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Speaker 3: Hi, everyone, welcome to the Bloomberg Business Week Weekend Podcast.
Speaker 3: Well our backdrop this week a special program as we
Speaker 3: bring you highlights from our coverage at the annual Milkin
Speaker 3: Institute Global Conference held in Beverly Hills, California. It's now
Speaker 3: in its twenty eighth year. Tim is out this week,
Speaker 3: but with Mena's place is Bloomberg TV anchor Romaine Bostk.
Speaker 1: Yeah, and the Milk and Global Conference is a gathering
Speaker 1: of individuals with a capital power and influence to change
Speaker 1: the world. So for the next two hours, we're going
Speaker 1: to speak with some of those who attended and who
Speaker 1: participated in panels on perhaps the biggest talks of the town,
Speaker 1: global trade and tariffs. And then we get to the
Speaker 1: flip side, where investors are finding opportunities everything from private
Speaker 1: credit to artificial intelligence.
Speaker 3: I have to say, Romain, it felt pretty optimistic, but
Speaker 3: the tower ward came into a lot of conversations. All right, everybody.
Speaker 3: We were also there. Keep in mind just ahead of
Speaker 3: the Federal Reserve decision to leave rates unchange yet again,
Speaker 3: even as President Trump strongly urges Fetcher J. Powell and
Speaker 3: Company to lower interest rates. For the latest.
Speaker 4: Economic news and all about the.
Speaker 3: Fed decision, head over to Bloomberg dot com or head
Speaker 3: to the Bloomberg terminal.
Speaker 1: And we had a lot of great conversations. But one
Speaker 1: of the big highlights was a conversation about the impact
Speaker 1: of tariffs on the global markets and how to manage
Speaker 1: that volatility. That conversation was with one of the biggest
Speaker 1: leaders in investment management, Pimco. It manages over two trillion
Speaker 1: dollars in assets, and we caught up with the CEO,
Speaker 1: Mani Romana.
Speaker 5: I think people had made the assumption that they'd be
Speaker 5: a very quick resolution to the tariff question, and the
Speaker 5: reality is there's a lot we don't know, but that
Speaker 5: tariff are going to be high, and that we're going
Speaker 5: to have to deal with it for a long time,
Speaker 5: and that will need to readdress our thinking both in
Speaker 5: terms of economic growth but also inflation.
Speaker 1: Can you make that change now, meaning like when you
Speaker 1: have to factor in what economic growth will be, what
Speaker 1: the impact of tariff's will be, even though we don't know,
Speaker 1: how do you make that pivot now?
Speaker 6: I think you do scenario analysis.
Speaker 5: The big three trading partners are China and Mexico Canada,
Speaker 5: So you basically run simulation and say, if this happened,
Speaker 5: then this will be GDP. If this happened, this will
Speaker 5: be inflation, and acknowledge that we don't know what the
Speaker 5: endgame is going to be the only thing we can
Speaker 5: reasonably say is the overwhelming likelihood is you will have
Speaker 5: high tariff for the foreseeable future, and we'll have to
Speaker 5: deal with this.
Speaker 3: Manny once we know what the terms are. Just some
Speaker 3: of the uncertainty go away and things settle down. But
Speaker 3: it's structurally a different financial dynamic potentially depending on how
Speaker 3: high those tariffs are.
Speaker 5: I think that's right, but I think a number of
Speaker 5: company we'll have to re engineer this supplight chain and
Speaker 5: optimize the production costs and the transfer pricing based on
Speaker 5: what the tariff will be. And I think that changing
Speaker 5: supply chain may not be as easy as what you
Speaker 5: make it to be. For us, we look at a
Speaker 5: set of macro parameters and optimize our portfolio and decide
Speaker 5: what we think is attractive in terms of asset and
Speaker 5: buy them at the best possible price.
Speaker 3: The ones I mean for investors, do they just kind
Speaker 3: of stay put waiting for everything to settle, or are
Speaker 3: they starting to make those bets assuming it is going
Speaker 3: to be very different. Tell us a little bit about
Speaker 3: what you are seeing in terms of at the time.
Speaker 5: I think you've seen enormous volatility in the equity market,
Speaker 5: and some are I would say with surprise that the
Speaker 5: equity market has bounced back to the Liberation Day level.
Speaker 6: But you've seen clearly a move to cash.
Speaker 5: All world, which is the bond world, has been pretty
Speaker 5: much unaffected. And my partner Dan Iverson has to say,
Speaker 5: where you look at the yell on the portfolio of
Speaker 5: bonds says six percent, six and a half percent, it's
Speaker 5: a very good predictor of what your return will be
Speaker 5: over the next five years.
Speaker 6: So if you want to own bones, you're.
Speaker 5: Gonna make six and a half percent, give or take
Speaker 5: over the next five years.
Speaker 6: How are you going to get there a lot of uncertainty,
Speaker 6: and that's.
Speaker 1: What I'm curious is about the volatility. And I mean
Speaker 1: you're referring to your CIO. I mean I thought an
Speaker 1: interview where you actual talked about how he was really
Speaker 1: embracing that volatility to a certain extent.
Speaker 6: There's too competent to it.
Speaker 5: What we like about volatil is the fact that it
Speaker 5: will provide investment opportunity and a source of alifi in
Speaker 5: terms of trading different part of the curve, but also
Speaker 5: different products and to move away from the US and
Speaker 5: find opportunity another part of the world. So you can
Speaker 5: always buy US asset, but you can also buy non
Speaker 5: US asset as a way to.
Speaker 6: Get duration and hedge them back into dollars.
Speaker 5: So, for example, we like Australian duration Australia as a
Speaker 5: dry Robert Academy. We like Australian bonds, but we hedge
Speaker 5: them back in two dollars.
Speaker 6: That's the way to add OURPA to the portfolio.
Speaker 1: How complicated is it to do that when there's also
Speaker 1: a ton of volatility in the FC space and no
Speaker 1: one seems to know where the dollars might be.
Speaker 6: You may wonder what the two thousand people. We have
Speaker 6: a new public school, that's what they do. You know,
Speaker 6: we could deal with that. Just about that. We can
Speaker 6: deal with that.
Speaker 3: At US Secretary Treasury Scott Besson obviously really kicking off
Speaker 3: milk and on Monday, and he talks about the importance
Speaker 3: of watching the ten year Do you agree in terms
Speaker 3: of US treasuries.
Speaker 5: The cost of boring is very important? And I think
Speaker 5: I will answer this in twofold one. The US dollar
Speaker 5: as a reserve currency is really important and the ten
Speaker 5: year bond is in a way the barometer for the
Speaker 5: financial health of the world Academy, so it is really important. Now,
Speaker 5: I would say you look at the whole year Cove,
Speaker 5: you look at the short end, the ten year, the
Speaker 5: thirty year. You think also about credit spread, they're very tight,
Speaker 5: and you think about all of this parameter and try
Speaker 5: to assess what's to come and how you're going to
Speaker 5: deal with it.
Speaker 3: Mannie, one thing I'm curious about, and bringing up Secretary Bessett,
Speaker 3: what is the voice that you listen to most and
Speaker 3: trying to determine ultimately what happens in the US, especially
Speaker 3: when it comes to its financial system. You know, it's
Speaker 3: been the place the world's safe haven, right and.
Speaker 6: It will remain the place of safe handy.
Speaker 4: We're so sure, why?
Speaker 6: Well, think about it.
Speaker 5: The US dollar is the reserve currency, but it's also
Speaker 5: the most liquid treasury market in the world.
Speaker 6: About an enormous factor.
Speaker 5: And yes, you know, you can make a reasonable argument
Speaker 5: that the dollar is slightly expensive and that you may
Speaker 5: want to diversify from the dollar to other currency, but
Speaker 5: it doesn't mean, it does not mean that the dollar
Speaker 5: loses its status, and I think it's very important to
Speaker 5: keep that in mind.
Speaker 6: There's no other reserve currency, there's no other place to.
Speaker 5: Move trillions and trillions of dollars away from the dollar,
Speaker 5: and it is what it is.
Speaker 3: Do you have faith in the Treasury Secretary to do
Speaker 3: the right thing or at least get the president's ear
Speaker 3: on doing the right thing, because he has said some
Speaker 3: things in regards to the fad the Treasury secretary.
Speaker 4: Even so, I'm just curre is do you have faith?
Speaker 5: I think the wonderful thing about financial markets is that
Speaker 5: they're efficient and so they'll tell them and that the market.
Speaker 6: Reacts to policy.
Speaker 5: And when the market doesn't like either policies or a tweet,
Speaker 5: the market react in such a way that people need
Speaker 5: to adjust the cost of action. The market wants the
Speaker 5: FED to be independent, and I think has voted very
Speaker 5: strongly about that, and I think that dictates some of
Speaker 5: the choices and some of the noise around all of this.
Speaker 6: And you know, it's a good thing. Markets are there.
Speaker 5: To reflect, to reflect supply and demand and also reaction
Speaker 5: to event in the world, and.
Speaker 7: We saw that play out in a big way in April.
Speaker 1: One side of that, though, basically to your comments about
Speaker 1: there kind of this being the most liquid market, this
Speaker 1: is kind of the reserve currency, and that's not going
Speaker 1: to end will lessen to a degree because when we
Speaker 1: look at our treasury market and we think about how
Speaker 1: many global investors hold our bonds, all the rumors that
Speaker 1: maybe certain nations might be willing to weaponize their holdings
Speaker 1: if the dispute with the US over trade escalates, does
Speaker 1: that concern you?
Speaker 6: You know, there's no there's no free launch.
Speaker 5: The reason why people own US dollar is because they
Speaker 5: like to own US dollar asset. There is a very
Speaker 5: strong case for American exceptionalism. The fact that the financial
Speaker 5: systems are very liquid and very well run, and that
Speaker 5: if you, for example, a Japanese investor, where there's about
Speaker 5: a trillion dollars of US debt held by Japanese institution.
Speaker 6: It's a good place to be even hedge back in yen.
Speaker 5: And I think that's that's really an important fact to
Speaker 5: remember in terms of the flow of fund and who
Speaker 5: needs to put money aware that is.
Speaker 7: The treasury market healthy right now?
Speaker 6: Totally?
Speaker 7: You do not You weren't concerned.
Speaker 1: At all about what transpired that first we to April,
Speaker 1: about the potential gum up in the system or that
Speaker 1: mismatch between buyers and sellers.
Speaker 5: No. We On the contrary, I think we've seen very
Speaker 5: liquid market voice in treasury and in credits, and to
Speaker 5: be honest, yeah, you know, markets have been remarkably well behaved.
Speaker 5: We had a couple of difficult days during COVID before
Speaker 5: they FED intervened, but it's been very with sailing since.
Speaker 5: And you know, the markets offer plenty of opportunity to
Speaker 5: change your mind. One of the good contribution have been
Speaker 5: ETF where ETF have a lot people like us to
Speaker 5: do portfolio trade, rebalance or book and to use this
Speaker 5: liquidity to move assets around. And I would really and
Speaker 5: fifacts this the markets are quite liquid.
