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Speaker 1: Welcome to the Bloomberg p m L Podcast. I'm Pim Fox.

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Speaker 1: Along with my co host Lisa A. Brahmowitz. Each day

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Speaker 1: we bring you the most important, noteworthy, and useful interviews

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Speaker 1: for you and your money, whether you're at the grocery

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Speaker 1: store or the trading floor. Find the Bloomberg p m

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Speaker 1: L Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot com.

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Speaker 1: Oil trading on then imax below seventy dollars a barrel.

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Speaker 1: Here to tell us more about oil and fossil fuel

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Speaker 1: is John killed Off. He is the founding partner of

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Speaker 1: Again Capital. John always a pleasure. Why do you think

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Speaker 1: the price of oil is going lower? Well, there was

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Speaker 1: a real sudden development in Libya yesterday morning. It was

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Speaker 1: announced that the two warring factions that had basically in

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Speaker 1: the process of stopping or halting Libya's oil exports resolve

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Speaker 1: their differences. There's some actual rumors out there that it

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Speaker 1: was spurred a bond by President Trump of all things. Uh.

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Speaker 1: And this oil is rapidly coming back to the market.

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Speaker 1: We're getting more and more good news almost by the

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Speaker 1: hour here, Pim. And it makes a big difference. You're

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Speaker 1: talking about getting about seven thousand barrels a day back

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Speaker 1: online fairly rapidly. And you add that to the recent

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Speaker 1: increases in production by Saudi Arabia, Russia and some others,

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Speaker 1: and all of a sudden that that the dire situation

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Speaker 1: that we were looking at UH is not looking so

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Speaker 1: bad all of a sudden. So we're getting some relief here,

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Speaker 1: all right, So John, can you pair that the idea

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Speaker 1: that Libya production is increasing and we're getting that into

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Speaker 1: the market given that, I mean, is that really what's

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Speaker 1: driving things way more than trade work concerns and an

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Speaker 1: expression of fear that the global economy is going to

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Speaker 1: slow down. Well, I would argue it's a big part

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Speaker 1: of it. But certainly the trade war fears are affecting

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Speaker 1: commodities UH more than anything else. Obviously soybeans and getting

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Speaker 1: the headlines on this, but you're seeing copper get hit,

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Speaker 1: you're seeing gold get hit. Um, you're seeing dollar strength,

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Speaker 1: which is driving down these prices as well. And certainly

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Speaker 1: we know that although it's not on the official list,

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Speaker 1: just jet that the Chinese had intimated that crude oil

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Speaker 1: purchases from the US and natural gas l G purchases

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Speaker 1: we're going to be part of their paraph retaliation. So

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Speaker 1: we're front and oil's front and center in that as well,

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Speaker 1: so that that is definitely part of it. And the

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Speaker 1: fears that global demand will take a hit from the

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Speaker 1: reduced economic activity. Right, so these things are all sort

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Speaker 1: of coming together as the perfect storm, but really a

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Speaker 1: confluence ys of of elements here. But but to sort

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Speaker 1: of counter that, the i e A came out with

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Speaker 1: a report today saying that even if the biggest producers

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Speaker 1: in Opequ basically produce as much oil as they can

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Speaker 1: that space, what would be required to offset potential loss

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Speaker 1: production in other places? So that seems sort of bullish

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Speaker 1: for prices given US applied demand dynamic. Can you square

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Speaker 1: those things? Yeah? I think they had an unfortunate printing

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Speaker 1: deadline this month because, uh, their numbers out this morning

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Speaker 1: about what the deficit supply demand deficit was looking like

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Speaker 1: that as a deficit of crude oil production didn't figure

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Speaker 1: in this rapid return of Libyan crude oil. Um. I

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Speaker 1: think their numbers on Saudi Arabia were a little low

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Speaker 1: as well, so they were talking about around at one

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Speaker 1: point four million barrel per day deficit later this year.

