040 --> 00:42:50,040
Speaker 11: Abigail Do, a little.

853
00:42:49,800 --> 00:42:52,520
Speaker 5: Market reporter for Bloomberg News, also joining us, helping us

854
00:42:52,560 --> 00:42:54,800
Speaker 5: kind of spend some more time on the real estate business.

855
00:42:54,960 --> 00:42:57,000
Speaker 5: I find it fascinating and there's a lot of different pockets.

856
00:42:57,040 --> 00:42:59,399
Speaker 5: I'm learning some are doing better than others.

857
00:42:59,480 --> 00:43:02,080
Speaker 3: I wasn't there you interested in luxury apartment buying in

858
00:43:02,080 --> 00:43:02,640
Speaker 3: his New.

859
00:43:02,520 --> 00:43:06,160
Speaker 5: Jersey those days Thursdays River I sold everything I owned

860
00:43:06,320 --> 00:43:08,760
Speaker 5: and now safely sconced down the Jersey.

861
00:43:08,800 --> 00:43:10,960
Speaker 3: Yeah, no, that's a that's definitely something.

862
00:43:11,120 --> 00:43:15,640
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863
00:43:15,840 --> 00:43:19,040
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864
00:43:19,040 --> 00:43:22,440
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865
00:43:22,520 --> 00:43:25,919
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866
00:43:26,040 --> 00:43:29,160
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867
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