Speaker 1: I promise not all my questions are pessimistic, but I
Speaker 1: do have one with the guard I mean, you had
Speaker 1: a market, they had to deal with the trade issues
Speaker 1: that hasn't been resolved, but they certainly made some degree
Speaker 1: a piece with where we are. There's now a big
Speaker 1: budget battle that's about to take place in Washington, and
Speaker 1: I do wonder as the lead leader of the biggest
Speaker 1: bond company, bon Investler out there is there concern that
Speaker 1: our fiscal deficit and the potential remedies that are being
Speaker 1: discussed in Congress could exasperate the situation in the fixed
Speaker 1: income market.
Speaker 5: That's the wonder of being the reserve currency. Everything else
Speaker 5: being equal, you could run a slightly higher deficit than
Speaker 5: you would otherwise. And I think that, of course, people
Speaker 5: will look at the amount of deficit and you know,
Speaker 5: it is overwhelmingly likely that the deficit is.
Speaker 6: Not going to get reduced.
Speaker 5: But once again, would you rather own very high quality
Speaker 5: assets in the US or would you rather own bonds
Speaker 5: in southern Europe? You can decide which one you you
Speaker 5: would rather own. That's the reality. The reality is you
Speaker 5: need to invest somewhere so.
Speaker 4: You're not worried about It's a lot of debt.
Speaker 8: It's a physical situation.
Speaker 3: It's been a lot of debt for a long time,
Speaker 3: but now we're at levels we haven't seen.
Speaker 4: Should we just accept it?
Speaker 9: No?
Speaker 5: I think I would reply with a quote that I
Speaker 5: heard Jeannett Yellen gave in a private conversation. She said,
Speaker 5: all we can say is it's not a problem until
Speaker 5: it becomes a problem. And so it's a deeper meaning
Speaker 5: maybe that it appears like there's a tipping point, which
Speaker 5: is very hard to guess where all of a.
Speaker 6: Sudden, either because the issue.
Speaker 5: Will lose credibility or because the policy doesn't make sense
Speaker 5: to market participant people all of a sudden don't want
Speaker 5: to be the margin.
Speaker 7: Old buyer our Thanks to filmco CEO Many Roman.
Speaker 3: Coming out much more from Milk in twenty twenty five.
Speaker 10: This is Bloomberg.
Speaker 2: You were listening to the Bloomberg Business Week Daily podcast.
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Speaker 3: I'm Carol Master along with Romaine Bostik in for Tim
Speaker 3: this week with a special edition of the Weekend Edition
Speaker 3: of Bloomberg Business Week. We are bringing you all the
Speaker 3: highlights from our coverage of the twenty eighth annual Milk
Speaker 3: and Institute Global Conference in Beverly. Hill's gotta say a
Speaker 3: lot of energy, A lot of people were here.
Speaker 1: A big theme this week cautious optimism. Robin Grew is
Speaker 1: chief executive officer at Man Group, one of the world's
Speaker 1: largest publicly traded edge fund companies, managing over one hundred
Speaker 1: and sixty eight billion dollars in client assets. She says,
Speaker 1: despite recent market of volatility, there's still plenty of investment opportunity.
Speaker 11: Volatility is a place where we need to lean in
Speaker 11: to do me. We are in volatile markets. We're not
Speaker 11: going back to a benign market environment, and so in
Speaker 11: that space, we have to be prepared to create diversify
Speaker 11: content and capability that's able to navigate these markets to
Speaker 11: provide outsized returns or alpha returns to our investments.
Speaker 1: How do you do that though, because when you look
Speaker 1: at the strategies that Man Group has a lot of
Speaker 1: systemic strategy, systematic strategies, a lot of trend following strategies
Speaker 1: that we've seen over the last few weeks and months.
Speaker 1: Does not necessarily perform optimally when there is so much
Speaker 1: misdirection going on in the market.
Speaker 11: Totally, totally, and they're not supposed to. I think that's
Speaker 11: the thing that we need to be mindful of. In
Speaker 11: a diversified portfolio, you're going to have assets and capabilities
Speaker 11: and strategies that do perform. And we've seen that in credit,
Speaker 11: we've seen it in great active equity management, we've seen
Speaker 11: it in multi strats. But you don't see it in
Speaker 11: trending because that whip saw and whiplashing behavior doesn't work
Speaker 11: for it. But that's why when clients are talking to
Speaker 11: us about how do they position their portfolios, they're looking
Speaker 11: at the things that will operate in markets as we're seeing,
Speaker 11: and they're also thinking about defensive alpha. And what we
Speaker 11: do know and what we've had history around, is that
Speaker 11: when you have decades of experience in momentum and trend
Speaker 11: they operate well when this volatility slows down and then
Speaker 11: you can find the trends again.
Speaker 1: Do you expect that volatility to slow down anytime soon?
Speaker 11: I think that volatility is going to be here for
Speaker 11: some time. It's whether the volatility is accompanied by whiplash
Speaker 11: behavior and that's what the markets are looking for, that consistency,
Speaker 11: something that is predictable and capable of being predicted. But
Speaker 11: there's no doubt that the opportunity sets across markets are
Speaker 11: really interesting right now. One hundred days ago, you might
Speaker 11: not have thought about Europe as a growth opportunity. We're
Speaker 11: looking at Asia with a very different set of lenses.
Speaker 11: We're seeing real opportunities for active and alternative investments. And
Speaker 11: it's about staying calm through this time as well. But volatility,
Speaker 11: will it be here for some time? I think so.
Speaker 11: Dispersion yep, I think so. But whiplash hope not forever.
Speaker 1: I don't loo if you got a chance to hear
Speaker 1: what Scott Besson had to say at one of the
Speaker 1: milk and panels here, but there was a really interesting
Speaker 1: moment where he really turned to the audience and looked
Speaker 1: straight at them and said, we're trying to make everything
Speaker 1: more appealing for you, meaning for the investors out there
Speaker 1: that are in this room. Do you find any comfort
Speaker 1: in hearing those words out of Scott Besson?
Speaker 11: Absolutely, we want this biggest deepest capital market to function really,
Speaker 11: really well.
Speaker 12: We just also good.
Speaker 11: To work by our clients to go and seek out
Speaker 11: alpha wherever that may be that outperforms across all markets.
Speaker 11: That's why we trade eight hundred plus markets in the world.
Speaker 11: That's our job to do that, and we do that
Speaker 11: for real individuals who have saved all their lives, who
Speaker 11: put into their pension pots, be their four one ks
Speaker 11: or they are raised. But yes, I think it's a
Speaker 11: tremendous statement that we have Scott Besson talking to us
Speaker 11: about actually being supportive of markets. I think that's a
Speaker 11: great thing.
Speaker 7: Is that too little, too late?
Speaker 1: This is a room full of people from around the world,
Speaker 1: and you know there's been a reallocation of capital, or
Speaker 1: at least a rethink of whether to reallocate capital away
Speaker 1: from the US to Europe for example, or even to
Speaker 1: other parts of the world.
Speaker 4: To not too late.
Speaker 11: I don't think so. I think we all look to
Speaker 11: the quality of the US as an investible space. Again,
Speaker 11: it's the opportunity set that's out there. Is it a
Speaker 11: bad thing that there's competition. Is there's a bad thing
Speaker 11: that there's growth in Europe or an opportunity set in
Speaker 11: Asia that's opening up.
Speaker 4: I don't think so.
Speaker 11: In the same way as I don't think it's a
Speaker 11: bad thing that we're seeing the opportunities in private.
Speaker 8: Credit open up.
Speaker 11: So I think there's plenty for us to keep our
Speaker 11: very detailed focus on. But no, I don't think it's
Speaker 11: too little, too late.
Speaker 1: How do you keep your team, the folks who work
Speaker 1: under you, not just motivated, but to get them to
Speaker 1: understand what the long term goal is in an environment
Speaker 1: where we are so focused on these minute by minute,
Speaker 1: short term disruptions.
Speaker 4: I think the.
Speaker 11: Reality is you have to be you have to have
Speaker 11: confidence in the strategies you're running, and you have to
Speaker 11: know that those strategies are performing the way they should
Speaker 11: do in the market environments you're in. So you keep
Speaker 11: that focus at man group. If we have strategies that
Speaker 11: aren't working in a period of time, I don't have
Speaker 11: to go on to the floor and make people feel
Speaker 11: more unhappy.
Speaker 8: They're doing that themselves.
Speaker 11: So for what we do, it's about being sure that
Speaker 11: we're doing the best we can do. We continue to
Speaker 11: be at the cutting edge entrepreneurially of content and product
Speaker 11: and capability that we deliver.
Speaker 8: That to our clients, that we deliver.
Speaker 11: More than just funds or products, even to clients that
Speaker 11: we're delivering the decades of experience we have in AI
Speaker 11: or technology, or we're delivering the nearly twenty years of
Speaker 11: experience we have in our partnership with the Oxford Man
Speaker 11: Institute at Oxford University. It's about keeping people focused on
Speaker 11: the day job. It's about staying calm.
Speaker 1: You mentioned AI, and of course Man Group is probably
Speaker 1: one of the early adopters, least in the finance space
Speaker 1: of AI, and I think we spoke about this at
Speaker 1: Bloomberg at best a few months ago. Does that become
Speaker 1: more critical in times like this having those types of
Speaker 1: capabilities or is it potentially a liability because you're effectively
Speaker 1: talking about I don't know something that's I don't want
Speaker 1: to say it's pre determined, but certainly there's a roadmap
Speaker 1: that's put out when it comes in these models.
Speaker 4: Listen.
Speaker 11: I think AI is a tool. We talked about it before.
Speaker 11: It is a great capability. When I think about generative
Speaker 11: AI and I think about AI agents, it's about deploying those.
Speaker 11: It means we can be better, faster, smarter. Doesn't replace
Speaker 11: the human being, and it doesn't mean that you need
Speaker 11: to ignore the risks that are incumbent in these capabilities too.
Speaker 12: But I do.
Speaker 8: I think that tech is part.
Speaker 11: And past of what the future looks like. Undoubtedly AI
Speaker 11: part of that. Undoubtedly you don't have to look very
Speaker 11: far in this conference to see just the power and
Speaker 11: the capability of these future technologies.
Speaker 1: You think the investment in that writ large, not just
Speaker 1: said Man Group investment in that AI tech that hasn't
Speaker 1: been disrupted at all. There hasn't been a rethink on
Speaker 1: that longer term investment opportunity.
Speaker 11: Else We continue to think that AI and will continue
Speaker 11: to think that this is both being consumed within Man
Speaker 11: Group and within the work we do, but the broader
Speaker 11: reach outs into other industries and other spaces is going
Speaker 11: to be I think transformation.
Speaker 1: You've been on the job for a while now, so
Speaker 1: you're not new, You're more of a veteran now, and
Speaker 1: you're a veteran at a time where this has to
Speaker 1: be one of the more challenging times to be a
Speaker 1: corporate leader, certainly of a financial company. And I am
Speaker 1: curious as to what you want to do to grow
Speaker 1: Man Group knowing that the world order that you came into,
Speaker 1: not over, is certainly being reshaped.
Speaker 11: I think the great this is a privilege to sit
Speaker 11: in the seats we do. And I've been talking to
Speaker 11: clients NonStop really for the last one hundred days or so,
Speaker 11: and that privilege is something we shouldn't forget. You get
Speaker 11: a front row seat into what's happening in the world
Speaker 11: doing the jobs we do. And so my job, how
Speaker 11: has it changed in the last hundred days. It hasn't really.