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Speaker 1: That's probably going to be no more than two hundred

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Speaker 1: to three hundred now. Um, if things hold up, especially

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Speaker 1: in Libby, and we see more of these these gains

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Speaker 1: from Saudi Arabia, who has it was probably on track

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Speaker 1: to put up about a million barrels more oil on

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Speaker 1: the market. Uh if you measure it from April when

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Speaker 1: they were at nine point eight seven. Uh, they're pushing

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Speaker 1: up towards ten point six ten point seven already and

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Speaker 1: may go to eleven over the course the next couple

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Speaker 1: of months. So it's it's a lot closer. That's when

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Speaker 1: we were surging here recently and we got the Brent

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Speaker 1: towards eighty bucks again and w t I back up

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Speaker 1: towards it's because the math was looking terrible, but the

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Speaker 1: Staudies really did step up, the Russians really did step up,

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Speaker 1: and this Libya thing was really a bolt out of

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Speaker 1: the blue. I can't I can't stay it enough. So

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Speaker 1: where do you think prices are headed in the near

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Speaker 1: term for both of you t I and Brent? Well,

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Speaker 1: I still think it's a tough slog here for for

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Speaker 1: from a consumer's perspective. Uh, the challenges you know, remain

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Speaker 1: in big time in Venezuela. It was more lost production

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Speaker 1: month on month. Again, that's continuing to decline. The Trump

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Speaker 1: administration appears to be hell bent on strangling around economically

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Speaker 1: and foreclosing their oil sales. I don't believe for a

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Speaker 1: minute that a single country will get a waiver from

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Speaker 1: from you know, escaping the sanctions that prevent their purchasing

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Speaker 1: Bringian oil. So, um, this is probably a buying opportunity,

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Speaker 1: and uh, you know, prices more likely towards eighty bucks

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Speaker 1: for Brent, uh will be revisited upon us. I think, uh,

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Speaker 1: you know later in the years. We're not we're not

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Speaker 1: out of the woods yet. Well, although things are looking better,

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Speaker 1: well better for the upside, you mean no, I mean

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Speaker 1: better better for consumers, I mean him, I mean you

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Speaker 1: could have easily have made the argument for barrel oil

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Speaker 1: if the status quo had been maintained here, if we

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Speaker 1: hadn't seen these um rapid changes from from Sadie, from

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Speaker 1: Libya and others. Uh that that that that fever really

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Speaker 1: has broken now from given what we're seeing production wise,

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Speaker 1: Well that's where I was gonna go with this. When

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Speaker 1: you mentioned you know, Libya and then you've got Russia.

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Speaker 1: You have Saudi Arabia. But let's just put in for

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Speaker 1: the sake of argument that Iran, for whatever reason, manages

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Speaker 1: to export more oil, Nigeria continues with its exports, and

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Speaker 1: maybe even Venezuela gets its act together. These countries they

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Speaker 1: can't eat the oil. Uh what that if they all

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Speaker 1: came back online? What do you think the price of

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Speaker 1: oil would be? Give you about twenty seconds. I think

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Speaker 1: we'd be trading back down towards fifty barrel if we

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Speaker 1: had all that production online. Plus we'll get the return

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Speaker 1: of Canada by the end of September. So um, they said.

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Speaker 1: I think there's a few couple more months of rough

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Speaker 1: letting PIM, but things can be looking a lot better

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Speaker 1: by the end of the year from a consumers perspective.

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Speaker 1: So lower. John killed Off, thank you so much for

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Speaker 1: being with us. Always great to get your perspective. John

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Speaker 1: killed Off is founding a partner of Again Capital in

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Speaker 1: New York, talking about the oil markets. Here with us

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Speaker 1: is somebody who has thought a lot about where to

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Speaker 1: produce goods and how to manufacture things efficiently and well.

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Speaker 1: Joseph of Bood, chief creative director at Men's Warehouse, training

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Speaker 1: us here in our eleven three oh Studios. He's also

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Speaker 1: the creator of Joseph A Buddha Manufacturing Corporation, which is

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Speaker 1: the largest men's tailored clothing factory in the United States. Joseph,

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Speaker 1: it is so good to have you here, and it's

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Speaker 1: interesting because you do most of your business, or do

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Speaker 1: most of your creations here in the US, most manufacturing.

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Speaker 1: I'm just wondering, given that, do you think that you're

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Speaker 1: going to be somewhat insulated from all of the trade

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Speaker 1: talk or will it somehow come back to you. I

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Speaker 1: really don't know what the ultimate result will be. We've

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Speaker 1: been manufacturing in Massachusetts for thirty one years when I

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Speaker 1: launched the first collection. That's where Joseph Budde Manufacturing is,

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Speaker 1: and we've seen a steady growth, uh when we've had

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Speaker 1: price increases or price reductions, because we've always tried to

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Speaker 1: price our product fair, so the price value proposition of

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Speaker 1: what we make there. As I had mentioned earlier, we

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Speaker 1: um we our manufacturing in that factory where we have

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Speaker 1: eight hundred people, is with our custom product and that's

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Speaker 1: where young guys are now starting to come out and

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Speaker 1: buy suits and making an investment. So we haven't seen

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Speaker 1: any of these uh, these issues at the moment really

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Speaker 1: impact us. Speak if you can about the changes in

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Speaker 1: the factory and you've added workers there and what you're

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Speaker 1: looking to do, because you know, when you think about

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Speaker 1: custom suits, you don't necessarily think that they can be

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Speaker 1: made in the United States. But that's not the case.