Speaker 11: It's still about doing the right thing by clients. It's
Speaker 11: still about sticking to the strategy we have. It's still
Speaker 11: about creating diversified or sootable and correlated content so our
Speaker 11: clients can benefit and can return value to their underlying
Speaker 11: savers and pensions.
Speaker 7: Our thanks Demand Group CEO, Robin Group, all right.
Speaker 1: Well.
Speaker 3: Also top of mine this week was access to private credit.
Speaker 3: Given market uncertainty, I got to say, remain private credit
Speaker 3: always a big topic here.
Speaker 1: The companies that get private credit loans are looking increasingly
Speaker 1: wobbly in banks are among those that could eventually be
Speaker 1: on the hook for those losses. For his take on
Speaker 1: the environment, we spoke to Steven Tannenbaum see this Golden
Speaker 1: Tree Asset Management founder and chief investment officer, overseeing almost
Speaker 1: fifty seven billion dollars for institutional investors so.
Speaker 13: Right now spreads HyG which is the ETF, it's pretty
Speaker 13: much unchanged, yet the expectations for the economy have shifted down.
Speaker 13: So right now the market doesn't seem to believe that
Speaker 13: there's an issue, but predictions and the environment certainly doesn't
Speaker 13: reflect that.
Speaker 4: So roundtrip, are we back where we want to be?
Speaker 3: Or are we back at a place that's very different
Speaker 3: from where we started.
Speaker 13: So I think the real issue is, is this twenty
Speaker 13: twenty two where the concerns about a recession are overblown
Speaker 13: and we're going to play.
Speaker 12: Through this very much the resilience.
Speaker 13: Ad Treasury Secretary Besson talked about it.
Speaker 6: Or are we in for something.
Speaker 13: That's more turbulent and that the expectations that the economy
Speaker 13: is slowing is actually going to be realized, in which
Speaker 13: case spreads do not reflect that.
Speaker 1: When you look at how much spreads did increase in
Speaker 1: early April and then narrowing, that's a current sense similar
Speaker 1: to the rebound that was seeing in e public equity
Speaker 1: markets here, I.
Speaker 13: Think there's certainly are complementary. There's been more dispersion in
Speaker 13: the equity market, and particularly in mid and small cap
Speaker 13: than what we've seen in the credit market, which has
Speaker 13: really been pretty much technically recovered pretty much to the
Speaker 13: levels that they were before.
Speaker 1: When you're looking around right now and you've see what's
Speaker 1: already on your portfolio but also new opportunities, do you
Speaker 1: have some sort of transparent price to starting right now
Speaker 1: or are things kind of money?
Speaker 13: In terms of the stuff we're doing now, there's always
Speaker 13: an idiosyncratic I've been a portfolio manager for thirty five years.
Speaker 13: There's always something to do. But in terms of the
Speaker 13: market that interesting, there's no fullmo of not participating. But
Speaker 13: we're going to get more evidence about how things are
Speaker 13: in the next forty eight weeks. And I'd rather be
Speaker 13: tighter with more confidence or believe that the market reflects
Speaker 13: the uncertainty.
Speaker 7: So you don't want excitement, you want boring.
Speaker 12: No, no, no.
Speaker 13: I rather have a lower price with excitement, higher price
Speaker 13: with boredom, well said.
Speaker 3: Well said, are you looking to do capital raises because
Speaker 3: you anticipate there's more opportunities to come once things settle down.
Speaker 13: We're pretty good with capital, so we have our catchers
Speaker 13: mitt and also we're pitching some deals.
Speaker 6: You know.
Speaker 13: One of the things about this current environment is there's
Speaker 13: the m and a and some of the acid sales
Speaker 13: that private equity was expecting isn't coming realized. There's a
Speaker 13: wider gap between buyers and sellers. So one way to
Speaker 13: return capital to LPs is through dividend deals, so we
Speaker 13: want to facilitate that.
Speaker 3: I am also curious we have seen spikes in terms
Speaker 3: of credit spreads widening. I think about the last month,
Speaker 3: the moments of stress here. Do you think that's it
Speaker 3: for this year? I mean, the volatility has been immense,
Speaker 3: and I understand what you're saying, the difference between the
Speaker 3: public and the private markets, and I'm curious which one is.
Speaker 13: Right through at this So I remember during the UBS
Speaker 13: Credit Swiss and it lasted for maybe a day, and
Speaker 13: there was a good reason because the dynamics of that
Speaker 13: deal that were onerous to the Credit Swiss junior deadholders
Speaker 13: that you could extrapolate that, and it turned out because
Speaker 13: with the Swiss regulators different than the rest of Europe,
Speaker 13: you could pretty much isolate that. I think it's very
Speaker 13: different in the US. It's still developing. And then there's
Speaker 13: also there's a tariffs with our allies and who we
Speaker 13: have very healthy relationships, and there's the more developing relationship
Speaker 13: with China that is unclear, and those are two different
Speaker 13: discussions and how they turn out we're going to see.
Speaker 1: That was Steeve Tannenbaum, Founder, managing partner and CIO at
Speaker 1: Golden Tree Asset Management.
Speaker 3: Still ahead on Bloomberg BusinessWeek, FCC Chairman Brendan Carr on
Speaker 3: incorporating private investments to grow wireless communication across the United States.
Speaker 4: This is Bloomberg Business Week.
Speaker 2: This is the Bloomberg Business Week Daily Pod. Listen live
Speaker 2: each weekday starting at two pm Eastern on Apple CarPlay
Speaker 2: and the Android Auto with the Bloomberg Business App. You
Speaker 2: can also listen live on Amazon Alexa from our flagship
Speaker 2: New York station Just Say Alexa played Bloomberg eleven thirty.
Speaker 4: I'm kel Master along with Romaine Bostik.
Speaker 3: We've got a special edition this week of the weekend
Speaker 3: edition of Bloomberg Business Week. We are highlighting interviews from
Speaker 3: this past week's Milkin Institute Global Conference, held as it
Speaker 3: always is every year for twenty eight years in Beverly Hills, California.
Speaker 1: And while tariffs and market volatility we're certainly top of
Speaker 1: mind this week at Milkan Technological advances and the US
Speaker 1: dominance in them well. That also featured prominently among their discussions.
Speaker 3: They certainly did with thoughts on how the Trump administration
Speaker 3: is working toward generating eighty billion dollars in government revenue
Speaker 3: helping the US better compete with China.
Speaker 4: We caught up with SEC Chair Brendan Carr.
Speaker 12: President Trump has been very clear he wants to unleash
Speaker 12: America's private sector to build again. If you look back
Speaker 12: the last four years, so many infrastructure projects got down
Speaker 12: in dreams of red tape. We saw it with this
Speaker 12: forty two billion dollar Internet infrastructure plan that went nowhere,
Speaker 12: and so we've directed us to deregulate. In fact, we've
Speaker 12: engaged in the most massive deregulation effort at the FTC
Speaker 12: that we've ever done. It's underweight right now. We've closed
Speaker 12: and looking to close two thousand dockets that have been opened.
Speaker 12: But probably the most important thing we can do for
Speaker 12: the economy right now is spectrum. These are the airways
Speaker 12: that your smartphones use. We made a lot of progress.
Speaker 12: I thought they're in the first Trump administration. We fell
Speaker 12: behind a little bit during Biden. We needed new hundreds
Speaker 12: of megaherts out in the marketplace. That's actually deflationary is
Speaker 12: going to drive down prices for consumers. It's being pro
Speaker 12: competitive too.
Speaker 7: Those dockets, I mean what actually the accelerated that? What
Speaker 7: was the outcome?
Speaker 12: Yeah, So right now we're targeting all of those, we're
Speaker 12: seeking comment on it. We've already closed over one hundred dockets.
Speaker 12: We're doing a massive deregulation initiative, and permitting reform is
Speaker 12: so key. You know, we have these rules on the
Speaker 12: books that forced broadband providers like AT and T to
Speaker 12: invest billions of dollars in old copper line networks, where
Speaker 12: we're taking a fresh look at that so they can
Speaker 12: move that investment over to high speed IP networks. So
Speaker 12: it's effectively moving billions of dollars of capital into new
Speaker 12: neck networks. So these are some of the economic agendas
Speaker 12: that we're running at the agency.
Speaker 4: So what's the timeline on all of this.
Speaker 3: It's a lot to get through, But what is the
Speaker 3: timeline that you guys are looking at?
Speaker 12: It is our directions move on Trump speeds that we're
Speaker 12: moving very quickly. In the first hundred days already we've
Speaker 12: taken action across many of these fronts. Also national security,
Speaker 12: we set up a new Council on National Security. At
Speaker 12: the FCC, we're making sure that we're not vulnerable to
Speaker 12: threats that come from communist China, for instance. We're looking
Speaker 12: at making sure that people can make and manufacture things
Speaker 12: here in the US as well. So we're running a
Speaker 12: full economic agenda. We're pretty proud of it.
Speaker 3: What are you hearing from members of the telecom community
Speaker 3: about what they can do in terms of manufacturing here
Speaker 3: in the United States.
Speaker 12: Yeah, there's a lot we can do. For instance, no
Speaker 12: piece of electronics can be used in the US unless
Speaker 12: it's tested in a lab, but so far as seventy
Speaker 12: five percent of those testings take place inside China. So
Speaker 12: we're looking at steps we can do to resure a
Speaker 12: lot of that testing as well, and that'll help give
Speaker 12: US manufacturers a boost.
Speaker 7: How long would it take to do that, you know.
Speaker 12: I think it can be pretty short order. We already
Speaker 12: have some of that testing here already, so we're taking
Speaker 12: steps to sort of further do it. But these are
Speaker 12: just you know, parts of the pieces we're running at
Speaker 12: the FCC. It's a really important agenda. Again, we've got
Speaker 12: to unleash America's private sector. They were held back too
Speaker 12: long by different red tapes and regulations permitting reform. Again,
Speaker 12: as I mentioned, a lot of state and local regulations
Speaker 12: still slow down internet builds. There's a role for the
Speaker 12: FC to step in there and help clear the way.
Speaker 12: But spectrum, permitting, reform, deregulation, that's the driving agenda at
Speaker 12: the FCC. I think it's gonna be great for the economy.
Speaker 7: How unified is this approach from the administration.
Speaker 12: Is the FCC a.
Speaker 7: Part of that?
Speaker 12: Yeah, for sure. Look President Trump was put together just
Speaker 12: an all star team, particularly this second administration. Everybody is
Speaker 12: fully aligned. They're executing the president's agenda. You mentioned AI.
Speaker 12: I mean that's gonna be the use case that's going
Speaker 12: to drive so man of these telecom networks. That's how
Speaker 12: we have to get more spectrum out there. That's all
Speaker 12: we have to make it easier to invest in these
Speaker 12: new high speed networks. When you look at the data
Speaker 12: demands of AI, you know, data generally is going up
Speaker 12: to AI is going to increase through the roof.
Speaker 1: Where do we stand though, on spectrum because I've heard
Speaker 1: that before. What's out there and even though some of
Speaker 1: the spectrum that has been released over the last few years,
Speaker 1: there have been some concerns that they might be causing
Speaker 1: an appearance, particularly with some of the recent incidents that
Speaker 1: we had in aviation.