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Speaker 1: It's interesting we we grew organically since nineteen seven. The

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Speaker 1: first year, we produced about two thousand suits. In the

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Speaker 1: last few years, it's been over three hundred thousand in

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Speaker 1: that thirty year period. And we have increased our workforce.

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Speaker 1: In the last three and a half years, we doubled

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Speaker 1: our workforce. UH and New Bedford has a great uh

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Speaker 1: a great character for people with a great work ethic.

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Speaker 1: We're so proud, I mean, of all the things I've

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Speaker 1: ever done, I'm so proud of that factory and the

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Speaker 1: people who work there. It's a really feel good moment

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Speaker 1: and we do create a great product. So actually speak

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Speaker 1: a little bit more about that because we hear a

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Speaker 1: lot about quote labor shortages, company is having trouble hiring

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Speaker 1: people in the US. Are you experiencing the same? Well,

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Speaker 1: it's interesting. We have a sign out. So one of

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Speaker 1: the one of the signs that I love the most

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Speaker 1: in our company is there's a sign outside that factory

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Speaker 1: that says now hiring, And I really love that we have. UM.

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Speaker 1: We really tap into the community. We have a training

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Speaker 1: process when people do come in if they aren't skilled

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Speaker 1: in sewing. So we see that we've supported the community,

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Speaker 1: they supported us, and we want to continue to do that.

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Speaker 1: We have had that growth and we really do see

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Speaker 1: it through you know what we're manufacturing through our custom business.

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Speaker 1: Use the word community. And I want you to speak

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Speaker 1: if you can about the annual suit drive that put

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Speaker 1: together because you don't just make suits, collect them. Yeah, well,

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Speaker 1: I think July is our suit Drive month where we

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Speaker 1: basically collect gently worn clothing. We have them come into

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Speaker 1: our seven and fifty men's where house stores and then

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Speaker 1: we refurbished them in get them back to folks who

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Speaker 1: might want to re enter the workforce, who might not

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Speaker 1: be able to afford products. And this is our eleventh year.

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Speaker 1: We've raised uh, we've we've collected one point six million

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Speaker 1: garments and we give them to a hundred and fifty nonprofits.

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Speaker 1: So good things come from good things. And I will

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Speaker 1: just say you are dressed phenomenally today. It was you

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Speaker 1: walked in and I thought, Wow, a lot of pressure.

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Speaker 1: But to say it's a lot of pressure, I I

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Speaker 1: guess I dressed for TV and I didn't dress for radio. No,

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Speaker 1: it's fabulous. I do want to get back to the

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Speaker 1: idea of you know how difficult it is to hire

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Speaker 1: right now in the tight labor market, and I'm just wondering,

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Speaker 1: are you finding that you're having to offer higher and

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Speaker 1: higher salaries and that the increases are accelerating more rapidly. Well,

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Speaker 1: we obviously always want to be fair to our employees.

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Speaker 1: We and we have we have a union shop. We

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Speaker 1: have a great relationship with the union. UM. I've always

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Speaker 1: believed that in that area that it's been a great

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Speaker 1: uh uh community of people wanting to work in a

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Speaker 1: great factory. So we've over the years, we've had the

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Speaker 1: highs and lows of increasing the workforce, but we always

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Speaker 1: really want to dedicate dedicate ourselves to the kind of

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Speaker 1: people that we have because they are, in essence, the

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Speaker 1: lifeblood of the business. Now, maybe the other part of

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Speaker 1: the lifeblood of the business is the customer. And just

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Speaker 1: to continue the theme of the suit drive, uh, if

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Speaker 1: you donate a suit, you get a fifty off coupon, yes,

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Speaker 1: And I think that that's also an incentive for people

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Speaker 1: to think about cleaning out their closets. How many of

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Speaker 1: us are hoarders. You know, you have a suit that