Speaker 7: Here can that sort of coexist altogether?
Speaker 12: Yeah, Look, you know, thankfully President Trump has a playbook
Speaker 12: on this. In twenty seventeen, we had fallen far behind China.
Speaker 12: He stepped up and said, look, I want to lead
Speaker 12: in five G. I want to lead in six G.
Speaker 12: Who cleared hundreds of megahertz of spectrum? We fell behind China.
Speaker 12: The reality is we are falling behind China right now.
Speaker 12: But we have the playbook. President Trump is going to
Speaker 12: step in. We're working right now. Chairman Ted Cruz and
Speaker 12: the Senate is working hard to get spectrum across the
Speaker 12: finish line. We can put it in reconciliation, and that's
Speaker 12: going to help pay for a lot of the efforts
Speaker 12: that people want to do in there. It's going to
Speaker 12: be eighty billion dollars or more to be raised if
Speaker 12: we start auctioning this spectrum off chare card.
Speaker 3: What does this do for people who really don't have
Speaker 3: access when it comes to telecommunications are rural areas we
Speaker 3: so so much of this post pandemic. Everyone has talked
Speaker 3: about helping these areos for a long time.
Speaker 4: How do you actually help those Americans.
Speaker 12: Yeah, there's a couple things we're doing there. When we
Speaker 12: get more spectrum out that will bring people across the
Speaker 12: digital divide, will give people more competitive options. But also
Speaker 12: think about this new new generation of low worth orbit satellites.
Speaker 12: Whether it's Starlink, Kuyper just started launching, there's other providers
Speaker 12: out there. When we bring that together as part of
Speaker 12: the solution, that's really the long term key to bridging
Speaker 12: the digital divide in a cost effective way.
Speaker 3: Well, that's interesting that you bring up Elon Musk Starlink.
Speaker 3: Does we know his certainly close relationship with the president.
Speaker 3: I mean, how much of the work you are doing
Speaker 3: is kind of focusing on his kind of technology.
Speaker 12: Well, look, I think the space economy in general is
Speaker 12: probably one of our top three issues that we're doing
Speaker 12: at the FCC. We need to start moving much more quickly.
Speaker 12: It took years to get the permits necessary for a
Speaker 12: lot of the communications for these satellites. We need to
Speaker 12: be doing that in a matter of days and weeks.
Speaker 12: But it's not just Starlink, but they do it safely.
Speaker 3: Though there is some concern about how many satellites are
Speaker 3: up in space at this point.
Speaker 4: We just did a big deep.
Speaker 3: Dive yere at Bloomberg about concerns about satellites coming down.
Speaker 4: I mean, there is a process here. How do you
Speaker 4: do this safely?
Speaker 12: Yeah, we feel comfortable. There's order, debre mitigation rules that
Speaker 12: are in place if we license all the satellites. At
Speaker 12: the end of the day, we feel very comfortable that
Speaker 12: we can still get thousands of more satellites out there.
Speaker 12: We get in. The new trend is direct to people's
Speaker 12: cell phone, and that's something it's just emerging. In fact,
Speaker 12: we've given providers authority to go higher power from these
Speaker 12: LEO satellite systems to get even better direct to sell capabilities.
Speaker 12: This is a really exciting area.
Speaker 1: I want you to talk though, particularly when it comes
Speaker 1: to the satellites in space. There's obviously a lot of
Speaker 1: competition between nations for that real estate, if you will,
Speaker 1: in the air. The US obviously had the first mover advantage.
Speaker 1: China has been launching like crazy. India now trying to
Speaker 1: get into the mix. I've we're seen in other countries,
Speaker 1: including in Latin America, also try to find space up there.
Speaker 1: Does this become a conflict at some point.
Speaker 12: Look, I think this is going to be a very
Speaker 12: important geopolitical issue is you know, China is trying to
Speaker 12: launch their own version of whether it's Starlink or Kuiper,
Speaker 12: and when they're able to pair Belton Road with high
Speaker 12: speed internet provided from satellites with their own CCP content
Speaker 12: moderation filters, that's a real threat going forward. And that's
Speaker 12: why it's so imperative that the SEC moved quickly to
Speaker 12: allow US providers again a full range of them to launch,
Speaker 12: to compete to provide coverage.
Speaker 1: And so that's what we're going to do with the
Speaker 1: age than our thanks to FCC Chairman Brendan Karr.
Speaker 3: Now from investing in high speed networks to leading the
Speaker 3: global race for energy independence and artificial intelligence dominance. It's
Speaker 3: another major goal for the Trump administration.
Speaker 1: Michael Kratzils is policy director for the White House Office
Speaker 1: of Science and Technology.
Speaker 7: He says, the.
Speaker 1: Administration is all in on energy and overall technological dominance.
Speaker 14: Yes, and something that the President is very focused on
Speaker 14: and something we as administration are committed to ensuring, as
Speaker 14: the President says, unquestioned and unchallenged global technological dominance and
Speaker 14: that's to require a lot of work from us, from
Speaker 14: R and D to DRAGGED to adoption.
Speaker 8: So there's a tunnel working on.
Speaker 14: And as the President signed executive Order just a couple
Speaker 14: of weeks ago to make sure that our K through
Speaker 14: twelve education system is geared to prepare our students for
Speaker 14: for this AI future.
Speaker 7: What's the runway for that?
Speaker 1: Because there's been a lot of talk about how much
Speaker 1: of brain power, if you will, already exists, meaning so
Speaker 1: for the adults out there, and how many people we
Speaker 1: need to sort of train up, meaning the next generation
Speaker 1: of folks to ensure that we have enough skilled people
Speaker 1: to take this forward.
Speaker 14: The President realized that it's critically important that we prepare
Speaker 14: the next generation of Americans to wield and utilize these tools.
Speaker 14: So we began with this Executive Order on Artificial Intelligence
Speaker 14: in K through twelve and essentially is doing three things.
Speaker 14: I think the first thing and the most important thing
Speaker 14: is bringing together public private partnerships to support AI education.
Speaker 8: It's something that we cannot do alone. We have great.
Speaker 14: Industry partners that care about helping here. We have great
Speaker 14: folks in philanthropy, great folks in government, and the K
Speaker 14: through twelve system itself. The second, which is really exciting,
Speaker 14: is a Presidential AI Challenge. So we want to create
Speaker 14: in a sense, an Intel Science Fair or like a
Speaker 14: Doe Science Foal or Premier competition for AI that would
Speaker 14: ultimately end up in a event at.
Speaker 8: The White House next year.
Speaker 14: And lastly, if you said we have to train Americans,
Speaker 14: reskill them, and retrain them with the AI tools that
Speaker 14: they need to succeed in this economy, we're working very
Speaker 14: closely with the Department.
Speaker 8: Of Late to make that happen.
Speaker 1: And just to be clear, so the President understands that
Speaker 1: and understands the importance of a government role in facilitating this,
Speaker 1: because when a lot of people talk about our leadership
Speaker 1: in the United States from a technological standpoint, they point
Speaker 1: back to a lot of those post World War two
Speaker 1: programs that came out of the Defense Department at DHARPA
Speaker 1: and other sort of government research facilities that fed into
Speaker 1: university research of facilities and ultimately into the private sector.
Speaker 7: Is that the playbook?
Speaker 14: Yeah, So what's very unique about the American innovation ecosystem
Speaker 14: is it it's really it's three parts. It's one part academia,
Speaker 14: one part private sector, and one part government and all
Speaker 14: of them kind of pass the torch from one another
Speaker 14: to drive innovation. So the federal government often funds early stage,
Speaker 14: basic pre competitive research. Universities make fundamental breakthroughs or discoveries.
Speaker 14: Those are ultimately taken up by the private sector and commercialized,
Speaker 14: and the government steps in to help create a regulatory
Speaker 14: environment for those new technologies to succeed and thrive. So
Speaker 14: we're going to continue to work on that effort and
Speaker 14: make sure that we have the best functioning innovation ecosystem
Speaker 14: in the world.
Speaker 1: What needs to be changed when it comes to the
Speaker 1: regulatory environment. You've been on the record in the past
Speaker 1: saying that you thought that things were there were too
Speaker 1: many barriers, if you will.
Speaker 7: What's in the on.
Speaker 1: The agenda right now that this administration wants to do
Speaker 1: to lower or at least smooth out those regulations.
Speaker 14: We really have to find and identify barriers which are
Speaker 14: inhibiting the preferation of emerging technologies. We want to be
Speaker 14: flying supersonic again. We want commercial drone delivery to be
Speaker 14: happen in the United States. We want self driving vehicles
Speaker 14: on the road. We want aipowered medical diagnostics. All these
Speaker 14: things have been slowed down or hampered by a regulatory process,
Speaker 14: which may be good intention, but it's just too slow,
Speaker 14: and we need to continue to leave the world on
Speaker 14: this and doing this deregulation is a big.
Speaker 8: Piece of the Trump agenda.
Speaker 1: Do you see us primarily in competition with China on
Speaker 1: that front?
Speaker 14: Look, I mean, we're a competition with so many people
Speaker 14: around the world. Everyone wants to be a leader here,
Speaker 14: and obviously the PRC has made it very clear of
Speaker 14: that they want to leave the world by twenty The
Speaker 14: US is in a very lucky position where we are
Speaker 14: the world leaders. So we need to continue to make
Speaker 14: sure we have an environment where we can maintain that leadership.
Speaker 1: And university is going to be a critical part of that,
Speaker 1: are they not. There's been a lot of discussions about
Speaker 1: the president's attacks on certain universities, about some of the
Speaker 1: brain drain that maybe we might see as a result
Speaker 1: of that. How do you reconcile that The most important.
Speaker 14: Thing about fairly funded R and D we have to
Speaker 14: think about is it's not about spending a lot of money.
Speaker 14: If you spend a lot of money on the wrong things,
Speaker 14: it's worse than spending a little money on the right things.
Speaker 14: So we're making sure that the biggest priorities for the nation,
Speaker 14: things like leading and artificial intelligence, leading in quantum information science.
Speaker 8: Can we continue to fund those.
Speaker 14: Areas and make sure that our universities are a big
Speaker 14: part of that agenda.
Speaker 7: Terrorists.
Speaker 1: I have to ask you about Tarik's Your president has
Speaker 1: made it clear he's tariff man. They're here, they're coming.
Speaker 1: Does that have an impact though, on what you're trying
Speaker 1: to do? Do you have to factor in maybe the
Speaker 1: extra costs to whether bringings in or reshot things.
Speaker 14: We're seeing as some of the greatest technology companies in
Speaker 14: America in the around the world are coming and they're
Speaker 14: investing in the United States, A Secretary Vestin said this morning,
Speaker 14: more investments coming to the United States in the last
Speaker 14: one hundred days than it has in the four years
Speaker 14: under President Biden. So what we're doing is actually bringing
Speaker 14: these new technologies here in the US.
Speaker 8: We saw the TSMC.
Speaker 14: Announcements that's happening in Arizona, where we're gonna be building
Speaker 14: meeting edge fabs here in the United States, and so
Speaker 14: many more great investments. So I think we're in a
Speaker 14: pathway to really make sure that we have the tools
Speaker 14: that we need to keep driving this AI leadership position.
Speaker 1: That was Michael Pratzio's policy director for the White House
Speaker 1: Office of Science and Technology.