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Speaker 1: maybe five or six years old or seven years old,

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Speaker 1: probably still in good shape, but are you really going

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Speaker 1: to wear it? And do you want to go out

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Speaker 1: and get a new one. So it's an incentive, but

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Speaker 1: I really think the whole, the very essence is to

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Speaker 1: be able to donate those suits and get them on

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Speaker 1: the backs of people who could really use them. Are

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Speaker 1: you a hoarder of suits? Well, I I keep a

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Speaker 1: lot of things because they're my archives. So I've got

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Speaker 1: things I probably wouldn't wear from my first collections you

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Speaker 1: would probably love, but I them because you're either a

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Speaker 1: special moment or it's not a closet, it's an archive,

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Speaker 1: it's a museum. Close mum. But I really think, well,

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Speaker 1: for me, it's important to keep those pieces because either

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Speaker 1: the historic for the brand, or they would be great

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Speaker 1: design ideas to reinterpret later on. Thank you very much,

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Speaker 1: a little bit of an archive. Thank you very much

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Speaker 1: for dressing up and thanks for coming much appreciate Josepha

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Speaker 1: bood Is the chief creative director of Men's Warehouse. Yes, him,

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Speaker 1: I'm expecting you to come in and fine form tomorrow.

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Speaker 1: I'll do my best. I can't keep up with Josepha Bood.

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Speaker 1: All right. You can follow Joseph Bood on Twitter at

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Speaker 1: Josepha Bood and just to mention the Suit drive check

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Speaker 1: it out on social media. Just use the hashtag hashtag

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Speaker 1: give a suit. As we continue to talk about straining

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Speaker 1: relationships between the US and China, I think it's important

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Speaker 1: to take a look at, you know, what that relationship

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Speaker 1: actually has been over the past two decades and with

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Speaker 1: us to help us do that. As Brad setser, he

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Speaker 1: is Stephen A. Tannenbaum Senior Fellow for International Economics of

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Speaker 1: the Council of Foreign Relations, also formally the Deputy Assistant

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Speaker 1: Secretary for International Economic Analysis in the U. S. Treasury

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Speaker 1: Department from two thousand and eleven. Brad, always wonderful having

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Speaker 1: you on. I wanted just to start with a recent

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Speaker 1: paper that you wrote taking a look at China's trade

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Speaker 1: practices with the US and taking taking a look at

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Speaker 1: where grapes are are legitimate that the US has with China.

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Speaker 1: Can you just sort of broadly outline some of those.

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Speaker 1: So you know, I think there are three broad subsets

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Speaker 1: of policies where the US can sort of legitimately complain

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Speaker 1: that Chinese actions have undermined the intent, if not the letter,

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Speaker 1: that lay behind China's w T accession. The first is

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Speaker 1: the one that gets all the attention, which is forced

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Speaker 1: technology transfer. China, in theory cannot require as a matter

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Speaker 1: of government policy that a US company transfer technology to

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Speaker 1: a Chinese partner as a condition for market entry. However,

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Speaker 1: in a state dominated economy China, the the the the

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Speaker 1: viable partners UH to form a joint venture tend to

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Speaker 1: be state companies, and the state companies can say, as

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Speaker 1: a matter of commercial UH decision making our own commercial interest,

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Speaker 1: we will require tech transfer as part of any j V,

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Speaker 1: and so the net effect has been a de facto

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Speaker 1: requirement for tech transfer, even though there is no disjure requirement.

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Speaker 1: The second is that China just makes use of domestic

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Speaker 1: subsidies on a scale that no one else does, and

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Speaker 1: it has a market distorting effect that goes beyond UH

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Speaker 1: that of any other economy. Domestic subsidies are not prohibited

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Speaker 1: by the w T O. You can only bring a

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Speaker 1: w t O case to offset the adverse impact a

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Speaker 1: subsidy has on your your exports, and that processes UH

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Speaker 1: is slow, UM, and it just wasn't designed for an

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Speaker 1: economy where pretty much any company that has access to

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Speaker 1: the state banking system de facto it has a subsidy

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Speaker 1: because you're the intent was to prove a specific subsidy

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Speaker 1: kind of a budget line item, and that's not quite

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Speaker 1: how China subsidies work. The third is a bunch of

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Speaker 1: by China policies that UH. You know, since you're selling

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Speaker 1: in large measure to large Chinese state companies or companies

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Speaker 1: UH with heavy state or party influence, there can be

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Speaker 1: informal requirements that if you want to sell to China,

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Speaker 1: you've got to produce inside China. And those don't have

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Speaker 1: to be explicit procurement rules. They can just be, hey,

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Speaker 1: you want to sell to the Chinese railway company to

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Speaker 1: state enterprise, you better produce inside China. The cumulative effect

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Speaker 1: has been I think a set of real impediments two

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Speaker 1: companies that want to produce outside China and sell into China,

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Speaker 1: as well as a set of require a fairly onerous

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Speaker 1: requirements if you want to invest in China to produce

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Speaker 1: in China, Brad, do you believe that this is part

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Speaker 1: of the reason why this seems to be such political

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Speaker 1: frustration with any kind of relationship that's based on quote

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Speaker 1: free trade with China. I mean, I noted your description

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Speaker 1: state dominated economy, and then I also think about all

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Speaker 1: of the companies that have participation from let's say, the

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Speaker 1: People's Liberation Army in China. Has the trading system just

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Speaker 1: been set up that doesn't work when you confront that

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Speaker 1: kind of state intervention on such a wholesale level. I mean,

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Speaker 1: I don't think it works particularly well, uh, in an

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Speaker 1: economy where the party controls the state and the party

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Speaker 1: cann exercise indirect influence over such a large range of

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Speaker 1: state enterprises. It undoubtedly is part of the reason why

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Speaker 1: there's bipartisan frustration at China. But you know, on the

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Speaker 1: flip side of all this is that after the global crisis,

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Speaker 1: China reduced its export dependence through a rather massive domestic stimulus,

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Speaker 1: and so a lot of the uh, you know, the

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Speaker 1: macro economic distortions that China created before the global crisis

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Speaker 1: have to degree faded. So it's it's always a little

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Speaker 1: bit of a mixed bag. So, Brad, this has been

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Speaker 1: an issue for decades. Why hasn't it been dealt with

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Speaker 1: by previous administrations? Well, at every single point in time,

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Speaker 1: I think people shied away from confrontation. China is a

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Speaker 1: big important player, not just in the global ecou onemy,

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Speaker 1: but in the the global security situation. So there's always

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Speaker 1: pressure to make sure that China is cooperating in other areas,

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Speaker 1: the North Korea set of issues, that kind of thing.

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Speaker 1: And then for a long time, you know, there are

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Speaker 1: constituencies in the US that didn't necessarily want to get

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Speaker 1: too tough on China. There are companies that didn't want

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Speaker 1: to get too tough on China's currency intervention because they

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Speaker 1: were producing in China for export and a weak currency

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Speaker 1: helped them. There are companies that are much more afraid

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Speaker 1: of Chinese retaliation because they've developed successful businesses in China

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Speaker 1: through joint ventures. Then they are interested in the potential

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Speaker 1: gains from a more confrontational policy. So at each incremental moment,

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Speaker 1: the decision was made to back away from full on confrontation.

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Speaker 1: Do you think that the U s economy now is

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Speaker 1: strong enough that it is a good time to take

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Speaker 1: on some of these issues, as President Trump and his

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Speaker 1: UH his cabinet have suggested. Look, I think there's always

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Speaker 1: a debate about whether it is better to UH take

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Speaker 1: on a more confrontational approach when your economy is weak

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Speaker 1: and when you could really benefits, say from increased exports,

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Speaker 1: when your economy is operating below potential. In theory, the

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Speaker 1: gains from exporting are much larger than they are when

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Speaker 1: your our economies operating at potential. The flip side is

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Speaker 1: that we are better uh that you know, and you

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Speaker 1: can analyze the short run drag from the trade war

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Speaker 1: as a reversal of a portion of the fiscal stimulus,

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Speaker 1: and since there was probably excessive stimulus in the economy

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Speaker 1: to begin with, in that sense, it's a way of

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Speaker 1: removing the excess stimulus and therefore won't have tremendously negative effects. Brat,

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Speaker 1: give you about twenty seconds here. Um, you've served as

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Speaker 1: Deputy assist and Secretary for International Economic Alliance in the U. S.

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Speaker 1: Treasury just came out for us. What do you believe

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Speaker 1: is really going to happen? Well, you know, I was

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Speaker 1: a mid ranking official in another administration, UH, and in

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Speaker 1: an administration where trade policy wasn't set in the Oval office,

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Speaker 1: uh directly by the president. UH. So my general's argument

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Speaker 1: now is that take what the President says on trade,

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Speaker 1: both literally and seriously, and the best guide to future

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Speaker 1: action is what he has said, and what he has

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Speaker 1: said is that he will continue to escalate. I think

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Speaker 1: the interesting question now is how China chooses to respond.