Speaker 3: And that wraps up our first hour of the weekend
Speaker 3: edition of Bloomberg Business Week from Bloomberg Radio. Coming up
Speaker 3: in the next sixty minutes much more from Milkin twenty
Speaker 3: twenty five. This is Bloomberg Business Week. I'm Carol Masterton,
Speaker 3: joined by Bloomberg TV ancho. Remain pastic to stay with us.
Speaker 3: Today's top stories in global business headlines aren't coming up
Speaker 3: right now.
Speaker 2: You are listening to the Bloomberg Business Weekday podcast. Catch
Speaker 2: us live weekday afternoons from two to five pm Eastern.
Speaker 2: Listen on Apple CarPlay and Android Auto with the Bloomberg
Speaker 2: Business app ord. Watch us live on YouTube plenty ahead.
Speaker 3: In our second hour of the weekend edition of Bloomberg
Speaker 3: Business Week, Carol master here along with Bloomberg TV anchor
Speaker 3: Romain Bostik, highlighting important and smart conversations from this week's
Speaker 3: Milk and Institute Global Conference in Beverly Hills.
Speaker 4: We were there. There was a lot going on.
Speaker 1: Including a conversation with former Baltimore Mayor Stephanie Rawlings.
Speaker 7: Blake on housing affordability.
Speaker 4: First up this hour.
Speaker 3: As we've mentioned, many of the discussions at the Milk
Speaker 3: and Global Conference this week highlighted opportunities during uncertain times.
Speaker 3: One of those opportunities lies in global real estate and
Speaker 3: how market leaders are capitalizing on distressed assets and real
Speaker 3: estate debt amid tightening credit conditions.
Speaker 1: Discussing investments in real estate and American exceptionalism. Our Debra
Speaker 1: Kaparral German and CEO of Ventas, Justin Kennedy, managing partner
Speaker 1: and co founder of three six five zero Capital, Andrew Smith,
Speaker 1: Managing director of Bayview Asset Management, David Seinbach, Global chief
Speaker 1: investment Officer at Hines, and Barry starn Like, Chairman and
Speaker 1: CEO of Starwood Capital Group. They joined Carol for a
Speaker 1: panel from the Milk and Global Conference.
Speaker 7: Here's Deborah kicking it off.
Speaker 15: I still think the US is the principal best investment
Speaker 15: in the world, and we're on sale now.
Speaker 4: We're on sale now. So by yeah, David, what do
Speaker 4: you think?
Speaker 16: Well, look, without questioning, the US remains the largest economy
Speaker 16: in the world. I do think that a lot of
Speaker 16: things are getting reworked in the global economy. I think
Speaker 16: it's some things you're going to pick up in the session,
Speaker 16: and I think embedded in that are some deep opportunities
Speaker 16: as well as some emerging risk.
Speaker 17: Andrew, Yeah, I would echo their optimism as well. I
Speaker 17: think that it is largest economy in the world. We
Speaker 17: are a little bit on sale right now, but overall,
Speaker 17: you know, I don't know where else you're going to
Speaker 17: go to get the diversity and safety of opportunities. Despite
Speaker 17: some of the noise we're seeing out there, Boy.
Speaker 3: It sounds like American exceptionalism will exists by American.
Speaker 18: Yeah, I'm hoping Barry's going to say something different.
Speaker 6: I'm counting on it as I'm with.
Speaker 18: The rest of the crew.
Speaker 4: He's so shy, you know.
Speaker 18: Biggest most efficient capital markets, Yeah, biggest most important market,
Speaker 18: energy independent and let's call it. If we take the
Speaker 18: secretary as it is, word this will get fixed. So
Speaker 18: US looks pretty good.
Speaker 4: All right, what do you say, Barry?
Speaker 19: I don't want to make anyone to be sad. I yes,
Speaker 19: we win by default, but that's not the way we
Speaker 19: should win. We should win because we're doing the right
Speaker 19: things and the world admires us and wants to invest here.
Speaker 19: So I think it's a little more complicated than that.
Speaker 19: You know, we are the largest economy in the world's
Speaker 19: for now. Yeah, I guarantee you China will pass us
Speaker 19: because they're quickly building bridges into all the countries that
Speaker 19: we have offended. We also have food independence. By the way,
Speaker 19: we used to have stable, quiet borders, but they're no
Speaker 19: longer here either. So we shouldn't take it for granted
Speaker 19: where we are. And we have a thirty seven trillion
Speaker 19: on its way to fifty trillion, and that's going to
Speaker 19: require funding from the rest of the world. So don't
Speaker 19: be so complacent on our position in the world. The
Speaker 19: British had a pretty good run sort of the Holy
Speaker 19: Roman Empire, you know, we had one hundred years and honestly,
Speaker 19: I look back and I talk about this sometimes. If
Speaker 19: we don't fix our education system, the destiny of the
Speaker 19: United States is not good. And I saw this morning
Speaker 19: Abu dhabviusly introduced AI into schools. We have to actually
Speaker 19: get with the program. We can't rely on historic innovations
Speaker 19: that also came from immigrants that run all our great
Speaker 19: tech countries that we want in the country today. So
Speaker 19: you got to look in the future, not in the past,
Speaker 19: and I think we have a lot of challenges we
Speaker 19: are we should win and I promise these guys.
Speaker 4: I was going to start macro.
Speaker 3: But the one thing that I think is interesting and
Speaker 3: forgive me, and I can't remember who's said this, but
Speaker 3: it's Donald Trump being the right question. He's just not
Speaker 3: the right answer. And W you're nodding.
Speaker 15: Yes, I would point out and agree with a lot
Speaker 15: of what Barry's saying. But if you think about our
Speaker 15: global leadership position in biomedical research, for example, where the
Speaker 15: envy of the world, there's almost a trillion and spend
Speaker 15: and whatever, the question is cutting fundamental research that's going
Speaker 15: to cure Alzheimer's is essential and has a huge multiplier
Speaker 15: effect on the economy.
Speaker 17: I think part of what we're saying there's just a
Speaker 17: lot of noise that we don't know how to cut
Speaker 17: through that the communication globally on what we're doing is
Speaker 17: not really there. So I think we all believe that
Speaker 17: the ultimate goals are ones that get us to the
Speaker 17: right place. But how many people do we offend along
Speaker 17: the way, and can we kind of reel it in
Speaker 17: enough to make a difference.
Speaker 19: You live in a classhouse, you have at thirty seven
Speaker 19: trillion dollar deficit. The deficit will easily pass two trillion
Speaker 19: this year. Even in the Trump twenty nineteen economy, before
Speaker 19: the pandemic, he ran a jillion dollar deficit with a
Speaker 19: three point eight percent unemployment rate. We were basically, as
Speaker 19: one of the money matags said, we were on the
Speaker 19: sugar highs. We can have a twenty year plan. Doesn't
Speaker 19: have to be overnight, but we have to have a
Speaker 19: plan to have global confidence. And you know it's supposed
Speaker 19: to revenue and the expense side, so it's not a
Speaker 19: foregone conclusion. We should win. I mean, we are by
Speaker 19: far the best at most of everything we do here,
Speaker 19: and people envy this country. We have to continue to
Speaker 19: want them to envy. And the best and the brightest
Speaker 19: have to come here and we have to let them in.
Speaker 19: So we want all these fabulous people here.
Speaker 4: Just one question on tariff's So is Tariff's than the
Speaker 4: right strategy? Is it right? This pushback?
Speaker 3: I'm not saying the back and forth, but in general
Speaker 3: of saying terms have to be fairer.
Speaker 16: I do think deals will get cut. It's going to
Speaker 16: be time. It's probably take more time that we probably
Speaker 16: appreciate we're gonna have to live with this in between
Speaker 16: period of a lot of just uncertainties that businesses are
Speaker 16: pulling back to wait to see what plays out right.
Speaker 16: But I think even on the other side of this,
Speaker 16: it does feel like there will be more friction costs
Speaker 16: in the global business of trade. After you squeeze all
Speaker 16: the toothpaste out of the tube, it's really hard to
Speaker 16: put it all back in. And so I think we
Speaker 16: are going to be living in a world of more
Speaker 16: friction costs. And I think that, though, to me, is
Speaker 16: a broader theme of degabalization that we've been watching for
Speaker 16: several years now. This is simply deglobalization playing out, and
Speaker 16: this is going to be one of many things that
Speaker 16: investors have to think about and navigate.
Speaker 4: All right, well, let me just ask you guys.
Speaker 3: Are you optimistic in terms of when it comes to
Speaker 3: real estate investing?
Speaker 6: Yeah?
Speaker 19: Actually for real estate yeah.
Speaker 4: Yeah, you guys are pretty up.
Speaker 10: Are you optimistic?
Speaker 18: Maybe the outlier here?
Speaker 4: You're going to be the out Well, that's opportunity for you.
Speaker 12: We think so.
Speaker 18: But it's at the same time a risk factor for
Speaker 18: the markets. We see a situation where real estate has
Speaker 18: really changed fundamentally across a number of very important hurdles
Speaker 18: that people they have to think about in terms of
Speaker 18: their investment strategies in the current environment, particularly looking at
Speaker 18: the commodity part of the asset class, and maybe people
Speaker 18: up here maybe in a little bit different place relative
Speaker 18: to specialization Endeavor's book in the let's call it a
Speaker 18: plus plus targeting at hines as we look at the market,
Speaker 18: these types of strategies have been very successful the same
Speaker 18: time successful at the same time, the commodity part of
Speaker 18: the market has suffered a huge shift in demand, and.
Speaker 19: What s the class you're referring to.
Speaker 18: All industrial has had a shift in demand to the
Speaker 18: positive side. Multifamily is kind of a more complex picture
Speaker 18: that's really regionally guided. But both retail was really the
Speaker 18: both retail and office where we first saw let's call
Speaker 18: it the impacts of technology changing, let's call it the
Speaker 18: core utility of properties. That these are markets where we're
Speaker 18: been through fifteen years of re equilibration in retail and
Speaker 18: we're just at the start of looking for equilibrium in
Speaker 18: the office markets. On the commodity part of the asset class,
Speaker 18: you know, just a quarter mile away here on Avenue
Speaker 18: the Stars, the highest rents the highest occupancy ever seen.
Speaker 18: Same it's true in Park.
Speaker 12: Avenue in New York.
Speaker 18: Yet downtown Los Angeles is having the essentially an existential
Speaker 18: moment in terms of, you know, our tenants able to
Speaker 18: pay rents that or rent's able to be achieved that
Speaker 18: are at all the creative at any price for those assets.
Speaker 18: Month one year of rent on Centric City buys you
Speaker 18: a building in downtown Los Angeles. And this is a
Speaker 18: very new place for the markets, and this is what
Speaker 18: we're concerned about. And then you know, the questions that
Speaker 18: this poses for let's call it traditional real estate strategies
Speaker 18: we think are pretty significant.
Speaker 4: So that's a dispersion.
Speaker 16: David, Well, yeah, as I also think, you know, what's
Speaker 16: happening in the market is this dispersion. But what's compounding
Speaker 16: that and I think investors need to be thinking about
Speaker 16: this in terms of the next couple of years, is
Speaker 16: new supply has really been cut off, right, interest rates
Speaker 16: move five inner basis points around the world, and the
Speaker 16: development does not pencil anymore. And so so many projects
Speaker 16: around the world have been now stalled, stopped for now,
Speaker 16: and that people forget how long it takes to build things.