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Speaker 1: Were if we go through with the two billion in tariffs,

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Speaker 1: we've exceeded US exports to China, and so China in

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Speaker 1: order to match would have to look at non tariff responses.

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Speaker 1: Thanks very much for being with us. Brad Setser is

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Speaker 1: from the Council on Foreign Relations and formerly Deputy Assistant

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Speaker 1: Secretary for International Economic Analysis in the U. S. Treasury.

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Speaker 1: Our next guest is a well known name in the

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Speaker 1: real estate industry at Scott Lawler, founder and chief executive

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Speaker 1: officer at Waypoint Residential. Normally he's in Connecticut, but he

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Speaker 1: trecked in here to our eleven three oh studio. Scott.

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Speaker 1: Thank you so much for being with us. You have

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Speaker 1: decades of experience in the market, and I want to

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Speaker 1: start with a note that that caught my attention, um

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Speaker 1: that Morgan Stanley wrote where they were talking about the

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Speaker 1: Bank of Ozarks and their weak earning and how some

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Speaker 1: of their concern that some of their earnings will raise

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Speaker 1: concerns across the banking industry because of their suggestion that

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Speaker 1: commercial real estate standards were weakening and that the area

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Speaker 1: is getting much riskier. What's your take on that. So,

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Speaker 1: in other words, you're saying that there was concerned because

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Speaker 1: the Bank of Ozarks was a very active construction lender,

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Speaker 1: that they might have some difficulty if the cycle turns well,

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Speaker 1: and that this signals broader weakness in the commercial real

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Speaker 1: estate market, at least as far as fundamentals versus some

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Speaker 1: of the valuations that are being put on them. Okay, yeah,

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Speaker 1: I think it might be a bit of a stretch.

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Speaker 1: I mean, um, one thing that's very very different about

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Speaker 1: this cycle versus the last cycle, of course, is leverage levels. Okay,

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Speaker 1: and so uh, you know, the Bank of Ozarks, my understanding,

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Speaker 1: would typically play as a first mortgage lender in the

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Speaker 1: construction world, making development loans at reasonable loan to value ratios,

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Speaker 1: you know, fifty sixty maybe sixty. And to suggest that

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Speaker 1: we have an imminent cycle that's going to impact the

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Speaker 1: performance of that loans of those loans. Excuse me, Um,

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Speaker 1: that's tough to see. I mean, we'd have to have

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Speaker 1: something that I think, um exceeded what we experienced ten

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Speaker 1: years ago for a bunch of six d l TV

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Speaker 1: construction loans to jam up Bank of ozarks earnings. If

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Speaker 1: that was the implication of the report, I want to

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Speaker 1: ask you about senior housing and what you're seeing there

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Speaker 1: in terms of the kind of build out that's happening. Well,

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Speaker 1: you know, we've gotten into that space about a year

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Speaker 1: and a half ago. We've done a handful of deals.

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Speaker 1: We're very excited about it. There are things to love

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Speaker 1: and things to hate. Like anything, the things to love

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Speaker 1: are pretty obvious. Obviously, the demographic sort of tied away

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Speaker 1: that's coming represents tremendous demand for the space now, of

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Speaker 1: course everyone knows that, and the upshot is everyone's in

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Speaker 1: the business and the challenge we're facing as a tremendous

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Speaker 1: amount of capital in the apartment sector has tried to

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Speaker 1: sort of branch out, if you were, the last couple

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Speaker 1: of years from conventional into senior student and so on

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Speaker 1: and further geographically, and so the playing field is very crowded.

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Speaker 1: Senior is a very uh, how to say, you have

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Speaker 1: to be very careful in the senior business. It's not

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Speaker 1: just real estate. In fact, that's only part of the

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Speaker 1: conversation at best. They're all sorts of operating issues. You

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Speaker 1: have to be smart about knowing what you know and

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Speaker 1: what you don't know, and solving for what you don't know,

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Speaker 1: uh to uh to take on one of these one

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Speaker 1: of these assets. So we think we've done that and

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Speaker 1: I like the space, but it's something you have to

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Speaker 1: tread cautiously, and you have to be careful when the

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Speaker 1: capital comes in because if you're going to play in

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Speaker 1: a space that is a little bit more operating risk,

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Speaker 1: you ought to be compensated. And what we're seeing or

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Speaker 1: a lot of senior housing deals with the returns of

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Speaker 1: the same as conventional deals, and that's the result of

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Speaker 1: capital flow, and that's when you can really, you know,

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Speaker 1: get burns. So you have to be very, very careful.