Speaker 16: You just don't throw these things up. I mean, there's
Speaker 16: the planning, there's the consent, there's all the things that
Speaker 16: have to happen locally. Then you have to actually do
Speaker 16: the construction.
Speaker 7: And so I think that what.
Speaker 16: We're going to see in this environment is right now
Speaker 16: is certainly a time to buy, not build, and there's
Speaker 16: some great opportunities on the buy side, but what people
Speaker 16: are not watching is the fact that we're not building anything,
Speaker 16: and that will drive even more rent growth for the
Speaker 16: best in class and will become the big opportunity. So
Speaker 16: a thing I think investors miss, and this is a
Speaker 16: common you just see this through cycles, is the market
Speaker 16: is now in a buy phase, and which is great,
Speaker 16: I think again, I think it's a great opportunity, but
Speaker 16: they're going to miss these early development signals that will
Speaker 16: start emerging because the best margins and development are early
Speaker 16: in the cycle and they diminished as a cycle wears on.
Speaker 16: So that's this turning point that we're not there yet,
Speaker 16: but I think it will be coming in the next
Speaker 16: eighteen months.
Speaker 19: Say, I mean, I think most investors know the supply
Speaker 19: picture for real estate. If you're sophisticated, you know the
Speaker 19: multi stack is going to drop sixty percent, industrial stacks
Speaker 19: down seventy percent. Nobody in the right mind would build
Speaker 19: an office building lest it's a build to a suit
Speaker 19: for at tenant. Today hotels are still trying to build,
Speaker 19: but constant capital is so enormous that they're struggling to
Speaker 19: make the numbers work. The lending markets, which Justin is
Speaker 19: in and I mean angels, so I mean they'll lend
Speaker 19: us money for office buildings at four or five hundred over,
Speaker 19: We'll say no, thank you. It's higher than massive negative
Speaker 19: leverage on the dead side.
Speaker 13: But it is.
Speaker 19: One of the most important premises of opportunistic investing in
Speaker 19: real estate is replacement cost. And you can buy almost
Speaker 19: everything pretty cheap here and with the land at zero
Speaker 19: and it's just a question of what it's going to
Speaker 19: cost to keep the building whatever it is tenanted. But
Speaker 19: it is interesting to me. I started this new hotel
Speaker 19: brands One Hotels in Baccarat and we're not a commodity
Speaker 19: and because of that, we're like one hundred and fifty
Speaker 19: one hundred and seventy percent of a fair market share
Speaker 19: in every market we operate, and we're in like fifteen
Speaker 19: or twenty markets. Now it's happening in real estate too,
Speaker 19: and people are running office buildings better. She's running her
Speaker 19: senior housing and assistant living and senior stuff better. Commoditization
Speaker 19: is leaving the table, and you have to do something better.
Speaker 19: It is really really interesting today how you take real
Speaker 19: estate and make it not a commodity. And it's upping
Speaker 19: the game on all of the operators in the business
Speaker 19: to figure out how to do in your assay class
Speaker 19: to steal market share because there's plenty of occupancy. You
Speaker 19: just have to be different.
Speaker 1: That was Barry Sternlick, chairman and CEO of Starwood, Deborah Kafaro,
Speaker 1: chairman and CEO of Ventas, Justin Kennedy, managing partner and
Speaker 1: co founder of three six five zero Capital, Andrew Smith,
Speaker 1: Managing director at baybut Asset Management, and David Steinbach, Global
Speaker 1: Chief Investment Officer at Heines a panel discussion with Carol.
Speaker 1: The full panel discussion can be found at Milkin Institute
Speaker 1: dot org.
Speaker 3: Lots of stuff check out all the conversations from Milkin
Speaker 3: as well. Hey, you're listening to Bloomberg Business Week coming
Speaker 3: up more from Milkin twenty twenty five with a look
Speaker 3: at individual companies.
Speaker 4: This is Bloomberg.
Speaker 2: This is the Bloomberg Business Week Daily Podcast. Listen live
Speaker 2: each weekday starting at two pm Eastern on Applecarplay and
Speaker 2: the Android Auto with the Bloomberg Business App. You can
Speaker 2: also listen live on Amazon Alexa from our flagship New
Speaker 2: York station, Just Say Alexa played Bloomberg eleven thirty Carol Master.
Speaker 3: Here alongside Romain taking for Tim Stenevik. This week, we're
Speaker 3: continuing our coverage from this year's Milkin Institute Global Conference
Speaker 3: held in Beverly Hills. Let's continue now with a look
Speaker 3: at how individual companies are navigating global economic volatility.
Speaker 7: First up, Crudential Financial.
Speaker 1: It just released its quarterly results, beating expectations and that's
Speaker 1: a big deal after the company missed expectations in five
Speaker 1: of the past eight quarters.
Speaker 4: Yeah, it was a change in trend.
Speaker 3: Prudential Financial, by the way, manages about one and a
Speaker 3: half trillion dollars in assets, so definitely a bell weather
Speaker 3: in the financial services environment. Andy Sullivan is the company CEO.
Speaker 3: He joined us at the Milk and Global Conference.
Speaker 10: The underlying fundamentals were strong in the quarter. But that said,
Speaker 10: the reason I said what I said is we have
Speaker 10: so much more opportunity as a firm when I look
Speaker 10: at our under underlying capabilities, our people, our brand, you know,
Speaker 10: and then the long term tailwinds that our business mix
Speaker 10: positions us for retirement and private credit. Right, we can
Speaker 10: do more and we can deliver more for our stakeholders.
Speaker 4: You did say I'm the all and you tell Blimberg,
Speaker 4: we've deployed capital.
Speaker 3: As a company and not produced a return that we
Speaker 3: promised and communicated on public calls to our shareholders.
Speaker 4: That must change. How do you get there?
Speaker 3: And how long does it take you to kind of
Speaker 3: consistently provide the earning spectre that you'd like to to
Speaker 3: present to investors.
Speaker 10: Yeah, well, so there's two sides to this, right, there's
Speaker 10: the organic side and then there's the organic side. On
Speaker 10: the organic side, I'm a big believer. You say, what
Speaker 10: you're going to do? You have an expected return level
Speaker 10: for the organic capital we deploy, and then it's it's
Speaker 10: about executing and executing well, a lot of that is
Speaker 10: about focus and making sure we're not spread too thinly
Speaker 10: as a company.
Speaker 4: On the internetre were you spread too thinly?
Speaker 10: And we were in so over the past five years,
Speaker 10: we've exited a number of international markets. We now have
Speaker 10: a portfolio of you know, we're in the markets we
Speaker 10: want to be in. We're in the largest retirement insurance
Speaker 10: and asset management markets in the world, but we were
Speaker 10: in too many markets and we were sub scaled. Unfortunately.
Speaker 10: You can look at that and say, well, that's not
Speaker 10: a big deal. There's that much capital deployed. But it's
Speaker 10: a management focus this year, right, Something funny.
Speaker 7: I mean you bring that up. In prior to your
Speaker 7: being named.
Speaker 1: I know there was a lot of talking Credential about
Speaker 1: leaning deeply deeper into that with regards to the potential
Speaker 1: for retirement income to be a major growth driver.
Speaker 7: Is that still the case under your leadership?
Speaker 12: Oh?
Speaker 10: Absolutely, it's probably our best growth driver in the company.
Speaker 10: You know, whether you're talking about in the United States
Speaker 10: where where we call peak sixty five, where ten eleven
Speaker 10: thousand people are retiring every single day.
Speaker 8: You know, a lot of work has.
Speaker 10: Been done on accumulation in the US market, but not
Speaker 10: as much work on how to help people with protected
Speaker 10: income and decumulation. That's why I think you see this
Speaker 10: convergence of asset management and insurance, in particular in the
Speaker 10: annuity space, because there's such an opportunity, there's such a
Speaker 10: large gap in the market. But it's not just a
Speaker 10: US issue. We're a major insurer in Japan obviously, with
Speaker 10: the aging demographic there and the fact that those citizens
Speaker 10: have almost most of their assets in the banks, they
Speaker 10: need the exact same.
Speaker 1: Help with regards to the relationship you have with the
Speaker 1: pension finds and the deals that you make with them,
Speaker 1: so that are they offloading the risk to potential are
Speaker 1: you absorbing that risk?
Speaker 10: So we're actually a primary writer of the of the
Speaker 10: annuities product you may be referred to. We've we've expanded
Speaker 10: our capabilities with a reinsurance capability. Really what that's about
Speaker 10: is we need to bring additional capital to the space.
Speaker 10: You know, just being if you're just looking at the
Speaker 10: mutual insurers or the public insurance, there's not enough capital
Speaker 10: to back the liabilities that really need to be put
Speaker 10: into the market to provide that level.
Speaker 8: Of protected income.
Speaker 10: So a lot of what you see is about bringing
Speaker 10: capital into the space.
Speaker 3: I want to ask you about your asset management business
Speaker 3: PEGUM in particular. You guys report a net INFLOWCE of
Speaker 3: about four point three billion in the first quarter.
Speaker 4: We're now fairly into the second quarter. How are things
Speaker 4: looking right now?
Speaker 10: Well, I will say that the volatility has an effect.
Speaker 10: Right when you have policy on certainty and it creates volatility,
Speaker 10: business decision makers and individuals start to slow up on
Speaker 10: their decision making. We saw that in the month of
Speaker 10: March and we've seen that continue into the second quarter.
Speaker 10: You know, from an institutional number of transactions perspectives. So
Speaker 10: we have a we're the third largest real estate company
Speaker 10: in the world. If we were on this nice trajectory
Speaker 10: of recovering from the lows of real estate, but what
Speaker 10: we saw in March and into the second quarter is
Speaker 10: a slow down now in transactions.
Speaker 4: How well do you expect that to continue?
Speaker 3: And I know it is based on we're all like
Speaker 3: the million, you know, tillion dollar question in terms of
Speaker 3: what we expect. Do you feel like things are settling
Speaker 3: down in terms of what we are hearing the cues
Speaker 3: from the White House?
Speaker 10: Well, I would say, you know, from the conversation this
Speaker 10: morning with the Treasury Secretary, you know it is about
Speaker 10: when do we see these first tariff deals come into place.
Speaker 10: You know, I'm not going to be able or here
Speaker 10: to predict when that is. But what we're hearing from
Speaker 10: our clients is they want to stay invested and they
Speaker 10: and they would want to stay leaned in. So whether
Speaker 10: that's months or quarter is hard to say.
Speaker 1: That was Andy Sullivan, CEO of Crudential Financial.
Speaker 3: Another company we were able to highlight at Milkin this
Speaker 3: year's jet manufacturer Bombardier, the company posting guidance for twenty
Speaker 3: twenty five, again indicating it can navigate through an uncertain
Speaker 3: economic environment. Raman and I caught up with the company CEO,
Speaker 3: Eric Martel.
Speaker 20: We got we've been here many many years actually, you
Speaker 20: know what, Milk, and we're doing this every year. We
Speaker 20: have a lot of our customer here, so it's an
Speaker 20: importunate need to have conversation with our customer and so
Speaker 20: this is a great conference. You know, there's a lot
Speaker 20: of interesting topic I would say we discussed these days.
Speaker 20: So we are happy to be here again for I
Speaker 20: don't know how many times stop counting.
Speaker 3: Well, you know, but you are what's great about talking
Speaker 3: to someone like you are someone who's really.
Speaker 4: Leveraged the supply chain across North America.
Speaker 3: And I'm curious, what are some of the lessons that
Speaker 3: you've learned from building that out that maybe you could
Speaker 3: share with other folks who are looking at maybe I've
Speaker 3: got to do it, but it looks like it's just insurmounting.
Speaker 20: I think in the early days of COVID, I would
Speaker 20: we talk about fall twenty twenty. We've made a very
Speaker 20: different decision at Bombardi. Instead of cutting people in supply chain,
Speaker 20: we had people which was very different than the normal crowd.
Speaker 6: So I think that's what explained probably our ability to.
Speaker 20: Better forecast over the last couple of years the number
Speaker 20: of airplane were delivered. So we have a very proactive
Speaker 20: approach trying to see problems coming up, like eighteen months
Speaker 20: before they come so that you have time to sort
Speaker 20: them out. So it's been serving us pretty well. We're
Speaker 20: not perfect, you know.
Speaker 6: We still have things sometimes that come out at the last.
Speaker 20: Minute, but so far we've worked very diligently with our
Speaker 20: supplier base, which we have five thousand supplier total, so
Speaker 20: which is brings some complexity, but it's been going fairly
Speaker 20: well so far.
Speaker 1: What's the man like And let's start with the airlines
Speaker 1: first out side of the business, because several of the
Speaker 1: big carriers, not necessarily the ones that used embrayor use
Speaker 1: Bombardier jets. I basically said, look, things are going to
Speaker 1: be a little slower than what we thought in terms
Speaker 1: of passenger travel. Have you seen any real ripple effect
Speaker 1: of that down to the types of jets that you.
Speaker 20: Sell yet, So, as you said, we're focused on business aviation,
Speaker 20: so we just do private jet. But clearly COVID was
Speaker 20: an accelerator for our environment. A lot of people, you know,
Speaker 20: go back to twenty twenty. In the summer of twenty twenty,
Speaker 20: a lot of commercial flight were rounded.
Speaker 6: You know, a lot of the aizone did not happen.
Speaker 20: So the people who could afford it maybe didn't buy
Speaker 20: their own airplane, but they about shares you know, from
Speaker 20: fleet operator and hours and started to fly private.
Speaker 6: So we've seen an explosion of hours.
Speaker 20: If I look at the hours our jets were flying
Speaker 20: in twenty nineteen, today it's about forty percent higher, and
Speaker 20: it's the new normal. It's been going up another three
Speaker 20: percent since last year. So clearly our business it was
Speaker 20: it created a new normal of activity and since then
Speaker 20: it's been just growing, keep growing.
Speaker 1: So what ails the airlines does not necessarily affect your company,
Speaker 1: your customers in the same way.
Speaker 6: They're little different customer base. You know, the people that
Speaker 6: buy our product are chairman CEO.
Speaker 20: Either they have a company in the US, so they
Speaker 20: will use a smaller jet, or they have a global
Speaker 20: company and I don't know, they're in New York today,
Speaker 20: they need to be in Singapore next day and come
Speaker 20: back to Dubai three days later. So this guy, it's
Speaker 20: a very efficient tool for them. You know, they will
Speaker 20: never be able to do that flying commercially.
Speaker 1: Can I ask you about the new eight thousand jet?
Speaker 1: Is that going to enter service this year?
Speaker 6: It is?
Speaker 20: Actually so we stopped flying the airplane. Now we flew
Speaker 20: the airplane. We have all the testing done. Now we're
Speaker 20: working with the authorities, you know on engines, you know,
Speaker 20: with g because you know, most of our customer base,
Speaker 20: supplier base sorry, is in the US, twenty eight hundred
Speaker 20: supplier in the US, and we are working with all
Speaker 20: these guys to get the eight thousands sotified by year end.
Speaker 6: We're pretty excited because this is going to be the new.
Speaker 20: Flagship of the industry, the biggest airplane in business aviation
Speaker 20: that flies further, faster, higher.
Speaker 6: Than anything else that exists today.
Speaker 3: Wait, so I'm just curious going back to busines, jet
Speaker 3: orders and companies in their environment. Are you seeing orders
Speaker 3: fall off from companies at all that as a sign
Speaker 3: of holding back to work, But it is something that,
Speaker 3: like I think we're looking for different indicators, like when
Speaker 3: it comes to what's the health of the overall outlook
Speaker 3: in a world where certainly at milk.
Speaker 4: And everybody keeps talking about uncertainty.
Speaker 20: You know what, it was very similar in the first
Speaker 20: quarter to what we saw three years ago when we
Speaker 20: hand the bank crisis, about three or four weeks of
Speaker 20: uncertainty and you know, we assemble the airplane in Canada,
Speaker 20: so there was question about the tariff I was going
Speaker 20: to work.
Speaker 6: There was a bit of lack of clarity.
Speaker 20: But as things clarified around the quater, we've seen things
Speaker 20: re engaging normally. So right now we have quite a
Speaker 20: bit of activity, you know here this week, but also
Speaker 20: you know, worldwide, I would say Middle East is very strong,
Speaker 20: APAC remains pretty strong, to Europe maybe a bit more slow, but.
Speaker 6: The US is doing fairly well.
Speaker 3: Eric Oth, you want to ask you President truck meeting
Speaker 3: with the Prime Minister of Canada Mark Carney. USMCA came
Speaker 3: up several times and the Prime Minister is stressing, you know,
Speaker 3: the importance of that agreement. I am curious what kinds
Speaker 3: of opportunities that integration specifically has provided you guys.
Speaker 8: I think if you have a good trade.
Speaker 20: Agreement, it is a good trade agreement already, and I
Speaker 20: think I understand exactly. The President of the United State
Speaker 20: wants to revisit that and we're I think our government
Speaker 20: will be fine doing so.
Speaker 6: I think it's been a huge leverage from.
Speaker 20: The three country that are part of the agreement over
Speaker 20: the years. Actually aerospace, even before NAFTA in nineteen seventy nine,
Speaker 20: we had a free trade agreement worldwide, and I think
Speaker 20: there's an aerospace you know.
Speaker 6: Of course we assemble.
Speaker 20: We're being seen at perceive as a Candian company, which
Speaker 20: I'm extremely proud of, but we are really a North
Speaker 20: American company. I have twenty eight undred supplier in the US,
Speaker 20: twenty eight hundred and many in New Mexico, also made
Speaker 20: in Canada, so overall we've done extremely well.
Speaker 6: Altogether. It's a great business.
Speaker 20: But it's important, you know, this is not something we
Speaker 20: can change overnight. It's going to have to take time
Speaker 20: if we want to move things around, bring back work
Speaker 20: into the US, which we still have a lot today.
Speaker 20: And it's interesting, despite being Canadian today, I have like
Speaker 20: if you take the global seventy five hundred today, forty
Speaker 20: two percent of all the cost of the airplane is US.
Speaker 20: So because we do build a wing, which is one
Speaker 20: of the most important components here in Dallas, and we
Speaker 20: also buy the engines from ge.
Speaker 3: La Fayel, right exactly. So if he wants to buy
Speaker 3: what is it, the new eight.
Speaker 7: Hundred, it's eight thousand. It's out of my price range.
Speaker 1: But I'm sure he's got some brother more eligible customers
Speaker 1: lined up.
Speaker 6: We gotta have a discussion after you.
Speaker 7: Know what, maybe one day I can train Eric. It's
Speaker 7: been a pleasure.
Speaker 6: Thank you. It's been a pleasure to thanks to both
Speaker 6: of you.
Speaker 7: That was Eric Martell's CEO at Bombardier.
Speaker 3: Still ahead on Bloomberg BusinessWeek, the debt ceiling still called
Speaker 3: X date kicked down the road but for how long?
Speaker 3: Plus we tackle the housing affordability crisis in the United
Speaker 3: States with the former mayor of Baltimore.
Speaker 4: What's more to come from Milkin?
Speaker 6: This is Bloomberg.
Speaker 2: You are listening to the Bloomberg Business Weekdaily podcast. Catch
Speaker 2: us live weekday afternoons from two to five pm Eastern.
Speaker 2: Listen on Apple CarPlay and Android Auto with the Bloomberg
Speaker 2: Business app, or watch us live on YouTube.
Speaker 3: I'm Carol Master along with Romaine Bostik, a special version
Speaker 3: of Bloomberg Business Week, our weekend edition this week, where
Speaker 3: we bring you highlights from our coverage of the Milkin
Speaker 3: Institute's Global Conference, held annually in Beverly Hills.
Speaker 1: This past week, Treasury Secretary Scott testified before a House
Speaker 1: appropriations hearing in Washington and said the Treasury is on
Speaker 1: quote the warning track toward exhausting its capacity to stay
Speaker 1: within the federal debt limit.
Speaker 3: We should point out the Treasury Secretary also here at
Speaker 3: Milk and making an array of comments about the US. Meanwhile,
Speaker 3: the head of the nonpartisan Congressional Budget Office suggests the
Speaker 3: Treasury has a few more months before exhausting its cash
Speaker 3: to keep paying its obligations in full and on time,
Speaker 3: thereby avoiding a potential default.
Speaker 1: For more on that potential X date, we spoke to
Speaker 1: CBO director of Philip Swagel.
Speaker 21: We still have it as late in the summer, you know,
Speaker 21: into August into September. It's of course It's possible that
Speaker 21: it can come forward depending on the continued revenue, especially
Speaker 21: in June, but for now we're comfortable with our later
Speaker 21: date that Congress has time to act on it.
Speaker 1: The revenue you're seeing coming in, at least in the
Speaker 1: most recent mouth, you're encouraged by that.
Speaker 21: You know, it was tracking reasonably well with our expectation,
Speaker 21: and this is the projections that we made back in
Speaker 21: January and February that the revenues are still in line
Speaker 21: with that.
Speaker 3: One thing I want to ask you in terms of
Speaker 3: real deficit reduction, because one of the things that just
Speaker 3: did a global real estate panel and the thing that
Speaker 3: they are most concerned about seem to be the growing
Speaker 3: US deficit. What real constructive work are we doing to
Speaker 3: really reduce the deficit and what kind.
Speaker 4: Of pain might it impose on US citizens?
Speaker 21: Yeah, it's you know, I've seen the Treasury Secretary talk
Speaker 21: about that. He was here at the Milking conference this morning,
Speaker 21: I'm talking about it. He is writing in the Wall
Speaker 21: Street Journal about it, and so I know he's focused
Speaker 21: on it. I know the administration is focused on it.
Speaker 21: And it's important, it's necessary. It doesn't have to be
Speaker 21: done immediately, but that sense of this should be reassuring
Speaker 21: to the American people.
Speaker 4: Why do you say it doesn't have to be done immediately?
Speaker 4: Many would have said ten years ago, fifteen.
Speaker 3: Years ago, we would have had this conversation and talked
Speaker 3: about kicking the can down the road.
Speaker 4: And here we are again. Why is it not an
Speaker 4: immediate problem?