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Speaker 1: I love the space. I like it long term, big picture,

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Speaker 1: but it's a time to proceed questionously. Scott, I'm wondering,

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Speaker 1: inter just since we talked so much here about tariffs

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Speaker 1: and cross country capital flows, I'm just wondering, do you

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Speaker 1: see a reduction in investments in US real estate from

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Speaker 1: say Chinese wealthy individuals. Well, you know it's interesting, um,

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Speaker 1: where we played geographically, we went cross paths with that

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Speaker 1: quite as much. You know, historically, foreign capital, whether from China,

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Speaker 1: Persian Gulf, Latin America would have you would prefer what

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Speaker 1: I would describe as major coastal metro areas. So you

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Speaker 1: cross paths with that capital, either partnering with it or

432
00:24:53,600 --> 00:24:57,440
Speaker 1: competing against it quite a bit more in New York, DC, Miami,

433
00:24:57,680 --> 00:25:01,280
Speaker 1: l A, San Francisco, VERSUS say around you know, Tennessee

434
00:25:01,320 --> 00:25:04,520
Speaker 1: and the Carolinas and whatnot where we invest. Um, So

435
00:25:04,600 --> 00:25:07,359
Speaker 1: I don't think we've observed any difference in our playing field.

436
00:25:07,960 --> 00:25:10,639
Speaker 1: My understanding, um, from friends who do some of that

437
00:25:10,680 --> 00:25:13,639
Speaker 1: other investing is that they have observed, you know, maybe

438
00:25:13,640 --> 00:25:15,760
Speaker 1: a fall off, for instance, in Chinese capital coming in

439
00:25:15,840 --> 00:25:19,120
Speaker 1: and so on. Um, But again would impact our business

440
00:25:19,160 --> 00:25:23,200
Speaker 1: directly that much. Mid size cities in the United States.

441
00:25:23,280 --> 00:25:25,320
Speaker 1: Tell us about the health of mid sized cities for

442
00:25:25,400 --> 00:25:27,879
Speaker 1: the real estate business, Well, you know, we're obviously a

443
00:25:27,880 --> 00:25:31,359
Speaker 1: big fan of those markets. I think, Um, you know,

444
00:25:31,400 --> 00:25:36,080
Speaker 1: those markets represent a little bit more interesting pricing, if

445
00:25:36,119 --> 00:25:38,080
Speaker 1: you will. Then some of the bigger markets because of

446
00:25:38,160 --> 00:25:40,920
Speaker 1: capital flow. I will say that that dynamic has changed.

447
00:25:40,960 --> 00:25:42,639
Speaker 1: I thought I was really smart going some of the

448
00:25:42,760 --> 00:25:46,560
Speaker 1: secondary tertiary markets five years ago, like a Louisville, Kentucky exactly,

449
00:25:47,000 --> 00:25:49,400
Speaker 1: or even smaller you know. Um, we have a lot

450
00:25:49,440 --> 00:25:51,000
Speaker 1: more friends who have kind of worked their way to

451
00:25:51,040 --> 00:25:53,520
Speaker 1: those markets. As I was talking about before, the capital

452
00:25:53,560 --> 00:25:56,200
Speaker 1: is drifted out not only by product but by geography.

453
00:25:56,280 --> 00:25:58,320
Speaker 1: So we don't feel quite as you know, nearly as

454
00:25:58,400 --> 00:26:00,160
Speaker 1: much sort of ahead of the pack, if you will,

455
00:26:00,200 --> 00:26:02,680
Speaker 1: as we did several years ago. Nevertheless, I think on

456
00:26:02,720 --> 00:26:05,400
Speaker 1: a relative basis, it's still fair to say that from

457
00:26:05,400 --> 00:26:09,120
Speaker 1: our perspective, the risk adjusted opportunity in secondary and tertiary

458
00:26:09,119 --> 00:26:12,120
Speaker 1: markets is superior to the risk adjusted opportunity and major

459
00:26:12,160 --> 00:26:14,480
Speaker 1: coastal markets. Now that's a controversial statement many of my

460
00:26:14,480 --> 00:26:17,800
Speaker 1: institutional friends. You know, I'll get some text saying, how

461
00:26:17,800 --> 00:26:19,880
Speaker 1: can you sit there and say that? Really, I hear

462
00:26:19,920 --> 00:26:22,080
Speaker 1: that from a lot of people. Okay, well that's what

463
00:26:22,160 --> 00:26:24,920
Speaker 1: I'm saying. More people are coming our way. But historically, right,

464
00:26:25,000 --> 00:26:26,960
Speaker 1: you know, cap rates, you know what to say it.