Speaker 21: No, No, you're exactly right that in the past there's
Speaker 21: been an urgency and then the lack of follow through,
Speaker 21: the lack of action. And that's part of my message
Speaker 21: is that we do as a country have time because
Speaker 21: the rest of the world still sees us as a
Speaker 21: country that's stable, that's secure, that's growing. There's lots of
Speaker 21: volatility in the US and the policy environment now, and
Speaker 21: that's a negative. We still have the trust of global
Speaker 21: investors and that's what gives us time.
Speaker 1: How competent, though, are you right now? And your economic projections?
Speaker 1: The Treasury Secretary specifically called out the cbo'sgen projections of
Speaker 1: two percent or so. He's saying, in his view, that
Speaker 1: number should be closer to three percent.
Speaker 7: What's the gap? Why? Why does that gap is?
Speaker 6: Okay?
Speaker 21: No, No, the gap is understandable because what CBO is
Speaker 21: doing is projecting the economy under career law, and what
Speaker 21: the Treasury Secretary's doing.
Speaker 12: Is completely appropriate. He's saying.
Speaker 21: With the president's agenda, you know, he says, we, you know,
Speaker 21: we the administration have a pro growth agenda. He thinks
Speaker 21: that will be successful, and of course all Americans hope
Speaker 21: it will be and that will boost economic growth, and
Speaker 21: if it does well, then that will be good for everyone.
Speaker 21: We're looking we're just looking at different things. So as
Speaker 21: we're looking at what was the economic trajectory before the
Speaker 21: President's agenda.
Speaker 7: They're the balance though as well.
Speaker 1: So we don't quite know which policies will become law
Speaker 1: or become real. I know that's going to take some time,
Speaker 1: but we do know the contours of this administration a
Speaker 1: crackdown on immigration, which immigration, of course, to a certain extent,
Speaker 1: has been a net positive at least on aggregate.
Speaker 7: GDP growth in this country.
Speaker 1: There's also a lot of issues when it comes to
Speaker 1: the IRA which the Trump administration is trying to scale back.
Speaker 1: When do you factor those impacts in and the potential
Speaker 1: drag on growth?
Speaker 12: Okay, no, no, you're putting your finger exactly in.
Speaker 21: The important question is that all of the change is happening,
Speaker 21: both the executive actions and then the legislation being considered
Speaker 21: by the Congress. How will those impact the economy? And
Speaker 21: so the executive action you mentioned on immigration, that affects
Speaker 21: the labor force, that affects the economy, It affects the
Speaker 21: federal budget. We are tracking that. It's still a little
Speaker 21: bit too soon to know what is the long term
Speaker 21: impact of that. Is the decline in immigration temporary or
Speaker 21: is it a long term factor, And that's the kind
Speaker 21: of thing we are tracking. Our next update will be
Speaker 21: late spring, early summer, and we will build in that
Speaker 21: the IRA all the other changes into that next update.
Speaker 3: You know, many economists that would in terms of immigration
Speaker 3: the importance in terms of feeding the labor market, providing
Speaker 3: a younger population. They point to Japan, they point to
Speaker 3: places like South Korea where folks are not having babies anymore,
Speaker 3: and even in America in terms of the small families
Speaker 3: that people are having. So I understand what you're saying,
Speaker 3: but a lot of economists have done the research for
Speaker 3: years about the importance of immigration in terms of the
Speaker 3: health of economic growth for a nation.
Speaker 21: Yeah, yeah, I know. It's it's what makes immigration a
Speaker 21: difficult issue is that it's both an economic issue, and
Speaker 21: you pointed to the key economic factors, but it's a
Speaker 21: social issue. It's a political issue. People worry about crime
Speaker 21: and safety and then local communities, and it builds together
Speaker 21: all those things. And then there's high schooled immigration and
Speaker 21: low skilled immigration and those are connected as well in
Speaker 21: the policy space. So that's what makes it a difficult thing,
Speaker 21: is because it brings together so many cross currents in
Speaker 21: our society.
Speaker 3: I am curious when you guys think about the outlook
Speaker 3: you do have. We're an earning season and we've been
Speaker 3: reporting on it, and you do have companies come out
Speaker 3: the two scenarios because they see it as one potentially
Speaker 3: where we are no growth or in a recession and so.
Speaker 4: It doesn't look so good.
Speaker 3: We have another where things look pretty normal and we're
Speaker 3: back to American exceptionalism. Tell us about the scenarios that
Speaker 3: you are planning for, because that's very different.
Speaker 4: In terms of the US government with.
Speaker 8: The fiscal pasture.
Speaker 21: Looksi O, No, you're right, and we at CBO have
Speaker 21: the same dilemma as the companies to try to figure
Speaker 21: out which trajectory are we going on? And of course
Speaker 21: there's a spectrum between them. You know, we suspect the
Speaker 21: volatility of the last month will lead to slower business investment,
Speaker 21: reduce capital inflows, reduce foreign investment in the US. That
Speaker 21: will tend to have a negative effect on growth. On
Speaker 21: the other hand, if there are trade deals, if there's
Speaker 21: changes in regulation that are pro.
Speaker 7: Growth, that will go in the other direction.
Speaker 21: And that's where we're looking at, is to try to
Speaker 21: figure out the balance between the sort of the downward pressures,
Speaker 21: the volatility especially and the upward of the president's agenda.
Speaker 3: Is there a balance or meaning one way or the
Speaker 3: other based on what we've seen so far, it's.
Speaker 21: Just too soon because there's a sense in which we
Speaker 21: have all the volatility, we have all the negative parts,
Speaker 21: and now we're waiting on the positive and that I'll
Speaker 21: just say. You know, we posted our first cost estimate
Speaker 21: for the reconciliation Bill of the House Armed Services Committee.
Speaker 21: So there's lots more to come as the different committees
Speaker 21: in the House do their work and we will analyze it.
Speaker 12: But it just gives you an education.
Speaker 7: There's a lot more coming.
Speaker 21: There's a lot of legislative activity, and that's the part
Speaker 21: that's still.
Speaker 12: To be written.
Speaker 7: That was CBO Director of Philipswegel.
Speaker 3: Now, as we get ready to wrap up our coverage
Speaker 3: from the twenty eighth annual Milk and Institute Global Conference
Speaker 3: held in Beverly Hills this past week, now, one more
Speaker 3: conversation we wanted to bring to you on something that
Speaker 3: is very relevant and has hit the nerves of many
Speaker 3: across the country.
Speaker 4: And that is the lack of affordable housing.
Speaker 3: It's been an issue we've talked about though for a
Speaker 3: long long time.
Speaker 1: Median home prices now approaching more than six times the
Speaker 1: US median income, and if you're renting, you're spending more
Speaker 1: than the third of your income on rent alone.
Speaker 3: For more with the government as well as what the
Speaker 3: private sector can do to help alleviate the housing crisis,
Speaker 3: we spoke with Stephanie Rawlings Blake, Airbnb Housing Council Chair
Speaker 3: and the former mayor of Baltimore.
Speaker 9: One of the things that I took out of the
Speaker 9: panel that we had is that it's going to take all.
Speaker 4: Of us right.
Speaker 9: Airbnb understands, for example, that they're not the cause of
Speaker 9: the housing supply shortage, but they can be a part
Speaker 9: of the solution. As a mayor, I knew that I
Speaker 9: didn't cause it, but I had to be a part
Speaker 9: of the solution.
Speaker 12: And some of the.
Speaker 9: Developers and private equity folks that were on the panel,
Speaker 9: they have to understand that they have to be a
Speaker 9: part of the solution as well. So it's an all
Speaker 9: hands on deck.
Speaker 2: You know.
Speaker 9: We talked on the panel that we're short in this
Speaker 9: country over five million homes and we're not going to
Speaker 9: close that gap by doing what we did yesterday or
Speaker 9: a decade ago. We have to think critically and with
Speaker 9: more innovation around how to build more, how to build faster,
Speaker 9: and how to build better.
Speaker 1: How do you hug the city though grapple with economic growth,
Speaker 1: similar to what Baltimore went through where you had this
Speaker 1: huge resurgence, companies coming back, people moving back to the city.
Speaker 1: Of course, that also drives up typically real estate prices
Speaker 1: as people look for homes.
Speaker 7: So if there's a balance, right, you want.
Speaker 1: To reap the fruits of getting all those people back
Speaker 1: into your city, but at the same time, you don't
Speaker 1: want to shut everyone out who maybe isn't at a
Speaker 1: certain income level.
Speaker 7: Where's the balance?
Speaker 9: So I always look for the win win, and when
Speaker 9: you talk about bringing people in, that's always a good thing.
Speaker 9: But in Baltimore, like many cities, we have a circuit breaker,
Speaker 9: meaning the value of your home year over year could
Speaker 9: go up one hundred percent, but your property tax will
Speaker 9: only go up a fraction. And that allows people to
Speaker 9: stay in their homes and reap the benefit of wealth
Speaker 9: creation through their home. But they are also things like
Speaker 9: repurposing vacant homes. I think we need to think differently
Speaker 9: about vacant homes. Yes, they're they're are black, but they're
Speaker 9: also an opportunity when home ownership is so far out
Speaker 9: of reach for many of America's young people, we can
Speaker 9: look to rebuild and these vacant homes as a way
Speaker 9: because the infrastructure is already there. Right, cities like Baltimore
Speaker 9: were built for, you know, over a million people, so
Speaker 9: that infrastructures there, the people aren't there, So how do
Speaker 9: we look at those vacant homes as opportunities for families
Speaker 9: and young people to become homeowners.
Speaker 3: Stephanie, I love that you went there because I think
Speaker 3: people are like, just build homes, build homes, build a
Speaker 3: five million homes. It's not just about building them anywhere.
Speaker 3: It's about building them where people need them, and they
Speaker 3: tend to be cities which tend to be expensive, So
Speaker 3: as soon as the build.
Speaker 4: Happens, it's often expensive. How do we fix that.
Speaker 3: How do we get developers, politicians, everyone to say, let's
Speaker 3: build where the housing is needed, and let's make sure
Speaker 3: we make it affordable.
Speaker 4: How do we do that?
Speaker 9: So cities like Baltimore are incentivizing affordable house incentivizing repurposing
Speaker 9: vacant homes. That was one of the projects that I
Speaker 9: started as mayor, my Vagans de Value program that our
Speaker 9: current mayor has taken on and made it his own.
Speaker 9: So we need to do things like that where we're
Speaker 9: creating incentives like down payment assistance. The president of Don
Speaker 9: Hopkins at speaking here at Milk and they give employees
Speaker 9: like match for Max, They're giving their employees thousands of
Speaker 9: dollars and down payment assistance if they move around the university.
Speaker 9: So things like that, and we have to look for
Speaker 9: innovative ways to promote financing of these of affordable housing
Speaker 9: as well.
Speaker 1: That was Stephanie Rawlings Blake, Airbnb Housing Council chair and
Speaker 1: the former mayor of Baltimore, and.
Speaker 3: That reps up our special weekend edition of Bloomberg Business
Speaker 3: Week from Bloomberg Radio at the Milk and Institute Global
Speaker 3: Conferences past week. You can catch all the conversations from
Speaker 3: the event on the Bloomberg and at Bloomberg dot com.
Speaker 4: Thank you so much for joining us.
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