465
00:26:27,119 --> 00:26:29,720
Speaker 1: You know, um, as as we came into this psych

466
00:26:29,800 --> 00:26:31,840
Speaker 1: you know, cap rates in New York and San Francisco.

467
00:26:32,400 --> 00:26:34,800
Speaker 1: Uh fell quite a bit faster than cap rates in

468
00:26:34,880 --> 00:26:37,199
Speaker 1: you know, Chattanooga and Greenville and whatnot, And there's some

469
00:26:37,280 --> 00:26:39,840
Speaker 1: logical course to some spread. But my view is I thought,

470
00:26:39,880 --> 00:26:42,560
Speaker 1: on a relative basis at the origin made more sense

471
00:26:42,640 --> 00:26:45,240
Speaker 1: in the smaller markets. So um, you know, we're big

472
00:26:45,280 --> 00:26:48,159
Speaker 1: believers in in midsize metros. We think they've changed culture.

473
00:26:48,200 --> 00:26:50,280
Speaker 1: We think that changed commercially within your kids getting out

474
00:26:50,320 --> 00:26:52,359
Speaker 1: of college and move into a Louisville, Kentucky is a

475
00:26:52,359 --> 00:26:55,240
Speaker 1: different conversation than twenty five years ago. And so as

476
00:26:55,240 --> 00:26:56,919
Speaker 1: a result, we're happy to own apartments that we have

477
00:26:57,000 --> 00:26:59,480
Speaker 1: to be the same thing. I have to underwrite, you know,

478
00:26:59,560 --> 00:27:01,840
Speaker 1: our our locations on our sub markets very carefully and

479
00:27:01,880 --> 00:27:04,439
Speaker 1: make sure you're comfortable with diverse and deep demand drivers

480
00:27:04,440 --> 00:27:06,280
Speaker 1: and all that relative to the size of the market.

481
00:27:06,920 --> 00:27:10,480
Speaker 1: But tell us it makes terrific sense, and that's very important.

482
00:27:10,520 --> 00:27:12,960
Speaker 1: I'm saying that for our property type. If I was

483
00:27:13,000 --> 00:27:14,639
Speaker 1: in the office business, I might be a little more

484
00:27:14,640 --> 00:27:16,119
Speaker 1: cautious in some of those markets. And you know, as

485
00:27:16,160 --> 00:27:18,239
Speaker 1: I used to be Scott Lawler, thank you so much

486
00:27:18,280 --> 00:27:20,080
Speaker 1: for being with as Scott Lawler as founder and chief

487
00:27:20,080 --> 00:27:24,320
Speaker 1: executive officer of Waypoint Residential normally in Connecticut. Be joining

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00:27:24,400 --> 00:27:27,919
Speaker 1: us here today in our eleven three oh studios. Right now,

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00:27:27,960 --> 00:27:30,040
Speaker 1: let's head over to a D and Win Studios in Washington,

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00:27:30,119 --> 00:27:35,480
Speaker 1: d C. Nancy Lines is there with world national headlines. Nancy,

491
00:27:38,320 --> 00:27:40,840
Speaker 1: thanks for listening to the Bloomberg P and L podcast.

492
00:27:41,200 --> 00:27:45,080
Speaker 1: You can subscribe and listen to interviews at Apple Podcasts, SoundCloud,

493
00:27:45,200 --> 00:27:48,680
Speaker 1: or whatever podcast platform you prefer. I'm pim Fox. I'm

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00:27:48,720 --> 00:27:52,720
Speaker 1: on Twitter at pim Fox. I'm on Twitter at Lisa Abramo.

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00:27:52,840 --> 00:27:55,399
Speaker 1: It's one before the podcast. You can always catch us

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00:27:55,480 --> 00:28:04,040
Speaker 1: worldwide on Bloomberg Radio